403. Mimesis and role models

René Girard proposed a theory of ‘mimetic desire’. Desire does not arise from within the individual but from mimicry, imitation of what others do. The closer one is to the other, the stronger this desire is, mixed with envy and grudges when not having equal access.

This leads on to mimetic violence, where rivalry and grudge escalate to the point that the original object of desire is lost from sight, and the grudge itself is imitated, evokes anger that is in turn imitated, and his escalates into mutual violence.

That leads to the need for a scapegoat, often quite arbitrary, to load off the blame onto.

That, in turn, according to Girard, leads on to the elevation of the scapegoat as a divinity, to carry the blame, and to constitute a taboo, to prevent a re-kindling of the violence, and to be pacified with sacrifice and ritual.

And that, Girard argues, is the beginning and the basis of all culture.

I want to give some opposition to all this.  

In his early and late work, Girard allowed for a more beneficial view of imitation, which can generate empathy and sensitivity to political problems. I want to support the latter and expand on it.

In my analysis of causality, and is application, at several places in this blog, I adopted Aristotle’s multiple causality, which includes the exemplary cause, a model to be imitated or a role model to be followed (items 96 and 99 in this blog).

For example, as masters of phronesis, Aristotelian practical wisdom, Mahatma Gandhi and Nelson Mandela served as role models. I noted that since good practice, also in professions, cannot always be captured in closed protocols, since much practice is too rich, i.e. too context-dependent and variable, an example to be followed may be the only effective form of guidance, leaving some room for personal interpretation of the ideal.

Such leeway for interpretation is not only beneficial for motivation and the intrinsic value of work, but also under conditions of uncertainty where no optimal choice of policy can be established and codified in advance, but room is needed for adapting to what emerges in new options and conditions.

While Girard associates imitation with envy and threat, that is not necessarily so. Similarly, in item 338 I opposed the view, propounded by Žižek and Lacan, of the other in terms of threat rather than also of opportunity. At several places in this blog I argued that opposition from the other helps to escape from one’s prejudice, and to learn and grow. 

Also, in imitation an innovation realises its potential, becomes established, and there is nothing wrong with that. That is how people get to benefit from the innovation.

Next, imitation with variation is a source of further invention and innovation. I showed that in my ‘cycle of invention’, in items 31 and 35 in this blog. That arises, in particular, when some existing ractice is carried into a new context, in ‘generalisation’, to be imitated there, but then meets with new challenges, for which the first step is to differentiate the practice, tapping form memory of earlier trials and applications.    

There is also an alternative view of the scapegoat, as designated by an authoritarian leader to load off the blame for not fulfilling the promises by which he captured the population. 

I do not wish to deny that imitation can also be negative, in envy and rivalry, leading to an escalation of conflict and violence, as Girard argued.

However, in that there is also something else at play, as I argued in item 48 in this blog. That is associated with the idea of a hierarchy of needs (due to Maslow), with at the basis, on the most primary level, the most fundamental, physiological needs of food and sex, and safety and shelter. In that, people are more similar, and hence more rivalrous,  than on the ‘higher’ levels of a need for social recognition and self-realization. There, I proposed, people differ more, and are less rivalrous, less involved in a zero-sum game, more complementary, in opportunities to learn from each other, so that beneficial imitation may be more prevalent.

402 What poems do[i]

I have written poems all my life, in batches, at intervals. I did not publish but merely filed them, but recently I started working on them and posting them on two blogs, one in English and one in Dutch. That made me reflect on what it is that poems do.

In my philosophy, and in my previous career in science, the line running through all my work is dynamics, change. So one of the questions for me is: what does poetry have to do with that?  Novalis said: ‘Poetry is the elevation of man above himself’. How does that work? And how do poems differ from prose?

There are five differences between poetry and prose.

First, while in prose a line ends at the end of the page, in poetry the line ends earlier, and either the phrase runs to its end, or it is broken in ‘enjambment’, to continue on the next line. The last word on a line jumps out, gets emphasis, and that can be used in the design of the poem.

Second, lines are grouped in stanza’s, of two lines (a couplet), three (triplet), four (quadruplets), etc. A classic form is the sonnet, with 12 lines, divided over two quadruplets and two triplets (the Petrarcan sonnet), or two sextets and a couplet (Shakespearian sonnet).  The Haiku has three lines of 5, then 7, then 5 syllables.  

Why such structures? They yield ways to cut up the world that the poem presents. The Shakespearian sonnet has been associated with a debate: 6 lines thesis, 6 lines antithesis, and a couplet as resolution. One can also opt for an unbroken series of lines, in a world without seams.

