Let's Reason

The coronavirus pandemic caught most of the world ill-prepared to defend itself against a new and deadlier virus.  Our unpreparedness became evident in our financial fragility, inadequacy of health systems, and fragmented international cooperation.  As usual, lots of ideas as to what we need to do the day after are tossed around.  Thinking, however, in terms of piecemeal steps is not enough.  We will be better served if we think big and revise the premise of our current approach.

What I have in mind is a reexamination of how we manage economic growth and its risks.  By growth, I primarily mean the growth of GDP and our fixation that annual output increases at the highest possible rate.  By risk, I mean the exposure of a nation or the world to human illness and deaths, hardship as a result of fragile household finances, and breakdown of social cohesion.

In finance and economics, we talk of a tradeoff of risk and return.  That is, higher return comes with higher risk.  Businesses and individuals have to make decisions that involve this tradeoff almost every day.  Each one of us is supposed to choose the combination or tradeoff of risk and return that leaves us most comfortable (or with the highest utility in economic parlance).  The implication is significant.  There is no one combination that is best for all of us.  We can all be happy at our different tradeoffs.

What happens, however, when the tradeoff refers to the total output (GDP) of a nation and its accompanying risks?  Who chooses the growth-risk tradeoff?  In democracies the tradeoff is decided at the ballot box.  So here is the challenge: to move a democratic country from one growth-risk tradeoff to another we need to marshal a majority of votes in favor of a new tradeoff.  Leaving the rest of the world aside, it is fair to say that for various reasons, the American choice is one that favors a pro-growth tradeoff by putting lesser weight on the risks.

But does this pro-growth stance serve us well?  Many (and I am one of them) argue that the economic growth, as we have practiced it for several decades, dangerously ignores some important risks.  First, it ignores the risks from the consequences of economic and social inequities it creates.  We should, at long last, realize that inequality of income and wealth harms everybody.  Economic insecurity and fragility as well as poverty (especially among children) deprive large segments of Americans of the ability to grow their human capital and better weather shocks to their income sources.  Inequities also expose financially weaker people unevenly to health risks.  We are currently seeing these effects in the proportionately higher numbers of the infected and dead among minority and less economically-privileged Americans.  Economic inequality can also deplete social capital and lead to political instability.  Episodic and temporary rescue plans are not a sustainable solution.  A country with extended fragility pays a higher cost to fight systemic disruption of its economic and social fabric.

The pro-growth bias also impacts our financial and environmental safety.   Since 1980, the US has suffered three major financial crises – the banking crisis of the 1980s due to imprudent lending practices, the stock market collapse of early 2000s due to accounting and financial shenanigans, and the housing-banking crisis of 2008 again as a result of unscrupulous financial practices.  In each of these crises, billions and trillions of dollars of wealth evaporated and millions of livelihoods were destroyed.  And yet we don’t seem to learn.  Each crisis gives birth to regulatory legislation only to be compromised or reversed by business and political interests in a few short years.* The unspoken motive of these reversals is always the same: to protect or raise private profits.  However, when the crisis comes and decimates these profits, the same actors ask the government to socialize their losses by passing the bill to all of us.

Common sense would dictate that wealthy nations can afford and should invest in clean water and air.  And yet our record is one of advances and reversals.  Especially this administration is hell bent on its policy to juice economic growth at the expense of the environmental progress this country has made the last few decades.  It is an irony that the pandemic with its restrictions on movement is making air cleaner and saves lives.  Why can’t we use policies to the same effect?  How many lives are we willing to sacrifice in order to eke a little bit more of GDP growth?  And what about the looming risks of climate change?

The argument that underlies our current emphasis on economic growth is that it is the indispensable ingredient to our quality of life.  But if that’s so, why do we then stick with a model that keeps middle class and lower incomes woefully insufficient while upper incomes grow much faster?  The current premise of our economic model is also wrong on other grounds.  First, it implies that quality of life is primarily measured in economic terms.  But as I wrote above, our comfort and satisfaction depend on both economic resources and risks to other aspects of our lives.  International country rankings show that size and growth of GDP do not necessarily predict happiness.  Harnessing a country’s wealth to achieve greater financial security, richer personal fulfillment and social harmony can be even more rewarding and worth-pursuing goals.

Second, growth heavily and at an increasing rate depends on the quality of human capital.  Better education, health and financial security contribute significantly to that quality and by extension to productivity, which is a major driver of economic growth.

Finally, redirecting our economic model to green energy, better and universal health care, scientific research, better education and better social services can produce engines of economic growth which also mitigate our exposure to unwanted risks.

* In their book Firefighting: The Financial Crisis and Its Lessons, Ben Bernanke, Timothy Geithner and Henry Poulsen, the major architects of the policy response to the 2008 crisis, who come from both aisles of American politics, argue that the regulatory reforms instituted after the crisis still serve us well, a view that challenges the recent demolition efforts in the hands of the Trump administration and its Republican allies in Congress.

Courage is one of those virtues, societies idolize, poets extol in verses and authors lionize in epic stories.  We see it as physical courage in soldiers, firefighters and police officers.  We see it in parents protecting their children.  We see it in anonymous people rescuing strangers.  We also see it as moral courage in people who stand up for justice and human rights, theirs and those of others.  We see it as professional courage in people who stand up for what is right in their work.

But where does courage come from?  What makes doctors, nurses, emergency medical and hospital workers around the world get up each day and put themselves at risk in order to deliver life-saving services to the rest of us in this deadly pandemic?  And most remarkably of all, what makes them excited and animated when they talk about their work?  Certainly, it’s not because of the monetary rewards.  Many of them earn below average salaries.

Our first inclination in answering these questions is to say that courage and selflessness are the outcomes of a very long process of inculcation from one generation to the next.  Or that they come with the job.  Or that courageous and helping people self-select to enter careers that require these traits.  All that has a grain of truth.  But let’s remember that there is no behavior that has no origin in our nature or, more plainly, in what nature has endowed us in order to survive very challenging and changing environments.  Inculcation and upbringing matter.  But they are not the whole story.  How do we know this?  Because the same courageous and selfless behavior is found in other species!

