Author: George Papaioannou

Judged from a national security and economic performance standpoint, the US is doing quite well.  And yet its people are divided and unsure of their future, gripped by a sense of loss or risk of losing of what they hold dear.  More distressingly, though, the object of anxiety is not something all Americans regard as a common good or a central embodiment of their common destiny.  Instead, the object of anxiety is what different groups of Americans consider to be the common good of their respective group, of their tribe.  That’s why we read and hear so much in books, articles and the media that we are in the era of tribalism.

America is a complex country.  It is a non-ethnic country made up of people of different ethnicities, religions and cultures.  The American revolutionaries claimed independence not in the name of an ethnic group or a certain religion.  They claimed it in the name of people that were willing to bond together under a constitution and a justice system in order to live in liberty and pursue happiness.  This must not, however, mask the reality that the dominant early Americans were white western Europeans and protestants.  Nor should we ignore that independence and freedom did not extend to the slaves.

Given human nature, it is not unreasonable to speculate that the public sentiment at the time was that America would remain what it was at its birth: a sovereign country for protestant white western Europeans.  That was the implicit surrogate of a national identity.  It is easy, therefore, to understand the suspicions and pushback against new- comers who did not fit this demographic profile: the Catholics, the Jews, the Eastern European Orthodox immigrants, the Asians, the Latin Americans.  Eventually, the Anglo-Protestant identity was expanded and refashioned as a Judeo-Christian identity, notwithstanding the many Americans this religion-based identity excludes.

For most of its history, the sense that America is a nation of immigrants bonded by laws and a Protestant ethic toward work and enterprising held sway while the country was on an upward trajectory that eventually made it a global economic and military leader.  That was enough to help the system gloss over its internal frictions and discontents.  However, things, both domestically and internationally, have changed and are bound to change even more in the future; hence, the insecurity or more accurately the insecurities.  One or more for each different constituent.

Domestically, less educated as well as rural Americans feel they are looked down by urban elites.  An intersection of white and rural Americans, especially those they call Old or Middle America, feel their culture threatened by the rising population of Latino and Asian Americans and the prospect of more immigrants entering the country from Latin America and Muslim countries.  A similar combination of Americans feel their voting power and control over government institutions are being eroded by the same suspects plus a vague assortment of nefarious internationalists or globalists.  The common grievance of these groups is that “other” Americans or future Americans-to-be are tipping the scales of control and influence in shaping culture and politics at the expense of whites.

Then we have the religion vs secularism division, as Christian religionists (not only Evangelicals) aim at expanding their rights and moral code beyond what secular Americans find acceptable.

Economic insecurities also fuel strong divisions and resentment.  Working class Americans feel left behind as technology and outsourcing takes their jobs away.  Those in the lowest rugs of the economic ladder resent losing jobs or better wages due to the influx of low-skill immigrants.  A cross-section of Americans resent the fact that international trade arrangements and the rise of other economies, most particularly China’s, threaten the economic hegemony of the US.  A similar sense of reduced relative influence in the sphere of global affairs help to arouse sentiments of nationalism.

In summary, different groups of Americans are vying for a national identity that will define them domestically as well as internationally.  The struggle is for “Who are we?” and “What kind of country is America?”

These questions were destined to come to the fore sooner or later whether a politician like Trump had appeared in the scene three years ago or at a later time.  Indeed, Pat Buchanan had campaigned on a basically white western European kind of nationalism in the 1990s but the time was not yet right.  By capturing the mantle of white nationalism and America First, Donald Trump became the catalyst for raising issues of national identity and purpose to the level of public discourse.  Regrettably, though, Trump chose sloganeering over a reasoned debate.

It does not help that the two major parties, as well as Trump himself, have embraced identity politics that make it difficult for either of them to throw a conciliatory bridge to the other groups.  To do so, they fear, will erode their base.  It’s like playing a chicken game, with each party afraid to make the first move.

If the politicians are afraid to take the initiative, is it likely that civic groups and thought leaders will do so?  What if each one of us engages in this endeavor by trying to understand the grievances of the other side?  Unfortunately, the education system has not equipped many Americans with the ability to engage in critical thinking.  Even well-educated Americans are unable or unwilling to get out of their respective echo chambers and listen to the opposing arguments.  John Adams had said that the purpose of education is to prepare people to be citizens of a democratic state.  If by education we also mean life-long learning, we should heed his advice without delay or reservation.

The midterm elections will bring an unprecedented number of women to the US Congress.  This piece is related to the emergence of female empowerment.  I hope mixing humor with information will help us get over our election-induced hangover and give us some food for thought. 

From XY to XX

This post is about men and women, though mostly about women.  Now that I have your attention, let me say there is good news and bad news for men.  The good news is that we are still around.  The bad news is this may not last for long.

Researchers in Australia have found that termite colonies in Japan can thrive and reproduce without any males around.  We have known for long time that asexual reproduction is possible in plants and animals.  Some species (reptiles, bees, birds) can even alternate between sexual and asexual reproduction.  Asexual reproduction, also called parthenogenesis, occurs when the egg alone produces new off-springs.  In an interesting case of parthenogenesis, female hammerhead sharks and black-tip sharks reproduced without sex after they were kept in captivity without males.  Equally impressive is the case of a female boa constrictor which was able to asexually reproduce 22 female off-springs.

