Practical Philosophy and Structured Economic Incentives

Giving Measureable Meaning to the Moral Imperative


Analysts want there to be an algorythmic mechanics to indicate probable, testable, outcomes.

Determining variables are not always easily reduced and structured into differentials that make for reliable evaluative measures despite the assumption that all the effects are included in a regression.

Normative measures included in public policy, for example, can present with unintended consequences that confound technically descriptive, analytical models as well as normative, prescriptive models. The differential between economic models in combined operation (mixed economic models) makes for a complex analytic that becomes reduced to moral imperatives as declarative knowledge.

Reliance on prescriptive modeling for declarative knowledge is inherently biased and quickly reduces to political power for sustained application. The means is unscientific, but it is not unpredictable; that is, pure and mixed models have predictable consequences that are likely to be managed in predictable ways to sustain application of the modeling with a legitimacy of a moral imperative despite a verifiable insignificance.

While the incentives of a free-market model, for example, are easily verifiable, there is a tendency to modify the model for a non-market effect but with the "virtue" of a free-market legitimacy. The incentives modify with the model, however, and the outcome will, predictably, not be the predicted consequence of the model. There will then be unintentional consequences that, while being intentional, are easily argued to be spurious and confounding due to the complexity of a "mixed" model.

Culpability is structured into the unaccountability of the unintended consequences. A problem to be solved is then reduced to negotiating what the problem is, usually identified with conserving a moral imperative that results in an unresolvable, antagonistic differential.

The modification does not disconfirm the unmodified version. Instead, the measureable effects of the modified version, with a moral imperative to apply "virtuous" means-to-ends, supports the free market hypothesis.

Given the current status of our political-economic system, are we encouraging virtue or vice? For an equities analyst, for example, the differential can mean the difference in regulatory reform that affects margin performance. The calculus can be significantly changed based on the imperative scored into the political-economic differential equation.

Another good example is health care reform. If the solution is affordability to satisfy an imperative, three possibilities emerge: reduce costs, increase income, or both. We see, however, that the problem has been negotiated into an enormous bureaucratic scheme to provide insurance premiums, mandated to support the cost. The meaning of the imperative--delivering healthcare--is normatively the same but measurably different on an effective quantitative score.

Consolidation of industry and markets purports to increase the virtue of economic efficiency through an economy of scale to satisfy the imperative for the accumulation of capital (economic growth). The imperative is measureably achieved while the proposed effect of economic growth algorythmically cycles negative.

In the case of health care, the proposed reform will spread the risk and reduce costs through an economy of scale. The accumulation will effect growth of the insured. More funds are available for health care, and less for anything else. Capital is accumulated to achieve the scale, which is the problem--the more accumulated the less available to spend with any discretionary control over prices. The only price control is the deflationary affect on the general economy in the form of demand reduction--the inability to pay (the problem).

The distribution required to prevent a massive accumulation from being deflationary prospectively comes in the form of lower costs.

Reorganization of existing health-care costs into a mandated government accumulation will not reduce costs without cost controls, which is not a part of the program. Costs will equilibriate based on the amount of non-discretionary funding available. The general economic effect is disequilibriating.

The differential between the two practical models, free-market economics and an economy of scale, appears to be insignificant if they both yield lower costs and spread the risk. However, the accumulation has a deflationary tendency, consolidates the risk and the cost without control or an easily verifiable accountability.

Ensuring a free-market model is about providing health care at an affordable cost, equilibriating the cost to available income. Ensuring an economy of scale efficiency is about consolidating the risk into an accumulation of capital to pay the risk premium without equilibriating the cost to available income, which is the deflationary problem to be reformed.

In the former case, providers must control costs to stay in business (alpha risk). In the latter case, providers are incentivized to control the governing authority and bankrupt consumers (gamma risk). The former is pro growth with low inflation. The latter is pro inflation with low growth and provides an abusive incentive that Adam Smith proscribes by ensuring a free market in priority.

The latter results in reduction of supply and higher prices, and that is why the health care reform legislation will likely include provision for increased compensaton for providers. The problem is sustained in the form of a solution, favoring a deflationary accumulation of capital to grow the supply of insured funds available for provider cost increases.

