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.

Selling the Greed

"Buy the greed, sell the fear," so the saying goes, but as we emerge from a period of our economic history in which this philosophy has been practiced to the nines, and the result has been to cultivate a culture of corruption and crisis, the small number of beneficiaries and their huksters now need to sell the greed and persuade The People to buy the fear.

"Greed is good," so the argument goes, and we must now manage the crisis component of this practical, utilitarian philosophy with the neo-conservative element, like the McCain camp, arguing that The People must buy into the fear of socialism in order to preserve what motivates the creation of wealth and, therefore, the privilege of determining its distribution.

Wealth shared is wealth squandered by not making the scarifice necessary to create it, so they argue, but The People are not seeing an empirical verification of that hypothesis. The utility is not verified, but disconfirmed by the clearly observable evidence.

Yet, we still have the aspiring non-elits that cling to the absurd belief that if we share the wealth, the wealthy will no longer be wealthy and the poor will still be poor. The result is a Non-Pareto Optimal, dead-weight loss in which everyone loses.

The argument is irrational because it is the product of greed, an emotion accepted, bought, as a practical philosophy instead of an indicator for behavior modification that avoids an impending crisis of a few that have too much at the expense of everyone else having too little--what we have now.

Conservatives argue that the criticism of the utility of greed is overly academic. We are thinking about it too much. That a sacrifice has to be made for the production of wealth, savings, is obvious, and the elite, they argue, are best suited to own and manage that sacrifice, the savings, so that we can have more savings by it being deprived of The People. It is, of course, illogical to claim the deprivation of value adds value. No, it redistributes the value to cause an easily avoidable crisis--a cyclical liquidity crisis characteristic of a debtor economy.

Since the elite are best suited for managing the capital (the savings, the sacrifice), they must be rewarded with the "privilege" of not having to share in that sacrifice, conservatives argue, because they will not, then, take the risk to organize the production of wealth we all enjoy. The privilege is the reward for successfully providing The People with what they want, and that is motivated by the emotion of greed with the result being an accumulation of wealth that indicates the value added in the form of the capital.

The problem with the conservative argument is that the value was not added, it was accumulated. The result is a debtor economy (a leverage economy in which more value is added than produced) that is always being managed, organized, to buy the greed and sell the fear even when it is illogical and empirically not beneficial for The People that give it both the value and the legitimacy of its power.

Conservatives argue recognition of the problem as socialism. The logic required to solve the problem is reduced to the fear, the emotion of it, which otherwise serves to indicate danger to protect and promote the welfare of the species. Conservatives are utilizing this primordial survival instinct to destroy its utility for The People. Reversing that would be to, as they say, think about it too much. Providing for their welfare, I dare say, is what The People want, and providing for recurrent crisis does not, then, fit the reward of privilege.

The privilege of accumulating value by leveraging it into an artificially added value is supported by the innovation of productive capacity. The more per-unit production added per dollar invested, the more value can be added, or accumulated, to be greedily reinvested for more accumulation through innovation. The problem is that the accumulation does not allow for a competitive reinvestment based on the profit margin. The result is to greedily innovate ways to add value without growth, which leads to the crisis of overproduction in which demand is overburdened with debt, like we have now.

The growth that occurred was largely in the real estate development sector, where you can get rich quick, but because the wealth is greedily accumulated, instruments of finance were innovated to allow the demand to be driven by debt that could not be paid. The result is the crisis of overproduction, or the inability to pay--the foreclosure crisis.

According to conservatives, the capital is greedily invested to innovate production which adds wealth. If the reward of greed is denied by sharing the wealth, it will not create it. If we do not allow the reward to be fully enjoyed by the risk taker, the risk will not be taken, and the reward will not be had to be unduly redistributed with a socialist model, or reinvested to cause competition and disinflation with full employment and maximum consumer choice provided by a free-market model.

Greed drives the incentive to risk the capital. Without it, risk, or innovation, will not occur. This equates risk of loss with productivity and innovation. If you are not productive and innovative--greedy, you lose.

So, the argument goes, we were much better off before we started flirting with spreading the wealth around. That has made the capital not willing to take the risk of growth and innovation. It becomes illiquid. If we do not allow greed to operate, we will self-determine, choose by operation of our intellect, an extreme deprivation. We are all better off if we all embrace the reality of our greedy impulses and ignore the latest fashion of intellect.

Never mind that greed is likely to result in the indifferent deprivation of others, which brought us to the crisis of illiquidity. It was the greed--the overwhelming, irrational, fearless passion for risk and reward, the supreme confidence in its virtue without thinking about it too much, not the lack of it--that caused the illiquidity. If greed is the problem, how is it the solution?

Now that the greed has been overbought into a major crisis, the fear is now oversold. The People are not buying it. It is illogical. It is unreasonable to accpet the problem as the solution.

Where The People once accepted the business cycle as a naturally recurrent event of undirected determinism, like the weather, We now know it can be the directed product of our self-determination, not driven by greed and fear, but the virtue of our intellect.

Obama/Biden!

Reality By Narrative

I recently published an article about the practical philosophy of phenomenology. Let's look at a practical case study.

Consider commodities prices.

The "reason" oil prices are in retrace of the uptrend is be"cause" of the macro deflationary trend, so the story goes.

The deflationary trend was, in reality, "caused" by the peak price of oil.

The peak price was a fundamental fraud. The story for the uptrend, the narrative, was a fraud. The story for the downtrend is equally, by the necessary tautology of the narrative causational argument (by the validity, not the verification of the argument) a fraud.

Remove the perceptual manipulation of the argument (the phenomenology), what is left to explain the entire cyclical (physical) phenomena of the trends is the consolidation of the capital.

Consolidation of the capital (a lack of pluralism that is the defining characteristic of democracy) is the source, the sole "cause" of the problem.

If you want to "really" solve the problem, eliminating the cause is a necessary condition. Nationalizing the consolidated capital does not solve the problem, it just reorganizes it.

The money flow indicator (the movement of consolidated capital) is the sole determinant of the trends. The story, the narrative, to explain, to justify, the outcome is ex-post-facto: it is a phenomenology. The explanation of the phenomena is argued as the cause when it is "really" an effect (occurring after the fact).

So this is "literally," philosophically, with the legitimacy of the built-in rhetoric of verification (the scientific method), what I mean when I say that government must ensure a deconsolidated capital and markets "in priority." It is a necessary condition for solving "the problem."

So... which is reality: the narrative phenomenology of the political economy, or my reflection (the critique) of the phenomena?

So you see how phenomenology works as a practical philosophy. Reality is just whatever you want it to be, a priori or posteriori. Reality is not independent of perception: phenomena is "really" phenomenon (God, the Spirit, Nature, is pure perception of being, not mere existence). Existence is nothing (no thing) without your perception of it.

It's time to make reality what you want it to be.

It's time to speak truth to power.

Obama 2008!

Very best wishes.