Economists have started to take morality seriously

Ben Chu in The Independent

“We don’t do God,” Tony Blair’s press secretary, Alistair Campbell, once famously remarked. Similarly, economists don’t “do” morality.

They are a breed concerned with economic efficiency not spiritual uplift; human choices and incentives, not human values. They believe questions of morality can be left to philosophers and theologians.

There’s an element of truth in that stereotype. Economists have indeed tended to leave aside issues of morality. In some cases that’s because they think, on ideological grounds, that it has no place in the discipline.

But even more thoughtful and less dogmatic economists have tended to shy away from the question on the grounds that moral values are tricky to pin down, much less quantify.

That’s not to say that their research agendas have not supported “moral” agendas. They often expose market failures which harm the less well-off. And they defend the right of governments to intervene in markets in ways that might reduce short-term economic efficiency, such as by fining polluters.

They argue for the responsibility of governments to provide public goods like education. And there are also plenty of mainstream economists who justify progressive taxation on the grounds that high inequality is socially undesirable.

Yet their theoretical models themselves have generally had no place for morality.

But things might be changing. Two economic Nobel laureates at a meeting on the German island of Lindau last week outlined a bold attempt to put morality into theoretical economical modelling.

Oliver Hart, a 2016 Nobel winner, presented a paper, co-authored with Luigi Zingales, in which he looked at how the personal morality of shareholders might affect the behaviour of the companies in which they invest, in particular whether those firms will behave in a way that will maximise profits or whether they sacrifice some profit for the sake of behaving in a socially responsible manner.

To give an example, it’s perfectly legal for the American supermarket giant Wal-Mart to sell automatic weapons. But its executives could, in theory, choose not to do so. So what determines the corporate decision?

The Hart model raises the possibility that the incentives in the system of stock-market listed companies – the psychology of shareholders and the pressures on managements – might be behind an “amoral drift” in corporate behaviour.

In a similar vein, Jean Tirole, who won the Nobel in 2014, outlined at Lindau a theoretical framework in which he, along with Armin Falk, tries to model behaviour taking into account how certain popular “narratives” can inhibit people from doing what they would normally consider the right thing. A good example of such a narrative in the British context might be popular opposition to the admittance of Syrian child refugees on the false belief, pushed hard by the right-wing media, that they are all really adults pretending to be children.

“Economics is fundamentally a moral and philosophical science, embedded in the larger social sciences,” Mr Tirole said, urging other economists in the audience to join in the project of trying radical new approaches.

It remains to be seen whether this particular research agenda gets anywhere. There are plenty of holes that one can pick in the very simple models presented by Hart and Tirole and the broad-brush assumptions they make about people’s decision-making processes – something they both readily acknowledged.

It may turn out that the particular value that economics adds does indeed lie more in analysing the behaviour of broadly self-interested individuals in markets (whether competitive or not) rather than trying to build models that factor in more complex human motivations.

Yet those who criticise the “dismal science” for assuming that we are all self-interested robots should at least acknowledge these efforts by some of the luminaries of the field.

And this work is also a useful rebuke to the charge that by analysing human behaviour as narrowly self-interested the economics profession is implicitly encouraging people to behave in that selfish way, that the axioms of classical economics have a “normative” impact on society. 

And in a sense this is a return to older ways of thinking. Seventeen years before he wrote The Wealth of Nations in 1776 Adam Smith produced The Theory of Moral Sentiments.

“How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortunes of others, and render their happiness necessary to him, though he derives nothing from it, except the pleasure of seeing it,” wrote the revered father of economics.

Some of Adam Smith’s successors, at least, are taking those insights seriously.

Two cheers for the Supreme Court

Gautam Bhatia in The Hindu

On the 4th of November, 1948, Dr. B.R. Ambedkar rose to address the Constituent Assembly, and proudly stated that “the... Constitution has adopted the individual as its unit”. On Tuesday, this constitutional vision, under siege for much of India’s journey as a democratic republic, came within a whisker of destruction at the hands of the Supreme Court. But when all the dust had cleared in Courtroom No. 1, it finally became evident that Chief Justice J.S. Khehar had been able to enlist only one other judge, out of a Bench of five, to support his novel proposition that the religious freedom under the Indian Constitution protected not just individual faith, but whole systems of “personal law”, spanning marriage, succession, and so on. This view would not only have immunised instantaneous triple talaq (talaq-e-biddat) from constitutional scrutiny, but would also — in the Chief Justice’s own words — have ensured that “it is not open for a court to accept an egalitarian approach, over a practice which constitutes an integral part of religion”.

