Saturday, 1 September 2012

Faith vs Expectations

Classical Economics castigated something called 'chrematistics'- 'getting rich' as opposed to 'getting by'- and, it might be argued, Economics has struggled to keep a distinction between the Real and the Nominal in its theorizing because 'Money is the root of all Evil.' 
A separate issue is whether a similar, or systemic, confusion or confounding, of two quite different things- Faith & Expectations- also obtains.
True, Money is Credit- in the sense that to credit someone or something is to believe someone or something, but to what extent is this based on Expectations?- i.e. some sort of rational calculation of what will happen- and to what extent is it based on Faith?- not a rational calculation but something involving one’s ethos, who one is to oneself.
    Some Institutions still require a profession of Faith from us. We are required to pledge alleigance to the State and to accept what it deems legal tender in settlement of entitlements and obligations even if our Expectation is that the State might collapse. Some professions, the Law, Medicine, Accountancy, actually Banking and Broking and so on too, require a profession of Faith such that an indefeasible duty is created even if that conflicts with rationally arrived at Expectations. Yet, the astonishing progress of Science and the utter marginalization of Theology, militates for every Institution demanding Faith- or requiring Faith to function properly- to try to convert Faith into Expectations by some maneuver more or less illicit.
The Rational Expectations doctrine together with the Efficient Markets Hypothesis had the effect, for the financial sector, of taking Faith- as in good Faith and bad Faith, ‘integrity’ as against being a greedy s.o.b- out of the equation on the grounds that it wasn’t needed- it was the feather Dumbo held with his trunk, he thought he needed it to fly, but he didn’t, his big ears were doing all the heavy lifting.
This would have been fine so long as preference diversity didn’t change too much. Economists know that bad things happen when preference diversity is too great or too small. What they don’t know how to do is separate revealed preferences from true preferences- if such a thing exists. The problem this gives rise to is that, even if everybody subscribes to the correct Economic theory and all relevant information is instantly reflected in prices, still an element of impredicativity has entered the system and so there is no Muth Rational solution- i.e. Rational Expectations faces an aporia. It seems getting rid of Faith and Faith based Identity wasn’t such a good idea- Dumbo without his magic feather is just a clumsy pachyderm tripped up by his own big ears.
This isn’t a real big problem. Evolution is about Conserving Information even at the price of the occasional revolutionary saltation. Human Societies are very good at producing the next best thing to Faith- viz. the Expectation that your Life is gonna suck big time- and so Economics will triumph over Chrematistics, Expectations will be pruned back to Faith like proportions- the wagon will trundle on.
And it is this, the fact that the wagon trundles on, which is what is wrong with any grand narrative that promises to’ set our present moment against the sweep of history so as to explain our predicament and help us find footholds for changing it.’- we all know in advance that such grand narratives are a magic feather while Dumbo’s Momma is caged up in that wagon ever rolling on.

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