Metaeconomics

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Metaeconomics is defined in a manner similar to Microeconomics, still retaining the focus on economic decisions by individuals and firms, but with the Meta meaning going beyond, transcending. Metaeconomics sees a Market Forum as a Decision Forum influenced by the Community. So, Metaeconomics sees the fundamental need to go beyond the Microeconomics frame of the Market, which sees the Economy without attention to the Community. As Marglin has argued, even thinking in terms of standard Microeconomics could serve to undermine Community. Metaeconomics works to resolve this matter.

Recognizing Community means that Metaeconomics brings the Moral Dimension into view, which starts with Empathy, and focuses attention on how that dimension affects Price. Metaeconomics goes beyond and transcends by seeing a variety of legitimate Other Forums essential to representing that Moral Dimension... e.g. in the US Government, there are Administrative, Legislative, and Judicial Forums. Other Forums also operate in the broader Community, serving to nudge Self-interest to better choices, and, when bad choices emerge instead, may be controlled through regulations, law, and Government. The Other Forums work to help represent the Empathy based Other (shared ethical, moral dimension based)-interest... serving to temper and bound the more primal, Ego based Self-interest driven choices.

Metaeconomics revives the original intent of Adam Smith, who framed the economy in 3-dimensions: moral rules, government and law, and markets. Metaeconomics integrates the 3-dimensions, with moral rules undergirding government and law, and the Community more generally, all represented in a shared Other-interest. The Moral Dimension was to be brought into the Market through the Moral Sentiments... in modern terms and Metaeconomic framing, through the Empathy based Other(shared with others in the Market, but internalized to Own-self)-interest.

Due to bringing Empathy back into economic thinking as Adam Smith originally had in mind, Metaeconomics is a Framework and Theory of use in building a more Humane Economy, an Empathy Economy... integrated with the more primal Ego Economy... as part of an Empathic Civilization. Stakeholder Capitalism is also about bringing an Empathy based Other(shared with suppliers, customers, employees, natural systems on Spaceship Earth, as well as shareholders)-interest to bear in tempering and bounding the Ego based Self-interest (represented in Management, CEOs) driving the pursuit of profit in Capitalism.

Assumptions and Definitions

Many if not all of the assumptions and definitions in Microeconomics) also undergird Metaeconomics. The main differences arise due to Metaeconomics being based in empirical testing coming out of Behavioral Economics (for an overview of the Behavioral Economics empirical evidence, see Altman; Tomer). In contrast, Microeconomics largely rests on the Milton Friedman claim in The Methodology of Positive Economics that if the model predicts reasonably well, it does not matter if the assumptions and definitions are based in empirical reality or not. Due to Metaeconomics assumptions and definitions being based in empirical testing, there are some differences.

The main difference is that Metaeconomics sees a dual interest at work in achieving rational choice, based in subselves and multiple selves psychology, ego and empathy findings in Neuroscience, and the role of empathy documented in Neuroeconomics. A growing literature in behavioral science (especially in Behavioral Economics) points to Empathy-Sympathy-Compassion playing a substantive role, on the path to a more Humanistic Economics, moving beyond... by Tempering and Bounding... the more primal Egoistic-Hedonistic tendency in human nature.

The main difference is made clear with recognizing that Ego based Self-interest is joint, interdependent and non-separable with the Empathy based Other (shared with others, but still internal to the Own-self)-interest. Metaeconomics sees a rational person maximizing Own-interest through finding balance in the interdependent Self&Other-interest.

Just like Microeconomics, Metaeconomics is focused on the person, not other people: It is about self/own-regarding, within Own-self. A person considers others only in the sense of being mindful of people, and also of nature... the Community writ large... outside of Own-self. It is configured like Humanistic Economics and Buddhist Economics.

It especially recognizes the part of Buddhist Economics which puts focus on self-sacrifice, and being Selfless rather than focusing on the more primal Selfish tendencies. Through Metaeconomics focusing on maximizing Own-interest, there is more often than not a requirement to sacrifice a bit in Self-interest. Maximizing Own-interest also requires sacrifice in the Other-interest. Altruism now means, in Metaeconomic terms, to sacrifice potential gains in Self-interest to potentially achieve gains in Other-interest, and to sacrifice potential gains in Other-interest to potentially achieve gains in Self-interest.

Metaeconomics also sees the key role of Self-control in finding the balance in Self&Other-interest, in that the more primal drive of Self-interest needs to be Tempered and Bounded by the Other-interest, through Self-control. If Self-control fails, Metaeconomics sees a role for a nudge, and, if needed, a move to regulation and outside control... the libertarian paternalism of Thaler and Sunstein. As Elster makes clear, there are times when it is essential to "bind me (bind the Egoistic-Hedonistic drivers in the self-interest, in the pleasures promised by the Sirens) to the mast."

