Category Archives: Natural justice

Of Cats and Cashflow: Human sentimentality and the flaw in economic rationalism

Last Christmas, I paid $5000 for a cat.

$5000.

For a cat.

“Cat” here, in case you should be wondering, is not the title of an avant garde piece of sculpture by some breaking new artist, or a colloquial reference to a rare wine or other exclusive gift for a loved one. Nor indeed, anything special in the feline department.

Just an ordinary cat that my 9 year old daughter had saved her pocket money to rescue from the Animal Shelter. Yes, okay, it’s accepted family lore that he is actually a pedigree animal who somehow found himself down on his luck on kitty skid row – but I can accept there may be a degree of parental self-delusion in that particular idea.

Whatever his back story though, as the warm summer evenings of 2013 began to lengthen, heralding the winding down of business and arrival of the holiday season, all thoughts of casual beachside barbecues and Christmas relaxation were rudely dashed for me one Saturday morning as young Pedro – having manfully picked a fight with a passing car – dragged his sorry frame into the house and collapsed theatrically in the middle of the living room floor.

After a quick cat scan at the local veterinary hospital (no, not a moment of levity playing on my feline friend’s biological order there – a real actual honest-to-goodness “cash up front please sir” CAT scan cat scan) showed up the incontrovertible evidence of a clean and comprehensive break right through the young street fighter’s pelvis, the therapeutic choices came to a quick fork in the road. One path led to major surgery, emptying of savings accounts (“kids – hands up who’s going to University. Not so fast there you two”), and having a half-shaved grumpy convalescing cat locked in a cage in our cosy house through the warmest weeks of summer. The other, to a quiet, calm, fully funded holiday season. Even a couple of weeks of really nice vacation. As well as the sticky point of explaining to my daughter why her precious kitty wouldn’t be joining us for Christmas dinner.

The path we chose (and I say “we” here entirely in the blame-shifting and shared responsibility sense – my wife’s version of this story may differ on the precise extent to which each of us couldn’t stomach the tough decision making) probably tells you everything you need to know about why I’m never likely to make the annual list of Australia’s 10 hardest hearts. And why you shouldn’t take my advice on anything to do with finance.

The point is, this doesn’t qualify as an investment decision. It’s not like I had some brilliant plan to parlay this $5000 outlay into a major stream of retirement income. Even if the cat in question is possessed of the kind of dashing good looks that could make him a major star in pet food commercials…if he could at some point stop trying to take a chunk out of any hand with the temerity to pat him without explicit permission.

No, it just turns out that little tiny titanium screws are really expensive. If you want them put somewhere useful by a veterinary surgeon, anyway.

The much pampered and perhaps overly tolerated Pedro - a few lives down from his initial quota of 9 perhaps, but still going strong as an extended metaphor for social relativism. And definitely not just a shameless attempt to elevate my viewing stats through use of a cute cat picture.

The much pampered and perhaps overly tolerated Pedro – a few lives down from his initial quota of 9, but still going strong as an extended metaphor for social relativism. And definitely not just a shameless attempt to elevate my viewing stats through use of a cute cat picture.

And there, laid bare for the world to see, lies the fundamental flaw with economic rationalism. People are not reliably rational actors on the world stage – we all bring our personal values, idiosyncrasies and biases to economic decision making.

For those of you who might not be fully familiar with the concept, economic rationalism (market liberalism, for readers from outside Australia) is the dogmatic view that markets and money can always do everything better than governments, bureaucracies and the law.

In the more prosaic words of Michael Pusey – Professor of Sociology at the University of New South Wales: “Forget about history and forget about national identity, culture and ‘society’…Don’t even think about public policy, national goals or nation-building. It’s all futile. Just get out of the way and let prices and market forces deliver their own economically rational solution.”

This philosophy underpinned a sharp step to the right across much of the Western political sphere in the 1980s and 90s – think the Hawke-Keating-Howard years in Australia, Thatcherism and its correlatives in Europe – and has more recently been used as the basis for a strict balance sheet approach to management in many areas of wider society – education, housing, the arts, even environmental policy.

This deference to accounting undeniably has a certain elegance to it – a simple coherent narrative that can easily be painted on a placard, or broadcast in a 6 second sound bite. Like Creationism re-packaged for a political audience though (and with many of the same elements of true belief and ideological fervor), the sneaky trick here is that while this is dressed up as analytical economics, really it is all about political philosophy – the ideology of unfettered personal freedom. Don’t get me wrong – it is entirely proper for economic rationalists (or anybody else) to allow value judgments about freedom to define their policy prescriptions. It is improper and, more importantly, incorrect, however, to claim that these ideas flow simply from the laws of economics, and possess some sort of inescapable mathematical truth.

