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constructing an economic constructing an economic cognitive model using cognitive model using

dialectics to explain the dialectics to explain the psycho-dynamic motion of psycho-dynamic motion of economic decision-makingeconomic decision-making

Presented by Peter BaurPresented by Peter Baur

University of JohannesburgUniversity of Johannesburg

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the psychodynamic motion of the psychodynamic motion of decision-making will be examined decision-making will be examined using two important componentsusing two important components

Dietzegen view of Dietzegen view of “Dialectic Theory”“Dialectic Theory” induces its own error in its reasoning, yet provides a induces its own error in its reasoning, yet provides a

mechanism to examine the role of our environmentmechanism to examine the role of our environment

Schumpeter's theory of Schumpeter's theory of “Creative Destruction”“Creative Destruction” provides the platform to examine the conflict between provides the platform to examine the conflict between

the role of institutions and the development of the role of institutions and the development of businessbusiness

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dialectics is like a goddialectics is like a god

decision-making is not in isolation, decision-making is not in isolation, interrelated system of ideas and thoughts.interrelated system of ideas and thoughts.Plato:Plato: “dialectics: the corner stone of “dialectics: the corner stone of

science” science” Aristotle:Aristotle: “no man can become wise by “no man can become wise by

himself”himself”SocratesSocrates taught his students by encouraging taught his students by encouraging

them to ask questionsthem to ask questionsunfortunately much of its value was lost unfortunately much of its value was lost

through the Marxist ideologythrough the Marxist ideology

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dialectic learningdialectic learning

Thesis

Anti-Thesis

Concept

Thesis

Anti-Thesis

Thesis

Anti-Thesis

Thesis

Anti-Thesis

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adds value to learningadds value to learning

goal orientated:goal orientated: conscious and deliberate steps taken towards some conscious and deliberate steps taken towards some

cognitive notioncognitive notion

adaptive:adaptive: yet, not fixed and malleable to reasonyet, not fixed and malleable to reason

adds value:adds value: induces students to construct a schema for making induces students to construct a schema for making

and responding to arguments, deeper knowledge and and responding to arguments, deeper knowledge and improved skills transfer (law, economics, politics)improved skills transfer (law, economics, politics)

its criticism:its criticism: linear approach is too simplisticlinear approach is too simplistic

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simplicity induces its own errorsimplicity induces its own error

aa decision decision is to choose between two or is to choose between two or more alternativesmore alternatives

yet yet alternativesalternatives are not perfect substitutes are not perfect substitutes for each otherfor each other

alternatives are associated with different alternatives are associated with different levels of levels of meaningmeaning

we interpret and we interpret and experienceexperience the world in the world in terms of meaningterms of meaning

we thus construct our own we thus construct our own social realitysocial reality

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linking reality to behaviorlinking reality to behavior

Thesis

Anti-Thesis

Perceived Thesis

Perceived Anti-Thesis

Concept Perceived Reality

Synthesis / Truth

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our logicour logic

Meaning

Environment

Experience

Somewhat Pre-

Determined Experience

of Reality

Communicate

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limits to human rationalitylimits to human rationality

not all cues are attended to optimallynot all cues are attended to optimallystimulus induces a search for the cause of stimulus induces a search for the cause of

those feelings which have been initiated by those feelings which have been initiated by the stimulusthe stimulus

we label feelings in accordance to what the we label feelings in accordance to what the world around us suggests we should be world around us suggests we should be experiencingexperiencing

our realities are a construct of our social our realities are a construct of our social environmentenvironment

