Category / Philosophy and Hedonics

Financial statements and the death of Osama January 31, 2013 at 5:06 am

Or, why Baudrillard can teach us more about accounting than Descartes

The Epicurean Dealmaker confuses us thus:

accounting is … an epiphenomenon to the actual day-to-day activities which any business conducts. It is a way to keep track of the financial outcomes of a firm’s true activity, which is conducting business.

Why this isn’t false, per se, it is deeply unhelpful. That is because it suggests that there is somehow an underlying `real’ business which `real’ managers, the kind who wouldn’t know a statement of cash flows if they were threatened by one in Central Park, someone live and breathe.

Things are rather different. First, as Baudrillard taught us, the way to think of meaning is not as imbuing some ineffable connection to the real, but rather as a web of reference. In other words, there’s no real business, there is just a collection of actual and conceivable management reports. Management can’t manage `the real business’ because there is no such thing. They can and do manage (and become seduced by*) signs of business. That’s all.

In this light, the current criticism of bank accounting (see, for instance, Partnoy and Eisinger) can be read as an objection to its relationship to other accounts. DVA in the P/L means that US GAAP is substantially different from management accounting, for instance. What the readers of financial statements want to see is something that is closer to not the truth but rather to the narrative that managers have constructed to give themselves comfort. They want an albeit redacted and dramatised precis of what really happened in the situation room, not Brave Zero Thirty.

*Doesn’t this account of seduction remind you of the games management play?

Baudrillard’s concept of seduction is idiosyncratic and involves games with signs which set up seduction as an aristocratic “order of sign and ritual” in contrast to the bourgeois ideal of production, while advocating artifice, appearance, play, and challenge against the deadly serious labor of production. Baudrillard interprets seduction primarily as a ritual and game with its own rules, charms, snares, and lures.

Let’s open a bottle and toast to uncompetitiveness February 7, 2010 at 9:41 pm

In the midst of a good nag, Europe’s voters are the biggest obstacle to ambitions to become more dynamic and successful, the Economist stumbles on a truth:

… lots of Europeans do not want to live in the most dynamic and competitive economy in the world. They prefer to work fewer hours than Americans or Japanese (about 10% fewer, on average), to take long holidays, and to retire as soon as possible.

Honestly, reader, do you really blame them? Who aspires to spend more hours in the office? Who doesn’t like holidays?

If economists persist in tutting and sucking their teeth when people decide that economic growth is not the most important thing in the world ever, then they display a rather shallow understanding of people, as well as of economics.

This man writes well March 11, 2009 at 7:40 am

He says:

The state that promises maximised choice and minimal risk is in serious danger of encouraging people to forget two fundamentals of economic reality – scarcity as an inexorable truth about a materially limited world, and concrete productivity and added value as the condition for increasing purchasing power or liberty, and thus sustaining any kind of market…

In contrast to an economic model in which the exchange of goods is the basic process being analysed or managed, we have encouraged a model in which the process of exchange itself has become the raw material, the motor of profit-making. But the problem comes when massively inflated credit is “called in”: when the disproportion between actual, measurable material security and what is being claimed and traded on the market is so great that confidence in the institutions involved collapses.

The writer, if you are interested, is Archbishop Rowan Williams. He reminds me of an insightful book from the 70s, The Limits to Growth. Perhaps we should be asking a little more forcefully what growth is for: if strong increases in GDP always come with volatility, or gross income inequality, or both, is maximising GDP always the right course?

Fodor foo-ey February 15, 2009 at 9:12 pm

Warning: (amateur) philosophy ahead.

I like Jerry Fodor’s articles in the LRB. They are always well-written, provocative, and often wrong. Here is a recent example. Jerry is talking about whether physical things can increase your brain capacity, so that in particular if you lose your notenook (PDA, whatever), have you literally lost (a part of) your mind. To kick things off, he needs a dubious definition:

The mark of the mental is its intensionality (with an ‘s’); that’s to say that mental states have content; they are typically about things. And (with caveats presently to be considered) only what is mental has content.

