Author: Dennis Venter
Abstract:
AAt the heart of the renewed criticism against neoclassical economics is the idea that it is
incompatible with the dynamic type of economic coordination that emerges in the real world. Its
focus is limited to what its accepted methodology can measure while all else is deemed
constant or exogenous. It is in this need for a new approach to economics that this paper finds
its aim: To provide a way to make sense of the open dynamic nature of the real world. The
paper sets the stage with an expanded version of the history of economic thought: starting with
nomadic society, including experiences beyond the Western one, and ending with the present
system. This provides a rich and dynamic sketch of economic coordination over time,
intertwined with a complex development of history and economic thought. This is then analysed
with a four-quadrant framework which allows the identification of three specific variables which
interact to drive dynamic change in any situation. Although these variables are simply defined
as perspective (i), environment (P), and needs (N), their power is twofold: Firstly in the way it
structures the development in the dynamic coordination, and secondly, in the way that it
connects with existing theories, which implicitly presuppose these same three variables in their
own exploration of how mechanisms create real-world outcomes. The text provides one such
example. Affordance Theory is applied to show how the three variables interact: In our
environment (P), affordances are said to represent latent possibilities independent of the
individual’s ability to recognise them, they become active given the “physical capabilities of the
actors... their goals, beliefs and past experiences”. Similarly, needs (N) in a hierarchy imply that
they are latent in the human psyche where the satisfaction of one need affects a change in
perspective which is an activation of the next need. Finally, the conclusion brings the three
variables together into a more dynamic definition of economics, expressed as a conceptual
function: E=f(NP). Rather than fixating on the specific perspectives resulting from change, this
paper highlights the way in which three well-defined variables drive change.
Key words: Institutional economics, economic pluralism, emergence, integral economics, social complexity
JEL codes: A2, B0, O0, P5, Y2, Z1
Venter, D. 2016, The Need for a Dynamic Approach to Economics, SSRN. DOI: 10.2139/ssrn.4874074
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