Friday, July 28, 2017

Organizational justice III

[This may be the third -and last, I swear- part of a paper to be submitted to a conference in the Jesuit University Ignatianum in Krakow w the same title, or may be not, depending on how happy I am with the final result… it is, however, an issue I have been wanting to tackle for some time now but had postponed so far to deal with lighter matters. You may find the first and second part here: OJ I and OJ II ]

In my previous post on this subject I sketched what a framework for justice within an organization may look like based on the Kantian twin precepts of:

a)       granting dignity and recognition to each individual (which implies seeing them as ends in themselves, and never using them as means for a certain end of ours that they have not willingly agreed to pursue themselves) and

b)      construing every decision as the application of a rule we could wish was universally followed

Although I concluded that an organization where everybody follows such precepts (what I called a “KoE organization”) is clearly preferable to a “utility maximizing” one for its members I introduced the possibility that it may not be so clear cut for other groups, be them consumers, stockholders or society in general. In this post I want to close the series extending the previous analysis to those wider groups, seeing if there is something we can conclude (regular readers of this blog surely know that reaching ultimate conclusions is not exactly one of its strongest selling points…)

To make the analysis as comprehensive as possible I will distinguish four groups of people with a legitimate interest in the organization’s operations:

·         employees (the people formally affiliated with the organization, the members, who typically receive payment from it in exchange from their work)

·         owners (the people that have advanced the capital required for the organization to start operating, in the expectation of receiving in exchange a percentage of the benefits it produces proportional to the capital each one has given). Note that the juridical personality of the owners can be very varied, ranging from stockholders (a wide set of individuals with limited liability, as they only risk a fixed amount of money) to partners (typically fewer, who may potentially risk all of their wealth) to other corporations (be they industrial conglomerates or financial institutions who do not actively participate in running the organization)

·         consumers (the rest of the society that can potentially buy what the organization produces, or at least be impacted by the way it operates -be it because it depletes some common good or it contributes to the common well-being)

To make the analysis more dynamic, I will also consider a fourth group:

·         potential employees (people that still does not belong to the organization, but may do so in the future if certain decisions are taken)

What I will do then is analyze how the framework we sketched deals with the potential conflicts of interest between the (current) employees and each one of the other groups, in opposition to what the economic (utility-maximizing) framework would dictate. I can advance that in most cases we will find that the utility-maximizing theory serves to perpetuate the existing relationships of production and systematically defends the interests of the owners over the employees, the employees over the consumers and the current employees over the potential ones, in ways that are very difficult to reconcile with any widely accepted definition of justice. It remains to be seen to what extent a Kantian (or contractualist, we will highlight some of its limitations) approach con overcome similar difficulties.

Employees vs. Owners

We don’t need to get all Galbraithian here (although coming back to the insights of good ol’ Kenneth is always a good thing) to remember how modern capitalism relies on a “caste” of people with a distinct, hard-to-acquire knowledge (what has been somewhat pompously called “management science” that, to be honest, isn’t that difficult to acquire to begin with) to run most businesses. That managerial class is what Galbraith termed a “technostructure”, and it tends to pay itself nicely leaving little to distribute in the form of benefit to the poor capitalists that originally risked their hard-earned money to get the concern going (never mind that with decreasing social mobility the savers with capital to spare have mostly inherited it, and are conforming a new rentier class not that different from the most famed one of the gilded age). Of course, in the eighties of the past century those cunning little capitalist had already developed a sure-fire way to align the interest of the leading managers with their own: link the reward of the top executives (in the form of bonuses and stock options) almost exclusively to their ability to increase the return of the money they had been entrusted with. Conveniently, that’s when the theory of Shareholder value as main (and almost only) metric of the success of a company was born (along with the theory of efficient markets, to provide a patina of legitimacy to such patently absurd construct).

I find it convenient to highlight that this particular conflict plays out with high frequency in the boardrooms of almost every company that has a board as supreme governing body. Every time the results go south or when the yearly salary review comes around it has to be decided how much will be taken from the employees (how many of them will be laid off or how little the total salaries will rise for the coming year) vs how much will the benefit be reduced or how much loss will be suffered by the capital owners. Only there isn’t usually much conflict, because nobody represents the employees in the boardroom (I know, I know, in Germany that’s not the case, but my German contacts luridly tell me how the worker’s representative can be easily bought, manipulated or outmaneuvered, so the dynamics in big German corporations are not that distinct from those of the rest of the world). And any CEO worth his salt knows just how many people he has to give the pink slip to have the analysts praise his resoluteness and have his share value recover from the most negative profit warning. You are going to sell a 25% less than what you had announced just a few quarters ago, and your planned 25 cents per share of benefit rather look like a 5 cent per hare loss? No biggie, lay off a few tens of thousands of workers and the share will probably stay put, or even recover a bit if the market is generally on an upward trajectory. Some astute observer may object that laying off a substantial percentage of the headcount may compromise the ability of the company to meet tis production targets, thus further endangering its very survival, to which I reply reminding my readers that the average corporation carries within its ranks a 20% (and that’s a conservative estimate) of bullshit positions, that add no value whatsoever to its bottom line. Any given company, from the biggest corporate behemoth to the slickest family firm can sustain a significant reduction of its workforce without losing much of its ability to deliver on its existing commitments, and to take on additional contracts.