To ask “where does courage come from?” is not a superfluous question.  Courage comes with risk.  Risking one’s life, livelihood, or standing in the community are not exactly the types of behavior favored for survival, procreation and wellbeing.  This is how Darwin himself described the dilemma of being courageous and selfless versus neither:

It is extremely doubtful whether the offspring of the more sympathetic and benevolent parents, or of those which were the most faithful to their comrades, would be reared in greater number than the children of selfish and treacherous parents of the same tribe.”  On the contrary, the bravest, most self-sacrificial men “would on an average perish in larger number than other men.”  A noble man “would often leave no offspring to inherit his noble nature.” *

The funny thing with nature, though, is that it achieves selfish results out of selfless behavior.  Of course, the most basic example is that of a parent sacrificing him/herself for the child.  Although the parent perishes his/her genes survive in the child.  (That’s what Darwin meant in the last sentence above.)  This gene inheritance instinct also works when one sacrifices for a relative.  Choosing to risk and sacrifice can even extend beyond kin to members of one’s group (clan or tribe).  It can also be justified by reciprocal altruism that increases the chances of survival for all.  So, do nothing or take flight in the presence of danger, that is, the opposite of being courageous, is not the only behavior favored by our evolutionary path.

There is, however, another, even more heartwarming story, in the book of nature.  This is the story of empathy and social bonding.  We know that like us, other mammals like elephants and primates mourn the passing of members of their family.  They, like us, are also attracted by the distress of others in their species.  Even prairie moles and rats have been found to display signs of stress when other moles or rats are in distress.  All that shows that we are endowed with empathy and have a social sense of wellbeing.  As the primatologist Frans De Waal writes, our default mode is intensely social.  Beyond the preservation of our genes, it is also our empathy for others and our instinctual need for social cooperation that drives us to behave selflessly and even courageously, and, by doing so, to gain a survival advantage as a species.

As important empathy and selflessness are for our physical survival so are they for our survival as a good society.  It is selfless and courageous behavior that defines the moral standing of societies and, by extension, the preservation of human rights and liberties.

It is in periods of acute and nearly existential crises, like the current pandemic, our personal and collective courage is tested and matters.  It is in such periods that mischievous and power-grabbing governments attempt to curtail civic liberties and political rights by exploiting public fear and misinformation.  We see it these days in the attempts of strong men with authoritarian leanings to impose measures that go far beyond those responsible citizens are willing to surrender for the common good.

In good and trying times, courage matters the most for the preservation of liberal democracy.  And to that end, it matters a lot to have leaders who promote courage and selflessness in the interest of political liberties and the wellbeing of society.  That’s why it is sad to see that this administration is led by someone who seems so oblivious to the importance of cultivating courageous and selfless behavior.  When the leader of a country declares “I don’t take responsibility at all” and instead brags about his ratings on Facebook, you know this person is leading without courage.  And this is not all.  With an unprecedented record of firings of government officials and public servants who do not toe his line, this President has shown that courage and selflessness are punishable qualities.

Too bad he is not versed in history.  Had he been fortunate to partake of such knowledge, he   would perhaps be aware of another leader who, twenty-five centuries ago, knew the significance of courage for the wellbeing of society.  That leader was Pericles, who in his funeral oration for the fallen soldiers of Athens during the first year of the Peloponnesian War and in the midst of a plague spoke these words to his mourning people: “Happiness comes from Freedom, and Freedom comes from Courage.”

*  From The Moral Animal, Robert Wright.

Third week of the “stay home” reality for us in the US and things are not looking good.  Lives are in suspension, minds try to conceive new meanings, and ….. finding interesting new shows to stream has gained a whole new sense of urgency.  When boredom drives you to do your tax returns even when the government (US) tells you they aren’t due until three months later, you know this is not things as usual.

The drama is being played out in multiple stages.  In the hospitals, where heroic doctors, nurses and other aides give their best despite the risks they take.  In homes, where we try to overcome the dullness of repetitive daily patterns.  In the supermarkets, where we try to avoid everybody else and hope to find what we need.   (Why is it in this “Greatest Country of All” we can’t find masks and sanitizing materials?)  In the news, where all we read or see is about new cases and deaths and frantic hospital scenes.  I wonder what life would feel like if every day we were told how many people contracted this or that deadly disease.   In the government, which struggles to put us ahead of the curve but its announcements often don’t match the reality on the ground.  When Covid-19 cases stand at over 250,000, the most in the world, and deaths at over 5,000, what should I make of the message we are doing better than anybody else?  In the research labs, where scientists from around the world are putting their brains together to fight our way out from this pandemic.  It is in the hospitals and the labs I see our hope and redemption; where I see our collective humanity at work.

Facts are stubborn and hard to argue against.  Sooner or later they make us adjust our perspective on many things.  So here is a list of what is in and what is out given the facts of this pandemic.

Acceptance is in, denial is out.  Not that long ago, our government and its supporters told the nation that the coronavirus pandemic was a foreign agent, another manufactured political ploy, and, if real, one that would whisk through these blessed United States of America like a light breeze, to dissolve into the warm mist of April.  Over two trillion dollars of emergency aid, massive layoffs, and projections of 200,000 potential deaths later reality has sunk in.

Scientists are in, lawyers are out.  Nature is a bitch.  You can’t fight it with sycophants, lawyers and lawsuits.  Used to taking out rivals by using all the levers of the justice system, now for this, his life’s greatest challenge and fight, our president, discovers that his best comrades are scientists, like Dr. Anthony Fauci and Dr. Deborah Birx, and all others in this country and around the globe.  You can’t take Covid-19 to the courts, nor can you shut it down with another NDA.  The only ones to fix this now are doctors, nurses and scientists.

“Make ventilators” is in, “make tanks” is out.   The defense budget is the sacred cow of the US.  We have enough power to kill everybody on earth several times over, but we don’t have what it takes to defend us against this tiny virus.  You see, defending against pandemics has no lobby to match those who push for more money to build missiles and fancy weapons.  Even mighty countries can go down by the force of their folly rather than the force of their enemies.

Living the moment is in, living for the future is out.  When the epidemiologist in charge (in the US), Dr. Birx, put on the screen the graph of potential deaths a few days ago, I bet many of us wondered whether we would still be alive when that long right tail of the curve finally hits zero.  When planning for the future – weddings, trips, parties – depends on the uncertain path of a deadly virus, then our best option is to live each moment and make the most of it.  We would also live more relaxed lives in ordinary times if we could master to live the now instead of worrying about tomorrow.  Planning for the future has its merits; but when it consumes our thoughts and energy or creates anxiety, let’s go back to enjoying the moment.  Going back to Dr. Birx’s presentation, she told us that with mitigation the model predicts about 200,000 deaths by end of August.  What if instead she had said “By August we expect 329,800,000 Americans to be alive out of 330 million today?”  Most of us would feel better, though, nothing would have changed.  Humans are emotionally biased to respond more strongly to bad than good news.  Her statement, deliberate or not, stood a better chance to make us focus on the bad outcome and thus remain extra cautious.  If, you want, however, to boost your morale, think that you have more than an excellent chance to be one of the 329,800,000 Americans still alive by August.  In fact, the probability not to die because of Covid-19 is 99.94 percent!  But remember that every time you let your guard down that probability declines.

Uncertainty is in, calculated risk is out.  If we are averse to risk, we are even more so toward uncertainty.  We talk of risk when we can, even with some error, estimate the odds of failure (and conversely of success).  If I have a deck of 52 cards, I know that I have a 4 over 52 chance to draw, say, an ace and win a wager; or I have a chance of 48 over 52 to lose.  That’s the risk I take and it is informed by that probability.  What if, however, I have to estimate my risk and I don’t know the number of cards and the number of aces in the deck?  This is uncertainty.  Insurance firms sell us coverage against risk not against uncertainty.  Investing, airplane safety, and much more in our lives are informed by risk estimates.  But risk estimates are based on patterns of events we have identified.  To our misfortune, this pandemic face us with uncertainty and that’s why it is a lot more terrifying and hard to manage.  Because it is new, we have no knowledge about the pattern of infections and deaths.  Human life has improved tremendously thanks to our ability to wrap our hands (brains if you wish) around risk.*  Now this advantage is taken away.  The essence of our battle against Covid-19 is to reduce uncertainty and improve our estimation of risk.  That’s when we ‘ll know we are taking control of this pandemic and our lives will return to some normalcy.

All this is sobering stuff.  Living with restrictions is annoying.  And if you lost someone you knew the loss is crashing.  But our blue planet will churn one more time and the sun will rise again tomorrow and more spring flowers will bloom.  And the probability to breath at the end of the summer is 99.94%.

* A wonderful book on this subject is:  Against the Gods: The Remarkable Story of Risk, by Peter Bernstein.

They say a crisis is too good a thing to waste.  Crises create opportunities to learn.  Crises are like natural experiments, that is, real-life situations we cannot replicate for the sake of research because of the high cost or because we cannot design with high degree of authenticity.  The coronavirus pandemic is a devastating calamity but one that also comes with some valuable teaching moments.

Government matters.  Ronald Reagan and Margaret Thatcher became the heroes of conservative politics and thought by declaring that “government is the problem not the solution.”  The experience of the last forty years teaches us the opposite.  When governments retreat infrastructure decays, social problems flare up and crises take a heavier toll, human and economic.  Government has not been invented by people as a parasite of the private sector.  It exists because it has a crucial and unique role to play.  Adam Smith’s profit motive can take us so far in meeting our needs.  At the end of that road it is only the government that can pick up the task of providing for the rest of our needs.

Take the case of hospital beds in the US.  We currently have 2.8 beds per 1,000 persons, much below what is available in other advanced countries.  This may make sense as a cost containment solution at the level of each hospital system.  But it doesn’t from a public policy standpoint in cases of health emergencies.  Think of this.  The US has more beds for its inmate population (about 2.3 million) than it has to take care of its sick people in a case of a pandemic like this one.  Not to mention, of course, the deficit in other medical equipment.

We need to understand that the government and public sectors have distinct priorities and missions.  The bias in favor of private sector solutions and less government has brought us to where we are now and will continue to be the root cause of future failures.

Preparedness matters.  The lack of preparedness and quick response to the coronavirus pandemic in the US is a direct consequence of the mantra “a smaller government is a better government.”  We now find the hard way that fighting a tiny virus requires a really big government.  Assigning a secondary role to government to address local and national problems translates into less monetary, administrative and professional resources and, hence, delayed and inadequate responses.  There is no way we can sugarcoat the current inadequacy of tactical and strategic planning on part of the federal government to face this crisis.  A country that is obsessed with all kinds of statistics and data cannot gain a reliable knowledge of the extent of the pandemic because of our failure to test in big numbers. *  We have failed to measure and count the one thing that right now matters the most for how we plan our economic and medical response to the crisis.

Fiscal responsibility matters.  When the government passed the $1.5 trillion tax law in 2017 amidst a period of economic growth and falling unemployment, wiser voices warned that we were over-straining the debt capacity of the country and leaving very little room to fight the next economic crisis.  As predicted by experts outside the Administration, the last three years annual fiscal deficits have ballooned to $1 trillion and the national debt has climbed by a similar magnitude.  And now the chicken has come home to roost.  The additional $2 trillion (and most likely much more) of debt we have to assume finds our national finances without any slack for more debt.  The money that is truly needed now will bring the indebtedness of the federal government to unprecedented heights for a peace time economy.  Who will pay? (See below.)

