- INTRODUCTION[*]
In an interdependent world, we connect with and bump against each other in every action we take. How we manage to keep peace in this storm of interactivity is a question we need to address. It turns on how we mesh with folks surrounding us in our plans and activities, which is an issue of functional organization and social system design. Strife is symptomatic of failure, raising questions of form, framing, culture and human nature.
Entropy – disorder – refers to how heat is stored and dissipates as life flourishes or recedes. There is also a role for entropy in social science. Fifty years ago, Nicholas Georgescu-Roegen educated economists on what entropy meant to economics and ecological process, almost a decade after Kenneth E. Boulding considered what we might do with an entropic index of organization and knowledge if we devised one.
The aim of this essay is to propose planning horizons as a directional measure of social cohesion. The relational linkage of human decisions, in line with these two authors’ suggestions along with those of Herbert Simon on our rational limits, is horizonal in this sense.
The presentation has seven parts. Part 2 reviews the need for a systems approach in social science to offer a context to this argument. Third, entropy is discussed. Fourth, the value of an entropic measure is addressed and, fifth, an ethical theory of planning horizons is introduced. Sixth, the promise of a horizonal research program is explored. The last part will summarize.
- ENTROPY AND INTERDEPENDENCE
Among academics in general – and within economics in particular – an accepted mode of analysis is to split things up into parts and treat them as independent. This is why a partial lens is used to fashion equilibrium models of balancing forces, so to reap predictable outcomes.
To reassemble these scattered details into holistic conceptions is seldom ventured, however; that is a much more daunting endeavor. There are representative frames for this sort of analysis, though; indeed, systems theory emerged to bring interactive phenomena into holistic connection.
The issue of interdependence serves as a starting-point for institutional and ecological economics, which view evolution diversely. Both emphasize dynamic complex systems swimming in space and time. Multidimensional linkages slide into being; creative forces abound and dissipate as society opens into an ecologically active frame of factors shifting continuously along unpredictable lines. This unbounded dynamic conception departs from mainstream models.
Entropy is seen in physical terms as disorder; all organization degenerates into chaos and death. The view is dismal, though it need not be: life is emergent order, directing energy into itself at the cost of high entropy elsewhere. The big picture always spits out more entropy than it takes in, despite the local losses of entropy that vital life fosters.
Think of the entropic content of water at different temperature levels. Ice at zero degrees Kelvin – as cold as anything gets – is frozen in its place. As temperature rises, however, the molecules start to jiggle around. When this chunk of matter reaches 273 degrees (zero degrees Celsius), it uses energy in a phase change with temperatures stable.
This shift to water raises entropy as our jiggling crystal liquefies. Further heat jumps these particles through another 100 degrees, where liquid turns to gas. The rising entropy in transition from solid to gas simply evolves from fixity into vapor. The heat is usable if contained, turning from ice through water to steam, possibly in an engine.
But that is a physical view of entropy. Think of a living organism as a container of low entropy, organized for survival. Life is an integral system, where elements fit together. Its integrity yields resilience. Segmentation brings death. The whole is more than its parts.
The economist Georgescu-Roegen addressed entropy as energy, where evolution ends in chaos while life forms pockets of order. His focus on energy emphasized qualitative emergence. Boulding cast entropy as an organizational index of ‘goodness’ stemming from learning and knowledge, summarizing complex systems in a one-dimensional scalar. He called for an ethical calculus in natural and social science.
So Georgescu-Roegen’s entropy is about energy use for enjoyment, while Boulding’s view is institutional, linked to organization. The impact of private and social planning horizons on pricing, growth and efficiency offers a novel look at entropy as organizational slack, casting horizon effects along an entropic continuum, measurable in order.
- ENTROPY IN ENERGY AND ORGANIZATION
Most treatments of entropy involve energy use, where endeavor raises local order and disorder elsewhere, exhausting a stock of fuel (low entropy) in achieving goals. But entropy can be social.
Georgescu-Roegen noted that interdependence and nonlinearity yield dangers for quantification, as ‘sameness’ shunts any qualitative variation of units subsumed. He accepts control and complexity as entropic concepts, but deems them unscalable. A horizonal index subsumes control and complexity into one measure.
Boulding sees horizonal learning and teaching as evolution. Simon’s rational limits show entropy in the ‘fit’ of models to their realms of use. The match of assumptions to applications shapes our planning horizons.
Social theory – unfit to its setting – corrupts our range of vision. For example, if growth brings shifts in demand away from materials into intangibles, institutions should evolve for cooperation as well, or the advance is stifled. Competition is antithetical to complementary yields.
The realism of assumptions shall limit our reach of view. Realism matters, as will essentiality. Every outlook is selective, blind to all it ignores. Our ranges of vision imply a measure of entropic control.
- TOWARD A HORIZONAL MEASURE OF ENTROPY
The issue is interdependence; systemic complexity is central to horizonal theory. Economists sidestep problems in networks: splitting complex systems into well-defined ‘markets’ of substitutes sets an answer into the question, kicking the can down the road.