Had the Chief Justice managed to persuade one other judge to sign on to his judgment, we would have found ourselves living under a Constitution that sanctions the complete submergence of the individual to the claims of her religious community. A reminder, perhaps, of how even the most basic constitutional values, often taken for granted, hang by nothing more than the most fragile of threads. But if the relegation of the Chief Justice’s argument to a legally irrelevant dissenting opinion narrowly averted disaster, the separate opinions of three judges invalidating the practice of talaq-e-biddat gave us something to cheer about — but not much. By a majority decision, instantaneous triple talaq is now invalid, a significant victory that is the result of many decades of struggle by the Muslim women’s movement for gender justice. That is something that must be welcomed. However, the value of a Supreme Court judgment lies not only in what it decides, but also in the possibilities and avenues that it opens for the future, for further progressive-oriented litigation. In that sense, the triple talaq verdict is a disappointment, because even the majority opinions proceeded along narrow pathways, and avoided addressing some crucial constitutional questions.

The majority

Justice Rohinton F. Nariman, writing for himself and Justice U.U. Lalit, held that the 1937 Muslim Personal Law (Shariat) Application Act had codified all Muslim personal law, including the practice of triple talaq. This brought it within the bounds of the Constitution. He then held that because talaq-e-biddat allowed unchecked power to Muslim husbands to divorce their wives, without any scope for reconciliation, it was “arbitrary”, and failed the test of Article 14 (equality before law) of the Constitution. The practice, therefore, was unconstitutional.

Justice Nariman’s reasoning, while technically faultless, avoided the elephant in the room that had been ever-present since the hearing began. Under our constitutional jurisprudence, codified personal law — that is, personal law that has been given a statutory form, such as the Hindu Marriage Act — is subject to the Constitution. However, uncodified personal law is exempted from constitutional scrutiny. In other words, the moment the state legislates on personal law practices, its actions can be tested under the Constitution, but if the state fails to act, then those very practices — which, for all relevant purposes, are recognised and enforced by courts as law — need not conform to the Constitution. This anomalous position, which had first been advanced by the Bombay High Court in a 1952 decision called Narasu Appa Mali, and has never seriously been challenged after that, has the effect of creating islands of “personal law” free from constitutional norms of equality, non-discrimination, and liberty.

By holding that the 1937 Act codified all Muslim personal law, Justice Nariman obviated the need for reconsidering this longstanding position, even as he doubted its correctness in a brief, illuminating paragraph. As a matter of constitutional adjudication and judicial discipline, he was undoubtedly right to do so. However, it is impossible to shake off the feeling that the court missed an excellent opportunity to review, and correct, one of its longstanding judicial errors. It seems trite to say that in our polity, there should not exist any constitutional black holes. The basic unit of the Constitution, as Ambedkar said, is the individual, and to privilege state-sanctioned community norms over individual rights negates that vision entirely.

In a separate opinion — which turned out to be the “swing vote” in this case — Justice Kurian Joseph did not go even that far. He simply held that talaq-e-biddat found no mention in the Koran, and was no part of Muslim personal law. Effectively, he decided the case on the ground that talaq-e-biddat was un-Islamic, instead of unconstitutional — begging the question whether secular courts should be adjudicating such questions in the first place. If Justice Nariman’s opinion was narrow and technical, Justice Joseph’s was narrow and theological. Therefore, in a case that involved, at its heart, issues of the intersection between personal law, the Constitution, and gender discrimination, there is no majority view on any of these topics.