Economic inequality matters.  Prior to the coronavirus crisis we were told that we have a thriving economy.  But for whom?  First, let’s state the fact that average GDP growth has not exceeded in any significant order that of the pre-2017 years, let alone the President’s uninformed assurances for growth much higher than 3%.  Instead the tax cuts created additional deficits and debt with the vast bulk of the benefits in after-tax income and stock market gains going to the top 1 to 10%.  Despite a very low unemployment, significant segments of American families are exposed to financial fragility.  Forty percent of Americans do not have more than $400 to spare in an emergency and credit card delinquencies among young Americans are rising.  Average savings in 401K plans are also woefully low for the size and growth record of the American economy. **  What does this terribly skewed distribution of incomes and wealth mean?  It means that this supposedly thriving economy does not have the capacity at the household level to endure a dislocation of jobs and money in times of crises.  As a result, we need much larger stop gap rescue measures, as now, to avert the economic collapse of households.  So here is the shortsightedness of the trickle-down theory.  It prefers to create immense wealth for the few instead of economically empowering all citizens so they can become better masters of their economic fate.  Ironically, the conservatives’ trickle-down theory betrays the spirit of individual independence they espouse by creating what amounts to a modern-day type of economic serfdom by keeping large numbers of Americans in a perpetual state of financial fragility. ***

Who pays matters.  Who do we think will pay for the exploding fiscal deficits and debt?  Our children and their children and grandchildren, of course.  And we know why.  Because over thirty years the effective tax rates on high and very high incomes has declined without producing enough economic growth to sustain or boost tax revenues.  This has left the federal and state governments with fewer fiscal resources to prepare us for emergencies and minimal capacity to absorb economic shocks without resorting to extreme fiscal measures.  If we have any sense of fairness and social solidarity, Congress should soon adopt legislation to impose a tax surcharge on high incomes and later undertake a radical restructuring of the tax code to restore robust funding of the government so it can do its own job, the job the private sector is not designed to deliver.

The ultimate lesson in a crisis is that’s when a nation needs a leader.  A leader who accepts responsibility, displays humility before the enormity of the challenge, shows compassion, knows how to inspire the people, and gives hope based on facts, reason, and the resoluteness of the human spirit.  I wish I had that leader.

* As of March 25, the number of tests in the US stood at 418,810 whereas it stood at 357,896 in South Korea.  South Korea has a population of 51 million people compared to 330 million in the US.  Therefore, on a per person basis, the US is behind by an order of 6.  And, of course, it took longer for us to ramp up testing than it took for So. Korea.  Without extensive testing, we cannot plan our way out.

** The financial fragility or state of American households has been tracked by the Federal Reserve since 2013.

*** If the word “serfdom” bothers anyone, I suggest reading the main editorial of today’s (March 27, 2020) NYT that describes how several European countries are handling the crisis-induced unemployment.  Instead of boosting unemployment benefits, these countries committed to compensate firms for keeping their employees on the rolls.  It is much more dignified, and eventually productive, to keep people employed than laying them off.

This week I was supposed to be in a warm and sunny place visiting and having good time with friends.  But the plans were cancelled and now here I am feeling duty-bound to write one more blog post.  I could take the week off as originally planned but I don’t want to surrender too much to this bug.  It can control my movements but not my pen, oops sorry, my keyboard.

Fighting a virus is so frustrating.  It is not big enough to slap it or whack it.  You can’t hose it down or blow it away.  Invisible and tiny infiltrates everything.  We close the door behind us as we come home and we may carry it inside with us.  We look out the window wondering when it will invade our privacy but we can’t see anything.  We wash our hands but it could be on our clothes and shoes.  How do you escape such an intruder and stalker?

I could go on like that listing all the frustrating thoughts that come to mind, but I prefer to write down some loftier (oh, just poetic license) thoughts I made as this virus is taking more and more of a foothold in our daily lives.

We are first and foremost biological creatures.  This is a virus attacking a species.  It affects us, sickens us and kills us biologically.  Time for us to think of ourselves as a species not as individuals or groups, or nations.  It is in such moments we realize we are one and the same species and we need to defend us together, grieve together, recover together.   We humans have done a horrible job exterminating countless species.  This is the moment to reflect what that means when we ourselves feel that existential threat.

We are also social creatures.  To endure and overcome the challenges and risks of our biological journey on earth, we created art, and literature, and culture and religion to find beauty and meaning as an antidote to our fears and the anxiety of our eventual end that we, better than any other species, are able to contemplate.  But none of these we do alone.  We share and enjoy them together.  It is in sociality our species has found an instinct that increases our chances to survive.  But now this social life we value is under attack.  Our natural inclination to socialize puts us at risk and could kill us.  Imagine if the biological balance between us and other forms of life were such that we had to give up our sociability.  We would no longer be able to learn from each other or develop empathy for strangers.  And we would not be capable to trust others to care for our offsprings, to feed us or defend us.  We would not be the same species.

Trust matters.  Nothing is more important in our social life than trust.  It keeps us together, establishing expectations of reciprocity, fairness and solidarity.  Those who betray our trust we consider unworthy of interacting with us.  In serious matters, societies often ostracize those who violate the unwritten rules of trustworthiness.  In cases, like the one we face now, when we have to engage in collective behavior as pluribus not unum, we need to trust those who have the responsibility to lead the common effort and fight.  We expect of them reliable information, transparency and unvarnished truth.  As harmful as this virus is, it gives us the opportunity to judge the trustworthiness of our leaders and inform ourselves in future political decisions.

Science matters.  Thanks to our developed brains, we humans can learn about the laws of nature and develop technologies and responses to natural forces.  That helps us gain some – not total – control over our fate.  We don’t have to wait and see what the course of the virus will be for our survival.  We can counterattack it biologically as well.  Funny, though, that our reliance in science increases when we face a clear and present danger that threatens us now not down the road.  We are wired to have this strong response to present dangers.  It would be even better if we could overcome our relative indifference to future risks, like those lurking due to climate change, and let science guide us.  Being selective in our acceptance of scientific knowledge is not wise.

Character matters.  The virus has the potential to kill us one at a time.  But it will kill less of us if we show solidarity.  A person’s character is tested in crises.  We have to do the right thing not only for us but also for our fellow humans.  We have to sanitize, stay home and keep our distance from others.  We are not used to living like that.  Our contemporary life is full of recreation and entertainment opportunities that take us away from home and mix us with many people, often strangers to us, in all sorts of interactions.  How can we suspend this life style without feeling being out of our skin?  But we need the temperance and perseverance to do it.

We have become a complex species.  Not just a host to billions of biological cells, but also social players as well as cultural and spiritual beings wielding technology and interacting politically to organize the path of our finite lives.  As such we can suffer or perish in many different ways because of our multifaceted nature.  Biologically, socially, technologically, culturally, spiritually.

Or we can marshal all these constituents of our species and survive one more time and try again to become a better species for ourselves and the rest of the natural world.

Every time I hit the “I Agree” tag on a commercial, government or health care web site I have mixed feelings.  One is positive because agreement will give me passage to a flow of information between me and the site owner.  The other is trepidation because I am uncertain how my personal information will be used.  These hits occur by the millions every hour.  With every hit, the volume of data under the control of the various data aggregators mushrooms.

Never before, humanity as a whole has given away a valuable good (in this case private personal information) at such a huge scale in return of benefits we can hardly grasp and without any competitive mechanism that would give us some bargaining power.  Once our data are collected, they are compiled, spliced, diced and analyzed to yield as much information about our identity, habits and relationships.  Then the scary part comes: the manipulation of our emotions and the programming of our next moves.  From my reading on the subject, I have come down to understanding this business as a three-stage process: data collection; information processing; manipulation and programming of human action.

The private data industry is nothing resembling the perfect competition of Economics 101 textbooks.  It is highly oligopolistic and anti-competitive.  It is part of what Shoshana Zuboff (NYT Jan. 26, 2020) calls Surveillance Capitalism.  It is concentrated in the hands of few players, the most formidable being the Big Four: Amazon, Google, Facebook and Microsoft.  The private data industry works like a natural monopoly.  That is, the firm that first achieves a critical volume in its business is the one that keeps expanding thwarting competition from others.  As someone put it, “it doesn’t make sense for you and your friend to be on different Facebook-like platforms if the two of you cannot communicate.”  But these giants don’t leave things to chance.  Once a potent start-up rival appears on the horizon, they buy it out.  They devour their competitors as if they are playing Pac Man.

According to Zuboff, the concentration of private data leads to epistemic inequality, that is, an uneven distribution of knowledge.  A few large players know a lot more about everyone and everything than the rest of us.  And because private information about us can be gleaned from the release of data by our relations, we have no idea what the data aggregators know about us.

I have limited footprint in social media but from my occasional online buying I know that each time we buy an item, we are prompted to consider other items that presumably appeal to our taste or that of cohort groups.  By analyzing our information, data aggregators can infer our preferences and influence our choices.  Now, if such firms are really able to coral large numbers of consumers to buy their suggested goods and services, you can plan the production and sales of manufacturers and vendors.  The until a few years ago unpredictable consumption patterns of millions of people now become a little more predictable.  Project this line of data-information processing-manipulation longer and longer and you arrive close to a centrally planned economy.  With hindsight, we can say Lenin misspoke when he said “The capitalists will sell us the rope with which we will hang them.”  Instead, he should have said “The capitalists will sell us the data to plan them.”  Had the Soviet Union survived thirty more years, this could have possibly happened.

Corporations are, after all, mini planned economies.  One of the first things I learned as an MBA student was the value of planning.  To plan what millions of consumers will purchase is a very inexact science.  But if you have access to information and behavioral buying patterns provided by big data aggregators you can reduce the uncertainty to manageable levels.  This means corporations have a big interest in manipulated and programmed activities which makes them natural allies of the data aggregators.  This means there is a strong lobby willing to resist serious government oversight.  The US Congress, for one, has been quite inactive in relation to this matter.  Data collection and oligopoly on information and knowledge are, however, too important to ignore for the health of an open economic and democratic society.

These thoughts are echoed in the article “Can technology plan economies and destroy democracy?” by Benedetto Cristofani in the Christmas 2019 edition of The Economist.  This article as well as Zuboff’s piece in the NYT and another related article by Yuval Harari (author of Sapiens) in the October 2019 issue of The Atlantic make the same points.  Namely, exploitation of private personal data diminishes individual autonomy.  Individual autonomy is based on diffuse and decentralized information.  When information is concentrated in the hands of a few players, individuals can be herded toward behavior that is not necessarily optimal to them.

Ironically, surveillance capitalism is the perverse result of a democratic system averse to regulation of large business as it slowly slides toward economic and political oligarchy.  As such, surveillance capitalism is the exact opposite outcome of what libertarians, the defenders of individualism, would advocate for but are unwilling to block.  In this new world, the arguments of unfettered market evangelists, like the Austrian Economist Friedrich Hayek and the American economist Milton Friedman, that free markets and democracies are superior to command economies and centralized political systems thanks to the free flow of information and knowledge are severely challenged.  Private data in the hands of Artificial Intelligence could move the “invisible hand” more efficiently than free markets.  But this “invisible hand” would be waved by a centralized cabal not by multitudes of autonomous individuals.

The end result of these possibilities and warnings may exaggerate the capabilities of information technologies and lie years ahead.  But so did a lot of other transformative human inventions at the time they were imagined.  So, it’s not too early to start reflecting and deliberating on what lies ahead.

Are you frustrated that your Republican or Democrat friends – depending on your affiliation – don’t understand you?  There are some surveys I recently saw that made me again think of the current state of our two-mindedness.

So, let’s ask:  What makes the people of a country disagree on important issues?  One reason among my top candidates is that the national narrative no longer works for everybody.  Narratives are useful because, like glue, they keep societies together under one vision informed by common historical experiences and shared values.  But narratives may have a shelf life.

In the American narrative, ambitious individualism and strong work ethic lead to success.  That seemed true in a simpler economy, less based on knowledge and technology, and less dominated by big corporations.  There is no longer a Wild West to conquer or fields and prairies to turn to wheat fields and ranches.  Individualism is now tramped by the methodical advance of corporations organized, systematized and programmed by the McKinseys of the global ecosystem. These days, a big retailer opens in your area and wipes out your life as a proprietor.    A Chinese young man leaves his village and heads to Guangdong’s industrial hub and there goes your assembly line job in Toledo Ohio.  The narrative was careful to promise equal opportunities not equal outcomes.  But this is no longer true.  Opportunities still exist but like other goods are concentrated in fewer hands.  You were told that merit is your ticket to success but meritocracy is challenged every day by the entitlement ethos of those who can afford to give their own a leg up by all means.  So, not every American buys into this narrative.