Due to seeing both Ego&Empathy, Self&Other-interest at work in rational choice, Metaeconomics includes the potential for both a Pleasure Utility and a Moral Utility, which may or may not be commensurable (empirical question), as suggested by Etzioni. Another possibility is material and symbolic utility, as suggested by Khalil. The matter of two almost opposite pulls, leading to tension over economic choice, is actually a very old argument. It goes back at least to Plato's chariot being pulled by the Ego based black horse harnessed with the Empathy based white horse. The white horse works at tempering and bounding the black horse, with the driver working for rational balance, which is essential to moving forward.

Seeing an Empathy based Moral Utility results in Metaeconomics also seeing pervasive interdependence among individuals, among firms, and as between individuals and firms, as well as between and among people which is also the case in Humanistic Economics, Feminist Economics, and Buddhist Economics. Metaeconomics also sees pervasive interdependence between people and nature, between people systems and the other systems on the Spaceship Earth. Being based in 1st and 2nd Law Thermodyamics, Metaeconomics sees the Market, the economy as embedded within the Spaceship Earth System, as in Ecological Economics: Everything in the Market, in the economy writ large, is internal to that system, so there are no externalities. Metaeconomics posits that empathy is the key to understanding the interdependence (everything internal, no externalities) of the economy and the Spaceship Earth system, an emerging theme in sustainable systems thinking,. Empathy plays a substantive role in better ensuring a rational choice, which is also a proposition in Feminist Economics, as well as Buddhist Economics. Adam Smith also well recognized Empathy (and Sympathy-Compassion arising out of it), which at the time, was referred to as the Sentiments.

History

Metaeconomics shares in the history of Microeconomics, especially going back to the first Nobel Prize in Economics (shared) awardee, Ragnar Frisch. In fact, the core idea in Metaeconomics... as represented in the inherent interdependence between and among individuals and firms... rests in the original formulation in Frisch. Frisch demonstrates in both graphical and mathematical terms how to represent and model interdependence, jointness, and non-separability, which is demonstrated to arise from nonallocable inputs in production. A version of the same analytical machinery was first used to represent interdependence, jointess and nonseparability arising from nonallocable goods in consumption in Lynne. Recognizing interdependence is to bring ethics and the moral dimension back into explicit consideration in economics, which is the signal feature of Metaeconomics.

Metaeconomics and Microeconomics share much of the same history, resting on essentially the same set of assumptions, and even using similar analytical machinery as illustrated in Figure 1, with a fundamental difference tracing back to the mid-1930s. In particular, both Becchio and Buracas point to the notion of Metaeconomics first proposed by Karl Menger (son of the economist Carl Menger, who contributed to marginal productivity theory, a key part the Neoclassical Economics approach that uses Microeconomics), a mathematician in Vienna in the 1930s.

Becchio points to how Karl Menger was a supporter of the Hilbertian program on economic theory which Menger referred to as applying a kind of Metaeconomics, which was consistent with the philosophical foundations of the neoclassical approach. As Becchio makes clear, the aim was to apply a metamathematical model to economic theory. The goal was to free what would become modern Microeconomics from ethics, free it from ethical and moral considerations, believing it would reduce logical mistakes. Buracas points to how Metaeconomics now represents an economic approach that, in contrast to Microeconomics, reintegrates ethics and economics.

As noted earlier, it was Adam Smith who pointed to keeping the ethical system, the moral dimension, explicit in economics. Baracas also points to the other main feature of Metaeconomics, which was also a theme in Schumacher: Metaeconomics recognizes thermodynamic limits, and sees the key role of the Moral Dimension in achieving sustainability.

Metaeconomic Theory

The key feature of Metaeconomics Theory is the attention to nonallocable inputs or goods as illustrated in Figure 1 by overlapping isocurves: Overlapping isoquants in production and overlapping indifference curves in consumption. It is the overlapping of isocurves that characterizes interdependence, jointness and nonseparability, in contrast to the more typical single set of isocurves representing independence, non-jointness and separability in Microeconomics. Seeing interdependence in both consumption and production...and, then, in demand and supply... also facilitates attention to bringing the consideration of ethics, the moral dimension, back into explicit consideration.

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Isocurves illustrating interdependence, jointness and nonseparability

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The empathy based Other-interest on path 0M serves to temper and bound the more primal Self-interest on path 0G, which results (with sufficient Self-control) in a rational choice path 0Z on the way to maximizing Own-interest.

In contrast to Microeconomics, it is not irrational to consider the Moral Dimension represented in the Community; in fact, every point on path 0Z in Figure 1 represents a bit of sacrifice in Self-interest payoffs, generally essential to doing-the-right-thing, to achieving an overall better outcome. Rationally moving on path 0Z also means sacrificing a bit of Other-interest, as represented in path 0M, also helping achieve a better outcome. Rational path 0Z is about balance in a person's life, the tendency to Egoistic-Hedonistic choices tempered and balanced by Empathy-Sympathy-Compassion, the latter for both Own-self and in effect for others, yet, it is still internalized within the Own-self.

