1 Information and interests
This chapter provides a summary and critical account of the historical debates over the nature of information and knowledge, as background to the explanations based on support-bargaining and money-bargaining, and the use of the information interface, that are developed in following chapters. It provides also an account of the more recent treatment of information in the context of the neoclassical economic model. As intimated in the Introduction, the problems with information encountered in common economic transactions are difficult to reconcile with a mathematical model. The critique of the economics of information serves as an introduction to various aspects of money-bargaining. Support-bargaining and money-bargaining are closely interlinked, so that an account of one necessarily makes reference to the other.
The historical debates have been largely concerned with what lies beyond our minds and how we access it, rather than the everyday usage of information and knowledge. The âbig questionâ has dominated the field: what knowledge do we have of an external world? how do we obtain it? how do we know it is true? For most of human intellectual history the âbig questionâ was debated in the context of religious belief. The answer was assumed to be a matter of âabsolute truthâ â a truth entirely independent of human minds, but made accessible to human minds by divine concession. Information and knowledge depended on unlocking the codes by which denizens of a supernatural world communicated with the human world.
In the modern era the natural sciences have seemed to give the best âwindow on the worldâ, if not answers to the âbig questionâ. The natural sciences â physics, chemistry, biology and their many associated investigations â have seemed, at least until quite recently, to provide genuinely direct access to the material substance of the world around us. In many respects, and for many people, they have taken over the role of religious doctrine in identifying the nature of the world we live in. The displacement is all the smoother in that the natural sciences generally share the idea of an absolute truth available to humanity through diligent research. The consistency of the laws of natural science with common experience, and the remarkable products that derive from natural scientific knowledge, seem to confirm that we do indeed have direct knowledge of reality. Such an idea has been shaken in the past century by developments in the fields of relativity theory and quantum mechanics. Our access to information about the external world seems less than absolute; even the external reality itself may not be absolute. But natural science remains the most dependable means of extracting information and knowledge from the phenomena of what is still taken to be an external world.
The high status achieved by the natural sciences with regard to identification of true information about the world derives mainly from its adoption of a process of systematic testing introduced formally in England through the foundation of the Royal Society in 1660 for the specific purpose of advancing experimental study of natural phenomena. Evidence provided from experiments was regarded as critical to the acceptance or rejection of the hypotheses the experiments were designed to test. Theory had to be consistent with observations and records of what actually happened in defined circumstances. The key to truth was evidence, and the sort of evidence that everyone could share.
Natural science in its earlier forms and ecclesiastical approaches broadly share an understanding of truth as absolute and potentially accessible. They are, however, sharply distinguished by their concepts of evidence. Something like modern forms of legal evidence were emerging in the fifteenth and sixteenth centuries in Britain, roughly in the period when ideas of scientific evidence took shape, though it is also argued they were not established even by the mid-eighteenth century.1 The adoption of evidence as the determinant of truth flew in the face of prior religious understanding. Mediaeval âtrial by ordealâ assumed the direct engagement of God in determination of guilt or innocence. A certain procedure was reckoned to give God the opportunity to signify guilt or innocence. The major break of Christians from the Roman Catholic Church was marked by difference over the understanding of the eucharist. Roman Catholics held it as an article of faith that the bread and wine of the eucharist were transubstantiated into the body and blood of Christ by the invocations of a priest. Protestants denied that such a change took place. The only evidence was that of sensory perception. If Catholics could not accept that what looked, tasted and felt like bread was bread, then there was no evidence to determine the issue one way or the other. The truths of faith were not truths that could be revealed by evidence of the sort generated by common perception, nor even by evidence of a more scientific kind, if it had been possible to conceive such an approach. Even today, when there is overwhelming evidence for an evolutionary origin of the human species, many people adhere to the explanation of their faith. Identification of true information through the assembly of evidence by empirical tests remains the cornerstone of natural science.
The empirical tests used by natural scientists involve not only the systematic collection of evidence, but replication of the evidence by different agents. There has to be corroboration of evidence, as with legal evidence, by a second agent and preferably more. Evidence that cannot be replicated is likely to be rejected. The reproduction of scientific evidence implies that it must be possible to replicate the phenomena under investigation, which means they must have some degree of stability, and it must be possible to isolate the phenomena under investigation from other factors that might influence outcomes. Some natural scientific phenomena, for example factors affecting climate change, are unstable and difficult to isolate. Consequently evidence assembled for climate change has been extensively disputed. Scientific method is considered further in Chapters 2 and 6, the former in the context of Bruno Latour and Steve Woolgarâs account of âsocial constructionâ and the latter in the context of Alvin Goldmanâs treatment of scientific realism and veritistic analysis.
