Wednesday, December 9, 2009

Financial Innovation

I promised I would say a bit more about my current publishing projects in this post - the projects that have been keeping me from posting for some time now. However, I am still too busy to talk about more than one of them right now (there are quite a few). I am working on a Handbook of Financial Ethics - a large, ambitious venture that will bring together 30 or s0 leading financial experts to tackle ethical issues in all areas of finance, from its theoretical justification to its institutions and practices. Of course, the current crisis will act like a force of gravity on the project - but its historical reach will be wider than that.
I am pretty excited about this. And, I have been thinking pretty hard about who to invite and what topics to include. I have more or less nailed things down now - though I expect to make some changes, in detail, in response to feedback from potential contributors.
Yesterday, one of the prospective chapter descriptions I outlined in the formal proposal concerned the ethics of financial innovation. We have been through a period of intense and rapid innovation recently. And, to put it mildly, things have not turned out as predicted. Hard questions arise as to whether the fancy financial tools that were supposed to strengthen markets have actually brought them to their knees.
On the one hand, finance theory dogmatists want to brush aside such questions, and thereby keep the path wide open for further innovation. On the other, there has been a concerted knee-jerk reaction from the enemies of capitalism (whatever that is) who want to shut everything down with draconian regulation. They are usually blissfully unaware that such regulation needs to be even heavier than they can probably envisage because attempts to shackle innovation in the past have only succeeded in stimulating a proliferation of cleverer forms of it.
Innovative financial methods are most likely to succeed after they have been subjected to real life trial and error (unfortunately many theorists tend to think that internal consistency and testing within abstract models in empirical isolation is sufficient). But, conducting experiments in the global economy is a bit like testing a substitute for dynamite in a crowded public place.
The problem here is this: financial innovation is too valuable to be subjected to preventative regulation, but too risky (especially, ironically, when it targets risk) to be unleashed willy nilly in the real world. One quick thought on this that struck me was: Why make trial and error an all or nothing phenomenon? Why not find ways of marking out certain areas of the economy in which experimentation can be carried out to test whether the new tools are fit for wider, or even global, use?
In the old days, before technology and deregulation linked everything to everything else, I suppose that used to happen - the world of finance was a black box, and nobody cared too much about its contents as long as the economic outcome was beneficial.

Friday, October 2, 2009

Apologies, apologies

Sorry for not having made any entries recently. I have been extremely busy with a host of publishing projects - and this has left me with no spare time to think or write about anything else. I will tell you about my projects in my next post.

I should also say sorry to those of you who were following my comments on the current financial crisis. These didn't dry up. I stopped to stake stock of things and make an assessment of the various things that are being done in response to the crisis. I will say something about those shortly.

Friday, August 7, 2009

The wonderful puzzle of being

When I was a small child, one question kept me awake at night: "How is it possible for anything to exist?" The short answer that everyone seemed to want me to believe was that God makes this possible. But, I didn't buy that. It simply pushed the question further back: "How is it possible for God to exist?" I didn't see the justification for giving God special existence privileges so that this question doesn't arise. "Even granted that God is a necessary being, how can there be such a thing?"

I found it hard to avoid the conclusion that existence is impossible, and I never found an adequate explanation for the fact that it so obviously false. In later years, I noticed that some scientists believed 'a singularity' (a unique event that somehow started the ball of the existence of our universe rolling) provides the answer. I wasn't impressed: "How is it possible for there to be a singularity?"

There are various ways of tackling the puzzlement that is generated here: by talking about different senses of the words "being" and "existence", by trying to show that the philosophical language game generated by asking fundamental questions about existence is a pseudo-language game, and so on.

Perhaps I will discuss those moves another time. Right now, I want to talk about something that probably derives from, but is not necessarily caused by, the puzzlement I have referred to.

This is the sense of wonder at the very existence of things. Such a sense of wonder plays quite a big part in my own psychological make-up. And, it has taken me a long time to realise that it does not play the same kind of role in everyone's make-up. I have come to accept that, but I still find it hard to deal with at times. "How can you be so concerned about all that stuff, when it is so amazing that you and the things that are bothering you even exist?" I find myself thinking all too often.

Many people, probably most, have a tough time getting through their lives so we should not expect them to be bolstered up by sheer the fact of existence itself. They don't have that luxury. Against this background, the sense of wonder that I have invoked seems a quirky, personal matter, something that has little social value.

However, this is unfair. Wonder need not be obliterated by adversity. In the midst of a raging tooth ache, I have found myself pondering how incredible it is that this pain and my shuddering reaction to it should exist. At some later stage, I will probably say a bit more about the phenomenology of wonder, about what it is like to experience other creatures as pockets of the mystery of existence.

Sunday, July 5, 2009

Values in the dark

Philosophically speaking, values are tricky customers. Deny their existence, and all hell breaks loose. A world bereft of values seems to be pointless. Moreover, if values do not actually exist, then what passes for them in social settings has to be the product of historical whim, something that is imposed rather than discovered. That way lies relativism, nihilism and the barbarity of power politics.

Philosophers have danced around for centuries, trying to avoid being pulled in the latter direction. But, their attempts to identity values as entities in their own right or give them a rational foundation have failed to pan out.

Some thinkers have accepted the hellish conclusion, and even tried to celebrate its consequences.

