CBS. 2. September 2015.

"Into the age of non-economics" By: Joergen Oerstroem Moeller.

Visiting Senior Research Fellow, Institute of Southeast Asian Studies.

Adjunct Professor, Singapore Management University & Copenhagen Business School.

Honorary Alumnus, University of Copenhagen.

CBS. 2. September 2015.

Disclaimer:Power point available at ARC website.I will not comment on all slides.And for some slides only say a few words.In a few cases I will repeat myself –

apologize.

Prelude. 1.

Adam Smith ► economic incentives. Classic. Capital formation. Interest rate.

Supply. General equilibrium. Keynes. Consumption. Demand. No

general equilibrium. Friedman. Monetarism. Inflation targeting. 1950s. Unemployment. 1960s demand pressure. 1970s stagflation – debt

no issue. 1980s. The market reinvented! Deregulation. 1990s everything fine-do not interfere. 2000s bubbles followed by financial crises and great recession. 2010s debt major issue. Forecasts!!!!

What is economics? Descriptive – instrumental – normative? Objectivity versus subjectivity?

Prelude. 2.

Science itself has since the Heisenberg uncertainty principle in quantum mechanics from 1925 moved away from pure objectivity towards uncertainty and more inaccuracy. In scientific terms this is obviously a watershed, but it may be even more important in implanting the fundamental philosophy that things are not so certain and accurate as science over several hundred of years had taught.

Schrodinger’s cat.   In 1958 Norwood Russell Hanson put forward his theory

that what we see is not objective, but that the result of observing something depends to a certain degree on the observer; what our senses receive is actually filtered sensory information.

Prelude. 3.

Kuhn: A scientific revolution occurs, when scientists encounter anomalies which cannot be explained by the universally accepted paradigm. The paradigm is not simply the current theory, but the entire worldview in which it exists, and all of the implications which come with it.

Following Kuhn and Arnold Toynbee (the rise and fall of civilizations), whenever an economic paradigm is unable to provide useful answers to a period’s biggest challenges, society will enter a transitional period in which, sooner or later, it replaces the existing logic and operating system with an updated and better one. There are two driving forces for moving an economy or a society from one operating system to another one. Exterior challenges (the push factor) [book HOW

ASIA CAN SHAPE THE WORLD] and the development of consciousness (the pull factor). Otto Scharmer and Kathrin Kaufer. Leading from the emerging future. Berett-Koehler publishers, San Fransisco.

I. The TRANSITION.

Mass consumption replaced by mass communication & plenty/abundance replaced by scarcities.

Sharing of information ►knowledge ► groups ►

values. Burden sharing ► groups ►values ► equality

or more precise fairness. Both point to values as the controlling factor.

Geopolitically. A globalized world where inequalities among and inside countries are exposed

I. The Transition. A. Mass communication. 1/6. Economics. Growth.

Flows of goods, services, and finance reached $26 trillion in 2012, or 36 percent of global GDP, 1.5 times the level in 1990.

One in three goods crosses national borders, and more than one-third of financial investments are international transactions. In the next decade, global flows could triple, powered by rising prosperity and participation in the emerging world and by the spread of the Internet and digital technologies.

Global flows could reach $54 trillion to $85 trillion by 2025, more than double or triple their current scale. Mckinsey global institute, April 2014.

I. The Transition. A. Mass communication. 2/6. Among PEOPLE.

Mobile phones 2015 (mio): China 1300, India 960, USA 327, Indonesia 250, Brasilia 284. Internet access persons China. 668 million (mobile internet users 525 million).

Communicate with anybody, anytime, anywhere about anything. According to a World Bank econometrics analysis of 120 countries, for every 10-percentage-point increase in the penetration of broadband services, there is an increase in economic growth of 1.3 percentage points.

I. The Transition. A. Mass communication. 3/6. Among MACHINES. Source: Samuel J. Palmisano, Chairman, IBM Corporation

Approximately two billion people now on the Internet. Upwards of a trillion interconnected and intelligent objects and organisms – the Internet of Things.

One billion transistors for every human being on the planet. Intelligence now embedded in the systems that enable

services to be delivered… physical goods to be made and sold

All of this is generating vast stores of information. Estimated that there will be 44 times as much data generated over the next decade, reaching 35 zettabytes (a 1 followed by 21 zeros) in 2020. Advanced computation and analytics makes sense of that data in something like real time. This enables very different kinds of insight, foresight and decision making.

