Tunnel Vision

Why has "humbition" not made it into our lexicon?

2011-07-14T11:57:00.000-07:00

First, I really enjoy Kaufmann's writing style.

The Birth of Guilt & Justice
Children are taught to expect certain punishments for certain wrongdoings. If they do something wrong and the promised consequences don't come, the child feels guilty. Kaufmann argues that we develop guilt feelings out of promises made by authority figures when we are young and impressionable. It's an irrational process resulting from our social traditions, and it is preventable.

Against Guilt
Kaufmann talks about guilt like a disease and he's surprised that no one in our civilization has looked for a cure yet. He's so innovative that he has to regularly invent new words.

Guilt feelings make people unhappy. Nice people tend to suffer more from guilt than mean people - not fair. Guilt feelings don't really help victims. People who feel guilty want to spread the blame on others. Feeling guilty does not keep people from feeling self-righteous. In fact, people might feel proud of wallowing in guilt.

He anticipates the question: don't we need guilt for moral reform?

"In intellectual and artistic endeavors and in sports it is obviously possible to be sharply self-critical without harboring guilt feelings. If the desired goal is that one should not be self-righteous and that one should try hard to rise to a higher level of existence, guilt feelings establish no high probability at all that one will move in this direction; what is needed is a fusion of ambition with humility. ... I shall call the fusion of ambition with humility humbition."

Kaufmann speaks of virtues like honesty and humility. He does not seem to question that these are admirable and we should have them. Where does he get the "should" from? And from where does he think people will get the motivation to be morally perfect? Can you have happy feelings about moral accomplishments and just extinguish sad feelings about moral failings?
He differentiates "my guilt" from "my fault." If something is genuinely my fault, then I should do something to make up for it instead of feeling remorseful. I'm not totally sure where to divide self-criticism from guilt. Is he implying that people should live without any emotions? A gymnast feels "upset with himself" if he fails in a competition.

"Those who assume that they must feel guilty until someone else forgives them are clearly not autonomous." Some of us mentioned earlier that we might not want to be autonomous in the Kaufmann sense. Living in community (and dependency) is something I do consciously because I think it is preferable both for myself and those around me. I don't think it makes me weak or incapable of independent thought. Asking for forgiveness is an act of humility and courage and forgiving a debt is an admirable act of generosity.

Forgiveness presupposes that I and the victim of my action both acknowledge that I did something wrong. I admit to being guilty when I ask for forgiveness. Kaufmann may argue that exchanging this intangible forgiveness doesn't really help my victim, but it does for two reasons: I am obliged to forgive him in the future and he doesn't have to hold onto feelings of bitterness (which literally leads to cancer).

Here's where I get to my main question for the chapter. Would Kaufmann allow for healthy guilt and unhealthy guilt? Wallowing in self-hatred is bad and unproductive. I also agree that vague guilt over the pain of others in the liberal activist sense is bad. But if I hurt my sister and don't feel bad about it, I'm a psychopath or a masochist. He thinks he's addressed this concern at the end of the chapter, but I don't feel he has. [I'm not ignoring his point that good and bad are impossible to define precisely, but if we can strive for what we think is morally good I think we can hate what we think is morally bad.]

Kaufmann meet Hayek on retributive justice; Hayek Kaufmann

2011-06-27T09:41:00.000-07:00

The first of Kaufmann's tenets on retributive justice is that "punishments can never be just". The word just is derived from the Latin ius which can be translated as just and as right. To explore what Kaufmann means by his first sentence, let's restate the first tenet as "punishments can never be right".

If Kaufmann's first tenet doesn't ring true for you, my restatement sounds even more off.--What are you saying? Of course it can be right to punish someone for committing a wrong and certainly a WRONG.-- Kaufmann's argument for why punishments can never be just is that they can never be precisely just, i.e., punishments can never be right on. A judge could always shade the punishment a little less or mete out a little more and so whatever is ultimately administered will never be just. Kaufmann's point is not to dismiss retributive justice altogether, but to force us to take personal responsibility for the justice that is meted out and not unthinkingly delegate it to the cosmos.

Hayek approaches justice from the perspective of a "sense of justice". Our sense of justice is an abstract rule of which we are cognizant but nevertheless incapable of articulating in precise terms. In other words, when asked how should a murderer be punished, the abstract rules of our sense of justice cannot specify whether it should be 20 years or 20 years, 6 months, and 4 days, but we certainly feel that 2 years would be too little. Justice is a feeling, which is not to say that it is merely a matter of emotion, but the sensory order of the process is not conscious and hence not articulably precise.

My take is that Hayek and Kaufmann are on the same page with each other. Kaufmann's project is to hold a mirror in front of our faces so that we humbly accept and take personal responsibility that retributive justice is only a sense, no matter what in actuality is meted out. Hayek's is to explain that the way that the sensory order works for justice is the reason why Kaufmann has a project to undertake.

The Death of Retributive Justice

2011-06-22T04:40:00.000-07:00

As I read it, his justification of punishment is on essentially utilitarian grounds. It is good for society as a deterrent, as a means of informing others as to what is permitted and what isn't, as a means of engendering a moral sense, by preventing private vengeance, and so on. I don't doubt that this is true. But he continues, nevermind whether punishment is just. The important question is, "is it useful?" But then, the question is also, "Is it justifiable?" (note that he carefully avoids the use of this word in discussing the analysis of any particular act of punishment, preferring words like "appropriate" or "reasonable".) And this seems to pose a problem, because, on what criteria are we supposed to determine what is and is not justifiable?

I was wrangling with this idea and the apparent contradiction of it all, until I realized that the first chapter provides the answer. Justice is the refuge of the decidophobe who wants easy answers to the impossible moral quandaries of life. Refusal to honestly assess the usefulness and justifiability of any particular punishment by referring to its cosmic Justice is just one way of avoiding having to choose and judge for oneself and of avoiding the moral responsibility that goes along with any such judgement.

The way I read it, so far the book has been as exhortation to constantly question the validity of one's own (and others') moral judgements. And the basic problem of autonomy is to avoid the tempting descent into nihilism which says, "if all moral judgements are questionable, then how can any of them be correct?" The (maybe unsatisfying) answer is that correctness, per se, is irrelevant, or even meaningless. But there is wrong and there is WRONG, and we must be willing to decide which actions fall into which category and to be willing to be held responsible for the effects of our judgements on others.

What do the Hayekians in the audience think about this reliance on reason?

In the Fatal Conceit (p. 68), Hayek says, "While it is true that traditional morals, etc are not rationally justifiable, this is also true of any possible moral code (...) so no argument about morals -- or science, or law, or language --can legitimately turn on the issue of justification." And this is where he introduces the quote I mentioned earlier, "if we stopped doing everything for which we do not know the reason, or for which we cannot provide a justification in the sense demanded, we would probably very soon be dead."

Is the essential humility of Kaufmann's argument (that we can only compare differences of degree and have the courage to be held responsible for our judgements and choices) enough to end this potential dispute?

Without Guilt & Justice: Chapter 1, Secs. 7-11

2011-06-15T06:53:00.000-07:00

I note with regret that the momentum of book club has already slowed down. Hopefully some of you are still reading and just failing to write. Here's my best attempt to summarize the rest of Chapter 1:

Kaufmann introduces his next five strategies: Manichaeism, moral rationalism, pedantry, "futurism", and marriage.

Manichaeism occurs when the decider loads his discussion of the two sides of an issue such that there is no choice - one side is clearly superior to the other. I consider confirmation bias to be a related phenomenon.

Kaufmann calls moral rationalism "the subtlest [strategy] of the lot". The moral rationalist would claim that one can eventually derive moral rightness/wrongness after careful thought; Kaufmann cites the diversity of moral ideas and even goals across society and states that this cannot be true.

For a moderately related discussion of reason/rationality, here's a recent article from the New York Times I have yet to digest.

Pedantry is next, and here Kaufmann supports my theory that procrastination is a form of decidophobia when he says "as long as one remains absorbed in microscopic distinctions one is in no great danger of coming face to face with fateful decisions."

I refer to the ninth strategy as "futurism". The Nazi example is an extreme example where joining with the "wave of the future" would have been a poor decision, but in many cases - particularly economic bubbles - futurism is very dangerous. I derive the bubble comparison from the example of pets.com, which seems like an obvious example of futurism, and the example leads to a related question: were homebuyers in the United States decidophobic in the last decade?

Finally, the tenth strategy is marriage. I am pretty skeptical of this as a strategy. In the case of religion, the one fateful decision to become a monk removed all future choice options. In the case of marriage, however, the decision to tie the knot does not explicitly shrink your choice set. In fact, if one partner in a marriage makes no decisions, it must be the case that the other partner makes all the decisions! I'm curious how the married members of this reading group feel about the idea that marriage is a strategy for the decidophobic.

In the final section, Kaufmann defends his right to create a new word to describe this phenomenon, then discusses the possibility of reaching full autonomy. I'm not convinced that autonomy is an admirable goal. Humans, after all, have developed as social animals, and group affiliation is an important part of my own identity. Would Kaufmann suggest that we are being decidophobic by reading this book as a group, as opposed to individually? After all, we are giving up some of our autonomy in order to discuss the ideas with one another...

In terms of other discussion questions: which strategy do you use most often? Which strategy do you see most among friends/peers? For me, the answer is probably pedantry - though it's not any of you that is pedantic. Has Kaufmann outlined a complete set of strategies, and is decidophobia an important and neglected phenomenon in the modern world?

Choosing Not to Choose/The Proper Scope of Decidophobia

2011-06-08T06:30:00.000-07:00

1) To piggyback on Jill's question about whether it can be considered an act of autonomy to cede one's autonomy, it reminds me of the age old debate in the "freedom first" crowd about whether someone ought to be able to consent to slavery.

My sense from his rejection of Kierkegaard's leap into faith is that Kaufmann's answer would rely on the fact that someone choosing slavery voluntarily is unlikely to have healthy, considered reasons for doing so.

Now, supposing that the person did have good reasons... or is that supposing the absurd?

2) My sense from everyone else is that there is consensus that making every decision with autonomy is absurd, but I can think of two different reasons for this. The first, which is more mundane, is that it is simply too costly to spend all this time thinking about every decision. As Alfred North Whitehead said "Civilization advances by increasing the number of things we can do without thinking about them." The second has more to do with the embodied wisdom of tradition. To believe that our rational considerations of the facts will always surpass the wisdom of years, generations or centuries of acquired experience is extremely arrogant. As Friedrich Hayek says "If we stopped doing everything for which we do not know the reason, or for which we cannot provide a justification, ... we would probably soon be dead."

My concern is that it is equally true that if we did everything someone told us to do without asking them to provide a justification, we would also probably soon be dead. Or in the words of my mother, "If all your friends were jumping off of bridges would you do that too?"

Clearly there is room for judgment and taste in this balancing act. For this reason, I think we should attempt to classify the types of situations in which decidophobia is a danger and those in which it is emphatically not.

I'm going to avoid making my list because I want to think about it a bit more, but in my first few minutes thinking about it, it struck me that perhaps answering this question is a really good way to figure out what matters to you or what characteristics you value in others.

Suppose you generated a survey along the following lines:

You will read about a number of hypothetical decisions that a person might have to make in their lifetime. How important is it to think carefully about each of these situations before reaching a decision:

Rate on a scale of (Not at All Important[1] to Very Important[5])

Choosing a political party
Becoming a vegetarian
Learning to drive a car
Deciding to go to church

etc...

Could you use that to predict anything? Should I sell the idea to Match.com?

Innate Decidophobia (WG&J, 1.1-1.6)

2011-06-07T11:42:00.000-07:00

Reading these sections reminded me of a documentary I saw on some of the cognitive differences between primates. In the documentary, they reported the results of an experiment that illustrated some of these differences. The experimenters crafted a small box that held M&M's inside that could be opened with a lever, but the lever was somewhat hidden. The experimenters presented the box to their subjects (either a small child or a chimpanzee) and performed an elaborate ritual involving tapping the box in various places with the stick. At some point in the ritual, the lever is finally tripped and access to the M&M's is granted. All this time, the subject watches. Next, the experimenter closes the box and places it in front of the subject, allowing the subject to attempt to obtain the M&M's.

The difference between how chimps and small children respond at this point is striking. Chimps pick up immediately on how to obtain the M&M's - they go straight for the hidden lever. Human children, on the other hand, recreate the elaborate ritual that the experimenter showed them. The connection to decidophobia may not be clear, so let me explain. The child is treating the experimenter - an adult, presumedly - as an authority that must be correct. The chimp, on the other hand, merely treated the adult as someone to learn from - not as someone who is infallible. Several of the strategies for dealing with decidophobia seem to have the same sort of flavor as the child's actions. Exegetical thinking treats the text as an infallible authority. The exegetical thinker may ultimately twist the message of the text in the process of interpretation, but the fundamental similarity remains in the assumption of an infallible authority. Religion, another of the strategies of the decidophobe, tends to share this feature though perhaps without the exegetical thinking. Allegiance to a school of thought also shares this feature in the underlying and often unrecognized assumptions - axioms - of the school of thought.

So some of the strategies for avoiding decision making seem to have a fundamental similarity with how children react to the box experiment, but what to make of this? The documentary used this experiment to illustrate that humans naturally take on a student-teacher relationship which puts the teacher in an authority role similar to that of the experimenter in the box experiment. This distinguishing feature of humans among other primates allows the species to effectively transmit knowledge and culture through the generations. It appears that several of the major strategies for dealing with decidophobia are rooted in a deep part of human nature. I'm curious if decidophobia itself has similar roots (I bet it does).

Bart's comment on Pete's post is fortuitous because it hits on an interesting point that can be raised here. Some of the strategies that decidophobes use to deal with their aversion to decision making appear to be extremely beneficial to survival - transmitting culture and technology to later generations is a great way to ensure the continued survival of your genes! But that doesn't address a more fundamental question - is decidophobia itself adaptive? How could not making a thoughtful decision be beneficial? I have some thoughts on this, but I'll hold my tongue until Kaufmann has a chance to intimate his own ideas.

Without Guilt & Justice: Chapter 1, Sections 1-5

2011-06-06T07:29:00.000-07:00

I’d like to start off by saying that I’m excited about the reading and the discussions to come. And thanks Pete for starting out.

I guess what I’ve read so far – sections 1-5 – can be summed up in the Nietzsche quote: “Of necessity, the party man becomes a liar. By lie I mean: wishing not to see something that one does see; wishing to see something as one sees it.”

This really struck me because it’s all around us – in personal and fleeting interactions, in work and in play. This idea – decidophobia – is as Pete pointed out, a simultaneous yearning for autonomy and fear of choice and it relates to the root of Nietzsche’s quote. Whether one is being blinded or finding solace in the control of religion or one is a drifter governed by caprice, most people say that they want to and do have free will, but likewise don’t want to be responsible for their own autonomy. A fear of outcomes, coupled with convenience, drives individuals' decidophobia. In deliberate or 'accidental' outcomes, one can always fall back on this idea of becoming a liar: it can be said in the end that ones' decisions and the reasons for acting, saying, thinking are transformed by a matter of framing or post facto justification. The drifter in his choice to not decide makes this the crutch on which to lean. The religious follower may do the same: “many people… manage to persuade themselves that their own moral views do not depend on any decision of their own but are simply part of being Jewish, Christian, or say, Hindu”. So may the movement joiner, etc.

And I think this relates back to the discussions of learning – teaching fear is easier than prudence and self-reliance. Having fear for something I believe is a more innate human quality because it's built upon uncertainty -- and uncertainty surrounds us. People don't want to look to the future (too far) because, as pointed out, death always looms and people don't like being too self-reliant for other reasons mentioned here. But, to have a fear for something simply means that one may have a feeling of anxiety concerning the outcome of something. Though anyone of us can reduce risk and in many situations – to a large degree – reduce and predict outcomes, the ‘what if’ still remains. I think this sort of anxiety can be embedded by the way a child is raised - by parents, the church, teachers, the media, etc. I also believe that the “one unanimous and harmonious ant heap” seems to reduce these feelings. Having your autonomy removed, and banding with others who likewise concede, makes even unpleasant outcomes easier to handle -- you did it because you were supposed to, because everyone else did or would have done the same thing, or even because you didn't have a choice (it was out of your control).

But, I guess what interests me, is where the line is drawn. Complete autonomy is looked at as this sort of self-actualized ideal and I’m not sure that – maybe in the most cynical sense – it can ever really be achieved. How exactly are we to define autonomy? People always make a decision, but at what point can an outsider (or even the person himself) differentiate from original and conditioned experience? It is obvious that institutions like the church, work, military, school and even the family (among other things) are inevitably influencing one’s self-image and self-perception so at what point is choice yours only? Is it not autonomy if you choose to let someone else decide? How would you know? How would this be measured? Pete mentioned that people stop asking critical questions -- is this a defining characteristic of having decidophobia?

This all reminds me of the Rush song “Freewill”:

You can choose a ready guide in some celestial voice.
If you choose not to decide, you still have made a choice.
You can choose from phantom fears and kindness that can kill;
I will choose a path that's clear-
I will choose Free Will.

And sorry, I'll try to keep it shorter next time.

Without Guilt & Justice: Chapter 1, Sections 1-6

2011-06-05T19:39:00.000-07:00

Organizational stuff:

In the title, please remind everyone what sections you'll be discussing.

If you want to cite the text, please provide a few words so we can search the text and find your source.

As a friendly reminder, the book is available here.

I'm going to attempt a quick summary, then ask a few questions.

Kaufmann begins by introducing his core concept - decidophobia. For me, the most useful way to think of this concept is to consider a continuum of autonomy within which humanity can exist. There are two extremes - slavery and complete autonomy - and the average person would find either one unpleasant. We carve out an existence somewhere in between the two, and decidophobia refers to the tendency for humans to shy away from autonomy and towards slavery within the continuum of choice. "Men do not crave slavery or concentration camps," it is true, but neither do they want the freedom to make all choices without interference.

He outlines ten strategies people use to avoid decisions. The five we will discuss here are religion, drifting, allegiance to a movement or cause, allegiance to a school of thought, and exegetical thinking. He briefly mentions totalitarian government as a way of avoiding decisions, as well, but notes that people do not voluntary choose to live under totalitarian regimes, so it would be a misnomer to describe this as a strategy.

I found the early sections about "teaching" to be particularly interesting. Kaufmann is claiming that decidophobia and the strategies for dealing with it are often taught by parents. In fact, Kaufmann claims that parents teach children to fear decisions because it is too hard to teach skills of "prudence [and] self-reliance" (sec 1). I wonder how often this occurs in teaching. Is statistical significance at the 95% confidence level a short-cut which is similar to fear of decisions? [Matt - I'm sure you can make some Bayesian joke here]

The section about religious authority - the fact that servants of the Church willingly sacrifice all autonomy - has me thinking about the role of authority at a university. The convent, the Army, and the factory are all institutions which insulate their members from most decisions, but the university seems to occupy a different space which allows greater autonomy. After all, students have the freedom to choose their own majors, eat on their own schedules, and more; however, they also have degree requirements and dining halls which provide some tangible limits to their choices. Does the institution of "universities" serve as a counterbalance to institutions such as the Army? Are rising tuition rates undermining the usefulness of universities to society by preventing potential students from choosing to attend?

At the end of Section 3, Kaufmann discusses two models of drifting as a form of decidophobia. Do you think drifting - or, even more broadly, decidophobia - is a relatively modern phenomenon? After all, for most of history, people were either serfs (too poor to have choices) or elites (able to command resources to the point of being unconstrained). The space of potential decisions is much greater today than it has been throughout history, and I think decidophobia must be a by-product of this.

This post is getting long, so I'll wrap up. I can't read section 5 without thinking of people who will say "the government will solve it" or "the market will solve it" with respect to any problem of society. Both ideologies provide their users with an excuse to avoid considering difficult questions. The 4th to last paragraph in section 6 (beginning with "Exegetical thinking is also exemplified...") seems important - it could easily be used to revive a discussion of the su'um - but I cannot put my finger on why. Hopefully you guys can help me with that.

One Shot games, Emotions, and Gains from Exchange

2010-12-05T00:00:00.001-08:00

The thing I have found most fascinating from class is how people cooperate in one-shot games. It seems as if experimenters have tried to come up with ever more elaborate experiments which discourage cooperation in trust and dictator games, and yet, even in some of the most extreme cases, people still act, seemingly irrationally, against their own self interest. In repeated games, we can attribute this to building a reputation, but when there is only a single interaction, this explanation falls apart. Why then, can we get to the efficient outcomes in trust games, and why do so many not keep it all in dictator games?

In class, we seemed to have come up with a reasonable account for these behaviors, which boils down to emotions. We feel guilty if we deviate and keep all the money in a trust game. We have a moral code which tells us it is wrong to take from someone who has trusted us. Because of “irrational” emotions, it is in our best interest to cooperate, in order to save ourselves the sleepless nights. After reading Hayek, it seems like these emotions are a part of tradition, and lie between instinct and reason. I would not be at all surprised if a child, playing the role of person B in a trust game, deviated most of the time.

And so we come to thing I find most fascinating: society has developed to the point that we reach can often reach the efficient outcome, even in the extremes. When we are a tourist at a restaurant we never plan on going to again, we still tip. We know this is the best outcome for society as a whole, because if tourists never tipped, servers would never treat tourists well. We are willing to sacrifice a little here and there in order to promote the efficient outcome.

One of the questions I still have is whether it really is irrational on the individual level to do this. When I am confronted with a situation where I have a chance to deviate, I sometimes wonder what would happen if I did take advantage of the situation. Would my action influence how others behave when they come into the same situation? Could this make it so that next time I run into someone completely different, I will be in a worse position? These thoughts push me more towards cooperating. Although the emotions which push me towards cooperating may be irrational on an individual level, these thoughts seem to be a rational case for cooperating, through looking at an extending web of repeated interaction.

Either way, I think the most important takeaway, from both one-shot games and the entire class, is that people strive to make their lives better, and the natural vehicle for achieving this is a desire to truck, barter, and exchange. This desire has led to us develop complex ways to encourage the maximum gains from exchange, including exploiting reputation and emotions.

Blog # 12

2010-12-04T20:12:00.000-08:00

I found Chapter nine of The Wisdom of Crowds regarding committee’s especially interesting. I’ve never been a fan of group projects or discussions, and after reading about the shuttle disaster and the group dynamics at play regarding the committee charged with assessing the extent of the damage to the shuttle now I know why. A few over-zealous and biased members of a group can completely destroy what little chance there may be of finding an acceptable response to a problem. Some people that are naturally less aggressive can be intimidated and/or coerced into inferior roles within the group and a lack of diversity of opinion can result with sometimes horrific results. It is this diversity of opinion that Suroweicki touts as the single best guarantee that a group will come up with a favorable response or outcome. While it seems collective knowledge is able to surpass any one person’s individual knowledge, there are apparently conventions to be followed that will allow for the group to be beneficial and reach competent solutions. Interpersonal dynamics regarding status and rank by the members of the group must be somewhat neutralized for a group or committee to realize gains from this type of problem solving mechanism. This is not to say that there is no room for leaders in a group setting, it just means that the leaders need to be cognizant of the fact that for a group to be successful everyone’s opinion must be heard. Confirmation bias, the unconscious seeking-out of information that supports one’s previously formed intuitive opinion, seems like a huge hurdle to navigate but like a lot of things once one is aware that the issue exists, the solution to the problem is not far behind. This seems to be the case with the shuttle disaster. The bias of the preconceived notion that even if the shuttle was damaged there could be nothing done to fix the problem apparently was an idea brought into the group, as opposed to being a product of the group had tragic consequences. Group polarization seems an interesting concept insofar as it can lead people to more extreme positions and conclusions than they had before even being in a group setting. This dynamic was in play regarding the shuttle as well. To not try and assess the damage to the shuttle through the use of photographs seems about as absurd and extreme a notion as could possibly be associated with the panel of experts. The shuttle was doomed when the foam insulation struck it, but there had to be away to save the crew. Maybe depositing the crew on the space station and then sending up another shuttle to retrieve them could have been an answer. The fact that groups are able to make smarter decisions faster and better than their smartest member apparently gives way to the notion that the group is always right. And as we’ve seen with the shuttle disaster, sometimes the exact opposite is true. Groups can and do make collectively dumb decisions, and some of these decisions are much dumber than any one member of the group would have come up with on their own.

Predicting the Future

2010-12-04T19:16:00.000-08:00

The Ultimatum Game, despite its remarkable simplicity, raises a lot of questions. What’s worse is that the answers experimenters derive always seem to have exceptions. There are no definite answers because each individual has a different price he is willing to pay to “prove a point” to the other person. One person might accept five dollars regardless of what the other person gets and I’m sure there is someone out there that would reject $100,000 if the other person got an even larger sum. It all depends on the concept of “fairness,” a term that’s about as ambiguous and subjective as you can get. Individuals acting out of their own concept of fairness are bound to produce different results based on an immeasurable number of influences that occurred before they were presented with the ultimatum game. They bring these influences into their thought process and arrive at a wholly unique decision. How then can we expect to predict what will happen in future ultimatum games if each one is entirely singular in its process?

What’s more, I’m not totally convinced what sum of money I would personally accept. It is entirely dependent on the context of the situation. Odds are I wouldn’t be too radical in my decision—I’d almost always prefer money over making a point to someone. I’d probably still take $100,000 even if the other person got a million dollars, or a billion dollars. Heck, I’d probably take $10 even if the other person got a billion dollars. Part of my thought process is spent considering the benefit the other person receives—I wouldn’t want to stop anyone from getting a billion dollars. So at some point, it just wouldn’t matter what the other person received. However, the point is if I can’t accurately predict my actions, how accurate can any model for this experiment be? You can predict patterns, but at the end of the day it’s just a guess of how people will behave. This has been one of the things that have bothered me with a lot of economic experiments we look at, and it reminds me of someone’s blog a ways back about whether or not Economics is a science. In order for a model to be useful it needs to be consistent, but what exactly does that mean? Is “consistently” as good as it gets? For instance, Surowiecki says that the group will “consistently” arrive at a better decision than any one individual; however, the fact remains that every so often one individual will outperform the group. Such statements that allow for unspecified and incalculable room for deviation I can’t help but find bothersome. However, you can’t have specific answers because it comes down to individuals who have different opinions about pretty much everything. So the best you can do if form models that are based on patterns.

Which might be why is so hard to predict bubbles. Surowiecki notes that part of the cause of bubbles is that no one knows what price a stock should actually be. However, I think another part of it is that everyone brings in their own personal opinions as to when the stock is in a bubble and when it is a good buy. These numbers might not actually reflect the value of the stock—they may be based on completely irrelevant data. For instance, Surowiecki also brings up the concept of “anchor” prices, or prices that people use to judge whether the current price of the stock is overvalued or not. These anchor prices are by no means legitimate; however, there is a large tendency to use them. In our experiment, our anchor price was in the 300’s, I believe, and it stayed there for the majority of the experiment. We didn’t reflect on the actual value of the stock but instead considered what it was selling for last round, what we purchased our last stock for, what price we sold our stock for, or similar data that didn’t ha. When you bring a bunch of information into the marketplace that has little or no connection with the real value of things, you get skewed prices. However, it is difficult to tell what relevant or irrelevant data is and how much that data affecting the current price.

A Few Concluding Lessons I've Learned

2010-12-04T17:51:00.000-08:00

Being that this is the last of our blog posts for the semester, I thought it would be fitting to discuss a few of the things I've learned throughout the duration of our class. While there are a variety of things that I have learned over the course of the months, one of my particularly favorite areas of study was Hume and his ideas regarding innate human qualities. The reason I enjoyed studying David Hume's work was because not only did I initially disagree with his assertions, but I also felt uncomfortable with them as well. The assertion that I am talking about in particular being that mankind is not programmed with an innate propensity to cooperate and is not naturally predisposed to do good or facilitate the advancement of civilization. My initial disagreement came from my standpoint that I felt it was pessimistic or negative to think of mankind's achievements and propensity to achieve as a result of us being a blank programmable slate—rather than an organism with inherent intelligence that was naturally predisposed to cooperation. There was something about this claim that was unsettling to me primarily because it carried the implication of uncertainty about the future of civilization since its' core message was that we got here by accident rather than design. However, this eventually became a topic that I enjoyed discussing in class very much because it provided me with the opportunity to hear various points of views on the matter. For instance, there were a number of people in our class who thought just the exact opposite of me—that the fleshing out of such an idea actually inspired more optimism than pessimism about mankind and the future of society. If civilization arose out of accident rather than preordained plans, they reasoned, then if anything one should be optimistic about the future since we have already observed mankind's tremendous potential for cooperation and technological advancement. The reason I chose to write about this as one of the things I had learned is because despite my prior inclinations, I eventually came to understand and embrace this exact same point of view and began seeing optimism where I had previously seen doubt.

