Titelblad boek An economic theory of greed, love, groups and networks

An economic theory of greed, love, groups and networks --- A high "Sam de Wolff" standard

Publication: Cambridge University Press (2013, Cambridge)

First insertion on Heterodoxe Gazet Sam de Wolff: 21 march 2014

E.A. Bakkum is a blogger for the Sociaal Consultatiekantoor. He loves to reflect on the labour movement.

The book An economic theory of greed, love, groups and networks by the Dutch economist Paul Frijters, in collaboration with Gigi Foster, realizes a high "Sam de Wolff" standard. That is to say, the contents is original, with lots of instructive arguments, and the interdisciplinary character stimulates the thinking across the boundaries of the profession. For although the title refers to an economic theory, the work is surprisingly similar to existing discussions in the psychology, sociology and the anthropology. Frijters takes the classical homo economicus as his starting point, the egoistic and calculating individual, who is driven by greed. Frijters analyses his behaviour in social situations.

For the homo economicus needs groups. Thanks to the group all kinds of individual skills can be learned, collective decisions are very rational (due to the mutual control), there is a mutual solidarity (security), and power can be exerted on other groups. At the same time the members are forced into the curb of the group morals, which leads to a mental stress. Frijters believes that the individual member escapes from his mental anguish by surrendering to love. People like to indulge in phantasies about myths, in cases where events escape from their comprehension. Some selfdeceit makes life more pleasant1.

The interdisciplinary character of the book is its stength and its weakness. The theory is vulnerable for criticism from specialists, who obviously can advance all kinds of counter-arguments, and it is doubtful if Frijters can answer them all. That is not fatal, as long as the theory is able to prove her worth in all sorts of applications. Unfortunately, the book is not filled with applications. The contents is mainly philosophical and theoretical. It is true that Frijters has developed mathematical models, but they are banished to an appendix at the end.

Your columnist is excited by this appendix. It is regrettable that these models have not been published before, except in technical reports and internal manuscripts. They have never been scrutinized by other authoritative economists. Also the validation with empirical facts is missing. So there remains a lot to be done in order to secure the scientific acceptance for the theory2. Undoubtedly Frijters is aware of this task, because his former teacher, the Dutch economist Bernard van Praag, had to fight all his life for scientific recognition. Thus it will be interesting to see what Frijters himself will do with his findings.

Frijters states that love originates from the subjective rationality of the individual, in interaction with mythical images and phantasies. Love can even be an impulse, which is active at the subconscious level. This vision reminds of the existing anthropological, sociological and psychological theories about early cultures, such as in medieval Europe3. It is a pity that these theories are not mentioned, for that would have clarified the nuances. That is also true for the ideal-type of the classical homo economicus, which nowadays is rejected by many scientists, including economists. Frijters maintains this ideal-type for practical reasons. This is allowed, provided that the theory is verified and justified by empirical data.

Love occurs witin groups. The formation of groups is the core of the theory of Frijters. Groups develop their own morals, which become institutional4. The various groups are mutually connected in a value-neutral social network. Frijters focuses on the analysis of trade networks. In the course of time the networks and groups can transform into each other. Examples are fusions between enterprises, branch organizations, or reversely the subcontracting of activities. Frijters complains that the economics neglects group processes, but this is somewhat unfair with regard to the institutional current.

The book discovers love in all sorts of phenomena: marriage, the military training, religion, trade- and professional organizations, and nationalism. It is in part a subconscious process, and even innate. The text is well-written, but this can not conceal that the matter is complex. There is plenty of relevant literature, and it is rather speculative to unite them into a single curb. Also when the authors discuss the abundant literature of the theme group power, references to existing studies would have been helpful. This would strengthen the scientific foundation of the original ideas of the authors. And when the hierarchies and bureaucracies are discussed, the sociologist Max Weber could have been mentioned.