The dissent

This brings us back to the dissent. Not only did the dissenting opinion privilege community claims over individual constitutional rights, it also conflated the freedom of religion with personal law, thereby advancing a position where religion could become the arbiter of individuals’ civil status and civil rights. Here again, it had been Ambedkar, extraordinarily prescient, who had warned the Constituent Assembly on the 2nd of December, 1948: “The religious conceptions in this country are so vast that they cover every aspect of life, from birth to death... if personal law is to be saved, I am sure... that in social matters we will come to a standstill. I do not think it is possible to accept a position of that sort. There is nothing extraordinary in saying that we ought to strive hereafter to limit the definition of religion in such a manner that we shall not extent beyond beliefs and rituals as may be connected with ceremonials which are essentially religious. It is not necessary that the sort of laws, for instance, laws relating to tenancy or laws relating to succession, should be governed by religion.”

Ultimately, what separates religious norms and personal law systems — and this includes all religions — from the laws of a democratic republic is the simple issue of consent. This is why the Chief Justice’s conflation of religious freedom and personal law was so profoundly misguided: because, in essence, he took a constitutional provision that had been designed to protect an individual, in her faith, from state interference, and extended it to protect a personal law system that claims authority from scriptures — scriptures whose norms are applied to individuals who had no say in creating them, and who have no say in modifying or rejecting them. The Muslim women challenging triple talaq invoked the Constitution because there was no equivalent within their personal law system; the Chief Justice would have denied not only them that possibility, but would have denied to every other individual, who felt oppressed and unequally treated by her religious community, for all time — and told them, as he did in this case: “Go to Parliament, but the Constitution has nothing for you.”

At the very least, the Majority judgments did not close that window. For that, we must say: two cheers to the Supreme Court.

Silicon Valley siphons our data like oil. But the deepest drilling has just begun

Ben Tarnoff in The Guardian


What if a cold drink cost more on a hot day?

Customers in the UK will soon find out. Recent reports suggest that three of the country’s largest supermarket chains are rolling out surge pricing in select stores. This means that prices will rise and fall over the course of the day in response to demand. Buying lunch at lunchtime will be like ordering an Uber at rush hour.

This may sound pretty drastic, but far more radical changes are on the horizon. About a week before that report, Amazon announced its $13.7bn purchase of Whole Foods. A company that has spent its whole life killing physical retailers now owns more than 460 stores in three countries.

Amazon isn’t abandoning online retail for brick-and-mortar. Rather, it’s planning to fuse the two. It’s going to digitize our daily lives in ways that make surge-pricing your groceries look primitive by comparison. It’s going to expand Silicon Valley’s surveillance-based business model into physical space, and make money from monitoring everything we do.

Silicon Valley is an extractive industry. Its resource isn’t oil or copper, but data. Companies harvest this data by observing as much of our online activity as they can. This activity might take the form of a Facebook like, a Google search, or even how long your mouse hovers in a particular part of your screen. Alone, these traces may not be particularly meaningful. By pairing them with those of millions of others, however, companies can discover patterns that help determine what kind of person you are – and what kind of things you might buy.

These patterns are highly profitable. Silicon Valley uses them to sell you products or to sell you to advertisers. But feeding the algorithms that produce these patterns requires a steady stream of data. And while that data is certainly abundant, it’s not infinite.

A hundred years ago, you could dig a hole in Texas and strike oil. Today, fossil fuel companies have to build drilling platforms many miles offshore. The tech industry faces a similar fate. Its wildcat days are over: most of the data that lies closest to the surface is already claimed. Together, Facebook and Google receive a staggering 76% of online advertising revenue in the United States.

An Amazon Go ‘smart’ store in Seattle. The company’s acquisition of Whole Foods signals a desire to fuse online surveillance with brick-and-mortar business. Photograph: Paul Gordon/Zuma Press / eyevine

To increase profits, Silicon Valley must extract more data. One method is to get people to spend more time online: build new apps, and make them as addictive as possible. Another is to get more people online. This is the motivation for Facebook’s Free Basics program, which provides a limited set of internet services for free in underdeveloped regions across the globe, in the hopes of harvesting data from the world’s poor.

But these approaches leave large reservoirs of data untapped. After all, we can only spend so much time online. Our laptops, tablets, smartphones, and wearables see a lot of our lives – but not quite everything. For Silicon Valley, however, anything less than total knowledge of its users represents lost revenue. Any unmonitored moment is a missed opportunity.

Amazon is going to show the industry how to monitor more moments: by making corporate surveillance as deeply embedded in our physical environment as it is in our virtual one. Silicon Valley already earns vast sums of money from watching what we do online. Soon it’ll earn even more money from watching what we do offline.