Another lesson that I took away from our class is that trust, although at first sight a simple concept, is actually an incredibly complex concept—not to mention one that presents the problem of a double-edged sword. The nature of trust one that relaxes our doubts of one another's integrity, and thus innately promotes a lack of verification and fact checking. However, the problem with trust is that it can be easily abused, and more often than not the abuse of trust occurs when the verification or fact checking is stopped. The problem that becomes presented then, is a conundrum like one in which legitimate trust requires an environment free of constant speculation and distrust, but is also commonly violated in such environments as well. Trust, as it would seem, is an erratic idea that has a multitude of self-contradicting ideas.

While these are two of the more prominent issues which I enjoyed learning about throughout the course of the semester, it should not be mistaken as the only ones. There have been a variety of topics I have enjoyed analyzing for the past several months including the ideas of specialization, evolution of trade, one-shot experimental behavior, and price convergence in double-auction experiments just to name a few. All of these issues and all of our other issues explored have helped me develop new insights into the foundational principles of what constitutes economic behavioralism and theory, and have also aided in my ability to rationalize a host of ideas and thought processes I never could before.

Bubble Experiment

2010-12-04T17:29:00.000-08:00

I had never participated in this type of bubble experiment before, but I very quickly made two assumptions about the experiment that would guide my actions. First, I realized that the prices being paid in the exchange market were not going to adjust to the real value of the asset each round. The price of the asset was not going to fluctuate much until later rounds when the dividend value of assets dropped significantly. Secondly, there would be a collapse in the market at a certain point. I also assumed the majority of the other participants would see what I saw. So in order to outperform the market in this experiment I would have to predict the collapse of the bubble, or be innovative and find another way to exploit the market.

I tried to exploit the unstable prices of the early action by buying assets. My hope was that the early prices would be lower than the price that they later stabilized at. I actually had no intention of holding these assets; I figured I could flip them quickly and use the additional profits to purchase more assets to hold. After a few rounds the prices had stabilized and I had a decent number of assets that were yielding a good dividend, so my next priority was to sell before the bubble crashed. I failed miserably at that.

I was concerned that if people saw that assets were being dumped it would lead to an immediate bubble crash, so I tried to sell slowly over a couple of rounds. I started selling too late, and the bubble burst on me before I had a chance to liquidate everything. I sold some of my assets but I held on to some for all 15 rounds, just taking the dividend payment.

I had gotten sucked into the bubble and was caught trying to maximize profits in a market that I knew was unstable. In hindsight I think I should have dumped my assets quickly instead of selling over a period of time. In a real market where transactions are public, dumping may drive the market down, but in our experiment each transaction was private so there was no way differentiate dumping from a normal sale of an asset.

This experiment showed me how easy it is to fall prey to the collapse of a bubble, even if you know it is coming. It becomes incredibly hard to sell since everyone else continues to make money. People obsess over profits to the point that it becomes a competition. Even if two people profit from an investment, the one who made more is somehow the winner; it becomes a zero sum game.

On bubbles.

2010-12-04T14:56:00.001-08:00

This was my second time participating in the bubble experiment we did in class last week so I knew a few things ahead of time. I knew that prices weren’t going to fall with the value of the asset and I knew that the best course of action was to buy up as many assets in the beginning and sit on them until near the end. By using this method I thought I would be able to earn a profit on the items but still be able to sell them for roughly what I paid for them. Even though I knew this was what I should do and the market should go through the bubble it was difficult for me to keep it up.

I kept thinking to myself that the market was going to crash before I could sell everything or that I should continue to buy even into the final rounds. I knew that my plan would work if I remembered to sell before the bubble collapsed and I just missed that point.

By the 5th round I think I had somewhere around 8 or 9 assets that I was sitting on. They were yielding a pretty good profit so I wanted to continue to sit on them. As the rounds got closer and closer to closing I kept thinking that I needed to sell but I didn’t want to give up my earnings for next round. I ended up selling just as I saw prices thinning out in the upper region and this may not have been the best idea. Luckily for me however I hit the high end of the collapse and I was able to sell all of my goods for over 200 points, some even for 350. At that point it hit me that I had fallen prey to what I tried not to and had gotten absorbed in the bubble, trying to squeeze every last penny out of it, despite the fact that it was incredibly risky.

Looking back I realize that one of my errors was trying to sell everything off at once. I knew that I had to get rid of my assets so I tried dumping them all on the highest available bidder. This however, made the price plummet. I would take the highest bidders but that meant I had to keep dropping down to their price level. I had to do it this way but I think if I had slowly sold off my assets I would have gotten a lot more money in the end.

This effect relates back to the Wisdom of Crowds when the author talks about the giant hedge fund, LTCM. LTCM tried to sell their stocks before they plummeted to zero but in doing so they drove the whole market even further down. Looking back they probably realize that they could have prevented their fall if they had sold sooner or used a better tactic but as they say hindsight is 20/20.

What really interested me about this experiment and its application in real life is how often we all fall prey to it. I do not understand why we constantly find ourselves in a bubble despite professionals’ and analysts’ warnings. Even though I knew what was happening in the experiment I still had trouble staying out of it and in the end wound up as absorbed as everyone else.

There was one group, however, who seemed to stay out of it fairly well and that was the group that always bid the projected value many times at the beginning of each round. As far as I know they didn’t buy ridiculously priced assets to later regret it but I’m not sure if they made a lot of money either. Maybe in the end riding a bubble is the best way to make money but you still need to know when to stop and that is what is really difficult.

Great Experiment, but I want more

2010-11-20T20:33:00.001-08:00

Of all the experiments we have done this semester, I enjoyed this week’s one the most.

Of particular interest to me are the prevailing prices for intra-village trade. In my village, prices weren’t determined in terms of supply and demand, at least initially. Instead, prices were determined by each party involved making a partially verifiable representation about their payoff functions, and then seeing the trading partners try to match announced income levels. I say partially verifiable because, though you do see the quantities that each person uses to produce in each round, you don’t see their actual income. Though taking advantage of this would be difficult and require some weird moves, I think it could be done, at least under the income-equality pricing that I observed.

One of the cool things about this experiment is that it provides an outside option. Every person in the experiment has at least 2 potential trading partners, which should give participants the ability to punish cheating partners by negotiating with their other counterpart. For example, in my village, I was a red producer, trading with the blue merchant. At least in the initial rounds before the merchants realized they could trade with other villages, it would have made sense for me to change with the red producer in my village. However, that producer didn’t start specializing until late in the experiment, meaning that if the blue merchant had wanted to take advantage of his unique ability to produce blue units, I would have had no outside option and would have been forced to either accept his offer or simply produce nothing over the course of the experiment. However, this never really happened. My trading partner and I roughly matched income in spite of his market power. I find the fact that no one in our experiment managed to take advantage of this situation rather surprising, but I guess it falls in line with the greater narrative of unfairness-aversion within groups.

As an aside, it has been a little frustrating in this class, that people seem so willing to cooperate with each other, but it is to be expected when people go through so many experiments with each other; it is almost as if this entire class is a trust game. The most interesting part of this is that this Monday saw our final experiment, and the last period of our 4 month-long trust game went by without any collapse in the internal trust.

Back to the experiment however, once the merchant realized he could trade with people, we quickly ironed out how many pinks we would try to obtain and how much red/blue the pair of us were willing to give up to obtain it. This leads me to disagree with part of the analysis that was in the resulting paper. On page 290 of the Moral Markets book, we read “Notice all the unspoken trust in the red-blue village...Person 1, without producing or discussion, begins the day by immediately moving 20 reds to person 4”. I understand that there is no speaking prior to trading on the aforementioned days of the experiment, and I guess this does constitute trust. However, this is observed in day 15, when trading/producing habits are largely set in stone. Additionally, at least in my experiment, the norm was to discuss things in the latter half of the day, after the merchant had returned from the market as opposed to beforehand. So while it was true that I wouldn’t begin the day by bartering with my trading partner, that is in fact how I would end the previous day, making the silent exchange in the morning no more trusting than if I had hammered out the details in the moments following production.

In the last few rounds of my experiment, my merchant finally realized he had market power and began to charge higher prices for his services. As he began this process, I slowly began to feel out the other merchant to see if I could contract with him as a punishment/profit-making mechanism, and to see if it would go above and beyond my income from my habitual partner. This is the reason I am such a huge fan of this experiment. It allows for all of these levels of complexity in such a simple, basic environment.

I would love to see this done again, but with a couple of changes; namely the allowance of private bilateral communication, which would facilitate distrust and make it easier to change trading partners, and the exclusion of merchants from production, since that would more closely replicate real life. It is true that the merchants produced smaller quantities than producers, but due to their Min[2*blue,1*red] payoff function, it wasn’t as big of an issue.

Blog #11

2010-11-20T12:10:00.000-08:00

The experiment regarding merchants and the role(s) they play in the economy was very interesting regarding the implicit and explicit communication that went on between not only the villagers themselves, but amongst the merchants as well. From mine and Brent’s role as producers and merchants, I feel we were better able to experience the full spectrum of exchange and cooperation, both implicit and explicit. For example, even though it took us a bit of time to find the correct production specialization and a suitable trading partner, once these tasks were accomplished we were able to take excess producer inventory to the merchant market and once there exchange these blue goods for the most pink goods we could obtain. However, we did not explicitly tell our producing partner we were going to take the excess inventory, nor did we tell them how we would (or even if we would) distribute the pink goods upon our return to the village. This type of non-verbal implicit communication could have been due to the fact that test subjects are immediately grouped into a cyber “villages” and when individuals are initially classified as a village, to me there is a certain amount of obligation to the group as a whole for ensuring favorable outcomes for your fellow “villagers”. This village atmosphere could then contribute to a strong in-group affiliation resulting in the lack of specific and explicit communication among villagers, and yet lead to favorable gains for trading partners within the villages. Like I said, as I recall neither Brent nor myself at any time imparted information to our partner regarding the excess blue inventory, but our partner was able to see this action through the declining balance in their field. Upon our return from the merchant area, this trust was rewarded by the equal split of the pink goods. I suppose we could have negotiated regarding the division of the pink goods, but I don’t think it would have been advantageous for Brent or I seeing that it was excess producer inventory that was used to acquire the pink goods in the first place. This could have provided motivation for our not attempting negotiation, but I believe the desire to fairly compensate our producer ally was the prime reason for the equitable division of the pink goods. Additionally, as I recall when we returned from the merchant area with the pink goods, our producer partner did not even inquire regarding the terms of the trade between us (Brent and I) and our merchant partner. This would seem out of step with a real-world transaction of this sort because it seems that nowadays nobody would give anyone who was not a blood relative charge over valuable goods without an expressed written agreement specifically outlining terms, conditions, and penalties for failure to comply with the contract. This lack of formality in the village area could in part be explained by our classroom association. As a whole our class could be somewhat viewed as an in-group prior to the assigning of the “village” term and the associated obligations that implicitly and instinctually go along with that association. When the word instinct comes into play regarding this experiment, I wonder if somehow the merchant acted as a type of physical facilitator to bridge, as Hayek puts it, the gap between “instinct and reason”. Hayek claims that cultural evolution (custom and tradition) lies between instinct and reason, and I wonder if one can view the merchant area (with its much more formal and impersonal exchanges) as a result of the implementation of man’s reason then this kind analogy kind of makes sense. In any event, the experiment was excellent insofar that it illuminated the merchant’s role(s) in an extended order.

Experiments and the Real World

2010-11-19T16:52:00.000-08:00

As I’ve been trying to come up with my own experiment for the final project, I found that is a remarkably difficult process to create a useful experiment that accurately portrays a scenario we would encounter in the real world. The problem, and this is a big problem, is that there is so much variance in the way people really go about trading. The last experiment we did provided some interesting results, but I don’t know how realistic of a scenario it was. Producers were limited to just two merchants—how often is this the case? Not very often, in fact it seems likely that there is an enormous pool of merchants who don’t produce anything themselves and who make their living solely by buying and selling goods for profit. That isn’t to say they aren’t useful, but only that they have much less bargaining power than they were endowed with in the experiment.

There is also a lot of trade that occurs only between producers. For instance, a company like YKK who manufactures zippers sells its wares only to other producers. There is no significant need for specialized merchants at all in this scenario, as the producers are acting as their own merchants. Although there was trade available between producers of the same village, it would be interesting to see what would happen if you opened it up to producers from other villages as well. I felt like this experiment created some artificial distinctions between producers and merchants—in reality there can be more of a gray area between the two. Especially with the advent of better transportation and communication the occupation of complete merchants is being demanded less and less. The position of merchant, largely, is being replaced by do-it-yourself producers.

There is also the problem that not everyone in a village will necessarily be a producer or a merchant. There will be plenty of people who are not in the labor force and who contribute very little to the productivity in the market, and there might be people who are producers but do not produce a good that is valuable anywhere but in their own village.

These are all nitpicky details, but they hold some of my frustration with trying to form an experiment of my own. There seems to be no fine line about where to say an experiment is “good enough.” Should experiments account for natural disasters? Should there randomly be a flood that destroys a producers output for every round? The level of detail you can place on these experiments is endless. Of course, the real question is would any of these changes have an effect on the outcome of the experiment. It’s hard to tell without actually testing all of the different possible scenarios. Some of the things discovered through the experiment, such as the casual nature of people in the same village versus the business attitude between the merchants, perhaps transcend any deviation from the experiment we participated in. After all, we tend to witness similar behavior in the real world—people are more cooperative with others they have a relationship with. Perhaps these are just laws that don’t depend on extraneous details.

But no experiment can hope to capture all the nuances of real life. By nature it has to be simplified in some form and condensed into a set of directions. Does this make experiments any less valuable? Not if the experiments can still create models that reflect the general principles we act on. We can assume that real life actions will not absolutely follow economic predictions with 100% accuracy, but we can extract motives and, hopefully, predict trends.

Merchant & Buyer

2010-11-19T13:04:00.000-08:00

I have always questioned myself if humans didn’t care to know if they were helping or hurting the market simply by being in it or was it only personal gain that matter?

In “The Two Faces of Adam Smith” Vernon Smith writes that “Smith’s other incredible insight was that every individual in making the annual revenue of society as great as he can neither intends to promote the public interest, nor knows how much he is promoting it.” People are usually happy if their desires and wants are met and in wide-ranging human beings have a selfish leaning of filling their own needs before others. Therefore it is very appealing that people participating in markets generally help the market, without even being aware of it. In fact, it is more likely that a person would be an impediment to a market if they tried to learn the market and play along with it. If people start questioning the market, they try to understand it, and therefore throw it off.

As a result “by pursuing his own interest he frequently promotes that of the society more effectively than when he really intends to promote it.” The realization that a person can ruin the market by focusing on it, and better it by not paying attention to it seems odd, but is true all the same.

It is human propensity to give something in return if you have received something. This tendency helps to better the market because people exchange and trade items that are “fair” on their own. It is a natural human response to receiving, and in most cases, especially considering future trades, people will not default.

For instance, in the Mediterranean culture giving and receiving are strongly upheld. If one family lends to another, it is absolutely essential that the second family returns the favor at some point. To not give a gift after receiving is looked down upon and can give a person a bad reputation, simply by not following through. This type of behavior is common in many cultures and is the basic reason why markets work: one must give in order to receive.

Trust for the Future

2010-11-17T22:14:00.001-08:00

I am still slightly taken aback by the realization we made in class today. Before taking this class, I had never thought of trust and integrity as more than a virtues or morals that one simply “ought to” possess. After taking this class and looking at trust and integrity through an economic viewpoint, it is bewildering to look at both qualities, not only as aids to harmony and general well-being, but as essential tools to efficient trade and exchange amongst traders. Today’s discussion brought up the point that if every transaction were a “one-shot” transaction, there would be no trust and reciprocity in the market. No trader would have incentive to follow through on his or her promises or deals. Consequently, no trader would trust another because he or she would know about the other’s disincentive to reciprocate his or her end of a deal. It is only because we develop relations with those whom we trade with that we use trust and integrity as tools to ensure that these transactions and exchanges are as efficient and successful as possible. It almost crushes the utopian part of my mind that wants to believe that people are trusting and trustworthy simply for the sake of being so. In reality, however, the truth is that we live in a society of people and bodies that are constantly exchanging and trading with each other. Therefore, trust is almost an “innate” quality within our society because of the economic and social condition in which it exists. We rarely face “one-shot” deals, and that is why we do value trust and integrity as much as we do.

Economic relationships in the trading market rely on trust and integrity in order for deals to flow and become solidified in the market. Deals and transactions are only completed when those who are trusted prove themselves worthy by reciprocating their end of the transaction. If trading bodies do not establish trust between each other, there is no trade made between them, which puts that part of the economy at a standstill or gridlock.

The idea of trust being a tool for economic transactions can be expanded to include the idea that trust is a tool for social and personal “transactions,” better known as relationships, among individuals. Trust is built between two (or many) individuals because of the anticipation of future interactions with each other. Each person honors the other’s trust because each wants someone he or she can rely on, confide in, or depend on in the future. This is not to say that I agree entirely with the argument that says that there is no such thing as true altruism. We live in a complex world, and I find it hard to believe that no one is ever capable of finding an action that is truly altruistic. It is certainly possible, even if it may be rare and debatable. In most cases, however, trust and integrity are the building blocks of substantial and long-lasting relationships. One-shot games do not build relationships. Exchange of confidence, emotion, stories and even belongings- all blanketed by trust, are what build relationships among humans. It may sound cynical at first to claim that trust only exists because of our interest to form relationships that benefit us in the future. When looked at realistically, though, it makes sense that this is the only way that trust comes about. We are social creatures, whether it is in regards to economic transaction or social interaction. For both to be possible, trust must inevitably be used to secure their presence in our lives.

On Property Rights

2010-11-13T22:51:00.000-08:00

Hayek has some interesting views on what developed into the foundation of our property rights. We’ve spent a lot of time discussing the nature of respect involved in the foundation and upkeep of property rights, and I found Hayak’s little section “The Challenge to Property” between pages 48 and 52 appropriate to this.

He begins talking about ‘constructivism’ and ‘scientism’, which he doesn’t clearly define, but does clearly link to the failures of socialism. From my own synthesis I see constructivism as the more liberal philosophy opposed to what would be compared conservative economics today, particularly the abuse interpreting the “reason” that developed the foundations of human institutions. In discussing this, he says: “That interpretation is one by which, in the name of reason and the highest values of civilization, moralists end up flattering the relatively unsuccessful and inciting people to satisfy their primitive desires.”

What does he mean by “their primitive desires?” Is he referring to the propensity of an individual to disregard the earned right of another in respecting their property? I believe he is, and I believe he has taken this principle to the aggregate scale- what happens when an entire body of people castes aside the ownership side of respect in ownership? Well there would be no respect to follow. The Soviet Union is commonly known to have fallen apart because the government refused to recognize the efforts of its people to own something. They forbade property in every sense, and after many years of FORCING the people to obey a government, they collapsed in potentially the biggest example of why the respect of property is important in modern human history. Their counterpart, the United States, instead established and promoted a system where rights of ownership were respected, and their population (us) was willingly eager to keep our government afloat. In a nation that didn’t value recognizing the efforts and rights of those who labored to secure something, the populace daftly dismantled their superiors.

Hayek recognizes this, and says something along these lines to conclude his passage: “Freedom originated NOT by human beings ‘striving for freedom’ in the sense of release from restraints, but by their striving for the protection of a known secure individual domain.” What he means by a “known secure individual domain” is precisely what our class has identified as property rights; the rules and general consensus that go into how you get the boar, the hare and the apple. That’s property, and in the course of the human domain, Hayek is arguing that it is of paramount importance in holding things together.

Hayek eyes utilitarianism and more

2010-11-13T21:50:00.001-08:00

The greatest thing for me about Hayek’s view of how things are, and ought to be, in the world, is the acknowledgment of imperfection and incomplete knowledge. His views on rationalism, positivism, utilitarianism, and empiricism definitely strike a chord with me.

Following from our class discussion, it is easy to point to situations where each of these previous philosophies is habitually (and sometimes necessarily) violated. Take “The idea that it is unreasonable to follow what one cannot justify scientifically or prove observationally.” from page 61. This is just untrue. For example, it is entirely possible that this life is just a dream, and all of the people that I meet are just projections of my subconscious, Inception-style. However, I take it on faith that other people do exist, are real, and have feelings and motivations independent from my own. This act of faith guides every action I take, and will continue to guide my actions for the foreseeable future. If you think that is ridiculous, fine. But then I would challenge you to prove me wrong, and I doubt you could conclusively do so.

The next statement of philosophy that Hayek takes a dig at comes from rationalism; “The idea that it is unreasonable to follow what one does not understand”. This is also clearly violated by every one of us every day. Let us take the example of computers. All of us know how to interact with them, but If I then challenge you to explain how to build an operating system, only a few will be able to answer. If I take it several steps further and ask how to wire a circuit board, I doubt I will get more than one correct answer. One of the greatest things about computers is that never before have people who know so little been able to accomplish so much, and this in itself clearly violates the principle of rationalism. I know that this isn’t a moral issue, but the same could be said about telling children what to do, and having them listen to you; it happens, should happen, and will always happen.

Finally, he takes a shot at utilitarianism – “that it is unreasonable to do anything unless its effects are not only fully known in advance but also fully observable and seen to be beneficial”. This requirement is clearly impossible to fulfill in most situations, but also makes experimentation impossible in its own right.

Hayek does an excellent job at dealing with these competing viewpoints, and his argument that the order developed by our cultural and societal evolution probably thrived because they were the most effective strikes home with me.

On Laws

2010-11-13T16:12:00.001-08:00

Throughout reading Hayek I have come across many points that I find incredibly interesting and wish to delve into further. The one that has stood out the most to me is the evolution of morals and laws that are now crucial to the success of our society.

Hayek states that people didn’t know the impact that implementing laws would have on our society. Vernon Smith brought a very curious question that entered my mind when I read that article but was quickly pushed to the back of my mind when I continued to read what Hayek had to say. That question was this; if humans really didn’t know the impact their laws would create why would they implement them in the first place. I found this a difficult concept to wrap my head around. If there were no known reason to put laws into place than why would we do it? As a class we came to an interesting conclusion, maybe people implemented laws because they saw the negatives of what happens without them.

This is incredibly clear when one examines murder. People must have seen how detrimental the death of someone in a community was, especially if that community was of the size were there was division of labor but not enough people to double up on many jobs. In this case a vital niche in the community may cease to be filled causing people to suffer unnecessary loses in standard of living and possibly life. On top of the social aspect we have the moral aspect. People do not enjoy hearing about someone being murdered and they certainly do not want to see it so for this reason it is deemed immoral according to Hume and looked down on by society. Looking at laws and crimes in this light it begins to become clear why laws were implemented in the fashion they were.

On the level of morals one can also look at laws as a way to force the morals of a group onto the individual. For a very long time laws were simply a restatement of many religious ideals that had the backing of the government. These laws and rules were not set out because they reasoned out what was moral but because, according to Hume, they could feel in their guts what was immoral and what was moral. This is another example of why laws were implemented despite the lack of forethought and planning.

As we look at modern day politics and economics we can see that our current thought is that we can predict all of the outcomes of a law. People have now begun planning out laws because they believe that they know what is best for the world, society and the economy. I’m not entirely sure if this is the best for our society and economy but it seems to go against what Hayek is preaching. Society has a track record of consistently working its problems out on its own so why do we have to start interfering?

The Ironies of Education

2010-11-13T13:57:00.000-08:00

For the better part of the past six years of my educational experience I, like many of the students in the social sciences department, have been entrenched in the works of Rene Descartes, Jean-Jacques Rousseau, John Locke, and many other philosophical figures whose works focused heavily on the vast propensity of mankind's innate characteristics and tendencies. From as early as my high school career as a sophomore to just a year ago in my Political Economy class I had been lectured about and wrote about why mankind was naturally predisposed to create order and natural social understandings/contracts—after all, it seemed like a perfectly reasonable explanation as to why mankind was the most advanced species on the planet. Not only was this school of thought heavily engendered into me by common educational practices, but also by very basic religious principles that all Christians grow up with: that God made man in his image and thus mankind's contemporary social order had to arise out of instinctually preordained plans. The point of these introductory statements is that my experience is not atypical, many students in the social sciences department are inevitably exposed to these ideas and due to American demographics there's a fair chance they will come from a practicing Christian background as well. However, where my experience of the common social sciences student does become atypical is my choice to pursue an education in Economics—a field that as our last session made clear is at odds with the 'traditional' mentality of the rest of the social sciences department in its assessment of human nature and our societal evolution.

It is the mentality of the the rest of the social sciences department, particularly that of its' intellectuals, that Hayek has a blatant problem with. He confronts a good chunk these issues he has in Chapter 4: The Revolt of Instinct and Reason. Hayek's initial displeasure with the notion that mankind is instinctually inclined to be a creature of good-will is illustrated not only by his facetious account of how Rousseau invented a natural component of mankind that was predisposed to cooperate, known as the 'general will'—but also by his comment that "Moreover, irrationalist as it[Rousseau's idea] is, it nonetheless did appeal to progressivists by its Cartesian insinuation that we might use reason to obtain and justify direct gratification of our natural instincts" (50). Hayek not only takes issue with how the social science department's intellectuals' hypothesize that mankind's instincts are innately programmed for cooperation and good-will, but also with the implications of such notions. Visibly displeased with the intellectual's conclusion regarding human instinct, Hayek is not surprisingly spiteful of their attempt to transition their school of thought on natural instinct to reason and its applicability. To the intellectuals, because innately mankind is instinctually good-willed and seeks, as Rousseau puts it, to form a ‘social contract’, reason can therefore be derived from a base of ethical and moral standpoints whose sole purpose is to better society as whole. This is the exact school of thought that would drive Hayek insane because it paves the path for objective terms like reason and rationality to be highjacked by a set of standards that have no applicability to their purpose—and to further the problem blurs the line between what is truly reasonable by reasonable standards and what is reasonable by arbitrary and artificial pre-determined standards. It is this exact mode of thought, or error as Hayek would put it, that have brought about the justifications for socialism and its legitimization through mutilated rationality and reason.

The reason I chose to write about Hayek's inexorable frustration with this socialist system of propagation of vindicated fallacies through our institutionalized education system was because secondarily I found it humorously ironic, but primarily because of its applicability to my original introductory anecdote. If every Political Science or Government student took Economics and read Hayek like I have, then odds are that the Government departments would have a huge drop-out rate or a high number of people switching majors. Many future politicians and policy makers simply take the PoliSci or Gov route without ever having read or understood Hayek and Economics, and ironically end up being the very people who make those decisions about reasonability and societal laws. Thus, it would appear then that to a typical PoliSci/Gov/social sciences student that the irony of their education is that they will have a long and bureaucratically entangled future path towards getting a policy making job, while the irony of education to contemporary Hayek disciples is that not only will those students have a hard time getting those jobs, but that they'll be working so hard to get a job so that they can finally do it wrong and implement the wrong knowledge.

blog # 10

2010-11-13T12:29:00.000-08:00

These six chapters of Hayek covered so much ground that it is difficult to know where to start, and on which topic(s) to focus on. It seems however that there is an underlying theme in the first three chapters, and that theme would appear to be the concept that the haphazard formation of the extended macro-order coupled with the lack of complete knowledge that is inherent in the extended order, is based on abstract rules that have been developed and learned through tradition and custom rather than to be constructed as a deliberate process based on logic and reason. That this type of unsystematic and indiscriminate formation of both rules of conduct and the construct that depends on these conventions was somehow the basis for what we take for granted today as a market was at first difficult to accept as true. But upon further reflection it appears that that is precisely the way the system works. Each producer is concerned with only their limited and very specific individual concerns, and could hardly be aware of all the implications and ensuing down-stream repercussions of their own individual pursuits of profit. I had always previously thought that a responsible and competent businessman should and could be capable to know exactly the uses, applications, and movement through the market of their individual products., but now see that especially in such an extended global order as we have today this perception was short-sighted. The big picture is how the overall system of trade (the macro-order) came about, and not just the flow of a relatively few number of specific goods through the market. I now believe Adam Smith to be correct when he realized, to quote Hayek,” that we have stumbled upon methods of ordering human cooperation that exceed the limits of our knowledge and understanding.” Another point that naturally evolves from this position is the question of when does an increase in knowledge by either individuals or a relatively small number of individuals who have banded together actually facilitate or hinder market efficiency? To put another way, is a fundamental lack of knowledge requisite for the extended order to operate with optimal effectiveness? I think there might be an experiment in there somewhere; I’m just not sure how to go about it.
Another interesting observation that came up in discussion was that the rules developed for use in micro-orders such as families and close-knit groups, and the rules developed for the macro or extended order cannot be used interchangeably. Apparently when the goals for the micro-order are imposed on the macro-order the efficiency of the market structure breaks down. This was demonstrated with the example of the alleged price-gouging regarding the sale of generators after a hurricane. This is an elegant example of what happens when two distinct systems, each with their own levels of altruism and solidarity, are inappropriately and mistakenly joined. It seemed that everyone affected by the hurricane suddenly became a micro-order, and when the rules of the macro-order (i.e. profit) were implemented, the whole system broke down at the expense of all concerned. These “sentimental yearnings” (as they were described in discussion) with and for all their moral underpinnings actually inhibited and ultimately destroyed utility. An advantage of the macro-order, insofar as that the macro-order’s abstract rules could adjust and adapt, was not even able to come about due to government intervention in the form of the police. This adjustment would have probably taken form in the adjustment of prices asked for the generators, and in all likelihood all concerned would have been better-off in the long-run.

