Sen's Isolation Paradox and his trajectory as Rational Fool.

Amartya Sen's version of the isolation paradox can be simply stated thus-

'an individual has to choose between a unit of consumption now, and three units in twenty years. But he knows that in twenty years he will be dead. He is concerned about future generations, but not enough to sacrifice one unit of his present consumption for three units of the generation that will be alive in twenty years. So he decides to consume the unit. But another man comes along and tells him that if he saves this consumption unit, he, the other man, will do the same. It is therefore not unreasonable for the first man to change his mind and agree to save. The ensuing gain for the future generation is a lot greater (six units), and he, the man, can bring this about simply by sacrificing one consumption unit'

Is this account reasonable? No. Why? It is not robust. All that is necessary is for someone else to turn up and say 'thank God, the two of you are sacrificing 2 units of consumption. I was going to sacrifice 3 units till I heard what you were doing because I wanted 9 units to be available in 20 years time. But since some other guy is bound to join you in this scheme, I'm off the hook and can go party hearty.'

There is no reason to believe that an individual who comes out of isolation and meets a succession of people won't stick to his initial decision at the end of it precisely because his strategy is just as likely to be the Muth rational solution whereas, by sheer bad luck, he could meet a succession of moral cretins. 

It might be argued that people do in practice match altruistic proffers. However, the context in which they do so is one where mimetic effects obtain or reputational goods are positional. Here, a costly signal can spread so as to create a separating equilibrium. However, in that case, there is some extra benefit from adhering to it.

Sen thinks the isolation paradox is a prisoner's dilemma. How can it be? You just tell the other guy to fuck off coz he's being silly- people need to do the right thing coz it's the right thing to do not coz someone else is doing it too- and there's no dilemma.

Only if you've decided to save the money and are now looking around to convert others would you be interested in this type of proposition. But, conversion is about setting up a costly signal so as to create an in-group which enjoys superior trust and moral worth and thus has a dynamic of its own.  Professional criminals with their code of omerta and gentleman gamblers who prefer to commit a highway robbery rather than welsh on a 'debt of honour' can display the same quality as members of a Church concerned with bringing Humanity to Salvation before the end of days, or philanthropists deeply concerned with preserving the Environment.

There is one caveat we should make. It would be wholly unreasonable for any group of like minded people to agree to entrust the Government with money for a specific purpose. Not only do Government's have sovereign immunity, they are apt to renege on commitments- more especially if they are democratic in nature. The safer course is to set up a Trust with an associated lobbying group rather than assume that the politician who takes your money, promising to do your bidding when the time comes, will actually be in a position to redeem his word.

Sen saw that the 'isolation paradox' was not productive. What replaced it for him?
In Rational Fools he writes-

As we consider departures from "unsympathetic isolation abstractly assumed in Economics," to use Edgeworth's words, we must distinguish between two separate concepts: (i) sympathy and (ii) commitment. The former corresponds to the case in which the concern for others directly affects one's own welfare. If the knowledge of torture of others makes you sick, it is a case of sympathy; if it does not make you feel personally worse off, but you think it is wrong and you are ready to do something to stop it, it is a case of commitment. I do not wish to claim that the words chosen have any very great merit, but the distinction is, I think, important. 

Obviously, Sen is wrong about sympathy. One may feel sympathy for a condemned man if he makes himself sympathetic by talking about his dear old Mumsy but we may also be glad to see the fellow hanged by the neck.

Sen is speaking of something much stronger than sympathy. I may have no sympathy for a condemned man because of the nature of the crime he has committed but I may also help him escape from a horrible fate because he is my own flesh and blood and I couldn't bear to see him suffer.

Thus, Sen says 'In the terminology of modern economic theory, sympathy is a case of "externality."

Clearly, this isn't so. I may buy my son's release from death row. This is a market transaction.

