Responding to Crisis

I just read this article called Money and the Crisis of Civilization. It argues that the cause of our current global financial turmoil isn't merely “unregulated casino-style financial manipulation.” Rather, our problems arise “from the very nature of money and property in the world today, and it will persist and continue to intensify until money itself is transformed.” It calls for an entirely new world system, in which we “do not drive the conversion of all that is good, true, and beautiful into money.” (Whose opinion of goodness and beauty is he talking about? The author leaves that up in the air. The virtue of a free market is that we can make such decisions for ourselves.)

Lots of my neighbors in Berkeley react similarly, in claiming that the lesson of the crisis is that we need a fundamental overhaul of our economic/political system: profoundly more government control, and less freedom in the marketplace. Supporters of any alternative system can always use bad times this way: (1) things suck now, (2) I have an idea for changing things, (3) therefore, we should follow my idea.

There’s some merit to this “logic.” When we’re born into this world, blank of experience, our brains need to follow very simple algorithms in order to survive. I can see why DNA, in Her wisdom, would program us with, “Whenever you’re in pain, change what you’re doing. Try an alternative – any alternative – and see if it makes the pain go away.”

That’s not bad for a simplistic strategy. But like many of our inborn simplistic strategies, it’s sub-optimal for intelligent adults.

Some say that since a free-market system results in periods of suffering, and is ultimately unsustainable, we should therefore adopt a more Socialist path. This conclusion might be correct. Maybe more Socialist laws would reduce suffering and lengthen humanity’s survival. No one can predict future effects for certain, and such speculation is beyond my pay grade.

My point is that in deciding whether to make changes, we’ve got to put aside preconceptions, and examine both the benefits and dangers of each option. It’s not sufficient to say, “We need to ditch capitalism because it’s painful and unsustainable.” Buddha said that everything is transitory, and wanting anything results in suffering. If this is indeed the nature of reality and human life, then it’s a mistake to reject a system merely because it’s painful and impermanent.

If Buddha is correct, then utopia isn’t an option. Those advocating an alternate system need to go further than pointing to the pain in the current system. They must demonstrate that their particular alternative is likely to produce less suffering.

(“Man’s desires are infinite, but the means necessary for satisfying these desires are limited.” This is the opening sentence of a graduate-level Economics text… but it could just as easily be Buddha explaining the universality of suffering.)

If you put a rat in a cage and shock him randomly, he’ll do all sorts of “superstitious” behavior – running in circles, jumping up and down, doing somersaults. It’s his attempt to improve the situation by doing anything different. And if by pure chance the shocks stop when he does a somersault, he’ll do more and more of them, whether or not there’s a real cause and effect. Human beings can act the same superstitious way.

If I follow you around every day, eventually I may see you make a major mistake. At that point, I can say, “You’re such an idiot! You tried to live your own life, and look at the trouble that caused. If you’d just put me in control of your life, I’d do it much better, and you’d be saved from screw-ups like this.”

But the fact that you made a mistake, and I claim in retrospect that I would have avoided it… doesn’t mean that my way will really work better in practice. It may sometimes be true that you really would have done better with me controlling your life… but is that sufficient justification? Maybe freedom – even the freedom to make stupid choices – has an intrinsic value, and shouldn’t be so quickly abandoned in times of trouble.

We could, after all, reject Democracy because of all the flaws we find in democratic countries. “Democracy is the worst form of government except all the others that have been tried.” Isn’t it possible that the same is true of free markets? I could complain about how terrible it is that my job was outsourced, but it’d be even worse to deny the job to the guy in Indian who now does it… and needs the money more desperately than I.

As usual, this is best understood by a gambling analogy. In blackjack, you sometimes find yourself holding a 16 when the dealer shows a 7. You’ll notice over time that when you hit in this situation, you most often lose (since 8 out of 13 card ranks – 6 through King – bust you). Based on our inborn, simplistic logic, we may implicitly conclude, “Hitting here keeps failing, so I need to switch strategies and stand.”

But standing here is a huge error. The key point is that holding 16 is a bad situation, in which you’ll most often lose whatever you do. The correct move is to hit, since any different choice would make matters even worse. The only way to reach the right decision is through careful analysis. (Tangentially… if the dealer were showing a 10 instead of a 7, then standing is only a tiny error. That’s because for those 5/13ths of the time that you don’t bust, you’ll most often win the hand when the dealer shows a 7. When he holds a 10, you’ll often lose in all cases, so your decision doesn’t matter.)

People (including me) don’t like that fact that we get led astray when we follow the feelings and intuition we automatically gain through experience. It’s so much easier and more satisfying to believe that our intuition is Truth, and we can dispense with reasoned analysis. In some life situations (e.g., deciding which friends you can trust), intuition may indeed be our best guide. But not always.

When I dealt blackjack in Vegas, I’d advise players to follow the computer-generated basic strategy available in many books. “There are so many things in life that you can’t understand rationally,” I’d tell them. “But with blackjack, you can. Forget about what feels right, and follow the book.” Sometimes they’d listen, but more often not.