How do principal-agent relationships evolve within a context of structural contradictions?

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The principal-agent relationship is a very simple one. It simply means any relationship in which one party (the agent) is contracted by another (the principal) to do something on their behalf. So when you take your car to the garage for example, you, as owner of the car and the person hiring, are the principal. The car mechanic, as the person being hired to do work on your behalf, is the agent.

As society has grown more complex and specialised, principal-agent relationships have become increasingly important to modern day life. The reason for this is that they exist when one party does not have the time, resources and/or expertise necessary to carry out a certain task, and must seek an agent to do it on their behalf. Therefore, Dilbert - principal-agentbecause such relationships are so widespread, and because they create problems such as moral hazard, asymmetrical information, adverse selection, and agency rent (see notes at the bottom if you wish to know what these are), they are always evolving.

In thinking about how relationships evolve, the common approach is to think in terms of utility, attachment, and the basic emotions which drive us to maintain those relationships. In other words we tend to conduct relational analyses in an individualistic light, looking predominantly at the agents (when described in agency-structure terms both principal and agent are agents) who take part in the relationship, more than the structure within which that relationship evolves. Yet structures are built by individuals, and they are built to achieve certain things. Therefore, structures have intentions just as much as do individuals.

So what does it mean when principal-agent relationships evolve within a context of several overlapping structures? Does it cause a synthesis of those structural intentions? Or was the Bible (Matthew 6:24) right when it said that “no man can serve two masters”; implying that, if structures can be considered as Masters, then either one or both will have to be chosen over the other at various times.

Let’s take the structural contradictions between liberalism, capitalism and democracy as examples. Can a principal-agent relationship evolve within each of these structures, and at the same time better achieve each structure’s goals? What’s the aim of each? I have to be very clear here; what I’ve written below is purely my interpretation of these concepts, and some people would disagree.

Liberalism aims to maximise freedom of the individual, insofar as said freedom does not impinge upon the freedom of others; and thus it treats all individuals as being equal under the law. An utopian liberal principal-agent relationship would therefore be the most anarchic of all structural relationships. Its theoretical ideal would be that principal and agent collaborate together on an equal footing, towards a Pareto-optimal outcome in terms of marginal utility gains (an outcome in which no stakeholder’s level of satisfaction deteriorates). However its intentions as a structural framework would not be to create a Pareto-optimal outcome, but rather to allow it. This is why many people think that liberalism and capitalism go hand in hand, because liberalism is more concerned with equality of input i.e. legal rights, than output i.e. wellbeing, power etc.

Capitalism aims to maximise productivity, by ceding power over the means of production, distribution and exchange of wealth to private individuals who express competencies through their existing capital holdings. An utopian capitalist principal-agent relationship would perhaps behave in a Darwinist fashion, as a great deal of Darwinist thought was absorbed into the then youthful notion of capitalism.The ideal capitalist principal-agent relationship would at face value seem very conservative, as it would seek to maintain, and further, the power held by the ultimate capitalist principals i.e. the capital holders. And yet it would be ruthless about letting those who squander their power fall.

Democracy is slightly more collectivist in its thinking than those other two structures above. Where liberalism is slightly anarchic about its definition of principals i.e. everyone should have equal rights; and where capitalism selects individual capital holders as the ultimate principals; democracy finds the majority electorate to be the ultimate principal. An utopian democratic principal-agent relationship would therefore seek to empower the electorate.

Although many well-renowned figures have argued that democracy and capitalism go hand in hand e.g. Schumpeter and Friedman, the aims of democracy and capitalism are immediately and visibly contradictory if the above definitions are used. So what does this mean for the evolution of principal-agent relationships? If you were writing a contract governing a principal-agent relationship today, what would you do? Would you instinctively employ one structural understanding over another? Would you seek to serve the interests of multiple structures at the same time?

My expectation is that as principal-agent relationships evolve, they’re led by social, state and international structures towards one or other particular ideological structures. So for example in the period after the Cold War ended I might expect to see that principal-agent relationships evolved towards being more capitalist, as this period of history saw many people believing that capitalism was the best system that we would ever find. Whereas when a left wing government takes power, and proves to be successful with the economy, I would expect to see that principal-agent relationships become more socialist.

I’m now thinking about starting a PHD in exploration of this question, in which I would explore recent theoretical developments, and the thoughts of those elites working in the field, to test whether or not these structures do seek to pull the evolution of principal-agent relationships in different directions. Given that this is a huge question, my initial thoughts are to limit the parameters of this study as described below:

Geographical restrictions Comparison of Luxembourg with an individual UK constituency of a similar sized population
Restrictions in terms of people Economic fiscal relationships between decision makers on the one hand, and the principals of both capitalism and democracy on the other (I added liberalism above as a further example of the many competing structures that affect our thought, but it would be too broad to encompass more than 2 within a PHD)
Restrictions on the types of relationships Specific fiscal decisions made by key individuals, and how the decision makers interacted with their agents and principals in making the decisions. It doesn’t matter whether those decisions were made into law or not. It could simply be a decision to vote in a certain way. The focus will be on what influenced that decision and how e.g. were measures taken to mitigate the principal-agent problems, and if so did they better help capitalism or democracy?
Temporal restrictions The longer the timeframe the better the data will be in terms of building a trend in the evolving direction of said principal-agent relationship. However this will of course depend on what data is already available.
Restrictions on the type of research Secondary theoretical analysis will be required in order to test what I see as the study’s main weakness i.e. the subjective theoretical interpretations against which data is analysed. And if feasible it would be great to verify any hypotheses which emerge as a result of this research en masse via crowd-surfing. However most data gathered will be in the form of individual interviews with the key stakeholders involved.