Competition?!

2010-11-13T12:06:00.000-08:00

Competition is something that is often viewed as a contributor to success. We have been taught that competition is a good thing, whether it is an economist stating the need for competition in markets or a coach encouraging competition for a starting role on a team.
As we have read during this course, our primate relatives and dolphins were often observed forming coalitions. Daily routines of the chimps that were studied indicated heavy competition for hierarchal roles in their society. They left this lower level bickering when the need arose, such as an external threat. Similarly, the dolphins were seen forming higher-order coalitions when a “rival” group possessed a desired female. I understand that in these cases the reward for forming a coalition outweighs the benefit of refusing it. In our dolphin case, each dolphin gets a shot at fathering another dolphin with the captured female, while our chimp example illustrates the need to protect the group from a threat. What I don’t understand, however, is if it is possible for individuals, human or animal, to realize a higher need beyond what has been seen in their respective microenvironments. I think for animals, I cannot provide an accurate answer, but for humans, the government attempts to build citizen support for events such as the war and tear down support for the Soviet Union. Governments has the power to know more than the general public and this minor fact seems to be one of the key factors in this fear that causes crowds to follow government propaganda. The fear of the unknown drives the masses to believe in the people who appear to know it all. So I do feel that at least people are aware of the macro-environments around them, even if the view is a little fogged from government intervention.
Does this seem to counteract natural selection? Perhaps dolphins have progressed to their current intelligence because those that were the smartest and strongest were able to successfully mate more frequently than the less cunning, weaker males. Perhaps chimps have come to their current evolutionary state because the most strategic and cooperative groups have outlasted or destroyed their rival groups. However, as the view of competition becomes more macro, more all encompassing, I have a tough time reconciling the reward of such acts.
In admiration to humans, there are a million ways to consider how we have come to our current level of existence. Although we have made tremendous strides in the progress of humanity, history can show us some brutal examples of how we have strayed from the optimal path. We have seen genocide, species of animals extinct, and yet our perception of these facts changes incredibly slowly. Note how long it took for women to gain almost equal rights in some countries, or how long it has taken us to recognize the ramifications of living lifestyles that put such high stress on the environment. Perhaps a better example would be if you imagined Hitler’s notorious acts as being committed merely two centuries earlier. Would it have even been stopped? My major problem with these realizations is simply that depending on your own idea of “natural”, you may be able to justify any of the most horrific, immoral acts in the brief history of humanity as the progression of natural selection. I mean, we’re natural right? Aren’t we just trying to make our species the best?
So when does competition become bad? Ridley seemed to like the “openness” of the dolphin world. Aside from some obvious female oppression, I really liked his idea. The removal of nationalism, boundaries, and all these societal creations that, in my opinion, foster the bad kind of competition is something that is often overlooked. Realistically, I think it is the illusion of external threats that create animosity between groups. We can observe it on the chimp level, or even better, with our own government’s propaganda. In some cases the Government’s propaganda is an effort to unite us against the Soviet Union, Taliban, and others. Perchance it would be beneficial to find out where this fear comes from. I think it’s possible to beat your best friend in a footrace without stepping on his foot, because in the long run, the latter doesn’t make anyone any faster. Competition in sports is an understandable situation on the other hand competition between friends seems dangerous to the relationship and not beneficial for either party.

Humans Are Not Born Wise

2010-11-12T13:52:00.000-08:00

As I read through F.A. Hayek’s book: The Fatal Conceit, chapter one, ‘Between Instinct and Reason’ caught my attention when Hayek mentions about the following reality. “Man is not born wise, rational and good, but has to be taught to become so.” Furthermore, Hayek tells us that, “it is not our intellect that created our morals; rather, human interactions governed by our morals make possible the growth of reason and those capabilities associated with it.” “Man became intelligent because there was tradition.”

The ability of a five year old kid to rationalize is relatively low compared to, say, a twelve year old. When I was a kid, one of my favorite sayings was “why.” I often wanted an explanation to everything that I would think of at that moment. I probably believed every answer that my parents gave me, whether it was true or not. However, it is surprising to know the presupposition that, “the related idea that it is unreasonable to follow a particular course unless its purpose is fully specified in advance.” But when one is a kid one is told to do something without even knowing the purpose of it. “We often do not know why we do what we do,” as Hayek claims. We could agree that human beings are definitely not born wise, but instead acquire knowledge gradually.

But, Hayek reveals to us “that there might be limits to our knowledge or reason in certain areas” and that “the most important task of science might be to discover what these limits are.” It seems that although humans develop wisdom gradually, human beings reach a point where their knowledge is capped. Even though humans move from the stage of being a kid to adolescence and then to adults, it doesn’t mean that an adult entirely knows the purpose of everything he/she does. Consider the following hypothetical example. Assume the human brain was capable of attaining knowledge at 100%, meaning knowing every purpose of everything in advanced. Now assume the knowledge of an intelligent person such as a scientist (e.g. Einstein) is capped at 15%. Since no human being would ever be able to access the other 85%, this would be considered a limit to our reason.

Incidentally, Hayek points to something rather interesting, that “if we stopped doing everything for which we do not know the reason, or for which we cannot provide a justification in the sense demanded, we would probably very soon be dead.” This brings us back to the example of a kid who is told to do something without knowing the reason to it. It is as if we are still kids, in the sense that we still don’t know the reason behind everything that we do. Just as kids aren’t prepared to handle a rationale explanation to a specific question asked, it seems that we also wouldn’t be prepared to know the justifications of everything we do.

It is interesting to note the notion that tradition is what has enabled humanity to become intelligent. Our traditions have told us “primarily what we ought or ought not to do under certain conditions rather than what we must expect to happen.” For example, our rules such as honesty and of property rights are “handed on by tradition…” These rules aren’t created by reason, but learned as they have evolved and been passed on from generation to generation. Think about the following question for a minute. Why is it that people celebrate Christmas? Some people might respond, ‘because Jesus was born that day.’ This, however, is erroneous. But since many individuals made it a tradition and as this tradition got passed on to generations, most people nowadays truly believe that Jesus was in fact born on Christmas.

Moreover, if we take a closer look at the word tradition, one possible definition refers to it as “an inherited pattern of thought or action.” It seems that our minds are programmed by traditions, and this is how we develop our wisdom. It also seems that our actions and thoughts were not genetically transmitted thus “what we call mind is not something that the individual is born with, as he is born with his brain…but something that his genetic equipment helps him to acquire, as he grows up, from his family and adult fellows by absorbing the results of a tradition that is not genetically transmitted.” The reality is that much of our thoughts are developed through tradition, which is why we sometimes have a difficult time understanding things that we do that seem unreasonable. As Hayek argues, our “cultural evolution is brought about through transmission of habits and information not merely from the individual’s physical parents, but from an indefinite number of ancestors.”

It's Beyond Me

2010-11-12T02:08:00.000-08:00

I found the way Hayek described how the “abstract rules” of moral code adapted to society very interesting. Perhaps the most interesting aspect of his description is the way he argued and supported the fact that there are just simply some things in life that are beyond our understanding. As he stated, many intellectuals and scientists spend their lives trying to rationally and experimentally prove hypotheses regarding certain processes like biology and economics. While biology is a more observational and tangible science to rationalize and experiment with, economic science and the morality of trade are more difficult to analyze through reason alone. Hayek states that our society has a set of “abstract rules” when it comes to the morality of human interaction and exchange. These rules include honoring concepts such as fairness, honesty, reciprocity, and justice. He claims that, rather than being put into place at a set moment in time, these rules evolved through an evolutionary process if human experience. This explanation is one that he supports well throughout his entire argument. If one stops to think about this claim logically, it makes perfect sense. Morals and accepted “traditions” in society are not written somewhere as stencil for humans to follow in the course of their everyday life. They are instead, generally accepted, almost subconsciously as the way we “ought” to behave when interacting with each other. When I was a little girl, I was always asking the question “why,” things were the way they were. If my brain were developed enough at the time to even ponder the abstract concepts of exchange and interaction, I may have questioned the reasons why they possess certain moral qualities and how they came about. At that stage in life, I probably would have assumed that a group of people did in fact get together and decided upon the ways they were going to trade and interact and the “rules” that would come along with these processes. To me, it always seemed as if the world was indeed set up to work as “perfectly” as it did in my eyes at that young age. It is ironic to be in my freshman year of college and to learn that some things, though we may try to rationalize them intellectually are simply beyond our understanding. These things, and in this case, the trading system and human exchange, do actually work and function successfully, despite the fact that they can not always be tangibly or scientifically observed. It is refreshing to read a well-supported and legitimate argument stating that we simply cannot and should not try to know how and why everything works.

Despite never being able to scientifically prove the assumption, it seems that society’s “abstract rules” as we discussed in class, came about come as a product of our emotion. That is, we adopted moral rules because of the negative effect their alternatives had on the emotional well being of man. For example, human society has adopting the general consensus that killing is wrong, not because a group sat down and decided it, but because people did kill and got killed. Seeing this happen through multiple experiences had the general effect of upsetting the witness’s emotions negatively. Thus, killing in general adopted the “wrongness” it possesses in human society. Emotions in economic exchange also effect how we partake in it. Through trading processes and trail and error over generations of economic exchange, we have learned that cooperation, trust, and honesty are all successful in producing overall economic efficiency, and thus become “morals” of the science. Despite the fact that we will never be able to scientifically prove how these morals came to be, it is a good thing that they did. They have produced the most efficient economy possible for men in our current place in modern time.

Foundations of Order without Law

2010-11-07T00:40:00.001-07:00

I found our discussions of order without law to be very interesting. However, I feel like there are many questions we did not fully discuss. I would like to discuss these questions: How does social order differ from order through law? Where does order without law derive its power? What are the benefits to having order without law? And what are the limitations to not having law?

In order to really figure out the benefits and origin to order without law, I think we need to first ask under what circumstances are rules and customs considered to be law. It turns out this does not have an easy answer. Most of us would agree that our justice system is based upon laws and that the whaling and cattle ranch examples from class portray systems without (relevant) law. However, much earlier in the semester, we discussed lex mercatoria, or “merchant law”, where merchants formed their own set of business practices and even set up their own courts to settle disputes. Would this be considered order through law, or order without law?

I feel that even though the rules had been written down and codified, and a legal system had sprung up around them to settle disputes, “merchant law” was still not really law. The reason I feel this is so is that “merchant law” was decentralized and voluntary, which I feel are the two features that separate systems without laws from traditional legal systems. In all of our examples of order without law, people join together and voluntarily form an association with rules. We can see this in merchant law through the fact that people could choose to not be a part of the system, and trade without abiding by the rules set forth by the other merchants, although it would make it more difficult to run a business. In addition, we see that the worst punishment that the courts could deliver was ostracism. This is a very important distinction compared to traditional law.

In traditional, centralized law, people have very little choice whether to follow the laws. When people deviate from the prescribed rules, they are taken by force and put into prison. This is in stark contrast to being labeled a cheat by other merchants or having everyone gossip about you. In addition, with laws, punishment is dealt by a higher power, most often the government in our case, while we see that in our examples of order without law, the punishment is given by the individuals within the group itself.

So, it is easy to see that centralized law gains its power of enforcement through force. However, how is enforcement in order without law powerful? How can ostracism or gossip function as a powerful punishment and deterrent to deviation? One of the important things I have learned from this class is that people choose who to deal with in exchange, and so ostracism can lead to a person being cut out of the loop of exchange. This can include both traditional economic exchange as well as social exchanges, such as favors. By being cut out, a person naturally becomes much poorer. Also, we have seen through our readings that humans are social creatures. It is nearly impossible for a person to function independent of others, not only because of material constraints, but also because of importance of society in defining the individual. Put simply, being shunned by family or friends is a painful thing, since we naturally want to get along with others.

What are the benefits to using these decentralized systems over the traditional approach? We can see that by having the group determine and deal out punishment, the rules are naturally very flexible to circumstance. This allows for different locations to have differing laws, as we saw in the case of rules regarding whaling. In addition, this allows for the laws to adapt to changing circumstances, just as the merchant laws would add and drop rules as needed. Beyond just flexibility, order without law can act swiftly against transgressions, since the affected group both judges and punishes, rather than having to appeal to a higher power, and then have that power enforce the judgment. Finally, and perhaps most importantly, rules and punishment must be fair, because association is voluntary. Simply put, sets of rules must deal with competition. If punishments and rules in a group are unfair, members/outcasts can form a new association with more fair rules.

Where do these systems fail? We have already seen that problems can arise with people like Frank Ellis. Frank did not care about being a part of the group. This made the group lose its most important tool against deviation. In addition, he shows how weak a group can be against stopping people outside the group. The merchant laws can help prevent cheating amongst merchants, but they can’t prevent the occasional thief. It seems that although property rights can be defined, agreed upon, and enforced within a group for the most part, protecting them against those outside is a much more difficult task. Having a centralized system of law which people cannot opt out of seems to help deal with this problem, however I wonder if it is possible for order without law to deal with it effectively as well.

Man the Animal

2010-11-06T19:34:00.000-07:00

Reading about animals participating in quasi-economic exchange never gets dull for me. What we accept to be natural for humans, that we exchange goods and services to make ourselves better off, is consistently surprising to find in other animals. I at least feel like trade is mankind’s big secret—the undisclosed recipe for our success as a species, and when I read about little fish trading in accordance with their opportunity costs, it makes me stop and revaluate my understanding about what is actually going on in these exchanges.

One of the important differences between animal trade and human trade is that animals frequently, if not always, exchange services and not goods. Baboons groom moms for a peek at their babies and cleaner fish clean other fish in exchange for the food they get in the process. I cannot recall an example where animals exchanged one quantity of goods for quantities of a different good. You do not see baboons exchanging twenty bananas for one pound of meat, for example. Why is this? It seems that animals are just a small step away from crossing this bridge of economic discovery. They are already performing some marvelously complex exchanges, so what’s the hold up? It’s hard to say for sure, but I feel it must have something to do with the advent of language. Animals obviously communicate with one another. Our readings covered this thoroughly. Chimps, for instance, have a large library of vocal calls they can make to alert others. Many other animals communicate through actions such as annoyance, aggression, or submission. Commodity trade doesn’t require a great deal of language; however, the one thing it does require is the one thing these animal forms of communication lack. That is, they are absent of a means to communicate quantities and numbers. After all, human trade was shown to exist before language and it was common to see trade occurring between two cultures with no common language between them. It was only through our grasp of quantities that we were able to figure out relative prices and from there to exchange goods.

What was surprising about these exchanges occurring between animals was the unsettling similarity to how humans react and respond to trade. As Clarke pointed out in class, the capuchin monkey responded eerily similar to how he had acted during the experiment when someone offered him a portion of the 20 he felt was unfair. I too was a culprit of demonstrating capuchin behavior. In the second portion of the trust game, I consistently chose the [0,0] option. This goes against economic reason. After all, it is better to have a little than to have none. However, because of the way emotion and our concept of “unfairness” governs our decisions, we are able to end up at a point where everyone is worse off. We’d rather have nothing than have a cucumber if someone else is getting a grape. However, it is not just this feeling of unfairness that we share will animals. A variety of emotions are shared—jealousy, anger, annoyance, fear, and compassion guide our actions whether you are a baboon or a human. This is such a big deal because it redefines how much cognition these animals are capable of. For a monkey to throw away food he had once valued after being introduced to the possibility of acquiring a grape suggests a level of understanding and self-interest that is remarkably advanced.

There is also the example of the two monkeys working together to pull a tray of food, and one monkey prematurely lets go of the tray and collects her cup of food before the other monkey can get her cup. The foodless monkey then proceeds to throw a fit until the other monkey helps pull the tray once more. We don’t know why the monkey helped the other monkey; however it is clear that such an action was not necessary and did not provide further benefit for the monkey. Whether this action was altruistic or stemmed from annoyance at the angry monkey is the same problem we face with humans. Do humans do good acts out of kindness or out of some other less virtuous motive? In any case, we should realize we are not alone in this conundrum.

Emotions Influence Human Behavior

2010-11-06T17:24:00.000-07:00

Although there are many similarities in our economic transactions that we can learn from the economic exchanges of social animals, understanding human economic transactions is by far more complex thereby making us a very distinct species. There is something different about the human being that makes us unique. As I read through chapter eight Conundrums of Culture from Matt Ridley’s book The Agile Gene, my attention was caught when Ridley argues, “that a lot of what we celebrate about our brain has nothing to do with culture.” “Our intelligence, imagination, empathy, and foresight came into existence gradually and inexorably, but with no help from culture.” And if “there are limits to the power of culture to change human behavior,” what is it that truly influences our human behavior?

Behavioral economics suggests that our “human economic transactions are controlled at least in part by emotions.” An emotion can be characterized as any strong feeling such as joy, anger, love, hate, horror etc. These are intuitive feelings as distinguished from reasoning or knowledge. This notion assumes that although we may think that many of the choices we make are rational they are indeed influenced by our emotions. Consider the following example. The vast majority of Americans trust television news more than any other source of news because television is a visual medium, which has a greater impact on the brain than the spoken or written word thus visuals can be remembered because they produce emotions and emotions are trusted.

It seems that a lot of what we celebrate about our brain has to do with our emotions. It is sometimes difficult to try to understand the way our human emotions function in economic exchanges, given that most of us are instructed to think logically about every decision that we make. But our emotions are assumed to be far away from reason. However, it is interesting to note that, “our emotional decisions are not necessarily unwise.” This suggests that perhaps our logic is not fully alienated from our emotional decisions. Incidentally, one could argue that perhaps part of our culture might influence some of the decisions we make, but to a lesser extent than our emotions.

But, our laboratory experiments have indicated that when we are involved in an economic exchange our reaction to what is “fair or unfair” is derived from our emotions. During our previous one-shot game experiment, as a buyer I reacted to the offer and made a decision based on my emotion. I wasn’t sitting in front of the computer screen and deciding through the offer logically. I was emotional about it—whether I should accept the offer or not, rather than simply taking anything I could get. For example, the ‘standard model’ of economic research “maintains that humans base economic decisions on rational thought processes” whereas the new discipline of behavioral economics indicates that, “people reject offers that strike them as unfair.”

Another interesting assumption of behavioral economics is that our emotions “preserve the spirit of cooperation and that such emotions powerfully influence behavior.” Unlike classical economics that “views people as profit maximizers driven by pure selfishness,” this new school reveals to us that, “people occasionally help one another without any obvious benefits for the helper.” Although this may seem irrational, it seems that our emotions play a huge role in establishing a cooperative landscape amongst each other.

This is parallel to what Matt Ridley explains to us in his book, The Origins of Virtue, that, “we use our emotions to make credible commitments” and that “we bring irrational commitment driven by our emotions.” This is one of the underlying reasons why emotions trigger reciprocity in human beings. It is through our emotions that we decide to scratch peoples back today so that they may scratch our back tomorrow.

Furthermore, humans are social beings that have innate instincts. These instincts enable us to react to situations through our emotions. At first, this may seem illogical but the reality is that our reactions to economic transactions reflect anger, frustration, irritability, envy, and resentment just to name a few. It is as if our innate instinct pushes away our logic, allowing our emotions to drive our decisions. It seems that our emotional instincts react rather faster than our logic when we involve ourselves in economic exchanges. Our “decision making and emotion go together.” I end this blog concluding that what influences our behavior when we engage in economic transactions with others is not our culture or reason but our emotions.

Blog #9

2010-11-06T12:20:00.000-07:00

The capuchin monkey example in the de Waal article raises interesting questions regarding cooperation among individuals whether animal or human, and in our interpretation of this behavior. In the experiment where both monkeys together have to pull the tray to get the pay-off, the “cooperation, communication and the fulfillment of an expectation” part I agree with, but when de Waal goes on to include the phrase “sense of obligation” that’s were it gets a little fuzzy for me. We have seen reciprocal behavior in the grooming of apes, in vampire bats that help feed one another, and now with these capuchin monkeys, but to go so far as to anthropomorphically project what seems to be a human moral or legal condition into a situation that could simply be the result of instinctual cooperation between group members is a bit much. Granted, de Waal does qualify his statement with the word “perhaps”, but still to me the word “obligation” just does not quite fit. A point was raised in the class discussion that perhaps the monkey that got its food was merely trying to shut the other monkey up, and for that reason the monkey helped bring the tray in again. This seems like a possible explanation, but if that is the case, I have to ask myself is it possible for animals to become annoyed with one another, or are we again projecting human traits and mixing-up what could again be an instinctual response which has evolved so that the species is more likely to survive. In Jane Goodall’s paper, “annoyance” seems to be the key emotion when an infant baboon playfully kicks an older male baboon and is bitten by the older baboon. But I wonder if there is something other than “irritation” and “annoyance” that caused the older baboon to respond aggressively? Could it be that the infant baboon had not followed an evolutionary hierarchical system, and for that reason the infant baboon was bitten? Could even the behavior of the third baboon that came to the aid of the infant baboon and then later apparently “punishes” the infant baboon be explained by the same violation of an instinctual hierarchical system that is in place for the long-term good of the species? I have a hard time accepting that these types of responses are something other than instinctual, innate behavior. Granted chimpanzees do have highly developed social structures, and are capable it seems of almost human responses and inclinations, but even with a genetic similarity to humans in the 98% -99% range, the difference that the one or two percent represents is the difference between killing and eating another’s infant with apparent immunity if the timing is right (even if others did see you do it), and having an orbiting space station. When the capuchin monkey apparently got angry in response to the perceived slight of trading the pebble it was given for a slice of cucumber instead of a grape, Hume’s “morality as a feeling” (as opposed to morality as a product of reason) immediately came to mind. This seems to be a perfect example of Hume’s concept except that the subject that experienced this moral feeling was probably incapable of moralistic discernment, and that was what led me to question where do we draw the line with attributing human-like characteristics and intentions to even our closest biological relatives. Especially in today’s culture, the attribution of human traits and characteristics to animals is rampant and even economically beneficial. One only has to turn on a television or go to the movies to see this type of anthropomorphic activity, and Disney basically rules the world due to its implementation of it. Insofar as chimpanzees go, apparently the fact that chimpanzees do resemble humans so closely in so many ways only serves to make such attributions to their species easier and more frequent.

"How Animal Do Business"

2010-11-05T20:39:00.000-07:00

Frans B. M. de Waal in his article “How Animals Do Business,” there is a large amount stated about the freeloader problem in human, and some animal, societies. In the American society today freeloading is an ongoing issue and a problem that cannot be solved in a day. The problem with freeloading is the fact that everyone who cooperates in a certain task feels they have a right to a share in the profits. However, it is more likely than not that others can share in the profits as well, even if they didn’t do anything to deserve a share. This problem can evoke many upset feelings of wrongdoing and lead to the reason why so many people choose to only trust close friends and family. De Waal states in one section “this is why humans protect themselves against freeloading and exploitation by forming buddy relationships with partners- such as spouses and good friends- who have withstood the test of time.” No one wants to take a chance on being cheated out of the benefits they are getting simply because another person feels they can get away with it.

Along with freeloading comes the element of trust. For example, in order for two people to start a business together, they must both trust each other first and make sure one of the partners isn’t going to take off with all of the money. Both people have to put trust in each other and weigh the costs and benefits. If neither man could fund a new business on his own then he has little chance of owning and building up a business in the future, however when both men come together they can trust each other, put money together to start a new business, and therefore have profits in the future, larger than either man could have done on his own.

The reason so many people turn to spouses and friends to avoid the freeloader problem is because they know they have more invested in each other than simply working together. Generally marriages and friendships have a basis of truth, honesty, and natural reciprocity that comes from the mere fact of looking out for one another. There is a less likely chance of a friend or spouse freeloading on someone when there is more to his or her relationship than simply seeking a one-time benefit. Freeloading when there is a relationship at stake means a person has a lot more to lose than just being disliked by the person or persons they are freeloading from.

In other words, I would like to examine what people can gain from trusting people who are not their friends and family even though they have adequate knowledge about the risk of freeloading. Anytime you engage in a reciprocal relationship you are taking risks. People are unpredictable and seemingly untrustworthy. Are those willing to trust others simply assuming they will be the exception, that freeloading will not happen to them? Have they come to a realization that if we all begin to trust one another more we can have a more fulfilling and productive life especially if the freeloaders value this trust?  Stepping outside of your friends and families in business situations can surely lead to a better-rounded experience in life. You are more likely to be able to separate your social and work life that leads to better relationships with your friends and family. Your mental health also increases when business and personal life are separated because you are able to escape both of them at certain times and reflect upon them once emotions have run their course and you are more reasonable. Perhaps we all have something to gain from becoming more trusting of mankind and taking every precaution to make sure that we as individuals do not become freeloaders in society.

Nietzsche

2010-10-30T21:04:00.001-07:00

In the Genealogy of morals Nietzsche presses on what in my opinion breaks down to an instinctual if not shortsighted system of ethics. His system seems to rest on the inherent human tendency to avoid pain and pursue pleasure. In this way Pavlov and other classical psychologists would likely agree but the concordance ends there. Nietzsche’s paper is inundated with examples of how pain stands alone as the single most unforgettable source of information. It is under this assumption that Nietzsche builds his system giving examples of both Roman and Greek law allowing for the victim directly to inflict pain on the criminal. This is appealing in that it ties into another point that Nietzsche makes about the innate pleasure in causing others pain. Nietzsche comments that both inflicting pain and preventing joy from others can in fact be stimulating to us. It’s this idea that his system is based off of.

While seemingly a wonderfully simple and efficient system it is not without it’s flaws. The system is good at accurately reprimanding those who directly harmed you, but does not take into consideration a situation where A fails to pay B which in turn fails to pay you. Is it fair to punish B, since after all it wasn’t there fault that they were unable to pay you. Perhaps one should punish B and B should punish A, all the way to the top. In this way one might reach the root of the problem. However that seems unlikely, given the complexity of the system and leveraging of the firms on one another. One example of this is the banking industry before our most recent recession. All of the banks were leveraged on one another so when one went down the others were soon to follow. While Nietzsche’s model makes sense in smaller community based markets, it’s hardly applicable to markets as complex as modern banking.

Nietzsche makes a strong argument about the creditor and debtor and the idea of “how the sense of justice ever appeared on earth.” I find it very hard to believe that the human conscience would ever allow a person to cause pain to another without having some way to justify it, mental illness being the exception.  These justifications could range from religious sacrifices to anything considered an eye for an eye. In accordance with this view that pain is not inflicted upon another for no reason at all, comes the question of what does one do to deserve pain? Nietzsche would agree that justification for pain first came about with the debtor creditor relationship and trust between the two. Whether the debtor and creditor were trading items, promising something to each other, or trusting that the other would simply follow through, a default on any of the following could be justification to inflict pain on one another. Therefore a sense of justice appeared on earth the first time one person defaulted on someone else. The person left feeling cheated would instantaneously feel a drive to inflict the same pain upon the other, therefore creating the first form of justice.

Glass Case of Emotions

2010-10-30T19:19:00.000-07:00

The subject of death is a very sensitive topic of discussion especially when it pertains to losing someone who has played a significant role in your life. Death is one of the most devastating feelings of emotion and one of the hardest feelings to cope with in human nature. Obviously death is not avoidable as it is part of human nature and it happens to all forms of living organisms, but it is often very difficult for some when they are dealing and accepting death as each individual deals with it in their own way.

I was entertained with the ideas and differences of opinions our class had as we discussed and got into Adam Smith’s theory of self-love, and sympathy with the tragedy of dealing with death. I was enjoying listening to the opinions of others as we dissected the meaning of sympathy and its controversy over being an act of selfishness that Smith denies. According to Smith, emotion is founded upon each individuals own personal belief of self-love, and that sympathy is derived from an imaginary change in a situation with that the person who it is principally concerned. Basically sympathy is putting yourself in the other person’s shoes and trying to imagine how they feel. When we notice others are in pain or devastated by various acts such as death that are outside their personal control, we as humans “mostly” try to help others and sympathize with them when we notice they are in some form of pain or grief. However the condolences of grief we experience can never be compared to that who it is truly affecting.

