101. The Republic Part 1b

Note: This post is the one hundred and first in a series about government and commercial ethics. Click here for the full listing of the series. The first post in the series has more detail on the book 'Systems of Survival' by Jane Jacobs which inspired this series.

Note also: this is a continuation from post 100.

"Power Corrupts. Absolute Power Corrupts Absolutely"

proverb



"Hey Bob, Supe had a straight job
Even though he could have smashed through any bank
in the United States. He had the strength, but he would not

...

Superman never made any money saving the world from Solomon Grundy
And sometimes I despair the world will never seen another man,
Like him"


Crash Test Dummies, Superman Song



In Book 2 of the Republic, Thrasymachus has quit the field and Socrates thinks the discussion is over. But Glaucon and Adeimantus pursue the argument further, pressing Socrates to explain to them how justice is not just something that is sought for the benefits it brings, but is also an end in itself.

Glaucon gets Socrates to agree that there are three classes of goods: those which are unpleasant in themselves but serve a worthwhile purpose (e.g. medicine), those which are pleasurable in and of themselves (e.g. eating) and those which serve a worthwhile purpose and are worthwhile on their own merits, and furthermore to agree that justice falls into the third category.

'How would you arrange goods --are there not some which we welcome for their own sakes, and independently of their consequences, as, for example, harmless pleasures and enjoyments, which delight us at the time, although nothing follows from them?

I agree in thinking that there is such a class, I replied.
Is there not also a second class of goods, such as knowledge, sight, health, which are desirable not only in themselves, but also for their results?

Certainly, I said.
And would you not recognize a third class, such as gymnastic, and the care of the sick, and the physician's art; also the various ways of money-making --these do us good but we regard them as disagreeable; and no one would choose them for their own sakes, but only for the sake of some reward or result which flows from them?

There is, I said, this third class also. But why do you ask?
Because I want to know in which of the three classes you would place justice?

In the highest class, I replied, --among those goods which he who would be happy desires both for their own sake and for the sake of their results.

Then the many are of another mind; they think that justice is to be reckoned in the troublesome class, among goods which are to be pursued for the sake of rewards and of reputation, but in themselves are disagreeable and rather to be avoided.'

Glaucon points out that Greek society seems to be of the opinion that justice falls into the 'troublesome' class of goods. From this argument it follows that if a man had the power of avoiding retribution – if, for example he possessed a ring of invisibility - then that man would be foolish to still be just, but instead would be better off pursuing injustice.

'They say that to do injustice is, by nature, good; to suffer injustice, evil; but that the evil is greater than the good. And so when men have both done and suffered injustice and have had experience of both, not being able to avoid the one and obtain the other, they think that they had better agree among themselves to have neither; hence there arise laws and mutual covenants; and that which is ordained by law is termed by them lawful and just. This they affirm to be the origin and nature of justice; --it is a mean or compromise, between the best of all, which is to do injustice and not be punished, and the worst of all, which is to suffer injustice without the power of retaliation; and justice, being at a middle point between the two, is tolerated not as a good, but as the lesser evil, and honoured by reason of the inability of men to do injustice. For no man who is worthy to be called a man would ever submit to such an agreement if he were able to resist; he would be mad if he did. Such is the received account, Socrates, of the nature and origin of justice.'

It also follows that it is enough to merely seem just rather than actually being just, since this will bring on the rewards from others that are given to the just, and avoid the punishments handed down the unjust.

Glaucon explains how the life of the unjust man who seems just will compare to the life of the just man who is seen as unjust,

'the just man who is thought unjust will be scourged, racked, bound --will have his eyes burnt out; and, at last, after suffering every kind of evil, he will be impaled: Then he will understand that he ought to seem only, and not to be, just; the words of Aeschylus may be more truly spoken of the unjust than of the just. For the unjust is pursuing a reality; he does not live with a view to appearances --he wants to be really unjust and not to seem only:--

His mind has a soil deep and fertile,
Out of which spring his prudent counsels. In the first place, he is thought just, and therefore bears rule in the city; he can marry whom he will, and give in marriage to whom he will; also he can trade and deal where he likes, and always to his own advantage, because he has no misgivings about injustice and at every contest, whether in public or private, he gets the better of his antagonists, and gains at their expense, and is rich, and out of his gains he can benefit his friends, and harm his enemies; moreover, he can offer sacrifices, and dedicate gifts to the gods abundantly and magnificently, and can honour the gods or any man whom he wants to honour in a far better style than the just, and therefore he is likely to be dearer than they are to the gods. And thus, Socrates, gods and men are said to unite in making the life of the unjust better than the life of the just.'

At this point Adeimantus jumps in to add that Glaucon’s account of justice is consistent with the message from poets and prose writers and parents and tutors, all of whom encourage the young to become just, not for the sake of justice and their own spirit or soul, but for the rewards that come from being seen as just, with respect to opportunities for advancement and so on.