So, how long do you men out there think women will tolerate us before they turn on the parthenogenesis machine and do away with us?  (I would not trust them alone in the lab.)  Think of the benefits they will reap.  No more excuses they have a headache.  No more explaining about how many pairs of shoes they have collecting dust in the closet.  No more defending their credit card balances.  No more putting up with our sour mood because our bunch of men scored fewer points than another guy’s bunch of men when all of them make more money than we need to know.  No more coming back from a trip and finding dirty dishes in the kitchen sink instead of in the dish washer that happens to be one foot away.  Of course, they will lose too.  Who will take the garbage out?  Who will throw the ball to little Jonny?  Who will find out that the lump doesn’t work because it is unplugued?  Still, I bet our absence is going to be a net gain for women.

Under our nose, women have been preparing for this over a long time.  Look around the house.  All electrical appliances invented by men are in order to do chores women used to do with a lot more work: electric irons, dish and cloth washers, dryers, cooking stoves.  Throw in some artificial intelligence and women will have nothing to do but sit back and sip their martinis.

But lest you think they are slackers, here is what else they are doing.  They are getting educated.  More than men are.  In recent years, a greater percentage of US high school female students have been enrolling to college than boys.  As of 2015, a higher percentage of 25 to 29- year olds with a college degree were women than men.  And, pay attention to this: twice as many bachelor degrees were earned by women (57.3%) than men (25.6%) in 2016!  (The source didn’t say who got the rest!)

The results of this rapid educational advancement by women are already manifesting themselves and will have even more far-reaching consequences in the future.  Despite persisting bias in entering and advancing in certain professions, more young women are becoming better qualified than men to enter well-paying fields.  Less educated American young men do not lose good jobs only to outsourcing.  They also lose them to their fellow American women!  Young women have greater difficulty to find men with appropriate professional qualifications and education.  For this, and other career-related reasons, young women postpone marriage and child bearing to a later stage of their life than in past times.  This has already produced very low birth rates in industrialized countries.

These trends are noticed globally.  In my old place of work, the Zarb Business School, there is practically a gender parity among the many Chinese students that arrive each year.  Chinese parents are heavily investing in their daughters’ education in order to give them financial security and overall independence.  As I noted in an earlier post, years in school are almost equal for boys and girls around the world.

More and better educated women will be able to utilize knowledge and information to more successfully navigate the fast-changing world we are living in, including global competition for jobs.  They will also be more open and receptive to foreign cultures than their more parochial male peers.  This could create tensions that we are already witnessing in this country when it comes to the political choices women, especially educated ones, make compared to men.

Eventually, greater education and professional advancement will be translated into political power.  Today, as I write this piece, we know that an unprecedented number of women will enter the halls of Congress as a result of the midterm elections.  More women will most likely do so in the future.  Women have seen the challenge to their status and self-actualization and have rightly channeled their indignation to political action with confidence and purpose.  We should expect a different kind of political style and practice in all levels of government when female presence increases to a critical mass.  Men should start getting used to the idea that the long period of patriarchy* that began with the introduction of agriculture and property may finally come to an end.

Despite the fact women are half of the human population, in most places they have been denied their fair share of participation in all human activities.  Their emergence as co-equal will lead to a new social, cultural, economic and political order.

* Biological explanations are part of the theories that try to explain patriarchy and might, therefore, stymie female advancement outside traditional roles. Nonetheless, we should not ignore that, notwithstanding the power of nature, humans have been able to “hack” nature and divert it to their goals.  For example, contraceptives regulate reproduction; medications moderate mental illnesses and mood disorders, and so it goes with other human intervention with nature.  Therefore, it is unlikely that biological forces alone will stop women from gaining the status they wish for themselves.

On November 6, Americans will cast their votes in the midterm elections.  Many have called these elections the most important in our lifetime.  The question is “important in regards to what?”  Is it in order to declare our approval or disapproval of the president’s policies and executive style and the Republican’s legislative actions, including their Supreme Court appointments?  Is it in order to restore checks and balances with respect to how the US government is conducted?  Or is it to reaffirm certain fundamental American values?

To different people all or only one of these reasons may matter.  I will argue the third is the most important.   First, and with regards to checks and balances, let’s clarify that party dominance in designing and enacting policies is not what was foremost in the minds of the framers of the American Constitution.  After all, most parliamentary democracies bestow this privilege to the governing party, which usually controls the executive as well as the legislative branch.  The reason checks and balances were written into the American constitution – by recognizing all three branches as co-equal – was to prevent the president from becoming an autocrat and tyrant in the mold of the much hated, at the time, British king.

It seems that fortuitously or for some underlying reason, Americans have heeded the framers’ concern and, with few exceptions, have produced bi-partisan governments. I have found that over the past one hundred years one-party dominance (by that I mean all three branches are controlled by the same party) has happened five times.  The Democrats have held full control sometime in the years 1937-45 (during the FDR era) and in 1961-69 (under JFK and Johnson); whereas the GOP has had control sometime in the years 1927-33 (under Hoover) and in 2001-07 (under G. W. Bush), and again since 2016 under Donald Trump.

In reviewing President Trump’s first nine months in office, an article in the October 2017 issue of the otherwise liberal Atlantic concluded that despite Trump’s breaking established norms, threats, and mean-spirited style, institutions had held pretty well, and, hence, one-party dominance had not done a serious damage to the constitutional order.  A year later, another article in the October 2018 issue of The Atlantic again arrived at the same conclusion.  Despite the realignment of Congressional Republicans under the Trump banner, the judicial branch has held up, though bruised by the relentless attacks from the president.   Attorney General Sessions is still in the Department of Justice and special counselor Mueller continues to do his investigation.  So, if your standard for judging the endurance and strength of checks and balances is one out of three branches doing its job, then we are not yet in crisis territory.  But the current state in this particular area is not reassuring for the future.  Should Republicans hold on to the House and the Senate, their loyalty to President Trump, who has assiduously campaigned on their behalf, will compel them even more to shield him from any check.  Given his inclination and habit to run all things as his personal interests dictate as well as his fondness to cultivate a personality cult (the antithesis of what a democratic leader ought to do), there is no guaranty what the quality of American democracy will be at the end of his tenure.