Third, there is rhythm (meter), a sequences of beats. Classic is the jamb, going te dum, te dum, te dum, te dum, te dum (with the beat on ‘dum’), here five times on a line, called a pentameter. I have a preference for the tetrameter, with four beats, often used in ballads. The beat can also be reversed, in the ‘trochee’: dum te, dum te, dum te, dum te. The beat (dum) has been associated with the male, the one without beat (te) with the female.   

Why meter? It is said to come from the primal existential experience of the heartbeat, with the primordial experience in the maternal womb, and of the beat of walking, or a trotting or galloping horse. 

Fourth, there is rhyme. There used to be strict forms, some connected to the sonnet. For the Petrarcan sonnet abba, abba, cdc, cdc, or: abab, cdcd, cfe, fgg. Such orders of rhyme came to be seen by many as formalistic and constraining. They are, when the need to thyme dominates the intended meaning and story. One recommendation is to write up what you want to say and then try to make it rhyme, but don’t when it distorts what you want to say. But there now is also much ‘free verse’, with no regard to ‘rules’ of rhyme or even meter.

Why rhyme? It is pleasing to the ear, establishes order and repetition, but can indeed become forced and artificial.

Fifth, there is sound, more widely than in rhyme, in alliteration (same consonants) and assonance (same vowels), within lines or across them. Sharing vowels or consonants makes connections between words that can yield surprising associations and extensions or twists of meaning, in new combinations. That happens also with metaphor, where A is seen in terms of B.

Why these connections, by sound and metaphor?  This is what poems do: lift, shift or twist meanings, or generate new ones. This helps to halt and redirect thought. Innovation has been characterized as ‘novel combinations’, and in yielding such novel combinations poetry innovates language.

Poems stand things on their head, generate surprise, novelty, new world views.      

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[i] This piece is based on a poetry writing course given by Mary-Jane Holmes at Casa Ana, in the Alpujarras, high up in the Sierra Nevada, in Southern Spain, on a book on poetry ‘The ode less travelled’ by Stephen Fry, and the book ‘On poetry’ by Glyn Maxwell.

401. Schooling in the modern world

There is debate on how to teach, in  primary and secondary education, in the modern world. Does the old idea of education as transfer of knowledge still apply in a world where Internet provides easy access to all the knowledge there is? How to cope with this flood of knowledge?

Younger teachers (such as my daughter Anouk) claim that it no longer makes sense to transfer facts and figures, and to give lengthy lectures, in one-directional transfer. They plead for a more dialogical process, in discussion between teachers and pupils, and pupils among each other. Instead of cramming facts into them, let them ask questions and then look for answers and debate them.

Older people (like myself) ask what then happens to the use of existing knowledge: does that not get neglected or even lost? And they argue that one must have knowledge to know what questions to ask.

Also, isn’t the present calamity of the production and credence of fake news due to lack of knowledge and critical thought, disregard of the facts and how they connect?

Who is right? Both are, depending on what meaning of knowledge you take. 

Cognitive science offers the distinction between on the one hand declarative knowledge, of facts of date, place, people, and events, and on the other hand procedural knowledge about logics and processes of structure, causal or logical connection, with arguments of implication or other inference or association. They occupy different regions of the brain.

Facts are isolated, while procedures give their connection. That makes it easier to remember, because of coherence where the one thing rests upon the other, like a house of cards, and one can use the one as a trigger to remember the other. It is beginning to happen to me that I can’t remember the name of the author of a book, but I can tell you what he or she tells.

The problem of the flood of information in the Internet age may be solved by teaching the procedural knowledge needed to ask the right questions and to connect the facts, offering cognitive and logical structures in which one can fill in the facts taken from Internet.

Procedural knowledge can be learned by reading books that supply arguments and analyses, but the book does not answer back to questions that may arise. For that, one would have to check the references and trace the trail of literature involved.

But for that knowledge the internet offers the ideal vehicle, to search for sources and connections. And if reading is replaced, to a greater or lesser extent, by dialogue and debate, does that not make the process faster and more versatile, and the learning of how to ask questions and evaluate answers more fruitful?

In other words: could one not make the learning of procedural knowledge the cornerstone of teaching, and train how to develop that and use it in tracing, filling in and evaluating the facts from internet?

This connects with my arguments, in earlier items in this blog, that one needs the opposition from others, in debate, to have a chance of being freed from ignorance and prejudice. For that one also needs sufficient variety of cognition, at a cognitive distance large enough to yield surprising insights but not too large to absorb and make use of it. That would also train pupils not to hide in the comfort of filter bubbles that confirm prejudice.

A complication may be the following. How do you grade students when there are no standard tests of knowledge, in the more processual mode of procedural learning? Or is the very concept of grading a bit of old thinking? But then, does evaluation of students and their progress not become too subjective, based on a teacher’s impressions, and is that not prejudicial, and susceptible to negotiation between teacher and student? Might that not lead to inequality and a decline of standards?   

400. Survey of his blog

Including this piece, there are now 400 items on this blog. Here I give a survey according to the number of times a piece has been viewed.

The following 23 items were viewed more than 100 times:

Number           Title                                                                                       Number of views

63                    Nietzsche and Levinas                                                           640

19                    Beyond nihilism: imperfection on the move                         526
3                      Trust: what is it?                                                                    519
128                  Eastern and Western philosophy                                           496
72                    Uncertainty and openness                                                     371
7                      Geometry and finesse                                                            339
73                    Psychology of trust                                                               328
77                    Beyond Enlightenment and Romanticism                             314
88                    Wabi Sabi                                                                              312
70                    Forms of identification                                                          305
61                    Levinas: philosophy of the other                                           282
179                  Moral robots?                                                                        275
71                    Judgement of good and bad                                                  271
76                    How much community?                                                        261
75                    Horizontal control                                                                 231
89                    Aesthetic judgement                                                             208
62                    Levinas: Justice?                                                                   151
69                    Sources of trust                                                                     144
312                  Reason contributes to freedom of the will                            128
333                  The curse of identity                                                             118
74                    Roles of a go-between                                                          114
143                  Forms of nihilism                                                                  110
80                    Art                                                                                         105

59 items were viewed between 50 and 100 times

281 items were viewed between 20 and 50 times
33 items were viewed less than 20 times.

I remind the reader  that on my website https://www.bartnooteboom.nl

on the page for the philosophy blog items are bundled according to theme. The themes are the following:

basic income, a way out for socialism, identity, culture, evolution,
multiple causality, God and religion, robots, power, knowledge/truth/and invention,
ethics and morality, the human condition, self and other, trust, meaning,
Eastern and Western philosophy, puzzles in philosophy, democracy/autocracy/and fascism, voice and exit, system tragedy, power, art and literature, fallen foundations, language games and crossing cultures, politics of virtue, ontology, economics (old and new, nihilism.

Nietzsche, nihilism and beyond

Time, duration, and discontinuity: Bergson, Derrida, and Bachelard
Foucault
six more pieces on Foucault
Levinas
Montaigne
Heidegger
Baudrillard
Wittgenstein, Zizek and Hegel

I also remind readers that on the blog you can post comments. I encourage you to do so. I will respond to any comment or question.

399. Old and new economics

In item 387 in this blog I used Imre Lakatos’[i] notion of a  research programme to characterize mainstream economics. To recall: such a programme has a ‘core’ of fundamental principles, assumptions and directions for research, which must be protected from falsification at all costs, by means of a ‘protective belt’ of subsidiary assumptions that supplement or implement the core principles. When something comes up that falsifies the whole, it is attributed to the subsidiary assumptions, and a replacement is sought there to make the core work better.

That notion arose from a debate, in the philosophy of science, on the falsifiability of science. Popper had demanded falsification as the central purpose of scientific conduct, but then, in a famous article ‘Two dogmas of empiricism’, the philosopher Quine proposed that a theory is never tested as a single proposition, but as a system of propositions with main assumptions plus subsidiary assumptions and principles (e.g. about the direction and method of research, measurement), which is falsified as a whole. Then the question is which assumption or principle to consider falsified and in need of replacement. According to Lakatos’ scheme the core assumptions are to be held on to, and revision is sought in the ‘protective belt’.

I now present the core of a new programme of economics, to replace the old one. The cores of the old and the new are compared in the table below. Criticism of the old and arguments for the new were presented in preceding items in this blog. 

Old and new economics

               
                        Old                                                                             New

            Rational actors                                               Limited rationality, decision heuristics

            Autonomous individual                                 Socially constituted individual
            Optimal outcomes                                         Processes of adaptation and development
            Competition                                                   Competition and collaboration
            Risk                                                                Uncertainty
            Utility ethics                                                  Virtue ethics

The table shows a virtual reversal of core assumptions, from the old to the new. That illustrates how fundamental, radical, my proposal is. The components were discussed in preceding items in this blog. Here I recall some of the main connections.

A key feature is uncertainty, going beyond risk, formerly recognised, in economics, by Keynes (and Frank Night). With risk one knows what can happen, so that one can append probabilities and calculate an optimum expected outcome. With uncertainty one does not know what might happen, and options for choice emerge from action rather than being given in advance. That has a number of implications. Since optimal outcomes cannot be calculated in advance, that perspective of economics drops out, and one falls into the need to analyse processes of adaptation, to emerging outcomes, possibilities and options.

The most interesting and innovative relationships are the most uncertain. That requires trust, as a leap of faith across a gap of uncertainty. In contrast with earlier economic thought that trust cannot survive in competition because it requires giving without being able to count on receiving, the proposition is that in present economies next to competition firms also need to collaborate for innovation, which entails uncertainty, so that to survive one must handle the art of trust (without trust thereby becoming blind).  

A switch is needed from the utility ethic underlying mainstream economics, looking only at the utility of outcomes, to a virtue ethics, looking also at virtues, not only of reason, and courage, but also of justice and moderation. Justice is needed for pressing social and political reasons, and moderation especially for saving the environment.

Relations also need to have some stability and some local roots, without falling into rigidity, and without surrendering international trade, but with necessary regulation of it. That is required for justice, political recognition of locality, and by an economic need for collaboration that also requires trust.   

How realistic is this shift? I don’t know, but in view of present populist revolt and the climate crisis, something has to change radically, or society will be destroyed.  

I do not want to claim that the old economics is always wrong. It still applies under the following, clear conditions: the values involved can be measured, preferences and all options for choice are known, plus the possible outcomes (‘pay-offs’), for oneself and any others one is dealing with. Then one can calculate an optimum, or equilibrium (in game theory), and it would be silly not to use that opportunity. If, on the other hand, one or more of those conditions are not satisfied, under uncertainty, and preferences, options or outcomes are emergent rather than being given in advance, then one should shift to the new economics.

This goes back to an experience I had, when working for Shell in London, in the 1970’s, as a project leader in the computing centre, where we used optimization techniques for the scheduling of refineries, routing of ships, location of gas stations, and design of loading stations for natural gas. For strategic planning, however, given the uncertainties involved, we developed scenario analysis, where we did not optimise, which was impossible, but used simulation to analyse the robustness of policies across different possible futures.

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[i] Lakatos, The methodology of scientific research programmes, Philosophical

  papers volumes 1 and 2, J. Worrall and G. Curry (eds), Cambridge University Press.

398. A paradox of international trade

There is a long tradition, since Plato at least, to reach for pure, fixed universals that transcend the messy, shifting variety of particulars experienced in the world.

On the other hand, since Aristotle there is an appreciation of the variety of particulars that appear in reality, emerge, realize their potential and decay.

The opposition between the two is reflected in a long line of contestation within religions: in Catholicism, Protestantism, and the Islam, between two streams: the strict, orthodox, intolerant universalists, and the more lenient, tolerant, liberal particularists.

The opposition is also reflected in a difference between relatively lenient, tolerant cultures in cities that are based on international trade, and more rigid cultures in internally oriented, craft based communities. The rationale for this difference seems clear: tolerance of variety is needed to conduct international trade. An example of a port culture is Amsterdam, which has been a hub of trade for four centuries. One would expect something similar in other port cities.

However, current globalisation is borne by a universalist market fundamentalism, an ideology of the market as a pure universal, the same everywhere, that will automatically establish itself if only one abolishes all the obstacles of intervention by states.

In reality, markets require institutions to work, and markets vary greatly between industries, due to differences in factors that shape markets, such as economies of scale, degree of concentration, monopolisation, technological change and resulting uncertainty, entry barriers to markets, transaction costs, including different degrees to which users can judge the quality of products, switching costs between products from different producers, separability or complementarity of products and production processes.

The focus of the development of the EU lay on the internal market as a universal good that would develop automatically as soon as different government rules were dismantled, in what has been called ‘negative integration’. The expectation was that this would eradicate complexities of rules and regulations, and that prosperity and goals of employment, living conditions, labour conditions, and the abolishment of exclusion would automatically follow.

It did not work out that way. As markets spread across different sectors of society, in drives of liberalisation and privatisation, complexity of rules and regulations did not decrease but increased, because of the imperfections of markets and differences between those sectors.

This unexpected complexity became one of the sources of irritation and opposition towards the EU as an excessive regulator, constraining freedom.

Meanwhile, the dream of the market as a magical source of prosperity and quality of life and society also was not realised. The exclusive focus on the internal market was seen not to fulfil social goals but to thwart them, and now the EU belatedly has to take a more socially oriented turn.

In sum, there is a paradox of universalist ideology versus particularistic reality of markets, and society has suffered again from the illusion of universalistic dreams.       

397.  Power, dependence, control and trust

Economists shy away from discussions of power, because power should not play a role in supposedly anonymous market forces. Economists do talk of market power as a disturbance of markets by monopolies, oligopolies and firms erecting entry barriers to markets. That is to be fought by competition authorities. But power is more widespread. Power creates dependence. But it can also be positive. Even monopoly can be beneficial.

I use the (customary) definition of power as having influence on the choices of others. It can be positive, in an extension of options for choice, and freedom of choosing from them, or negative, in reducing them.

If for choice one is dependent upon another, than he/she has power over you. One can avoid or reduce that by avoiding him/her or by creating counter-power, by constraining the actions of the other. Trust is leaving room for conduct for others, control is constraining it. Control can result in a vicious circle of accumulating mutual constraint. A danger looms of excessive oversight and control.

What forms and sources of dependence are there? One is that the other has a unique offer, with few adequate alternatives. That is the power of monopoly. Or there is no way out, no exit: you are locked in. That is the power of enforcement. Or there are incentives to submit to power, for the sake of income, position, protection or prestige.   

How to deal with power?

One can fight negative power by constraining the room for power play, and punishing it by means of contracts, legal coercion. However, the specification of activities, rights and duties constrains action, and can act as a straightjacket that inhibits innovation. Contracts are also costly and may be difficult to enforce, particularly if it is difficult to monitor the partner’s conduct.

One can also exert direct hierarchical control by taking over the partner, becoming his/her boss. That is a cop-out: one does not face the challenge of collaboration between independent partners. 

One can also employ a reputation mechanism, where the partner will not cheat for fear of losing his reputation. Or one can use a hostage, in the form of some commercially sensitive  information one has of the partner, with the threat, often implicit, not pronounced, to divulge it when the partner misbehaves. The hostage may also take the form of a package of shares that one has in the partner’s business that one can sell to someone with the intent of a hostile take-over of the partner.

There are also more constructive, benevolent ways of dealing with power.  

In relations of collaboration there is the following ‘paradox of specific investments’. To create unique novelties, in innovation, connecting each other’s competences, one typically needs ‘specific investments’, dedicated to the relation, that have no use elsewhere. That makes dependent: if the relation breaks, the investment is rendered useless. If the investment is asymmetric, mostly on one side in the relationship, dependence is one-sided. On the other hand, if the investment makes you special, offering something unique, that gives countervailing power. A monopoly, in fact. This can generate a race not to the bottom but to the top: partners keep investing in themselves to maintain a unique offer.        

Another possibility is to demand shared payment and ownership of the specific investment. Yet another is to make the partner dependent in some other way, by offering some other unique benefit, such as access to a market, a brand name, special knowledge, technology, or a patent, or to some other resource (a lobby, perhaps).

One may also rely on other sources of reliability that are not oriented towards control, such as trust based on ethics or personal bonds of friendship, family, clan, or custom.

With the latter, however, one can get caught in systems of paternalism and enforced loyalty that do not allow for exit, thus imposing another constraint from power. Obligatory bonds limit the variety and freedom of outside contacts needed for learning and innovation.

Sometimes there is no alternative to such personal bonding, as in countries where there is no institutional basis outside personal relationships, such as a legal system to support contracts, reputation systems, or a shared ethic and morality. I found that to apply, for example, for different reasons, to Japan and the Ukraine.

In Japan the reason is a strong tradition of family values, which is now weakening. In the Ukraine the reason is widespread corruption and lack of a reliable legal and democratic order and justice.     

396. From optimal to adaptive

The assumption, in economics, that people exhibit rational choice that leads to optimal outcomes yields an excuse not to look at processes that may or may not yield optimal outcomes. That may contribute to simplicity, avoidance of complexity, but also leads to neglect of important realities, of actual decision making, conduct, market imperfections, and differences between industries. And when optimality is impossible, due to uncertainty, one needs a different, adaptive stance.  

It is needed, for government and management of firms, to act on the basis of insight in those realities. There is a myth afoot that for management it does not matter where you are manager, because it supposedly is the same everywhere, and that is not the case. Economic variables such as economies of scale, concentration, integration in mergers/acquisitions or alliances, entry barriers to markets, transaction costs, transparency of product quality, technology, knowledge intensity, uncertainty of markets, investments and their lead times, type of labour, importance of teamwork, fluidity of knowledge, etc. vary with industries.

On the macrolevel it is useful to see the economy and industries as evolutionary systems of variation, selection and transmission of what survives. State interference is then seen as exerting influence on those processes, rather than direct interference in conduct, though the latter may have to be part of it. In any case, an evolutionary, adaptive approach is modest concerning planning, especially planning of innovation. That  would be as if evolution planned, designed new species. There is little scope for ‘intelligent design’, as in biology.

In economies, variation arises from entrepreneurship and invention, selection is performed by markets and institutions, and the transmission of success lies in growth of successful forms, imitation, publication, and teaching. One can influence variation by enabling entrepreneurship, with financial and fiscal measures, and employing it in the innovation of public policies and services. One can further the selection by markets by preventing monopolies and oligopolies, entry barriers to markets, and other conservative ploys of existing firms. One can further transmission of success with policies concerning communication, information, education and training.