Such a study would not only provide invaluable data on the evolving trend of principal-agent relationships among political and economic elites, but would also prompt further research questions into the impact of competing ideological structures on decision making among elites. However, the idea behind this research is at present only that: an idea. No research proposal of any shape or form has yet been drawn up. Therefore, I would be immensely grateful to you if you could share your thoughts with me. It doesn’t matter how educated those thoughts are. What do you expect that I’d find? Is it a worthwhile idea? Is it feasible? Whatever your thoughts are, I would truly love to hear them!

 

P.S. If you’re interested then please see the below definitions of the major problems in a principal-agent relationship:

Moral hazard is a situation in which the contract arranged between principal and agent makes one party more likely to take risks, which might adversely affect the other party. An interesting example today is bank deposit insurance. If a bank shows signs of trouble, and individuals’ deposits in that bank are not guaranteed by the government, then depositors/investors are likely to run on the bank (withdraw more than the bank holds in reserves, and prompt bankruptcy) out of fear. Yet if the government says it will insure deposits in the event of a crisis, then banks feel more able to take risks, because should the worst occur then they would not bare the costs. In the principal-agent relationship, the agent may have incentive to act inappropriately if the agent’s and principal’s interests are not aligned, and depending on the nature of the contract. For example collective cabinet responsibility creates moral hazard, for it means that the results of high levels of risk created by one Minister (agent) will be shared by all other Ministers, and the Prime Minister (principal)

Adverse Selection refers to the process through which undesirable selections could be made, usually as a result of when principal and agent have asymmetrical information. In agency terms, adverse selection often occurs because those least qualified for a post are often the keenest to be hired. For the same reason, the most ambitious are likely to try harder, and so to obtain posts more quickly than those who are perhaps more able. Yet they could also be more likely to policy shift if they think it will get them a better job in the near future. In political situations adverse selection may often be more likely, as it could occur without asymmetrical information. For example election results could require a coalition, or party factions could necessitate certain, otherwise undesirable appointments.

Agency Rent describes the opportunity for agents to extract ‘rent’ (in material or policy terms) that the principal would rather not pay. This rent can be extracted within the agent’s ‘bargaining range’. For example even if there are other perfectly suitable candidates for the job, so long as there are costs involved with replacing the agent, there is always bargaining power to be had. Rent can be extracted in material terms where the agent has the power to request more resources/pay than he/she actually needs, in the form of leisure i.e. agent shirking, or in the form of policy i.e. policy shifting.

Agent shirking is a situation when the agent is not putting in the required effort to get the job done, which is possible in the Principal-Agent relationship because the agent can observe what he/she is doing much more closely than can the principal. Dilbert - principal-agent 2

Policy shifting occurs with the presence of asymmetrical policy goals between principal and agent. As the agent does not share the same preferences as the principal, they may not lead in the direction that the principal would wish. For example ministers may have different policy ideas to their principal: the Prime Minister.

320px-Principal_agentAsymmetrical information means no more than to say that both parties do not have the same information. But the most commonly described problem here is what Gary Miller describes as Weber’s asymmetry i.e. the agent, as the specialist, holds an informational advantage over the principal, who thusly feels a need to make use of his/her authority to incentivise the agency to act according to his/her interests. For example when you take your car to the garage, you know that the mechanic knows more about the car than you do. You don’t know that when they say they’ve fixed the problem, they haven’t created another dozen, which will require you having to go back to the garage within a few months. So you, as principal, might want to ask for some sort of insurance e.g. that if there is a problem in the same area of the car within the next six months, that they will fix it.

“We should be too big to take offense and too noble to give it.” Do you agree?

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Modern society places great emphasis on not giving or taking offence. It is the reason why so many people support, and so many others are annoyed by, the idea of ‘political correctness’. But should we?Offence

The quote was from Abraham Lincoln; and we have a prima facie (at first sight) urge to agree with it. But this does not mean it is beyond dispute. In fact the statement is both imbalanced, and also inconsiderate of human emotion. The taking and giving of offense is both part of human nature, and also purposeful. Indeed as Thomas Carlyle once said:

“No man lives without jostling and being jostled; in all ways he has to elbow himself through the world, giving and receiving offense.”

Offense giving and taking are most often the least honourable courses to take. And nobody likes the person who’s quick to give or take offense. But let’s face it; emotions get a point across as reason just never could. And taking offense is an emotive reaction. Imagine you’re a Palestinian or an Israeli person, and while you live in London you meet someone who doesn’t know anything about Israel and the holocaust, or Palestine and the human rights crisis (if you don’t know already, you should note that the number of Palestinian refugees stands at a similar figure to the number of Jews killed in the holocaust). Imagine not taking offense when that person makes stupid remarks about people in the region. Wouldn’t that be a good time to start taking offense, in order to ensure that such stupid remarks are not repeated?

In the political world, umbrage seems to be a powerful tool in twenty first century politics. Announce that the opposition’s or media’s tactic is outrageous and offensive, and you will immediately frame a public response; not in terms of whether that opposition/media point has logic, but rather, whether or not they are in the wrong. In other words it shifts the negative focus somewhere else, and leaves only sympathy behind. After all, who can’t empathise with someone who’s been offended?

There are two responses to such umbrage in politics. One comes from the logic of Voltaire:

“I disapprove of what you say. But I will defend to the death your right to say it.”

The quote actually comes from Evelyn Beatrice Hall in her 1906 biography of Voltaire, whose opinions she was attempting to summarise. It was her interpretation of Voltaire’s attitude towards Claude Adrien Helvétius, and his controversial book De l’esprit. But nevertheless, the quote has gained a great deal of attention, and been repeated many times by those who believe that we should be entitled to both give and take offence as we please.

