Growth, Industrial Externality, Prospect Dynamics, and Well-being on Markets

TL;DR

This paper develops a comprehensive model linking growth, externalities, and well-being through market dynamics, integrating behavioral theories and sustainability considerations to analyze economic activity and societal progress.

Contribution

It introduces a novel framework combining functional structures, externalities, and Prospect Theory to analyze market dynamics and sustainability in diverse societies.

Findings

Derived basic equations of market dynamics and equilibria.

Generalized Prospect Theory probability weighting for rationality analysis.

Linked well-being closely to market satisfaction and societal maturity.

Abstract

Functions or 'functionings' enable to give a structure to any activity and their combinations constitute the capabilities which characterize economic assets such as work utility. The basic law of supply and demand naturally emerges from that structure while integrating this utility within frames of reference in which conditions of growth and associated inflation are identified in the exchange mechanisms. Growth sustainability is built step by step taking into account functional and organizational requirements which are followed through a project up to a product delivery with different levels of externalities. Entering the market through that structure leads to designing basic equations of its dynamics and to finding canonical solutions, or particular equilibria, after specifying the notion of maturity introduced in order to refine the basic model. This approach allows to tackle behavioral foundations of Prospect Theory through a generalization of its probability weighting function for rationality analyses which apply to Western, Educated, Industrialized, Rich, and Democratic societies as well as to the poorest ones. The nature of reality and well-being appears then as closely related to the relative satisfaction reached on the market, as it can be conceived by an agent, according to business cycles; this reality being the result of the complementary systems that govern human mind as structured by rational psychologists. The final concepts of growth integrate and extend the maturity part of the behavioral model into virtuous or erroneous sustainability.