It’s easy to picture how this will work, because the technology already exists. Late last year, Amazon built a “smart” grocery store in Seattle. You don’t have to wait in a checkout line to buy something – you just grab it and walk out of the store. Sensors detect what items you pick up, and you’re charged when you leave.


Imagine if your supermarket watched you as closely as Facebook or Google

Amazon is keen to emphasize the customer benefits: nobody likes waiting in line to pay for groceries, or fumbling with one’s wallet at the register. But the same technology that automates away the checkout line will enable Amazon to track every move a customer makes.

Imagine if your supermarket watched you as closely as Facebook or Google does. It would know not only which items you bought, but how long you lingered in front of which products and your path through the store. This data holds valuable lessons about your personality and your preferences – lessons that Amazon will use to sell you more stuff, online and off.

Supermarkets aren’t the only places these ideas will be put into practice. Surveillance can transform any physical space into a data mine. And the most data-rich environment, the one that contains the densest concentration of insights into who you are, is your home.

That’s why Amazon has aggressively promoted the Echo, a small speaker that offers a Siri-like voice-activated assistant called Alexa. Alexa can tell you the weather, read you the news, make you a to-do list, and perform any number of other tasks. It is a very good listener. It faithfully records your interactions and transmits them back to Amazon for analysis. In fact, it may be recording not only your interactions, but absolutely everything.

Putting a listening device in your living room is an excellent way for Amazon to learn more about you. Another is conducting aerial surveillance of your house. In late July, Amazon obtained a patent for drones that spy on people’s homes as they make deliveries. An example included in Amazon’s patent filing is roof repair: the drone that drops a package on your doorstep might notice your roof is falling apart, and that observation could result in a recommendation for a repair service. Amazon is still testing its delivery drones. But if and when they start flying, it’s safe to assume they’ll be scraping data from the outside of our homes as diligently as the Echo does from the inside.

  Silicon Valley is an extractive industry. Its resource isn’t oil or copper, but data. And to increase profits, Silicon Valley must extract more. Photograph: Spencer Platt/Getty Images

Amazon is likely to face some resistance as it colonizes more of our lives. People may not love the idea of their supermarkets spying on them, or every square inch of their homes being fed to an algorithm. But one should never underestimate how rapidly norms can be readjusted when capital requires it.

A couple of decades ago, letting a company read your mail and observe your social interactions and track your location would strike many, if not most, as a breach of privacy. Today, these are standard, even banal, aspects of using the internet. It’s worth considering what further concessions will come to feel normal in the next 20 years, as Silicon Valley is forced to dig deeper into our lives for data.

Tech’s apologists will say that consumers can always opt out: if you object to a company’s practices, don’t use its services. But in our new era of monopoly capitalism, consumer choice is a meaningless concept. Companies like Google and Facebook and Amazon dominate the digital sphere – you can’t avoid them.

The only solution is political. As consumers we’re nearly powerless, but as citizens, we can demand more democratic control of our data. Data is a common good. We make it together, and we make it meaningful together, since useful patterns only emerge from collecting and analyzing large quantities of it.

No reasonable person would let the mining industry unilaterally decide how to extract and refine a resource, or where to build its mines. Yet somehow we let the tech industry make all these decisions and more, with practically no public oversight. A company that yanks copper out of an earth that belongs to everyone should be governed in everyone’s interest. So should a company that yanks data out of every crevice of our collective lives.

No alternative to austerity? That lie has now been nailed

Owen Jones in The Guardian

Ever since the banks plunged the western world into economic chaos, we have been told that only cuts offer economic salvation. When the Conservatives and the Lib Dems formed their austerity coalition in 2010, they told the electorate – in apocalyptic tones – that without George Osborne’s scalpel, Britain would go the way of Greece. The economically illiterate metaphor of a household budget was relentlessly deployed – you shouldn’t spend more if you’re personally in debt, so why should the nation? – to popularise an ideologically driven fallacy.

