Sunday, 31 March 2019

Dravid's ten string lyre



Wine's Red Sea un-parted by her Dance or the Muse's
 Memory is Miriam alone- Chance its own Eleusis.
May Dravid's ten string lyre
Tune Iyer to Pariah.

Andre Orlean's mimetic economics & Macron's golden showers

French thinkers, as different as Gabriel Tarde and Rene Girard have stressed mimetic effects in Society and Politics. However, the Anglo-Saxon world associates such effects with 'mob psychology' and the theories of Gustav Le Bon. We have a mental picture of the excitable Frenchmen storming the Bastille and then cheering for the Guillotine, whereas the 'man on the Clapham omnibus' keeps a stiff upper lip and casts a cold eye over the financial pages of his newspaper. Veblen, it is true, introduced us to the notion of 'positional goods' and bandwagon effects- but the thing was vulgar ; noveau riche Chicago meat-packers would grow out of it. Indeed, if only the Americans could learn to play a gentlemanly game, like cricket, they wouldn't be so damn obstreperous. 

Keynes, it is true, was a bit of a bounder and spoke of 'animal spirits' in financial markets but au fond he was merely the perennial Old Lady of Threadneedle Street, rouged and lipsticked and got up in a garish frock- having to play the sultry gold-digger because it had run short of bullion. 

Still, purely as a matter of modelling dynamics, there's no reason we can't simulate mimetic effects and pass the thing off as Expected Utility theory under lagged Information dispersal. 

The French Economist, Andre Orlean, however, thinks a more fundamental change in our thinking is required.
In a recent interview  he states
25
A.O.: According to mainstream theory, commercial stakeholders are already socialized—before arriving on the market for exchange, they already know exactly what they want. Contrary to this, we must recognize that stakeholders’ preferences are built during interactions with others. This is what I call the mimetic universe—economic stakeholders never know what is good for them; they seek to discover that by using models which they copy. Nobody is naturally inclined to want a mobile phone or access to the Internet!26 As the philosopher Rene Girard explains it, imitation takes two forms, according to whether the model is external to the subjects’ social world, or belongs to it. Don Quixote, who conforms to the precepts of Amadis of Gaulle, a fictional character, illustrates external mediation perfectly. Consequently, their preferences are exogenous and the Walrasian model is observed, except for the fact that the stakeholders’ objectives are no longer considered natural, but resulting from an external model.
It seems this 'external mediation'  is simply a representative agent theory. In the next period, these Quixotic agents have no money or have been locked up in a loony bill. Utility of a 'natural' sort has weeded out unviable mimetic models. Well, not quite. But the law of large numbers means that the wannabe Quixotes are cancelled out by all the Christs and Napoleons and me pretending to be a K-Pop idol and so forth such that for a big enough market there is little actual noise.
27A more interesting case is that of internal mediation, where models and subjects are in the same situation, namely that, a priori, neither know their preferences, and both determine them by observing each other.
Again, for a large enough market, this cancels out as noise. Anyway, Tarde's Law would suggest that the inferior will follow the superior- unless it is cooler to do the reverse. So we don't really have a chameleon on a mirror type situation here unless public signalling is dysfunctional. But that would mean the Central Bank and Treasury Secretary and so on are all for shit. But, in that case, both need to be fixed pronto.
Models also need a model of their own to copy. In this type of situation, the cumulative phenomena are in full effect because the goods’ desirability increases with demand. Think about trends, for example: the fact that an individual chooses an object has a snowball effect; it encourages another to want the same object.
There are markets which are chaotic because bandwagon effects are too big. High Fashion, Speculative Financial instruments- sure- there can be dramatic 'tulip' type booms and busts but for a large enough, diversified enough, economy it oughtn't to matter too much.
According to Walras, such cumulative phenomena do not occur; as soon as several people want the same object, prices increase and demand falls; the mechanism is self-regulating. In the world of internal mediation, the more others want an object, the more desirable it becomes.
I may want the life of a rap-star but I don't got the moolah for it. Effective Demand is what counts.
This is because a product’s attractiveness is not based on what it is, but on the fact that others want it.28 In this world, the scarcity of goods is by no means natural.
It is perfectly natural for everyone to want to be the richest man or the person married to the most attractive spouse and so forth.

Girard, for some crazy reason, decided, on the basis of his reading of Proust, that Society would need to periodically sacrifice a scapegoat so as to discharge all the hostility generated by 'mimetic rivalry'. That's also why he thought Christianity was such a special religion coz, apparently, Christians get together and crucify Christ every year at Easter and then chop up pieces of him and drain his blood which they consume at Mass for the rest of the year. Anyway, that's why I'm not talking to the Christians, not coz Santa didn't bring me any prezzies this year.
The idea of need-oriented production must be abandoned.
Cool! We won't need to make boring stuff like food anymore.
Mimetic competition keeps creating new desires. They permanently reinvent objects in a perpetual motion of scarcity creation.
Sure. If one animal sees another chewing on a nice piece of meat, it wants some too. If it is bigger, it may chase off the other animal.
The anthropologist Marshall Sahlins understood that very well: in Stone Age Economics, he shows that the societies in which scarcity prevails are by no means the primitive ones, but our own. Why is that? Because ancient societies have exactly the goods they need, and nobody would enjoy working pointlessly to produce additional goods–whereas this is what we do.
We produced better weapons and killed the primitive guys and took their women and land and also confiscated any nice shiny stuff they may have found- like nuggets of gold.

Land became scarce even before the invention of agriculture. Stronger bands chased off weaker groups of hunter gatherers. Women were probably always scarce which is why you have gender dimorphism and some guys got six packs and glossy hair and so I end up in the kitchen talking to Engineers at parties.
Producers keep creating new goods; because they enter our differentiation and distinction strategies, they try to monopolize our desires to their benefit. Perpetual scarcity is the first law of our political economy, with the known ecological consequences.
Scarcity is the first law of Biology. If it didn't exist, Evolution would have had no selection mechanism.
29
Aren’t you reinventing the ideas of Thorstein Veblen? This American institutionalist economist from the beginning of the 20th century had already shown that individuals consume whatever gives them social status by copying the trends of the upper class.30 
A.O.: Indeed, Veblen is one of the thinkers who understood that consumption is all about competition, that products bought are like trophies acquired for the prestige they offer. He also saw that this led to endless, unquenchable desires.
Desire for women and land are pretty unquenchable for most people. A guy who has plenty of both also has an unquenchable desire not to get killed- so he has has to keep beefing up his security.
Nevertheless, in Veblen’s approach, although everyone follows the model of the upper class, no one knows how the upper class itself functions. In response, Veblen introduces the predatory culture hypothesis, which is specific to these classes and determines their behavior. The mimetic approach does not need the existence of this hierarchy a priori: it explains how distinction occurs in a world of equals. Paradoxically, the mimetic theory produces hierarchy.31
How is this a paradox? If people want stuff others have- indeed, if they want to be them- then evolution is gonna endow a socialized species with dominance and submission rituals and a sense of hierarchy coz otherwise intra-species conflict would be too great and you'd have an extinction event.

Mimetics is also about learning new stuff. This can create a knowledge based hierarchy.
In this approach, goods selected for their prestige can, a priori, be anything. But, in reality, it is money that has become essential. You even say that fascination for money is the market economies’ main driving force.32 
A.O.: The constitutive desire of market societies is the desire for money. What binds stakeholders of market economies first is not the goods’ utility; it is the general belief in money as the definition of value.
Why did Trump want to become President? The answer is he gets more value that way then just being a fat guy whose Finances might come crashing down once again.  Money can't buy you Happiness. You've got to use it buy stuff that makes you happy. Which rich guy has a wholly liquid portfolio? Only one who is planning to skip town before the shit hits the fan. Otherwise, most people follow rational portfolio choice theory and keep only a small proportion of their assets in liquid- i.e. money- form. That's why them guys got so many mansions they scarcely visit and uncut diamonds and Old Masters and so forth.
What is objective and binding for economic stakeholders in this world is the fact that, for each transaction, there is a transfer of money, which agents’ accounts serve to record. Money is the institution that creates value. 
So, a utopian Commune, or College, or Monastery could create no value.
33But in that case, where does the desire for money come from? It is the direct consequence of the separation of markets. The fundamental objective of economic stakeholders is to access the goods of others, and the only way to achieve this is by arousing their desire for what I have to offer myself. The economist who understood this well, was . . . Adam Smith! At the beginning of The Wealth of Nations, he writes: “Every prudent man in every period of society, after the first establishment of the division of labor, must naturally have endeavored to manage his affairs in such a manner as to have at all times by him, besides the peculiar produce of his own industry, a certain quantity of some commodity or other, such as he imagined few people would be likely to refuse in exchange for the produce of their industry.” Everything is there. The question is indeed to know what others desire, to determine the next general trend. And, as Smith wrote, finding the answer to this question is first of all a matter of the imagination. A priori, any goods can be suitable. I suggest calling the property of being desired by others “liquidity,” and the goods which satisfy this property “liquid goods.” Liquidity is the form power takes within commercial relationships, because it is through the possession of liquid goods that stakeholders gain access to the products of others. This power, unique to market economies, is a purchasing power.
Unique to market economies? Hardly. You could get a lot with dollars in the Soviet Union. Rubles- not so much.
Money is the absolute form that liquidity takes. It results from mimetic competitions, because these demonstrate a propensity to focus on one and the same object.34
In which case fiat money is impossible. We should all be trading cowrie shells or gold coins or whatever. Mimetic effects can't fully explain the origin of money. Only rationality involving a theory of mind- which is what defeats mimetic effects coz if I think you're stoopid my instinct to imitate you is repressed or goes in the other direction- can explain the origin of fiat currency.
How a feeling of collective belief can be permanently focused on an object like money remains to be explained.35 
A.O.: Remember that, for thousands of years, gold remained the reference, the fabled object par excellence that everyone chased after, because everyone believed in its power.
Cows were important. The word pecuniary derives from pecu- a cow.  It was only after an Economy reaches a certain stage of sophistication that gold gains salience because of its intrinsic properties- ductility, untarnishability, etc- as solving a coordination problem regarding the medium of exchange.
It is this kind of fascination that we need to try to explain. We believe that it originates from mimetic polarization.36 The fact that mimetic polarization is capable, in this way, of generating lasting social beliefs that create value, is what Emile Durkheim already understood in his day. For this author, what is thought of and felt collectively, which he calls unison, acquires an extreme hold on individual minds, and deeply transforms them. This is the case, he says, of revolutionary crowds, whose combined force is the origin of new divinities, like the Fatherland or Reason.
Or the gilet jaunes- oh wait! Gold is yellow...so that means, Macron's showing the yellow streak is actually mimetic polarization! Wow! How mind-blowing is that! Out trumping Trump, the man will soon be begging for golden showers from all and sundry!
This particular power, inherent to the polarized multitudes, plays a particular part in Durkheim’s discourse, since he even sees in it the definition of social facts as a specific feature of society. As a result, this definition of the concept of the power of the multitude provides the basis for a theory capable of seizing all values within the same framework—economic value as well as religious, moral, and aesthetic values. This is the way to solve the current schism in the social sciences.

