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.
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! 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.
A 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. 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.
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.
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.
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.
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.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.
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.
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.
But 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.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.
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. 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.
“As Conservatives, we are engaged in a battle against cultural Marxism...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'-
"I'm very worried about this ongoing creep of cultural Marxism which has come from Jeremy Corbyn".
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'.
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.
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.
' 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.
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
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
The general equilibrium of the economy is then the set of prices which equate all excess demands to zerois 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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
... 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.
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.
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?
... let us clarify the basic ideas underlying this paper. The first idea is relevant to two kinds of ìincomparability. 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.
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'.