I-Thou Economics for a People-Centered Economy
It can be possible to create a discipline of economics that is highly efficient and people-centered, seeing personal relations as meaning and wealth creation as means. The purpose of such economics will be to facilitate an economy that points people to see to each others wellbeing and penalizes “rat-race”, i.e. people are pushed to work harder without increasing wellbeing.
David Nordfors, Co-Chair i4j
There is a short summary of this article here.
Economics in its present forms can be counterintuitive and have negative effects on society and the economy. For example, workaholics neglect families and friends and that is bad for well-being. But it is good for revenues, so the economy offers incentive for such behavior and this is why it exists. Increased commuting distances are bad for commuters but it is good for economic growth because it drives creation of infrastructure. Paying people for doing things we prefer doing ourselves is “good for the economy”. This does not make sense to the lay man. So what is wrong? When mathematical models give counterintuitive results it can either be because reality is more complex than we think it is, or it can be because the model is missing something, or both. Which is it? It is both.
The argument for a complex reality: all business is good business as long as it doesn’t kill business. By keeping each other busy people are synced, they practice depending on each other and they maintain common standards. They are ready for applying their collective ability to opportunities and threats. By being earners and spenders, people who don’t know each other depend on each other and that is what extends the good society beyond the range of family and friends. GDP points to civilization, away from tribalism. The economy happens when people need each other. When people need each other more, it grows, and society becomes supposedly more valuable for its citizens.
But GDP makes no difference between when people love or hate needing each other. The relation between wealth creation and well-being is therefore problematic. Well-being cannot exist without wealth. But wealth can exist without well-being. Some people get wealthy by making humanity a bit more miserable. Businesses even have incentive to ruin the economies that feed them. Presently, there are economists suggesting that the economical incentives for replacing people with machines are so high that all jobs will go away and people will no longer have to work. This would be the end of society, because it would dissolve the interdependency of citizens unknown to each other upon which it stands.
When GDP was introduced it provided direction for governments to create the policies that led to better jobs, education, healthcare and leisure. A creator of GDP, Simon Kuznets, warned against relying on it too heavily. But the lack of alternative powerful indicators makes it difficult for governments to do anything but aim for the highest GDP growth they can achieve. The same goes for companies, where CEOs and boards of directors find themselves committed to maximizing profits, not well-being, even if they know that it is well-being that their workers and customers actually want.
Economists are looking at how to measure well-being in ways that governments can use for improving policies, but the indicators presented so far still remain to become influential. In the case of business management, research has shown that well-being among workers is a better predictor of long term sustainable success than quarterly reports, but it is difficult to implement and maintain because it can not “show the numbers” as concretely as quarterly reports do. Design thinking, a method that has empathy among the workers as a necessary component, has proven its mettle on the market. But even when an empathy-based production method shows the numbers, a serious flaw remains: the notion of well-being as the means for creating wealth. It is a reversed logic. It should be the other way around, well-being should be the purpose, wealth the means. It is the same difference as between being invited to dinner and then make love and making love in return for a dinner. It is the difference between organizations that use their profits for caring about their workers and those who care about their workers in order to be profitable. Economics does not appreciate the difference, but people certainly do.
Contemporary economics is based on mathematical theory, which makes it very powerful. And as we get more computational tools, an economy focused on trade, competition and creating dollars increases it’s power over our lives, pushing the other parts aside. When people are offered more opportunities to earn or save money, the opportunity cost of leisure time will increase. Higher risks on the labor market provide incentive to avoid that cost. Citizens may spend more of their time attempting to earn a living or, alternatively, shedding risk by, for example, not having children. We do see lower nativity rates in advanced economies, and perhaps this contributes to it.
The well-being indicators of today are compound indicators, measuring things like education, access to healthcare, happiness and so on. Many of these things map directly onto policy, taxes and budgets. But even if they gain influence they are still only providing the means creating meaningful lives for people. They may also be difficult to integrate in economic theory, for example accounting. They will not not simplify the mathematics, and most probably make it more complex.