Very true! Pissing in each other's mouths is indeed the way to solve the current schism in the Social Sciences- at least, as these things are understood in France.

Suella Braverman & Cultural Marxism

Suella Braverman is a British Conservative M.P, very much pro-Brexit, recently said-
“As Conservatives, we are engaged in a battle against cultural Marxism...
"I'm very worried about this ongoing creep of cultural Marxism which has come from Jeremy Corbyn".
This is a perfectly reasonable statement. Braverman- an Indian origin lady of mixed Goan Christian & Hindu heritage, who has only very recently married a Jewish gentleman- is, for sound tactical reasons, linking Corbyn to antisemitism while expressing distaste for Marxism which has always taken a dim view of Jews- as witness this notorious passage from 'On the Jewish Question'-
Let us consider the actual, worldly Jew – not the Sabbath Jew, as Bauer does, but the everyday Jew. Let us not look for the secret of the Jew in his religion, but let us look for the secret of his religion in the real Jew. What is the secular basis of Judaism? Practical need, self-interest. What is the worldly religion of the Jew? Huckstering. What is his worldly God? Money. [...] The Jew has emancipated himself in a Jewish manner, not only because he has acquired financial power, but also because, through him and also apart from him, money has become a world power and the practical Jewish spirit has become the practical spirit of the Christian nations. The Jews have emancipated themselves insofar as the Christians have become Jews. [...] In the final analysis, the emancipation of the Jews is the emancipation of mankind from Judaism.
I need hardly say that the above is gaseous poison. Marx was a Lutheran, albeit of Jewish origin, who initially adopted 'Young Hegelian' jargon of a theological, rather than proto-scientific, stripe, and thus did not see that the essence of Judaism is 'mussar' ethical thinking founded upon the notion that 'one's spiritual needs are the material needs of the suffering other'.

 Jews, like Quakers, Zoroastrians, Jains etc. did well in trust-based trading networks because they acknowledged a reciprocal duty of care such that the 'winners' in economic exchanges used a portion of their gains for philanthropic and communal purposes.

Nobody in India- Suella's ancestral home- thought that Jains or Parsis or any other minority Religious sect was not sincere in its beliefs. One might say ' so-and-so is a blood sucking bania'- but a bania (businessman) might belong to one's own sect. There are Muslim 'bania' castes. What is unheard of is the suggestion that ethical Religion is created by the demands of a commercial society, though, obviously, the virtues it inculcates- thrift, honesty, diligence, sobriety, philanthropic munificence- have a reputational effect and militate for financial success.

Interestingly, a recent article states that Hindu businessmen prefer to hire young Muslims because they believe them to be more sober and honest. This is the other side of the coin of soi disant Islamic fanaticism. I suppose it also helps that Muslims can less easily steal your clients and set up on their own. Still, such young people find that the belief that Muslims are now more pious and less likely to touch alcohol than Hindus is giving them an edge in an otherwise more hostile world.

This brings me to the question, why of all the various religious minorities which have gotten ahead- whether they be Quakers, Mormons, Parsis or Jains or whatever- why have only the Jews been singled out for the vilest vituperation? Why has their Faith been equated with laissez faire Capitalism?

The answer has to do with the view that the Jews are Deicides- Judas sold the Lord for 40 pieces of silver. However, this view has not been taught by any Church longer than I've been alive. Thus, it is only through the Marxist route that it can continue to work its mischief.

Clearly the Board of Deputies of British Judaism thinks differently. Its spokesman says 'cultural Marxism' is related to Nazi '“Kulturbolschewismus” - and the charge that Jewish intellectuals were orchestrating the spread of Communism, as well as sexual permissiveness. Thus, an Indian origin lady married to a Jew, should have chosen her words more carefully.

This is nonsense. Suella is clearly of Indian origin. Like the vast majority of people the world over, she has no interest at all in what some stupid German hooligans said or thought eighty years ago. Every one knows the Nazis were ISIS type gangsters seeking wealth through conquest and slavery. Anyway, they had the shit kicked out of them a long time ago.

If Suella was blonde and blue eyed, maybe, some people might think her castigating 'cultural marxism' was an anti-semitic dog-whistle. But she isn't blonde. She looks entirely  Indian. The Board of Deputies have made themselves look very foolish.

Marx tried to break with German stupidity by studying British Classical Economics. Marxism is an economic theory. Thanks to smart Soviet and American and Japanese and Italian and Indian economists, it had attained a highly sophisticated mathematical representation by the end of the Sixties. Unfortunately, parallel developments in the theory of computability, complexity, concurrency etc. showed that it was useless. Still, people like Anwar Shaikh can make it empirical by using Big Data and modelling economic processes in terms of 'turbulent flow'. However, this kind of stuff needs a high I.Q and, in any case, is the sort of thing people can figure out for themselves.

 Cultural Marxism, however, was always intended for the very stupid. It's something you can rap about in-between bong hits and your day-job delivering pizzas.

There may have been a time when the Frankfurt School looked smart. It wasn't. It was a pile of racist shite- stuff like pretending Schoenberg was a good composer and Jazz was bad coz it was nigger music. It had zero impact on India or China or anywhere Marxism still had salience.

No doubt, desi Leftists of my generation started burbling about Walter Benjamin but this was only coz they were ill paid tenure craving hacks who were pretending that the Left hadn't shat the bed back home. Meanwhile, muffasil desis who had studied STEM subjects had gotten rich. Only their idiot daughters- for the sake of an Ivy League credential- audited courses on this type of shite.

Marcuse's Eros & Civilization had zero impact on the Global South. This is because if you could read it, you could also buy as much drugs and deviant sex as you liked. Polymorphous perversity was as cheap as chips in shit-hole countries, which is why hippies turned up there in such numbers.

Jews did not spread Communism to China or India or Africa. Nor were they associated with sexual permissiveness. On the contrary, they were respected for commercial probity and a commitment to higher education. 'Cultural Marxism' was, till recently, flourishing in India- Suella's ancestral home. But, for genuine Marxists, only Economic Marxism matters. Either the thing can grant working people a more secure and higher standard of living or it is worthless. Ethical Religion improves life-chances. Having lost touch with Economics, Cultural Marxism is mere mystagogy without catechesis which, out of the wanderings of Cain, constructs a wilderness Zion.

Saturday, 30 March 2019

Keynes's big mistake- addressing Economists not the general public

       
Keynes addressed his 'General Theory' to his fellow economists while, disarmingly, admitting to having shared the very errors he would now attack.

The matters at issue are of an importance which cannot be exaggerated. But, if my explanations are right, it is my fellow economists, not the general public, whom I must first convince. At this stage of the argument the general public, though welcome at the debate, are only eavesdroppers at an attempt by an economist to bring to an issue the deep divergences of opinion between fellow economists which have for the time being almost destroyed the practical influence of economic theory, and will, until they are resolved, continue to do so. 

It would be quite proper for a Physicist or a Chemist or a Neurosurgeon to politely remind the layman that she has no empirical knowledge of electrons or neurons and isotopes- but Economics is not a Discourse of that type. Its terms are abstractions founded upon familiar activities- consuming, investing, producing, buying and selling- and its applications are wholly idiographic, not nomothetic.

Furthermore, there are more varieties of axiomatic Economic systems than there are Economists and their predictions diverge considerably.