The reduction of available income--the reduction of demand--is the risk that is supposed to be reduced by mandated health-care premiums. Instead, the risk is reorganized to look like risk reduction.

The two operational models--the pluralistic free-market model, and the model of consolidated economy of scale--is an antagonistic differential. The virtue, the strengths, of the two models are non-complimentary, the differential is in itself functionally disequilibriating, and the imperatives are categorically undefined, meaningless, variables.

Instead of encouraging virtue, we cultivate vice in priority with the legitimacy of the outcome falsely attributed to an ontology of free-market mechanics. It is every man for himself. The outcome cannot be a malign or criminal intent if we are all striving for the same reward. The winners are the "natural aristocracy" and "the right thing to do," no matter how wrong it may seem to the losers,
is "Beyond Good and Evil." Depriving the winners of their winnings is, therefore, unnatural. It is wrong and results in ontological crises, like the one we are experiencing now. The only right thing to do is to "let it be." Let the results of the free market stand. The only evil, then, according to the conservative argument, is to redistribute the wealth, and power, accumulated.

Accumulation of wealth and power, conservatives maintain, cannot be considered in any way a criminal intent. It is the right thing to do. This moral imperative is, however, categorical--it is not only the right thing to do, but a compelling endeavor that defines one's existence: no matter how immoral a value we may assign it, wealth and power will be sought and accumulated. It gives meaning, categorical value, to existence.

The categorical assignment of value is largely expressed in the sense of a distributive justice imbedded in a logic of orderly hierarchy and collective action.

The moral imperative is categorically infused with the power to organize toward a specific goal, or for specific performance, like analyzing whether banks that are organized "too big to fail" are more or less valuable to shareholders now that TARP funds--the product of a moral imperative--are being replaced with new equity.

Categorical distribution of value gives measurable meaning to the moral imperative. Since its meaning is imbedded in ethical argumentation, however, ambiguity abounds.

Unlike the empirical argumentation of the scientific method, the categorical measure of an ethical imperative is imbued with difficult-to-measure qualitative, normative values. The values are "indicated" by quantitative measures like the distribution of wealth and the exercise of power.

For example, is a one dollar vote in the marketplace equivalent to one person/one vote in the political marketplace? While the question is quantitatively testable, the meaning--the interpretation of the data--is subject to an endless qualititative ambiguity (reduced to an antagonistic analytical differential) of an unmeasurably argumentative proportion on values that are not generally, but should be, considered a function of verifiable hypotheses.

The measure of normative values is less a matter of confirmable ontology than an acceptance of faith supported by reason--the Aristotelian/Thomistic model of moral construction (teleology). It is an epistemology that natural science has rendered outmoded (the earth is not empirically flat and the sun does not empirically revolve around the earth).

The Aristotelian/Thomistic model of reasoning is critically flawed if we seek verifiably declarative knowledge and accept the predictive utility that comes with it. Despite the demonstrated utility of the scientific method, however, it does not keep us from constructing teleological, organizational models dressed up as naturalistic ontologies. It is a false epistemology intended to support the categorical assignments that achieve the moral imperative of doing the right thing. This is achieved with highly qualitative, and ambiguous, assignments of ethical value.

For example, bailing out too-big-and-complex-to fail banks was a moral imperative because it prevented a depression. The virtue of the benefit includes record foreclosures, massive unemployment and reduction of net worth redistributed to upper-class incomes.

Bailing out from the bottom up is an unconfirmed, untested, moral hazard premised on the false argument that accumulation of wealth creates growth and employment when the opposite is verifiably true. Disconfirmation of the tested hypothesis (growth creates wealth) is ironically considered by the same conservative argument to be morally superior to its confirmation, however.

Although demonstrated accumulation of wealth provides a productive incentive (something to be strived for), without growth there is little wealth to be accumulated; and as it accumulates there is little left to prevent a punitive, gamma-risk distribution on wealth that is retributively valued.

Confirmation of the wealth-creates-growth hypothesis is, then, a productive disincentive. It is a moral hazard.