Production (Supply and Derived Demand) Theory

As in Microeconomics, there is also a formal, Mathematical Metaeconomics of Production, which formalizes the notion of nonallocable inputs leading to interdependence. Classic examples of interdependence, jointness, and nonseparability due to nonallocable inputs were given by Frisch as represented in the cases of producing mutton and wool; eggs and poultry meat; or producing gas, coke and coal tar, as illustrated in Figures 14b.2 and 14b.3 in Frisch, and represented in Figure 1 with inputs on the axes and products in the isoquants. The sheep, chicken, and chemical process are in charge of the relative amounts produced, not the manager, not the economic decision maker. The sheep rancher can feed varying proportions of grain and hay: The sheep internally allocates the grain and hay between mutton and wool, with very limited to no control even possible by the rancher.

Textbook Understanding of Metaproduction Economics

Metaeconomics points to how production can also have a Community dimension, as in an influence from the Other-interest. For the Self-interest only, independent production processes (fully allocable inputs) case, see Microproduction Economics.

Community influences are regular occurrences in real production processes. It is common in sheep ranching communities, for example, to have sheep shearing days, wherein all the ranchers join together in harvesting the wool. Looking to Figure 2 (representing Figures 14b.4 and 14c.2 in Frisch), Metaeconomics points to the shared Other-interest at work in producing the wool, e.g., the camaraderie from a day of shearing, together, paying off with a joint outing at the local pub that evening.

For the mutton, on the other hand, each rancher simply calls in the shipping company to haul the sheep for meat off to market; only Self-interest at work for mutton. Hay (x1) and grain (x2) produce a mainly Self-interest product represented in meat (q2 represented in IG) and a product that has some shared Other-interest features represented in the wool (q1 represented in IM). Microeconomics would suggest looking at only the Self-interest components of each and maximize the Self-interest based profit. Metaeconomics sees the interdependent, joint, non-separable shared Other-interest arising out of the nonallocable inputs between the Market and the Community outcomes, and points to maximizing Self&Other-interest, as represented in maximizing Own-interest.

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Possibility Curves illustrating the influence on Choice arising jointly from the Price Evolving in the Market Forum and from the Value Evolving in Other Forums

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Microeconomics specifies profit maximization at some point A in Figure 1, paying attention to the ratio P1/P2, and moving up that path until the marginal returns are just equal to the marginal costs, which occurs as the rancher reaches point A. Metaeconomics transcends and goes beyond by accounting for the role played by the non-money valued other-interest V coming out of the camaradarie from shearing sheep, together in shared community. Metaeconomics predicts the rational choice is on some path 0Z, putting more favor into path 0M than Microeconomics would deem rational.

Metaeconomics says it is, indeed, quite rational to not maximize profits, choosing point B, instead. Looking at Figure 2, point B shows the interests, the payoffs, are balanced by both the Prices for meat and mutton, and the Value (Priceless) of the comaraderie in shearing wool. The Value V influences the kind of response to the Price P. The Value V coming out the Other Forum (the Community of ranchers shearing sheep, together) is represented in the slope of the IGM2 curve.

And, if the rancher was driven mainly by camaraderie with others in the community of sheep ranchers, the Value is represented in IGM3 in Figure 2, with maximum Other-interest at point C: Perhaps sheep ranching is more a way-of-life in a Community, and not much about the money, the profit. Metaeconomics clarifies that Value influences but is not the only component of Price. Looking at Figure 2, Metaeconomics suggests the rancher will rationally achieve Happiness at point B, not in extreme points dictated by the Market (point A) or by the Community (point C). The Happy point B shows balance in Price&Value, Self&Other-interest, Market&Community, Market&Government. Happy (and rational) point B arises due to the Empathy based other(shared with the other ranchers, yet internalized within own-self)-interest tempering and bounding the Ego based self-interest. As derived in the Mathematical Metaeconomics, formal model, the supply functions evolve along the path 0Z, with both a P1, P2 influence coming out of the Self-interest and a Value influence coming out of the Other-interest. Supply by the rancher is interdependent with the larger Community within which the rancher produces sheep. The derived demand functions for inputs also evolve along path 0Z; again, like with the supply, the shared Other-interest also influences the derived demand.

Metaeconomics facilitates addressing the case arising when one of the products is entirely a non-market product... a common occurrence with respect to Spaceship Earth System products... things produced naturally by the hydrologic system, climate system, ecosystem, soil and water systems, as considered in the Empathy Conservation literature. Assume for the moment that wool was only sheared because the sheep needed to be clipped in order to withstand the heat of the summer.

In shearing strictly for heat management, Microeconomics points to path 0G, only, and ignores the camaraderie for ranchers shearing sheep, together. It also ignores the fact the rancher is in effect, first, empathizing with the sheep, then, second, sympathizing and eventually, third, acting in compassion for the sheep, making them more comfortable during the heat. In such a case, the rancher operating with empathy would work to temper the (ego based) self-interest even more, perhaps moving even closer to point C, just in order to do the right thing by both the other ranchers (camaraderie plus revenue from selling the wool) and the sheep. The rancher as producer is doing the right thing by the larger Community, as perceived through a rational choice in the Own-interest of the rancher.