The second response is captured by widespread laws and conventions against denying the Holocaust (it is illegal inRacism in tabloids Germany, Austria, Romania, Hungary, Belgium, France, Israel, Luxembourg and many other places – in Austria it can earn you 6 years in jail), by Germany’s ban on the publishing of Mein Kampf (to be lifted in 2015), by the Islamist reaction to a series of Danish cartoons depicting the Islamic prophet Muhammad, and by even neo-liberal groups who aim to censor the press as a means to mitigate the spread of false and misleading information such as is spread about by tabloid papers.

The two opposing views understandably create quite a bit of animosity, and trigger a lot of offence.

against press censorship

But the very fact that a debate on whether or not we should be permitted to offend causes a torrent of offence giving and receiving, surely proves that it is both natural, and also to an extent unavoidable. In the economist’s ‘ultimate game’, designed to teach us about human nature, Player A is given 20 $1 bills, and told that in order to keep any of the money, A must share it with Player B. If B accepts A’s offer, they both pocket whatever they’ve agreed to. If B rejects the offer, they both get nothing. Economists expected pure rationality at first; A would propose the lowest possible amount i.e. 1 dollar. And B would accept, knowing it was better than nothing. But in fact what happened was that when the amount given was 7 dollars or less, most people took such offence that they preferred rejecting the offer in order to teach A a lesson, rather than taking the lower amount. Indeed in Descartes’ Error, neurologist Antonio Damasio argues that humans who behave purely rationally are in fact brain-damaged. Now one could of course argue, as I would, that punishing player A based on the offence caused was in fact entirely rational. But the offence which lies at the heart of the matter still seems to call the shots.

The question that remains for you to answer, is, should such offence giving and taking be calling any shots? Was Lincoln right that “we should be too big to take offense and too noble to give it”?

Does meaning go further than emotion?

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“We think, therefore we exist.” It’s a clever phrase, and difficult to refute. But thought can be little more than a computation. cartoon-meaning-of-lifeA more pertinent phrase would be “we feel, therefore we live.” But today, as with Descartes’ quote, the fact that feeling is a crucial aspect of life is fairly obvious. So let’s take it to the extreme.

In his book ‘The Passions’, Robert Solomon proposed that emotions literally are the ‘meaning of life’. What he meant by this was that emotions constitute frameworks of value and significance. Without emotions there would be no value, and therefore no meaning.

Is this true? Does meaning go any further than emotional implication? meaning-emotion-meaningIn day to day life everything can be connected to emotion. The thing we remember most from any given day is always that thing which causes us to emote most, whether it be because it gave pleasure, pain or any other emotion. And even those mundane trivialities of life that we have to do, but may not result in any emotional engagement e.g. employment to do a task for another, are still purposefully carried out in order to avoid negative emotional implications were we not to do the tasks.

However, if all of reality were nothing more than a stream of emotions and preceptors able to feel them, many people think that life would be more meaningless. In fact some people even believe both, seemingly opposing views.

On the meaning of life, Aristotle said:

“Happiness is the meaning and the purpose of life, the whole aim and end of human existence.”

It seems almost utilitarian of Aristotle to say such a thing, and the statement finds a great deal of acceptance today. And yet Aristotle also argued that were life nothing more than emotion, then life would mean less.

How can we hold such opposing views? Is there any meaning beyond emotion? How does one justify it? Is it simply that one source of emotional gratification today is justification relevant to tangible realities, and so we believe that we would always need such justification, simply because we don’t know of a world without it? Indeed the human mind is unable to imagine that which carries no weight in reality. We cannot imagine a colourless world, and as such are likely to remark that a world without colour would be worth less somehow. But isn’t that only because we know of colours? Even a person born blind has been told of colour, and wonders what they are missing. But if we had known nothing else, and if only two things existed: emotion, and the ability to feel; would we want for more? Does meaning go further than emotion?

Matthew Ratcliffe thinks the answer lies in the phenomenology of mood, which he describes as a generalised, background of feeling.

“Not all moods are generalized emotions. Some may indeed take this form but those that are responsible for the ‘meaning of life’ are not intentional states at all. Instead, they are part of the background structure of intentionality and are presupposed by the possibility of intentionally directed emotions.”

Ratcliffe gave the example of fear, which he says it would not be possible to experience without tangible cause. In other words Ratcliffe highlights the fact that the meaning of emotion hinges on our ability to think. After all, emotions are nothing more than chemicals unless they are processed and interpreted. And of course once we have the ability to think, we have the ability to doubt, to speculate, to make justifications and comparisons, and to build upon thoughts with still other thoughts. Emotions ruled by thought

So, what does all of this mean? Is it possible to feel, and not think? Is there meaning without feeling? If we could feel and think, but not remember, would we want reality? Does meaning go any further than emotion?

Does Civilisation Lead to Fragmentation, or Collapse?

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If civilisation is that which broadens society, within the framework of a social contract between people, (if you wish to dispute this definition then please see the previous posts: what is civilisation & what is it to be civilised) then what happens when society grows too big/civilised?

You could debate the extent to which civilisation is growing or shrinking (the sick society post seems to suggest that we may in fact be at the beginning of our decline). But if/when it is expanding, then this broadening of society seems doomed to lead towards societal fragmentation.

More InfoAs civilisation has grown, we have built more complex identities & more complicated lives; we have explored far and wide; we have built bigger social networks than ever before; we have settled in more places; we have constructed more buildings, groups and works of art; and we have more commitments on what precious resources we have. How can we keep up with all of these developments?

In short, due you think civilisations come to ends in ‘Big Crunches’, when the gravitational forces that held civilisations together (e.g. ideologies, nationalism, religion etc) begin to crush the spirit of civilisation? Or do you think, like scientists currently think about the universe, that modern societies could continue to expand, until one day that one society has become ten, or twenty or more?

