What led me to ask such fundamental questions? Here are some observations/experiences in no particular order.

Banks vs Corporates:

• It is a lot easier to make money in the finance industry by catering to banks.
• Banks are a lot less concerned with the accuracy or soundness of the results produced by our software.
• Banks are interested in far more complex analyses than corporates are. However, unlike the people at corporates, people at banks do not necessarily know what they are doing or how the analyses are to be interpreted.

Money:

• There is far more money to be made in the finance industry as compared to other industries.
• Many engineering graduates from IIT have some certification or the other related to finance (NCFM or some other acronyms that I don’t care to remember). These were unheard of when I graduated in 2006.

Math:

•  Highly sophisticated math is required for any non-trivial analysis. Very few people have the capacity to understand the math.
• A lot of the math is circular. Mathematical models are often calibrated to market prices of assets. The market is made by people who use mathematical models to price assets.
• A lot of the math is essentially unfounded. Correlation trumps causality because the causality is too complex to model mathematically.

It is clear to me that the finance industry is sick. What made it sick? How long has it been sick? Can it be cured? If so, how? I will consider these questions in future posts. (I have a history of starting a post with part 1 in the title and failing to follow up. This time however, I am sure there will be more posts on this theme.)

In a comment on my previous post, I wrote:
“My working definition of mysticism is:
Any claim about reality (not just the self) which cannot be verified by another person.”
…
“If you say that your mind tells you X and my mind does not tell me X, and there is nothing in external reality that can validate X, clearly we are at an impasse. No further communication is possible, which, not surprisingly, is the core of all mystic claims”

To which Ajit Jadhav replied:
The matters of truth and falsehood are not established in reference to other people. It’s all between your own self, and reality, full-stop. The objective standard is (your grasp of) reality, not other people. And, note, “reality” also does include consciousness, i.e., “self” (and the selves of others). Primacy of existence doesn’t deny that fact. Consciousness is real.
…
the issue really is only with the qualifier: “external.” Agreed? If so, would you please tell me why you insert that qualifier? And, could you offer me a definition of the term “external?”

Main post:

The exchange above raises the crucial question: How does one evaluate claims related to consciousness- such as telepathy?

Quoting Rand:

A consciousness conscious of nothing but itself is a contradiction in terms: before it could identify itself as consciousness, it had to be conscious of something.

Directly or indirectly, every phenomenon of consciousness is derived from one’s awareness of the external world. … It is only in relation to the external world that the various actions of a consciousness can be experienced, grasped, defined or communicated.

Communicated, yes. But experienced, grasped and defined too? Can one not experience pain or pleasure without relation to the external world? What exactly does external mean here? Consciousness (mine as well as other people’s) is a part of reality. It exists too. Does the external world include the consciousness of other people but not one’s own? Does it exclude all consciousness?

All concepts are formed by a process of abstraction. One cannot form a concept from a single unit. That holds for the concept of consciousness too. Before a consciousness could identify itself as consciousness, it had to be conscious of other entities having consciousness. A baby raised in total isolation with no conscious entity around it, could not conceive of consciousness, could not conceive of any difference between the external world and the products of its own consciousness, could not achieve certainty about anything. It should be clear now that what one perceives and infers about other people’s consciousness is crucial to the concept of consciousness as such.

For instance, a child may see people walking around a table instead of colliding with it. This allows him to infer that the table exists external to the consciousness of these people and his own. The child sees (readily) that his mother does not understand what he wants. This allows him to infer that his desire is internal to his own consciousness and is not accessible to his mother. The child sees (readily) that he does not understand what his mother wants. This allows him to infer that her desire is internal to her own consciousness and is not accessible to him. Without such an understanding of what is internal and what is external, the child would not be able to develop the concept of consciousness at all.

The external world is those aspects of reality to which other people have access. Or, employing the concept of consciousness, the external world is those aspects of reality to which any consciousness has access. With this understanding of the external world Rand’s “It is only in relation to the external world that the various actions of a consciousness can be experienced, grasped, defined or communicated” makes sense.

