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updated 2:57 AM CEST, May 8, 2019

The economics of ideologies and beliefs: the concept of self-excludability

The economics of ideologies and beliefs The economics of ideologies and beliefs

I introduce here a new concept for the research of the economics of ideologies and beliefs.

To someone like me who considers free trade and the need for competitive markets to be the gravity of economics, a blind force that cannot be turned off (a continuous effort on behalf of policy-makers), but needs to be tamed and domesticated according to our society’s needs, reading about pro-globalization, pro-market authors is a daily bread. And if the author writes with intellectual honesty and self-criticism (not a common phenomenon and combination), it is music to my ears.

Tim Harford is one of these guys and I like him even more since I learned he has been at BBC 4 which I listen to regularly and since I have listened to his TED talks. Tim and his ideas will get a separate post soon.

What has amazed me most recently is that I found a somewhat weaker point in one of his books that Tim doesn’t seem to find worthy enough to question and analyse (yet).

I need to raise an objection since the reasoning of the book stumbles a bit there.

In Chapter III (Perfect Markets and the “World of Truth”) of his popular The Undercover Economist he lists four effects of any set of perfectly competitive markets (which is by the way and by definition the most effective way of running any given economy):

  1. Companies are making things the right way – Resource-wasting, unefficient companies will lose market share and will eventually go out of business
  2. Companies are making the right things – Since “price is a direct line of communication from what products cost to what customers prefer, and back again”, costs of products and the priorities of customers will always find a balance of the right products
  3. Things are being made in the right proportions – Since price equals cost to the manufacturer and price equals cost to the customer, every situation will always correct itself: if you produce too much, price will drop and if too little, they will raise
  4. Things are going to right people – Only those people will pay for any product who are willing to pay for it, since they value it (for any reason)

While I wholeheartedly agree with points 1, 3 and 4 of the list (again, this is a hypothetical scenario, there are no perfectly competitive markets and there shouldn’t be), the fluffiness of point 2 struck me immediately. What about intellectual products? What about intellectual ideas? And, in the first place, ideologies, intellectual agendas, beliefs and worldviews in general?

In terms of the first two (intellectual products and ideas), massive literature exists, and it mostly deals with scientific discoveries, inventions, innovation, intellectual property, patents, new technologies, even languages and the diffusion and marketing of these goods through institutions, creativity, and their impact on growth, piracy and so on. It seems to be quite clear that in their case lawlike economic regularities can be applied with some specifics (so point 2 as well.

But in terms of ideologies, intellectual agendas and beliefs, usual and unusual manipulation and power games come into the picture, while at the same time the truth of reality and the ultimate values are at stake as well as the ultimate goal of human life. Lawlike regularities are to be detected which are no longer blind forces but interwoven with rational thinking, the perennial values themselves and human emotions.

Waves of evolutionary incentives and psychological components are interconnected and overlapped, and sensitive questions about cultural progress, honesty, sustainability, transcendence, worship, intelligence, justice, and politics need to be asked, while the impact is huge on history and on human life.

I certainly disagree at first sight that the companies, parties and religious leaders all the time make the right things here and the customers simply set up priorities when choosing.

But carrying out such studies seem to be an enormous inter- and multidisciplinary effort.

I put here one finding on the subject and I will extend the analysis to other topics soon (like game theory). This finding is about the rivalry and excludability matrix and their range. My conclusion will be here that ideologies and beliefs are difficult to fit in the standard model of economics.

In economics, goods or products are  rival if their  consumption by someone prevents someone else from consuming them. Non-rival, if you can extend the consumption to any given number of individuals without additional cost. Excludability is about the possibility to prevent people from accessing a certain good.

The below table helps highlighting the differences with examples. Both categories form a continuum, there is no black and white binarism here.

 

 

Excludable

Non-excludable

Rivalrous

Private goods

Food, clothing, car etc.

Common goods

Lake for fishing, coal etc.

Non-rivalrous

Club goods

Theatre, mobile network, etc.

Public goods

State law, air etc.

In general, intellectual property and ideas are non-rival, and can be excludable (a copyrighted song or a patent) or non-excludable (like a book of Plato or the telephone as such).

When it comes to ideologies and worldviews, this model doesn’t work any longer, since they might become an inherent and essential quality and attribute of the human agent itself. While theoretically anyone can adhere to and follow any or more than one ideologies (like a non-excludable good), usually people stick to a specific one and its interiorisation and self-identification prevent the individual from the possibility to really accessing another ideology or belief and change the actual one. The blocking point can come from psychology (eg cognitive dissonance) or from the result of growing up in a family with a given set of values and behaviours or from the risks and consequences of changing the given belief. It’s a sort of self-limitation or self-barrier.

Ideologies and beliefs are therefore mostly non-excludable and self-excludable at the same time.

(I don’t consider here autocratic and dictatorial regimes where they can be excludable.)

The subject of self-excludability is an exciting concept I invented and it is going to be elaborated further.

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