SYSTEMS THINKING
The ontology of the modern age aka, the Enlightenment
, began in Europe around the 16th century CE.
The natural philosphy of Newton and Descartes bifurcated the psychic/spiritual from the scientific/physical and, to Alfred North Whitehead,
left Nature ... without meaning, or value.
It is the bifurcated view that persists today, underlying political
divisions of "left" and "right" and academic "arts" and "sciences". It frames our thoughts, economic and social structures, despite the fact that science itself has moved on.
The science of the 21st century aims for unification, not bifurcation. A universe of colliding billiard balls is replaced with quantum potentialities
determined by what?, an observer. As Whitehead put it, a dead Nature can give no reasons. All ultimate reasons are in terms of aim-at-value. A dead Nature aims at nothing.
It is the essence of life that it exists for its own sake, as the intrinsic reaping of value
(Whitehead, 1934; 8,9).
Whitehead raised the notion of an "absoluteness of self-enjoyment", which is to praise the subjective end of things.
From the dead Nature of Newton, he proposes the idea of 'creative advance'. By this he means the process of eliciting into actual being factors
in the universe which antecedently to that process exist only in the mode of unrealized potentialities.
The process of self-creation is the transformation of the potential into the actual,
and the fact of such transformation includes the immediacy of self-enjoyment
(Ibid; 26, 27)
And this is the turn we shall take here. Development - economic growth - is usually presented quantitatively:
as a percentage change in the National Product, or as capital accumulation or return on investment.
Similarly, it is assumed that such development is produced quantitatively from economic factors. This is the bulk of economic theory.
Development is also the spontaneous expression of society, with or without economists.
An economy is not just mathematical fiction, but the coordinated effort of humanity striving towards a goal.
That goal may be vague and inarticulate - as in "betterment" - or deliberate and reported - as in a war effort or space program.
And it can be scrutinized qualitatively as well as quantitatively. The feverish development of weaponry, for example,
is qualitatively different from the provision of basic needs.
Organization
Life and all that we perceive derive from particular organization. It is the organization which gives us value and meaning.
All things have an inside and an outside, preconditions and effects; and it is in relation to things,
to other people and other living creatures, that we define ourselves. There is no individual in a Newtonian sense - no discrete atomic building block. There are only boundaries of organization.
Organization is modeled in 'loops' or in composite loops called 'systems'. Behavior is conceived as process within a structure,
but this structure is also a process of another structure, ad infinitum. Being and becoming, structure and process, are defined by an
intended boundary of explanation. There are countless systems owing only to the boundaries intended and the processes captured therein.
Structures refer to the system's separation from its environment (our limits of explanation) which become its static quality.
The processes captured enable an analysis of the system's dynamics - its functional change. All systems are, accordingly, both
static and dynamic.
So let us begin to re-ravel the knots. The knots here pertain to a social and economic organization.
We must first have a notion of the person. Let us hurriedly specify that the person is composed of "inner personal tension",
borrowing from Kurt Lewin:
Using the construct of a "system in tension" for representing psychological needs definitely presupposes a field theory.
Conceptually, tension refers to the state of one's system relative to the state of surrounding systems.
The essence and the purpose of this construct is to include a tendency for change in the direction of equalization of the state of
neighboring systems. The construct, therefore, presupposes a geometric representation of the person and a distinction of functional
subparts or "systems" within the person, with a definite position in regard to each other...... (Lewin, 1951; 11)
The hypothetical person is described also within an envrionment, and the environment is more of concern to us here.
But the environment necessarily imposes meaning on the individual, and that individual (owing to his own directive) strives for such meaning.
Hence, a relation attains a degree of stability-- a steady state. Lewin brings us back to Culture:
One should view the present situation - the status quo - as being maintained by certain conditions or forces.
A culture - for instance, the food habits of a given group at a given time - is not a static affair but a live process
like a river which moves but still keeps a recognizable form. In other words, we have to deal, in group life as in individual life,
with what is known in physics as "quasi-stationary" processes. (Lewin, 1951; 173)
Here we may specify some variables in our model for economic development. These are of two kinds to represent both structure and process.
The static element is represented in a variable termed 'level', 'state', or 'balance sheet,' depending on the system under investigation.
