Tuesday, November 4, 2014

Four books and one film to understand the world

Money, Coordination and Prices (1998)
Fieke van der Lecq

Van der Lecq asks the question 'Why does money exist?' After an extensive review of the many approaches to understanding money, she ultimately argues that the very reason for money may be the same reason that there is often little incentive to change nominal prices. Money provides a broad look at the role of norms, conventions and institutions in coordination - the macro-foundations of micro behaviour, if you will. The point is made clear when she looks at the necessity of meta-assumption in  game theory, the meta-assumptions in game theory that we ignore but are the key reasons there is so little practical application, and so on. It is probably a book for those with a fair bit of economics training.

One stand out section for me was the way coordination requires clues about the behaviour of others. In game theory it is merely assumed, almost always without question, that there is a common knowledge of instrumental rationality. What that assumption is also rational is never quite made clear. But in any case, the way Van der Lecq describes the role of 'focus points', or clues we use to infer the likely behaviour of others. She quotes Schelling
People can often concert their intentions or expectation with others if each knows the other is trying to do the same. Most situations (...) provide some clue for coordinating behavior, some focal point for each person's expectation of what the other expects him to be expected to do (Schelling 1960, p57)
To be the approach in this book to money sits very cleanly with Erving Goffman's approach to coordination, in that we present ourselves in particular ways in different circumstances in order to present the necessary signals for coordination. While I don't have a separate entry for his book The Presentation of Self in Everyday Life, I highly recommend it.

Moral Tribes: Emotion, Reason and the Gap Between Us and Them (2013)
Joshua Greene

A brilliant look at what morality is, how people respond differently to seemingly different framing of the same utilitarian dilemma (mostly centred on the trolley problem). The big message from this book for me is summarised in the passage below.
Morality evolved to enable cooperation, but this conclusion comes with an important caveat. Biologically speaking, humans were designed for cooperation, but only with some people. Our moral brains evolved for cooperation within groups, and perhaps only within the context of personal relationships. Out moral brains did not evolve for cooperation between groups (at least not all groups). How do we know this? Because universal cooperation is inconsistent with the principles of natural selection. I wish it were otherwise, but there's no escaping this conclusion

Economic Indeterminacy (2013)
Yanis Varoufakis

A terrific book focussing on the rather technical aspects of game theory and the hidden assumptions that no one wants to talk about. The big message for me was that all economists, when they truly dig down into the depths of their theory, hit a wall of indeterminacy. Most then do the dance of the meta-axioms to step back from the wall with additional hidden assumptions. To make a career you must continue to dance away from that wall - confronting it casts you as an outsider.

Another important piece in Varoufakis's work is the nature of human conflict, and how it can fit into the picture of rationality. Put simply it can't. And that the puzzle that led Varoufakis down the garden path.

The following passages are insightful.

…young graduates, who spent countless months and years mastering this analysis, they will, indeed, require an heroic disposition to ‘come clean’; to admit that all this investment has led them to the conclusion that conflict is … indeterminate. Those of them who do say this courageously will never get tenure, as their papers will remain unpublished – their models will not have achieved the requisite ‘closure’. And those who maintain silence of the faulty foundations of their analysis, continuing to produce models of greater complexity along the same lines (and on the basis of the same denial of indeterminacy’s actual hold), will become the new blood that keeps neoclassicism fresh and forever dominant within the economics departments of the best universities. 
In this sense, economists do not mind it when other social scientists disparage their model of men and women as unrealistic, as unrepresentative of how people actually think and act, even as downright misleading about the people around us. Their defence is simple: while homo economicus, the instrumentally hyper-rational ideal type, may not exist, it is an excellent benchmark against which to ‘measure’ the rationality of living and breathing humans and, moreover, it represents a very helpful model of the type of behaviour toward which real humans tend the greater their immersion in market competition.   
And when critics of the economists’ theories point out systematic differences between actual behaviour (e.g. in the laboratory) and the behaviour economists predict, the latter resort to the explanation that these differences are the result of the fact that people are not as rational as they, the economists, assume. That if they were truly rational, economic theory would predict perfectly their behaviour. Thus, economists interpret the chasm between observed human behaviour and the behaviour their models predict as a reflection of the divergence between actual and ideal human rationality.

