I am conflicted. I have been reading a good deal of interesting material on pragmatism that is either written by analytic philosophers or couched in analytic terms (or both). Much of this is pleasantly surprising in the sense that the usual bad attitude is absent. However, a further pleasure caused my conflict: should I be enjoying this stuff? Should I not instead be suspicious of attempts to graft analytic discourse onto pragmatism? Do I really want analytic theorising to make an impact within the pragmatist camp - even when it is qualified all over the place by 'minimalist', 'deflationary', 'quietist', and the like? After all, such theorising is often just too easy. Think, for example, of how little effort is required to forge a 'new' distinction. For all their virtues, and despite their inclination to throw around anchoring terms like "reality" and "truth", analytic theorists are generally answerable only to attenuated versions of history and the latest theoretical fads.
I will return to this topic. Meanwhile, perhaps I will have to attend some more APA (Analytic Philosophers Anomymous) meetings to help me get over this.
Apologies for the lack of postings - I have been incredibly busy.
Sunday, June 20, 2010
Saturday, February 20, 2010
Power with Purpose: Obama and Pragmatism
Obama's pragmatism has provoked a good deal of criticism. Much of it rehearses old philosophical prejudices or conflates "pragmatism" in the philosophical sense with "pragmatism" in the everyday political sense - the sense that equates it with opportunistic and unprincipled political realism.
If you want some background within which to situate Obama's approach, you might like to take a look at my new book: The New Pragmatism (Acumen (UK) & McGill-Queen's University Press (US)). It tries to explain in clear and accessible terms how pragmatism offers just the kind of social hope that Obama constantly invokes. And, for a quick take on what pragmatism can offer in politics without encouraging a wishy-washy approach, one that lacks deep convictions, see pp.116-118.
Thursday, February 11, 2010
Things I am thinking about
As is my custom, I am not going to follow up immediately on the promise made in the previous post. I need to brood for a bit longer on the ethical upshot of what I said. Instead, I want to give some air to just a few of the questions that have been bugging me.
Some philosophers only think about one thing. I am not one of those (and, to be honest, I am pretty sceptical as to whether such parsimonious thinkers exist). I carry a whole bunch of questions that puzzle me, and I worry away at them and shuffle them around as they fall in and out of contention in response to the exigencies and surprises of daily life. Amongst other things, I have recently been thinking about some specific questions of value and also, more generally, about risk. Two questions about value, in particular, have vexed me: (1) Can assets be objectively valued for business/investment purposes? and (2) Do assumptions that attribute certain kinds of positive value to nature have to depend on dubious metaphysics? Of course, some philosophers, closer to the (probably) imaginery ones alluded to at the start of this paragraph, would deal with these questions by ascending to a more abstract one: a question that embraces the whole theme of 'value' (eg. "What is value?"). But, as I said, I am not like that.
The assets puzzle started off because, for reasons I do not want to go into now, I had been prompted to think about how a business can best be valued. Market capitalisation is the usual starting point for listed companies and the price that might be fetched in a sale caters for the private ones. But, to go along with those answers, we have to swallow a lot of finance theory that is riddled with unrealistic assumptions.
For a time I was stuck in what I took to be the paradoxical conclusion that businesses should never be bought or sold. Let's say the value of company C is equivalent to the sum of future cash flows adjusted to present value (leave fixed assets out, assuming they only have value as cash generation enablers and also ignore 'good will). Suppose the value, as calculated, is high enough for it to be reasonable for someone to buy C (the cash yield situation looks good)? Then why sell? (i.e. why sell something valuable enough to buy?) So, to cut to the chase: either a company is always going to be too valuable to sell or not valuable enough to buy. Of course, all sorts of other factors come into play - but some just add to the paradox (e.g. hidden value - well the seller can exploit that so "why sell?" is still an issue under such conditions). Other considerations do involve circumstances in which a sale makes sense: the owner wants to retire, has lost interest in the business, the buyer has strategic opportunities not open to the seller, and so on. But, as soon as we bring in 'circumstances', as soon as reality enters the picture (as, of course, it should), we are way beyond the realms of finance theory (which deals in idealised fantasies). I am thrashing around in such thoughts because I am sceptical about the financial calculations used to assess the value of assets in the widest sense (including options, etc.) - calculations that appear to assume a quasi-platonic notion of 'real value' has a useful role here. Confusion about this notion infects modern finance thinking and has been one of the causes of the current crisis.
I am also thinking through some questions about nature and value partly in response to dogmatic environmentalism - you know, the kind of environmentalism that encourages hate speech against humans as a species, as if the world would be a better place, a paradise even, without us. So I am asking, for instance, what conception of value is at work here and, more generally, what is at the bottom of our love of nature and our tendency to wax sentimental about it? There is so much fog generated by the politicalisation of debates over such questions, that to address them will require a separate posting some other time. Meanwhile, I continue to ponder what it is about nature, if anything. that justifies us attributing great value to it if we do not also attribute some divineor otherwise benificent purpose to its workings. Why, for instance, are we not, instead, appalled by nature's abundant and apparently all-embracing cruelty? My children have been watching the fabulous Planet Earth series on DVD and find the cruelty hard to take: a fungus that takes out the central nervous system of ants and ends up growing out of their heads while they are still alive, lions taking down baby elephants, and so on. Why are we inclined to care so much about something that evidently doesn't care a fig about us (or anything else)? Or, more importantly, should we be so inclined?