Even the best Economic model- in the sense of the one whose predictions are least wrong- features arbitrary assumptions and fatuous generalizations about social and individual behavior which, in every case, some group of non-economists would be better placed to affirm or deny. Not surprisingly, there is always a non economist whose predictions are better than any contemporary economist- Ricardo, the richest economist ever, first made money and then became an economist. Thus, it is only as a matter of 'comparative advantage', that non-economists pay a little money to the economist for some specific purpose which it would be a waste of their own time to do more quickly and accurately. Thus Jeff Bezos is not an economist, but he employs a lot of nerdy guys with PhDs in Mathematical Economics to sweat the small stuff.

All this was well known in the mid Thirities. Yet, by writing for economists, not laymen, Keynes was choosing the stupidest possible audience. Thus he was bound to write nonsense.

Consider the following-

 A monetary economy, we shall find, is essentially one in which changing views about the future are capable of influencing the quantity of employment and not merely its direction. But our method of analysing the economic behaviour of the present under the influence of changing ideas about the future is one which depends on the interaction of supply and demand, and is in this way linked up with our fundamental theory of value. We are thus led to a more general theory, which includes the classical theory with which we are familiar, as a special case.

If you have a degree in Econ, this seems perfectly sensible. Yet it is nonsense on stilts. Any biological phenomenon features 'changing views of the future' which alter what is done both quantitatively and qualitatively.

Cows grazing in a meadow respond to 'changing views of the future'- e.g. whether it will rain or whether a tiger will attack- and this changes the quantity and direction of employment in the grass eating industry as well as the profession of saying moo.

Keynes, in the introduction to the German edition of his work admits that
 ' the theory of output as a whole, which is what the following book purports to provide, is much more easily adapted to the conditions of a totalitarian state'
He does not understand that behavior and expectations must be very different under a totalitarian regime. Hypocrisy is compulsory. Information aggregation is based on lies. Even great famines or crushing military defeats can be both wholly secret while still being common knowledge.

In the introduction to the French edition, referencing 'Say's Law, he writes-

My contention that for the system as a whole the amount of income which is saved, in the sense that it is not spent on current consumption, is and must necessarily be exactly equal to the amount of net new investment has been considered a paradox and has been the occasion of widespread controversy.
This is not a paradox. It is nonsense. Resources may be expended on things- as when one casts one's bread upon the waters- which are neither consumption nor investment but which, proving utile, turn out to be one or the other. The opposite is also true. A White Elephant is neither consumption nor investment though this may not be known when first received.
The explanation of this is undoubtedly to be found in the fact that this relationship of equality between saving and investment, which necessarily holds good for the system as a whole, does not hold good at all for a particular individual.
There is no such equality for either the individual nor the 'system as a whole' because
1) Under uncertainty, regret minimization entails resources being expended on things which, save in some calamitous or ontologically dysphoric scenario, are wholly inutile.
2)  Only the future can reveal if a thing was utile or not fit for purpose.
There is no reason whatever why the new investment for which I am responsible should bear any relation whatever to the amount of my own savings.
Nonsense! Your 'share' of the Investment you initiate equals the value your investors put on your monetary contribution plus 'sweat equity'- i.e. an asset (in this case, the present value of an income stream) which you have 'saved'- i.e. not already committed to some other purpose.

Keynes's next sentence, however, is even more bizarre-
Quite legitimately we regard an individual's income as independent of what he himself consumes and invests.
How is this legitimate? These are dependent variables.
But this, I have to point out, should not have led us to overlook the fact that the demand arising out of the consumption and investment of one individual is the source of the incomes of other individuals, so that incomes in general are not independent, quite the contrary, of the disposition of individuals to spend and invest; and since in turn the readiness of individuals to spend and invest depends on their incomes, a relationship is set up between aggregate savings and aggregate investment which can be very easily shown, beyond any possibility of reasonable dispute, to be one of exact and necessary equality.
This can never be the case if the Future is uncertain.
Rightly regarded this is a banal conclusion.
It is utterly mad!
But it sets in motion a train of thought from which more substantial matters follow. It is shown that, generally speaking, the actual level of output and employment depends, not on the capacity to produce or on the pre-existing level of incomes, but on the current decisions to produce which depend in turn on current decisions to invest and on present expectations of current and prospective consumption.
What cows do at this moment depends on their current expectations. The same is true about people. Why arrive at so banal a conclusion from so utterly crazy a train of thought?
Moreover, as soon as we know the propensity to consume and to save (as I call it), that is to say the result for the community as a whole of the individual psychological inclinations as to how to dispose of given incomes, we can calculate what level of incomes, and therefore what level of output and employment, is in profit-equilibrium with a given level of new investment; out of which develops the doctrine of the Multiplier.
 So, as soon as we know the future, we will be able to calculate propensities which enable us to predict the future coz we already know it.

Or again, it becomes evident that an increased propensity to save will ceteris paribus contract incomes and output; whilst an increased inducement to invest will expand them.
An anticipated fall in income would increase savings. Why speak of 'propensities'?
We are thus able to analyse the factors which determine the income and output of the system as a whole;—we have, in the most exact sense, a theory of employment.
Which cashes out as 'people are employed if it is expected that they can be paid'.
Conclusions emerge from this reasoning which are particularly relevant to the problems of public finance and public policy generally and of the trade cycle. 
Even better conclusions emerge by ignoring economists entirely.
 Another feature, especially characteristic of this book, is the theory of the rate of interest.
Which would soon be shown to be utterly useless because no risk-less asset existed. Countries could be overrun and their bonds could become waste paper.
In recent times it has been held by many economists that the rate of current saving determined the supply of free capital, that the rate of current investment governed the demand for it, and that the rate of interest was, so to speak, the equilibrating price-factor determined by the point of intersection of the supply curve of savings and the demand curve of investment.
This was silly.
But if aggregate saving is necessarily and in all circumstances exactly equal to aggregate investment, it is evident that this explanation collapses.
It collapsed because it was silly not because of some 'necessary equality' which was even sillier.
We have to search elsewhere for the solution. I find it in the idea that it is the function of the rate of interest to preserve equilibrium, not between the demand and the supply of new capital goods, but between the demand and the supply of money, that is to say between the demand for liquidity and the means of satisfying this demand.
Money, or Credit, comes in a lot of different forms and has a lot of different prices. We can always find some way of defining demand and supply so that they are brought into equality by a price movement. But, this is merely a manner of speaking.

The Classical theory of Employment
Keynes summarizes it (on the basis of Pigou's work) as follows

 there are only four possible means of increasing employment: 
(a) An improvement in organisation or in foresight which diminishes 'frictional' unemployment;
Foresight, or its lack, is all that matters. Organization itself depends on predictability. 
(b) a decrease in the marginal disutility of labour, as expressed by the real wage for which additional labour is available, so as to diminish 'voluntary' unemployment;
Keynes means a decrease, at the margin, in the opportunity cost or transfer earnings of Labor. Thus the real wage can remain constant but Unemployment still falls if Unemployment Benefit is taken away.
(c) an increase in the marginal physical productivity of labour in the wage-goods industries (to use Professor Pigou's convenient term for goods upon the price of which the utility of the money-wage depends);
Productivity affects real per unit labor cost. It does not matter in which industry it occurs. Higher productivity, ceteris paribus, means lower unemployment.
(d) an increase in the price of non-wage-goods compared with the price of wage-goods, associated with a shift in the expenditure of non-wage-earners from wage-goods to non wage-goods. 
This is a meaningless distinction which arises out of old fashioned notions about vanity and luxury goods and how the rich are a different species than the rest of us.

This whole classical theory, like the Keynesian theory, is junk. Expectations and Uncertainty matter but this is as true of cows as human beings.

Cows will devote less time to eating grass and more to saying moo and moving away if they have adverse expectations or face greater uncertainty. The same is true of how we employ ourselves or others or are ourselves employed.

Involuntary unemployment

The demand for most types of labor is derived from the stuff labor helps produce. If 'Aggregate Demand' in the Economy is weak because the future now appears more uncertain, then the demand for Labor falls. At the existing wage rate, some people who want to work can't find employers willing to take them on.

Keynes gives his definition-
Men are involuntarily unemployed- If, in the event of a small rise in the price of wage-goods relatively to the money-wage, both the aggregate supply of labour willing to work for the current money-wage and the aggregate demand for it at that wage would be greater than the existing volume of employment

This is nonsense. If supply and demand increase at the current money wage, then employment will increase. A small change in the cost of living does not matter.

It is a shock to realize that Keynes wasn't just not a Keynesian, he was also a fucking cretin.

Why was this not apparent at the time? The answer is Keynes pretended to be smart. He references Einstein's theory of Relativity like he actually understood it.

The classical theorists resemble Euclidean geometers in a non-Euclidean world who, discovering that in experience straight lines apparently parallel often meet, rebuke the lines for not keeping straight—as the only remedy for the unfortunate collisions which are occurring.
Where did Keynes meet these 'geometers' who experienced gravitational effects strong enough to cause parallel lines to meet in their locality? The stupid economists reading this shite probably thought Keynes met them at High Table or in a Gents toilet. They got a frisson from reading about the Social Life of this oh-so-superior Old Etonian and Cambridge Apostle.
Yet, in truth, there is no remedy except to throw over the axiom of parallels and to work out a non-Euclidean geometry. Something similar is required to-day in economics.
Fair point. Economics is a shite discipline. Tell it go fuck itself by all means.
We need to throw over the second postulate of the classical doctrine and to work out the behavior of a system in which involuntary unemployment in the strict sense is possible. 
This is easily done. Just introduce Expectations. If people expect a Recession, the Derived Demand for all factors of production will fall and they will all suffer 'involuntary' unemployment.

