Contradictory ideas

I recently had a couple of meetings with a senior banker. In the first meeting, during some light talk, he mentioned his support for a signature campaign for the stricter implementation of the PCPNDT act (which bans sex determination tests). In the second meeting, he mentioned how certain regulations recently imposed by the Reserve Bank of India are so oppressive that his bank can either comply with them fully or serve its customers well but not both. Presumably he does not like the regulations and wants them removed.

Both the PCPNDT act and the banking regulations are a violation of the right of individuals to freely contract with each other. The advocates of both justify them by claiming that they serve the “public good”. But recognizing this involves thinking in terms of principles. That is something that even the most successful businessmen seem incapable of. As another example, just read this piece on the budget in today’s Times of India by Narayan Murthy, the founder of Infosys. He starts off complaining about the fiscal deficit and then goes on to write that all the allocations in the budget are inadequate! Do these people ever bother to think?

Social planning

In a response to a forwarded post, a friend made the following argument (I am putting only its essence and in my own words, since I have not taken permission to make it public)

Market forces can produce outcomes that are worse off for everyone in the system. A social planner can, (in some cases at least) improve on the efficiency of the market. Pigouvian tax is an example.

In his response, he acknowledges that it might be difficult in practice for the social planner to obtain all the information required, but says that it would be very surprising if the social planners actions could never lead to efficiency improvement.

Consider the crux of the argument (emphasized above). There are three aspects to it that should be considered.

1) What are market forces? They are an abstraction that refers to all the judgements made by individuals interacting with each other under some conditions. If one is talking of a free market, these conditions are the absence of any coercion. Note that for the concept of coercion to be clear, a system of property rights (at the very least) needs to be in place (More on this in 3). If one is to prove the statement above (in a mathematical sense, which is what my friend meant), these market forces need to be modeled. This leads to 2.

2) How are choices evaluated? In actuality, every individual evaluates and weighs choices in a unique manner depending on the context of his knowledge, his hierarchy of values etc. This evaluation is neither necessarily rational nor quantitative. Yet if a mathematical result is to be obtained, both the evaluations and the decisions based on these evaluations need to be quantified. The evaluation (sometimes called “utility”) is quantified by assigning a monetary value to every “variable”. The decision making process is quantified by assuming that each individual acts to maximize utility (the sum of the monetary values of the results of all his choices).

3) What is the system? In actuality, the system is the set of laws that determine the kind of interactions that occur among individuals. In the model, this translates to assumptions that certain factors will remain constant over time.

Once these three aspects are modeled, one ends up with a set of equations that can be solved to determine what utility each individual will be able to achieve. The solution represents an outcome. In certain cases, feasible outcomes may exist that are better for each individual. (This usually happens when there are “externalities” which can be considered mathematically as non-linear effects). The most obvious problem with this argument is that it involves a huge number of variables, so man variables that no human (or computer) can solve the set of equations in any meaningful time. That however, is not my argument. My friend already acknowledges this fact and claims (plausibly) that in certain cases, a social planner may find an approximate solution that is still better than the free market one. My arguement is that: The fact that a (mathematically) feasible better solution exists, does not mean that it is possible to achieve in actuality. The reason is that the sort of actions required to achieve the feasible solution change the system (point 3) that was analyzed. In actual terms, such actions necessarily involve violating the property rights of individuals, thus changing the interactions between people, the monetary values they attach to different choices and the strategies they adopt to maximize their values. In plain language, attempts to achieve the “optimum” solution are lost in a host of unintended consequences. The information that says a better solution is feasible exists not with any single individual but with a vast number of individuals. To put that information to use, even if a social planner is able to approximate it, he needs to communicate it to all the people who will need to act on it. But force (and social planning is all about force) is a very destructive way of communicating. Successful communication is done with persuation and persuation is what the free market is all about.

