Philosophical Conceptions and Equilibrium Results

Imagine a strategy in an iterated prisoner’s dilemma game called “Pessimistic Tit-for-tat” (PTfT). It is functionally the same as normal Tit-for-tat. The player plays the same move that their opponent played last round. The only difference is that this player plays Defect in the first round instead of Cooperate. If both players play PTfT, they’ll receive the infinite series of (D,D) payoffs. The good news is, if I know that the other player will copy my moves, maintaining defection rarely holds as an equilibrium.

The question stands however, why wouldn’t they start with normal TfT? We might presume that a player who is pessimistic plays PTfT at the outset. They begin with the belief that the other player will play Always Defect (AD). If both players begin with the pessimistic mindset befitting the PTfT strategy then an infinite stream of both defecting is an equilibrium no matter what their discount rate is. Not only that, but given that the players cannot communicate in any way except through the strategies of the game, the stream of (D,D) that both players observe does not refute their initial pessimism. Little does either player know, but if they only took one small leap of faith and played C, just for the heck of it, a window of opportunity and the ability to communicate would open up that could lead both players into each other’s loving arms. 

Robert Hardin describes a similar thought experiment in his 2003 book Indeterminacy and Society. The supposedly unique equilibrium of a finitely repeated prisoner’s dilemma is (AD,AD). The trough equilibrium is due to the ability of both players to backwards induct and anticipate the final round of defection, unraveling any prior possible cooperation. Hardin proposes that in the first round, one player plays Cooperate. By making this simple sacrifice, one player has opened up the window of possibility and no longer given the game a strictly determinate outcome. Interestingly enough, this strategy was exactly what was played in a 100 period prisoner’s dilemma game played by Armen Alchian and John D. Williams as recorded in William Poundstone’s Prisoner’s Dilemma. For the remainder of the game the two economists used the two strategies as both a means of punishment and reward as well as a means of communication.

In his 1898 essay “Philosophical Conceptions and Practical Results”, William James attempts to clarify the pragmatic maxim with an example. 

“The question, is matter the producer of all things, or is a God there too? would, for example, offer a perfectly idle and insignificant alternative if the world were finished and no more of it to come. Many of us, most of us, I think, now feel as if a terrible coldness and deadness would come over the world were we forced to believe that no informing spirit or purpose had to do with it, but it merely accidentally had come. The actually experienced details of fact might be the same on either hypothesis, some sad, some joyous; some rational, some; odd and grotesque but without a God behind them, we think they would have something ghastly, they would tell no genuine story, there would be no speculation in those eyes that they do glare with. With the God, on the other hand, they would grow solid, warm, and altogether full of real significance. But I say that such an alternation of feelings, reasonable enough in a consciousness that is prospective, as ours now is, and whose world is partly yet to come, would be absolutely senseless and irrational in a purely retrospective consciousness summing up a world already past. For such a consciousness, no emotional interest could attach to the alternative. The problem would be purely intellectual; and if unaided matter could, with any scientific plausibility, be shown to cipher out the actual facts, then not the faintest shadow ought to cloud the mind, of regret for the God that by the same ciphering would prove needless and disappear from our belief.…Accordingly, in every genuine metaphysical debate some practical issue, however remote, is really involved. To realize this, revert with me to the question of materialism or theism; and place yourselves this time in the real world we live in, the world that has a future, that is yet uncompleted whilst we speak. In this unfinished world the alternative of materialism or theism? is intensely practical!”

William James “Philosophical Conceptions and Practical Results”

Now think back to the two pessimistic players. It appears that their pessimism leads them into a trap, and that in their debates about what theory more properly describes the past AD or PTfT, there will be endless pedantic debates. But when each player, iteratively choosing a strategy, must decide whether to remain in their pessimism to a predictable conclusion, or to take a momentary leap of faith, the question of what the other player is truly playing remains a lively and interesting question. So appears the game between man and the theories which he imposes upon his surroundings. As James notes, metaphysical debates remain live practical issues as long as there is a future to keep them alive.