The requirement for stability in the phenomena under investigation creates difficulties for the extraction of true information relating to phenomena that do not have such qualities. The social sciences are concerned with phenomena involving human volition, rather than the inanimate phenomena which are typically the subjects of natural scientific enquiry. Replication of phenomena involving many humans, each with their own inclinations, is difficult to achieve. Not only are the phenomena at issue exercising their own volition, but the social scientists themselves have their own volition that is likely to affect their approach to the subject phenomena. Natural scientists can easily be conceived as detached and disinterested investigators of truth, since the behaviour of their inanimate phenomena will be of no personal concern to them. Social scientists may claim the same status, but those who find their results inconvenient are likely to argue that the research was affected by the preferences of the researchers. Social scientists nevertheless recognise the importance of evidence derived by scientific method and adopt such modified forms of scientific method as are feasible with the phenomena they deal with.
Neoclassical economic theory and information
The success of natural scientists in the nineteenth century across Europe and the prestige of its practitioners set students of human society wondering whether a similar approach might yield comparable rewards in their field. The economic theory that developed in the late nineteenth century, commonly referred to as neoclassical economic theory, was conceived on the model of the natural sciences, in particular physics. The aim was to develop a theory of economic transactions that would have status comparable with that of physical science. The concern of economics with physical things like bricks and chairs suggested that the analogy with physics might not be misplaced. Economists could assume, like physicists, that what they were dealing with had an existence independent of any human perception. It was, however, necessary to adopt the practices of physics on a highly selective basis. Mathematics could be used in a theory about âthingsâ, just as it was in physical enquiry, and neoclassical economists adopted a mathematical approach. For many years into the twentieth century debate was maintained over the concepts of economic theory, but in the latter half of the twentieth century the mathematical aspects of the model gained ascendancy. The Robbins concept of economics, mentioned in the Introduction, as a study of resource allocation, became dominant. It came to be accepted in economics faculties of universities that mathematics was the essential means by which the microeconomic mechanisms of exchange, and hence the mechanisms of economic systems, would be revealed. It became the âmainstreamâ theory of economics, dominating the institutionalised teaching of economics. To a considerable degree, âeconomicsâ became and remains âneoclassical economicsâ. Modifications and alternatives have been proposed, including the present idea of money-bargaining, but none has eroded significantly the dominance of neoclassical theory groups.2 The global financial crisis starting in 2007 intensified debate over the deficiencies of neoclassical theory.
Mathematics imposed certain requirements on the phenomena it dealt with. These requirements could only be met through assumptions. Economics was concerned not only with âthingsâ but with human beings. The incidence of human volition was potentially a major stumbling block for a mathematical model. Its difficulties were minimised through an assumption that humans would always act rationally in pursuit of objectives defined in the model. Further necessary assumptions included homogeneity of products, many buyers and sellers, consumer choice based on marginal utility, firms equating marginal revenues to marginal costs, an absence of a spatial dimension and a severely truncated time dimension.3 While the use of mathematics took neoclassical theory closer to physics, the necessary assumptions for the application of mathematics removed it far from the empirical concerns that are the bedrock of natural scientific enquiry. Neoclassical economists presented mathematics as in itself sufficient guarantee of the truth of its conclusions. Physicists had shown that the universe behaved in accordance with mathematical models, so it was thought reasonable to contend that human exchange could likewise be represented mathematically.
For those not entirely convinced by the mathematical argument, the fall-back was to excuse the lack of scientific rigour on the grounds that the mathematical approach provided at least a useful simplification of economic exchange. Useful lessons could be learnt from the mathematical model regarding the dynamics of monetary exchange. It constituted a useful frame of reference. Observations could be extensively âinterpretedâ by reference to the economic model, in the way that adherents of religious faiths interpreted their observations in accordance with their faith.
The lack of empirical concern in economic theory was noted by William Beveridge, author of the âBeveridge Reportâ of 1942 that formed the foundation of the National Health Service in Britain. Beveridge devoted his farewell address in 1937 to the London School of Economics and Political Science, after 18 years as its director, to a plea for greater concern for âobservationâ in the social sciences and less preoccupation with theoretical speculation.4 The social sciences should be scientific in their approach, concerned with facts, rather than tolerate so much abstraction. He made the point most strongly by reference to John Maynard Keynesâ famous book, A General Theory of Employment, Interest and Money, then of recent appearance.5 Beveridge notes that Einsteinâs formulation of relativity theory started and finished with observed facts, but Keynesâ general theory is quite different: