Tuesday, November 15, 2011

The Four Books of China

Let's talk again about virtue versus neutral rules. First, a recall: I found Alisdair McIntyre's book After Virtue very refreshing when I read it recently. McIntyre argues that a rediscovery of Aristolte's take on the virtues, and hence an older tradition of moral philosophy, gives us a route of the relativistic dead-end into which contemporary liberal politlical theory has backed itself. The neutral state, which does not have any conception of the good life, is empty.

Is this just a eurocentric prejudice? I've been reading The Four Books: The Basic Teachings of the Later Confucian Tradition translated with commentary by Daniel Gardiner.

It is a summary and commentary on the four most seminal books of ancient China, including Confucius' Analects and the Mencius, as interpreted by Song Dynasty commentator Zhi Xi in the 13th century.

Almost every educated Chinese gentleman for a thousand years spent much of their youth pondering these books. The books played a central role in the culture for 1500 years before that. Indeed, the books, together with the Five Classics were much of education. They formed the core of the Chinese civil service examinations which chose ruling offiicals for nine centuries, right up to the early years of the twentieth century.

I found my way to reading them because they played such a dominant role in another book I read recently. I loved Jonathan Spence's Return to Dragon Mountain, the evocative true story of a Chinese family in the seventeenth century as the Ming Dynasty collapsed. Much of their energy was spent studying these classics, and therefore competing for power as officials and reputation as cultivated gentlemen.

The fascinating thing is they have some broad, rough similarities to Aristotle, who of course lived almost comtemporaneously with Confucius in the "Axial Age" . It was an unimaginably long way from Macedonia to Shandong Province, but something must have been in the air.

Confucius believes, above all, in virtue and setting a virtuous example. He consistently shies away from setting down universal moral rules. The aim is to cultivate oneself, so one does the appropriate thing whatever the specifics of the situation may be.

For example, the commentary on the Analects notes (p39)

Note here that, asked about true goodness, Confucius again presents characteristics or qualities of it, not a definition. These qualities are universally desirable, according to him, and are to be exhibited even when the truly good person finds himself among peoples who have no stake in Chinese culture or customs.

And in the fourth book Maintaining Perfect Balance, 2:2, it says

The superior man maintains perfect balance and keeps to the constant because, as a superior man, he accords with circumstances in finding the perfect balance

The commentary on this extract says

Preserving the balance is situational and is determined by the circumstances of the moment. There is no unchanging, absolute standard of right. The challenge for the individual is to weigh all circumstances senstitively and behave in a manner fully appropriate to the circumstances. (p113)

Of course, I don't want to overdo similarities. The cultivated man, in the view of these sages, probes for the underlying principle in things, and then tries to act appropriately.

And there is no doubt that it is a hierarchal and quite stuffy view of the world, filled with ritual and obedience - perhaps conditioned by the strife and chaos of the era. People clutched to whatever sense of order they could. In some ways it is a celebration of bureaucratic diligence which did not always serve China well.

But what I take from this is the Four Books are at root about cultivating personal qualities first, not applying universal rules of conduct or neutral law. There are personal qualities that everyone can aspire to, and which serve as examples to others.

6. The Master said, One who practices government by virtue may be compared to the North Star : it remains in its place while the multitude of other stars turn around it.

Commentary: [Virtue in the rulrer exercises a moral power over those he governs; this virtue operates silently and without force, through a sort of charismatic attraction. Virtue's capacity to exert influence over others, even to transform them, is spoken of repeatedly throughout the Analects]

And most famously (section 74, p37)

If you desire good, the people will be good. The virtue of the superior man is wind; the virtue of the small person is grass. When the wind passes over it, the grass is sure to bend.

Change of Pace Photo

The Walll St bull fenced in at the foot of Broadway, about two weeks ago

De-Occupy Wall St

The police cleared Zucotti Park in the early hours of last night, and then power-scrubbed the park clean. Protestors have reassembled there this evening, but they are not being allowed tents and sleeping bags.

The novelty of the protests is wearing off, as the weather gets worse. The surprising thing has been how small the overall encampment was. The park is not very big, maybe two-thirds the size of a football field. And some of it just gets stilly. Middle-aged hippies relive their boomer youth.

But regardless of the actual reality of Zucotti Park, there has been an underlying... sympathy is the wrong word among the general population. But an understanding of where people are coming from.