There is no need to write nonsense like-
with a given organisation, equipment and technique, real wages and the volume of output (and hence of employment) are uniquely correlated, so that, in general, an increase in employment can only occur to the accompaniment of a decline in the rate of real wages.
Sez you. A good harvest or oil strike could increase real wages without increasing employment. Indeed, for a large enough 'Income effect', it may reduce it.
Thus I am not disputing this vital fact which the classical economists have (rightly) asserted as indefeasible.
Because you are a cretin.
In a given state of organisation, equipment and technique, the real wage earned by a unit of labour has a unique (inverse) correlation with the volume of employment.
Fuck off. Nobody knows the real wage. We estimate it after the fact and get different results coz of Laspeyres bias or Paasche bias or whatever. If Keynes had not decided to address Economists- i.e. cretins- he would not have written anything so cretinous.

Economics is a type of pedagogy- like 'Creative Writing' or 'Literary Theory'- it is not a Science- like Physics- or even an Art- like producing Literature. It is true that some second rate people may be able to pass themselves off as 'Economists' thanks to this pedagogy just as there are some cretins who can pass themselves off as cultured people on the basis of theoretic jargon. However, no body needs to study this shite subject in order to excel in actually economizing on the use of resources or propelling Society to a more stable and prosperous configuration.



Ken Arrow and financial weapons of mass destruction

Why do Economists believe that Economics is a real subject, like Physics, rather than a type of pedagogy for the second rate- like 'Literary Theory' for those who struggle to read, or 'Creative Writing' for those with little imagination and no innate talent?

Consider the opening to Ken Arrow's Nobel lecture-
 From the time of Adam Smith’s Wealth of Nations in 1776, one recurrent theme of economic analysis has been the remarkable degree of coherence among the vast numbers of individual and seemingly separate decisions about the buying and selling of commodities. In everyday, normal experience, there is something of a balance between the amounts of goods and services that some individuals want to supply and the amounts that other, different individuals want to sell. Would-be buyers ordinarily count correctly on being able to carry out their intentions, and would-be sellers do not ordinarily find themselves producing great amounts of goods that they cannot sell. This experience of balance is indeed so widespread that it raises no intellectual disquiet among laymen; they take it so much for granted that they are not disposed to understand the mechanism by which it occurs.

Laymen? Is Economics an esoteric discipline which grants its priesthood the power to loose and bind? Is it based on Heavenly revelation? Do its practitioners perform miracles or cast out demons?

If not, why make any such distinction?

Now it is true that Physicists and Chemists and Medical Doctors are able to do some things which the uninstructed are not. However, nothing similar holds with respect to Economics or Literary Theory or Sociology or Political Philosophy

The paradoxical result is that they have no idea of the system’s strength and are unwilling to trust it in any considerable departure from normal conditions. This reaction is most conspicuous in wartime situations with radical shifts in demand. It is taken for granted that these can be met only by price control, rationing, and direct allocation of resources.
These were methods advocated by some economists at that time. Other economists may have made different suggestions. But this was also true of lawyers and politicians and so forth.

There is no evidence that Economists ever had a consensus on a matter on which 'laypeople' were wrong. There is no Galileo for Economics. On the contrary, all there has been is competing Inquisitions on the one hand and agnostics on the other.
Yet there is no reason to believe that the same forces that work in peacetime would not produce a working system in time of war or other considerable shifts in demand.
Arrow is being silly. If you have conscription, those who remain behind aren't going to be allowed to profiteer too visibly. Otherwise, you get a Bolshevik revolution.
(There are undesirable consequences of a free market system, but sheer unworkability is not one of them.)
This is nonsense. The free market system is wholly unworkable if crime is unchecked or an invading army is not opposed.
I do not want to overstate the case. The balancing of supply and demand is far from perfect. Most conspicuously, the history of the capitalist system has been marked by recurring periods in which the supply of available labor and of productive equipment available for the production of goods has been in excess of their utilization, sometimes, as in the 1930’s, by very considerable magnitudes.
So what? Any Society may end up with too much of something or too little of something else. Expectations are often proven wrong. Suppose it is discovered that a meteor is going to hit the earth. It is likely that a lot of our Capital investment decisions were wrong headed. The same is true if we believed a Revolution of a certain sort was likely, but it did not in fact come to pass.

Laypeople understand this very well. Myopic mathematical economists may remain incorrigible in these matters. Alternatively, they might simply play with their toys during work-hours and be sensible the rest of the time.
Further, the relative balance of overall supply and demand in the postwar period in the United States and Europe is in good measure the result of deliberate governmental policies, not an automatic tendency of the market to balance.
This has always been true. People like Keynes pretended, in the Thirties, that stupid Economists had caused the Depression. That is why Keynes said his 'General Theory' was addressed to his colleagues. Laymen were welcome to listen but should keep their mouth shut.

However, Economists didn't cause the Depression. Why? They were shite. They had no power. Most were poor and taught in cow colleges. The one or two who made money on the Stock Market- people like Irving Fischer- remained bullish on fundamentals and were thus revealed to be shitheads.
Nevertheless, when all due allowances are made, the coherence of individual economic decisions is remarkable.
To whom? Only a guy who thinks it miraculous people don't shit their pants all the time.
As incomes rise and demands shift, for example, from food to clothing and housing, the labor force and productive facilitities follow suit.
As one begins turtling one goes into the toilet and lowers one's trousers. Isn't that extraordinary? How do people know a great big turd is going to emerge from their anus?
Similarly, and even more surprising to the layman, there is a mutual interaction between shifts in technology and the allocation of the labor force.
How stupid did Arrow think people who had studied Engineering or Law instead of Econ actually were? Even Chomsky didn't write an outraged article about telegram delivery people losing their jobs because of neo-liberalism.
As technology improves exogenously, through innovations, the labor made redundant does not become permanently unemployed, but finds its place in the economy.
Arrow is being silly. Some older people will never get another job. Many will never get quite as good a job. There will be localized effects on property prices and small business profitability. Laypeople understand this. Only real smart Economists can't.
It is truly amazing that the lessons of both theory and over a century of history are still so misunderstood.
By economists, not laypeople.
On the other hand, a growing accumulation of instruments of production raises real wages and in turn induces a rise in the prices of labor-intensive commodities relative to those which use little labor. All these phenomena show that by and large and in the long view of history, the economic system adjusts with a considerable degree of smoothness and indeed of rationality to changes in the fundamental facts within which it operates.
So Economists aren't really needed- save perhaps to serve a pedagogic function or else as political window dressing.
The problematic nature of economic coordination is most obvious in a free enterprise economy but might seem of lesser moment in a socialist or planned society.
WTF?! The thing is seamless under free enterprise. It is problematic in a command economy coz the thing involves all sorts of administrative protocols and bureaucratic procedures.
But a little reflection on the production and consumption decisions of such a society, at least in the modern world of complex production, shows that in the most basic aspects the problem of coordination is not removed by the transition to socialism or to any other form of planning.
Wow! Arrow said this in 1972. Talk about being on the wrong side of History!
In the pure model of a free enterprise world, an individual, whether consumer or producer, is the locus both of interests or tastes and of information. Each individual has his own desires, which he is expected to pursue within the constraints imposed by the economic mechanism; but in addition he is supposed to have more information about himself or at least about a particular sphere of productive and consumptive activity than other individuals. It might be that in an ideal socialist economy, all individuals will act in accord with some agreed ideas of the common good, though I personally find this concept neither realistic nor desirable, in that it denies the fact and value of individual diversity. But not even the most ideal socialist society will obviate the diversity of information about productive methods that must obtain simply because the acquisition of information is costly. Hence, the need for coordination, for some means of seeing that plans of diverse agents have balanced totals, remains. How this coordination takes place has been a central preoccupation of economic theory since Adam Smith and received a reasonably clear answer in the 1870’s with the work of Jevons, Menger, and above all, Leon Walras: it was the fact that all agents in the economy faced the same set of prices that provided the common flow of information needed to coordinate the system.
Smith, Jevons, Menger, Walras et al did not ask how coordination problems are solved. That was Thomas Schelling's contribution. Rather those old geezers assumed markets were focal and the solution occurred there- maybe through a Walrasian autioneer or some such theoretical apparatus.

Price vectors aren't what people coordinate on the basis of. Rather it is their own Expected Cost or Benefit which determine which focal point for coordination they choose. Vendors can change what is focal. So can Buyers. Any focal point can be thought of as a market and the reverse is also true. Thus we speak of a University as 'a market place of ideas', or a singles bar as a 'meat market'- because some sort of transaction or exchange occurs there. Exchanges don't have to all occur, or have to occur in a time irreversible fashion, at these focal points. Pareto efficiency can be achieved elsewhere and in a manner such that both parties can unwind sub-optimal transactions. Thus a 'price vector' is merely a public signal, one among many, associated with a focal point. Correlated equilibria can evolve independently from there in different directions.

Arrow's believes he has incorporated Uncertainty in his model. Actually, he has only incorporated probability.