If still these concerns do not rise to the point that a bi-partisan government is needed, what about the possible erosion of fundamental American values?  Abraham Lincoln once said that the Constitution and Law were supposed to be America’s political religion.  As president, Trump might have not damaged the Constitution and the justice system by action but he has certainly attacked the ideas on which the Constitution and Law were founded.  He has questioned the objectivity of a federal judge because of his ethnic background, has called upon the DOJ to prosecute his political opponents, and has threatened to take executive action against the birthright of citizenship granted by the 14^th Amendment.  He has attacked the freedom of speech by declaring the press to be the enemy of the people; and he has done pretty much the same in regards to his political opponents.  He has been divisive from the start of his presidency by catering only to the political spirits and politics of his base and has called those who demonstrate against him to be a mob.  Thus, he has failed to act as the president of all Americans.

The Constitution does not discriminate on the basis of ethnicity, race, color, or religious background as to who is or can be an American.  Moreover, the confidence of this Republic in its capacity to take in people from foreign lands and turn them into loyal citizens is such that we can demonstrate our Jewish, Greek, Irish, Italian and any other ethnic affiliation and still be considered American patriots.  And yet, Donald Trump has demonized and dehumanized Latin American and Muslim people and has offended them as unfit to join this country.  Furthermore, his rhetoric, willingly or not, has given voice to white nationalism and has emboldened fringe groups that stand for hate and an illiberal order.

Under any other administration, a caravan of hungry, destitute and desperate migrants would have been handled by the appropriate authorities as a matter of law and order with very little said by the president.  Instead, the leader of a country of immigrants chooses to name these people invaders and a danger to the country.  And for no other purpose but to manipulate public sentiment through fear mongering he has ordered the military to intervene in a clearly civilian matter of law enforcement.  If that’s how he understands the purpose of the military, what other uses is he likely to have in mind? I don’t need to remind anyone that once the military is called out of the barracks to intervene in domestic affairs, we have entered a slippery slope toward suppression.

Despite all its flaws, America is a unique experiment in making a nation out of people of all kinds of different backgrounds.  The national motto is still E Pluribus Unum, “out of many one.”

One party’s economic policies can make us prosperous or may give us judges that rule in favor of our partisan values.  If we lose, however, the foundational values that have inspired and guided this country, none of these gains will matter.

So, to my initial question as to what these elections are all about, my answer is: In order to re-affirm the fundamental values this republic has set in its best moments.

From the moment Donald Trump entered the race for the 2016 presidential election, the press and TV media have been flummoxed by the type of personal character and tactics he has introduced to American politics.  The fascination has mostly centered around the question of what explains the man’s behavior.  What kind of an American politician could display personal traits, communication language and political tactics that would have eliminated any other candidate, past or present, and expect to win?  Only belatedly some commentators have also started to deal with the really important question of why despite all that Trump succeeded in attracting enough votes to win and has since maintained a solid loyal base of around 30 to 35 percent.  As unique (and I don’t mean this in a positive light) as Trump appears to be, trying to explain his appeal to voters is a lot more important for our political system than his psychological profile and motivations

Prior to the 2016 election, I thought the aggressive and bullying style was Trump’s way to shake republican voters away from established politicians.  While researching for a finance project, I had come across a reference to two ways professionals and businesses use to build reputation.  One is called type reputation and is used by newcomers to a field, who need to signal how well and aggressively they will meet the clients’ needs.  Trump’s abrasive tactics had the purpose to convince conservatives he would be their warrior.  The other type of reputation is behavioral reputation and comes into play once one has established the type reputation.  Behavioral reputation is built on actions that satisfy mainstream standards.  Without using this terminology, some commentators had estimated that, once in the White House, Trump would change his approach to garnering reputation and esteem by reverting to the standard mainstream behavior of previous presidents.  We now know we were all clearly wrong.  So, the question remains what explains the appeal.

Most of the analysis regarding Trump’s appeal is based on survey results that show rising white nationalism, economic insecurity of working-class people and anti-immigrant feelings among conservatives.  If it were the policies only, though, that mattered for people’s choices, was it rational for such voters to prefer Trump – given his offensive, hurtful and inflammatory tactics – over other very conservative and more seasoned candidates, like, say, Ted Cruz?  Trump’s appeal was missed because of our misguided adherence to the belief that rationality drives, or should drive, human decisions, including political choices.

Genes and brains, however, are not made to serve rational behavior.  Instead they are made to serve survival by replication and through adaptability to changing environments.  Morality as well is formed to help humans successfully navigate complex social environments in order to survive.  Similar to cognition, morality is intuitive and innate to our nature.   For cognitive functions, scientists use the terms fast and slow thinking.  Or more generally, system 1 and system 2, respectively.  For morality, Jonathan Haidt* uses the terms Elephant for innate morality (passed on by genes and influenced by the cultural environment) and Rider for reasoned morality.  Faced by various moral choices, we first respond automatically according to our innate morality.  This is the elephant that moves us through moral choices.  Our rider tries to steer our elephant toward more nuanced and reasoned moral choices but not always successfully.  It often works to validate our innate moral choices.  That’s why we talk of confirmation bias.  Therefore, if you wish to change another person’s morality try to talk to the elephant, not to the rider.  It is interesting that these recent advances in our understanding of human behavior had been foretold by the Enlightenment philosopher David Hume who proposed that humans are motivated more by sentiment than reason and rationality.