And 'Risk'? Next time. Perhaps.
Some philosophers only think about one thing. I am not one of those (and, to be honest, I am pretty sceptical as to whether such parsimonious thinkers exist). I carry a whole bunch of questions that puzzle me, and I worry away at them and shuffle them around as they fall in and out of contention in response to the exigencies and surprises of daily life. Amongst other things, I have recently been thinking about some specific questions of value and also, more generally, about risk. Two questions about value, in particular, have vexed me: (1) Can assets be objectively valued for business/investment purposes? and (2) Do assumptions that attribute certain kinds of positive value to nature have to depend on dubious metaphysics? Of course, some philosophers, closer to the (probably) imaginery ones alluded to at the start of this paragraph, would deal with these questions by ascending to a more abstract one: a question that embraces the whole theme of 'value' (eg. "What is value?"). But, as I said, I am not like that.
The assets puzzle started off because, for reasons I do not want to go into now, I had been prompted to think about how a business can best be valued. Market capitalisation is the usual starting point for listed companies and the price that might be fetched in a sale caters for the private ones. But, to go along with those answers, we have to swallow a lot of finance theory that is riddled with unrealistic assumptions.
For a time I was stuck in what I took to be the paradoxical conclusion that businesses should never be bought or sold. Let's say the value of company C is equivalent to the sum of future cash flows adjusted to present value (leave fixed assets out, assuming they only have value as cash generation enablers and also ignore 'good will). Suppose the value, as calculated, is high enough for it to be reasonable for someone to buy C (the cash yield situation looks good)? Then why sell? (i.e. why sell something valuable enough to buy?) So, to cut to the chase: either a company is always going to be too valuable to sell or not valuable enough to buy. Of course, all sorts of other factors come into play - but some just add to the paradox (e.g. hidden value - well the seller can exploit that so "why sell?" is still an issue under such conditions). Other considerations do involve circumstances in which a sale makes sense: the owner wants to retire, has lost interest in the business, the buyer has strategic opportunities not open to the seller, and so on. But, as soon as we bring in 'circumstances', as soon as reality enters the picture (as, of course, it should), we are way beyond the realms of finance theory (which deals in idealised fantasies). I am thrashing around in such thoughts because I am sceptical about the financial calculations used to assess the value of assets in the widest sense (including options, etc.) - calculations that appear to assume a quasi-platonic notion of 'real value' has a useful role here. Confusion about this notion infects modern finance thinking and has been one of the causes of the current crisis.
I am also thinking through some questions about nature and value partly in response to dogmatic environmentalism - you know, the kind of environmentalism that encourages hate speech against humans as a species, as if the world would be a better place, a paradise even, without us. So I am asking, for instance, what conception of value is at work here and, more generally, what is at the bottom of our love of nature and our tendency to wax sentimental about it? There is so much fog generated by the politicalisation of debates over such questions, that to address them will require a separate posting some other time. Meanwhile, I continue to ponder what it is about nature, if anything. that justifies us attributing great value to it if we do not also attribute some divineor otherwise benificent purpose to its workings. Why, for instance, are we not, instead, appalled by nature's abundant and apparently all-embracing cruelty? My children have been watching the fabulous Planet Earth series on DVD and find the cruelty hard to take: a fungus that takes out the central nervous system of ants and ends up growing out of their heads while they are still alive, lions taking down baby elephants, and so on. Why are we inclined to care so much about something that evidently doesn't care a fig about us (or anything else)? Or, more importantly, should we be so inclined?
And 'Risk'? Next time. Perhaps.
Friday, January 22, 2010
The Financial Crisis, Yet Again
When I talked previously about the current financial crisis, I was very concerned about the lack of insightful and informative analysis of its causes and consequences. Since then, the situation has improved, with commentators such as Paul Krugman, Joseph Stiglitz and Robert Shiller, in particular, making some very useful contributions (though the crisis deniers tend not to listen to them: regarding any reformist suggestions as 'socialist'). Nevertheless, the overall situation still concerns me greatly. And here, very quickly, are some of the reasons why (I will expand on these on another occasion).
Clearly, those most responsible for creating the crisis have failed to seize the opportunity to radically rethink their approach to business and finance in order to help build an international financial system that avoids such problems in the future (if you think about it, the government bailouts, though necessary, provide a strong disincentive to do this). Most seem to have reverted to type by resolutely defending the dogmas that encouraged grossly irresponsible risk-taking.
Unfortunately, their critics follow suit by voicing simplistic anti-business views that fail to engage with those dogmas in a realistic or fruitful manner. This negative stance yields little by way of practical recommendations for improving financial behaviour and institutions.