Greek debt crisis: ‘People can’t see any light at the end of any tunnel’



But now, thanks to Portugal, we know how flawed the austerity experiment enforced across Europe was. Portugal was one of the European nations hardest hit by the economic crisis. After a bailout by a troika including the International Monetary Fund, creditors demanded stringent austerity measures that were enthusiastically implemented by Lisbon’s then conservative government. Utilities were privatised, VAT raised, a surtax imposed on incomes, public sector pay and pensions slashed and benefits cut, and the working day was extended.

In a two-year period, education spending suffered a devastating 23% cut. Health services and social security suffered too. The human consequences were dire. Unemployment peaked at 17.5% in 2013; in 2012, there was a 41% jump in company bankruptcies; and poverty increased. All this was necessary to cure the overspending disease, went the logic.

At the end of 2015, this experiment came to an end. A new socialist government – with the support of more radical leftwing parties – assumed office. The prime minister, António Costa, pledged to “turn the page on austerity”: it had sent the country back three decades, he said. The government’s opponents predicted disaster – “voodoo economics”, they called it. Perhaps another bailout would be triggered, leading to recession and even steeper cuts.

There was a precedent, after all: Syriza had been elected in Greece just months earlier, and eurozone authorities were in no mood to allow this experiment to succeed. How could Portugal possibly avoid its own Greek tragedy?


In 2016 – a year after taking power – the government could boast of a 13% jump in corporate investment

The economic rationale of the new Portuguese government was clear. Cuts suppressed demand: for a genuine recovery, demand had to be boosted. The government pledged to increase the minimum wage, reverse regressive tax increases, return public sector wages and pensions to their pre-crisis levels – the salaries of many had plummeted by 30% – and reintroduce four cancelled public holidays. Social security for poorer families was increased, while a luxury charge was imposed on homes worth over €600,000 (£550,000).

The promised disaster did not materialise. By the autumn of 2016 – a year after taking power – the government could boast of sustained economic growth, and a 13% jump in corporate investment. And this year, figures showed the deficit had more than halved, to 2.1% – lower than at any time since the return of democracy four decades ago. Indeed, this is the first time Portugal has ever met eurozone fiscal rules. Meanwhile, the economy has now grown for 13 successive quarters.

During the years of cuts, charities warned of a “social emergency”. Now the Portuguese government can offer itself as a model to the rest of the continent. “Europe chose the line of austerity and had much worse results,” declared the economy minister Manuel Caldeira Cabral. “What we are showing is that with a policy that restitutes income to the people in a moderate way, people get more confidence and investment returns.”

Portugal has increased public investment, reduced the deficit, slashed unemployment and sustained economic growth. We were told this was impossible and, frankly, delusional. And so British workers endured the longest squeeze in wages since the 19th century, while the coalition did not even come close to meeting its commitment to eradicate the deficit by 2015. Why? In part, because low pay means workers paying less tax, receiving more in-work benefits, and spending less money. Portugal is increasing demand; the Tories suppressed it.

Portugal’s success is both inspiring and frustrating. All that human misery in Europe – and for what? What of Greece, where over half of young people languished in unemployment, where health services were decimated, where infant mortality and suicide increased? What of Spain, where hundreds of thousands were evicted from their homes? What of France, where economic insecurity fuelled the rise of the far right?

Portugal and Britain offer lessons for social democracy too. In the aftermath of the bankers’ crash, social democratic parties embraced austerity. The result? Political collapse. In Spain, support for the socialists fell from 44% to the low 20s as the radical left Podemos ate into their vote. In Greece, Pasok almost disappeared as a political force. In France, the Socialists achieved little over 6% in the first round of this year’s presidential elections. And in the Netherlands this year, the Labour party slumped from a quarter of the vote to less than 6%.

By contrast, the two social democratic parties that have broken with austerity – in Portugal and Britain – are now performing better than almost all their sister parties. Indeed, polls show Portugal’s Socialists now 10 points clear of the country’s rightwing party.

Europe’s austerity has been justified with the mantra “there is no alternative”, intended to push the population into submission: we have to be grownups, and live in the real world, after all.

Portugal offers a powerful rebuke. Europe’s left should use the Portuguese experience to reshape the European Union and bring austerity across the eurozone to a halt. In Britain, Labour can feel more emboldened in breaking with the Tories’ economic order.

Throughout Europe’s lost decade, millions of us held that there was indeed an alternative. Now we have the proof.