Now consider a much simpler moral argument. Every value that man achieves is a result of using his mind. And the essential requirement for the mind to work is freedom. When man is free to act as his mind instructs him to do and is responsible for the consequences of his actions, his mind works the best. When he is forced to act against the judgement of his mind, his mind becomes passive and he loses the motivation to use his mind (something that never figures in a mathematical model). In the most fundamental sense of the word good, force can never be good for man.

In his response, following my post on propaganda, my friend clarified that what he meant by propaganda was a one-sided presentation of an idea that does not consider all sides of an issue. The moral idea (in the paragraph above) when supplemented with the practical arguments and all the evidence of the past century becomes a fundamental political principle. And there is no other side to the issue left. As I wrote in this post, as long as one is unsure of something and has not integrated ideas into principles, it is good to be circumspect and consider all pros/cons of all sides of an issue. But on issues on which it is possible to have relevant principles, there is only one side. Fundamental principles do not allow any evaluation in shades of gray. Whether I should be free to act on my own judgement or whether I should allow a social planner to force his whims on me or whether I should become a social planner myself is not an issue where I will weigh the pros/cons of the alternatives.

Finally for the sake of completeness, consider the Pigouvian tax/subsidy to correct for externalities. The first point to be noted is that most externalities go away when property rights are properly defined and implemented. And in fact a tax on pollution is actually quite close to what a property-rights solution to the “problem” of pollution would be. As for the subsidy on education, one can just look at the state of subsidised public education in the U.S. to see how it works. Externalities cause problems in model-based economics because they are non linear effects and most models are linear (eg, price = marginal utility) (for the simple reason that non-linear models are untractable). Man’s mind is not a linear device however, and a linear model does it no justice. Just think of the salesman who negotiates a price (= marginal utility?) or the investor who depends on a virtuous cycle where increase in supply creates a non-existant demand to recover his investment.

Laws vs Regulations

Recently Diana Hsieh (of NoodleFood) raised the question “What is the difference between laws and regulations?” Since I consider myself opposed to all regulations but firmly believe that laws are necessary, this is an important question.

Before I get to law or politics, the first thing to note is that the word regulate derives from the word regular as in regular behavior, regular schedules etc. Anything that is regular is easier to understand, easier to predict, easier to work with. Regularity therefore is a desirable state. But it is not desirable in itself. It is not an end. It is desirable because it usually makes the achievement of actual ends easier. Consider an example. Fixed (or regular) office timings make it easier for people to collaborate, to plan their work, to plan their personal lives etc. But there can be any number of good reasons to break the regular schedule. And the decision to adhere to or ignore a regulation is based on a lot of narrow context. Laws on the other hand are inescapable. Consider the laws of logic or the laws of physics for example. They are general principles inherent in the nature of reality. In a legal or political context, laws are the principles that are necessary for men to live together in a society – necessary because of the very nature of man and society. Without laws, society would break down.

Since the role of a government is to preserve men’s rights and since rights only have meaning in a social context, it is the role of a government to establish laws. Since laws are general principles, there can’t be too many laws. Moreover they rarely need to change over time. Unless a fundamental change occurs in the nature of man or of society (it is conceivable that advances in technology might lead to such changes) laws do not need to change. This is the reason for measures such as checks and balances, separation of powers etc.. in good political theory.

Since regulations (a set of rules intended to make things regular) are highly dependent on context (both in their formulation and in their use), a government is completely unsuited to either formulate or enforce them. Regulations are best created and enforced by the particular set of individuals who need them. More importantly, when a government enforces regulations, it necessarily violates the rights of men to judge what is in their best interests.

Finally, there were some comments on Diana’s post to the effect that “Once Congress passes a law, agencies must write regulations to put the law into effect”. This is a badly wrong idea. It is like saying that the laws of physics are implemented by using rules of thumb. What is needed to put a law into effect is an interpretation of the law to specific cases. That role belongs to the judiciary, not to the executive.


Via Bill Brown at The New Clarion, I came across this piece by David Brooks. The piece begins with

You wouldn’t know it some days, but there are moderates in this country — moderate conservatives, moderate liberals, just plain moderates. We sympathize with a lot of the things that President Obama is trying to do. We like his investments in education and energy innovation. We support health care reform that expands coverage while reducing costs.

