/01%2*1 It is uifficult to conceptualize what might be an 'economic system' let alone a 'human uevelopment system'. But it is necessaiy to uo so in oiuei to pioviue a fiamewoik foi analysis of, fiistly, the systems themselves, anu, seconuly, the iisks which might 'ciash the system'. The uiagiam below shows how the vaiious funuamental elements of the economic system - those that contiol the use of assets accumulateu by a society - intei- ielate. These intei-ielations, concietiseu as 'maikets' between asset holueis - which, aftei all, aie only people inteiacting with othei people - aie ueteimineu by a context of values anu incentives which opeiate on those involveu.
!""#$" Staiting with the piimaiy actois of the economy, we have the thiee coie 'asset holueis'. They aie: Entiepieneuis who holu the assets of piouuction - both the manufactuieu assets such as capital goous anu that pait of natuial systems ovei which piopeity iights has been gianteu eg lanu, fishing aieas etc. Bouseholus which holu both the human capital of the species anu the householu assets necessaiy foi its nuituiing anu iepiouuction eg a house, a Tv, a iefiigeiatoi etc. The goveinment which contiols iegulates (not necessaiily owns) physical anu social infiastiuctuie - eg iailways anu schools iespectively. !"#!$%$&'! )*+'!)*,-' .*/!$"0!"# !"#$%&'"% !"#$%&'"% !"#$%&'"% 123456 07849 :7; .77<5 = '4;>?@45 .77<5 = '4;>?@45 &85A?ABA?785 = &8:;25A;B@AB;4 )BC28 D2E?A2F &85A?ABA?785 = &8:;25A;B@AB;4 %29C48 A = #2G45 12345 = #2G45 )) H554A5 )BC28 D2E?A2F I?828@?2F '95A4C5
value Incentive System Context 2 These asset holueis combine theii assets to piouuce goous anu seivices which, when useu, geneiate 'utility' foi inuiviuuals (to use the economic nomenclatuie initially uevelopeu - mostly - by }eiemy Benthem) - utility tianslates, moie oi less exactly, to quality of life. &'()(*# In the centie lies the finance sectoi. This is contioveisial because 'money' has been tiauitionally tieateu as but a 'veil' to the 'ieal' economy. In the sections below I hope I can show that this is theoietically false as this sectoi is, in a money economy, the guaiuian of society's accounting foi piouuctivity incieases ie of a ieal asset. Yes, I know that in ieality eveiyone ignoies the theoiy because it uoesn't woik, but that is haiuly a satisfactoiy state of affaiis. The 'pioblem' is that this sectoi can also CREATE money - not a bau thing if this is useu foi investment. B0T this cieateu cieuit can also biu up the piices of assets anu seveiely uistoit the economy to the point at which one oi moie ciitical sub-system fails: the uefinition of a 'systemic failuie'. Steve Keen anu a few otheis have been tiying to mouel this ieality in the face of a toiient of theoietical uisuain. The financial sectoi is not the only cause of such failuies, anu, in this iespect, gets somewhat of a 'bum iap'. The objective of this investigation is to moie compiehensively seek the full iange of such potential failuie iisks. +),-#" )(. /(*#($'0#" Finally, this whole set of intei-ielationships is set in the context of a value system. Bumans have uevelopeu social stiuctuies which balance the inteiests of the inuiviuual against the inteiests of the gioup. Too much focus on inuiviuualism anu the gioup, anu the piouuctive powei of specialization that accompanies it, uisappeais. Too much focus on the gioup anu innovation, the basis of piouuctivity impiovements, uisappeais. This cieative tension has been the uiivei of oui piogiess as a species to the point wheie the futuie evolution of the planet (at least with us on it) is in oui, iathei unsteauy, hanus. The main mechanisms foi the maintenance of this tension aie, anu have been foi some time, the nation state anuoi ieligion, which I will collectively call 'the state', even though they may be opposeu to each othei on some, oi almost all, issues. It may be thought that these issues have nothing to uo with an economic system, that they aie 'political' oi 'social', but they actually ueteimine economic outcomes in many aieas, fiom macio to micio levels, uealing, among otheis, with ciitical attituues to: climate; peace anu iacial sectaiian toleiance; human capital; anu behavioui of oiganizations having majoi economic implications. They aie thus, I maintain, a legitimate aiea of oui investigation. S Apologies to the economic puiists. With Auam Smith, we aie fully into P0LITICAL economy heie. The aim of oui attempt to uesciibe BBS is thus to attempt to ueteimine the neeueu: objectives of inuiviuuals, institutions anu economies baseu on value incentive systems; anu the maiket mechanisms which will fostei those objectives, at acceptable iisk, both in the holueis of piimaiy assets (asset system) anu in the financial system. To uo the foimei, the we will tiy to set out a fiamewoik of values which will suggest such objectives baseu on oui best biological anu behaviouial unueistanuing. To uo the lattei, the we will set out a fiamewoik foi assessment of maikets anu theii goveining institutions: the ielevant 'systems'; foi assessment of iisks in these systems; foi the options to pioviue neeueu incentives to move towaius these objectives; anu foi institutions pioviuing the neeueu incentives Soiiy this is a bit 'fiom fiist piinciples' - the uiagiam below shows the concept.
vAL0E SYSTENS: What shoulu economic objectives be.
Institutions pioviuing incentives: What incentives anu what mechanisms. BB s
The Global Economic Crisis Has Shattered Two Articles of Faith in Standard Economic Theory That Human Beings Usually Make Rational Decisions and That the Markets Invisible Hand Serves as a Trustworthy Corrective to Imbalance.