Economists' Grail: A Post-Crash Model

By Mark Whitehouse
Wall Street Journal, 30 November 2010

Physicist Doyne Farmer thinks we should analyze the economy the way we do epidemics and traffic.

Psychoanalyst David Tuckett believes the key to markets' gyrations can be found in the works of Sigmund Freud.

Economist Roman Frydman thinks we can never forecast the economy with any accuracy.
Disparate as their ideas may seem, all three are grappling with a riddle that they hope will catalyze a revolution in economics: How can we understand a world that has proven far more complex than the most advanced economic models assumed?

The question is far from academic. For decades, most economists, including the world's most powerful central bankers, have supposed that people are rational enough, and the working of markets smooth enough, that the whole economy can be reduced to a handful of equations. They assemble the equations into mathematical models that attempt to mimic the behavior of the economy. From Washington to Frankfurt to Tokyo, the models inform crucial decisions about everything from the right level of interest rates to how to regulate banks.

In the wake of a financial crisis and punishing recession that the models failed to capture, a growing number of economists are beginning to question the intellectual foundations on which the models are built. Researchers, some of whom spent years on the academic margins, are offering up a barrage of ideas that they hope could form the building blocks of a new paradigm.

In the wake of a financial crisis and punishing recession that the models failed to capture, a growing number of economists are beginning to question the intellectual foundations on which the models are built. Researchers, some of whom spent years on the academic margins, are offering up a barrage of ideas that they hope could form the building blocks of a new paradigm.

"We're in the 'let a thousand flowers bloom' stage," says Robert Johnson, president of the Institute for New Economic Thinking, launched last year with $50 million from financier George Soros, a big donor to liberal causes who has long been a vocal critic of mainstream economics. The institute so far has approved funding for more than 27 projects, including efforts by Messrs. Farmer and Tuckett aimed at developing new ways to model the economy.

Some of academia's most authoritative figures say the new ideas are out of the mainstream for a good reason: They're still very far from producing a model that demonstrably improves on the status quo.
"I guess I'll wait until I see these models and what they can and cannot do," says Robert Lucas, an economist at the University of Chicago who won the Nobel Prize for his work on "rational expectations," the concept at the very heart of modern orthodoxy.

New York University's Mark Gertler, who with now-Federal Reserve Chairman Ben Bernanke did ground-breaking work in the 1980s on how financial troubles can trip up the economy, says economists already have many of the tools they need to fix the current models.

"It strikes me as not productive to say that all we have done is a complete waste," he says. "The profession is extremely competitive. If you have a better idea, it's going to win out."

Today's models emerged from a revolution of their own. In the 1970s, economists were struggling to figure out how policy moves, such as raising taxes or cutting interest rates, could change how people behave. They were also eager to subject their own reasoning to the unforgiving judge of mathematical logic.
So they populated their models with rational people who can calculate the value of various possible moves and choose the optimal path. A person deciding whether to buy a car, for example, would take into account the potential return on investing the money, the probability that car prices will rise, and the chances that an increase in tax rates will cut into her disposable income.

By translating peoples' preferences into equations, and finding the point at which they meet those of firms and other players, the models forecast an exact trajectory for the economy. That feature makes them very attractive to economists, who can plug in a change in interest rates and see precisely how the move might affect an entire country's output for the next few years.

The problem, says Mr. Farmer, is that the models bear too little relation to reality. People aren't quite as rational as models assume, he says. Advocates of traditional economics acknowledge that not all decisions are driven by pure reason.

Mr. Farmer sees a perhaps greater flaw in the models' mathematical structure. A typical "dynamic stochastic general equilibrium" model—so called for its efforts to incorporate time and random change—consists of anywhere from a few to dozens of interlinked equations, which must agree before the model can spit out a solution. If the equations get too complex, or if there are too many elements, the models have a hard time finding the point at which all the players' preferences meet.

To keep things simple, economists leave out large chunks of reality. Before the crisis, most models didn't have banks, defaults or capital markets, a fact that proved problematic when the financial crisis hit. They tend to include only households, firms, central banks and the government. They also commonly use a single equation to represent each player, impairing the models' ability to explain the unexpected outcomes that can emerge when millions of different people interact.

"You are limited by what you can solve," says Mr. Farmer. "It puts the whole enterprise in a straitjacket."

His proposal: Create a richly complex, computer-based simulation of the economy like those scientists use to model weather patterns, epidemics and traffic. Given enough computing power, such "agent-based" models can include millions of individual players, who don't have to be rational or agree with one another. Instead of equations that must be solved, the players have open-ended rules of behavior, such as, "If I've just turned 55 and I'm feeling blue, I'll buy a sports car."

A leading expert on complex systems at the Santa Fe Institute, a nonprofit think tank, the 58-year-old Mr.Farmer has spent much of his life trying to figure out how to predict the future.

In the 1970s, he and a group of graduate students from the University of California at Santa Cruz managed to outsmart Las Vegas casinos, developing software and portable computers that clocked the velocity of the ball and rotor on roulette wheels. Later, he made a small fortune as a partner in Prediction Company, which applied some of what he learned at the roulette table to financial markets and was ultimately sold to the Swiss bank UBS AG.

Some policy makers believe the agent-based approach to modeling the economy has promise. "I think the whole profession is much more open to these new approaches than it has been at any time in the past 20 years," says Simon Potter, director of economic research at the Federal Reserve Bank of New York.

The tough part is coming up with rules that bear some relation to reality. To that end, Mr. Farmer and three economists—Robert Axtell of George Mason University, John Geanakoplos of Yale University and Peter Howitt of Brown University—are hoping to involve dozens of experts on the behavior of consumers, investors and firms in a massive model-building project. Inputs could include everything from historical data to interviews.

"It's going to be a very hard job that will require a lot of time and persistence," says Mr. Farmer. He estimates that a proper agent-based model could take many years to build, but would cost a tiny fraction of the $1 billion a year the government spends on the National Weather Service. "This is not something you can do in your kitchen."

Writing better rules for human behavior will require researchers to dig deeper into the human psyche, says Mr. Tuckett, a professor at University College London. Specifically, he's looking into how unconscious needs and fears can cause big swings in financial markets.

The field of economics has already borrowed from psychology to help explain the sometimes irrational behavior of people and markets. Psychologist Daniel Kahneman shared a Nobel Prize in 2002 for his work identifying the ways in which humans systematically overestimate or underestimate risk.

Mr. Tuckett goes one leap further. Extensive interviews with money managers have led him to posit that because certain financial instruments are so volatile and hard to value, they trigger humans' tendency to fantasize. Borrowing language from Sigmund Freud, he calls such financial assets "phantastic objects," which people see alternately as capable of fulfilling their dreams of wealth and power or utterly worthless and repulsive.

Economic models, argues Mr. Tuckett, need to account for the way peoples' behavior changes with the psychological context. When they're in fantasy mode, they'll place astronomical values on anything from Dutch tulips to dot-com stocks to complex mortgage securities. When they realize the folly of their ways, they'll focus only on the flaws. He hopes to create a survey of investors' state of mind, which could be used as an input for an agent-based model such as the one Mr. Farmer is developing.

The 63-year-old psychoanalyst, who is working with Manchester Business School finance professor Richard Taffler to develop a new field of "emotional finance," says it could be a long time before his ideas reach the mainstream.

"Economists have been terrified of psychology," says Mr. Tuckett. "They believe that if they take it on board, they'll have to go interviewing people and will never be able to make generalizations."

Mr. Frydman, a professor at New York University, is accustomed to the role of an outsider. The 62-year-old economist says that even as a graduate student in the 1970s at Columbia University, he didn't buy into the concept of rational expectations—a stance that has left him to pursue a career on the academic margins for more than three decades.

The main flaw in the dominant models, he says, is the same feature that makes them so attractive to policy makers: Their ability to make precise predictions. To generate their predictions, the models assume that people, firms and other players always make decisions in the same way. The players must also share the same beliefs about the exact probabilities of various outcomes, such as a rise in car prices or tax rates.

"It's like socialist planning," says Mr. Frydman. "If we really knew that much, we could have Communism and God knows what." Capitalism works better than other systems, he says, because it lets people disagree about the future and profit from their insights—rational behavior that models don't accommodate.

Mr. Frydman doesn't offer a better way to make predictions. Rather, he believes economists and policy makers must come to terms with the limits of their knowledge.

Consider the housing market. If prices far exceed historical averages, as they did in 2006, we can know there's an elevated risk of a crash. What we can't know, says Mr. Frydman, is when that crash will occur, how exactly consumers will respond, or how much a given decrease in interest rates might help.

In Mr. Frydman's view, the best that policy makers can do is try to limit extreme swings. A central bank might, for example, set indicative parameters for the prices of assets such as stocks, bonds and houses. If prices exceed those parameters, potential buyers will be forewarned that they're taking on added risk of a big loss—and might even think twice about doing so.

Developed with economist Michael Goldberg of the University of New Hampshire, Mr. Frydman's concept of "imperfect knowledge economics" has some influential admirers, including Nobel Prize-winning economist Edmund Phelps of Columbia University.

The ideas of Messrs. Farmer, Tuckett and Frydman are just a few of the myriad being hatched around the globe.

Many economists think the next big idea will more likely come from the ranks of younger Ph.D candidates, who are producing reams of work examining the financial crisis. Established academics—such as Mr. Gertler, Nobuhiro Kiyotaki of Princeton, Marcus Brunnermeier of Princeton, Michael Woodford of Columbia and Robert Hall of Stanford—are making progress on including banks, financial markets and even a bit of irrationality in traditional models.

Mr. Farmer says he thinks the traditional models will always be useful for certain types of analysis, but isn't optimistic they'll provide the whole solution. "Economic forecasts have never been very good, and it's not clear that if we stick with the methods we're pursuing we'll do any better," he says. "We need to try something new."


J. Doyne Farmer

Mr. Farmer, a leading expert in complex systems at the Santa Fe Institute, wants to develop a computer-based simulation of the economy like those scientists use to model weather patterns, epidemics and traffic. He thinks such simulations could be more useful than the mathematical economic-forecasting models currently used by the world's most powerful central banks.  The 58-year-old Mr. Farmer has long been interested in predicting the future. Back in the 1970s, he and a group of graduate students from the University of California at Santa Cruz devised a way to beat roulette using wearable computers that clocked the velocity of the balls and rotors. He later made a small fortune as a partner in Prediction Company, which applied some of what he learned at the roulette table to financial markets.

Roman Frydman

Mr. Frydman, an economics professor at New York University, believes exact economic forecasts are futile. Under his concept of "Imperfect Knowledge Economics," which he has developed together with Michael Goldberg of the University of New Hampshire, policy makers must recognize the limits of their knowledge. They can, for example, know that if stock valuations far exceed historical averages, there's an elevated risk of a crash. But they can't know exactly how much a given decrease in interest rates might help if and when the crash happens.  He believes the best policy makers can do is try to limit extreme swings in financial markets and the economy. They can, for example, step in to curb credit in boom times, or set indicative parameters for the prices of assets such as stocks, bonds or houses.


David Tuckett

Mr. Tuckett, a psychoanalyst at University College London, believes Freudian analysis may hold the key to understanding the gyrations of financial markets.  Together with Richard Taffler of Manchester Business School, he is trying to develop a new field of "emotional finance," which studies how investors' behavior changes with their state of mind. Borrowing language from Sigmund Freud, he defines certain financial assets as "phantastic objects," which people see alternately as capable of fulfilling their dreams of wealth and power or utterly worthless and repulsive.  He hopes to create a survey of investors' state of mind that economists could use to improve their forecasts.

What Was I Thinking?

Illustration by Shannon May

Review of Antonio Damasio's "Self Comes to Mind: Constructing the Conscious Brain", Pantheon, 2010.

by Ned Block, New York Times, 26 November 2010

In “Self Comes to Mind,” the eminent neurologist and neuroscientist Antonio Damasio gives an account of consciousness that might come naturally to a highly caffeinated professor in his study. He emphasizes wakefulness, self-awareness, reflection, rationality, “knowledge of one’s own existence and of the existence of surroundings.”

That is certainly one kind of consciousness, what one might call self-consciousness. But there is also a different kind, as anyone who knows what it is like to have a headache, taste chocolate or see red can attest. Self-consciousness is a sophisticated and perhaps uniquely human cognitive achievement. Phenomenal consciousness by contrast — what it is like to experience — is something we share with many animals. A person who is drunk or delirious or dreaming can be excruciatingly conscious without being wakeful, self-aware or aware of his surroundings.

The term “conscious” was first introduced into academic discourse by the Cambridge philosopher Ralph Cudworth in 1678, and by 1727, John Maxwell had distinguished five senses of the term. The ambiguity has not abated. Damasio’s distinctive contributions in “Self Comes to Mind” are an account of phenomenal consciousness, a conception of self­consciousness and, most controversially, a claim that phenomenal consciousness is dependent on self-consciousness.

Phenomenally conscious content — what distinguishes the experience of blue from the taste of chocolate — is, according to Damasio, a matter of associations that are processed in different brain areas at the same time. What makes a conscious state feel like something rather than nothing is explained as a fusion of mind and body in which neurons become “extensions of the flesh.” Self-consciousness is the result of a procession of neural maps of inner and outer worlds. What’s more, he argues, phenomenal consciousness depends on self-consciousness. Without a self, he writes, “the mind would lose its orientation. . . . One’s thoughts would be freewheeling, unclaimed by an owner. . . . What would we look like? Well, we would look unconscious.”
Even fish and lizards have a kind of minimal self, one that combines sensory integration with control of information processing and action. But Damasio’s self is not minimal. It is inflated with self-awareness, reflection, rationality, deliberation and knowledge of one’s existence and the existence of one’s surroundings, and this is what he ends up arguing a ­being needs in order to have phenomenal consciousness.

You may have sensed that I think there is a problem with Damasio’s emphasis on self-consciousness: indeed, “Self Comes to Mind” is mainly about self-­consciousness rather than experiential phenomenal consciousness. And the book is not about ­geology or underwear or many other things either. So what?

I can explain the problem by a brief detour into a different book, “The Origins of Consciousness in the Breakdown of the Bicameral Mind” (1976), by the American psychologist Julian Jaynes. Jaynes held that consciousness was invented by the ancient Greeks between 1400 and 600 B.C. He argued that there was a dramatic appearance of introspection in large parts of the “Odyssey,” as compared with large parts of the “Iliad,” which he claimed were composed at least a hundred years earlier. The philosopher W. V. Quine once told me that he thought Jaynes might be on to something until he asked Jaynes what it was like to perceive before consciousness was invented. According to Quine, Jaynes said it was like nothing at all — exactly what it is like to be a table or a chair. Jaynes was denying that people had experiential phenomenal consciousness based on a claim about inflated self-consciousness.

Damasio also denies phenomenal consciousness because of the demand of a sophisticated self-consciousness. You may have noticed an exciting report a few years ago of a patient in a persistent vegetative state (defined behaviorally) studied by the neuroscientists Adrian Owen and Steven Laureys. On some trials, the two instructed the patient to imagine standing still on a tennis court swinging at a ball, and on others to visualize walking from room to room in her home. The patient, they found, showed the same imagistic brain activations (motor areas for tennis, spatial areas for exploring the house) as normally conscious people who were used as controls.

More such cases have since been discovered, and this year Owen and Laureys described a vegetative-state patient who was able to use the tennis/navigation alternation to give yes-or-no answers to five of six basic questions like “Is your father’s name Alexander?” These results are strong evidence — though not proof — of phenomenal consciousness in some of those who showed no behavioral signs of it. But Damasio scoffs, saying that these results “can be parsimoniously interpreted in the context of the abundant evidence that mind processes operate nonconsciously.” His skepticism appears to be grounded in the fact that these patients show no clear sign of self-consciousness and thus constitute a potential roadblock in front of his theory.

Damasio also stumbles over dreaming. In dreams, phenomenal consciousness can be very vivid even when the rational processes of self-consciousness are much diminished. Damasio describes dreams as “mind processes unassisted by consciousness.” Recognizing that the reader will be puzzled by this claim, he describes dreaming as “paradoxical” since the mental processes in dreaming are “not guided by a regular, properly functioning self of the kind we deploy when we reflect and deliberate.” But dreaming is paradoxical only if one has a model of phenomenal consciousness based on self-consciousness — on knowledge, rationality, reflection and wakefulness.

Contrary to Damasio’s point of view, there is good evidence that vivid conscious experience may be antithetical to self-reflective activity. In one experiment, the Israeli neuroscientist Rafi Malach presented subjects with pictures and asked them to judge their own emotional reactions as positive, negative or neutral — a self-oriented, introspective task. He then presented different subjects with the same pictures and asked them to very quickly categorize the pictures as, for example, animals or not. Of course these subjects were seeing the pictures consciously, but Malach found that the brain circuits involved in scrutinizing self-reactions (as indicated by the emotional reaction task) were inhibited in the fast categorization task. Subjects also rated their self-awareness as high in the emotional reaction task and low in the fast categorization task. As Malach puts it, these results comport with “the strong intuitive sense we have of ‘losing our selves’ in a highly engaging sensory-motor act.”

Damasio argues that a creature without sensory integration and control of thought and action would be unconscious. But even if that is true, it does not show that phenomenal consciousness requires self-awareness, reflection, wakefulness, or awareness of one’s existence or surroundings. This argument conflates the minimal self with the inflated self.

Is this discussion of any practical importance? Yes. Phenomenal consciousness is what makes pain bad in itself and pleasure good. Damasio’s refusal to regard phenomenal consciousness (without the involvement of the inflated self) as real consciousness could be used to justify the brutalization of cows and chickens on the grounds that they are not self-conscious and therefore not conscious. Damasio, in response to those who have raised such criticisms in the past, declares that in fact he thinks it “highly likely” that animals do have consciousness. But this doesn’t square with the demanding theory he advances in his book, on the basis of which he denies consciousness in dreams and in “vegetative state” patients who can answer questions. He owes us an explanation of why he thinks chickens are conscious even though dreamers and the question-answering patients are not.

Africa Needs Aid, Not Flawed Theories

 

by Bill Gates
Wall Street Journal
27 November 2010

The science writer Matt Ridley made his reputation with books like "The Red Queen: Sex and the Evolution of Human Nature" and "Genome: The Autobiography of a Species in 23 Chapters." His latest book, "The Rational Optimist: How Prosperity Evolves" is much broader, as its title suggests. Its subject is the history of humanity, focusing on why our species has succeeded and how we should think about the future.

Although I strongly disagree with what Mr. Ridley says in these pages about some of the critical issues facing the world today, his wider narrative is based on two ideas that are very important and powerful.

The first is that the key to rising prosperity over the course of human history has been the exchange of goods. This may not seem like a very original point, but Mr. Ridley takes the concept much further than previous writers. He argues that our success as a species, as opposed to earlier hominids, resulted from innate characteristics that allowed us to trade. Not long after Homo sapiens emerged, we were using rare objects, like obsidian blades, far away from the source materials needed to produce them. This suggests that large numbers of commercial links were established even at the hunter-gatherer stage of our development.

Mr. Ridley gives many examples of how exchange allowed groups to thrive, by enabling them, for example, to acquire fish hooks or sewing needles. He also points out that even the most primitive human groups today are open to exchange. I've always thought this openness was surprising, considering the risks involved, but Mr. Ridley convincingly describes its adaptive value.

Exchange has improved the human condition through the movement not only of goods but also of ideas. Unsurprisingly, given his background in genetics, Mr. Ridley compares this intermingling of ideas with the intermingling of genes in reproduction. In both cases, he sees the process as leading, ultimately, to the selection and development of the best offspring.

The second key idea in the book is, of course, "rational optimism." As Mr. Ridley shows, there have been constant predictions of a bleak future throughout human history, but they haven't come true. Our lives have improved dramatically—in terms of lifespan, nutrition, literacy, wealth and other measures—and he believes that the trend will continue. Too often this overwhelming success has been ignored in favor of dire predictions about threats like overpopulation or cancer, and Mr. Ridley deserves credit for confronting this pessimistic outlook.

Having shown that many past fears were ultimately unjustified, Mr. Ridley finally turns his "rational optimism" to two current problems whose seriousness, in his view, is greatly overblown: development in Africa and climate change. Here, in discussing complex matters where his expertise is not very deep, he gets into trouble.
Mr. Ridley spends 14 pages saying that everything will be just fine in Africa without our worrying about negative possibilities. This is unfortunate and misguided. Is his optimism justified because things always just happen to work out? Or do good results depend partly on our caring and taking action to prevent and solve problems? These are important questions, and he doesn't answer them.

In discussing Africa, Mr. Ridley relies on critics who say, essentially, "Aid doesn't work, hasn't worked and won't work." He cites studies, for instance, that show a lack of short-term economic benefit from aid, but he ignores the fact that health improvements, driven by aid, have been a major factor in slowing population growth, which has proven, in turn, to be critical to long-term economic growth. I may be biased toward aid because I spend my money on it and meet with lots of people who are alive because of it, but even if that were not the case, I would not be persuaded by such incomplete analysis.

Development in Africa is difficult to achieve, but I am optimistic that it will accelerate. Science will come up with vaccines for AIDS and malaria, and the "top-down" approach to aid criticized by Mr. Ridley (and by the economist William Easterly) will fund the delivery of these life-saving drugs. What Mr. Ridley fails to see is that worrying about the worst case—being pessimistic, to a degree—can actually help to drive a solution.

Mr. Ridley dismisses concern about climate change as another instance of unfounded pessimism. His discussion in this chapter is provocative, but he fails to prove that we shouldn't invest in reducing greenhouse gases. I asked Ken Caldeira, a scientist who studies global ecology at the Carnegie Institution for Science, to look over this part of the book. He pointed out that Mr. Ridley celebrates declining air-pollution emissions in the U.S. but does not acknowledge that this has come about because of government regulations based on publicly funded science, which Mr. Ridley opposes. As Mr. Caldeira rightly observes, "It is a wonder of development that our economy can grow as air pollution diminishes." What is true of the U.S. case, I'd suggest, can be true of the world as a whole as we deal with the challenges posed by climate change.

"The Rational Optimist" would be a great book if Mr. Ridley had wrapped things up before these hokey policy discussions and his venting against those he considers to be pessimists. I agree with him that some people are overly concerned with potential problems, and I hadn't realized that this pessimism was so common in rich countries over the last several centuries. As John Stuart Mill said in 1828, in a quote from the book that I especially enjoyed: "I have observed that not the man who hopes when others despair, but the man who despairs when others hope, is admired by a large class of persons as a sage."

The most obvious instance of excessive pessimism in Mill's era was the "Communist Manifesto." In one of history's great ironies, Karl Marx used the profits from the German textile mills of Friedrich Engels's father to support the writing and distribution of a political philosophy based on pessimism about capitalism.

Pessimism is often wrong because people assume a world where there is no change or innovation. They simply extrapolate from what is going on today, failing to recognize the new developments and insights that might alter current trends. For too long, for instance, population forecasts have ignored the possibility that population growth would ease as the world became better off, because people who are wealthier and healthier do not feel the need to have so many children. (For more on this issue, see the excellent presentations on the "Gapminder" website of the development expert Hans Rosling.)

A lot of the rhetoric about sustainability implicitly assumes that we will exhaust our natural resources, as though there will never be any substitution of one commodity for another in the future. But there has always been such substitution. The late economist Julian Simon made a famous wager with the biologist Paul Ehrlich, author of "The Population Bomb." In response to Mr. Ehrlich's prediction that population growth would lead to resource scarcity and mass starvation, Simon bet him that the cost of a basket of commodities, including copper, chromium and nickel, would actually decrease between 1980 and 1990. Mr. Simon won the bet because he believed that, despite increased demand, increased supply would win out. And in fact, to take one example, fiber optics soon took the place of copper wire in many communications technologies.

There are other potential problems in the future that Mr. Ridley could have addressed but did not. Some would put super-intelligent computers on that list. My own list would include large-scale bioterrorism or a pandemic. (Mr. Ridley briefly dismisses the pandemic threat, citing last year's false alarm over the H1N1 virus.) But bioterrorism and pandemics are the only threats I can foresee that could kill over a billion people. (Natural catastrophes might seem like good candidates for concern, but I've been persuaded by Vaclav Smil, in "Global Catastrophes and Trends," that the odds are very low of a large meteor strike or a massive volcanic eruption at Yellowstone.)

Even though we can't compute the odds for threats like bioterrorism or a pandemic, it's important to have the right people worrying about them and taking steps to minimize their likelihood and potential impact. On these issues, I am not impressed right now with the work being done by the U.S. and other governments.

The key question that Mr. Ridley fails to address is: What's wrong with worrying about and guarding against threats that might become real, large problems? Parents worry a great deal about their children's safety. Some of that worry leads to constructive steps to keep children safe, and some is just negative emotion that doesn't help anyone. If we all agree to join Mr. Ridley as rational optimists, does that mean that we should stop worrying about trends that might cause problems and not take action to anticipate them?