Investments with whose money and whose judgement? But those are not questions that would occur to Brooks. He is after all a self confessed collectivist. He does voice some objections to the massive spending that Obama’s budget entails.

The U.S. has never been a society riven by class resentment. Yet the Obama budget is predicated on a class divide… The U.S. has always been a decentralized nation, skeptical of top-down planning. Yet, the current administration concentrates enormous power in Washington… [etc etc]

Note the nature of the objections. None of the objections are based on principles. They are merely appeals to tradition. And yet Brooks writes

We moderates are going to have to assert ourselves. We’re going to have to take a centrist tendency that has been politically feckless and intellectually vapid and turn it into an influential force.

The centrist tendency has been “politically feckless” and “intellectually vapid” because that is its essential nature. Moderation in politics is not the same thing as moderation in eating or spending or drinking. Political ideas – all ideas for that matter – are true or false. And once one has sufficient evidence to judge which of the two a particular idea is, moderation is just a euphemism for lack of courage and anti-intellectualism. While it is a virtue to have an active mind that constantly evaluates new evidence, adopting an anti-intellectual stance that treats every issue as perpetually open, regardless of evidence, is not. Moderates like Brooks necessarily have to appeal to tradition if they are to hold any position at all, a tradition set by people who were not moderates. Brooks’ centrist tendency is suffering from too much moderation.

The scope of morality

In my last post I wrote:

Only political ideals can be judged morally. The construction of a political system is a matter of science (political, legal etc…), not of morality. For example, whether to have a presidential system, or a parliamentary system; whether the tenure of elected representatives should be 4 years or 10 years; whether copyrights should be granted for 20 years or 50 years; whether the minimum voting age should be 18 years or 21 years; etc.. are not moral questions.

Is such a distinction – moral vs “scientific” (for lack of a better word to describe judgement that is not moral) – valid? What is it that makes a particular question, a moral question? What is the use of making such a distinction?

Consider some examples of what I would regard as moral questions:

  1. Should I have definite goals (short term and/or long term) or just live life as it comes?
  2. Should I choose my own happiness or other people’s happiness as the purpose of my life?
  3. I do not approve of something my friend did. Should I voice my disapproval?
  4. A guest forgot something at my house. Should I return it?

Consider some examples of what I would regard as “scientific” questions:

  1. Should I buy a new computer next week or next year?
  2. Should I use Windows or Linux?
  3. Should I rent an apartment or buy one?
  4. Should I buy a newspaper or use the internet?

There is nothing about the questions themselves to justify a distinction. Both kinds of questions are about choice, both can be answered objectively – with reference to facts as one sees them, both can be easy or difficult to answer, both require the same method to reach an answer – analyze the relevant facts and make a value judgement. And yet it is quite clear to me that there is a distinction. What is it?

The distinction is in my understanding. As I integrate facts, I form certain principles to help me form my value judgements. As I observe newer facts, I validate these principles and identify contexts within which they apply. If a particular question can be answered by the direct application of a principle I have already validated, I regard that question as a moral question. This means that when I classify a particular question as a moral question, I already have an answer to it and I am certain of my answer. However, if the context implied in a particular question is extremely narrow, I will not have any single principle which I can use to answer the question directly (because I only form or retain principles which apply to broad contexts as a matter of economy). I would regard such a question to be a “scientific” question. By analyzing the relevant facts, I might eventually reach an answer to such a question. I might also be certain of my answer. But that certainty is not relevant to the distinction. The question remains a “scientific” question until I formulate the answer directly in the form of a principle.