In the further filling in of the processes of variation, selection and transmission, important differences arise in comparison with biological evolution. There is artificial variation in combining genes other than by breeding, in genetic manipulation. Firms can influence selection by markets and institutions by political action, such as lobbying. They can test products before they are brought to market. Invention still involves trial and error, but it is not entirely random, as variation is in biology, because it is fed by learning, logics of inference and science.

The logic of adaptation in evolutionary systems avoids the problem of rational choice, on the basis of calculation, with probabilities attached to possible outcomes, that it cannot deal with uncertainty that is ‘radical’, in the sense that one does not know all that can happen. Given the impossibility to predict, due to uncertainty, and the consequent impossibility to find an optimal strategy, one can make use of scenario’s, alternative imagined possible futures, and seek a strategy that performs reasonably well across them, without optimality in any single one of them. One can use computer modelling, simulation, for this. In the development of products one can mimic evolutionary processes of variation and selection, as happens, for example, in the development of robots and algorithms.

On the level of the individual also, uncertainty has its implications, requiring adaptiveness. One should grow up to be robust under unforeseeable setbacks, be resilient, learn to fall and stand up, have reserves to fall back on, and be flexible and creative in taking new directions when needed, even when they are not known in advance.     

395. Individual and social

The theme of self and other has been discussed extensively in this blog, and a bundle of items on that theme can be downloaded from my website www.bartnooteboom.nl  A combination of elements from the blog and my 2012 book ‘Beyond humanism: the flourishing of life, self and other’, and my 2015 book ‘Beyond nihilism: imperfection on the move’, with the title ‘Beyond nihilism: self and other between Nietzsche and Levinas’ can also be downloaded from that website. Here I give only a brief summary. 

The human being is individual but not autonomous, as economists would have it. It is socially constituted, on the basis of interaction with others, and shared culture. Culture here is anthropological: habits and customs, but also an ethic and morality. While those may be shared, what is made from it becomes individual, along a personal path of life.

That yields diversity, or what I called ‘cognitive distance’, and that may hinder mutual understanding but also offers an opportunity, to learn, and to escape, more or less, from personal prejudice and myopia. For this, one needs to develop the ability to understand people who think differently, intellectually and morally. That also yields economic advantage, in a better ability to innovate by combining different ideas.

For its development, the human being needs recognition, acceptance and respect, in local communities with some stability, needed also to develop and maintain trust, but those communities also need some external contacts and some entry and exit of inhabitants, not to get mired in rigidity, myopia and prejudice.

Strong bonds of interaction and mutual understanding are difficult to achieve on a national level. That requires decentralisation of governance to municipalities or city neighbourhoods, with an elected mayor, council and citizen panels, with or without political parties. That carries problems, as discussed earlier, but those are not insuperable (see item 347 of this blog).

A second need is to put an end to the present excessive flexibilization of work, with more continuity of work and teams. That is good for the quality of labour and the quality of products, which require ‘specific investments’ in mutual understanding and trust, for which some continuity of relationships is needed, in order to recoup those investments, which otherwise would not be made.

For this, and for innovation, the environment, and a just future for the young, a perspective of the long term is needed. No longer the obsession with profit in the next quarter. If shareholders cannot muster this, then they should not have a majority in supervisory boards. Those would also contain membership from employees, customers, suppliers and the local community. The latter especially with a view to protection of the environment.

Economists will comment that then the price of capital will increase, because opportunities for profit are foregone, which would lead to lower prosperity. Yes: that would have to be accepted: a bit less prosperity for the sake of a more humane and sane society.

394. Rationality and heuristics

How could one still maintain, as economic theory did, that people make rational decisions?  Already long ago (in the work of Herbert Simon), theory took bounded rationality into account, but only in a limited sense. The idea was that the capacity for rational thought is limited, and should be used where priority is highest.

A distinction was made between substantive and procedural rationality. Procedurally, it is rational not to evaluate everything in a substantively rational mode. That makes sense and still applies. One encounters it again in Kahneman’s distinction between ‘system 1 and system 2’. The first is based on unreflected routines where one acts without conscious deliberation, while the second entails conscious, critical reflection.

Without routines, life would not be practically viable. Imagine that in walking, or driving a car, one must reflect on it. Then one would not have attention to where one needs to go, and why, and to talk with another passenger.

But there is more, as understood in more recent ‘behavioural economics’, which has adopted insights from social psychology, in the form of decision ‘heuristics’, shortcuts for fast decisions, which are procedurally but not substantively rational. Here is a survey of some of them.

