Abstract
By using examples, this chapter, which is mainly based on Forrest et al. (J Bus Econ Technol 25(1):56–67, 2022), demonstrates how some key and useful real-life variables are missing from theoretical studies of economics. It then explains what differences these missing variables can make if one or several of them are considered and included in relevant theories and consequent applications. A comparison with the development of mathematics and physics suggests why it is necessary for economists to identify elementary postulates (in the language of mathematics) and laws (in the language of Newtonian physics) at the level of the four human endowments (self-awareness, imagination, conscience, and free will) as the bases for developing the rest of the theory of economics. To illustrate the potential of this proposal, this chapter uses a theorem with a straightforward argument to demonstrate when a firm experiences organizational inefficiency. Comparing with the literature, the contribution of this chapter is how it considers the general process of decision-making based on the most fundamental systems of values and beliefs of economic agents. By doing so, it will potentially help realize the goals of behavioral economics at the height of analytical analysis with greatly enhanced practical applicability.
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Forrest, J.YL., Wu, K., Joo, Bk., Yan, L., Isariyawongse, K. (2023). The Need to Include Real-Life Factors in Economic Studies. In: Systemic Principles of Applied Economic Philosophies I. Translational Systems Sciences, vol 38. Springer, Singapore. https://doi.org/10.1007/978-981-99-7273-9_6
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