Charles Moore's ideological blinkers prevent him from looking much beyond a sense of nostalgia for the curriculum of sixty years ago.

Education is now about 'governmentality' Mr Moore, it is not to educate in any traditional sense, but is entirely utilitarian.

It has a double purpose: to reinforce an acceptance of the free market dystopia, and to lower expectations from that dystopia.

It's about returning most people to corporate bondage, made more bearable by a sick libertarianism, which is also in the corporate interest.

What is it all for? Never in history have politicians talked more about the importance of education. Never has it been more generally agreed that the modern world is a “knowledge economy” ...

The aim of modern education to teach children to ask more questions, and not simply to stuff them with information, is surely right.

But that promise has been broken. We seem to have devised a system of curriculum and examination which pulls off the incredible double of being very hard work but very low quality.

There are endless projects and modules, and endless ways of re-marking to upgrade one’s results, but no definite test of what is known and understood.

In this process, a strange thing has happened. For all the patter about diversity, education has become more hostile to things that are outside the immediate experience of the pupil ...

Telegraph  11 December 2009

Neoliberalism and education

The importance of knowing how

Meanwhile, the free markets have their own problems with the eradication of altruism since the dividing line between self interest and greed is somewhat elastic.

The sacking of Nilesh Shroff, who had a habit of, er, 'disadvantaging' his clients provides an example:

FSA bans and fines trader £140,000 for unauthorised 'pre-hedging'

The Financial Services Authority (FSA) has banned and fined trader Nilesh Shroff for deliberately disadvantaging his customers by 'pre-hedging' trades without their consent. Shroff has been prohibited from performing any regulated function on the grounds that he is not fit and proper and has been fined £140,000. While Shroff was a senior trader at Morgan Stanley, the FSA found that he disadvantaged his clients on seven occasions between June and October 2007 by partially 'pre-hedging' programme trades without the clients’ consent.

'Pre-hedging' refers to trading by a broker for his firm’s benefit in advance of carrying out a trade for his customer, using information provided by that customer. Where customers instructed Shroff to buy particular stocks, he bought those stocks for the firm first, causing the price to increase before he executed the customers’ trades. Where the customer order was to sell he first sold on behalf of the firm, decreasing the price. Shroff knew such unauthorised pre-hedging was expressly prohibited by the FSA and Morgan Stanley’s policies and not in his clients' interests.

Margaret Cole, the FSA's director of enforcement, said:

"Nilesh Shroff has been banned from trading because he repeatedly abused his position of responsibility as a senior trader and the trust placed in him by clients and by his employer. He was aware of FSA guidance and Morgan Stanley’s rules in relation to pre-hedging but nonetheless he broke them.

"As an experienced trader, he would also have known that his orders were likely to disadvantage his clients. The FSA will take action against those who act without honesty and integrity and who do not follow our rules."

Shroff agreed to settle at an early stage of the investigation and therefore qualified for a reduction in penalty. Were it not for this discount, the FSA would have imposed a financial penalty of £200,000. Following its own investigation, Morgan Stanley dismissed Shroff for gross misconduct on 28 December 2007.

FSA 26 May 2009

FSA bans third ex-Morgan Stanley trader

FTAdviser.com

This crisis is a turning point, not only in the economy, but in our thinking about economics. Adam Smith, the father of modern economists, argued that the pursuit of self-interest (profit-making by competitive firms) would lead, as if by an invisible hand, to general well-being.

But for over a quarter of a century, we have known that Smith's conclusions do not hold when there is imperfect information - and all markets, especially financial markets, are characterised by information imperfections.

The reason the invisible hand often seems invisible is that it is not there. The pursuit of self-interest by Enron and WorldCom did not lead to societal well-being; and the pursuit of self-interest by those in the financial industry has brought our economy to the brink of the abyss.

No modern economy can function well without the government playing an important role. Even free marketeers are now turning to the government. But would it not have been better to have taken action to prevent this meltdown?

This is a new kind of public-private partnership - the financial sector walked off with the profits, the public was left with the losses.

We need a new balance between market and government.

New Statesman 16 october 2008

Enron's Rise and Fall

Northern Rock boss sold £2.6m of shares while urging employees to keep buying

"Fuck You Buddy"

... Curtis examines the rise of game theory during the Cold War and the way in which its mathematical models of human behaviour filtered into economic thought.

The programme traces the development of game theory with particular reference to the work of John Nash, who believed that all humans were inherently suspicious and selfish creatures that strategised constantly.

Using this as his first premise, Nash constructed logically consistent and mathematically verifiable models, for which he won the Bank of Sweden Prize in Economic Sciences, commonly referred to as the Nobel Prize in Economics.

He invented system games reflecting his beliefs about human behaviour, including one he called "Fuck You, Buddy" (later published as "So Long Sucker"), in which the only way to win was to betray your playing partner, and it is from this game that the episode's title is taken ...

A separate strand in the documentary is the work of R.D. Laing, whose work in psychiatry led him to model familial interactions using game theory.

His conclusion was that humans are inherently selfish, shrewd, and spontaneously generate strategems during everyday interactions ...

All these theories tended to support the beliefs of what were then fringe economists such as Friedrich von Hayek, whose economic models left no room for altruism, but depended purely on self-interest, leading to the formation of public choice theory.

In an interview, the economist James M. Buchanan decries the notion of the "public interest", asking what it is and suggesting that it consists purely of the self-interest of the governing bureaucrats.

Buchanan also proposes that organisations should employ managers who are motivated only by money.

He describes those who are motivated by other factors — such as job satisfaction or a sense of public duty — as "zealots".

As the 1960s became the 1970s, the theories of Laing and the models of Nash began to converge, producing a widespread popular belief that the state (a surrogate family) was purely and simply a mechanism of social control which calculatedly kept power out of the hands of the public.

Curtis shows that it was this belief that allowed the theories of Hayek to look credible, and underpinned the free-market beliefs of Margaret Thatcher, who sincerely believed that by dismantling as much of the British state as possible—and placing former national institutions into the hands of public shareholders — a form of social equilibrium would be reached.

This was a return to Nash's work, in which he proved mathematically that if everyone was pursuing their own interests, a stable, yet perpetually dynamic, society could result.

The episode ends with the suggestion that this mathematically modelled society is run on data—performance targets, quotas, statistics—and that it is these figures combined with the exaggerated belief in human selfishness that has created "a cage" for Western humans ...

Wikpedia

Rand's advocacy of "rational selfishness," is perhaps her most well-known position. She defines morality as "a code of values to guide man's choices and actions - the choices and actions that determine the purpose and the course of his life."

Rand maintained that the first question isn't what should the code of values be, the first question is "Does man need values at all- and why?" As well, of importance for Objectivist ethics is an answer to the question "What are values?"

According to Rand it is only the concept of 'Life' that makes the concept of 'Value' possible," and, "[t]he fact that a living entity is, determines what it ought to do."

She writes:

"there is only one fundamental alternative in the universe: existence or non-existence—and it pertains to a single class of entities: to living organisms. The existence of inanimate matter is unconditional, the existence of life is not: it depends on a specific course of action... It is only a living organism that faces a constant alternative: the issue of life or death..."

The survival of the organism is the ultimate value to which all of the organism's activities are aimed, the end served by all of its lesser values.

Integrating with this is Rand's view that the primary locus of man's free will is in the choice: to think or not to think.

"Thinking is not an automatic function. In any hour and issue of his life, man is free to think or to evade that effort. Thinking requires a state of full, focused awareness. The act of focusing one's consciousness is volitional.

Man can focus his mind to a full, active, purposefully directed awareness of reality—or he can unfocus it and let himself drift in a semiconscious daze, merely reacting to any chance stimulus of the immediate moment, at the mercy of his undirected sensory-perceptual mechanism and of any random, associational connections it might happen to make."

According to Rand, therefore, possessing free will, human beings must choose their values: one does not automatically hold his own life as his ultimate value.

Whether in fact a person's actions promote and fulfill his own life or not is a question of fact, as it is with all other organisms, but whether a person will act in order to promote his well-being is up to him, not hard-wired into his physiology.

"Man has the power to act as his own destroyer—and that is the way he has acted through most of his history."

As with any other organism, human survival cannot be achieved randomly. The requirements of man's life first must be discovered and then consciously adhered to by means of principles. This is why human beings require a science of ethics.

The purpose of a moral code, Rand held, is to provide the principles by reference to which man can achieve the values his survival requires. Rand summarizes:

If [man] chooses to live, a rational ethics will tell him what principles of action are required to implement his choice. If he does not choose to live, nature will take its course. Reality confronts a man with a great many 'must's,' but all of them are conditional: the formula of realistic necessity is: 'you must, if -' and the if stands for man's choice: 'if you want to achieve a certain goal'

Rand's explanation of values presents the view that an individual's primary moral obligation is to achieve his own well-being - it is for his life, and his self-interest in it that an individual ought to adhere to a moral code.

Egoism is a corollary of setting man's life as the moral standard. A corollary to Rand's endorsement of self-interest is her rejection of the ethical doctrine of altruism — which she defined in the sense of August Comte's altruism (he coined the term), as a moral obligation to live for the sake of others.

Rand referred did not use the term "selfishness" with the negative connotations that it usually has, but to refer to a form of rational egoism.:

“ To live, man must hold three things as the supreme and ruling values of his life: Reason, Purpose, Self-esteem. ”

Since reason is man's means of knowledge, it is also his greatest value, and its exercise his greatest virtue.

"Man's mind is his basic tool of survival. Life is given to him, survival is not. His body is given to him, its sustenance is not. His mind is given to him, its content is not. To remain alive he must act and before he can act he must know the nature and purpose of his action. He cannot obtain his food without knowledge of food and of the way to obtain it. He cannot dig a ditch––or build a cyclotron––without a knowledge of his aim and the means to achieve it. To remain alive, he must think."

In her novels, The Fountainhead and Atlas Shrugged, she also emphasizes the central importance of productive work, romantic love and art to human happiness, and dramatizes the ethical character of their pursuit.

The primary virtue in Objectivist ethics is rationality, as Rand meant it "the recognition and acceptance of reason as one's only source of knowledge, one's only judge of values and on's only guide to action."

Rand's egoism rejects subjectivism. There is a difference between rational self-interest as pursuit of one's own life and happiness in reality, and whim-worship or "hedonism."

A whim-worshiper or "hedonist," according to Rand, is not motivated by a desire to live his own human life, but by a wish to live on a sub-human level.

Instead of using "that which promotes my (human) life" as his standard of value, he mistakes "that which I (mindlessly happen to) value" for a standard of value, in contradiction of the fact that, existentially, he is a human and therefore rational organism. The "I value" in whim-worship or hedonism can be replaced with "we value," "he values," "they value," or "God values," and still it would remain dissociated from reality.

Rand repudiated the equation of rational selfishness with hedonistic or whim-worshiping "selfishness-without-a-self." She held that the former is good, and the latter evil, and that there is a fundamental difference between them.

For Rand, all of the principal virtues are applications of the role of reason as man's basic tool of survival: rationality, honesty, justice, independence, integrity, productiveness, and pride—each of which she explains in some detail in "The Objectivist Ethics."

The essence of Objectivist ethics is summarized by the oath her Atlas Shrugged character John Galt adhered to:

"I swear -- by my life and my love of it -- that I will never live for the sake of another man, nor ask another man to live for mine."

Wikipedia

Augusto Pinochet: Economic Policy

By mid 1975, the government [of Chile] set forth an economic policy of free-market reforms which attempted to stop inflation and collapse. (Pinochet) declared that he wanted "to make Chile not a nation of proletarians, but a nation of proprietors." To formulate the economic rescue, the government relied on the so-called Chicago Boys.

The economic policies espoused by the Chicago Boys and implemented by the junta initially caused several economic indicators to decline for Chile's lower classes.

Between 1973 and 1989, there were large cuts to incomes and social services. Wages decreased by 8%. Family allowances in 1989 were 28% of what they had been in 1970 and the budgets for education, health and housing had dropped by over 20% on average.

The junta relied on the middle class, the oligarchy, huge foreign corporations, and foreign loans to maintain itself. Under Pinochet, funding of military and internal defense spending rose 120% from 1974 to 1979.

Due to the reduction in public spending, tens of thousands of employees were fired from other state-sector jobs. The oligarchy recovered most of its lost industrial and agricultural holdings, for the junta sold to private buyers most of the industries expropriated by Allende's Popular Unity government.

This period saw the expansion of monopolies and widespread speculation.

Pinochet: Economic Policy

The Chicago Boys

Pareto efficiency, or Pareto optimality, is an important concept in economics with broad applications in game theory, engineering and the social sciences.

The term is named after Vilfredo Pareto, an Italian economist who used the concept in his studies of economic efficiency and income distribution.

Informally, Pareto efficient situations are those in which any change to make any person better off would make someone else worse off.

Given a set of alternative allocations of, say, goods or income for a set of individuals, a change from one allocation to another that can make at least one individual better off without making any other individual worse off is called a Pareto improvement.

An allocation is defined as Pareto efficient or Pareto optimal when no further Pareto improvements can be made. This is often called a strong Pareto optimum (SPO).

A weak Pareto optimum (WPO) satisfies a less stringent requirement, in which a new allocation is only considered to be a Pareto improvement if it is strictly preferred by all individuals (i.e., all must gain with the new allocation).

In other words, when an allocation is WPO there are no possible alternative allocations where every individual would gain. An SPO is a WPO, because at an SPO, we can rule out alternative allocations where at least one individual gains and no individual loses out, and these cases where "at least one individual gains" include cases like "all individuals gain", the latter being the cases considered for a weak optimum.

Clearly this first condition for the SPO is more restrictive than for a WPO, since at the latter, other allocations where one or more (but not all) individuals would gain (and none lose) would still be possible.

Formally, a (strong/weak) Pareto optimum is a maximal element for the partial order relation of Pareto improvement/strict Pareto improvement: it is an allocation such that no other allocation is "better" in the sense of the order relation.

A common criticism of a state of Pareto efficiency is that it does not necessarily result in a socially desirable distribution of resources, as it makes no statement about equality or the overall well-being of a society ...

Wikipedia

A Psychological Basis?

The idea of 'rational action' has generally been taken to imply a conscious social actor engaging in deliberate calculative strategies. Homans argued that human behaviour, like all animal behaviour, is not free but determined.

It is shaped by the rewards and punishments that are encountered. People do those things that lead to rewards and they avoid whatever they are punished for. Reinforcement through rewards and punishments -- technically termed 'conditioning' -- is the determining factor in human behaviour.

This behaviour can, therefore, be studied in purely external and objective terms; there is no need to invoke any internal mental states. People learn from their past experiences, and that is all we need to know in order to explain their behaviour.

The inspiration behind Homans's psychology was the behaviourism of Skinner, developed from studies of pigeons (See Skinner 1938, 1953, 1957).

Food is the basic goal sought by animals, and Skinner held that animal behaviour could be shaped by the giving or withholding of food. Food is a reward that reinforces particular tendencies of behaviour.

Humans, however, are motivated by a much wider range of goals. While pigeons will do almost anything for grain, humans are more likely to seek approval, recognition, love, or, of course, money. Human consciousness and intelligence enters the picture only in so far as it makes possible these symbolic rewards.

Homans did not see this as involving any fundamental difference in the way that their behaviour is to be explained. The character of the rewards and punishments may differ, but the mechanisms involved are the same.

In social interaction, individuals are involved in mutual reinforcement. Each participant's behaviour rewards or punishes the other, and their joint behaviour develops through this 'exchange' of rewarding and punishing behaviours.

While any behaviour can, in principle, reinforce the behaviour of another, Homans held that approval is the most fundamental human goal.

Approval is a 'generalised reinforcer' that can reinforce a wide variety of specialised activities. Because of its generalised character, Homans saw approval as directly parallel to money.

Both money and approval are general means of exchange in social interaction, one in economic exchange and the other in social exchange.

John Scott

Behaviorism

The concept of "governmentality" develops a new understanding of power. Foucault encourages us to think of power not only in terms of hierarchical, top-down power of the state. He widens our understanding of power to also include the forms of social control in disciplinary institutions (schools, hospitals, psychiatric institutions, etc.)as well as the forms of knowledge. Power can manifest itself positively by producing knowledge and certain discourses that get internalised by individuals and guide the behaviour of populations. This leads to more efficient forms of social control, as knowledge enables individuals to govern themselves.

"Governmentality" applies to a variety of historical periods and to different specific power regimes. However, it is often used (by other scholars and by Foucault himself) in reference to "neoliberal governmentality", i.e. to a type of governmentality that characterizes advanced liberal democracies. In this case, the notion of governmentality refers to societies where power is de-centered and its members play an active role in their own self-government, e.g. as posited in neoliberalism.

Because of its active role, individuals need to be regulated from 'inside'.

A particular form of governmentality is characterized by a certain form of knowledge ...