The heuristic of ‘availability’ is that people pay attention to what is ‘available’, in the sense of forcing attention, being emotionally laden, as a threat or opportunity. That can go wrong, in an excess of impulse, neglecting less salient but still important issues, but it helps in setting the agenda for scarce attention. Also, the danger of routines is that they are also practised where they do not apply, and then emotion of danger or opportunity is needed to catapult one into critical awareness.

Another well-known heuristic is that of ‘loss aversion’: a perspective of loss (‘loss frame’) weighs more heavily than that of gain (’gain frame’). One goes to greater extremes of conduct to keep what one stands to lose than to gain what one does not yet have. In evolution, that contributed to adaptiveness: loss leads sooner to death or harm than gain does. This has a stabilising effect on relationships: the one who wants to break the relationship does it to gain, the other stands to lose, and will go to extremes to prevent it.

Another heuristic is to raise incidents tot the level of laws: ‘You always with your …..’, while it happened only once or twice. That is unreasonable, but can have survival value to respond in time to threats.

A fourth heuristic is that of ‘escalation of commitment’: the more loss one has incurred in a certain position, the more one commits to it, since ‘otherwise the losses would have been in vain’.  That is not rational: the past is water under the bridge and cannot be changed; one should look only at possible further losses in the future. That heuristic also works in favour of the continuation of a negative relationship. A classic example is that of George Bush, for whom it was difficult to withdraw from Irak, because then all the American deaths ‘would have been in vain’. It would also amount to an admission of having made a mistake, in entering. A new president, Obama was needed for withdrawal, and then he made the same mistake of increasing the commitment in Afghanistan.

A fifth heuristic is that of engaging only upon incremental deviations from existing policy, even if the initial position does not make sense, and a radical turnaround is needed.

A sixth is ‘cognitive dissonance’, where after a choice one only has attention for information that confirms that it was a good choice, not to what denies that. In a difficult to end relationship one only wants to hear the good things of the partner, and when one has broken the relationship only the bad things.

393. Openness, transparency and trust

Here I give an intermezzo, in the present series on economics, on an issue of trust that I came across.

In a Dutch newspaper it was said, recently, that transparency, with demands for openness about what is going on, is antithetical to trust, is a form of control.

By contrast, I have been arguing, in this blog and elsewhere, that openness is necessary for trust.

What now? Who is right?

I argued that openness is needed to demonstrate trustworthiness, in admitting errors before t

hey are detected by the partner, trying to mend the problems that result, and promising to make an effort to prevent similar errors in future, in the exercise of ‘voice’. It is voluntary

By contrast, transparency is imposed, not voluntary, indeed a form of control. It reduces the room for action for the other, and that is the opposite of trust, which is giving room.

The difference lies in what the partner is to be open about, and whether it is imposed or voluntary.

Now one might argue that if openness is needed for trust, it is no longer voluntary but necessary, imposed. A might demand that B be open, ‘or else’.

But A cannot enforce this: how does he know whether B is holding something back? He can only enforce his demand by specifying what B is to be open about. And the whole point of openness is that relations are uncertain, and you cannot specify in advance what can happen, so that it has to be left to B to tell what comes up and needs to be reported.

Demanding transparency, specifying in advance what needs to be reported, is part of the old control mode of managing relations, as if one knows what may come up so that one can manage it.

The point of professional work is that it cannot be caught in specific protocols, as argued and shown in the literature on ‘communities of practice’.

The discussion on transparency in the newspaper came up in the context of politics. That yields another point. There, the claim of transparency is that in a democracy politicians have to be open about policy making and negotiation while those are going on. That yields another problem.

Politics in a democracy is a messy business of finding a compromise between standpoints that at the start seem irreconcilable. In groping around for a solution one has to test concessions one might make, to see what concessions will be made in return, to try and achieve some balance. If during that process every move has to be in the open, in the trials and errors of compromise before a balance has been struck, constituencies will rise in protest, blocking the process.

How about openness there, then? After a balance has been struck one should bring the arguments into the open, with pros and cons, and put that to the electorate. And then one needs to be open in not parading it as better than it is, raising expectations one cannot fulfil, because that is most destructive of trust.

392. Greed and urge to manifestation

Theories of capitalism usually depart from the assumption of greed: the urge towards profit and income. People are driven to pursue them to survive, in a job or in a market, under the regime of competition, in shareholder capitalism.

But perhaps more important than greed and survival is the urge to manifest oneself: to ‘make a difference’, to be noticed, acquire attention or power. Salaries are not only sources of income but also signals of success in a power game.

The philosopher Plato spoke of reason as a charioteer that tries to reignin two horses: one of eros, desire, and one of thymos, the urge to self-manifestation. The philosopher Spinoza called it conatus. The philosopher Niezsche claimed that the urge to power is stronger than the urge towards survival.

