What is it about?

Up until this study, whereas the empirical evidence shows very clearly that man interweaves the satisfaction (utility) that is derived from each of 'social interactions' and 'economic activity', only the utility, wealth that is derived from economic activity could be subjected to formal theoretical modeling. This study upends the status quo, develops a formal theoretical rubric for the modeling of 'socioeconomic man', that is, for the modeling of agents who are parameterized by interwovenness of social interactions with economic activity. The intuition for the formal theoretical result is as follows. Social interactions involve choices, such as, whether to spend time befriending Agent A vis-a-vis Agent B. The choice as to which of A or B to befriend precedes expenditure of effort on the activity of 'befriending'. Consider then, economic activities. The choice as to what to produce - e.g. salt vis-a-vis shoes - precedes the deployment of resources towards the activity of production. The formal theory that is developed in this study explicitly establishes that the act of production itself only satisfices the utility that already is estimated and anticipated in context of the choice between A or B, or the choice between salt and shoes. The activity of production only facilitates, as such an outcome that already was determined in context of the choice between a menu of possibilities. For concreteness, absent juxtaposition of the utility (satisfaction) to be derived from the befriending of A vis-a-vis B, or the utility to be derived from the production of salt vis-a-vis shoes, it is impossible to arrive at any choice between the competing items. Prior then to embarking on efforts for either of befriending or production of items, utility that is pursued already is fixed, determined. Given all utility is specified in context of choices between alternate paths, the choice between befriending either of A or B - equivalently, the choice between production of friendship with either of A or B - is, mathematically, equivalent to the choice between production of either of salt or shoes. It is not then the properties of competing paths that have materiality, but rather the activity of choice. In presence of exclusion of properties of competing items, paths, or possibilities from the modeling of utility, mathematically, utility from social interactions and utility from economic activities are additive, or better yet 'composable'. If, however, utility from social interactions and utility from economic activities do not have the same nomenclature - such as, centimeters, kilograms, etc. - there is arrival at mere talk that is lacking in substance. Thankfully, as is enunciated in what follows, this study arrives at exactly such a nomenclature.

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Why is it important?

In light of study findings, it is possible to, mathematically model social interactions. It also is possible to, mathematically model 'socioeconomic man' - man that is a composite of social interactions and economic activities. It, of course hitherto has been possible to model economic man - man that solely is parameterized by pecuniary (monetary) wealth. Absence of semantics is evident as follows. If the goal is to model man that only is parameterized by monetary (pecuniary) wealth, there is arrival at necessity of modeling of aggregate wealth. If the goal, however, is to model either of social interactions or socioeconomic man, there is arrival at the restriction that only 'changes to non-monetary (non-pecuniary) wealth' can be modeled. If the specification of non-pecuniary wealth is ad-hoc, and if the specification of non-pecuniary wealth is dichotomous to the specification of pecuniary wealth, yet again there is arrival at mere talk that is lacking in substance. This study arrives at a well defined specification of non-pecuniary wealth. In stated respect, all non-pecuniary wealth have parameterization as, 'increase to awareness as to rational courses of actions'. Changes to awareness are, as such the nomenclature of non-pecuniary wealth. But is the stated nomenclature, or in mathematical terms, 'measure' robust to the modeling of economic man? If economic man is to increase wealth, necessarily there is arrival at deduction of a rational course of action that increases monetary wealth. Necessarily then, increase to wealth that is the direct outcome of a decision which is taken by economic man directly is predicated on arrival at awareness of a rational course of action that induces said increase. Given the increase to pecuniary wealth directly is a function of the improvement to awareness, improvement to awareness is a sufficient statistic for increase to pecuniary wealth. We are able, as such to substitute modeling of awareness for the modeling of monetary wealth. In light of the foregoing, absent functioning as a socioeconomic man, economic man is unable to be the direct source of increase to own wealth. Given monetary wealth can, however, increase in response to actions of others - e.g. an existing shareholder can, absent doing anything, become richer; that is, absent any increase to the number of shares that are owned (absent any new investment decisions), arrive at increase to the value of the shares - it remains robust to focus solely on the modeling of economic man in contexts within which agents themselves are not the direct source of increases to own wealth. Given there then is abstraction from 'decision making' on the part of said agents, there is not arrival at any contradiction. For additional concreteness, suppose an agent purchases 100 shares of Facebook at $50.00 per share in 2020. Suppose, absent any new investment decisions on the part of the agent, Facebook's share price increases to $60.00 in 2021, then to $72.00 in 2022. Whereas the 10% increase to wealth in 2021 is attributable to the actions of a socioeconomic agent (the agent did not prior to the purchase own any shares of Facebook), the same 10% return in 2022 is outcome of the actions of an economic agent (Facebook's capacity for maintaining it's previous return of 10% is not predicated on the actions of the agent, because the agent neither bought nor sold shares of Facebook between 2021 and 2022). Suppose, however, that, on the contrary, in 2021, with economic agents still expecting a 10% return from Facebook in 2022, the economic agent rightly forecasts a 15% return from COSTCO, as such sells 50 shares of Facebook in order to purchase 50 shares of COSTCO at $60.00 per share. In stated alternate scenario, the agent functions as a socioeconomic agent in each of 2020 and 2021, because the choice to sell Facebook and buy COSTCO necessarily is predicated on awareness of a new rational course of action. We have then that all agents fluctuate between functioning as either of socioeconomic or economic agents. Clearly, vibrancy of an economy directly is a function of proportions of all agents per unit of time who function as socioeconomic agents. To see this, suppose all agents in an economy attempt to function solely as economic agents. We have that all are price takers, with outcome necessarily an economy stagnates, because there is not anyone doing anything new. Simultaneously, if all agents seek to function solely as socioeconomic agents, none are price takers and there is arrival at chaos. In presence, however, of some optimal proportion per unit of time that function as socioeconomic agents, but yet with each agent functioning at some point in time as a socioeconomic agent, there is arrival at balance and vitality within an economy. Importantly, the formal theory that is developed in this study facilitates an hitherto lacking robust structure for the implementation of empirical or experimental tests of cognitions - rationality and awareness - of socioeconomic agents.


This study shows rationality of socioeconomic agents is evident in searches, in the current period, for the objective that, achieved next period generates the most utility; and searches for the action, to be taken in the current period which facilitates the utility (satisfaction) that is anticipated from achievement of the chosen objective. Each of searches for objectives and searches for actions that are anticipated to best facilitate a chosen objective all are attempts at inducement of improvements to awareness. In stated respect, study findings explicitly arrive at the finding that, "a rational socioeconomic agent is an agent who anticipates, every period, the feasibility that he or she can arrive at improvements to awareness." In the same vein, "a rational socioeconomic agent is an agent who does not act contrary to his or her existing awareness'." Combined, we arrive at designation of a rational socioeconomic agent as an agent who, in context of acting in consonance with existing awareness' regardless remains open to acquisition of new awareness' - new awareness' which necessarily supersede some pre-existing awareness. In Economics parlance, "a rational socioeconomic agent is an agent who is non-satiated with respect to acquisition of new awareness' ", as such an agent who expects to acquire new awareness'. The best sorts of new awareness' are those that take mankind from the erroneous impression that the sun revolves around the earth (respectively, that the earth is flat) to the new awareness that it is the earth that revolves around the sun (respectively, that the earth is round). The discovery that the earth is round got Europe trading with India. The discovery that the earth revolves around the sun, and that movement in space is governed by the Law of Relativity has resulted in GPS, space travel, missile technology etc.

Dr Oghenovo A Obrimah
Fisk University

Read the Original

This page is a summary of: Progressiveness of Increase to Utility from Socioeconomic Activities: `Barebones' Necessary Conditions, SSRN Electronic Journal, January 2021, Elsevier,
DOI: 10.2139/ssrn.3910836.
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