I strongly believe that we, as individuals, each and everyday deduce our own theories and thought processes of emotion. I am not just pertaining to the emotions of empathy and sympathy, when we help others deal with death, but that with any cause and effect and its relations to feeling of emotions. But towards that as currently discussed in the readings of Smith as sympathy, and empathy, are all based on our upbringing and psychological life experiences on how to handle those feelings of emotions. Yes, I do in fact agree with Smith that when we do grief for others, we sympathize for them entirely based upon the other persons account, not our own. We almost have an out of body experience and try and relate ourself to the person and how they must feel if that specific act happened to you and how you would best believe to handle the situation with those overwhelming feelings of emotions. How can be helping others deal with these emotions, which is often very difficult, be remotely in any way considered an act of selfishness? I agree with Smith and it should not be considered an act of selfishness or as a feeling of moral or obligation attached to it like David Hume. I believe it would be selfish for the person who is in grief to not open up to others when they are dealing with their grief, a complete 180 switch when denying condolences and acts of benevolence, that’s almost selfish. My question to Adam Smith is how did he begin to debate the question sympathy and its relations to selfishness? There is definitely some confusion with the misrepresentation of the defining the two words selfishness and sympathy.

The Context of An Economy

2010-10-30T19:09:00.001-07:00

As this class moves on, a lot of our discussions are really moving along in deeper and more interesting ways also. Through our blogs and class time, we seem to be as a whole moving towards bigger-picture questions about how issues like property rights, trust, and empathy play a role in the working economy. For me personally, in class it’s hard to express my point precisely as I would like to because I don’t have time to write it out and refine it, and sometimes the result is that what I say is confusing.

What I was getting at on our debate over Adam Smith’s beliefs on the motives behind empathy was that what matters about empathy is it’s context. The more I think about it the more I believe I certainly overstretched in calling him a hypocrite (and probably made myself one in the process), and it’s important to recognize the difference between Smith’s contradictions precisely because of the context he is discussing. What I mean is, Smith discussing the reason behind a butcher providing us our meat arising not from his benevolence but rather from his self preservation does NOT mix with his reasoning about our empathy with others. They aren’t explanations traveling along the same roads of logic- they are explanations aimed at explaining and supporting two completely different highways. The two scenarios he is talking about are entirely opposite complexes; it is apples to oranges. While his reasoning is quite contradictory if we put it in the same pot, we can’t understand them properly if we throw them in the same pot. They’re not meant to be melted together; we can’t compare the two to each other because the context they are written about is as different as black and white.

To make more sense of this, we can look at our own experiments, and the way economic markets are organized as a whole. Professor Wilson pointed this out, but it’s in every respect relevant to this clarification: recalling our double-auction game from a few weeks ago, there was no empathy involved in that experiment. The way it was structured did not allow, nor was it meant to entice, players to use their empathies in their buy or sell decisions. Our one-shot game and reciprocating scenarios games did.

As a class, we had very little dead-weight loss and certainly a lot less hurt feelings and frustration at the conclusion of our double-auction experiment. The results were much different after the one-shot and reciprocating scenario games, only about one half to two thirds of us were experiencing maximum efficiency at any given point.

In other words, when empathy, morality and selfessness were involved, we made a lot less money.

Naturally, we can see the same argument proving true in the way our nation’s large-scale financial markets are organized. Buying and selling stocks and commodities doesn’t allow traders to bring empathy into the market, and one who does is likely to be fired from his firm for not performing as he should be. The way our markets are organized can help explain the difference in Smith’s explanations of self-love and selflessness; the situation he is seeking to explain is more important than the logic of the explanation itself. As a buyer, we would look at somebody who speaks of placing himself in the seller’s shoes and buying the product for a way higher price than necessary as a fool because the situation doesn’t call for it. Perhaps we should be more lenient in thinking about the context of the scenarios Smith is discussing before we jump our guns and throw his logic to the dogs.

How Humanity Subsists in Society

2010-10-30T16:28:00.000-07:00

Adam Smith’s Theory of Moral Sentiments reveals to us that, “man is driven to take refuge in society, not by natural love which he bears to his own kind, but because without the assistance of others he is incapable of subsisting with ease or safety.” This implies that we are indeed social beings and that without any other human beings around us, say, if one isolated itself from society and lived by himself/herself, the reality is that one would not be able to maintain or support oneself. In addition, humanity seeks to take refuge in society. A possible definition for refuge is “a shelter from danger or hardship” or “safety.” This means that human beings are driven to seek for their own safety and also expect to receive safety from others in society. Safety provides to human beings a sense of protection, thus without safety human beings would not be able to subsist. However, the question is: how do we develop this sense of safety amongst each other in order to subsist in society? I’d like to dig a bit deeper into this.

An example of the notion behind virtue and vice that Adam Smith provides to us is a great starting point to this issue. Smith tells us that, “virtue is the great support, and vice the great disturber of human society.” Vice is considered a wicked behavior or a practice that’s immoral while virtue is the “quality of doing what is right and avoiding what is wrong.” This indicates that a human being that practices vice is actually making a contribution to bringing “ruin and disorder” to society and as a result many people experience hardships or confront themselves with dangers. Vice also does not promote the safety of individuals in any way, shape or form. On the other hand, virtue is the great support of human society, as Smith claims, because with it comes prosperity. This type of prosperity may not be referred to as only economic welfare, but also security.

It seems as if virtue is what brings safety whereas vice brings ruin, but both virtue and vice are practiced by individuals yet safety still exists in our society. However, this sense of security may be developed through government intervention by establishing laws and punishing those who commit acts that are wrong or harmful to other individuals. Even though many people see an act of virtue as ‘pleasurable’ while an act of vice as ‘offensive’ people still practice vice. This is one of the problems I see with developing a sense of security among each other without having any government law, knowing that others in society will inevitably bring ruin. It would be impossible for the entire human race to practice virtue, because it seems as if there is something innate in us that makes us behave wrong or commit acts of immorality. It is as if our behaviors are driven by some form of instincts, one that is for the good while the other for the bad.

But if this notion is correct—that is, although humans are born with or develop these instincts, they still look to take refuge in society. Perhaps I may now be beginning to see the light at the end of the tunnel. This ‘light’ that I see conveys to me that it may be by experience that we develop this sense of safety among each other. Not by virtue or vice, but through experience. Possibly, if it weren’t for experience, then it might be difficult to subsist in a society where vice predominates. Consequently, no longer would individuals take refuge in society because vice would only bring people harm and not safety. As Smith argues, it is vice that “disturbs the order of society.”

When people experience some type of dramatic event, that event colors their views for the long-term. For example, people who experienced the Great Depression grow up to be savers whereas people who experienced the Vietnam war grow up to be mistrustful of government. The point I want to make is that people’s experiences are what shape the behavior of human beings. Even if people are driven to behave wrongly, people refrain from doing so because of the consequences they know that wrong act may bring. The interpretation I take from this reading is that people’s experiences is what continues to sustain human beings to seek support from one another, and not just by virtue alone. The reality is that it could be difficult to see society function by neglecting our experiences.

On the praise of selflessness.

2010-10-30T15:21:00.001-07:00

In Nietzsche’s piece, The Gay Science, the argument forms that one who praises selflessness is in fact being selfish. He states, “The ‘neighbor’ praises selflessness because it brings him advantages.” Looking at this quote one is originally absorbed by the apparent logic in it. ‘The only reason we praise those who help others is because it encourages even more people to sacrifice their own well being for the benefit of me.’ Is this really true though? Why then do we praise those who donate to causes that do not help us? Or ones in which the benefactor is someone we don’t’ even know?

At first glance I was shocked at how great an argument the selfishness of praising selflessness was. I told my roommate and had a good conversation with my dad about it and through these discussions I began to see the flaw in the reasoning of Nietzsche. Nietzsche seems to think that the neighbor will only praise the giver if he benefits from the sacrifice. There are many examples were this is not true. I know I have never received any charitable organizations bestowing money or privilege on me yet I still praise the things they do for the people they help. I know that I have received kind, selfless acts from friends and that I greatly appreciate them when they come around but that’s what I think friends do for each other. It is not like I take advantage of my friends, it is a reciprocating game in which both of us help each other so that we both end up better in the end. Simply because someone does something selfless doesn’t mean they have to be incredibly worse off. If my friend wants me share my notes with him it honestly doesn’t harm me in any way but it helps him a lot. I will probably never ask to see his notes but I know that I can help him so I do. Does him thanking me for giving him my notes selfish? Not in my opinion, that’s just what friends do.

Upon further reflection I also realized that many times, people praise the selfless even when they don’t have anything to gain from it. When we look at Bill Gates, who is donating billions to various charities, we do not say that is a great act because he helped us personally. Instead we look at it and say that is an admirable thing to do, he is helping those in need and for that reason we should praise his selflessness. Most people who praise these acts do not actually feel the impact of these billions of dollars but know that other people do. All these people are not being selfless in encouraging him to donate more or encouraging others to act in a like manner because they are not receiving any benefit themselves.

Nietzsche’s argument may appear intelligent and accurate when viewed on a small scale of personal gains and sacrifices but on the larger scale most people who praise selflessness are not acting selfish. I would even argue that between friends and “neighbors” selfless acts and their praise benefit everyone not just the recipient of the praise. Friendship is a relationship of mutual giving and receiving that makes everyone involved better off.

In fact, if you look at it logically the praise of selflessness may actually be selfless itself. We see someone doing something for our community and we sacrifice our time, effort or money to congratulate them and encourage them to do more. Other people see this and feel like maybe they can sacrifice a bit of themselves for the benefit of society and more selfless acts are created. So by giving up your own time and effort to praise the selfless you inspire more people to act in a like manner creating a greater good for society. In other words your sacrifice benefits the greater good.

An anomaly revealed in Wednesday's experiment, or a regularity?

2010-10-30T11:27:00.000-07:00

Although Wednesday's one shot experiment was probably one of the shortest we've ever had as a class, it was both insightfully revealing and aptly correlated to our McCabe & Smith readings. The experiment was very similar to that of Dr. Smith's in our previous readings, the Player 1 Player 2 and 25,25/15,30 one shot game. One of the key differences, however, was that there was a greater degree of latitude given to the Player 2's, or, in our experiment, the sellers. At the end of the experiment, Prof. Wilson came in and showed us the results, and explained to us that there were a good number of buyers and sellers who had a one shot agreement, but some that did not as well. He listed off the different buyers and sellers who did not have an agreement, noting something along the lines of "yes, despite you being students of economics and what you've been taught there were still buyers who chose to come away with nothing instead of something". At the very end of this list was a seller who had offered I believe 17, meaning the buyer would have gotten only 3; this buyer who took 0 over 3 was me. Prof. Wilson's proclamation of the 17/3 disagreement was followed by what turned out to be a louder than I had realized mumble: "that's right!". At that moment however, there was a good three or four people that laughed at that comment I had just made, and it was at that moment that I realized that we were asking the wrong question in Dr. Smith's experiment from our readings. The question shouldn't be "why don't all Player 2's take the 15,30 option" but rather "why don't all Player 2's take the 25,25 option?" There are two very important reasons for why I believe we have been wrongly assuming that the 15,30 option is the most logical. First, the reason several people laughed at my comment was because it was down-right dumb and illogical. Logically, no one would be proud or happy to admit that they came away with $0 instead of $3. That being the case, there were in fact other buyers who had been offered more than me but turned it down as well. If something is in fact always better than nothing, how can the despondent buyers be accounted for? What could have possibly accounted for our irrational behavior? Second, there is a legitimate reason for why I chose to take 0 over 3. Because I knew that the seller could go anywhere in-between 10-20, the second that I saw the 17 offer the first thing that came to my mind was that the seller had disrespectfully undervalued the power of my acceptance or denial capability. The seller, like the several laughers, had incorrectly analyzed the point of view of the buyer and assumed that I was faced with a situation in which I had to make a deal, rather than one in which I had a choice to. Furthermore, they had not only applied the same logic that Mohammed did in our 10/25 class that in an "end of the world scenario(one shot game)" the buyer (player 1) must get more utility out of $15 than $0, but also assumed that the player with best available options automatically had a greater degree of power in the relationship—even though in our experiment neither player could reap a benefit without the others approval! So, what conclusions can be drawn from this information? First is that even though the experiment is a one-shot game with no hopes for reciprocity in the future, it would appear as if reciprocity of courtesy still in fact plays a role since the despondent buyers seemed to get more utility from denying their sellers a large profit than they would from accepting a small payout. Secondly, we have been assuming that because the experiment is a one shot scenario or an 'end of the world' scenario that the buyer or player 1 should be complacent with any gain at all—but it appears as if the exact opposite is the case. Because it is a one shot scenario, buyers offered a low enough amount apparently feel less inclined to cooperate at all since there is no possible future profit and since their acceptance of a low payout still results in more of a win for the sellers than the buyers. Since we know humans are irrational and always much more uncomfortable accepting less money than more money, the question should be "logically, if both parties want to guarantee a profit, why don't they both go for 25,25 every time, or 10/10 or 11/9 every time?"

Sympathy and Selfishness

2010-10-28T20:33:00.000-07:00

Our debate over Smith’s ideas felt very similar to the debate we had on Hume. Yes, they are different theories with different subject matters, but the way Smith and Hume construct their arguments has similarities. One of the most troubling similarities is the specificity with which words are used. Whereas Hume had the class arguing over words like “emotion,” “reason,” and “morality,” Smith creates a similar disturbance with his specific use of words like “selfishness,” “self-love,” and, of course, “sympathy.” These words have no defined definition, so it makes it very unwieldy to argue against Smith’s ideas. There is no consensus on what is selfish and what is not selfish, and as a result it becomes very subjective whether Adam Smith is correct when he says sympathy is not derived from selfishness. Sympathy is an even more cumbersome word. There are different degrees of sympathy. There are different causes for sympathy. If someone is disingenuously sympathetic, does that count? In short, it quickly becomes a mess, and while it is easy to come up with examples where sympathy is derived from selfishness, in the process you are breaking the imaginary semantic rules Adam Smith has used to fortify his argument.

So, like Hume, Adam Smith is infallible because his words are tailored to the world he has created. This may not be the same world you or I have in mind, but we have to play by the rules set forth by Adam Smith in his argument.

With that said, and keeping in mind the specificity of certain words, I tend to agree with the notion put forth by Adam Smith that sympathy is not derived from selfishness. It might be in a person’s self-interest to sympathize with someone else, but that does not mean the act of sympathizing is selfish. One of the reasons for this has to do with an idea proposed by Hume. That is that actions don’t innately have morals attached to them. As a result, the act of sympathizing cannot be selfish—if we assume it to be selfish it is only because we are using our past experiences to determine what is selfish and what is not selfish, and to gauge sympathy accordingly. Instead, sympathizing is devoid of emotion and morality. It is a blank slate until our egos quickly judge and examine it for its moral integrity.

However, if we ignore Hume’s argument and assume sympathy can have some innate moral firmness, another reason I think Smith is correct in his assumption is that the word selfish has a certain connotation in the way it is used that makes it much different from self-interest. Selfishness, according to Smith, is wrought in vice. Self-interest on the other hand is always present in every action we make, sympathy included. However, self-interest does not imply vice or hostility, instead it implies we are motivated by our own interests. You can be self-interested and others can benefit. If you are selfish, someone will be worse off. So, in the act of sympathizing, you aren’t making others worse off, even if it is in your own self-interest feel sympathetic. Therefore sympathy cannot be born out of selfishness.

An example came up in class where it was proposed to be selfish if you do not act benevolently to those you have sympathy for. The flaw with this argument is that while how you may choose to act according to your sympathy can be considered selfish, the act of sympathizing is separate from this. Let’s take the popular dead-son and butcher example. You, the butcher, react to the death of someone’s son and sympathize with them. Then, you either choose to give them free meat or not to give them free meat. There are two different actions going on in this example:

1.) You sympathize with the people who lost their son.

2.) You react to your sympathy and act either positively or negatively.

So while the end result might be that you are considered selfish by others, the original action of sympathizing is independently unselfish. That doesn’t mean sympathizing is altruistic and it is perfectly possible that no one benefits from your sympathy. It doesn’t mean that sympathy is necessarily “good” or “bad,” it simply means that sympathy cannot be construed to have originated from selfishness.

Thoughts on Trust

2010-10-23T23:56:00.000-07:00

This is a bit of a grab-bag of some of my thoughts this week. Also, as a quick aside, Matt Ridley was on the podcast Econtalk earlier this week, where he discussed a lot of what we've been talking about in class. Here's the link if anyone is interested: http://www.econtalk.org/archives/2010/10/ridley_on_trade.html

Currently, about 2-3% of Americans work in agriculture. I find it incredible that most of us are willing to trust complete strangers to grow and harvest the food we need to live. If the farmers decided to not grow one year, we’d have a pretty rough time. It is this trust and trustworthiness which allows us to divide labor and specialize, the things which create the wealth of nations.

I was person B in the experiment. At first I was trustworthy. Person A played right a couple of times towards the beginning, even though I had been trustworthy, which tipped me off that we weren’t paired with the same person every time. After a while of having a trusting relationship, I considered defecting. I looked at the payoffs, and figured that since there were 6 pairs of people, that even if 1 or 2 people always defected, A would still probably trust (although this would only hold true for random matching; with sorted matching, I’d have been hosed). And, since all the A’s I faced trusted me, I figured there weren’t many, if any, people defecting, and so I would probably be able to defect and get away with it.

So, the next round I got all ready to defect, but after about ten seconds of trying to work up the nerve, I realized I just didn’t have the heart to defect; it just felt wrong to do so. I’m not quite sure how this fits into Hume’s idea of morality. I think that defecting felt wrong in part because I put myself in Person A’s shoes, and wondered how it would feel to be betrayed by someone I had been trusting. I also felt that being the one guy who was defecting would make it wrong, since the rest of society was not defecting. Lastly, I felt that my experience had shown that being trustworthy had made both players better off, and so defecting would destroy that benefit, and was therefore wrong.

One thing we discussed in class was why in the one-shot, trust game, why people did not defect. I think there are a couple of reasons for this. One of the main ones is that I don’t think there really is such a thing as a one-shot game. There probably aren’t many examples in our everyday world which even closely resemble a one-shot game, but one which does would be tipping a waitress (or waiter) while out of town. Tipping is used to encourage good service from the waitresses, but if you know you will only go to that restaurant that one time, why bother tipping? Why not just keep your money and their good service? It seems however, that we know that if no tourist tips, that waitresses will simply not provide as good of service to tourists, and so even though you may not run into that same waitress again, you would receive worse service from others.

It seems to me that even in the one-shot experiment, by defecting, Person A’s will perhaps be less trusting in other ways in their life, or during future experiments, and so it seems like even if they don’t know who you are, and the same situation won’t come up again, and you will probably never even interact with that person again, you’ll still end up with a little less trust in the world, and be worse off.

Finally, I find it interesting that decentralized societies seem to rely on trust moreso than more centralized ones, and I wonder what the effects of this are. If the government is forcing the farmer to grow your food, do you really appreciate it as much, or do you want to give up as much towards other’s benefits? For example, if government regulation demanded that people tipped 15% regardless, the waitress-customer game seems to become more like an involuntary trust game. Would waitresses really give as good of service? It seems counterintuitive, worrisome, and fantastic that in a free, decentralized society, we rely and trust other people to do things for us. Things would seem lot more reliable if we had a government forcing everyone to perform tasks.

On the end of the world

2010-10-23T20:01:00.001-07:00

After scanning a few other blogs and reflecting on what was said in class I kept coming back to Mohammed’s example of is the world were ending. He asked us all to imagine that the world was coming to an end and this was the last interaction that we would have to make before we all died. He said he would take the money and screw his counterpart. In this example it makes sense. Obviously the world isn’t really ending and it was simply the conceptualized world of the game he was speaking of but it started me thinking on what people would do if the world really were coming to an end. Would people still act selfishly despite the fact that they will never be able to use this money? Or would they act selflessly, hoping that last act of kindness would help their conscience rest for the remainder of eternity?

Kindness is very prevalent in our society even without this inevitability. In the one shot trust game people trusted their counterparts nearly 2/3 of the time and this trust was returned roughly the same percentage of the time. This indicates that about 66% of people are both trusting and, when given the chance, trustworthy. This proves to me that people are either naturally in need of companionship and reciprocity or that it is something in our society that all people learn. Will this instinct, be it nature or nurture given, hold stronger or weaker in the presence of impending doom?

Now I know that these people were able to leave the room and spend their cash they just earned however they felt the urge but what if they couldn’t spend the cash? I know that rationally we should not care who gets the most if we really have no possible future but I am still curious as to what people would do. When faced with this final system, however, it seems like humans would forget rationality entirely and would be stripped down to their bare instincts, either to be selfish or be selfless. Personally I would like to think that I would act selflessly even though it really has no impact on anything past that point.

This argument really comes down to whether or not society is encouraging people to act along their core beliefs (that sharing is caring and that selflessness is a virtue) or whether it is struggle to oppress the human urge to cheat and steal. This debate is age old and is basically debate basically between the philosophies of Hobbes and Rousseau. Hobbes would argue that humans are naturally corrupt and given the final instance in the face of death would still choose to take whatever they can and leave their counterpart along in the dust with as little as possible. Rousseau on the other hand would urge that people are good by nature and instead of being corrupt would try to help the other person in the end.

I do not know what the actual human psyche is but I do know that society puts an incredible emphasis on altruism and sharing. We have all seen that commercial with the song “Sharing is caring it can be fun!” and know how engrained that message is into our heads. We all feel a pang of guilt when we see someone less fortunate than us, even if we can’t help him or her or had nothing to do with his or her poverty. This trait is either inborn into humans or so intensely taught that it has become an instinct in most of us. Would this instinct hold even in the face of death? We may never know.

The Only Morals that Matter Are Rational Ones

2010-10-23T18:13:00.001-07:00

In our experiment and our readings on trust games we saw that there are some people who strayed from what we would assume to be the most logical answer. There were those who did not respond to trust, but rather material wealth, and others that did not respond to material wealth, but rather equality.

In our discussion we tried to interpret the reason that some people would deviate from the popular actions. Did people make their decisions predominantly on morals or on material wealth? From our discussion most of us came to the conclusion that people develop their decisions from experience, either from the present situation in the experiment or more complicated and unknown experiences from their life. I believe that the reason that experience plays such a large role in this decision factor is because one must decide whether trusting relationships or material wealth are of greater value to their self-interest. The key to understanding this is to understand that as selfish peoples we do not always seek out material wealth, we seek out what makes us happy the most. At times material wealth is what makes one happy, and in other times equality makes us the happiest, but whatever the decision people choose the action that serves in their best interest in that moment.

What serves our best interest at times may seem illogical to the perception of economists. I believe that economist view certain people’s actions as irrational because they are looking at the action, not the motive. As Hume stated, morals and rationale are not the same, and many times people act on their morals. People may claim in the moment that they are being rational and moral, because in the moment everyone always believes that they are right. However, acting on morals does not always negatively affect the economy. Previous experiences and rational do shape some of our morals. For instance, in the long run it is rational to trust – we know that cooperation can maximize wealth – and this rational has become imbedded in parts of society and has developed into morals. Many people believe in the “Golden Rule”, but this rule doesn’t stem from people’s moral ideals, but rather rational thinking; yet I believe that when people do follow through with the golden rule they are not thinking about the rational behind it, but rather their moral conscience. As backwards as it seems, most humans have a tendency to act on their moral ideals rather than their ability to think rationally. I believe that at times morals can be beneficial to the economy, but only when they stem from rational thinking.

Clearly we see many situations where decisions based on moral beliefs are idiotic to say the least. For instance, in a one-shot trust game (such as the Fig. 3 in Positive Reciprocity and Intentions in Trust Games) it is irrational for the second player to deviate to a choice of equality when they could maximize their wealth and the total wealth of all the players – yet in this game we see that this holds true. Why do people fall into this sense of a social contract when in fact they are withholding the productivity of the economy and their ability to maximize their wealth? Social experiences and morals clearly dictate this specific game. But now I ask would we be better off if everyone acted out of rational instead of morals? The answer is no. Continuing my focus on Fig. 3, if player two were rational he would end up screwing over player one. Then player one – in a long-term situation – would not trust player two and in the end the economy would be in an even worse off situation. Thus we can determine that if this were the case that we must maintain some sense of morality and trust for it is only rational to do so.

If we are to maintain trust, maximizing the economy is essentially limited to that decision of equality by player 2. In order to maximize an economy there must be trust on all levels which although rational would only be supported by society’s ability to understand their moral ideals. I don’t think that trust games should be about focusing on what is rational, but why people believe that their actions are moral. Creating a common sense of morality and trust would create rational actions.

The 6 out of 17

2010-10-23T17:20:00.001-07:00

Towards the end of our class session, we discussed a certain instance during a one-shot trust game. We saw that 6 out of 17 participants chose to defect. The question that we couldn’t definitively answer was why these 6 participants chose to do so. Given the environment in which the experiment was done in, we can logically narrow down several factors. One being that the instructions were not clear or detailed enough resulting in some participants not being able to understand the concept; therefore causing the participants to make an erroneous selection. The other being the converse to what we had discussed about morality.

We had agreed that morality is a conditioned response in which our past experiences are brought with us wherever we go. This was validated by the comment Dr. Wilson made, which stated that there is person that comes to an experiment with a blank slate. We all come in with some sort of background and experiences. I had proposed that while most people are conditioned to cooperate or rather share with others, there are also people who are conditioned to avoid cooperation.

Another comment made by Megan about your mood at the time could be a factor. It could be true that based upon the time of day or mood a participant in may cause them to defect; especially since it relates to the payout they will receive. Maybe someone was hungry and wanted the few extra dollars for some food. Or someone was just in a bad mood and felt the need to defect, either way there are still a multitude of factors that go into a person’s frame of mind.

On the other hand, we saw that in an involuntary trust game two thirdsof participants chose to defect. This particular trust game showed the difference in which intentions could play a factor. The voluntary trust game offers each player two choices. The involuntary trust game only allows player 2 to have two choices and player 1 is stuck with only one; to trust player 2. If participants know this from the instructions, anyone who is player 2 would seize the chance to maximize their personal wealth because there is no actual trust here.

By taking the results of both trust games into account, it seems that the proposal in which some people are conditioned to avoid cooperation is a stronger argument. The reason being that given the results of the involuntary trust game, we see that if player 2 solely controlled the results and thus would defect for the larger payout. In the voluntary game, player 2 knows that player 1 had chosen to trust them and that their faith deserves a payout; this is true for almost two thirds of the participants. The 6 out of 17 who chose to defect despite the implied trust, may simply be those people who don’t think trust should be rewarded or that only their interests matter.

The comment in which if we modified the involuntary trust game to give player 1 to choose (0, 0) would be illogical. Player 1 wouldn’t choose (0, 0) unless they knew that player 2 was untrustworthy. Being an anonymous game, player 2 would know that player 1 really only has the choice in which to trust them. Therefore resulting in the same result as the original involuntary trust game where most participants would choose to defect. It would also reinforce the fact that trust is usually rewarded since player 2 would know from the modified involuntary trust game that player 1 didn’t actually choose to trust them; they had to.

Taking as many factors into account, it seems that the most logical explanation as to why 6 out of 17 participants chose to defect during the voluntary trust game. Some people are conditioned or more inclined to serve their personal interests first over another person’s given the circumstances. The possibility that just people some people were in a bad mood resulted in a third of the participants to defect in unlikely due to the size. Also given the circumstances we see that cooperation is not completely a natural tendency but rather a conditioned response in which reciprocity is the main reason for continued trust as shown in the repeated games. But that I’ll save for a later posting.

Is Trust Moral?

2010-10-23T17:08:00.000-07:00

We discussed in class how the experiment and findings in “Sustaining Cooperation in Trust Games” tied into Hume’s theory of morality as a social conclusion derived from experience. For me, the most apparent parallel in the experiment is the difference in outcome between the sorted and random treatments. If experience did not have any effect on a human’s perception of what the right action is, then the players in the randomly matched game would have the same outcomes as the sorted players. Although the sorting mechanism was described as rewarding the trusting and trustworthy players by putting them together: “There is a strong intuition that a good mechanism is one which rewards those who have a history of trusting/trustworthy behavior: such agents should get what they deserve” (1001), I think both types (trusting and not trusting) were rewarded: they had their expectations fulfilled. In the sorted treatment, the secret sorting procedure (an invisible hand, if you will) acted as an incentive for the players to maintain their original choices; it created the conditions that supported the player’s initial actions and reified the type of society the players expected (an environment where trust was rewarded or not).