A successful economic theory for well being that can eclipse GDP as well as outshine the bottom line in quarterly reports, should
* separate people from things
* make a difference between meaning and maximizing means
* be applicable where economics applies
* appeal to decision makers
* empower citizens
* be mathematically elegant
Unified Economics for Wealth and Well Being
Economics is, like physics, a formal science based on mathematics. The economy is a system of people and things that interact. People have a sense of value and they have currency for trading things they find valuable. They may align their activities, either in a formal way as in, for example a company, or informally, such as people dressing in fashion or another cultural pattern of behavior. Economics models the interactions among people and things. The modeling of transactions, such as market theory, is particularly central. Economics helps us understand how we create economic value for each other and is used as a tool kit for people and organizations to create value for themselves.
Economics is both appealingly powerful and appallingly flawed. Some people may think that its flaws, in particular the failure to model well-being, are inherent and come from being able to price everything that is traded but not other things that matter, like friendship or clean air, which cannot and should not have a market price. They will say that markets are inherently cynical and should be separated from the more human aspects of life. Various well-being measures are being created to raise the importance of these priceless things, such as health, happiness and education. This results is two parallel systems of economics: the economics for wealth and the economics for well being. There is on the one hand GDP and quarterly reports and on the other hand well-being indices. This dual economics serves the already existing split between between business and charity, for-profit and non-profit entities. Governments will earn from the hard economy and spend a large part of it on the soft economy. Successful business leaders can “give back”, turning hard company profits into soft foundation grants.
Is it possible to unify the hard and the soft economics into a single economics for well being, with which governments and companies can beat competitors using the dual system? We know that organizations with motivated workers perform better than those with people who hate their jobs. If people get on well they work better together, there can hardly be good work motivation without that. If people feel that earning their living is meaningful and that it enables everything else that is meaningful in life, that will increase motivation, too. This does not mean a life on roses, rather a life providing the power to find happiness and overcome difficulties, turning crisis into opportunities. It seems reasonable to assume that any organization that has an economics toolbox for achieving that should be able to outcompete any organization that focuses on the bottom line. Unless, of course, such economics is a self contradiction and therefore cannot exist. Well being romanticists and market economy cynics will both say so, saying that building a good organization is not a question of numbers, but a question of good leadership with good brains, hearts and guts. But there is no contradiction between such leadership and unified wellbeing economics. Good leaders may perform even better with it, if it exists.
Economics that does not objectify people
Economics objectifies people. They are defined by their attributes, like gender, strength, health, skills, talents, education, professional experience, certifications, recommendations, nationality and so forth. They create value by operating on needs that also are defined by attributes. The value of people arises when observers estimate how a person’s attributes can satisfy needs when applied to an operator, such as a profession.
In economics, people will therefore always be interchangeable with anything that has similar attributes. Reality is different. There is a fundamental difference between how people relate to each other vs machines: I say “Thou” to a friend, not to a machine. In this work I will use “I-Thou” to describe what people can refer to as an “encounters of souls”, and “I-You” for their interactions around attributes. For example, if “you” are not doing a job to my satisfaction I can exchange you for another “you” or for a machine, which is an “it”, that will do the job. I can exchange you, but thou art not exchangeable. I can leave thou, I can meet another “thou”, but this is not an exchange. The rule is that “Thou” will convert into “you” (or “it”) when exchanged. This is consistent with common daily language, for example “selling out”, or “prostitution” convert “thou” to “it”. Along these lines, “You” is a second person pronoun for “it”. There is no third person for “Thou”
There are only two ways we can relate: “I-Thou” and “I-It”. “It”/”you” refer to attributes and can be traded if there is a market and a business model, “thou” can not and will be converted into “you” upon attempt.
