THE Global Justice Movement Website

THE Global Justice Movement Website
This is the "Global Justice Movement" (dot org) we refer to in the title of this blog.

Wednesday, August 20, 2008

The Importance of Binary Economics: A Brief and Partial Assessment

By Mark Reiners, Guest Author

Philip Ball's recent book, Critical Mass: How One Thing Leads to Another provides an overview of the broad and growing range of theoretical and academic work applying concepts and methodologies from statistical physics to the domains of social science, often especially to economics. Chapter Ten, "Uncommon Proportions," devotes considerable space to the issue of skewed distributions of wealth. While there may be many epistemological and ontological grounds for being extremely cautious about playing fast and loose in drawing extrapolations from the field of statistical physics to that of social phenomena, notwithstanding the interesting and perhaps important nature of some of this work, there are citations here that may be of considerable value in trying to assess whether Binary Economics deserves the mantle of historic importance often assigned to it by those who find its logic and prescriptions convincing and compelling.

In Chapter Ten of Critical Mass, references are made to the importance of power-law distributions in statistics, the fact that the presence of these relations in relevant indicia strongly suggests that the probabilities for the emergence of "extreme events" are greatly increased, Pareto's Curve (which expresses the relative tendency for wealth to become concentrated) as an economic case-in-point, etc. But from the standpoint of the aforementioned assessment of the relative importance of Binary economics, the following paragraph may be of the greatest relevance and significance.

"Econophysicists Sorin Solomon in Israel, Jean-Philippe Bouchard in France, and their co-workers have proposed models to explain how the Pareto law might arise, drawing on ideas developed to explain the movement of the chainlike molecules in polymers. The researchers compare these motions with the movements of money in investment markets. Solomon, working with Zhi-Feng Huang of Cologne University, has shown how there is a tendency for trade to increase the steepness of the Pareto slope in unregulated markets, creating an ever-increasing disparity between rich and poor. One consequence of this is that market fluctuations also increase: the market becomes less stable. So, the researchers argue, a social policy that aims to raise the wealth of the poorest members of society 'is not just a humane duty but also a vital interest of the capital markets' — a form of enlightened self-interest."

There are multiple dimensions of this paragraph which might be extensively "unpacked" with respect to their implications for an assessment of the importance of Binary economics; but within Binary theory, given the importance of the concept that there is a very important and powerful relationship between economic growth, stability and efficiency on the one hand, and the socially distributive balance of the ownership of productive assets of the economy on the other hand, the closing allusion to a critical symbiosis between a normative factor such as economic justice and the supposedly more "objective" factors such as economic efficiency and stability is only the most obvious.

Given the interest and importance of their stated conclusions to this effect, it will be most interesting to explore in more detail the theoretical models of the researchers cited here with another consideration in mind with respect to the allusions to "movements of money" and "trade"; a consideration deeply fundamental to Binary Economics, but one often overlooked by those carried away with merely examining statistical indicia. Namely, that what such indicia portend conceptually, may generally be far more related to what the parameters of the system are than to the variables chosen for statistical scrutiny, per se. And in the case of economic systems, the parameters — the social, legal, institutional and econo-theoretic analog of the genome in biology — may be considered to be comprised of the legal, theoretical and institutional infrastructure which defines rights of property, the rules-of-the-game for how the markets are allowed to work, etc. In short, the frequently — if not generally — tacit presumption, that the statistics associated with the outcomes of "the market" can justifiably be taken as reflections of a Divinely ordained, temporally eternal set of underlying parameters as fixed as the laws of physics are presumed to be, is wildly misplaced. It is not Divinely ordained or fixed by natural law, that economic parameters can only be defined or configured in a manner leading to the kind of highly exclusionary and highly concentrated profile of productive-asset ownership that happens to prevail in their current configuration.

Binary theory and economics have long asserted that this generally invisible legal, econo-theoretic and institutional infrastructure is deeply and profoundly important to outcomes having more socially constructive normative consequences. Part of the beauty of Binary theory, is the revelation that the normative and the stable and efficient are not only not to be viewed as in opposition but, indeed, are complimentary. And that is far more a conceptual than a statistical or mathematical issue; and it is at the conceptual level — the level of its theoretical emphasis on the distinction and importance between productiveness and conventional productivity, the Binary property right, and the concept of Binary growth — which may be the truest measure of its historical importance. In this sense, the importance of Binary Economics is not merely in illuminating the theoretical and institutional errors and oversights in the prevailing "invisible infrastructure" which conspire to inhibit the kind of optimal economic systemic efficiency, stability and justice alluded to by these researchers but, in so doing, making that infrastructure far less invisible.

What is perhaps most significant in this context about the work of theoreticians such as those cited above from Critical Mass, is that they may be providing important insights supporting such an assessment; and given a social, political and academic environment so conspicuous for its manifest absence of moral courage, and a tepid reluctance to challenge conventional wisdom, no matter how urgently circumstances may suggest that such challenges would be highly apropos, that support may prove to be very important indeed. In fact, there may be a terrific chance here for Binary economists to reach out to these researchers to explore collaborative research opportunities.