So how does the dominating economic theory propose we deal with such type of conflict? On paper it is pretty easy: Each worker “deserves” to be paid as much as he contributes at the margin to the value of whatever it is his employer sells. If the last machining operator adds 20 $ per hour worked to the final product, 20$/ hour is what he should make. If, due to the law of diminishing returns, the next machining operator the company hires only adds 18 $ per hour then it would be fit and proper if all the machining operators already hired saw their salary reduced to 18 $/hour (the fact that such reductions rarely happen is a testament of the extraordinary generosity of modern corporations, for sure). Of course, such answer contains a double dose of baloney: first, there is no way a company knows how much each worker adds to the value of the product (believe me, I’ve designed enough analytic accounting systems to know, doesn’t matter what the GAAP says, doesn’t matter if it is ABC, Pareto costing, proportional allocation, rule of thumb or whatever, the process of determining how much value any given activity and any given position adds is rife with subjective allocations, hunches or right away creative obfuscation) and second, even if it knew, if in some ideal world there were unassailable rules (not subject to manipulation to favor the rich and powerful and better informed at the expense of the poor and weak and ignorant) to determine how the work of A compares with the work of B regarding how much they each contribute proportionally to the final price that may be demanded for their joint product, why should it be more just to pay A and B in the same proportion? There are a number of confounding factors that it may be equally just to have in consideration (A may need to devote much more time than B to complete his contribution, the work of A may be more physically or mentally demanding, A activity may be more hazardous, or injurious, etc.) To top it off, the abilities demanded to perform A’s and B’s work may be very different, and command a very different reward in the market. So, although the “differential value contribution” may sound nice, it is but a justification. The truth of the matter is that what I’ve termed the “economic approach” has no answer at all to the question of what is just to pay each worker (or how many workers should the company employ). What it has is the following rule: “use as few workers as you can get away with (given the work laws of the country) and pay them as little as possible (given what it would cost you to replace them with somebody with similar skills hired in the market) to maximize the profit of the company”. A pretty ugly rule when formulated that way, but I myself have been a relentless applier of it for my first fifteen years in business, and am still frequently called to keep on applying it and selling it to the ranks, so I know firsthand it is not as simple as “selfish and megalomaniacal executives throw workers under the bus every time the going gets tough”, as sometimes you either 

a) have no other choice or 

b) become very good at rationalizing and convincing yourself you have no other choice, although in fact you do…

So how would a contractualist, or Kantian approach look like instead? Let’s start with the owners: when someone chooses to finance a new operation they should clearly state what is the return they are aiming for (typically above the market average, depending on the risk level). Sadly, an investment in any enterprise beyond a purely commercial one (entered for a single or a at most a very limited number of transactions) may take years to come to fruition, years in which the market conditions will change, new competitors will enter the market, business cycles will effect their deleterious influence, technology will evolve and potentially disrupt existing practices, etc. Which means that God only knows what may happen with the targeted return, regardless of how good or bad the executives tasked with steering the company turn out to be. And it’s not like all investments are similarly liquid. If you own shares of a company (thus negotiated in a secondary market) you can always sell them if you are not happy with how said company is performing, but not all companies are publicly traded, and selling a stake in one that is not may be fraught with difficulties, and end up costing to more than erase any potential gain. Still, a clearly stated desired rate of return set as a target for the administrators is the only valid, just solution for clearing up that side of the equation.

What about the employees’ side? We face a similar difficulty, as you may be (indeed you should be) as transparent and straightforward as possible when negotiating each hire regarding not just salary and overall working conditions (overtime compensation, holidays, health coverage, safety measures, responsibilities) but also scope of professional advance and career prospects. People work not just for what you pay them today, but also for what they hope to get from it in five, ten, even twenty years (although given market dynamics it’s difficult to fathom what company can still offer some serious semblance of stability over such long term). When I left/ was kicked out my first job what really pissed me off was not that my employer was not honoring some short-term aspect of our contract, but how a whole long-term promise of what working there and committing to the kind of work-life (un)balance it required was being voided and trampled, not just for me but for all the employees that remained. I do know that companies have to adapt to changing market conditions, and that labor contracts can not be renegotiated continuously to reflect such changes, but I still think the twin obligations of any director are honoring the contract with the owners and honoring the contract with the employees, giving both similar weight. And at some point in time both will be largely verbal, implicit, based on a shared understanding and not subject to being claimed in a court of law. And of course one side (the owners) have the power of firing you, while the other has not (workers nowadays have really to be pressed crazily, and badly mistreated, before they may threat with collective action against their employer) so it is only human we give more weight to the interests of the former against the latter. Even then, the Kantian right thing to do is to strive to balance both.

Employees vs. Consumers

According to classic economic theory, there is no real conflict here: a company tries to sell as dear as it may (regardless of who reaps most of the benefits of the income they try to maximize) and its clients would pay as little as possible. That’s shown by the slope of the supply curve tilting upwards with price, whilst the demand curve tilts downward. Where both curves intersect we find the equilibrium price at which the market clears, and at that price everybody has as much of the product as makes them maximally happy: the consumers ideally derive as much marginal utility from consuming that precise amount of what the company produces as they would from any other combination of consumables (by definition, were that not the case, they would choose the alternative combination they more pleasurable, or more utility-maximizing), and the company uses its inputs with maximal efficiency, deriving from them as much income as possible given the technological possibilities of the age.

A very neat and nice construct (let’s forget for a moment there is no such thing as a continuous supply or demand function, as in most markets there are so many more variables that determine how many units would be sold as to render price almost immaterial) that allows us, as a society, to forget that old concept, so exhaustingly discussed for ages, of value. What is, in a market economy, the value of an item for sale (be it the hour of a strategic consultant, or a car, or a house or an epipen to self-inject a life-saving medicine in a moment of dire need)? Being blunt, who cares. Every one of those items has a measurable amount attached to it: its price. And the moment somebody is willing to pay such price, the question is settled, regardless of how much effort it took to put such item in the market, or any other scholastic nicety (the scarcity of capital or land, the marginal productivity of the factors required to produce it or whatnot) that people have resorted to in the old times to explain such price. What is actually paid is all there is to it when it comes to valuing any commodity offered in the market, and any alternative concept of “value” is but a metaphysical fiction. So there is not such a thing as a “just price” that may be calculated independently of what people pays for things, so it may conceivably deviate from the latter amount and thus may point to a “market failure”. By definition, the market has no failures.
Remember that old canard about “use value” and “exchange value” and how the difference between both allowed the evil capitalist to appropriate the excess work capacity of the proletarians, and grow rich exploiting their immiseration? That was Ol’ Karl talking nonsense (well, he was actually talking mostly nonsense, anyway, so you may be pardoned for not paying attention to this particular point). But we don’t need to resort to Marxist obfuscations based on a muddled understanding of Hegel’s dialectics to recognize the market may indeed fail to reflect in the price for which certain commodities exchange the whole loss of collective utility to produce and consume them, the difference between such real costs and what society can successfully pass to the producers normally being known as “externalities”. Such failure creates an unfair distribution of burdens and rewards, as the costs are borne by groups different from those obtaining the benefit of such production and consumption. 