The conservative argument, "accumulation of wealth causes growth" demonstrates how normative arguments become functionally complex and appear differentially hypocritical. Giving measurable meaning to moral imperatives is an evaluation of legitimacy, and as we see in the example, the functional differential is easily rendered an abstruse inscrutability that is effectively unempirical but measurably meaningful and fully functional, nevertheless.

It is not that the conservative-normative argument is an unverifiable hypothesis. It is disconfirmed (not verified) with each economic cycle into recessionary trend. That is why conservative proponents rely on the lack of a null hypothesis.

By not allowing the distribution necessary to verify it, the argument is made that the conservative-normative is verified by never being nulled. Since the best way to declare knowledge is to continuously try to disprove it, the conservative norm is falsely argued to stand the test of the null hypothesis.

The Bush tax cuts, for example, were to result in a budget surplus according to the conservative-normative hypothesis. The verifiable result is the Great Recession. Since the new adminstration will not apply an alternative, but is engaged in a reorganization of the problem from the top down, the null-hypothesis remains effectively untested and the conservative-normative gains empirical legitimacy despite continuous failure.

In the above example, the moral hazard is conversely verified by "virtue" of the intended result since accumulation of wealth and power causes a perverse incentive and a moral hazard. The predictable outcome of the practical model is, nevertheless, deemed forgiveably unintentional and will not be prevented to conserve the virtue of the verifiable benefit, avoiding the moral hazard.

Although the deprivation of the Great Recession is undesireable, according to the conservative-normative argument, it is a necessary condition (a categorical imperative). Economic growth will not occur without the moral imperative expressed as legitimately declarative knowledge: providing the incentive for growth (productivity) is caused by deprivation.

The differential is antagonistic, however, because the deprivation (the accumulation), by definition, prevents growth which is dependant on distribution.

Preventing the means of deprivation (the distribution) is a moral hazard because it will prevent the means of providing for the deprived. The differential struggles against itself to a generally beneficial and legitimate effect that requires secret, elite knowledge to fully understand.

The deprived, non-elite masses do not see the empirical, ethical value of capitalism and its cyclical processes because they do not have the secret elite knowledge to realize it. The non-elite must rely on faith in the system, and a failure of that faith is a heresy to be discouraged by political-economic sanction (deprivation). The travails of a natural, innate deprivation obstructs access to the knowledge necessary for economic success, not the exclusive deprivation of the capital.

According to the classical model of capitalism, deprivation is the virtue (the strength) of capital formation. Without it, we will ALL be much worse off than the deprivation necessary to achieve economic growth. The consequences are morally imperative and ontologically unavoidable (i.e., the accumulated value is completely non-retributive and the active pursuit of self-interest to provide for the undeprived a forgiveable consequence).

The ethical value of forgiveness plays a vital role in the logic of a righteous accumulation of wealth and power. Accumulation has both the dimension of a measurably indicated practical efficiency (the profit margin) and ethical value (the right thing to do). It should not be discouraged because it is the motive (the telos) to expand the pie.

An unforgiven debt burden at the bottom during the Great Recession, however, has unnecessarily given the profit motive an extraordinary retributive value. The extra value presents with extraordinary gamma risk that we will all find empirically, measurably, detrimental in the most meaningful way, relinquishing freedom to tyrannical ambitions that have become the structured incentives of power.

Health care reform legislation, for example, is an imperative that is structured with such an enormous complexity (the bill is over 2000 pages), that it is purely an endeavor of elite authority. Proponents would convince us that the complexity cannot be resolved by the non-elite in a free-market structure. Its passage is more a demonstration of tyrannical ambitions armed with moral imperatives than a practical measure to relieve the masses from the travails of a conservative-normative deprivation. It now awaits the empirical test, the normative differential, of a meaningful confirmation, nevertheless dependant on a normative description of power.

The normative differential has become so complex in the hands of technical expertise that it has been driven to an extraordinary level of unmanageability. The differential has become so antagonistic that reconciliation of the modeling is more a function of negotiating what the problem is than solving THE problem.

Nature is indifferent to whether we want to identify the truth. Nature asserts the truth with the force and empirical legitimacy of a categorically imperative authority. Ignoring the truth is a gamma risk that gives measureable meaning to our moral existence driven by the strength, the virtue, of our intellect to structure the power of our incentives.

