1 constructing an economic cognitive model using dialectics to explain the psycho-dynamic motion of economic decision-making Presented by Peter Baur University of Johannesburg

2 the psychodynamic motion of decision-making will be examined using two important components Dietzegen view of “Dialectic Theory” Dietzegen view of “Dialectic Theory” induces its own error in its reasoning, yet provides a mechanism to examine the role of our environment induces its own error in its reasoning, yet provides a mechanism to examine the role of our environment Schumpeter's theory of “Creative Destruction” Schumpeter's theory of “Creative Destruction” provides the platform to examine the conflict between the role of institutions and the development of business provides the platform to examine the conflict between the role of institutions and the development of business

3 dialectics is like a god decision-making is not in isolation, interrelated system of ideas and thoughts. decision-making is not in isolation, interrelated system of ideas and thoughts. Plato: “dialectics: the corner stone of science” Plato: “dialectics: the corner stone of science” Aristotle: “no man can become wise by himself” Aristotle: “no man can become wise by himself” Socrates taught his students by encouraging them to ask questions Socrates taught his students by encouraging them to ask questions unfortunately much of its value was lost through the Marxist ideology unfortunately much of its value was lost through the Marxist ideology

4 dialectic learning Thesis Anti-Thesis Concept Thesis Anti-Thesis Thesis Anti-Thesis Thesis Anti-Thesis

5 adds value to learning goal orientated: conscious and deliberate steps taken towards some cognitive notion conscious and deliberate steps taken towards some cognitive notion adaptive: adaptive: yet, not fixed and malleable to reason yet, not fixed and malleable to reason adds value: adds value: induces students to construct a schema for making and responding to arguments, deeper knowledge and improved skills transfer (law, economics, politics) induces students to construct a schema for making and responding to arguments, deeper knowledge and improved skills transfer (law, economics, politics) its criticism: its criticism: linear approach is too simplistic linear approach is too simplistic

6 simplicity induces its own error a decision is to choose between two or more alternatives a decision is to choose between two or more alternatives yet alternatives are not perfect substitutes for each other yet alternatives are not perfect substitutes for each other alternatives are associated with different levels of meaning alternatives are associated with different levels of meaning we interpret and experience the world in terms of meaning we interpret and experience the world in terms of meaning we thus construct our own social reality we thus construct our own social reality

7 linking reality to behavior Thesis Anti-Thesis Perceived Thesis Perceived Anti- Thesis Concept Perceived Reality Synthesis / Truth

8 our logic Meaning Environment Experience Somewhat Pre- Determined Experience of Reality Communicate

9 limits to human rationality not all cues are attended to optimally not all cues are attended to optimally stimulus induces a search for the cause of those feelings which have been initiated by the stimulus stimulus induces a search for the cause of those feelings which have been initiated by the stimulus we label feelings in accordance to what the world around us suggests we should be experiencing we label feelings in accordance to what the world around us suggests we should be experiencing our realities are a construct of our social environment our realities are a construct of our social environment Experience Environmentmeaningcommunicate

10 our cognitive structure is part of a socially reinforced view of the world our cognitive structure is part of a socially reinforced view of the world therefore therefore meaning is imposed by greater society that constrains people to behave in a certain way meaning is imposed by greater society that constrains people to behave in a certain way cultural identity Experience Environmentmeaningcommunicate

11 ‘i’ want to believe direction on the development of thought is not from the individual to society, but flows from society to the individual direction on the development of thought is not from the individual to society, but flows from society to the individual therefore: therefore: reality is a construct of meaning reality is a construct of meaning and meaning is derived through social agreement and meaning is derived through social agreement society is therefore organized into an infinite number of social structures, each with their own meaning systems society is therefore organized into an infinite number of social structures, each with their own meaning systems Experience Environmentmeaningcommunicate

12 language of meaning interpretation of meaning is language dependant interpretation of meaning is language dependant both the symbols and the way in which they are ordered have an impact on meaning both the symbols and the way in which they are ordered have an impact on meaning culturally dependant culturally dependant Experience Environmentmeaningcommunicate

13 culture, consciousness and psychological phenomenon culture develops cognitive schemata culture develops cognitive schemata EnvironmentReceptorCultural Cognitive Schemata Chosen Behavior o Visual o Auditory o Kinesthetic o Knowledge o Expectations o Values Motives, Perceptions, Emotion, Sensation, Memory, Needs o Physical o Social o Individual Stimulus

14 we are the product of our past our reality is not only of the present. but a construct of our past our reality is not only of the present. but a construct of our past our reality is made up of life experience, background, cultural history our reality is made up of life experience, background, cultural history memory is part of the cultural construct memory is part of the cultural construct society, race, culture, identity, state and nation state are concepts we have created to help us understand our mixed realities society, race, culture, identity, state and nation state are concepts we have created to help us understand our mixed realities

15 shifting relationships change is formed out of conflict (opposites), and conflict is necessary for change to occur change is formed out of conflict (opposites), and conflict is necessary for change to occur Institutions are created to describe codify and manage this change Institutions are created to describe codify and manage this change This ongoing change is inherent in Schumpeter's “ creative destruction ” This ongoing change is inherent in Schumpeter's “ creative destruction ”

16 creative destruction and technology process of industrial transformation that accompanies innovation process of industrial transformation that accompanies innovation technology depends on market conditions technology depends on market conditions market conditions depend on social and political factors market conditions depend on social and political factors technology is endogenously determined by the economic system technology is endogenously determined by the economic system the system is responsible for change the system is responsible for change

17 the old becomes the new the old system gets absorbed into a whole new entity which is equivocally different the old system gets absorbed into a whole new entity which is equivocally different the new entity is created to survive in its changing environment the new entity is created to survive in its changing environment thus the economic system is revolutionized from within thus the economic system is revolutionized from within the existing culture which fueled growth becomes the very system that initiates its own demise the existing culture which fueled growth becomes the very system that initiates its own demise

18 institution vs. market business is forced to change to survive business is forced to change to survive rate of technological innovation determines rate of change (t) in order to ensure survival of business rate of technological innovation determines rate of change (t) in order to ensure survival of business institutions evolve slowly, independent of technological innovation but dependent on social systems institutions evolve slowly, independent of technological innovation but dependent on social systems institutions create policy to govern the market but with a lag of (t-1) institutions create policy to govern the market but with a lag of (t-1)

19 policy is inappropriate institutions are thus providing inappropriate policy institutions are thus providing inappropriate policy policy makers thus make mistakes policy makers thus make mistakes

20 conclusion this theory should form the basis of all good policy decision-making to help eliminate error by policy makers this theory should form the basis of all good policy decision-making to help eliminate error by policy makers I thank you