That is enough for this post. I will pursue this later.

A game that turned philosophical:
An uncle was playing a game with a young cousin who had to answer several questions of the “What is your favorite …?” form. I did not see either the questions or the answers but my uncle declared that my cousin had failed because she ansered some (all?) questions with multiple answers instead of just one. That started a discussion on what it means to like or love something/someone and what these emotions are based on. To which an aunt said: A mother loves both her sons equally. One loves all one’s relatives. That does not mean that one likes them equally or even likes them much. Liking (Aavad in Marathi) is based on judgement. Love (Prem in Marathi) is unconditional (I am sort of putting words her mouth here, but that was clearly the intent). I think this particular sentiment is pretty much the general understanding of these concepts in Indian culture but I was quite surprised to hear my aunt – whom I had never regarded as an intellectual - frame the issue so clearly. It is rare to hear people outside of Ayn Rand novels say anything so clearly. I wonder how many individuals – particularly women - who are quite capable of thinking with clarity, have been turned into confirmists by our culture (More on the particularly women comment later).

A conversation that I dreaded but which turned out quite well:
I am now approaching the official, tradition-optimized age for marriage. As such, every relative – close or distant – is interested. Close relatives actually want to help me find a match. Distant ones are usually content with exhorting me to marry. Usually, I fend off the latter with a smile, but dealing with the former is a more serious affair and I knew I could not put it off indefinitely. It turned out that my uncle – mentioned previously – despite little meaningful interaction with me, had a fairly good idea of what sort of a person I am. When he – inevitably – raised the subject, he started with his own idea of what sort of person would be a good match. The matter of belief in God came up and when I said that I wanted an atheist like myself, he tried to get me to be “less rigid” by pointing out that as compared to men, very, very few women are rationalists (I don’t particularly like the term but it will do. I will use it here to merely describe anyone who does not accept the orthodox conception of God). He went on to explain that children get most (if not all) of their beliefs from their parents and their upbringing and it is only after they are grown (if at all) that they start evaluating and developing their own beliefs. So it does not make much sense to insist on specific beliefs in a potential partner. These could change after marriage too. There was nothing particularly new (to me) in what my uncle said but it was refreshing to have a rational discussion on a topic I hoped to evade.

I also got a new insight from the discussion – there must be a significant difference between the way girls and boys are brought up. In the households I have been in - urban, well-off, stable, salaried folk – I haven’t noticed any significant difference in the upbringing of girls and boys. Girls are educated as well as boys are and are allowed to pursue careers. And yet, it is certainly true that most (an overwhelming majority) girls from these households are orthodox and tradition-bound, while there are a significant number of boys who are much less orthodox. This could be a result of a difference in upbringing. Or it could be that girls tend to submit to authority more easily. I strongly suspect the former and will now be looking out for such a difference more actively. I did get an indication of the difference when an aunt asked me to marry a girl who would be willing to work part-time and take care of my mother. Paradoxically, my aunt’s daughter works a full-time demanding job and seems all set for a good career. I definitely need to understand how these things work.

A formula for life from the bridegroom:
Marry at 28. Have two children by 32. By the time you retire at 60 both your children will be married. Well, the math is certainly immaculate. But I cannot conceive living my life by such formulae. What I find staggerring is the number of people who do live like this. There is a whole thriving marriage industry to enable such formulae. No boy meets girl here. Rather it is family (with boy) meets family (with girl). They negotiate a few times. And if things work out, boy marries girl. Paradoxically, for a culture that looks upon any business activity as lowly and materialistic, the mechanics of a traditional marriage are indistinguishable from those of a business transaction.

A few hours later I discovered that I had an upset stomach and a slight fever. So much for my theory! I need to be more careful.

From the movie: Mere Jeevan Saathi (1970). Lyricist: Majrooh Sultanpuri

Rough English translation:

Usually, all by myself,
after a fall, I can pick myself up.
But if you take my hand,
I can change the world.
I have asked for you,
for the sake of the world.
Now, my love, decide for yourself

Love is the most selfish emotion that one can experience. Claiming that it is for the sake of the world – I wonder what it takes to sink so low.

