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Annotation: This article has emerged in response to the contemporary demand of the state, society and business for the development of a new economic theory. This theory reflects upon the contemporary needs of the socio-economic development of the state; improvement of the conditions for businesses; formation of the transparent legal system with an easily accessible body of law; development of a qualitatively new level of formation and development of labour management relations; enhancing the efficiency of the financial system. Methodologically, the theory focuses on the impact of the changes of a variety of internal and external factors, crises phenomena, and monetary-economical parameters of the behaviour of individual citizens, society as a whole, of social and business groups.
This article introduces the reader to the new paradigm – Life economy. Life economy is framed as a concept of economy as a complex system, which consists of interconnected subdomains, which structure and interactions are hierarchically arranged in such a way, that each subdomain acting within and upon the rules characteristic to the whole economy, retains, without replicating the economy on a smaller scale, its unique position in the wholistic model of the economy itself.
Subsequently, the article introduces socio-economical and individual-economical psychology, as well as defines positive and negative reinforcement of socio-economic activity. Building upon the above-mentioned terms, a separate section of this article is dedicated to the study of technological aspects of contemporary marketing.
The article coins and defines the term live socio-economic network.
In addition, the themes of public administration, business development, economy as a whole, contemporary trends in the development of labour relations and the scope for their improvement are also addressed; as are the aspects of free markets of services and goods.
This article is the first introductory step towards studies of the new theoretical approach in the economics, the concept of life economy.
Keywords: Life economy, living organism, socio-economic psychology, individual economic psychology, positive reinforcement of socio-economic activity, negative reinforcement of socio-economic activity, mass psychology, digital channels, viral marketing, live socio-economic network, state, business, people, currency flow, labour market, corporate rules, social policy.
Аннотация: Статья является ответом на современный запрос государства, общества, бизнеса на разработку новой экономической теории, отвечающей на актуальные вопросы социально-экономического развития государства, создания комфортных условий для ведения бизнеса, формирования прозрачной правовой системы с понятными законами, создания качественно нового уровня построения и развития трудовых отношений, построения сильной и доступной финансовой системы; теории, изучающей поведение людей, граждан, общества, «масс», бизнес кругов при изменении различных внешних и внутренних факторов, кризисных явлений, финансово-экономических параметров.
В статье вводится новое направление в экономической науке – теория «Живой Экономики» и дается ее определение: Живая Экономика – это теория, представляющая экономику как сложную комплексную систему, состоящую из взаимосвязанных между собой элементов, организация и взаимодействие которых соподчинены и взаимосвязаны таким образом, что каждый элемент, функционируя по принципам и законам всей системы, при этом не является её точным подобием и копией, но является обязательным звеном в единой целостной модели.
Так же в статье вводится новое направление в психологии: социально-экономическая и индивидуально-экономическая психология, а также вводятся понятия и определение мотиваторов и демотиваторов социально-экономической активности.
В продолжении изучения социально-экономической и индивидуально-экономической психологии, в статье рассматриваются высокие технологии маркетинга в современном мире.
В статье вводится новое понятие и дается определение: социально-экономическая сеть (живая социально-экономическая сеть lifeeconomy).
Рассматриваются актуальные вопросы государственного управления, развития бизнеса, экономики, современные тенденции развития трудовых отношения и перспективы их улучшения, исследуются «свободные рынки» товаров и услуг.
Данная статья является первым этапом большой работы по исследованию и изучению нового направления в экономической науке – теории «живой экономики».
Ключевые слова: живая экономика, живой организм, социально-экономическая психология, индивидуально-экономическая психология, мотиватор социально-экономической активности, демотиватор социально-экономической активности, психология масс, цифровые каналы, вирусный маркетинг, живая социально-экономическая сеть, государство, бизнес, люди, циркуляция денег, рынок труда, правила игры, социальная политика.
«Complex problems – straight forward solutions. The state should not work instead of business, the state should not work for business, but should offer sufficient conditions for business development and operations. The state must provide security for its citizens and the facilitation of their well-being. These are the fundamental characteristics of a powerful state».
Contemporary economics as a science faces an array of pressing questions and burning issues, answers to which shape microeconomics policy of the state such as; success and development of various industries and businesses, and public well-being, in short – the future of our planet.
According to Alvin E. Roth (born 1951, Noble Prize winner in economics 2012), while medical scientists can solve the problem of kidney transplants, it is economists which can design, develop and maintain the market. The market which is based on the free exchange between individuals, essentially mediated by monies, and not necessarily directed by regulatory code. Remarkably, kidney transplantations in the United States (US) continue to be carried out despite the direct prohibition of monetary mediation of this process.
In our opinion, economic efficiency does not depend on rigorous implementation of logically non-contradictory theories, which offer various recipes for growing a “monetary tree” and achieving entire public well-being. Yet, it is a product of a complex and continuous effort of moulding efficient public and individual life sustenance systems.
According to Adam Smith ’it is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest”. However, this straight forward, and as it appears, efficient formula does not answer all the questions that economists face. For instance, why is the average living space area per person in the US 65 square meters, while in Germany it is 40 and in Russia only 24? Why was Russia’s GDP over the course of the first 15 years under a market economy below the level achieved during the most efficient times of a Soviet economy? Why has the Russian economy not collapsed as a result of the challenges, shocks and targeted impacts it experienced during 2014-2015? This is an interesting question since less significant shocks, under different circumstances and at different times, may lead to the collapse of what appears to be a stable system.
Historical evidence suggests that any economy is notably more stable than scientists and analysts are inclined to think. Yet, simultaneously, these same economies are more susceptible to sudden changes, referred to as “black swans”  in contemporary literature. In many ways, such stability and unpredictability of economies’ response to exogenous impacts, internal and external shocks, can be explained by the holistic internal structure of these economies, whose functioning cannot be reduced to a limited, conceptually justified set of rules, acting and being preserved outside the time factor.
The fact of the matter is that economic processes cannot be separated from other processes, taking place in a live fabric of a public machine; mass psychology and mass consciousness cannot be wholly or partially disregarded. Yes, without a doubt, marketing studies have made significant progress in the analysis of mass psychology, demand manipulation, and even in the invention of new demands, which are biologically uncharacteristic to human demands. But in our opinion, marketing separated from macroeconomy, represents a fairly isolated sphere of economic studies.
Attempts to establish the basis to classify parameters and advantages of various systems, end up to a great extent at the fringe between political and economical spheres of a given public machine. This complicates the objective detachment and description of their characteristics and positive aspects. As an illustration, it is worth mentioning the analysis of breakthrough innovations, represented in the work of such a profound researcher as Janos Kornai. Out of almost 90 innovations described by him and implemented in XX and at the beginning of the XXI centuries, there is none developed within a socialist economic system . Despite the launch of Sputnik, the first cosmonaut in space, and additional breakthrough achievements originating from a state-controlled economy, his evaluation appears to be somewhat bias. In the context of contemporary economy, speculations regarding advantages and disadvantages of various economic models dominating in XX century and defining economic and social realis of the distant past are meaningless. Nevertheless, with regards to the of running an economy, intellectual confrontation economists and social scientists represent an invaluable source to discover and understand future economic development. Mistakes and failures, in particular misjudgment of soviet social scientists and economists, resulted in the collapse of an effective in various spheres economic system, and brought about prolonged and considerable damage to the Russian economy. Lack of effective alternatives, along with the weakness in sharing them with general public, harmed no less, then following quite efficient in the context of developed market economy and 1970 crisis monetary concept of economy management.
In the XX century significant results have been achieved in the context of state-controlled economy, and market economy. However, these results cannot vouch unambiguously for advantages of a given economic system in a given historical prospective. Moreover, it was during ideological confrontation of the twentieth century that John Galbraith’s (1908-2006) theory of convergence of market and controlled systems was developed. The framework of this theory, proposed solely from political standpoints, allows for differences in functioning [of such systems] to be reduced significantly. According to Galbraith, economic systems rapidly react to structural and organizational changes, occurring as the result of pressure from increasing scale of production. In the free market subsystem the free price mechanism, market competition and other processes are key characteristics, while for the controlled subsystem all processes are fundamentally different. As a matter of fact, it is evident that in reality, theoretical paradigms are lacking in the concepts of market and controlled economies. In other words, an economy functions upon its own principles regardless of the point of view of an external observer, who endeavours to distill and describe its key characteristics. According to Victor Ivanter, who spoke at the II World Economic Forum at the Finance University in November 2015, the current state of economy ‘dies hard’. This happens irrespectively to applied economical policy and views on implemented and potential [economical] tools.