Another suspect in bringing people apart is partisan politics.  Parties have an interest to promote an “us versus them” mentality.  Tribalism keeps party supporters in the fold.  Parties can still weave ideas from the same national narrative but using different versions.  To the Republican base, the national narrative remains alive if its protagonists are mainly European descendants.   To the Democratic base the narrative remains alive no matter what the ethnic background of the new Americans is.

And then there is a third suspect of the two-mindedness.  It is our instinctive and genetic predispositions that along with our life experiences shape our political preferences.  At the very core, we are not more liberal or more conservative just because we are indoctrinated in partisan ideas and by culture.  We are liberals or conservatives because we already have what it takes to be one or the other.  Cultural experiences may moderate or intensify our original tendencies but do not change them.  We all operate under the same set of instincts but we are not all equally motivated by these instincts.  As a result, our behavior and choices differ.

The genetic story predicts that liberals care more about the human condition of others and value equality in outcomes.  To conservatives, care is left to the individual and fairness in the distribution of rewards has to be proportional to the effort.   Therefore, a narrative of merit justifies the uneven split of spoils.  A liberal is less loyal to the group’s values because individual freedom for experimentation matters.  A conservative, on the other hand, prides loyalty to the group.  Hence, conservatives are keen on nationalism and security.  Liberals respect authority and hierarchy less than conservatives.  Sanctity and the risk of degradation matter less to liberals.  Conservatives are more repulsed by impurity of life styles and (national, religious or tribal) symbols.  Liberals resent top-down rules imposed by governing bodies.  Conservatives are more inclined to accept, even, impose common rules to all.

Jonathan Haidt uses this matrix of moral foundations to explain the divergent views of Republicans and Democrats.   The Pew Research Center periodically publishes surveys on partisan views.  Its recent surveys show that Republicans and Democrats are far apart how seriously they think of climate change and environmental protections.  Is this because Republicans outright discard science?  Isn’t rather plausible that Republicans are more innately averse to experimenting with a new way of life under environmental and climate-driven constraints?  The same large discrepancy also applies to how Republicans and Democrats see guns and the military.  Both have to do with how effectively a person can protect his group (i.e., his tribe) and impose authority.  Democrats are less keen on these security-related issues.  Race and immigration also divide Republicans and Democrats, most likely because sameness of the other matters to conservatives more as a way of promoting social cohesion and loyalty.  Poverty leaves Republicans less concerned because they take it to be the result of lesser effort and merit and, hence, a fair outcome.  Democrats see more the hand of unfair distribution and, thus, they want to fix it through social programs.

The NYT recently published the results of an international experiment regarding how liberals and conservatives think and act.  When asked about poverty, three quarters of American liberals and non-Americans (liberals and conservatives) voiced concern about it whereas only a quarter of American conservatives did so.  Government policies to alleviate poverty were also supported by American liberals and non-Americans by a wide margin contrary to their limited acceptance by American conservatives.  Similarly, American conservatives were much more likely to justify poverty on such factors, like ability, hard work and risk taking, thus, suggesting that rich people deserve what they earn, in line with the American narrative regarding the positive link of wealth to merit.

But here is the surprise.  When the participants were asked to share with others an extra bonus income received randomly, American conservatives were equally likely to split it fairly with others just like the liberals.  When participants were told the extra income was due to greater effort, only a minority of American liberals and conservatives split it with less “productive” participants.  This means American liberals are not unwilling to accept merit as a cause of income inequality.  And conservatives were found to give to charity with the same frequency as liberals, suggesting they are not insensitive to poverty.

This experiment shows that national and party narratives are powerful influences of peoples’ ideology.  American conservatives do believe the traditional American narrative that links success to hard work and ability.  That’s why they are reluctant to support more taxes and social programs to reduce poverty.  However, the power of the naturally selected instincts of reciprocal altruism and fairness do manifest themselves when it comes to acting out.

It seems to me that our common biological origin binds us more than the divergent ideas we have as to how we can make our condition better.

Several months ago, I wrote a post titled “Capitalism As A Cocktail” that argued that the American economic system is a hybrid of a lot of capitalism with some – yet crucial – social programs (Social Security, Medicare and Medicaid to mention the most popular). We basically rely on the income and wealth generating capacity of our capitalist economy to produce the resources that support the social programs.

The point we often miss is that the structure and performance of our capitalist economy is not free of consequences for the overall health and stability of the American society and the ability of government to manage social welfare programs.  Therefore, we all have an interest in ensuring that the capitalist part of our economic system delivers outcomes that are consistent with having a financially safe, well-educated, healthier and socially content populace.

Unfortunately, this is not what we have now.  Despite an unprecedented, in its duration, growth of the economy, several indicators show that in education, health, and social advancement and contentment we have a bi-polar system in which the lucky few who reap the lion’s share of incomes and wealth have advanced but not the many who have been left financially behind. *

It is not surprising, therefore, that we currently have strong populist movements on the right and the left that clamor for righting the unequal distribution of economic and social gains.  The respective solutions of these movements, more inward and nativist on the right and more socially activist on the left, are challenging the economic orthodoxy of the two major parties and their respective power centers.

Besides the economic populists, a growing number of successful business people and true capitalists, from Bill Gates of Microsoft to Larry Fink of Blackrock, are voicing their concern about the current course of American capitalism.  Therefore, the pressure to move to a more sustainable kind of capitalism is all around us.  To put it differently, American capitalism is facing an identity crisis.  The cocktail has to be mixed again to give it a more popular taste.

So, how did we end up with the present kind of capitalism?  This is how I see its post-war evolution.  The recovery of the civilian economy after the WW II saw the rise of corporatism in the hands of all-powerful managers.  The fast gains of the American economy gave them the wherewithal to accommodate the interests of labor unions.  This social contract kept both the aggregate pie as well as its slices growing for workers, businesspeople and shareholders.  That was the period of managerial American capitalism.

This economic compact came to an end under the pressure of foreign competition, especially from Japan.  By the early 1980s, American corporations had realized that their complacency had left them exposed to aggressive competition from nibbler foreign rivals.   Private investors also realized that shareholders were not getting maximum value on their investment.  Soon, corporate raiders, like Carl Icahn and T. Boon Pickens, ushered in a period of takeovers and leveraged buy-outs that brought firms under the control of more profit-oriented owners.  Now factories would close not because of slow business but because they had to be moved in lower-cost areas, though, still inside the US.  The drivers were greater economic efficiency and value creation.