I wonder if there will be more violent clashes at the big marches that were planned before this for Thursday.

Monday, November 14, 2011

Virtual jobs

I'm discussing Martin Ford's book The Lights in the Tunnel: Automation, Accelerating Technology and the Economy of the Future.

He believes that the structural unemployment caused by automation could tip the mass market into decline, as a matter of straight arithmetic.

And he stresses the importance of the mass market. Warren Buffet is never going to buy a million cellphones for his own use, for example. If you lose the mass market, you lose the bulk of consumer demand.

So he argues consumer demand is the fundamental necessity for the economy. Production is not the problem. Generating enough demand to sustain that production is.

What, then, is the solution? Ford proposes new taxes, especially on capital-intensive industries to reflect the negative externality they have on the mass market.

When a business eliminates a job as the result of automation technology, the income that was previously paid to that worker does not simply vaporize. In fact, it is redirected in two ways: (1) Some of the income accrues to the owners and managers of the business, and (2) some of the income is redirected to the consumers of the business’s products or services in the form of lower prices. Therefore, the government can recapture the wages from the automated job with some combination of two types of taxes. First, higher business taxes, capital gains taxes and more progressive income taxes on wealthy individuals can be used to recapture the income that goes to the business’s owners.

Secondly, some form of consumption tax could be used to recapture that portion of the lost wages that results in lower prices. This consumption tax might be a simple sales tax or a value added tax (VAT) similar to the ones already popular in Europe. It would also be possible to design a wage recapture scheme which de-emphasizes direct taxes on business and relies more on a consumption tax.

This much is interesting but not that unusual. Hundreds of tax reform schemes exist.

Of course many people would hate the idea, he says, because it seems more progressive, a sort of Robin Hood scheme to take from the successful and productive. But the wealthiest and most successful would lose if the mass market goes into a tailspin as well, he argues.

More interesting is what he says should be done with the money.

While it is conceptually not difficult to envision how the government might recapture lost wages through special taxes, it is much harder to design an effective way to direct that income to consumers in the absence of jobs. The lack of these incentives is a primary problem with current welfare programs. Welfare, as it is currently implemented, provides few incentives for self improvement and little hope for the future.

So government and welfare redistribution is not the answer, he argues. Instead - and this is a wonderful phrase - we need to create "virtual jobs".

A program in which everyone is provided with a relatively equal income—in return for doing nothing—provides no motivation for self improvement, no sense of self-worth and no hope for a better future. This is the problem with existing welfare programs. What we need then is a mechanism that provides for unequal (but not unfair) incomes. We need to synthetically recreate the rewards and incentives that are currently tied to jobs. ... Most importantly, we need to insure that the incentives built into the system motivate individuals to do what is best for themselves and for society as a whole.

At the most basic level, a job is essentially a set of incentives.

So the really important thing then becomes - what are the incentives? He proposes three main criteria - level of education, participation in "activities that enhance community, civic and cultural development. ", and reducing externalities like environmental damage.

It is, of course, easy to laugh or sneer at the idea that people should be paid to read instead of to work. But, as I have tried to point out here again and again, if we transition into an automated economy, we will have to pay people to do something—or we will have a general collapse of consumer demand.

He cites Keynes' Economic Possibilities essay, and concludes with ideas about transitional arrangements. There should be more work-sharing, more decoupling of benefits like heath care from employment, and more streams of income based on his alternative incentives. He then discusses the impact on developing countries.

It is the idea of a virtual job which is the really interesting thing here, where incentives are decoupled from production and exchange of basic goods and services. It is a different idea altogether from government planning or rights-based welfare transfers. It replaces the 20th century idea of the welfare state, which really did transfer money to people in return for nothing,

But it will encounter much of the same skepticism about government. People will fear elites will hijack the incentives to create a stifling liberal paradise - for a while - before it all turns into Greece.

However, I think there really is something very important here. It focuses attention on the incentives we believe we ought to have in society, rather than the labor market in isolation.

The problem is we have deep problems talking about incentives, because the standard liberal framework forbids discussion of ends.

I've argued throughout this blog that people need a new sense of purpose, and we need to think more about the fact that our economic needs change as we saturate our needs for basic goods and services.

This is one way to think about setting up society and a new economy for achieving broader stimulation, engagement and purpose, rather than maximizing the dollar value of GDP.