Economics as we know it today has no way of representing “I-Thou”. But “thou” is essential for the economy. Empathy and love, friendships and families form an “I-Thou” economy with a different set of rules for interaction. The “I-Thou” and the “I-it” economies are connected but separate. The economy of all possible interactions can therefore not be one-dimensional, and economics can therefore not represent it. A people-centered economics must include “I-Thou” and therefore be (at least) two-dimensional
Economics is agnostic to what people consider meaningful, defining meaning as maximizing the means. It may seem like a reasonable assumption if people always apply their available means to make their lives meaningful. But in reality, people fall under the influence of economic thinking, adopting a view that maximizing their means is what brings meaning to life. The success of the market economy in creating highly productive exchange systems can influence people to thing that these are general principles for success and attempt to identify parts of the “I-Thou” economy that they can be applied to. This is attempted, for example, in some online systems for intimate matchmaking, establishing “I-Thou” relations. In some cases it works, while in others “I-thou” is converted into “I-it” in the process. Successful dating systems must see “I-Thou” as purpose and “I-it” as the means, drawing the line between them, or they will become systems for prostitution. Singles may see parties as means serving the purpose of finding friendship. Those who see friendship as means serving the purpose of going to parties are considered to be bad friends. It is seen as cynical. People who can’t understand the difference are considered to be sociopaths.
A Darwinian perspective defines purpose as the continuation of the species, seeing everything else as means. For mankind, this centers around “I-Thou”: finding a partner, making love, bringing up children and caring for their offspring. Darwinian selection has shaped our organism to guide us through the process of continuing the species. The first step is finding a mate, driven by the feelings of lust, from testosterone and estrogen. Then comes focusing on a single partner, being in love, driven by dopamin and serotonin.It is followed by attachment, keeping couples together long enough for them to have and raise children, fueled by oxytocin which is released during orgasm, bonding couples, and at childbirth, bonding a mother with the child. Vasopressin is the drug for commitment, also released after sex, keeping parents committed. Love, attachment and commitment to others is replaceable but not interchangeable. If a healthy mother loses her single child she may attach to another, but she will not exchange her child for another in an “upgrade”, even if she prefers many attributes of the other child. These are essential parts of the identity of mankind and of the strategy for continuing the species. It requires “I-it” and “I-Thou”, the latter being the purpose of the first,
It is of high importance to keep in mind that nature favors variation within limits and that different individuals will make different contributions to the species. If some people do not have children, they can contribute to the success of others. All family raising will depend on I-Thou friendships and I-iT relations, and not all providers of such relations need to have families of their own. Humanity is an organism, culture is its metabolism, we are its cells and we are diversified. Most mothers find ultimate purpose in their children, but individuals will find purpose in other things too. There need to be people who see purpose in everything that is essential for the continuation of our species. But for all people, respect for family and friends, considering them unique and non-interchangable is hardwired in our organism.
The simplest people-centered economy may define “I-Thou”, interpersonal relations, as the meaning of the economy and the “I-it” relations as means. Applying this idea to economics suggests that there are two types of value, “Thouness” and “Itness”. The people-centered economy in its Darwinian interpretation means to increase thouness (as long as this promotes continuation of the species). This, in turn, provides incentive to generating the necessary means. I have an incentive to work for money in order to provide for my family.
The following section suggests how weirdness can be removed from economics by introducing “thouness” in its simplest form.
Testing the Theory by Example: Bob Takes Ann Out for Dinner
Bob wants to visit his friend Ann and take her out for dinner. She lives in a different city an hour away by Railex public transportation. A Railex return ticket costs ten dollars. Bob earns twenty-five dollars per hour by working for Acme Inc. He works two hours, which is enough to buy the train ticket, and to take Ann to her favorite restaurant, the Rose Pub. Ann’s friend Marie works there as a waitress, and she wants to introduce Bob to her. They meet up, have a great time together until Bob must take the train back home. Marie is very busy and doesn’t get much of an impression of Bob, but Bob immediately feels connected with her when she serves them. Bob pays the check for $40 of which Marie $10 from the Rose Pub.