'Parents and tutors are always telling their sons and their wards that they are to be just; but why? not for the sake of justice, but for the sake of character and reputation; in the hope of obtaining for him who is reputed just some of those offices, marriages, and the like which Glaucon has enumerated among the advantages accruing to the unjust from the reputation of justice. More, however, is made of appearances by this class of persons than by the others; for they throw in the good opinion of the gods, and will tell you of a shower of benefits which the heavens, as they say, rain upon the pious; and this accords with the testimony of the noble Hesiod and Homer, the first of whom says, that the gods make the oaks of the just'

This is, in my opinion, the most eloquent of all the books in the Republic, and I have to say it makes a very convincing case for the notion that justice is a means to an end rather than an end in itself. Plato seems to feel the same way as he has Socrates praise the argument made by Glaucon and Adeimantus and admit that he feels unequal to the challenge of refuting it.

Indeed, the rest of the book is a roundabout approach to refuting this argument with Socrates first constructing the ideal state (the Republic) and then showing how someone who has uncontestable power and uses that power for their own ends (a tyrant) will end up the worst off of all men, in the same manner that tyranny is the worst form of government.

To be honest, I'm not really sure what to say about this book other than that it was thought provoking.

On the one hand, like the interlocutors in the Republic, I have a gut feeling that even if one was all powerful, the regular rules of justice should still apply. On the other hand, it does seem that society mostly seems to value justice as an end rather than on its own merits, and I do see how if one person was all powerful, the notion of 'take vengeance' which is a central part of the guardian syndrome would cease to have meaning for everyone else, since they would be powerless to take revenge on an all powerful person.

Certainly, any notion to construct a system of morals which argued that people pursued justice because it was in their own self-interest, would strugghttp://www.blogger.com/img/blank.gifle not to admit that the all powerful person could be expected to disregard justice as a notion for lesser beings.

For that reason, David Gauthier took up this issue in his work, 'Morals by Agreement' eventually reaching an argument similar to the one employed in the movie, 'Megamind' - that even an all powerful person would have an interest in society being successful since a successful society is just more pleasant to be around than a downtrodden one. Gauthier ends up by arguing that it is because people have a certain element of socialness, or care for other people, that even if they had absolute power, they would still place a value on behaving justly towards others, even when they have no need of it to get what they want.

But still, at some level, the ability to requite or take vengeance does have to be present in order for the concept of justice to operate. For example, people hardly treat animals with anything resembling the human notion of justice but I suspect that if animals were able to rise up and rebel against their human oppressors, showing that they had the power to 'take an eye for a ribeye' this would lead to a new relationship which might extend the human notion of justice towards animals further than it goes currently.



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site note: Posting may move to Wednesday for a while due to other commitments on Tuesday nights.

24. Morals by Agreement: The Lockean Proviso

Note: This post is the twenty-fourth in a series. Click here for the full listing of the series.

This is the sixth and final (for now, anyway) post on the book Morals by Agreement, by David Gauthier.

Gauthier summarizes his argument in chapter 7, of Morals By Agreement as follows:

"If you seize the products of my labour and then say 'let's make a deal', I may be compelled to accept, but I will not voluntarily comply. We are therefore led to constrain the initial bargaining position, through a proviso that prohibits bettering one's position through interaction worsening the position of another. No person should be worse off in the initial bargaining position that she would be in a no-social context of no interaction. The proviso thus constrains the base from which each person's stake in agreement, and so her relative concession and benefit, are measured. We shall show that it induces a structure of personal and property rights, which are basic to rationally and morally acceptable social arrangements."

As best as I can tell, Gauthier's argument is effectively the same as in the previous chapter. That is, if people are going to set up a society based on cooperation, chapter 6 argued that people who break their agreements wouldn't be accepted in such a society, since they would make it impossible for people to make agreements 'rationally'. In chapter 7, the argument is that cooperative society also needs to exclude people who better their own position at the expense of others, since people who act this way make it irrational for people to participate in that sort of society.

He notes that another way of expressing this is to say that, within a cooperative society, people have the 'right' not to be coerced or deceived into doing things they would not do voluntarily.

Of course, the history of just about every piece of land on the planet is a history of people having taken it by force at some point and then made any future agreements starting from that position, so Gauthier does make one concession to reality in noting that people will acquiesce to a deal that benefits them, even if that deal is unfair because it represents past acts of coercion - if the deal is better than nothing. So, for example, in South Africa it was not required to undo every act of colonialism before apartheid could be ended.

He also notes that where some people have a large technological advantage over others, it won't necessarily be rational for them to cooperate with the others, as opposed to simply coercing the others to do what they want. He ends the chapter by arguing that this means that the proviso applies only in relations between equals.

Presumably the reason for the distinction is that, in a battle between equals, the retaliation back and forth would leave both parties worse off than a cease fire, whereas in a one-sided battle, the victor is likely to come out ahead, even after allowing for their costs of coercion. Gauthier doesn't (as far as I see, anyway) consider whether this notion has any implications for the behaviour of the government, which, as the only legitimate source of force in society, is in a similar position vis-a-vis its subjects as the technologically superior party is to the inferior. In other words, Gauthier's argument seems to imply that it is 'rational' for the government to coerce people in ways that it is not rational for individual citizens to do.


One thing that was unclear to me was why Gauthier seemed to insist that the prohibition against violating the proviso only applied before the establishment of cooperative society, rather than remaining in force all the time, even after society was established. Perhaps he simply assumes that, once cooperative society is established, refraining from the sort of coercive behaviour that would violate the proviso is already taken care of by the the fact that people come to voluntary agreements (as described in chapter 5) and abide by those agreements (as described in chapter 6).

