Cost benefit analysis in organically-linked societies

P8475423 at vmsuser.acsu.unsw.EDU.AU P8475423 at vmsuser.acsu.unsw.EDU.AU
Fri Jul 14 22:51:40 MDT 1995

Lisa made a comment on c/b analysis that referred to my opinion,
and I think I should elaborate:
A rather different kind of comment I got from Steve Keen is that he
thought a c/b, limited resources, unlimited demands analysis of human
behavior is more appropriate to foraging societies than to
capitalist.  That was an unusual response, in my experience.

The reason for this belief is that cost-benefit analysis, as
practised, is a fundamentally "atomic" procedure, whereas I
believe that a developed social/production system like capitalism
is fundamentally "organic". Now to explain those two terms:

"Atomic" means that a complex system can be understood by breaking
it down into constitutent parts, analysing those parts separately,
and aggregating up those parts to form a conclusion about the whole.
This is the basis, in mathematics, of linear algebra, and a
precondition to applying it is that the whole is no more and no less
than the sum of its parts: the relations between things can therefore
be ignored.

"Organic" means that a complex system involves complex relationships
between its constituent parts, so that the relationships are perhaps
as important as the constituent parts--perhaps more so. This is the
basis, in mathematics, of complexity analysis, and a precondition for
applying it is that the relationships between entities in a system
are "nonlinear"--you can't say, for example, that increasing
employment by a factor of 3 will cause wages to rise by a factor of
3, etc.

Capitalist society--indeed any technically advanced society whose
system of production involves relationships between people, and
which itself can have an impact on the ecosystem--is organic
in character.

Yet cost-benefit analysis proceeds from the belief that the overall
benefit of a project to society can be assessed by breaking down
its impact into constituent parts--impact on tourism, impact on
the environment, impact on output of other industries, etc.--,
adding up the various sums, and deciding to go ahead if the overall
figure is positive, and not to if it's negative.

Perhaps Lisa isn't aware that this is the way c/b analysis is
peddled in economics: it isn't applied at the individual levelm
but as a mechanism to decide between competing projects at the
societal level.

That is why it is more applicable to a forager society than to
advanced capitalism. Such a technique of production can be
largely independent of others for output, and--within limits--
is of too small a scale to impact on the source of use-values
on which life depends.


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