We can make account of the economy, like this:
1) The economy is descripted as a graph
2) A vertex is a person or a thing
3) An edge is an interaction, either “I-Thou” or “I-it”
interactions={
{“Bob”→”Acme”} → {“production” → 2"hours work”},
{“Acme”→”Bob” } →{“payment” →50"$”},
{“Bob”→”Railex”} →{“payment” → 10"$”},
{“Railex”→”Bob”} →{“production” → 1"train ride”},
{“Bob”→”Rose Pub”} →{“payment” → 40"$”},
{“Rose Pub”→”Bob”} →{“production” → 2"dinners”},
{“Marie”→”Rose Pub”} →{“production” →1"serve restaurant table”},
{“Rose Pub”→”Marie”} →{“payment” →10"$”},
{“Bob”→”Ann”} →{“thou” → “♡”},
{“Ann”→”Bob”} →{“thou” → “♡”},
{“Ann”→”Marie”} →{“thou” → “♡”},
{“Marie”→”Ann”} →{“thou” → “♡”},
{“Marie”→”Bob”} →{“thou” → “♡”}};
Now we draw it as a graph. We use different colors for souls and objects, and for the two types of interactions — “Thou” and “it”.
Here is the graph of the story:
Basic Economics
Here is the economics of the story. First, let us list all value creation:
production →2 dinners+2 hours work+serve restaurant table+train ride,
payment →110 $,
thou →5 ♡
“ITness”: the value created by I-IT interactions
The itness created in this example is the sum of all production (gray) and payments (green).
production →2 dinners+2 hours work+serve restaurant table+train ride,
payment →110 $,
“THOUness”: the value created by “I-Thou” interactions
In the same way, the created meaning is the summed up “thouness”.
thou →5 ♡
We may coin the “meaningful efficiency” as the ratio of Thouness/Itness.
Meaningful Efficiency:
Thouness/Production → (5 ♡)/(2 dinners+2 hours work+serve restaurant table+train ride)
Thouness/Payment → (♡)/(22 $)
Comparing People-Centered and Classical Economics
Classical economics does not have a way of representing “Thou”, everything is “It”. In the absence of “Thou”, meaning equals maximizing the means. This means increasing the GDP, increasing profits, and so on. The assumption is that people will find their own meaning when provided the means. If this would always be true, then classical economics would not be flawed. But we know that it is flawed, because entirely focusing on creating wealth is not the best way of creating well being. Let us look closer at how this works and if people-centered economics can make a difference, and if that can be for the better or worse, or both.
In both the people-centered and classical economics it is meaningful for Bob to work two hours extra in order to afford going out with Ann. The difference is, in classical economics it will be even more meaningful if Bob works six hours extra and spends the money on healthcare to treat his work stress, instead of taking Ann out for dinner. In the people-centered economics, if Bob does works the extra hours instead of going out, GDP will increase just like in classical economics. The difference is that it creates less Thouness so that the meaningful efficiency of the economy will go down.
Despite lacking Thou, interpersonal relationships will be recognized as meaningful also in a classical analysis, as drivers of production. People want houses for their families, schools for their kids, cafes for meeting friends, and so on. But classical economics will in this way objectify interpersonal relationships, the Thouness is as valuable as the GDP it creates. This gives rise to interesting perversions in classical economics. For example, if people spend less time with family and friends and work more, this is “good for the economy”. If Acme transfers Bob to another city that is further away from Ann, it is also good for the economy, because now Bob must work more hours and take a more expensive train ride to go visit her.
In people-centered economics this will not happen. Staying more with family and working less might or might not improve the economy. If it means that family members will not afford to visit their friends, it might be bad for the economy, shrinking the meaningful efficiency. But if it means they find their time more well spent with people they connect with, the meaningful efficiency will go up. They will have incentive to work more hours and increase the GDP if they see a meaning in doing so, i.e. it increases Thouness. If Bob is transferred further away from Ann, GDP will increase, because Bob will have to work more hours in order to see her, but the Thouness would not increase, and therefore the meaningful efficiency would shrink. The dollar would lose power in bringing people together. With Thou as the meaning and It is the means, the people-centered economics will not have an incentive to objectify Thou, as classical economics may unwittingly do, as long as macroeconomic policies focus on increasing Thouness and tending to the meaningful efficiency.
The different view on what is meaningful in classical economics and people-centered economics is this:
- Classical Economics:
“It is meaningful that Bob visits Anne because it makes him works extra hours” - People-Centered Economics:
“It is meaningful that Bob works extra hours so that he will visit Anne”
The classical economics comes across as cynical, while the people-centered is in line with how individuals think and speak.
This difference in reasoning is expanded for some cases:
