A Theory of Planning Horizons (2): The Foundation for an Ethical Economics
Jennings, Frederic B., The Journal of Philosophical Economics
Abstract: The concept of planning horizons serves as a measure of many unsettled aspects of economic analysis. First and foremost, the notion is ordinal: we speak of 'horizon effects' as directional shifts in planning horizons without tallying 'wits' or calibrating horizonal axes of change. Second, the derivation of horizon effects is inductive; we simply assert their inherence in the range of factors subsumed within the imagined projections behind all choice. The planning horizon is set wherever surprise supplants expectation; the horizon occurs at the outer range of accurate anticipation, to which we lack clear epistemological access. Planning horizons - horizon effects - suggest a new foundation for an ethical economics of conscience, social maturation and growth.
The idea of planning horizons invites a distinction of foresight from myopia in economic constructions. But time horizons are only one aspect of our planning horizons: to see ahead in time we must embrace all relevant causal effects. Foresight depends on knowledge of how reality actually works, which is a matter more of degree than 'truth'; the planning horizon offers an index of our 'rational bounds.' Our range of anticipation is also related to our internalization of social and ecological externalities in our decisions, so to the scope of our ethical conscience and to our sense of human community. Indeed, the organizational health and integrity of our society is horizonal in this sense.
The aim of this paper is to explore and develop the concept of planning horizons in its intellectual origins and economic concerns. Its philosophic conceptual roots, methodological underpinnings, psychological insights and economic implications are outlined to show why an economics of planning horizons offers an ethical economics of interdependent dynamic complex systems. With standard doctrines seen as a special case in a larger horizonal frame, social theory embraces an ethical economics with dissimilar institutional implications favoring cooperation.
Keywords: planning horizon, ethics, conscience, complementarity, myopia, horizon effects
The first part of this two part discussion of planning horizons and their relevance outlined the microfoundations of this concept along with some applications. This second installment describes their role as an ethical ground for economics. The planning horizon offers an ordinal index of conscience, knowledge, maturity, foresight, patience and perspective. Indeed, the notion entails an 'organizing principle' on which economics will likely restructure, once the implications of this idea are fully engaged. The previous paper explained how planning horizons affect the pricing decision, as an extension of orthodox theory into network contexts of fully interdependent decisions suggesting that cooperation is efficient due to contagious horizon effects and the complementarities of increasing returns (Kaldor, 1972; 1975) and intangible goods. Indeed, the balance of human relations is horizonal in this sense: longer and broader horizons shiftour interdependence away from substitute tradeoffs to complementary gains. But what are planning horizons in their relation to other writings and traditions in economics? That is the aim of this sequel to the paper on market design.
First, there is a history of attempts to incorporate time and dynamics into neoclassical theory that will be briefly addressed. There has been a long conversation in economics on how we should integrate dynamic concepts into our models, suggesting that time is not enough for any emergent theory of cost. The methodological lesson is about temporal limits on anticipation as seen in horizonal theory. The planning horizon undoes such cautions, solving the problem of how to conjoin knowledge with pricing in network contexts, shaping economic growth as a horizonal process (Jennings, 2011b).
Once horizonal links to pricing and growth are understood (cf. …