Sen is trying to show that 'sympathy' is compatible with standard rational choice theory. He is utterly wrong. Sympathy has no such connection. It is ontologically dysphoric and points to a universe in which pain and joy are received through more than one body or, indeed, from bodies at different times and places. Since we are under no obligation to 'be at home in this world' and since much of what makes our lives worth living to us involves unique mental realms wholly different to anything that might be analysed under the rubric of economics or, 'moral science', it follows that Sympathy has a rigid designation wholly orthogonal to Sen's plane of discourse.

A quite different point may be made about his notion of commitment-

 commitment does involve, in a very real sense, counterpreferential choice, destroying the crucial assumption that a chosen alternative must be better than (or at least as good as) the others for the person choosing it, and this would certainly require that models be formulated in an essentially different way.

This is nonsense. A commitment is merely a constraint of a certain type. If I decide to make a commitment to the Jewish Religion, my preferences regarding what to do on the Sabbath are constrained in a novel way. Such commitments must always arise. They pose no scandal. It is understood that commitments are defeasible- if you suffer a heart attack, I don't expect you to abide by your commitment to play squash with me next week- sympathy, however, is not defeasible at all. It either exists or has been extinguished.

Sen takes a different view-

The contrast between sympathy and commitment may be illustrated with the story of two boys who find two apples, one large, one small. Boy A tells boy B, "You choose." B immediately picks the larger apple. A is upset and permits himself the remark that this was grossly unfair. "Why?" asks B. "Which one would you have chosen, if you were to choose rather than me?" "The smaller one, of course," A replies. B is now triumphant: "Then what are you complaining about? That's the one you've got!" B certainly wins this round of the argument, but in fact A would have lost nothing from B's choice had his own hypothetical choice of the smaller apple been based on sympathy as opposed to commitment. A's anger indicates that this was probably not the case. 

Sen must have been a very strange little boy. What actually happens is that it is the stronger boy who gets to make the offer. He also gets to withdraw it, cuff the weaker fellow, trip him up, urinate on him and walk away taking bites out of both apples in turn.

This is not to say little boys are incapable of sympathy. They may feel pity for an urchin tinier than themselves. They magnanimously make an offer and fully expect the timorous little fellow to pick the smaller apple. Failure to do so provokes a commitment to Justice as kicking the shite out of any little tyke who tries to act smart in the belief that words mean shit.

What has all this to do with economics? The answer comes in two parts

1) John Muth's theory of rational expectations as coinciding with the prediction of the correct economic theory tells us that there is a pooling equilibrium which however need not have a theory of emotions like sympathy, nor insist that 'we be at home in the world'. Why? These questions are not part of the proper study of economics. They are wholly independent of it. Professors of Economics have no business gassing on about such subjects any more than plumbers or bus drivers do in order to avoid the proper discharge of their duties.

2) Commitments can be monitored and may take the shape of 'costly signals' militating for separating equilibria. This in turn may give rise to a discoordination game and have dynamic effects such that we are no longer speaking of 'the core' of a particular coordination game but rather a complex process featuring 'hedging' and 'income effects' and so forth. Here is the complexity which Economics needs to study and tame with heuristics. It has no business gassing on about how certain sorts of commitments are good and why oh why oh why are all the other economists not simply committing to whatever shite I am currently spouting? Don't they understand that truly rational people will just listen to me repeating the same shite from decade to decade- though I ignore all the interesting developments in my subject- because otherwise they will just have proved that they were fools- Rational Fools!- not to say knaves, all along.

Consider the following-

Suppose I am trying to investigate your conception of your own welfare. You first specify the ranking A which represents your welfare ordering.

Nobody could actually do this save an omniscient being existing eternally. However, in that case, one could also specify a cardinal utility function. The trouble is, an omniscient being existing eternally wouldn't have any preferences because, absent pervasive Knightian Uncertainty, they would have no survival value. In other words, the one hypothetical person who can answer the question must have nothing to say.