A second variable, the action variable, is also termed differently according to area of study, e.g., 'rate', 'flows', 'profit and loss.'
Action variables depend upon the level variables, and level variables change magnitudes through the action variables.
Through the course of social and economic understanding there have been organizational forms which stress the level variable over the rate variable,
and vice versa. The first instance is typically characterized by the 'household', or any other budgetary organization including also a governing body,
or non-profit organization. This is the process of a system which consumes from its environment for reproductive value:
the state of stability. It should be noted that all organizations strive for some degree of stability or cohesion, but this is
inevitably compromised by its need for purpose.
The purposive organization associated with surplus production for exchange is peculiar to modern rationality.
It is founded historically on the concept of 'Capital Accounting' defined by Weber as "the valuation and verification of
opportunities for profit and of the success of profit-making activity. It involves the valuation of the total assets of the
enterprise, whether these consist in goods in kind or in money, at the beginning of a period of activity;
and the comparison of this with a similar valuation of the assets still present or newly acquired, at the end of the process"
(Weber, 1947; 191, 192)
By focusing on the change in levels of stocks within the organization, a sense of dynamism is introduced.
A macro-representation of the flows within a structure is the Leontief 'input-output' model.
The I-O model is essentially a matrix relation of factors of production generally represented by industries or sectors.
The internal flows are determined by the technical coefficients which remain fixed, assuming constant returns to scale in all sectors.
The magnitude of flows is demand determined: households and government are exogenous, i.e., independent variables.
A good illustration of the model is provided by A. S. FATEMI.
In the United States, the Bureau of Economic Analysis (BEA) developed a method for estimating regional I-O multipliers known as RIMS
(Regional Industrial Multiplier System). The BEA later released RIMS II
and accompanying handbook, offering the coefficients for any region in the country for a mere $600.
Modifications have been introduced to explore the dynamics of development, as in incremental capital coefficients, etc. Isard (1976)
has gone further to suggest an economic- ecologic model in which various natural elements are entered as components in the matrix.
Also, from information sciences, it is theoretically possible to insert Processes into the model, i.e.,
I-P-O, to increase its dynamism.
Finally, it is also conceivable to append Outcome to the process, thus creating a feedback loop as an additional Input to the next round of processing.
This feedback loop is the information system. So, the model becomes I-P-O-Om:
Control
Janos Kornai, a Hungarian economist, placed emphasis on the control and the flow of information.
Accordingly, he is interested not only in the real processes, such as those represented in the input-output model, but also
in the "control processes" which are of intellectual nature. Within the control processes he includes "observation, information transmission, information processing, decision preparation,
and decision-making" (Kornai, 1971; 39).
Within both the real and control spheres are organizations with varying degrees of superordination and subordination.
The control sphere generally controls the real sphere, yet within the control sphere there are also two types of superordination
and subordination: one based on the right to command and subject to legal sanctions, the other based on monopoly of indispensable
information. (lbid; 77) We therefore introduce a mathematical 'partial preordering' within the set of economic organizations and
weigh the relations according to level of influence. In addition to the directive functions, Kornai also recognizes the
'autonomous functions' based on the "average diligence, conditioning, routine, identification with one's job of the people
working within the system' (Ibid; 178). This level of control is strictly horizontal in nature, and corresponds more closely to
'substantive rationality' in the economic process, as contrasted with 'formal rationality,' as distinguished by Weber:
The term 'formal rationality of economic action' will be used to designate the extent of quantitative calculation or accounting which is
technically possible and which is actually applied. The 'substantive rationality', on the other hand,
is the degree in which a given group of persons, no matter how it is delimited, is or could be adequately provided
with goods by means of an economically oriented course of social action.
This course of action will be interpreted in terms of a given set of ultimate values no matter what they may be. ...
(Weber, 1947; 184)
Moreover, the formal expression will be dependent upon particular substantive components.
Among these components, Weber mentions: 1) Market competition among relatively autonomous units; 2) Money accounting,
specifically capital accounting mentioned above; and 3) production of goods in a competitive market determined on the basis of
'effective demand'. By effective demand, he means the structure of marginal utilities in the income group which has both the inclination and the resources to purchase a given utility.
This will depend upon on the distribution of wealth in a given society
(Ibid; 212).
The autonomous functions will, it is suggested, maintain only the status quo of a functioning system.
