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01. The Aftermath of Neo-liberalism - Introduction

In my previous lectures I have demonstrated that the present idea of a free market is a utopia, based on a Randian misconception of the human condition and human nature.

Besides that, the beliefs of neo-liberalism are based on a complete misconception of the ideas of Adam Smith and at this moment, due to all this narrow mindedness and wishful thinking,

we face one of the biggest financial and economic crises in history. Resent history has been the clash of the systems: Communism versus Capitalism.

And while large crowds were cheering, the Berlin Wall fell on November 9, 1989. It became the symbol of the collapse of communism as a feasible social and economic system and the apparent victory of capitalism.

Now, about 25 years later, we must conclude that this was a Pyrrhus victory, that capitalism has not brought the solid and secure economy, which is beneficial to the common interest.

So, we have to face the question: "What next?" How should our world look like? Who owns what and how is it justified? How should the limited wealth of this earth be shared and distributed?

To give you a recent example…. The North Pole. Who in the world would be interested in that lump of ice except some scientists and adventurers?

But the situation has changed. To be honest, people smell money there because of gas and oil. Suddenly maps are deployed, pencil and ruler at hand and states are confronted with the question: Who owns the North Pole and why?

So, What next? That is the question I want to investigate and analyze in this project. The first half will be an analysis of the questionable ethical characteristics and effects of the free market in our life.

The second half will deal with human nature, with the basic question, related to the idea "Greed is good". We have to answer the question what we really are.

Are we what Aristotle suggested, beings guided by virtues or like Thomas Hobbes (….) thought: "Homo homini lupus", predators among predators, each one for himself?

In this context we love dichotomies and we have a number of them: are we basically egoistic or altruistic beings? Are we basically individualistic or social beings?

Are we independent individuals, fighting for our autonomy or do we long for belonging to a group? Are we basically ratio or emotion driven?

In 1996 the pharmacists supplied about 80 million standard daily doses of antidepressants. In a period of 15 years this has increased with 230% !

Today 259 million SDD of antidepressants are supplied. And here I am talking only about figures,which apply to the Netherlands only!

"We are all sickened by the current economic system. While produce, consume and enjoy are the holy trinity of the neoliberal belief,

there comes just less valuable from our hands and we feel emptier, sadder and lonelier than ever.", to quote the Belgian professor of clinical psychotherapy. Paul Verhaeghe.

My desk is littered with newspaper clippings. All dealing with different aspects of the collapse of capitalism. Let me quote a banker, a VIP among Dutch bankers.

The headline of the article: "Ethics among bankers is hard to find." Subheading: "The banking industry has become an industry where you can do anything as long as there is no rule that forbids it."

According to George Möller (64), author of the book "Waardenloos (Without values)" (2012), it is about time that such condemnable attitude changes.

The first economists such as Adam Smith, were economists with morality. In their form of free capitalism was assumed that the people were friendly virtuous and that it was the silent hand of God that eventually guided our actions.

They closed transactions in the confidence that both parties involved benefited from then. That increased prosperity.

In the second half of the 20th century, economics disguised itself in a cloud of mathematical models and assumed the attitude of being equal to natural science.

People like Milton Friedman and Paul Samuelson built models for monetary gain. Transactions are concluded because they made money for you . That someone else is harmed - or even being ripped off - is not seen as immoral as long as it is not prohibited.

And this has led to our present situation. In many political debates we are no longer treated as human beings, but simply as costs. It's about time that we rethink our position.

 

 

