Category: Economics

  • The Essence of Moral Failure, Or, How To Be Filthy Rich And Famous

    The Essence of Moral Failure, Or, How To Be Filthy Rich And Famous

    Image of classical statue depicting blind justice with scales. True Justice is Moral, it treats everyone's interests equally
    True Justice is Moral, not merely Legal. It treats everyone’s interests equally. (Adobe Stock image: licensed by author)

    # 51 on my, 99 Life Tips – A List is: Treat people as if their interests are exactly as important as yours. They are. (But they are not more important.)

    The Golden Rule has a couple of variations that condense to the same thing. The interests of people are relative and equal. This being the case, morality requires that you treat people as if their interests are exactly as important as yours. Any deviation is the essence of moral failure.

    To be moral, moral codes must be based on truth. At a casual glance, when contemplating aphorisms like, ”All men are created equal…”, the discriminating among us (and I use that term in the positive sense of one who has refined tastes and exercises good judgment), may argue about its veracity. By some metrics it doesn’t appear to be true at all.

    Yet, in the U.S. Declaration of Independence, this is one of the enumerated ”self-evident” truths. But, the careful observer recognizes the obvious. There is a disparate distribution of talent, physical attributes, mental aptitude, socio-economic standing, and opportunities for improvement and advancement between humans. 

    When I compare myself to LeBron James, or Stephen Hawking, or Yo Yo Ma, I see some pretty glaring inequalities. And those exist at the physical, mental, and talent levels. What about differences on the socio-economic ladder between myself and the wealthiest ”10%” who own more than the bottom 70% combined?

    Egregious Wealth Inequality is a Particular Kind of Immorality

    The following graphics show that the top 1% owns 31.4% of US net wealth as of the 4th quarter of 2020. The population from the 90th to 99th percentile owns 38.2%; the 50th to 90th percentile, owns 28.3% of net wealth; and the bottom 50 percent owned only 2% of the nation’s net wealth. Yay Capitalism!

    line charts and graphs showing the distribution of net wealth in the US by percentile
    If all men are created equal, and if everyone’s interests are equal, how is this happening? It may be legal, but is it moral? (Image from https://www.statista.com/statistics/299460/distribution-of-wealth-in-the-united-states/ screenshot by author)

    And to add insult to injury, the share of wealth going to the top is increasing as depicted by this graphic:

    graphic showing the share of net wealth is increasing for the top percentile
    The rich get richer, the poor poorer. Yet everyone’s interests are equal. This is everyone’s moral failure. (Image from https://www.statista.com/statistics/299460/distribution-of-wealth-in-the-united-states/ screenshot by author)

    Of course, I could have saved your time and some screen space by just summarizing the current state of Capitalism in the US with this familiar graphic. One wonders where these traditional, mythical images come from?

    Ouroboros. Snake eating its own tail. Depicting inequalities.
    Ouroboros. When society, especially economically, refuses to treat everyone’s interests as equal, this is what happens. (Adobe Stock Image: licensed by author)


    All men are created equal? Really? How so?

    Faced with these inequities, whence comes the certitude expressed, that all men are created equal? Or, on what moral basis are we enjoined to love our neighbor as our self? Or, for what reason are we to do unto others as we would want them to do unto us?

    It is because the self-interest of every human being is equal. The lowliest peasant or serf in history had interests as important to him or her as those of the gaudiest Lord or Czar. It may have been ”legal” for a Lord to exploit and use the serf, but it was immoral. 

    Similarly, today, it may be legal for capitalist billionaires and their corporations to pocket for themselves the wealth created by employees they hire and pay as cheaply as possible. It may be legal to exploit and despoil the environment, stripping it of resources faster than they can be replenished. Laws may allow or even encourage taking advantage of local real estate, utilities, and infrastructure, at little or no cost in resultant tax revenues back to the community and state. But such behavior is reprehensibly immoral, nonetheless. Let’s agree to call it what it is.

    It is a special gift of the ultra-wealthy to hide their immorality behind law, and do so to almost universal social acclaim. And yet the interests of Elon Musk or Jeff Bezos are not more important than the interests of the person just hired at minimum wage to scrub the corporate toilets.

    Where is our Moral Courage?

    Every dollar pocketed by selfish exploitation is an evidentiary document at the bar of Moral Justice, legal though it may be by custom or culture. We just happen to live at a moment in history when we celebrate the immoral as champions, rather than castigate them as villains.

    This is possible because for decades now the West has lost any voice of moral courage.

    In his famous speech at Harvard in 1978, Alexander Solzenhitsyn, the famous Soviet dissident, and Nobel Laureate said this:

    ”I have spent all my life under a Communist regime and I will tell you that a society without any objective legal scale is a terrible one indeed. But a society with no other scale than the legal one is not quite worthy of man either. A society which is based on the letter of the law and never reaches any higher is taking very scarce advantage of the high level of human possibilities. The letter of the law is too cold and formal to have a beneficial influence on society. Whenever the tissue of life is woven of legalistic relations, there is an atmosphere of moral mediocrity, paralyzing man’s noblest impulses. And it will be simply impossible to stand through the trials of this threatening century with only the support of a legalistic structure.”

