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The New Economics: The Three Economies

Originally Published in the March 2012 Issue of Country Wisdom News.

By: David McCarthy

I would like to share an emerging framework I’m developing that could be helpful in understanding and discussing economics. This framework points out and distinguishes three kinds of economies happening simultaneously in human society: the tangible economy, the symbolic economy, and the imaginative economy.

The tangible economy includes the physical elements that we need and use within the human realm: the earth itself, air and water, chemical elements, and all the products we create and exchange. It includes food, buildings, factories and equipment, and all manner of consumer goods. It also includes tangible services we provide each other, such as medical treatment, maintenance and repairs, and so on. In economic terms, the tangible economy is the full range of goods and services.

The symbolic economy basically refers to money and associated systems such as credit networks. Money exists as a symbol of value. It is not valuable in and of itself, but only for what can be obtained with it. Of course, around money we have developed the whole world of finance, a system of bewildering complexity that is all based on symbolic representations of value, contractual agreements, and instruments that vary in value based on time and circumstance. The fundamental principle of price exists within this sphere, as does that of ownership. There is nothing inherent in a house or piece of land that says I own it, nor is price an inherent feature of any good or service. Everything in the symbolic economy is established by human convention, agreement, or assertion.

Finally there is the imaginative economy. This is the realm of thought, knowledge, and wisdom, but also of illusion. It is the common human knowledge base, the intellectual inheritance in which we all share, as well as all of the skill and practical knowhow we earn through experience. It is the genius of technology, and the hard-won lessons of generations. It is the imagination of the dreamer, and the nitty-gritty common sense that gets the job done. It is theory, inspiration, the tools of knowledge-workers, and the stuff of intellectual property. Its dark side is deception and illusion. It is a Ponzi scheme or a computer virus, a big lie or a little bit of trickery. Or, it’s a business plan based on wishful thinking and bound to fail. For better or worse, the realm of the mind is unlimited, and it underlies all of the vast, complex, interdependent manifestations of economic life.

How can such a framework help us work with the real world? Even though the three economies are in fact inseparable, delineating them in this way creates a kind of fresh perspective from which we can gain not only understanding, but new ideas about how to move forward. For example, the tangible economy is not just about the physical things that we use and produce. It also is the very basis of that production, namely the natural world. Whether or not natural capital is acknowledged in the symbolic economy, its significance is undeniable. The same is true for services that we render to each other that are not monetized. Looking at these sorts of things directly, without the intermediation of monetary measure, ownership status, or contractual agreements is like opening a window onto a dark and dusty room.

As for the symbolic economy, there has been a tremendous outcry about “Wall Street vs. Main Street” in recent years, and rightly so. What this is really about is the neglect of the tangible economy and the preeminence of the symbolic. By grounding our thinking in the tangible economy, we may find not only sanity, but innovation in the symbolic realm. Indeed, what is the Slow Money movement but a recognition that any economy depends on the health of the soil that produces our food?

Finally, within the imaginative economy lies the potential for a sane integration of the three economies. With that comes ways of deploying human wisdom to address the great challenges we face. Among the many positive prospects I see are these: Insights into the psychological nature of materialism and how to transcend it; learning how to bring compassion into economic thought and practice; breakthroughs in the theory of capital and intellectual property; and innovations in symbolic social technologies. 

If we are willing to bring a fresh and direct mind to the imaginative economy, we can transcend conventional thinking and bring insight and transformation into play. That is the essence of the new economics as I see it.