Endogenous Needs, Values and Technology

Standard economic textbooks usually start with the assumptions that there exists • a set of representative consumers with exogenously given, fixed preference structures, • a set of representative production units with exogenously given, fixed production functions, • a set of identical market mechanisms determining a vector of endogenous prices enabling coordination of optimisation of the former two types of representative agents. Economic history shows that the last two hundred years of evolution in most advanced was mainly characterized by • an incredible change of dimensions and quantities of goods and services keeping preference structures in permanent flux, • an enormous amount of entry, exit and modification of production units and their corresponding production processes, • market mechanisms are constantly diversifying; the actual, observed price vector being the result of a multitude of market institutions that represent locally and temporarily frozen political and economic forces. Standard economic textbooks thus are simply inadequate to deal with economic facts, critique from science and practice righteously is booming. The following arguments will sketch a modelling framework that turns these inadequate methodological assumptions upside down: Needs that motivate consumers are explained endogenously. The growth of the heterogeneous set of households is made explicit. Evolution of technology is endogenously determined namely as strategic necessity of a changing structure of production units. Finally the forms of social organisation are assumed to be modelled explicitly, or, more precisely, the framework enabling the model-builder to formulate a specific, temporarily valid set of fixations regulating interactions in a society is characterized. While this last module concerns the more or less institutionalised outcome of struggling and bargaining of the involved agents – thus is meant to render at least some temporary stability by being itself stable – the other two modules (needs and technology) are far more volatile. Of course, in the long-run they all are interdependent. It follows that from a logical point of view the forms of social organization - i.e. the temporary stable arrangements of a given society for a given historical era – are the starting point to be developed first.