Greed - I

[They say age mellows a person. I expect the statement applies to me too. Especially so as far as my life as a professional economist is concerned. There was a time when all the economics I wrote was disfigured with endlessly many mathematical equations and symbols. It had no value outside the limited confines of my profession. For the past few months though, I have begun to ask myself whether I should not also try and communicate people whose welfare the subject matter of economics is concerned with. Unfortunately, I haven't been able to part company altogether with the ugly, frightening expositions. But when I get a chance, I try to don a friendlier hat. This is what happened when I was asked to address a Conference of academic economists at Jadavpur University, Kolkata last week. I knew that I was facing an audience which was used to my Dr. Hyde personality. But for a change, I tried to turn Dr. Jekyll. I am sharing what I did with IL now. Given the length of the lecture, I will break it up into a few parts. I don't expect to be read by too many. But it doesn't upset me. I attract few readers whatever I write. Can't blame anyone for me being uninteresting!! ]

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It is more than an honour to be invited to speak at this Conference and I am thankful to the organizers for their kindness. At the same time, however, I am embarrassed to be assigned this task, given especially the fact that I retired from academic service around three years ago. While I have been around here and there since then, I cannot claim to have been engaged in journal oriented formal research. As a result I do not have more than vague generalities to offer to this audience, verging on a discipline that is best described as Economic Philosophy. It is a subject that Professor Joan Robinson wrote on, but in which I have no training at all.

Nonetheless, like most economists, certain philosophical questions bother me as I observe the economic events that surround our daily lives. And one such issue concerns the concept of greed against the backdrop of capitalism. Put simply, my question boils down to: "Should greed be considered sinful in a society that has opted for the capitalist mode of production, a mode of production for which maximization of profits constitutes the driving force?"

The question arose in my mind for the first time following President Barrack Obama's swearing in ceremony. The President held two factors responsible for the devastation that visited the world's economies following the subprime crisis. The first was 'greed' and the second, a collective failure to take hard decisions. I had written a short piece for the media after hearing his speech and I will use parts of that article here today. However, I will supplement it with ideas that came my way since then.

What was the precise significance of Obama's twin accusations?

Let us begin with the charges in reverse order. There are two components in the second of the allegations that call for clarification, 'collective failure' and 'hard decisions'. Which collection did the President have in mind? One suspects that it excluded the President himself. It could not include the man in the street or the electorate either. And this made the word 'collective' sound like a euphemism of sorts, describing the Bush government.

Whoever may be held responsible for soft pedalling, the President was silent about the nature of hard decisions that, according to him, had been avoided. He could well have been alluding to the lack of adequate market controls and the fraudulent transactions which it engendered. And if this is the correct interpretation of his statement, then it is but a short step from here to 'greed' or what he identified as the villain of the piece. He seemed to be implying that excessive greed leads to violation of man made rules as well as Church made ethical codes of behaviour.

Some believe that the world's economies are now more or less out of the doldrums after being exposed to the massive doses of fiscal and monetary incentives. The policies followed are being viewed as a return to Keyensian prescriptions. And since Keynes too was concerned with a threatened collapse of the capitalist system, I shall attempt to review Keynes' own ethical stand on the notion of greed vis-à-vis capitalism. It is in this connection that I will borrow heavily from Robert Skidelsky's recent book, Keynes: The Return of the Master. Skidelsky has earned accolades for his biography of Keynes and in the Return of the Master he has tried to probe deeply into the man's mind to try and understand his philosophical attitude towards capitalism itself.

Going back to President Obama, greed of course is a strong expression, bearing as it does the connotation of sinful behaviour. To the extent, however, that one is sitting on judgement in a market driven society, a paradox of sorts seems to arise. In this context we cannot fail to recall one of the most frequently quoted sentences from Adam Smith's Wealth of Nations: "It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest." Smith of course may not have had market economies alone in his mind when he wrote these lines. It was a broader statement indeed, for he was explaining a natural propensity for barter amongst civilized human beings. The latter acquire from each other objects for their sustenance not by brute force, but through exchange based on mutual consent. Moreover, the consent in question is guided by self-interest. Or, as Smith points out: "Whoever offers to another a bargain of any kind, proposes to do this. Give me that which I want, and you shall have this which you want, is the meaning of every such offer ..." (One wonders of course if British colonial rule conformed to Smith's perception of civilized behaviour.)

While Smith's notion of self-interest cannot be identified with greed by any means, the dividing line between the two concepts turns imperceptibly thin once we move on to market driven economies or capitalist societies. For such societies, profit being the measuring rod of success, even without Marx's insight, one ought to be able to appreciate the fact that more profit is necessarily preferred to less. Or, to link it to Smith's wisdom, a capitalist's self-interest lies in profit making and it is quite pointless to set an upper bound on the volume of profit that capitalist enterprises might desire. When an excess of revenue over cost constitutes the bull's eye, the larger the excess, the happier is the man taking his aim.

It is the same profit that is recycled back to increase the pool of capital, thereby making self-expansion of capital (to use the Marxist expression) the ultimate objective of capitalist production. Entrepreneurs in charge of business enterprises merely ensure that this objective is fulfilled. It might seem like a contradiction therefore, at least for societies that have embraced the basic tenets of capitalism, to identify endless profit seeking as an instance of sinful greed.

What makes the paradox even more obfuscating is the infatuation displayed by contemporary policy makers across the globe towards growth. Economies aim for super fast growth-mobiles to ensure that national output grows faster than population, thus raising the per capita output and income. This is a necessary condition at least for improvement in social welfare, even though unequal distribution of output amongst the populace continues to be a thorny issue. Leaving alone the distribution dilemma, which for societies like the <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-comffice:smarttags" /><st1:country-region w:st="on">US</st1:country-region> is far less of a problem as compared to developing economies like <st1:country-region w:st="on">China</st1:country-region> and <st1:country-region w:st="on"><st1lace w:st="on">India</st1lace></st1:country-region>, the natural question to ask is how the growth objective can be addressed within the framework of market economies.