The examples are well known, from the environmental degradation caused by polluting companies (a negative externality borne by consumers that breathe a worse quality air, or drink a less clean water, or simply enjoy some utterly spoiled landscape) to the commonly enjoyed benefits of security and rule of law not paid by tax avoiders (a positive externality that creates the problem of “free-riders” that profit from such shared goods without having to pay for them, leaving others with a higher price tag to pay).

Economic thinking doesn’t have much to say about externalities, other than they may be bad indeed, and the only way it prescribes to minimize them is to put a price on them, so they can be properly internalized and taken into account as normal costs by the producers. Those are the vaunted “market solutions” for many problems that besiege modern economies, from overfishing to climate change to healthcare to pollution. How do they work? Let’s say charitably It’s a decidedly mixed bag. Acid rain and the excessive content of Sulphur dioxide in the air due to coal plants has been quite successfully tackled in the West through cap & trade and taxing, but CO2 emission hasn’t. On the other hand side, the global population of whales in the Ocean seems to be slowly recovering, but surely no market solution here, just every country except Japan accepted to friggin’ stop killing the poor beasts, which constitutes as good an example as you may dream of of the virtues of plain ol’ government steppin’ in and mandating was what self-evidently good and just, markets be damned. Another example? the only country that stubbornly sticks to a supposedly market driven approach to providing health care to its citizens has an abysmal record, with skyrocketing expenses for very sub par results. 

I think the evidence points clearly and unequivocally in the direction that in certain areas there is no rational way to put a cost in the productive activity so its costs are fairly borne, and there simply is no alternative to regulation to protect the common goods. I myself formulated an utopian approach for all economic activity, which I dubbed the “zero footprint rule” (Good stewards of the Earth) stating that all and every degradation of the environment was a cost to be borne by future generations, so all and every economic activity should be required to leave said environment exactly as it encountered it when its activity started (meaning they should potentially contribute to a fund not only for cleaning their short-term, immediate activity, but also for 100% recycling of whatever they produce and for the replacement of whatever non-renewable resource they consumed).

What then about contractualism? Other than avoiding fraudulent advertising, what does it have to say about the legitimate distribution of burdens between the enterprising manufacturers and the passive consumers down the road. Well, it turns out that a load of things, because even if no contract can be signed between producer and consumer (or, even less, between producer and future potential consumers that may not have been born yet) there are a couple of concepts that should be taken into account. First one, what Habermas dubbed the “ideal communicative condition”, which in this case means that the producer should try to imagine itself in an ideal world where he has the same power as the consumer, both have access to the same information, are blessed with a similar discernment (so he can not hope to outwit his client) and both have an infinite amount of time to reach a voluntary agreement both could feel happy about. That provides a set of stringent, “strong” boundaries to what a company can do regarding its possible externalities, starting with openly recognizing them, and ending with giving the affected parties a say in how they value them when it comes to minimize their impact. Second, let’s remember that old deontological tool, the categorical imperative: Producers should act under rules they could wish universal. They can pollute the water to the extent they would be OK with everybody else similarly polluting the water they themselves would have access to, and then drinking it unfiltered. They can add toxic (but addictive) carcinogens to the cigarettes they produce if they were similarly OK with other people adding similarly toxic components to other products they consumed and hiding it (that is, IF they were truly rational in a deontological sense, there is no way Jose in God’s green Earth they would behave as they have factually been doing for decades… but hey! They weren’t acting deontologically at all, just plain’ ol’ utility maximizing, and according to venerable Milton that’s all that could be asked from them: Friedman's everlasting shame ).

So, kids, utility maximization doesn’t have a stellar track record regarding the internalization of externalities (doesn’t matter what economists of the Chicago school may want to tell you), whilst a Kantian approach (with some Habermasian sprinkling) may take you closer to a fairer, more just world. Let’s turn our eyes, finally, to the last potential conflict we identified at the outset.

Actual employees vs. potential ones

Including people that only exists theoretically in your moral calculations is always tricky, as Derek Parfit famously showed in Reasons and Persons (where he essentially defended that we can literally do no wrong to future generations, as doing anything differently would imply they would not be born in the first place -other, different people would- so whatever shitty world we bequeathed them, such shittiness would be a necessary condition for them coming into existence, so it could only be seen as a net positive provided their life was at least barely livable, that is, barely better than not being born at all). We have seen that utilitarianism (or marginal economic reasoning) gives us a lot of latitude to engineer organizations that are less just than what deontology would allow us, both for their members and for society in general. But what if we extend the scope of our concerns to those people that do not belong yet to the organization, but may end up doing so (and profiting from such belonging) if it were more economically efficient, and guided itself by profit maximization (and rewarded its members by equalizing such reward with their contribution at the margins, however difficult it may be to calculate it)? May we find that the greater injustice  within the organization (in the form of the extra exploitation of its workers it condones) and within the wider society (in the form of greater externalities it allows) can be somehow compensated by the extra employment opportunities it provides, bringing more people into its beneficent (or not so beneficent, but let us leave that aside for a moment) fold?

Such consideration has historically been behind the discussion of the overall benefit of minimum wage laws: economists of a libertarian bend tend to disparage such laws, saying that “artificially” rising wages (by legislative fiat) depresses employment, as companies hire less people than what they would choose to do in a “free” market situation. For an example of such disparaging, see Tyler Cowen: Minumum wage is evil and his co-blogger at MR Alex Tabarrok: And awful and And the absolute worst. For Scott Sumner, the fact that higher wages cause fewer people to be employed was “one of the few certainties in economics” (and those few were already precious, if we want to take seriously Economics claim to be a “science”), that’s him comparing his musical chairs model with Keynes’ (or at least with Keynes’ first 50 pages of the General Theory: Money Illusion charitably reading (part of) the GM.  On the other hand side, economists of a non-libertarian persuasion (and that may well be the majority of the profession, from Neo-Keynesians to more statist bent) tend to minimize the impact of such laws, and to highlight the social benefits of people earning a “living wage” that, complemented by generous state aid if needs be, allow every worker (regardless of level of qualification) entirely participate in the benefits of shared socio-economic life (something that earning less than 8 $/hour makes damn hard, especially if hired on a temporary basis).  Recently, two studies analyzing the impact of Seattle rising it’s minimum wage to 15 $/hour and reaching opposing conclusions (one, from UCB, found little impact on employment level, whilst another one from WSU found a significant impact, a good summary of the difference and potential origin of the differing interpretations can be found at the NYT: Is the minimum wage in Seattle good or bad for employment?)

It has to be noted that the contractualist framework we have used as a counterbalance to the prescriptions of what we may term “crass utilitarianism” (as I readily confess I’m “slightly” strawmanning here to make my case more clearly) seems to fail us in this case. You can not “give voice” or “out yourself in the shoes of” people that doesn’t actually exist, being only potential. You can not imagine an “ideal communication situation” where the other part can be any of your countrymen, or even as yet unborn generic human beings. Deontology and contractualism require an actually existing other whose actual concerns and preferences can be duly taken into account.

In this later type of conflict, then, I will not resort to the superiority of the deontological ethical position, but on a three pronged approach, based on three observations about how our society works:

·         If instead of every potential worker that may find employment at a given wage level we fix our gaze in society as a whole, it seems evident that the lower the wage the less attracted new cohorts of workers seem to we towards paid occupation. That observation seems to be confirmed by the low participation rate in the economy where (overall) minimum wage regulations seem to be laxer, or have stopped decades ago updating them with the rate of inflation, and thus stand today with minimum wages stuck as a smaller percentage of the median salary (the USA, which now shows one of the lowest participation rates of the advanced economies). So paying shitty wages may seem a good idea in each individual organization that does it (it may provide employment to more people, which at first blush seems a net positive) but end up hurting the whole of society as it discourages more people from seeking work in the first place (I admit this argument is tentative, and a lot of additional research should be conducted to test its robustness)

·         An economy in which companies are allowed to pay peanuts to their less qualified employees may indeed have a higher aggregate employment level (again, it may not, as hinted in the previous point) and even produce more goods and services (translate that higher employment level – which means it uses more intensively one factor of production, labor- into a higher aggregate supply). But that doesn’t mean that their citizens end up deriving more utility of such state of things. That in our opulent societies we may have reached a limit to the amount of things we value consuming, and that may in turn explain the low productivity gains in most advanced economies was recently pointed to me by this interesting article: (What if we grow less because we want?) whose implications I will probably develop in more detail in a further post.

·         Finally, we shouldn’t forget that each organization’s decision (about salary and production levels) are taken in the context of a certain dominant reason which dictates what both employers and employees should understand as a life well lived, what desires they are allowed to act upon in the pursuit of such life, and how they should defer to each other when acting on those desires. The utility-maximizing mindset is, in this context, part and parcel of the dominant reason of our times (desiderative reason), and the outcomes of such mindset are inseparable from the more encompassing consequences of such reason (something Daron Acemoglu recently recognized in one of his latest posts: We need to grow because... growth! -he calls it “commodification and the insatiability of needs”, but recognizes previously that such commodification is based on setting the social hierarchy on the amount of goods each individual can command)

So for a society that accepts the tenets of desiderative reason (grading people based only on what they earn, and teaching them to value only what translates into a better grade) it may be that the conflict between exiting workers and potential ones can indeed be solved along utility-maximizing lines, and the it is indeed better to pay each member as little as possible because then there can be more of them.

But I hope I have sufficiently argue that we shouldn’t resign ourselves to live forever in such a society (I do recognize it is undeniable that we do live under such one now). And what I say regarding the resolution of the conflict between current employees and potential ones can be extended to the previous two (between employees and owners and between employees and consumers). Both can be solved appealing to utility-maximization rules, and in both cases the solution fits with the overall framework for organizing social relations we collectively adopted in the second half of last century (desiderative reason). Not only fits, but they necessitate each other: desiderative reason needs a way of organizing society (a set of rules within organizations) that steer everybody to produce as much as humanly possible (and then some), rewarding each individual in strict proportion to their contribution (regardless of how “deserved” his ability to contribute is in the first place) and punishing them for any perceived defect (the biggest defect being any inability to actively produce and participate in the system of social signaling that determines everybody’s position in the social hierarchy). Such way of organizing society needs a conceptual framework that legitimizes its rules and makes them acceptable to the many, regardless of how unfair it is in allocating the social product.

As a final aside, I’ll remind my readers that the original justification for accepting Desiderative Reason (“a life well lived is a life in which the maximum number of desires are satisfied or, which is the same, a life in which a maximum balance of pleasure over pain is achieved”) is 

a) inconsistent (pursuing such kind of happiness in the end is detrimental to achieving it) and 

b) unfair (at the end of the day, and after a couple decades of widely shared growth, a tiny minority has seen their ability to satisfy more desires enhanced to unprecedented levels whilst the vast majority has seen their desires grow, but their ability to actually satisfy them stagnate or even decrease -in the West, I know the story in the undeveloped world has been very different). 

But, and I’ve said this a million times already, dominant reasons do not evolve because they are “good” for the societies that adopt them, or because they make their members happier. They evolve because they become better at crushing (either by forcing imitation or by outright military annihilation) the competition.

Which, as I stated at the beginning, has very little to do with justice… 

Wednesday, July 19, 2017

Tired of winning, already? (to my American friends, with love)

Like with so many subjects, the Clash said it better (and shorter, and louder) forty years ago: ”I’m so bored of the USA”.

I know, I know, they are still the “indispensable nation”, an economic giant (their economy alternates as the world’s second biggest with the whole EU, which is not technically a country, both being already smaller than China), its military might far bigger than all the rest of the world combined, a cultural beacon shining its rays over all aspects of the life of the mind (from academic philosophy, whatever that is, to popular music and films) and of course an exemplar for the ages of what inclusive government (“of the people, by the people, for the people”, in the unforgettable words which close Lincoln’s Gettysburg Address) should look like.

Only what it actually looks like nowadays seems to have lost some of its luster… and from the inability to properly govern itself a lot of noticeable cracks are becoming more noticeable, like:  

·         An economy that not only finds it more difficult to achieve past rates of growth, and seems every decade more stagnant than the previous one (a recurrent theme of this blog, and not confined to the USA), but that is becoming more blatantly unequal and has serious problems distributing the wealth it still manages to create (and that stupendous growth of inequality is what would constitute a distinctly American phenomenon: Europe outperforms the USA economically )

·         No noticeable cracks in the military front, except for why on God’s green Earth do you, guys, spend so God damn much in it, given the rest of the world doesn’t really care? It’s all right to claim that Europeans have been free riding for decades under Washington nuclear umbrella and they should spend more to defend themselves (but from who? From the evil Russians, who in 20 years will be less populous than Vietnam and haven’t been able to bring to heel tiny Ukraine in five years of low intensity war? From the threatening Muslim and Sub-Saharan nations to the South that would rather migrate than invade, because their citizens emphatically do not want to live under their current social arrangement?). It’s all right to get your pants in a bunch about the increasing assertiveness of a rising China, but if after 16 years you still have not been able to pacify Afghanistan (or whatever you were trying to achieve there) maybe it is time to reassess if more aircraft carriers (price tag: 13 billion USD) or more F-35 jets (a real bargain in comparison, only 100 to 150 million USD a pop, depending on how many are finally manufactured) are really needed to combat today’s real threats (as opposed to those envisioned by military planners three decades ago)

·         A culture that seems to cannibalize itself in an endless repetition of trends and mods that stopped being original in the late 60’s of the past century. Look, I love classic Rock’n’Roll as much as the next guy (and my share of Country, too, and I unashamedly declare myself an avid fan of the Star Wars saga, so don’t take the following as preaching from my high horse or trying to claim some extra legitimacy from being the most highfalutin’ guy you’ve ever heard). Thomas Pynchon is still my go-to fiction writer, and I find John Rawls one of the deepest thinkers of the XXth century. Norman Mailer was absolutely tremendous (more at the beginning of his career than at the end), Saul Bellow, Philip Roth, John Updike… they all taught me profound and subtle and… TRUE things about human nature in this particular time of our history. European thinkers like Hannah Arendt, Theodor Adorno, Max Horkheimer or Herbert Marcuse produced some of their best work there and even Derek Parfit visited frequently and benefited from discussion with local scholars. And, although I haven’t seen a full TV show (not even a complete episode) for decades, I hear that this is the golden age of television and that the amount of creativity and brilliance and genius in exploring the nuances and follies of the human heart have reached heights never heard of in the history of our species. Which is all great and good, but kids go less and less to the movies (another cultural form traditionally dominated by Hollywood) and watch less TV, preferring to spend time in social media (yep, I know Facebook and Instagram are both based in the USA) and playing videogames (an industry that is geographically highly dispersed). Let us leave it at the point we can all agree: cultural dominance, understood in the traditional sense of “soft power” (the ability to promote one’s own values and tastes) is increasingly slipping away from the USA.

But of course all those cracks are being exposed, deepened, accelerated and highlighted because of the rot at the core of the American social system: a political process that seems to be dramatically out of whack, as exemplified by the election of a person with the most “questionable” character (more on that in a minute) and, derived from that, in the inability of both elected chambers to agree on basic, necessary measures for the smooth functioning of the republic. Things like a Healthcare structure that doesn’t leave a significant fragment of the population frothing at the mouth (“socialized medicine!”, “death panels!”, “tax cuts for the rich in exchange for people being let die in ERs!”), increasing the debt’s ceiling so government can keep on working, simplifying a tax code everybody agrees has become dysfunctional and of gargantuan complexity or approving a budget that deals with the ballooning federal deficit in light of the upcoming massive increase in retirements of the baby-boomers.

Please note with the above enumeration I’m not saying the USA is in a particularly dire situation or in much worse shape than the rest of the world. Any regular reader of this blog already knows I tend to disparage the whole West in similar terms, and there isn’t a single nation or group of nations I would identify as distinctly virtuous or as being in a position to give moral lessons to the rest. The whole world already embraced the dominant reason of the age (Desiderative Reason) during the second half of the last century. Such reason is “exhausted”, meaning that it can not awake the enthusiasm of the masses, or gain its allegiance, or simply convince them to trundle along however unhappily. As a result, growing majorities reject it and express their dissatisfaction through the most intimate way such expression of their lack of identification with the collective future such reason dictates may take: what I have termed “gonadal vote”, choosing not to reproduce a form of life that at bottom they find not worth it. Furthermore, and in addition to not reproducing themselves they may reject each of the particular tenets of desiderative reason by not accepting the socially defined rules for determining social hierarchy (thus resorting to the biological default mode of such determination: strength and charisma in a new tribalism/ feudalism we already see becoming more prevalent in the economic realm) and by not accepting the socially determined set of sanctioned, “proper” desires (the alternative always being perceived by the majority of the social group as self-destructive and anti-social).

Again, par for the course, and as long as somebody doesn’t come along with a valid alternative (one that can be enthusiastically accepted by a sufficient majority as providing a better basis for collectively living) all we critical thinkers will be able to do is criticize this or that particular aspect of our dying, decaying, decomposing, increasingly clunky and malfunctioning system. Back to my dear and near USA, then, as it presents a particular form of decadence and decomposition I think it is worth noting.

Which will take me to a brief detour through my latest research in a particularly dark age of my native country: the years between 1930 and 1939 in Spain, the decade just before the Spanish Civil war (in which my grandparents were caught, and immediately after which my parents were born). The sad, worrisome aspect of those years is how people were studiously but inadvertently sorting themselves in two camps that were becoming more and more “irreconcilable”.  To facilitate the sorting and identification each half of the country felt the need to embrace a set of opinions and external signs that unceasingly became more encompassing. In the early thirties you could be politically progressive but still religious, a lover of traditional music and foods and maybe even enjoy bullfighting. By the middle of the decade it was getting harder to be “moderately progressive” in politics, as even the supposedly moderate socialist party (as opposed to communists and anarchists) was for the nationalization of the means of production and a quite interventionist program in the economy, education and organization of the workplace. But regardless of politics and its preferred orientation of the economy, a host of other aspects of being a citizen were being colonized by the political orientation: a “progressive” (a term not much in use then, for what I’ve seen, they would think of themselves as people “of the left”) should necessarily denounce the inherently reactionary character of religion, the constraints to human flourishing imposed by any tradition and thus reject traditional songs, cuisine, dressing and forms of entertainment (including, of course, bullfighting). That created some cognitive dissonances, as the popular base of many leftist parties was not as well educated as to thoroughly enjoy modern culture, but let’s leave that aside for a moment. The mirror image of such phenomenon could be seen at the other extreme of the political spectrum, as followers of “the right” had to necessarily embrace the Catholic faith, and every other traditional form of being in the social world, while denouncing vigorously any innovation as contrarian to the national spirit (in their parlance, “national genius, bequeathed to us by the blood and the sweat of our hallowed ancestors”).

Seen from the perspective of almost eighty years it is clear that in both sides there should have been scores of people of honor and integrity, of common sense and decency, but one of the amazing results of my diving in the period is how little trace they have left. What you read (and occasionally hear in the radio addresses that have survived) is more and more rancor, more and more depictions of the other side as a conglomerate of pure viciousness and pure evil, more and more cartoonish misrepresentations of what the other side thought and said. No discourse of them was less than a bunch of hideous lies and irrational threats. No program was less than an all-out, uncompromising effort to erase the own side from the face of the Earth that, if put in practice, represented an existential threat to every decent man’s and his family’s existence. And as each side ended up reading the same (disjoint) set of newspapers, hearing the same radio programs (no TV yet) and talking to like-minded fellow travelers, all seemed to reinforce one another’s worse fears, all contributed to exacerbate one another’s basest impulses until they were actually killing each other, starting with some elected representatives and escalating in a bloodbath from which the country, almost a century later, has not fully recovered (as attested by the never ending trickle of books and films that still deal with the conflict, the majority of them in such a partisan manner that it is difficult to believe they are attempting to reflect such a distant event).

¿Sounds familiar? As well it should, because any casual observer of USA politics should recognize the dynamics just described as not too dissimilar from the one currently ruling the political discourse in their country. First, the never ending expansion of the badges of belonging to a definite tribe: if liberals say the world is warming and human activity is a main cause, any self-respecting conservative will denounce it as a hoax. If left-leaning media say the theory of evolution is the cornerstone of all the biological science any proud right-leaning citizen will educate himself to find the cracks and faults in the theory to “disprove” it. If progressives favor cosmopolitanism and the adoption of foreign tastes in music, clothing, literature, movies, food or even sexual preferences any traditionalist properly bred will reject such tastes and adhere to the good old cultural forms of the hallowed 50’s of the past century. And, of course, as liberals, left-leaning people and progressives cluster together and end up forming a homogeneous, internally consistent tribe, so will conservatives, right-leaning people and traditionalists, each group having more widely encompassing norms and behaviors to better identify themselves and exclude the others.

Second, the two major tribes are sorting themselves out and having decreasing contacts between them. Without a compulsory military service (the draft) and an increasing ideological alignment within professional occupations (so university professors, movie industry executives, hotel workers and software programmers increasingly vote Democrat; whilst military personnel, rust belt industry workers, investment banking analysts and policemen lean more heavily towards the Republicans), and the advent of e-commerce allowing each citizen to obtain the necessities of life without human interaction,  it is more and more common for Americans to spend their whole lives without having to interact with anybody from a different political persuasion (which, as we have seen, encompasses more and more of their vital outlook).

As a necessary consequence of the first and second observations, it comes as no surprise a third one: each half of the country thinks in increasingly more disparaging terms of the other half. What you hear in Fox news (but again, it would be an error to think that it is a problem circumscribed to just one of the sides, the same happens in Salon, the Daily Kos, the Huffington Post…) about “libtards” is just shocking. How can such a bunch of unprincipled, unpatriotic, overall silly and amoral and depraved bunch of degenerates hold such sway over public opinion (the maligned “mainstream media”) and be so close to forever ruining the shining “city on a hill” that the forefathers so arduously built by turning it into a communist dystopia? Seen from the other side of the aisle, how can a cabal of greedy, selfish, scheming billionaires have so utterly brainwashed enough of their fellow citizens to be so close of thwarting the promise of the republic and turning it into a fascist dictatorship? Seen from afar, I see America as distinctly far from becoming either, but when I read some of its media I wonder to what extent my perception may be deluded.

What I do see, as I’ve already predicted (Whoever wins tomorrow, everything is going to hell! ), is them advancing at increasing speed along the slippery slope of dehumanizing the political adversary ,with too many people already caught in that poisonous dynamic. We know how that game ends (not only Spain has the blemish of a Civil War in its history, you know), what we do not know is, alas! how such dire consequence may be prevented. 

Friday, July 7, 2017

Organizational justice II

[This may be the second part of a paper to be submitted to a conference in the Jesuit University Ignatianum in Krakow w the same title, or may be not, depending on how happy I am with the final result… it is, however, an issue I have been wanting to tackle for some time now but had postponed so far to deal with lighter matters. You may find the first part here: Part I ]

In my previous post on this subject I made a first attempt to define justice as a set of rules to determine how the benefits accruing from being part of an organization should be distributed between its members, and failed miserably. The conclusion I reached is that there is not, and there can not be, such a set of rules. The dominant reason of our time has tried to convince us that such rules do indeed exist, and are based on giving to each as much as he adds to the value of each additional unit produced (equalization of the marginal cost of the factor -in this case the salary of the employees- with the marginal price of the product, at a production level defined by the intersection of the demand and supply curve), but looking more closely “under the hood” we find there is no such thing as a supply curve, a demand curve, a marginal cost of production for each factor (be it capital, raw materials, land or labor) or even a marginal price. So in practice we are left with the old dictum the Athenians addressed to the Melians: “the strong do what they can (or what they please) and the weak suffer what they must”. The executives set the salaries as they please, and the workers accept it as they must, or go search for employment elsewhere (knowing that each departure lowers their employability and thus forces them to accept positions at a lower pay grade).

As an aside, it is difficult to escape the conclusion that such kind of reasoning (that appeared in Northern Europe around 1750, displacing baroque reason and substituting it with the new aptly named economic reason) triumphed precisely because it spared the new ascendant class (industrial bourgeoisie) to have to think “ethically” in terms of reciprocity and equal dignity between them and their salaried employees, replacing the weight of tradition (that had taken shape to ensure since prehistoric times that the non-land-owning masses could reproduce and continue indefinitely helping their masters thrive by ensuring a “living wage” for them before the concept of a market-defined wage could even exist) with an apparently impersonal, seemingly legitimate, alternative method for determining how to calculate what every worker was due. Unsurprisingly, it turned out workers in the then new industrial occupations were due much less than their forebears in the fields, but that were expected just as much to be laborious, frugal, conscientious and, above all, able to keep on having kids to ensure there would be a “replacement army” ready to take their places when they died from exhaustion and insalubrious working conditions.

