Exploring the Common Roots of Culture, Politics and Economics
46 Pages Posted: 8 Dec 2012 Last revised: 26 Jan 2013
Date Written: December 6, 2012
The 2008 recession resulted from the failure of financial institutions including banks, due to their uncontrolled self-indulgent financial practices leading to a severe economic crisis. Policy options to resolve the recession that has resulted from the crisis included financial sector restructuring or bail-outs on the assumption that the banks are generally moral and trustworthy organisations. A bail-out policy required debt servicing which has led in the European Union to measures of austerity, damaging social fabrics and hurting the more vulnerable. An alternative policy in the US has been to borrow more to stimulate economic growth the result of which should be a servicing of the debt. The economic crisis was not predicted by any economic models. Prediction of the crisis by economic models failed. After the Lucas Critique which says that economic and political processes are both important to economic theory, political processes have tended to be been reflected in economic models. The policy options of austerity and investment can be associated respectively with the culturally based political modes of Individualism (methodological individualism) and Collectivism (collectivistic methodological institutionalism). The making of economic policy arising from either of these political modes is seen by some to be an inadequate basis for developing a sustainable economic society, implying the need for improved socio-economic modelling basis that reflects culture. A new culturally based economic meta-model is developed, where cultural orientation is a driver for a strategic economic agency and the formation of economic policy. The meta-model enables the modelling of the relationship between cultural, economic and political processes using cybernetic agency theory, and specific propositions can be introduced to generate specific models. The meta-model that arises can assist in the understanding of complex socio-economic processes. The meta-model adopts trait-based agency theory, the strategic economic agency that is constituted as an agency’s normative personality from which political orientations and the anticipation of classes of decision making behaviour can develop. The paper shows that Individualism and Collectivism can be seen as a subset of the broader mindscape theory, reformulated here for the meta-model.
Keywords: Recession, status quo, bank deficits, policy, socio-economic system, macroeconomics, normative personality, traits, mindscape theory
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