The beauty of mathematics, of course – the reason political and social movements have long sought to co-opt it to their crusades – is that it gives defined, absolute solutions. Put your numbers into an equation, and you get an answer at the end. To as many significant figures as you like. This allows us to do amazing things – like build giant flying machines from aluminium and carbon fibre that can carry hundreds of passengers around the world in a matter of hours. Or land a spacecraft on the surface of Comet 67P/Churyumov-Gerasimenko hurtling through space 510 million kilometres from Earth.

Real world problems though – especially anything touched by the inordinate complexity of human social psychology – commonly fail to lend themselves to mathematical solution. The real world simply has too many possibilities and undefined variables – such that equations have no solid foundations they can be anchored to.

To make problems tractable – to allow mathematics to give us that pure, crystalline answer – we usually make certain assumptions to tie down the open ended possibilities and give us a solvable domain to work within. The danger here though is of ending up with what the great 20th Century physicist and public champion of science Richard Feynman used to call a spherical cow argument (readers of my earlier posting on University fees “More Pennies for Your Thoughts” will have seen a longer explanation of this concept) – an assumption that, while making your equation solvable, also removes any meaningful relationship to the physical system it purports to represent – and when that happens the clean precision of a mathematical solution can be misleading. Or worse.

The NASA engineers plotting the journey of the Mars Climate Orbiter to the Red Planet in 1999 produced incredibly precise solutions. They also assumed the output of one of the key pieces of navigation software on the Orbiter was in metric Newtons of force…when it was actually in pounds of thrust. Oops. This rendered their solutions elegant, precise…and dead wrong, with the $USD 125 million satellite coming in too close to the planet and breaking up in the Martian atmosphere.

Perhaps more than such elementary cases of error, however, the important thing to grasp in a social context is that you can use framing assumptions to distort the result in any direction you might desire. Want to argue against the opening of a new coal mine? Include some cost assumptions about externalities like atmospheric pollution, environmental risk, and increased traffic to show the economics don’t stack up. Or as I showed in an earlier blog, want to argue in favour of higher University fees? Make some helpful assumptions about the financial advantage accruing to a graduate while discounting the societal benefits and increased tax revenue from a more educated population.

Even in the best of circumstances though – if we assume (at the risk of vanishing into the never ending hall of mirrors that is self-referential logic) all our assumptions are correct and appropriate – the critical point to remember is that economics cannot tell you what is the right choice. Morality and values do not drop out of financial equations like wisdom paying out from a philosophical poker machine. Any investment decision comes down to a balance of short term sacrifice against long term gain. Instead of spending your money on something now, you invest it in the expectation of gaining greater reward at some future point.

When it comes to quantifying outcomes – basic economics – that can be a pretty straightforward calculation. “If I have $1000 now, would it be better to stuff it in my mattress or invest it in government bonds for 10 years”. Okay, there are still some assumptions to make about yields and the potential of unexpected events like your significant other throwing your mattress in a skip while you’re at work. Or a plunge in the commodity price on which a government had based all its economic projections, driving it to default on its debts (Hmmmmm…so how is the iron ore market going, by the way?)

By and large though, you can produce a pretty robust solution to that kind of question and say which one is likely to give you the higher return over a 10 year period.

Defining what the sensible decision is based on those results though – now there’s the challenge – with a crack arising in the logic around defining how great a long-term premium is required to make the short term sacrifice worthwhile.

Let’s say that Mike believes that the pleasure he derives from eating a custard slice is an appropriate trade for the 30 seconds it might shave off his life (or the hour in the gym it will take to work off all that delicious vanilla flavoured excess), whereas Susan doesn’t think the momentary pleasure of the creamy mouthful is worth the sacrifice. Who is right? Both are, of course. It’s a question of values and opinion, it has no absolute solution – no single true answer that trumps or invalidates all others.

Orthodox economics is very clear that policy recommendations must rest on both economic analysis AND a set of values. There is no objective adamantine economic ‘truth’ – the social implications of financial modeling depend on your personal beliefs and values.

Even Milton Friedman – often held up as the philosophical father of Economic Rationalism – understood this qualification, stating:

“As Liberals, we take freedom of the individual, or perhaps the family, as our ultimate goal in judging social arrangements.”