In the case of neoliberal governmentality (a kind of governmentality based on the predominance of market mechanisms and of the restriction of the action of the state) the knowledge produced allows the construction of auto-regulated or auto-correcting selves ...

Wikipedia

The Lisbon Treaty: A Very Real Danger

1. Privatisation of public enterprises;



2. Deregulation of the economy;



3. Liberalization of trade and industry;



4. Massive tax cuts;



5. 'Monetarist' measures to keep inflation in check,
   even at the risk of increasing unemployment;



6. Strict control on organised labour;



7. Reduction of public expenditures, particularly social spending;



8. The down-sizing of government;



9. The expansion of international markets;



10. The removal of controls on global financial flows.

Washington Consensus

Why Adam Smith Still Matters

The often-quoted "invisible hand", Adam Smith's totemic expression, is not the hand of God.

The term just names the impersonal forces of spontaneous order.

It is a system that, without asking much, manages to solve the enormous task of social coordination.

The spontaneous order thus resulting from social interaction is what Smith, in his Wealth of Nations, calls the "obvious and simple system of natural liberty".

This universal insight is by no means a naïve promise of happiness. All it promises - and that is no small thing - is social co-ordination.

This system is a dynamic one that leads to results determined by the spontaneous interplay of individual forces within a framework of evolved or intelligently crafted rules, or the law.

Smith is optimistic that the results of this interactive process are on the whole desirable.

Some scholars have attributed Smith's optimism to his alleged Deism. He seems to show a belief in a Creator who has endowed the world with certain natural laws accessible to human reason, but who refrains from intervening in the course of worldly events.

True or false, this is no founding pillar of Smith's system. Smith places the individual dispositions and actions of men at the baseline of his analysis.

If these dispositions and actions cannot be traced back to providence but are instead triggered by secular social learning or simply sheer evolution, this doesn't invalidate his logical result.

The masterpiece that matters is the social co-ordination achieved through interaction, and the generation of useful institutions that channel life in human society.

What is crucial, however, is reciprocity. It is only this requirement that guarantees the harmony of interests. Correspondingly, Smith does indeed see cases in which this mechanism doesn't work.

In the Theory of Moral Sentiments, he warns us not to give in to vanity and self-conceit, for example, and in the Wealth of Nations he describes the impairing effect of privilege.

Undeniably, business people will always be tempted by monopolies or cartels. This is held in check by their inherent instability.

Monopolies or cartels can be stable only when they are supported by a privilege granted by the authorities.

A similar point concerns selfishness and greed. Selfishness is self-interest out of bounds.

Usually, in market exchange, selfishness and greed are checked by the simple necessity of finding a transaction partner. Often, however, political measures are taken that boil down to making people more greedy than is natural - for example, through "quantitative easing" in monetary policy, through a generous social policy without any regard to what is affordable or not, through a lack of tight controls.

When that is the case, the natural check on greed breaks down. We then observe excessive behaviour and its devastating social results.

Regrettably, Smith was unable to conclude the third large project that he had been working on throughout his life: a theory of government.

In his "obvious and simple system of natural liberty", this is the only gap. It is not a small one. The answer to this question is fundamental for the current debate - in a situation where our Western civilisation seems to have come to a crossroads as more interventionist power is reclaimed for government, in which nationalisation and re-regulation are going unquestioned, and in which politics is generally gaining a new self-confidence.

The question has to do with the natural harmonisation of interests. Is there any way in which the interests of government are spontaneously aligned with the interests of the governed? Is political action possible without destroying the checks and balances of the spontaneous order?

Smith doesn't give us an answer. Maybe he had found that there was no such way.

Standpoint April 2009

Adam Smith and the invisible hand

The basic idea of rational choice theory is that patterns of behavior in societies reflect the choices made by individuals as they try to maximize their benefits and minimize their costs.

In other words, people make decisions about how they should act by comparing the costs and benefits of different courses of action. As a result, patterns of behavior will develop within the society that result from those choices.

The idea of rational choice, where people compare the costs and benefits of certain actions, is easy to see in economic theory. Since people want to get the most useful products at the lowest price, they will judge the benefits of a certain object (for example, how useful is it or how attractive is it) compared to similar objects. Then they will compare prices (or costs). In general, people will choose the object that provides the greatest reward at the lowest cost ...

Wikipedia