Machiavelli probably belongs in this company, though 'celebrate' is not the right term for his cool-headed approach. And, on some interpretations Nietzsche fits the bill perfectly. Hence, it should not be surprising that Pragmatists, who are deeply suspicious of traditional accounts of value, have tried to co-opt his writings.

But, for all his posturing, Nietzsche was insufficiently radical. And, he was less farsighted, even, than the apparently docile Dewey. Nietzsche tried to teach us how to whistle in the dark - just like he did. What we really need to learn is how to whistle darkly.

Tuesday, June 9, 2009

Taking a break from everything

One of the main advantages of taking an intellectual holiday is that it can remove you completely from the concerns and worries of the mundane world that you normally occupy. And, more importantly, it can disperse some of the prejudices that cloud up your thinking and trap you into negative patterns of behaviour.

When you return, you will not have a sun tan, but the influx of fresh ideas may have changed your whole perspective on life.

Many things are likely to seem different - less burdensome or intrusive, more interesting, perhaps more enchanting. Some of the changes might be quite subtle, especially those involving the values you attach to things. Of course, these psychological benefits are intimately connected with the knowledge that you gain while away - but it is probably best not to aim for them directly.

What if you want to take a break from everything?

To do this, you need to be in the company of some of the most radical philosophers who ever lived: the Madhyamika Buddhists. For these thinkers challenged the very basis of all that we are inclined to believe about the nature of the mind and the existence of things in our everyday world

In my previous intellectual holiday package suggestion, the mind travel arrangements were very ad hoc. You were invited to spend as much or as little time with Greek philosophers as you want, and to do so whenever you feel like it.

If you really want to take time out from everything with the Madhyamikas, then you need to be a bit more disciplined. Some constraints are necessary. I recommend shacking up alone for a couple of days or so with some primary texts, and, if at all possible, no outside interference (TV, telephone, e-mail, etc). It's a good idea to get away from your usual surroundings (this helps with the habitual distractions). A cabin deep in the heart of a natural wilderness would be ideal.

Just kidding! That would be nice. But actually, the venue doesn't matter too much - anything that provides Coleridge's "Solitude which suits abstruser musings". A room in the cheapest motel will do. If you do not already have something of a Madhyamika outlook on it, nature itself can be a distraction.

Spend as much of your time as you can reading and ruminating on these texts - they will include commentary to help guide your reflections. But, you need to absorb them slowly, to really chew them over. Speed reading is off the menu. Then, after this first intensive session, you can take a more relaxed approach, spending time with the texts, and following up on others, whenever you get the chance.

What texts? There are many excellent translations available, but the two that I would start with are:

The Fundamental Wisdom of The Middle Way: Nagarjuna's Mulmamadhyamakakarika


Ocean of Reasoning: A Great Commentary on Nagarjuna's Mulmamahyamakakarika

These introduce you to Nagarjuna, the founder of Madhyamika philosophy, and Je Tsongkhapa, the monumental Tibetan commentator and thinker. Both texts are available on Amazon. They are translated by Jay Garfield (the second with the help of Geshe Ngawang).

At the heart of the Madhyamika outlook, is the notion of 'emptiness'. This has often been wrongly interpreted in terms of 'the void' or 'nothingness', as if it is entirely nihilistic.

To see why this is mistaken, take a simple example. The wooden table in front of you, is that empty on this outlook? Yes. But empty of what? Well, not existence as such - it is not that it does not exist (the nihilistic interpretation).

It is empty of a certain kind of existence; namely, independent existence, existence in its own right or, as the Tibetans like to put it, existence from its own side. All existence is contextual - things cannot exist in isolation. This includes you! When you try to throw a lasso around your self and rope it in to defend it against the big bad world outside, you are wasting your time. You don't actually exist in a manner that will make that project feasible.

If you have been reading other posts here, you will see how this links up with Pragmatism, with its scepticism about metaphysical notions of an independent reality. The Madhyamika take on things is thoroughly holistic.

Further reading

Self, Reality and Reason in Tibetan Philosophy: Tsongkhapa's
Quest for the Middle Way, Thupten Jinpa
Buddhist Philosophy: Essential Readings, Jay Garfield and William Edelgass (eds)
Empty Words: Buddhist Philosophy and Cross-Cultural
Interpretation, Jay Garfield
The Emptiness of Emptiness, C.W.Huntington, Jr.
'Frost at Midnight', The Collected Poems, Samuel Taylor Coleridge

The thinking at the end of the tunnel

In a previous post I suggested reading 'The Last Days of Socrates' by way of preparation for an intellectual holiday to ancient Greece.

To take the actual vacation, why not start off by reading Pierre Hadot's What is Ancient Philosophy?. This will give you a feel for the notion of philosophy as a way of life rather than a mode of theorising about it. The Greeks are particularly interesting to spend some time with because they are both very strange and very familiar - though given the widespread educational neglect of the classics, the 'strangeness' is liable to dominate your first perceptions of them.

You can set your own agenda and timetable. As you dig deeper, by reading works by particular philosophers from time to time (Hadot describes many of the most important ones), you may then sense some affinity. For most of us are emerging from an intellectual tunnel of ideas created by Christianity and only made longer by those great figures, like Marx and Freud, who appeared to be set on dismantling it.

In the writings of the Greeks, we can see a form of thinking about the fundamental problems of life that has not been bent out of shape by the forces within this tunnel. For that reason alone, such thinking can be useful to us - even though we cannot simply transplant it into our own historical situation.