02. About the Rich

In my previous lecture I asked you to have a look at this diagram behind me and give your opinion. What do you read in this graphic representation of the decrease and increase of purchasing power.
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I was astonished, when I saw the graphics, and then I understood. This is the real world of which politicians never speak, but which they keep unaltered.
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In a year of deep financial crises, where banks loose billions, you would think that everybody across the broad has to take his losses. But this graphics shows, that the opposite is true.
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At least in the Netherlands, a country with a max tax rate of 52% and which is, if I am not mistaken, recently called a real socialist country by some American Republicans.
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As a caricature it sometimes is said, that the socialist steal from the achievers and rich and give it to the losers, the poor. Whatever true this may be, this is not the case in the Netherlands.
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The graphics shows us, that the richer you are the least negative effects does the crisis have on your purchasing power. Even more… If you belong to the richest 10% of society, your purchasing power even increased with 0.8%. Crisis or no crisis.
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A short scenario may explain the logic of this. A company sees its profits go down. However, profit maximization is the target of the company to keep its shareholders satisfied. Crisis or no crisis.
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Thence the company decides to reduce costs, which means, that it gives a 1000 employees the sack. As a result the company could even raise the dividend. The shareholders are happy and even see their purchasing power increase a little.
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Next there is some confusion now. In Dutch we have the word "biljoen" (billion). In English this seems to mean trillion. One Dutch biljoen euro is 1.000.000.000.000 euro. Just that you know….we are talking about huge amounts of money.
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-quote-
"The ultra-rich of this earth have parked at least 17 billion/trillion (?) euro in tax havens. An upper class has succeeded to withdraw from any joint responsibility by parking its money elsewhere at the expense of countries where they have amassed it.
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Therein they are facilitated by other countries which themselves often are victims of such practices, but they are only too happy to provide shelter to them. This applies not only to the Cayman Islands or the Channel Islands, but also to the Netherlands.
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In the last decades, in conjunction with the globalization and the neoliberal dismantling of the state, there has come to power a group of multinational corporations and super-rich, who benefit from the collective infrastructure , but increasingly fewer contribute and in its gated communities withdraw themselves to all social problems
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Where the bourgeoisie in the nineteenth century, because they themselves were strongly localized, committed themselves to the well being of their own city, because the cholera bacillus did not halt at their front door,
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this new money elite now does not solve problems at its front door, but it just moves its front door. It succeeds thereby repeatedly in playing states against each other by bargaining for extremely favorable tax rate terms for itself ." (Thomas von den Dunk, cultural historian) -end quote -
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A typical example is the Greek shipping companies. They use all infrastructure of the country, paid by tax money, without paying any taxes on their profits at all.
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Another example is the Dutch Railroad Company, a privatized formerly state-owned company. It has an office, just an office in Dublin, Ireland. That office buys all new trains, which ride in the Netherlands only, and the Dutch company leases the trains from this Irish office. It is just a construction on paper.
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To cut it short, while using all infrastructure in the Netherlands, this company succeeds in this way to evade 250 million euro of taxes a year.
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Besides that the quality of the service deteriorated, because the company needed more profit to pay a good dividend to its shareholders and postponed replacements and repairs.
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So much on the neoliberal dismantling of the state. There is something else. Maybe you have noticed that there is a new player in the field of politics.
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I always believed that the democratically elected politicians dealt with the economic and social problems. Since the crisis, say since 2008, there is a new player: it is called "the financial markets". Part of its power is due to the deregulation of the banks, thanks to Thatcher and Reagan.
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Regarding the euro crisis you now see how the politicians come to some agreement to solve the problems and then shudder and wait how "the financial markets" will respond.
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Who are these financial markets? Of course it is this superrich 10%, individuals, multinationals and banks. On the one hand they put governments under pressure and on the other hand make the taxpayer pay for their misconduct and survival. How good can life be?!
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-quote-
"This is a parasitic class of top bosses, who thinks that the rest of humanity actually should regard it as a great favor, that they are willing to live on this earth and therefore as a kind of favor create employment."
- end quote - (Thomas von den Dunk, cultural historian)
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In other words this 10% affects the social cohesion and increase the gap between haves and have-nots. And in this sense neoliberal capitalism fails in a social and moral sense as does the absolute belief in the free market.

 

 

 

03. The failing free market

In the discussion of my previous lecture I told you, that I am not the bright guy who invents all these ideas and arguments against neo-liberalism.

As I told you, look on the internet, check the literature, read your newspaper. Everywhere you find the growing insight, that we are definitely on the wrong track when pursuing the apparent blessings of the free market.

As I said….just read your newspaper. Therefor, as an example, I'd like to quote for you alter, written by some Dutchman and send to a national newspaper which published it. I read it as a confirmation of the growing insight, that things have to be changed.

-quote-
"More and more voices advocating reduction of privatization and of its product: the free market. The theory does not work. Healthcare is likely to be unmanageable and priceless. Most doctors who just want to be a doctor, want to get rid of the market.

Education groans under regulations; institutions are uncontrollable and chaotic mammoth organizations. Pupils and students become completely lost and often go their own way.

The remnant of the unsurpassed PTT (Dutch postal Services, hB), TNT, threatening to become unmanageable due to the repeated departure of directors . Housing .., no, now I hold on.

The Liberal toys just do not work for these organizations and services. Hopefully that penetrates slowly through in The Hague (seat of the Dutch parliament, hB)

and hopefully a new government will take appropriate measures to stop this misbegotten privatization and its product, the free market, as much as possible and to reverse with reason."

Henk Schraa, Heemskerk (The name of the author, just an ordinary concerned Dutch citizen). Tomorrow will be a significant day in Dutch politics. We may vote.

The campaigns are on and the situation is the clearest proof of what is happening in this world. The dutch situation is thus: the dutch parliament is composed of about 12 different parties. A government is always a coalition.

At this moment there are two parties in the lead for becoming the biggest party. On the one hand the liberal party, strong advocates for privatization and unlimited economic growth and on the other hand a socialist party, pleading for less free market and a more fair sharing of the national wealth.

At this moment the polls show a tie between the two. Nobody dares to predict anymore who will be the biggest party tomorrow evening at midnight.

And this simple political fact about a small country I interpret in the same way as I interpret the on coming presidential elections in the US.

Tho there are a lot of powers and influences beyond our democratic control, voters are not stupid. They too see what is going on in the world, that we have to choose between greed or sharing.

Before the 80s the stock exchange was a place where people interacted with people. After work you could meet the guy, who, for instance, ripped you off that day and you could at least have a discussion about fair trade,

but economic theory developed in the wrong direction after the war, because the mathematicians took power there. Economics thus has become a value-free trade in which moral judgments no longer count, but only numbers, put in a mathematical formula.

In other words, the pseudo-science claims thanks to the models of Nobel Prize Winners as Paul Samuelson and Black & Scholes, such as the option price theory and market efficiency theory, to have become a real science.

In this environment, the beast in man got loose. The goal is no longer to be the best bank for the customer, but to be the largest and most profitable one so that, thanks to super bonuses bankers could enrich themselves.