The answer clearly lies in capitalist competition. Individual capitalists are ever prepared to outdo each other through cost reducing and profit improving technological progress. With improvement in technology, which is itself motivated by the lure of higher profit, larger output is producible without commensurate increase in costs and this in turn causes the much revered growth juggernaut to start rolling. In the process, some gain, but many lose simultaneously. The battlefield is literally strewn with bloody, disfigured corpses. From a human perspective, it is not a desirable objective perhaps. However, it is an inevitable consequence of agreeing to move ahead with the 'free market' paradigm.

To proceed a step further, technological progress cannot be expected to remain confined to inventions like James Watt's steam engine alone. As economies progress, the tertiary or service sectors assume significantly greater importance compared to primary or manufacturing activities. And it is here that production techniques as well as technical progress begin to appear far less transparent than solar electricity or nuclear powered submarines. A very large part of the service sector is built around financial institutions, including commercial and mortgage banks, share markets and so on. More often than not, the only tangible objects that are produced and exchanged are sheets of paper. Indeed, with the phenomenal growth of internet services, a great deal of transactions occurs in paper-less virtual space, well out of reach of the final beneficiary or loser from any set of transactions.

And, as experience has shown, unprecedented sophistication in financial instruments, derivatives, derivatives based on derivatives, derivatives based on derivatives based on derivatives, ad nauseum, which themselves are instances of technical progress in financial service sectors, mystified all parties involved to an extent that ultimately led to a collapse.

Does it make too much sense to stick to the market logic and call it evil at the same time. If markets are wicked, then should they not be dispensed with?

To be continued in Greed II :hide:​

 

@ natpudan

You are right about Economics and Philosophy. However, this is less about Economics and more about Philosophy and to a large extent about Religion. To some extent, I was inspired by Chitvish's Sub-forum in writing this piece in the first place.

You are right again that even Elizabeth Taylor would be rejected if she tried to speak this strange language. On the other hand, you may not be wholly right. I find Chitvish's commentaries full of wisdom and they do attract the audience.

As I said, when I wrote this piece, I hardly had IL in my mind. But subconsciously at least, I do think Chitvish was advising me to present something before a crowd of professional economists that they would not be exactly looking forward to. Let's not limit ourselves to the narrow confines of economics I said to myself and ask instead broader questions about morality and ethics.

After I finished delivering the speech, I have to admit that the audience was speechless. Not out of awe and respect, but clearly because they felt that this guy has gone gaga. Except for a one or two persons, they all treated me as an untouchable I guess. Of course, my perception could have been incorrect.

I put it up here because Cheeniya's post On Bathing Beauties etc. set me thinking. I was hesitant at first and then finally decided -- How the hell does it matter? At worst they will not read! It really doesn't hurt all that much to be ignored. Unlike hunger, one soon forgets about it.

oj-da

 

@ Kamalji

Dear Friend:

Thank you in the first place for reading this at all. It was not written for non-specialists in academic economics, though I avoided mathematical symbols, creating thereby an illusion that I was addressing economists as well as non-economists.

Having said this, I must add that it was also addressed to any thinking individual in the final analysis. A basic problem faced by humanity, I think, is that God didn't create him/her with a natural bound on his/her feeling of satisfaction from material objects, including money. There are exceptions of course, you yourself may be one of the people I have come across who has found what he wants and has decided to remain content with it.

But, for almost all humanity, this is not true. The bound, if at all, needs to be acquired through introspection. And there comes the conflict between religion/philosophy and our daily existence. The conflict turns truly unresolvable in the case of someone who does not believe in the existence of God. This was true of Keynes, perhaps the greatest economist of the last century. He believed that free market capitalism was a way to attain good life, which itself was an almost undefined (undefinable?) concept. However, good life, in his perception, consisted of pleasures from non-material pursuits, such as love for a woman (not physical), acquiring knowledge, listening to music and so on. To be able to reach these goals, you need a minimum quantum of material resources and capitalism was a means to that end.

(Frankly, I think I have also been bothered by some of these notions. When I wrote my piece Adulterous Thoughts, that was what I was after. Can I love a woman without carnal objectives? Later on I expanded on this theme, converting it into a long story called Waiting for Priya. I don't know how clearly I had been able to make my point. As always, few read what I had to say. But I have stopped complaining about such trivialities. My search for the concept of man-woman love is far too large for me to be affected anymore by who's listening to my ramblings and who's not.)

Keynes believed, how strongly I don't know, that people will intuitively feel that they had attained all the material comfort they needed and then part company with material success in search of 'higher' objectives in life.

What capitalism has shown, especially in the latest crisis, is that the means threaten to turn into the end and that's a tragedy. So, what I was asking in this lecture was is there a way out for humanity?

Thanks for being with me. I was hoping someone like Chitvish would read this, or probably Cheeniya, since they maintained a sub-forum on philosophical questions on Hinduism. To tell you frankly, after putting up this post, my first impulse was to erase it. Then, I fell back on whatever mental strength I possess and held myself in check. I have done what I thought was meaningful, I said to myself. If the world doesn't think it has any value, I should accept the judgement with humility.

To quote from the Bhagvad Geeta:

Karmanyevadhikaraste ma phaleshu kadachana ...

Cheers.

oj

P.S. Incidentally, in the introductory paragraph prior to the leture itself, I said Dr. Hyde. It should be Mr. Hyde.