No special pleadings or claims of incontrovertible quantitative support there – Friedman is perfectly comfortable acknowledging that his social policy ideas (a fountainhead that fed both Reagan and Thatcher in their glory days of social engineering and reform, let us remember) are based on an ideology. And that’s fine. On that basis, you can assess and debate his arguments, and decide for yourself whether that’s the model you would like to see underpinning the society you live in. Friedman, unlike the hardline Economic Rationalists who have followed in his intellectual wake, allows that alternative social models may be equally valid if you don’t happen to share his values.

Like, for example, valuing a deeply ungrateful cat (and the happiness of a small child) more than a new sofa or a week in Paris.

And hey – at the end of the day, even if we were all perfectly rational actors making our life decisions on the basis of pure logic and mathematics, that might not actually be the lasting social panacea the Economic Rationalists hope for. You’ve seen what happens to the planet Vulcan in J. J. Abrams’ 2009 Star Trek re-boot, right?

Rosetta Stones and Rugged Men

The Rosetta Stone - prize exhibit of the British Museum...and extended scientific metaphor.

The Rosetta Stone – prize exhibit of the British Museum…and extended scientific metaphor.

There are all kinds of arguments to be made about the imperial history that saw Britain amass the huge treasure trove housed in the British Museum, and whether ‘finders keepers’ should actually be a valid point of international law. Unarguably though, this collection is one of the most glorious and inspiring concentrations of culturally significant historical artifacts in the world. And amongst all this splendour, the most visited antiquity is not some golden treasure or grand architectural marvel – but a simple carved slab of rock – the Rosetta Stone.

This artifact has been displayed behind protective glass since 2000, but when I first visited the museum in the simpler (or perhaps more naive) days of the previous century, the stone was tantalisingly exposed to the world, lying in a steel cradle where I could have reached out to gently touch its ancient surface, had I been so inclined.

The stone itself is a slab of dark, fairly fine-grained granodiorite, a broken fragment of a previously larger tablet inscribed with a decree issued by Ptolemy V in 196 BC, commemorating his ascension to the Egyptian throne. Neither the elegant solidity of the stone though, nor the content of the inscription, explain why this piece is so inspirational and universally recognised.

Instead, the Rosetta Stone has entered our lexicon as the ultimate cypher – the key to breaking the deepest of codes – reviving a dead language.

The Ancient Egyptians were a famously literate society. We’re not talking the mass literacy of the modern world of course, with only around 1% of the population – at a generous estimate – able to read and write. This is a rate put to shame by even modern laggard states like Burkina Faso, where literacy extends to 21.8% of the population – the lowest rate in the world by current UN reckoning. Egypt’s 1% though stand out through the mists of history for having produced, among other milestones in the development of civilization, one of the earliest true traditions of narrative literature, recorded in an array of letters, poems, and commemorative autobiographical texts celebrating the careers of prominent officials. Beyond these temple walls and epic monumental writings of storied fame though, the Egyptians also left a record of the day-to-day function of their highly ordered society – of harvests and recipes, contracts and legal disputes – on papyri and tablets that have withstood the ravages of time in the hot dry climate of the Nile valley and its surrounding deserts to preserve a historical record of the ancient world unique in its depth and completeness.

The important element for our story though is that when first re-discovered by the explorers and enquirers of an enlightened Europe intent on understanding and controlling (and returning to our opening discussion of the British Museum, often exporting) the mysteries of the world, this treasured store of information was locked away – hidden, denied to the hopeful scholars – behind the apparently impenetrable barrier of lost language – with understanding of both hieroglyphic (the famed pictographic writing of Pharonic tombs and Hollywood blockbusters) and the simpler written version of Ancient Egyptian erased by the shifting sands of time.

Where the Rosetta Stone enters the picture is that it’s message of glory and divine rule is inscribed not once, but three times, in three different languages – those two lost Egyptian scripts and, crucially, the very much alive (at least for upper class educated Europeans of the 19th century who had been to the right schools) ancient Greek – for which we can thank the fact that the Ptolemaic Dynasty was actually founded by Macedonian general Ptolemy Soter, who installed himself as ruler of Egypt in the carve-up of Alexander the Great’s empire in 323BC. Even in its broken state (none of the three versions of the inscription is complete), this combination provided a starter kit for the eventual translation of the previously lost Egyptian languages. The Rosetta Stone, in essence, provided a single example of spectacular clarity that made sense of a much larger array of other information, unlocking that vast catalogue of previously indecipherable records.

