Monday, 29 October 2012

Ethics, Engineering and Efficiency.

What is Ethics? Essentially it's stuff to do with your ethos- what you are for yourself, what kinds of things you value or want to value, your life project or salutary lack of any such hair up yo' ass, as well as what sort of World you want to inhabit, or want to want to inhabit, who you want to relate to and how you want them to relate to you or each other- so it would be reasonable to say Ethics is about what Economists call 'Preferences' except when it isn't and comes under the rubric of 'Signalling' or 'Mechanism Design' or whatever.

This brings us to the question- what is Economics? Well, its about how to economize- do the same thing but using less resources and from that point of view it is a type of Ethical theory- viz. it's better to do things in the least expensive and least stupid way. Engineers are attracted to this aspect of Economics and good Economics is smart engineering. However, Economics- like Theology or Literary Theory- is also something else- a Careerist Ponzi scheme based on the bankrupt notion of a totalizing 'grand narrative', whose hallmark is its radical heterogeneity with respect to what it claims to study. Thus, Theology explains why Religion and Spirituality and Love of the Creator is totally ungodly and spite ridden in a fucked up way & Literary Theory explains that good writers are really very very evil and bad writers and very very bad writers are actually very very good and saintly. Similarly, Economics is about being very very wasteful and stupid. Herbert Hoover was a truly great Humanitarian when he acted as an Engineer. As President, thinking he had to act the Economist, he fucked up big time.
Why? Well he'd spotted, as an engineer, that a whole industry can come forward when they put a floor under wages- so as to avoid cut-throat price and wage competition such that quality declines or a 'repugnancy' factor is created thus destroying the market long term. But, once President, he didn't get that downward wage rigidity meant that markets couldn't clear without an anti-deflationary monetary policy, a full employment balanced budget Fiscal policy as well as optimal, correlated equilibria (rather than Mercantilist, beggar my neighbour) Tariff policy. In other words, the engineer was seduced by the apparent similarity between Economics and his own profession and didn't do proper due diligence to check that Economists weren't all a bunch of irresponsible fuckwits whose idea of a good time is fiddling while Rome burns in a grand Concerto of 'told you so'.

The pity of the thing is that there was once an Engineer who took up Economics and invented a notion of Efficiency which ought to have got everybody singing from the same hymn sheet.
But, before looking at that story, the question arises- what is Efficiency and why would Economists care about it? Briefly, Efficiency is about waste, cutting it down, and it is the sort of thing you hire Engineers or Managers or Agronomists or other such people with practical skills to do for you. Economists can't do anything themselves except produce hot air, so its useful for them to set up problems such that Engineers can have a crack at them while standing back to take the credit.
That being said, let us now look at the trajectory of Vifredo Pareto, the paradigmatic Engineer who moved into Economics because he was sick and tired of the way the stupid pi-jaw of Economists empowered the Govt. to tie Industry up in knots and create waste. Pareto put forward a theory of 'residues & derivations' such that Moral & Political Entrepreneurs recombine various stupid and vacuous ideas (derivations) because there is a market for something which caters for irrational, or instinctual or thymotic or mimetic or other such Social glue (residues).
The theory of imperfect competition allows us to predict that you are going to get a lot of product differentiation with excess capacity in 'derivations' where there are low barriers to entry (anybody can set up a Think Tank), whereas you are going to get very little real product differentiation as opposed to wasteful advertising and branding if there are high barriers to entry (setting up a Political Party which has a shot at power under first past the Post). In other words the two main parties or sects or whatever will be virtually identical while the lunatic fringe will be all over the place. But, the important thing for Pareto is that 'derivations and residues' obscure the Engineering problem- cracking down on stupidity and waste. In other words, noise ye shall always have with you, so concentrate on the signal,  ignore the Careerist, Credentialist, pi-jaw merchants scoring points about which of them was more diligent at swallowing whatever shite Aristotle or Kant or Gramsci or David Icke bequeathed to posterity, or pretending to be more pro disabled Lesbian Bahishkrit Samaj Smartha Vadadesi Vadama Bloggers wot have been forced to repeatedly commit suttee by Narendra Modi just to suck up to the Tatas.
The concept of Pareto Efficiency was one of Pareto's legacies to Economics as wot she is taught but many Economists never liked it because it got in the way of Classical Economics- which consists in saying really sarky things to the Economy till it sits up straight and stops chewing gum and turns in its homework assignments on time.
This is a link to a paper on 'Ethics & Efficiency' by a Dutch Professor which summarizes the Hilary Putnam/Walsh/Sen approach which seeks to revive old fashioned Pigouvian Welfare Economics as a tremendous engine for whining and pretending to be a great big bleeding heart while quietly climbing every Careerist ladder in sight and living it large on the Conference Circuit.

At the heart of its complaint against Pareto Efficiency is the feeling that if bargaining power, or wealth or something else of value, is not equitably distributed to begin with, then the outcome of trade and exchange might worsen Social Welfare though technically leaving no one worse off.
Indeed, we all at some time or another- either by reason of information asymmetry, lack of endowment, neediness or desperation or some thing else of that sort- feel that we are likely to get the short end of a stick in a negotiation. Hence, middle men evolve who are either stronger or more daring or more in the know than you, and they act as your pimp or dealer or whatever.
The question which naturally arises is do pimps actually make under-age crack whores or elderly Tam Bram gigolos (what? You think this blog pays my dental bills?) significantly better off in the same way that the Feminist Anti Poverty industry (Gender and Development it used to be called) actually makes millions of women living in rural Belgravia significantly better off? The answer is, yes of course they do. Only pimps can make inter-personal comparisons of Utility and tell you which street corner to strut your stuff and decide how  much of your chest hair to expose or what to charge for a Manmohan Singh special (don't ask but at least its shuddh vegetarian unlike the Montek Singh Ahluwalia which Feminist Academics, flush with their bonus money from Big Pharma (what? they make tampons don't they and Feminist Academia is about menstruating all the time) insist upon just to humiliate us elderly Tam Bram prostitutes dressed in our P.Chidambaram style veshtis and untucked white shirt.

Yet, and this is the paradox, though Pimps and Sen-tentious Welfare E- Con Problematization represent a Ethical interessement mechanism they only do by involving all in a lasting impoverishment.
The Pareto efficient solution is to have no interessement mechanisms and everybody voting with their feet for a better Tiebout model- like how's about we just get dinner and maybe a movie and then call it a night. Which isn't to say you shouldn't murli Manohar Joshi. Murli him but good.

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