I think we have a better chance to understand the Trump phenomenon in light of the above arguments.  Trump consistently speaks to the sentiments of conservatives; that is, he addresses their elephant.  Surveys and casual observation show that conservatives hold very strong beliefs about loyalty (to family, social institutions, country), authority and order, and sanctity.  According to Haidt, loyalty, authority, and sanctity are three of the five pillars of Moral Foundations, the other two being care and fairness.  Conservativism coincides with moral innateness (or intuition) that primarily favors loyalty, authority and sanctity; whereas liberalism coincides with moral innateness that primarily favors care and fairness.

Trump never addresses his supporters by appealing to reasoned arguments.  Should he do that, their views about matters of national interest, immigration policy, religious versus secular rights and other issues would cause them to temper their views and be more inclined to consider policies advocated by the less conservative or liberal opponents of Trump.  Instead, by speaking to their elephant, Trump keeps his voters firmly away from the influence of any reasoned rider they may have.

And by speaking exclusively to like-minded people, Trump avoids accountability.  The psychologist Phil Tetlock suggests that accountability comes into play when (a) one knows he/she will be held accountable, (b) the audience’s views are unknown and (c) one believes the audience is well-informed.  These are exactly the conditions – especially the first two – that do not hold in Trump’s rallies.  Hence, Trump has no interest to use reason and arguments as opposed to what we call “raw meat.”

Now, in case those of us who abhor Trump’s methods start to feel too righteous, let’s be reminded that we are as susceptible to our liberal elephant as Trump’s supporters are to their conservative elephant.  Should our own Trump-like warrior emerge to appeal to our innate liberal morality, we could very well descend to the frenzy and hurtful level of Trump’s rally crowds.

Let’s hope this will not happen so that we can continue to fight the politics of divisiveness and misplaced patriotism with reason and humanity.

*Jonathan Haidt, “The Righteous Mind: Why Good People Are Divided By Politics and Religion”

A baker has struck again.  This time in Belfast, in North Ireland.  As reported by the New York Times, a Belfast baker refused to bake a cake with a message celebrating same-sex marriage back in 2014.  Two years earlier, the owner of the Masterpiece Cakeshop in Colorado had also refused to bake a wedding cake for a gay couple.  If this trend spreads, I am afraid, bakeries soon will spoon out more bitterness than sweetness.  I am also concerned about an old acquaintance who had the habit to have untimely wishes written on cakes.  For example, he would come to a Fourth of July party with a cake wishing us “Merry Christmas.”  Luckily, back then he lived in Long Island, which, as part of the Northeastern US, is, in general, more lax about religious etiquette.  But he now lives in Florida, where such pranks may not be received as kindly.  I wonder whether a baker down there has put an end to his habit.

In the Masterpiece Cakeshop case, the US Supreme Court ruled that the baker’s religious beliefs had not been considered by a Colorado Commission when the case was referred to it.  In the Belfast case, the British Supreme Court went much further by ruling that the baker’s refusal was not related to the identity of the customer as gay but rather to the content of the message which the baker had the right not to reproduce in accordance with his religious beliefs.

So, what’s with bakers?  Are they stricter in their religious devotion; or more sensitive and protective of their right of free expression and speech?  Could that spread to other business lines?  And what would that mean for society?

Let’s start with the religious argument.  Christian opposition to same-sex marriage is grounded on the New Testament story of the blessing of the wedding at Cana by Jesus, while opposition to same-sex relations is found in various commands in the Hebrew Bible.  This original opposition took more intensity in the early centuries of the Christian Church from Paul to Augustine as Christian Fathers developed a more fundamental aversion – some would say hostility – to all matters of sex.  Some of that aversion reflected a deliberate effort to put more distance between Christian and pagan morals and a larger part was due to putting soul above body as the road to salvation.  There is no reference, though, in the Gospels, as far as I know, that Jesus directly said anything against same-sex love.  After all, Jesus commanded his followers to “Love one another as I love you.”  Jesus also preached tolerance and forgiveness.  He admonished that when we are slapped on one cheek we should turn the other.  The Lord’s Prayer also admonishes “And forgive us our trespasses, as we forgive them that trespass against us.”  Reflecting the spirit against self-righteousness Pope Francis responded “who am I to judge that person?” meaning a gay person.  I wonder, therefore, why these bakers, and possibly other professed Christians who find themselves in similar situations, do not abide by the message of Jesus and the Lord’s Prayer in a show of tolerance toward fellow human beings.  Are they after all free of trespass to disapprove of the trespasses of others?  In “The Evolution of God” Robert Wright makes the case that over millennia of human life, people’s understanding of deity has evolved toward a more inclusive and benevolent Creator.  It is unfortunate that this evolution has eluded a significant segment of Christians as well as the adherents of other religions.

Now let’s turn to the argument made on the basis of one’s right of free speech and expression (a right recognized in the First Amendment to the US Constitution).  As I mentioned above, the US Supreme Court has not yet decided on the right of a business to refuse to reproduce an unacceptable message or symbol.  But the British Supreme Court did.  Having to choose between the right of the party that wishes to express something and the right of the party that must assist in the production of expression, the British Court decided the right of the second party is stronger and should prevail.

Because this decision may also come to pass in the US, it should raise concerns for all of us regardless of our views toward homosexuality.  Suppose I wish to print a book critical of Christianity or another religion (since the refusal right would apply to all religious beliefs), the printer has the right to refuse.  And if this shop is the only one, I have to find printing services elsewhere.  If a consortium of religious organizations raises the capital to buy all the printing presses in a town, or county, or state, or …. , then no newspaper or book deemed offensive can be printed.  Isn’t this what happened in the Dark Ages and even later under the command and influence of the Church?  If those that mediate in the production of speech and expression are granted the right to object on various personal grounds, what is the future of free speech?