Productivity Gains

Recessionary trends reduce both purchasing power and net worth of consumers.

Readily apparent is that reduction of buying power makes for a worsening crisis begging for a technical correction. What is not so apparent is what happens to the net worth.

Reduction of purchasing power has a very near-term, deflationary effect, reducing inflationary pressure by reducing demand. As prices fall, monetary assets appreciate in a zero-sum relationship. Losing monetary assets--losing a job or a house that was leveraged into cash--by liquidation under deflationary pressure prevents participation in the benefit.

Reduction of net worth has a longer term effect that disconnects, and disassociates, the cost with the benefit. Net worth just seems to evaporate, and that is the way it is described by the vast majority of economists and analysts that have access to popular media outlets, reinforcing the apparent and popular understanding of it. However, the understanding is an affirmation and not a confirmation of the phenomenon.

Now that the Dow has retraced to 10k, the big question is, "What needs to happen to get the retail investor back in the market?"

When retail investors had a job, savings went into the house and the stock market. Where did all that value go?

Throughout the period of conservative resurgence small investors were told that trickle-down economics would trickle (retail) into an individual's retirement account and appreciate the value of homes. Small investors subsequently fell to the macro-economic reality of the business cycle. Rather than sharing in the wealth, they were providing it to be consolidated.

Sharing in the accumulation phase of the cycle, the retail investor was marked to market as the wealth to be accumulated, not to accumulate wealth. What would have happened if Social Security funds would have been put into the market, as conservatives strongly advocated, prior to the Great Recession as well?

The promise of sharing in the wealth by investing in it before it trickles down is not only seductive but also provides the productive incentive to generate the income to invest. It is the perfect retail marketing scheme evolving from a distrust of trickle-down economics touted to provide the greatest good for the greatest number. Wages and salaries can be leveraged into wealth rather than providing mere subsistence. That would give credibility to the beneficence of accumualting capital. Capital formation is then not simply an expropriation of value produced by labor.

Rather than being alienated from the wage and salary earner, productivity is value gained by labor in the form of capital. The value is being verifably appropriated, instead of expropriated, as the value of labor's investments tick up. The value is being reinvested for continuous accumulation (not economic growth) rather than retributed by a gamma-risk distribution, stabilizing the cyclical macro trend and avoiding crises. Socialism? No need for that. Free-market economics? No need for that. Consolidation of capital, industry and markets benefits everyone...it is the model of maximum efficiency!

The new and improved model of capitalism is a touted utopia with labor sharing in the capital gained.
Neo-conservative reconstruction is to demonstrate that the classical model of capitalism can be modified to be veridically utilitarian. That it is not verifiably utilitarian, but systematically yielding a highly exclusive benefit, is the perennial problem of capitalism and the systemic risk to be managed. Managing that risk is in full mode at this time with an estimated retributive value of approximately $10 billion by the year 2010.

The retributive value has been accumulating since the dawn of capitalism. Perennial (cyclical) liquidity crises keeps the capital consolidated and functions to mitigate the declining rate of profit, preventing deconsolidation and resisting the natural tendency to free-market pluralism.

If capitalism does not consolidate (accumulate) into "too big to fail," the capital will reorganize (resolve) into small, pluralistic entities that are both capable of succeeding and not too big to fail the system into a crisis mode if some do. The systemic risk is managed by process of a pluralistic, continuous improvement.

Since the improvement (the correction) is not allowed to happen, the declining rate of profit technically presents as productivity gains. The declining rate of profit is borne by wages and salaries--income that is not technically considered capital gained, but its primary cost. Distribution of the cost determines the accumulation--to whom the benefit accures.

In a consolidated marketplace, the cost accrues as a debt, and the benefit accrues as a profit. The result is the jobless recovery we have now with the declining rate of profit being absorbed by the vast majority of consumers in the form of reduced wages and salaries and working more for less--productivity gains.

The expropriation is described as "capital formation." The loss of net worth is gained in the form of productivity gains. Each member of the family having to work two or more jobs to pay the profit margin, like it has been for twenty years or more, will be considered an improvement over massive unemployment.