In summary, the application of “economic” principles to determine the shape of distributive justice within the organization will never be able to achieve a truly fair outcome, because it was (an unexpected stroke of the “genius of History”, as nobody really intended it or planned consciously for it) designed from the beginning to favor one set of citizens (the owners of the means of production, as rusty Marxist as it may sound nowadays) over all the rest.

What are we to do, then? Recognize that modern economic organizations will never be fair or equitable or just, and propose a withdrawal into an alternative spiritual realm separate from the unavoidable materialism and the worldly concerns of capitalism? That would be the “Benedict option” as proposed by Rod Dreher, but I’m not ready to concede that’s the only viable option to live a just life yet. Because, as I mentioned in the first post on this series (yep, this one may still not be enough, so I may end up giving the subject the full series treatment), there is another alternative we have to explore first, which will lead us away from the concept of “rules for distribution” and towards one of “rules for living (or just working) together”.  And, as I intimated there, I suggest we take our lead from Kant to get there.

I will start by reminding my distracted readers that Kant seats at an interestingly unique point in the history of Western thought (recent witness of something that has only happened twice in the last twenty five centuries). The wars of religion that ravaged Europe in the XVIIth and XVIIIth centuries had debilitated the authority and plausibility of revelation, and created and opening for that most exceptional event: the substitution of the keystone of Dominant Reason: the definition of what a life well lived consists in. It is indeed before Kant’s birth when life stops being primarily a matter of preparing oneself for a future and perennial hereafter, and starts being a matter of satisfying as many desires as possible, or (another alternative and identical formulation) of achieving the best possible balance between pleasure and pain decidedly here, in this world. I won’t dwell much in how such change took place (just a callout to the most salient thinkers that shaped the new sensibility which was the precondition for the wholesale acceptance of the new dominant reason: Spinoza, who dared to point out the multiple inconsistencies and morally dubious events narrated in the Hebrew Bible -that was the “authority-debilitating” hard lifting-; Shaftesbury and Hutcheson, who translated for the English speaking world a moral philosophy owing more to the Classical Hellenistic and Stoic thinkers than to the Church fathers; and of course, Hume, who worked out a philosophical anthropology in which only the pursuit of desires could serve as  a valid explanation of behavior, developments I’ve already narrated in History of Western Dominant Reason I and History of Western Dominant Reason II ). Being a clever guy, Kant had already noticed that previous attempts to base morality (the appraisal of the goodness or badness of human actions) in how conductive any given behavior was to a greater or lesser degree of happiness were doomed to fail, for the same reason we already identified as dooming any attempt to base a criterion for organizational justice in rules of distribution: the pleasure (or pain) that each individual derives from a certain state-of-the-world is strictly incommensurable, not only between individuals, but between different moments in the life of each single individual: there is no universally valid answer to “what is preferable, that I raise my salary so I can buy an additional Ferrari, or that I raise yours so each fifty of you can buy and additional loaf of bread?” (regardless of how strongly we may feel that only one answer is morally acceptable, the Ferrari-loving bosses of the world have ultimately succeeded in convincing us, through three centuries of tireless economic thinking, that it is far from a settled matter). There isn’t even a universally valid answer to the question “what is preferable, that I enjoy an additional glass of wine now that I am young and healthy, or that I abstain and thus enjoy a slightly milder and more wholesome old age, when I will be more weak and infirm no matter what?”  

Having been awakened of his “dogmatic slumber” (a very famous sentence penned by himself that has become a hopelessly worn-out commonplace, but the more I think about it the less sense am I able to make of it) by none other than Hume, Kant then started from the premise that a rule for the distribution of goods (or services) could never form an adequate basis for regulating the relationships between men, no matter how apparently impersonal (and thus “impartial” in some objective sense) it were. All that Hume wanted with the appeal to such rule was a justification of the then forming system of production (early capitalism) based on strong property rights (indeed, all the chapters on justice within the Treatise on Human Nature just deal with the need to respect validly formed and socially sanctioned property rights, regardless of how such property was acquired at the dawn of society). Hume himself knew that a society purely based on the pursuit of ever increased material goods bounded only by the respect of private property wouldn’t go very far, as countless coordination problems would arise for which no solution would be available within such purely egoistic framework (in more recent days people like Deirdre McCloskey have tried to resurrect the idea that respect for property rights and admiration for those that enjoy great amounts of them is almost exclusively all that is needed for a well-ordered, well-functioning society, in what constitutes one of the purest, most unadulterated defenses of our current form of dominant reason… the fact that the people under such reason is deciding in growing numbers not to perpetuate it should give us pause as to how unquestionably good and not amenable of being improved upon it really is). Hume’s solution was to add another principle to his understanding of man, that of sympathy for our fellow beings, that should ensure that we do not let our unbridled selfish interest conflict too much with that of the rest of our countrymen, allowing for some mutual concession and thus the potential resolution of such coordination problems.

But the appeal to sympathy can clearly be seen not to be up to the task, as sympathy is too elastic a principle, too amenable to being applied in degrees to be able to solve what we may term the “Ferrari problem” (even if I have all the sympathy of the world for the workers in the factory I own, I may consider they are already well-fed enough, and I really, REALLY, would enjoy that new Ferrari a lot, damn it!), which stands for every distributional justice problem we may think of. Remember that at bottom, our criticism of economic rules (be they classical or marginalist) rests on the premise that there is no such thing as a valid “utility” (being logically coherent, as in stable in time, transitive and commensurable between different individuals) that we could use to compare the moral worth of different potential outcomes (or of alternative distributions). If you substitute “feelings” or “emotions” for “utility” you should immediately be able to see what Kant saw: that Hume’s proposal for morally conducting ourselves (which we could cartoonishly summarize as “respect private property and be somewhat sympathetic to your fellow humans” -at least it clearly beats that of the Mongols: “if the city surrenders kill only adult males and rape all the women, if they resist kill everybody (after the raping, that is)”-) was a dead end, increasingly invalid for the needs of a growingly complex society.

His genius was abandoning the distributive framework altogether (he overcome it by transcending it, by casting a wider net), and instead of focusing on what rules should there be so everybody receives what they are due he decided to focus on a wider set: what rules should there be so everybody is treated fairly in every interaction, not just when the pay day comes around. He also identified (successfully, in my humble opinion) the biggest obstacle to acting morally (and another reason why any attempt to base behavior on feelings should fail to achieve fair outcomes): we humans are a selfish lot, regardless of how sympathetic we consider ourselves (or we teach ourselves) to be. In another worn-out commonplace of his: “from the crooked timber of humanity never straight ever came out”. We rest satisfied with giving little and taking a lot. Our true motives many times elude us, and rest hidden even from ourselves. Even when we feel we are being virtuous and upright, we may be acting mean and unjustly.