They correspond to a particular 'gravity' which provides a system with its capacity to secure its existence: to survive.
In Kornai's terminology, this is the 'primary adaptation'. 'Secondary adaptation' would then refer to attempts to achieve
certain aspirations, expectations or norms. Secondary adaptations, then, require a higher, more formalistic function of the system.
Space-Time
Other models have developed to approximate the operations of an economy at varying temporal and spatial relations.
One with particularly provacative impact was the Forrester model in the first Club of Rome report.
This model propounded the so-called 'limits to growth' by incorporating technology, capital, population, and
non-human resources within a closed system. It is illustrative of the 'global model' with a time span of approximately 200 years.
The younger Forrester (1973) has developed a national model of the Canadian economy of approximately the same time span.
Additional models have been introduced to specify regional interactions of shorter duration, e.g., Hamilton, et al (1969).
Economic activity follows various cyclic influences. The common 'business cycle' consists of a period of roughly 3 - 7 years,
and is reflected in the interactions between backlogs, inventory and employment. The 'Kuznets' cycle reflects the rebalancing of
labor and capital and consists of approximately 15 - 20 years. In the longer run, we are more interested in the interactions within the capital-producing sectors.
Here, we speak of the Kondratieff cycle, or economic long wave, lasting approximately 45 to 60 years. The long wave consists of an overbuilding of capital plant,
followed by a wearing out and depreciation of that plant. The end of the capital construction phase is revealed where business-cycle activity becomes more severe, unemployment rises,
return on investment declines, productivity falters, new innovation diminishes, speculative activity increases, prices and interest rates rise, and economies stagnate (Forrester, 1982).
The Forrester model in World Dynamics (1971) represents the 'life cycle of economic development' lasting approximately 200 years,
as indicated through shifting loop dominance. Positive feedback loops dominate the growth phase of development,
while negative loops lie dormant within the structure. Accumulated growth, so the model assumes, will eventually trigger negative
processes which bring the economic process from growth to steady state.
The succeeding limits are depicted as a "slow restriction of alternatives rather than by obvious trauma or collapse.
Tradeoffs develop where choices were unnecessary during the growth phase" (lbid). The elder Forrester offers the following prescription:
a shift in substantive values,
Impending changes in the world system threaten modern social values and goals.
The industrialized societies have become geared to a philosophy of growth and rising standard of living for everyone.
This cannot continue indefinitely. New human purposes must be defined to replace the quest for economic advancement.
Nature must be helped rather than conquered. Civilization must be restrained rather than expanded.
Social pressures probably must increase rather than decline, until those pressures can be transformed into a change
in social values that take satisfaction from an equilibrium society. The underdeveloped countries face equally traumatic
changes in goals. They now aspire to reach the level of industrialization of the advanced countries.
But they may already be in better balance with the environment than the countries they try to emulate.
(Forrester, 1971; 125)
However much we may yearn for stability, it is certain that change is inevitable.
And while the 'that' is so callously posed, the 'what' has yet to be determined.
To what we evolve will be determined to a great extent by the quality of 'secondary adaption' and creativity there endowed.
The 'how', meaning the actual transition, may be abrupt and harsh or gradual and easy.
It may also be by proclamation or understanding. In the former instance, it may be legitimized by force with war or sporadic violence
as last recourse. In the latter instance, we will need new social organizations and ideas, such as provided here in an internet forum.
It is with consideration to the latter course that we take up our next topic.
Social Organization
In reviewing the literature above, certain rules of organization are common.
This organization is conceived as a system of linkages-- common subparts-- through which some particular controlling order prevails.
It is also mentioned that in all organizations there exists a serial relation.
By 'serial' is meant a controlling relation that is "assymetrical, transitive and connexive".
This relation has been described by Kornai, in terms of superordination and subordination between and within the control and real spheres of an economy.
The ordering principles of social organizations throughout history have emphasized varying degrees of vertical and horizontal control.
It should be added that in no organization is there a complete absense of either dimensional linkage pattern,
but linkages have differed in relative formality and attachment - meaning authority over components.
We shall describe the organizations stressing the vertical linkage patterns with respect to 'dominance-dependence',
and those stressing the horizontal linkage with respect to 'network' or 'community'.