Empirical testing suggests Metaeconomics can be a more powerful analytical system when ever there is a Community issue related to the Market, as in the empathy based camaraderie of shearing sheep with other ranchers as well as in the empathy with the sheep. Microeconomics extracted the Community. Metaeconomics put it back, through the construct of the shared Other-interest.

Due to Metaeconomics being based in empirical testing and science, it has pointed to how real producers do not always choose path 0G (or the vertical axis, absolute Self-interest only) as Microeconomics claims (generally without empirical test). Real producers are influenced by the Community of shared Other-interest, as Metaeconomics claims (generally with empirical test), moving onto path 0Z. Looking at Figure 1, with more industrial inputs on the vertical axis and more conservation oriented inputs on the horizontal axis, the mix of market products (e.g. more corn, soybeans, wheat) and non-market (e.g. better downstream water quality, less over pumping of groundwater aquifers, more wildlife in the farm fields) products will often be at point B, not at the Self-interest only point A. Values beyond Price affect economic choice when it embeds conservation.

Empirical Testing: Field and Survey Research

Many studies have rejected the notion from Microeconomics that Self-interest only explains conservation behavior. One of the first showed that shared, community attitudes representing the shared Other-interest were a major force in the adoption of conservation tillage. The same study showed that inserting Self-interest style variables into what otherwise was considered an Other-interest only (coming out of sociology) model also improved the latter. The overall conservation norm in the farming commmunity was shown to be a major force in adopting drip irrigation technologies, along with asserted control by regulatory agencies. As Lockeretz had pointed out a few years earlier, the empirical evidence was accumulating that there was no coherent economic framework and theory to explain conservation behavior; the result was to propose Metaeconomics.

Guided by Metaeconomic framing and theory, it was now possible to refine and focus the empirical testing. One such study showed how the shared Other-interest was represented in the older, well-established idea of Stewardship. Still another went outside the arena of soil and water conservation, using Metaeconomics to guide empirical testing of the farmer adoption of anaerobic digestion technology, again finding support for the role played by a shared Other-interest. It was found that shared Other-interest played a substantive role in farmer decisions about adopting conservation tillage for the purpose of sequestering carbon in the soil, and, thus, contributing to solving the ongoing move to the Tragedy of the Commons pertaining to over use of the limited capacity of the atmosphere on the Spaceship Earth to hold and process greenhouse gases.

Another study moved Metaeconomics to addressing dual interests as a better overall frame, pointing to how Self-interest was likely more primal, secondary to the shared Other-interest, while demonstrating a substantial role of the shared Other-interest in driving conservation tillage adoption behavior. The approach gave a 3-fold improvement in the capacity to explain variation in choices as contrasted with Microeconomics. The key role of Self-control was also highlighted.; the notion of Empathy Conservation eventually evolved out the fundamental role found for Empathy in that study.

Empirical Testing: Experimental and Behavioral Economics Laboratory

The focus on farmers and farming stayed the same as in the field and survey research. Often real farmers would also come into the laboratory settings, as the general population was invited to participate. Most participants in the experiments, however, were university students, although many of them had farming backgrounds. Also, the experiments were consequential to choice for students, who generally are not earning large incomes. All the experiments were done using real money, with far better than typical earnings per hour while in the experiment than in the labor force as a student.

1. In a carbon offsets trading experiment, participants asked to play the role of a farmer could sell carbon offsets to an environmental organization, who would retire the offset, in effect reducing the carbon load on the atmosphere, or, they could sell the offset on the market, which maintains the current level of carbon load, except to the extent that those selling the offset would not normally be able to do so unless they first reduced their own contribution to the load. Strong support was found for Metaeconomics on three fronts:

a. Persons in the experiments demonstrated overall tendencies to seek balance within their own-interests.

b. Persons were willing to sacrifice more in one domain or the other as they oriented and reoriented their interests in going through the various phases of each experiment, as Metaeconomics posits.

c. Persons stirred in the priming and the psychological questioning produced rational consideration and reconsideration. The priming moved , choice out of the domain of only intuition-based habitual behavior, within which the pursuit of self-interest is likely more primal. The result was that Self-interest was tempered and conditioned by the consideration of shared other-interest, as Metaeconomics predicts, leading to a truly rational choice.

2. Follow-up experiments by Czap and Czap (2010); Czap and Czap (2011) added the option to donate the offsets to the environmental organization, who then retired same; the experiments gave additional support:

a. 10-percent took the option of donating options, even when prices that could be received for selling the offsets were increased: “the participants consider donations as something that they ‘ought to do’ regardless of the income that they are getting from other (selling) activities” (Czap and Czap 2010, p.2038), suggesting pecuniary and non-pecuniary domains of interest are not subject to a simply trade-off.

b. Changing the prices for offsets did influence the selling choices as between the environmental organization and the offsets Market, suggesting that Self-interest also conditions and otherwise influences the Other-interest, as long as both are in the pecuniary domain (both have Prices).

c. Decisions to join in the shared Other-interest, environmental cause were stirred by those who first start moving more offsets to environmental organization (Czap and Czap 2011); Other(shared with others)-interest can be nudged by those already in the cause.