This question is in fact much more difficult than it seems. And you can see this by thinking about fallen civilisations from eras past. The ancient Sumerian civilisation (the civilisation which invented writing, and whose name means ‘land of the civilised kings’) collapsed under the strain of repeated invasions. The Mayan civilisation came to an end palenque-overview_mg_1198as a result of the Spanish invasion in the 16th century, due to war, disease, and a foreign civilisation determined to assert its own supremacy. The Khmer civilisation in modern Cambodia came to an end due largely to environmental changes. Ancient Rome fell as a result of repeated invasions, but over an incredibly long period of internal economic decay. All of these falls are caused by very pragmatic things: food resources, safety, environment and economics.

Are you still following? Good! Because almost all of the above ‘falls’ were in fact the falls of political and economic entities; and not civilisations! That one requires the other could be true, and should be the topic for another day. But that point aside, if civilisations are primarily about societies, then how much do those above examples really help? Was Roman civilisation expanding when it fell? Did it end up splitting into various smaller civilisations, all of which bore the mark of its ideas, art, music, writings and religion? Or was it in fact being pulled towards a ‘big crunch’, by entrenched ideas of aristocracy, hierarchy, militarism and hedonism? Did Mayan civilisation get destroyed by the Spanish? Or did its spread get temporarily halted, only to re-emerge and fragment into various different territories, such that signs of it can be seen today in Guatemala, Mexico and Belize?

Author and historian William R. Everdell once said that the rise and fall of civilizations is

“more a pattern in the mind than a pattern in the world.”

If this is true, and civilisations are carried not by the size of your guns, but rather the potential within the minds of your society, then what is the future for modern civilisations today? Are we headed towards a big crunch? Or are we headed towards accelerated expansion and fragmentation?

Is Society Sick?

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I heard it said once that people who are overly competitive are showing signs of insanity. It was a native American tribe who held this view, and it is a view that I immediately sympathised with, even if I would never have used the word ‘insanity’. Many of my strongest political convictions are reflected in this view; that homelessness and extreme poverty should be eradicated, that all people have value to contribute within society, and that extreme capitalist and individualistic thinking has corrupted our pursuit of happiness.

However it was when I set up the Democratic Reform Party that I really started thinking about our mental/spiritual health as a society. The more I learned, the more it seemed to me that our entire socio-Anorexiceconomic system is designed to defeat itself. We are taught in homes and schools alike what “success” actually is, not explicitly of course; but we nevertheless emerge at the end with three distinct ideas: the first idea of success is fame and fortune; the second is a highly paid job, a house, a marriage, and kids; and the third is to become a hero, but we are warned away from this latter route by dint of the fact that for every hero there are a thousand failures. In fact a quote of Dorris Lessing springs to mind:

“Ideally, what should be said to every child, repeatedly, throughout his or her school life is something like this: ‘You are in the process of being indoctrinated. We have not yet evolved a system of education that is not a system of indoctrination. We are sorry, but it is the best we can do.”

Through this indoctrination we, in our ‘careers’, are encouraged to pursue one thing above all others: money. It is polyp_cartoon_Rat_Racethis pursuit that drives so much of us into competition, that eats up our free time, limits the pursuit of leisure, results in more emphasis on career than social relationships, and indeed encourages us to move away from friends and family in the name of money. So it encourages us to spend more resources on ourselves, and also in ways which, statistically speaking, are in fact more likely to limit rather than increase, happiness.

Since this experience I have not learned anything which has shaken these ideas and thoughts from my mind. I’ve known many friends with severe depression, several of whom have attempted suicide. I received a message only two days ago from the mother of a close friend, saying that my friend needed help. I have even experienced the loss of one of my family members in a manner which seems to me certain to be linked to the depression which plagued his mind. It was hard writing that. It’s been quite some time now, and I have talked about it, if fleetingly; yet even a sentence brings tears to my eyes.

So yesterday, when I heard Tim Macartney (social entrepreneur and leadership expert) talking at the London School of Economics about the ‘Children’s Fire’, I thought that this is definitely something I wanted to blog about. The ‘Children’s Fire’ was literally a small fire placed at the heart of decision-making councils in some ancient native American tribes. It served as a reminder to those present that no decision should be passed which might harm a child, irrelevant of whether that child be human or animal.

Tim Macartney told his audience that he had once introduced this idea to a council of leaders, and been told that it was a little naive, and perhaps even childish, to think that we could employ the same idea today. Yet Tim responded by asking the audience to think in the exact opposite manner. He asked them to think of a society where that fire was never used.

“Don’t you think” he said, “that this society without the children’s fire, is sick?”

A few years ago I read a report explaining that clinical depression would, on current trends, become the world’s second most disabling condition behind heart disease by around 2020. I felt saddened, and immediately wanted to raise money for charities working to help people with depression. Yet I, like many others I guess, held hope that the trend would slow. In fact however, it sped up. In late 2013 experts reported in the journal PLOS Medicine that depression had already become the second biggest cause of disability in the world! You can see the BBC report here: http://www.bbc.com/news/health-24818048.