Economics is not a science like physics. In fact it is human behavior and thence a part of psychology end thence a part of philosophy, which can show you that there first is ethics and then there is economics.

 

 

 

 

 

04. Ethical boundaries

We live in a time where almost everything is for sale or can be sold. In the past three decades, markets - and market values ​​- began to dominate our lives like never before.
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It was not a conscious choice to end up in this situation. It seems like it just has happened to us. After the end of the Cold War the free market and the market-theory gained an unprecedented prestige.
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No other method of the organization of production and distribution of goods was so successful in generating wealth and prosperity.
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More and more countries around the world accepted the mechanism of the market, but there happened also something else.
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Market values ​​got an increasingly important role in society. Economics was dominated everything. Human beings became just numbers in mathematical equations.
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The logic of buying and selling did no longer apply only to material goods, but also began to control other areas of life. It is about time we ask ourselves if we want to live this way.
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The years leading to the financial crisis of 2008 were a turbulent era. The belief in the free market and deregulation reigned supremely: it was the time of the triumph of the market.
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That era began in the early 1980s, when Ronald Reagan and Margaret Thatcher proclaimed that the free market, and not the government, was the key to prosperity and freedom.
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That trend continued with a market-friendly liberalism of Bill Clinton and Tony Blair, who despite minor adjustments confirmed the belief that the free market was the most important means to improve general welfare.
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As I already have expressed in previous lectures, today we have serious doubts about this belief. The financial crisis has not only shown that it is not as efficient in spreading risks as it claims to be.
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But we also have gotten a strong feeling that what we call "the financial markets" and the banks have drifted away from ethics and that we have to do something about that.
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Some say that it is general greed, which is the weak spot of the financial world. Just keep the greedy bankers and speculators in check and our problems will be solved.
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This is however only a part of the diagnosis. Sure, greed plays an important role in this crisis, but there is more. The increase of greed in the past 30 years is not the worst thing, that has happened.

The most fatal change that has taken place is, that the market and market-values have extended into areas of our life, where they don't belong.

Thence we have to do more than re-educate bankers and teach them not to be too greedy and teach them responsibility towards society.

We need a serious discussion about the ethical boundaries of the free market. The free market has got in its grip areas of our life which were formerly dominated by not-commercial values.

These areas are education, health care, hospitals, social housing (houses to rent by those who can not afford to buy a house), public security, even our body and matters of life and death. If you want you even can "buy" a child.

But why should we care, that everything can be bought? Just name the price. I can mention two reasons. One is inequality and the second is corruption.

Inequality is easily understood. If everything can or has to be bought, it means, that enjoying participation in all benefits of a society is mainly achieved by having money. No money? Bad luck for you…sorry! Or should we think differently here?

The second reason is maybe harder to understand, but it means that the belief in the benefits of the free market slowly corrupts human values, which are above selling and buying.

Just one example. In the next lectures we'll dig deeper into this aspect. How about selling your organs? For instance a kidney? You've got two, haven't you? Just think about this. We'll discuss this matter extensively in future lectures.

 

 

 

 

 

05. Libertarianism

In 2009, Paul Ryan, running mate of Mitt Romney, said "What's unique about what's happening today in government, in the world, in America, is that it's as if we're living in an Ayn Rand novel right now.

I think Ayn Rand did the best job of anybody to build a moral case of capitalism, and that morality of capitalism is under assault."

So let's investigate whether this assault on the morality of capitalism is justified.

The richest 1% of Americans possesses over a third of the country's wealth, more than the combined wealth of the bottom 90% of American families. The top 10% of American households are taking 42% of all income and hold 71% of all wealth.

Economic inequality is steeper in the United States than in other democracies. Some people think that such inequality is unjust and favor taxing the rich to help the poor.

Others disagree. They say there is nothing unfair about economic inequality, provided it arises without force or fraud to the choices people make in a market economy.

The toughest defenders of the later point of view are the Libertarians, like Paul Ryan. You find these ideas among conservative Republicans, members of the Tea-Party movement. Even in the Netherlands we seem to have a libertarian party.

Libertarians reason that taxing the rich to help the poor violates a fundamental right. Taking money from the rich is coercive. It violates their liberty to do with their money whatever they please.

Our liberty is based on what Robert Nozick (1938 - 2002) claims: "individuals have rights which may not be violated by other individuals" in his book : "Anarchy, State, and Utopia" (1974)

According to him, we have natural rights, especially our liberty and self-ownership (we own ourselves). This leads to his idea that we must see humans as ends in themselves and redistribution of goods is only justified on condition of consent.

This means that everything can be regulated by the free market. If this leads to winners and losers, there is nothing wrong with economic inequality as such.

You can conclude nothing about the justice or injustice of this situation. What matter is how the distribution came about.

All kinds of government rules and regulations to redistribute wealth, enforce health care, provide for social security for the poor and unemployed, are one by one serious infringements of the individual's right to liberty.

This is, because all is financed by imposing taxes, which even can be regarded as theft.
Check this:

There is the natural right of self-ownership. If I own myself, I own my labour. If I own my labour I must be entitled to the fruits of my labour.

If someone else was entitled to the fruits of my labour, he would own my labour, so in fact own me. This is almost close to slavery.