3.Czap, Czap and Bonakdarian measured the level of empathy, and probed into the matter of contributing to the provision of public goods, finding:

a. The degree of empathy is the important driving force behind the shared Other-interest in a common cause.

b. Locus of control and past contributions (i.e. habit, represented in longer standing shared Other-interest) are among the most important determinants of current behavior.

c. More empathetic people are more likely to engage in a new Other-interest, to join-the-cause of providing a public good.

d. People will contribute more in the Other-interest when it reflects a true public (i.e. nonexcludable) good than an excludable public good, suggesting they are more likely to join in sympathy with goods they cannot freely opt out of being affected by the outcomes; having less freedom to affect outcomes results in more voluntary engagement in the shared Other-interest of the common, truly public good, suggesting another dimension of control and Self-control, with control a main focus of Metaeconomics.

4. A series of downstream water pollution experiments were conducted, relating to upstream soil and water conservation efforts, keeping soils from eroding (and, related thereto, keeping chemicals and fertilizer from entering downstream waters), with substantial support for Metaeconomics as follows:

a. A one-unit change in empathy (as measured on the Likert scale) leads to an increase in conservation effort by 3.3-9.5 percent depending on the model, which is quite substantial.

b. Empathy framing works in nudging people towards more environmentally friendly behavior; an empathy frame caused upstream farmers to allocate on average 47-percent of their land towards conservation, while in the Self-interest frame only 19.6-percent. Metaeconomics would propose that empathy tempers Self-interest, which is confirmed by the finding.

c. Farmers on the river who also drew water from the river for drinking purposes gave strong evidence for the balancing of Self&Other-interest that Metaeconomics predicts is essential. Such farmers (experimental participants in the role) did the balancing to a substantial degree, no matter which framing was used: They allocated 45-percent and 39.2-percent of their land for conservation in the empathy and self-interest treatments respectively. The group, as designed in the experiment, had to walk-in-the-shoes-of-others and they indeed chose to give up a significant share of their potential profit even when nudged to look for their Self-interest.

d. Emotional feedback was examined via players being able to send smiley  and frowney  emoticons to other players. Several findings support Metaeconomics, and especially the finding that the expression of the frowneys by the downstream water users was quite effective in moving the upstream farmers towards giving up some of their profits in favor of the downstream users. Passing on the negative emotions resulting in evoking empathy in upstream farmers and stirred the Other-interest in better quality water for everyone.

e. Follow-up studies compared the effectiveness of inducing conservation by imposing a fine for non-compliance and the assignment of property rights to the downstream water user. In both approaches, participants chose levels of conservation close to the shared optimal level, with inducing empathy working better for achieving more equal profit distributions than imposing a fine. Intriguingly, as Metaeconomics predicts, imposing monetary fines was found to be counterproductive: Fines lowered conservation levels, while not affecting sharing. In contrast empathy nudging increased sharing behavior, but did not significantly affect conservation. Assigning the property rights to the downstream water users led to more sharing. Overall, Metaeconomics suggests that empathy nudging would be more effective than fines, i.e. encouraging people to temper their Self-interest, rather than to punish (fine) them for not doing so.

f. Continuing the conservation behavior testing, four alternative conservation policy designs were examined: Financial incentives through a crop insurance subsidy given regardless of conservation nudging; crop insurance subsidy associated with and used to directly nudge conservation; and, empathy nudging with each of the subsidy cases. Intriguingly, as Metaeconomics would predict, a combination of pecuniary incentives and nudging empathy was most effective.

Other Behavioral Economics studies have given similar outcomes: Financial incentives matter due to Self-interest in same, but money isn’t everything, location 1731., as the Other-interest framing and influencing the pursuit of Self-interest in Metaeconomics makes clear. It was also found that no matter the current level of conservation, financial incentives are far more powerful and effective in inducing more conservation when combined with empathy nudging. Gender also makes a substantive difference, in contrast to Microeconomics contentions that male and female preferences are essentially identical, location 5113. In general, the differences arise in the Other-interest playing a larger role in females, as is well documented in Feminist Economics contention that Community plays a substantive role; Metaeconomics helps makes sense of the contention due to Empathy being found more prominent, a greater force, in females than in males.

Empirical Testing: Overall Findings

Bottomline: The empirical testing of Metaeconomics going back to the late-1980s provides substantial support for Metaeconomics, starting with Lynne, Shonkwiler, and Rola. It was clear that an alternative framework and theory was needed, as Lockeretz (cited earlier) had also argued at about that same time. The progression toward Metaeconomics is documented and summarized in great detail in Lynne et al., also supported by the more recent work by Czap et al. (referenced earlier) in the economics laboratory, a research program that is ongoing.

The word is also spreading into other disciplines and frames. Empathy will be a key factor not only in ensuring sustainable food production. It will likely be found a major force in all industries, in the supply of virtually all, it not all, other products: Empathy will likely prove to be a key driver in all manner of production.