I cannot tell how the US Supreme Court will eventually rule in a case involving the refusal of service on religious grounds.  What I do know, however, is that, in the US, there are a couple of much worse cases of violations of the First Amendment when it comes to religious freedom and the separation of church and state.  In the first case, we are forced to transact in a currency that bears the message “In God We Trust.” How does that not violate the right of atheists, agnostics and even religious people who find it offensive to mention God at all or so cavalierly in a government instrument.  The second violation occurs every day when millions of American pupils as well as others on other occasions recite “one nation under God” as part of the Pledge of Allegiance.   Mind you that “under God” was added in 1954 and “In God We Trust” in 1956 as a result of the anticommunism hysteria spawned during the McCarthy era.  Neither of them was found to be necessary or appropriate for the national currency or the pledge in prior times in accordance with the US constitution which entrusts the wellbeing and fate of the nation not on any deity but on the people.

In car factories, robots assemble cars.  In logistical centers and warehouses, robotic machines sort merchandise, bar code it and stack it.  At home, we ask a small box to play a song or list nearby restaurants serving gyro.  On the phone, we exchange information and manage transactions by talking to a bot powered by AI.  The growth of AI applications in a short period of time is already impressive and will become even more pervasive and dominant in the work place in the near and distant future.  Advances in AI will have far reaching implications for jobs and incomes, employment and the nature of work.  Parents with children in elementary school should already be discussing jobs with their children so they don’t end up with dead-end career choices.

To understand the implications of AI on jobs, we can think of it as an example of outsourcing.  The first significant outsourcing of work was to machines and took place after the first industrial revolution.  The second outsourcing of work was to computers.  The third outsourcing of work was to send it abroad, mostly to countries with low labor cost or unique knowledge expertise in some field.  AI is the fourth phase of outsourcing of work, with the difference this outsourcing can go far beyond what is possible with machines and computers.  Beyond doing work that handles hardware and software, AI machines have the potential to learn on the job and execute tasks out of reach to humans.

Even without going into the most far-reaching capabilities of AI, we can ask what jobs are more likely to survive AI and what the consequences might be for human employment.  Based on present estimations, jobs with a good chance to survive are those that require:

• Social intelligence and people skills
• Creativity and coming up with ad hoc solutions
• Working in unpredictable environments

As advances in AI threaten more and more jobs, the question is how AI and human work will co-exit in the future.  There is considerable disagreement about the impact of AI on employment.  One possible and very dire scenario envisages AI machines gradually displacing humans in a growing range of jobs.  The result will be massive unemployment, first in lower-skill jobs and then progressively in higher-skill occupations.  We can call this the substitution scenario.  Under this scenario, AI will destroy human jobs faster than it will create new ones.  Critics of this scenario point to the historical experience from previous industrial advances.  More jobs were created than destroyed.  However, we cannot ignore the fact that old factory jobs that paid very decent wages have already been lost to the machines.  AI is much more potent than previous technological revolutions and as such it precludes reliable projections from past experience.  The alternative scenario is one of a symbiosis between AI and human work.  AI machines work alongside human work and help to expand economic output (GDP) beyond the level possible only with human employment.  We can call this the complementarity scenario.

Both scenarios face a couple of crucial constraints.  The first constraint is related to the purchasing power and size of the economy.  For example, the substitution scenario must explain how an economy will retain its purchasing power to absorb the aggregate output if machines keep displacing more and more human workers, thus destroying incomes.  The complementarity scenario must explain how far an economy can grow in size to accommodate both machines and a fully-employed human labor force.  To the extent economies are constrained in size, cost efficiencies will likely favor the substitution over the complementarity model.

The second constraint relates to availability of a work force possessing skills for a knowledge-driven economy.  Expansion of the usage of machines requires increasing numbers of workers capable of handling robots.  Speaking of the US only, there is currently a significant deficit in this type of workers.  The present state of education in the US, especially in analytical and technology-related fields, can stymie the inroads of AI.

AI has the potential to lead to unusual consolidation of incomes and wealth among a limited number of firms that master superior efficiencies in the use of AI technologies and among fewer workers who master high-level skills.  The result will be lower or no incomes for broad segments of working-class people.  How should then societies respond to this problem?  One proposal is the adoption of UBI (Uniform Basic Income) offered to all and high enough to cover basic needs.  Another proposal is for governments to enhance the purchasing power of workers through subsidies that lower or eliminate the cost of education, health care, raising children and caring for family members, to mention some.  A third, innovative proposal is the Social Investment Stipend (SIS).*  SIS will be paid to those who dedicate their work (work released thanks to AI) to advance socially beneficial goods, like care of others, education and community service.  (I would also add advancement and appreciation of the arts.)  SIS is supposed to be a better solution because it avoids the idleness that goes with UBI.  Work plays an important role in giving people a sense of contributing to society and, hence, a sense of dignity.  Therefore, SIS is a way to reward and incentivize individual engagement in society.

Obviously, the above and other solutions, require decisions that will reflect political choices.  Ignoring the downside risks of AI can spur popular resistance to technological advancement.  Ignoring the right of all people to benefit from the immense benefits AI can bring can very well create a backlash similar to the one we see now regarding international trade.  Sharing common windfall gains is not new to market economies.  Alaska and Norway use oil revenues to fund income-boosting and pension programs.  A rational approach dictates that societies weigh the benefits and costs of alternatives and adopt arrangements that maximize the social good.