If the state takes a part of my money, the fruit of my labour, it in fact takes my labour, which means that e.g. for 30% I am forced to work for the state, which is an infringement of my liberty.

We could object….hold on….you are a democratic citizen and thus subjected to laws which passed by majority vote.
The Libertarian reply would be: But what becomes of my individual rights?

May the majority deprive me of the freedom of speech and religion, as it deprives me of part of my income by taxation, claiming that as a democratic citizen I already have given my consent to whatever it decides by majority?

Does this argument hold? Are we indeed morally free in our self-ownership? Let me give you two examples.

Example one: Kidney donation is meant to save lives. You can donate one to your child because you can live with one.

But if you OWN your body, these considerations do not matter. You are free to do with your property, i.e. kidney, as you please.

Suppose some art dealer offers you US$20.000 for a kidney. He makes coffee table ornaments of human kidneys. What prohibits you to take the money? Who cares about one kidney less?

Or suppose in a poor Indian village a father wants money for sending his son to college, so he'll have a better future. He sells a kidney to a rich American for transplantation.

Two years later he needs again money, now for sending his second son to college. He owns his body in absolute liberty and there is again a rich buyer for his second kidney…….

 

 

 

 

 

06. Corrupting fairness

As some of you may know, the State of the Union is an annual address presented by the President of the United States to the United States Congress.
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We have something like that on the third Tuesday of September. Then the Dutch queen delivers a speech, of course written by those who are politically responsible. She is just an ornament.
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But they made her say something that concerns us seriously here.
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"The growth of the global economy remains below expectations."
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Just think this over:
One: Why has there to be growth, while already a number of economists have said, that we live on a planet with limited resources and that striving for unlimited growth is irresponsible and in fact insane.
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Two: 'below expectations' Whose expectations ? Ours? Who formulates these expectations and why and what are the standards?
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Here again you see how the free market economy is taken as an obvious fact without any criticism. Production, consumption and a permanent growth of these two is almost a religious belief in the capitalist society.
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Is the market economy THE ultimate system, that is consistent with what we experience as human values? Values we cherish, because they are at the root of our welfare and happiness and make use human in stead of consumers.
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Let me be straight. No, the market economy is not the best or only system to do justice to all men. Even more emphatically,
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it can be argued that in some cases this system even corrupts our moral values and that we therefore seriously have to reconsider our human condition with respect to the belief in the free market.
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The basic question is: Can money buy everything, like in the Atlantis of Ayn Rand love relations in fact were contracts, regulating the exchange of services in a relation like love, sex, affection and mutual support?
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Let's begin with a simple issue: jumping the queue. When I flew with Ryan Air some time ago, I paid some extra. This allowed me to board the plane as one of the first while others had to wait in a long queue.
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Unfair? I paid extra for it. Well…. I saw those looks of people in the other queue…. Here we already can make two observations.
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One: here we are confronted with inequality based on the fact that I have the money to pay for the extra and others haven't.
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Second: there is also a corrupting effect on certain values. Waiting in a queue is accepted by poor and rich. It has an egalitarian, democratic meaning.
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We all have to wait for our turn. We experience that as a social value, not as a good that should be bought and sold on the market.
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Of course, this example of my flight looks trivial, but this market effect goes much further. Lobbyists need access to politicians. They do so by attending all kinds of meetings of committees of Congress in the US.
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But a lot of people want to attend these meetings, so you have to be early and stand in line for hours before the meeting begins.
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The lobbyists, however, pay people to stand in line for them and exchange places just before the meeting begins. This means that a democratic and equal right to attend such meetings has become a commodity on the market.
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Physicians, who "sell" there mobil phone number for US$15.000 a year, which means that the patient can call him directly and get an appointment the same day. So, no equal accessibility of medic care.
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Standing in line - and you can think of any situation where it applies - represents a social value of respecting equal chances for everyone in certain situations, whether you are poor and rich.
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This is just in a nutshell a first example, which draws our attention to the fact that the increasing influence of money and the free market is penetrating areas, which once were dominated by non-commercial values.

 

 

 

 

 

07. The body as private property

The main goal of this series of lectures is to question the idea, that everything has a price, that everything eventually can be bought and sold.
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What I mean to show is, that the belief in the free market has penetrated areas of life where it does not belong, like social and medical care, education, family life, the government and other areas.
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Stated in other words: is the basic structure of our social world a matter of personal freedom, private property, production and the exchange of goods and services by buying and selling?
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We already saw two examples which raised serious doubts: the libertarian view of self-ownership and values of fairness and equality which used to dominate situations, where we have to stand in queue.

In 1997 Barbara Harris founded the non-profit organization "Project Prevention". On its website its goal is formulated a little vague:

-quote- "Project Prevention does not have the resources to combat the national problems of poverty, housing, nutrition, education and rehabilitation services.

Those resources we do have are spent to PREVENT a problem for $300 rather than paying millions after it happens in cost to care for a potentially damaged child." -end quote-

In fact is means, that drugs addicted women receive US$ 300 after they have let themselves sterilized, so that they never will give birth to another child.

From the perspective of the free market philosophy this looks like a sound enterprise. It concerns an agreement between private persons in which there is no coercion, but only freedom of choice.

As a free market transaction the agreement offers a profit for both parties and increases public welfare. The drugs addict receives US$ 300 for her or his reproductive capacity.

