Psychologists
have noted that when asked a question, people often answer a different question which they find easier to respond to. Neoclassical economic theory, or ‘mainstream’ economic theory, seems a good illustration of the phenomenon. Instead of answering the question, ‘How does economic exchange work?’ neoclassical economists have answered a different question: ‘What does a system look like in which the pursuit of private interest
leads to the fulfilment of public interest
?’ The answer to the different question is the neoclassical economic model.
The first question is the subject of this ‘Starter’. The answer requires first an answer to the broader question: ‘How does social and political society work?’ ‘Democracy
’ provides a fine set of principles but does not explain how ‘democracies
’ actually function. It is suggested that they function through ‘support-bargaining’. People need support from those around them as a matter of personal security
, and will change their opinions and behaviour to get it. Individuals instinctively bargain for support with each other and in the process form groups committed to certain interests, actions, ideas, opinions and theories. The mutual support of members promotes confidence
in a group regarding the rightness of its commitments, however odd they may appear to non-members. ‘Support’ functions as a bargaining counter in a bargaining process through which individual interests
and group
or social interests
become
adjusted to each other.
It is then possible to answer the first question. Amongst the varied outcomes of the support-bargaining process is ‘money’. ‘Money’ gains support in a community because it is useful in a bargaining process with a similar dynamic to that of support-bargaining. ‘Money’ is a precise and divisible bargaining counter particularly useful in transactions involving items with similar qualities. ‘Support’ is a matter of psychology
, lacking the characteristics desirable in a bargaining counter for use in economic transactions. So long as a form of money has the support of the community in which it is used, it will function as a bargaining counter in a process of ‘money-bargaining’. So, the answer to the first question is that economic exchange is a money-bargaining system.
Mainstream economic theory recognises the ‘public interest
’
as the ‘optimal allocation of resources
’ arising from the pursuit of private interest
through economic transactions. The outcome is optimal in the sense that no redistribution of resources can make anyone better off without making others worse off. Few would recognise this as being the public interest
in any but a technical sense. The idea of support-bargaining makes apparent that a great variety of group or communal interests
can be identified through support-bargaining. It is then necessary to realise through money-bargaining not just the individual interests
that are the concern of neoclassical theory, but also communal interests
. To accommodate communal interests
, it has been found possible to make levies
on private money-bargaining, without disabling private money-bargaining systems, to provide revenues for government budgets
. Money can then be disbursed for the accommodation of communal interests
. Support-bargaining agencies, including political parties
and governments, are accorded responsibility for communal interests
. Governments are able to realise communal interests
through budgetary
expenditures. They become part of money-bargaining systems. Money-bargaining systems are concerned with both individual
and communal interests
.
* * * *
This Starter provides an account of support-bargaining, the formation of theories through support-bargaining, the origins of money-bargaining in support-bargaining, the dynamic of money-bargaining and the interrelation of money-bargaining and support-bargaining. It evaluates the role of information
in human affairs. It explains also how it is that mainstream theory has emerged as the mainstream when it so manifestly fails to provide a faithful account of the dynamic of economic exchange. There is little that is novel, but the Starter is not simply a summary of previous work. It is a new expression of the theory of support-bargaining and money-bargaining. The compact format makes apparent the relationship of the different components to each other. It provides direct answers to the questions thrown up by the many who challenge the mainstream model. It provides a new account of economic exchange, but one that will be instantly recognised as consistent with everyday experience.
‘The Main Course’, at the end of the book, provides summaries of the contents of the seven books already published on support-bargaining and money-bargaining.
‘Notes from the Kitchen’ at the end of each chapter identify the main coverage of the issues of each bite in earlier books, with an indication also of the main sources used. A full account of the sources used is provided in the earlier books.
Notes from the Kitchen
Sources
The Introduction to Economics for an
Information
Age (EIA) considers responses to questions. Chapter 9 of Kahneman (2012) is ‘Answering an Easier Question’.
References
- Kahneman, Daniel, 2012, Thinking, Fast and Slow, Penguin.
- Spread, Patrick, 2019, Economics for an Information Age: Money-Bargaining, Support-Bargaining and the Information Interface (EIA), Routledge.