This distinction applies even if the principles I have accepted are not based on a complete rational understanding, but are accepted unquestioningly from the culture or from faith. As long as I accept a principle, I will regard any question that is directly answered by it as a moral question. As my understanding improves, it is possible that a question that was once a “scientific” question (for me) will become a moral question. Also, should I discover that some principle that I had previously accepted is incorrect, a question that was once a moral question will become a “scientific” question. A moralist (someone who has firm principles about several issues) will regard a lot of questions as moral questions. A pragmatist (who shies away from all principles) will regard most of these questions as “scientific” – to be resolved by trial and error, by an approach of whatever works.

Why is the distinction useful? By considering the questions a particular person regards as moral or scientific, I can understand what principles he accepts or does not accept. If there is a particular question that I regard as moral but he does not, it means that there is some principle which I accept but he doesn’t. If we are to have a constructive debate, the subject of the debate should be the relevant principle and not the particular question. As a case in point, I believe that government bailouts are morally wrong. Someone (and there is no dearth of such people) believes that bailouts are necessary to “save the economy”. Instead of arguing about how a particular bailout will affect the economy, the argument should be about how a bailout is unjust and why injustice can never be practical, with the bailout as a mere example.

This distinction is useful even when I deal with people with whom I share basic principles. When I deal with such a person, I can safely assume that we will agree on moral questions. But we may well disagree on “scientific” questions. The disinction helps me predict where we can expect to agree.

Moral Absolutes

In a comment on my previous post “Terrorism and moral outrage“, wgreen asked

The inward sense of justice is evidence of the existence of moral “absolutes”. How do you justify the existence of such absolutes?

Is an inward sense of justice really evidence of the existence of moral absolutes? Consider the concept ‘justice’. Without any absolute (universal and objective) moral standards, it would be impossible to judge any action (particularly the actions of others). And without such judgement, there could be no such thing as justice. To the extent that a person has a sense of justice, he recognizes the existence of moral absolutes. An inward sense of justice is evidence of a (possibly implicit) belief in the existence of moral absolutes, but in itself, it is not evidence of the existence of moral absolutes. But where does a sense of justice come from? What is the basis for the moral absolutes on which a sense of justice depends?

A sense of justice comes from the constant necessity of judging actions (both one’s own and those of others) to achieve one’s goals. Those actions that further (or appear to further) one’s goals are judged as good. Those actions that hinder one’s goals are judged as bad. The requirements of one’s chosen goals become a personal standard by which actions are judged. This personal standard can be used objectively, since the requirements of any particular goal can be objectively determined. But by itself this standard is not universal. It is only when one projects one’ s own goals on other people (whether consciously or unconsciously) that the personal standard becomes a universal one and gives rise to a sense of justice. Is such a projection proper?

Since man has free choice, he may choose any goal. But the achievement of his goals is not merely a matter of choice. He cannot achieve any goal without meeting its requirements. No matter what his goal is, he cannot achieve it if he is not alive to pursue it. In this sense, his own life is his ultimate goal. Without it, no goals can be achieved. The requirements of his life are a part of the requirements of any goal he may choose. Since the requirements of life are essentially common to all men, the principles required to pursue these requirements successfully are moral absolutes – moral because the principles are guides to action and have to be voluntarily followed, absolute because they are objective and universal.

But what about goals that are not consistent with the requirements of life – goals that can only be achieved with damage to one’s life? It is certainly possible to choose such goals. Indeed, altruism – the dominant moral code today – considers such goals and the sacrifice necessary to achieve them as noble. What does the acceptance of altruism do the idea of moral absolutes? When man’s life was dominated by religion and a concern with the supernatural, it was possible to hold moral absolutes inconsistent with life. Today, when the influence of religion has weakened and men are concerned with their lives on earth, moral absolutes inconsistent with life cannot survive. Since it is impossible to practise altruism consistently – the ‘noblest’ men would become martyrs – an (implicit) acceptance of altruism inevitably leads to a rejection of moral absolutes and a gulf between the moral and the practical. It leads to a culture that believes that the manufacturing of cars requires adherence to absolute principles, but the life of a man (which is far more complex and sensitive) requires none.