Corporate takeovers and leveraged buy-outs, along with the corporate restructurings they effected, were accepted as the epitome of “creative destruction” that allows economic resources to be moved to their best use.  Much less attention was paid, though, to their costs for the communities and individuals that were caught on the losing side of restructurings.  The emphasis on generating value gains at the firm level – mostly captured by shareholders – is at the heart of the “shareholders first” capitalism.

The third stage of American capitalism was the outgrowth of globalization and digital technology that made possible the management of global operations.  Now the corporate restructurings could be done on a global scale.  American communities and workers would no longer lose to rivals within the US; they would also lose to China and other low-cost countries.   Thus, the resentment against business dislocation and loss of jobs mutated from the parochial to the nationalist level.  As American workers were losing because of the global rearrangement of the economic system, income and wealth inequality started to become glaring.  The knowledge economy started to bifurcate the economy into sectors of high incomes and sectors of low wages.  Among 21 OECD countries the US has both the highest income inequality and highest compensation of elite professionals.  On top of that, tax rates and tax loopholes became extremely favorable to high income earners.  As always, high concentration of wealth goes hand-in-hand with high concentration of political influence and power.  The result is the “plutocratic capitalism” we have today.

The current American capitalism ascribes to several questionable principle.  The first is the utilitarian principle that what matters is aggregate economic growth; if winners gain more than losers lose it’s fine.  A second related principle is that as long as all income groups gain, disproportionate gains are fine; in other words, individuals are strict wealth maximizers and don’t care about the fairness of the distribution.  The third principle is that financial incentives (including state help though taxes, subsidies, etc.) should be allocated with priority to the job creators, i.e., firm owners and investors.  This is the trickle-down principle.  The fourth principle is that the cost-benefit analysis should be done at the firm level.  That leaves the side costs of “creative destruction” on communities and individuals out of consideration.

The problem is that these are principles without empirical support or validation.  The utilitarian theory has its problems and people are not strict wealth maximizers; fairness does matter.  The trickle-down principle has not worked.  And ignoring the costs of “creative destruction” can harm social cohesion and trust.

Moving toward a more inclusive and socially responsible American capitalism requires that we seriously rethink its current principles and purpose and we return it to the service of society.

*  A good account of how America has fallen behind in various indicators of economic and social progress can be found in Winners Take All by Anand Giridharadas.

During our history on earth, our endowment with brains that have grown in sophistication over time has been a boon and a bane.  Our brains have produced ever more effective technologies and conceived captivating myths, ideas and beliefs.  All have fallen prey to our urge to prevail over our natural environment and fellow humans.  For all our more advanced development relative to other species, we humans seem to arguably be the least tolerant to nature and our own species.

Just read Yuval Harari’s Sapiens to grasp the scope of devastation exacted on the fauna and flora of this planet by our ancestors – a devastation continued to this day by us.  And our history books are no less replete with wars, massacres and barbarities people have committed upon other people.  In my posts, I often refer to and decry the harm that religious zealotry and intolerance has inflicted on many people over the centuries.  But to focus only on religion as a root of aggression is a narrow reading of history or a poor understanding of the full scope of the sources of intolerance.  For example, religious people point out that secular movements have also produced great human suffering.  They point, in particular, to human decimation committed by the Jacobins following the French Revolution, imperialism and colonialism, Nazism and various communist regimes.

What is common behind religious and secular human catastrophes is the presence of some Big Idea and the determination of its devotees to evangelize and impose it on all people.  Is it possible that all these ideas – religious and secular – become disastrous because they fail to rely on reason? Not really.  Jacobins embraced reason, they even built temples to celebrate reason.  The genetic theories and policies of Nazis were based on reasoned science, though, in reality, it was pseudoscience.  Because reliance on reason and science as antidotes to superstitious religiousness has again emerged as the safe path to a better humanity, it is wise to stare at both with some skepticism before we commit new mistakes in their name.

Two books I recently came across call us to think more open-mindedly about the human nature and the causes of our troubles.  The first is Seven Types of Atheism by John Gray, a retired professor of Oxford and the second is Believers: Faith in Human Nature by Melvin Konner, a professor of anthropology and medicine at Emory University.

The gist of Gray’s book is that any idea or belief (religious or secular) that envisions an unique and universal “end of history” where all humanity finds spiritual salvation, peace or harmony (whichever state you prefer) puts itself at risk of becoming oppressive and very likely on the path of aggression in order to bring all of us into compliance with its tenets.  For Gray, the various types of atheism he identifies are not different from religious beliefs if they also adopt the view that there is an end of history common and good for all humanity.

Christianity preaches that human history will end with the day of judgment when the pious will be separated from the sinful.  Because to Christians saving one’s soul is a universal good, proselytizing and converting the heathen does God’s will.  Millions of people have suffered for resisting this end-of-the-world vision.  Islam with its own salvation story also has to account for its own spread behind the sword.  Nazism believed that the end of history was a eugenically cleansed humanity that is represented only by the Arian race.  The concentration camps bear witness to the pursuit of this belief.  Russian Bolsheviks and China’s Maoists believed that communism would bring social harmony to the human race.  Millions died before the pursuit of this idea was abandoned.  Believers in reason and science also have their own blissful destination for humanity by placing too much faith in the capacity of humans to be rational and thus able to replace the comfort of religiousness with the certainty of reason and science.  In pursuing that goal, atheists can become as illiberal as the religious people they oppose.

Gray’s premise is that the evolution of nature moves without purpose other than its preservation.  Each person seeks and finds his or her own meaning by various spiritual, intellectual or materialist means.  To proclaim that one purpose, one end of history is good for all of humanity is antithetical to how nature works.  To him “live and let live” is what can keep us from oppressing each other.

