A Sociocybernetics Model for Social- Economic System Architecture

Systems Research and Behavioral Science Syst. Res. 29, 263–273 (2012) Published online 2 December 2011 in Wiley Online Library (wileyonlinelibrary.com) DOI: 10.1002/sres.1134 ■ Research Paper

Coping with System Sustainability: A Sociocybernetics Model for Social- Economic System Architecture

Guohua Bai* and Lawrence Henesey School of Computing, Blekinge Institute of Technology, Sweden

This paper proposes an epistemological model based on cybernetic principles and activity theory to interpret two levels of problems that are intertwined in our social-economic system, namely the liveability and sustainability problems. In the ﬁrst part of the paper, important principles and concepts from related ﬁelds of cybernetics and activity theory are introduced for later construction of a model. In the second part, a model is constructed on the basis of the introduced concepts. To validate the proposed model, the current economic crisis is studied in the third part. An important contribution of the proposed model is a theoretical understanding of the two levels problems and how to construct macro social-economic policies to avoid similar crisis in the future. Copyright © 2011 John Wiley & Sons, Ltd.

Keywords feedback; social activities; liveability; sustainability; autopoiesis

INTRODUCTION or set of individuals (de Chazal, 2010). The second order problem about fundamental structure and The global economic crisis has led to a need for social subsystems relationships will be the focus solutions, such as a systems approach and deeper of this paper. The problems of structure and rela- analysis of what could be performed to avoid tionship of social subsystems will be defined in such a future global crisis. Discussions in many this paper as the sustainability level problem. forums and mass media have mostly focused on We propose the application of the systems the first order casual effects such as bank loan sys- approach to our world social-economic system tems, bonus problems and credit systems. This is can yield benefits. Cybernetics as one of the what referred to as a ‘liveability level problem’, important parts of system paradigm offers a which is defined as related to the contentment comprehensive understanding to current socio- with life in particular location of an individual logical challenges and problems. Churchman and Ackoff (1950) proposed the essential understanding of the cybernetics in social science and * Correspondence to: Guohua Bai, School of Computing, Blekinge Institute of Technology, Sweden. psychology and warned of the risk of the two E-mail: [email protected] becoming separated:

The psychologist and social scientist are aware actual output from the goal/status are identified of the complexities of phenomena in their own or measured, that is, it works against a deviation. field and may look upon the metaphors and All tracking systems, speed control systems, such analogies of the cyberneticians with scep- as a thermostat, are all based on the negative feed- ticism. The danger is that eventually some back. Classical economists such as Adam Smith cybernetician goes astray and makes propo- (1776) claimed that the ‘free market’ wouldtendto- sals which to the psychologist and social scien- wards economic equilibrium through the price tist are completely outrageous. The end point mechanism, in which demand and supply are nega- of the process may come when each field tive forces against each other to an equilibrium returns to its own work and ignores the poten- price. This view now is questioned from current tial contribution of other disciplines. The real practices such as problem of unemployment, bank danger is the complete loss of integration, credit system, bonus class and monopoly market. which at the present time, seems essential in Positive feedback, however, amplifies a devi- the study of purposive behaviour. (p.33) ation, so the end result of a positive feedback is often ‘explosive’ or ‘blocked’. Thus, this type of To be aware of the risk as warned by Churchman, feedback works normally as a temporary control this paper proposes an epistemological model by in some dynamic systems, such as nuclear fission integrating the two related fields of cybernetics based explosives, world population system, stock and social psychological studies. The model can co- markets, bank run and bankruptcy, economic herently integrate the liveability and sustainability recessions or expansions. of human activity systems, and provide a systemic The above two kinds of feedbacks (Figure 1) re- interpretation to the current economic crisis and quire that the output of the system must be fre- faced problems quently measured against a predefined status in order to decide the next input. Feed-forward, however, is different from the above two kinds of feed- CYBERNETIC PRINCIPLES OF FEEDBACK backs because it works only on its own predefined AND PURPOSIVE BEHAVIOURS way without responding to how the output reacts. Two prerequisites are needed for a reliable Cybernetics has been traditionally applied in feed-forward: the external environment must re- areas of engineering control. In recent years, main predicable, and the effect of the output of the Research Committee 51 on Sociocybernetics the system should be known. Apparently, the (2011) within the International Sociological Asso- two prerequisites can hardly be met in real world ciation has made great efforts in applying some of situation, especially for a socio-economic system. the high level principles of Cybernetics in study- Therefore, feed-forward is normally used as a ing various social and cognitive problems. For ex- complementary to feedback. ample, feedback and feed-forward are important Another important principle of cybernetics is embodiments of purposeful behaviour in cyber- goal seeking. It is embedded in all the above three netic systems. In control theory, there are three kinds of controls and is an important purposive fundamental different types of control mecha- behaviour, which is defined by Churchman and nisms, namely, negative feedback, positive feed- Ackoff (1950) as an intensive function of a system. back, and feed-forward (Skyttner, 2000). A system has an intensive function if it consists of Negative feedback is to minimize a deviation be- objects that accomplish their goals by changing tween actual output of the system from the prede- their behaviour according to changes in the envir- fined goal(s). It is the most common type of onment. This accomplishment requires that the control in a system for maintaining an equilib- system can measure the changes in the environ- rium—a status of a system in which competing ment and compare the changes with its goal(s). forces are balanced. Negative feedback works only In many social studies, however, this requirement when there exists a goal/status (such as equilib- is either impossible, or undesirable. Therefore, the rium) for the system, and the deviations of the intensive function is primarily studied by the so

Figure 1 Negative feedback and positive feedback called first order cyberneticians. The second order virtue of being alive. It is also the most basic unit cybernetics or sociocybernetics is more interested for human or collective performing any specific in studying higher level purposeful behaviour, function or obligation. No one can survive with- namely purpose. A system has a purpose if it out participating in various social activities. Ac- accomplishes its objectives by exhibiting different tivity is ‘the non-additive, molar unit of life’ types of behaviour, even though the environment (Leontèv, 1981). remains constant or unknown. All human-involved An important departure point of activity the- systems are purposeful systems, especially socio- ory from many other sociological studies is that economic systems. activity theory regards social properties as emergent properties instead as properties deducted from or a sum of an individual’s properties. In a THE ACTIVITY THEORY certain sense, many other sociological studies take the individual human being as the onto- Activity theory is a philosophical and cross- logically given starting point from which ev- disciplinary framework for studying various erything else can be deducted (Smith, 1776). forms of human behaviours and social practices. Consequently, socialization, norms, values and It uses the category ‘activity’ as ‘a system of its culture are popular means for explaining why own structure’ or the minimal unit (Leontèv, individuals unite into something called society 1981) to approach the relationship of subjective (Qvortrup, 1996). Activity theory, however, takes minds with the social context. Some important the activity interactions between people and their concepts and models of the activity theory from social cultures, norms, values to be then identi- the work of (Davydov et al., 1982), (Vygotsky, fied as a basic unit of a social system. Activity is 1978), (Leontèv, 1981), and (Engeström, 1987) an emergent property and synergy of ‘collective are introduced in the following as building com- intentionality’. This collective intentionality is ponents for the sociocybernetics model in the not the sum of singular intentionality but a new next section of the paper. emergent property of collectives (Searle, 1995). In modelling an activity, a triangle model is proposed by Leontèv (1981) to include three Activity—The Most Basic Unit of Social System fundamental elements and relationships in an activity (Figure 2). In this model, an activity is An activity is a basic process that a human being defined as the ‘middle link’ in a three-part or a collective carries out or participates in by scheme in which a subject interacts with an object

converted into objective results and products (Vygotsky, 1978; Leontèv, 1981; Davydov et al., 1982).

