Theory of Economic Constructivism

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In this paper, a new tool for economic analysis and improvement of economic theories – the Theory of Economic Constructivism (TEC) – is considered. TEC is based on epistemological constructivism, duality theory, second-order cybernetics and network analysis of economic systems. From a single point of view based on an analysis of dual self-reference systems, emerging economic phenomena – autopoietic systems, circular and transit processes, communication networks – are described. The concept of closed, circular processes, as invariants of economic systems, ensuring sustainable economic development, is elaborated. A theoretical substantiation of the place, role and significance of closed structures at different levels in a management system is carried out. A network-based improvement of the balance model, taking into account the structure of linkages in the economy, is proposed. Examples illustrating the possibilities of calculating stable variants of structures are provided for different types of model economies. Using the topological apparatus of dual networks, the main variants of cash flows associated with the production sphere of the economy are considered. On the basis of the presented theoretical provisions, practical conclusions for improving the economy under the conditions of innovation and globalisation are drawn. The interrelation between exchange and contractual economies is affirmed. By contrast with contracting, exchange establishes relations between goods, recording the relations between operators exactly in those areas where they can only function jointly, supporting each other. When a chain of enterprises becomes isolated, forming a cycle that is balanced in its all nodes, a closed structure emerges, one that is absolutely independent from the external price landscape. A very significant part of the further progress of TEC can be connected with the formal characteristics and stability conditions of such closed loops (space cycles).

Posted for comments on 23 Oct 2017, 10:53 am.

Comments (4)

  • Andrei Shelomewntsev says:

    Professor V. Popkov in his article proposes to consider the economic theory of constructivism as a new stage of development of the traditional views on the changing economic reality (that reality).

    The author introduces readers to the evolution of views on the ongoing economic process and notes reflective character of modern economic theory. He understands reflexivity as an opportunity to not only explain economic phenomena, but also actively influence them. The active impact on reality, according to the author, is the basis of economic constructivism.

    The problem of the influence on real processes naturally leads to the discussion of the truth in economic science.

    So, the Professor refers to G. Soros and writes that “ economics, the attempt to rely on facticity as a criterion of truth is not justified since theoretical approaches in social sciences may alter observed phenomena (Soros, 2001, p.6)”.

    However, the facts are never a criterion of truth in science for a different reason.

    V. Popkov writes: «We define economic constructivism as the deliberate construction of economic reality in accordance with the axiological preferences of a social subject (whether individual or collective), which takes into account the structural and parametric interfacing of subject and object on the basis of the principles of self-reference, duality, circularity and cyclical causality».

    In our opinion, these approaches are by no means new. They are the object of scientific debate for more than 20 years. From this point of view, first, reflexivity and constructivism are a feature of many social Sciences and not only in the economic sphere. So we can talk about social constructivism. This characteristic of the social Sciences mentioned in the beginning of the twentieth century.

    Second, we agree that economic constructivism is implemented via the reflexive nature of economic science. However, the author has not fully disclosed the nature of this characteristic in the economy. This characteristic of the economic science we can call “theory of economic constructivism.”

    Among the advantages of the V. Popkov’ article, we would like to highlight the following points.

    First, we consider that the remark of the author about the traditional economy which he considers in the N. Wiener’ cybernetics context – as a “black box”: the ratio of “input” and “output” – is very interesting. (The consequence of circularity lies in the fact that there is no noticeable effect of the initial operation on the final result; once having been activated, the circular cycle maintains itself, levelling oscillations (disturbances) in the input within certain limits. The general cybernetic sense of closeness lies in the fact that the nontrivial machine has neither “inlet” nor “outlet”. All processes take place within the closed cycle, which cannot be broken without the loss of all those processes. Any gaps in the cycle come under the function of the observer, which, in accord with its own point of view (and properties), can provide autonomous systems with attributes of inlet and outlet, external and internal).

    Also this author’ opinion is very interesting: “These elements are in some way active and interact with each other. The action and interaction of the elements are arranged in such a way as to support their existence as well as their repeated action and interaction. Elements serve to construct a function, which function, in its turn, serves to produce elements, which serve to construct the function, and so on, ad infinitum, in a closed circle (circularly)”.