Consumer (Demand) Theory

As in Microeconomics, there is also a formal, Mathematical Metaeconomics of Consumption, the formal representation of nonallocable goods giving rise to interdependence. For the allocable goods case giving rise to complete independence among consumers, see Microconsumer Economics. Nonallocable goods, leading to interdependence between and among consumers, is represented in overlapping indifference curves: See Figure 1, now seeing goods on the axes, and the iso-curves as indifference curves. One set represents Self-interest and the other set represents the shared Other(again, internalized to the Own-self)-interest.

Textbook Understanding of Metaconsumer Economics

Consider Figure 1 now representing any pair of consumer goods. Consider the classic case of bread (q1) and wine (q2). If both goods are consumed strictly for their utilitarian purposes... bread for nutrition and wine for the hedonistic payoff from drinking alcohol... the Self-interest set IG, as in Microeconomics framing, is more than adequate to the task of analyzing consumer choice. Due to hedonistic tendencies, fed by consuming lots of wine perhaps being more primal, Consumers simply move up the Ego based path 0G.

Bread is still given some payoff, too, so the consumer is paying attention to the marginal utility as they go, relative to the marginal costs of doing so, until the income constraint stops further movement at point A. The relative marginal utilities reflecting the payoff from the utilitarian consumption of bread and wine is equal to the price ratio P1/P2. The consumer has maximized Self-interest utility subject to the income constraint represented on the RoRo budget line.

Metaeconomics tells a substantively different story. For example, consider a case in religious ceremony, specifically, the Eucharist in the Christian church. As Buber said it, there is now a potential I&Thou... Person&God, Self&Other... thing going on. Metaeconomics points to not only the Self-interest in the nutrition in the bread and hedonistic payoff from the wine, but also a gain in the connection with Thou, a God, a shared Other(still internalized within Own-self)-interest, including the shared Other-interest with others at the table within whom the person is in communion. The Other-interest would also include the Church writ large, and also represented on path 0M. Balance in the Self&Other is achieved at point B in Figure 1. Metaeconmics clarifies that it is not only the P1 and P2, and relative P1/P2, affecting the choice.

A less dramatic example of balance in bread and wine would be the case of the shared Other-interest with the family, and, with the medical doctor who gives advice, regarding good health. The shared Other-interest points to drinking less wine relative to the bread, no matter the price ratio P1/P2. Overall, the Other-interest is about influencing (nudging if not regulating and controlling) the Self-interest with shared Other-interest. Metaeconomics points to how it is rational to consider not only P1, P2, and P1/P2, but also the Value V, leading the truly rational choice at point B.

Metaeconomics makes the nature of truly rational choice even more clear with the help of Figure 2. The frontier, utility possibility curves of Figure 2 are derived by moving along an income budget line RoRo in Figure 1 and tracing the payoffs in each domain of interest into Figure 2. Notice how payoffs in both domains of interest increase as one starts down the budget constraint from the top in Figure 1, giving region RoA in Figure 2, or moving up from the bottom of the budget line in Figure 1, giving region RoC in Figure 2. Choosing a point in either of these regions is irrational, as too much attention to Self-interest is irrational in RoA, and too much attention to Other-interest is also irrational in RoC.

Humans need balance in order to be Happy, which arises from being rational, rationally balancing the two interests. Balance goes well beyond just finding one rational point A, as in Microeconomics framing. Metaeconomics points to a region AC within which every point is a rational choice, all dependent upon on how one chooses in balancing Self&Other-interest. Given a region of rational choice, it is also now easier to make sense of the empirical reality that real consumers sometimes vacillate in consumer choice, sometimes drinking too much wine, other times eating too much bread... which we now see is perfectly rational.

Balance in the interests... balance in a life choice... is made clear in Metaeconomics, and, it varies, dependent upon the person. Point A in Figure 2 (value curve/line V = P IGM1) is the balance point if one is driven mainly by the Egoistic-Hedonistic tendency, paying attention mainly to the Market, which as noted, is likely more primal in most people. Point C in Figure 2 (value V curve IGM3) is the balance point if one is more prone to go along with that which is shared with others, as in being very devoted to doing the right thing, defined in consort with others, as in a Church, paying attention to the Community (or, the Government, to the extent it represents the Community one prefers).

For most, however, Metaeconomics points to balance at point B in Figure 2 (Value V curve IGM2), a person weighing the pros and cons, looking at the economic costs represented in P1 and P2. The person is looking at the Price P signals from the Market Forum, as well as the Value V signals from the Other Forums in one's life. And, there are usually many Other-interests: We might envision literally dozens of Other-interest sets like IM in each person's reality, many Communities of shared interest (religious, political, family, work, clubs), including the Government: The balancing is not easy. The extent of a diversity of Other-interests being at work is an empirical question.

Notice, too, how V is equal to P only at point A: All Value V is reflected in the Price P, as Microeconomics teaches. In contrast, in Metaeconomics, V is not necessarily the same as P, as illustrated at points B and C; in fact, we might say that while P is an influence on choice, the V based outcomes at point B and C are priceless. And, it is quite rational to not base consumer choice only on P: The V can also play a role, as in doing-the-right-thing, the Moral Dimension of the choice, playing a role. And, it is perfectly rational to act on the Moral Dimension... in fact, it is essential to Happiness... as Adam Smith made clear in The Theory of Moral Sentiments.

