Economic Policy—An Open-Systems Perspective: Institutions, Constraints, and Utopia

Abstract

The article discusses theoretical aspects of economic policy from an open-systems perspective, thereby highlighting that policy cannot be conceived of as a set of measures mechanically deduced from economic theory. It provides an outlook of individuals and collectivities as systems that interact with other systems, according to rules and goals, thus institutions, that need not be mutually consistent. Policy acts on these multifarious interactions. It causes not only reactions according to given interaction rules but also, often unpredictable, changes in the latter. It, therefore, involves a process whose open-ended dynamics can hardly be outlined a priori. In order to be consistent with the expectations of policymakers and of other economic actors, it must clearly identify which interactions and institutions it aims to act upon. It also needs to be framed within a long-term perspective, where an “ideal” that transcends extant constraints acts as a beacon and tool of inquiry. The article ends by briefly pointing out an implication of this theoretical discussion. While it is reasonable to pursue policies related to gender, race and income and wealth distribution, systemic interdependence suggests that treating them as additive goals may re-inforce self-referential dynamics among social groups, at the expense of a unifying, ideal-led project.