---------------- From internet of things to internet of everything.

I. The Transition. A. Mass communication. 4/6. Mobilization of knowledge. Politics.

Knowledge is produced in enormous quantity by countries, corporations, and communities. How to use it?

Depends on: How open societies are and to what degree they give access to knowledge. [are societies open for use, transfer, and application of knowledge?]

People want to share. But not with everybody! Group behaviour – common and shared values. Risk: Social networking divide – you communicate with like-minded.

Key point is whether producers and OWNERS of knowledge – often institutions – trust individuals with knowledge.

If you do not communicate, you do not exist. If you do not think you do not exist

I. The Transition. A. Mass communication. 5/6. Mobilization of knowledge. Economics.

Cost of producing knowledge not known + Marginal costs & utility absent. Used again and again,

by many people at the same time, no repair, obsolescence? Increasing returns to scale re-interpreted. City one million cars – one more: User value for purchaser +, user value of existing cars –. One more mobile phone. User value for purchaser AND existing phones +.

Price & Market. 1: Internet ► share not own. Uber + Airbnb. 2: Knowledge + information ► free good.

The incentives to produce knowledge and make it available are non-economic driving the introduction of mass communication.

I The Transition. A. Mass communication. 6/6. Business model as

barrier.

Information becomes scarce and subject to price fixing because of commercialization to generate profits for corporations that erect barriers for creation and transformation of information. It is done by controlling transmission. A barrier that technology + social media is fast undermining auguring a collapse of the existing economic model. Corporations will fight this until they die and die they will!

Neither economics nor the business model can handle these changes ref Kuhn – world view.

Hotel example from Singapore!!! Resistance to Uber.

II. The Transition. B. Scarcities. LESS IS THE KEYWORD. Food. FAO 40 countries face food shortages, 40% increase in food production to 2030 and

70% to 2070 for status quo. Raw materials. Resources. Energy/oil.

Water. Water stress 2040. WRI: Ratio of withdrawals to supply high for China, India, US, Mexico. Extremely high for Middle East and North Africa.

Clean environment. WB: the health costs of air and water pollution in China amount to about 4.3 percent of its GDP. By adding the non-health impacts of pollution, which are estimated to be about 1.5 percent of GDP, the total cost of air and water

pollution is about 5.8 percent. They are linked to each other. To feed the population double

water use efficiency over the next twenty years.

II. The Transition. B. Scarcities. 1/2. Production – productivity.

Industrial society: productivity production per person per hour. How much MORE could a person produce.

Future: productivity how much more output we can squeeze out of one unit of input of resources.

Total use of resources. Examples:1) Obsolescence. 2) A chip weighing 2 gram: 600

times of resources used. Price does not reflect this, based on raw materials (cheap, extraction costs here

and now) and R&D distributed over millions of microchips. 3) Marks & Spencer plans to overhaul its supply chain, stop purchase supplies from one hemisphere to another, may save the company GBP 175 million annually.

II. The Transition. B. Scarcities. 2/2. Production. U – R – I model.

U-use►Durability, choose commodities to this effect. R-reuse►Repair (repair industry in US one of the fastest declining industries),

regenerate, remanufacturing and recycle. FRAM! I-ideas►Innovation + R&D aiming at less use of

resources. Product cycle + life cycle► Total resource use. 3D disaggregation. McKinsey: potential cost savings in the EU through this model amounts to $US

380 billion equal to two per cent of GDP. Waste costs France Euro 140bn per year. 7% of GDP. Southeast Asia is expected to generate 480 million tons of industrial waste in

2025. That figure will almost double, to about 900 million tons, by 2050. Requires: new production methods, new innovation, new thinking, and new price structure.

Generate value. A potential growth machine, but another kind of growth. Waste becomes precious.

II. The Transition. B. Scarcities. 2/2. Appendix. Fridge

Buy a new fridge lower el-consumption. Resource use (RU) ↓.

Add resources uses to produce the new fridge. RU ↑. Total Resource Use (TRU) ↑.

Option one. Scrapped. RU ↑. TRU ↑. Waste recycled ? TRU + waste recycled shows resource+waste result.