Empirical Testing: Case of Recycling

A demonstration of Metaeconsumption Economics... an empirical test of the main propositions... is represented in Kalinowski et al. Figure 1 is demonstrated with All Other Goods (d) on the vertical axis and a Recycle Good (e) on the horizontal axis. Two ways of measuring the Recycle Good were represented in Recycle or Not Recylce variable; Plan to Recycle 5-years From Now variable; and in a Recycle Content of Goods variable. The first two dependent variables were examined in a logit regression model; the third variable was examined in a tobit regression model.

The main independent variable used to capture the influence of the Other-interest, and the non-separability with Self-interest, was referred to as a combination of "... three salient questions used to build the jointness variable:

1. Importance: "How important is recycling to you personally?" (5 – point scale, recorded with a 5 for extremely important) 2. Orientation and integrated balance in self ... and other ... – interests: "Do you see your recycling effort as primarily in your own personal interest (1); more in the interest of society as a whole (5); or balance between the two interests (3)?" (By using 1, 3, or 5, in effect using the same range as a 5 – point scale). Any response greater than 1 indicates a self-interest conditioned by the other-interest, with a greater orientation to the other–interest likely leading to more recycling. 3. Support an ordinance: "Would you strongly support, support, oppose, or strongly oppose an ordinance requiring recycling?" (5–point scale, recorded with with a 5 for strongly support)."

It is noted that the 3-scales were multiplied together, to represent "the complex interdependent and joint determination among these phenomena." The variable was found highly significant, along with Self-interest only variables like income. The results led to rejection of the Null hypothesis that Self-interest only (Microeconomics framing) drives recycling choices. The results suggest the need to further explore Metaeconomics, as Other-interest variables had both significant and substantive effects on recycling choices.

The Metaeconomic analysis led to several contentions, which would be quite different in Microeconomics which sees only Self-interest driving recycling choices. It is suggested that the Metaeconomic analysis points to three key, recycling policy considerations:

1. Build a sense of identity with the cause: Something like "XYZ County Recycles"… generate a sense of pride and camaraderie in the action.

2. Find ways to help a person who recycles now, and a person who will potentially recycle in the future, see it is acceptable to join into a shared Other–interest toward such action.

3. Shift the policy focus and the process to consideration both Market and Government involvement, i.e. financial incentives to appeal to the Self-interest and a recycling ordinance to reflect the shared Other-interest. Results suggest a person who recycles and/or buys recycle content goods actually prefer some degree of outside control, to in effect discipline the recycle market.

Microeconomic analysis points to only the role of the Price P (the cost to the consumer to recycle; higher prices for recycle content goods) and Income, pointing to maximizing the (monetized) Self-interest. Metaeconomics goes beyond and transcends by adding the Moral Dimension... doing-the-right-thing-through-recycling.. pointing to the Value V reflected in the shared Other-interest, and to the essential need to balance Self&Other-interest.

Supply and Demand

Metaeconomics demonstrates the same general features of Supply and Demand as in Microeconomics. A textbook styled analysis is represented in Figure 3. Plotted against Price on the vertical axes, Supply S curves slope upward due to rising marginal costs, which in turn arise from diminishing returns in production and supply. Demand curves slope downward due to decreasing marginal utility as consumers buy more of the good. Movement up and down the curves, with the Price revealed at the intersection of Supply and Demand, is essentially the same. Both Microeconomics and Metaeconomics, in textbook fashion, point to how changing tastes and preferences favoring more of the good would shift the Demand D upward, as would higher income. Changing technology lowering the costs of production would shift the supply S downward.

Both Microeconomics and Metaeconomics posit the consumer is sovereign. Such sovereignty on the part of the consumer is illustrated by solid line demand curves along with "dot-dash" supply curves in Figure 3, meaning the supply arises as producers see the demand evolving in the market. In contrast, Metaeconomics also sees the possibility for producer influence... in effect, solid line Supply S and dash-dot line Demand. A case in point, is where an organic food producer promotes a shared interest in doing less chemical damage during farming, which encourages a consumer to join in the shared Other-interest about that lower damage, and start buying product from said firm. In textbook terms, Metaeconomics posits (always and empirical question) that an Empathy based Other-interest represented in Supply S could stir an Empathy based Other-interest either shifting, or maybe even creating, a Demand D.

Metaeconomics stays with the fundamental premises, with only a few exceptions. First, Demand is shown to intersect the horizontal axis at point D in Figure 3: Demand is bounded at the point of satiation. The stomach is full, the Hedonistic desire is satisfied at point D. Second, the production capacity of the Spaceship Earth (Natural) System contributes substantively to the supply of any product humans decide to put into production. In fact, the Spaceship Earth System (e.g. hydrologic cycle, carbon cycle, forces producing the weather, pollutant cleansing in the ecosystem, among thousands of other services) works for free, as illustrated by the Supply curve intersecting the horizontal axis at point S in Figure 3, contributing to supply S at no cost.