Community-based Activity System

fi Figure 2 An individual activity based on Leontèv (1981) Based on the rst activity model from Leontèv, Engeström (1987) introduced three more components, namely community, rules (including laws, norms and cultural traditions), and labour divi- via artefacts. A subject in an activity is a conscious sions into the triangle model (see Figure 3). He actor or a group of conscious actors. An object is then expanded the concept of contradiction and some part of the real world that the subject acts mediating principle into community level. upon. ‘If I act, there is something in front of me, Contradictionisanimportantconceptin an object (Schwarz, 1997)’.Theobjectmanifests activity theory to interpret the initial point of a itself only if there is an interaction with a subject. development process. Contradictions manifest The object and subject are non-separable. Activ- themselves as problems, ruptures, breakdowns, itytheoryencompassessocial,historicalandcul- and clashes. Activity theory sees contradictions tural properties to be as objective as physical as sources of development (Bai & Lindberg, and biological properties. An object (objective) 1998, Turner & Turner, 2001). Activities are vir- is always held by a subject, a person or a group tually always in the process of working through of persons who is or are engaged in an activity. contradictions (Kuutti, 1996). To resolve a An object provides motives for the activity contradiction which normally involves two mu- and gives the activity specificdirection.‘Behind tual opposite parts, there needs always a medi- the object, there always stands a need or a ator. In Figure 3, together with the classical desire, to which the activity always answers contradiction of ‘subject-object’ mediated by (Leontèv, 1981)’. artefact, two new contradictions are identified A subject cannot act on an object directly, but after the introduction of community, namely only through artefacts as mediators. The introduc- the contradiction ‘subject-community’,andthe tion of artefacts as mediators in mediating the contradiction ‘object-community’. In a similar man- very classical ‘mind-body/subject-object’ paradox ner as the instrument/artefact is introduced as or contradiction is a major contribution of activity the mediator of the contradiction ‘subject-object’, theory. ‘Mediator objects connect humans not only with objects, but also with other people’ (Leontèv, 1981). In particular, artefacts are understood as objective transmitters for the internalization process Artifacts and externalization process. The internalization process is the process in an activity that trans- forms the object in focus into its subjective forms Production or images (mental models, theories, skills, con- Object sciousness, etc.). Through this process, the object Subject Outcome in focus will be ‘generalized, verbalized, abbre- Consumption viated, and most importantly, becomes suscep- tible to further development that exceeds the Exchange Distribution possibility of external activity (Leontèv, 1981). The externalization process is the process Rules Labor Division Community that internal process manifests itself in external actions performed by persons, and is Figure 3 Community-based activity (Engeström, 1987)

Engeström introduces ‘norms, rules’ as the me- construction of the sociocybernetics model, diator of the contradiction ‘subject-community’ which will be described later in this paper. and ‘division of labour’ as the mediator of the contradiction ‘object-community’.Basedon Marx’s terminology of social production, ex- Activity is an Autopoietic and Self-referential change, distribution and consumption, he fur- System ther maps those four human fundamental activities as four sub-triangles. In the next, those Autopoiesis is a concept developed in the 1970s fundamental activities will be applied as compo- by Maturana and Varela (1972) in describing cells nents to the sociocybernetic model of feedback systems. The basic deﬁnition of autopoiesis is economic-subsystem. that a system self-reproduces the components According to Figure 3, the development of eco- that produce it (Mingers, 1995). Although no bio- nomic production, exchange, distribution, and logical system can maintain itself without consumption activities are accordingly driven resources from the environment, only mater and by four kinds of contradictions, that is, contra- energy, not elements and not unity can be dictions of subject-object, subject-community, imported from or exported to the environment. object-community and production-consumption. A biological system is organisationally closed Firstly, production activity is driven by the contra- but communicatively opens. Luhmann (1986) diction ‘subject-object’; namely, by using instru- generalized the concept of autopoiesis to cover ment (‘tool’ in the terminology of Vygotsky, or not only organic systems but also social systems. artefacts in Figure 2 by Leontèv), the subject However, one question has to be answered then: works and produces the objects that correspond what elements or units in our social autopoietic to the given need or an outcome. Secondly, the system are self-produced and not imported from exchange activity is driven by the contradiction the environment? According to Luhmann (1986, ‘subject-community’, namely, the subject exchanges 1995), social systems are autopoietic systems in his/her labour value (exchange value) within the which only communication is the reproduction community to obtain his/her needs (use value) unit. according to the community’srulesandsociallaw Social systems use communication as their (second mediator). Thirdly, the distribution activity particular mode or autopoietic reproduction. is driven by the contradiction ‘object-community’; Their elements are communication which are namely, the outcome of the object is distributed for recursively produced and reproduced by a social reproduction among members (organiza- network of communications and which cannot tions, companies) of the community according to exist outside of such a network...... For a the principles of the division of labour (third medi- theory of autopoietic systems, only communi- ator). Finally, the total social-economic activity cation is a serious candidate for the position system (the whole triangle) is driven by a new of elementary unit of the basic self-referential kind of contradiction: ‘production-consumption’, process of social systems. Only commu- namely, by the paradox that we produce output nication is necessarily and inherently social. and simultaneously we consume the output in (Luhmann 1986, pp. 174–177) order to re-produce it. The contradiction of ‘production-consumption’ provides an inner The crucial role of communication is no doubt and never-ending energy that drives an accumu- one of the most signiﬁcant elements in any social lating cycle of consumption and production. system. Any system must include the communi- ‘Were it not for the paradox that consumption cation channels to knit units or parts together as necessitates production, and vice versa, activity one coherent whole. However, communication would not exist (Holt and Morris, 1993)’.This may not be the only kind of unit that is autopoie- implies that the relationship of ‘production- tic in a social system. In fact, communication is consumption’ forms a positive feedback accord- only meaningful when an activity is constructed ingtocybernetics,anditwillbeappliedfor and by which it is mediated. Activities which