(RWR). Option two. It is repaired and sold to somebody not

having a fridge. RU ↑. TRU ↑. That somebody is now able to conserve foods better.

RU ↓. TRU ? Waste of food↓. In this case TRU depends on the time horizon –

durability plus planned or not planned obsolescence. Point. Product cycle + life cycle gives a more

complicated result than assumed. BTW. Datacenters consume up to 1.5 percent of global

energy

II. The Transition. B. Scarcities. 1/2. Consumption. Inside box.

Keynes: Consumption theory – how to get people to consume more, consumption is the key to all economics.

Future: How to get people to consume less + change pattern from materialistic to less materialistic consumption.

In reality a swing towards 1) Durability as competitive parameter. Label

saying likely durability like today’s labels exp date. Planned obsolescence no longer.

2) Target for recycling, share of components like today’s labels displaying calories.

Illustration: A watch. Battery? To wind? Self-winding. Compare total use of resources over ten years.

II. The Transition. B. Scarcities. 2/2. Consumption. Outside box.

The consumption function: First. Uncertainty. If consumption is postponed

no guarantee it can take place later. Restrictions on buy a car, car use etc.

Second. More focus on happiness (satisfaction) through non-material consumption e.g. communication. The feel good factor.

Third. Societal aspect. Global survey 28,000 people. Asia-Pacific on top for brands ‘give back to society’ & number one cause to support: Environmental sustainability. Source: The Global, Socially-Conscious Consumer, March 2012, The Nielsen Company, http://nielsen.com.

III. The Transition. C. 1/10. Economics. Price mechanism? Market?

1) Prices not set by supply vs demand but to generate short term corporate profits.

2) Market does not exists anymore. 1318 corporations control 80% of global business; 147 controls 40%.

4) Consequence of mass communication: a) Knowledge as a free good being commercialised – artificial prices. b) People are ready to pay the user value – not the price to own. They rent to use – not buy to own.

5) A kind of leasing economy. Consumers lease or rent goods or services or cars or houses for use and only as long as they use them. Corporations own goods and services! Monopoly of ownership!Example. Most airlines do not buy an airplane. They rent it even if officially they buy. Managing the entry into service, operations, maintenance and the transition of aircraft pose challenges to an airline’s core mission. Why invest in the infrastructure, systems and operations needed to perform these functions? Boeing. GoldCare

III. The Transition. C. 2A/10. Economics. Distribution wage vs capital. Skills.

Piketty. Wage vs capital share right concept in industrial age. Wrong concept now. Knowledge means that marginal product of labour will not equal the real wage.

Formerly. Technology embedded in capital. Higher quality/technology higher productivity/higher return to capital. Not to workers even if labour productivity went up.

Now. Brain power + skills of workforce = combining services/capital ► product concept ►total factor productivity (TFP) goes up. Higher remuneration goes to the skills factor neither to labour nor to capital. Application of technology!

Ref Kaldor’s distribution theory based on different savings rate between capitalists and workers. Now different skills factor among people. Premium or discount!

III. The Transition. C. 2B/10. Economics. Distribution wage vs capital. Skills. Education system.

Supply/demand of skills. US figures show that if no mismatch growing equality – if mismatch growing inequality.

US. 35% of employers find it difficult to fill positions because of lack of APPROPRIATE skills. (technicians, engineers, sales representatives to mention a few).

Europe. Share of graduate workforce in jobs that do not need graduate skills. (UK 60%, France 25%, Poland 40%, Sweden35% - Germany 10%, Switzerland ˂ 10%. Denmark ˂ 20%).

Top takes a disproportionate share of income. ‘Scarce’ skills: Premium. Traditional non-graduate middle class + traditional workers squeezed by influx of graduates suppressing the wage rate condemning ‘workers’ to unemployment.

Long term unemployment as share from 2007 to 2011. US 10 → 30, UK 22 → 35, France 40, Germany 55 → 48.

III. The Transition. C. 2C/10. Economics. Distribution wage vs capital. Abuse of skills – distorting the economy.

Skills means that people earn money not only doing something boosting the economy, but by offering services that looks like increasing production, but doesn’t – in reality encroaching on productive sectors.

Extractive and inclusive societies introduced a couple of years ago. More relevant to look at extractive versus inclusive sectors. 1950 the financial sector in US and UK accounted for ten percent of GDP. Now approx. 8 percent after ten percent prior to the financial crisis. Fancy ideas how you can shuffle financial papers around not contributing to GDP.