The trusting and trustworthy players are acting in the best interest of the society. For the reader (or this reader, at least) that is the moral way to act: “This is a ‘social variable’ in the sense that it is sensitive to more than just one’s own payoffs and actions, since one’s counterpart has a role in determining whether or not the cooperative outcome is reached. A society has an interest in seeing agents with high values of such a variable” (1001). Since a society would benefit in seeing more individuals with high values in the social variable (the trusting/trustworthy players), why are there not more players who started off being trusting?

I have other questions without good answers: Why did the Players 1 of both treatments split almost 50/50 between being trusting and not trusting in the first trial? This is the same outcome a person would get from flipping a coin! These outcomes are not random, though. Would there be more of one type of players (trusting or not trusting) if a nonrandom group was chosen? Say, all Peace Studies majors? One of the examples from The Origins of Virtue gives a partial answer to this question. Ridley cites Robert Frank’s article “Does Studying Economics Inhibit Cooperation?” where Frank found that fourth year economic students, “after being taught that people were essentially self-interested”, defect more often in the prisoner’s dilemma than students from other disciplines (260). I interpret this outcome as indicating that since the students had learned that everyone is self-interested, they felt justified in acting on what they perceived as self-interested. Defecting became moral for them.

Artificially Natural

2010-10-23T14:31:00.000-07:00

Trust and greed, two words so seemingly opposite, surprisingly correlate with one anoother- as portrayed in the experiment. It's pathetic to think about, really, but even I hate to admit I incorporate Hume's problems with trust into my daily life.

I'll trust you if you trust me; I won't tell your secrets if you won't tell mine; I'll help you on your project if you help me on mine.

There's a problem with this. We are more obliged to instill trust within our friends acting more kindly and just to them rather than we would to strangers and unfamiliar individuals. We do this because of the benefits of teamwork and cooperation, and who wouldn't want to gain profits? If given trust from another being, I would feel it almost necessary to honor it back. Then again, that depends on your perspective of human morality, good virtues and morals; thus, bringing Hume back into play. Along with gaining profit from cooperation, you also gain the opportunity of a free-ride. Getting the benefits from teamwork without actually playing the second part of the team is tempting and more profitable, but deceitful. This debate relies on an individual's mindset of human nature; would they rather seek for the easier option if they knew they wouldn't get caught slacking? Or would they go with Hume's answer that, "honesty is the best policy". But Hume's solution can't really be one, can it? Once again, I think it falls back to whether the individual has trust as a natural virtue, or an artificial one. If trust is natural, then they are more likely to honor the bond of cooperation and do work. If artificial, then the way they see trust would be only how they learned to conform with it from viewing examples from their environment and society; thus, making it more liable for them to take advantage of the relationship because it's something they learned not something already instilled within them. Learning trust can just be the same as learning how to lie, steal, or cheat. If something is not natural to you, it's more easily vulnerable to deceit and change. Trusting because of human nature's subliminal law is only so worthy as the public conforms it to be. The question now, though, is which is stronger: artificial or natural virtues.

Within the experiment, I was happy that Player 1 granted me the opportunity of choice. I knew he would want me to choose what worked best for the both of us, yet instead of picking it himself, he risked that choice onto me; hence, that was the moment of trust. I felt it honorable to choose the co-op choice; it just made more sense. To be honest, I believe I was acting out of artificial virtue. If Player 1's options were hidden from me, I would and I did, choose the option more beneficial to me. When I picked the co-op choice, I was thinking to myself: "I should pick this, but only because he knows what I'm choosing." If it was a natural virtue for me, I think my thoughts would have gone more like this: "I should pick what's best for both of us because it's the right thing to do." That's the problem with trust, if we're entitled to trust a stranger, we're not as likely to always be honorable and honest. However, trust between friends can be completely different. The relationship between friends nourishes a more natural sense of trust, we're more likely to be honorable because we choose to be out of goodness.

"Every single act is performed in the expectation that others are to perform the like." Hume states this as a perfect example of artificial trust. Every time I chose to honor Player 1's trust towards me, I only did so because I knew he expected me to do so. To me, artificial trust overpowers natural trust, but only because we live in such a society where individuals feel obliged to conformity. But is artificial trust the relationship with every team or friendship? I would say no. While artificial trust seems more practiced, it is only because the majority of the world are strangers to one another. Artificial trust is more common between strangers while natural trust still survives within true bonds and friendships.

Restoring Trust Through Less Government Power

2010-10-23T12:36:00.000-07:00

Matt Ridley makes an emphasis on the following: “If we are to recover social harmony and virtue, if we are to build back into society the virtues that made it work for us, it is vital that we reduce the power and scope of the state.” This statement caught my attention, specifically when Ridley mentions that to recover social harmony the power of the state must be reduced. In previous blog posts, I’ve been wrestling with this notion on whether power should fully reside in one central location or not, that is, centralization vs. decentralization. I agree with Ridley when he argues, “I am not so naïve as to think that some form of government is not necessary.” Thus, this makes me realize that there should be a balance in government power.

When we look at the way the U.S. was before 1787, the states had more power than the central government. It is important to remember that our founding fathers believed that the “articles of confederation” did not work and that a new constitution was needed. They wanted a strong central government that would put down rebellions and protect property. What’s more, our founding fathers did not trust people—that is, the masses. Even though our founding fathers created a federal system of government where they divided power between the states and federal government, it seems as if “authority replaced reciprocity” because “until the invention of property and government, people had lived lives of freedom and equality.”

During our experiment on Monday, I was player 1 and although this trust game proved to me a ‘trial and error’ phase at the start of the game (in the first few rounds) as well as developing a sense of trust through experience, I was also able to see this experiment from a different lens. As player 1, I imagined for a bit as if I was the “central authority” since the first move was always my decision. Because I was defected in the first few rounds, I decided to punish player 2 for a long period of time. I pictured myself as a “government” when I decided to play top only [25, 25], implying that player 2 was being regulated by me. I fully understood that this wasn’t the best choice for both of us, but I was merely trying to manifest my power and control.

Immediately upon starting game two, I noticed that player 2 ended the first few rounds at [0, 0]. Perhaps player 2 was doing this out of anger or as a payback for my previous harsh punishment. This brings an interesting point, which Ridley makes a note of, that “heavy government makes people more selfish, not less.” Maybe player 2 became somewhat more selfish because of my previous behavior towards him/her. However, the reality is that I wasn’t allowing for reciprocity to take place. Had my punishment not been so harsh, player 2 would have most likely cooperated over time since it was in players 2 best interest to build trust in order to reap long-term benefits.

In this same manner, it seems as if government makes it difficult for reciprocity to take place in society thereby “the sense of community fades.” In addition, people become mistrusted of government since they see it based entirely on power. This makes it difficult for people to cooperate. As Ridley claims, “in two centuries the great traditions of trust, mutuality, and reciprocity on which such cities were based have been all but destroyed – by governments of both stripes.”

Furthermore, Ridley tells us, “the state makes no bargain with the citizen to take joint responsibility for civic order, engenders in him no obligation, duty or pride, and imposes obedience instead.” For instance, schools are designed primarily to create obedient citizens who are patriotic, they are designed to promote obedient citizens who are willing to die in pursuit of government policy no matter how foolish that policy may be. When we are kids, this sense of patriotism is inculcated by teaching us historical myths—a story whose reality has been modified or altered. A good example of this is when the school system tells us that Abraham Lincoln fought the civil war to free the slaves, however, the reality is that he fought the civil war to preserve and keep the union together.

The point I want to make is that the government indeed uses its power to influence and control our behaviors. Although government is needed in our society to maintain order, I agree with Ridley when he mentions about questioning “the necessity of a government that dictates the minutest details of life…” Reducing the power and scope of government would restore trust and the ability for people to cooperate amongst each other.

Blog #7

2010-10-23T12:08:00.000-07:00

The recent experiment with trust games and the ensuing discussion really brought home the Hume concept that morality is not the product of reason, but rather more of a response to a feeling. For me anyway, this seems to be demonstrated by the fact that it’s the feeling one gets as player two in response to player one’s decision that determines player two’s course of action. This feeling led me to choose what I considered the moral “high road”, and also led to reciprocation by rewarding player one with a higher pay-off for what I believed to be a demonstration of trust. If my decision were based wholly on reason alone, I believe I would have chosen a different course and taken the most I could get for myself. This seems to elegantly demonstrate what Hume calls the active principal of conscience or morals. I had a problem accepting Hume’s classification of reason as inactive and contrasting morality as active, and just attributed this type of rhetoric to the philosophical argumentation process that enables theories to be weighed and measured, but now I think it seems Hume might have been on to something. As a player two, I was definitely influenced by what I considered to be a show of confidence in me by player one, and based on this interpretation I consistently rewarded player one with the higher pay-off. This type of response was common in our experimental group based on the results displayed after the experiment was over, and interestingly our group apparently tended to defect less than other economic undergraduates test subjects. We tried to explain why our group defected less than other groups that had taken this same type of test, and came up with reasons ranging from a stronger sense of camaraderie amongst ourselves to a sense of karma, and to what I consider to be the correct response, an attitude of “what if it was me.” This goes back to what I think was Adam Smith’s concept of seeing our actions through someone else’s eyes, and also of someone being the “examiner and judge” of their own actions. Having developed a connection with society, most people are influenced by past experiences, either good or bad, and bring the residue from these experiences with them into the test cubicle. This observation could help explain why both player one and player two choose the way they do. Having been the recipient of an unfavorable outcome in the past, if given a choice player one might tend to take the sure thing and end the game immediately. As for player two, the same sort of undesirable past experiences might make player two more apt to defect when trusted. Of course, these notions would tend to make more sense if a consistent pattern of response was displayed by either player, as opposed to just the random and occasional non-trusting or non-trustworthy response. The influence of past experience seems to be demonstrated by the treatments of test subjects in the Random and Sorted groups. The longer player ones’ played in the Random pairing scenario, the more they tended to be less trusting. Experience seems to affect player two’s as well. In the Sorted pairings, player twos’ trustworthy response climbs dramatically based on the number of times player two has been trusted in the past. These situations and outcomes seem to all point to the importance past experience whether good or bad can play in one’s decision-making process. Even if playing in a one- shot game, I believe the same concept of trust and the complementary reward given by player two to player one for player one’s ability to trust player two still applies. Granted in our discussion we had some students claiming that they would always take the higher pay-off for themselves in every situation, but I believe that when faced with the real-time decision of whether or not to trust or not to trust, to be trustworthy or not to be trustworthy, people will generally choose the two former conditions as opposed to the two latter conditions.

Trust!?

2010-10-22T23:49:00.000-07:00

Trust is a bigger word than what it seems to be. Why would individuals trust each other? The only reason that I can think of is because of mutual advantage and to avoid a cost of investigating each other well. When it is a one round game with no future contact as if it is the end of the world why would someone share? What is the incentive? When it is the end you wouldn’t even want to compromise for your son or daughter or sibling or parents. In simpler words, it is over. So get what ever you can and survive. It’s like the cave man; he can only think ten minutes ahead of time like a dog. The only thing he cares about is survival even if it takes to kill someone else and eat him!! According to Murray Gell Mann Nobel prize in physics the way he describe individuals is “Find Food, Don’t be eaten, Find mate, and Have sex” his philosophy is exactly like the cave man.

I disagree with the results of voluntary trust game (figure 3) experiment. For many reasons, first the sample size is small and it is undiversified, second they are students who been taught through out their life that sharing is caring, and last we don’t know what social norms the participants came from. As player 2 I will choose 15,30 since it is one round game and I will never be in need of sharing in the future since it is a determining point. As Hume said the rules of morality is the effect of reasons.

Prince the rapper in his 1982 album had a song called party like it’s 1999. Party as there is no tomorrow since in the 20^th century everyone almost had the fear of not making it to the 21^st century. It is greed that made people to have the fear of not surviving! Alan Greenspan decided to dedicate $420 per person for the entire population for the fear of banking system failure when its year 2000.

Ridley argued that there was greed before capitalism. In fact I believe GREED is the reasoning behind capitalism. Do we expect from someone who lived in the African desert a survival life to share or trust? He learned it the hard way to be independent and to take matters by his own hand. We have to investigate the thought process and the basis of social norms for the individuals who participated in this experiment to justify the result.

The Risk of Trust

2010-10-20T23:23:00.000-07:00

As a result of being a subject in this week’s experiment, Hume’s point of human morality being developed through experience was proven to me. I did not realize it at the time, but I played into his theory perfectly when playing this trust game. At the beginning of the class Stephen asked if we were paired with the same person every time. Professor Wilson refused to answer this question, but assured us that we were, in fact, playing with each other as opposed to playing against a computer. Knowing that I would be paired with a classmate for each round made me want to find out whether or not I was paired with the same classmate each time the game was played. As Player 2, I chose to cooperate for the first ten rounds or so. Player 1 had extended his or her trust to me from the instant the game began up until this point. Knowing this was in fact, only an experiment, I decided to experiment myself and to see what would happen if I chose to deviate for one round. I did this, and as I predicted, the person I was playing with ended the game immediately at the start of the next round. For approximately five rounds, Player 1 repeated this action. I realized that I had lost Player 1’s trust. This also suggested to me (though I would find out that this was an incorrect assumption at the end of the experiment) that I was playing with the same person the whole time. I took note of the fact that we had once seemed to have a trusting relationship. This was a relationship that had begun at the beginning of the first game when Player 1 took the initial risk of allowing me to make a decision, which hopefully for him or her, would make both of us better off than we would be if he or she played “right.” I accepted this risk, as a gesture of trust and honored it. Thus began our relationship. As I was playing with who I believed to be the same person, I understood why he or she punished me after deviating for one round. I had broken the trust in our relationship. Once he or she finally allowed me to make the next move several rounds later, I made sure that I remained faithful to playing “down,” in order to prove myself to Player 1 and gain back his or her trust. I had stepped out side of my personal moral tendency to cooperate, and when it was proven to me through punishment that deviation was in fact as “wrong” as I had perceived, I was quick to return to the decision that felt more morally sound to me.

My own behavior in this experiment exemplifies Hume’s conclusion about morality, and more specifically, trust being a result of experience rather than reason. (Before I elaborate, I should note once again how I was incorrect about playing with the same person throughout the entire experiment. It was my perception, however, that I was in a trust relationship with a particular person in the room). It is nearly impossible for the moral of trust to be built through hard reason. Reason would tell Player 1 that he or she should always play “right,” since it would be reasonable for Player 2 to always deviate. When Player 1 takes the risk to allow Player 2 to play, this is seen as a gesture of trust with the hope that, if honored, the trust will continue through multiple rounds in which both Players become better off. In order for trust to develop in the first place, one Player has to take the risk of trusting the other player. Without past the past experiences that we as humans have had in trusting others, we would not come to this conclusion. We engage in real life “trust games,” and therefore learn that the moral of trust can be beneficial to us, regardless of what reason may suggest. For example, male and female relationships form from an initial risk of trusting the other person. If both partners only made decisions based on reason, it would be rational for them to never get together in the first place. Without committing their time, trust, and confidence in each other, each person is guaranteed never to be hurt by the other’s potential deviation. Relationships are often wonderful, however, and can often prove to be worth the risk if both partners uphold the trust. This trust, like many morals, is not a product of reason, but of the emotion and experience of humans. It looks to me as though Hume is correct in his assumptions. Who would have thought such a renowned economist could be?!

Lobster anyone?

2010-10-16T22:24:00.000-07:00

We talked in class about Ridley’s example of the lobsters and whether the official law ensuring free entry into the market by protecting the traps of all fishers or the actual practice of groups protecting their turf and cutting traps loose was best. Taking this question into consideration with the Ellickson reading on whaling, the actual practice of cutting traps, which causes a barrier to entry and disrupts the ideal state of completion, is the better practice. The lobster situation is much like one of the other examples Ridley gives of the subaks in Bali, where rice farming was working well without pesticides and fertilizer and outside intervention (237). Enter the International Rice Research Institute, which suggested a different strain of rice and a new planting rotation to increase output (238). It did not work, and it took a group of scientists to figure out why the system that was already in place worked better. The communal knowledge of how to plant had developed over generations without any conscious recognition on the part of the people who practiced it. Given this outcome, it seems like sometimes the best answer to the question of why something is done a certain way is that it has always been done that way. Ridley discusses the practice of conservation in indigenous populations, which are widely thought of as great conservationist cultures: “Conservation, says Vickers, is not a state of being but a rational response to new circumstances” (223). He argues that in places where conservation is necessary to maintain the lifestyle of the human population (such as not over hunting in certain areas so as not to kill off species of prey) the human population creates a system with which to maintain it. This is what the lobster fishers have established in Maine: an unspoken law outside of the law with a means of enforcement (cutting traps free) that maintains the lobster population. As Ridley states, the situation is ripe for “an environmental disaster” (229) because there is not official government restriction on the fishers besides a cheap license and simple tools. The establishment of unofficial fishing territories by the groups of fishers keeps people from over fishing and killing off the lobster population to extinction in that area. The person who comes to fish unattached to a particular group or territory is not as motivated to care for the replenishment of the supply of lobster and the continuation of the business as those who fish the inlet each year are. The “outsider” (who may be considered a poacher, even though property rights are not official) does not have the specialty information and the rapport of the already established fishing community and therefore poses a danger in his ignorance. As in the whaling example, the insiders, the small group that shares information and monitors each other’s actions, settles upon the best practices for the whole because they have a history of doing so. In the whaling example, part of this system required establishing a sense of property rights that provided incentives for doing the hardest part of the production process, the initial harpooning of the whale. The system evolved through experience and communication. These readings left me with a few questions about what is significant in the development of effective, efficient property rights and systems of “conservation.” Is the fact that they are small groups that are able to communicate relevant or is it because they are experts with knowledge of what it takes to be successful in the field? Do the people in small groups become experts with efficient systems because they can communicate and have a communal system of property rights or do they have to be experts first?

What is Justifiable? and who gets to decide?

2010-10-16T19:28:00.001-07:00

The Origins of Virtue by Matt Ridley suggested that the truth is humans being try often to endorse their actions. Ridley essential thought is “by recognizing the inevitability of greed and self interest, we seem to approve.” This justify why we as humans believe that an action or thought process of ours is justifiable just because someone has told us it is obviously predictable. Habitually a person will hear the proverb “we are only human” or “he’s just looking out for number one.” This shows how common the ideas of tolerating flaws are in our society. When somebody says they are only human beings they’re usually saying something such as: I make mistakes, don’t judge me for what I did, humans are not perfect. Which brings up the next point that is the justification of actions.

Humans love to be perfect that’s why they justify every flaw in there thinking rather than having the feeling of greedy, guilty, or selfish. Its more convenient for someone to accept what a person has told him or her is predictably then it is to try and change it. For instance, a man who stays home and take care of the kids and prepare dinner while waiting for his wife to come back from work is not justifiable in many societies because the man who should be the one working and the wife taking care of the house according to Ridley because it is generally acceptable in society that a woman cooks and take care of the kids and a man does not.

Ridley concentrates on an example of the idea to approve greed and self-interest when he writes about the economic students. In his example a class of economic students “after being taught that people were essentially self-interested, grew more so themselves.” This proved that something that was accepted of human nature, such as self-interest, grew stronger as others justified it.

In conclusion, it is reasonable to say that the explanation or approval of an act comes from the beginning of following a crowd. When a man hears that he is a man and should not have to cook, he justifies his lack of help around the house. This turns into a domino effect from one person to another, until a large number of people in the so-called “crowd” or society have justified their actions. This could be applied for both actions that are right or wrong could catch on and spread quickly throughout a society. As a result, a person will justify their actions, especially those of guilt, greed and self-interest because it is simply what everyone else is doing.

Government Regulation is Valuable... Only in Existence of the Irrational

2010-10-16T17:22:00.001-07:00

In our readings on Ridley and Ellickson, we were able to recognize that groups of people were able to utilize cooperation and social standards to maximize their wealth. Taking a look back we can see these examples; for instance, in the whaling industry, historically speaking, property rights and cooperation maximized wealth. Whalers were able to create social customs and rules that were maintained such as the rule of “fast-fish” or “iron-holds-the-whale”. It seems logical that whalers implemented these rules as a means to maximize their personal wealth.

The logic behind the fast-fish rule is quite simple; with the establishment of property rights whalers would not steal from one another, because they feared retaliation – as the kindergarten taught “Golden Rule” stated, “Do unto others as you would have them do unto you.” It seems that a societal norm developed pressuring individual whalers to abide by the fast-fish rule or be deemed an evildoer by the group.

A more complicated rule, iron-holds-the-whale, only makes logical sense if catching the whale were only possible with the aid of others. Let’s use a classroom as an example, say one kid – the teachers pet – is privileged to the answers to an upcoming exam, while the other students are not. The child alone can only achieve 100 points if he keeps the answers to himself, however if he shares the answers amongst ten of his classmates they could all achieve 1000 points combined. It seems illogical for the student to share his answers – if he were to keep the answers to himself he would be the best student in the class; however, if on the next test, another student were to receive the answers and did the same and kept the answers to himself the original teacher’s pet would fail. The only logical explanation for the iron-holds-the-whale rule would require that there be a high risk of failure and a low possibility to gain and therefore joint cooperation would prove to be the most efficient means of wealth over the long-term.

The fast-fish rule and iron-holds-the-whale rule are two prime examples of how groups can create their own social norms and establish a means to better maintain cooperation in effort to maximize wealth. In Ridley’s book, Ridley gives examples of how governments and centralized bodies can negatively effect property rights and thus interfere with cooperation and wealth maximization. Ridley’s example of the lobster traps displayed how the groups used tactics such as barriers to entry to claim property rights and as a result put social pressure on cooperation to maximize wealth. A means to create a barrier to entry was by cutting lobster traps.

The act of cutting lobster traps is illegal, but Bart brought up the question of whether or not government intervention and policing of these traps was productive for society. This is a tricky situation, because if the police or government doesn’t serve one’s best interest then they find it as an attack on them. If I were to view the concept on the broader scale of society at large, I would have to say that government regulation places limitations on productivity.

In class I gave the example of speeding. Is it right for the police to slow transportation? If so, the result is inhibiting economic productivity – a shipping truck limited to 55 miles per hour on a highway when it could travel safely at 75 miles per hour could be 136% more productive (without consideration to gas mileage). It seems that government regulation could in fact be inhibiting economic prosperity. Of course people feel that speed limits save individual’s lives, but wouldn’t people drive at speeds relative to their ability to stay safe? If everyone were comfortable driving at 85 mph without receiving a ticket – we can imagine that safety standards in cars would improve naturally out of demand – then there would be no need for cutting off a driver or other acts of selfish indecency.

Societal norms put pressure on people to be logical – to think about what is in the best interest for them is for them to have their interest towards society. As a result people on the road would be less apt to drive others off the road in road rage if there were no reasons to cut others off, and there would be the notion that if you cut someone off then they may cut you off back. Of course there are positives about government regulation; it stops those who are completely irrational from doing so. For instance, a group of people that street race, something that is irrational, because it has no more productive value than maintaining a thick headed person’s ego, or a person cutting a lobster trap out of pure entertainment and laughter.

The only logical reason for having government regulation is to enforce people who act out with irrational intentions. Hume talked about how we can deem an action immoral until we understand the motive. We can also think of this in the reverse: we can deem an action moral until we understand the irrational motive. In this case of policing people’s actions I would say we couldn’t look at morals, because deeming an action virtuous is a matter of perspective, so we must view them as being rational or irrational. Is it rational for someone to cut a lobster trap to maintain order and preserve order that maximizes wealth? I believe so.

Some may say that these actions limit person from entering a market, and such barriers to entry are unfair. I argue that limitations to entry by societal pressures maintain order within limited markets. For example, the fishing industry is a limited market. Allowing too many peoples into a market would easily cause overfishing. I believe that when groups become too large, they become more chaotic and the ability to create and preserve social norms decreases. As a result, property rights would become less enforceable, and a depletion of supplies would quickly ensue. If government bodies were to step in and remove barriers to entry they would have to increase their ability to protect property rights, something they virtually impossible to do in the fishing industry. It seems that the simple right of allowing lobster fishers to cut intruding lobster traps maintains an equilibrium that a government agency would not be – in all probability – not be able to replicate and as a result hinder economic productivity.

It seems to me that government regulation is a hindrance on many levels to economic productivity. The goal of any government regulation should be to remove those with irrational motives. It seems that those who do not maintain logic and rational are those that create a need for government intervention.

Cheats and Altruists

2010-10-16T16:48:00.000-07:00

Matt Ridley’s book, The Origins Of Virtue, tells us about a reality that is worth considering. In chapter seven, Theories of Moral Sentiments, the Wason test is used as an example to find out two things. We have an economist interested in knowing whether a man kept his word or not—that is, looking for cheats, but we also have an anthropologist looking for an altruist. It caught my attention when Ridley points out to these two interested evidences: cheats and altruists.

Ridley claims that the latter is much more harder than the former, especially when he mentions that “people are bad at looking for altruism; better at looking for cheating.” One of the underlying reasons for this, as Ridley makes a note of, is that the human brain seems to “treat every problem as a social contract arrived at between two people and looks for ways to check those who might cheat the contract.” Before I make any conclusions, I’d like to dig deeper into the meaning behind social contract.

One possible definition of social contract is “an implicit agreement among people that results in the organization of society; individual surrenders liberty in return for protection.” If we try to explain why is it much easier for people to detect cheats than altruists, it seems as if the word ‘cheating’ could be connected closer with individual protection. For example, when a person has accumulated wealth, say, through buying and selling real estate, when engaged in the purchase of a specific property the buyer looks out for his/her protection by making sure that property is free and clear from any liens. There have been situations in which a buyer that’s interested in purchasing a property from a seller (whom might even be a friend) might tell the buyer the following: “if you buy the property directly from me (the seller) you could save money on transaction costs, in fact, you could keep this money instead of paying it out.” It might be that the seller is really trying to be an ‘altruist.’ But the buyer would be more interested in protecting himself/herself and as a result the buyer would direct its attention towards detecting whether the seller might be a cheat or not. This could be accomplished by hiring someone to do a property search/ background check in order to make sure that the property is not subject to any judgments.

I used this example because although the seller might be interested in the welfare of the buyer, it seems rather illogical for the buyer not to think that the seller is also looking out for himself/herself, given that it’s a mutual transaction where both get some benefit from it. As Ridley argues, “we seem to be uniquely aware of cost-benefit analysis of exchanges.”

This leads to the second point I want to establish, that is—this notion of self-interest/individualism as a role that drives people to detect cheats easier than altruists. Individualism is the belief that your success or failure in life depends on your own efforts. Furthermore, individualism believes that the individuals’ rights, beliefs, and freedoms supersede the rights of the group. Our society, in America, is composed on the ideology of individualism. By contrast, in Japan, the rights of the group are more important than the rights of the individual. A good example of this is the process it takes for buying a gun in Japan. In order to buy a gun in Japan, one has to go through a long process in the police station in addition to passing tests, which determine whether one can buy a gun.

But, this doesn’t quite cover the problem because we can’t assume that people in Japan are able to detect an altruist much easier than a cheat. However, it seems that our self-interests are somehow ingrained in us which may be one of the other reasons why we are able to detect cheats easier. Moreover, if we assume that “reciprocity motivates people,” this practice of exchanging things with others for mutual benefit could also explain why we are much more prone to looking for cheats. Ridley makes the following point, which explains the reality to this, “while we universally admire and praise selflessness, we do not expect it to rule our lives or those of our close friends.” “We simply do not practice what we preach.” This provides a further explanation why we don’t see many people in our society who are truly altruists. Given the relatively small percentage of people who are indeed altruistic, it is much easier for us to identify a cheat because the vast majority of people aren’t selfless.