The Marriage Model of Economic History

There are two simplistic ways to do economic history. The first is the muddy, materialistic, and miserly (plus Marxist) approach. The second is the airy, heavenly, and idealistic approach. I want to propose a third. 

In the first, all the dependent variables are functions of material incentives. Why did the Industrial Revolution happen? Because property rights were secured, and long-term capital investments became worthwhile. Why is church attendance going down? Cable-TV has provided an ample substitute on Sunday mornings. Why did some Communist revolutions succeed and others fail? The successes occurred when the material interests of enough classes aligned. The basic tools of supply and demand explain the earthquakes and avalanches of human society, in all its peaks and valleys. (Figure 1)

The second approach can’t be expressed as a function, or if it can, it’s non-continuous and non-differentiable. Think of a Dirac-delta function. Why did the Industrial Revolution happen? The heroes of the Enlightenment wrote great tracts on liberty unleashing the spirit of human creativity and flourishing. Why is church attendance going down? The same spirit of Enlightenment has shown the old gods to be obstacles to human advancement. Why did some Communist revolutions succeed and others fail? Because some failed to properly enliven the proletariat with ideas, rhetoric, and revolutionary spirit. Supply and demand may have its place, but the primary agents of change are exogenous ideas. Ideas fall like manna from heaven. They’re a free lunch and we all get a slice. (Figure 2)

Both of these are caricatures, and I don’t believe any serious economist believes them in totum. The materialistic approach runs counter to the lived experience of being a human. Most people are motivated in business, love, and war by ideas. But the idealistic approach also runs counter to life on a material planet. Just as many people are motivated by money, pleasure, and navel-gazing self-interest. Most of life is shoving your meat bag around the planet as efficiently as you can. There’s a tension between both styles of explanation. I want to propose a third approach that hopefully incorporates the insights of both. 

What is the primary actor in biological evolution? Is it the mutations of the DNA, or is it the shape of the environment? Well, the environment, after all, is what “naturally selects”, but without mutations there would be no gas for evolution to get going. One could contend that as long as mutations occur, the environment is actually the final decider waiting for the one mutation that will survive, but why do we have to presume that there is only one potential mutation that the environment will select for? Suppose there are three possible mutations that we can evolve into (A, B, and C). If the environment tells us that B will not survive, then it is still up to the randomness of mutations to decide whether we go for A or C. If the environment selects against people that are five-foot tall, we may evolve into either four-foot tall or six-foot tall creatures. From that point on, the mutations that were chosen in the past create the new environment that selects for future mutations. There are two independent operations, the source that chooses mutations and the choice that selects for them. But when put into action over time, the environment selects the mutations that survive, and the mutations that survive create the environment. This understanding of evolution as a guide to human history is primarily motivated by William James’ essay “Great Men and their Environment”.

How many counterfactual histories depend on questions about individuals? What if Hitler had gone to art school? What if Columbus hadn’t gotten the funding for his voyage? What if Mary told Gabriel no? Individual human lives, ideas, and the spirit that they infuse the world with are like novel mutations on the human soul. But the society of incentives and interests that they’re born into remains ever-powerful. Wycliffe’s reformation didn’t work, but Luther’s did. The Reds beat the Whites on the battlefield and determined the 20th century for Russia. Sometimes the commodities market does matter more than the marketplace for ideas.

Of course, there has to be a seed, but the seed cannot fall on rocky soil or thorny soil or pre-trod path. And after the crops are grown, they’re going to determine which fields are plowed next. But what came first, the seed or the soil? The answer to me is in John 1, but that’s a bit too much to go into right now.

Also:

Beliefs and Institutions. A chicken and an egg problem or are they two sides of the same coin? When somebody says that they are Catholic, does this mean that they are part of an institution or that they hold a set of beliefs? Jesus was the meeting place of heaven and earth, “The Word made flesh”. Institutions are “beliefs made flesh”. Institutions aren’t just necessary for the proliferation of beliefs, they are also the product of beliefs themselves.