The economy rewards those who can ‘commercialize’ services above their value through corporate capitalism/mutual oligopoly.

One of the reasons this can happen is the lack of price of knowledge, marginal utility plus increasing returns to scale. Those buying these services have no idea about their profitability. They are unable to form a comparative analysis whether this is the most profitable investment for them to undertake.

III. The Transition. C. 3/10. Relative

factor prices.

Industrial age: Era of plenty. Labour force scarce → wage ↑. Commodities available → prices ↓.

Result: underemployment, pollution, waste of resources. Innovation.

Future. Era of scarcity. Labour forces large → wage ↓: higher employment, lower remuneration of labour, less waste of resources, higher quality of the environment. Innovation.

Relative factor prices must change. Prices figure in life cycle. And this is happening. Wage share is falling. Appendix.

With a lower share of GDP to labour material consumption falls (workers savings rate lower) – predicted by Marx, but analytical basis different.

OBS. Material consumption cannot any longer be counted on to drive the economy – China!

III. The Transition. C. 3/10. Relative

factor prices. Appendix.

Labour’s share of national income. Percent. 1980 to 2012. The Economist October 4th 2014.

1980 2012 Sweden 62 54 US 59 55 Japan 54 52 Britain (1987) 54 54 China (1993) 60 49

III. The Transition. C. 4/10. Economics. Business model – corporate governance.

Corporate capitalism. Economic theory operating with competition not applicable – economic policies become ineffective. Too big to fall? Maybe. Definitely big enough to shift costs to the public sector ref how financial institutions shifted their debt burden to the public over the financial crisis. State – Business: Symbiosis.

Ownership in the hands of investment funds not interested in running a corporation but making a short term profit. Common interests for owners and employees - a cornerstone in the industrial society – does not exists. Anonymous ownership.

Franchising: People do not know from whom they buy. Example: Of the 4,942 hotels operated by InterContinental it owns just eight. The “asset-light” approach brings in franchising and management fees. Financial short term, not operating a business. The consumer does not have any idea of who he/she deals with. Or worse. They think they know, but what they think they know is false.

Anonymous supplier – as anonymous ownership.

III. The Transition. C. 5/10. Business

model. Private profit seeking enhanced by shifting costs to the public sector. Four examples..

1: Financial crisis. Financial institutions shifted losses on non-performing loans to the public. Result: Due diligence & distinguishing loans with low risks and high risks not necessary anymore – Detrimental for future investments.2: Reduce workforce shifting burden to social welfare. Result: Public deficits go up and so do the tax burden on those who work. What is called ‘churn’ – higher productivity when workers move from one job to another – becomes more difficult (they do not jump from one job to another but from job to no job). 3: Privatize public services-save money on public budget. Postulate better service & higher productivity. Result: Capital flows out to private investors. Lower societal productivity. Investment & maintenance?4: Planned obsolescence forcing consumers to buy new products even if the existing one could last longer. Result: Material consumption + environmental & ‘resource’ costs goes up. Reform of tax system jeopardized – planned obsolescence pushes up prices reducing margin for imposing levies.

III. The Transition. C. 6/10. Economics. Work. People work if they contribute to GDP as we define it.

Share of work force in agriculture and manufacturing falls dramatically. The latest scare cars! Automation! Work does not exists anymore!

The economic rationale reflects partial analysis (short term profit for the business Sector, decouple from society). 1) Fire workers-market profit goes up-corporate tax goes up, but total tax revenue goes down → different tax rates-social welfare expenditure up. Burden transferred from private to public sector – deficit on public finances vs profit in private sector. 2) Same picture for public services-now run by private business ► ‘profit’ + higher ‘corporate’ productivity & lower societal productivity. Conclusion: As long as the public sector is willing and capable to accept this, a large share of people will be unemployed.

Employment to a large degree steered by the education – skills in demand.

Maybe a future approach should be to define work as contributing to society. Care functions – social welfare.

Denmark 1/3-1/2 of population is engaged in voluntary work. It must have a value and a price but is disregarded because of short term market view. GDP.

III. The Transition. C. 7/10. Economics. Tax system.

The income tax is based on the notion that ability to produce measures a society’s wealth. Wrong. Now it is ability to save resources to maintain them for the future that makes a society rich.