What to pack for the mind-beach.

For a lighthearted general introduction: It's All Greek To Me, Charlotte Higgens

For something more serious that is designed to cater for political correctness and other aspects of modern theorising about identity: The Greeks: A Portrait of Self and Others, Paul Cartledge

As a small child, I found The Greeks by H.D.Kitto endlessly fascinating - though I presumptuously thought I could do better, and wrote to Penguin to tell them so. They replied with a charming hand-written letter saying that although they were sure my book would be very good, they were unable, for legal reasons to offer a contact to someone of such a tender age. I came across The Greeks in a second-hand book shop recently - it has not aged well, but precisely because it did not have to navigate through the mine fields of modern political preconceptions, it throws out some colourful ideas.

Key Works by the two most famous Greek Philosophers
Republic and/or Symposium and The Death of Socrates, Plato
Ethics, Aristotle (I prefer Roger Crisp's translation (Cambridge University Press))

Other books I have found use in this connection
Care of the Self, Michel Foucault
Shame and Necessity, Bernard Williams
The Art of Living, Alexander Nehamas

Monday, June 1, 2009

One of Psychology's big mistakes

I recently wandered into the foyer of a top five-star hotel, The Arabella Western Cape Hotel and Spa, only to find it invaded by biological psychiatrists. In fact, they had taken over the whole place for a few days to hold a conference on, you guessed it, 'Biological Psychiatry'.

Two things imediately made me sceptical, suspicious even. And, they were interlinked. First, the awkward name tag. And, second the huge amount of financial backing manifestly in evidence.

What's wrong with the name? Why is it awkward? Well, it seems to bind together two incomensurable disciplines - one associated with the body (biology) and the other associated with the mind (psychiatry). Now I can hear you thinking "Surely as a Pragmatist, you don't fall for all that old mind/body dichotomy stuff?"

Well, I don't. And clearly one of philosophy's most interesting and ambitious goals is to naturalise things non-reductively (e.g. bring the mind down from the metaphysical ether into the field of nature without sawing off its intriguing features in order to do so). But, I was sceptical as to whether the psychiatrists present had worked all this through. Had they really come up with an ingenious way of pulling together two disparate vocabularies, one involving intentions, desires, beliefs and so on and the other referring to physical causation and the behaviour of matter?

Of course, assimilating a discipline of dubious empirical merit to science is an effective way of both hiding that defect and paving the way for awards, grants, and research resources.

The money factor increased my doubts. It is far more likely, I thought, that money brought these two disciplines together than some intellectual innovation that hitched mind-talk into creative communicative harmony with body talk. What better way for the drug companies to peddle their expensive stuff than to sponsor a discipline that by its very name suggests a direct route from body to mind (the very route followed by their wares)? The impact of this factor is serious. Commercial corruption in medicine has become a huge problem (check out what has been happening at Harvard Medical School - see The New York Review of Books (recent archives)).

Stumped by the dim prospect of stemming the tide here, I started to reflect on psychology in general. (By the way, I think there are prima facie grounds scepticism about a profession
that cannot find a manageable name, that leaves the public to find its own way through a very confusing maize of terminology.
Think of: 'psycholanalysts', 'psychiatrists', 'psychologists', 'clinical psychologists', 'cognitive psychologists', 'behavioural psychologists', and zillions of types of therapists. I am just going to use the blanket term 'psychology'.)

The kind of psychology I grew up with, that shaped my thinking and my cultural ethos - Freudian psychology, no longer strikes me as remotely plausible. And, nothing else represents much of an improvement. I began to believe in the unconscious pretty early in life, and soon decided it was a good thing to make friends with. That seemed a better deal than treating it like a demon that had to be caged if I couldn't tame it.

I refined my understanding by taking on board some of Marcuse's nifty ideas ('surplus repression', 'polymorphous perversity', etc.), but later the whole Freudian schema, refined or otherwise, made little sense. It wasn't that it had been refuted, it just fell by the wayside.

Freud himself began to look less like the scientist he aspired to be and more like someone who spawned some fascinating fantasies about the life of the mind, fantasies that turned out to have a hidden shelf life. However, 'Civilisation and its Discontents' is still on my list of must read books. But, it's now in the fiction category.

As Pragmatism got a stronger grip on me, I began to take a very different view of the mind, one that didn't fit together very well with anything I saw psychologists doing and saying. In the first, and most extreme instance, I even had trouble isolating the mind from its environment. With holism's map in my back pocket, everything seemed to be connected to everything else and the sharp divisions between things morphed into conventions backed by pragmatic pay-offs.

A handy slogan for this view is "The Mind is everywhere if it is anywhere". My hunch is that this links up with what the Zen Buddhists call "Big Mind", and I further conjecture that in the 60s, the hippie/counter culture movement simply got it wrong when they brazenly cashed all this out in terms of expanded awareness. Hence, a second slogan: "Mind is more than my awareness".

An important practical benefit of this outlook could be that the prospect of death becomes less daunting. If I identify with, and attach value to, things outside my head, say, my work, my friends and family, artitfacts I have produced, and so on, then there is a sense in which I can live on after my death. I find this consoling as I pour more of myself into my writing and my children. Whether I should be so consoled given how the universe is likely to end (see previous post on this topic) is nevertheless still a tricky question.