Blog #6

2010-10-16T14:38:00.000-07:00

Emotions as tools that enable “social creatures” to solve problems and to defer an immediate, possibly selfish resolution to a perhaps more reasonable, long-term solution was certainly a startling revelation when I first read about this concept it in the Ridley book. I had always previously thought that emotions were, at best, simply a means to impress upon oneself a sense of affection, or habitual sympathy as Adam Smith calls it, or a sense of disdain. Emotions could lead to either a very pleasant interaction, or the depths of hell. To view emotions as devices that can elicit desirable, long-term goals such as trustworthiness and social harmony was eye-opening to say the least. To then throw in the mix that emotions are beneficial to our genes’ long-term evolution as a means to provide for one’s long-term welfare was certainly thought provoking. All it takes is for someone to be tricked or fooled by someone one time, and an individual could then look upon any and all future interactions with distrust and cynicism. It appears to be a more instinctual response to be on the look-out for a possible deception than it is to be on the look-out for a potential gift. It seems nature has endowed us a certain suspicious tendency toward interactions with others. This is perfectly understandable as it is more detrimental to have missed an opportunity to uncover a fraud and be harmed by the exchange, than it is to be in the same position one was in previously prior to the exchange and one having only failed to benefit from it. Of course, in certain contractual affairs, circumstances leading up to the exchange can prove to be detrimental if the contract is not honored, but I think the same concept still applies. I believe this is what Hume was saying in an earlier reading, and I think this is also what the Wason experiment in Ridley reveals.
Adam Smith’s concept of an “Impartial Spectator” seems to have a striking resemblance to the psychological concept of what is commonly referred to as having a “conscience.” Both these concepts appear to try to protect society through the mechanisms of guilt, shame, and/or public humiliation and ostricization. Taken in the context of commerce and exchange, these can be truly powerful motivations for maintaining a certain degree of trustworthiness and honesty. Granted, in today’s business climate with its global customer/ client base, indiscretions and questionable ethics can go one on for some period of time, but it seems that when one deals unscrupulously in business or social exchange the result is a certain degree of arrogance and untouchability that eventually leads to the ultimate downfall of the practitioner. This seems comparable to the a former chapter in Ridley where in the prisoner’s dilemma game, strategies like Tit- for- Tat that originally promoted a certain degree of cooperation (but also exercised retaliation when needed) came out ahead in the long-run, while other more aggressive strategies ultimately failed partially due to the fact that the more aggressive strategies had to deal with each other after the easy prey was gone. This also supports the concept that a more cooperative and trusting strategy pays-off in the long run. Long term success appears to hinge upon the foresight and presence of mind to forego immediate reward in preference to a more forward-looking relationship based on mutual trust.

On the evolution of relations

2010-10-15T16:24:00.001-07:00

This weeks readings all have the common thread of the interconnectedness of human beings. Where did this innate need to connect and trade come from however? Did humans simply breed into this system where we all have an urge to work together and continue to grow? Or is this need for society a recent thing caused by our upbringing in cities and towns?

Adam Smith touches on the evolutionary benefits of such connectedness and that is the way someone raises a child. A child needs caring parents to grow up more efficiently when he cannot care for himself. For this reason both the parents and the children need some sort of bond tying them together. This is exhibited through children’s love for their parents and parent’s unconditional love for their children. This cycle continues on down through the generations but it does nothing to explain why we feel connected to anyone else in our society. That comes up when Smith mentions how people attach themselves to their brothers and sisters. It seems that constant or near constant contact with someone causes them to care for and connect with their brothers. This connection continues throughout life and when each child has children of their own they still feel connected with their brothers and sisters and still spend time with them. This exposes all of the children’s children to each other and forms the bond of cousins. This bond is slightly less and every degree of separation lessens the bond but that doesn’t mean it doesn’t exist. In my opinion it seems that our interconnectedness all relates back to the nuclear family. Because we feel connected to our brothers, cousins and every other relative we begin to expand that circle and it is difficult not to extend your connections outside of your family. This indicates to me that evolution created the interdependence of humans so as to better ensure the survival of the species. It creates a more efficient society and a safer place to live as a whole.

A recent study I read in my high school economics class indicated that scientists believe homo sapiens survived, not because of superior intellects to the other human species, but because they knew how to work together. This trait allowed Homo sapiens to specialize their labor and become more efficient than any of their counterparts could. The ability to form communities ensured the safety of the species and still lives on in us today.

Now, societies cannot function without laws and order, and it seems that evolution has provided us with an uncanny ability to create efficient systems out of near chaos. Ridley brings up many examples of interactions that seemed to have fallen prey to the plight of the commons. In every example however, those involved developed a system of rules that created an efficient sustainable market. Organization in this manner is so innate in the human psyche that planned government institutions with panels of trained economists could not even best the results of people who knew nothing more than tradition and their trade.

It seems like humans always find a way to make things as efficient as possible. Especially when it comes to trade. As Ellickson brings up, the whaling industry created a system that nearly eliminated transaction costs and deadweight loss simply by holding each person accountable for their actions and setting down basic guidelines. The system wasn’t created in one night though. There was a lot of trial and error, especially when the whale of choice changed from the Right Whale to the Sperm Whale. Sperm Whales were much harder game and the fast-fish rule could no longer work efficiently. Instead of sitting around or delegating about a new law however, the people immediately worked together and created the iron-holds rule. This again was the most efficient way to handle the whaling issues at hand and it was all out of communication between the whaling ‘family’.

All of this interconnectedness and efficiency stems from the interconnections of humans with their fellow man. No one man or even one family could have come as far as humans have without working with others and creating societies. Without the ability to work together, born from a parent’s love, we probably wouldn’t even exist today and we definitely wouldn’t be taking this class.

Whales, Homo erectus, and altruism

2010-10-14T23:03:00.000-07:00

Economics, as we know it today, is such a new subject that it is easy to overlook just how far back we were using the basics of trade. Our first readings were concerned with ancient trade that took place several thousand years ago. This might seem like a long time ago; however, on the timeline of trade, this is barely scratching the surface. I’m reading a book on anthropology and there is a section dedicated to an archeological dig in Ologesailie, Kenya. The site was excavated by the famous Leaky family and what they discovered was a large plot of land where ancient hand axes had been continuously made in bulk for almost a million years. This was way before Homo sapiens existed, or even Neanderthals for that matter. The creators of the hand axes are assumed to be one of our distant relatives, most likely Homo erectus. This was a long, long time ago and for a million years they did nothing (at least that we know of) but build hand axes. It is an extraordinary puzzle why these hand axes were made or for whom they were made; however, it shows that even a million years ago, people of some sort were beginning to figure things out about commodities, division of labor (somebody had to do the hunting and gathering while others made axes), and possibly even the beginnings of trade.

It is no wonder then that in all this time we have developed a brain that is specialized for certain aspects of trade. Large-scale production, as seen in Ologesailie, could not work if we had no social contracts or could not detect if a social contract was broken. If there was no morality attached to stealing, would anyone take the considerable time and effort to make axes? Perhaps they built the axes for the pure joy of making them and therefore didn’t care if someone took their axes. I find this hard to believe though. The stone resources used to build the axes came from a quarry some ten miles away. There was a lot of effort put into building these axes, enough so to make it reasonable to assume that they were valued in some capacity by their creators.

Before realizing how far back production of goods went, the idea that the frontal lobe of the brain housed some device that detects cheating seemed preposterous. Such an evolutionary leap would require a lot of time—more so than just a couple thousand years. A million years, and maybe even longer, seems like a more adequate amount of time. However, what still doesn’t make sense to me is why detecting altruism failed to develop in the brain. It seems to me that detecting someone you can trust and detecting someone who is a cheater are of equal importance and should be represented equally in the brain. If our brains have had a million years to develop, why are we still so bad at detecting altruism? Maybe altruism is just harder to detect—you’re never sure if you can really trust someone even after knowing them for a long time. Or maybe altruism was just so much more of a rarity in nature that our brains were never exposed to it. In any case, for all our evolutionary bounds made since our Homo erectus ancestors, we have made little progress in becoming altruist detectors.

The whaling experiment was a good example of all this. It was easy to tell if you couldn’t trust someone. If someone stole your circle, it was unlikely that you would trust that person again in the future. However, even if you had cooperated with someone diligently for some time, it was difficult to tell if you could always depend on them. I was a pretty good example of this—I was working well with someone in the beginning, but towards the end I started to keep circles to myself rather than sharing with my previous cooperator. It wasn’t due to any feud-inciting incident, it was just that my attitude had changed. I was inconsistently dependable as an altruist, as is the case with pretty much everyone. I feel that this inconsistency is a big cause for why the brain has not developed a more efficient system of detecting kindness.

Is Anything Truly Abstract?

2010-10-13T18:03:00.000-07:00

After reading the writings of David Hume and Adam Smith, I have come to a quandary regarding whether “abstract” ideas, emotions, and states of being should actually be thought of as so. It seems that many economic and philosophical experiments have been designed or attempted with the idea that the subject or subjects can be placed in an abstract state or can be forced to encounter an abstract idea or object. The definition of abstract is “thought of apart from concrete realities, specific objects, or actual instances.” Usually we think of emotions, thoughts, and other spiritual entities to be abstract. When we try to dig deeper into the causes of these things, however, it appears that their existence becomes perhaps less abstract than we have perceived them. Hume and Smith in their writings both attempt to philosophically and rationally attempt to explain the roots of abstract ideas or emotions in human society. They both do a fairly convincing job at this, which is what brings about the question as to whether there is such a thing that is truly abstract.

We often, as a human society, attempt to understand, measure, and determine justice. We, as a class, were even able to argue and deliberate what it constitutes and how it is formed while reading Hume for quite some time without ever coming to one solid conclusion. Aside from the difficult task of measure what is just and unjust, Hume does make a convincing point when he states that justice does not exist without the existence of physical and even spiritual property. Because justice exists as a reaction to another existence, it seems as though it looses some of its abstract quality. No, it is not tangible; so it may be seemingly abstract in that sense. It does, however, exist in relation to something else. Therefore it is not so “separate” from reality as it once appeared to be.

Adam Smith uses examples of this opinion in his “Theory of Moral Sentiments.” We would usually philosophically consider the emotion of sympathy to be abstract, as it is an emotion that we feel but cannot perceive in any other way. Adam Smith, however, looks into the idea of sympathy itself and claims that it does not exist without being attached to a situation. We do not witness another person’s passion and sympathize with it automatically. We must analyze the situation that provoked this passion. We see that it takes fact and evidence to produce this emotion within us. Thus, sympathy, unable to exist on its own, has some of its abstract qualities reduced. Similarly, he touches on the fact that beauty does not exist on its own, but only in its relations to others and how they react to it. A notion that seems to play into westernized pop culture quite nicely, actually. In theory, however, this is true. Beauty does not exist in a vacuum. It is “in the eyes of the beholder,” as the adage states. Without this said “beholder” it is not an “abstract” entity on its own.

Today in class, Professor Smith made a poignant point when he asked, “What makes people strangers?” While a stranger may come the closest to playing an “abstract” in an experiment testing the way humans naturally interact with another who are all uninfluenced by emotional attachment, he will never be truly viewed by the other subjects in a purely abstract way. We are social beings. We interact and understand what it means to live a life. Because we understand each other, even in the most general sense, it is entirely impossible to ever create an “abstract” situation for an experiment involving the interaction of humans. Because we all experience feelings of emotions and sentiments, we are apt to extend these to others to some degree, regardless of relationships, or a lack thereof.

Perhaps this argument looks too deeply into the definition of “abstract.” It is, however, interesting to examine the origins of ideas and emotions before we quickly write off their existence as “abstract.” Because their existence is a reaction to actuality, they seem to be much more tangible than we give them credit for. Emotions and ideas are just as “real,” as the most physical of objects, and should more often be studied as so.

Humean Morality or Human Morality

2010-10-10T19:39:00.001-07:00

Hume stresses that the moral "guidebook" that society has accustomed or adapted to is only impressions rather then ideas. To sum up Hume's definition, moral impressions can only be enacted by human beings, evil is linked to pain while virtue is to pleasure, and judging these impressions are worthless unless from a second-person point of view. To Hume, there is no solid factual base or scientific evidence to back up whether an action is immoral or moral.

With every action comes the question of "right" or "wrong". Hume made it a point to visualize events where the public would deem the action as immoral. Rather than the most obvious situation to bring up, murder, let's go to something smaller. After all, the smaller the action, the harder it is to point out the evidence backing up the immorality.

Let's say a young, poor boy steals food from a store. Our emotions lead to sympathy- which Hume defined as the foundation of moral obligation. Our impressions tell us the situation went this way: the boy and his family can't afford food to eat daily, the boy was hungry, he only took a small snack and harmed nobody while doing so. What actually happened, however, was a small human stole. Hume classifies that however our reasoning and senses lead our conclusions to be, there is no solid actuality of conception of virtue or vice.

From the above situation, our moral impressions were from the boy and his actions; thus, the food he stole, the inanimate object, is worthless to consider moral or immoral. The reasoning it takes to judge an action's morality is only just the same as perceiving. For example, Hume says that the physical appearances we observe from our senses of an object do not definitely exist as it's true characteristics and qualities- such as his view of colors. Humans see bananas as yellow, but to what extent is it truly yellow? And how do we prove it? To our knowledge, we know to classify a banana as yellow, but we cannot go further to prove the actual existence of it's quality of that color. After all, my yellow isn't the same as your yellow, or a young girl's yellow, or anyone else's yellow; in reality, what ever color we perceive on the banana is our "own" perception of yellow. This philosophical view is what Hume correlates to the existence of morality. I agree with him that the state and being of morality is only a sentiment that lives only within ourselves, human beings. If any situation were to come up, the question of morality would be considered from our feelings while the facts we gather come from our reasoning.

In previous readings, Hume makes a point that passion is what drives an individual to their actions. This correlates to how someone feels about an action; generally, someone should have a specific feeling or opinion set in mine, but their feelings alter them to think otherwise. It is only our perception of an action that determines the morality of a situation; actually, facts, as stressed by Hume, make no difference in judging a situation. The argument of stem cell research is something that deemed both immoral and moral. Those who find it immoral have probably had no affect by it or personal experience from it; however, those who find it moral most likely have been helped by the stem cells and have experienced the positive effects of it. This shows that no reasoning or facts are involved with determining an action, rather their feelings come first to play.

In my personal opinion, morality is only considered from our passions with passion being the true origin. An action can only have something wrong or right about it if and when somebody decides to have an opinion on it. If a murder were to happen without anyone in the world knowing, it isn't automatically immoral. There is no scientific basis, actual fact, or rule that it is wrong. There is a rule forbidding murder, but there is also no rule or proven fact stating that killing consists of vice. After all, there is not one thing that every, single person agrees on: the death penalty is deemed immoral is many areas, but also practiced in others, abortion is divided into pro-life supporters and pro-choice fans, some cultures commit suicide as an offering while many classify it distasteful, etc. That is proof enough that morality derives from within, a person's own belief system. An action, whether there may be an obvious "wrong" or "right", will always have a population coming to two or more different conclusions. Morality is not fundamentally based within the action, inanimate objects, or situation; instead, it is a belief or passion- a sentiment. I believe that morality is not intrinsic in our society, but it is a social built structure.

Questioning Hume and Justice

2010-10-09T16:56:00.001-07:00

Questioning Hume and Justice: Motives vs. Actions, Nature vs. Society, Theoretical vs. Practical.

Justice, whether a natural or artificial virtue?

This is the question that David Hume poses from the start of his Of Justice and Injustice. Is justice existent in the natural world, or is a socially constructed (“artificial”) value?

Hume’s first assumption is that, “when we praise any actions, we regard only the motives that produced them…the external performance has no merit.” Just this idea is in itself controversial—Hume applies his own views on morality here, and asserts that the reader hold those true as well. However, this assumption is questionable at best—while Hume believes it’s the motive should be judged when looking at morality, many individuals judge simply the action itself when deciding whether or not it is moral. The trouble I find with taking Hume’s definition of judging morality is that while it may (arguably) be theoretically sound, it is much more weak when applied as a practical tool; motives are rarely obvious and it’s difficult if not impossible to judge other individual’s motives. Even with their admission, we cannot be sure of whether or not the individual is lying or telling the truth. The last problemI have with this is the fact that just motives are not the end to justice itself—just motives must be followed by actions which are just, or otherwise the ‘justice’ has no practical purpose.

Hume attempts to put his arguments into a real life example with the following case; “We blame a father for neglecting his child. Why? because it shews a want of natural affection, which is the duty of every parent.” Interestingly, he doesn’t back up his assumption here that affection is the ‘duty of every parent’—he seems to take it as a given fact. However, one could argue that the duty a parent has to his offspring is not necessarily a natural duty; that it is a social construct learned from society since birth and from interaction with one’s own (and others’) family. And, if that is the case instead, is there any difference in judging the father's morality? I would argue that there is not; regardless of whether the duty is natural or has been socially ingrained as a virtue makes no difference.

Hume gives another example, where he tells of a man who hypothetically lends him money to be repaid later, and then contends that his (Hume's) obligation to pay the man back lies within the fact that he values justice and humanity. His action of paying the man back derives from his value in honesty and humanity, which, according to Hume, is critical because “no action can be virtuous, but so far as it proceeds from a virtuous motive.” Here again, I’m troubled by the precedent that Hume’s idea is setting—it is theoretically possible for an action to be virtuous, but for the motive not to be. To keep Hume’s example, let us assume that he pays the man who lent him the money back—an action that Hume admits is moral. However, what if Hume’s motive wasn’t to preserve honesty, justice, and/or humanity? What if Hume simply feared retribution (an arguably selfish motive), and only out of fear paid the man back? In this case, Hume would say that the he is not virtuous, rather selfish, regardless of the fact that the action was the morally appropriate one.

Utilizing Hume’s assumption here in the real world leads to further problems, as we look to see how his ideas would be practically applied to society. Although individuals do not perform the morally correct action 100% of the time, they do so most of the time—however, it is not because they are inherently virtuous or moralistic. It is more likely they do so because of the counter-example I gave earlier—that most individuals (whether 'virtuous' or not) are incentivized to perform virtuous actions simply because society is set to reward and punish their behavior (whether through legal means, cultural norms, relationships with other individuals, etc.) Hume’s theory of morality is so ingrained in ideals that it has almost no place in the real world—we cannot accurately judge the motives of others, only their actions. Even if we were able to do so, it would be of little use, for as long as humans (who Adam Smith would argue are led by their own interests, and aggregately by the “invisible hand”) act virtuously and morally, regardless of motive, we have a well-functioning society.

Lingering questions: Does justice have to be one or the other, a natural or artificial trait? If it’s a social construct instead of a natural trait, how does this change the virtue itself--Why is it important to distinguish one from the other?

Distinction Between Virtues and Duties

2010-10-09T15:46:00.000-07:00

David Hume’s writing work, A Treatise of Human Nature, caught my attention when he presents to us the following example: “We blame a father for neglecting his child because it shows a want of natural affection, which is the duty of every parent.” The modern translation interprets this last sentence in the following words: “ We blame a father for neglecting his child, because it shows that a father is not fulfilling his parental duty.” It is interesting to note that Hume makes a distinction between a duty that one must fulfill, such as an obligation, and an actual virtuous action. Note that Hume argues, “all virtuous actions derive their merit only from virtuous motives.” When we examine the example of the relationship between a father and child, the father who does not neglect his child is not performing a virtuous action, but rather fulfilling an obligation. One question that comes to mind is whether or not the father is able to replace a parental duty with fulfilling a virtuous act instead.

Merriam-Webster’s Dictionary defines virtue as a particular moral excellence, or conformity to a standard of right. Examples of virtues are generosity, prudence, fidelity, self-control, and compassion. Let’s consider generosity as an example. A parental duty would be supplying the child with basic needs such as food, clothing, shelter, and education while generosity would be going beyond and improving these basic needs. For example, providing the child with an education would be a parental duty but sending the kid to the best institution would be considered a generous act. This shows that while it may seem that the father is fulfilling a duty, the reality is that the father is actually being generous. A father can indeed be generous with his child.

If we consider that virtues are developed through practice and learning, in the example of the father and child relationship, the father that practices generosity with his child is fulfilling a virtuous act without a virtuous motive to do so. Additionally, Hume claims the following: “were not natural affection a duty, the care of children could not be a duty.” In other words, natural affection is also considered a duty. But, Hume later argues, “but in the main, we may affirm, that man in general, or human nature, is nothing but the object both of love and hatred...” If affection is derived from love, I object to the notion of affection being a duty. It would also make one think of hatred as a duty. This is one of the problems I have with what Hume is trying to convey.

However, when we look at the behavior of humanity, many of the things human beings do for their loved ones indeed seems more of a duty, at least it is portrayed as a duty and not a virtuous act. Although a person can learn or know about the existence of a virtue, this doesn’t mean that the person also practices the virtue. There is a difference between learning and practicing. It is impressive to know the large amount of individuals that are not virtuous which leads us to assume that, in the case of the father and child relationship, many fathers do not practice generosity with their children. In fact, many do not even fulfill their obligations as fathers. This is one of the underlying reasons why there is this sense of a duty between a father and child, as Hume claims.

Moreover, Hume tells us that the temperaments of human beings are different, for instance, some men are more sensitive while others are rougher in their affections. Thereby not every individual is capable of producing virtuous acts, which is why many people in society have difficulties in seeing someone who practices virtuousness without even giving much thought to whether they are satisfying an obligation. The reality is that it is very difficult to find great people, in particular, those that exemplify virtuousness beyond their obligations. I think Hume would probably agree with me on this one when he says, “So far from thinking, that men have no affection for any thing beyond themselves, I am of opinion, that though it be rare to meet with one, who loves any single one person better than himself…” I end this blog concluding that although one can separate an obligation from a virtue, a person that practices acts of virtue sees anything that it does beyond just fulfilling a duty even in situations where it actually is considered a duty.

If the line is blurred to obtuseness, chances are it doesn't exist

2010-10-09T14:56:00.000-07:00

Whereas last week I spent a majority of my blog post reflecting on the class session and everyone's various input, I would like to focus a majority of this post on a few of the major points made by Hume that I believe are highly disputable. However, one comment I'd briefly like to make about our last class session is that I thought it was one of the most entertaining and thought provocative classes we have had. I use the word 'entertaining' because of the unorthodox and unique scenarios put forth by Hume that are thought provoking yet comical to a degree. One of the obvious examples among many that comes to mind from our last class was the discussion of his wild boar example in which he calls attention to the relational nature between labor and natural property rights.

Although there are a multitude of issues I would like to discuss, you'll find that due to the nature of the word limit on our posts in combination with the everything I would like to say, I will be able to cover only just a small few of them. The first of qualms that I have with Hume in Part 2 of A Treatise of Human Nature is that he vehemently tries to distinguish between 'virtuous motive and the regard to the virtue'. It's vexing enough as it is that he's attempting to split the world's thinnest hair, but logically he's down right wrong if his earlier arguments from Part 1 claim to hold any water. Hume made it very clear in his previous writings that he believed vice and virtue were by nature subjective as a result of being social constructs. That being said, since he himself has said that the only qualifications for something to be a vice or virtue be that the perception of the person observing the deed deem it one or the other—then it seems totally illogical that the motive of a virtue can simply be distinguished from the regard to virtue. All one need do is look at contemporary society to see that this is clearly not the typical scenario regarding virtue and vice. As much as I love my cousin and think of him as one of my best friends, I still find his attempt to pursue his goal of becoming a firefighter one that is void of virtue.

Firefighters, like many other high-risk public jobs, are professions that are automatically glorified and deemed as some of the most virtuous or noble of jobs by our society. I, however, am one of the few people in society that disagrees with that school of thought because of the grossly high pay grade of firefighters combined with their three to four day work weeks and astronomically low hiring numbers as a result of how they've structured their industry. If one were to look at the data, they would see that there are phenomenally more people that attempt to be firefighters than fire stations hire. So, what this all means is that while what clearly motivates a healthy amount of people to be a firefighter is the financial and quality of life incentives, it is their heroism of taking risk that is the dominating factor in society's perception of their virtue. It would appear then, that although Hume is somewhat correct in the fact that motivation for virtue and regard for virtue can be totally different, he is incorrect in the assumption that because they are distinguishable under a microscope that they are therefor just as distinguishable in realistic everyday life perceptions—which, according to Hume, is the bread and butter of how to define virtue and vice.

Hume not only makes an incorrect argument that vice and virtue are distinguishable, but tries to argue the exact same point about the origins of justice and injustice in paragraph seventeen of section 3.2.1. He notes that "the sense of justice and injustice is not deriv'd from nature, but arises artificially, tho' necessarily from education, and human conventions". I have a major problem with the assertion that justice and injustice are artificial and not natural terms. To make a statement like this is to presuppose that education and human conventions are not natural aspects of human life. It is almost to say that such aspects of human life arise out of preordained thought or intelligent planning—which is most certainly not the case. Cavemen never sat down and planned out their evolutionary path—they never had a summit and said "hey, you know what would probably put humans ahead of the curve to become the most dominant species on the planet? Education and human conventions!" No, that conversation never took place, unlike the natural yet incidental ability for mankind to evolve through education and human conventions. There is nothing artificial about learning or understanding and improving human conventions; all of those things happened naturally and as a result I would argue that both justice and injustice have much more natural origins than artificial ones.

Blog # 5

2010-10-09T13:17:00.000-07:00

Hume paints a fairly bleak picture of humanity in this reading. Phrases such as “… there is no such passion in human minds as the love of mankind, merely as such, independent of personal qualities, of services, or of relation to ourself’ seem to rule out and exclude the untold numbers of everyday acts by everyday people that do show a love of mankind. Hume allows himself some wiggle room to explain proven and true humanitarians such as Mother Teresa and Mahatma Gandhi by qualifying this statement with the opening phrase of “In general,”, but nonetheless a fairly forlorn outlook.
The “Chicken or the Egg” question was raised in class discussion regarding how did people originally know what constituted an ethical action, and how was this information originally conveyed or perceived? Using the repayment of the loan as an example, it would seem that the ethical thing to do and the self-interested thing to do are one in the same. Self interest dictates one should repay the loan because at sometime in the future one could again be in need of a loan. This could be comparable in this day and age with protecting one’s credit rating by repaying the loan, or abiding by the terms of the lending agreement. Clearly, if the negative repercussions of non-repayment were removed and an option to walk away from the obligation presented I suspect a large segment of the population would cease to repay the loan. The ethical thing to do would be to repay the loan out of a sense of moralistic obligation regardless of changes in circumstance even if the lender released to the borrower from any and all obligation. However, to be fair it seems the difference between the self-interested act and the moral act is the motive behind the act. I believe this is the distinction Hume is referring to when he states that a virtuous motive is needed for action to be truly virtuous. But in such a strictly business relationship as today’s credit market offers, to try to intertwine morality to the simple act of repaying a loan or adhering to a loan contract seems unnecessary. This is why the “Chicken or the Egg” question regarding the implementation and passing- along of ethical practices seems to be answered simply as one’s self-interest ( that in this case can be determined quickly and easily by almost everyone) is self evident. There need not be any formal instruction or insightful revelation to determine the best course of action. The experience of being involved in such a situation is sufficient in and of itself to produce the correct and best response.
Later in the work, Hume states that a man’s reputation is the dearest thing to him, and nothing affects a man’s reputation more than how a man interacts regarding the property of others. This seems to say that man is most accurately and severely defined by his conduct regarding the property of others. I would put forth that this position seems extreme insomuch as it seems to place property rights and objects ahead of man. There are plenty of instances where property does not come into play, and these instances can have consequences that outweigh any one mans reputation. For example, a neighbor calling on another neighbor to temporarily care for their sick child could have much greater impact on one’s reputation than if the neighbor who was asked to care for the child took a piece of fruit (which he was able to grasp by reaching over the fence) from his neighbor’s fruit tree. It just seems counter intuitive and excessively materialistic to think that man is defined most by his interactions with the property of others.

Animal trade

2010-10-08T16:02:00.000-07:00

Wednesday’s discussion strung my mind down the path of all kinds of questions associated with economics in the animal kingdom. At the end of class, Vernon gave us a quote that made itself particularly noticeable to me:

“Of all the species on the planet, we are the only ones who trade stuff with others by consent”.

I could think of a couple examples that go against this at the time(whale sharks and sea lice for one, alligators and river canaries for another), but on the whole I thought this was true. There were two big questions that came to mind for me from there; 1) why DON’T some of the more sophisticated animal species trade with each other by consent? 2) How do animals trade? What’s the measure of exchange for them?

A couple hours searching for this on the internet led me prominently to three species- dolphins, chimpanzees, and lions. They are good candidates to answer these questions; they are relatively sophisticated non-humans, they behave in groups, and they adhere to social codes. Flies and snakes aren’t so good at adhering to social codes, and trade is after all the greatest of social codes.

For these three animals, the biggest commodity they have to worry about “exchanging” with the rest of the world is their food supply. Interestingly enough, all three actually have developed a sense of property over food supply. For not being human, they seem to have a good sense of the boar, the hare and the apple example that Hume has given humans. Lions understand that when another has killed a gazelle, the meat is the killer’s possession. Dolphin’s stay away from a school of fish if another pod has gone to the effort to herd it, and chimps forfeit the right to the termites in a mound that another individual figured out how to break open. What’s more about this, they all share.

I’m no animal behavioralist, but what seems to overshadow these species’ sense of property is their sense of family. None of those rules are true for individual dolphins, chimps, or lions when interacting with another stranger. Then the right to food goes straight to who’s better at combat. Over millions of years though these animals have taken the safety in numbers concept into the next level, they have developed a sense of family and loyalty based on genetic heritage. And because of this, they have begun trading with each other. By consent. And because of their respect for their brothers and sisters, they share. A lion that kills a gazelle willingly gives to other members of the pack. Male chimps are completely willing to harvest for female chimps, and dolphins will give extra fish to a weaker member who can’t snap them up as fast as the others.