Debt: The first 5000 years (2011)
David Graeber

There are hundreds of reviews of Debt online. This is not a review, but merely a recommendation. The book is long and wonders a little, but you will be rewarded by reading with an open mind. Debt focuses on recasting the nature of financial debt as fundamentally a human relationship - something we all too quickly forget when discussing the modern world of high finance (or should I say modern world of relationships). The following passages make this ‘relationship calculation’ role of debt and money quite clear.
Freuchen tells how one day, after coming home hungry from an unsuccessful walrus-hunting expedition, he found one of the successful hunters dropping off several hundred pounds of meat. He thanked him profusely. The man objected indignantly: 
"Up in our country we are human!" said the hunter. "And since we are human we help each other. We don't like to hear anybody say thanks for that. What I get today you may get tomorrow. Up here we say that by gifts one makes slaves and by whips one makes dogs. 
... The refusal to calculate credits and debits can be found throughout the anthropological literature on egalitarian hunting societies. Rather than seeing himself as human because he could make economic calculations, the hunter insisted that being truly human meant refusing to make such calculations, refusing to measure or remember who had given what to whom, for the precise reason that doing so would inevitably create a world where we began "comparing power with power, measuring, calculating" and reducing each other to slaves or dogs through debt. 
It's not that he, like untold millions of similar egalitarian spirits throughout history, was unaware that humans have a propensity to calculate. If he wasn't aware of it, he could not have said what he did. Of course we have a propensity to calculate. We have all sorts of propensities. In any real-life situation, we have propensities that drive us in several different contradictory directions simultaneously. No one is more real than any other. The real question is which we take as the foundation of our humanity, and therefore, make the basis of our civilization.
Here is another
This is a great trap of the twentieth century: on one side is the logic of the market, where we like to imagine we all start out as individuals who don't owe each other anything. On the other is the logic of the state, where we all begin with a debt we can never truly pay. We are constantly told that they are opposites, and that between them they contain the only real human possibilities. But it's a false dichotomy. States created markets. Markets require states. Neither could continue without the other, at least, in anything like the forms we would rec­ognize today.

The Fog of War (2003)
Errol Morris

Lastly, a documentary that really opened my mind to recent US war history - The Fog of War. It is based on the life of Robert Strange McNamara, and centred on a lengthly interview of him at age 85 reflecting on the nature of war. McNamara was the US Secretary of Defence from 1961-1968, following a period as the President of the Ford Motor Company, and overall was a very influential decision maker in key aspects of US military actions. It is a little scary the way he explains just how close the US was to other wars, including the invasion of Cuba, and how often mistakes are made that cost the lives of millions.

The whole film is on YouTube here, and below is the trailer. It is worth your time.



  1. ""Up in our country we are human!" said the hunter. "And since we are human we help each other. We don't like to hear anybody say thanks for that. What I get today you may get tomorrow. Up here we say that by gifts one makes slaves and by whips one makes dogs"

    couldn't agree more

  2. "Because universal cooperation is inconsistent with the principles of natural selection. I wish it were otherwise, but there's no escaping this conclusion." This is part of the big message?! How quaint that there are thinking people who don't seem to realise that humans, thanks to Darwin et al, are a post-evolutionary species that is no longer subject to natural selection. But even pre-Darwin it was only universal cooperation i.e. both within and across tribal groups that made us puny hairless apes the numerous uno species on this planet, IOW a classic case of natural selection.

  3. The common assertion that markets require the state (repeated by Graeber) seems to be directly contradicted by the many historical examples of functional markets that have existed without the state… or indeed, existed and exist despite the state actively trying to shut them down.

