ECONOMIC  Systems

Theories

   Robert Heilbroner    

Theories

Still in the 18th century, the "philosophers of earthly matters" (Robert Heilbroner) appreciated that economics[1] represents an autonomous field, unaffected by the control exerted by political power, religion, morality, etc.

In another phrasing, a precise institutional framework, defined by competitive markets where producers and consumers driven by their own interests operate, a deductive methodology (laws, abstract reasoning), and a universal-cosmopolitan vocation (phenomena, processes, laws are considered valid regardless of time and place, while structural differences between countries or regions are neglected) illustrate the autonomy of economics and accompany the modernization of the world.

Fritjof Capra

Alfred Marshall

Werner Sombart

Janos Kornai

János Kornai 

Walter Eucken

Important theorists, who contributed to the growth of the prestige stock of the German historical school (sheet no.1), have associated the concept of system with the functional characteristics of the economy.

For example, Werner Sombart (1863-1941) referred to a set characterized by a "spirit," a "form," and a "substance," in other words, to the combination of a mentality, a legal apparatus, and technical procedures.

In this perspective, the capitalist economy, where human action is oriented towards the pursuit of the greatest profit or the greatest net monetary gain, develops a mentality recommended by the spirit of acquisition, competition, and reasoning (all things are weighed based on cost and yield calculations), a legal organization based on private property over the means of production, on entrepreneurial acts capable of achieving the most suitable use of resources in order to meet consumer needs, and on the worker's right to freely dispose of their labor power, as well as a production technique compatible with large industry (machinism).

In turn, Alfred Marshall (1842-1924), a prominent representative of neoclassicism (sheet no. 2), considered that the economic system is a coherent complex of institutional and social structures, economic and technical, psychological and mental, whose essential objective is to mitigate the conflict between limited resources and unlimited needs.

Closer to our days, Walter Eucken (1891-1950), one of the exponents of the Freiburg School (who developed the concept of "social market economy"), contemplated the notion of "type of economic organization" as a substitute for the economic system. The German professor observed that in all societies, economic activity is enhanced by the plans and projects that producers and consumers imagine and execute in order to act against the scarcity of goods.

The adjustment of these plans is accomplished either by following spontaneous mechanisms, with a multitude of decision-making centers, or by considering directed mechanisms, which formalize the decisions of a single center.

Thus, Eucken identifies two fundamental types of economic functioning – the decentralized one, where the market is constituted through distinct economic centers, connected by exchange networks, the enterprise represents the production unit meant to associate commodity markets and factor markets, money serves as a common denominator of economic activities and decisions, prices express the tensions of scarcity in current life (their movements allow for the balancing of exchanges), the state's intervention, on the one hand, orients but does not suppress the decision-making freedom of agents, while on the other hand, it targets the major lines of economic activity without disturbing the market mechanism, and the centralized one, based on orders directed to economic agents by the State, whose plans are dominant, based on conventional administrative evaluations, meant to replace market prices, with enterprises transformed into technical production units (fitting into a production volume, receiving quantities of production factors based on technical coefficients that they cannot contest, etc.).

A completely different approach to the concept was proposed by János Kornai (1928-2021) (sheet no. 3). The Hungarian researcher indicated solutions for transforming the economy from a logico-mathematical science into one of concrete systems.

He argued that the economic system presents itself as such thanks to the accessed inputs, the released outputs, and the transformation of its internal state, particularly of its material and informational elements. In its behavior, the economic system develops a certain regularity: it responds based on rules to the stimuli it receives, illustrated by the "reaction function," which measures the outputs and state changes of the system in relation to the inputs and the initial state of the system.

A presentation of the various forms in which the meanings of the economic system have been and are received cannot be separated from the claims of Fritjof Capra (b. 1939). The well-known physicist and epistemologist identifies five criteria of the "systemic approach" [the transition from parts to the whole (the properties of the parts can only be understood in the dynamics of the whole), the transition from structure to process (each structure represents a manifestation of an essential process), the transition from "objective" science to "epistemic" science (epistemology, in other words, the understanding of the process of knowledge, is included in the description of natural phenomena), the transition from the pyramidal structure to the "network-type" structure (the metaphor of knowledge), the transition from "truth" to approximate descriptions (all scientific concepts and theories are limited)] before advocating for moving away from the conventional knowledge model (derived from theoretical physics, with the representation of independently existing realities) and privileging thinking "that generates wholes, general principles, interrelations instead of parts, subsystems or static snapshots".