For some of the lead actors, such as Goldman Sachs, it seems to be "thanks for the leg-up, but now it's back to business as usual". In a letter to the Financial Times, the CEO candidly admitted "complexity overwhelmed us" - presumably, with huge (perhaps record) profits, the company has solved that problem. No doubt its fear of losing the competitive advantage prevents it from sharing the secret to the greater good (just to be be clear: I am being ironic - they have no 'solution', but have adroitly found ways of cashing in on the crisis, and in the finance world, 'cashing in' is, by definition, socially beneficial).
Here, the entrenched thinking of those in the first category above is the most worrying. One fears that their views lack any rational foundation - if only because no evidence is allowed to refute them. The finance theory (e.g. the efficient market hypothesis, and so on) that sparked the creation of fancy financial gift-wrappings for risk and guided the behaviour of powerful financial institutions was subjected to a giant experiment. Powerful lobbying ensured that perceived regulatory obstacles were removed or forestalled, oversight bodies were conveniently complicit, and ethical interference of any kind was at a minimum. Under these hugely favourable conditions, with large amounts of capital swishing around, the finance community should have been poised to work some magic to the economic benefit of all. But, the end result was a gigantic screw up. And, apart from some token apologies, the main actors have shown no real remorse, and many have scrambled to invoke ad hoc conjectures that blame 'less than ideal' conditions for the crisis - as if the experiment would have worked if only the government hadn't .... or whatever. Recall, there are Marxists who discount the fall of the Soviet Empire and insist that the communist experiment has yet to be carried out.
At this point, those in the 'critics' category mentioned earlier might interject: "Yes, but this is because you have a naive conception of business motivation. When you said that the finance theory-based beliefs behind the crisis were not held on a rational basis, you were ignoring the individualistic bias that infects the thinking of the finance community. The beliefs may have failed in the social arena, and they may have harmed others, but most of the individuals concerned emerged, not just unscathed, but much richer. For them, the experiment did work, and that shows that their views were held on a rational basis. For what could be more rational than making lots of money, especially when wealth creation is automatically good for everyone and not just the immediate beneficiary? By the looks of the profits now being made, the finance community is setting things up for another economic flare-up." More on the ethical implications of all this next time.
Clearly, those most responsible for creating the crisis have failed to seize the opportunity to radically rethink their approach to business and finance in order to help build an international financial system that avoids such problems in the future (if you think about it, the government bailouts, though necessary, provide a strong disincentive to do this). Most seem to have reverted to type by resolutely defending the dogmas that encouraged grossly irresponsible risk-taking.
Unfortunately, their critics follow suit by voicing simplistic anti-business views that fail to engage with those dogmas in a realistic or fruitful manner. This negative stance yields little by way of practical recommendations for improving financial behaviour and institutions.
For some of the lead actors, such as Goldman Sachs, it seems to be "thanks for the leg-up, but now it's back to business as usual". In a letter to the Financial Times, the CEO candidly admitted "complexity overwhelmed us" - presumably, with huge (perhaps record) profits, the company has solved that problem. No doubt its fear of losing the competitive advantage prevents it from sharing the secret to the greater good (just to be be clear: I am being ironic - they have no 'solution', but have adroitly found ways of cashing in on the crisis, and in the finance world, 'cashing in' is, by definition, socially beneficial).
Here, the entrenched thinking of those in the first category above is the most worrying. One fears that their views lack any rational foundation - if only because no evidence is allowed to refute them. The finance theory (e.g. the efficient market hypothesis, and so on) that sparked the creation of fancy financial gift-wrappings for risk and guided the behaviour of powerful financial institutions was subjected to a giant experiment. Powerful lobbying ensured that perceived regulatory obstacles were removed or forestalled, oversight bodies were conveniently complicit, and ethical interference of any kind was at a minimum. Under these hugely favourable conditions, with large amounts of capital swishing around, the finance community should have been poised to work some magic to the economic benefit of all. But, the end result was a gigantic screw up. And, apart from some token apologies, the main actors have shown no real remorse, and many have scrambled to invoke ad hoc conjectures that blame 'less than ideal' conditions for the crisis - as if the experiment would have worked if only the government hadn't .... or whatever. Recall, there are Marxists who discount the fall of the Soviet Empire and insist that the communist experiment has yet to be carried out.
At this point, those in the 'critics' category mentioned earlier might interject: "Yes, but this is because you have a naive conception of business motivation. When you said that the finance theory-based beliefs behind the crisis were not held on a rational basis, you were ignoring the individualistic bias that infects the thinking of the finance community. The beliefs may have failed in the social arena, and they may have harmed others, but most of the individuals concerned emerged, not just unscathed, but much richer. For them, the experiment did work, and that shows that their views were held on a rational basis. For what could be more rational than making lots of money, especially when wealth creation is automatically good for everyone and not just the immediate beneficiary? By the looks of the profits now being made, the finance community is setting things up for another economic flare-up." More on the ethical implications of all this next time.
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.
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.
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.
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.
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