The concept of a cypher along these lines is not uncommon in observational science. We often look to sites and specimens where relationships or natural processes seem expressed with unusual clarity or simplicity in order to illustrate our ideas or to use as the basis of discussion.

This is certainly not a new idea when it comes to theories regarding the nature of geological systems – indeed, it’s as old as the science of Geology itself. James Hutton – the 18th century Scottish polymath who surely boasts a claim as strong as any to be the intellectual father of this field – didn’t try to explain his ideas on the dynamics of the world by picking up the nearest pebble. On the contrary – he was renowned for taking friends and dignitaries on field trips to view exceptional exposures he had located that seemed to present particularly clear examples of the phenomena he was discussing. His Rosetta Stones.

Even today, we look to such unusual examples where the complexity and vagaries of natural history seem momentarily brushed aside to reveal unambiguous evidence of a physical process in action.

The corollary to the importance of such examples though is the critical question – where should we look for our Rosetta Stones? To give away the ending here, the smart money is on “anywhere and everywhere”…but this measured insight often proves surprisingly difficult to impart. Rather, there is a persistent belief among many in the profession that the importance of an outcrop is (or at least, with a plaintive appeal to cosmic justice, should be) in inverse proportion to the ease with which it can be accessed.

Release a group of Geology students into the wild on a mapping exercise – especially, it should be said, young male students, and their first reaction usually isn’t to sit down and plan an efficient programme of work. It’s to decamp to the highest, most rugged, least accessible area of the field.

At the heart of this challenge lies some pretty fundamental human psychology. We love stories – and whatever we might tell ourselves, we spend much of our lives with an ear half tuned to an internal narrative of how our actions stack up. “I had to ford the river in spate, vanquish the dragon, then climb to the highest room in the tallest tower” is simply more appealing than “well, I just poked about under the bush and there it was.”

Which leads me to the rugged man maxim – an empirical law derived from observation of generations of young Earth Science students in action. In its purest form, this represents a belief that the most important outcrop in a district – the most informative, the most significant to unravelling the ambiguous twists and turns of geological history – will be found at its pole of inaccessibility: the hardest point to reach.

Besides giving rise to a host of sore and sun-burnt students though, does the Rugged Man Maxim stack up when it comes to results? All those trips I took as field trip leader to Andalucian Accident and Emergency departments trying to help testosterone-fuelled young men explain in broken Spanish just where the thorns were lodged – were they actually associated with greater understanding on the part of the bandaged apprentice geologists, and higher marks in their mapping projects?

I think we all already know the answer to that question.

Certainly, physically and logistically challenging fieldwork can produce results of great significance and enrich our understanding of fundamental questions. But the importance of a locality does not derive from its accessibility or spectacular grandeur – it is incidental to it.

The Burgess Shale was discovered in 1909 by paleontologist Charles Dolittle Walcott in a remote mountain pass, high in the Canadian Rockies. The exquisitely preserved 505 million year old fossils extracted from this spectacular wilderness setting – as far from the Madding Crowd as you could hope to find yourself – provided a new window on life in the ancient Cambrian oceans – a Rosetta Stone that changed and enhanced our understanding of a host of other, less complete and more poorly preserved fossil fauna.

At the other end of the scale, you can get to the La Brea Tar Pits in urban Los Angeles on the Metro Rail – but that doesn’t stop the Pleistocene fossil fauna preserved in the tar being any less inspiring and scientifically significant in its own way, as the best known and most exquisitely preserved record of the extinct mammalian megafauna of North America.

Neither methodical and thorough investigation nor boundless investment are guarantees of significant discovery, and equally, sometimes it really is simply enough to be in the right place at the right time – as in 1928 when William P. “Punch” Jones and his father were playing horseshoes in Peterstown, West Virginia, and happened to turn up a 34.48 carat alluvial diamond, the largest such gem found in the United States to date.

Fundamentally, there is no justice in the layout of the world and its geological treasures. The key exposure that will lay clear the mysteries of a study area and lead to a bankable discovery may well sit under a poisonous thorn bush atop the windswept peak of the highest mountain in the district. But it’s just as likely to be right beside the trail where you stopped the 4WD for the night in the shade of a beautiful old acacia tree, so don’t discount your good fortune on those occasions when you do get lucky.