* Note that it is called the 'Lockean' proviso because John Locke was one of the first philosophers to set out this sort of notion that people had the right to do what they wanted as long as they didn't make others worse off in the process.

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Finally, if you would rather get someone else's (more concise) perspective on Morals by Agreement, one of the most interesting internet links that I found summarizing it was these philosophy class notes, written by Dick Arneson

23. Morals by Agreement: Constrained Maximization

Note: This post is the twenty-third in a series. Click here for the full listing of the series.

This is the fifth of what should be a few posts on the book Morals by Agreement, by David Gauthier.

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In the Seinfeld clip above, Jerry Seinfeld arrives at the car rental agency only to find that although they have his reservation they don't have a car for him. He then explains that they don't understand the concept of a reservation - anyone can take a reservation, the trick is holding the reservation.

Similarly, in David Gauthier's philosophy based on people who maximize their self-interest, it's easy enough to explain why people might make agreements to co-operate (as explained in chapter 5) but the hard part is to explain why people would hold to their agreements. This is the task of chapter 6 of Morals by Agreement, where Gauthier attempts to explain why people who are self-interest maximizers would keep to their agreements when breaking those agreements might be more beneficial to them than keeping them would be.

Gauthier notes that in Hobbes' book, Leviathan, Hobbes creates a character known as 'the Foole' who argues the case for breaking your agreements where this is beneficial to you. Hobbes' solution is the creation of the sovereign. A government that will ensure that it is in your interest to keep your agreements by punishing you harshly if you don't. He also points out that Hobbes' solution dispenses with the need for morality (understood as a constraint on pursuit of self-interest) by simply re-aligning self-interest with the good of society via the sovereign's presence.

Gauthiers introduces the terminology 'Straightforward Maximizer' to be someone who, like the Foole, does what is in their best interest even if they have previously agreed not to and 'Constrained Maximizer' to indicate someone who foregoes their self-interest in situations where a fair co-operative solution will yield them a benefit over what they would get if everyone pursued their self-interest.

The Constrained Maximizer will cooperate if he expects others to do so, but if he suspects that the people he is dealing with are straightforward maximizers, he will do the same to avoid being taken advantage of.

In the terms of the Prisoner's Dilemma, the Constrained Maximizer will not confess if he thinks that the other Prisoner is also a Constrained Maximizer, but if he thinks the other prisoner is a straightforward maximizer, he will confess to avoid being taken advantage of.

Gauthier explains that the Constrained Maximizers will achieve better outcomes than the Straightforward Maximizers in the case where everybody knows which type of person everyone else is (i.e. if Constrained Maximizers had to wear 'CM' sweatshirts and Straightforward Maximizers had to wear 'SM' sweatshirts.) This is only logical - the Constrained Maximizer changes his strategy based on who he is dealing with whereas the Straightforward Maximizer doesn't, so naturally it is in the interests of the Constrained Maximizer to want everybody to be easily identified in one role or another.

Sadly, of course, in real life it is not always obvious who you can trust.

This (I think) is why Gauthier later says that,

"Failing to exclude straightforward maximizers from the benefits realized by co-operative arrangements does not , and cannot, enable them to share in the long-run benefits to co-operation; instead it ensures that there are no benefits to share."

In other words unless you kick out the straightforward maximizers, co-operation will fail.

Gauthier argues that Constrained Maximization is not simply another way to pursue maximization of your self-interest given particular circumstances, but rather requires that the Constrained Maximizer choose a disposition towards not breaking their agreements. The reason that people must choose this disposition rather than deciding on a case by case basis is that people who decide on a case by case basis will be kicked out of society so they won't get the benefits that co-operation brings.

Finally, Gauthier points out that over time, a community where all are constrained maximizers will be expected to outperform a community where all our straightforward maximizers.

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To be honest, I didn't find this chapter, which is the heart of Gauthier's theory, very convincing. A few comments:

1) Back in chapter 3, Gauthier argued that prudence - taking into account my future interests - was no part of rationality. But now it seems that choosing the disposition towards constrained maximization rests on the sort of prudential concern that was dismissed as irrational in chapter 3 (unless I am confused). This is OK by me, I never really agreed with the notion in chapter 3 that it was rational to be imprudent, but it doesn't seem consistent.

2) It's not clear how the Straightforward Maximizers are going to be excluded. Who will exclude them and what incentive do they have to undertake the substantial costs of doing so?

3) Although the Constrained Maximizer is disposed to switch to Straightforward Maximization when confronted with another Straightforward Maximizer, it seems likely that the person who Straightforwardedly Maximizes full-time is likely to be better at it. For example, I buy a piece of artwork from a man who, after taking my cash, pulls a gun and demands that I give back the art that I bought. I might choose to repay this act of Straightforward Maximization by responding with violence myself, but if the man is a professional crook, it seems plausible that he is better with a gun than I am. And if I myself develop a great skill at Straightforward Maximization in order to successfully battle these lifelong criminals, then it seems possible that I might reach a point where it is in my benefit to become a crook myself.

4) Most fundamentally, this notion of people 'choosing a disposition' doesn't square with my intuition of how these sorts of decisions are made. I'm reminded of the joke about, I believe, Abraham Lincoln who was known for his honesty and incorruptibility.