What? Where did that come from, in particular the `only’ clause? There is no motivation for it. It’s just like saying that only brains can have frabble, and so my notebook can’t be a part of my mind because it isn’t frabbly. The key point being that frabble is meaningless and so by definition unfalsifiable.

Once Jerry has got away with his definition, his path is clear to disparage fancy electronics and humble paper alike:

That’s not, however, because iPhones are ‘external’, it’s because iphones don’t, literally and unmetaphorically, have contents.

In other words, privileging wetware-implemented connotations above other kinds is what allows Fodor to say that notebooks don’t have contents, and hence can’t be parts of brains. But there’s no reason for such prejudice. I like my red hardback notebook because it is better than my memory: I would rather use it than my aging wetware for some things. It’s deeply unfair to say that just because neurons are inside and paper is outside, neurons are somehow better. Just because we don’t know how, exactly, we access internal memory there is no reason to claim that someone (in Jerry’s case a female someone) doesn’t have to think about (or, in any literal sense, ‘consult’) her memories; she just has them.

There’s a lot more of this kind of thing in the article, including the claim that only minds can entertain modal connotations (`what ifs’), all of which seem to me to follow from the initial act of wetware apartheid. C’mon, Jerry, notebooks might not have feelings, but they certainly sometimes have contents.

Towards a quantitative hedonics April 8, 2008 at 7:11 am

It is possible to support the general theme of a body of work without thinking any particular part of it is interesting or successful. Susannah Clapp captures the phenomenon nicely in a Guardian review of the play Contains Violence at the Riverside studios. Here the audience sit on the roof of the theatre and observe the action in adjacent buildings through binoculars.

In Contains Violence the spectators aren’t in the same building as the actors. You make up your own long-shots and close-ups, using their binoculars to zoom in and out at will; the headphones, which are designed to lock you into the action (you hear not just conversation but the slosh of water, the ring of a phone, the crackle of paper, the clink of a keyboard), also protect you from the sound of other audience members and from street noise. You are, weirdly, much further away from the actors than usual but aurally much closer up. Beneath the imaginary acts of violence, as in a dreamlike backdrop, buses pass by silently, pedestrians bustle, and ambulances speed to real emergencies. Occasionally, a non-actor – a cleaner or late worker – gets snarled up accidentally in the action.

So far, so illuminating: this inside-outsideness sets you up to look quite differently at your surroundings – which is not something The Importance of Being Earnest will usually help you do. But the exciting stuff has actually all happened before the show begins: this is a concept, an occasion, not a drama. Contains Violence has contrived the most thrilling of settings, but it doesn’t manage to convey a real story or any richness of expression.

In other words, great idea, poor use of it. I feel the same way about quantitative hedonics. The idea of trying to use rigourous (OK, quasi-rigourous) economics to argue about happiness without all the usual moral biases or imposition of arbitrary utility functions is a good one. Most of the work in the area, however, disappoints. A good example is given by Jeremy Waldon in his review of Sunstein’s Worse Case Scenarios in the LRB:

[Sunstein] is reluctant to abandon a method of measuring losses by how much people would pay to avoid them, even though it is hopelessly flawed by the fact that poor people would pay less simply because they have less. (We measure the value of a life by asking how much people would pay to avoid its loss, under various scenarios. Now, as a matter of fact, a poor person will not pay $100,000 to avoid a 10 per cent chance of death from cancer, because the poor person has no access to $100,000; so a poor person’s life must be worth less than a million dollars; and so it is not clear how the government can justify imposing taxes for a scheme that spends many millions of dollars to avoid this sort of hazard. That’s the sort of argument this book is inclined to defend.)