Copyright © 2011 John Wiley & Sons, Ltd. Syst. Res. 29, 263–273 (2012) DOI: 10.1002/sres Coping with System Sustainability 267 RESEARCH PAPER Syst. Res. include always communication are always so- is impossible to observe—or to handle—society cially self-produced and reproduced within its re- as a whole. As a further consequence, it is impos- cursive network. sible to talk about what is rational for society as a An autopoietic system, while organisationally whole, or what will benefit society as a whole closed (no elements or units imported outside of (Thyssen, 1995). A serious consequence of this the system); nevertheless, it must be referred to labours division and closeness of self-organization an environment, background, or context. Obvi- is that it can resemble a self-interested and strongly ously, a system cannot distinguish itself if it liveable cancer cell, which in the end, will destroy cannot differentiate itself from something which the whole system sustainability including itself is not. Also a system can never expand or liveability. The problem of over emphasizing develop itself without referring its embedded en- the selfhood of labour divisions (liveability), vironment. This is especially important when such as banks, stock market and credit system, talking about humanity and social systems as will eventually lead to system crisis as whole an autopoietic system. The idea of autopoiesis is (sustainability problem). applicable to society only regarding the social To let each labour division associate its own humanity system as whole. This means that so- interest with the overall system of humanity has cial subsystems as units of the whole society long been a dilemma for sociologists and system must be properly regulated and harmonized. thinkers. The authors in this paper supports that The labour division in our social system has dis- functional subsystems cooperate not based on tanced the dependence of each other and from consensus or a religious value, but on their mu- its environment. This distanced dependence can tual benefits and complementary principle(s) lead to an illusion of independent autopoiesis. (Bai, 1999). The functional benefits of the subsys- This will be discussed in the following about tems are so vital that no society can afford to labour division or functional subsystems. make social system dependent on consensus (Thyssen, 1995). Even democracy is based on ma- jority principle not consensus. All subsystems Labour Division or Functional Subsystems must share a vision of the whole system in which its identity is identified by its contributions to the Societies today are organized into many func- whole, not by itself. Therefore, the paper is con- tional subsystems such as economical system, tributing a sociocybernetic model of the whole political system, education system, to which ac- system for achieving such a vision. The model tivity theorists call labour division, and what will be later validated through analysis of the fi- Luhmann calls ‘differentiated function systems’. nancial crisis (cf. Wikipedia for a comprehensive A function system is said to be functional in that explanation on fihttp://en.wikipedia.org/wiki/ it achieves its identity through the fulfilment of a Late-2000s_financial_crisis). function of the entire system. It has been argued that one of the prominent features of the modern society has been the extent of its differentiation A SOCIOCYBERNETIC MODEL or division of labour and therefore to lead to increased collective productivity. Obviously, the In order to build up a model, we need first to more differentiation there is, the more specialized identify the most basic units for the relevant sys- the roles that are played by actors, and therefore tem. Put another way, what exactly is being the more important became intercellular and reproduced in the society if the society is an inter-divisional communication and control autopoietic or self-reproducing system? What is (Corning, 1994). or are the most basic unit(s) for conducting social However, according to Luhmann, each func- problem analysis? There have been several pro- tional system is closed and creates its own posals and suggestions. The unit could be, for ex- domain allowing only certain operations. As a ample, the individual (Miller, 1978, Mingers, 1995), consequence of this organizational closeness, it the unit of action (Suchman, 1987; Lave, 1988;