Personally, I have learnt to move on after making a point. The point of this post is to reinforce those lessons.

I would never have been able to identify all that is wrong in the movie scene, but the contrast between the movie scene and the original is obvious. Reading an analysis of the contrast – in style as well as meaning – is fascinating as it helps me understand what sets Rand’s novels apart from other novels. I have long wanted to write a review of Atlas Shrugged and lacked the ability to do so. This review of a single scene captures some key aspects of what a full review should express.

I have always thought that adapting a novel like Atlas Shrugged to the movie medium without missing a significant part of its power is impossible. Reading Pisaturo’s essay reinforced that idea. Here is the original passage from the novel

He touched the bracelet in his pocket. He had had it made from that first poured metal. It was for his wife.
As he touched it, he realized suddenly that he had thought of an abstraction called “his wife”—not of the woman to whom he was married. He felt a stab of regret, wishing he had not made the bracelet, then a wave of self-reproach for the regret.
He shook his head. This was not the time for his old doubts. He felt that he could forgive anything to anyone, because happiness was the greatest agent of purification. He felt certain that every living being wished him well tonight. He wanted to meet someone, to face the first stranger, to stand disarmed and open, and to say, “Look at me.” People, he thought, were as hungry for a sight of joy as he had always been—for a moment’s relief from that gray load of suffering which seemed so inexplicable and unnecessary. He had never been able to understand why men should be unhappy.

                   — Atlas Shrugged, Ayn Rand

No matter how well a scene like this is adapted to the movie medium (I think Pisaturo does a good job of describing a possible adaptation), understanding the scene would remain subject to the viewer’s perceptiveness and interpretation. The novel on the other hand is unambiguous. It states everything in plain words and the meaning is impossible to miss. Speaking for myself, I would surely have missed most of the meaning in the passage in any adaptation I can imagine. And that explains why I don’t really enjoy watching movies.

Logic:

Logic is the set of rules that allows me to evaluate an arguement independent of its content, purely from its structure. Just as I use grammar to parse a sentence and determine the relationships between the words in the sentence, I use logic to parse an arguement and determine the relationships between the statements in the arguement. Just as a grammatical sentence may be meaningless (Colorless green ideas sleep furiously), a logical arguement may be meaningless or irrelevant. However, the analogy with grammar only goes so far. There are many different grammars and all of them are equally valid within the context of their application – a given language. Any consistently applied way of meaningfully combining words in a sentence forms a grammar. Grammar is a matter of convention. The same is not true of logic. The word itself has no plural. This is a striking fact. Think about it. It indicates that man cannot even conceive of a plural for logic. There can be no such thing as my logic vs your logic. Logic is the structure of coherant thought. It is a part of the mental apparatus that man is born with. It is implicit in the capacity to think. By implicit, I mean that I cannot choose to think illogically (though I may make mistakes). To identify mistakes in thinking, the implicit rules of logic need to be made explicit by identifying them. This is a science. Like all sciences, the science of logic also presupposes several things. In particular, it presupposes man’s ability to use logic (implicitly). Whether the word logic refers to the implicit set of rules or to the science which deals with identifying them depends on context. In this post, I am going to use the word logic to refer to the implicit set of rules.

Reason:

Reason is the faculty of understanding and integrating sensory material into knowledge. Reason does not work automatically. To reason, man has to consciously choose to think and to direct his thoughts to achieve understanding. By directing thoughts, I mean preventing thoughts from wandering by staying focussed. Reasoning involves the use of logic. It also involves several other techniques. “Reason employs methods. Reason can use sense-perception, integration, differentiation, reduction, induction, deduction, philosophical detection, and so forth in any combination as a chosen method in solving a particular problem.” [Burgess Laughlin in a comment on an old post] Deduction obviously uses logic. I believe induction does too but the science on inductive logic is nowhere as well developed as it is on deductive logic. Sense-perception, integration and differentiation don’t use logic (Note: integration and differentiation refer to grasping the similarities and differences between various things). Reason then is not simply the faculty of using logic.