This is really interesting to me, and while these animals still have to contend with protecting the food they kill/harvest/herd, they understand what property is, along the same guidelines that we do, and they are willing to trade with each other by consent. It’s a primitive trade- one dolphin pod isn’t specializing in killing herring and swapping it with a pod that harvests carp- but it’s still a trade. And It’s by consent. We may not be the only species that trades for consent after all.

Artificial Justice

2010-10-06T22:47:00.000-07:00

I am not certain as to whether or not I absolutely agree with Hume’s conclusion that justice is an entirely “artificial” virtue produced solely by education and human conventions. The debate between “natural” and “artificial” virtues is one that could be argued from many different angles and viewpoints. There have been in the past, however, examples of certain “justices” being “artificially,” that is through human conventions and education, produced throughout history. It is when justice is interpreted in subjective ways through the eyes of different peoples that we see Hume’s argument to have the most certainty behind it. The best way to illustrate the artificiality of justice is through examining past events and experiences of societies of humanity. It seems as though the most general consensus of society is one that would loosely define “justice” using words such as “fairness,” “equity,” and “reciprocity.” All of these words are generally regarded with good connotations. We see however, when other factors such as racial conflicts, brainwashing, and ignorance are mixed into the equation, societies’ ideas of what constitutes “justice” can easily be skewed in many different directions.

The first example to best illuminate the fact that justice is an artificial virtue which can be dependent on human convention and condition is the slave trade of the 17-1800’s. Without a doubt, no white man in America during this time period would ever consider putting another white man up for sale as property. At this point in history, society would consider this an “unjust” thing to do. Society, however, was conforming to the idea that it was “just” to sell black people as property. It was engrained in the education of the dominate white population was, in fact, above the black population for whatever reason. This was, in general, not questioned by society at large but accepted as fact. Although it was not, this consensus felt “natural” to the members of society at that time. It is thanks to transcendent thinkers and educators that we no longer recognize this act as being justifiable behavior.

Taking convention in society a step further is when society becomes susceptible to the realm of brainwashing. Nazi Germany will forever be a prime example how society’s views of what is just and what is not can be altered drastically by influences implemented through education. By implementing fear and creating a “cult of personality,” Hitler’s Nazi Regime was successful in convincing Germany’s society into believing that Jews were evil and that it was therefore “just” to exterminate them in the most horrible ways possible. Study after study has been done on how a society at large could actually conform to such despicable treatment of fellow humans. This shows that instilling passions such as, in this case, fear, into the education of a certain people can actually “artificially” convince them that certain things are just, even when they are not.

Ignorance in general seems to also be a blinder to justice. When feelings of racial or cultural superiority become the convention of a society, that society’s general view of justice is skewed. When a group of people looks upon another group as inferior, its actions toward the latter become negatively juxtaposed from how it would treat people of its own group. Succession of the feelings of superiority of a group from one generation to the next is how these feelings eventually start to feel “natural” to a group. “Artificial” justice is thus born, and no matter how distorted a person’s actions may seem to another, the former truly believes that his or her conceptualization of certain virtues such as justice are correct.

As previously stated, it can be argued that there is some type of justice in the world that is, in fact, natural. It is when justice is interpreted subjectively we see that it can be taught and implemented to become a “virtue” that appears to be most artificial when abused or manipulated by a society.

Crowdsourcing, Statistics, and Games Played by Computers

2010-10-02T22:23:00.000-07:00

As a disclaimer and precursor, let me say that I’ve been taking a statistics class this semester that I've gotten pretty interested in.

When I was reading Surowiecki’s The Wisdom of Crowds, I couldn’t help but think back to my statistics class and the ‘magic’ of the Central Limit Theorem. The Central Limit Theorem states that if you take a large set of samples from any (with a few exception) distribution, and plot the means of those samples, the resulting distribution is approximately normal, with a mean equal to the mean of the parent distribution.

Now, let us pretend that I am trying to determine how tall a tree is. I might try to use some combination of shadow height plus time of day, approximately determine how many times I would have to stand on my head to be of equal height, or some other process. The point is that I will basically be making a draw from a distribution that centers somewhere around the height of the tree. Additionally, other people that are making this same judgment will be undergoing similar mental processes, and making more or less accurate draws from their own internal distribution. Assuming people generally process things using roughly the same senses, it is believable that we are drawing from the same distribution. The coolest thing is that the distribution we are drawing from could be normal, uniform, or a fat tailed beta, or really pretty much anything, but the fact is that if we average the sample means (the means of our decisions),

We will end up with a normal-shaped “Sampling Distribution”(distribution of sample means) that is centered on the mean of the parent distribution. The beta example I show is a better example of the submarine problem that Surowiecki mentions, as the sampling distribution mean is closer to the true mean than any of the individual draws, while the draws from a uniform distribution might be more applicable to the jelly bean problem.

Draws from a Uniform Distribution

Draws from a "fat-tailed" beta distribution:

This is just kind of a cool statistics thing that caught my attention.

The other portion of this week’s reading that really gripped me was Matt Ridley’s pair of chapters on the Prisoner’s Dilemma. Not only is it an interesting topic in general, but it is of special interest to me since I took a class a few years ago where I participated in a similar contest. Every person in the class had to design an algorithm to play the “Trust Game”, which would then compete against each other. The trust game is fairly simple: One player, the originator, commits to give some amount of money (m) to a responder. However, in the process of transferring, the money is multiplied by some number(x), and the responder will receive $(m*x). From there, the responder is allowed to give the originator some portion of the money, or not.

In this environment, participants had an average lifetime of 10 interactions, and then had a chance of reproducing depending on how well it had performed, very much in the Darwinian fashion. Interactions occurred by randomly picking another algorithm, and playing one round with it. I had heard of tit-for-tat before, and even though we only experienced single-round contact with competitors, my algorithm was allowed to keep a stored memory of its interactions, so I decided to do my own implementation of tit-for-tat. I would start out cooperating with each type of enemy I faced (either giving them money as the originator, or returning half as the responder), and then simply match their moves. Sounds simple, right? However, initially anyway, I failed horribly, and was consistently the first to be knocked out among my classmates. I failed to take into account the short lifetime of each player, and the fact that my perception of trading partners could not be transferred to descendants. Because of my overly naïve beginning, I, and the rest of my classmates, lost to an even simpler method: Never cooperate. If I had been smart, I would have tried to implement a stochastic simpleton/“Pavlov” strategy, but it is what it is.

The important thing in these environments is to remember what you are being judged on. In my environment, I decided to use tit-for-tat, which never wins an individual match. It gets lots of points, but that wasn’t the goal; the goal was to beat my opponents in every interaction. The fact that such a small change (maximizing the points earned in individual interactions vs maximizing the sum of points from all of your individual interactions) can so dramatically change the effectiveness of a strategy is just a really interesting aspect of game theory. I guess that the trust game implementation was less reflective of the real world than prisoner’s dilemma problem faced by Anatol Rapoport’s algorithm, which to be honest is a huge relief. If the dominant strategy in the repeated interactions of life was to exploit partners, then I would be incredibly fearful for humanity.

Efficiency of Group Solutions

2010-10-02T16:11:00.000-07:00

In Surowiecki's Knowledge of Crowds, his theory that large groups of a mixture of independent individuals can come up with aggregate solutions to complex problems better than very intellectual individuals or experts working alone. However, my problem arises with one of his assumptions--that incorrect guesses/ideas by individuals average out to (close to) the correct answer.

Surowiecki gives the example of a jar full of beans--individuals guess how many beans are in the jar, and a large percentage of the time, the average of all the guesses is more correct than all but a few individual guesses.

This underlies the assumption that for every one individual who guessed below the correct amount, there is another individual who guessed a similar amount above that number. However, what about in scenarios where individuals have a tendency to underguess or overguess? It’s unlikely that for every individual who will guess a figure above the true amount there is another individual just as likely to guess a similar number below the true amount, in almost every problem scenario. Surowiecki makes the assumption that the guesses average out to the correct answer, but in more situations than not, it seems that humans would tend to lean to one or the other--either having a tendency to overguess or underguess, depending on the scenario and on the problem.

Regarding his theory that collective, aggregate solutions to complex problems are better solutions than relying on expert individuals, it seems that there are exceptions to that rule. For example, in juries--a small group of individuals must come to a collective decision regarding a complex problem. Surowiecki already tackled the issue of group think, but what about in scenarios where a few or one individuals actually harms the overall groups progress? In the jury example, one or two individuals may disagree with the large majority of the group and not budge on their perspective opinions for large lengths of time. In this case, it may be argued that, eventually, the collective group will still succeed with the best solution. However, this may not be the most efficient solution--the majority of the group may have been able to come up with the same solution in a shorter period of time if unanimity were not required. Does this speak against groups or against a faulty design of systems that require unanimous decisions? On another side, an expert (i.e. a judge) may be able to come up with the same, ‘ideal’ answer (or near enough), in a much more efficient manner (in less time and with less individuals). Would Surowiecki say that in cases such as this it may be wiser for individual experts to make decisions rather than equally informed groups? The other issue with this is that with the large amount of complex, everyday problems, it is too impractical to have a group solve a large amount of them, as it is more time consuming and simply unfeasible. For this reason, even though the collective group may be able to solve problems with a more effective rate, many individuals and institutions tend to go the more practical route--a more cost effective, time effective (albeit possibly less accurate) individually-founded solution.

Lingering questions:
Regarding ideas of groupthink, I thought it was interesting to think about some of the examples that Matt Ridley gave of animals in natural habitats. Does groupthink, which Surowiecki discusses in The Wisdom of Crowds, occur in nature?

Also, I found lacking the examples of tit-for-tat in the animal world. Although there were a few strong examples that Matt Ridley mentioned, such as the vampire bats and the fish, I have to agree with critics that it’s odd that we don’t see tit-for-tat more in nature. Could part of this be that tit-for-tat (or the more ‘evil’, more deceptive tit-for-tat, which takes advantage of less intelligent programs) isn’t the best strategy outside of controlled experiments with few variables? Is the strategy truly too complex for most animals to understand and regularly utilize? Or do animals simply have other, more effective ways, ingrained in them through evolution?

Cooperating is it to Maximize efficiency or is it following the crowd?

2010-10-02T16:08:00.000-07:00

We have always been taught to be independent and decision makers, is that really in our advantage? We were told to Make our own decisions, and not just follow the crowd. When we were younger we were encouraged to make our own decision and to stay away from the bad influence friends. Many of us were asked the question “well if your friend jumped off a bridge would you?” Of course the answer is NO and the point it’s making is just because someone else is doing something, doesn’t mean you should. Incongruously, a lot of us grow up with these beliefs instilled in them, and then spend their whole lives following what other people do. It is natural in many scenarios if someone is saying or doing something then you ought too.

In “The Wisdom of Crowds” Surowiecki says “when the pressure to conform is at work, a person changes his opinion not because he actually believes something different but because it’s easier to change his opinion than to challenge the group.(38).” This conclusion was based on an experiment that was done in a group where lines were drawn on cards and passed around and a whole group had to decide which lines were the same lengths. All but one person in the group knew to lie about which lines matched up and one person was in the dark. The statistics show that 70% of the subjects changed their minds at least once since the entire group was agreeing but them. Regularly it is natural to not cause a tumult and to just go along with what a group is saying especially if the odds are many to one.

An additional case of this is the test of people on a street corner. In the experiment random numbers of people were placed on a street corner staring into the sky in groups of 1, 5, then 15. The more people on the corner, the more passers by stopped to stare into the sky. More frequently the meager number of people persuaded that there really is something to look at or in the example of the lines that maybe everyone else is right since there are so many of them. People’s decisions and opinions can often be influenced by something if a larger group is doing it, or if they are largely outnumbered, this is what I believe is the essence of follower.

Hume's Strategy

2010-10-02T15:55:00.000-07:00

What really caught my attention while reading Hume was the distinction he gives to the crime of ingratitude: “Of all crimes that human creatures are capable of committing, the most horrid and unnatural is ingratitude, especially when it is committed against parents, and appears in the more flagrant instances of wounds and death” (3.1.1.24). Placing this claim in the context of the rest of the text helped me to orient myself within Hume’s argument. For Hume, reason can only come to a conclusion that has always already existed; reason deduces the fact of what is external and observable while “impression” (which I quote here to preserve Hume’s definition as human’s perception, sensation, and sentiment) induces the notion or idea of what is proper and moral. Reason gives a person answers from without, and impression gives a person answers from within. The social, human created nature of morality is evident in Hume’s assertion that patricide (the severest form of ingratitude to a father) is the most extreme crime. Why should the murder of one’s parent be any worse than the murder of any other human being? There is no observable evidence that offers a different scale for the murder of someone close to you, someone you are indebted to. This concept of a higher disgust for harming your kin—a person you know in your community—develops out of the necessity to maintain community relations and order in the mutually dependent social system. The fact the Hume should zero in on ingratitude toward a parent is indicative of his social context as a member of the British Empire in the colonizing glory of the 1700s. Deference to a paternal authority and a belief in the benevolence of the father figure was the basis of maintaining order in such a patriarchal, colonial society. What I intend to emphasize by this observation is Hume’s own point that morality is created and comes from experience in a social context.

Hume’s example of ingratitude falls into line with the Ridley chapters about cooperation and reputation: ingratitude is just a form of defaulting on expected reciprocation. Ridley’s narrative of the evolution of computer strategies for the prisoner’s dilemma leads to a statement that corresponds with the claims in The Wisdom of Crowds about decision making and Hayek’s description of the market: “One of Axelrod’s conclusions was wrong: there is no stable conclusion to the game” (77). A diversity of strategy within the group leads to the best outcomes. The computer strategies described in Ridley’s telling needed to vary in their degree of trust (as expressed through forgiveness) and trustworthiness in order to establish a market that was not vulnerable to the “Always Defectors” or other “mean” strategies. Trust becomes a much bigger problem when the players are able to share information about other players and past behaviors. The monitoring agent of reputation makes defecting all the more wrong because the social environment makes others aware of it. Just as Hume explains, defecting may be deemed immoral (or, at least the wrong strategy) only after the experience of the experiment.

Tit-For-Tat

2010-10-02T14:55:00.000-07:00

Visions provide individuals with a sense of how the world operates. Social theories are created and built upon these visions, which vary based on the different moral and mental natures of people. Matt Ridely explores the human nature of people and animal tendencies bridging the gap between biology and economics. Humans are social in nature and we tend to live in tight-knit communities. Throughout our lives the connections we make are like that of a spider web, a network intertwined with the individuals we come across throughout our lifetime. No longer are humans entirely self sustainable for we are far more dependent on other members of our species than any other.

Adam Smith’s constrained that vision focused on the egocentric aspect of human beings. Claiming that self-interest is the driving force in our actions; and this nature cannot be changed. He believed in government constraints, such as checks and balances to limit power, believing that no one can be trusted with complete power because of the underlying self-interests. Government itself is proof of human nature’s need of constraints, and according to Smith, the division of labor is essential to markets and economic success.

Specialization comes from a tendency in human nature to exchange. Since everyone has different talents, it is in a person’s best self-interest to focus on their individual talent. If this is valuable to others, people will be willing to trade, allowing a person to acquire more of the goods they desire, compared to if they did everything themselves. This is the basis behind markets and beneficial interactions. However, this concept is limited by the extent of the market. If the market is small, no one will want to completely dedicate themselves to one particular task. A larger market enables specialization which fosters beneficial interactions more easily. Self-interest is the main idea behind markets and trade. Smith believed that by allowing people to engage in the activities in which they excel/specialize, it is advantageous to the society as a whole. So by perusing one’s own interests, society is more efficient and better off.

It is in this synergy of specialization that makes human societies run, and it is distinguishable from all other social creatures.

Matt Ridely and James Surowiecki bring up the issues that relate and portray animalistic and human behavior in group theory. Raising the question are people only honest when it pays for them to be so? With Ridely giving examples from vampire bats working together; you scratch my back and ill scratch yours. A favor done by one animal could be repaid by a reverse favor later. The evolution of Tit-for-Tat and cooperation. With prisoner’s dilemma and game theory, it all boils down to the temptation of the specific individual to decide if they want to better society by working together or to act selfishly and claim what he believes is rightfully his and not share with others. The ethics and moral dilemmas vary among each individual.

Reflection on Hume and Exploration of Ridley

2010-10-02T14:03:00.000-07:00

After a few days of reflecting on last Wednesday's class, I found myself both happy but unsatisfied with how the class ended. While there was an in-depth analysis of David Humes A Treatise of Human Nature that a plethora of information regarding morality, virtue, and reason—time alloted us the ability to only scratch the surface of Matt Ridleys The Origins of Virtue. In addition, although we covered the meat of Humes writings there were still some issues that I felt were unresolved. Furthermore, time did not afford us the luxury of discussing what I felt was the most fascinating of the readings: chapter four of The Origins of Virtue.

OK, so I really liked how the class immediately jumped into Humes argument that reason is "the discovery of truth or falsehood". It led everyone to a discussion about whether or not morals are derived from reason, and for that matter if terms such as 'vice' and 'virtue' were even definitive in their definitions or completely subjective. However, while I will be the first person to support the method of baptism by fire by jumping directly into very dense and theoretical arguments, both I and the class forgot to determine a starting point. On page 294, paragraph four, Hume argues that because good and evil are dependent upon each persons unique opinion, reason, which is derived purely from logic and not emotion, can therefor not be a suitable barometer for measuring what is good and what is evil. In retrospect, I think this would have been an apt starting point since, in my opinion, a majority of the class seemed to vehemently disagree with Hume that morals and vice and virtue are subjective labels. Briefly, I would like to explain that I feel that reason and a small degree of subjectivity are indistinguishable. Reason is the offspring of not only our universal ability as humans to decide what is most logical and what isn't, but to a degree from our emotions as well. No one person is purely logical in their reasoning of various everyday-life situations, and certainly nobody is immune to the grips that our emotions have on us when making decisions.

I must admit, although I found Humes writings to be a much greater challenge and far more intellectually stimulating than The Origins of Virtue, I enjoyed Matt Ridleys work a great deal more and found it to be the most intriguing of our readings. Chapter three introduces us to the notion of reciprocity and exposes us to the various examples of experiments regarding human nature: from observation of Costa Rican vampire bats to countless computer simulations, involving most notably 'Tit-for-tat'. While the vampire bats and coral reef fish examples were very interesting, it was the computer simulations that I felt were the most fascinating. The reason is because while human nature remains relatively unchanged in a 30-40 year period, within that same period there were a multitude of evolutions and conclusions regarding the computer simulations. At first, Tit-for-tat was the undisputed champion of the computer simulation world—dominating for a lengthy period of time a variety of simulations thrown at it. However, as the number of skeptics grew, a number of simulations began to poke holes in the validation of Tit-for-tats ability to maximize efficiency. If, for instance, there was a defector that constantly defected, it would simply enter into an all out war with Tit-for-tat that was never ending.

Furthermore, not only was it discovered that Tit-for-tat sometimes got into reciprocation wars with defectors, but that it was also highly susceptible to demise by simulations that were even nicer than it (in a world with no defectors that is). This discussion transitioned into chapter four, which fleshed out the notion that social ostracism and reciprocity not only played key roles in these computer simulations of human behavior, but were central to their existence. Chapter four discussed at length the importance of reciprocity in the animal kingdom, which, relative to the computer examples, did not seem to be a major component of Tit-for-tat.

The issue that the culmination of the Tit-for-tat and reciprocity in the animal kingdom examples brings to mind an issue that I feel is the most appropriate to end with. Since the end result of studying animal behavior and undergoing thousands of computer simulations is to find definitive results about human behavior, is it possible that the most successful people in the world (i.e. leaders, intellectuals, businessmen) are so successful because they do not confine themselves to the parameters given to computer simulations? In other words, is the reason that there is no one single dominant computer simulation due to the fact that human beings, unlike the simulations, not only have zero parameters for their decisions, but also have unlimited potential in the evolution of their thought processes? If Tit-for-tat was smart enough to reconfigure itself for each new simulation it was given, would it not essentially be the same thing as a human, and thus, because we do not yet have computer intelligence of this degree, can it not logically be deduced that all simulations have been in vein if it is true that their purpose was to discover something new about human behavior? Just some food for thought.

Blog #4

2010-10-02T13:08:00.000-07:00

Ridley succinctly describes the foundation for cooperation as it relates to people (and animals) interacting with each other over an extended time period. Cooperation was then seen not as an irrational strategy, but as a successful approach to making the best of what could at times be a less than desirable situation. When I was first introduced to the prisoner’s dilemma, my first reaction was that if both prisoners co-operated they would both be better off. Later, I was to learn that this strategy was irrational due to the fact that the temptation to defect was too significant, and failure to defect by either prisoner could have disastrous results. The risk associated with co-operation was just too great. But now it appears that when games are played many times or played for a random number of times the benefits from co-operation become more and more attractive. This would seem to be a better reflection of real-world interactions where people co-operate, not from some altruistic or moral motivation, but from a desire to improve their own situation either at the present time, or to improve their situation at a later time. Reciprocity in the context of a dependable ally could come in very handy, and these types of relationships are apparent to each of us virtually everyday of our lives. These types of give-and-take relationships exist on the premise of trust, and cease to exist when trust is gone. Forgiveness can come into play to repair relationships, but such acts would appear only to be beneficial in cases where investments in time, money, or some other commodity has been made in sufficient quantity to counter the breach of trust. Morals, ethics, and questions of right and wrong don’t seem to apply when the parties involved are co-operating in legal activities for mutual benefit.
These transgressions could be seen as what Hume calls the “horrid and unnatural” crime of ingratitude. Hume goes on to put forth the example of children killing their parents, but this is only a matter of degree and severity, not concept.
Morality as a feeling or reaction and not the product of the mind through reason at first glance seems counter intuitive. People can spend a fair amount of time thinking and trying to deduce through reason what exactly the “moral” thing to do is in a given situation, and this introspection or examination could lead people to think that morality is the product of reason. Later in his work, Hume states that sometimes the feeling can be so “soft and gentle” that people can mistake the feeling for an idea. This is pretty deep stuff, and causes myself to wonder how many times I’ve done just that. The good news is that once someone is exposed to concepts such as these and believes them to be true, the spell is broken.
Hume’s claim that reason can never produce the “duties and obligations of morality” but can only find them is pretty much the slam-dunk that ends the argument.
The separation of morality from reason would seem to have implications regarding our study of game theory. Morality, being defined in this case as the option of that which would make everybody better off, would seem to dictate choosing the reward, while reason dictates a reduction of risk by choosing the punishment. Reason would appear to be directly opposed to morality. These types of choices seem to be common-place in today’s business markets. “Predatory” lending practices, pension manipulation, and certain credit practices could all be thought in terms of this dichotomy. Again, the light at the end of the tunnel appears to be that when people form long-term relationships built on reciprocity and mutually beneficial outcomes, the dynamics change to a more favorable position.

Reason and Emotion

2010-10-01T17:19:00.000-07:00

Hume is specific when he uses words like “reason,” “morality,” and “emotion, and because of this it’s hard to find counterarguments to his ideas. People have different ideas about what “reason” means, and many of these different takes on the word wouldn’t work with Hume’s hypothesis. Hume uses the word as an objective perception of the facts. It’s a definition that works well for his theory and it creates a clear distinction between reason and emotion. However, I feel reason and perception of the facts is inherently subjective. I don’t think separating reason from morality is quite as clear cut as Hume is making it out to be. When I think of the word “reason,” I immediately ask who is doing the reasoning. In Hume’s case, it’s assumed it’s some wholly objective viewer.

Now, how often is that the case? Outside of computers and other machinery, the answer is not very often. Humans are simply incapable of reason as Hume is describing it—the emotion, another word whose definition creates some problems, is always present and always tainting the “facts.”

In a nutshell, the problem I have with Hume’s argument is that it is infallible only in the world Hume is describing, which is a completely theoretical and an unrealistic representation of reality. Hume’s mighty conclusion is that morality is derived from emotion and not reason. I’m not all that familiar with philosophy so I’m not quite sure what this idea accomplishes. So, morality is derived from emotion—are we supposed to do something about it? Should I feel bad that my morals are subjective? Should I try and be more reasonable, as unattainable a goal as that is? For humans, emotion is reason, for crying out loud. There’s nothing we can do about it, it’s just a byproduct of being what we are. We use emotion to filter the world and tell us what we like and what we do not like. I expect Hume will try to explain how to make use of his ideas in the next part of the reading; however, as it is I have a lot of answered questions.

Whatever conclusion we come to about Hume’s conclusion, the bottom line is that we wouldn’t be better off if we acted solely on reason. If we were nothing more than walking calculators, which is if we didn’t have emotion to make use of reason, people would be worse off. If morals didn’t stop people from stealing and murdering, there would be a lot more of that going on. It’s easier to steal than to work—if those are the facts and you have no emotion, you will steal. More importantly morals wouldn’t instigate people to police “justice,” however you want to use the term. If there was no retribution for harmful acts, everyone would steal and murder until there was nothing left to steal and no one left to murder.

So I think it’s in poor taste to give emotion a bad name. Although, I’m not sure Hume is saying that emotion is necessarily bad or less useful than reason. He makes a distinction between the two, but I don’t recall him saying that morals are bad just because they are founded on emotion. This could be important an important detail, but I’m not quite sure how to piece it all together. I suppose a big piece of the puzzle has to do with how any of this is related to economics. Game theory seems to connect Hume’s ideas of morality and our understanding of economics, as there is definitely some gray moral ground in that area of study. For instance, what makes one defect? If it is Hume’s idea of “reason,” one would defect because there are gains to be made. Cooperation does not yield the same benefit as defecting—those are the facts, so it is reasonable to defect. Morality on the other hand doesn’t provide a direct answer as to what the best solution is. Instead, it individually guides our actions by making us choose whether to cooperate, to seek retribution against a defector, to defect out of fear that the other person will defect as well, or to follow a multitude of other possible motives and emotion-based actions.

Whatever the case, morality as Hume is describing it slips its way into every action we make. If it plays a role in whether or not we wave good morning to an angry neighbor, it is bound to have implications on economic choices as well.

Knowledge of Crowds on a Large Scale - Brent Chow

2010-10-01T17:03:00.000-07:00

During our discussion Surowieki's Knowledge of Crowds, we came across the concept of how large groups can be more knowledgable than an individual expert. We discuss that even a person with an irrational thought process can be a benefit to a large group, providing people with an understanding of what is wrong. From this we can assert that failure, although negative in the micro sense, can have a positive in a macro sense. In our discussion we discussed how decentralization is a key part of this thought process; however, I would like to bring up a contradicting scenario where centralized knowledge can prove beneficial towards a crowd’s knowledge.

If there is a large body of peoples, and within this body are smaller groups – think of it as a group and the collective thoughts of individuals – and we know that failure and diverse thinking is a key part of a large group's discovery process, then it would make sense to have a centralized body of people. I am not stating that the large body has a whole should have centralized knowledge, but rather that there could be a group of people that have a centralized knowledge and other groups that do not. The most obvious scenario that this situation holds true to is to modern mankind and our political and economic thinking.

Let’s step back to the Cold War Era and look at how man as a large “crowd” has been able tackle the driving issues of politics and economics. If we assume that the Communist Soviet Union, a socialist and communist nation, is a group of people's with a centralized knowledge of all its peoples and economy, and capitalist and democratic republics as a different group of peoples and all of which fall under one large umbrella. We can historically map the fall of many communist and socialist countries or “individuals”. In this example, we can label the Soviets as the irrational thinker of a group – the person who failed and exemplified to the “crowd” not necessarily what is right, but what is wrong. One may say that there are more variables that exist on the realm of governments and nations than on the simple playing field of a crowd; I disagree. Political pressure is equivalent to that of peer pressure and military pressure is equivalent to that of a schoolyard bully staring down someone with a contradicting answer. Groupthink is just as common amongst individuals and friends as countries and their allies.

Arguably the growth of democracy and capitalism can be contributed to countries that have attempted to maintain a centralized government and/or economy. If we were to plot the knowledge of the crowd (countries) during the Cold War Era, we would see that there may be a large spread between those that believed in decentralized governments and those that believed in centralized governments. Today, we can infer from changes in the economic and political policies in countries such as Russia and China that countries a converging on a more common ground. Without a doubt, the aggregated perception on politics and economics is still developing as the “crowd’s” diversity in perception is experienced, but over time, failure and experience of the irrational will guide mankind towards more efficient markets and politics. In this scenario, we do have experts – we could even assemble a panel of experts on politics and economics – but I do not believe that their collective results could be as knowledgeable and accurate as the collective results of a larger group, in this case that being the world.