* SIS is advocated by Kai-Fu Lee, Chairman and CEO of Sinovation Ventures and former president of Google China; his essay appeared in the WSJ, Sept. 25, 2018.

Besides the book Life 3.0 by Max Tegmark (mentioned in the previous post), other books on AI and jobs are The Future of Work by Darrell M. West and Human + Machine by Paul Daugherty and H. James Wilson.

Until several years ago, I had difficulty to readily recognize that AI stood for artificial intelligence.  Not any more.  References to AI have become quite ubiquitous in the press and books.  The immediate interest in AI is in connection to how it will improve everyday living and how it will impact jobs and employment.  As important as these effects may be, AI is destined to impact human lives in even more profound ways.

AI is part of the fourth industrial revolution that includes nanotechnology, quantum computing, biotechnology and the internet of things.  Just as a reminder, the previous industrial revolutions starting in the 18^th century were associated with the steam engine, electricity and tele-communications, and most recently the digital technology.

AI, however, can be emblematic of a new stage in human development, which the MIT physicist Max Tegmark calls Life 3.0.  Tegmark thinks of life “as a self-replicating information-processing system whose information (software) determines both its behavior and the blueprint for its hardware.”  Life 1.0 was the stage of simple life forms whose hardware (arrangements of atoms) was replicated by information carried in their DNA without any new learning after birth.  The next stage, Life 2.0, emerged from the evolution of the hardware of Life 1.0 that eventually produced species, primarily the human species, that developed the ability to learn after birth and design new software (processing of information) that gave rise to social patterns, culture and advancement of knowledge.  In Life 3.0, humans with the aid of super technology (AI) will become masters of their destiny by being able to redesign both their hardware and software and take control of the evolutionary process.  It is also the stage when AI machines have the potential to become autonomous.

The difference between human intelligence and AI is that humans rely on biological matter to develop intelligence and learning.  In contrast, AI is non-biological.  The big insight that drives the development of more human-like AI machines is that intelligence and learning, whether human or artificial, are the products of physical matter, like atoms, and information which is also collected and analyzed by matter.  In the brain, this is accomplished through the neural networks.  Both matter and information processing obey physical laws.  Therefore, ability to understand and apply the physical laws that underlie the capacity of human brains to develop intelligence and master learning can lead to the design of machines that are also intelligent and capable of learning.  The Google AlphaGo device is already an example of a machine that can learn on its own.  Its prowess in learning was demonstrated when it beat the champion of the Chinese game GO.

The challenge, a rather scary one, is what happens when through its ability to learn, AI develops into Superhuman AI.  Tegmark envisions a multitude of potential scenarios describing human life with AI.  Here are some interesting scenarios:

• Libertarian utopia: AI machines and humans peacefully coexist in a system that recognizes legal and property rights for both.
• Benevolent dictator: Adverse impact of AI on human welfare is avoided through the abolition of property and the institution of a guaranteed income for all.
• Gatekeeper: AI becomes the regulator of new advances and sets limits; whether they are good to humans depends on the goals of AI.
• Protector god: AI behaves as benevolent supporter of humans.
• Enslaved god: AI is controlled by humans who use it for good or bad ends.
• Conqueror: AI prevails and unbounded gets rid of the now redundant humans.
• Reversion: Humans put an end to technological progress and eliminate AI.

These possibilities beg the question: how will humans manage to deal with the power of AI.  If AI has the potential to learn and develop its own goals, how do we protect ourselves?  The safest way is to design AI with goals that are compatible with ours.  But how do we decide?  Are we going to decide collectively, say, through a UN type arrangement?  What happens if one country adopts a more aggressive AI model that can threaten the wellbeing of other countries?  China’s determination to advance its AI technology belies their apprehension to falling behind in such a critical area.

More importantly, besides forming its own goals, an autonomous AI may acquire the capacity for consciousness.  Those who, on religious or philosophical grounds, believe in the dualism of matter and soul (as two separate entities) will have difficulty reconciling with the idea that AI machines can develop consciousness, that is, ability to sense experience subjectively.  Evolutionary biologists, neuroscientists and analytical philosophers, though, are approaching consciousness as the product of physical processes obeying physical laws.  Theory and experiments already provide support for this.  If consciousness is what information feels when it is processed in certain ways, and the processing follows physical laws, then it could be possible to develop AI with that potential.  If and when AI advances to the point to have consciousness, the line between humans and AI machines will become extremely blurred.

Humans do not have a good record of catching up with the consequences of new technologies and the result has often been anxiety and upheaval.  AI represents yet the most critical challenge humans will have to face.  AI that can learn on its own and form goals may be still many years away or, for now, in the imaginative minds of scientists.  But so were many other advances sometime in the past, like, for example, cloning. Understanding the potential power and the implications of AI is a critical step towards planning and preparing for a human life with AI.

Note: Max Tegmark’s book is titled LIFE 3.0: Being Human in the Age of Artificial Intelligence.  To follow developments in AI relevant to human future go to http://futureoflife.org

My next post will deal with the more immediate concerns arising from AI in regards to jobs, employment, and some possible solutions.

Americans like to talk derisively of European socialist ideas and practices.  The irony is, though, that the American economic landscape has some remarkably important examples of socialist arrangements.  Take, for example, Social Security, Medicare, and Medicaid, instituted by law and very popular with Americans.   And then there are implicit socialist arrangements that are popular with business, principal among them the “too large to fail” doctrine.  It was that doctrine that helped bailout the insurance firm AIG, Citi Group, Wall Street and the auto industry in Detroit. I call these arrangements socialist because, while they allow the private appropriation of profits by shareholders they socialize the risks, meaning they spread them over all taxpayers.