And the buyer get for his money the certainty that the addict won't put (disabled or addicted) children in the world anymore.

Everybody happy, it seems, but yet this project received a lot of serious criticism. Let us look at a few arguments against this market transaction.

Is the addicted really free in her choice? That addiction and poverty and the need for a new kick drives her to go for the money no matter what this will cost her, is one of the objections.

This means that to assess the moral permissibility of a market transaction we will therefore have to ask: Under what conditions offers the situation in the market freedom of choice and under what conditions do they exert coercion?

An other objection is that of corruption. It is not about the conditions under which an agreement is concluded, but about the nature of what is being bought or sold.

It is a perfectly free transaction when a thief gives money to a judge to "buy" a not-guilty verdict. What happens here is, that something is bought or sold, which not ought to be bought or sold.

Corruption is not only a matter of bribes. We also corrupt some object, activity or social behavior, when we put a lower price on it than is appropriate.

To give an extreme example: to sell your baby just for the money is corrupting what we value as parenthood and loving care for a child,

because thus you treat your child only as a product in stead of treating it as a human being who is entitled to the love and care of his parents.

In this situation Harris regards the addicted mother simply as a malfunctioning baby machine. Women who accept the US$ 300 offer accept this humiliating judgement.

You could object that a judge sells a verdict, which you can not regard as his property, while a women owns her body and thus her fertility. Then it is a normal transaction, not corruption of a value.

This leaves us with the fundamental question: Are we allowed to regard our body as private property with which we can do as we please?

In this context I want to remind you of my previous lecture dealing with the libertarians concept of self-ownership. Is it morally justifiable to buy that second kidney of that man, who needs money to get his son to college?

 

 

 

 

 

08. Science and statistical significance

Yesterday I ran into an issue which is a small detour of our present project , but yet closely related. Living in a world dominated by the belief in the free market means living in a world dominated by money.

We also live in a world, which is no longer dominated by all kinds of religious convictions, but by the rational insights which science offers us. At least that is what we believe.

But suppose, that a lot of science is corrupt? I mean, that the higher value of finding the truth about facts is replaced by receiving money to produce only favorable information about facts?

In other words, must we conclude that a lot of information with those appealing headings like "Researchers of institute so and so have discovered…" or "Recently discovered scientific facts show…" are a fraud?

But the science I am talking about is not mathematics, but I mean the sciences which are based on statistics, especially psychology, sociology and medicines. I'll tell you why….

The most commonly used statistical method is the p-test, and its origin lies in the year 1904. Place of action: the Guinness factory in Dublin.

Guinness wanted to approach brewing beer scientifically and therefore appointed the young chemist and mathematician William Gosset .

Gosset focused on the biological variation of brewing raw materials such as barley and hops. The content of resins in the hops determines the taste and the stability of the beer, too much resin makes the beer undrinkable, and too little, too.

Each hop flower has a different resin content, and when Guinness wanted to buy a wagonload of hop, they could not take measurements of each flower.

Gosset found a way to calculate how many hop flowers you had to analyze to determine with a given confidence how much resin the whole wagonload hop contained.

When he reported: "There is a chance of more than 5% on average this party has too little resin", the sale was not on. By the way, his last statement is just a guess. Guinness never revealed their secret of how they actually selected their hop.

This statistical method was adopted by many sciences. Biology, psychology, environmental and health sciences would be helpless without statistics, and economics and sociology are leaning heavily on it.

Drugs are allowed, dangerous substances prohibited, defendants sentenced to prison on the basis of statistical calculations.

These calculations have become far more complex since Gosset and his hop flowers, and they are only feasible using computer programs.

But here comes the catch. The p-test shows whether there is less or more than 5% chance that something is the case. Below 5% means that it is STATISTICALLY SIGNIFICANT, which means not just a coincidence.

Flawed findings, however, with respect to this 5% test, for the most part, stem not from fraud or formal misconduct, but from more mundane misbehavior: miscalculation, poor study design or self-serving data analysis.

"There is an increasing concern that in modern research, false findings may be the majority or even the vast majority of published research claims," Dr. Ioannidis said. "A new claim about a research finding is more likely to be false than true."

Dr. Ioannidis is an epidemiologist who studies research methods at the University of Ioannina School of Medicine in Greece and Tufts University in Medford, Mass.

In a series of influential analytical reports, he has documented how, in thousands of peer-reviewed research papers published every year, there may be so much less than meets the eye.

"People are messing around with the data to find anything that seems significant, to show they have found something that is new and unusual," Dr. Ioannidis said.

In the U. S., research is a $55-billion-a-year enterprise that stakes its credibility on the reliability of evidence and the work of Dr. Ioannidis strikes a raw nerve.

Yes, a raw nerve, moral values like honesty, integrity, truthfulness in exchange for money. Money for more research, more spectacular "findings", more personal prestige.

We recently had that in the Netherlands too. Just a quote from the Dutch Wikipedia!

-quote- End of August 2011 close colleagues of the research group of Professor Diederik Stapelto reported to the rector of the University of Tilburg, Philip Eijlander, the suspicion of fraudulent activity in their searches.

About a week later, Stapel admitted that in some publications he had used fictitious data. Almost immediately Stapel was laid off. A collaboration of three committees, with professors from Amsterdam, Groningen and Tilburg, led by psychologist Willem Levelt was asked to investigate exactly which publications were based on fictitious data.