Of course, if we can only identify with a certain locus of awareness, if we can't stop believing that there is some special boundary around this awareness that makes us who we essentially are, that we need to be hemmed in to exist, then the prospect of that awareness being obliterated is quite scarey by comparison. But, this is a huge topic. Let me narrow things down to a particular example.

Consider emotions. On the holistic view, once again, these are not psychological atoms drifting around in the mind, they are linked up to all sorts of things in all sorts of ways. They do not hang suspended in psychological space playing their own tunes quite separately from rational concerns. For instance: they consort with beliefs. The ancient Stoics had a good line on this. By themselves, emotions are boring. It is only when beliefs and judgements enter the picture that they become interesting - and, if we do not take responsibility for what what we bring to the party, problematic.

Emotions even have a history, and not just their own.

Many psychologists seem to make a big mistake in their general approach to, and handling of, emotions. Especially those whose methods involve dredging up past emotions or focusing on particular ones in order to somehow improve a person's present psychological state (and/or future behaviour).

Think of someone who is often fearful, timid, and totally lacking in confidence. Surely such a person must have felt confident (and hence neither fearful nor timid) at some point in their lives? What if we get them to concentrate on one such feeling of confidence that they once experienced? Won't that help them to positively reorientate their inner state? Although this is example is simplistic, it is typical of psychological approaches to the emotions. And, it gets just about everything wrong.

There is no such thing as a feeling of confidence as such (for a start, it isn't an emotion). But, let us allow that kind of talk just to get things started. On the view that feelings are not psychological atoms, the confidence that I experience at a particular time is linked up, in complex ways, to the whole situation I am in. To later bring the feeling component of it forward, out of context, to play a therapeutic role is to misunderstand its nature and to mystify its causal significance.

To focus on a past feeling of confidence in order to instil confidence now, is to get things the wrong way round causally speaking. Confidence is an effect of acting in certain ways (and/or being acted towards). It can generate further feelings of confidence under its own (affective) steam, but these are inappropriate (and can be pathological) by themselves - that is, independently of the circumstances, both social and personal, that make confidence appropriate (I have heard psychologists blithely say that 'appropriateness' should not be predicated of feelings, as if they just exist and the links we are alluding to are merely incidental).

To get a fix on how New Age therapy fads frequently misconstrue things, run this example through substituting "happiness' for 'confidence'.

In itself, happiness is inconsequential, and hence not worth pursuiing.

Upshot? Chasing past feelings for present purposes, as psychologists are often inclined to do, is disasterous. It ignores the subtle ecology of the mind within which everything has its time and place.

Pouring chemicals into that ecology, as I suspect the biological pychiatrists (and their sponsors)are keen on doing is an even more daunting prospect. And, it is likely to do even more damage.

End Notes: (1) Alert readers will notice that some of what I say is still couched in non-Pragmatist terms - I talk about emotions as if they have a nature, and so on. But, this talk rests, in the end, on Pragmatic considerations: things work out better if they are treated in this way (at least until we find better descriptions, etc.). Furthermore, no Pragmatist is going to hold that disparate vocabularies must be kept apart because of their inherent features. It's simply that, like different tools, they are suited to different tasks. If someone finds a useful way of combining scalpels with lawnmowers, that's fine. I just don't think that biological psychiatrists have performed the equivalent of that feat. (2) If you are not a philosopher, and you find all this baffling, here is some background reading that might help. For illumination on why it is a mistake to circle the wagons around inner states (on grounds that they are private, known only to the person in question, and, indeed, 'inner') see Wittgenstein's Philosophical Investigations , Sellars' Empiricism and The Philosophy of Mind , and Putnam's work on the question as to whether meanings are in the head. For more on Holism, start with James' great classic Pragmatism. For a rejoinder to my dismissive treatment of Freud by an excellent philosopher and fully trained psycho-something-or-other, check out Jonathan Lear's Freud.

Wednesday, May 20, 2009

Is it impossible to believe something because it is true?

I have been thinking about truth quite a lot recently. "Isn't that what philosophers are supposed to do?" Not really.

I guess I have been a card carrying Pragmatist for some time now, and as such I am usually pretty reluctant to make a big philosophical deal out of truth itself. I am more interested in what we might call 'truth markers' - evidence, justification, the social conditions for generating truth, on so on. Besides, most philosophical talk of truth is either banal (it reduces to 'truisms') or infected by the nasty bug of realist metaphysics (more about that on another occasion).

However - and, there is nearly always one of those - Pragmatists are also fallibilists. They are practised in the art of holding firm to the truth of something while keeping aware that it could turn out to be false. Since I know my views could be mistaken, I like to test them now and then by, as Nietzsche puts it, "thinking against myself".

So I have been doing a lot of metaphorical head-scratching lately: "Have I got it all wrong about truth?"

Then this line of argument popped into my head. I'm sure it's fallacious, but I can't yet see why.

And, it seems to cement my Pragmatist views even more firmly in place. No more head scratching for the time being.

Here's the argument (the brief version): "Truth/true" have no philosophical synonyms. Suppose X is an appropriate synonym, then 'Theory of X' will do all the philosophical work of 'Theory of Truth'.