As the joke goes, a businessman walks into his office, offers Lincoln $100 to change a piece of legislation and Lincoln smiles and says no.

The next day, the man comes back and offers $1000. Again Lincoln smiles and declines the offer.

On the third day, the businessman comes back and offers $10,000. This time Lincoln gets angry and throws the man out of his office. The man asks, 'why was your reaction so different this time' and Lincoln replies, 'you were getting close to my price.'

In real life, people don't simply adopt a disposition to keep agreements and then dispense with any thoughts of breaking them. People are constantly weighing whether or not it makes sense to keep an agreement.

You can see this clearly in the different levels of security that attend situations with different rewards to agreement breaking. A dollar store has little in the way of security other than keeping more expensive items behind the counter. A jewelry store however, where the small size and high value and resaleability of the merchandise provides greater incentives for agreement breaking (theft), tends to have much higher security.

It seems more probable to me that people incorporate morals into their decisions, not by adopting a disposition based on long run maximization of their interests, but rather by applying utilities to the morals themselves, where actions that involve violating one of our morals attract a negative utility that offsets the potential gain from the action. This would explain why we are so concerned with the words used to characterize a situation: "it wasn't really a lie" we say or "technically it wasn't stealing", statements which don't make a lot of sense under Gauthier's framework. But I'm getting beyond the scope of the current discussion.

It seems likely that straightforward maximizers are not excluded from constrained maximization society based on society's perception of their disposition but rather in response to specific acts which demonstrate that disposition at a level beyond what society is willing to tolerate. Therefore, to the extent that straightforward maximizers could carefully choose their transgressions so as not to get caught or to the extent that they could acquire enough power that society was unable to exclude them (think organized crime) they might be able to avoid being excluded from society regardless of their disposition.

22. Morals by Agreement: Cooperation and Bargaining

Note: This post is the twenty-second in a series. Click here for the full listing of the series.

This is the fourth of what should be a few posts on the book Morals by Agreement, by David Gauthier.

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The clip above is 'Opportunities' by the Pet Shop Boys. The chorus says, "I've got the brains, you've got the looks, let's make lots of money" and this is a pretty good summary of chapter 5 of Morals by Agreement.

Of course, in Gauthier's language this translates into, "we become aware of each other as potential co-operators in the production of an increased supply of goods, and this awareness enables us to realize new benefits"

Gauthier's argument is that, given the opportunity to work together to better (or not worsen) their position, people are rational to do so. I agree not to play my tuba late at night and you agree not to mow your lawn early in the morning. Or maybe we form a joint partnership (in order to make lots of money). Or maybe I agree to give you my wallet and you agree not to shoot me*, etc.

Now, I guess to most people it probably seems fairly obvious that people make agreements of this sort all the time and it makes sense to do so, but you have to remember that Gauthier is starting from his notion of the rational human as one that does nothing but maximize its own interest in the present, with no ability to work together with others in a cooperative fashion.

The problem is that, unlike in the perfectly competitive market where people could (per Gauthier's theory) reach optimal outcomes by strictly pursuing maximization of their self-interest, situations where cooperation would be beneficial are situations where the market has 'failed' meaning that simplistic pursuit of self-interest by all parties will lead to sub-optimal solutions because it fails to consider superior 'joint strategies' where the people in a situation choose their strategies together (by bargaining to reach agreement) rather than separately.

You can think of a basketball team that has a better chance of scoring if they follow the play their coach drew up for them than if they all just do their own thing and hope for the best.

Or if we think back to the original Prisoner's Dilemma, if the prisoners were able to make a binding agreement with each other not to confess, then this would open up a new, optimal (from the prisoners' standpoint) solution to their dilemma that was unavailable when they were only able to each maximize their own self-interest.

Gauthier argues that in this context, rational behaviour requires that people agree to constrain their self-interest maximization for a while in order to secure a share of the benefits of cooperation.

Gauthier explains that, in the bargaining phase where the spoils of (the future) cooperation are being divided up, people are still acting to maximize their self-interest as best they can under the circumstances. But the bargain that is reached is an agreement to not maximize self-interest while carrying out the terms of the bargain.

So, I maximize my self interest as I push for the smallest concession possible when agreeing not to play my tuba late at night ('ok, I won't play after midnight, but I won't agree not to play between 11 and midnight' etc.) but when midnight strikes, I go against my self-interest by keeping the terms of the agreement and not just going ahead and playing my tuba anyway.

This question of whether the rational Gauthier people will actually stick to their agreements is one of the stickiest that Gauthier faces and is the subject of chapter 6.

I should also mention that Gauthier spends much of the chapter explaining his bargaining theory that if people have an equal willingness and ability to drive a hard bargain, they will end up making an equal bargain (one where everybody gains a roughly equal share of the spoils of cooperation).


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* You might think that the bargain where I give up my wallet in return for my life is not a fair one and should count differently than the others somehow - Gauthier agrees but defers discussion of the bargaining position of the parties until chapter 7

21. Morals by Agreement, Perfect Competition, Perfect Monopoly and the Market as a Moral-Free Zone

Note: This post is the twenty-first in a series. Click here for the full listing of the series.

This is the third of what should be a few posts on the book Morals by Agreement, by David Gauthier.