Therefore, the quest for conceptual rules in the context of detailed studies of economic systems, cannot be reduced to the detachment of the concepts of “controlled system” and “market economy”, but has to take on a greater scope, taking into account studies of the reactions to external stimuli of separate elements of economic system; their transformations, formation and disintegration of economic systems.
CLASSIC SOCIO-ECONOMIC THEORIES. DEMAND FOR THE NEW PARADIGM IN ECONOMIC THEORY
To a degree, the state of contemporary economic sciences permits one to draw attention to history of philosophy and refer to the school of French materialism. It is to this school, Denis Diderot (1713-1784), Julien de La Mettrie (1709-1751), Baron d’Holdback (1723-1789) belong, to mention a few. The works of La Mettrie “The Natural History of the Soul”, “Man a machine” and Baron d’Holdbach “The System of Nature,” are rich of thoughtful examples of mechanistic approach. At present, the analogy of mechanical materialism appears relevant. [According to this analogy] the world order is compared with a piece of machinery that works according to certain interconnections of its parts. It is difficult to make parallels to the contemporary perception of the economic system. Nevertheless, it is possible to mention the famous MONIAC computer, designed by William Phillips, to describe the internal connections in economy. Despite the fact that MONIAC is now on display [Science Museum, London], “engineering [thinking] continues to dominate economic thoughts” . A similar mechanistic approach is characteristic to contemporary economic theories, where analysis and interpretation of economic processes dominate.
Approaching the subject of their studies systematically, representatives of schools of dominating economic thought of present, or the past, brought to the forefront systematic links which were special and meaningful to them, and through which they made recommendations to control economic system and define economic policy. In a simplified way, it is possible to imagine, that in distinguishing and justifying the special role of state control in economy, we, inevitably, downgrade the role of free market and self-regulation, and vice versa, in emphasizing the advantages of freedom and competition, we neglect an important, confirmed by developed market economies, potential impact of the state upon the economy.
Following the Keynesian model of collective demand and investments in securing economic growth, we neglect the role of the reverse side of the demand, namely, the role of aggregative supply. The impact on the latter is the point of criticism of John Keynes’ theory.
A holistic vision of an economy, as a single entity composed of interconnected elements, is not a new notion in economic thought. It is this vision that forms the foundation of the theory of general equilibrium which doctrine that was originally introduced through the work of Leon Walrus (1834-1910), and later reinterpreted by Maurice Allais (1911-2010, Noble Prize in economics 1988), Gerard Debreu (1921-2004, Noble Prize in economics 1983), John Neumann (1903-1957), John Hicks (1904-1989, Noble Prize in economics 1972), Robert Lukas (1937 – , Noble Prize in economics 1995), Kenneth Arrow (1921 – , Noble Prize in economics 1972). With all due respect to systematic approach to economy, the prime deficiency of the theory, which forms the foundation of modern economic thought, is, to a degree, adherence to mechanistic view of economy. Hence, there is not a “representative” agent, through which it would be feasible to represent the body of agents in economy; [moreover] the price alterations in reaction to certain changes are greatly varied and hardly foreseeable. [All of the above] At varied time intervals are affected by different factors. The list of limitations of general equilibrium can be extended further. However, in the core there appears to be disconnection between political, cultural, and ethnic factors, as well as a reduction in the complexity of the economic processes to general uniformity.
A separate movement [of thought] in economic sciences is represented by economic imperialism. Represented in the work of Gary Becker (1930-2014, Noble Prize in economics 1992), it has marked the wide-ranged expansion of economic thought into other spheres of sociological studies. This includes the justifiable, rational and successful implementation of the methods of economic studies to the analysis of the behavioral patterns in demographics, criminology etc., [theoretical] approaches appear to be limited by factors such as time, cultural and ethnical [aspects], similar to the above mentioned theory regarding general equilibrium.
In the context of the transition of the paradigm of world development, global migration processes, confrontations, presented by a number of scientists as religious wars, the vigorous and qualitative socio-economic development of Russia requires the revision of fundamental theoretical economic concepts, it requires fundamentally new economic theory.
SOCIO-ECONOMIC AND INDIVIDUAL ECONOMIC PSYCHOLOGY. POSITIVE AND NEGATIVE REINFORCEMENTS
In general, contemporary global socio-economic and political challenges, accumulated in the world economy misbalances require new approaches in economic theory. The approaches, which will focus on consistency and coherence in the decision making process, specifically on complex studies of socio-political and socio-economic phenomena, which in their own right are closely connected with public and individual psychology.
At the closer look, differences between individual and public (mass) psychology appear to be less striking as it might be expected. While individual psychology is based on studies of a separate individual and the ways in which such a person seeks to meet their own demands, this psychology rarely disregards relation of such a person to other members [of the society]. In inner life of a person another person is regarded as an ideal, object, as the friend or as an enemy. Therefore individual psychology in its core is, at the same time, literally social psychology.
Personal relations to one’s parents, siblings, partner, doctor and therefore all relations, which were so far the subject of psycho-analysis, can be regarded as social phenomena and can be compared to other processes, labelled by us as narcissistic, whereby meeting one’s demands avoids other people’ influences or avoids [social] contacts. Hence, the difference between social and narcissistic (Blueler) can be autistic. In its inner manifestations it belongs to the sphere of individual psychology and cannot be regarded as a characteristic, that separates it from social psychology.
Reference to and citing from this non-fundamental, but interesting and important work of Freud is not irrelevant. Moreover, it is worth to add to this citation: «The individual in the relations which have already been mentioned – to his parents and to his brothers and sisters, to the person he is in love with, to his friend, and to his physician – comes under the influence of only a single person, or of a very small number of persons, each one of whom has become enormously important to him. Now in speaking of Social or Group Psychology it has become usual to leave these relations on one side and to isolate as the subject of inquiry the influencing of an individual by a large number of people simultaneously, people with whom he is connected by something, though otherwise they may in many respects be strangers to him» . Hence mass psychology studies an individual in the context of the tribe, peoples, cast, social class, institution or as an element of human mob, organised into a mass at a certain time and to meet certain ends. Once this natural connection ceased to exist, it was possible to analyse the phenomenon, which took place in these special conditions. These phenomenon can be described in terms of trivial herd instinct, or group mindedness, which are not evident in other circumstances. We disagree with the point that is difficult to see the significance of numbers. It is this significance that can awake in an inner life of human novel, previously inactive instincts. Let’s point at two more possibilities. Social instinct does not have to be an initial one. It is possible to break it down and it is possible to trace its roots in a more limited environment, for instance, in a family.
Furthermore «Although Group Psychology is only in its infancy, it embraces an immense number of separate issues and offers to investigators countless problems which have hitherto not even been properly distinguished from one another» .
Correlation between Freudian and socio-economic psychology in Life Economy theories are fundamental.
It must be admitted that the term ‘socio-economic psychology’ has not been widely circulated at present, despite the fact that as a branch of two academic spheres of economics and psychology, economic psychology is not something new. Initial foundation work in this field are referenced to 19 century work of Gabriel Tarde ‘La psychologie économique’ (1902–3), Hugo Münsterberg Psychology and Industrial Efficiency (1913). It is worth mentioning Russian sociologists and philosophers such as Peter Struve, M.Tugan-Baranovsky, Sergei Bulgakov and many others, who wrote on the necessity of taking into account cultural and psychological factors of economic development. In his work “Philosophy of enterprise”. Bulgakov talks about the ‘soul of economy’ and ‘subjects of enterprise’. Motivational mechanics is mentioned in Alexandr Chayanov ‘Peasants’ enterprise’. This list can be continued.
Not to mention classical work in sociology and social economics of Carl Marks, Hilbert Spencer, Werner Sombart, Max Weber. ‘Economic’ individual as well as rational motivation of economic behaviour by Adam Smith have to be included.
Why Freud in the end? Let’s refer to his quotation: «The relations of an individual to his parents and to his brothers and sisters, to the object of his love, and to his physician – in fact all the relations which have hitherto been the chief subject of psychoanalytic research – may claim to be considered as social phenomena; and in this respect they may be contrasted with certain other processes, described by us as ‘narcissistic’, in which the satisfaction of the instincts is partially or totally withdrawn from the influence of other people» .
Should one examine the tendency mentioned in [the work of] Freud outside the mainstream psychoanalysis, but in the context of economic behaviour, re-examining ‘all those relationships’, which were [and are] the focus and the product of psychoanalytical studies, we can admit that the whole individual life of a person, taken as an abstract ‘complex’ subject, social entity on one hand and individual independent subject or individual universe on the other, is not only governed by the multitude of laws and rules, which will be examined more closely further in relation to micro and macroeconomic relationships and interactions, but represents, in principle, a separate individual economic model in its nature. It is this model which has a well developed and highly complex system of hierarchical motives, actions, emotions, cognitive processes etc. In essence, the individual represents a miniature closed socio-economic system, not only at the level of interaction with another subject or other subjects, but at the level of relations with itself; at the level, which trivially can be referred to as primitive life sustaining activity. In this sense the famous Maslow’ hierarchy of needs is relevant, and which can be seen as a chain of the incrementally complex socio-economic, but not just relationships.
In principle this thought is not novel. Initially individual is some kind of intrasocium, while quite clearly dividing relationships with the self and the others. This individual maintains such relationships by a sort of ‘a mirror principle’. By which the relationships with the self are conducted on a psychological principle, i.e. relationships to the self, self appraisal, awareness of motives and logic of self behaviour, awareness and idea of problematic areas, such as; fears, acceptance of self, formation of complex relationships with ideal (desired, imagined) self image and real self. All these form the basis for the system of relationships with others, beginning with the level of the nearest subject of social contact – meaningful other, and concluding, in principle, with the attitude to any social group. However, examining this process through the prism of the relationships of the economic nature, whereby each element of such relationship is a part of a joint network of socio-economic relationships in their making, we obtain exactly the first, primary generating element of economic interconnections, stressing once more, not in the context of relationships with others, but in relation to oneself. In other words, it appears that originally a human being is not only included into the system of economic relations multiple times: initially at the level of relation to the self, according to Freud unconsciously, and further at the level of relation to the individual on the part of relatives: a baby, a child is looked after, is talked to and related to. It is this care, this relation becomes later on ‘the material’ for one self in forming ‘reflexive reactions’, which to the degree can be referred as secondary – it is me who ‘gives’ first, the very fact of my birth above all is a socio-economic phenomenon, plus one more addition to the budget of the family, society, humankind; and then I ‘receive’: i.e. care etc., and hence I ‘return”. Afterwards the process accelerates as the ‘importance’ of this individual grows in all senses – the caliber – and this process exponentiates. This does not exclude without any doubt the increment, but essential binary analysis: what I ‘produce’ and what is ‘produced for me’.
All the above has one important aspect: real person in principle is not inclined to conduct self-analysis, and analyse all what happens with oneself independently, going beyond the self; and without a pressing need the individual is not inclined to do so. However, in the process of systematising it is not only necessary to go beyond the boundaries of the model, but to be able to ‘abstract’ oneself at the same time without neglecting neither of the contactual psychological variables.
As Louis XIV ones declared ‘the state is we’, referring to himself as ‘we’. While saying today that the state is we, we understand that without the aggregation of individuals into ‘social mass’ there is no and cannot be, any state.
Examining and analysing directly or indirectly, with some given assumptions, an individual as a complex evolving socio-economic system, not transferring but incorporating rules and tendencies of evolution of a living (biological) organism and life (social) organism into the rules and tendencies of evolution of economic systems, and placing the former prior to the latter, we undoubtedly and implicitly obtain an opportunity to see the content and regularities of socio-economic development as a whole, and its components in particular. It is this notion that offers the basis to introduce the term not only socio-economic, but ‘individual economic’ psychology.
Therefore the concepts of ‘socio-economic psychology’ and ‘individual economic psychology’ in the framework of ‘life economy’ represent new paradigm in studies of economic processes and phenomena at macro, mesa and micro levels from the point of view of state administration, as well as for forming business processes.
As far as the state administration is concerned, first of all we have to mention positive and negative reinforcements, which accelerate, or on the contrary, decelerate, the involvement of potentially active citizens in the socio-economic activity of the state.
According to our paradigm, positive and negative reinforcement are the principal tools which socio-economic psychology and individual economic psychology apply to the studies of behavioural [patterns] of; individuals, citizens, society, masses, and business circles, as the reaction on the impact of changes of various external factors, crisis phenomena, financial and economic parameters, socio-economic indicators, and legal regulatory documents. They are all applicable to the studies of the impact of media, such as television channels, radio broadcasting, news agencies and news feeds, social networks, official statements, expert opinions, in short to all [elements], which define the media component of socio-economic processes and phenomena, political situations, world situations or directly participates in the above processes.
Positive and negative reinforcement of socio-economic activity (see Table 1, Annex) or passivity have been neglected to date, while they indeed have an important role in our lives to play, and in multiple ways our economic and political views affect career choices, educational level, individual and social contacts, ethical and moral qualities, family relationships, relationships with colleagues, and friends; they affect work efficiency, but above all, they impact upon our psychological and physical conditions, in other words affect our health .
In the context of socio-economic and individual-economic psychology, closer attention should be paid to the contemporary marketing development.
ADVANCED MARKETING TECHNOLOGIES AT PRESENT
The rapid development of the Internet and new digital media communication channels with consumers has fundamentally affected traditional marketing concepts. According to Seth Godin (2004) ‘marketing in interactive world is cooperation, where the marketing expert helps the consumer to buy, and the consumer helps the marketing expert to sell’. At present consumers are actively involved in moulding the best offer by using social network platforms, blogs and video resources to express their opinion, to make comparisons and to offer criticisms. From being a passive target audience, consumers have been transformed into active participants of marketing activity, becoming developers and mediators of experts’ opinions. Their comments are rapidly disseminating.
Therefore the present state of marketing is referred as the era of digital marketing, the new stage of marketing evolution, which permits emerging market participants, who actively use modern internet channels and mobile technologies with consumers, known as rapid propagation [on the market].
Digital communication channels have given to marketing specialists an opportunity to conduct personal dialog with each consumer. The foundation of such dialog is based on the expertise accumulated from previous interactions with consumers, and analysed by software. This [approach] permits the fine-tuning of the marketing neurone network so that it identifies the consumer.
Rapid evolution of digital marketing resulted in review of the rules of classical marketing for the benefit of experiments with dynamic address channels of communication with consumers, who are involved in the marketing decision making process. Therefore digital marketing offers an opportunity to use efficiently personalised marketing, which is based on the principle of developing trustful consumer communications.
Without a doubt, the ways of advertising approaches to consumers have been undergoing changes, as well as the ways of estimating their efficiency. With the development of viral marketing successful video advertising and with the help of digital media, businesses can reach a much wider audience, whom not only passively consume the information, but actively express their opinions’ on the content; assess and disseminate the information. Obviously, positive psychological reinforcements in advertising is shifting from showing comparative advantages [of the product] towards basic human values, which stably maintain peak number of hits in the network. As the result, companies begin to compete in order to gain trustful relationships with clients in advertising, in order to involve clients in the formation of market offerings in a better way. Hence companies ought to use personified digital marketing channels dynamically, so that they entice consumers to respond emotionally and share their own opinion, to be heard by the producers of goods and services. Therefore the traditional scheme of brand advertising, whereby the costs competed on the basis of the frequency of contacts with target audience and the spread of this audience, is also changing and is being replaced by personalised dynamic advertising, which ingeniously utilises a variety of means of digital communication with consumers.
A remarkable example of the innovative dynamic digital marketing is the advertising conflict of car brands, which was rapidly cascaded through social networks after AvtoVAZ released and advertising banner stating, “Time to say good bye to not Vesta”, which was hinting that it was high time to replace old Kia and Hyundai with new Lada Vesta .
In response, Hyundai published a Facebook poster in support of Solaris brand: ‘Our not Vesta do not break’. Ford released a Facebook and Twitter poster with two Asian brides and Ford Fiesta with the inscription: ‘While all argue about not Vesta, we are having Fiesta!’ Volkswagen reacted with a graphical ‘Our not vesta is ready in Polo!’ Lastly, Citroen published a banner with a car and wedding rings: ‘Citroen C-Elysee is a reliable groom from Europe’.
Therefore a number of foreign car brands, including Audi, Peugeot and Volkswagen have shown an extremely dynamic approach of brand management by joining the advertising challenge and successfully applying viral marketing, using social networks and various channels of digital communications. The trend was picked up by the mass media and reached a significant proportion of the audience. It is worth noting that in the above car example, there has been no direct correlation between the marketing costs and the span of the target audience. In the era of digital media communications, the factors of rapid response, creativity and consumer involvement via various media channels is far more important.
Modern interactive technologies permit companies to establish trustful ‘personal’ relationships with consumers, who are at present active participants in the market and marketing communications.
Trustful marketing builds up trustworthy relationships with consumers not via promoting goods and services, but by studying consumer needs and wants, and offering expert solutions. Furthermore, one can learn about consumer needs and the ways these needs can be met by studying consumers’ preferences using digital communication channels and conducting neural network analysis of the data. The more trust consumers will play to your offers and the higher will be the probability that the consumer will give preference to your offers as opposed to those of your competitors. Trust based marketing opens uniquely new opportunities of drawing attention of your potential consumers. The central aspect of this strategy is not the classical marketing promotion, but the consumers trust you as an expert in the field. A successful marketing strategy should strive to stimulate consumer’s desires, to share information with consumers about their preferences and offer an opportunity to take an active part in the company’s marketing. On its own turn, the use of personified digital communication channels allows companies to mould creative content that meets consumers’ expectations, supports their involvement in communications and the dissemination of experts’ opinions via blogs, YouTube channels, with the support of specialist mashup services. Fascinating examples of mashup services are collaboration of Google Maps data with the estate data, telecommunication services and various targeting mashups.
Such multifaceted use of digital marketing can significantly reduce advertising budgets by studying consumer problems in a given field. This, in its turn, will maximise profit outside price competition.
THE FALL OF THE OIL ERA AND THE ADVANCEMENT OF NEW ‘TECHNOLOGICAL REVOLUTION’. LIFE ECONOMY THEORY
The 20th century economic theories do not work in the 21st century. They were based on economic growth regardless of socio-economic psychology, individual economic psychology and studied economic processes irrespective of individual and groups, without taking into account the self organised on the basis of historical, ethnical and cultural principals strata of the society. This is why the ‘best practices’ of economical management failed.
In the context of globalisation and high dependency of resource income, budgetary system in an array of countries has been and is designed on the principal of centralisation of financial resources with their further redistribution. The budget at any level, as opposed to the private business, was the financial foundation of socio-economic development of a given region. Therefore the regional financial system in a variety of countries was failing to sustain its socio-economic development.
It is necessary to realise that the oil rule gradually comes to its end. The new ‘technological’ revolution is at the door. Therefore it is the fine studies of own economy, society, socio-economic psychology and individual economic psychology, that will direct the way forward and will inform us about resources and pace necessary to reach the desired result.
The society awaits the new economic theory, the theory of Life Economy. Within this theory each individual, as a part of the system, develops independently while remaining a part of this system and acts upon common principles and rules. At the same time the general principles of economic system shall be connected more closely to the individual interests.
‘The state should act instead of business, it should not act for business, but should rather maintain necessary conditions for business development. There is no business outside the state. Without business the state impoverishes and annihilates. If the state does not comprehend this notion, sooner or later it enters into an acute conflict with business. This conflict does not benefit either of the sides and above all, it is this conflict that brings about corruption, inadequate business systems, which finally results in aggravation of social, economic and political stability’. Over the course of the past 10-15 years, in a number of countries we observe strong control practically in all spheres of social and economic activity, in the various aspects of the life of society. The state not only endeavours to control such spheres, but actively directs businesses and citizens on how and where they should work, conduct enterprise and human activities; it is trying to concentrate in its own hands the control mechanisms and influence all economic and social processes. Various development, control and participation institutions emerge. Essentially, the state appropriates functions of control over the whole economy, including indirectly control of private business, services and goods.
We observe that various legal documents (instructions, decrees), instructions of how and where one should sell, how one should conduct their own business, which colour and shape his ‘tent’ should be and where it should stand; where to invest, where to build, where to locate offices, and where to live. (For instance the call ‘All hands to the Far East!’).
A rigid control over external trade is established. In addition, no directions were given as where to obtain affordable credits, loans, to sell goods and services, where to get the parts, how to conduct business with varied exchange rates, which banks to open accounts in order not to lose financial resources, are simply absent. These lead to shrinking of small and medium size businesses, which cannot legally and profitably operate in such conditions.
All these elements appear to be attributes of state-controlled economy, but lack one of the most important management functions, which is a detailed planning system. Hence the accumulation of the resources occurs in the absence of diligent planning system, project assessment criteria and personal responsibility of managers.
Therefore the state, taking upon itself the role of business, limits its function to formulating restrictions, concentration of [financial] resources and further redistribution among limited number of participants, does not set clear terms of reference in all areas of economic development, and does not appraise the results of public and business satisfaction.
Even in these conditions we should not forget the fundamental economic law of demand and supply and the free market.
Should there be demand, there is supply. The restriction of goods under sanctions is a good example. Yet, the demand for these goods is still there. As a result, these goods reach our market through third countries and at higher costs.
What is actually happening? The trade business for such goods shifted from legal transactions in the market to illegal transactions in the “black-market”. The result is that the state loses income from unpaid taxes, prices raise, and corruption results.
How can this situation can be addressed? We can say straight away, that addressing this phenomenon is not only hard, it is next to impossible. Free markets resemble the nature of water. Once the water flow is blocked in one place, it leaks in another. Moreover, business is an essential element of Life economy. It interacts with other actors such as civil servants, ordinary goods consumers, institutions of [state] power etc.
Noble Prize winner Alvin Roth (born 1951, Noble Prize in economics 2012) talking about world free markets at the II International economics forum at the University for Finance in November 2015, said that legal and illegal markets of goods and services exist, as the demand brings about the supply. The question is whether the state would legalise this business and could partially control and tax it, or it would not. In the latter case [the business] would still operate in the shadow economy (stimulating corruption, causing tax and other financial loses).
Let us examine more closely the period of time during the last decade [20th century]. It was challenging time. But what exactly was happening? Markets operated, but operated chaotically in the absence of control and state assistance was negligible. At the same time there were free markets and people, interacting with each other, were developing markets for goods and services to meet their basic needs. At that time the new type of entrepreneurship emerged – shuttle trader. In many cases the first capital was generated by shuttle business and [with this capital] started legal and systematic business. After the time the shuttle business transformed and became more adaptable to internal and external changes, and thus became more stable.
The economy was rapidly expanding between 1998 and 2008. A number of experts, including overseas experts, link this process with the growth of oil prices. Was increasing oil prices the only reason? Let us examine statistics of average annual Brent oil prices per barrel in USD: 1998 – 11.91, 1999 – 16.56, 2000 – 27.39, 2001 – 23.00, 2002 – 22.81, 2003 – 27.69, 2004 – 37.66, 2005 – 50.04, 2006 – 58.30, 2007 – 64.20, 2008 – 91.48. Examining these numbers closely and comparing with current oil prices we can conclude that the prices between 1998 and 2004 were lower than at present. Nevertheless, the economic growth was high. This suggests that during the above mentioned period of time the state control was less strict and businesses were more optimistic, confident and stable. The banking system also needs to be mentioned here. It was fairly stable between 2000 and 2008. During this time the state did not work for business, it just created comfortable business conditions.
The above mentioned factors contributed to a favourable investment climate based primarily on stable and incrementally developing financial system, and a reliable, transparent and clear legal system that warranted citizen rights and rights of the legal entities and protected them from taking voluntary risks and decisions.
The call to invest into the economy, including presentations at various forums, talks about prospects and opportunities in single regions, will not be heard until the investors will see for themselves where and how to invest, and until they feel that their investments and rights are protected. There is no need to manage an investor, the investor needs to be directed and given necessary conditions for its development. It has to be clear that the investor is not a mechanistic element or organisation, they are individual decision makers. These decisions depend upon their convictions and understanding, which is formed not on someone else’s desires, actions and talks, but upon what the investors would like to gain. Give them what they want and they will come with their capital. It is similar to the process of homeostasis, by which the living organism protects itself against various harmful stimuli, hence the investor reacts negatively to external input which is not harmonised with their own needs and capabilities.
The finance system can be compared in its complexity with the blood circulatory system, whereby banks, like the heart, execute pumping function and maintain money circulation. When the blood does not reach some areas of the brain in a living organism, various parts of the body simply cease to function properly. Similarly if money in the financial system do not reach some parts of the economy, whether they are administrative institutions, businesses or ordinary citizens, they stop to function as they should, while in the long term financial they literally and figuratively speaking, begin to die.
At present, in addition to unstable banking system, which was caused by unclear guidance, the regional misbalance of geographical distribution of banking system also exists (it is concentrated in the central region and has an insufficient density in a number of regions). This contributes to the misbalance of socio-economic development in regions and results in a concentration of businesses and human capital in the central region. Nevertheless it is a free market, and its participants adapt to these conditions and migrate to the places where they feel more comfortable. The question is whether they feel more comfortable in a legal or illegal economy?
This is just one example of free market. It is necessary to realise that for business, much like for a living organism, certain freedom is essential. It is [in upon this freedom] that businesses can reach its full potential.
Similar processes were taking place in the labour market. During 90th the state could not secure the transition of work force from various sectors of the economy into the new ones, trivially since new jobs did not exist. Businesses and the work force adapted to these hostile conditions themselves. The Russian labour market demonstrated a unique possibility to avoid mass unemployment by reducing working hours and hourly pay. To the degree businesses were meeting the social needs of its employees by providing housing, and subsidising holidays, youth summer programmes and independent health services. At the same time the state did not demand that businesses would fulfil labour law regulations.
As the result, despite apocalyptic prognoses, mass unemployment has not taken place and social instability did not lead to challenging the political constructs.
Yet the early 2000th showed different tendencies. The decrease of unemployment and growth on minimal wages should have led to an increase in the standard of living. However, this was not happening. Why? Analysis suggest that this resulted from management inconsistency in various branches of the economy. Let us give an example. Beginning in 2000, there was a positive tendency of the growth of average wages in the economy. For Russia it is a benefit not least from the quality of living standards point of view, but also from consumer demand, which stimulates the economy. However the principal beneficiary was the state controlled sector of housing and utilities. During the period between 2000 and 2013 the income grew 11-fold, the housing and utilities costs grew 17-fold.
In particular, the costs of hot water supply grew 21-fold, heating 18-fold, water supply and disposal 17.5-fold, housing costs 15-fold, gas – 11 fold, electricity – 8-fold
Therefore the growth of utility costs as the result of ineffective management negated the efforts to improve living standards.
During this period the labour market experiences negative tendencies. While in 2000 the gray labour market offered 10.27 jobs, in 2013 it had 19.08 employees. In practical terms, employees and employers dissatisfied with institutionalised management in this sphere, withdrew 9 million jobs from the formal labour market. Only the pension fund of RF lost 2.5 billion rubles of potential payments (see Figure 1).
Again the question why? Partially the answer is obvious: people do not believe that social security payments will guarantee a comfortable retirement, that municipal taxes will be spent to meet their needs. In the course of the last 15 years the state has changed the rules of social security payments three times. Without public agreement it froze the capital part and at present time are in discussion regarding the possibility of raising the statutory retirement age; [the state] stimulates the level of public mistrust in comfortable retirement. Therefore any macroeconomic models of social security system will face the public reaction, which has lost its trust.
As a result, non-transparent and unstable social security policy forces citizens to withdraw from formal relationships with the state.
At present public administration and a number of business representatives ask similar questions:
– What to do when it is difficult to create comfortable business conditions?
– What to do when state control is strict on one hand and business is no longer supported on the other?
– What to do when legislative control of an economy are not implemented and there is no access to affordable credit sources?
– What to do when in [such conditions] businesses experience a catastrophic lack of monetary resources and finds iself in an informational vacuum?
– What to do when during the oil era the oil run out and the economy could not adjust to the present realia and the technological revolution?
– What if the modern theories explaining economic processes and phenomena in an economy (i.e., Keynesian economics, monetary economics, etc.) in 20 and 21 century no longer work?
The answer is obvious. Economy is a life organism. It can restore itself and will work even better. Businesses itself has to tell the state about the problems, which require a solution, [in order to] create a comfortable atmosphere for its operation, to gain [necessary] freedom and a secure future. Time for talking is over, it is time to do the work, time for active cooperation. To this end businesses need to get a bit more freedom, create necessary conditions, reduce state control of the economy and business itself will start growing. Give businesses access to quick and affordable loans for quality projects, then it will no longer need subsidies. State should not direct it and show the [direction] vector, it simply has to create conditions and monitor the quality.
This is equally applicable to citizens: they do not need to be told how to live, they need better conditions for living.
The state should systematically approach this problem and introduce comprehensive rules of engagement:
– transparent legal system with comprehensive code of law, which reflects interests of business and the society;
– introduce robust and accessible financial system, and first of all banking system;
– grant business with comprehensive tax benefits, reduce [level] control of a number of economic spheres;
– sequentially realise the reforms;
– reject on-going cadre and institutional reorganisations;
– reduce the degree of public uncertainty and fear, improve the degree for trust in public administration;
– design clear planning system in conjunction with budgetary parameters and indicators of regional socio-economic development, as well as with the state programmes;
– create global internal analytical data base for planning purposes;
– improve financial independence of federal subjects and municipal formations;
– introduce stimuli for improving tax collection into the budgets of federal subjects and municipal budgets;
– conduct open dialog with the society and business;
– develop further and strengthen to role of such public and legal institutions as notaries and advocacies.
Once the control system is introduced and rules of engagement are comprehensive, comfortable conditions are offered, open dialog established and all components of the system begin to collaborate as one single entity, it is then that the state, society, economy will achieve stable progress.
In our paper we introduce the new paradigm in economic sciences – the theory of Life Economy.
Life Economy is a branch of economical sciences based on the paradigm of ‘life economy’ as a complex system, which consists of interconnected subdomains, the structure and interactions of which are hierarchically arranged in such a way, that each subdomain acting within and upon the rules characteristic to the whole economy, retains, without replicating the economy on a smaller scale, its unique position in the wholistic model of the economy itself. This theory explains economic processes and phenomena seeing the latter as a living organism, in the very heart of which are people, businesses, social groups, various institutions of public administration, self-organised on the account of historical, ethnical, cultural particularities of the society and which play their own roles, function and mission in maintaining of life and evolution. At the same time they operate according to characteristic for each subsystem rules and legal and institutional requirements.
The term Life Economy completely reflects our vision of socio-economic system as living organism, that evolves and acts within the framework of rules governing historical and cultural development, social evolution in the context of socio-political realia of a state in question. It studies socio-economic growth in conjunction with socio-economic psychology, individual-economic psychology; it studies socio economic processes taking into account an individual, social groups, society, self-organised in historical, ethnical and cultural particularities. We can see the latter aspect as a special boundary environment which supports or inhibits the evolution. This organism, by analogy with the neural network in a living being, spans all areas of the society beginning with global and reaching local levels; each component of this system is connected (through knots) to definitive real subject, groups of subjects – individuals, business subjects, social and public administration institutions, actively collaborating with and changing them, as well as changing itself upon their influence.
Life Economy theory is based upon the requirement to study the structure of positive and negative reinforcement, their impact on public policy, the behaviour of citizens and businesses.
We can be criticised for adherence to social behaviourism, and rightly so. At the same time it is not completely true, since it is not always the case that direct analogies and references to real living organisms in socio-economic analysis can be made. Yet, the very principle of living organism equated to live economy and rules of systematic, but infinitely complex evolution of the system, undoubtedly referenced to what in our opinion is viable.
This theory shall establish the contact points between all components of the system, their connections and sustain their continuous interaction.
This article is the first step on the quest to studies of «life economy».
1. Ивантер В.В. Живая экономика // Прямые инвестиции. 2008. №1. С. 14-18
2. Н. Талеб. Черный лебедь. М., 2012.
3. Я. Корнаи. Размышления о капитализме. М., 2012.
4. Д. Койл. ВВП. Краткая история, рассказанная экономистом. М., 2016. С. 32-33.
5. Freud, Z. Group psychology and analyst of the Ego. (1921)
6. Чаянов А.В. Крестьянское хозяйство. Избранные труды. Москва: Экономика, 1989.
7. Сет Годин. Доверительный маркетинг. Как из незнакомца сделать друга и превратить его в покупателя. Альпина Бизнес букс, 2004.
Приложение к статье 1.1. LIFE ECONOMY
Positive and negative reinforcements of socio-economic activity
|Negative reinforcements of socio-economic activity
|Any negative information disseminated by mass media about the situation in the economy, social sphere, interior or foreign policy.This negative reinforcement has the greatest impact during the crisis in economy when on top of immediate challenges which individual faced in everyday life and which have negative impact upon psychological and physical well being, this individual is loaded either consciously or unconsciously additional negative information. For instance it can be information about economic decrease, budget cuttings, GDP reduction, raise of foreign currency exchange rate in relation to ruble, withdrawal of bank licenses, problems in banking sector, falling of the oil prices. The content of the information about all above can change very rapidly, even multiple times in the courser of one day. Most of the time it does not carry any meaningful content to the majority of the public and has no real connection to their lives. In particular it is true for oil prices. It is unlikely that there are a great number of people, who sells and buys raw oil on professional basis, signs contracts to this effect. Nevertheless, the more this information is disseminated, the more public discusses it, the greater crisis is created in their imagination. Virtual problems contribute to the pool of real ones. People are concerned about what is important for them personally: raising costs of consumer goods and services, decline in income, raise of unemployment, credit payments (it is worth mentioning, that borrowers of hard currency loans know about the exchange rate without excessive media input). By accepting additional negative information they link them to own problems, which completely different nature then change of oil prices.Above all, it has to be said that all public statements made by officials on the matter of budget cuttings, reduction of civil servants, raise of unemployment, reforms in social security, tax raises entail unnecessary stress for the reasons, which may never take place.
|As the result this negative reinforcement results in decreasing social activity of the public. People become passive to a greater degree in their work, demoralised, their work efficiency decreases; their creativity decreases, as does their business activity, the sense of uncertainty propagates. They feel that their future is insecure, they experience ungrounded anxiety, depression, aggression, relationships worsen. The continuos exposure [to this negative reinforcement] leads initially to psychological and later to physiological problems. This individual is lost as the active labour entity to the state economy.
|Negative reinforcement excessive information is a common phenomena linked with the growth of internet-based news media. At the same it is not a well studied one. It has a serious impact upon economically active population, upon its efficiency and working capacity.Without any exaggeration it is possible to say that the wast majority active users of the Internet often access it to read the news. Some visit it far too often. News feeds change rapidly and users strife to keep up following sometimes one source for 4-5 hours daily on-line. With what purpose? Since this information does not have for us any relevance, it is by far and large is nothing to do with our work, direct activities or family. Before the Internet public used to read more, access the information in the newspapers. They would not read it again and again. It was sufficient to read news in the morning, for instance on your way to the place of work or during the tea time. There is a great deal more information, the content has scaled up, as some can argue. It is indeed the case? In fact, most if the information we access is some sort of ‘garbage’, which has no purpose apart of being negative. Something, which arrests our attention, we study more closely, but a lot of information which is put our way districts us. We read parts [of information] and begin to think that we have an informed opinion on a number of issues. Yet, this is just general knowledge, without any specialist content. Everybody talks about inflation, some do not even understand what it is, how it is calculated, what factors play a decisive role in this process in reality. This leads to the fact, that many people enter the economic life with a lot of knowledge knowing nothing. Returning to the topic of news feeds, it is necessary to be clear, what do we gain in return? Perhaps many have noticed that after such a session the level of concentration diminishes, it is hard to focus on the immediate tasks, on own work (hence it is necessary to limit the Internet access in work places not only from the security point of view); passive attitude, tiredness, lack of will, aggression follow. Such practice turns into addiction of some sort, ‘news dependency’.
|This negative reinforcement reduces quality and efficiency of work, affects stamina, leads to the lack of concentration on the immediate tasks. The use of excessive information leads to the lack of competence and professional qualities, of qualification, and as a result entails the reduction of competitive ability on the labour market and to the social tension. Public becomes more passive in its strive to work and achieve the results.
|Inversely proportional, or reciprocal effect occurs when the pre-planned information stream creates exactly the opposite effect on the target audience in comparison to what is was designed for. A good example is the information about tackling the corruption in mass media. This information which has its purpose to prevent corruption. It purpose to show the outcome of such programme in the form of court cases, inform about the investigations, demonstrate the efficiency on this direction, inform potential corrupt official where it all leads to,and to the ordinary citizens it has to tell that such work is under way, even within the institutions of public administration, reassure them and show what is done to tackle bureaucratic outrage. The aim is absolutely valid. However, the design of the information package about such events has to be approached with great caution. For the ordinary citizen what is important is the result, not the process. The results are not comprised by the number of court cases and convictions, not in numbers, but in reassurance that citizens can be sure that his business will not be taken away, if he has one; that it will be possible to submit and obtain necessary paperwork, receive quality services. He can put his trust into the fact that his lodging will be completed on time, his savings will stay intact in the bank, which engaged in illegal activity. This is crucially important! This campaign can be executed subversively, but its results should be public.Ordinary citizens often affected in a negative way when the see in the news arrests in their making, wast amounts of wealth accumulated by a criminal. It often creates [unintentionally] a negative effect. On one hand it manifests itself in the nature of questions and comments made, such as: ‘How much did he steal?”; “Was the corrupt official was convicted and how many are left out there?”; “Perhaps he [the corrupt official] did not share [with his colleagues]?”; “He will get away with this”; “They are all the same” etc. Such questions and statements must not have place as they discredit the public administration. Some may even say after such information was made public: “How did one manage to do that?”; “Perhaps if one could cooperate with his colleagues better he would not be caught”; “One is to be a civil servant”. People watch television in the evening, they experience negative emotions, but in the morning they face the same problems.Reports about various festivals, undertakings that take place in parks, museums etc is a good example. Vivid and picturesque reports about such events undoubtedly are positive. However, during the crisis such information may cause a negative effect to psychological state of an individual. Once an individual hears the call to take part in a given event but clearly realises that he will not make it for monetary reasons, it creates anxiety and aggression.
|Reciprocal effect can generate irritation, the feeling os staging the events, dissatisfaction, aggression feeling among the general public. In case of frequent and inappropriate information dissemination the reverse effect can take a place, [the effect of] rejection.
This negative reinforcement in socio-economic and individual economic psychology represents the state of discomfort of an individual connected to the realisation of conflictingperception of practical experiences, knowledge, empirical perception of socio-economic state of understanding of socio-economic state in relation to the information stream reporting the state of and processes in the economy. This contradiction leads to a conflict of a single individual, and later on to the conflict of groups and masses.As an example of such dissonance in socio-economic and individual-economic psychology can be a contradiction between the awareness of single individuals (including representatives of business, experts and scientists) about the real state of affairs in the economy and the way it is shown in the mass media. in talking about the economic stability, banking system, labour market, mass media tend to water down the information. For the people who can compare the every day information with the information presented by the media (raising costs, loss of jobs, reduction of wages) feel a sort of dissonance, a contradiction.
Inflation rate is a good example. In the common sense the inflation means nothing but the raise of prices for the consumer goods and services, the fall of currency power to buy. Therefore when they hear about the inflation being at the level of 3, 5, 7 percent, it straight away means that the prices have raised by 3 – 7 percent. In the shop they observe the for somer goods prices have raised up to 30 percent, the utility costs have gone up by 15 – 20 percent, but their wages have not changed and even in some case have gone down.
This creates misunderstanding, followed by aggression and rejection of the information supplied by the mass media.
In this case it is worth mentioning the low level of legal and economic education among the public, as the information stream imposed on unprepared audience can cause unexpected results.
|This negative reinforcement leads to decrease of the level of trust to the information disseminated by the mass media, officials and can finally lead to lack of trust to the public administration.[it] causes the sense of a contradiction, uncertainty in the terms of the economy leads to the passive approach to the decision making.
|The negative reinforcement will suppression is often encountered among civil servants and in large private companies, in which the management asserts itself at the cost of their subordinates. Trivially any initiative is punished. Employees are simply required to fulfil the will of the manager, often bypassing or breaking the law. In principle, citing Henry Ford, not those who think is needed but the one who is doing what has been told. It is necessary to note that such behaviour among managers often vouches for their incompetence. Famous formula reads: emotions = available information – essential information. If there is an excess of information, then a human feels comfortable and certain, can identify tasks, aims and time frame; understands clearly what the results is to be achieved. If the available information is scarce, it arises the feeling of misbalance, which entails negative emotions, can hardly identify tasks and realise what is necessary. This results in shouting at the subordinates and emotional breakdown.At present a high staff turnover is characteristic for the civil service, primarily owing to this negative emotional state, which tells a lot about the incompetence and inadequacy of the managers.
|“To think is the hardest task. This is why only some can do that” (Henry Ford). And he is right. There are managers and those who are managed. Yet the will suppression puts off the most progressive and thinking people.During crisis, people who lost their jobs and are not able to think, are left to face problems themselves. They cannot start their own business, think about and find the best solution simply because their ability to make independent decisions has been ruined.
|“There are only two things which force someone to work: desire to get wages and the fear to loose the job” (Henry Ford). As for the rest “a human has two motives. One is genuine and another that sounds appealing” (Henry Ford).This negative reinforcement is frequently an extension of will suppression. But why it is negative? This reinforcement has two sides. On one hand, fear is the major tool of managing an individual and the society, the strongest negative reinforcement. On the other, it is the most powerful negative reinforcement that prevents potentially active citizens from entering economic activity. The fear of loosing job, wages, uncertainty and instability prevents people, who have their own ideas and projects, to realise them.
|This negative reinforcement results in lack of involvement of potentially active citizens, who are an essential element of economic development, into the economic processes.
|Understatement or half truth
|Understatement or half truth is one of reinforcements which annoys the most progressive people. Lately we evidence a range of events dedicated to explaining socio-economic processes and the situation: forums, conferences, round tables at which the experts and academic society, primarily the officials, talks about the problems, explain the situation in the economy, world tendencies and possible countermeasures against the crisis. The majority of those who attend [such events], mainly businesses and academics come to find answers to their questions, but leave even more confused.Why this is happening? Firstly, it great deal depends on the speaker. If the speaker is not convincing, cannot answer questions, does not talk openly, partially withholds the information, unclear in own vision of the situation, this annoys and demotivates listeners, since they do not hear answers to the problems that worry them, the answers about the life economy. It is clear, the officials in most of the cases, or even always, cannot say what they think. Yet this way it is even worse then complete lack of information.Good illustration of the case are hard currency borrowers. It is clear that they take extra risks taking hard currency loans. However, they took their decision when the economy was stable, and banking clarks were assuring that hard currency loans were more profitable. People believed them. Today their negative reaction is defined not only by the raise of the service costs for currency loans, but the by the lack of information, clear answers to their questions, understatements and half truth.
|This negative reinforcement leads to the decrease of trust to the official information, mistrust to the public administration institutions.
|Distorted or excessive openness
|At present the tendency in the sphere of information is directed towards the maximum openness. A significant number of sites has emerged, primarily run by the institutions of power. They publish a large number of reports, information, instructions, guidance, information about the governance etc. It is likely that in order to be able to handle this non-uniformed information another site is required, such that it should give the essential guidance on the information access. State services internet portals have been launched. Undoubtedly, there sites are extremely useful, but also are extremely overloaded.To make the information hard to access one has to make it all public. This statement really means that amateur audience hardly stands a chance to make sense of this information. Above all, it’s credibility and quality is hard to verify. One can see the front page (graphs, diagrams etc.). It is impossibly to very them.[The idea is that] the general public, seeing this information should feel involved in the governance processes, but in fact is to be desired. Public needs information about what worries it most of all. Perhaps it can be less information, yet the quality should be higher, the content more precise, representative and give the answers to the [public] concerns.
|This negative reinforcement affects and reduces the interest to the official sources and undermines the trust to the data published by them.
|Social networks are mass negative reinforcement [in their essence]. The ordinary social network is designed to support, reflect and organise interactions in the Internet. Effectively, they represent a form of virtual socialisation. It is true, that they can bring together vast number of people and allow them to socials for hours and days. People become heroes of the social networks in a matter of minutes. They can permit themselves various statements (the freedom of socialisation raise concerns though). This freedom is equally a source of positive and negative influence.But what social network really is? Nothing. An individual trivially loses contact with the reality. Such person is no longer a part of life economy since he or she is involved in a virtual one. moreover, paradoxically, the social network leads to loneliness. The sense of community and involvement in socialisation disappears in a thin air once [an individual] faces the reality.
|Negative reinforcement to a greater or lesser degree withdraws an individual from real socio-economic processes, from the life economy.
|Positive Reinforcements of socio-economic activity
Positive information is one of the major positive reinforcements that creates positive information context about socio-economic development, the state of the economy, public administration activity, and above all about the results of such an activity.Public must witness that they are not only informed about something, but that actually these words are confirmed by the action, the actions are taking place.For example, [one can look at] the measures to support the economy. These actions should result in opening new factories and production facilities. Media coverage of such events forms an important aspect of positive information context, stimulating of businesses and active involvement of citizens into economic processes.
For example, it is the TPD (territorial preventative socio-economic development). The law was passed in the end of 2014. Apparently for the last 1.5 years TPD have been emerging across the Far East territories. However, it is crucial that they are not only mentioned, but are actually shown. A busy constructions side, where the infrastructure is in its making. It it then that the investors will get involved, and it is likely that the public will start considering relocation in the region. Unless public, including investors, businesses and ordinary citizens, does not see real actions, TDP will remain at a far distance, not here. Seeing barren territories and the territories under construction are tow different things and the impact [of these scenery] is different.
Moreover, public should not only see the results and experience them.
Talking about the import replacement means that public visiting a supermarket should see, for instance, not the imported grocery, but home grown one produced in Russia and sold at affordable costs. This is a real result. There is no doubt that a tuber of measures has been implemented to replace the import, but the results must be even more visible and vivid.
|This positive reinforcement should create a positive socio-economic informational context and contribute into the socio-economic activity of the public and favourable investment climate.
|Useful and relevant information
|Useful and relevant information is a positive reinforcement, that enables public to gain access to relevant and useful information essential to address real challenges. This positive reinforcement is an individual economic psychology tool. A given individual should be aware what is the required information, when it is needed and where to find it. Selecting the information one should focus on the actual task and rid of the irrelevant information.Structuring, clarity and comprehensiveness of information are much needed here.Mass media should disseminate the information which public needs.
|This positive reinforcement makes it possible to gather relevant knowledge and focus on solving a relevant problem. One sets the goal and reaches it. Information is essential element of achieving this. This positive reinforcement mobilises people for solving relevant problems.
|Legal and economical education
|Despite the fact of living in the 21st century, the majority of public for various reasons do not have sufficient knowledge and skills in law and economics. Obviously, people can access definitions, terms, procedures on the Internet, but they will have difficulties in applying them, as they knowledge is far too general rather than specific.Mass media often relates to the public information about inflation, sequester, spending cuts, inflation targeting. For instance, the search in the Internet on inflation targeting will return Wiki definition, whereby ‘Inflation targeting is a monetary policy in which a central bank has an explicit target inflation rate for the medium term and announces this inflation target to the public. The assumption is that the best that monetary policy can do to support long-term growth of the economy is to maintain price stability. The central bank uses interest rates, its main short-term monetary instrument’. As a rule, it is where everything ends. It appears that the information is just a collection of words, definitions, some of which end up with [reassurance, that] ‘everything will be well’, in which in application to real life has next to no meaning not only for the general public, but also for the experts.
|This positive reinforcement permits to channel the programme of actions to each individual and to the public in general. It allows to cascade down the information which the speaker was trying to deliver.This positive reinforcement contributes into administration credibility.
|Credibility and clarity
|The positive reinforcement credibility and clarity is an extension of the reinforcement legal and economical education. It reflects upon the request of the society for clarity and credibility of measures to stabilise the economical situation and involve into economic activity active and progressive citizens.Credibility and clarity reflects the ability of mass media and various institutions of public administration to present in a clear and credible way their plans and measures, which they intend to implement or already implementing.
|This positive reinforcement permits to enhance the level and the degree of trust of citizens; convince them in the reality and correctness of socio-economic course, motivate them to take an active part in this process.
|Life socio economic network
|Life socio-economic network is one of the major components of the life economy paradigm.This positive reinforcement is a powerful tool of developing life economy by the means of virtual economy.Life economy, life socio-economic network are designed to develop, reflect and structure socio-economic relationships between active citizens, state, business, expert and academic strata on the Internet.
|The resulting effect of this positive reinforcement is involvement of highest number of potentially active citizens (mass psychology) into the economic activity; establishing of cooperation and trust between the state and businesses in relation to formation of ‘comfort business environment’, as well as residents and non-residents; establishing of the springboard for free exchange, sale of goods and services; stimulating of socio-economic development of life economy by the means of virtual economy.
|Decent pay is one of the most powerful positive reinforcements, which stimulates public to invest own intellectual and physical labour in socio-economical development; it enhances the economic growth, stimulates the development of the new products and services.In our opinion, one of unpopular and destructive measures, which reduces the consumption, decelerates socio-economical development and leads to the tensions in the society is cutting of the pay, primarily among the civil servants. On one hand, undoubtedly, in the context of crisis and the reduction of the revenue, one of the measures will be optimisation of the administrative apparatus and pay cuts. Yet, this measure has a destructive nature. For instance, the question of pay cuts for state employees has purely populistic nature. First of all, this measure does not lead to significant changes to budgetary expenditure; and secondly, civil and municipal employees for a significant portion of general public and pay cuts lead to ‘washing away’ professionals from public services; thirdly, [these cuts] have no relevance to general public, and it does not create a positive emotional effect, as it used to be, since for many it is that they relatives or friends are actually state employees and therefore this measure does not bring ‘political’ dividends; fourthly, it overloads the bureaucratic apparatus and results in poor quality of the services; the fulfilment of professional duties attires formal character.Pay cuts lead to the reduction of internal consumption and, sequentially, to reduction of demand, income of the private businesses, reduction of work places.
|Positive reinforcement decent pay is the major stimulus for involving active and progressive public into the economical activity of the country.
|Comfortable emotional atmosphere
Comfortable emotional environment is a positive reinforcement, that complements the decent pay. According to Henry Ford ‘the main purpose of the capital not to make more money, but to make money to live a better life’.This statement is absolutely true. We do not live in order to work, but work to live.