Hutchins, 1994) and communication (Luhmann, of goals and learning, legal control, military ac- 1986). In this paper, however, activity is the recom- tion and democratic movement. mended unit of social reproduction or social autopoiesis. Human activity systems in this paper are categorized as social-economic activities of The Positive Feedback of Social-Economic production, consumption, exchange, distribution, Systems and social political activities of human inquiring of goals and learning, legal control, military action As described in the activity theory, social and democratic movement. Communication such reproduction and consumption are the most as mass media, reports, and statistics are links that basic human activities. The two compose a fun- tie all the social activities as whole. Based on the damental contradiction which drives a society activity theory, feedback/feed-forward principles forward—a paradox that we produce products and social autopoiesis, the author constructed a and, simultaneously, we consume products in social activity model—a sociocybernetic model as order to re-produce new products. Consumption shown in Figure 4. necessitates production and vice versa. This indi- In Figure 4, the sociocybernetic system as cates that the production and consumption form a whole is constructed as two loops, that is, the positive feedback loop in the sense that the more inner loop of social economy activities and outer consumed, the more we have to produce or the loop of social political activities. The inner loop vice versa. The exchange activity, before the con- refers to the social-economic activities of social sumption in Figure 4, is a marketing process, reproduction, consumption, distribution and and it is through media that a product becomes exchange based on the activity theory model in an object of an individual’s consumption. The Figure 3 and principle of contradiction (Bai & marketing process is a value exchange process Lindberg, 1998). The outer loop refers to the so- that individuals (groups) purchase their needs cial political activities such as human inquiring (use value) by the market value (exchange value).

Figure 4 Social activity system (double loop sociocybernetics)

Focusing at the loop of production-distribution regulating society from any deviation of in the inner loop as shown in Figure 4, we iden- norms, rules or laws—both humanistic and in- tify a positive feedback loop. Some products that stitutional. This feedback must be objective are produced in the production process will not and without any bias. Therefore, it is impor- be consumed directly by members of a society tant that this feedback should be free from eco- to which we may call them semi-products. Those nomic interest, political interference and even semi-products will be sent back to reproduction. more important the reporters must have moral Those semi-products must be distributed through obligation. distribution activity to each differentiated sub- The feed-forward function is the never-ending unit or labour division. The more products pro- human activity of inquiring and learning activ- duced, the more semi-products will have to be ities that will enable to challenge the contempo- distributed. So production and distribution com- rary values and social goals, and meanwhile to pose another positive feedback loop in Figure 4. establish new values and social goals for social Generally speaking, the inner loop of social- development. The continuous constructing of economic system is an unstable system based social goals is often manifested as political, demo- on positive feedback. We all experience the wild cratic even military actions. Therefore, the world economic turbulence and bankruptcies, such as is not absolutely stable. When such unstable situ- the IT bubble in early 2001 and now the economic ation occurs, the inner loop of social-economic crisis, which started in 2008. Therefore, the inner system will not be stable, namely the social pro- loop cannot be free of control. No matter if the duction, consumption, exchange and distribution economic system is a free market system or a cen- activities will be interrupted, destroyed and trally planned economic system. Regulation and reformed. control, which are located outside the loop, must It should be clear that the outer loop of socio- be applied, such as rate adjustment through political system is self-referential and autopoietic. banks or even political interference by central It is self-referential because the laws, norms, rules government, for example, political interference are created by human beings (no matter by how happened in Argentina (1990s) and currently in and whom) and in turn are applied to regulate the USA (2009). The issue of political regulations human beings self. It is autopoietic in the sense on economic systems will be discussed in the that all activities inside the system as whole next part of outer loop. are reproduced by the network of the activities Although the subsystems of production, con- themselves. sumption, exchange and distribution are located in the inner loop of social subsystems, they are not, however, autopoietic and closed. Each subsystem is not self-reference in the strict sense. MODEL VALIDATION: THE CASE OF GLOBAL Instead, they are mutually referential. ECONOMIC CRISIS