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While thinking about Jane Jacobs' Guardian and Commercial syndromes, one of the notions that occurred to me was that the Commercial syndrome reminded me of the microeconomic notion of 'perfect competition', while the Guardian syndrome reminded me of the microeconomic notion of 'Perfect Monopoly*'

Given that the ethics in the two syndromes often seem to come in opposing pairs (shun force vs. exert prowess, industriousness vs. making rich use of leisure), it seemed plausible to think they might represent two opposite conceptions, such as competition and monopoly.

However, it was not until reading chapter 4 of David Gauthier's 'Morals by Agreement' that I came across any substantiation of my intuition about the two syndromes. So before I get into chapter 4 of Morals by Agreement, let's first clarify what is meant by perfect competition and perfect monopoly.

Wikipedia describes Perfect Competition as follows:

"In neoclassical economics and microeconomics, perfect competition describes the perfect being a market in which there are many small firms, all producing homogeneous goods.
...
A perfectly competitive market may have several distinguishing characteristics, including:

Many buyers/Many Sellers – Many consumers with the willingness and ability to buy the product at a certain price, Many producers with the willingness and ability to supply the product at a certain price.

Low-Entry/Exit Barriers – It is relatively easy to enter or exit as a business in a perfectly competitive market.

Perfect Information - Prices are assumed to be known to all consumers and producers.

Transactions are Costless - Buyers and sellers incur no costs in making an exchange.

Firms Aim to Maximize Profits - Firms aim to sell where marginal costs meet marginal revenue, where they generate the most profit.

Homogeneous Products – The characteristics of any given market good or service do not vary across suppliers."

I don’t have much to add to this description. Basically, the idea is that each seller in the market is powerless to change the terms of the market and the only way they can pursue their interest is to maximize the amount of goods that they produce and can sell into the marketplace.

Now, perfect monopoly:

"In economics, a monopoly (from Greek monos , alone or single + polein , to sell) exists when a specific individual or an enterprise has sufficient control over a particular product or service to determine significantly the terms on which other individuals shall have access to it. Monopolies are thus characterized by a lack of economic competition for the good or service that they provide and a lack of viable substitute goods.
...
a pure monopoly can -unlike a competitive firm- alter the market price for her own convenience: a decrease in the level of production results in a higher price. … An important consequence of such behaviour is worth noticing: typically a monopoly selects a higher price and lower quantity of output than a price-taking firm; again, less is available at a higher price."

Again, I have little to add here. The idea is that in this case the seller has the power to decide how much they want to produce, since they don’t have to worry that if they cut back production, someone else will just take their place. Economics assumes that both the firm under perfect competition and the monopolist want to maximize their profits. However, under perfect competition, maximum profit is achieved via maximum production whereas under monopoly, maximum profit is achieved via optimal production, where the optimal production level does not equal the maximum production level.



So, back to Gauthier. Chapter 4 of Morals by Agreement is titled, "The Market: Freedom From Morality"

Gauthier comments that

"the idea of such a [perfectly competitive] market illuminates our understanding of rational interaction by revealing a structure in which the divergent and seemingly opposed interests of different individuals fully harmonize. Conceived as an ideal type, the perfect market, as we shall see, guarantees the coincidence of equilibrium and optimality, and so its structure is the very antithesis of the Prisoner's Dilemma"

Gauthier suggests that it might be an ideal world if every market could be perfectly competitive but, "because the world is not a market, morality is a necessary constraint on the interaction of rational persons."

He further notes that,

"the absence of force and fraud is essential to the workings of the market. Before [Adam] Smith's invisible hand can do its beneficent work, [Thomas] Hobbes war of every man against every man must first be exorcized. And this, as we shall see, means that the ideal of free interaction which Smith celebrates is not natural but artificial, arising, for rational persons, only within a framework of agreed constraints. In understanding the perfect market as a morally free zone we shall be led back to its underlying, antecedent morality."

To be honest, I'm not sure I follow the argument that the market is morally free but has an antecedent morality (where people give up using force or fraud to get what they want) which somehow precedes the market but is not a part of the market.

At any rate, Gauthier goes on to specify a few more conditions of the market as a morally free zone:

1) No externalities, either positive or negative.

2) Private ownership, composed of two parts:
- initial factor endowment
- free individual market activity

3) Private consumption, composed of two parts:
- private goods
- mutual unconcern (note that this is an extension of the initial conception of rational behavior from chapter 2 which permitted one person to have an interest in another's well-being (for its own sake) - now in the morally free zone, such concerns are no longer allowed)

4) Both production and exchange are carried out under certainty (perfect information)

Gauthier then makes reference to what is known as the 'The First Theorem of Welfare Economics' which states that a perfectly competitive market is 'pareto efficient' or pareto optimal meaning that given the results of the competitive market, nobody can be made better off without anyone else being made worse off. It might be interesting to see if their are any moral assumptions smuggled into the First Theorem, but that would be a project for another day.

Gauthier then notes that the market takes as given the initial distribution of factor endowments and comments that the results of the market are fair only if these inputs are fair. The question of what makes for fair inputs is left for another chapter.

Gauthier then moves on to argue that the market does not contain any form of partiality that would justify a moral constraint needed to overcome this partiality. I didn't follow exactly what Gauthier means here. He seems to be trying to establish that nobody is unfairly harmed or benefitted by the operation of the market, but I'm not 100% sure on that. At any rate, the only form of partiality he detects in the market is (economic) rent. Says Gauthier,

"to the extent to which certain factors are in fixed supply - to the extent to which certain abilities or materials are not freely substitutable in the market - there is the possibility that demand for the goods produced with the use of these abilities or materials will bring about a market price for their use that includes rent.

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We shall return to the subject of rent, in considering the establishment of the perfectly competitive market as one of the terms of agreement among rational persons. For the present, we should note that our argument in support of the claim that the perfect market would create a morally free zone has not been shown to apply to those parts of market transactions that involve rent."

The next section, which I literally read 10 times but still don't quite follow, explains why there is the assumption of mutual unconcern or 'non-tuism' or that people take no interest themselves in other peoples interests. In Gauthier's words,

"It is neither unrealistic nor pessimistic to suppose that beyond the ties of blood and friendship, which are necessarily limited in their scope, human beings exhibit little positive fellow-feeling

...

The fundamental distinction between 'us' and 'them', between blood-brothers and strangers, has limited the scope of co-operation ... among much of humankind. We invoke the assumption of mutual unconcern to determine if that limitation is an inescapable evil of the human condition."

But if Gauthier is assuming that mutual unconcern exists (it seems he has never gone to the movies, where large groups of people squirm and laugh and cry and get angry on behalf of characters they have never met before and that they know are fictional, but I digress), then why the need to further make it an assumption of the competitive market? Why not just remain silent on the topic unless mutual concern would somehow interfere with the operation of the market. And if mutual concern interferes with the operation of the market (as we noted that Joseph Heath argued back in post 9 of this series, as I'm sure you recall :), then wouldn't the need to refrain from exhibiting mutual concern itself be an impartial constraint on people's behaviour and thus qualify as a moral rule by Gauthier's standards?

Anyway, Gauthier then goes on to note that the scope of this mutual unconcern is properly limited to the market,

"In real quasi-market societies there is a temptation, manifest both in thought and practice, to see the social world as falling within the scope of the market, and thus free from all forms of constraint. On the one hand the ideal of a morally free zone is extended to embrace all social interaction, and on the other hand all human relationships are interpreted as self-interestedly contractual, lacking in interpersonal concern. Thus neither the need for moral and political constraints nor the possibility of genuinely affective human ties is sufficiently recognized.

As we have already insisted, one of our fundamental themes is that the morally free zone created by the market can arise only within a deeper moral framework. We shall show that moral constraint is not only compatible with mutual unconcern, but indeed rationally required given this unconcern and the typical structures of interaction."

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* economists typically just use the term 'monopoly' or 'pure monopoly' rather than 'perfect monopoly' but I felt the language used for the two concepts should be parallel in order to reflect the nature of monopoly and competition as opposite ends of a single scale.

20. Morals By Agreement, Chapter 3: Strategy (Game Theory)

Note: This post is the twentieth in a series. Click here for the full listing of the series.

This is the second of what should be a few posts on the book Morals by Agreement, by David Gauthier.

In the last post, we covered chapter 2 of Morals by Agreement, where Gauthier sketched out his view of what it meant for people to behave 'rationally' in situations which didn't involve other people who might themselves be trying to act rationally and whose actions might depend on our actions and vice-versa.

So in chapter 3, Gauthier extends his model of rational behaviour to cover what he refers to as 'strategic interaction' - that is situations where people are interacting with each other, rather than acting on their own. Basically, in the terms I used earlier in this series, he is moving from rational actions, to rational transactions.

The formal branch of knowledge that studies transactions is Game Theory. The most famous game in Game Theory is the Prisoner's Dilemma, which I introduced earlier in the series here.

For more background on game theory here is the Wikipedia entry on game theory and here is the excellent Stanford encyclopedia of philosophy entry on game theory.

When it comes to game theory, examples are the way to go to gain understanding.

Consider a simple game, where Harold and Kumar are trying to meet up at a local restaurant for a meal, but they are not in communication with each other. However, they both know that there are only two restaurants in town, White Castle and Black Castle. Furthermore, they know that Black Castle is closed.

                                        Harold
                            White                     Black
Kumar   White:      [5,5]                 [3,0]
                 Black :     [0,3]              [2,2]

The best outcome is if they both meet at the White Castle (5 for both). For both Harold and Kumar, the next best option is if they go to White Castle and the other person goes to Black Castle - they don't get to meet up, but at least they can eat. For both players, the third best is to meet at Black Castle and the worst option is to go to Black Castle while the other person has gone to White Castle (alone AND hungry).

Gauthier defines rational behavior in transactions, or 'strategic interaction' as follows:

A)Each person's choice must be a rational response (i.e. utility maximizing) to the choices she expects the others to make
B) Each person must expect every other person's choice to satisfy A
C) Each person must believe her choice and expectations to be reflected in the expectations of every other person.

So in the example above, Harold figures that if Kumar goes to White Castle, he (Harold) is better off going as well. But even if Kumar doesn't go to White Castle, Harold is still better off going to White Castle. So condition A sends Harold to White Castle. Condition B tells Harold that Kumar will follow a similar logic and also end up at the White Castle.

The outcome where Harold and Kumar both go to White Castle is what is known in game theory as an equilibrium outcome. What this means is that, given that both Harold and Kumar are choosing to go to White Castle, there is no reason for either of them to unilaterally change their choice. Compare that with the situation where Harold is going to White Castle and Kumar is going to Black Castle - this is not an equilibrium because in this situation, Kumar would be better off to change his strategy.

Now let's look at a different type of game. Consider the question of what side of the road to drive on. For now, imagine that only two people live on a road, Adam and Eve, and they need to agree on which side of the road to drive on and they both own British cars that were designed for driving on the left side of the road.

                                        Eve
                            Left                     Right
Adam   Left:      [2,2]                 [-10,-10]
            Right :    [-10,-10]            [1,1]

Note that there are 2 equilibrium outcomes in this game, One where both drive on the left and both drive on the right. Even though both Adam and Eve are better off if they both drive on the left, if for some reason they are currently both driving on the right, neither has an incentive to unilaterally change their strategy. Only by working together could they shift from the sub-optimal equilibrium to the optimal equilibrium. Unsurprisingly, this type of game is known as a coordination game, where the coordination needed has two parts: 1) making sure that both people pick the same outcome and 2) making sure the equilibrium they end up in is the optimal one.

But what if we change the game slightly so that Adam has a car that is designed to drive on the left and he has always driven on the left so strongly prefers driving on the left. Meanwhile, Eve has a car that is designed to drive on the right, but she just got her license so she is less attached to driving on one particular side.

                                        Eve
                            Left                     Right
Adam   Left:      [5,2]                 [-10,-10]
            Right :    [-10,-10]            [2,3]

Again there are 2 equilibriums and Adam and Eve need to coordinate to make sure they drive on the same side of the road. But the situation is complicated now by the fact that Adam prefers the 'drive on the left' equilibrium and Eve prefers the 'drive on the right' equilibrium.

This now becomes a bargaining problem, one that has been much studied and argued over in the history of game theory. The reason I bring it up here is because Gauthier himself brings it up in chapter 3 - because it will be useful to him later on in the book.


Finally, I won't go over the Prisoner's Dilemma again, but it is worth noting (as Gauthier does) that in the Prisoner's Dilemma, the equilibrium that Gauthier's rules for rational behavior lead to is different from the (Pareto) optimal outcome. In other words, if people pursue their own utility maximization it will lead to sub-optimal outcomes where there are possibilities to make people better off without making anyone worse off, but these possibilties are placed out of reach by people's self-interested behaviour.

Gauthier will argue that morality consists of the constraints necessary to generate optimal outcomes for 'rational' people.

19. Morals By Agreement

Note: This post is the nineteenth in a series. Click here for the full listing of the series.

This is the first of what should be a few posts on the book Morals by Agreement, by David Gauthier. Basically, it is a 'contractarian' attempt to show how rational self-interested utility maximizers in the standard economic mould would find it rational to agree to set of morals, or impartial constraints upon their actions.

Chapter 1 of Morals By Agreement by David Gauthier is an overview, which I'm going to skip. Instead, I'll start with chapter 2: 'Choice: Reason and Value', in which Gauthier sets out the basics of the view of the world that he is using for this book, a view that goes by the name 'rational choice theory'.

As Gauthier says,

"the theory of rational choice takes as primary a conception even more clearly subjective and behavioural than interest, the relation of individual preference"

The theory centres on individuals (as opposed to groups, or society as a whole) who take actions in order to achieve a certain outcome.

"the theory of rational choice defines a precise measure of preference, utility, and identifies rationality with the maximization of utility. ... "the theory of rational choice implicitly identifies value with utility"

"we shall develop a set of conditions for considered preference, which must be satisfied if utility, as a measure of preference, it to be identified with value, and the maximization of utility with rationality."

Utility is defined such that if a person prefers one outcome to another, the preferred outcome has greater utility. In this theory, the causation runs form preference to utility, meaning that you don't prefer one action to another because it has greater utility, one action has greater utility than another because it is preferred by you.


Gauthier spends the rest of the chapter on three notions:
1)What it means for a person's preferences to be 'considered'
2) What is means for a person's preferences to by 'coherent'
3) Why it is right to consider value as a subjective, relative measure.

1) Considered preference

Gauthier argues that a person's preferences are not rational if they say one thing and do another because their values are confused. As long as they do what say they want to do, we can assume that their preferences as revealed by their behaviour (the way that economists measure preference, typically) and their preferences as revealed by what they say, are in alignment, and rational (where rational means maximizing utility, and utility is maximized by doing what you prefer to do).

He then notes some of the ways that people's choices may fail to maximize their utility:
a) They might be misinformed. Someone might intend to drink a glass of wine but end up killing themselves because they didn't know the glass was poisoned.
b) They might be uninformed. Someone might choose a poor wine to go with his dinner because he has not experienced the more preferable combination of wine and food before.
c) Someone might agree to a proposal, only to instantly regret their impetuous agreement.

Gauthier then argues that if a preference is such that is is correctly informed and considered and that the action taken aligns with a person's stated intentions, then we can treat their actions as showing a 'considered preference' and meeting the demands of rational choice.

He then discusses and rejects three counter-arguments to this notion of rational choice as expressed via preference:

1) People may have preferences that contradict their interests
2) People may have preferences that cause them unhappiness
3) People may have preferences that cause them to maximize their present utility at the cost of their future utility.

Really, in my mind, these are all really the same objection, expressed in different ways, with the third expression being the clearest and most general. With that in mind, I will just repeat Gauthier's counter-argument to the consideration of prudence (i.e. not doing things you know you're going to regret later - the third point above).

"To maximize on the basis of one's present preferences need not be to ignore one's future preferences; one may take an interest in one's future well-being now, preferring a satisfying life to immediate gratification. But also, one may not. Our view is that prudence is rational for those who have a considered preference for being prudent, but not for those who on full reflection do not.

Our disagreement with the defender of prudence does not turn on whether future preferences are to be taken into account, but on how they are to be considered. We both agree that the unreflectively heedless person, who takes no thought about the morrow, chooses irrationally. One's considered preferences for possible outcome's of one's choices must take into account the expected outcomes on oneself. But one may choose to ignore those effects in what one does; one may choose to take no thought for the morrow. And this reflective heedlessness is not irrational on our view. The defender of prudence insists that rational choice must be directed to the maximal fulfillment of all our preferences, present and future, in so far as we are able to determine what they are. On our view, rational choice must be directed to the maximal fulfillment of our present considered preferences, where consideration extends to all future effects in so far as we may now foresee them."

The requirements for a person's preferences to be coherent in the sense that they will support a person's attempt to maximize their utility via their preferences are well-known and fairly prosaic. Wikipedia explains:

"Rational choice theory makes two assumptions about individuals' preferences for actions:

* Completeness – all actions can be ranked in an order of preference (indifference between two or more is possible).
* Transitivity – if action a1 is preferred to a2, and action a2 is preferred to a3, then a1 is preferred to a3.

Together these assumptions form the result that given a set of exhaustive and exclusive actions to choose from, an individual can rank them in terms of his preferences, and that his preferences are consistent."

Once we allow uncertainty into the results of our actions, there are some more requirements for coherent preference, the most questionable of which is that people are indifferent to uncertainty. i.e. if you offer me $10 for sure, or alternatively you will flip a coin and if its heads, you'll give me $21, and if its tails I get nothing, the theory assumes that people will always take the coin-flip, since the expected return (on average) is $10.50, which beats $10.

Finally, Gauthier defends his relative, subjective viewpoint.

There are two contrasts here:

1) A relative view in which what is 'good' or 'right' varies from person to person vs. an absolutist point of view in which what is 'good' or 'right' is the same for every person.

2) A subjective view in which the idea of 'rightness' or 'goodness' only exists in the presence of sentient beings vs. an objective view in which 'rightness' and 'goodness' are concepts that exist independently of whether there are any people around to actually act in a 'good' or 'right' way. In the objective view, the independent 'goodness' notion acts as a constraint upon the actions of the sentient beings (or ought to) whereas the subjective view sees no such independent constraint as existing.

Gauthier spends a few pages defending his contention that the 'true' viewpoint is the subjective and relative one, but to be honest, it's a bit too abstract for me to grasp, let alone summarize in a blog post.

Taking all this together, Gauthier note that under this rational choice framework, as long as a person's preferences are coherent (i.e. they don't prefer apples to pears, pears to peaches, and peaches to apples) and considered then we can't say that a person's preference is irrational. Even if a person preferred destroying the world to getting a bruise on their finger, that preference is still considered rational in this theory.

He concludes as follows,

"Value then, we take to be a measure of individual preference - subjective because it is a measure of preference and relative because it is a measure of individual preference. What is good is good ultimately because it is preferred, and it is good from the standpoint of those and only those who prefer it. ... Our concern is to demonstrate the possibility and the characteristics of a rational morality, given that value is itself subjective and relative."

18. Interlude

Note: This post is the eighteenth in a series. Click here for the full listing of the series.

I was out running on the seawall on a rainy Saturday morning, a couple of weeks back, turning over in my mind what type of interpersonal behaviour would match up with the Commercial set of morals from Jane Jacobs' Systems of Survival:

A person who was purely self-interested might fail to be honest and might not shun the use of force and might not respect contracts, while a person who was sympathetic to others as much as they were sympathetic to themselves would likely 'go beyond' just the commercial morals into guardian morals like 'loyalty' and 'treasure honour' (and regard bargaining with someone with the same distaste that they might regard bargaining with a friend or family member).

It occurred to me as I was running that what might work would be someone who was not willing to harm another by stealing from them or defrauding them, but at the same time had no interest in helping another, i.e. someone who prefers to serve their self-interest, but isn’t willing to actively harm others directly to do so in a case where hurting others is the means to improving their self-interest, rather than a side effect.

After I got home and I was on the computer, I tried googling for notions of this type, and came across a description of 'Morals by Agreement' by David Gauthier – a book which was already been in my list of books to cover (sine many other works refer to it) so I moved it up to the next spot on the list.

Sadly, 'Morals by Agreement' is an academic book in tone, which means that it starts out by defining the meaning of the word 'the' and builds from there. So although it may be a little tedious, I might as well take the opportunity to also explain some of the 'building block' concepts used in economics and philosohpy, before launching into the heart of Gauthier's argument. But, I'll have to wait until next week to get started on that....