But, after centuries of effort, nobody has been able to come up with an X that fits this bill. Now, since language is not like mathematics, it is highly unlikely that there is such a synonym - it's not that language is opaque in the way that mathematics can be (so there is no word that would do the job, hiding somewhere on the far shores of language or deep in the pages of some huge dictionary). But, we needn't go into this (it could trap us in the thickets of realism again). We can simply say that for working purposes, there is no known synonym. If there is no synonym for it, the word "truth" is not very informative (we know what to do with it, it serves a social function, but it doesn't 'say' anything directly -anything than can be substituted for it).

But, it seems to then follow that it is impossible to believe something simply because it is true.

Suppose I say to you "You should be believe P" and when you ask why, I say "Because it is true" - then you start behaving exactly as if you believe P.

What is going on? Can you have come to believe P solely because it is true? Surely not. Since "true" has no synonym, I might as well have said "Believe it because K" without telling you what K stands for. Your coming to believe P must have involved something else: either your belief that when I say something is true it is usually true (as when you value my opinion of wine and I say that the 1995 merlot is a good wine) or something in the content of P that links up with something else, say evidence, that leads you to believe P.

For Pragmatists, truth is like a stamp of approval - not that interesting in itself. The important philosophical issues surround the circumstances in which it is awarded correctly, and the implications thereof.

Wednesday, May 13, 2009

What if things are going to end very badly?

Now when suffering is marshalled forth as the first among the arguments against existence, as its nastiest question mark, one would do well to remember the times when one made the reverse judgement because one did not wish to do without making-suffer, and saw in it an enchantment of the first rank, an actual seductive lure to life.

Here is something to think about before you consider taking an intellectual holiday. If the world is going to end badly, is this a bad thing now? Normally, I guess we think of something as good or bad without relativising it to time. So what am I getting at?

The chances are that the world is going to end badly, and not just badly, but very badly. My question is: "If it is going to do so in the very distant future, does that matter now?"

Or, to put it another way, "Are distant events morally insulated from us by their distance from us?"

Why do I say the world is likely to end very badly? Well, the most likely scenario, leaving aside humanity's prior self destruction, is that the earth, and any planets we may have inhabited by then, will be burnt up by the sun. If the human population is very large, this will constitute an immense disaster. More people could die in the conflagration than have ever died before then. Pretty bad?

Intuitively, we might think: "Yes - obviously. We can now say categorically that this is a bad thing, 'distance' does not come into it?"

But again, very bad? And, when reflected on now, when it apparently need have no unwelcome practical consquences for us?.

Again we might simply think: "Of course. And, that's the end of it."

But, if it is going to be a disaster on a huge scale, shouldn't it have some causal effect on us now - other than that of getting us to agree that it's a very bad thing when we are asked about it?

What kind of causal effect? Here, I am not thinking about purely psychological effects - though it might be rational to get somewhat depressed by even the thought that the world can only end badly for us.

Here is a tough question: "Could a very bad ending subtract the value from human life now, rather like a bad enough ending to a play can ruin it in its entirety?" Is the issue as to whether each individual human life is worth living undecideable - because it cannot be settled until the final curtain drops on life as a whole?

I am wondering whether we can use such conjectures to test our value systems. Are they insulated from distant events, are they local in that sense? Do they only apply to what happens in our vicinity, so to speak, even when they are veiled in absolutist/universalist terms?

What about a person who has lived a good life, one that we would all agree was a valuable life. Can the value of their life be destroyed by something external like the fact that it is all going to end very badly for everyone else in the distant future?

If we make a mental survey of human life over the fulness of time, we might picture a huge pile of meaningless misery that gets multiplied in size at the very end, with little pockets of light flickering through the mess from the 'valuable' lives lived up to that point. Do those lights mean anything? Can they signal the existence of value in isolation? Or does the total pile of misery overwhelm their significance (we leave animals out of this, but their pain and suffering could also be factored in)?

Looked at this way, the universe can seem like a pretty efficient machine for generating bad outcomes for sentient creatures (with just enough good outcomes over the shorter term to keep the show going).

But, human life is extraordinarily worthwhile despite the suffering it entails - isn't that obvious? Surely, only a morbidly out of touch philosopher with too much thinking time on their hands would doubt it?

But, wait a minute. Does that mean "However much suffering is involved"?

If you were given the option to build another universe just by pressing a button, with the one condition that it would mimic ours in every detail (so it would contain the same amount of bad things happening to people, and the same bad ending), would you press the button? Should you? Or, more to the point, is it obvious that you should?

Note that any optimism on this score needs to be carefully separated out from distortions caused by our own comfortable place in the scheme of things. If you are reading and understanding this, you are very special - privileged, even (nothing to do with me!). To see why, first step back from our universe. Then, imagine taking part in a lottery where each ticket stands for one of the many people who have been born up to this point in history. Take a ticket. Your prize? You are now that person.

What are the chances of you being as well-off (materially and psychologically) as the person you were before you stepped back?

If this line of thinking starts to persuade you not to press the button, then what does that imply about our world? That it would be better if it had never existed (given that it is physically indistinguishable from the rejected possible world)?

The sort of questions we have been posing, questions about our place in the whole scheme of things, are what we can call cosmological questions. Hence, I signal 'Cosmology' as one of my interests in my profile. We seem to be one of the few civilisations that tries to operate without a cosmology, without a sense of how we fit into 'the whole scheme of things'. Instead, we have bogus cosmology, new age versions that tell us the universe owes us a decent living, and so on. Unfortunately, with a few notable exceptions (e.g. Derek Parfit and John Leslie), philosophers are not interested in the interesting questions here.

