Theory on framework issues

Tuesday, December 18, 2012

17.1. Societal implications of ego-depletion theory and construal-level theory: Ignored transaction costs and proliferation of electoral events (Part 2 of "Philosophical and political implications of ego-depletion theory")

From ego-depletion theory, we should conclude that making choices is far costlier than what’s told by common sense, this conclusion the source of the theory’s societal implications. Nobody expected that decision fatigue at the day’s end would cause judges to deny almost all petitions they heard. According to common sense, the main cost of decision-making is the time it consumes, but ego-depletion research shows that there’s a much greater unnoticed cost:
Decisions become remarkably harder and less competent with each succeeding decision.
Two societal implications are that 1) accepting or declining economic transactions is costlier than we think and 2) electing numerous officials curtails democracy.
Ignored transaction costs
The housing mortgage crisis exemplifies the first implication: commentary has failed to take account of the toll imposed on people who want to buy homes, when pseudo-opportunity taxes their willpower. The structure of “opportunity” is central here: an open offer from varied offerors isn’t subject to once-and-for-all decisive rejection. Instead, a potential borrower may have to wrestle with impulse for months, so that finally accepting a loan becomes a desperate response to the constant drain on scarce willpower.

The harm never considered is how much willpower is drained from those who refrained from borrowing, who successfully resisted the impulse to take a home loan; how the drain on their willpower paralyzed them in making other decisions—having been forced to squander their willpower on resisting loans that should never have been offered. Willpower is a scarce resource, and it is far more costly than almost anyone realizes. It’s the great hidden societal cost of market transactions. And while researchers assume willpower is replenished with a night’s sleep and breakfast, I suspect that longer frames also operate—this is the reason we need weekends and vacations.

The faux-democratic proliferation of electoral events
Like proliferating consumer “choices” that kill happiness and productivity while seeming to enhance them, the proliferation of elections has an analogous paradoxical effect on democracy. Since every choice offered diminishes our ability to make choices, elections for judges and dogcatchers or for the multiple offices required under the U.S. federal system weaken democracy by detracting from the effort citizens devote to any electoral contest.

Although dramatically reforming the American political structure is neither feasible nor high priority, it is well to have a vision of what kind of structure is or isn’t effectively democratic. Ego-depletion theory tells us that the fewer offices for which a citizen votes the better, but construal-level theory offers additional standards. It proposes that
“Seeing the forest” and “seeing the trees” involve integrated mental sets, dubbed far-mode and near-mode because distance of time, place, and person makes us think in terms of forests and nearness in these respects makes us think in terms of trees.
Outcomes will depend on whether the decision is construed in far-mode or near-mode. The theory might be invoked to support a system of checks and balances like the U.S. system, where elections staged at different intervals and over different-sized constituencies induce varying construal levels. At the federal level, elections to the House of Representatives are relatively near-mode, due both to small districts and frequent elections, and presidential elections may be most far-mode, although Senate terms are longer. Near-mode fosters resistance to change, so it is theoretically consistent with construal-level theory that the House has taken so strongly to saying no.

But if the system succeeds in eliciting different construal levels in different government branches, this has come to seem a defect rather than merit. If government is to deal in broad purposes, far-mode should dominate in formulating policies. If policies are to be implemented intelligently, near-mode should dominate in their local application. How to square this with ego-depletion theory’s moral that the number of contests in which any citizen votes be limited, preferably to a single office? One way to try to accomplish this might be a unicameral parliament with local bureaucracies appointed top down, but this produces an effect opposite to the intended. Appointments to distant career posts are based on far-mode processes, unlikely to lead to effective near-mode reasoning by the appointees.

Another little used but in-theory effective means of unifying local government with national government could better secure the appropriate allocation of near and far cognition: indirect election of progressively higher levels of government by local bodies, so the choices are minimized and each delegation is progressively more far-mode. It may be objected that this was part of the defunct scheme originally adopted under the U.S. Constitution, which provided that local government bodies elect U.S. Senators and delegates to the electoral college, but the U.S. Constitutional scheme insubordinated local power to national by limiting the power of the federal government, whereas in the (unitary rather than federal) system here envisioned, the higher levels dominate the lower despite being selected by them, to subordinate near-mode to far-mode while economizing human willpower.

Saturday, December 1, 2012

18.0 Capitalism and socialism express conflicting reciprocity norms: A reinterpretation of Marx’s theory of capitalist decline

Capitalist stagnation
U.S. workers’ wages stagnated in the last three decades, state-driven China almost alone internationally in substantially improving popular living standards. While other political economists in Marx’s day had observed a tendency for profit rates—driving production under capitalism—to decline, Karl Marx claimed the decline is inevitable, this forming the conclusion of Marx’s three-volume magnum opus, Capital.

Marx’s central argument is counterintuitive but simple. Value consists of labor hours embodied in products. Employers (capitalists) profit by paying laborers for their time, the amount of value paid being less than the amount of socially necessary labor the workers add. With capitalism’s evolution, a declining proportion of the value produced is constituted of labor directly employed, an increasing proportion of labor already concretized in capital goods, since mechanization of production is the fundamental means to increasing economic efficiency, where capital goods contribute to the value of a product to the extent they are consumed in its production. With the increasing organic composition of capital—as proportionately more value is created through capital goods—rate of profit must fall, since it is based on exploiting labor and that already embodied in capital goods has been sold and accounted for.

Despite its centrality to Marx’s analysis of why capitalism eventually comes to retard economic progress, the tendency of the rate of profit to decline is far from universally accepted as true even by Marxian commentators. Marxian academics have even questioned it mathematically, but the real issue isn’t the almost-trivial mathematics but its mapping to reality: does the declining Marxian rate of profit entail a declining actual rate of profit?

Conflicting reciprocity norms
That owners of capital (capitalists) profit from a series of “fair” exchanges could be termed the central premise of Capital. Workers exchange their labor time for its value—that is, the laborers’ own price of reproduction. The arrangement is fair under a reciprocity norm according to which commodities trade at their market value. But it is unfair under a reciprocity norm according to which all receive in proportion to their value-producing labor. Although Marx didn’t stress the point, what’s striking is that each antagonist in the historical drama—the social classes workers and capitalists—frames its interests in terms of a simple coherent reciprocity principle, with the difference that the workers favor a ratio derived from production and the capitalists from distribution. (See Alan Page Fiske, Structures of Social Life: The Four Elementary Forms of Human Relations (1991) [“equality matching” and “market pricing,” but Fiske, while discussing Marx, doesn’t link equality matching to the labor theory of value].)

The market’s function
Attacks on the soundness of Marx’s law of the tendency of the rate of profit to decline derive from its seeming impossibility—this, in turn, due to not seeing the connection between “profit” as defined in the theory and in the ledger. We must start from fundamentals. According to Marx, civil society exists to allow human cooperation in the labor process. Civilization is built on accomplishing this by fostering the accumulation of economic resources by few; capitalism was the form economies came to take at the onset of the industrial revolution. Like other economic systems that followed the agricultural revolution, it arose and became ascendant because of its efficiency in extracting value from labor, but it accomplishes this with a progressive enlargement of the value diverted to augmenting industrial machinery rather than directly producing more products for consumption, which gradually changes the tasks presented. As the contribution of machinery grows relative to the direct contribution of laborers, the basic economic tasks besetting society change from producing value from labor to realizing the value embodied in machinery.

But the capitalist market continues to be a system adapted to extracting value from labor. Insofar as profit represents a gain in value accruing to the capitalist class as a whole, it comes from the value contributed by the laborers. As the production process has progressively less proportionate need for laborers, it becomes harder to profit sufficiently at their expense.

Limits of state action under capitalism
It might be thought that this Marxian profit is a reification. Who’s to say it is the proper abstraction for understanding capitalist motivation, rather than, say, the concept of “interest,” favored by the ultracapitalist “Austrian school.” One response that denies the centrality of Marxian profit (technically, surplus value) is that state action can co-opt the market to new ends. Since the market tends to overproduce capital, adroit government spending might redirect it to produce more consumer goods. This is the essence of Keynes’s policies. The most obvious problem is that unprofitable spending is competitively inefficient and is only sustainable in huge nation states with considerable economic autonomy; otherwise, it may cause a nation’s industries to fail against international competitors, who are free-riders on the increased buying power of the local population. International economic competition sets limits on a country’s ability to use Keynesian policies or any policies involving state subsidy. Yet periods aren’t rare when one capitalist power dominates and is subject to diminished international competition. Also, if Keynesian policies are directed to creating positive externalities or “public goods” favoring profitability, their benefit may outweigh their harm to profits.

But insuperable obstacles to using government to redirect the market keep Marxian surplus value a good first approximation to balance-sheet profit. While a government-regulated market is often thought to provide the best of capitalism and socialism, in an important sense, it provides the worst of each in that the state attempts to regulate in ignorance of the facts, a company’s plans a closely guarded commercial secret. But the more fundamental problem with government-directed capitalism is that it amounts to the government’s adding to some capitalists' profits at the expense of other capitalists. Where political power follows economic power, the political unity of the class of capitalists depends on their shared economic interests. Private property is the means of coordinating individuals into a social class sufficiently unified to legitimize government. This unity depends on allocating wealth according to the dominant reciprocity norm, based on market exchange rates.

The result is only limited government intervention can please the capitalist class. Rather than contributing to the profits of the class, government policy must use incentives which advantage parts of the class at the expense of the other parts. To create an incentive sufficient to replace the incentive of Marxian profit with balance-sheet profit, differently constituted, would involve huge wealth transfers within the capitalist class, calling the system’s legitimacy into question by undermining its broad support by the dominant social class.

Corrected on January 2, 2013: the organic composition of capital increases rather than declines. The point is purely terminological and the result of my still not grasping why machinery is termed "organic." Thanks to a correspondent, who corrected me.

Blog Archive

About Me

Joshua Tree, California 92252-2141, United States
SUPPLIER OF LEGAL THEORIES. Attorneys' ghostwriter of legal briefs and motion papers, serving all U.S. jurisdictions. Former Appellate/Law & Motion Attorney at large Los Angeles law firm; J.D. (University of Denver); American Jurisprudence Award in Contract Law; Ph.D. (Psychology); B.A. (The Johns Hopkins University). E-MAIL: Phone: 760.974.9279 Some other legal-brief writers research thoroughly and analyze penetratingly, but I bring another two merits. The first is succinctness. I spurn the unreadable verbosity and stupefying impertinence of ordinary briefs to perform feats of concision and uphold strict relevance to the issues. The second is high polish, achieved by allotting more time to each project than competitors afford. Succinct style and polished language — manifested in my legal-writing blog, Disputed Issues — reverse the common limitations besetting brief writers: lack of skill for concision and lack of time for perfection.