The committee reported that "it is a large-scale, long-term fraud on data, causing people and especially young researchers entrusted to him at the beginning of their career, to be deeply affected.

This is extremely reprehensible behavior that science and especially the field of Social Psychology is highly prejudiced. "

"Money is the root of all evil", sung by the Andrew Sisters comes to my mind now and on the other had the fierce argument of Francisco d'Anconia against this view in "Atlas Shrugged" (1957) by Ayn Rand.

http://online.wsj.com/article/SB118972683557627104.html

 

 

 

 

 

09. Don't buy Xmas presents....

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"You were right. The toast was a HUGE hit! I used the version with the dance quote. One person told me it was the best toast they had ever heard.
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I had at least 3 dozen people congratulate me on it throughout the night. Many of them pointing out a different part that they enjoyed. The groom's parents and uncle were especially touched by what I said." - end quote -
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Isn't this great?! And this only for US$149 !!!! This is about the speech of the best friend of the groom (or something like that) at his wedding. He didn't write it, but bought it at http://www.ThePerfectToast.com
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How would have been the reactions of the people have been when he had ended his speech by telling that he didn't write the speech himself but had it written for US$149 by someone else?
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Are there things that ought not to be bought? And if this is true, then what things are ok to sell or buy and which not? Or to say it in other words: do there exists things which money can not buy.
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Ok, friendship, or a Nobel prize or an Oscar can not be bought, but Richard Allen Posner (born January 11, 1939), an American jurist, legal theorist, and economist, suggested that adoption babies would be better of when sold to the highest bidder.
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Let's talk about gifts. You like getting gifts? Then you are economically pretty dumb :-) Let me explain. You contribute to an enormous value destruction.
-
December 1993, the economist Joel Waldfogel, published an article with the title "The Deadweight Loss of Christmas". You can find it on the internet, very technical article.
-
His conclusion: "Estimates in this paper indicate that between a tenth and a third of the value of holiday gifts is destroyed by gift-giving. (…) holiday gift expenditures in 1992 totaled $38 billion according to one estimate.
-
If between a tenth and a third of this spending was wasted, then the deadweight loss of 1992 holiday gift-giving was between $4 billion and $13 billion." - end quote -
-
In 2009 Waldfogel restyled his ideas on the subject and published them in a nice book (US$9.95 only) Maybe a nice gift ;-) for Xmas. "Scroogenomics: Why You Shouldn't Buy Presents for the Holidays"
-
- quote -
"Another huge, value-destroying hurricane is about to slam America, destroying billions of dollars of value. Another Katrina? No, another Christmas.
-
This voluntary December calamity is explained in a darkly amusing little book that is about the size of an iPhone.
-
Scroogenomics comes from a distinguished publisher, Princeton University Press, and an eminent author, Joel Waldfogel of the University of Pennsylvania's Wharton business school."--George Will, Washington Post
-
Let's listen to Waldfogel himself: "Gift giving is a poor way to allocate resources……" , a quote from a 6 minutes video interview with the author. I'll give you the URL at the end of the lecture and you HAVE to watch it.
-
- quote -
"The bottom line is that other people who go shopping for us and buy clothes, music or whatever , are probably not as good in choosing as we would be ourselves.
-
There is a good chance that their choices, no matter how well intended, are ineffective. If we consider their gifts to the degree of satisfaction that the money spent could have given us, we see that there is value destruction."
-
"Economic theory - and common sense- tell us that things, we bought ourselves, offer us more satisfaction per euro, dollar or shekel than things others bought for us."
- end quote -
-
Of course this lecture may cause a smile on your face or make you laugh, but my real intention is to ask you: do you think this is all ok or comes there over you a feeling that we are loosing here things we value?
-
You may just go home and think about this. In my next lecture I'll come to conclusions. Now just have fun and watch Joel Waldfogel.

http://press.princeton.edu/video/waldfogel/

watch this (unfortunately only in French and German):

http://videos.arte.tv/fr/videos/la-grande-pompe-a-phynances--6965918.html

 

 

 

 

 

10. The words 'to make money' hold the essence of human morality.

I don't know what your feelings are about it, but before 2008 I never have realized that there exists something like "financial markets".
-
Of course, I knew about the stock exchange, but that governments depend on how financial markets respond? No, that was really new to me.
-
It all looks so innocent and understandable. Let's quote Wikipedia:
"A financial market is a market in which people and entities can trade financial securities, commodities,
-
and other fungible items of value at low transaction costs and at prices that reflect supply and demand.
-
Securities include stocks and bonds, and commodities include precious metals or agricultural goods.
-
There are both general markets (where many commodities are traded) and specialized markets (where only one commodity is traded).
-
Markets work by placing many interested buyers and sellers, including households, firms, and government agencies, in one "place", thus making it easier for them to find each other.
-
An economy which relies primarily on interactions between buyers and sellers to allocate resources is known as a market economy in contrast either to a command economy or to a non-market economy such as a gift economy.
-
In finance, financial markets facilitate:
- The raising of capital (in the capital markets)
- The transfer of risk (in the derivatives markets)
-
In economics, typically, the term market means the aggregate of possible buyers and sellers of a certain good or service and the transactions between them.
-
During the 1980s and 1990s, a major growth sector in financial markets is the trade in so called derivative products, or derivatives for short."
- end quote -
-
It is simple as that. All is just interaction between buyers and sellers. That is what most economists like to believe, but philosophers and psychologist question fundamentally.
-
In a previous lecture Longstep brought to my attention the following documentary:
http://videos.arte.tv/fr/videos/la-grande-pompe-a-phynances--6965918.html
(unfortunately only in French and German). There is also a part two.
-
The story of the documentary is pretty scary. It is hard to believe, that we are dealing with human beings controlling the financial world.
-
It just looks like a small oligargy of financial hotshots that try to control our world. Their motivation? That is the most scary part: making more money….
-
This in combination with the simplistic anthropology of many economists, who believe to live in a world of buyers and sellers,