Interestingly, there has been an important socialist experiment in the US directly related to the 2008 crisis.  I don’t know whether you are aware that if you moved to Europe and wanted to finance your new home, you would have difficulty finding a long-term fixed rate mortgage.  And such mortgage would cost you more (after other factors are accounted) than in the US.  Why?  Because the US has applied some innovative socialism in the housing market that Europe never did and still doesn’t.

If a bank gives you a fixed rate mortgage loan for 15 to 30 years it faces the risk the borrower might default on the loan or interest rates might rise in subsequent years.  In the latter case, the bank would have to pay higher rates to attract deposits but wouldn’t be allowed to raise the mortgage rate.

Part of Franklin D. Roosevelt’s initiatives to restore the US economy after the Great Crash, the National Housing Act established the framework through which the US government would promote housing financing.  These institutions are the Government National Mortgage Association (Ginnie Mae), the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Association (Freddie Mac).  These agencies guarantee the interest and principal payments of mortgage loans that conform to their guidelines and gave rise to an innovative financing instrument, the mortgage-backed security (MBS).  An MBS is a bond whose interest and payment are backed by the interest and principal payments on the mortgage loans that back up the MBS.  To issue MBSs, Fannie and Freddie buy thousands of mortgage loans from banks and credit unions and then issue bond as MBSs.  Turning loans into securities is called securitization.  By selling its mortgage loans to these agencies, a bank passes the default (credit) risk and the interest rate risk to the buying agency.  More importantly, the mortgage loan issuer recovers its money and uses it for new mortgage loans while earning fees from the origination and servicing of the mortgage loans.  On top of that, the created MBS can be resold many times in the capital markets and generate trading fees and profits for traders.  Because banks don’t have to commit capital for the long-run and the agencies (Fannie and Freddie) can sell the MBS to others, interest rates on mortgage loans can be lower than absent such an arrangement.  Lower mortgage rates mean more affordable housing to the public.  So, voila.  You have an all-around wonderful win-win innovation for the agencies, the banks, the home buyers and the Wall Street traders who sell and buy MBSs.

So, where is the socialist ingredient in this recipe?  By US law, Ginnie Mae is a Government Agency backed by the full credit and faith of the US government, i.e., backed by the US tax payers!  Fannie Mae and Freddie Mac, which are considered Government Sponsored Enterprises (GSE), do not enjoy the same privilege, but are implicitly assumed to carry the backing of the US government.  The implicit US guarantee was given by the Reagan Administration Treasury Department in a letter to the rating agency S&P in 1982 when Fannie Mae had run into trouble.  The letter said that S&P should consider the special status of Fannie Mae.  Special status? Yes, because Fannie Mae, in 1968, had been turned from a government agency into a publicly traded stock corporation that could potentially go belly up.  That letter was enough to lull investors into the belief that Fannie Mae (and also Freddie Mac) deserved less scrutiny of their assumed risks given the implicit backing of the government.  In capital markets, when investor monitoring and scrutiny decline, expect bad things down the road.

On the road to 2008, other government initiatives, meant to do good, were distorted by political expedience and greed, and turned the arrangements aimed to facilitate home ownership into a destabilizing force.  One such noble initiative was the Community Reinvestment Act (CRA) of 1977.  It came as a result of evidence of neglect of economically depressed neighborhoods by banks.  Banks would take the deposits of these neighborhoods but would not reinvest them locally in home or business loans.  The Act required that a substantial portion of mortgage loans sponsored by Fannie and Freddie come from low-income households.  Later during the Clinton years, the government allowed Fannie and Freddie to extend sponsoring to mortgages of lower (subprime) standards in discharging their CRA obligations.  As it turned out, opening the door to lower standards had unintended consequences.

The government arrangements to help home financing worked with great stability until the early 2000’s.  However, starting in the 1980’s, deregulation had opened the market of mortgage-backed securities (MBS) to private investment banks (like Goldman Sachs) and gradually to commercial banks (like Citi Bank).  In 1999, Clinton signed an Act, enthusiastically backed from both aisles of Congress, that gave commercial banks full powers to act in the securities business just like investment banks.  This deregulation greatly increased competition for the creation/issuance of MBSs for all players, including Fannie and Freddie.  The competitive advantage of private banks was that they could buy and turn into MBSs any type of mortgage loans whereas Fannie and Freddie were restricted to loans conforming to their standards.  The pressure by the shareholders of Fannie and Freddie to produce sufficient returns pushed both agencies to further lower their standards in order to expand the pool of eligible mortgages for purchase and securitization.  At the same time, mortgage loans of good and bad quality were created by mortgage companies and investment and commercial banks at a frenetic rate pushing house prices to unsustainable levels.  Around 2005, the Republican-controlled Congress sensing the impeding housing bubble and disaster attempted but failed to reform Fannie and Freddie and the housing financing market in general.

In 2008, Fannie and Freddie came unravelling.  The US Treasury gave each a life line of $100 billion, fired the top executives and cancelled dividend payments.  It also obtained capital stakes in both agencies. The shareholders of both agencies lost their money, as they should have.  To the surprise of many, by 2017, the government had spent the sum of $191.4 billion backing these agencies but had received back $279.7 billion in dividends.  Not a bad bail out!