The form of the network plays a crucial role in the economic models of Frijters. Thus the contents of the neoclassical paradigm is extended, whilst at the same time a relation is forged with institutionalism and with the economic sociology. It has already been remarked, that the network theory is banished to the appendix. Perhaps this is done in order to please readers who lack mathematical skills. By the way, the authors do not really address one particular group of readers. The text varies between popular and professional science5. However that may be, the network is included in the production function, as a separate factor. At last the authors describe an application of their theory, namely the economic meltdown after the desintegration of the Soviet Union.

In other words, in the theory the network is the symbol for the entrepreneurial spirit. The entrepreneurs are the contact makers (even though there are other aspects, such as the capacity to innovate and organize). Institutions are essential in order to facilitate the making of contacts. Moreover, the contact makers are the carriers of the democracy (similarly it has been stated that the free market stimulates the democracy). For they try to keep out the morals from the network. The state must restrict itself to the task of regulating within the network, and subordinate itself to the markets.

The final 45 pages of the book describe several exciting mathemathical models. Here the human preferences are represented by individual utility functions, that include the utility of others. This is a radical rupture with the neoclassical paradigm! It turns out that utility function develop in an unpredicable manner. The individual utility functions are integrated into a group theory, where the group members can influence each other and outsiders as well. It are fascinating and innovative ideas. For the time being, the scientific relevance is unknown. For a message of this book is that abstractions can break adrift from reality.

In conclustion, Frijters and Foster believe that humans are egoists, whose ambitions collide with those of others. The egoism itself is the source of the morals, and in particular of the love and altruism. This process unfolds more at the subconscious level than by calculation. Incidentally, your columnist is not certain that this is a good thing. The theory is based on a varicoloured collection and combination of knowledge. Although references are scarce, the arguments are fascinating and inspiring. That is worth something. The main text (not the appendix) can be read like a novel. Your columnist believes that now it is essential to apply the formal theory (the mathematical formulas), by the authors and others. This will decide whether An economic theory of greed, love, groups and networks will become a classic work.

  1. Henriëtte Roland Holst - van der Schalk expresses this in a clear manner in her poem Over het geluk van volkomene onzelfzuchtigheid in the volume Sonnetten en verzen (p.46): Like rivers continuously poor / their life into the endless life of the sea, / by giving a calm enjoyment is realized / and by knowing the eternal greatness / is maintained - in this way life would pass / of the people and and undisturbed peace / will live in their hearts, if they incessantly let / their soul - like some do / transmit the power of love in a perfect / freedom of thinking with respect to themselves and their desires, / pushing their wealth as a wide flow / in the richness of those endless distances, / pooring all the time with full love flows / in the love that feeds all currents. (back)
  2. On p.372 of An economic theory of greed, love, groups and networks Frijters says with regard to such a model, that the findings have not been published in a professional magazine, because the underlying idea is to general, and because applications were lacking. In other words, at the time this specialization did not yet exist. (back)
  3. In a similar way the Flemish poet Achilles Mussche reflects in the poem Nocturne from the volume De twee vaderlanden (p.4): Deep is life in the loud quite nights, / deeper than complaints, deeper than desires, / drunk with eternity, drunk with urges; / from the bounded tired deed of all days / our heart rises towards the dawn of God, - / night, dream-woven nights, many-voiced old nights of nostalgia, / that kiss awake the abyss of life. (back)
  4. Each group invents her own jokes. Thus there is an assemblage of jigsaw puzzlers, a billow of smokers, a chapter of authors, a cloud of meteorologists, a click of computer mice, a dose of doctors, a chain of warders, a drove of cabbies, a flood of plumbers, a current of electricians, a formation of geologists, a handful of pam readers, a number of mathematicians, a collection of mathematicians, a complex of psychologists, a mass of fat people, a shortage of dwarves, and a wave of surfers. (back)
  5. Frijters has indeed promoted his book in the Netherlands, during a series of lectures for an audience, which consisted mainly of laymen. (back)