The Nascent Science of Psychoeconomics

Corporations, businesses and economies, are
conceptualized, by a new order of scientists, as complex systems
of interacting elements which resemble living organisms, each one
trying to adapt, and to survive, competing in an ever changing
environment.

Working at the Santa Fe Institute, Nobel
laureates of the caliber of Murray Gell-Mann and Philip Anderson
in physics, and Kenneth Arrow in economics; propose the unified
vision that disciplines (as seemingly unrelated) as neural
networks, ecology, artificial intelligence, complexity, human
psychology and chaos theory, offer an untapped potential for the
(proper) conduction of economics, business, education, and even
politics.

Along these lines, physicist cum economist
Brian Anderson (also of the Santa Fe Institute) has dared to
propose that the old conception in economic circles, of markets
endowed with an in-built tendency to proceed always to preset
equilibria and corrections, was a false assumption. He maintains
that: "He [Arthur] couldn"t imagine anything less like the real
economy, where new products, technologies, and markets were
constantly arising and old ones were constantly dying
off.

The real economy was not a machine but a
kind of living system, with all the spontaneity and complexity
that [molecular biologist Horace F.] Judson was showing him in
the world of molecular biology". Thus Anderson began to utilize
principles from molecular biology to explain markets
behaviors.

Equally resonant with these new principles
were the ideas of the Belgian physicist Ilya Prigogine (Nobel
Price 1977) when he wrote in an article that "…it"s
conceivable that the economy is a living (italics ours),
a self-organizing system, in which market structures are
spontaneously organized by such things as the demand for labor
and the demand for goods and services."

Arthur refined much of his conceptual
theorizing when he had an opportunity to exchange ideas with
Norwegian economist Victor Norman.

He further expressed and expanded on these
thoughts: "The important thing is to observe [that] the actual
living economy out there. It"s path-dependent, it"s
complicated, it"s evolving, it"s open, and it"s organic
(our emphasis)."

"If the Santa Fe economists found the
prospect (of multidisciplinary collaboration) exciting, however,
they also found it vaguely disturbing. And the reason, says
Arthur, was something that he didn"t put his finger on until much
later. "Economics, as it is usually practiced, operates in a
purely deductive mode," he says. Every economic situation is
first translated into a mathematical exercise, which the
economics agents are supposed to solve, by rigorous, analytical
reasoning. But then here were [economist John] Holland, the
neural net people, and the other machine-learning
theorists.

And they were all talking about agents that
operate in an inductive mode, in which they try to reason from
fragmentary data to a useful internal model. Induction is what
allows [us] to infer the existence of a cat from the glimpse of a
tail vanishing around a corner. Induction is what allows [us] to
walk through the zoo and classify some exotic creature as a bird,
even though we"ve never seen a scarlet-crested cockatoo before.
Induction is what allows [us] to survive in a messy,
unpredictable, and often incomprehensible world."

We find ourselves, today, with our feet
firmly planted in the threshold of a new era, an era of sweeping
adaptive changes in the way that we conceive and formulate our
future financial courses and predict their outcomes.

A New World wherein quantum dynamics, chaos
theory, complexity and artificial intelligence, interact with
psychology, ecology, biology and sociology, not to name economy,
medicine, pedagogy and astronomy. All these developments
constitute on a veritable holistic and original bold approach to
the capture of the significance, and of the essence of the world
of commerce between peoples, and of peoples themselves within
their cosmic spheres.

Thus the inception of the new field of
Psychoeconomics with its unlimited possibilities for application
in our understanding of chaotic, unpredictable and elusive
phenomena in a broad variety of disciplines.

But, this kind of exercise in attempting to
control, organize and predict outcomes is not new. Philosophers,
warriors, strategists, members of the vast assortment of
religions, magicians and politicians, have used their skills
through the ages, to try to gain an edge of Darwinian advantage
in the universal quest for one"s adaptation and survival. In
other words, the evolutionary drama is being played afresh in the
corporate office and in the boardroom. Put differently: "Survival
of the fittest" in the strictest of economical and human of
senses is being redux.

We live in a multifactorial society. We are
influenced by events, which do not necessarily originate in our
proximity or by events, which are not always under our spheres of
control and influence. For example, a crisis involving a
superpower in a certain region can choke our vital supplies,
impose a hardship on our ability to conduct business "as usual"
and deprive us from the opportunity of being able to maintain a
competitive edge. This can be a serious threat to our
business.