*NOTE: That in this blog I am not suggesting that knowledge in crowds can benefit from centralized knowledge. Rather, I am stating how centralized knowledge can be beneficial in the sense that its inclusion can add to the diversity in perceptions within a crowd.

The Complexity of Decentralization

2010-09-30T21:18:00.000-07:00

First of all, I have to admit the fact that this weeks readings were rather fascinating. Although I was a little puzzled about David Hume’s book, A Treatise of Human Nature, our class discussion was effective in providing clarity to some of the confusions I had. There were many interesting topics to write about, but given the limited amount of space to type I am going to devote this weeks blog to our reading on James Surowiecki’s book: The Wisdom of Crowds.

On a previous blog post of mine there was a question that I asked: how do we know that people would make the correct decisions? This question was based on F.A. Hayek’s reading, in particular, when he argues that the ultimate decisions must be left to the people who know directly of the relevant changes. This is known to be a form of ‘decentralization.’ This question was also based on the notion of a knowledge that is communicated to a central authority (single mind) in order to solve issues—which Hayek mentions. However, during our class meeting on Monday, Bart raised an interesting question: When does decentralization not work, and when is it effective and when is it not?

Surowiecki tells us about four conditions that characterize wise crowds. It is important to understand that a group must satisfy these four conditions in order to produce a smart market, as Surowiecki proposes. These four conditions are the following: diversity of opinion, independence, decentralization, and aggregation. I want to emphasize on the ideology of decentralization.

Surowiecki argues “decentralization works well under some conditions and not very well under others.” This seems rather complex to comprehend. But, it is important to note when Surowiecki claims that a small group of people will not be smarter than the larger group. Thereby, it seems as if decentralization would not work if it were a small group of people and at the same time organized. We see a good example of this in the book, when the U.S. intelligence evolved into a collection of decentralized groups. The key here is to understand that although one can label a group as ‘decentralized’ we need to consider its size and whether its been organized or not. If it’s a small group that has been organized, there is a danger—that is, “groupthink” which Surowiecki mentions. This is one of the reasons why people, if in constant interaction with each other, wouldn’t be able to make collectively intelligent decisions.

Moreover, Surowiecki argues, “a decentralized system can only produce genuinely intelligent results if there’s a means of aggregating the information of everyone in the system.” Furthermore, he claims that “without such means, there’s no reason to think that decentralization will produce a smart result.” This implies that decentralization would not be effective if this were missing. Thus, having such means is crucial for decentralization to be effective. This is one of the interpretations I got from what Surowiecki is trying to convey.

However, we need to remember that this interpretation is based on a theoretical perspective that Surowiecki transmits to us. Although I am convinced by some of the arguments that Surowiecki proposes, I am still somewhat perplexed about the reality of when decentralization would and when it would not work in our society.

Here is something Surowiecki tells us, which I found amusing: “Decentralization had led the United States astray. Centralization would put things right.” When we think about the attacks on Pearl Harbor, do we really believe that the attack was difficult to perceive? I don’t want to get too much off topic, but this is important to consider. We now know, thanks to declassified government documents, that not only was the attack known in advanced but the U.S. also adopted actions to provoke Japan to attack. Robert B. Stinnett filed a freedom of information act request and hit the “ultimate jackpot” which led him to publish the following book—Day of Deceit: The Truth About FDR and Pearl Harbor. I used this example because had the people been able to make a decision, chaos could have probably been prevented. This is counterintuitive because it would have been ‘decentralization’ that would have put things right.

If it is assumed that the closer people are to a problem, the more likely they are to have a good solution, then we could conclude that decentralization would work under this circumstance. I remain challenged by this notion of decentralization, but I end this blog concluding that for decentralization to work, “power cannot fully reside in one central location.”

On Morality as an Emotion

2010-09-30T13:34:00.000-07:00

David Hume argues in his book, A Treatise of Human Nature, that humans derive value and morals from emotions instead of reasoning and fact. At first when I read this I thought he was way off base but after discussing it in class I realized that he does have many valid points that I agree with. I do not necessarily believe everything he puts forth but I do for a lot of it.

He begins his arguments by saying that the only thing the mind can know is perceptions. These perceptions include our sense like taste, touch and sight as well as our thoughts and feelings towards the world around us. Hume goes further to break down these perceptions into ideas and impressions. From there we can look at morality as either one of the two. If we argue that morality is an idea that is concreted in truth then it must follow that morality is a constant, where one behavior is always moral and another is not. How can someone label one behavior as always moral however? Morals are situational and there is no black and white test on what is moral in one situation and what is immoral in the same. People base it on their own gut instincts instead of a reasoned algorithm to determine the relative morality of each behavior. They can just feel what is right and what is wrong.

If morality were a set truth then it would not change over time either. We can look at history and easily discredit this argument. Less than 200 years ago it was completely acceptable and in the eyes of many not immoral to own slaves and beat them because they were less than human. Now we look back and cringe at the apparent immorality of our ancestors. Even in this day our moral code as a society is shifting. Look at the gay rights movement. Prior to this generation almost no one accepted homosexuals, saying that they were immoral and acting against God himself. Now however, we see that people are changing what they view as immoral and moral, accepting actions as moral that were previously moral. If morals truly were based in fact than how could they change? Facts are set, unchanging and definite. Since morals change they are obviously not based in natural fact.

Hume’s next point is one I have a little trouble buying into completely. He states that reason cannot evoke any actions and is rigid and unchanging. If all everyone knew every fact than perhaps reason could be called rigid, but with each new fact someone learns their reasoning and outlook on the world changes. Now the main point I disagree with that he brings up here is that reason cannot cause or prevent actions. Hume states that reason can excite passions in individuals that then cause them to act. How is this not reason exciting action? If you look at it the reason caused the passion, which caused the action. So, if even if you buy Hume’s argument that only passion creates actions the reason still caused the action through the transitive process. Reason can affect actions in the manner of exciting passions therefore reason causes actions.

Now I concede that reason is one step off of creating the action so Hume’s points still hold that actions are not good or evil due to reasoning. It is still the passion that has the final say in someone’s actions so if someone is embarrassed by an act or feels that it is immoral they will still avoid doing it even if reason tells them they will be better off. If someone has a strong moral code and has reasoned that he can get away with theft he will still resist it do to the emotions he feels contrary to the reasoned selfishness his mind is telling him. Morality and emotions can trump reason but that does not mean reason cannot affect actions.

In the same stream Hume states that actions cannot be labeled as either good or evil. Instead they are all situational. If actions could be labeled as moral or immoral than even inanimate objects would be capable of immorality. If you are walking down the street and see a man run into an old lady and continue walking you will label that man as inconsiderate and rude, however, if you watch a rock roll down a hill and hit a smaller rock you will not label the rock as immoral. Because actions in and of themselves cannot be moral or immoral it follows that there is no set criteria for morality and immorality therefore it is beyond reason to comprehend what creates and dictates the conception of morality.

In conclusion I believe that Hume has many valid points and that morality is based largely on emotional feelings rather than reasoned thought. People all have different facts at their fingertips yet they all come up with similar moral codes around the world indicating that some form of evolution deemed our moral system as beneficial to society.

The other side of the Devil

2010-09-30T11:59:00.000-07:00

Reading through your blogs and listening to your comments in class, I seem to repetitively find myself in the role of devil’s advocate against you all. I don’t mind, but before I set out yet another post in advocacy of your opposite, I should probably put out a disclaimer. You’re all very smart and you write well. Talking with you guys is better than listening to Dr. Booth; you guys make things interesting. But I wonder how much you guys are willing to remove yourself outside the world of academia.

This class is very unique and very good, but in my opinion very biased. It’s an academic philosophy class. We get to ask really good, really relevant and really cool questions. But it’s biased towards being academically philosophic. I am consistently picking up on my part and unwillingness by you guys to start thinking outside of that box. I can only speak for myself and not for you, but my childhood encompassed a vast amount of experiences, and I have many boxes to think in. The world exists outside of college, and I really think some of you might want to start believing in the validity of real-world, practical thought. It’s like practicing physics in a vacuum- it will never carry over to the world of actual happenings, where air resistance and counterforces morph that perfect parabola and contort it into an ugly little spike.

I’d like to see you guys start throwing some questions towards the humanity of economics. Start debating the humans behind these economics rather than the economics themselves. This week’s/last week’s blog posts seem to put you all in agreement that the theoretical is rarely practical, so then what are you going to look for to bring practicality to your life from this class? No matter what you end up doing or where you end up going, you will always live in a peoples’ world. People pull the strings that make the puppet-game of machinery, computers, and financial analysts spin in a working manner. Why are none of you asking questions about the personalities behind the men and women who theorized the articles you are reading, and what that might mean for the perspectives they might develop and the beliefs they will most likely market?

Most of you seem to be convinced that the majority of our race is inherently good and moral; that wealthy individuals in positions of power and regulation actually do want to set up systems that benefit each individual in a society. Have you given any serious thought to the fact that they might not? In our class we never seem willing to discuss any of the fringe economics questions… the economics of morality, deceit, sex… those shady little bastards that make our world go round because people are willing to do all of these for a payoff, tangible or intangible. Are you guys scared to search for the answer to these? To debate whether the trade and exchange of goods does properly breed selfishness and immorality in such a way that isn’t good for anybody but oneself? In almost every one of our discussions there’s been a good chance for one of you to tackle something like this, but we never do, we go right back to talking about if perfect competition can ever really exist, theoretically.

Economics is a side to psychology. We study it because it helps us predict how people will behave. Start considering it a pillar to the human structure instead of a gold caste human statue itself and every single one of your very sharp and very capable minds will start creating some very pungent and particularly insightful questions to answer. There is personality in everything, including economics. Why are we not examining it? It has everything to do with how men will trade. These economists are men, guys… yes they’ve had their papers published and people believed what they said but they are still men. There’s no need to bow before them and throw away all belief that poverty might actually have some roots in social justice, or that knowledge of trade is essential, or that Marxism might have actually been good at the time just because these old guys said so. I challenge you to start becoming more than just somebody who thinks big thoughts; these theories and systems and ways of exchange mean nothing without the humans behind them.

Hayek Fangirl Seeks Clarification

2010-09-25T17:53:00.000-07:00

Reading Hayek, especially “Competition as a Discovery Procedure”, was a new experience for me because he deconstructs a lot of the concepts and questions that are glossed over in the initial exploration of economics. As Bart said, Jevons was our straw man for the sake of argument, and we really did not spend that much time on him because Hayek offered us much more compelling discussion.

Hayek enacts a pretty intensive takedown of the perfect competition concept; but, honestly, I can’t imagine not learning the perfect competition model, and the other simple tools where major issues are assumed away, in an introductory macro or microeconomics course. But I guess that would be because I learned it that way. You have to start somewhere when you are first learning, and a “perfect” model where all those problematic variables are assumed away can be helpful. However, I do wish there had been an asterisk next to the perfect completion model in my textbook that explained, or at least cited, the contention over the framework. It is irresponsible and intellectually stifling to take for granted what was originally assumed away for the sake of a model, and Hayek calls attention to this problem in his writing.

What really clicked for me while I was reading Hayek was his analogy of the market as a kind of scientific method. I had an Oprah “ah-ha moment” when I read the following line: “The advantages of accepted scientific procedures can never be proved scientifically, but only demonstrated by the common experience that, on the whole, they are better adapted to delivering the goods than alternative approaches” (256). The scientific method comparison made sense and seemed like a coherent way of explaining the trouble with proving something so fundamental and important while at the same time arguing for its correctness. Ah! But then I got to thinking and was a little deflated when I considered that Hayek might have been taking one of those copouts he was accusing those other “uninteresting” economists of. He does some assuming himself in this process, saying something to the effect of: “since we can’t test the test, then let’s just assume it’s the right one since we haven’t found anything better.” Not quite an epiphany, especially if he precedes this by pointing out gaps in those other economists’ reasoning, but it is a very simple way of breaking down the problem of deciding how goods are best distributed. I do appreciate the way he sets up a judgment of the achievements of the market on fair ground.

One of the other ways Hayek demystifies the argument for and against economic controls is by working with the question Bart asked in class: How do you explain the process of the free market without personifying “the market” ? Giving “the market” a will or a goal is counterproductive when pitting the idea of the free market against socialism because socialism hinges on governing trade in order to reach goals. Bureaucrats have goals as do all individuals, but the market does not.
There is one passage from Hayek that I am struggling with: “It is one of the paradoxes of the present world that the communist countries are probably freer from the incubus of ‘social justice’, and more willing to let those bear the burden against whom developments turn, than are the ‘capitalist’ countries” (262). I thought one of the most attractive elements of the description of socialism is the argument for social justice, that socialism ensures a more “just” distribution of goods and labor compensation. I’m just not following Hayek’s reasoning here.

On Hayek's Competition as a Discovery Procedure

2010-09-25T17:12:00.000-07:00

Hayek’s Competition as a Discovery Procedure makes a lot of good points, I cannot accept every argument made. The point that I take the most issue with is the blanket statement that, like scientific method, “its performance cannot be tested in particular instances where it is significant” (Competition as a discovery procedure (CDP) pg256). This is true in a sense, as it is not an easy thing to test if competition did a “better” job of allocating agents to slots than I could have by dictating the assignments. However, what is false here is that one can absolutely test mechanisms in general. One could easily devise an experiment where agents have values for slots but are randomly assigned, and then compare that to results from an environment where agents place bids in order to obtain their most desired assignment. While Hayek almost redeems himself in my eyes by saying “The difference between economic competition and the successful procedures of science consists of the fact that the former is a method of discovering particular facts relevant to the achievement of specific temporary purposes, while science aims at the discovery of… ‘general facts’” (CDP pg256). The point that competition truly exists to determine prices and allocations is valid. However, he sells economics short when he implies that scientific method cannot be applied to competition. From the pit market in Edward Chamberlin’s seminal 1948 paper “An Experimental Imperfect Market” to Stephen Rassenti and Vernon Smith’s 1982 paper introducing the combinatorial auction, great strides have been made in understanding competition using experimental means. To sum thing sup here, while I agree with Hayek that it is difficult, if not impossible to examine if competition was the absolute best mechanism ex post, it is clearly wrong when he says that competition cannot be tested.

Another point that I disagree with in Competition as a Discovery Procedure is on page 263 when Hayek writes “how much more important it must be in countries where the chief task is to discover yet unknown opportunities of a society in which the past competition has not been active.” I cannot see how this would be correct. As much as I think that competition is the best way to grow an economy and create surplus for everyone involved, I think that it is far less important to have competition in an economy that is undeveloped than it is in a developed one. My reasoning here is that government-directed economies, while not nearly as efficient as free-market ones, can still move an economy along some general path. The advantage of undeveloped economies is that their governments have frameworks they can apply to their own nation. For example, America today has no real role model as far as how to grow their economy beyond its current level since it has emerged at the top in terms of GDP, and remains near the top in terms of GDP per capita. However, if you look at China, they are growing as fast as they are because they were able to look at other, more developed economies and pick and choose parts that they saw as drivers of growth. Their civil liberties situation notwithstanding, this has served them extremely well in a pure wealth creation sense. Additionally, even a foolhardy government can recognize the value of mining natural resources. This is often an option early on in a country’s development, but stops becoming such an important wealth creation option as the economy develops, meaning the free market becomes a, relatively, better and better economic option.

On the other hand, I have to agree with Hayek’s general premise: Competition is the best way that we know to allocate goods and resources in a way that makes everyone better off. We may not know that this will always be the best way, but the fact that economies are typically successful to the degree that there is freedom to compete tells us anecdotally that this has been the truth in the past, and appears to be the truth in today’s world as well.

Perfect Competition and its Application

2010-09-25T15:16:00.000-07:00

In the world of academia, we often devote too much time and focus on trying to understand economic theories and models such as perfect competition. While this might be a good thing to do and use as a fundamental ground for say—analysis about a particular market, the reality demonstrates the opposite. When we look at any economic theory, it is good to not only question its validity but also inquire about the origins of how these theories came about. Who were these individuals who proposed such theories and during what times were these theories proposed? This is important to consider since the study of economics attempts to follow the behavior of humanity, and human beings are constantly changing their tastes and preferences—thus making it a big challenge to keep up with the knowledge that affects their behavior.

I question about the time theories were proposed because during that particular time period, individuals behaved differently from today. Their demand for goods and their lifestyles were different. The way goods were produced was different from today. Although there are still labor workers, today, for example, we have labor workers operating high technology machinery. Therefore, I stress about considering the time such economic theories were proposed. Perhaps, ‘perfect competition’ might have been a great fit at the time it was proposed. But should it still be applicable today? It would be logical to conclude that perfect competition does not exist and has never existed in any society.

Perfect competition presupposes the following: “complete knowledge of the relevant factors on the part of all participants.” For instance, if we think about this weeks experiment that we participated, sellers were not fully informed with anticipation about the prices buyers were willing to pay. It seems this was a process of discovery or a process of ‘trial and error’ as Vernon Smith has made a note of in our previous class meetings.

I want to take this moment to dive into a remark that F.A. Hayek makes about perfect competition. In Hayek’s Individualism and Economic Order: The Meaning of Competition, Hayek argues that “we should worry much less about whether competition in a given case is perfect and worry much more whether there is competition at all.” It seems much more easier to establish a case in regards to discrediting the notion of perfect competition. On the other hand, I’m intrigued when Hayek mentions about worrying more about whether competition exists at all. This is what I find to be rather interesting. For example, in business schools, we find classes that focus on preparing students to learn how to identify, analyze, and out beat, competitors in the marketplace as if competition were something ‘not complex’ and easy to learn and make application of.

However, competition, as Hayek proposes, is a process that involves “a continuous change in the data and whose significance must therefore be completely missed by any theory which treats these data as constant.” Because our individual tastes and preferences are constantly changing, it is difficult to not only collect this information but also difficult to try to understand competition by the application of a theory. The problem I see is that any information collected today would already be considered outdated by tomorrow. Thereby, the data collected today could not be utilized as constant to understand competition tomorrow. It is as if competition is constantly evolving.

I find it fascinating when Hayek claims that the services of different firms will never be exactly alike and that “no products of two producers are ever alike.” This makes me realize that economic schools shouldn’t spend too much time studying and emphasizing the theory behind ‘perfect competition.’ There is no such thing as two lawyers, doctors, or firms that are perfectly alike. We could use the theory of perfect competition for academic purposes only. But knowing the fact the there is no such thing as perfect competition, learning the theory would be rather worthless if one is trying to solve with it economic issues.

As Hayek argues, “competition is by its nature a dynamic process…” It goes beyond using theories as a form of analysis. It is a process of figuring out what type of goods consumers’ want, when they want them, how they want them, and how much they demand. I interpret this dynamic process that Hayek tell us about as a form of continuous discovery of knowledge from both consumers and producers in a market. I end this blog concluding that since knowledge is constantly changing, for economists to fully understand the way competition truly works by applying economic theories is very complex and difficult to accomplish.

Hayek & Competition

2010-09-25T14:43:00.001-07:00

In Competition as a Discovery Procedure, Hayek argues that "...competition is valuable only because, and so far as, its results are unpredictable and on the whole different from those which anyone has...aimed at."

His point that competition is a means to discovery becomes clear as the paper goes on, coming to the conclusion that the reason we have competition is to discover things we have not know before.

However, regarding the above quote, Hayek is implying that competition is only valuable when they are different from those anticipated--which is not necessarily always true. It's possible in many ways to have competition in the markets (valuable competition) with results that one (or more) has predicted as the outcome. For example, let's say there's a bid for a military government project between half a dozen companies. They will engage in competition to demonstrate that they can each produce the better goods and/or services at a lower price. In the end, one of the companies will win the bid, however, the 'competition' part is necessary--each has to come up with a plan and demonstrate how they will build and provide the necessary goods/services and how much funding they will need to do so. One company will in the end, yet it's likely that the result may have been predicted before the competition ended (or even started). Does this inherently defeat the value of the competition, as Hayek seems to suggest with his quote?

Hayek does come up with a very valid and important point later in the text, arguing that when most people discuss competition and the market, they talk of a "state of affairs which economy theory curiously calls 'perfect competition'. It leaves no room whatever for the activity called competition, which is presumed to have already done it's task." It's a critical point to bring up and one that many students contemplate when studying economics--how and why are we taught of an 'equilibrium' in 'perfect' markets when market size, demand, preferences, suppliers, and a multitude of other factors affecting 'equilibrium' price and quantity are constantly changing?

As simple as the claim is, Hayek addresses the fact that there is no true state of economic conditions where in competition 'ends' and variables remain perpetually constant. Markets are alive and changing, as technologies advance, incentives arise, preferences shift, and the supply and demand of complements, substitutes, and resources is always moving.

A student in class on Thursday brought up the point that it almost seems trivial to learn about markets in the way we currently do in most economic programs. However, there is of course a benefit to doing so, which Hayek does not mention in Competition as a Discovery Procedure or The Meaning of Competition. Upon entering the field of study of economics, it's nearly impossible to understand many of the variables and theories in constantly shifting, non-equilibrium markets. For this reason, most textbooks tend to paint a simple picture as possible and remove many outside variables when first introducing concepts of economics.

The basic idea of supply and demand may be easy enough to grasp. However, when learning about how supply/demand shifts rise/fall, or how prices/quantities rise/fall as substitute/complement demand/supply changes, it can become much more tricky. Although these are some of the most basic principles of microeconomics, they demonstrate why it's important, from a very early point, to provide an easy to comprehend, simplified model of market competition.

Although Hayek is correct in asserting that this oversimplification of markets is harmful when looking at economic competition, it's important to realize that it has it's place as well (if only for the purpose of demonstrating economic theories).

Hybrid Theory

2010-09-25T14:04:00.000-07:00

To be honest I didn't actually understand Jevons' entire point until we discussed it in class. I don't know if it was because I was tired, distracted or something else but I originally thought it was just a reiteration of things Hayek stated. I know see how incredibly wrong I was and this started a whole new line of thought in my head on which one was closer to the truth.

As we all know, now at least, Jevons was advocating the exact opposite of Hayek. Jevons said that perfect knowledge was key to a perfect market. Hayek obviously argues the opposite, saying, people only need to know who wants to buy their good and how much they are willing to pay in order for the market to reach its equilibrium.

I honestly have trouble agreeing with either of these men. I do not believe that it is one way or the other but if I had to choose I would say that Jevons’ theory of perfect knowledge might be closer to the truth. Jevons claims that brokers make all trades with “the most thorough acquaintance with the conditions of trade.” These brokers strive with their entire being to discover the ins and outs of supply and demand. The problem I have with Jevons is when he states his absolute that a market is perfect only when “all traders have perfect knowledge of the conditions of supply and demand, and the consequent ratio of exchange.” I cannot comprehend a society in which everyone knows everything about every trade going down at every time of the day. It seems impossible.

If every farmer were to know the entire trek of his corn from plowing to market he would have to spend time analyzing all of the separate trades that get the goods to the shelves of the market. Not only would he have to this the first time he sold his corn but he would have to do it each subsequent time he sold his corn as well. On top of the analysis of the supply and demand in the corn market he would have to also analyze all of the compliments and supplements of corn including wheat, butter, etc. He would also need to discover the buyer’s preference and local trends, research unemployment and lay offs as well as all the other contributing factors to each of these contributing factors. He would basically have to devote his entire life to the study of economics in order to trade his corn in a way that would create a “perfect market”. The only thing is, however, that, if he were to devote his life to the study of the intricacies of trading corn he would no longer be able to grow the corn he begun studying to sell. There is no way for every salesman, steel worker, garbage man or farmer to be an economist without destroying our economy as we know it and creating a society made up of only intellectuals, starving intellectuals with no new goods but with a perfect knowledge of how these goods could be traded. Jevons system seems again like one that idealizes the world and might be great if humans weren’t humans.

I know would like to look at Hayek. I have fewer complaints with the Hayek Hypothesis although I do not believe it is closer to the truth. Humans cannot live their lives with only the knowledge that surrounds them. One can never widen his horizons if he can only see what is directly in front of him. Hayek proposes that the less people know of the market the more efficiently it will run. A tin smelter does not need to know why his tin is demanded in China he simply needs to know that it is and that the Chinese will pay a certain amount for it. This however does not hold if the tin smelter could help the Chinese and show them that another good (which he also provides) may be more efficient for their means. People cannot work together and innovate without discussion from all sides, including producers and costumers. No one can know everything about his or her own field, occasionally fresh eyes are a positive in innovation. If everyone only stayed in his or her own little economic bubble innovations and progress would stop, stagnating human society.

In conclusion, I do not see how either of these economic philosophies could actually work. There must be a middle ground that can maximize the spread of ideas while still keeping people specialized in their own fields. A system to analyze and spread the knowledge needed to make a “perfect market”.

2010-09-24T22:29:00.000-07:00

After this week’s readings and group discussion, I walked away curious about the proper meaning of the term “competition” as it is used economics. I was left disappointed after this week’s group discussion for we didn’t really get into much detail about what specifically Hayek was trying to disprove in his article of The Meaning of Competition. Hayek describes that people and economist often misconstrue the meaning of the word competition to that of what it is commonly referred to in everyday language. Monday’s experiment was purely competition for lack of better words so what is it that Hayek is trying to disprove about the meaning of the word?

Midway through Hayek’s article he recalls the words of Dr. Johnson “Competition is the action of endeavoring to gain what another endeavors to gain at the same time.” This is what I have always closely considered competition to be defined as. I know I was competing against others in the market on Mondays in class experiment. This is a question to all; what makes the meaning of the word competition to be considered different in terms of economics? I’m not trying to focus on the specific word “competition”, but does the theory of competition not exist in economics, what should it be considered? Would Hayek disagree that Mondays experiment should not be considered competition?

How Hayek Changed my Thinking

2010-09-24T17:43:00.000-07:00

After reading some of the works of F.A. Hayek, I can say with confidence that some of ideas that have changed for me have been ones pertaining to the fields of morality, social justice, and the operation of markets. When I was growing up in San Francisco, I attended a very small high school. This high school, being Christian and liberal arts-oriented, naturally had many theology professors who taught a fair number of courses about social justice and social morality. In addition to being highly exposed to this sort of education, there was also a lack of any economics classes whatsoever at my high school. Combined, these two factors led to a way of thinking about the world and how its assets were allocated that was very different than the one I began to culminate once I entered the economics department at Chapman.

One of my professors used to make us read various pieces by the classical prophet Amos, whose bulk of writings focused primarily on the plight of the poor and the wicked tactics the rich used to get richer. The summary of many of these class sessions spent talking about Amos and social justice almost always led us to the conclusion that the rich are able to get rich through manipulation of various institutional structures and that the poor are held into poverty as a result of the mass accumulation or hoarding of wealth by so few. Furthermore, 'social justice', as it was explained to us, was always a very vague and bland term that seemed to entail anything that was "fair". As lazy high school students we didn't care to argue much, so it became our belief that what was just was subjectively fair and anything that did not appear fair or humane was inherently evil and intentionally harmful. Thus, entering Chapman University as a freshman, the ideas of market orders and economic prudence were ones that were totally unknown to me—and remained alien concepts until my junior year when I became an economics major.

My first encounter with Hayek was in a class called Political Economy. Much like our assigned reading Competition as a Discovery Procedure, we explored the concept of why the markets we had existed today and why they had recently miserably failed us. Many students tried to argue that the economic system in place in America(i.e. a combination of market regulations, market freedoms, etc.) was inherently flawed and that by nature the market was inherently flawed because it kept producing bubbles. Although the professor never refuted that claim, he made a statement very similar to Hayek’s in Competition as a Discovery Procedure: "One is that competition is valuable only because, as so far as, its results are unpredictable and on the whole different from those which anyone has, or could have, deliberately aimed at" (255). After that class and as the semester progressed, I began to look at American society and the sum of our aggregate actions differently. The notion started to occur to me that human beings were not by nature intentionally cruel, nor were they dumb or illogical as well. That being the case, I began to realize that poverty exists not because of spite by the rich or some sort of engineered plight, but because life isn't perfect and reality dictates that not everyone has the capabilities or tools to become vastly wealthy—and even if they did there would still be poverty because of competition—something that Hayek’s readings helped me to understand as natural, and not man-made.

The idea of markets and their byproducts being natural orders was one that completely changed my ideas of what social justice meant. Prior to reading Hayek, social justice meant to me whatever was morally prudent and not decadently wrong. The problem that I began to see with that mode of thinking was that it allowed those who were unsatisfied with the market and the byproducts of economic activity to simply deem such things wrong simply because they found them unpalatable. In a sense, Hayek’s readings forced me to take a closer look at poverty and why it was caused rather than just label it and everything associated with it as evil simply because I found it unpleasant.

It would appear as if then, that I have been able to look at both sides of the argument of social justice, and although I am prone to agree more with those that say it is bologna to a degree, I am glad that I have had the opportunity to explore both sides of the debate.