Grounding Social Theory in the Natural Sciences

Abstract

All social relationships and the coordination of any activity between humans depend upon the transmission, reception, storage and processing units of information measured in bytes. Bytes provide a basis for grounding the study of social relationship and institutions in the natural sciences because their transmission or storage requires changes in energy or physical states. All humans are restricted in their ability to obtain data, information, knowledge, wisdom, or manage complexity, because of their physiological and neurological limits to transact bytes. This introduces an instrumental criterion for investigating, evaluating and designing the informational architecture of organisations and social relationships.

Transaction Byte Analysis (TBA) is introduced as a framework to subsume Transaction Cost Economics (TCE). TCE is based on the normative need to economise the social construct of cost while TBA is based on the instrumental need to economise bytes. Human limits in transacting bytes are quantified and used to explain information overload and bounded rationality. Four modes of information and control with their strengths and weaknesses are identified and related to four modes of governing relationships. Unlike TCE and many other theories, TBA accepts that individuals can be either, or both, cooperative/competitive, trusting/suspicious and/or altruistic/selfish. Laws of governance are introduced that provide methods for obtaining reliable results from unreliable components. These provide criteria for evaluating or designing social organisations to reliably achieve their purpose. The utility of TBA as a framework for investigating the form and effectiveness of institutions is illustrated with micro and macro examples.

Keywords: Bounded rationality, Bytes, Complexity, Cybernetics, Governance, Information science, Requisite variety, Self-regulation, Social architecture, Transaction Byte Analysis

JEL Classification: A14, B49, D29, D79, D83, G39, L00