Rationality:

“Rationality is man’s basic virtue, the source of all his other virtues… The virtue of rationality means the recognition and acceptance of reason as one’s only source of knowledge, one’s only judge of values and one’s only guide to action.” [Ayn Rand, in The Virtue of Selfishness]

In the discussion that motivated this post, a colleague argued that if the use of reason does not guarantee correct decisions, it cannot be one’s only guide to action. A gut feeling or intuition might sometimes be a better guide to action. There are two separate issues here – the fact that the use of reason cannot guarantee correct decisions and the claim that intuition can be an alternative guide to action.

Consider intuition first. Intuition is an involuntary automatic evaluation of the available choices. There is no conscious awareness of the reasons for the evaluation. Intuition is a learnt response from previous experience. As such intuition is extremely helpful in any decision making process. However, the fact remains that in every voluntary decision – the sort of decision where there is enough time to reason – intuition is only one of the inputs to the use of reason. As long as I make a decision consciously and deliberately, reason remains the only guide to action. The only alternative is to evade the responsibility of a choice. Relying upon intuition is not irrational in itself. I might decide that I do not have sufficient knowledge to reach a decision and choose to rely upon intuition instead. As long as I identify the lack of knowledge, my decision is fully rational. Identifying the lack of knowledge (and hopefully doing something about it) will actually allow me to learn from the new experience and improve my intuitions for future use. Blindly relying on intuition – by default instead of by choice – will actually weaken my intuition in the long run. Intuition is one of the most valuable tools for decision making but it needs to be carefully cultivated by the use of reason for it to be good or useful.

It is important to stress that rationality (in the context of making a decision) involves the use of all my knowledge to the best of my ability. In particular, this includes knowledge of the time available, the relevance of prior experience and any known gaps in knowledge. It is this last aspect of rationality – the use of known gaps in knowledge – that is the motivation for the field of probability. Probability is about quantifying uncertainty by making use of all known information and postulating equal likelihood where no information is available. The consistent use of the equal likelihood postulate is at the heart of probability theory and it is what gives probability its precise mathematical characteristics. In modeling an outcome for an uncertain event, I start with a uniform distribution (every outcome is equally likely) and use available information to transform it into a more appropriate distribution. The parameters of the transformation represent a quantitative use of known information. The shape of the final distribution represent a qualitative use of the known information.

With this brief treatment of probability, I can now address the obvious fact that the use of reason cannot guarantee correct decisions. Consider an example. I have historical data for the exchange rate between a pair of currencies. I also have market quoted prices for various financial instruments involving the currency pair. To model the exchange rate at some future time with a probability distribution, I can use the historical data to establish the shape of the distribution and the market quoted prices to obtain the parameters of the distribution. If I had more information (say a model for other parameters that affect the exchange rate), I could incorporate that too. A decision based on such a model would be a rational decision. On the other hand, I could say that since the model does not guarantee success, I will simply use a uniform distribution (Ouch!! That is not even possible since the range for the exchange rate is unbounded. Let me simply restrict the range to an intuitive upper bound) with the arguement that the uniform distribution might actually turn out to be better. Yes, it might turn out to be better, but the arguement that it should be used is still invalid (Consequentialism is invalid and I am not going to argue this). Not all decisions can be formulated with precise mathematics like this, but the principle is the same. It is always better to use all my knowledge to the best of my ability.

Another aspect of the original discussion remains unaddressed – the claim that rationality is subjective. Since this post has already got long enough, I will just stress here that there is a difference between context-dependent and subjective.

To setup a shop (or pretty much anything) in India, one needs to acquire a license (or registration or whatever). As far as I know, these licenses have never been auctioned. Assuming a very modest figure of Rs 1 lac per shop license auctioned, and just half a million shops who could have paid this modest sum, that works out to a loss of 5000 crores.