    The evolution of secret North Korean black markets is the example I was reading about today, but you can find other examples in all corners of the world through all times in history. Markets in online anarchy (e.g. Silk Road) have been booming; I wrote recently about markets in scooters in Cambodia which rely entirely on non-state protection systems; nearly everybody knows somebody who has bought weed on the black market; the history of Zomia (highland s/e Asia) provides thousands of years of markets with no (or a weak) state; anarchist Iceland survived for 400 years; people like to be 3edgy5me about Somaliland but they had functional markets for decades without government (often better than in nearby Eritrea); the factional TV drama of "Deadwood" is based on the true story of a town in "wild west" America that existed outside the state; and there are many other examples.

    I can understand if somebody was arguing that non-state markets are inefficient. Perhaps. But to deny they exist seems to be hope over reality. Black markets exist.

    It is worth noting that Graeber desperately wants to believe that markets are created by the state because he is an AnCom who wants no state and no markets. If markets could exist without the state his world view would collapse… and he would either have to tolerate markets (giving up his communism) or accept the existence of a state to try and repress the markets (giving up his anarchy).

    Obviously he doesn't want to do either, so he simply asserts that black markets and anarchist markets cannot exist. I've heard the same prayer hundreds of times from other AnComs and LibSocs (and less radical people also) but it's just not true.

    1. Muppet, I'm not really sure you've thought through your argument. You seem to be saying there are state-sanctioned markets (and currency), but also those "which rely entirely on non-state protection systems".

      Okay, sure. Besides the labelling, what is fundamentally different about the protection system of government, and say, the protection system of the mafia? Nothing. They are both 'states' in some form - they monopolise power to dictate the social order and facilitate trade under a particular set of conditions.

      You seem to be fixated on the 'nation-state' image of a social order as being the only thing that qualifies as a state. But ANY system of order serves the same function, facilitating trade (not necessarily markets as we imagine them) and specialisation etc. Any tribal society has some kind of 'state' system that maintains order, whether it rely on witch doctors and virgin sacrifices and spears in the leg as punishment.

      I can't comment on what Gabber thinks generally.

    2. The difference between private and government provision of a service (in this case, security) can be measured in a few different ways, but that's not relevant to the point at hand.

      The point I'm making is simply that you do not need a state to have property and markets. Black markets exist.

      I'm not sure what definition of "state" you are using, but I am using the generally accepted concept of "an organisation with a geographical monopoly on the initiation of involuntary force". This is also how Graeber (and other anarchists, and most political philosophers) use the word.

      The important thing to remember is that "state" does not mean "governance". As you correctly say, there are many different possible systems of order. That is my point. You can have systems of order without a "state" and it is possible to provide security without a state.

      For example, in the example I recently wrote about in Cambodia, the security for motorbikes is provided by a few guys sitting on the side of the road promising to look after your bike. In the case of silk road and TOR, security comes mainly through reputation effects, anonymity, and trusted third parties. In the case of Zomia, security came mostly through the threat of exclusion and social pressure. There are plenty of other examples if you want to jump down the rabbit hole of anarchist theory and history.

      If you use the word "state" to define any system of order (whether voluntary or not), then we simply have a semantic disagreement. But that is not what Graeber meant when he said markets require a state, and I was responding to his argument.

      Amusingly, if you define "state" to include any system of order, then you have defined anarchists out of existence and libertarians are defenders of massive statism. Damn Wittgenstein strikes again.

  4. I haven't read Graeber's book, so I can't make any statements. And perhaps the "generous hunter" example wasn't typical or even the best one, but I don't think from the hunter's speech one can conclude that people are generally egalitarian or cooperative.

    Say, this is what the hunter said:

    "Up in our country we are human!" said the hunter. "And since we are human we help each other. We don't like to hear anybody say thanks for that. What I get today you may get tomorrow. Up here we say that by gifts one makes slaves and by whips one makes dogs."

    By INSISTING on giving Freuchen a gift, isn't the hunter making him a slave?