We take from the theory of probability the concept of a state of the world, which is a description of the world so precise that it completely defines all initial holdings of goods and all technological possibilities. Uncertainty is not knowing which state will in fact hold...
 Commodities in the ordinary sense are replaced by contingent commodities, promises to buy or sell a given commodity if and only if a certain state of the world occurs. The market will then determine contingent prices. Clearing of the markets means clearing of the contingent markets; the commitments made are sufficiently flexible so that they can always be satisfied.
Aristotle had warned of the danger of greater precision (akrebia) then the subject matter warrants. Economics does not warrant a 'description of the world so precise' that it could never be computed in the lifetime of, not just the species, but the Universe itself.

Speaking of Aristotle, the further question arises, why should Economics confine itself only to monetary exchanges? One may speak of non-monetary transactions- e.g. relationships of give and take- as contingent contracts of Arrow's sort. What these don't cover is radical, Knightian, Uncertainty where possible states of the world are unknown. Consider what happens when you and I have a good faith contingent contract. However, for an unanticipated reason, I can't make good. Then, though a price existed and 'supply' and 'demand' seemed to match, actually there was no supply in one particular case and thus there was excess demand. No doubt, this risk could be insured against. However, the same problem arises. What if the insurance policy can't pay out? We could then have reinsurance and re-reinsurance and so on...an infinite regress of insurance.

 However, the problem would not go away. If we can't anticipate all future states of the world and assess their probability then excess demand is bound to arise because supply fails under an unanticipated contingency- including the possibility that probability was miscalculated. In the short to medium term, this may not be known. But sooner or later, the tide goes out and a lot of people are discovered to have been swimming naked.

To say-
The general equilibrium of the economy is then the set of prices which equate all excess demands to zero
is to say 'the general equilibrium of the economy is where every contingent contract is knowably fulfillable- i.e. all possible future states of the world are known and their likelihood is common knowledge.

However, if this were the case, there would be no need for markets or prices or, indeed, for communication. Our perfect foreknowledge would cause us to, like windowless monads, synchronize our actions perfectly. We would wake up in the morning knowing exactly from which individuals we should take the various things we need and exactly to whom to give the things we would otherwise sell. No words need be exchanged. Language would be redundant. No education would be needed. Everything would be common knowledge. There would be no need for the Law or the Insurance industry. Everything would be known in advance.

Arrow, unlike Sen, was a first rate economist. His notion of contingent contracts is used by the Fintech industry.

 Clearly, the contingent commodities called for do not exist to the extent required, but the variety of securities available on modern markets serves as a partial substitute. In my own thinking, the model of general equilibrium under uncertainty is as much a normative ideal as an empirical description. It is the way the actual world differs from the criteria of the model which suggests social policy to improve the efficiency with which risk-bearing is allocated.
This 'normative ideal', prior to the financial crisis, led to excessive securitization and a hypertrophy of the derivatives market. Warren Buffet, or so it is believed, warned of 'financial weapons of mass destruction'. No doubt, post-crash fears were exaggerated. The US stock market index has quadrupled since then. Still, it is evident that the 'markets for everything' approach is no panacea. Arrow did not hit the mark. His hamartia was the hubris that precipitated the sub-prime Crash.

Thursday, 28 March 2019

Why NYAY will be pared down and Zombified

Rahul Gandhi's NYAY scheme- which would give about 90 dollars per month (which in purchasing power would be equivalent to perhaps 500 dollars) to the poorest fifth of households- has received the endorsement of celebrity economists like Piketty & Rajan. If Modi wins, no doubt the BJP will steal this item of its clothing next election season. But what will be the eventual outcome?

As a proportion of Tax Revenue, the total commitment is likely to peak over the next decade at around 12 percent assuming current growth trends continue. However, there is scope for eliminating other subsidies so the impact may be smaller longer term. Ultimately, it would cease to be a problem if it is rolled into a Universal National Insurance Scheme with a contributions based element. Ultimately, it could be self-funding and thus independent of Fiscal policy- i.e. it would have no inflationary or crowding out effect. Rather it would reduce uncertainty, increase mobility and improve allocative and dynamic efficiency.

Three questions arise

1) Does the State have adequate administrative capacity to roll out this measure?

Rahul has said there would be pilot projects. Clearly, some States or Territories already have this capacity and so the answer is yes. Laggard States have an incentive to adopt best practice from the more developed areas. There are clear economies of scale and scope which would tend to diminish the operational costs more particularly if Information Technology is properly applied.

2) Will its intended recipients fall into a poverty trap?

We don't know the details but, presumably, this is the sort of thing the pilot projects will give us information about. There is no reason disincentives should necessarily be created.

3) Is it sustainable?

My gut-instinct is that the 20 per cent figure will be pared down. This is because this particular demographic can grow twice or thrice as fast as the rest. You can't create a sense of hereditary entitlement which will cover 40 per cent within a couple of decades, more particularly because people will use political connections to get themselves enrolled in this group.

At the same time, while net contributors may want targeted benefits for victims of illness, redundancy, death of bread-winner etc, they don't want what is in effect a 'basic income' scheme from which they are cut off. Subsidies on food, electricity, etc, potentially benefit everyone. Clearly, there could be a Caste or Communal angle to this. The 80 percent may feel themselves to be different from the 20 percent, though they recognize that misfortune may reduce their economic status. However, Social insurance would give them higher benefits than the basic dole because it would take note of the specificity of the misfortune suffered.

There is also a Regional aspect to this. More developed states which have completed demographic transition aren't going to want to subsidize population growth in less developed States. On the other hand, they may want to see a National Insurance Scheme linked to Health and Educational Services on an all India basis because this improves their own geographical mobility. What matters is that there is a link between contributions and targeted benefits which are linked to adverse contingencies.

I believe that this scheme, if implemented, will soon be pared down and assume a Zombie like form. Why? Regions have discovered a way to stop being net contributors to the Exchequer. True they pay their taxes but they also run up debts to Nationalized banks. There is net inflow, not outflow which is counterbalanced by redistributional schemes like this. Poorer Regions will have criminalized Leadership which will use a Zombified version of the scheme to tactically reward specific votebanks- but the benefits will be rationed by their own goons. The thing will exist but only 'naam ke vaaste'- for name's sake alone.

It is no accident that this scheme is being publicized as elections approach. This suggests that the political class in India already knows that its future will be as I have described.

Amdbekarite Social Choice vs Gotoh & Yoshihara


Gandhi thought he had himself become a 'bhangi' because he cleaned toilets and thus was a 'Harijan' (son of God but here meaning 'pariah'). In his view, this qualified him to do Social Choice on behalf of the Dalit (broken or downgraded) or Bahishkrit (excluded) sections of Society who, he believed, were cognitively incapable of doing it for themselves.

However, Gandhi was prepared to talk to representatives of these and other subaltern communities. Indeed, there is a sort of Gandhi-giri which poses as the interlocutor for any and every aggrieved Social Grouping and which thus claims 'obligatory passage point' status for itself.

Dr. Ambedkar took a wholly different tack. He insisted that discrimination had an objective, justiciable, Kripke type 'rigid designation. It wasn't something any self constituted group could intensionally define in a strategic manner (i.e. Spivak type 'strategic essentialism' would be wholly mischievous) . Rather the matter was wholly extensional, albeit juristic and protocol bound.

Ambedkar's view is that Politics is Social Choice- bad Social Choice if it perpetuates discriminatory and exclusionary practices, good Social Choice if it objectively defines discriminated against groups and offers justiciable means of redress and advancement.

Another difference between Gandhi & Ambedkar is that the former insisted that the welfare of the least well-off must take priority. However, every Social grouping, at that time- except perhaps for small minorities like Parsis, or Jains- had some members who starved to death in a year of dearth.

By contrast, Ambedkar backed quota based affirmative action even though this would create a 'creamy layer'. It was clear that all Social Groupings and Identity Classes had this feature. Ambedkar was aware of Tarde's mimetic law and wished to create a highly educated, Spiritually and Morally enlightened, Dalit leadership which would become a role model for the rest. All political parties in India have accepted Ambedkar's model. One consequence is that different parties compete for different Dalit sub-castes. This creates multiple avenues of advancement. No matter which party comes to power, some Dalit Grouping will receive empowerment- at least for its 'creamy layer'. Thus there is the possibility of circulation of elites within the Dalit firmament.

Gandhi's policy prescriptions can have a description in Social Choice theory. Indeed, we will be looking at a paper by two Japanese economists which could easily be modified to present just such a model of Gandhian Social Choice.

By contrast, Ambedkar embraced a wholly Pragmatic Political Philosophy. No praxeology of an axiomatic or algorithmic sort could provide a covering set for the field in question. On the contrary, only pragmatics, not semantics, matters. In this spirit, Ambedkar dismissed his contribution to drafting the Constitution as 'hack work'. This was around the time that Ken Arrow was founding a notion of social welfare functions as Constitutions.

We can all agree that last went nowhere. Even as an academic subject it had begun to languish by the beginning of the Eighties. Mainstream Econ Journals refused to publish any more Social Choice papers. Mechanism Design was fine. Game theory was fine. Econometric work on inequality or discrimination or old fashioned Pigouvian approaches to Environmental or Congestion problems were welcome. But ringing the changes on Arrow's impossibility theorem was useless.

