Wednesday, February 27, 2013

The Green-Eyed Rationalist

"Thou shall not covet..." features prominently in the Ten Commandments because of elementary economics.

Information is scarce, which is to say two things: it is valuable and it is costly to obtain. That information is valuable is trivially obvious. The costs might be a little bit harder to grasp, but consider that to become knowledgeable about something, you need to obtain, process, and interpret signals. Each step poses its own challenges. I submit to you that it's sensible to be thrifty in each step. We generally specialize and trade when it comes to obtaining information, hence the press. Signal processing is done by the elephant most of the time, preserving the rider for truly novel, challenging situations that demand close scrutiny. Even interpretation is often left in the hands of others who have done the heavy lifting for us. Why bother formulating the foundations of moral theory from scratch each time you're presented with an ethical dilemma? Kant's already done it for you. Or Aristotle, or Aquinas, or Bentham, or Nietzsche, or whoever you like.

So why shall thou not covet thy neighbor's ox? Think about envy as a way of economizing on scarce information. Art lives next to Betty, who earned her oxen by pillaging and looting Lothar of the Hill People over on the other side of the valley. Carl moves into the empty hut to Art's left, droving an oxherd at least as grand as Betty's, so Art could perhaps be forgiven for assuming that Carl has also gained his wealth through the liberal application of violence.

I'm willing to claim that envy is a more-or-less useful heuristic for the circumstances that marked the large bulk of human history. Under conditions of low capital accumulation, wealth differences were more likely to arise not because of the gains from trade protected by secure property rights, but by the careful application of brute force. You see a rich dude, he's probably rich because he's a cheat, a bully, or a racketeer. Now spin the clock forward to the era of merchantry, and we've got a much different story. The sea captain who buys cheap and sells dear ends up with a train of oxen as large as that of the prince who wrings the fat of the land from his lean, immiserated serfs. The same heuristic that makes Art wary of Duchess Betty's wealth is entirely inappropriate when applied to Carl the Monger. When there are more Carls running about than Bettys, heuristic substitution by divine fiat is probably a good least-cost means of protecting valuable capital from re-allocation by rationally envious goatherds. Mobs restrained by the Word of God allow honest farmers and merchants to make us all wealthier through their industry and thrift.

But what, you ask, does any of this have to do with euvoluntary exchange? Well, I claim that paternalism grounded in concerns for BATNA disparity leverages envy by proxy.

Darvis is an itinerant oxhand looking for work. Betty hires him and sets to working him to the bone and paying him a pittance. Art sees this and denounces Betty, that cruel exploitrix. Sure enough, he rallies the townsfolk to dismantle her ranch and reassign her property to each according to his needs. Bereft of his daily bread, Darvis slouches to Carl's to ply his trade. The sad saga repeats, but this time two honest men are ruined instead of just one. Relying on cheap (though still rational) heuristics leads to avoidable tragedy.

"Smash the rich" sentiments can reasonably be justified when the riches accumulate through the use or threat of violence. I think it's fair to be suspicious of folks who "earn" sizable boodles in the warm embrace of the state. Conflating wealthy merchants with crony capitalists may be an easy cognitive shortcut, but it's one that unjustly threatens peaceful voluntary trade. "Rip the System" might be a more useful sentiment to the extent that it encourages institutional reform in the direction of open access orders, fiscal federalism, and an impersonal rule of law. This must, of course, run jointly with a thoroughgoing appreciation for the wonders wrought by lawful capitalism. I think Americans have a general appreciation for this, deep down. Question folks about their attitudes towards the amorphous "rich", then follow it up with questions about specific rich people. I think you'll find most of the contempt restricted to, well, the contemptuous wealthy (not named here since I'm not keen on defending libel suits). Few people I've spoken with begrudge honest business folk their holdings.

The lemma to this is that the real aversion is all on the low end. We hate seeing relative poverty because of pity for the poor, not strictly because of envy of the rich. I'm inclined to believe that this is a strangely American phenomenon, but I'll freely admit that this hypothesis requires more research.

Sascha Konietzko: underappreciated philosopher

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Do you have suggestions on where we could find more examples of this phenomenon?