    ~ Alexander Solzenhitsyn, speech entitled, A World Split Apart Harvard, 1978 (emphasis mine)

    Our Interests are Equal The Moral Act Like It

    Self-interest is relative. Mine may not mean much to you. But my interests are certainly important to me. Just as important as yours are to you. 

    This is the basis of equal treatment and the basis of equal love. My hopes and desires and needs are not more important than yours or anyone else’s. They are important to me for reasons of my own. And yours are the same. They are important to you for reasons sufficient to you. 

    When we acknowledge this, and treat each other accordingly, we’re operating on the basis of truth. We are affording each other the respect and recognition born of interests that are of equal value. 

    In any dealings we may have together, I don’t expect you to treat me as if my interests are more important than your own. Don’t expect me to make my interests subservient to yours, either. They are equal. We may choose to negotiate and compromise. There may be give and take, but if either of us elevates and imposes our interests above the interests of the other, we are guilty of that which constitutes the entire essence of moral and ethical failure, regardless of our justifications, of so-called ”legality”, and regardless of our stock portfolio or checking account balance.

    And let us hold each other to account. Let us act as if our interests have value. And let us think about these things in our business dealings, in our purchases, in our valuation of the character and actions of others, especially when evaluating the wealthiest, who routinely extract from you every penny of interest they can. Just because something is legal does not mean it is right. Remember this and as far as is in you, treat people as if their interests are exactly as important as yours. Because they are.

  • The Ultimatum Game

    How many of these could you win?

    There are two basic motivators for humans. These are fear of loss and hope of gain. This dynamic animates every choice we make. There is overlap. There is some vicissitude from one decision to the next, but most people will generally align themselves into one camp or the other over their lifetimes. ”Fear of gain” and ”hope of loss” do not exist as motivators, but the way people perceive gain and loss, are relative. The concept of value comes into play. And human interaction, with its perceived value, has an impact. The two basic motivators then, nudge people toward what they value. 

    Interesting studies show that in general, persons place a higher value on things they possess or think they are owed, than they value the very same things if they were trying to obtain them. Your used car, or your house is worth more to you as the owner/seller than the same car or house would be if you were trying to buy them.

    A study on the psychology of economics (Neuroeconomics) called the Ultimatum game presents some interesting findings. First developed in 1982, it has been repeated many times, across many different cultures and countries, and with many variations. There is an abundance of information online if you care to indulge yourself further.

    The typical format for the basic version of the Ultimatum game groups participants into pairs; a proposer, and a responder. They are endowed with a sum of money. Both the proposer and the responder know the amount of money being gifted. The proposer is told to make a single, one-time proposal on a split of the money between the participants.  If the proposal is accepted, the pair will each receive the amount of the proposed split. If the proposal is rejected, they each receive nothing.

    What is being studied is whether or not the participants will make rational decisions enabling them to agree on a proposed ratio and pocket their cut of the provided money. If not, what other considerations are at work?

    Example: Al and Barbara are given $10 in ones to split between themselves. Al has to make a proposed split that Barbara will accept, otherwise, neither of them takes home any of the free money. Al can make only one offer. Barbara knows there are ten dollars on the table. What does Al propose? What do you propose if you are Al? What are you willing to accept if you’re Barbara?

    Pure rationality, expressed as the expected utility theory of economics, dictates that the responder should accept any proposed split, even if it is only $1. Any amount is more than zero, comes at no cost, and is more than the participant entered the study with. In actual results, any offer of less than 20% of the total amount is rejected more than 50% of the time. Offers of only $1 are rejected almost all the time. Offers of between 30% and 40% are accepted almost all the time by responders, albeit, the further from 50%, the more reluctant the responder is to accept, and the less happy they feel about their share.

    Why is this? Researchers in economics are puzzled by these findings since they defy rational behavior, and therefore don’t fit neatly into economic theory. Psychologists dig deeper and discover that an emotional component exists in humans that causes perceived unfairness to be rejected. But it goes further than just rejection of an unfair proposal for one’s cut of ten bucks.

    Interesting fMRI findings show that some respondents declining to receive an offer they feel to be unfair, prefer to punish the proposer, causing both themselves and the proposer to receive nothing. The part of the brain that is stimulated to release dopamine as a pleasure response can be triggered by the rejection of the offer, specifically because it punishes the proposer for his unfairness. Let me say that again: The research shows that there is pleasure derived from punishing the unfair actor. 

    Turning down an unfair offer, induces physiochemical and psychological gains to the responder greater than free money in their pocket would provide. They are willing to punish themselves financially, forfeiting the purely financial gain, because it literally feels better to them to walk away with zero, rather than to walk away with a gratuitous dollar and be treated unfairly.