Mr. Ridley devotes his attention to just two present-day problems, development in Africa and climate change, and seems to conclude, "Don't worry, be happy." My prescription would be, "Worry about fewer things while understanding the lessons of the past, including lessons about the importance of innovation." This might qualify me as a rational optimist, depending on how stringent the criteria are. But there can be no doubt that excessive pessimism may cause problems with how society plans for the future. Mr. Ridley's book should trigger in-depth discussions on this important subject.

Like many other authors who write about innovation, Mr. Ridley suggests that all innovation comes from new companies, with no contribution from established companies. As you might expect, I disagree with this view. He also seems to think that innovation involves simply coming up with a new idea, when in fact the execution of the idea is critical. He quotes the early venture capitalist Georges Doriot as saying that as soon as a company succeeds, it stops innovating. A great counterexample is Intel, which developed over 99% of its breakthroughs after its first success.

Mr. Ridley describes the economy of the future as "post-corporatist and post-capitalist," a silly throwaway phrase. He never explains what will replace all the companies that figure out how to make microchips or fertilizer or engines or drugs. Of course, many companies will come and go—that is a key element of capitalism—but corporations will continue to drive most innovation. It is a dangerous and widespread problem to underestimate the ongoing innovation that takes place within mature corporations.

In his quest to highlight exchange as the key mechanism in the success of our species, Mr. Ridley underplays the role of other institutions, including education, government, patents and science, all of which, especially since the 19th century, have played a central role in the improvements that humanity has experienced. Too often, when Mr. Ridley finds an example that minimizes the contributions of these institutions, he seems to think that he has validated the idea that exchange deserves all of the credit.

I am always amazed by scientific possibilities. Electricity, steel, microprocessors, vaccines and other products are possible only because of our efforts to understand the world and how it works. The scientists and tinkerers who investigate these mechanisms are engaged in a profound process of discovery. Without their curiosity and creativity, no amount of exchange would have produced the world in which we now live.
 
—Bill Gates is co-chairman of the Bill & Melinda Gates Foundation and serves as chairman of Microsoft. 



Bill and Melinda Gates hold young patients on a malaria vaccine trial in Manhica, Mozambique, in Sept. 2003.

What are we bid for a World Cup?

By Simon Kuper
Financial Times
November 26 2010

Three years ago, when the bidding to host the World Cups of 2018 and 2022 was just getting going, a lobbyist explained to me how the decisions would be made. Over lunch at the International Football Arena in Zurich – a cosy annual gathering of the game’s power brokers – he led me on to the terrace for a quiet word. There, he emphasised that what “the world” thought about the various bidding countries wouldn’t matter much. Instead, the only voters were “24 old men”. He meant the members of Fifa’s executive committee (Exco), who will choose the hosts for 2018 and 2022 in Zurich this Thursday. The lobbyist and his partner, he added, “know those 24 men better than anyone. We know their strengths, we know their weaknesses.”
That lobbyist has since switched to work for a different bidding country. And the number of old men has dropped to 22, after Fifa, the global football authority, suspended two Exco members. One, Amos Adamu of Nigeria, had allegedly asked undercover newspaper reporters for money in exchange for his vote, and another, Tahiti’s Reynald Temarii, was accused of breaching Fifa’s rules on loyalty and confidentiality in the same sting. In short, someone found their weaknesses. Both men have said they will appeal.

Yet the lobbyist’s point stands. The campaign to host these World Cups is much like a conclave of cardinals choosing a pope. It’s a campaign waged mostly behind firmly closed doors, and the very secrecy of the process, and the desperation of the nine bidders to win, invites corruption. Despite the secrecy, we do know many of the considerations that will sway these 22 men. That allows us to guess which two bidders will be dancing on the streets of Zurich come December 2.

Fifa plans to choose a European host for 2018, and a non-European one for 2022. One of Exco’s considerations, obviously, is the quality of bids. The 22 men will want to know which hosts can stage a competent World Cup. However, South Africa’s World Cup this year put that issue to bed somewhat. The developing country did a fine job: nice stadiums, pretty good infrastructure, and Fifa doesn’t care about the white elephants now rotting in the sun. If South Africa could do it, the Exco members will reason, then every bidder this time probably could too. The only bidder that emerged from Fifa’s evaluation reports looking bruised was Qatar. The tiny desert state, the report suggested, has neither the climate nor the space for the perfect World Cup. But the American and Dutch-Belgian bids also suffered for not giving Fifa enough government guarantees. Fifa likes to be granted the right to do what it likes in a host country.

However, the quality of bid is just one consideration among many. Fifa also likes using World Cups to open new markets, to fill in the “white spots” on football’s map. This is where Russia looks good. It has less infrastructure in place than any other European bidder, but unlike its rivals it is an ­emerging football market. For 2022, Qatar, Australia and the US can make the same claim. Japan and South Korea might have too, except that they ­co-hosted a World Cup just eight years ago, and so they hardly look “new”. When bidders and lobbyists gossip in hotel bars, they usually dismiss the Japanese and Korean bids (as well as the Dutch-Belgian one for 2018) as near no-hopers.

RED CARDS

Amos Adamu
The former head of the Nigerian FA, Adamu is alleged to have accepted an offer of £500,000 in return for his vote. His suitors turned out to be Sunday Times reporters. Adamu plans to appeal against his suspension

Reynald Temarii
Oceania lost its voice on Exco when Temarii was caught in the same sting as Adamu. Temarii claims Blatter has exonerated him of any wrongdoing, and says he now plans to sue the Sunday Times for defamation

Lord Triesman
The head of the English FA quit in May, after the Mail on Sunday claimed he told a former aide that Spain would end its bid to host the 2018 World Cup if rival bidder Russia helped Spain to bribe referees at this year’s tournament

The great new football market, of course, is China. The country isn’t bidding now, but Sepp Blatter, Fifa’s president, is keen for it to host a World Cup, and that fact could shape the vote for 2022. Simply put: if an Asian country gets 2022, then China might have to wait until 2034 before the World Cup could return to Asia. That could induce Fifa to give 2022 to the US, so that China could have 2026. In July, Wei Di, head of China’s Football Association, duly said: “We are considering 2026.” That angered the Asian bidders for 2022, and Chinese officials appear to have reassured them behind closed doors that China didn’t really want 2026. Significantly though, China hasn’t climbed down in public. Quite likely, Wei Di’s remarks were a signal to Fifa to bear China in mind for 2026. If so, and if Exco listens, it’s good news for the US.

Only the purest of Exco members – Michel Platini, for instance – will vote strictly on quality of bid and the prospect of new markets. Others will be swayed by more political, but equally legitimate, concerns. Most Exco members want something for their votes: often, a vote for their own country. Mohamed bin Hammam, the Qatari Exco member, put this frankly at last month’s Leaders in Football conference in London. “I will be naturally looking to the interests of Qatar,” he said. “All the bidders are telling me, ‘Okay, if you vote for me I will vote for you.’ That must not be surprising to anybody.” He admitted he wouldn’t necessarily vote for the “best” bid, but one that served Qatar’s interests.

The voting process – choosing two hosts on one day – practically invites deal-making between voters. Explicit deals are illegal – “You vote for me for 2018, and I’ll vote for you for 2022” – but tacit ones will happen.

That points to another consideration for many Exco members: friendship. “Friend” is their word for “longstanding ally”. The three South American voters will surely support their “friend” Spain, for instance. By contrast, the Dutch-Belgians and the English are short of “friends” in football.

Lobbying can win you friends. Russia has the best lobbyist of any bid: Premier Vladimir Putin. He has been buttonholing some very powerful people, inside and beyond Fifa, to talk about 2018. Putin helped clinch the winter Olympics of 2014 for the Russian city Sochi, and will attempt the same in Zurich next week.

All these considerations might sound tacky, but they are reasonably above-board. However, more venal considerations matter too. As the lobbyist told me, many Exco members are old: some won’t be alive in 2022, and may not care much whether the tournament is a roaring success or not, while others may see this as their last chance to extract big favours. Now the world is courting them. From December 3 they will be nonentities. They want something out of this vote.

That something might simply be a nice trip. Many countries have offered Exco members very comfortable visits to inspect their facilities. That is quite legitimate, but a five-star trip can be a voting incentive in itself. Other Exco members want something for their football federations. That’s why some bidding countries have sent their national teams to play friendlies in improbable places – places that happen to have Exco members. One Exco voter asked a bidding country to pay for a team coach for his national side. Again, a perfectly legal inducement: it’s called “promoting football development”.

As neither bidders nor Exco members like to say much about these sorts of favours, we are left to guess how common they are. Interestingly, when a British Sunday newspaper pretended to offer both Temarii and Adamu money for their votes, both men mentioned having received offers from other bidders – in Temarii’s case, worth several million dollars. The scandal spooked Fifa and all the bidders. Claudio Sulser, head of Fifa’s ethics committee, says: “The damage to Fifa is great.” Recently, bidders have been so scared of getting caught in new ­scandals that hardly anyone has dared say anything in public. The bid leaders have become diplomats rather than salesmen. That has made the race yet more secretive.

Secrecy will shroud even the day itself. The 22 men will hand their votes in sealed envelopes to consultants from KPMG. After each round, the candidates with the fewest votes will be eliminated, until one country gets a majority. Afterwards, all Exco members will be able to tell all bidders that they voted for them, and nobody will know for sure.

None of the 22 men, not even Sepp Blatter, knows who will win. Yet the best current guesses of the lobbyists and bidders around the coffee tables are Russia for 2018 and the US for 2022. (True, William Hill has Qatar as runaway favourite for 2022, but the bookmaker explains that very few punters have bet on the 2022 race, and so a couple of large-ish bets on Qatar would be enough to skew the odds.) When it’s all done, Fifa can go away and reform the voting process so that the whole thing is a bit less secretive and embarrassing when it next chooses a host, by which time many of today’s Exco members will be long past caring.

A New Theory of Justice

by Samuel Freeman
New York Review of Books
October 14, 2010

Review of "The Idea of Justice" by Amartya Sen
Belknap Press/Harvard University Press, 468 pp., $29.95

Prakash Singh/AFP/Getty Images

Amartya Sen giving the keynote address at the fifth annual Global Development Network conference, New Delhi, India, January 2004

1.

Since the publication of John Rawls’s A Theory of Justice in 1971 there has been an outpouring of philosophical literature on social, political, and economic justice unmatched in the history of thought. During the previous two hundred years, utilitarianism had been the predominant view in Anglo-American political philosophy. Utilitarianism argues that laws, governments, and economies ought to be organized to promote (“maximize”) the greatest sum total of happiness (“utility”) in society. Adam Smith’s argument that the “invisible hand” of the market coordinates everyone’s self-interested choices to promote the public good long ago established utilitarianism as the primary justification for capitalism. The great British classical economists (Adam Smith, David Ricardo, John Stuart Mill, F.Y. Edgeworth) were utilitarians, and economists still make utilitarian arguments to justify their single-minded focus on economic efficiency without regard to distributions of income and wealth.

Rawls claimed that because it ignores distributions of rights, liberties, opportunities, and other social goods, utilitarianism respects neither the separateness of persons nor the freedom and equality of democratic citizens; utilitarianism is prepared to sacrifice the rights, liberties, and opportunities of the few to promote the greater happiness of the many. Drawing on the social contract tradition of John Locke, Jean-Jacques Rousseau, and Immanuel Kant, Rawls argued that justice requires that societies be governed by principles that free rational persons would agree to from a position of equality.

He proposed a thought experiment: imagine an impartial situation where we are ignorant of particular facts about ourselves and society, but know all general facts from the social and natural sciences. From this “original position,” people would then agree to principles of justice to govern society. Rawls’s first principle of justice guarantees equal basic liberties for all: liberty of conscience, freedom of thought and expression, freedom of association, equal political rights, and freedom of conduct with a right to personal property. (Rawls crucially omits economic liberties such as the right to own and control means of production.) Rawls’s second principle affords everyone “fair equal opportunities” to develop their capacities and talents and to compete for social positions. This requires, he argues, extensive educational and health care benefits for all.

Finally, Rawls’s “difference principle” requires that economic inequalities be arranged to provide maximum benefit to society’s least advantaged members. This means that the economy should be organized to distribute income, wealth, and economic powers and responsibilities, so that the least advantaged class is better off than it would be in any other economic system. This, Rawls says, justifies a “property-owning democracy,” which, unlike our “safety-net” capitalism, requires that income, wealth, and economic powers be more evenly distributed across society.

Rawls’s theory encouraged the development of alternative theories of justice from different political perspectives. For example, Robert Nozick’s libertarian “entitlement theory” guarantees absolute property rights and unregulated economic liberties within an “ultra-minimal state” that provides no public goods or services, or benefits for the disabled or destitute. Ronald Dworkin set forth an egalitarian position that requires citizens to take responsibility for their economic choices within the setting of a capitalist welfare state. Such a state would give citizens equal amounts of assets with which to start their working lives, accepting that some would do much better than others, and compensate citizens for misfortunes for which they aren’t responsible. The late Gerald Cohen developed an especially far-reaching egalitarianism. It requires eliminating the economic consequences of all undeserved differences in natural talent and other products of luck; the only justifiable economic inequalities stem from differences of effort and arduousness. Many others have put forward alternatives to Rawls’s theory.

2.

In The Idea of Justice, the economist and Nobel laureate Amartya Sen is offering another significant, though very different, theory of justice. Sen’s 1998 Nobel Prize was awarded “for his contributions to welfare economics,” particularly the “axiomatic theory of social choice,…definitions of welfare and poverty indexes, [and] empirical studies of famine.” He was lauded for having “restored an ethical dimension to the discussion of vital economic problems.”


Sen is especially known for his arguments that individual well-being can be objectively measured by the access people have not only to goods, income, and liberties, but also by the variety of “capabilities” that enable them to pursue satisfying lives. He has written many important works on liberty and equality, and is widely respected for his path-defining works on developmental economics, poverty, and famines.¹ His thesis that no major famine has ever occurred in a functioning democracy—because democratic pressures on governments would compel preventive measures—is widely accepted.²

Sen has expanded considerably the depth and breadth of the field of social choice theory—the formal study of choices or decisions by groups of people, including societies. Social choice theory seeks to provide a basis for arriving at collective decisions given people’s differences in preferences and values. Widespread agreement on social and political policies is relatively rare. In view of widespread disagreement, how can we make sense of the idea that society itself prefers or chooses one alternative over another? Are there ways to consistently combine different individual opinions and values into a collective choice for society as a whole?

Majority rule may be appropriate for some choices; but one main result of social choice theory is Kenneth Arrow’s “impossibility theorem,” which shows that majority rule encounters problems of inconsistency in ordering different preferences. Social choice theory seeks ways to construct social choices by calculating the effects on individuals’ well-being that result from alternative social policies. The results are crucial for the feasibility of evaluating different social states of affairs and constructing meaningful measures of social welfare.
One of Sen’s most significant contributions to welfare economics and philosophical ethics is his account of human well-being with respect to “capabilities for functioning.” Utilitarians and economists traditionally have measured well-being by people’s “utility” or “welfare,” the satisfaction of desires or preferences. Our lives go well when we get what we want and/or have pleasurable experiences.

Sen rejects this account. People’s preferences, he writes, often result from mistaken beliefs or are adaptations to miserable or coercive circumstances (e.g., people may be satisfied being subservient if they have no alternatives). Measuring well-being by resources, such as income and wealth, fares no better, Sen says, for people have different “conversion rates” for resources. For example, providing equal resources to disabled persons and those who are not disabled does not result in their having the same well-being, since the disabled require more to perform the same activities. As he wrote in these pages in 1990:

A person who is not particularly poor in income, but who has to spend much of that income on kidney dialysis, can be taken to be suffering from poverty precisely because of the limited freedom he or she has to achieve valuable ways of functioning.³

Both utility and resources are poor indicators of how well a person is doing. Living a good and satisfying life, Sen argues, consists of engaging successfully in freely chosen activities against a background of worthwhile options and real opportunities. Instead of utility or resources, our well-being should be assessed according to the “capabilities for functioning” that enable people to exercise “effective freedoms” to choose and do what they value or have reason to value. Important capabilities include having adequate nutrition; health and longevity; personal safety and freedom from fear; physical mobility, literacy, and numeracy; and being able to appear in public without shame. Poverty, illness, disability, and subjection of women, among other restrictions, undermine capabilities and deprive people of their effective freedoms to engage in worthwhile activities. Sen contends that justice largely consists not in equality of capabilities, but in reducing inequality in people’s respective capabilities and guaranteeing that they have adequate capabilities for functioning amid real opportunities.

Sen’s capabilities approach has had enormous influence—his Development as Freedom is a leading work in development economics. He argues that expansion of capabilities and other freedoms should provide the main means and ends of economic development. The capabilities approach is currently being developed as one of the major approaches for addressing issues of social, political, and global justice and human rights.⁴

3.

In The Idea of Justice Sen orchestrates his many contributions and achievements into a distinctive position on justice. In addition to social choice theory and his capabilities approach, Sen incorporates discussions of rationality, objectivity in ethical judgment, liberty and equality, democracy, public reasoning, human rights, and global justice. Sen, unlike others, doesn’t try to provide universal principles—he is skeptical that there are any. He views freedom, equality, fairness, and other values of justice as too complex to be captured by principles that apply to all situations and societies.

Instead Sen outlines an impartial method of reasoning to assess the comparative justice of alternative states of affairs. This method takes into account the degree to which people’s capabilities and freedoms are fairly and effectively realized. He relies upon social choice theory together with Adam Smith’s idea of the “impartial spectator,” and also on an account of the objectivity of ethical judgments as defined by “their defensibility in an open and free framework of public reasoning.”


Sen urges us to adopt the perspective of an “impartial spectator” in deliberations upon laws, policies, and social actions. Just as consumers, given their budget constraints, can order their preferences for different bundles of economic goods, we can each evaluate and rank alternative social states of affairs according to the degree that they embody justice and other social values. But unlike our economic choices, when we reason about justice, he writes, we should put aside our personal preferences and take up an objective perspective that impartially takes into account everyone’s circumstances and well- being (assessed largely by the capabilities and liberties available to them). From this impartial perspective, we assess the consequences of proposed measures on everyone’s well-being, factoring in also considerations of fairness and individuals’ rights. We then decide between alternative laws, policies, or social actions, judging which ones best and most fairly promote our combined index of capabilities, liberties, and welfare of members of society. The state of affairs that ranks highest according to the combined index is the most just among the available alternatives.

Sen develops his account by means of extensive comparisons with and criticisms (over 150 pages’ worth) of Rawls’s position. His main criticism is that Rawls’s theory is “transcendentalist,” since it provides universal principles for a well-ordered, or “perfectly just,” society where everyone accepts and wants to do what justice requires.

Sen is mainly concerned with addressing existing injustices. He considers Rawls’s ideal theory irrelevant for this purpose: for addressing injustices in the real world, it is neither necessary nor sufficient to know what a perfectly just society is. We no more need “transcendental principles” to decide what justice requires than we need the Mona Lisa to judge the comparative merits of paintings by Dalí and Picasso. To address real-world issues, we should assess and rank in order actual, realizable states of affairs from an impartial point of view, and then choose the best alternatives according to the degree that they embody justice and other important social values. Sen says that a precondition for the reliability of our choices is that we engage in public reasoning with other impartial individuals.

Subir Halder/India Today Group/Getty Images

Amartya Sen, center, with other panelists at a discussion on India’s Right to Food Act, New Delhi, August 8, 2009

Sen’s method of comparing realistic alternatives and his dismissal of Rawls’s and others’ ideal theories might seem to fit with Americans’ matter-of-fact attitudes and impatience with philosophical theories. But ideal theory—the consideration of the principles or laws that would apply in hypothetical conditions—is commonly used in the natural and social sciences to acquire knowledge of real-world conditions. In price theory, for example, economists routinely construct mathematical models of what would happen under hypothetical conditions of perfectly competitive markets. The point of such idealizations is to filter out irrelevant considerations and concentrate on the interplay of causes and factors most relevant to the determination of the phenomena under consideration.

Political philosophy is of course not science, but clarification of our ideas about justice can be gained from idealizations designed to systematize our moral convictions. There are large questions about the direction of social and political policies and reforms that depend upon ideal theories of justice.

To contend that there is no need for ideal theory suggests that we should be satisfied with the alternatives currently on offer and haven’t any reason to think about long-term or extensive reforms. The Whigs had no need of John Locke’s radical social contract doctrine to justify the English Revolution of 1688. But Locke’s main ideas—the people are sovereign; government originates in their consent; government’s power is fiduciary and exercisable only for the common good; citizens have inalienable rights justifying a right of resistance when violated—supplied the conceptual frame for our Declaration of Independence and Constitution, and subsequently for many others. Whether ideal principles of justice are necessary depends upon one’s aims and long-term perspective.

Even in the short term, ideal principles are often called upon to motivate people toward political reform. Consider the galvanizing effects of Martin Luther King’s “I Have a Dream” speech. The aspirations King appealed to were grounded in political ideals and ideal principles and could not have been conveyed by focusing on practicable alternatives offered up by the status quo. Sen also would support measures that promote the civic equality and capabilities of historically repressed minorities to enjoy and effectively exercise individual freedoms. But in renouncing the reforming and inspirational effects of “transcendental principles,” Sen sacrifices a historically significant means for achieving justice even as he conceives it.

Sen still would contend that “transcendental principles” are unnecessary and of little practical consequence in ordinary political decisions. But what about judicial review and the US Constitution? The Constitution reads like ideal theory: “We the People, in Order to form a more perfect Union, establish Justice…promote the general Welfare, and secure the Blessings of Liberty….” It serves as the basis for our public understanding of ourselves as a people. The Constitution doesn’t say that we are to look at available alternatives and do what is best. Instead, the abstract rights and principles of justice in the Constitution have a fundamental regulative role in American society, and also provide a primary basis for public justification and criticism of government. It’s hard to see how Sen’s method of intuitive comparisons of alternative states of affairs, in which human capabilities would be better realized, could serve these crucial functions or suffice as a usable method for constitutional interpretation and adjudication.

Sen’s comparative approach seems better suited for legislative deliberations, where compromises are struck, deals are made, and legislators vote on alternative packages consisting of mixtures of measures and policies. But even the typical “sausage” emerging from legislative compromises (e.g., the recent health care bill) is largely the product of competing proposals that themselves have principled justifications.
Sen, however, argues that ideal theories such as Rawls’s are insufficient to decide political issues since their “transcendental principles” are designed to apply not to our world but to hypothetical circumstances where justice is done by and to everyone. This, he writes, “does not, of course, help at all…in comparative assessments of justice and therefore in the choice between alternative policies.”

Here Sen makes a common mistake. The fact that principles of justice are formulated for hypothetical circumstances does not mean that they do not apply to our actual circumstances; they would have little point otherwise. In current discussions of educational and health policy, Rawls’s principle of fair equality of opportunities is widely employed. Also, Rawls’s difference principle is deliberately designed to supplant utilitarianism in economic policymaking. Instead of legislating measures that maximize national wealth without regard to its distribution or the effects on unskilled workers, legislators, following Rawls’s principles, should take into account the long-term consequences of their policies for the less advantaged and regulate economic activities to fairly benefit everyone, starting with the poorest.

The health care issue shows both the strengths and weaknesses of Sen’s approach. Good health is certainly a capability and Sen admirably directs attention to its importance. But other theories of justice also do that, and Sen does not provide, as some of them do, principled guidance in answering difficult practical questions about how much of its resources a society should devote to health care at the expense of other needs, for example, or what level and distribution of taxes it should use to raise the needed funds. Nor does Sen’s account provide—as some ideal theories do—principles that address serious conflicts between different sets of capabilities; for instance, how should society strike the balance between maintaining individuals’ privacy and protecting their security?

4.

Sen criticizes Rawls, Ronald Dworkin, and others for focusing on distribution of rights and resources such as income and wealth and not being sufficiently concerned with the state of people’s lives. Rights and resources are, he says, only means to well-being and to exercising capabilities and achieving effective freedoms. Rather than focusing first, as Rawls does, simply on people with the least income, we should concentrate first on those, such as the disabled, who are least advantaged in their capabilities for functioning.

Moreover, Rawls says that the first subject of justice is the design of basic social institutions, including the political constitution, markets, property, and other institutions that make economic production and distribution possible. Sen replies that institutions are not “manifestations of justice,” but are only “effective ways of realizing acceptable or excellent social achievements.” Institutional design matters only in enabling people to live good lives; it is shortsighted to focus on the justice of institutions independent of “the social states that actually emerge” from them.

The backdrop to Sen’s position here is a more general debate that sharply divides moral philosophers, namely, the relationship between “the Good” and “the Right.” Is justice a means to something else, or does it realize an independent value of intrinsic importance? The former position, “consequentialism,” says that justice requires arranging institutions and distributing rights and other benefits to effectively promote (“maximize”) good consequences. Utilitarianism provides a familiar example of consequentialism: justice concerns the laws and distributions that maximize general happiness.

The contrasting view, “deontology,” says that justice constrains the means we take to promote good consequences, for it must take account of individual rights, fair procedures, and equitable distributions that manifest relations of mutual respect for others as persons. Rawls, Dworkin, Nozick, T.M. Scanlon, Thomas Nagel, and other Kantian or social contract theorists are deontologists. Sen, like most economists, and like utilitarians, tends toward consequentialism. Consequentialists see ideal theories as unnecessary since their moral principle for deciding justice and every other moral issue—maximize good consequences—can be applied to decide between alternative states of affairs no matter the circumstances.

Sen’s rejection of ideal theory is part of this same debate. We shouldn’t worry about the principles that would apply in an ideal society, he contends, for whether circumstances are ideal or nonideal, the same method of moral deliberation applies. We should imagine ourselves in the position of an impartial spectator who considers everyone’s well-being; taking account of material and social circumstances, we can rank available alternatives in order according to the appropriate mix or “index” of capabilities, welfare, rights, and liberties they guarantee, and then choose the best alternative along with measures effectively promoting it.
Though seemingly esoteric, the issue here is crucial. It profoundly influences many political and economic decisions, such as how much weight judges should assign constitutional rights compared with public security and the general welfare; or the use of cost-benefit analyses to decide individuals’ access to specific medical procedures and other services; or legislators’ worries that social programs for the poor will compromise economic efficiency.

Consider domestic terrorism. Vice President Cheney must have recognized the possibility that some Guantánamo prisoners were innocent bystanders swept up by a hasty dragnet during the heat of combat. But he argues, in effect, that the abuses at Guantánamo were acceptable because they increased overall security. He might concede that there were gross violations of some individuals’ freedom and see this as a cost of the government’s policies; yet he would consider this cost to be outweighed by the greater good. Deontologists contend that it is wrong to weigh justice against the general welfare and wrong to infringe upon the basic rights and liberties of a few individuals in order to achieve marginal improvements in the general welfare.

Sen is sensitive to the criticism that individual rights cannot be sacrificed for gains to the greater good. He revises the utilitarian tradition of consequentialist reasoning in two significant ways. First, he defines individual well-being less according to conceptions of utility and more by asking whether people have the capabilities to exercise effective freedoms amid real opportunities. Second, he incorporates into the good states of affairs to be socially promoted the selfsame deontological values of justice that Kantians and social contract theorists seek to realize via their “transcendental” principles of justice. These include equal basic rights, individual liberties, equality of opportunities, equitable distributions, and fair procedures.

This is an admirable—if ad hoc—effort to reconcile utilitarian, economic, and social choice reasoning with individual rights and principles of justice. But in the process Sen risks sacrificing traditional strengths of utilitarianism by obscuring the practical consequences of his view. For one powerful appeal of utilitarianism and similar consequentialist theories is that they purportedly simplify complex issues of justice by transforming them into empirical calculations of measures that effectively promote socially desirable states of affairs that themselves can be described by the natural or social sciences. With Sen’s “comprehensive consequentialism,” however, we cannot simply take the most effective means to promote or maximize empirically definable states of affairs. Instead, for Sen the states of affairs to be promoted incorporate moral values of justice that require that we respect individuals’ equal rights and fair distributions and procedures independently of further beneficial effects.

How, then, are we to address the inevitable conflicts that arise between maximizing good consequences (economic efficiency, overall happiness, or individuals’ capabilities) on the one hand and respecting individual rights and fair distributions and procedures on the other? Are we allowed to restrict the constitutional rights of a few (denying the rights of “enemy combatants” to habeas corpus and a fair trial, for example, or the interning of Japanese-American citizens during World War II) if that effectively guarantees the rights of far greater numbers to personal security and other freedoms?
Any reasonable account of justice must admit that in the event of extreme emergencies we must sacrifice some innocent persons’ rights to save multitudes. But it’s important to maintain a distinction between extreme emergencies and the ordinary circumstances of social life. Sen raises the possibility of abandoning this distinction. He says (referring to Nozick):

Once such an exception [for extreme emergencies] is made, it is not clear what remains of the basic priorities in his theory of justice, and the fundamental place that is given to the necessary institutions and rules within that theory. If catastrophic moral horrors are adequate for abandoning the reliance on the allegedly right institutions altogether, could it be that bad social consequences that are not absolutely catastrophic but still quite nasty might be adequate grounds for second-guessing the priority of institutions [that guarantee individuals’ rights] in less drastic ways?

I don’t believe Sen means to suggest, as many consequentialists do, that in the normal course of society we automatically respect individuals’ rights when we maximize the sum total of good consequences, even if these consequences are defined as greater effective freedoms and maximal satisfactions of individuals’ rights. For this would imply that we should frequently trade off the rights of the few against the rights and well-being of the many. There would be something wrong with human relations in a society if its government or citizens were normally prepared to misuse others to promote important social goals, even the goal of justice.
Conceiving of justice and respect for individual rights as if they were just one more good state of affairs to be maximally promoted, however, ignores the fundamental moral fact that justice is about social relations between persons and is not about persons’ impartial relations to states of affairs. Rawls’s social contract incorporates this fundamental moral fact. It is in danger of being compromised by Sen’s disengaged spectator’s impartial choice of the states of affairs that are best for people in one situation or another.

5.

Philosophy is a peculiar subject. Its apparent irrelevance accounts for both its charm and its dismissal as an idle luxury. It takes generations for philosophical ideas to take hold in popular awareness, if they ever do. Yet as John Maynard Keynes said, “The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed, the world is ruled by little else.”⁵ Locke’s social contract doctrine supplied the justification for the American Revolution and the conceptual frame for our constitutional democracy, and Locke’s doctrine of natural property rights together with Smith’s invisible hand and economists’ zeal for economic efficiency provide the grounds supporting capitalism today. How the current revival of political philosophy will influence future generations is impossible to predict. But it’s a safe bet that the debates will be of world-historical importance, and that Sen’s ideas about justice, social choice theory, and the capabilities approach to assessing well-being will make a crucial contribution to them.

1. For a helpful introduction and discussion of Sen's many contributions, see Amartya Sen , edited by Christopher W. Morris (Cambridge University Press, 2009). ↩
2. See Amartya Sen, Poverty and Famines: An Essay on Entitlement and Deprivation (Clarendon Press/Oxford University Press, 1981). ↩
3. " Individual Freedom as a Social Commitment ," The New York Review , June 14, 1990. ↩
4. See Martha Nussbaum, Frontiers of Justice: Disability, Nationality, Species Membership (Belknap Press/Harvard University Press, 2006). ↩
5. The General Theory of Employment, Interest, and Money (Harcourt, Brace, 1936), p. 383. 

On Tony Judt

Timothy Snyder

New York Review of Books

October 14, 2010

Erich Hartmann/Magnum Photos

Train between Latour-de-Carol and Foix, southwestern France, 1979

When I met Tony Judt twenty years ago, he was on his way to catch a train. But he lingered instead in Providence to lunch with a couple of Brown University undergraduates. He gently gave career advice to two young men hesitating between history and journalism. Of course I wouldn’t suggest that whoever had a meal with Tony either became a historian, as I did, or won the Pulitzer Prize for journalism, as did Gareth Cook. But Tony was always exceedingly generous with his time, especially with younger people. Brief requests for advice yielded pages of well-crafted counsel. He wrote letters of recommendation for dozens of people who were not formally his students, and organized conferences at which younger people met more established scholars. At his Remarque Institute at New York University, the criterion for participation was merit rather than renown.

Tony Judt was, in effect, two historians: first, a Marxist from a working-class English-Jewish background educated at Cam- bridge and at the École Normale in Paris who wrote four excellent books on the French left, and then a grand New York scholar who wrote an unimaginably good history of postwar Europe as well as strikingly clear studies of leading European intellectuals, such as Albert Camus and Leszek Ko a-kowski. The hinge was Past Imperfect, Tony’s eloquent critique of Parisian intellectual politics after World War II, published in 1992. On the surface, this was a close study of Jean-Paul Sartre’s communism and the political narcissism of Left Bank intellectuals who celebrated Stalinism while ignoring its consequences in Eastern Europe. At another level, it was the repudiation by a French Marxist of his own tradition.

Tony wrote his first book, La Reconstruction du parti socialiste, 1921–1926, in French; one French reviewer rightly noted that Past Imperfect read like an argument by a living French intellectual with several dead ones. Fundamentally, Past Imperfect was Tony’s first attempt at a philosophy of history that would survive the crash of Marxism and of the other great political and intellectual systems of the twentieth century. Yet even as he distanced himself from French Marxists, Tony resisted the temptation to substitute another source of intellectual authority for Marxism. Whereas some intellectuals of his generation replaced Marxism with something that seemed like its opposite—the market, for example—he instead rejected the very idea of a single underlying explanation of historical change.


Past Imperfect was possible because Tony had taken, during the 1980s, a kind of mental journey to Eastern Europe, against the drift of his own profession (Western Europeanists remaining such, despite the upheavals in Eastern Europe) and family history (Jews moving west from the Russian Empire). This intellectual move was more fruitful, if less dramatic, than his political encounters with the Jewish state. His youthful Zionism was a halfhearted rebellion against his parents, who wanted him to study in England; his later critique of Israel was, among other things, a kind of self-criticism. More interesting was his midlife participation in Eastern European intellectual life, which hastened the break with Marxism and enabled a more capacious view of the continent. Born in 1948, Tony was the same age as the generation of rebellious Polish intellectuals (often of Jewish origin) who were beaten, imprisoned, and expelled from Communist Poland in 1968 in an anti-Semitic campaign. Some of these people (notably Jan Gross, Irena Grudzin´ska-Gross, and Barbara Torun´czyk) befriended him in the 1980s, and their history, in a crucial sense, became his own.

In 1968, Tony was still both a Zionist and a Marxist. His Polish generational peers had never been Zionists (though they were called such by the Communist regime) and had been thinking their way out of Marxism for longer than he. In 1968, Tony, then twenty, took part in student demonstrations in Paris, London, and Cambridge; after an antiwar demonstration in Cambridge he trotted back to King’s College, chatting amiably with a policeman, hoping to reach the dining hall before the dinner bell rang. Two decades later, as a man of forty, Tony saw how different this was from police batons in Warsaw, and allowed the experiences of his Eastern European friends to overlay his own and enrich his understanding of postwar Europe. He was able to imagine that his own life (his father’s father was born in Warsaw; there were Judts in the Warsaw ghetto) might have taken a course like that of his friends. In the 1980s, Tony was teaching at Oxford, as was Leszek Ko akowski, the Polish philosopher who had been the intellectual inspiration of the Polish students of 1968. In one of his late essays, which appeared in these pages, Tony wrote brilliantly on Ko akowski’s masterwork, Main Currents of Marxism, the most faith-corroding history of the subject.¹

Tony was typical of thinkers of his generation in his attempt to escape, in the middle of life, from the attraction and pressure of structural theories such as Marxism. But he was unusual, as a historian, in that he chose pluralism, the embrace of multiple subjects, methods, and truths, rather than fragmentation, the flight to small islands of certainty. Many historians reacted to the end of faith in overall explanations by becoming experts in a narrow or specialized subject. In the 1990s, as he prepared himself to write Postwar, Tony chose the hardest path. Like Isaiah Berlin, another influential contemporary at Oxford, he accepted the irreducible variety within history, seeking to embrace difference within an account that was harmonious, convincing, and true. Tony brought together not only Europe east and west, but also Scandinavia and the Mediterranean. He wrote with equal authority about economics, society, politics, and culture, and granted the value of specialization by mastering the huge literatures of these fields, to which he imparted grace and unity.

Marxism is both a historical account of how the present arose and a prescription of how the future must be. In Past Imperfect, composed in the late 1980s and early 1990s, Tony permitted himself to be moralist and historian at the same time; during his research for and after the publication of Postwar, in the 1990s and 2000s, he allowed the two vocations of scholar and essayist to separate, to the benefit of both. As a historian he became more measured, and as an essayist he became more significant. His gift as an essayist, perfected after his move to the United States, was to be where he was and yet not to be where he was, to partake of the governing assumptions of his time and place without being governed by them. To take an example that is rarely mentioned: Tony was right, and right at the time, about the mendacity of the campaign for war in Iraq and the coming dreadful consequences for the United States. His inclination to criticize American policy, he thought, was what made him American.

Tony’s identity was cosmopolitan, but the breadth of his languages and knowledge concealed a certain unease. Once, at a conference in Berlin, the former East German spymaster Markus Wolf maliciously asked him to repeat a question in German. Tony did so, but with a kind of hesitation that was uncharacteristic of him. Having spent much of the last two years working with him on a book about twentieth-century thought and his own intellectual evolution, I now believe that I know the first sentence that he ever spoke in German. In 1960, when Tony was twelve, he and his family had to stay a night in Germany on the way to a summer holiday. On his father’s side his family were Eastern European Jews who had settled in Belgium, several of whom were murdered in the Holocaust. Tony was named after a cousin of his father’s who was killed at Auschwitz. His father could not bring himself to speak to the Germans at the reception desk, so he instructed his son what to say: “Mein Vater will eine Dusche“—my father wants a shower. The Holocaust, on Tony’s account, was everywhere and nowhere in his upbringing, like a vapor.

Much the same is true of the presence and absence of the Holocaust in his historical work. All of the early books about the French left ask, if only implicitly: Did it have to happen? Couldn’t socialism have triumphed rather than National Socialism? Mightn’t France have prevailed rather than Germany? Wasn’t enlightened politics somehow still possible? Even in Past Imperfect Tony had little to say about the French experience of German occupation and the crimes of Vichy. In Postwar he generally left the Holocaust out of the history, commenting in his conclusion on how it has been commemorated rather than focusing on the event itself. Like many other historians of his generation, Tony for some time wrote as if he believed that the great themes of intellectual and political history could be addressed separately from the Holocaust. But the mass murder of Europe’s Jews, as he told me, “keeps intruding.” When he fell ill, he was preparing himself to write an intellectual history of the twentieth century that would accommodate its major tragedy. It was only at the very end, in the work composed during his final illness, that Tony closed this circle.

Tony used the horror of ALS to breach some of his few intellectual limits. By 2008, when he was diagnosed, he held a chair, directed an institute, and was recognized as a historian and writer. All of this he had achieved on his own terms, rebelling when he liked and against whom he liked, always defining himself as an outsider. I think that the disease made that distinction between insider and outsider, though important to Tony throughout his life, much less relevant. Trapped inside his own body, he went outside of himself in a way that he had never done before. Mindful of his physical appearance after an earlier bout with cancer, and a private person throughout his life, Tony now exposed his wracked form and his complicated biography.

In late 2008 he agreed to compose, with my help, a long book about his life, and the life of the mind in the twentieth century. This work, which considers the major currents of twentieth-century thought, reveals the scope of Tony’s knowledge of intellectual life more vividly, I think, than anything that he had previously done. In its composition, his great pride cooperated with his great humility. As we completed six months of conversations, Tony began again to work on his own, dictating the short essays published in The New York Review, and composing the lecture on social democracy that he quickly expanded into the book Ill Fares the Land. We completed Thinking the Twentieth Century this July, a few weeks before his death.

When I last wrote to Tony Judt, not long before he died, I had just returned from a trip by train in Austria. Tony having made the same journey from Vienna to Krems and back with one of his sons, we exchanged e-mails about rail travel along the Danube with little boys. Thinking the Twentieth Century realizes one of the two books that Tony knew he wanted to write. The other, Locomotion, was about travel by rail. Precisely because he was unsentimental about his Jewish boyhood in London, he was nostalgic about the British trains. His school was built between the rail lines running from Victoria and Waterloo stations, suggesting routes of imaginary escape. As a teenager he would take his bicycle on the train and go exploring for the day. At the time he thought he was running away; with time he came to see that he was journeying among others. Travel by train, he came to think, is how society provides for itself, and finds itself along the way. Tony told me that one of the sadnesses of his illness was that he would never again find himself on a railway platform, uncertain of destination but certain of progress. Yet Tony was always in motion, even when he could no longer move, first pacing through an incomparable library of remembered books, then treading back and forth to find vistas upon an admirable life, ever revealing the limits of others, but always setting an example by overcoming his own.

1. " Goodbye to All That? ," The New York Review , September 21, 2006. ↩