Indians took the hint. Kaushik Basu was asked by Morishima whether he would pursue 'India's subject'- i.e. Arrowvian Social Choice. Basu was smart enough to see that the thing was as exploded as old fashioned 'Development' economics of the mathematical, Sukhamoy Chakrabarty type. It was better to pretend to be a Game theorist or some thing else which sounded like it might be useful.

Given the limitations of Sen-tentious Social Choice and keeping in mind the contribution of Suzumura and recent developments in Mathematics, it is perhaps appropriate to ask- is Ambedkar's deflationary account the only way forward? Are all Social Choice theorists wholly useless even if they aren't Bengali?

A look at a recent paper by two Japanese Economists suggests that this is indeed the case.

Reiko Gotoh & Naoki Yoshihara have a paper titled 'Securing Basic well-being for all' which focuses on groups- e.g. the disabled- who have been subject to historic discrimination.

The abstract states-
The purpose of this paper is to examine the possibility of a social choice rule to implement a social policy for securing basic well-being for all.The paper introduces a new scheme of social choice, called a social relation function (SRF), which associates a reflexive and transitive binary relation over a set of social policies to each profile of individual well-being appraisals and each profile of group evaluations. As part of the domains of SRFs, the available class of group evaluations is constrained by three conditions. Furthermore, the non-negative response (NR) and the weak Pareto condition (WP) are introduced. NR demands giving priority to group evaluation, while treating the groups as formally equal relative to each other. WP requires treating impartially the well-being appraisals of all individuals. In conclusion, this paper shows that under some reasonable assumptions, there exists an SRF that satisfies NR and WP.
Obviously these 'reasonable assumptions' will turn out to be utterly mad. However, it is worth examining this scheme because it is 'Gandhian' in that Groups are considered to be formally equal and their own account of themselves are accepted at face value. It makes various wholly unwarranted assumptions- e.g. that Groups will always lexically preference the well-being of the weakest of their members- and completely ignores all the real world problems faced by Social Choice- viz. Preference Revelation, Knightian Uncertainty, Indeterminacy, Concurrency, Agenda Control, Information Asymmetry etc, etc.

No doubt, a Theist of a Gandhian type may say- 'this is the Cross we must bear. God wants us to suffer by doing this wholly worthless type of Social Choice. What matters is that our intentions and our aims, not the results of our stupid meddling.'

Thus our two Japanese economists say-
The aim of “securing basic well-being for all” reflects the spirit of universality and equality.
Does it really? If we are equal, then everybody, not some clique, should be  engaged in the task. But, in that case, it would reduce to securing the basic well-being of myself and those I interact with. If everybody does so, the problem is solved by 'limited arbitrage'. The method used would be localised 'risk pooling', subject to arbitrage at the margin, so that a local basic minimum is provided to all no matter what contingency they suffer.

By contrast, if some people are more equal than others, perhaps because they have superior information and agency, then it makes sense for a small group to adopt a paternalistic policy designed to secure a minimum standard of living for Society. However, this means that they will exercise legitimate power & hegemonic domination. It reduces equality and 'universality' even if the aim is to increase these things in the long term.

To realize this aim substantively, we must particularly take care of differences among individuals in their contents of well-being.
Their contents of well-being are unknown. Even the contents of one's own well being are unknown. I may at this very moment have cancer. Equally I may have won the lottery. I don't know if I should be depressed or happy. Only time will tell.
It is, however, almost impossible to treat different types of individuals differently, while treating the same type of individuals equally.
Why? We do it all the time. McDonald's treats paying customers equally. Drunken bums who come in to shit on the floor are treated differently.
Given this difficulty, we are faced with the issue of what kind of mechanism can take the difference of individuals into account.
Markets, Bureaucracies, Mafias- any type of Social organisation or coordinating mechanism can do it.
Friedrich Hayek gave a clear answer to this question by stating that only markets can do that, because it is each individual who truly knows and can satisfy his diverse needs. Yet, we cannot rely solely on markets, since the market mechanism per se does not necessarily guarantee the basic well-being of all participants.
Why not? Just have a compulsory Social Insurance Scheme. Alternatively, the Government could use tax revenue to fund a Social Minimum. Hayek had no problem with that.

Ambedkar, as well as being a barrister and an authority on Constitutional Law, had PhD's from Columbia and the LSE in Public Finance and Monetary theory respectively. He was in favor of rapid industrialization and urbanization and well knew how fiscal and monetary policy could be used to provide a Social safety net which in turn would create legitimacy for Civic Planning and Rule enforcement. I doubt he'd have approved of V.S Page's Employment Guarantee Scheme which used taxes collected in the Cities to freeze up the Social Geography of the rural areas such that the forward Castes and the Cooperatives they controlled gained the benefit of a disproportionately Dalit captive labor pool. Cash transfers are a different matter. People may use them to move to better Rule of Law jurisidictions where discriminatory practices are punishable.

However, Cash transfers can't be 'self-selecting'. They have to be targeted on the basis of Constitutionally approved and legally defined groupings.
To resolve this difficulty, we introduce the notion of “groups.” This notion is defined as the representation of any particularity with which society should concern itself. That is, the differences of individuals in the same group can be compared, but the differences of individuals in different groups cannot be compared to one another.
This is silly. There are bound to be people who belong to more than one group. Thus groups will have to be ranked in terms of priority in access to entitlements. If each grouping has a different ranking, then there will be an incentive for the grouping to split.

Consider my own claim to affirmative action based on the fact that I am an Iyer and what's more studied Econ. This proves I'm as stupid as shit. Iyengars dominate everything coz them peeps be smart not Smartha which is soooo totally unfair. Now, it so happens that the Iyer Liberation Front, of which I am the Chairman and sole member, considers being 56, balding, fat and extremely ugly, to be the worst possible handicap. Thus, priority must be given to establishing my well-being before any other Iyer is helped in any way. My cousin, who heads the Opposition to Vivek Iyer Party,  considers being related to me to be the worse possible Social handicap. Priority should be given to getting me to convert to some other Religion or at least to change my surname or, at a minimum, stop showing up for family weddings or festival celebrations.

If Groupings are 'intensional'- i.e. internally defined, and if they are not homogeneous with reference to incidence of multi-dimensional disadvantage- then, clearly, their internal decision space is multi-dimensional and so Agenda Control gains salience and McKelvey chaos prevails.
Even if disadvantage is uni-dimensional, a concurrency problem arises if the cost of allaying disadvantage is idiosyncratic.
In practice, Groups split up precisely because there is no intensional way of taming Djikstra Concurrency or  McKelvey chaos.
Assuming three types of disadvantages, this section illustrates the difficulties in making trans-group comparisons and in identifying the least advantaged in society as a whole.
This same difficulty reappears within groups of more than one. This is why 'two of a trade can never agree'.
The three types of disadvantages can be seen as corresponding to three different conceptions of justice that underlie the reasons and the ways that a society should compensate individuals’ disadvantages. The first type of disadvantage is closely related to what Aristotle called “justice as redress.” It is based on recognizing the cause of the suffered disadvantage as an injustice that needs to be redressed and the responsibility of society as a whole is seen as engaged in this process.
This is purely a legal matter. The victim of a crime or tort is a rights holder under a bond of law with a corresponding obligation holder whom the Justice system compels to offer redress. There can also be provision for a fund to compensate victims of crimes where culprits are indigent. This cashes out as a Social Insurance scheme.

Only if Justice is protocol bound, extensional, and 'robust'- i.e. not sensitive to minor perturbations- can if fulfill its function. Otherwise Djikstra type Concurrency deadlock or live-lock or McKelvey chaos will prevail.
Public repayment represents an idea that it is society’s responsibility not to repeat such injustice in the future. Examples are disadvantages that derive from historical injustices such as colonial exploitation or the treatment of indigenous populations; or disadvantages suffered by victims of disasters and crime.
This is a purely political matter. The quantum of compensation will depend on the countervailing power or nuisance value of the group demanding reparation. What restrains Society from 'repeating injustices' is the Law.
The second type of disadvantage is related to the conception of “justice as compensation.” This concept implies that some individuals should be recognized as disadvantaged if their vulnerability is due to the failure of social institutions to protect them from social discrimination, such as persons with disabilities, particular diseases, or on the basis of age, nationality, gender, or being a single parent, rather than due to the natural characteristics of individuals as such.
Redressal means the same thing as compensation. There is only type of disadvantage here. 'Natural characteristics' don't exist or, at any rate, are not non gameably observable.
Finally, the third type of disadvantage relates to the concept of “justice as protection.” This concept considers it unjust that individuals exist that have less than is necessary for a minimum standard of wholesome and cultured living, even if such individuals are not regarded as disadvantaged in terms of the first or the second type of disadvantage.
This is simply Social Insurance. Our feeling is 'there but for the Grace of God goes I'. We pay into such a scheme because our future is uncertain. We may need this protection ourselves.
Redressing this requires a form of outcome-equality to bring every individual up to a reference point.
So, a Social Worker, or a Clergyman, or someone from a Charity, goes round to see if the person has unmet needs etc. The thing isn't rocket science but it does require a lot of tact and idiographic knowledge.
This concept focuses on individuals, unlike the first two concepts, whose specific causes of difficulties can be hard to identify.
The first two either focus on individuals or they are useless. Redressal or compensation involves identifying eligible individuals. Groupings don't matter. If they are costly to form, the rich may have many such and the poor none at all.
Because of this diversity of disadvantages and of the forms of justice underlying them, the concrete conceptions of “basic well-being” become plural.
This does not matter if it involves stuff that can be bought with money. Otherwise, 'specific performance' is the method of redress.
Take for example, individuals who have suffered disadvantages as a result of having been victims of an atomic bomb. This event, as many say, has completely changed their life plans and goals, and they have decided to live as witnesses of this social disaster in order to prevent it from ever happening again at any other place or time. In such cases, air tickets to fly to New York, which holds the “No more Hiroshima/Nagasaki Congress,” or a grant for publishing their memoirs may be counted as a necessity for securing their basic capability.
These unfortunate people are living witnesses that Atom bombs are a good thing at least when used against a sensible people, like the Japanese. It seems, some of them are so nice and sweet they are willing to fly to New York- the financial center of the only country that has ever used nuclear weapons and did so against them.