As long as man is concerned with his life on earth, he must consider any goal that is inconsistent with the requirements of his life as destructive. He must discover the correct moral principles that are required to lead his life successfully. He must recognize that some of these principles are absolute and others are contextual but all of them are objective – based on his nature and the facts of reality. The resurgence of violent radical religious movements (like Islamic terrorism and Hindu vandalism – both of which bemoan decaying moral values) is evidence that man cannot live without absolute moral principles in perpetual doubt and uncertainty. The decay of moral values is a definite trend and it cannot be addressed by an uninspiring stew of tolerance, moderation, permissiveness and compassion that rejects all moral principles. Reversing that trend requires a discovery and assertion of the absolutism of correct moral principles.

Terrorism and democracy

If The Times of India is to be believed, the mood of the public after the latest terrorist attack is different – it is one of outrage and anger.

…this was one outrage which finally snapped the endurance and infinite generosity of India. In the past, every assault on Mumbai — where, at times, the death toll was higher — had produced a flicker of anger, followed by an astonishing display of fatalism…
The mood is different this week; it is palpably angry…

So a country of men who look to the state to solve their personal problems is outraged that the government they have elected has failed to solve its problems? A country of men who cannot take personal responsibility in social and economic matters is outraged that their government has failed to take collective responsibility in political matters? A country of men which believes in a political system that grants voting rights to men who perpetrate honor killings and communal riots is outraged that their government lacks the moral courage to take appropriate measures?

Jug Suraiya writes

This is why 26/11 is tantamount to a blood-drenched referendum on India: which of the two Indias the world’s largest and most irrepressible democracy, or the world’s most corrupt and cynical mobocracy will emerge from the ordeal?…
It’s referendum time for India. Are we going to remain weak and vulnerable to repeated assault because of our inner divisiveness? Or are we going to beat the bastards, are we going to triumph over terror by surviving it, not on its dehumanising terms but on our own terms of a proudly free society and a strong and cohesive democracy impervious and unsusceptible to the exploitative politics of caste, creed and ethnic division? It’s time to choose.

Indeed it is time to choose. But what are the two choices that Suraiya is writing about. I see only one choice there. Suraiya is calling for a strong, free and cohesive democracy. Sounds good, except for the fact that the meaning of these words will be decided by a vote. And among the voters will be the men who perpetrate and condone honor killings, who kill their new-born daughters, who participate in riots, who indulge in violent strikes and hold cities to ransom. And manipulating these voters and ruling over them will be the men who are best able to play ruthless games of power. And cheering them on and waxing eloquent will be fools like Suraiya who believe that there is some magic in a democratic vote that turns vice into virtue. No, we will not achieve either freedom or security by going down this path. The path of democracy is what we have been following all this while. And this is where it has brought us. Care to see where it will take us next? We will have stronger laws and more teams of trained commandos. And when the next terrorist strike happens, these commandos will be busy raiding a party of teenagers high on drugs or settling some political score in a country that will have turned into a police state.

What is the alternative? It is to develop the moral courage to assert that political principles are not open to a vote, to assert that the right is a matter of fact and not of consensus, to reject a system of government that allows the least scrupulous to grab the most power, to develop a sense of personal responsibility for our problems, to value our lives and freedom enough to reject any interference.

So long as we do not value our own lives and allow our freedom to be chipped away in small pieces – by laws that ban smoking and make helmets mandatory – and large ones – by laws that enforce reservations, ban the setting up of educational institutes for profit, ban people from selling their property on their own terms – we have no cause to be outraged that the government does not value our lives either.

It is time to choose – freedom, responsibility and security or democracy, corruption, paternalism and terrorism. And if we make the wrong choice we will find that the rejection of all principles in a democratic free-for-all does not magically turn into sound politics. The last century saw the collapse of socialist governments under the weight of their flawed principles. Democracies do not have that risk – they have no weight to collapse under. But that will not prevent them from being blown away under the onslaught of Islamic terrorism which does have an ideology, believes in it and is committed to do whatever it takes to establish it.

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