Valuation-Signification is a central concept throughout my first four books, one that combines every art, science, theory, and practice to which I have gained exposure. Its importance comes from a simple human tendency – to capture information in a form that will survive the conscious individuals who produced it so that future generations may reproduce it. To that extent, the problem of all philosophy and science is the struggle to understand valuation-signification.

The uniquely human plight lies precisely in the struggle between two genetic codes, one biological and one social. We see this immediately in our oldest available documents, the Dead Sea scrolls and The Epic of Gilgamesh. Each thrust into written history a problem of complex societies, the power of the state, the control by divine intermediaries of our sexual freedom and preferences as well as that of our plants and animals.

Research in Chaos Theory and Complex Adaptive Systems has shown that fractal scaling cascades – from the human heart to stock trading – are everywhere. Armed with the idea that patterns at order of magnitude greater scale are produced by the self-similarity and amplification of patterns far smaller levels, the common theme of all human thought becomes clear – how do we reconcile the behavior of individuals with the behavior of society? Moreover, how can we make our world better?

First, let’s define these concepts separately, valuation and signification. Valuation is the way we recognize a signal or stimulus and determine the relative importance it may have to our needs and goals. Signification is the orientation process we utilize to determine the best action to be taken on the basis of our valuation. Note that we make millions of decisions per day, but most of them are unexamined, quasi-rational decisions. The fastest decisions are made for us, non-consciously, by the brain’s “filter” framework – an immense number of potential signals are dismissed as noise in a highly automatic process if we are not reflexively observing our observation. The challenge in defining a balanced view of behavioral economics lies in the spectrum between non-conscious economic decisions and the highly complex significations in which we incorporate multiple individual, ideological, and imaginary observers directly and even as observer-chains.

Valuation refers to the initial recognition of a signifier-pattern. It begins with the pre-conscious weighting of a signal – an object moving unexpectedly, a colorful poster, a subtle facial expression from a love interest – and continues with relatively simple valuations of agency, intention, causality, and opportunity. This is precisely why we might say that individual economic behavior may be anti-rational at times – for instance, we purchase a steak without looking at the price because we too busy on reacting to a comment on social media or flirting with another supermarket shopper we find attractive.

Thus, the central assumption of classical economics – that economic decisions are exclusively valuation-based and our valuation is rational, self-interested, and motivated by the fulfillment of mostly unchanging or “static” preferences is incommensurable with all practical evidence. Instead, statistical studies on valuation – from pattern recognition to consumer willingness to pay – reveal numerous cognitive biases, socially normative quasi-logic, and emotion-charged social role fulfillment. In academic terms, valuation is “fast-thinking” most of the time and an untrained, uneducated, non-conditioned individual unaware of observation would act almost exclusively pre-consciously. The moment we recognize we are being judged or gain the capacity to compare several contradictory explanations, we are able to engage in slow-thinking. The most important element to remember, however, is that there are millions of decisions each adult makes per day, however small. The brain has limited available energy for this, and fast-thinking is its way of conserving that energy.

Valuation is social, political, and economic. A signifier – an object that gains our subjective attention and has a universalizing symbol (e.g. Dog, Tree, Hot) – is simultaneously valuable socioeconomically and sociopolitically. Under fast thinking, these three elements of valuation are simplistic and binary. The dog is socially dangerous or not, the dog is politically under control or not, the dog is owned or not. In the absence of threat (the dog is running toward me growling and barking) or triangulating objectification (that nice dog belongs to my friend Jill), fast-thinking is largely based on the binaries of ignore/react and repetition/difference. We prefer to ignore most signifiers, because decisions are expensive in aggregate. The most difficult fast-thinking to predict is fast-difference. Why did I freeze when I usually run? Why did I fight when I usually walk away? Such is the beginning much reflection.

In short, valuation is our ability to recognize an object and its primarily prejudicial worth to us as an individual. We repeat the act of buying eggs without looking at price at all so long as we feel secure in our purchase and walk down familiar hallways consumed by our smart phone to the extent we feel safe to ignore signals from our environment. Yet again, this can be anti-rational precisely because the failure to search for signals means we can no longer rationally determine that the signals are noise.

Signification is the sense-making component of socioeconomic judgment. Socioeconomic is meant philosophically here as any “relations with exchange” in the most abstract sense – a lion loose in a shopping mall is a socioeconomic problem to the extent it hopes to exchange its energy for a shopper’s flesh. The attainment of a mate and intercourse is an exchange of advertised socioeconomic value in displacement of genetic code as well the exchange and integration of the code itself. Thus, signification implies that we not only recognize the relative importance of a signal, but also recognize the need to decide a course of action from available options.

We can again separate this into fast-thinking and slow-thinking. While it may be inconvenient for the theoretical elegance of classical economics, we should not conclude that fast-thinking signification is implicitly dysfunctional or undesirable. Instead, there is a need to interrupt fast-thinking periodically for a reflective analysis under slow-thinking conditions. For example, a routine pattern of ensuring a child is fed, clothed, and arrives at school on-time can functionally rely on fast-thinking to achieve appropriate outcomes; the danger of anti-rational patterns of behavior lies in whether or not we stop to engage in slow-thinking re-valuation and take rational actions to correct pattern – Am I feeding them the right breakfast? Have they grown and I need to buy larger clothes? Is this school system serving my child’s needs? If not, have I advocated sufficiently for their needs, should I escalate, or will I need to consider relocating to another school district? Clearly, there is a balance required between fast-thinking repetition of decisions and slow-thinking analysis of pursuing a different repetition pattern.