Do not tax information etc. Taxation is based on the assumption that it is ‘services’ as defined by the industrial age, but it is not – it is a free good.

Abolish the income tax and replace it with a tax on total use of resources. Progressive according to resource use.

III. The Transition. C. 8/10. Economics. Sum-up.

Adam Smith: pursuance by the individual for wealth coalesced into higher wealth for society as a whole because society’s wealth is the accumulation of individual’s wealth . Wrong. Inequality + in equitable opportunities.

Question: What does it cost to run a country? Three links cut. Consumer market buyer/seller – production capitalist/worker – business sector corporations/society.

Burden sharing, doing something for others, and less materialistic consumption requires mutual trust. Individuals only give up some of their potential benefits if convinced that others will do the same. If not hang on and an acrimonious battle of distribution follows, tearing societies apart.

Same line of thinking for sharing of knowledge. Knowledge and scarcities reduce wage share and increase

‘skills’ share. Economics as an interdisciplinary analysis steered by values not

homo oeconomicus. Common and shared values point to groups – politics, economics, ‘institutionalization’ changes. Irrationality shoots down economics.

III. The Transition. 9/10. Facebook! Example.

Production? What is produced by facebook? What is the cost of producing it? Marginal costs + marginal utility?

It may stimulate ‘production’ as we know it in other economic sectors but difficult to estimate.

How many people are employed by facebook? How much money is paid out to wages

compared to money flowing to the skills factor? Extractive company or? What does it tell us about mass consumption vs

mass communication? Consumer preferences – well being – the need to

communicate. The drive to be member of a group.

III. The Transition. C. 10/10. Economics. Irrationality. Utility theory not working as expected. Broader implications.

First group was shown a particular type of mug and asked how much they would be willing to pay for it. Those in the second group were given the mug and asked how much they would want in order to give it back. The second group demanded twice as much to part with the mug as those in the first group were willing to pay for it. Kahneman, jack L. Knetsch and Richard H. Thaler, “Experimental Tests of the Endowment Effect and the Coase Theorem”, Journal of Political Economy (December 1990).

Two groups of students chocolate versus apple. The price asked to give it up higher than the price ready to pay for it.

Taxes on plastic bags are more effective in changing behaviour than bonuses for reusable bags.

New. Not only price to get something but price to give up something. Broader perspective: Price for giving up clean environment.

In the 1970s economists admitted that human beings were irrational but for the purpose of economics it did not matter because it was not systematic. But they are; they have systematic irrationalities – judged by economics! Richard Thaler

IV. The Transition. D.

WE MUST THROW AWAY MOST OF ESTABLISHED THEORY AND ECONOMIC MODELS – BECAUSE ALL OF THEM ARE ANCHORED SOLELY IN ECONOMIC THINKING.

INSTEAD WE MUST INCREASINGLY USE PSHYCOLOGY, SOCIOLOGY, ANTHROPOLOGY, STUDIES OF BRAIN BEHAVIOUR AND COMPREHENSIVE THINKING ABOUT HUMAN BEHAVIOUR.

AND THEN TRY SOMETHING NEW – BIG DATA, DEDUCTION OUT, INDUCTION IN.

IV. The Transition. D. 1/5. Interdisciplinary.

The anthropologists Boyd and Richerson [http://ndpr.nd.edu/review.cfm?

id=3241] has come a long way towards showing that genes and cultures coevolves. They say: culture is an adaptation. Human beings like many animals acquire behavior, even more important the ability to adapt primarily by watching and learning. The difference between this learning process for animals and humans is: culture pervades human behavior and the human mindset. Human learning is also cumulative contrary to what seems to be the case for animals.

Culture creates social environments for learning selecting or favoring those who work from those who do not work or work less satisfactorily. This explains why human beings seek together in groups and why those that are able to work out how to cooperate inside groups among individual stand the better chance of surviving than those who do not.

IV. The Transition. D. 2/5. Interdisciplinary.

Delton et al shows that current economic models based upon rationality and selfishness leading to the conclusion that people are selfish in situations where they do not expect to meet their counterpart again is not correct. Using computer simulations they come to the conclusion that not only are people acting generously when expecting to meet counterparts again – which could be explained by selfishness calculating to get something in return or avoid retaliations – but also in a one-shot situation.