Even if these two Japanese Professors aren't playing an elaborate joke on us, the fact remains that monetary reparation will allow the victims of the bombing of Hiroshima and Nagasaki to do what they think best. Some may want to attend Conferences. Others may want to publish their memoirs. One or two may wish to give the money to Chinese victims of Japanese aggression. The rest may wish to spend the money in a self-interested manner.
This suggests that, under a common concept of “basic wellbeing,” special needs must be addressed relative to the different types of disadvantages.
No. Special needs must be addressed as needs, not disadvantages which may have already been overcome. A rich guy who overcame adversity should not receive more money taken from poorer people who did not have that particular disadvantage growing up. It is a different matter that if there was a justiciable deprivation, then the rich guy has a legal claim. But this is part of his endowment set. It does not arise from disadvantage but rather a right established under a bond of law.

Types of disadvantage do not matter when it comes to Social Welfare.  In any case, no typology of disadvantage is canonical. The thing is purely subjective, if not wholly stupid.
Lastly, it should be noted that an individual might actually suffer from all three types of disadvantages mentioned above and as a result will be included in all three types of groups.
If there is an advantage to be gained, rational people will claim to be part of any and every group. A lot of resources would have to be expended on checking the veracity of these claims.
This implies that such an individual’s basic wellbeing consists of three aspects which cannot be compared intra-personally, while each of the three aspects permits inter-personal comparison within each group. In this case, the individual can participate in the process of making an evaluation of each group, and moreover, deserves taking advantage of social policies which are chosen in terms of all three types of disadvantages, though the actual amount of provision might be reduced considering combination effects of the three policies.
Marvelous! Instead of doing useful stuff, we could all spend our days claiming to be Disabled as well as Transgender and to belong to some historically oppressed ethnic group. Just as, in India, a huge amount of havoc is created by the demand of prosperous, land-owning, castes to be counted as 'Backward', so too, would every country feature demands by people of the majority ethnicity to be treated as the victims of historical injustice. The perpetrator of the Christchurch atrocity would become a hero.
Of course, the three types of disadvantages do not necessarily completely characterize such an individual’s personality. Individuals have the freedom to evaluate their own well-being in terms of their personal conception of the good.
They also have the freedom to tell Social Choice theorists that they are being silly.
Furthermore, individuals have the  freedom not to participate in the process of making group evaluations or not to take advantage of social policies which give a certain provision to that group.
In that case, this paper is useless. People have the freedom to reject it as a pointless and wasteful bureaucratic exercise.
In our framework a group is nothing more than an informational basis for making social evaluation sensitive to particularity so that an individual is not fully characterized by the so-called group identity of the group they belong to, as Sen carefully points out (Sen, 1999, p.29, 2006, p.18f.).
Is this a sound 'informational basis for making social evaluation'? No. There is nothing to stop an imaginary victimhood from being claimed from a mercenary motive.  Wealthy men may complain of being persecuted by allegations of sexual harassment. They may demand vastly greater remuneration to offset their increased psychic pain.

The authors say

... persons with disabilities have taken the initiative and offered their expertise in assessing alternative articles, going by the slogan 'Nothing about us, without us.'
This makes sense when it comes to physical handicaps. However, mental illnesses may be a different kettle of fish. Furthermore, imaginary ailments or psychic injuries should be treated differently. This means, there must be 'something about us' which is not demarcated by us. Otherwise, the group of the privileged who have to pay for everything will be empty while the group of the insulted and injured would encompass everybody.
The above example urges us to reconsider the appropriateness of the standard framework of social choice theory, as there is little discussion about the relationship between asymmetrical prior treatments of individual preferences and the different types of social choice problems they are admissible in.
It is sufficient that there be legal redress regarding 'asymmetrical prior treatment' for the endowment of the agent to change in a manner which gets rid of the problem.
In addition, it indicates that the asymmetrical prior treatment of individual preferences could be appropriate when the given social choice problem is on the effective exercise of universal human rights with respect to the particularity of those individuals.
Rights only exist if there are adequate remedies under a bond of law. If so, the endowment set changes.
The main purpose of this paper is to formulate a social choice procedure that permits prior treatments for disadvantaged groups not as exceptions but as a general rule under some reasonable and socially imposed conditions. More specifically, we focus on a specific type of social choice problem: selecting a public policy in terms of securing basic well-being for all and defining the concept of a group as a representation of particularity that requires a prior treatment in order to secure basic wellbeing for all.
In other words, this is a theory which incorporates what the Law ought to be when it comes to redressal. However, it has the same problem as that faced by the Law- viz. spurious claims. Mechanism design may be of some use here. Social Choice theory is useless because the Preference Revelation problem is too great.

The framework of this paper is as follows. First, the key concept of this paper, an individual's well-being is defined as a function of individual's abilities and social policies (called well-being transformations). While no particular type of a well-being indicator is presumed, it is generically multidimensional in the space of plural attributes, each of which is observable in public.
Unfortunately, no attributes are unambiguously observable in public. That beautiful blonde is actually a dark haired man. He is wearing a polo neck so as to hide his Adam's apple. The bespectacled nerdy looking guy isn't really an computer geek. He is a con-man who will fleece you of your hard earned savings.
For the sake of simplicity and without loss of generality, well-being transformations are assumed to be fixed and the profile of each individual well-being is identified corresponding to each alternative social policy.
So, first our authors get rid of information asymmetry by making all attributes publicly observable. Then they get rid of Knightian Uncertainty by making outcomes wholly determinate. What's next?
The paper also refers to basic well-being, which represents a critical reference point of multi-dimensional well-beings that one can legitimately claim to have met by social policies, and each group can refer to it to identify the injustice of social policies.
How can one legitimate a claim to have established a 'reference point' in a Social decision space? I say it can't be done because antagonomic preferences can be utile. In other words, questioning the legitimacy of an ideology or institution is, itself, a good thing. We don't want there to be unanimity on this point because it will cause complacency and dynamic inefficiency.

Thus, our authors, after getting rid of Information asymmetry and Preference Revelation problems, and then getting rid of Knightian Uncertainty, have now gotten rid of the fundamental premise of an Open Society- viz. there can not be and ought not be unanimity re 'basic reference points' in the Decision space. On the contrary, well-being should be an essentially contested concept.

Our two very erudite authors assume that members of a group have a shared conception of the good.
The idea behind this formulation is that each individual of each group appraises the well-being contents of the members of the group, including her own, not in terms of a personal conception of the good but in terms of a shared conception of the good, on the basis of some commonality among members.
 Thus, though as individuals their preferences are heterogeneous, they somehow magically become univocal purely on the basis of group membership. If this is true, why not create a Super-Group of all members of Society? By the same magic, their preferences will become univocal. Social Choice theory would have univalent foundations.

Even if there is some reason militating against a Super-Group, it remains the case that on the author's assumption a particular grouping would have an algorithmic method of achieving unanimity.

This means a Group could check any mathematical proof- like the Mochizuki proof for the abc conjecture- by giving it a concrete model within its own domain. After all, mathematicians who believe the proof are a Social Grouping. They may become the target of discriminatory behavior. Since, once they become members of the 'Mochizuki Grouping', they will automatically have the same conception of the good, it follows that they will immediately create a Mathematics with univalent foundations in which the proof is correct. The 'Anti Mochizuki' Grouping, meanwhile, would have created an alternative Mathematics. All this will happen instantaneously, so we can immediately compare the two and make all sorts of new discoveries. It seems, just joining a Grouping creates a 'hive mind' which can immediately work out, in an intensional manner, a full fledged Mathematics with wholly univalent foundations which is thus computer checkable and wholly algorithmic. How cool is that! True, stupid Iyers like me won't benefit- but that is precisely why the Iyer Liberation Front demands that Ireland be handed over to us more especially coz Brexit gonna precipitate a Zombie Apocalypse in the part of London where I live.

Notice that what the two authors envisage below is perfectly compatible with Gandhism. It is wholly prohibited by Ambedkar who as a Buddhist asserted the emptiness and delusive nature of 'skandhas'- groupings, or aggregates.


Either being identified as the least advantaged has no effect- in which case why bother?- or it changes the expected endowment set. But in that case, there is an impredicative element here. Thus the operator can't always be reflective and transitive. We can't say there is a poset. For all we know, chaos might prevail. The Spilrajn extension theorem has no purchase. Everything is 'anything goes' because Income effects arise and indeterminacy obtains.