Based on the work of psychiatrists, psychologists and academics such as Fuller Torrey and Judy Miller, this trend in fact seems to be much broader than depression. They published a book in 2007, arguing that the rapid increase of mental illnesses since 1750 was an invisible plague that urgently needs to be tackled. The prevalence of insanity for example, according to their research, was once considerably less than one case per 1,000 in the total population, and yet by today has risen beyond five cases in 1,000. If true, the implications of such findings are quite scary.

sick_society_quote-text11875

Unfortunately the data over the period analysed by Torrey and Miller is sketchy, and so we can’t be sure of the validity of this argument. However we can be a lot surer of records gathered since the 60s and 70s. Based predominantly on census data from the period stretching back to 1971, researchers at the University of Sheffield found that a staggering 97% of communities studied in the UK have become more fragmented and “rootless” over this period, and also levels of “anomie” (social instability caused by erosion of standards and values) have risen significantly. In the US, over a similar period, it was also found that the rate at which Americans invite people into their homes has declined by 45%. Indeed findings such as these are not hard to find. Robert Putnam, in ‘Bowling Alone’, reported significantly increasing levels of dis-cohesion and social fragmentation. Cacioppo & Patrick published similar findings in 2008. Carne Ross had a significant rant about such statistics in his book published in 2011, ‘The Leaderless Revolution’. Professor Mark Stein drew the conclusion in a ‘Psychoanalysis of the Financial Crisis’ in 2012 that Western Society has been behaving neurotically for 20 years (http://www.businessinsider.com/a-psychoanlytic-guide-to-the-financial-crisis-2012-6). And I could cite many more sources!

Statistically speaking, happiness is no higher today than it was in the 1950s. And what’s worse is that our replacement for it i.e. the pursuit of money, isn’t helping us either. Since the 1970s the average income of the most wealthy has skyrocketed. But the median income of the average person has if anything fallen slightly. What does that suggest to you? Is our system broken? Is society itself sick?

Of course we could take any time or place in history, list the problems, and somehow come out with an argument that society is sick. So maybe these problems aren’t nearly so huge as they seem. But to me personally, they certainly seem to be pretty huge. How do they seem to you? Is society sick?

What is the nature of reality?

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Quarks-and-Leptons-ChartReference to basic building blocks in nature date back to the 5th, and possibly 6th centuries BC, from Ancient Greece and India. Such thoughts propelled a historic evolution of science and philosophy, to the point where today we are able to divide the atom into protons, neutrons and electrons, and then divide them into quarks, leptons, gauge bosons, photons, gluons and the higgs boson. We can delve even further into these elements with quantum field theory, which treats all particles as excited states of an underlying physical field. But it’s around about at this point when our understanding breaks down.

Our scientific understanding seems constantly to change, as we doggedly root down further and deeper into what we can analyse. Yet in everything we have found, or even thought of, we have always discovered two things: mathematics, and potential.

Galileo: “The book of nature is written in mathematical characters.”

Cartesian doubts come mostly on two levels: horizontal scepticism, whereby we doubt people’s expectations that just because something has happened a hundred or a thousand times, it will necessarily happen again; and vertical scepticism, whereby we doubt inferences and implications. Both doubts are rational, and we could perhaps imagine a reality in which these forms of horizontal and vertical logic don’t serve us very well. Yet in this reality, they do. Indeed Einstein found the numbers to suggest that the universe is expanding in 1916, and yet despite the fact that he thought it to be illogical and dismissed the maths, Edwin Hubble later found clear evidence of the universe’s expansion. Indeed if you look at the history of discovery in science, particularly related to those particles discussed above, you’ll often find that people knew about the particles before they found evidence of their existence. The reason why we can do this is that all of reality seems to obey mathematical rules. 1 + 1 always equals 2, no matter where or when you are. And this also explains why potential seems to lie at the heart of reality, for as I argued in ‘Does Nothing Come from Nothing?’ the existence of zero in addition to, and separate from, nothing, supposes that positives and negatives can spring into existence where before we would have been able to perceive nothing.

Plato argued that numbers are not simply human constructs, but are actually real, whether or not we can actually see them. Max Tegmark went so far as to theorize that the universe itself is made of maths. UniverseMath_m_0131Yet what are numbers? Why do we ‘sentient beings’ come pre-equipped with ‘number sense’, such that even if we don’t know the words for numbers we can instinctively understand what the difference is between encountering two dogs, three dogs and more? Why do we find beauty in mathematics? Take sounds for instance; those we perceive as a threat or warning follow different mathematical rules (if you draw patterns based on the notes) to those in which we find beauty.

Defined linguistically numbers are values used to express quantities, or more fundamentally they are information. But it seems hard to think of information being at the heart of all things, since insofar as everything has an information content or position, even if that position is set at zero, information can easily be thought of as a dimension (in fact even your shadow is an example of your informational content). And current scientific understanding says that dimensions sprang into existence with the Big Bang, which suggests that it is possible for dimensions not to exist (honestly, I’m not sure I can buy that).

What do you think numbers are? Are they the most fundamental aspect of reality? Are they the only reality? Could there be something other than maths? Are numbers simply a construct within our Universe?

What do you think?

Does the State Have Real Power to Intervene in the Economy Today?

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The latest Journal of Labour Economics (Uni of Chicago Press) features an essay entitled “The Detaxation of Overtime Hours: Lessons from the French Experiment.” The data does show an increase in the number of overtime hours claimed, which was the intention of the law. However data gathered about the number of hours worked (the particular focus is on trans-border workers, who should theoretically come to work less overtime than French workers after October 2007) shows that:

“The detaxation of overtime hours has had no significant effect on length of time worked.”

The law did nothing to change earlier laws or regulations concerning the working week (which was capped prior to 2007). It simply changed the cost of working overtime. And as such, according to the authors (Pierre Cahuc and Stephane Carcillo), despite the popularity of this same policy in other European countries (e.g. Austria, Belgium, Italy and Luxembourg), its result is simply to aid tax optimisation.

French 35 Hr Working WeekWithin the context of the French socio-economy this article and argument may strike you as being one among many overtly, and obviously political manoeuvres in what is today a highly divided society between the left and right wings of politics. However, there is a wider point at play, and a more international one. In an increasingly globalised world (and by globalised I actually refer to devolution as well as internationalisation), how much power do state politicians truly have over the economy (it’s a big enough topic already so please stick to economics if you comment)? And if such powers are different in extent to how they were in the past, then what is the shape of that trend? Are we on a plateau today? Or will the future see politicians at the state level become completely redundant?

According to a growing consensus, the result of modern globalisation has been a dominance of the markets and capitalists over the power of democracy and state governance. But in many ways this consensus is a shame, because it means that few people discuss the extent of government power anymore; they only discuss whether it is good or bad that it has declined, and will continue to do so. Furthermore, there is evidence to suggest that globalisation is not always the prime culprit behind such reduced power.

In the above example Cahuc and Carcillo do not argue that exempting overtime income from tax is ineffective because the global markets have a more powerful impact on the amount of overtime demanded or supplied. They argue that it is ineffective because it ignores some of the most fundamental principles of fiscal planning. If taxation is to be efficient then it must define a tax base that the authorities can easily verify, and checking the amount of overtime actually worked, as opposed to how much is declared, is almost impossible for the Tax Authorities and/or withholding agent, to accurately verify. Indeed, although they do not mention it in the article, one could go to the very roots of the subject. In ‘Wealth of Nations’ Adam Smith proposed four canons (principles) by which tax can be assessed: efficiency, fairness, certainty and convenience. It could be argued that exempting overtime income fails all four of these.

  1. Efficiency has been discussed already. It requires an easily identifiable tax base.
  2. On the matter of fairness, some have less verifiable hours than others, and often these people tend to be richer to start off with.
  3. The criteria of certainty is all about simplicity. The more complex the tax system becomes, and the less that the general public know about which parts of their income are taxed in which way, the less certain everything becomes.
  4. Convenience is about how easy it is to find out what’s owed, and how easy it is to collect the money. As already discussed, overtime hours hours not recorded but actually worked, is incredibly difficult to actually check.

Failures in these four areas suggest that rather than globalisation, it may often be sheer incompetence on the government’s side which causes an ineffectiveness of economic intervention. Clearly this is a subjective view, and it’s not necessarily one that I am advancing. However remember that the term ‘globalisation’ was barely even discussed before the late eighties. And yet the ability of governments to manage, plan and/or regulate their economies has been limited since well before.

Policy Area How did it Affect Economic Governance?
The Rise of Monetarism & Fall of Keynesianism Since the late seventies Keynesian macro-management has been largely discredited, Monetary Policy has taken precedence over Fiscal Policy, and Monetary Policy decision making has been outsourced to independent Central Banks.
Tax Resistance The ‘race to the bottom’, in which governments compete to attract rich residents with low rates of tax, is not the only reason for tax resistance. Think about the Boston Tea Party – what started the American Revolution was essentially tax resistance. And what about Hoover’s tax cuts in 1929? He cut marginal tax rates to the lowest point in modern history, a long time before modern globalisation.
Privatisation Speaking historically, privatisation was less about increased efficiency, and more about simple costs. Looking at examples like British Steel, privatisation occurred prior to globalisation, and was implemented as a way of getting rid of subsidies from the Exchequer.
Moves to Restrict Social Provisions and Benefits These also started prior to the modern period of globalisation. Extensive taxation, designed to redistribute wealth from poor to rich, was rejected by electorates around the world, particularly, and probably firstly, in the US.

According to Robert Skidelsky, an academic often referred to as today’s most prominent biographer of John Maynard Keynes:

“Globalisation is as much a consequence, as a cause of declining government power.”

Such a statement starts one thinking about the Japanese fiscal stimulation of the 90s, and those employed by many Economic Intervention Antisince the 08-09 financial crisis. It brings to mind the rise of China. And it also brings to mind left wing leaders from Latin America like Hugo Chavez and Evo Morales. In 2005 the BBC reported that out of 350 million people in Economic Intervention ProLatin America, 3 out of 4 lived in countries with left leaning Presidents. It’s become so significant a trend in Latin America that it has been given a name – “the pink tide”. And despite what many have said about their success, there have been successes.

So, does the state have real power to intervene in the economy in the modern, globalised world of today?

“If you have faith as small as a mustard seed, you can say to this mountain, ‘Move from here to there,’ and it will move.” Is it true?

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FaithThese words were Jesus’ words, taken from the Bible in Matthew, passage 17:20. But no this is not a religious post. If you remove all the dogmas and biases of our time, Jesus was a philosopher, and one with many interesting points of note. One of these points was that we have power over nature.

Today we know that we have power over nature. We collectively employ industrial level technologies to reshape our environment. Indeed where once upon a time humans looked upon nature with fear and awe, today we look upon it as much with a sense of caution, reservation and a fear not that it might hurt us, but that we might hurt it too much. However this wasn’t Jesus’ point. This power referred to above is indirect; for it involves usage of tools. Jesus argued that we have direct, mental power over nature. My question to you is whether or not this is true.

The scientific method of experimentation and empirical support is still relatively modern in human history. Despite early examples of the experimental method in works such as those of Alhazen (an Arab scientist of the 10th and 11th centuries AD), it was not until Francis Bacon, and later others such as Galileo and John Locke, that the experimental method of modern science came to the fore. It was a huge change in human thought, shifting our thought from hypothesis, meditation and deduction towards empirical evidence evaluated with sensory experience. But more recent shifts have taken place.

The study of physics today is divided between the observed and unobserved, and for this very reason more and more of quantum science cannot be judged by sensory experience. What makes this so is that the very act of observation changes what happens at the quantum level. This was evidenced by the Quantum Slit Experiment, which showed that individual electrons could follow multiple different avenues of potential at the same time. So for example if you fired a single electron at a board with two slits in it, it would actually go through both. Of course this baffled scientists, because it defies the rules of classical physics. double_slit_experimentSo they put a camera next to the board to see what happened. And lo and behold, the electron started behaving exactly as the scientists would have expected. It stopped behaving like a wave of potential, and started behaving like a single piece of matter, going through only one slit.

Quantum physics therefore seems to suggest that everything exists in potential, and it’s only when something is observed that one single thing can be perceived, which accords with our view of the world. Furthermore, many experiments performed with simple random selections of binary data (0s and 1s) from the 60s to today have found that our hopes seem to affect the probabilities in a real way i.e. if we hope for more 1s then there is a higher probability that more 1s will show up. Of course this seems like nonsense to us, because once again it defies the rules of classical physics. If it were true that we had such mental power over reality then why wouldn’t we see more signs of it? If a crazy person, or someone on drugs, believes they can fly, why can’t they actually fly?

The only explanation I can find or think of for the division between quantum and classical realities is that the very act of observation requires interaction with the experiment. To measure the position of an electron for instance, you must somehow change the electron. And if we heard of anyone doing anything that defied the rules of classical physics then we would have heard about the act i.e. observed it, and therefore influenced it with our own doubts.

How observation changes reality is unknown. It’s not as simple as saying that said observation requires us what-ifbouncing a photon off of the electron, since in theory this would have happened anyway. Indeed it seems as though there is an exchange of information at play, and that both we and the electron are somehow entangled and communicating information between one another instantaneously. In other words we are literally telling the electron how to behave. Since at the big bang all things, even space and time, were part of a singularity, we can suppose that all aspects of the universe are still entangled today. So therefore, if all observers believed a certain thing, would that thing happen? If everyone woke tomorrow believing that gravity didn’t exist, would we all float off into space?

Human Conflicts come from Structural Disequilibrium

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Sigmund Freud assumed that humanity bares a sinister instinct of self-destruction, which acts as the counterpart to all other instincts preserving life. It’s a psychological argument that human agency is at fault for all conflict, and as K.Waltz (Man, the State and War) once said, in trying to explain everything with psychology, such proponents ended up explaining nothing; for how can we stop two innately violent people fighting, other than by keeping them apart? Konrad Lorenz (scientist and author of ‘On Aggression’) put such weight on the importance of agency that he ended his book with the hope that we will evolve beyond our more base instincts.

“I believe that reason can and will exert a selection pressure in the right direction. I believe that this, in the not too distant future, will endow our descendants with the faculty of fulfilling the greatest and most beautiful of all commandments [that love and friendship should embrace all of humanity].”

Your FaultSuch arguments see the locus of the important causes of war to be found in the nature and behaviour of humanity. Confucius put it even more simply when he said

“There is deceit and cunning and from these wars arise.”

It’s actually a little bit of a blame game. But what if we weren’t programmed to be violent? What if violence and tensions arose only as a result of imbalances/disequilibria between different structures?

The causes of civil war was the topic of my undergrad dissertation. It was in fact a terrible piece as I only had a few days to write it up. But my research was extensive, and I hadn’t since challenged my basic premise that no single cause of war should be highlighted above the others – until this last weekend. Up until then I separated individual agency from the structures that they lived within, and so had to admit that our innate tendency towards violence could be one explanation of conflict. But I was wrong.

I was refuting (or trying to) an argument that we should base our diets on what the eco-system permits, by arguing that morality should supersede economic logic. I said that each way of thinking, whether it be economic in the thought process employed, or moral, or whatever else, is a lens through which we see the world. Sometimes, after an event has taken place, someone might call you stupid, and provide you with an argument that in hindsight seems obvious, but for some reason you completely overlooked at the time. It doesn’t mean you’re stupid; you were capable of thinking of that on your own. You just weren’t seeing through that particular lens at the time. Put simply, we don’t employ all lenses equally, because we have built them as internal structures within our mind, and used them since birth to make decisions.

lenses through which we see the worldIn every day life we are required to think economically, politically and socially. It’s essential to the tasks that modern economies expect us to perform. And yet it’s quite hard to discover who is moral and who is not. Perhaps more scarily, for many societies it’s as socially acceptable to joke about not being moral as it is to joke about not being clever. And when we do hear someone joking about not being very clever, we usually have an instinctive judgement reaction. We’re able to agree or disagree, even if we don’t actually say what we think. But what about when someone jokes about not being a good person? Then, it can be very hard to judge. Our moral lens is simply less frequently used than our economic one, and as a result it’s slower to adapt.

Right now you exist within an economy. You probably go to work, pay the bills, pay your taxes. In short, you lead quite a rigid lifestyle economically speaking. And yet put into the state of nature, with no economic structure in sight, you’re very likely to start thinking in terms of survival. ‘OK. I need food, water, shelter, safety, warmth.’ Given such a scenario even a devout moral vegetarian will become immediately aware that their eco-system has changed. They’re placed firmly back into the food chain, and will probably hunt and eat meat. But, will they have spent time to make a moral justification? Or will they be fine with the economic one, that their survival rests on their eating meat? Perhaps eventually that person will think of a truly moral justification. But it takes more time for that moral structure to adapt, and thus our immediate economic actions aren’t always the most moral.

It was when I made this argument about the different modes of thinking, and the speed of adaptation for each, that I realised I was thinking structurally. And when in the above example one structure adapts at a different speed to another, there arises a disequilibrium between the internal moral structure for decision-making, and the internal economic one. When the need arises we do what we have to, even if the next day we may feel guilty. Or in other words, these lenses through which we perceive the world are structural components of our thought processes, just as the economy, state, society, and international arena are all structural components of the world order. When those structures are imbalanced, or moving at different speeds, the result is an outpouring of emotions, and potentially aggressive behaviour (this behaviour can be aimed inwards or outwards). Just because we have a natural potential for aggressive behaviour does not mean that natures forces our hand. Even the actions of individual agencies are ruled by structures.