Generosity is apparently built into our genes and comes natural to humans contrary to conventional thinking saying it is a either calculated selfishness or a result of social norms, behavioral patterns, or group pressure.

Kilde: Science Daily 25 Juli 2011. http://www.sciencedaily.com/releases/2011/07/110725162523.htm

IV. The Transition. D. 3/5. Interdisciplinary.

Studies from Yale [Wynn, 2008 and Bloom 2010“Some innate foundation of social cognition”, in P. Carruthers, S.Lawrence and S. Stich (eds). The Innate Mind: foundation and the future. Oxford

University Press, 2008 ] watching the reaction of babies six to 12 months old indicate that some sense of good or evil or moral judgment may actually be in the genes. The main idea of the study was to show some figures climbing upwards a slope and watch the reaction of babies when other figures tried to help or block. The babies showed a clear preference for the helping figures.

IV. The Transition. D. 4/5. Interdisciplinary.

’The Social Conquest of Earth’ authored by E.O. Wilson, provides a convincing scientific argument that evolution works also on group level.

We are not only selfish, says Wilson. Our own survival depends on the group we belong to, that it functions well and that explains that genes makes us ’social’.

Inside the group we may behave selfish yes but his studies show that groups where members cooperate and support each other has a higher survival rate than groups where the opposite behaviour dominates.

IV. The Transition. D. 5/5. Interdisciplinary. Why did Homo Sapiens spread around the world? Source: Curtis W. Marean, Scientific American August 2015

A penchant for cooperation with unrelated individuals – hyperprosociality – is not a learned tendency but instead a genetically encoded trait found only in Human Sapiens (HS).

Sam Bowles: an optimal condition under which Encoded Hyperprosociality can propagate is when groups are in conflict. Groups with higher numbers of prosocial people work together more effectively and outcompete others and pass their genes for this behaviour.

Pete Richerson et al: This behaviour spreads best in subpopulations and competition between groups is intense and when overall population is small – like what was the case when HS started to migrate out of Africa.

V. Complexity. E. 1/6.

Complexity: A phenomenon involving multiple components in a dense network of interactions or relationships, where cause-effect relationships are not clear, stable or predictably repeatable. Exhibit new patterns and behaviours. Non linearity but random and/or discontinous: Source: Foresight, a glossary, CSC, Singapore.

Complexity is becoming the new norm for our societies. Because:1) Social networking + web → find and combine informations, not analyze & understand. From specialization to multitasking. 2) Intersectoral and interdisciplinary thinking, teaching, ability to combine/mix, ability to predict consequences of doing something in one sector on other sectors.

Losers: Basic research, objectivity. Ref Heisenberg, quantum mechanics etc. Winners: Ability to do something without really understanding why and how it functions.

V. Some thoughts about Complexity – Interdisciplinary&intersectoral Approach. E. 2/6. Social sciences = behavioural patterns; reactive, interactive,

pre-active. Analyses and forecasts are anchored in well-known behavioural

patterns. When things do not change, behavioural patterns do not either, forecasts will be accurate. When they do change, forecasts will miss the target. Existing modelling are almost ex definitione incorrect in times of change.

Cognitive dissonance. Discrepancy between existing belief and new information or views that contradict those beliefs. Cannot hold two opposing ideas, individuals tend to reduce their cognitive dissonance to denying or devaluing new information. Source: Foresight, a glossary, CSC, Singapore.

Human behaviour depends on – what we see – how we perceive it – how we react. This is not objective (conclusions drawn today different from tomorrow), but depends on a variety of parameters of which other human beings reaction may be the most important one – witness the analysis of human learning with copying others as the vital parameter. Ref Heisenberg and Norwood Russell Hanson.

V. Some thoughts about Complexity – Interdisciplinary&intersectoral Approach. E. 3/6. Grateful to Louis-Francois Pau who discussed deduction/induction with me.

Complexity incorporates that different people operate according to different decision rules. Heterogeneity. Not reflected in economics. Complexity model simulate how events in a system may unfold bringing out differences – not the same result. Ref Richard Bookstaber.

All the information needed for any decision or any policy is out there, somewhere in the mass of information and knowledge. The tricky thing is to put it together to form a useful pattern and picture. Ask questions, look at goals-instruments and cause-effect – contradictory to now looking for the answer inside established patterns and inside one or two social sciences.