Ambedkar converted to Buddhism and is venerated as a Boddhisattva. Our two erudite authors probably know more about Zen and the peasant-Sage Sontoku Ninoyima whose Economics has been formalized as a General Equilibrium theory immune to the 'paradox of thrift'- and virtually everything else under the sun than I do. Still, I did attend Morishima's lectures and drew some very cute pictures of cats on my exam paper. The title of Morishima's Course was 'Econ B' so I thought I'd get a B on the course. When I didn't I went to see the great man himself. I explained that I was an Iyer who had been historically oppressed by Iyengars like that Srinivas Ramanujan everybody keeps making films about. Anyway, he could not understand my accent but decided to give me a pass grade on the basis of my evident disadvantages. I tell you all this to point out that I have a Japanese Guru at least as prestigious as these two young upstarts who are probably slim and not balding and not intellectually challenged in any way. 

This relates to my 'basic well-being' which is connected to epistemic privilege. Gandhism, as well as what our two erudite authors are delineating here, has no problem with granting me equal epistemic status as part of 'basic well-being'. But in doing so they prevent a Grouping, or Identity Class, turning into a 'Sangha'- something greater than oneself in which one might profitably take refuge. This was the thrust of Dr. Ambedkar's later work. 

Gandhism, or Rawlsianism, or paternalism of every type likes to prescribe an austere package of basic goods somewhat below what is available in prisons where violent inmates will stage riots unless placated. The assumption is that hegemony is so entrenched that Groupings will accept this 'social minimum' and confine themselves to, like Oliver Twist, asking for an extra spoonful of gruel rather than Structural and Institutional reform. 

The Buddhist Sangha, as envisaged by Boddhisattva Ambedkar, proceeds in a wholly opposite manner. It rejects the miserabilist dole of the Paternalist. It constructs new Institutions and modes of conduct for itself. It represents 'endogenous growth', not the tyranny of exogenous epistemic hegemony.

I omit the formula. The claim is
 that the appraisal by the least advantaged individual of his/her own well-being condition in comparison with the basic well-being is approved by all other members of the same group, in that all of them do not reveal the opposite appraisal of this individual's well-being in comparison with the basic well-being.
Wonderful! Groupings here are methods of Social Control such that your own Identity Class forces you to accept an exogenous 'basic well-being'! Where has this happened before?

Chaim Rumkowski was appointed head of the Council of Elders of the Lodz Ghetto by the Nazis. His job was to get the Jews to work as hard as they could, for as little food as possible. Then he too, along with the rest, was herded into cattle trucks and sent to Auschwitz. Jews beat him to death. It seems 'Groupings' don't and should not accept exogenous definitions of 'basic well-being'. The film 'Bridge over the River Kwai' has a similar theme.

Our two authors attribute the power of evaluating social policies to each group. In other words, there is common knowledge and a 'Muth Rational' focal point available for free.

This begs the question of why Groupings would be needed in the first place. Surely the Super Group that is Society would arrive at the same result?

The authors explain their motivation by mentioning a distinction made by Amartya Sen. However, any distinction made by Sen is bound to be wholly fatuous.

... let us clarify the basic ideas underlying this paper. The first idea is relevant to two kinds of ├Čincomparability. In this paper, the least advantaged are identified as individuals whose well-being contents never dominate the well-beings of others in each social policy.
In other words, there is no 'poverty trap'. No one can improve their position by claiming to be a member of a disadvantaged or excluded group. Thus no perverse incentives arise. Obviously, if this obtained in real life, mechanism design would be easy peasy.
Due to the multiplicity of attributes that define the notion of well-being, there could remain incomparability among the least advantaged even within a group. However, the meaning of incomparability within a group should be kept distinct from incomparability (also called incommensurability) between groups.
Why?
The reason is that the former is a technical or political problem and certain conditions of compromise can be introduced to deal with it, as we have done by introducing 'Full Destitution Comparability' (i.e. there is an inter-subjective 'floor' for 'Destitution') and Dominance (the requirement that 'lowest well-being' need not be a singleton- i.e. two or more people with different characteristics can be treated as identical)  in this paper.
 This technical or political problem turns out to be whatever the Social Choice theorist wants. It is an artificial way to define the Social Minimum. Indeed, for a reason Suzumura explained, making individual preference profiles about not just Social States but also about how a Social State is achieved by a specific Social Choice mechanism is to assume that Equilibrium concepts and Preference Profiles are common knowledge. In other words, there would be no need for Social Choice, or Law or Economics. People would just get up in the morning knowing from whom to take things and to whom to give things. Language would not be needed. All our actions would be coordinated by this common knowledge we share.

Ambedkar was a 'first order' Public Finance/Monetary theory/ Law & Politics maven. He saw that Groupings are only useful if they become 'Sanghas'- Associations which pursue specific ends in a univocal manner such that preferences and procedures change for the better. Shontoku Ninoyima is an example of an agricultural economist who turns poor rural areas into 'Sanghas'- he reversed atomization. True, his friend the Buddhist monk takes up fishing because the poor people need protein. But this is an act worthy of a Boddhisattva.


By contrast, bien pensant theoretical tripe serve no good purpose. Groupings which can envisage a better allocation of resources leading to a higher 'basic well-being' are ruled out by the axioms of this scheme. Thus no Grouping can become a 'Sangha'- i.e. an Association which tackles common problems and ameliorates the condition of society. Rather, these Groupings are assumed to internally discipline their members to accept an exogenous hegemonic dominance.
On the other hand, the latter is a kind of incomparability for which no compromise can be found as long as the plurality of disadvantages is taken seriously. This distinction between these two forms of incomparability corresponds to the distinction introduced by Sen (2002) between tentative incompleteness and assertive incompleteness.
 the former consists of 'some pairs of alternatives that are not yet ranked (although all may get ranked with more deliberation or information)' while 'the latter consists of some pairs of alternatives that are asserted to be non-rankable'.

Notice that 'tentative incompleteness' is first order. It refers to an ongoing process of comparison and is alethic. 'Assertive incompleteness' is second order. It makes a judgment regarding a class of first order comparative propositions. However, it follows no procedure. It is imperative simply.

It is unnecessary to distinguish between first order, alethic, propositions and second order imperative ones. Why? Because the former can be resolved by research whereas the latter can simply be contradicted by insult and contumely.

In this case, inter-group comparability is asserted in an alethic manner and refuted by showing it involves impredicativity and thus no well ordering obtains- save arbitrarily. Intra-group incommensurability is imperatively asserted but immediately refuted by saying 'You have shit for brains, mate. There is no specific purpose for which such incommensurability obtains. Anything to do with choice under scarcity counts as a specific purpose. Either there is a bargaining solution or there isn't. Both imply commensurability or else the underlying population splits. '

Thus, there must always be a Suzumura consistent closure (i.e. Spilrajn extension theorem type) relation for the Rationalizations required for any specific purpose. This is no mere formalism but arises from the stochastic nature of consequentialism which in turn channelizes non-consequentialist procedures and even ontologically dysphoric commodities for reasons of regret-minimization.

I may mention that Social Choice has a different configuration space to Physics because physical agents may propagate and interfere with each other, whereas probability fields may not propagate but may interfere with each other. This is because, ex ante, on the one hand, we don't know which humans will die or reproduce etc, and on the other hand, probability fields are epistemic and non-local.

Thus, Hannan consistency, i.e. regret minimization, militates for partial and incomplete contracts in the short-run. At the margin, different Groupings do a little horse-trading to keep the door open just in case. In other words, even if there is no solution to a coordination problem, people hedge on dis-coordination games. Thus, at the margin there is always some intra-group commensurability of a 'tentatively incomplete' type.

As I have often pointed, in the global ranking of victim-hood, I am equivalent to a Guatemalan goat-herder with a degree in Mass Communications from Cornell and just a shade below a Lesbian plumber whose arms have fallen off. I say this on the basis of Amazon book sales of my Memoires d'Outre tombe as compared to those by other authors of comparable literary merit.

There is a reason the Law is separate from Economics which in turn is separate from Philosophy. This does not mean there can't be a Coase-Posner type Law & Econ, because the roots of the Common Law are well understood. It does mean an Economist/Philosopher gassing on about ideas of Justice will be wholly worthless. Judging is not Choosing because the former is protocol bound while the latter need not be 'robust' but does need to be 'regret minimizing'. Thus it can feature non-consequentialist procedures and ontologically dysphoric conceptions of the Good.

Dr. Ambedkar is the rare example of a first rate Economist who actually helped write a Constitution which permitted the exercise of Social Choice in a very poor, but firmly Democratic, country. By contrast, Indian Social Choice and Game theorists turned their backs on India and wrote nonsense while cannily keeping their Indian passports so as to claim to be 'native informants' or 'Mother Theresa's' or otherwise solicit 'intellectual affirmative action'.

Japan, of course, is a very different country from India. However, like India, it features an untouchable class. I am no expert on this matter but I believe that the experiment of throwing money at the soi disant leaders of this Grouping did no good whatsoever. By contrast, enforcing laws re. confidentiality, privacy and discriminatory practices was a step forward. It may be that a visionary figure like Dr. Ambedkar- who straddled the realms of Social Science and Ethical Spirituality like a Colossus- would have rid Japan of a blemish difficult to reconcile with that Nation's great traditions and accomplishments.