Perhaps future generations will have to cut down the population. Perhaps, if science can predict when the bad ending is likely, the human race will have stopped breeding before everything burns up, so there is no bad ending for anyone. Is that any consolation?

And, what should we make of the enforced finitude that the best scenario for us implies?

Another thought: are we local? Could the creatures destroyed when the world ends be so different from us, that we would only identify with them weakly - we don't even think of them as 'humans'? Here, we might decide: "Well yes, it's very bad. But for them them, not for us?" However, if we thought they were much better creatures than us morally speaking, we might feel that the envisaged ending will be even worse than if it happened to us. Conversely, if we do not think much of them on that score, we could say "Well, it might not be such a bad thing after all?"

However, there would be another story to tell about what had happened to us in the intervening period. And, presumably that would concern us greatly.

Saturday, May 9, 2009

Intellectual Package Holidays Revisited

The cultures of the developed West are fraught with paradoxes. One of them concerns the disparities between the overall intellectual ethos in such cultures and the intellectual resources that are readily accessible. With regard to 'ethos', the dominant trend is towards dumbing down. There is no need go into the dismal details. But, at the same time, if an individual wants to upgrade their thinking, the volume (and quality) of resources available is astonishing.

Hence, there has probably never been a better time to take advantage of my free Intellectual Package Holidays offer.

From time to time. I will make suggestions about where to go for an intellectual holiday. For reasons of safety, I will only recommend places I have already visited and know well. This might sound a bit restrictive, but don't worry, I have done a lot of mind travelling. Furthermore, as you get the hang of things, you will be able to make up your own itinerary. Indeed, I would welcome your suggestions in the 'comments' section.

First-off, I recommend going to Ancient Greece. That might sound like an obvious suggestion, coming from a philosopher. But it's not. Why? I will tell you next time. How do you get there?
Also next time. However, if you want a preview, read The Last Days of Socrates.

Saturday, April 25, 2009

Most actors find it difficult to see anything

The other night, while watching the movie 'Pride and Glory', I found myself captivated by the performance of Edward Norton. It was riveting. The other actors were pretty good, especially John Voight, Colin Farrell and Jennifer Ehle, but - without upstaging them or apprently drawing attention to himself in any obvious manner - Norton seemed to steal every scene he was in (and he was in a lot). This began to puzzle me. He was not making any of the usual actorish efforts to impress. But, neither was he sucking the audience in, making them move towards him, by withdrawing or enigmatically holding things back in some way. He was just there. Whether walking in the street or simply standing in the room, there he was. But, again, this wasn't about either 'presence' or absence of it. "What is going on?" I kept asking myself. And, then I cracked it.

I noticed him looking at the other characters and his surroundings and I became aware that he was really seeing them, and that his face was reacting accordingly. Not in a crude way - not in a "here is my 'looking at someone/something intensely' face" way - but with great subtlety. It highlighted the huge behavioural difference between seeing something and pretending to see it, and showed quite clearly that most actors fail to cater for this.

Norton's 'performance' also illustrated a philosophical view. I call it "people holism".

Platonists and Cartesians foster a picture of humans as isolated egos shacked up in bodies, and separated forever from the world around them. In technical terms, this means that an important human characteristic, concern for others, is an extrinsic part of our identity: it needs (self-interested) reasons to activate it.

This picture has been taken up with enthusiasm by many financial economists, and on another occasion perhaps we will discuss how their doing so has played a causal role in the current financial crisis. Meanwhile, let us consider an alternative view, one that Norton's acting brings to mind.

Pragmatists, taking their cue from William James and John Dewey, view humans as creatures that are initimately connected to everything else. Even their consciousness is best described as saturated with the world rather than separate from it.

We are, in short, embedded beings. And for us, seeing embraces our world. It is so much more than just a visual experience

Okay, but let's get back to movies. Maybe I should issue a warning. This has now probably ruined a lot of performances for me. It is much more obvious that many actors are not seeing what they are looking at, and that this is distorting their whole relationship to the objects/people in question. They stumble around, so out of synch with everything that they might as well be blind. The worst cases, as to be expected, are the high tech movies where the actors are not even confronted in the studio by anything like what they are supposed to be seeing (typically a monster, explosion, alien, and so on).

Perhaps we should be a bit concerned about this. Perhaps by watching so many people who are unable to see, we will eventually become blind and out of synch ourselves.

Wednesday, April 15, 2009

This blog is heavily in debt

Really it's a bit much. I bang on about the moral dimension of the current financial crisis all the while handing out I.O.U.s, and yet never seeming to get around to pay back time. As I recall, I promised to say why philosophers pretend to be so boring, elaborate on the virtues of pragmatism, finish the deviancy tale, and still more. Well here's a special one-off payment by way of penance: I have just finished writing a book on Pragmatism and anyone who wants to road test it before it goes to print can have a free draft via e-mail. Just send me your address. If you give me feedback, I will also send you a free copy of the actual book when it comes out. Meanwhile, I must remember to tell you about intellectual package tours soon. I will do that. Soon. I promise.

