Selfishness goes only so far, we also like a fair system

Ross Gittins finds that Selfishness goes only so far, we also like a fair system.

In the minds of many people - including many economists - capitalist economies are powered by selfishness. No, not quite.

The father of economics, Adam Smith, seemed to establish that proposition in 1776 in a famous quote from his book, The Wealth Of Nations: "It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest."

But Smith's views are rather more complicated than that. In the book he wrote 17 years earlier, The Theory Of Moral Sentiments, he observed that "how selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortunes of others, and render their happiness necessary to him, though he derives nothing from it, except the pleasure of seeing it".

Emphasis Mine

He concludes:

Why have humans evolved in a way that makes them worry about the welfare of the group rather than just themselves and their close relations? Probably because groups with pro-social norms outcompete groups that are deficient in this respect.

It's not surprising that the great religions - Judaism, Christianity, Buddhism, Islam, Hinduism, and so forth - stress the pro-social norms such as helping your neighbour, giving each his due and turning the other cheek.

These research conclusions have implications for government policy. Economists, convinced of people's simple selfishness, usually propose to deal with antisocial behaviour by raising the material cost of that behaviour. Increase the penalty if you're caught and increase the chance of being caught.

But this research suggests a principal purpose of publicly proclaimed laws and regulations is to stigmatise anti-social behaviour and thereby influence people's values and codes of behaviour.

To put it more positively, the authors say that "effective policies are those that support socially valued outcomes not only by harnessing selfish motives to socially valued ends, but also by evoking, cultivating and empowering public-spirited motives".

Emphasis Mine

In other words, humans survived by being cooperative rather than competitive.

It looks possible for a Communist society to enforce social norms by means other than force.

Read more!

You weren't Meant to Have a Boss

Yves Smith linked to You weren't Meant to Have a Boss. The gist is that people were not meant to work in large groups. The author has a bias towards small start-up companies for computer programmers. I think the author has misread the growth of large organisations.

...

What's so unnatural about working for a big company? The root of the problem is that humans weren't meant to work in such large groups.

Another thing you notice when you see animals in the wild is that each species thrives in groups of a certain size. A herd of impalas might have 100 adults; baboons maybe 20; lions rarely 10. Humans also seem designed to work in groups, and what I've read about hunter-gatherers accords with research on organizations and my own experience to suggest roughly what the ideal size is: groups of 8 work well; by 20 they're getting hard to manage; and a group of 50 is really unwieldy.

Whatever the upper limit is, we are clearly not meant to work in groups of several hundred. And yet—for reasons having more to do with technology than human nature—a great many people work for companies with hundreds or thousands of employees.

Companies know groups that large wouldn't work, so they divide themselves into units small enough to work together. But to coordinate these they have to introduce something new: bosses.

Emphasis Mine

And yet, these large organisatiosn work reasonably well. They are stable over a long time - some organisations lasting more a century.

The size of the organisation should depend on the size of the task at hand. For example, a farm would have required a dozen people to operate efficiently a century ago, but, today, a single person can operate a larger farm more effectively.

The degree of automation means that smaller organisations can now attempt to do what a large organisation would have been required with a manual division of labour.

Decision making requires someone to make a decision. This can be a person (e.g. a boss) or a committee or everyone. The quickness of decisions depends on the number of people involved.

Read more!

Rachel Corrie's Case For Justice

Five (5) years later, Rachel Corrie's Case For Justice is still compelling.

This week, the Corries come to Israel to attend the first Arabic-language performance of the acclaimed one-woman play, My Name is Rachel Corrie. ...

...

Moreover, this month has seen the release of Let Me Stand Alone: The Journals of Rachel Corrie, a major publication by Norton. Here, as in the play, Rachel becomes more than a political symbol. As Cindy explains, "Sometimes she is demonized; sometimes she is lionized, but it makes it more possible for her to have more impact if people see her as human." The sustained beauty of Rachel's writings and sketches, and her incisive observations into personal and global relationships, from 10 years old into young adulthood, expose a young woman who is deeply caring, creative, quirky, wise beyond her years, anything but naive. "People accuse Rachel of being naive, which of course she wasn't," says Craig. "Though she may have been naive about US pressure on Israel." Up to the day of her death, Rachel worked tirelessly, building relationships with Palestinians and Israeli activists, engaging in direct action, and strategizing on the grassroots level to stop the "massive destruction of civilian homes" in Rafah. In a press release from March 2003, she writes, "We can only imagine what it is like for Palestinians living here, most of them already once-or-twice refugees, for whom this is not a nightmare, but a continuous reality from which international privilege cannot protect them, and from which they have no economic means to escape."