But I want to go further and get an idea of your cardinal utility function, that is, roughly speaking, not only which ranking gives you more welfare but also by how much.

If you paid me enough money, I could supply you with this. But it won't predict my behavior at all. Why? Because of mimetic effects. I don't buy what I prefer but what I see the smart guys buying. This is the reason I wear a three piece suit rather than a baby doll nightie to business meetings.  

I now ask you to order the different rankings in terms of their "closeness" to your actual welfare ranking A, much as a policeman uses the technique of photofit: is this more like him, or is that? If your answers reflect the fact that reversing a stronger preference makes the result more distant than reversing a weaker intensity of preference, your replies will satisfy certain consistency properties, and the order of rankings will permit us to compare your welfare differences between pairs.

No. Actual welfare ranking is not supervenient on self-reported preference rankings. I think I have high welfare just now. But, my Doctor has already received the medical report which shows I am actually in terrible pain but, due to a vagary of the disease, blissfully unaware of it- at least in my verbal behavior.  

A guy who reported an imaginary crime may have no difficulty completing a 'photofit' of... well, let us just say a person with a distinctively 'urban' facial characteristics. 

In fact, by considering higher and higher order rankings, we can determine your cardinal welfare function as closely as you care to specify.

How? All you can do is get ordinal information. You can't do interpersonal comparisons. True, if two people with equal endowment buy and sell stuff to each other then money values are a proxy for cardinal utility. But, their behavior may be strategic or speculative- so we can't be sure. 

I am not saying that this type of dialogue is the best way of discovering your welfare function,

Actually, if I were rich, I'd pay a bunch of Doctors and Nutritionists and Sexologists and Fashion consultants and 'Happiness' exerts to work out the best welfare function for me and to guide me in my choices so that my life greatly improves- everything I eat is tastier, my orgasms are more intense, and people say 'Cor! That's one stylish bloke.'  

but it does illustrate that once we give up the assumption that observing choices is the only source of data on welfare, a whole new world opens up, liberating us from the informational shackles of the traditional approach.

Very true! Assuming omniscience and eternity does 'liberate from informational shackles'. But no new information is gleaned thereby. All that has happened is that stupidity of a meretricious pseudo- theological type has been indulged in.

This broader structure has many other uses, for example, permitting a clearer analysis of akrasia-the weakness of will-and clarifying some conflicting considerations in the theory of liberty, which I have tried to discuss elsewhere.

For an omniscient being living eternally, affects are effects. No question of akrasia can arise. There is simply indifference or impassability.

Sen did stop talking about choice & game theory- i.e. stuff Economists have to keep pegging away at- and started pretending he was some sort of Mother Theresa figure. In this paper from '77 we can predict how worthless will be his trajectory as he argues

  against viewing behavior in terms of the traditional dichotomy between egoism and universalized moral systems (such as utilitarianism).

Sen was not aware that nobody viewed behavior in this way. Everybody consulted psychologists and nutritionists and style gurus and so forth so as to change their behavior and gain more welfare. 

Groups intermediate between oneself and all, such as class and community, provide the focus of many actions involving commitment.

But such groups remain important whether or not they intermediate anything at all. A guy from Bengal who lives far away from Bengal still belongs to Bengal specific groups though, obviously, they can play no intermediating role in his relations with others in his new milieu.  

The rejection of egoism as description of motivation does not, therefore, imply the acceptance of some universalized morality as the basis of actual behavior. Nor does it make human beings excessively noble. 

If rejecting egoism doesn't make us noble, what does it do? The answer is it involves creating a group, in this case a Credentialised coterie, which gasses on about its own superior 'commitment' without lifting a finger to do anything useful or even displaying any sterling quality of character. Thus, Sen- a fool, but a rational one- settled down to an illustrious career of shameless mendacity alternating with high minded vacuity. Nalanda, that white elephant, could have had no more fitting Chancellor.