Over 750,000 two wheelers were sold in India last year. Each of those had to be registered. These registrations could have been limited (with the added benefit of reducing road congestion and pollution) – say to 500,000 – and auctioned to raise revenue. Assuming a modest amount of an extra Rs 10000 per registration, that works out to a loss of 500 crores. Similar losses could be worked out for sales of other vehicles. Let us say the total loss on all vehicles is 2000 crores. Further the government could have made it mandatory to renew vehicle registrations every year (as a security measure). These renewals could also be auctioned (to reduce the incentive to keep using old vehicles, thus reducing pollution). Assuming a very small amount of Rs 1000 on average per vehicle registration and estimating the number of vehicle owners who would pay this amount at 20 million, the total loss works out to another 2000 crores.

The cricket world cup is coming up. The right to use cricket as a theme for advertisements could be restricted and auctioned. Just imagine the loss! Easily another few thousand crores.

Tens of thousands of people migrate into cities from rural areas or smaller cities and towns. Since these people obviously cannot afford to buy houses, they stay on rent (if not in illegal slums). The right to rent space could be auctioned (with the added benefit of reducing overcrowding of the cities). Another few thousand crores lost.

Enough of examples. Let me generalize. Any activity that results in any value to anyone could be restricted by the government and the rights to it could be auctioned, thus generating additional revenues. Assuming just 1% of GDP as the revenue that the government could have generated by auctioning rights to economic activity, that amounts to a loss of 70,000 crores per year. Aren’t auctions wonderful? They have such immense potential to generate revenue. Sadly, this incredible idea is woefully under-used by policy makers. And no one is complaining about this scam!

Enough of sarcasm! Suppose the license rights had been auctioned. Who would have paid the money? The telecom companies who would have had to remain in business by lowering their costs - paying lower salaries to their staff or by hiring less, increasing the prices for their services and by reducing their profits. Ultimately, it is the “common man” – that mythical creature worshipped by all policy makers – who would have paid for the license rights. And where would the money have gone? Ah it would have gone to the same place where government money usually goes – but really, that is rude of me. I should not dare to ask such questions. Of course it would have gone into welfare schemes for the common man - the NREGA (remember the pictures of smiling villagers carrying a couple kgs of mud on their heads?), the minimum support price for various foodgrains (wasn’t there a recent report about grains rotting in government godowns? never mind), the public distribution system (absolutely necessary since minimum support prices cause inflation), the right to be educated (in a school where teachers never turn up, but that’s OK, the children can atleast have fun) etc. These are all noble ideas with proven track records. They must be implemented at all costs. You see, the “common man” is too stupid to know what he should do with his own money. That money should be taken away from him – by means of taxes on all consumption, license fees on every service that he uses etc, etc. A portion of it should be used to subsidize higher education (after all, the bureaucrats and policy makers need to be educated, don’t they?). Another portion should be used to establish various government agencies (like the agency which calculated the loss to the exchequer in the 2G scam). Another portion should be used to fund events such as the Commonwealth Games (it is a matter of national prestige after all). Another portion should be allocated to muncipal agencies and the like (like the one that digs up the road in front of my house every 3 weeks). Another portion should be used to line the pockets of the entire government machinery (people are corrupt and selfish, what to do?). Another portion should be used to create TV and other media advertisements for welfare schemes. And then, whatever is left (if any) may be returned back to the common man who should be grateful and beholden to the government for thinking of his welfare. Where would he be if he were left to the mercies of the free market? Oh no. That is just unimaginable. He would simply be exploited by the capitalists and left without a home, education and health care if he had full control over all his money. Just imagine!

Oh, did I get back to sarcasm after starting the last para with “Enough of sarcasm!”. Sorry about that. The real scam here is much, much larger than a few thousand crores. It has been in operation for decades (centuries?). And it is primarily a moral scam, not a monetary one. It is perpetuated by people who seek to derive their self esteem second hand – not from their personal achievements but from a claim to altruism (however tenuous), not from producing value but from distributing the value they have not produced. People like Raja are not responsible for the scam. People who support the system that makes Raja inevitable are.