Thursday, March 12, 2009

Beyond the Financial Crisis: Intellectual Package Holidays for the Mind

I will get back on the 'deviancy' trail shortly. Meanwhile, I want to briefly reflect on something that has been bothering me for a few months now: the low quality of public thinking about the current financial crisis. This crisis does not only involve the degradation of monetary wealth and the social misery caused by this. It is also a palpable manifestation of our intellectual bankruptcy. And, not just in the obvious sense that much of recent finance theory and the free-and-efficient markets ideology underlying it now seems as defunct as old-school, soviet-style marxism. Thinkers of all persuasions seem to have been caught out.

Where are the useful and pertinent commentaries by members of the intellectual avant garde, those who look down on the rest of us from the progressive heights? Deconstructionists and their ever more colourful offspring? They haven't left the starting gate yet. Ultra Radical Feminists? I've heard some predictable complaints that the crisis is an entirely male concoction, but nothing more insightful or constructive. As for political critique, those on the right are laughably sticking to their outworn dogmas and leftists seem a bit hysterical. Some have withdrawn into their Stalinist shells and others are hand wringing at the very thought that the business community has instigated a crisis that defies explanation in terms of their familiar jargon.

The management gurus, and other charlatans residing at somewhat lower altitudes of thought, are also keeping their heads down. Perhaps they sense that most of their drivel is now even easier to recognise as drivel. Though no doubt Tom Peters is somewhere right now shouting "This is all very exciting!" (only in CAPITALS). But, I don't think there will be a rush on the resulting book of rants.

The same goes for New Age prophets. You read The Secret or The Six Steps Towards Complete Self Love, but you still lost your house and your job. Time to wise up, I guess?

We can be thankful for these latter small mercies. But nevertheless, the paucity of fresh ideas on how to deal with what is happening and also move society forward amidst the exceedingly choppy economic waves is pretty depressing to behold. The Financial Times has just announced a series of articles by supposedly big hitters on 'The Future of Capitalism'. But, even the very use of the word "Capitalism" suggests we shouldn't get too excited.

Next time I will explain more details of my special free offer of Intellectual Package Holidays. Meanwhile, if you come across anything on the crisis that goes against the pessimistic grain of this post, please let me know. Perhaps we can find, and then nurture, some interesting ideas that will flower in the desert we seem to have been left with.

Tuesday, February 3, 2009

The financial crisis: the road to deviancy

Most textbooks on corporate finance start off by defining the goal of business as the maximization of shareholder value. This apparently innocuous definition generated the deviant model of business that is causing many of today's financial problems.

On the traditional model, companies focus on creating better products or services and when they succeed, the stock market rewards them accordingly. But, modern finance theory holds that, all things considered, share prices are the best indicator of the value of a company, not the finance-independent, quality of the underlying assets. The reasoning behind this claim can seem compelling if certain theoretical assumptions are accepted - the main one being that markets are efficient (which means, in effect, that they reflect the status of underlying assets in their pricing). We will perhaps look at these assumptions, and the evidence that is commonly adduced in their favour, on another occasion.

Meanwhile, we should note that when managers started to believe that share price is king, many of them lost their traditional focus. At first, this showed up in a wave of mergers and acquisitions. Smart business people recognised that it is easier, quicker, and less risky to improve stock market performance by buying or teaming up with other companies than it is to develop new products/services or refine old ones. At this stage, a lot of social harm was done, not to mention the opportunity costs of putting resources into acquiring other resources rather than the creation of new or better ones. However, finance theorists put a shiny gloss on all of this. Even though many of the deals came unstuck, they still happily claim that all was for the best, that the market for corporate control made business more efficient, put resources in the hands of those who were able to make better use of them, and gave investors a better deal. Because so much finance-theoretical research is politically contaminated even though it shelters under the image of scientific objectivity, we will probably have to wait decades get a less biased account.

The next stage in deviancy came, when managers realised that the shortest route to wealth creation bypasses old-fashioned economic activity. It involves the direct manipulation of share price by creative accounting and financial wizardry. This takes us into Enron territory. But, don't think of Enron as a special case. Share price manipulation was widespread. It was aided by auditors who were incompetent and willing to turn a blind eye even when they were not. Finance theory also helped because it entailed that such tampering is impossible - the market will soon discover it and punish the share price accordingly. Not surprisingly there was a convenient political match-up here. Right-wing defenders of free markets were all too happy to take advantage of this theoretical blindfold, though naturally they did not wear it themselves. Many were too busy playing the manipulation game or taking backhanders from others who were were already doing so.

I've seen no data on this, but no doubt sophisticated investors, those who supposedly keep markets efficient, also took their eye off fundamentals, finding it more simpler and more lucrative to guess what others are likely to likely to invest in, to bet on the jockey rather than the form, as The Economist once put it (though in connection with CEOs).

I will talk about the final steps towards deviancy next time. Meanwhile here is a clue: Porsche's most recently recorded yearly profits before taxes were $11.6bn. Of these, only 12% came from making cars.

Wednesday, January 21, 2009

The Financial Crisis: A Question of Perspective

One of the big problems in figuring out the nature of the present financial crisis is that it is very difficult to adjudicate between different perspectives on the facts of the case. These do not speak for themselves. And, there are various parties, with opposing agendas, who are crowding in to speak on their behalf.