Presently, no one knows what to do with Fannie and Freddie.  Some argue they should be converted to fully independent private firms.  Many experts, though, believe that without government backing they will not be able to sustain their mission.  Nonetheless, both sides are very leery of what would happen to home financing and the industries it supports under either alternative.  It is for this reason that private business enthusiasts are not very eager to see these agencies operate as independent private intermediaries without any government backing.  I am tempted to quip there is no government program that businesses don’t like if it lines their pockets.

The lesson is that back in the 1930s and the ensuing years, the US created an innovative – call it a socialist – solution to serve home ownership, but erosion of shareholder scrutiny and underwriting standards, and unregulated (prior to 2008) private firm activity converged to stoke the 2008 crisis.  Also, mixing private ownership and the inherent profit motive with an implicit government guaranty mitigated shareholder exposure to risk and undermined investor vigilance.  And one more thing: don’t let arguing about the housing crisis of 2008 sour your mood toward your Democratic or Republican friends.  Both parties did their best to contribute to it by corrupting good government programs.

In February 2002, in the aftermath of the scandals committed by the executives of Enron, Andersen and other companies, BusinessWeek printed a brief letter to the editor in which I argued that those who had the most to benefit from the function of markets should have the interest and honesty to protect the markets’ integrity.

When I composed the letter, I had in mind the proposition of moral philosophers that human actions ought to be guided by some sense of what is the highest good or summum bonum.  In a political system, a Church, a market economy, or any institution, maintaining the integrity of that entity ought to be the highest good instead of pursuing one’s self-interest.  This ethical obligation is all the more binding for those who profess to believe in the value and mission of the cause they serve.

With this in mind then, how should judge Kavanaugh act?  I start with the premise that he is dedicated to the justice system and its integrity.  He has labored to further the cause of justice and make a personal contribution to this cause.  That he would be loath to allow his personal interests or limitations to sally the integrity of the justice system.

Much more than ordinary citizens, judges inform their decisions by the historical experience of humanity, looking for examples of honesty and honor, and are mindful how their decisions might affect the integrity of institutions and our collective sense of fairness.  I would expect, therefore, judge Kavanaugh to reflect how his actions would affect the institution of justice he serves and how he will measure up to those who before him faced the dilemma of whether to pursue their self-interest or act honorably and stand up for what they considered worth defending.  What could such examples be?  Here is my list, and you may have lots more to suggest.

Socrates refused to escape Athens and spare himself of the death penalty, because, he told his students, his loyalty to his city compelled him to obey its laws even when they turned against him just like he obeyed them when they protected him.

Cicero stood up to Mark Antony and eventually paid with his life for exercising his right to speak critically of a ruler.

Thomas More was beheaded because he upheld his loyalty to the Catholic Church and refused to take the Oath of Supremacy and capitulate to Henry VIII.

Dietrich Bonhoeffer, a German pastor and theologian, was executed because he stood up against Nazism and Hitler in defense of human rights and dignity.

I am sure that judge Kavanaugh was exposed to these historical examples of courage and honor during his studies in the very fine schools he attended.  How should then Judge Kavanaugh convince his American fellow citizens that he is loyal to the cause of justice and he is honorable enough to serve it at its highest level?

He doesn’t have to withdraw his nomination.  What an honorable person would do though is to tell the Judiciary Committee of the Senate that he does not wish his nomination to go forward without a full investigation and vetting and without his accuser being heard properly and not expeditiously.  And, of course, he should tell the truth even if that means confirming the accuser’s story.

There was, in classical Athens, a speech writer who wrote speeches for defendants.  His name was Lysias.  In one of the speeches, Lysias has the defendant start by giving thanks to his accuser for bringing the accusations to the court because this would give him (the defendant) the chance to prove that justice was on his side.  Similarly, judge Kavanaugh, a man of the Courts, should proclaim that he welcomes the opportunity to defend himself and subject himself to full scrutiny just like any of the defendants that sat before him in his court.  That may carry the risk of being disqualified for the Supreme Court but it would secure his place as an honorable servant of the institution of justice.

I may be reaching for a pie in the sky, but it is worth reminding ourselves that courage and honor at the cost of a lot more than a seat on the Supreme Court is humanly possible and part of our historical experience.  Defending one’s honor is not alien to human nature.

Advice from the Past

In 1820, Thomas Jefferson expressed his opposition to the doctrine of judicial review and pointed at the perils of life appointments to the Supreme Court:

You seem … to consider the judges as the ultimate arbiters of all constitutional questions; a very dangerous doctrine indeed, and one which would place us under the despotism of an oligarchy. Our judges are as honest as other men, and not more so. They have, with others, the same passions for party, for power, and the privilege of their corps…. Their power [is] the more dangerous as they are in office for life, and not responsible, as the other functionaries are, to the elective control. The Constitution has erected no such single tribunal, knowing that to whatever hands confided, with the corruptions of time and party, its members would become despots. It has more wisely made all the departments co-equal and co-sovereign within themselves.

Note:  T. Jefferson, the author of the Declaration of Independence, was not one of the writers of the Constitution.  It would be interesting to know his views about the life tenure of SC justices around 1787 and whether he would have recommended for finite terms had he been involved in the framing of the Constitution.

In a previous piece on this blog, I had presented information suggesting that a large part of corporate liquidity freed up by the tax cuts is being directed to stock buybacks.  Today (9/17^th) the WSJ reported that repatriation of foreign profits is proceeding in a slow pace and the bulk of money is used for stock buybacks.  The newspaper estimates the repatriation rate is so slow that puts in doubt the Trump administration’s expectation for the repatriation of $4 trillion.  Siphoning repatriated profits to stock buybacks is consistent with the argument that in a full-employment economy business opportunities for massive new real (factory, equipment, R&D) investments are limited and the best policy is to return the excess cash to shareholders.