Adam Smith’s Guide to Loving Your Country

Image result for Adam smith american flag

Why does a single relatively-unknown football player’s refusal to stand for the National Anthem cause such intense and fiery clashes in the gladiatorial arena known as Twitter? Cries against injustice often back patriotism up against the wall. The Kaepernick Affair acts as a convenient little package of sentiments reflecting a broader tension. Adam Smith in The Theory of Moral Sentiments discusses “the love of our country”.

The love of our country seems, in ordinary cases, to involve in it two different principles; first, a certain respect and reverence for that constitution or forms of government which is actually established; and secondly an earnest desire to render the condition of our fellow-citizens as safe, respectable, and happy as we can.

Adam Smith, The Theory of Moral Sentiments pg. 231

It’s natural to split these two sentiments between conservatives and liberals, Republicans and Democrats, but those words already have too much baggage. I’ll use patriotism for Smith’s first principle and activism for the second. Smith says further:

He is not a citizen who is not disposed to respect the laws and to obey the civil magistrate; and he is certainly not a good citizen who does not wish to promote, by every means in his power, the welfare of the whole of society of his fellow-citizens.

Adam Smith, The Theory of Moral Sentiments pg. 231

Smith explains that these two principles are not necessarily in tension. In a golden age, when the current laws and traditions coincide with the well-being of the majority, we have relative peace and tranquility. The moment that they disjoint, however, “public discontent, faction, and disorder” rear their ugly heads. Smith takes neither the patriotic side nor the activist side. It requires “the highest effort of political wisdom” to determine when to make exceptions to tradition, and when to let their entrenched position grant them the last word. We respect traditions as they preserve wisdom from the experiences of our ancestors. We respect new ideas as they have the chance to correct for past misjudgments.

The passage on love of country precedes Smith’s famous passage about the man of system. He pits the spirit of system against public spirit.  The man of public spirit is able to toe the line between patriotism and activism. A country is one group of people, but it is made up of conflicting interests which must be parsed out and respected. The man of system is the villain of Smith’s story. He believes that what he knows about the political world and the principles he has devised are sufficient to judge political actions, regardless of whether or not those actions respect tradition.

In the Kaepernick case, respect for the flag and the causes of Black Lives Matter are not in necessary tension. This fault comes from a misunderstanding of what the flag represents to people. To most, it represents both the broadest American principles and it’s particular traditions such as liberty, the Constitution, baseball, and hot dogs. In fact, we may find it particularly patriotic to continue the mission of wider equality under the law. In this case, many had set up a false dichotomy because of a misunderstanding of what the flag might mean to others. To better serve public discourse, I recommend, invoking the authority of Adam Smith, to respect both patriots and activists. They are both legitimate sentiments with unique perspectives. The supposed choice between patriotism and activism is best answered with “Why not Both?”.

Special Thanks to Matthew Beal, Dr. Daniel Klein, and Molly Harnish for helpful comments and proofreading.

Towards a Practical Justice Part 3: The System of Natural Liberty and Smith’s Three-Tiered Justice

From the background of Smith’s moral psychology, I can now demonstrate the meaning that Smith ascribes to term justice. Smith employs the term justice in three ways, described by Daniel Klein (forthcoming). The first is commutative justice or “abstaining from what is another’s”. The second is distributive justice or “making a becoming use of one’s own” (what my neighbor did when he cleared our sidewalk for free). The last is estimative justice (Klein’s term), which is the hardest to define. It refers to treating things with due respect or estimating objects properly. I do a truly magnificent painting justice by giving it a prominent place on the wall in my house. Though Smith typically employs the term justice to mean commutative justice or the respect of property, Klein counts 30 times in TMS that he uses it to mean distributive justice and 36 times he refers to estimative justice (Klein forthcoming, 13 and 23).

In Part II of TMS, Smith uses the term beneficence to refer to distributive justice and uses the term justice to mean simply commutative justice. Beneficence can never be extorted from an individual. Taxation and redistribution do not make an individual generous or loving. Commutative justice, on the other hand, can be prompted by coercion. If someone takes your money by force, you have the right to take it back by force. Justice, in the form of general rules, prevents individual passion and partiality from corrupting a society. To the extent that simple respect for justice does not suffice, fear of law enforcement may be needed to fill in the gaps. Notice that this does not require aview of human nature that is fundamentally selfish, but only one that sees humans as partial and prone to make errors of passion. Justice and Beneficence play two distinct, but important roles to the functioning of a society.

Beneficence…is less essential to the existence of society than justice. Society may subsist, though not in the most comfortable state, without beneficence; but the prevalence of injustice must utterly destroy it… [Beneficence] is the ornament which embelishes, not the foundation which supports the building, and which it was, therefore, sufficient to recommend, but by no means necessary to impose

The Theory of Moral Sentiments pg.86

A society that wants to rely on only beneficence will surely collapse. Respect for Justice is needed because we cannot rely merely on an assumed love for all. We can, however, develop a serious love for the rules of just conduct. Justice can recommend us to behavior that makes us unintentionally useful to our neighbors, while simultaneously preventing us from intentionally harming them. Furthermore, like the example of the generous neighbor, beneficence focuses on the actions of individuals and not on the distribution of outcomes. Beneficence satisfies the pragmatic test in a way that schema of social justice does not.

There are many ways in which commutative justice is unique. Unlike other general rules, commutative justice is precise and accurate. There is little room for varying interpretations in the court of law. The rules of property are negative; they are upheld by not doing something. There are usually no rewards for not trespassing, whereas there may be rewards for acts of public service (distributive justice). Also, Smith makes clear that commutative justice is only intended for disputes between equal citizens. It may be bypassed by certain social entities. It may be proper for the government to violate property rights to extract taxes in the same way that it is okay for a parent to take away their child’s toy. This does not justify all government actions, in the same way that it does not justify all parental choices.

When the government does respect commutative justice, we call that liberty. In The Wealth of Nations (WN), Smith expounds on the “system of natural liberty”, a society in which the economy is guided by the invisible hand and the government largely respects property rights. Natural liberty is the system that Smith wants policy-makers to fall in love with when considering the well-being of the people. There are times when Smith does recommend government intervention in the economy as a matter of distributive or estimative justice. These include taxation, restrictions on notes of small-denomination, and usury laws among others.

In Book I, Chapter 2 of the Wealth of Nations, Smith says: “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” (WN 27, emphasis added). I highlight the word expect because ignoring it has led many to believe that Smith recommends we all remain selfish. That interpretation misses a lot of context. First, the butcher, the brewer, and the baker are living in a society where commutative justice is respected. In a market society, few have the time to develop intimate relationships, but they can recognize a duty to one another by respecting rules of just conduct. Second, Smith clearly does desire beneficence to be added to a society over and above commutative justice and self-love, but we should not expect our bread to be provided by it.

A similar misreading is done of Friedman’s famous article, “The Social Responsibility of Business is to Increase its Profits”. He says that executives have a duty to meet the demands of stockholders, but many forget that he continues, “…while conforming to the basic rules of the society, both those embodied in law and those embodied in ethical custom” (Friedman 2007, 173-4). Friedman wants executives to respect commutative justice, but also the general rules that are laid out for the conduct of distributive and estimative justice.

Smith is able to straddle the demands of social justice while recommending a practical guide to personal conduct. Though the rules for distributive and estimative justice are less precise than those of commutative justice, they still pass the pragmatic test because they are tailored to individual conduct. The rule that makes the man sacrifice his pinky for the “immense multitude” is directed at the person making the decision, not the at distribution of pinkies worldwide. I do not mean to imply that Hayek had no concern for issues of higher justice. Smith, however, does a better job at describing all the types of justice that we may want to address without sacrificing coherence. Some sentiments we are born with and some we develop over time. If we develop respect for property rights without love for our neighbor, we will have only an ugly foundation. Social justice, however, attempts to pursue love for our neighbor with disregard for commutative justice, a path that leads to the disorders of partiality and ignorance. Moving into the future, I recommend a multi-faceted justice to take advantage of the fruits that Adam Smith intended for the system of natural liberty.