To this end, we have to find ourselves in the comfortable environment. People should have time left to spend with the family, for themselves, for hobbies. All these are crucially important [factors] of socio-economical development on the whole.
Examining the current trends, we observe, that people have started to work twice, or even three times more then they used to do. What is left is just enough to meet the basic need in sleep, and even this is not always true. What result such intensive labour can bear? Often [the result] is negligible, or even void. There is a question why it is the case? The answer is straight forward. Firstly, the productivity laws still work. If one works in such mode for prolonged time, lacks rest, then the productivity productivity reaches its minimum. What one could do in 8 hours, it takes 12 – 16 hours. Secondly, this leads to serious implications. Thirdly, this often happens due to unreasonable use of working hours and inability to plan own workload. Fourthly, and we have already mentioned about it, [it often happens] because of the sheer incompetence of the management, which cannot clearly set the tasks, set the goals to the employees. The principle ‘things had to be done yesterday’, and which is often encountered even now, has long expired. The only thing it means that the information was not delivered on a timely fashion, managerial mistakes were made, and the ordinary employee had to correct them.
If the comfortable atmosphere at the work place will be created, then this will become the most powerful stimulus for individual development, and the development of the economy and the society.
|This is trivial positive reinforcement increases productivity manifold, it stimulates people to fulfil their duties to the highest standards.
|From open dialogue with the power to joint action
Positive reinforcement from open dialogue with the power to joint action is crucially important, especially during the crises and election campaigns, in order to involve a significant number of active and progressive citizens, business circles, experts not only into the open dialogue with the state, but even more importantly, into joint actions for their active participation in the economic processes.Talking about legal and economical education we mentioned that the format of forums, conferences, round tables is already redundant. At these forums the audience is nothing but passive listeners, while they should be active participants. They want to become active participants.We have already mentioned that the society has grown and is requesting more constructive dialogue, which includes not only comments from civil servants, but [presumes] the public and businesses take part in actions.
The motto of this process should be [the statement]: ‘If you wish that things change for better, gather your team and act!’
In this case the transformation of administration system is required.
At the initial state Power and Society jointly mark the problem, then at the second stage they work out solutions. At the third stage:
The society gathers the team to implement projects;
The power maintained the resource logistics and consults.
This presumes absolutely novel format, open and constructive dialogue.
|This positive reinforcement permits to all realise their individuality and, at the same time, make one feel a part of the whole, the participant with rights, duties and responsibility within one system, one state; to feel personal responsibility for the development of the country.
|Legal and economical transparency
|Legal and economical transparency is one of the positive reinforcements that stimulates the investors to invest into the country’s economy, create new enterprises; it stimulates citizens to start own business and enterprise; it enhance the trust to the power.When the legal system is stable, the code of law is clear, [then] the country’s economy is stable and transparent. In other words, when the rules of engagement are clear to all, the business develops more actively, citizens conduct business more willingly; something new is being invented; new daring projects are starting. It is because all want to play in win in the game, while to win in the game when the rules are constantly changing is impossible.
|This positive reinforcement is a valid tool for creating favourable investment climate, attracting investments, developing entrepreneurship.
Legal awareness is the positive reinforcement that moulds the system of legal views, which manifest themselves in relations of individuals, social groups, the society as a wholeto the existing and the desirable code of law, to legal phenomena, to human behaviour in the sphere of law.This positive reinforcement reflects so-to-speak legal moral and ethical qualities, which humans operate with in their lives, not least in relation to the perception of corruption levels and the fight against it.
The positive reinforcement legal awareness is closely connected to descent pay, comfortable emotional atmosphere and open dialogue with the power.
The state has two main goals: to maintain the security of own citizens and thew growth of their economic well-being. The state must meet this goals.
When these goals are failed, the code of law began to work formally and legal awareness diminishes.
Examining the statistical overview of crimes connected to the corruption, we see that during crises the statistics grows significantly. Why? The question is obvious: pay cuts, unemployment level, total demoralisation. Even knowing about the responsibility for such crimes, people still commit them. Harder punishment is not sufficient.
The positive reinforcement legal awareness should work in parallel with descent pay, comfortable emotional atmosphere and open dialogue with the power.
In this case public will find themselves in cooperation with the power; they will feel protected, responsible as well as they will see the fruit of own labour.
|This is one of the major positive reinforcements that form a specific form of public, the legal awareness. It motivates the society and individuals to contribute into the process of formation of the legal system of the state; to act responsibly in preserving, observing and protecting of this system.
|Stability and certainty
|Stability and certainty is quite clear and meaningful positive reinforcement, that stimulates citizens, investors to invest into the country’s economy; to develop long term development strategies and actively participate in socio-economic development.
|The main result of this positive reinforcement is the increase of trust to the economy of the country; to its system, and effectively, [stimulates] the desire to invest into the its socio-economic development.
Information about the authors
Saphonov Alexander L., DoS (economics), Profes-sor, Vice-rector for the development of the Academy of Labour and Social Relations
Work place: the Academy of Labour and Social Relations
Popkov Sergey Yu., Consultant in the field of economics of the General Director. Professor of the Faculty of Insurance and Taxation of the Academy of Labour and Social Relations. DoS (economics)
Work place: the Federal State Foundation “All-Russian Research Institute of Labour Protection and Economics” of the RF Ministry for Labour and Social Security; the Academy of Labour and Social Relations
Slobodchikov Iliya M., Vice Director of the Vygotsky Russian Federation University of Humanities, Professor of the department of psychological consultancy at the Faculty of Psychology of the Institute of Psychology of RSGU. DoS (psychology), PhD in Education
Work place: the Vygotsky Russian Federation University of Humanities; the Institute of Psychology of RSG
Smirnov Vladimir M., Vice Director of the Institute of Accelerated Programmes of the University of Finance under auspices of the Government of the Russian Federation. DoS (economics), Assistant Professor
Work place: the Institute of Accelerated Pro-grammes of the University of Finance under auspices of the Government of the Russian Federation
Yastrebova Elena V., PhD in Physics and Mathematics, Chief-editor of «Business in law. Economic & Law Journal»
Work place: Publishing house “Yur-VAK”
Справка об авторах:
Сафонов Александр Львович, проректор по развитию Академии труда и социальных отношений, доктор экономических наук, профессор
Место работы: Академия труда и социальных отношений
Попков Сергей Юрьевич, доктор экономических наук, доцент, советник генерального директора по экономическим вопросам. Профессор кафедры Страхования и налогообложения Академии труда и социальных отношений
Место работы: Федеральное государственное бюджетное учреждение «Всероссийский научно-исследовательский институт охраны и экономики труда» Министерства труда и социальной защиты Российской Федерации; Академия труда и социальных отношений
Слободчиков Илья Михайлович, доктор психологических наук, кандидат педагогических наук, заместитель директора. Профессор кафедры психологического консультирования факультета психологии Института психологии РГГУ
Место работы: Институт психологии им. Л.С. Выготского Российского государственного гуманитарного университета; Институт психологии РГГУ
Смирнов Владимир Михайлович, доктор экономических наук, доцент, заместитель директора
Место работы: Институт сокращенных программ Финансового университета при Правительстве Российской Федерации
Ястребова Елена Владимировна, кандидат физико-математических наук, главный редактор журнала «Бизнес в законе. Экономико-юридический журнал»
Место работы: ИД «Юр-ВАК»
 Nissim Nicolas Taleb. The Black Swan. 2007
 Корнаи Я. Размышления о капитализме – М.: Издательство института Гайдара, 2012
 James Coyle. GDP. Short story told by economist. M., 2016
 Freud, Z. Group psychology and analyst of the Ego. (1921)
 Freud, Z. Group psychology and analyst of the Ego. (1921)
 Freud, Z. Group psychology and analyst of the Ego. (1921)
 The Russian economist, Alexander Chayanov studied behavioural models of peasant farm families. In particular he noted, that important positive reinforcement for the artisan is the family needs. Hence his orientation to consumption, as oppose to saving, which on the contrary is characteristic for his Western colleagues. A.Chayanov. Крестьянское хозяйство. Избранные труды. Москва: Экономика, 1989.
 Translator’s comment: not Vesta literally means in Russian ‘not a bride’.