    Researchers surmise that since the responder knows the total amount of the endowment (which in some experiments is significant, totaling $100 or more), they calculate that ”fair” would be a 50/50 split of the pot. They proceed to take mental and emotional ownership of that 50% portion. Any proposal offering less than that amount, even though it is a positive gain in terms of money, feels like a loss in contrast to the 50% portion emotionally banked in the responder’s mind. Though fictitious, having no basis in reality or rationality, this is a loss that many responders are not willing to bear.

    In such cases, the feeling one receives from punishing an unfair partner is greater than the feeling one has from walking away with money on the house. The punisher is placing a much higher value on the amount of money they believe they are ”losing” by accepting an unfair offer, than the value they place on the non-zero amount they could have by accepting whatever offer is made. And…they get some dopamine as a bonus for punishing the unfair partner guaranteeing that they will get zero as the wages of their perceived greed.

    These findings are skewed to a statistically predictable significance when factors such as ”pro-social” or ”individualistic” personality types are factored in for comparison. Surprisingly, researchers find that the more a participant identifies as individualistic, the more they are willing to accept the most unfair of offers. The flip side is that pro-social participants will more often reject offers even at the 30% range to ”teach a lesson” to the unfair proposer. Pro-social persons value cooperation and fair play. They exemplify a ”win/win” attitude. 

    Individualists, on the other hand, do not expect fairness, are not surprised or angered when unfair offers are made, and they are not out to correct the unfair proposer’s future behavior by giving them a ”lesson”. To the individualist, there are winners and losers, and that’s that.

    Remember, there is no negotiating in the basic version of the Ultimatum game. Reciprocity is not a factor. It is a one-time, take-it-or-leave it proposal. The proposer has an incentive to be fair if she wants to walk away with anything, but the selfish greed of human nature dictates that even when an 80–20 split is proposed, it’s still accepted about half the time; and the proposer gets to keep 80% of the endowed amount.

    I find it fascinating and a bit counter-intuitive that individualists are more willing to be treated unfairly and not feel bad about it, at least in purely economic transactions. Especially in light of the fact that researchers have found that there is a correlation between behaviors in the Ultimatum game and other aspects of life that are not purely economic. 

    Sociologists study these kinds of psychological tests and their results to determine people’s ability to recognize, and willingness to tolerate, social injustices and economic inequalities. Apparently, self-declared individualists would rather be taken advantage of than have to suffer the indignities of cooperation and teamwork. At least according to the Ultimatum Game results.

    I don’t know anyone who relishes being treated unfairly, but then I suppose some people will sell themselves cheaply if they don’t have the kind of wealth or principles that are more valuable than what can be bought with a dollar. Especially if they can pocket that dollar and still cling to their illusion of self-reliance. Maybe to such a one, that feels like being a winner. After all, a dollar is a dollar, and self-respect won’t buy a cold beer.

  • Monopoly

    When my kids got old enough to play board games, we had a family tradition of playing Monopoly on New Year’s Eve.

    We would begin just after dinner time, maybe have a dessert of chocolate fondue while playing, and the kids and I would battle it out to see who would be the last Monopolist standing. There is at least one New Year’s Eve pic of me with my pocket’s turned out and empty after midnight, some lucky kid or other having bankrupted me as a result of me making one too many visits to her land of high-rent hotel properties.

    Monopoly is fun if the dice fall the right way early on in the game. Get the right properties, move quickly around the board, begin to collect the income of passing go, or land on some fortunate ”Chance” card telling you to collect $50 from every other player, and you create an early advantage.

    Play more than once, and you realize the central role that luck plays. Which is also what makes the re-playability factor high. You know that next time, your luck might change. 

    IRL, the luck for some people never changes. They can be the smartest guy at the table, but they start from a position so disadvantaged that they are always forced to pay out more than they can take in. Or they are forced into a life expending all their time and energy just to race around the board, hoping to get paid a humble and unchanging salary just for passing ”Go”. The cost of mere subsistence is so high they are never able to part with enough money to buy anything that will produce income. They fall further and further behind the ones who started with huge advantages to begin with.

    To such, words like ”personal responsibility”, and ”free market capitalism” don’t inspire loyalty, or hope. They create hardness, and division, and resentment, and ultimately rebellion. 

    Only one year did a kid of mine who had previously won become so upset at falling behind that we had a problem. She was not yet mature enough to recognize that luck was against her this go round. She erroneously thought that it was her skill alone that had gained her prior victory. At any rate, after growing increasingly frustrated at her change of fortune, without warning she grabbed the edge of the board and flung it upwards, disrupting the entire game for everyone. 

    We had our own little outraged Robespierre giving us all a micro-demonstration of the French and Bolshevik revolutions. Once we boxed up the mess, we laughed and dunked more marshmallows and strawberries into the creamy, warm chocolate. 

    To him who has ears to hear, let him hear. For your further consideration: