Thursday, October 30, 2008

Dreaming of Paradise

The morning started, appropriately enough, with paradox. Arrow's Paradox:

Trouble first surfaced during the Enlightenment, as Jean-Charles de Borda and the Marquis de Condorcet debated the merits of different voting schemes. But it was not until 1951 that Nobel laureate Kenneth Arrow fully laid bare a problem that Borda and Condorcet had been struggling with.

Borda advocated letting people rank each candidate with a number, adding the points, and choosing the candidate with the best total score. We could view the method of voting we use today as a special case of Borda's method — where our favorite candidate receives one point and everyone else receives none.

Condorcet, on the other hand, advocated a vote between every pair of candidates. The candidate that wins in every comparison is elected. The practical problem with Condorcet's method is that it may fail to produce a winner. We see this all the time in athletic competitions. The Astros beat the Reds, the Reds beat the Cubs, and the Cubs beat the Astros. Who's the winner? In voting, this is known as Condorcet's Paradox.

But there's a hidden problem with Borda's method of numerical ranking, too. Imagine we can get chocolate or vanilla ice cream for our picnic group. We cast votes, and chocolate wins. Now suppose someone suggests strawberry as an option. We add it to the list and vote again. Even though we all feel the same way about chocolate and vanilla, we may find vanilla now wins. Seems silly. But it’s a very real problem in U.S. elections, and the democratic and republican parties constantly worry about candidates from third parties claiming votes.
That's the context. Now, what is Arrow's Paradox? You are forgiven if, upon hearing of it, you think of Kurt Gödel:

We might ask if there’s a voting system — any system at all — that doesn't threaten to flip-flop two candidates when a third candidate enters the race. Remarkably, Arrow proved that for any system meeting the most basic standards of common sense, the answer is No.

The implications for voting are stunning. But the impact of Arrow's work on economics and social choice goes far deeper. If we can't reasonably combine individual preferences, how can we develop economic or social policies then claim they represent what society prefers? In a real sense, Arrow used mathematics to show that we can’t; that instead, rhetoric, gamesmanship, and back-room deals must necessarily be part of the political process.
It was upon this last sentence that I laughed out loud and said: "Well, duh!" We would, of course, improve everything if we could just squeeze the human element out and reduce it to pure rational decision making. Rather like Business is supposed to have done, according to all the Business advocates like the GOP and Alan Greenspan. Corporate America, as Daniel Gross points out, is scared of a Democratic sweep in Washington. They must be right, because Business is always rational, no?

Big retailers such as Home Depot, Wal-Mart, and Target, the Journal reports, are freaked out that Obama and a Democratic Congress would pass the Employee Free Choice Act, "which would do away with secret balloting and allow unions to form if a majority of employees sign cards favoring unionization." Now, don't get me wrong. EFCA may be a disaster for retailers. But of all the woes facing companies—the credit crunch, crappy growth, a disastrous job market, a lost decade in the stock market—unions are the least of their problems. So far this year, legions of retailers have gone bankrupt—Steve & Barrys, Linens'n'Things, the Ponderosa and Bonanza restaurant chains—victims of excessively optimistic projections, poor expansion choices, mismanagement, and horrific capital structures. Unions had nothing to do with their failure.

Retailers that survive face a bigger challenge. We've just concluded an economic expansion in which median incomes failed to rise. The people who shop at Wal-Mart, Home Depot, and Target are basically making the same amount of money they were in 1999. There are a host of reasons why wages failed to rise in this expansion, among them: globalization, outsourcing, and a decline in the educational attainment of workers. But unions aren't one of them. What's more, long-term stock charts put the lie to the binary concept—Republican, anti-big-labor good, Democrat, pro-big-labor bad. Check out these charts of Home Depot (up about five fold in the Clinton years, down about 60 percent in the Bush years), or Wal-Mart (boom in the Clinton years and drift in the Bush years, or Target (ditto).

Now, with consumer confidence at a record low, credit difficult to come by, and demand shrinking, retailers are facing a bleak outlook. And they're worried about the prospect of greater unionization at some point in the future?
Mr. Gross goes on to examine the fears of the U.S Chamber of Commerce and the CEO of FedEx, all of whom did better under a Democratic Congress and President than under the GOP reign. In fact, he argues, Washington doesn't really have that much to do with the business climate:

In the past 16 years a bunch of really big picture economic developments have influenced the trajectory of the nation's (and the globe's) economy. These include, but are not limited, to: the Internet, free-trade agreements, the emergence of China and India, the fluctuating price of oil and commodities, and climate change. But the people we've elected to serve in Congress and in the White House haven't had much of an impact on any of those trends. In so many areas—home ownership, the stock market, investor participation rates—the past eight years have been something of a lost decade. We can't blame President Bush and former Republican Congressman Tom DeLay for all of this. But it's pretty clear that the policies promoted by a Republican President and a Republican-controlled Congress didn't do a lot to stimulate broad-based growth. At the very least, recent economic history should cause people to reexamine some of their assumptions about the relation between politics and the private sector. I'm not saying it doesn't matter who sits in the White House or who controls Congress. But it doesn't matter nearly as much as many businesspeople think it does.
Now, of course, the tired-out mantra, which John McCain keeps appealing to, is that government is the problem, not the solution, and that business is not only more efficient than government, but more rational. Business has eliminated the human element, in favor of the profit motive, and the profit motive is the rising tide that lifts all boats. Except, as the current financial crisis shows, we didn't eliminate the human element at all. As This American Life aptly described it, the problem with the financial markets was too much money seeking a place to invest, and too few investments to put it in. So the market created new investments in mortgages, and when that wasn't enough, it created new mortgages, right down to the NINA (No Income No Asset) mortgage. Which is precisely what caused the collapse of the Savings and Loan industry in the 1980's. Surely a wholly rational market would have understood that.


ProfWombat made this interesting observation this a.m. at Eschaton:

Saw a program yesterday on the science channel about a mega-project some are thinking of building in Tokyo Bay--a huge pyramid, maybe 3500 feet high, composed of carbon nanotubes in open structure, containing multiple buildings to house maybe 750,000 people. Integrated buildings, transport, everything. My wife and daughter were watching, and, to my surprise, thought it kind of a neat idea. I was intrigued by the engineering, but appalled at the sociology, that anybody could even consider constructing such a thing. It was quite the opposite of everything such folk as Jane Jacobs have stood for, offered as if we haven't learned anything, at long last, that the dreams of the empowered remain at such odds sometimes with what seem to me self-evident human needs.
Self-evident human needs get in the way of human planning and the desire for a controlled outcome. What is a voting system if not a deliberately controlled outcome? As Andrew Boyd notes without a trace of irony or concern, the Democrats and the Republicans seek an electoral system in which the choice is entirely binary, as any tertiary choice means someone in the previously binary side faces a greater chance of losing. When voting is a zero-sum game, the only rational option is to restrict participation as much as possible, the better to insure the outcome. But when we press the system even further, and insist the results represent the absolute preference of a group, rather than the outcome the system is designed to provide, we are expressing the desire for a human system that will produce a non-human outcome.

Oddly enough, we keep calling that desired outcome "Paradise." Which may be why Jesus of Nazareth proclaimed the kingdom of God, and invited into it everyone from the ditches and the hedgerows and the alleys, all the people who never get invited in the first place. He declared it radically inclusive, while we focus only on exclusion, only on those whose thinking or worship or practice we like. Maybe that's why we keep turning that kingdom into the sweet bye and bye, and go on living out our quotidian days dreaming of perfection. One is oddly human, the other oddly inhuman. And yet which do we really crave?

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