One can appreciate that: it is also the urge of ambition, to ‘make something of your life’, and to ‘make a contribution to society’. That is also, more than profit, a drive for independent entrepreneurs. And they feel wronged when set aside as mere money grabbers.

An outcome of a mountain of research on happiness is that happiness consists of a combination of ‘pleasure and purpose’, in giving ‘sense’ to life. That concerns something bigger than yourself, or transcendence. That can be vertical, towards a God or heaven, but also horizontal, towards society. Not one’s own immortality but a contribution to what you leave behind at death. And if in that you make the best use of your talents, that can be pleasurable.

Then the drive to manifestation can be a virtue, and virtue ethics makes room for it, provided it is accompanied by, or is held in check, by the charioteer, in virtues of reason, moderation and justice.

However, success often leads to a neglect of such virtues, in self-aggrandisement, a feeling of being superior, elevated, ‘beyond the law’.

Money and manifestation are both addictive, not only for managers but also for stars in thirst for applause, and for scientists in search of publication scores and citations.

In capitalism, both greed and the urge for self-manifestation have become institutionalised, ingrained, in business culture, fed by managers having followed courses in economics in which they were told that self-interest rules supreme, as the motor of the economy. It has become an internal ethic that drives careers, salaries, and bonuses.

When confronted with increasingly vociferous critique from society, the inmates of these institutions honestly feel treated unfairly: they are only doing what society needs. Even supervisory boards of firms, having the task to correct management, go along, because those boards are recruited from the wider population of managers of other firms, sharing the same internal ethics and habits of thought.

So, part of the change needed is to compose such boards differently, with people not only from other firms, and not only as representatives of shareholders, but also from other groups of ‘stakeholders’, such as employees, customers, suppliers, local communities, and society at large, in particular with a view to the longer term future, in the interests of future generations and the environment.               

391. Ethics in economics

Economists claim that they do not make value judgements, but only indicate the economic consequences of policy. But the theory they use does implicitly harbour an ethics, even though many economists are not aware of it. Of what sort is that ethics?

There are several systems of ethics. Liberalism, and with that economic science, rests on utility ethics. That only looks at outcomes of choice and action, in this case utility, in the form of the greatest good for the greatest number of people. The ethical quality of other considerations, such as honesty, justice, forbearance, solidarity, etc. are irrelevant. ‘Greed is good’ as long as it leads to a higher level of prosperity, and the equity of its distribution is less relevant.

That stands in sharp contrast with duty ethics (going back to the philosopher Kant), where the issue is the ethical quality of motives of action, regardless of their consequences in terms of utility. The claim is that moral rules are universal, valid under all circumstances. The central principle is the ancient golden rule: One should (not) treat others as one would (not) want to be treated oneself. Here, that became the categorical imperative: an act is good if you would want to raise it to a universal rule. Lying is good if you would want everyone to do it. You don’t want that, so you should never lie.

I don’t go along with that because what is good or bad depends on circumstances. And what I find good for myself is not necessarily good for another: needs and demands vary.   

A third system is virtue ethics, going back to the philosopher Aristotle. Virtues are character traits, dispositions to conduct. Many virtues are eligible, depending on circumstamces. The classical ‘cardinal’ (pivotal) virtues are: reasonableness, courage, moderation, and justice. There is nothing wrong with pleasure, but it should be in combination with moderation and justice. That is missing in present theory and practice in economics.

Resistance is increasing against the conduct of a number of large firms, such as banks and pharmaceutical companies, those firms are suffering from it, and they come up with plans for self-regulation. The key question is whether when push comes to shove and this leads to less profit it will be accepted by shareholders.

For this I give an anecdote. Two years ago I was asked by a colleague in Scotland if I would want to take part, as advisor and possibly as a teacher, with a bank, in the teaching/training of employees in trustworthiness. Trust is one of my subjects, so I accepted.  The first step was a skype meeting for an exploration of ideas. We agreed that I would develop a proposal. In the discussion of that, in a second meeting, I asked whether it was part of the plan to educate employees to be trustworthy also to customers, not to sell them opaque products that work out to their disadvantage, as was customary among banks in the crisis of 2008. ‘Of course’, they answered. ‘But what if that leads to foregoing opportunities for profit, would that be accepted by shareholders?’. I received no answer and the meeting was abruptly ended. I tried to get in the comment that if you are the only bank that can make good on the promise to such trustworthiness, that might be very profitable, but it could no longer help.

In the course of the present series on economics, in this blog, I will argue for a transformation of economics, with as the most fundamental part replacement of utility ethics by virtue ethics, where utility still counts, but next to considerations of moderation and justice. That is needed for justice but also for protection of the environment, which under the present regime of economics seems unattainable.