Big data having access to the whole range of human behaviour collected without regard to specific disciplines may get the options policy makers need.

The assessment methods of the manifold results from big data analysis becomes crucial. If we get fx 100 outputs combing the available data how do we evaluate each one to find those to choose from and how do we choose?

V. Some thoughts about Complexity – Interdisciplinary&intersectoral Approach. E. 4/6.

It is much easier to carry out deduction than induction, because science narrows down alternatives, induction expands them. All the facts for induction may be there, but not or seldom the context to use them properly (the facts are often domain specific). This discrepancy pushes us towards using common sense or organizational theory and they are never accepted to be objective, or indeed forces subjectivity to be adopted deepening the distance to objectivity.

Thus it is not “science” and it is not based on ‘theory first – explanations/realities afterwards’

The ‘missing link’ is inductive methods and even more integrating such methods in decision making models.

V. Some thoughts about Complexity – Interdisciplinary&intersectoral Approach. E. 5/6. Francis Bacon: Inductive methods must incorporate a technic to classify

data and eliminate hypotheses rejecting possible explanations leaving only one. Observe, collect all form of data inside or outside the phenomenon we study, classify, set up tests to see whether the observation is specific or general. If general formulate a cause-effect through induction.

Before big data scientists pondered on how ‘things’ in their particular science interacted with each other. If the relevant scientific method confirmed that it was correct this interpretation was used as a cornerstone for future thinking inter alia in economics. Sequence was to form a theory then test it and afterwards put data into this model and it will tell us what is going to happen. Theory ► realities.

Big data reverse the order. First collect the data, then put data together finding out how they interact with each other. Then form a theory telling why ►realities first, then theory.

For economics. Hitherto cause→effect one answer. Future – big data combining many ways of thinking to solve problems – cutting the link to preconceived ideas. Sequence does not matter.

V. Some thoughts about Complexity – Interdisciplinary&intersectoral Approach. E. 6/6. A.

Effect → cause. Induction instead of deduction. Theory after having digested realities. Not any longer domain specific.

Around 1950 a regression analysis about cigarettes ◄► lung cancer was attacked by another regression analysis import of apples ◄► divorce rates. Never let realities stand in the way of a good regression analysis!

Traffic during rush hours indicator of business cycle.

Available parking lots in business district by satellite same.

V. Some thoughts about Complexity – Interdisciplinary&intersectoral Approach. E. 6/6. B.

For years economists and sociologists have debated falling birth rates. Hundreds of political steps have been implemented to raise the birth rate. Professor Skakkebæk, Medicine: Over decades the quality of men’s semen has deteriorated mainly because of chemical substances in the environment!!!

The final word: Because cause-effect is NOT repeatable something new is called for. Since 2008-2009 economists have looked for the next crisis. Wrong approach. There may a new crisis but it will not be like the one we saw in 2008-2009.

VI. Conclusion. 1/2.

Knowledge. 1: Free good. 2: Socialize – not private value. 3: Increasing returns to scale.

Scarcity. 1: Inbuilt obsolescence out. 2: Waste neutrality (zero waste). Total recycling.

1: Business less profitable maybe even non-profitable. Model replaced by smaller groups capable of using knowledge as a free good and handle scarcity – both according to social criteria. 2: Work.In 20-30 years time work as we know it now does not exists. 3:New distribution theory.

VI. Conclusion. 2/2.

Economics is about human behaviour; economic incentives play a role but by far from the only one and maybe not the most important one.

Move into interdisciplinary & intersectoral area.

Other social sciences and brain behaviour.

Complexity and big data. From deduction to induction.

joergen@oerstroemmoeller.com Author of:Books. 1) HOW ASIA CAN SHAPE THE WORLD –

from the era of plenty to the era of scarcities. 2011.

2) The Global Economy in Transition. 2013.3) Political Economy in the Globalized World.

2009. Articles. 1) Into the Age of Non-Economics. SER. Vol 59. No. 3 (2014).

2) Conventional Economic Theory – A Critique Highlighting Flaws in American Style Capitalism. SER. Vol 56. No 1. 2011.

3) Values and group behaviour Shape Future Governance. WFR 2015. Vol 7 (1) 4-11.