As an example, we use the case of the ongoing eco- Negative Feedback and Feed-forward of Social nomic crisis to validate the model if it can provide Political Systems a systemic explanation or interpretation of what has gone wrong and why. The facts and viewpoints Although the social-economic system is wild and arebasedontheinterviewandanalysisfromFront- unstable, it is however harnessed quite well line Homepage (2009). (mostly) through some control mechanism in the There have been many detail descriptions, outer loop of socio-political system that applies analyses and discussions in the mass media negative feedback and feed-forward mostly. about situations that may have caused the on- The feedback function of social sensors, statistic going global economic crisis. Mostly, the mass bureaus, reporters, investigators, juridical depart- media focus on facts, details and reﬂections. This ments, and the like are extremely important for paper is to analyse and interpret the crisis from a

Copyright © 2011 John Wiley & Sons, Ltd. Syst. Res. 29, 263–273 (2012) DOI: 10.1002/sres 270 Guohua Bai and Lawrence Henesey Syst. Res. RESEARCH PAPER macro relationship of the social-economic system system would become later a payoff. Today, when by applying the proposed sociocybernetic model. the system risk has become a reality, we may A well-accepted fact is that the root of the crisis wonder why so many experts and talented econ- started already in the so called shadow banking omists did not stand up and say ‘Wait a minute; system during 2000 to 2007. Unregulated house this is a lot bigger than Bear and Lehman. You loans and high risk mortgages have created a let them go, they will drag down Fannie Mae, mentality in USA that house prices could only Freddie Mac, AIG, GM, Ice Land, England, China go up, for example the price of a typical Ameri- and the whole world’. The decision made by can house increased by 124% from 1997 to 2006 Bush’s administration, and Paulson especially, (Economist). Buying a house was a matter of get- was based upon a belief that one must let the mar- ting a loan, selling the house and then making a ket wash itself out and that the best government is profit, no matter whether if the borrower had a ‘laissez-faire’ type. Believing absolutely in a free the income or means to pay back the loan. The mark system and holding it as a moral principle, creation of profit is viewed as making money Paulson could not see that every corner of Wall by selling a house by means of borrowing money. Street is now connected to another as a huge This business model concept is similar to a game web and stretched to the whole world. Hoping like rolling up a snow ball (a positive feedback that the cases of Bear Stearns, Lehman Brothers, phenomenon) down a hill. For example, the in- and the like were only a ‘one-off’. Paulson could vestment banks began with or had backed up not see the system risk that can lead to a collapse for $1 billion of subprime loans then to support of the whole financial system. Even though Ben $10 billion worth of structured products. Later Bernanke (Chairmen of Federal reserve bank) the investment banks created these $10 billion and Tim Geithner (Central Bank of New York) credit default to support $100 billion worth of in- warned that if there was no immediate govern- vestment elsewhere. The Wall Street investors ment intervention, then the whole financial sys- took this ‘stuff’, which was debt (bubbles of air) tem of this country and the world will melt and used it as credit or the building blocks on down in a matter of days, because of the fears which their financial empires were built. The being crossed over the borders of the free market whole financial system is similar to that of a castle system. Paulson was finally driven to make a in the air. Because of such an unhealthy structure series of decisions that eventually led to a global of financial system, USA’s economy in 2008 contagion of economic recession. reached a critical sensitivity. Ultimately, a rumour After many helpless reactions to the crisis, that ‘Bear Stearns was running out of cash’ caused Paulson was finally forced to agree direct gov- an economical tornado that swept the whole ernment intervention—the state capital injec- world—‘a butterfly’s effect’. We can conclude that tion. He said, ‘We regret what we have to take in the very beginning of the crisis, there were this action. Today’s action is not whatever we serious systemic problems or structure problem want to do, but today’sactioniswhatwemust embedded within the whole system. This is a do to restore our confidence of financial system.’ problem of sustainability of the whole economic Ironically, Paulson, the capitalism warrior who system. When the crisis was a reality, the adminis- spent his life perusing and defending free market tration had no choice but to fight for liveability. was in the end the biggest interventionist treasury There were two kinds of risks that US President secretary since the great depression in 1920s. George Bush’s administration had to deal with in the beginning of the crisis, namely moral risk or moral hazard and systemic risk. When Henry A Sociocybernetic Interpretation to the Crisis Paulson, the secretary of Treasury decided not to intervene and rescue Bear Stearns and Lehman On the basis of the above described case, this part Brothers for reason of defending the free market is to apply the proposed model to verify its principle and avoiding a moral hazard, a systemic applicability. From the model in Figure 4, we risk that a melt down of the whole economy know that economic system (inner loop), its self