Melvin Konner, an atheist himself, relies on evolutionary analysis to show that religiousness is not incompatible with human nature.  Although there is no God gene that predisposes many people to spirituality and religiousness, a combination of genetic and cultural factors makes religiousness a very human condition.  Therefore, the polemics of new-age atheists, like Richard Dawkins and Sam Harris, directed against religion, Christianity in particular, miss the point.

This is how Konner summarizes his arguments based on scientific evidence.  Religious inclinations and capacities are built into the brain, though, without uniform intensity across all people.  These inclinations start to develop in childhood and indoctrination does not explain religious development.  Faith development is not the same as moral development.  Religion evolved by natural selection.  This means that those genetically inclined toward spiritual or religious experiences were helped to manage fear, grief, and existential loneliness, and through bonding with others in acts of altruism, common defense and cooperation developed a stronger advantage for survival.

Because of this genetic connection and the power of culture, religion’s functions cannot be replaced by science, arts, or secular ways of life.  Religious believers which in Thomas Jefferson’s famous dictum “do not pick our pockets or break our legs” are entitled to enjoy freedom and tolerance just like atheists and non-believers are.

With arguments and evidence, Gray and Konner admonish us to recognize that though one species, each one of us seeks the enjoyment of life by taking different paths.  Forcing humanity toward a single final spiritual, religious, or material destination can only cause us friction, suffering and unhappiness.

I saw something several days ago that brought back to my mind what George Will, the conservative commentator, had said in a college commencement exercise many years ago.  What he said was something like that: “There are people who have values and then there are people who have virtue.”  He proceeded to say that one can argue Adolf Hitler had values (he valued the idea of the (supposed but false) superiority of the Arian race) but George Washington had both values and virtue (he fought for the independence of his people).

And so it is about freedom.  We praise it as one of the greatest values; but do we use it with virtue?  Freedom is like a floodgate.  It engenders so many other things.  With freedom we can be moral agents, that is, capable to demonstrate our morality by choosing between good and evil.  With freedom we can have self-determination by choosing to be what we wish to be.  And with freedom we can choose big and important things (whom to love or vote for) or small and pedestrian things (where to shop) that make life a personal experience.

But freedom has its challenges.  How we treat our freedom and that of others is one of them.  We often spend more energy trying to limit the freedoms of others than ensuring our freedom becomes an instrument of goodness.  My two previous posts treated this issue.  John Locke and the Enlightenment helped make the idea of individual freedom a fundamental value of the West and as such it made its way into the political declarations of the French and American Revolutions.  How ironic, though, that Western civilization, which so much prizes the ideal of freedom, has been responsible for the oppression and coercion of countless people around the globe.

Another challenge is this.  Freedom as a value can collide with freedom as a virtue when the right of freedom obtains a fetish power to the extent an individual considers the right to be superior to the responsibilities it entails.  This seems to be more of an affliction of western societies than Asian societies which value social harmony and goals, even at the expense of individual freedom.  Americans are perhaps the most representative of Westerners in their ardent advocacy of the right of individual freedom.  But how well do we use this right?

What triggered these thoughts about freedom was a scene on TV several weeks ago.  It was when advocates of gun rights demonstrated in Richmond, Virginia.  A reporter asked a few of them what brought them to the rally and their feverish reply was “to protect our right to carry guns.”  I juxtaposed that reply to the reality of gun ownership and its consequences in the US.  Americans own about 393 million guns or 46% of all the guns owned by civilians in the world.  Gun violence and gun-related suicides are major causes of death in this country.  Every year dozens of people from students to church-goers and mall-shoppers are gunned down in acts of mass shootings.  International statistics draw a clear association between number of guns and gun-related deaths.  Yet, gun enthusiasts, with help from NRA, are unrelenting in their defense of unregulated gun ownership no matter how much misery it causes the society.  Is this virtuous defense of freedom?

On a different level, Americans are abandoning smaller cars in favor of pick-up trucks and SUVs whether they truly need them or not.  Car manufacturers in the US are closing down lines for sedans to concentrate on the higher-margin SUVs.  How does that contribute to clean air, to road maintenance, and the climate?  If we consume in order to “keep up with the Joneses” instead of our real needs, how virtuous is this use of freedom?

And then, a piece of news that really shocked me.  The Watkins College of Arts in Nashville had to merge with another local college, Belmont University.  But Belmont happens to be a Christian institution that requires all its faculty and staff to be Christian.  So Belmont’s provost announced that the non-Christian faculty of Watkins College could not continue working at Belmont, though, later Watkins’ president said that some faculty would be considered for employment.  The artistic expression of the transferring Watkins’ students would also might have to be modified to make it appropriate for Belmont audiences.  Again, it is in the name of freedom, here religious freedom, that an institution practices a form of discrimination.  First, of all, how Christian is this?  And secondly, is it a virtuous application of freedom?

Down the list of abused freedoms, we have the freedoms of corporations.  They clamor for freedom to operate without regulations.  Fine.  We know regulations add to the cost of doing business and that cost is passed on to the whole society.  But are corporations virtuous users of business freedom?  I used to tell my business students that if they wished to keep regulation and its burden down, they should behave as ethical managers.  Those executives that abuse corporate freedoms spoil it for all businesses as society finds it necessary to regulate business behavior.  Their non-virtuous use of freedom is a cost to all of us just like the Richmond guys’ enthusiasm for free guns.

And because this is a seminal week in the political history of the US, I have to talk about freedom in the acts of politicians.  The Republican senators found themselves in a rare moment of history.  Many of them could have acted as free individuals, true to their privately expressed admission of wrong doing on part of the president, and free of the fear of risking their political future.  The excuse that Democratic senators might not have behaved any different is like telling a cop that you should not get a speeding ticker because everybody else drove as fast as you.  In serving in a court you should take care of both, procedural justice (fairness in the rules of the game) and distributive justice (fairness in the verdict).  All but two Republicans decided to sacrifice procedural justice (not calling witnesses) so that they would not face a much harder decision in distributing justice.

Many more examples could be cited.  The point is that to claim and defend the right of individual freedom, as we so loudly do in the West, is only half of the solution if it is wasted.  And the danger is that there always are out there those who proclaim to know how to make freedoms virtuous but there is no guarantee the way they understand virtue is the same as each one of us does.