avarice, usury and precaution must be our gods for a little while yet

as i was angsting about how long it took to get my visa application to the counter last week and further time angsting about all the bureaucracy, biometric stuff i had to do, and whether my plans would be derailed by a visa, i thought of two things. god, because it's very tempting to trust in one when things are out of your control, and john maynard keynes...
 What an extraordinary episode in the economic progress of man
that age was which came to an end in August 1914! The greater
part of the population, it is true, worked hard and lived at a
low standard of comfort, yet were, to all appearances, reasonably
contented with this lot. But escape was possible, for any man of
capacity or character at all exceeding the average, into the
middle and upper classes, for whom life offered, at a low cost
and with the least trouble, conveniences, comforts, and amenities
beyond the compass of the richest and most powerful monarchs of
other ages. The inhabitant of London could order by telephone,
sipping his morning tea in bed, the various products of the whole
earth, in such quantity as he might see fit, and reasonably
expect their early delivery upon his doorstep; he could at the
same moment and by the same means adventure his wealth in the
natural resources and new enterprises of any quarter of the
world, and share, without exertion or even trouble, in their
prospective fruits and advantages; or he could decide to couple
the security of his fortunes with the good faith of the
townspeople of any substantial municipality in any continent that
fancy or information might recommend. He could secure forthwith,
if he wished it, cheap and comfortable means of transit to any
country or climate without passport or other formality, could
despatch his servant to the neighbouring office of a bank for
such supply of the precious metals as might seem convenient, and
could then proceed abroad to foreign quarters, without knowledge
of their religion, language, or customs, bearing coined wealth
upon his person, and would consider himself greatly aggrieved and
much surprised at the least interference. But, most important of
all, he regarded this state of affairs as normal, certain, and
permanent, except in the direction of further improvement, and
any deviation from it as aberrant, scandalous, and avoidable. The
projects and politics of militarism and imperialism, of racial
and cultural rivalries, of monopolies, restrictions, and
exclusion, which were to play the serpent to this paradise, were
little more than the amusements of his daily newspaper, and
appeared to exercise almost no influence at all on the ordinary
course of social and economic life, the internationalisation of
which was nearly complete in practice.

i guess that nowadays travel is so affordable, and that government has some reason or another
to choose the freedoms that we are subject to, to preserve other freedoms. however, i can very
much understand the british suspicion of id cards and of their individual liberty because
government can be so damn inefficient sometimes.

but if you look at what i highlighted in bold, keynes demonstrates a maturity (albeit informed by
the war) that things may not always be so rosy. it's recession time, and it's a good time to go back
and read keynes. people know him only for keynesian fiscal stimulus, but let me present a few
of his other common sense observations.

- on moral hazard. willem buiter of lse has been going around suggesting that we should let banks fail.
in theory, this is right. however keynes has a beautiful common sense insight regarding "taking the
bitter pill." if it were true that one could swallow a bitter pill once and that would be the end of
it, then most people would do it. the problem is that we don't know how many pills we need to
swallow and as human beings, we may be able to swallow one or two pills but then the itch to
intervene comes later, at a greater cost, because somehow humans can only take so much pain
so it may be better to intervene while the cost of intervention is low to restore confidence. true, moral hazard has to be solved but this is something that one shows
strength and leadership in during good times, not bad times, through having the appropriate
regulations and premiums etc...

I always find Keynes has remarkable intuition, and he did better in psychology for his civil service
exams than economics (to his eternal resentment). but this informed him well as a speculator
buying corn and as someone designing policy. he was such a pragmatist, like lky and the traditional
british civil servant... utilitarian but with sensible aims and intuitions... like john stuart mill.

Another good read is this: economic possibilities for our grandchildren. very uneconomic, in
a sense, and utterly wrong in some respects, but good points all round well, perhaps we haven't
really solved for all our basic needs, but i sense that our needs really may be insatiable,
contrary to his believes... of course, the reason he writes such beautiful prose is to make a
normative point, not simply describe us as we are. he foresees that fact that we may actually
run out of work and be super productive. this happens in countries like france, where working
hours are short, but then again, perhaps there just isn't enough creative destruction going on.

but the normative point he makes, is a more subtle one... the world of economics and money
are all well and good for certain aims, but we are not civilization itself, or the supreme objective
it merely makes civilization possible. and he has in there, the example of the perpetual long-horizon
discounter, anticipating the behavioural economics paradox we have nowadays. money, in itself,
has no intrinsic value unless you spend it. of course, if i were that discounter, i would withdraw half
at any one time, and let the other half earn interest. so, see the power of prose to mislead.

but he was damned good at it. and i loved his article about newton, and how newton was more
a wonderful intuitionist as compared to the ideal of the rational man who works everything out
from first principles like descartes... his real achievement was to see the results that mattered,
and prove them afterwards, rather than proving everything from first principles like the bourbaki
school, which is rather tautological.

1 comment:

mich said...

yes!!! intuition > logic!!

- michelle tan on why she can't study philosophy