(production, consumption, exchange and distri- and then used as social reference to reflect what is bution) is based on positive feedback. A system socially right and wrong. The process of construc- based on positive feedback is an unstable system tion and application of various social regulations that always runs either exponential growing just is an open learning and systemic inquiring ap- like house loan leverage in USA 2000 to 2007 or proach. The process of building up and executing descending just like we are now in an ever deep social regulation is sometimes painful and brutal. economic crisis. A system risk is a risk that a Human understanding is perhaps the most chal- nation builds up its economic and financial sys- lenging thing. We, as humans, are always seeking tem without macro regulation or monitoring. A out goals and reasons. In many cases, the problem totally free market is equally idealistic and of searching such goals and reasons becomes a re- destructive as totally planned economy system. ligious approach about finding the wish of God, No country in the world could build its economic like Churchman said: system based on free market totally. The nature of the human system depends Therefore the socio-economic system (inner most of all on whether a perfect being exists. loop) must be regulated. The introduction of ...If it does, then our main attention as sys- market/planned economy control in the sociocy- tems researchers should be how our planning bernetic model is a regulation mechanism to the relates to its existence. If it does not, then we inner loop for interacting and smoothing eco- not only have a lot of explaining to do in terms nomic turbulence. Normally, national treasuries, of our values, but we also have to find a whole federal or government reserves and central banks set of godless values to guide us.(Churchman, can serve this purpose. When a case happens, 1987, p.140) such as the house loans and mortgages (growing) or the Bear Stearns crisis, this regulation must be actively and effectively enforced. An unleashed force from the inner loop can be very destructive CONCLUSION and delayed actions will result in losing control of the whole system. After the world wide economic crisis started in We can never over emphasize the role of mass 2007, the concepts of liveability and sustainability media, investigators, reports, and the like as feed- have been often discussed in different cases. For back mechanism of social-economic system. An example, in a special issue of the journal System example is that of CNBC’s report of interview Research and Behavioral Science, Shaw (2010) dis- Bear Stearns’ CEO Alan Schwartz, which was cussed the liveability and sustainability from intended to restore confidence of public to Bear cybernetic concept of gain in a system. This paper Stearns, turned out a dead trigger not only to constructed a sociocybernetic model based on Bear Stearns, also starting the Domino chain reac- both cybernetic principles and the social Activity tion of the whole financial system. We are living Theory. The model provides with an epistemo- in a media driven world and somehow the world logical explanation of social activities and their is connected by media. It is crucial that this feed- embedded relationships between social function back should be objective, trusted, and telling real systems. Based on this model, liveability and sus- facts what is going on in our social economic sys- tainability are systemically interrelated as one co- tem. An infected feedback by manipulated news, herent unit. The double loops of social activity reports, or statistics will lead the decision makers systems are mutually inter-dependent and cannot to make wrong decisions. The crucial role of mass be separated. Liveability and sustainability of our media including moral obligation of reporters in social-economic system are mutual parts of a our social system must be well recognized be- contradiction, and they should be regarded as a yond the economic and political interest. balance of risk and opportunity. From the perspective of autopoietic social sys- The principles of feedback and purposive beha- tem, the self-reference of various regulations, such viours from cybernetics have been introduced as as laws, moral obligations are socially constructed fundamental relationships of our social-economic