On this basis preventing jeering at polo matches is a much more important aim than giving clean water to sub-Saharan Africa since polo players are wealthy and will certainly pay a lot to increase their comfort slightly, whereas the citizens of sub-Saharan Africa are mostly (in dollars a day terms) very poor. So Waldon has a point: cash only works as a measure if we are comparing the happiness of people with roughly the same amount of disposable income. Even percentage of disposable income does not mean much to people who don’t have any. So how can we compare two regulations or two pieces of charity or whatever rigourously in terms of their outcomes? That, it seems to me, is an important question for quantitative hedonics.

Quantitative Hedonics August 5, 2007 at 10:31 am

I’ll start with an effective way to create hap- piness. Lays’ ketchup flavour crisps and Mouton Rothschild 1985. Yes, I know it sounds like a strange combination but it actually really works. So, if that is practical hedonics, what’s quantitative hedonics?

Economists are starting to broaden the idea of cost, in particular talking about the cost of happiness. Quantitative hedonics, then, is an attempt to measure misery or its inverse, joy. The basic idea is easy enough: if you rate your happiness sitting in the garden this morning at 6/10 without an ice cream and 7/10 with one, and an ice cream costs £1, then it costs £1 to increase your happiness 10%.

Nick Cohen in today’s Observer discusses an example of this: the cost of aircraft noise. Clearly being overflown makes people miserable. How much should the airlines pay to compensate the people they inflict this on? Obviously one cannot get an unequivocal answer, but even an estimate is interesting.

This view of the world suggests a different way at looking at some problematic modern situations. For instance recently the New York Times had a discussion of babies on public transport. One side took the view that a screaming child make the whole experience miserable for everyone: the other that they had a perfect right to travel with their child no matter how noisy. It would be interesting of debating whether it is acceptable to travel with a screaming infant what the hedonic cost of doing so was. Perhaps if this added onto the parent’s ticket their decision to travel might be different?

Pareto bites the dust March 9, 2007 at 10:52 am

There is an absolutely fascinating article in the current LRB about happiness and the hedonic treadmill. Briefly (and sadly you will have to buy the magazine as the full article is only online for LRB subscribers) it appears that Avner Offer has shown, at least to the reviewer’s satisfaction, that growing GDP beyond a certain point leads to decreasing happiness. Extra income is not Pareto optimal. Now if this Easterlin paradox is really true (and what is new about Offer’s book is apparently the wealth of detailed econometric evidence), this does pose some interesting challenges about what to do about it.

Hard edged thoughts from Asia December 22, 2006 at 9:33 am

A little while ago I was in Hong Kong (cue gratuitous Blade Runner themed pictures of the city at night). On the way back, I read a paper Dilemmas of an Economic Theorist. It was probably a good thing that I was on a plane at the time: the spluttering of disbelief that such egocentric ramblings was published in a peer reviewed journal would probably have disturbed my neighbours if I had been at home. As it was I took another swig of Cathay’s Bonnes Mares and composed a list of objections:

  • Firstly this paper seems entirely ignorant of any philosophy of science. While economics clearly isn’t scientific, one might at least hope one of the referees had heard of Popper if not Lukacs. Anyway. The author poses the ‘problem’: Should we abandon a model if it produces absurd conclusions or should we regard a model as a very limited set of assumptions that will inevitably fail in some contexts? This simply shows the importance of defining a domain of applicability. Then if the model doesn’t work within the domain, you have falsified it. It’s wrong. Move on.
  • The next ‘dilemma’ is even more absurd. Should our models be judged according to experimental results? What else are you going to judge them on? How nicely they are typeset? Whether they give you a warm and fuzzy feeling when you cuddle them? That such a question is posed in an eminent journal just shows how deeply screwed some academic economics is.
  • Finally we have Do we have the right to offer advice or to make statements that are intended to influence the real world?

Ignoring the temptation to suggest on the basis of the foregoing economists have no right to enter a university let alone try to influence the real world, what else is economics for?

Show me an economist who is willing to put his own money on a trading strategy based on his theorists, and I’ll respect him – Soros is the obvious example. Show me one who is trying to help a country improve its growth, or ameliorate poverty, or any other laudable objective, and I’ll respect her too. But an academic who write papers as fatuous as Dilemmas of an Economic Theorist? Even the famously polite Chinese might have a problem finding something good to say about him.