Today, the Corries share Rachel's sense of urgency, even as they point to the hypocrisy of the US government, the world's superpower, claiming impotence and abdicating responsibility in Rachel's case, and in the case for Palestinian justice. As Craig says, "We have the luxury to sit around and discuss all of this, yet we feel the growing impatience. We want to drive home Rachel's message that we have a responsibility to act."

Emphasis Mine

We should never forget what the bastards are capable of. Rachel's mistake was to think that there was a human being driving the bulldozer. Instead, there was a desensitised person who had been brainwashed into not seeing Arabs as human beings, and consequently, killing Rachel was not murder - only a day's work.

Read more!

Flip

Peter Sheahan's book, Flip lists four (4) forces of change (p.14)

1. Compression of Time and Space (p.15)
2. Increasing Complexity (p.20)
3. Increasing Transperency and Accountability (p.27)
4. Increasing Expectations (p.31)

1. Compression of Time and Space

For Communists, the compression of time means that decision-making is forced down the command hierarchy. This is good because workers are exposed to decision-making more and more.

The compression of space means that workers have to consider the international outlook. Unfortunately, workers could take the racist approach and retreat into nationalism. But successful workers will be those who can work across cultures to achieve a common purpose at an enterprise. For Communists, we can use this to educate workers about the value of internationalism.

2. Increasing Complexity

This is the most serious challenge to the command and control management structure. This is under increasing stress and is most likely to break first. If and when this happens, this would give Communists some latitude in developing worker confidence.

3. Increasing Transperency and Accountability

This follows from the compression of time and complexity. Communications have to be opened up within organisations with management sharing more information with workers. Communists should use this opening to develop their decision-making and self-management skills, and thereby increase their confidence in their own abilities.

4. Increasing Expectations

This is mainly about luxuries now becoming necessities. However with the looming economic crisis in the US, this may no longer be relevant.

Action Precedes Clarity

To confront these forces of change, Sheahan, among things, proposes that Action Precedes Clarity (pp.271-318). This is where we follow a trajectory by trying various things without having a detailed plan. This chapter should be read by those Communists who hunger for the perfect Party Programme.

Instead, we have a vague vision of a Communist society and must evaluate our actions in achieving that goal. Sometimes, actions may seem silly but the idea is to keep moving forward in the chosen direction.

Read more!

The seven habits of spectacularly unsuccessful executives

From On Bear Stearns, the Democratic Primary, and Other Avoidable Disasters by Bill Taylor, I picked up The seven habits of spectacularly unsuccessful executives by Sydney Finkelstein (PDF). As Taylor says:

And please keep in mind Professor Finkelstein’s most basic conclusion: “Extreme success is a warning sign of failure.”

I examine these criteria in terms of Communist Parties.

Habit # 1: They see themselves and their companies as dominating their environment.

Warning Sign: A lack of respect

Not a problem currently in Australia.

Habit #2: They identify so completely with the company that there is no clear boundary between their personal interests and their corporation's interests.

Warning Sign: A question of character

Think of Tommy Sheridan and the SSP.

Habit #3: They think they have all the answers.

Warning Sign: A leader without followers.

Definitely a problem with most of the micro-parties in Australia.

Habit #4: They ruthlessly eliminate anyone who isn't completely behind them.

Warning Sign: Executive departures.

Stalinism running riot.

Habit #5: They are consummate spokespersons, obsessed with the company image.

Warning Sign: Blatant attention-seeking.

Not currently a problem.

Habit #6: They underestimate obstacles.

Warning Sign: Excessive hype.

We have the opposite problem currently.

Habit #7: They stubbornly rely on what worked for them in the past.

Warning Sign: Constantly referring to what worked in the past.

Will always be a problem for us.

Read more!

Blogrolling 4

Did another rolling through the blogs:

1. Cell Phone Need is about various models of mobile phones.
2. Horsekaer is photoblog of a trip through Ireland (Non-English) - both the blog and Ireland are non-English.
3. love sms could be a commercial blog from New Dehli, India.
4. Lerares Chinees in Nederland appears to a Chinese/Dutch blog with various translation exercises
5. Alam Setia's photoblog is from India. Some colourful photos.
Here the link was broken.
6. Reach Out for the Stars is a school-girl's blog in English.
Here the link was broken.
7. Journey To The Top is a non-English blog.
8. Triathlon Team & Lauf AG der HSU Hamburg is a German blog about Triathletes.
9. It's my World is a blog from the UK. Apparently, she is pregnant.
10. Lucas is child blog in Spanish.
11. Read my mind is a photoblog about school students.
12. Oonaemilia is another child blog. (Non-English)
13. Urrutia Productions has videos and photgraphs about water-polo. (Non-English).
14. Love Parade is a commercial blog offering various items of female attire.
15. lui Ghenadie is a professional photographer's blog. Some quite interesting photographs. (Non-English)
16. maelstrom 2.0 is a strange blog. (Non-English)
17. Wonderful World is a librarian's photoblog.
En Circorama is primarily a photoblog of an Italian Circus with video and audio clips. (Non-English)
18. La Serenata Chilena is a photoblog of a trip though Chile.
19. Mirtha Bermegui Buenos Aires is a photoblog of her artwork.
20. michvanetta is a crafts blog for jewelry from Australia.
21. arka sokaklar is a non-English blog of one (1) post.
22. Swiss is a blog in English about a Swiss holiday by a Russian.
23. Back to Mirtha Bermegui Buenos Aires. I decided to stop there.

Read more!

The Shock Doctrine

Noami Klein proposes that neo-liberalism advances its agenda via The Shock Doctrine: The Rise of Disaster Capitalism. Her thesis is that a real or perceived shock to a society enables unpopular changes to be forced through whether the changes are relevant to the problem or not.

I think Klein misses a very important application of the Shock Doctrine at the enterprise level. This occurs whenever a reorganisation occurs and there are redundancies.

People are disorientated, and they are susceptible to whatever hocus-pocus management consultants come up with to justify working harder and longer at soul-destroying jobs.

The current mantra is that change is inevitable. That is like saying pain is inevitable in a prison.

Workers are captive to the employment contract. As long as the current system persists, sadistic managers will continue to inflict pain on their employees.

But as Klein points out, shock wears off, and memory returns. The problem is what happens then?

Read more!

Character and Capitalism

Yves Smith worries about "Character and Capitalism".

Steve Waldman is on a roll. He has an excellent piece today arguing that despite contemporary notions otherwise, capitalism and character (meaning moral fiber) have not and need not be contradictory.

Although Waldman makes a good case, the barriers to the return of character in commerce are more profound than he lets on.

...

... Waldman meant character in a narrower Victorian sense, as being a person of one's word. But even then, the drive to efficiency that has become pervasive in American businesses has made it well-nigh impossible for that to be operative. The reliance on FICO scores in place of more nuanced credit decisions is merely the logical result of processes that have been in play for many years.

...

So why, when we have had a resounding failure of impersonal methods of assessment, am I pessimistic about the revival of interest in character? Because it appears our society is unwilling to go back on the false economy of preferring anonymous, rule-based approaches. These methods do broaden the market of possible counterparties, which is seen an entirely beneficial, when there are hidden costs in having only superficial proxies about the people you interact with. If anything, I see ample evidence this attitude is becoming more pervasive.

Emphasis Mine

What Smith is describing is the alienation of the service provider due to the conversion of services into commodities.

In the example given by Waldman, J.P.Morgan was personally involved in the credit process. It was his money and he was evaluating the customer because he knew him from other parts of his life.

Now we have workers lending other people's money to complete strangers. There is very little personal involvement in the credit evaluation. If the loan goes bad, someone else gets involved in the collection process.

Read more!

Financial system must tap the taxpayer

Yves Smith is very concerned about the idea that the "Financial system must tap the taxpayer".

Krishna Guha in the Financial Times argues that US banks need new equity ASAP to prevent the operation of a "financial accelerator," which is basically, just as leverage feeds on itself, so to does deleveraging: falls in prices lead to margin calls, which lead to forced selling, which lead to more margin calls. We now have the institutional version of that phenomenon, which is that asset price falls lead to mark to market losses, which for banks holding similar assets on their balance sheets, generates an equal markdown of equity, which leads to deleveraging, further depressing asset prices.

Guha argues that private sources probably won't step forward to provide the needed equity; therefore the government must, otherwise it will resort to monetary stimulus, which given the already worrisome uptick in inflation, isn't such a hot idea.

Emphasis Mine

Smith would rather guarantee the customers through FIDC, but is against the bail-outs because of the moral hazard. Smith concludes:

Conversely, as Gillian Tett has argued (and I think she is correct here) there is money sitting on the sidelines that would come in and make investments, including recapitalizing banks, once investors had confidence that the bottom had been reached. Thus flushing out the losses is a vital to returning to some semblance of normalcy.

John Dizard has suggested the use of regulatory forbearance, which is code for letting the firms operate in some sanctioned manner with less than the normally required levels of equity (presumably with much closer oversight).

Emphasis Mine

Smith misses the point that the State exists to protect the interests of the ruling class. At this point in time, the ruling class is in real danger of losing its capital. Therefore, the State must act to safe-guard that capital by absorbing the losses through some sort of compensation.

The moral hazard only applies to those who are not in the ruling class. The longer we tolerate this sort of behaviour by the ruling class, the more we will get screwed.

Read more!