During fast-thinking signification, we are likely to repeat the decisions of our past or the perceived normative actions others we have observed based on role and context. For instance, when our child asks about “how babies are made” we potentially have numerous mental schemas and roles that have unique normative decision patterns associated. In terms of mental schemas, there is a choice between information that we could provide and the information that is optimal to exchange. Too advanced scientific information or graphic historical narratives will not help our child, and we have normative beliefs about what is age appropriate and our role as Mother or Father in providing the correct information.

Under slow-thinking, signification can re-determine which mental schema and normative role to engage, forcing a critical re-valuation that may not only shift motivation toward a new chaos attractor, but could instigate a reactive, anti-rational decision. To continue the “sex talk” example, recalling the answer given and the possibility that the child has aged and not asked again, we may determine the necessity of engaging them to ensure updated and more appropriate information about health, personal well-being, and respect for others is communicated.

Putting them together, valuation-signification may each be fast or slow – in fast-fast, our valuation may dismiss noise and react only with a continued search for new signals, or quickly determine a threat and a fight-or-flight response with little rational (or outright anti-rational) consideration. In fast-slow, we may instantly prioritize a signifier as critically important, but think very hard about the best individual and socially normative course of action; even queuing ourselves for re-valuation at a later time. In slow-fast valuation-signification, our calculation of relative importance may take purposeful consideration after several missed or repressed signals, while our ultimate determination of significance and course action may be instantaneous and hyper-reactive, like an explosive emotional response to a phrase our partner has said many times but seemed unimportant each time considered individually. Finally, most optimism about human liberal progress is based on the potential for slow-slow valuation-signification and the assumption that enough education and equal access to information would result in common rational decisions about economics, politics, and the improvement of society.

Despite the number of variables at play when we map out the valuation-signification system as a linear single-player decision, the difficulty in reproducing this decision process in artificial intelligence or attempting to use predictive modeling for the competitive decisions of corporations lies in an even more important pattern of complex adaptive systems that we have only recently begun to research – what I frame as Continuous Experimentation. We do not have a tree-like hierarchical library of schemas, norms, and roles to peruse when we make decisions; instead there seems to be constant stirring of memories and impressions that may be contradictory, incorrect, or unimportant. This variation is a form of bounded chaos, ensuring that we try new actions or apply new interpretations often enough – despite short-run potential mistakes – to not miss a potential adaptation and suffer long-run consequences.

Due the bounded chaos of continuous experimentation, valuation-signification is not so simple as a two-by-two matrix – slow-thinking may surface many fast-thinking conclusions that we reject or displace decisions completely. We may likewise chase a long chain of observers in our analysis of forecasted consequences as a mix of fast-thinking and slow-thinking. For instance, changing jobs may impact the ability to finance college education, and a path mapping personal enjoyment of work is pitted against the paths of college education and lifetime well-being for the child based on the relatively higher or lower availability of parental savings. Long chains of predicated valuation-significations may then emerge, with multiple re-valuation, before a commitment of action is finally pursued: Signifier/fast-slow/slow-fast/fast-fast/slow-slow/Decision. Additional complexity likewise emerges from the problem of distraction – even when appropriately rational slow-slow valuation-signification is occurring, a signifier may interrupt with fast-fast redirection of attention – whether the original slow-slow decision process is resumed before a decision is made is unlikely to be perfectly likely.

In conclusion, we can only rationally decide to the extent we realize there is a choice. Not only should we search for examples of rebels, discontents, insanity, and failure that we may learn from, we must be willing to risk mistakes of our own – even thoroughly thought-through risks – or we are imprisoned by our own ignorance.

For those reading Continuous Experimentation, keep in mind that I intentionally captured youthful skeleton of my lifework with no formal research (though plenty of education and learning). The sources cited below represent the formal research I have recently begun.

Research Resources

Hoff, K., & Stiglitz, J. (2016, 6). Striving for balance in economics: Towards a theory of the social determination of behavior. Journal of Economic Behavior & Organization, 126, 25-57.

Bosworth, S., Singer, T., & Snower, D. (2016, 6). Cooperation, motivation and social balance. Journal of Economic Behavior & Organization, 126, 72-94.

Chater, N., & Loewenstein, G. (2016, 6). The under-appreciated drive for sense-making. Journal of Economic Behavior & Organization, 126, 137-154.

Hoff, K., & Stiglitz, J. (2016, 6). Striving for balance in economics: Towards a theory of the social determination of behavior. Journal of Economic Behavior & Organization, 126, 25-57.

Levy, D. (1994). Chaos Theory and Strategy: Theory, Application, and Managerial Implications. Strategic Management Journal, 15, 167-178.