this leads to the famous speech on money by Francisco d"Anconia in Ayn Rand's "Atlas Shrugged". (Part Two, Chapter II, The Aristocracy of Pull)

- quote -
"If you ask me to name the proudest distinction of Americans, I would choose—because it contains all the others—the fact that they were the people who created the phrase 'to make money.'

No other language or nation had ever used these words before; men had always thought of wealth as a static quantity—to be seized, begged, inherited, shared, looted or obtained as a favor.

Americans were the first to understand that wealth has to be created. The words 'to make money' hold the essence of human morality.
-end quote -

And with this (American) morality we are dealing now and keep our conviction that the essence of morality is something quite different.

Dr. Vandana Shiva from India, held a lecture at Portland Community College in Portland, Oregon, USA on February 24th, 2011.

Lizzy brought her to my attention and a quote from her lecture, I think, is a perfect addition to this lecture:

-quote-
"Democracy in the present context is dead because originally it was of the people by the people and for the people.

Although millions of people say "no war" all governments of the rich nations send soldiers to Iraq and Afganistan.

Across the world people say "stop the banks from stealing our money" ... and the governments do nothing apart from saving the banks and let them be even more valuable than the people.

When corporations start to influence political decisions and lobbyists substitute the people then it is a government of the corporations by the corporations and the people are totally disposable.

This is what threatens democracy and why democracy has to be invented new".
http://www.youtube.com/watch?v=UOfM7QD7-kk

My only criticism here is, that corporations and governments are still just individual human beings. In other words, it still is about the individual ethics of an individual being that makes this world.

 

 

 

 

11. Slow assassination of moral values

Last night I was watching the movie "Basic Instinct" with Michael Douglas and Sharon Stone and observed the following scene.

In some meeting the psychologist describes the personality of the icepick murderer. The suspect, Catherine Tramell (Sharon Stone), Berkeley graduate in psychology and literature, wrote a book,

describing the exact details of how the murder with the icepick took place. She also inherited 105 million dollars from her parents , who died in a mysterious accident…..

When leaving the meeting and entering the elevator there is the following conversation between the participants of the meeting (policemen of course):

Mr. A: "We call her in for questioning."
Mr. B: "She has got enough money to burn this whole place down."

Mr. C:"Won't do any good. She just walks in with some super star lawyer, who got us all canned for wasting the taxpayer's money."

[OK….just for those who do know or don't know the move. Eventually she does get interrogated. And there it is where every man wants to watch the movie only frame by frame:-)]

That, I thought, is exactly how the top 1% percent, the super wealthy, live their lives. The truth has become a commodity for them.

What is new in economics is the believe in financial incentives. Of course, the bonuses of millions of dollars are a nice example of how we can influence individual market behavior of people.

The health lobby, which I now and then are inclined to call the health terrorists, is the kind of group that also comes with such ideas.

Some time ago the health fighters came with the suggestion to add an extra tax on food products that make people fat. You know, greasy hamburgers, French fries, potato chips, candy of all kinds, etc.

This, the lobby believes, would stimulate people to buy healthier food in the supermarket. Does money really change behavior in that way?

It is not as simple as that. Take for instance that Israeli nursery. The employees were pretty annoyed because a lot of parents came always in too late to pick up their children.

Let them pay a fine!, was the brilliant idea. That would stop parents from coming late. The effect was astonishing: the number of late parents almost double.

After twelve weeks they canceled the penalty system. People had regarded the fine just as an extra payment. But things got even worse. The number of parents that came too late to pick up their children stayed on the higher level after dropping the fine.

Here you see how a financial incentive corrupted a moral obligation to be in time and the social value of responsibility for each other.

In 1993 there was a referendum in a small Swiss village for or against the storage of nuclear waste. The inhabitants didn't like the idea but just 51% said OK.

Then the economists came up with an idea: give these people a financial incentive to agree to the nuclear waste storage near their village.

The result was, that the acceptance of the waste project dropped to 25% ! Economists believe that offering money makes something uncomfortable more bearable and acceptable.

However, the dedication to the public interest of the villagers did them regard the money offered as a disrespectful form of bribery.

An other experiment: two groups of children are asked to collect money for charity. One group listens to a motivational story, the other group is informed that they'll be paid for their efforts. This payment does not come from the charity money.

The result of the experiment was that the group that got paid for their work collected less money than the volunteers.

These examples illustrate how the introduction of money in a non-commercial situation can change people's attitudes and can supplant their moral and social responsibility.

 

 

 

 

 

12. The End

The standard economic theory assumes that goods and activities do not change character by commercializing them or offering them for sale.

Think of human organs, the willingness to accept dangerous situations like for instance stuntmen do, buying your entrance to a university,

using your body for advertisement, collecting money for charity, selling and buying CO2 rights and so on.

Market transactions increase the economic efficiency, they say, without the merchandise in question is being changed.

That is why economists generally are sympathetic to the use of financial incentives to encourage desirable behavior.

The reasoning is that market transactions are to the advantage of the two parties involved, buyer and seller, without harming other parties.

At least, IF you assume that the market and the human attitudes which are cultivated by this process do not undermine the immaterial value of the exchanged merchandise. and exactly this assumption is questionable.

A simple example: a theater company organizes performances of a play of Shakespeare and distributes free tickets, so that everybody can attend a performance.

Some smart guys get hold of as much tickets as possible and because these performances are so popular, they have no problem selling the free tickets for big money.

Here an immaterial social value gets degraded and corrupted by making the tickets to merchandise.

Fred Hirsch (1931-January 1978) was Professor of International Studies at the University of Warwick. He was a senior adviser to the International Monetary Fund from 1966 to 1972 where he worked on international monetary problems.

In his book "Social Limits to Growth" (1976) he is one of the first who warns us, that standard economic theory does not take into account this "commercialization effect".

By that he means "the effect on the character of a product or service when it only or mainly is provided through commercial way,

things as informal exchanges, mutual obligation, altruism and love (...) Generally and almost always implicitly it is believed that the process of commercialization has no influence on the product. "

And the effect on the character of the product was, that it changes the attitude of people and displace the immaterial values represented by or related to this good. when the market mechanisms are applied to the distribution of such a good,

Hirsch died shortly after publication of his book, which was publish just before Thatcher became Prime minister in the UK (1979 - 1990) and Reagan(1981 - 1989) was elected president of the US.

They opened the floodgates for the free market and helped to ignore these observations. It is now, that we become aware of it.

Economic theory focuses on explaining how competitive markets work: how they curb the SELFISH INTERESTS of market participants

by balancing them one against another in a way that results in the production of goods and services according to consumers' preferences and an efficient allocation of resources to their production.

To make the argument simple, intelligible and convincing required a highly simplified model of the economy,

that focused on the satisfaction of man's bodily needs and left out every obstacle, imperfection and complexity that could actually or potentially interfere with the market economy's perfect functioning.

In other words, economists created their own right theory by leaving out all other characteristics of human nature except selfish interest.

It seemed to have worked till now. So finally work for philosophers again …..

 

 

 

 

13. The Concluding lecture

The fact that standards are displaced by market forces, has significant impact on the economy.

It makes the deployment of market mechanisms and free market theory in many areas of the social life doubtful.

What should we think for example of financial incentives to encourage teachers to perform better in education, nurses in health care and other workplaces,

or to volunteers in social life, in family life and other places where is important that people are intrinsically or morally motivated?

"The" displacement effect " is perhaps one of the most important anomalies within the economy according to economists, because it seems to be at odds the most fundamental economic "law",

namely that increasing financial stimulation increases supply . If the displacement effect exists, financial incentives even decreases the supply, for instance the willingness to help others, in stead that they increase the supply.

What economists slowly begin to understand is that there is a difference between intrinsic and extrinsic motivation.

Oh sure, they know what it means: altruism is an inner (intrinsic) motivation to help your neighbor. The extrinsic motivation would be, when your neighbor asks you for help and offers you money.

Look, the later, THAT is economics, goods and services changing hand. Altruism is even a threat to the growth in economy.

For Ayn Rand altruism was almost a sign of mental disorder, a sign of weakness. In her opinion and in the opinion of many economists our social behavior is dominated by our preferences.

These preferences are very basic. They are material preferences. We are selfish, self-interested and that is why we act as we act.

All these other aspects of behavior which we call ethics, nice, really, but they have no meaning in an economic theory.

Like I said last Tuesday: Economic theory focuses on explaining how competitive markets work: how they curb the SELFISH INTERESTS of market participants

by balancing them one against another in a way that results in the production of goods and services according to consumers' preferences and an efficient allocation of resources to their production.

Economists believe that the commercialization of an activity does not change its character: money can never corrupt and non-market forces can never supplant non-commercial standards.

People who want to buy or sell a commodity find it to their advantage, while people who find that the value of such a commodity can not be expressed in money just don't need to participate in such trade. What is wrong with that?

Who cares? If you want to donate blood voluntarily, because you see it as a social obligation to help you sick neighbor, please do so. Very noble.

Two weeks later you run into you fully recovered neighbor, who tells you with lots of delight, that he just got US$ 200 for selling blood to the Blood Bank.

Then you run into that second neighbor who also survived thanks to your donated blood. He doesn't look in too good shape

and he tells you that he fortunately could make US$ 200 by selling blood to the Blood Bank. Means food for a week or so again.

And then there is that bill on your doormat: US $ 200. How stupid can a man be…………. ? Pretty stupid the economist says.

So you tell me….. who are we as human beings and by what standards do you like to organize our society? At least one observation: believe in the free market didn't work.

If you want to educate yourself, all inspiration for this project came from the book of Michael J. Sandel, "What Money can't by: The Moral Limits of Markets" (2012)