Experience Environment meaning communicate

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our cognitive structure is part of a socially our cognitive structure is part of a socially reinforced view of the worldreinforced view of the world

thereforethereforemeaning is imposed by greater society that meaning is imposed by greater society that

constrains people to behave in a certain wayconstrains people to behave in a certain way

cultural identitycultural identity

Experience Environment meaning communicate

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‘‘i’i’ want to believe want to believedirection on the development of thought is direction on the development of thought is

not from the not from the individual to societyindividual to society, but , but flows from flows from society to the individualsociety to the individual

therefore:therefore: reality is a construct of meaningreality is a construct of meaningand meaning is derived through social and meaning is derived through social

agreementagreementsociety is therefore organized into an society is therefore organized into an

infinite number of social structures, each infinite number of social structures, each with their own meaning systemswith their own meaning systems

Experience Environment meaning communicate

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language of meaninglanguage of meaning

interpretation of meaning is language interpretation of meaning is language dependantdependantboth the symbols and the way in which they both the symbols and the way in which they

are ordered have an impact on meaningare ordered have an impact on meaningculturally dependantculturally dependant

Experience Environment meaning communicate

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culture, consciousness and culture, consciousness and psychological phenomenonpsychological phenomenon

culture develops cognitive schemataculture develops cognitive schemata

Environment Receptor Cultural Cognitive Schemata

Chosen Behavior

oVisualoAuditoryoKinesthetic

oKnowledgeoExpectationsoValues

Motives, Perceptions, Emotion, Sensation, Memory, Needs

oPhysicaloSocialoIndividual

Stimulus

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we are the product of our pastwe are the product of our past

our our realityreality is not only of the present. but a is not only of the present. but a construct of our pastconstruct of our past

our reality is made up of life our reality is made up of life experienceexperience, , background, cultural historybackground, cultural history

memorymemory is part of the cultural construct is part of the cultural constructsociety, race, culture, identity, state and society, race, culture, identity, state and

nation state are concepts we have created nation state are concepts we have created to help us understand our mixed to help us understand our mixed realitiesrealities

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shifting relationshipsshifting relationships

changechange is formed out of is formed out of conflict conflict (opposites), and (opposites), and conflictconflict is necessary for is necessary for changechange to occur to occur

Institutions are created to describe codify Institutions are created to describe codify and manage this and manage this changechange

This ongoing This ongoing changechange is inherent in is inherent in

Schumpeter's “Schumpeter's “creative destructioncreative destruction””

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creative destruction and technologycreative destruction and technology

process of process of industrial transformationindustrial transformation that that

accompanies accompanies innovationinnovation technology depends on market conditionstechnology depends on market conditionsmarket conditions depend on social and market conditions depend on social and

political factorspolitical factors technology is technology is endogenouslyendogenously determined by determined by

the economic systemthe economic system the system is responsible for changethe system is responsible for change

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the old becomes the newthe old becomes the new

the old system gets absorbed into a whole the old system gets absorbed into a whole new entity which is equivocally new entity which is equivocally differentdifferent

the new entity is created to the new entity is created to survivesurvive in its in its changing environmentchanging environment

thus the thus the economic systemeconomic system is revolutionized is revolutionized from withinfrom within

the existing the existing cultureculture which fueled growth which fueled growth becomes the very system that initiates its becomes the very system that initiates its own demiseown demise

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institution vs. marketinstitution vs. market

businessbusiness is forced to change to survive is forced to change to survive rate of rate of technological innovationtechnological innovation

determines rate of change (t) in order to determines rate of change (t) in order to ensure survival of businessensure survival of business

institutionsinstitutions evolve slowly, independent of evolve slowly, independent of technological innovation but dependent on technological innovation but dependent on social systemssocial systems

institutions create policy to govern the institutions create policy to govern the market but with a market but with a laglag of (t-1) of (t-1)

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policy is inappropriatepolicy is inappropriate

institutionsinstitutions are thus providing are thus providing inappropriate policyinappropriate policy

policy makerspolicy makers thus make thus make mistakesmistakes

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conclusionconclusion

this theory should form the basis of all this theory should form the basis of all good good policy decision-makingpolicy decision-making to help to help eliminate error by policy makerseliminate error by policy makers

I thank youI thank you