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ethics and economics

Because of Western dominance, brilliant thinkers from the East get very little attention in global media. Even though brilliant economists from East Asia and China have created globally acknowledged economic miracles in their countries, none of them have received a Nobel Prize. On the other hand, Western economists whose theories were demonstrably in conflict with the events that took place in the global financial crisis — like Lucas, and Fama — have received Nobels. One of our greatest un-sung Eastern Heroes is Mahbubul Haq. My recently published article describes the revolution he created in economic thought:
HDI

Goethe starts his famous East-West Divan with a poem about the journey (Hegire), both physical and spiritual, from the West to the East. In this essay, we consider the analogous journey from Western to Eastern conceptions of development. This involves switching from viewing humans as producers of wealth, to viewing wealth as a producer of human development. To start with the Western conceptions, both Adam Smith and Karl Marx defined economic growth as the process of accumulation of wealth. The range of diversity of Western thought is bounded by the Left-Right spectrum. Ideas on which both extremes agree command widespread consensus in the West. Consequently, a core concept of modern economic theory is that wealth is the means and ends of the process of economic development. Unfortunately, due to the dominance and influence of Western paradigms, this concept has been widely accepted and adopted in the East today.

Mahbubul Haq was indoctrinated into the Western development paradigm which gives primacy to wealth at leading universities, Yale and Harvard. He got the chance to apply these economic models as the chief economist in Pakistan during the ’60s. However, because of his Eastern upbringing and heritage, he was able to see the murderous message at the heart of the cold mathematics of the Solow-Swan growth models. These models focus on savings, created by reducing present levels of consumption, as the only route to the accumulation of greater future wealth.

Mahbubul Haq realised what is not mentioned in the economics textbooks: obsession with production of wealth requires us to use the sordid and cruel tactic of making workers produce wealth, and refusing to allow them to consume it, in order to buy machines and raw materials. He was clear-sighted enough to see the consequences of these policies: wealth did indeed accumulate, but it went into the pockets of the 22 families, without providing relief to the misery of the masses. Today the global application of capitalist growth strategies has led to a dramatic increase in inequalities both inside nations and across nations. Just one among many horrifying inequality statistics is that the top 13 individuals now have more wealth than the bottom 3.5 billion on the planet.

Dissatisfaction with state-of-the-art Western growth theories led Mahbubul Haq to a revolutionary insight, taken from the heart of the traditions of the East, and having no parallels in current Western economic theories. Instead of capital, Mahbubul Haq placed human beings at the centre of the process of economic growth, returning to the ancient wisdom that “human beings are the means and ends of development”. Even though he was called a heretic for going outside the boundaries of contemporary economic thought, the pragmatic genius of Mahbubul Haq sought to minimise differences and create bridges to conventional thinking in order to achieve acceptance for his radically different approach to development.

His Human Development Index (HDI) was a master stroke, combining two inherently incompatible conceptions of development in a compromise which ceded ground to wealth in order to create international visibility for poverty. His friend and classmate Amartya Sen was reluctant to accept the HDI because of certain inherent flaws in this marriage of fire and water, but eventually agreed to its practical necessity. The pragmatic approach of Mahbubul Haq paid off handsomely when the HDI measure achieved global recognition as rectifying major defects in the standard GDP per capita. Widespread acceptance and use of HDI has led to a radical change in the discourse on development, by adding poverty, health, education and other soft social goals to the pure and simple-minded pursuit of wealth. The revolutionary ideas of Mahbubul Haq have led to improvements in the lives of millions, as global consensus developed on the social goals embodied in the MDGs and SDGs.

The Human Development approach of Mahbubul Haq was carried further by Amartya Sen, who defined development as the freedom to develop human capabilities. This notion, closely aligned with Eastern thought, was so alien to orthodox economists that they rejected it. Consequently, a new human-centred field of development studies emerged, which combined many streams of dissent from orthodoxy. Unfortunately, leaders at the helm of policymaking in the poor countries of the world are trained in orthodox economic theories, and have not assimilated the radical lessons of Mahbubul Haq, acquired from bitter experience. The paths to genuine development lie open, but with their backs to the doors, they are unable to see them.

Conventional growth theories create the mindset that the game is all about wealth creation. We will worry about our poor population only after we acquire sufficient wealth to feed them. The poor are a burden on the development process because providing for them takes away from money desperately needed to finance development of infrastructure, purchase of machinery and raw material, and industrialisation. We cannot afford to feed the poor, if we want to grow rapidly. The human development paradigm stands in dramatic contrast to this currently common mindset among planners. Instead of utilising humans to produce wealth, we utilize wealth to develop human capabilities. Our human population, our poor, are our most precious resource. This point of view receives strong support in the empirical findings of a recent World Bank study entitled “Where is the Wealth of Nations?” The study finds that the wealthiest nations are rich because they spend money to develop their human resources, and not because of natural resources.

Thus, instead of being a burden, our poor are our most efficient means to development. If we use available wealth to improve their lives, to empower them, to educate them, and to provide them with the support they need, they can rapidly change the fate of the nation. Furthermore, they are also the end of the development process — that our goal is NOT to produce more and more wealth, a la Adam Smith and Karl Marx — but to ensure that our people lead rich and fulfilling lives. If we use our energies to achieve this goal, we have already arrived at the destination — we do not need to wait for a distant future where sufficient wealth will accumulate to enable us to take good care of our people.

Published in The Express Tribune, May 20th, 2017.

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Part 2 of Lecture on Spirituality and Development: Friday, 27th Jan 2017 by Dr. Asad Zaman, VC PIDE — for Students of Religion & Development Paper, Center of Development Studies, University of Cambridge. Link for part 1: Spirituality . 50m Video lecture:

OUTLINE OF LECTURE:

    1. The meaning of development has varied dramatically across time, space, cultures.
      1. When Britannia ruled the Waves:
        Development definition suited Britain: Sea-Power, Coal Mines, Industry, Climate, Race
        No entry for “democracy” in Encyclopedia Brittanica, 1930
      2. Post-War Rise of USA
        Initial Definition: Democracy, GNP per capita – both criteria serve to ensure leadership of USA.
      3. Later, some Oil Economies had Higher GNP/Capita than USA
        So REDEFINE Development to include Income Distribution, so as to keep US on top
      4. Later, Switzerland, Japan and some other Scandinavian countries had Higher Wealth + Lower Gini. How to measure development to ensure USA is on top? Answer: Redefine Development to include Infrastructure
      5. Conclusion: Definition of Development Changes to suit the powerful. Criteria are chosen to ensure that the powerful are on top.

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Friday, 26th Jan 2017: Lecture by Dr. Asad Zaman, VC PIDE to students at University of Cambridge, Center of Development Studies for Religion & Development paper. 40 minute video recording of lecture on you-tube. For related posts, see: An Islamic Approach to Humanities.

Part 1: “What Is Spirituality?”:  Modern Secular thought takes spirituality and religion to be diseases which affect weak minds not properly trained in the scientific method. Part I of this lecture explain why this view, which is based on positivist ideas, is seriously mistaken. OUTLINE of this lecture is given below

Separate Lecture Part 2:“What is Development” focusing on how spirituality affects how we think about development and how to achieve it.

  1. Standard Modern Answer
    1. Spirituality is a literary term, used to spice up poetry and novels.
    2. It is like Phlogiston, Unicorns, Ghosts, Souls, God
    3. It is one among many medieval beliefs, like flat Earth, which have been proven wrong.
  1. Why don’t we understand spirituality?
    1. Because we have been trained to think like Logical Positivists, EVEN though this philosophy has been proven wrong! Key wrong positivist beliefs:
    2. Unobservables do not matter for science
    3. Science explains the observable patterns. It may postulate things like atoms, gravity, but this is just for convenience. Existence of gravity is not part of scientific assertion.
    4. Kant: Thing-In-Itself is not knowable, not relevant for science. Wittgenstein: Wherof one cannot speak, thereof one must be silent. ALSO, The human body is best picture of the human soul (That is, observables matter, unobservables don’t)
    5. SCIENCE is the ONLY source of valid knowledge.

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Ifaohungermapf any group of concerned citizens would gather to discuss economic problems, it would seem natural to begin with the problem of feeding the hungry. Strangely enough, one would not encounter this problem within a standard course of study of economic theory at any of the leading universities throughout the world. This is due to two major mistakes made in the formulation of conventional economic theories currently being taught and practised throughout the globe. The first mistake is the idea that the goal of an economic system is the production of wealth, broadly defined. For example, Adam Smith takes the fundamental economic problem to be the production of wealth. The maximisation of GNP per capita currently forms the core of economic growth theory. The value of human life can be evaluated in terms of how much wealth the human can produce. This also accounts for the use of the degrading term ‘human resource’, which basically puts humans on a par with other resources, like factories and machines, as inputs to the production process.

A revolution in economic theory would result if we replace this completely mistaken idea with its opposite: the goal of an economic system is to increase human welfare. Wealth is important only to the extent that it can bring about increases in human welfare. In conjunction with wealth, many other types of invisible inputs, such as social capital, cultural norms and institutional structures also play an important role in determining human welfare, broadly understood in terms of all dimensions of life which contribute to our collective well-being. Wealth, industry and production of goods and services are resources to be used to help improve human lives. A central goal of economics should be the relation between resources, and their relative efficiency at contributing to human welfare. In particular, providing food to the hungry is clearly the single most important and universal invariant in production of human welfare. The fundamental economic problem is to study how to use a given amount of wealth to produce the maximum amount of welfare.

The second mistake, engendered by the first, is the idea that investment in physical capital is the main source of growth and development. Mahbubul Haq pioneered the replacement of GNP by the Human Development Index. Similarly, Amartya Sen in his book, Development As Freedom, argues that progress is about the development of human capabilities. The UN now defines development as the ability “to lead long and healthy lives, to be knowledgeable, to have access to the resources needed for a decent standard of living and to be able to participate in the life of the community”. Of course, food is the sine qua non of human development. Many factors not usually considered by economists also play an important role in improving quality of life. The elements of trust, cooperation, culture and communities are gradually gaining recognition as important contributors to welfare.

A revolution in planning for growth would result from taking seriously the idea that human beings have far more capabilities and potential than any kind of machine. History gives us many examples of human beings who have changed the world. Given the right environment and training, all children have the potential to achieve extraordinary genius. It is our collective task as a society to ensure that all children get the opportunity to develop this potential. The economic system is valuable only as a means to achieving this goal. This means that providing basic necessities like food, healthcare and education is actually the most valuable investment we can make. Unfortunately, conventional theories of growth, currently routinely being applied throughout the world, do not recognise this fact. As a result, these false economic theories lead us to invest in industry, instead of our children, who represent our greatest potential and our future.

The spectacular failure of conventional economic theories during the global financial crisis has strengthened and created several movements for reform of these theories, ranging from mild to radical and revolutionary. Many of these reforms are taking on board the idea that economic growth is a means to providing for the people. Our greatest treasure is our people and investing in them is the surest path to prosperity.

Published in The Express Tribune, March 23rd, 2015.

A driving spirit of the modern age is the desire to banish all speculation about things beyond the physical and observable realms of our existence. This spirit was well expressed by one of the leading Enlightenment philosophers, David Hume, who called for burning all books which did not deal with the observable and quantifiable phenomena: “If we take in our hand any volume; of divinity or school metaphysics, for instance; let us ask, Does it contain any abstract reasoning concerning quantity or number? No. Does it contain any experimental reasoning concerning matter of fact and existence? No. Commit it then to the flames: for it can contain nothing but sophistry and illusion.”

This is a breathtakingly bold assertion. The literate reader may examine his or her bookshelf to see what little, if anything, would survive after applying Hume’s prescriptions. Nonetheless, the spirit of the secular age was very much in tune with Hume, and relegated vast areas of human knowledge captured in literature, history, and the arts, to second-class citizenship. The modern world has been shaped by this downgrading of the spiritual, intuitive, and mystical, and the elevation of the rational as supreme judge and arbiter over all other faculties.

The leaders of the Enlightenment advocated rationality as the sole criterion for establishing an authoritative system of ethics, aesthetics, and knowledge. This has led to a dualism which has become firmly embedded in the foundations of Western thought, and has created a social science incapable of perceiving, let alone solving the problems currently being faced by humanity as a whole. Western hegemony has led to the global and widespread acceptance of this dualism, clearly expressed by Hume, in embracing the quantitative and passionately and violently rejecting the qualitative. Exploring the full range of difficulties caused by this dualism would take several books. In this essay we consider just one of the salient problems. Harvard Professor Julie Reuben expressed it as follows: “Truth was (a united whole) embracing spiritual, moral, and cognitive knowledge. By the 1930’s, this unity was shattered; factual cognitive knowledge (was separated from) moral/spiritual knowledge.”

The Enlightenment project had aimed to provide rational foundations for all human knowledge. However, influential intellectuals like Max Weber, in the early twentieth century, argued that scientific knowledge had to be value-free, because values could not be established empirically. Widespread acceptance of this rejection of morality and spirituality has had dramatic consequences in all realms of human life. The most important questions that we face as human beings were declared to be meaningless, and unworthy of our attention and study. We all recognize that our own life is an infinitely precious gift; the most important question we face is: how should we use this gift? What is the purpose or meaning of life? What characterizes the ‘good life’ and what steps can we take to achieve a lifestyle which embodies the good?

Influential positivist philosophers argued that these questions had no meaning, because there was no empirical or observational evidence which could be used to answer them. All answers were equally valid. We should simply do with our lives whatever we desire to do. There were no ethical or moral standards to guide our behavior. As one of the leading positivist philosophers, A J Ayer, stated: “Moral judgments are as meaningless as a cry of pain”. Centuries of traditional wisdom about life was discarded as meaningless noise, and the new generations were encouraged to work out answers to these deep and difficult questions on their own, starting from scratch. To understand the catastrophic consequences of this, imagine what would happen if we threw out accumulated wisdom in medicine (or any other field of knowledge), and started again from scratch.

The key to the social sciences is an understanding of the nature of human beings. Can we understand human lives without understanding responsibility, conscience, courage, love, heroism and cowardice, trust, jealousy and the enormous range of human emotions? All of these elements of human lives are deeply and inherently qualitative and cannot be measured on any scales. Thus, by definition, these do not qualify for inclusion in the realm of scientific knowledge. The wisdom of the ancients, contained in books discussing these concepts in literary and philosophical terms, without measurement and data, would deserve to be burned according to Hume. But all this book-burning would leave us without any guidance on issues central to human affairs.

The dualism that deified science, and scoffed at that qualitative and unmeasurable, resulted in a tremendous loss of knowledge about the nature of human beings and society. We are living with the consequences of a college education which teaches students how to build bombs, but nothing about the ethics of killing innocents. As a chilling example, consider the changing attitudes towards torture and murder. Japanese soldiers were executed for torturing American POW using waterboarding, and American soldiers in Vietnam were tried for such treatment of Vietnamese prisoners. But recent Presidents have thrown their full support behind the use of extreme torture techniques, officially approving their use. Hollywood movies glorify and justify torture, even though empirical evidence shows that it does not work to obtain useful intelligence. Official reports show that senior officials in the UK and the US concocted evidence to fool the public into supporting the invasion of Iraq, resulting in deaths of millions of innocent civilians, and unnecessary expense of trillions of dollars. But no one has been convicted of any wrongdoing. MBAs are taught that the bottom line is all that matters, and social responsibility should not interfere with the pursuit of profits. Thus, there is no outrage at the deaths of the poor and hungry farmers, caused by millions of dollars spent on research to produce genetically modified terminating seeds, so that rich organisations can make more profits by selling seeds every year. Even justice has been separated from morality; in the adversarial system, lawyers are taught that their responsibility is to win the case for their clients, regardless of whether or not justice would be served by this win. Reform requires deep and fundamental changes in the system of education, which needs to be firmly grounded in all those ideas that have been kicked out of the curriculum as ‘unscientific’.

Short Posts on Diverse Topics: My author page on LinkedIn. Other works: Index . Related: Re-Enchanting the World.

Published in The Express Tribune, August 15th, 2016.ethicseducation

greedIdeology and Science are diametrically opposed to each other. An ideology is a set of beliefs that is maintained even in face of strong empirical evidence to the contrary. Science is primarily concerned with explaining the empirical evidence. Theories which conflict with observations are rejected.  This does not mean that ideology is necessarily wrong or bad – we must maintain our belief in justice, morality, honesty, trust, integrity without any empirical evidence; indeed, even when strong empirical evidence suggests that these beliefs will not bring us popularity or personal benefits. However, ideological beliefs in wrong ideas can blind us to the facts and prevent learning which is essential to progress. Nobel Laureate Joseph Stiglitz remarked that modern Economics represents the triumph of ideology over science. This essay explains the reasons for his remarks.

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The perpetuation of inequality through clustering in neighborhoods is graphically depicted in: “Living in a poor neighborhood changes everything about your life” by Alvin Chang. Of course, this concept cannot even be formulated in conventional economic theory. I think we must move beyond the idea that neoclassical economic theory is “wrong” and come to the realization that neoclassical economist accomplishes perfectly what it is designed to do. It is designed to conceal those aspects of economic reality which could create unrest among the bottom 99%, as well as those aspects which enable the 1% to achieve extraordinary privilege and power at the expense of the rest. For instance,  “The Veil of Money” shows that QTM and standard monetary theory is designed to conceal how the mechanism of money creation provides enormous advantage to the wealthy. “The Fairy Tale of GNP” shows how standard economic theory measures of progress are designed to conceal inequality and distributional injustice. The standard DSGE model, with only one representative agent, is designed to conceal the presence of disadvantaged groups, minorities and laborers.

In reading obits to prepare  an article in memory of Muhammad Ali, I came across something to the effect that Muhammad Ali was a child prodigy. In any just society, given educational opportunities, he would have grown up to be a scholar, a philosopher, a statesman, or other kind of superstar. However, given the realities of discrimination, he could only become a boxer. The drastically different economic realities of heterogenous communities within societies are systematically concealed by economic theory. The article below, about Muhammad Ali, was published in Express Tribune on 13 June 2016, with the title: “Remembering an Icon

The Greatest 

The dramatic shifts of fortune experienced by Mohammad Ali, who died recently on 3rd June 2016, reflects the checkered fortunes of the minorities he represented. It requires effort for contemporary mindsets to visualize the Civil Rights era of the 1960’s where Black Americans were fighting not just for social, economic and political equality, but most fundamentally, the right to lead lives with human dignity. Mohammad Ali was among the most colorful champions of equality in a now nearly forgotten era of Black liberation. He came to prominence on the world stage after a surprise victory against reigning heavyweight Champion Sonny Liston, when 7 to 1 odds were given against Ali. He earned the anger and ire of white public when he publicly announced his conversion to Islam, and renounced his “slave name” of Cassius Clay.

Muhammad Ali’s status as world champion provided him with the platform to express and articulate the sentiments of the oppressed Black minority regarding the Vietnam War.  He refused to “drop bombs and bullets on brown people in Vietnam while so-called Negro people in Louisville are treated like dogs and denied simple human rights”. [ read more]