Expropriation of the value--the zero-sum distribution of net worth from the bottom to the top income class (the constant, non-pluralistic accumulation of wealth and power)--appears as an unconnected cost and benefit. The cause and effect appears disconnected so it cannot be rendered a function of a problem/solution resolve.

Rising wages and salaries and full employment is considered to be the problem, therefore it is not the solution, which is what we have now. It is no accident.

The only reason the stock market is a leading indicator of recovery, and employment is a lagging indicator is because the capital gained (the consolidation of net worth--the formation of capital) has deliberate priority over employment (purchasing power and equitable distribution of net worth). It is what capitalism is intended to do and is supported in every way right down to the classification of wage and salaried employees.

Why is it that the controversial compensation of too-big-to-fail institutions are considered "bonuses" and not a typical laborer's wage or salary? Why is a medical doctor's pay considered in a different class than a typical laborer's fee for service? It is because it has an elite status with all the rights and "privileges" of achieving that status. Chief among the privileges is the exercise of power that is emblematic of status, like tyrannizing liberties, or expecting to be paid whatever fee is commanded for service in the name of public health.

The reason health care reform is so difficult is not because health needs to be determined a right or a privilege, which reduces to a matter of opinion, but whether it will be provided at an accumulative, and fully verifiable, cost. It is a struggle for economic power and political dominance.

The stakes for preserving the empirical measure of status are very high, as well as the costs for the vast majority of The People in which the choice is health care or bankruptcy and no reason to believe reform will change a system that supports accumulation over a distribution of power.

Relinquishing economic status is to relinquish and share power. The medical profession does not want to be subjected to the rigors of free-market economics because it "crudely" relinquishes status by disinflating the price (the profit) and the probable accumulation of wealth that confers status and power (health as well as wealth).

Health insurance companies want a special monopoly status and be allowed to consolidate to prevent free-market competition because a free market model means the firm MUST be pluralistically accountable in every possible aspect of public propriety. The firm is accountable on demand, which is a function of pluralism, rather than dictate the market on command, which is a function of elitist authority.

As long as the healthcare sector can function without being subjected to the rigors of free-market economics, it is more able to command the bid. The bid is whatever the provider asks and accountability becomes a function of litigation with high monetary awards from the deep pockets of the market's commanders.

The need to sue to get what the free market is likely to otherwise affordably provide indicates command economics and an elitist model in operation, not the failure of free-market economics.

Free-market pluralism provides accountability in the fullest and most immediately direct measure. It is inimical to market tyranny, holding would-be tyrants directly and immediately accountable by consumer bid in the marketplace.

Ensuring free-market economics provides tort reform beyond the consumer being left with no recourse, which only benefits the market providers--the economic elite--and will do nothing to control costs for consumers, only adding to the profit margin, and power, to command the bid on the bottom line.

In a free-and-open unconsolidated marketplace with no barriers to entry, a business enterprise, or a doctor, that has achieved a high status of profitability in the marketplace is an entity that consumers both want to do business with and invest in. Both can happen at the same time with the most direct, immediate, and easily verifiable accountability--exactly what litigious elitists, busily defining what is a right and a privilege, do not want.

One model is democratic, the other authoritarian. Which one do We choose to ensure freedom and liberty for all beyond the ephemeral determination of what is a right and what is a privilege?

A person does not have the right to, or the privilege of, anything if it is unaffordable. This is what a free-market economist refers to when describing and explaining the ontology of the distribution of power. Nature is completely ignorant of the right thing to do. There is nothing profane. All it knows is the truth. All We have to do is find it. There will be found the peaceful prosperity We are All looking for; and for the people that are more concerned with engineering the truth to a self-satisfaction than finding it, it will find you, much to your dissatisfaction. It is self-correcting, oblivious to propitiatory gestures and retributive rituals either ancient (like making sacrifice to the gods of providence) or modern (like retributing accumulated value in the form of a public debt).

The right to health and wealth is only verifiable by doing it, and the means to ensure it is the maximum pluralism, the maximum possibility beyond structured probabilities, free-market economics provides.