The rules of theoretical physics September 29, 2006 at 10:03 pm

The New Yorker has a discussion of new books by Lee Smolin and Peter Woit here. Both authors discuss the problem with String Theory – that it isn’t a theory at all, in the conventional scientific sense of making predictions that, if false, disprove the theory.

Both authors suggest part of the problem is that the game of physics is currently set up to reward mathematical dexterity over physical veracity, so we have a generation of theoretical physicists growing up who are fabulous mathematicans but who have no incentive to produce better physical theories. Of course once a community gets established and so acquires some power, this becomes self-perpetuating. They define physics as what they do, despite the evidence to the contrary.

(I’m not saying this is bad work, academically, and neither are Smolin or Woit: just that it is not science because it isn’t falsifiable. One should never underestimate the ingenuity of the experimentalists, so perhaps one day some of these theories will be testable, but no one appears to have any idea how to do that today.)

This, then, is a great example of a game labouring under an unhelpful historical precedent. Particle physics used to be over-funded partly because it was glamourous science (a theory of everything my arse – a theory of everything that matters to a small number of theoretical physicists more like) and partly because it was seen as useful for building bigger bombs. Now we don’t need bigger bombs and particle physics hasn’t had much to say about the Universe since the neutrino mass debacle of 1985 or so. So maybe it’s time for the rest of physics – all those people doing useful and interesting atmospheric, solid state, and statistical* physics – to rise up against the particle people and take some of their funding. Because, in science as in finance, that is one way of keeping score.

*Quantum computation is looking seriously interesting at the moment…

The Local Meme, Part II March 29, 2006 at 9:42 am

Plato was an aristocrat: the idea that you could know everything, that you sat, imperial, having information delivered to you, was completely natural. Perhaps if epistemology had started on a different track, it would not now be so challenged by finding that this model isn’t the way nature seems to work. For now at least, it seems that the Platonic observer is far too distant from the world. Instead, we have to leave our chairs to find out about reality, and whatever we do changes things. Is that really so unnatural, so dissatisfying?

In mathematics, isn’t the idea that you select a meta-mathematics for the task at hand completely reasonable? You don’t try to do the plumbing with just a hammer and nails, after all. And the axiom of choice is no more or less than a tool to be chosen or ignored, as the task at hand requires. It is no more `true’ than a hammer is: asking for the global truth of mathematical foundations increasingly seems to be a category error.

So, gentle reader, celebrate the triumph of local truth, of good enough for the here and now. Global truth is not just a dangerous ontological abstraction, it doesn’t even make sense.

The Local Meme, Part I March 27, 2006 at 11:23 am

A couple of years ago I was chatting to an acquaintance and, like many people, he was fascinated by quantum mechanics. I resisted the temptation to suggest he learn about Hilbert spaces before trying understand the theory of observation in QM (so, right, you take this operator wotsit, and you apply it to the state vector, right, and …) He did make me realise one thing, though: several of the great intellectual achievements of the last century have a common thread – the importance of the local. So at the expense of 99.9…% of the important stuff, here goes:

Special relativity overturns the primacy of the Newtonian observer and focusses attention on the relationship between different observers. What you can see depends on where you are and how fast you are going;

Quantum mechanics says that there is no information without observation. You interact with the system to measure it, and what you do changes the system. Again, there is no gros picture, no privileged observer (at least leaving aside the vexed question of the wavefunction of the whole universe).

The various incompleteness theorems of Gödel and others again assert limits to global knowledge: you can have this property of a proof system, but not that too. If you want all of arithmetic, you have inconsistency. (And interestingly these proof theoretic results now seem to be important for understanding the P = NP problem.)

And then there is constructive mathematics where to prove that the exists an x such that some property holds, we have to actually hold up that x and show it has the property – another local idea.

In Part II, a (probably jejune) way of thinking about how this fits together.