The production of physical goods is subject to increasing returns; the larger your output, the less units cost. Markets evolve for concentration, to make competition impossible: small firms are absorbed. Does it end with U.S. Corp.? Will the system monopolize? Isn’t that Socialism?
Kaldor said increasing returns make complementarity “far more important” than substitution for all long-run theory, yielding a case for cooperation. Any organizational form is based on social relations swimming in networks with no market divisions: substitutes and complements join in a seamless swirl. This implies our industry model ignores social alignment. A wrong theory – unfit to its sphere – retracts planning horizons, splitting belief from truth. Realism matters.
Substitution makes a linear, disaggregatable world equilibrate due to negative feedback. Complementary interrelations are nonlinear, uncontained, unstable, with positive feedback: cumulative causation will unfold diversely forever. If so, scarcity yields to abundance on an uncharted terrain of forces subject to unpredictable license in an open field of fates settling only in death. This is the untamed dynamic chaos of vital living systems.
For any interconnected domain, organization counts. So will plan consistency and thus horizonal length, the range of which shapes social effects. The planning horizon is like conscience in its span of attention. If we think our needs conflict, we engage in a rivalrous struggle with no hope for resolve. With aims aligned, our voices join in harmonious song.
If models are ill-conceived, planning horizons shorten; they yield distorting guides to action. The fit of essential assumptions to the reality in which we live frames our reach of vision to the impact of all we do. The more extensive our planning horizons, the further out we project our results. Ranges of vision include understanding – and caring – about our effect on others. Among complements, efforts align. Rivalry yields disorder. Horizon effects serve as an index of organizational loss.
- HORIZON EFFECTS AS A MEASURE OF ‘GOODNESS’
So what have I said? First, the planning horizon is set where anticipation is spiked by surprise. The closer the fit of theory to fact – the more appropriate our assumptions – the broader is our reach. The better we understand ourselves and each other, the larger our range of projection. Horizon effects spur economic cohesion and network control.
Second, horizon effects are contagious. We are role models for each other; learning is imitation. Horizons stretch or retract together with interhorizonal complementarity; they shape pricing and growth: the broader a price setter’s sphere of vision, the lower their cost, markups, and price, so the more output and growth.
Our world is one of uncertain knowledge in a dynamic, chaotic, complex swirl of social interrelations, so projecting consequence has speculative validity yielding unpredictable outcomes swamping anticipation. Our range of conscience shows in reactions. Do we care for others in how we internalize social effects? Horizonal length is an index of order, representing entropic control.
Boulding proposed the ‘wit’ as a unit of ethical organization, akin to a ‘bit’ of information, though wits are value-related. Also, we cannot tally them; all we have are changes – better or worse, longer or shorter – in a comparative frame mute on how much. Horizon effects as ordinal shifts shoulder the ethical load. Think of all economics has built on an ordinal link of prices to sales!
Like quantity and price are related, so are prices and planning horizons. The broader a seller’s span of projection, the lower the price and the more is sold. This applies to individuals in an exclusive venue. Now we deal with interdependence.
Horizon effects are contagious; what you do wiggles me. We must embrace social effects with a compositional rule. ‘Industry’ falls short with complementarity joined to substitution: networks subsume both.
In a group, producers score each price: rivals want it raised (to divert sales to them), while complements seek cuts (to raise sales for both). Prices set individually diverge from those set by the group, posing a measure of interdependence. ‘Industry’ calls collusion bad, while complements shift together; here, rivalry harms! In networks, both are entwined; what is their best design?
There is no answer revealed – competition or cooperation; separation or integration – the optimal form is obscure. But the balance suggests a horizonal lead, as it turns on horizon effects! Longer horizons strengthen complements and weaken substitutes; so with horizons interactive, framing a rule of composition will open new understanding.
The difference between individual and group pricing gives us a measure of interdependence in any group. As horizons extend, the excess of joint to individual prices shrinks as substitutes cede to complements, showing greater resilience and more social cohesion. Plans align, increasing order; everything gets smoother as interaction knits together.
The problem becomes institutional: with more integration, our rivalry yields to cooperation. If systems don’t adapt, that development process is stopped. Complementarity yearns for alliance that opposition impedes, spawning cultural losses of foresight. This is how a competitive failure reinforces a myopic culture writhing in acts of violence.
A horizon effect – the extension or retraction of planning horizons – shows an ordinal shift in our ranges of vision. Due to interhorizonal complementarity, these shifts are contagious, shaped as well by environmental stability, information, knowledge, learning activity, energy and attention, encouragement, hope, self-confidence and other factors around and within us. Most are ignored in mainstream models; including them is an advance. With any economic system moved by planning horizons, coordination takes on new meaning.
Horizon effects supply economics with an ordinal measure of entropy; all human-caused ecological losses are horizonal. The problem is not with lasting effects, but how we anticipate them. If everyone acts separately in an interdependent domain, the quality and organic cohesion of choices will bring order.
If so, horizon effects open new ways to assess economics. Even the merest glance at current affairs suggests the importance of viewing them through a horizonal lens, in an increasingly myopic culture ripped apart by opposition. Horizonal theory invites some major revisions in how we organize systems, showing elementary errors in what we think we know. As Georgescu-Roegen once said: “The history of every science, including that of economics, teaches us that the elementary is the hotbed of the errors that count most.”
- TOWARD A HORIZONAL RESEARCH PROGRAM
The economics of free markets stems from Adam Smith, who Kaldor said went wrong when he ignored increasing returns. Kenneth Lux saw an ethical loss in Smith’s support of self-interest. Both increasing returns and ethics suggest the need for a systems approach to organizational life. Including increasing returns secures a place for complementarity, yielding a role for planning horizons.
Seeing planning horizons as conscience sweeps ethics into view, while longer horizons shift social links toward concurrence. This suggests that personal growth encourages sensitivity, maturity, kindness and care for others. This is why horizon effects serve as a measure of order.
Planning horizons shape pricing and growth. There remains a lot to be learned about how they adapt to stimuli, and on how to find them in the patterns of daily life. For example, as social horizons extend, discount rates should fall, lengthening capital plans and terms, supporting greater ethical and ecological literacy. Even just to raise awareness of planning horizons shall likely yield new insight on how our rules shape us.
Two essential limits on neoclassical economics – safely in the core of the paradigm – are substitution and decreasing returns. Kaldor endorsed complementarity as a result of increasing returns; interhorizonal complementarity amplifies the claim. Static equilibrium models shun horizon effects, so are restricted to myopic concerns, steering attention directly away from more inclusive frames. The impact of competition on education and ecology yield dramatic confirmation of how rivalry fails. The short horizons so revealed derive from models unfit to their realms.
How will myopia emanate from unrealistic constructions? The answer resides in diverse symptoms of organizational stress stemming from human need deprivation. For example, interhorizonal complementarity means that treating adults like kids shall bring immature responses: signs of “frustration, failure, short time perspective and conflict,” according to Chris Argyris, a well-known management theorist. These symptoms show an organizational fragmentation through “rivalry … hostility and … a focus toward the parts rather than the whole.” A misapplication of frames shall lead to organizational loss, supporting conflict, competition, materialism, myopia and disruption. These pathological symptoms surround us, though neither seen nor recognized. As some wise soul once said: “Fish discover water last.”
Horizon effects from organizational stress signify entropy; they open to an unmapped terrain of vital learning and knowledge. Orthodox economics shoves it all out of view. The positive fruits of further research shall lead to a new understanding.
- CONCLUSIONS AND IMPLICATIONS
Georgescu-Roegen introduced entropy as energy; Boulding called for an ethical, entropic concept of organization. Planning horizons serve as a way to embrace entropy’s social effects. Our ranges of vision delineate how well our systems perform.
To wean mainstream models from substitution is a daunting task; committed to decreasing returns, standard theories of equilibrium mask contending outlooks, setting them aside. An Age of Denial lingers on, deflecting unexplored tracks. Network effects suggest the relation of value to rarity flips from scarcity to abundance as sources of worth: the more participants, the better for all. So is an old economic claim upturned by complementarity: what goes around, comes around, here.
Wrongly-applied models with unrealistic conditions shorten horizons. Standard theories of substitution do not apply to complementarity. The error reveals a myopic culture writhing in organizational loss, showing signs of frustration, anger, materialism and discord. These symptoms of organizational failure ring, confine and demean us, though we can only see the illness through a horizonal lens.
Academic closed minds, ethical and ecological losses, strife, fear, rage and division dun us at every turn. They are results of competitive frames set where they don’t belong: complements call for alliance. Here, rivalry fails. Substitution only applies to short-run effects; lasting connections are complementary, yielding cooperation as our route to broader horizons, so as well to entropic control.
In this sense, horizonal theory offers a more optimistic conclusion than orthodox economics. If competition – in keeping horizons short – is sabotaging efficiency, it confirms an important truth. Due to rational limits any theory is selective, and thus silent on all it ignores, set aside unseen. This is a case for open minds and multiple points of view, where each sheds light on the others. Holding horizons fixed – deeming knowledge as perfect – distracts us from our bounds. Such has special leverage in an uncertain, dangerous world.
Boulding criticized economics for ignoring human nature, realism and systemic concerns in equilibrium models. Simon appealed to colleagues for a larger range of view. Georgescu-Roegen warned us against “elementary” error. Kaldor called for a “major act of demolition” to orthodoxy. Boulding commended us all “to this unfinished task.”
Competition is failing us: a horizonal index of entropy indicates how. We must transform social relations toward cooperation. The symptoms of organizational stress alone would justify this, as an ethical route to ecological health and peaceful lives.
[*] This essay is based on a longer published paper found at: jpe.ro/pdf.php?id=7692.
Teaser photo credit: Constant Loubier on unsplash.