    Second, in our opinion, the author’s idea is to consider money, as a means of communication, is also original. The author dedicated a whole section to this question – “5.Communication as autopoiesis: money as a communication medium”.

    This author’s position is different from the usual. Indeed, the money perform the specific roles in the different models of national economies at the different stages of development. However, the money in all economies perform the role of communications. Money is the basis of the signaling system in any economy. They allow evaluating the efficiency of enterprises, industries, national economies and the welfare of the population.

    There are other interesting thoughts in the professor V. Popkov’ article, but we chose those that made the greatest impression.

    Prof. A. Shelomentsev
    Prof. S. Dorosenko

  • Iurii S. Ezrokh says:

    Representation of material flows (raw materials, component parts, energy, labour costs, and so on) in the value form (money) is confusing and does not show the fundamental difference between money and commodities: it neglects not only the difference between money and commodities as such but also the differences in the structure of their circulation. If this fundamental difference in the nature of communications objects in commodity and financial networks (material and ideal respectively) is not taken into consideration, then the risk of wrong decision-making will increase, for example, in decisions concerning the organization of product manufacturing. As a rule, decision-making is based on the analysis of financial (ideal) indicators, according to Friedman’s monetarist approach, which prevails in modern economic practice]. This approach leaves out material features of specific production, particular characteristics of the region, peculiarities of the national economics, and other factors.

    Without acquiring a proper understanding of how the material and ideal flows conjugate in the economy, it is impossible to make sufficient progress in studying the ‘network community’ phenomena. This research work applies the economic constructivism theory by V.Popkov, as a methodological tool.

  • Mark Auslender, PhD, Adjunct Full Professor, Ben Gurion University of the Negev, Israel says:

    The essence of the “objectifying” method of knowledge, which is dominant among economists worldwide, consists of the researchers’ description of an economic reality not in relation to a person. This would inevitably entail “subjectivity”, but rather in relation to the reality itself. To be more precise, this method has the researcher describing the relationship between the qualities of one individual “element” of an economic reality and another element of that reality. And the only thing left over is the “form” of mutual relationship between the qualities, which is proudly named “objective economic reality.” The objectifying method resulted in endless debates on possible methods of interpreting well-known theories. After all, any formal theory is open to semantic additions, although there are no methods for distinguishing interpretations based on merely “formal”, logical considerations. The notorious “relationships”, despite researchers’ attempts to instantly “cleanse” them off the human factor during their attempts at interpretation, once again require reconciliation of meanings. The theory of economic constructivism by Valerian Popkov proposes to introduce a person into a description of economic reality and to describe this reality on account of how an individual constructs the world around him. This is strong point of the theory by Valerian Popkov. Disputes about what is actually economic reality will continue, but after putting forward this approach their ontological basis becomes more clear.

  • Aurelio Hess says:

    Dear Professor Popkov,
    I´d like to begin saying that your paper is very interesting, especially because it goes in the same direction that I´ve been looking last years. I´d say that it´s well written too.

    Nonetheless, I don´t feel comfortable to comment, because I am more connected to quantitative subjects, and I don´t think I´m competent to say whether it´s good enough or not. I´m sorry for that.

    Anyway, I will try to contribute to what I know:
    An interesting book (Bernanke, B., 2009) taught me that an economic theory is a set of ideas, organized in a logic framework, and you did that. The same book explains that most theories are developed in terms of economic models, which is a simplified description of some aspect of the economy, usually expressed in mathematical form. Economists evaluate an economic model or theory by applying four criteria:

    1. Are its assumptions reasonable and realistic?
    2. Is it understandable and manageable enough to be used in studying real problems?
    3. Does it have implications thar can be tested by empirical analysis, compared with data obtained in the real world?
    4. When compared, are the implications of the theory consistent with real-world data?

    Although I understand that your theory needs a different approach, I´m not able to offer you that, unfortunately.
    Hope it helps someway.

    Always count on me to cooperate.
    Congratulations on your work.
    Prof. Aurelio Hess

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