This problem is tackled in the book I have been working on, as I mentioned in the last posting. The conclusions I am edging towards are: (1) there may be no neutral ground from which we can decide between different perspectives on the facts, (2) we may have to work backwards from conceptions of the kind of society we want to live in and the sort of people we want to be, adjusting our interpretation of the facts accordingly, and (3) in the end, we may only be able to deal with the crisis by means of what the late Richard Rorty called 'cultural politics'.

Tampering with 'the facts'? Sounds like idealistic, wishful thinking. But, it is actually a useful form of pragmatic realism. Dogmatism, the inability to see that facts have multiple, self-consistent interpretations, is what makes us lose touch with reality. If you have qualms about all this, then consider the problem of making good on talk about facts without appealing to interpretations. For how do we deal with the reality corresponding to the facts directly, on the outside of any interpretations, as it were? Hmmm,.... I hope you get it, but maybe, I should be able to think of a better way of expressing that last point.

In the case of high finance, there are many examples to illustrate the issue of 'perspective'. But, let me just pick one that recently stood out in my reading and research. It involves the complex financial instruments called derivatives. These do not show up on balance sheets, and are shielded from regulatory control and investor scrutiny. Trillions of dollars have been notionally involved in transactions based on derivatives. And, there have been some spectacular losses by organisations that, on the face of it, should not be carrying out high cost, risky transactions.

Enter our old friend, the father of modern finance theory, Merton Miller. In countless speeches and articles, he robustly defended derivatives on grounds of their social benefit, reinterpreting the spectacular losses accordingly - they provide no convincing evidence that special purpose regulatory control is required. Take the bankruptcy of Orange County. Its investment pool filed for bankruptcy in December 1994, reporting losses on leveraged purchases of derivatives-based securities of $1.5bn. Miller defends derivatives even in this case, and his strategy, as usual, is to view things from the economic heights so that only the overall flow of monetary wealth shows up, and the economic distress of individuals, not to mention the negative effects on social life, are bleached out.

However, let's not question this general approach, but look instead at a matter of factual detail that helps drive home the claim about 'perspectives'. Miller acknowledges that Orange County's approach to investment was risky: "That strategy had risks to be sure, but those risks would have been clear to treasurer Robert Citron - and, for that matter, to the people of Orange County who re-elected Citron treasurer in preference to an opposing candidate who was criticising the investment strategy." Miller's faith in the financial savvy of the good people of Orange County is touching, but strangely optimistic.

Here is his own, relatively clear, explanation of the heart of that strategy: "Most of the investments involved leveraged purchases of intermediate-term securities and structured notes financed with 'reverse repos' and other short term borrowings". So the good people understood and voted for that? There's a whole background story about the flaws in how finance theorists, and economists in general, treat voting preferences and other decisions. But, again, let's leave that aside. Let's look instead at Robert Citron himself, the person who was found guilty of violating state investment laws, the person the Orange County folk so shrewdly voted for, the person who Miller claims was well aware of the risks. Here's a different take on Robert from Frank Partnoy, a former derivatives broker and now law professor and best-selling author: "The sentencing inquiry revealed that not only was Citron a college drop out, he had the maths skills of a seventh grader. Psychologists put his ability to think and reason in the lowest 5 per cent of the population."

Now this may look like a simple stand-off over the which account is factually accurate, and hence an example that actually goes against my main point. But, that is because we have viewed these 'perspectives' in isolation. If we start to describe each one in more detail, which involves links with further interpretations of the facts, then we end up with two very large, empirically rich, internally consistent outlooks between which it is impossible to choose from neutral ground. Different perspectives. Enough said?

References: 'Value at Risk: Uses and Abuses', C.Culp, M.Miller, and A. Neves; in The Revolution in Corporate Finance, 4th Edition, J.Stern and D.Chew, Jr. (eds), Blackwell: Oxford, 2003, p.423
F.I.A.S.C.O. Guns, Booze and Bloodlust: The Truth about High Finance, Frank Partnoy, Profile Books: London,2007, p.173.

Wednesday, January 7, 2009

Ethics, finance, and everything else in the garage

During the down-time I referred to in the last post, I tidied up the garage - well I certainly moved things around quite a bit. And in the process, I dug out an old paper on Finance Theory that I'd written in preparation for a conference on corruption. I don't usually have a script for conferences, or anything else for that matter, but I guess I must have conjured up this one as a safety-net. Well, as I looked through it, one thought led to another, and I decided to write a book on the current financial crisis. I have been working on it since, planning to finish in 6 weeks. My problem is to get a publisher, or maybe an agent, by way of intermediary, to push the project through with similar speed. Wish me luck.

As for the rethink on the 'demarcation' problem, I realised I don't have a solution. On the one hand, I want morality to carry considerable weight, and in some cases to squash all other considerations. On the other, I don't want life, in all its grainy and surprising details, to be subjected to the tryanny of moral rules and regulations. Business, especially in the finance sector, is operating according to ethics-lite standards. My problem is to explain in pragmatic terms how to remedy this without appealing to an absolutist conception of morality. I think that what I need is some sort of 'virtue ethics' approach in which moral goodness, rather than rule-following, is cultivated in human beings so that it becomes part of their nature to do the right thing (i.e. principles and rules are irrelevant, and may even be disregarded when appropriate).

I am taking a break from posting for 10 days in order to concentrate on the book. Then, I may say more on this issue if I have made some progress. But, I will certainly tell you about my other publishing projects that may be of interest.