Copyright © 2011 John Wiley & Sons, Ltd. Syst. Res. 29, 263–273 (2012) DOI: 10.1002/sres 272 Guohua Bai and Lawrence Henesey Syst. Res. RESEARCH PAPER systems structure. Concepts from social activity Hutchins E. 1994. Cognition in the Wild. MIT press: theory, such as social-economic activities (pro- Cambridge, MA. duction, consumption, exchange and distribu- Kuutti K. 1996. Activity theory as a potential framework for human-computer interaction research. In tion), labour divisions or functional subsystems Context and Consciousness, Nardi BA (ed.). The MIT (autopoiesis), are introduced as fundamental ele- Press: London; 17–44. ments of the social-economic systems. Lave J. 1988. Cognition in Practice. Cambridge University Using the global economic crisis as a case Press: New York. study, we were able to verify the usefulness of Leontèv AN. 1981. The problem of activity in psychology. In The Concept of Activity in Soviet Psychology, the model. The model has provided a theoretical Wertsch JV (ed.). M. E. Sharpe Inc.: Armonk NY.; explanation to the crisis and also how to con- 37–71. struct macro social-economic policies to avoid Luhmann N. 1986. The autopoiesis of social systems. the similar crisis in the future. The authors be- In Sociocybernetics Paradoxes: Observation, Control lieve that a systemic view as proposed in this and Evolution of Self-steering System, Geyer F, Van der Zouwen J (eds.). Sage: London; 172–192. paper is very crucial to decision makers not only Luhmann N. 1995. Social System. Stanford University in macro level (national) but also to business Press: Stanford. managers and decision makers in companies. Maturana H, Varela F. 1972. Autopoiesis and Cognition. D. Reidel publ. Company: Boston. Miller JG. 1978. Living Systems. McGraw-Hill: New York. Mingers J. 1995. Self-producing Systems: Implications and Applications of Autopoiesis. Plenum Press: New York. REFERENCES Qvortrup L. 1996. How is society possible? The epistemology of social constructivism—A comment on Bai G. 1999. Sociocybernetic approach to information John R. Searle’s The Construction of Social Reality. systems development. Kybernetes - the International Cybernetic & Human Knowing 3(4): 27–40. Journal of Systems & Cybernetics 28(6/7): 792–809. Research Committee 51 on Sociocybernetics. 2011. http:// Bai GH, Lindberg LÅ. 1998. Dialectical approach to www.unizar.es/sociocybernetics/ [20 May 2011] systems development. Systems Research and Behav- Schwarz E. 1997. Toward a holistic cybernetics: from ioral Science 15(1): 47–54. science through epistemology to being. Cybernetics de Chazal J. 2010. A systems approach to livability and & Human Knowing 4(1): 17–49. sustainability: defining terms and mapping relation- Searle J. 1995. The Construction of Social Reality. The Free ships to link desires with ecological opportunities Press: New York. and constraints. Systems Research and Behavioral Shaw DR. 2010. Sustainability and liveability in the 2007 Science 27(5): 585–597. banking crisis: a failed transition to a low gain system. Churchman CW. 1987. Systems profile: discoveries System Research and Behavioral Science. 27(5):480–495. in an exploration into systems thinking. Systems Skyttner L. 2000. General Systems Theory—Ideas & Research 4: 139–146. Applications. World Scientific: London. Churchman CW, Ackoff RL. 1950. Purposive behavior Smith A. 1776. An Inquiry into the Nature and Causes of the and cybernetics. Social Forces 29:32–39. Wealth of Nations (1976). Cannan E (ed.). University of Corning PA. 1994. Synergy and self-organization in the Chicago Press: Chicago. evolution of complex systems. Systems Research Suchman L. 1987. Plans and Situated Actions. 12(2): 89–121. Cambridge University Press: Cambridge. The Econo- Davydov V, Zinchenko V, Talyzina N. 1982. The prob- mist. “CSI: credit crunch -Central banks have lem of activity in the works of A.N. Leont v. Soviet played a starring role” October 18, 2007. http:// Psychology 21:31–42. www.economist.com/specialreports/displaystory. Engeström Y. 1987. Learning By Expanding. Orienta cfm?story_id=9972489. Retrieved May 19, 2008. Konsultit: Helsinki. Thyssen O. 1995. Some basic notions in the systems Frontline Homepage. 2009. Inside the Meltdown. http:// theory of Niklas Luhmann. Cybernetics and Human www.pbs.org/wgbh/pages/frontline/meltdown/. Knowing 3(2): 13–22 [20 May 2011] Turner P, Turner S. 2001. A web of contradictions. Inter- Holt GR, Morris AW. 1993. Activity theory and the acting with Computer 14:1–14. analysis of organizations. Human Organization 1(52): Vygotsky LS. 1978. Mind and Society.HarvardUniversity 97–109 . Press: Cambridge.