Bibliography

  • Friedman Milton (2007) The Social Responsibility of Business Is to Increase Its Profits. In: Zimmerli W.C., Holzinger M., Richter K. (eds) Corporate Ethics and Corporate Governance. Springer, Berlin, Heidelberg
  • Klein, Daniel B., Commutative, Distributive, and Estimative Justice In Adam Smith (March 10, 2017). Adam Smith Review (Vol. 12), Forthcoming; Working Paper in Economics No. 17-11.
  • Smith, Adam (1759) The Theory of Moral Sentiments. Liberty Fund.
  • Smith, Adam (1776). An Inquiry into the Nature and Causes of the Wealth of Nations, edited by RA Campbell and AS Skinner Indianapolis: Liberty Fund.

The History of Western Philosophy by Bertrand Russell: REVIEW

It’s undeniable that Bertrand Russell has had an intense influence on a very large portion of Western thought since his heyday.   In some ways, he is the quintessential dogmatic academic.  His ideas about logic, ethics, and philosophy at large have lasted as the vast library of analytic philosophy over the last century.  He and his colleagues constructed a system via logical positivism that seemed at the time to close many of the gaps in philosophy.  Russell himself calls it the answer to all the inconsistencies in Kant in closing the gap between a priori knowledge and a posteriori knowledge.  From this perspective, he is able to look back at the entire Western canon of philosophy and make judgments about each and every philosophical position.

The book is written not with an emphasis on who Russell thinks was right, but on who was influential.  Three chapters are written on Locke though his inconsistencies are persistently pointed out.  It is split into three books.  The first on Ancient Philosophy, the second on Catholic Philosophy (which he more or less equates with the Dark Ages), and the third on Modern Philosophy up to and including himself (that is concluding with himself).  

A majority of the book feels not as if Russell wanted to provide his readers with a wealth of historical information, but as a stage upon which he makes fun of and pokes at everyone else’s ideas.  This attitude seems to be justified by his occasional assertion that everyone else isn’t scientific enough and they are religiously holding on to ancient dogmas which he is lucky to be enlightened enough to let go of.  He describes other philosophies as inferior to his own in that they are not on an “indifferent quest for truth”.  His attitude is reminiscent of (and likely informed) popular contemporary intellectuals like Bill Nye, Sam Harris, or Neil DeGrasse Tyson.  It seems as if he does a disservice in writing the book by interjecting every few pages to include his own opinions, and gets especially worse by the end of the book.  Especially his chapters on Hegel, Nietzsche, Marx, and the pragmatists he shows great dislike and contempt for their philosophies (not to mention that he wholly emits existentialists like Kierkegaard and Heidegger).  I can’t help but think that his vitriol is leftover from arguments he had in graduate school.  

Economist Deirdre McCloskey calls Bertrand Russell a paragon of our current phase of modernism or a dogmatism that claims we have finally found the correct way of doing things.  His chapter on Hume brings up many contentions to the foundation of his own reason, and he even mentions that many of Hume’s problems haven’t yet been solved.  However, he conveniently forgets these when he reaches his own philosophy.  

In spite, of my complaints, I think that the book is well worth reading by any interested in a general picture of Western Philosophy.  Though be warned that what you are reading is nowhere near a consensus, no matter how it is presented.

Ultimately, I give it a 6.5 out of 10 with a big Bias sticker.

 

 

Jean Baptiste Colbert: The Rise and Fall of Mercantilism

This is a short video that I did for my AP Euro class last year. Again thanks to Mr. McCauley.  It’s on the topic of mercantilism and particularly the policies and ideology of Jean-Baptiste Colbert.  This is the first upload to theeconplayground youtube channel so be sure to subscribe to that as well.