The Coevolution of Corporations and Economic Man
From Huben's Wiki
(Created page with "== Introduction == Corporations are an attempt to create economic man (or model it more closely.) It is well known now that the idea of economic man (Homo economicus), the ba...") |
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Why would anybody want to create economic man, let alone as a corporation? For the capitalistic production of wealth, which is central to the competitiveness of modern nations. | Why would anybody want to create economic man, let alone as a corporation? For the capitalistic production of wealth, which is central to the competitiveness of modern nations. | ||
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| + | Likewise, governments strive to create a more capitalist environment in which competition can take place. Humans vary in their ability to compete in the capitalist system: if corporations can be engineered to compete better or if the system can advantage corporations, they will dominate. | ||
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| + | The question is not whether these ideas are true of all people or corporations: the important thing is that whichever is likely to be closer to Homo economicus will likely dominate in economic competition. | ||
== Economic Man vs. Humans vs. Corporations == | == Economic Man vs. Humans vs. Corporations == | ||
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! Corporations | ! Corporations | ||
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| − | | rational | + | | rational utility function optimization |
| − | | | + | | conflicted utility functions with multiple goals |
| − | | | + | | simply defined utility function with single wealth goal |
| + | |- | ||
| + | | unlimited rationality and complete knowledge | ||
| + | | severely limited rationality and knowledge | ||
| + | | can leverage combined rationality and knowledge of many people | ||
| + | |- | ||
| + | | no development, personal limits or death | ||
| + | | slow development, personal limits and death | ||
| + | | rapid development, no personal limits, immortal | ||
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| + | Utility functions are critical to the idea of economic rationality that is central to the idea of economic man. Economic man would rationally optimize the output of a utility function. This can be a non-trivial task for many sorts of utility functions. Human utility functions generally have multiple, conflicting goals such as personal survival, pleasure, wealth and reciprocality. That makes for very difficult optimization. By contrast, corporate utility functions consist primarily of maximizing financial return to investors. That makes for much simpler optimization, and also explains the anti-social character of corporate behavior. As David Hume said, "it is not contrary to reason to prefer the destruction of the whole world to the scratching of my finger": hence corporate indifference to the externalities they create. | ||
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| + | The rationality of humans is grossly limited by knowledge, the computing power of brains and the heuristics we use. | ||
The ideas of "economic freedom" espoused by libertarian-leaning propagandists tend to be focussed on freedoms important to corporations, and not so important to humans. | The ideas of "economic freedom" espoused by libertarian-leaning propagandists tend to be focussed on freedoms important to corporations, and not so important to humans. | ||
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The attempt to create capitalism is essentially an attempt to approximate the requirements of microeconomic free-market theory, starting with economic man. Corporations are designed to act as economic man with fewer limits than actual people do. Hidden assumptions of economic man include no limitations of processing power, size, hands, lifetime, etc.: exactly what corporations solve. Corporations are created as first-class citizens with their own systems of law which provide them with privileges ordinary people don't have. All large amounts of money or property are now controlled through corporations. The Marxist idea of creating a worker class as fodder for corporations is spot on. Markets and property rights (both amazingly hypertrophied by government action) are sandboxes created for corporate play: always regulated because otherwise externalities get out of hand. And this is all done because of the greater productivity from market activity that is essential in the competition between states. You don't get that increased productivity from uncoordinated individuals (the second class citizens, us.) | The attempt to create capitalism is essentially an attempt to approximate the requirements of microeconomic free-market theory, starting with economic man. Corporations are designed to act as economic man with fewer limits than actual people do. Hidden assumptions of economic man include no limitations of processing power, size, hands, lifetime, etc.: exactly what corporations solve. Corporations are created as first-class citizens with their own systems of law which provide them with privileges ordinary people don't have. All large amounts of money or property are now controlled through corporations. The Marxist idea of creating a worker class as fodder for corporations is spot on. Markets and property rights (both amazingly hypertrophied by government action) are sandboxes created for corporate play: always regulated because otherwise externalities get out of hand. And this is all done because of the greater productivity from market activity that is essential in the competition between states. You don't get that increased productivity from uncoordinated individuals (the second class citizens, us.) | ||
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| + | The preoccupation of behavioral economics with humans may be missing the important fact of different behavior of corporations. | ||