Just in the interests of explanation think about an economy which rapidly grows, while the state structure remains relatively stagnant, and although social expectations rise, little socially actually changes. Russia at the outbreak of the First World War fits this example perfectly. Socio-political expectations rose along with the economic reality, and yet when these expectations weren’t met, frustration and aggression was the result. So when it entered WW1 it entered with severe structural disequilibria, and when it left, it did so to civil war.

Plate SpinningThe best way to think about how structures cause conflict is to picture a game of Plate Spinning (a game where plates are kept from falling to the floor by spinning them atop of a series of poles). If one of the plates begins to spin at a slower speed than all of the others then it begins to wobble. There is an immediate disequilibrium between the different plates, and potential for damage if the plate is allowed to fall. My contention is that each of these plates represents a different structure; or rather each of the poles and people spinning represents a different structure, and the plates represent the visible agencies who are seen to be causing conflict, but are in reality only reacting to structures which have changed their behaviour out of sync with their partners.

What do you think?

21st Century Thought in IR

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WW2 VictoryThe effects of World War Two in International Relations are numerous, with only the most obvious below.

  1. The loss of life led to obvious demographic, socio-psychological and economic impacts
  2. Decolonisation after the war led to a re-mapping of the geo-political environment
  3. The international power centre shifted from Europe to the US and USSR
  4. New international bodies emerged e.g. the Bretton Woods Institutions

These effects are well known. Indeed it was the biggest war that humanity has ever experienced, directly involving  over 100 million people, and from more than 30 different countries. So such effects are even expected.

However, one of the most enduring impacts of WW2 has also been one of the least talked about: the entrenchment of political thought. Appeasement is now seen as wrong. There is seen to be no choice other than capitalism or socialism, democracy or dictatorship and liberalism or conservatism; when in reality the number of options that we have is far far larger. And all of these entrenchments seem to based upon two dangerous assumptions: the assumption of knowledge, and the assumption of righteousness i.e. the arrogance of assuming that ‘we’, the subject(s) of contemplation, are always in the right.

It could be argued that we have always held these assumptions, and that they are an implicit part of human nature. And yet not only are they very illiberal and non-cosmopolitan assumptions to hold; it is also a fairly safe thing to say that there have been more conflicts since WW2 than before, year on year. The U. of Michigan’s “Correlates of War” project documents every conflict since 1816, and according to their calculations
there have been a total of 194 actual “wars” between 1945 and 2001, and that does not include the more than 3000 different disputes that occurred in the period. So was it just circumstance that caused these polarisations, divides and tensions? Or was there a fundamental change in the way we think?

The American philosopher Avital Ronell believes that increased moralistic interventions abroad do stem from such assumptions.

“The other is so in excess of anything you can understand or grasp or reduce, this in itself creates an ethical relatedness… A relation without relation, because you can’t presume to know or grasp the other. The minute you think you know the other, you are ready to kill them! You think oh! They are doing this or this.. they’re the axis of evil…let’s drop some bombs!. But, if you don’t know, don’t understand this alterity, it’s so other that you can’t violate it with your sense of understanding; then you have to let it live.”

According to Derrida we cannot be moral if we think that we are in fact moral. In other words, if you’re arrogant enough to think that you’re fulfilling what Peter Singer would call your moral obligations to help others, then you’re not questioning yourself enough, and not pushing yourself enough. Thus we could push the argument of Avital Ronell still further (since she cited Derrida’s above argument when saying the above), to suggest that the increase of military interventions in international relations marks a decline in international morality.

Personally, I wouldn’t buy the notion that we are becoming less moral. After all, we don’t need to know someone else to kill them; indeed being able to kill someone when you do have such knowledge seems even more immoral to many people. We can kill instead based on an educated guess. In fact humans act on guesswork all the time. What Ronell is really saying is a values statement that when we know the risks are large, and yet the probabilities of reaching our desired outcome are unknown, we should be risk averse. Just because liberal interventionists are less risk averse, or choose to weigh the unknown probability of success against the unknown probability that more will die if intervention is not carried out, it does not make them less moral than non-interventionists. And indeed the opposite argument could also be made.

Assume NothingThe more pertinent question therefore, is whether these assumptions of knowledge and righteousness are more present, and/or having a greater impact on international affairs today or not. After all, modern examples seem very easy to find. It is why the logic behind why Samuel Huntington’s thesis on the ‘Clash of Civilisations’ seems so compelling. It is the reason why despite the fact that the world is becoming increasingly globalised and cosmopolitan, we see signs of the ‘other’ everywhere. It is the logic behind liberal interventionism, the interventions in the Middle East, Zionist militarism, and even the calls from those inside the affected countries e.g. Syria, for outside help.

Whatever its source, they are dangerous assumptions to hold if we let them dominate twenty-first century thought. The extent to which this is true can be seen in the handling of Russia’s Crimean intervention. The calls are not for Russia to come to the negotiation table, delay the annexation of Crimea, or organise a new referendum conducted under UN supervision. These options are seen as weak, and a form of appeasement, which, despite the fact that Hitler is dead, would only create a new Hitler. So instead, the calls on Russia are for them to simply back down, reject their long cultural history of expansionism and pan-Slavism, and see them adopt the culture and tactics of the United States – the single country which it would most humiliate Russia, and particularly Putin, to be seen emulating. Keynes wrote a pamphlet in 1919, arguing how the world’s tough approach to Germany would cause trouble. And of course he was right. Are we learning the wrong lesson(s) from history?

Do you believe that the assumptions of knowledge and righteousness dominate 21st century diplomatic thought more than they did prior to WW2? What has changed that led us here? And where will it lead us in the future?

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