It follows that if the Spaceship Earth System is damaged, like in exceeding the capacity of the atmosphere and ecosystem to process carbon, the supply curve would shift to the left. And, third, as noted, Metaconomics posits the Other (shared with others, yet internalized within the person, producer and/or consumer)-interest can influence both the Demand D and Supply S curves. The shared Other-interest causes (can cause: an empirical question) interdependence in Supply&Demand.

Some more textbook explanation, greater detail, here: Metaeconomics differs with Microeconomics in seeing the possibility (an empirical question) that the shared Other-interest in some consumption good ... in well functioning markets, shared with the supplier, too, as Empathy based Other-interest plays a role in influencing Self-interest on both sides of the trade... could also shift the demand curve. Suppliers work to Empathize with consumers, to fill the demand. Consumers Empathize with producers about realistically can be supplied, given the capacity of the Spaceship Earth, and the technology available to producers. Community standards favoring not using genetically modified wheat, for example, which is all about the supply technology used on the farm as well as what is in the consumer preference for how bread is produced, would tend to shift the demand to the left from DD1 to DD2 bread produced with genetically modified wheat.

The farmer, after Empathizing and joining in shared Other-interest in not using genetically modified organisms, would then tend to abandon the less costly wheat that has been modified, represented in producing bread on SS1, and shift to the higher cost wheat technology that uses regular wheat seed, causing higher bread prices on SS2. Bread prices will now be higher at P2, due to a change in the shared Other-interest about how wheat is produced. The point B outcome is on path 0Z in Figures 1 and 2, where Empathy based Other-interest has played a role, while point A is the Ego point of mainly Self-interest on path OG in Figures 1 and 2.

In Metaeconomics, again, in textbook fashion, the demand curve could also be quite volatile, due to a vacillating ability to maintain Self-control. Said Self-control could fluctuate greatly, especially in staying with community standards expressed in a shared Other-interest in which the consumer may not be fully committed. The demand for wine might reflect consuming wine on some occasions giving into Egoistic-Hedonistic tendencies to want more alcohol, and, dampening the consumption of wine on other occasions in the spirit of the Community standard of Other-interest favoring less alcohol consumption.

The demand curve for wine could shift up and down as the mood (and Self-control) vacillates between and among different shared Other-interests that the person is paying attention to, or not, at the time. Said demand curve might suggest the consumer is not-rational, due to inconsistency, when in fact the consumer is being quite rational, as different shared Other-interest specifications are embraced or not.

The play of Value V with the influence on Price P is also demonstrated, again in textbook fashion, in Figure 3. Notice how the area under the Demand D goes off to infinity, which is to say the Value V is without bounds, as in the notion of Priceless. Yet, the Value V influences the Price P at every point on the Demand D curve, and Price P would also influence Value V as the Demand shifts. Value can be infinite, especially for a good like water, with which no person (or any other living entity on the Spaceship Earth) can do without; at the same time, there can be a finite Price P for water used in irrigating a golf course, at some point A in Figure 3.

Overall, the analytical machinery of supply and demand works about the same. The most significant difference arises in the possibility for interdependence in supply and demand. Metaeconomics points to the essential need to do the empirical testing in the search for how Self&Other-interest are being balanced.

Criticisms and Response

The main criticism of Metaeconomics is framed by the long term conversation and debate about single v. multiple utility frameworks. Neoclassical Economics, which is built upon a foundation of Utilitarian Philosophy, has historically argued there is only one utility. Even if other utilities exist, each would be mediated into a simple, uni-dimensional utility.. People would mediate the two into one set of utils...only conceptually: No such thing exists, in Microeconomics, as utility is only ordinal. The contention has been disputed in Economic Psychology/Behavioral Economics, showing that utility is really cardinal and can be measured, like Bentham originally proposed.

Metaeconomics does acknowledge that for many economic goods... especially personal goods for personal use... the presumption of a mediated, single Self-interest only utility likely works well enough. Unfortunately, only a few goods are strictly personal goods: Most goods have a shared Other-interest dimension, as in having a glass of wine and some bread with friends. Metaeconomics provides important and new insights, even though it sees such matters as empirical questions, not to be presumed in one direction or the other. Metaeconomics does not presume that every choice is strictly in the Self-interest as in Microeconomics.

The Response especially points to inputs and goods with which a person has a shared Other-interest, especially prominent in how a person relates to nature, as interdependent, joint, and non-separable travelers on the same Spaceship Earth. Metaeconomics provides new insights and empirically defensible interpretations and results. The Metaeconomic based empirical results from the Empathy Conservation and Recycling Literature verifies that multiple utility, dual interest frameworks and theories have scientific credibility. There is a right-thing-to-do in farming and in recycling choices, with the right thing serving to temper and bound the Self-interest, as guided by the shared Other-interest. A truly rational, efficient choice balances Self&Other-interest.

Citations

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