You may disagree with Kant’s philosophical anthropology, and highlight instead how evolution has made us a social being, prone to cooperation (but a rather particular sort of cooperation, that based on expected reciprocation, and we have as many evolved mechanisms to detect potential defectors and non-reciprocators and punish them as we have to offer tentatively to collaborate with strangers). His greatness comes from seeing that a truly moral system could not rest on the expectation of goodness (or lack thereof) from others. We had to be good, even in a world populated by devils. We had to be kind and helping and nurturing towards others absolutely, not because they deserved it, not because we expected them to reciprocate, but because they, being rational, had an unconditional dignity that demands it. Note that I’ve said “demands”, not “earns or may earn”, not “can give it in exchange”, not “merits”. Even the dumbest, less cultivated, laziest and even crookedest human being, just for being human (and thus having at least the potential of being rational, even if that potential is not entirely fulfilled) has dignity and has to be given certain rights and certain recognition. He then may, freely, do bad deeds that deserve to be punished, and thus have some of his rights abrogated.

The second element of genius in Kant’s thought is seeing that emotion (in XVIIIth parlance it would be more correct to speak of “passions”) is not a reliable guide to good behavior. He overturns Hume’s arch-famous dictum that “reason is, and can only be, a slave to the passions” and proposes we go back to the Greek ideal of understanding reason as the charioteer that drives the chariot pulled, it is true, by desire and passion (epithymetikon and thymos, I know the choice of modern terms may be contested). And to counter Hume’s argument that reason is toothless, that it can never move us to act (an argument based on an understanding of reason as the ability to “compare propositions regarding the number and qualities of what we perceive”) he resorts to an intuition that ends up being (again, in my most humble opinion) stranger than the Scot’s objection: reason may be just the ability to compare propositions (or whatever other combination of mental acts), but it results in the ability of choosing different courses of action, as attested by the perception every one of us has of having a free will. That free will, however mysterious may be, is only understandable if we can present our own actions to ourselves as particular instances, or applications to particular circumstances, of general rules. Being truly free, then, is the same as acting in accord with true reason, and consists in following those rules that we have chosen ourselves to follow (that we have autonomously legislated for ourselves, to which we have decided to bind ourselves). It is now evident why Kant’s anthropology is not only incompatible with Hume’s, but its exact opposite: no place here for passions (“Sympathetic”, prosocial or otherwise) and no need to postulate a highly suspect universal “taste” (a word too socially caused and too variable between different societies to carry all the philosophical water that Hume asks it to carry) to explain how we manage to praise and condemn the same behaviors. Being free and acting reasonably are two sides of the same coin, that, if pursued consistently, would lead us to collectively build a “kingdom of ends” (Reich der Zwëcke) where those deserving to be happy would, indeed, be happy (something we can not count on happening in this Earth, because of the “crooked timber” problem we already mentioned).   

And indeed that “kingdom of ends” is a much better model for a just organization than the imagined set of selfish “optimizators” that try to maximize the amount of goods they receive under some distributional rule or other (“rules” not in the Kantian sense of “maxims” that guide our conduct, but of comparisons between heterogeneous and discontinuous quantities, like “marginal cost” and “marginal value” that purport to determine the ratio of exchange between them), sprinkled with varying (and impossible to measure) amounts of sympathy that the economic model proposes. In the “kingdom of ends” (from now on KoE) we treat each member of the organization as we ourselves would like to be treated, so there goes the Ferrari problem. We ensure certain inalienable rights are respected, and we clearly delineate the duties that come with those rights. We use people as ends in themselves, and never as means (2nd formulation of the Categorical Imperative). 

I dare to postulate as a universal rule that anybody in his right mind would prefer to work in a KoE organization rather than in an economic organization (expect those that would be assured to be in leadership positions with an inordinate fondness for Ferraris, who may prefer the economic alternative… we may question, however, to what extent such profile is compatible with the common definition of “being in his right mind”). However, that postulate does not allow us to consider the case closed, as it only reflects the interest of a portion of the stakeholders of any organization (namely, the employees). What if economic organizations are more efficient, and thus the whole of society (consumers, future generations) is better served by them? What if economic organizations can consistently generate higher returns on investment, and thus the owners of the invested capital are better served by them? How should we balance the legitimate demands of different groups of stakeholders against those of the employees?

Those are all valid questions, that will obviously require an additional post to be answered (another way of thinking about it: once we have set aside distributive justice as the right framework to deal with fairness in organizations, and turned to procedural justice, which gently nudges us towards a more contractualist approach, we must see how the inherent conflicts of interest around the organization, not just within it, are dealt with by the new framework). 

Tuesday, July 4, 2017

Organizational justice

[This may be the first draft of a paper to be submitted to a conference in the Jesuit University Ignatianum in Krakow w the same title, or may be not, depending on how happy I am with the final result… it is, however, an issue I have been wanting to tackle for some time now but had postponed so far to deal with lighter matters]

Declaring that capitalism sucks and that the way we have chosen to organize our societies is fundamentally flawed and not conductive to human happiness and/ or flourishing is great fun and a source of moral validation (so much so that it is impossible not to perceive in such denunciations a whiff of suspicious self-righteousness that no truly moral worthy subject should stoop to), but at the end of the day everybody needs to earn a living, bring home the bacon, put some food in the table and a roof over his (and eventually his loved ones’) head and so on and so forth. Nowadays, to that end you normally don’t go out in the woods to hunt and fish and chop wood, but you join an existing organization, where you are assigned some tasks and perform them to the best of your ability. Or at least to the extent that would convince those in levels of responsibility that it is in their best interest to keep on employing you. Even if you choose the route of being an autonomous professional selling your skills in the open market there are a number of relationships you enter into (with the regulatory body that determines how your practice should be carried out, with subcontractors to deal with aspects of your daily routine you choose to outsource, with customers that -hopefully- end up paying your bills, with tax authorities you have to pay to so you can go on with your business, etc.)  that place you firmly within the context or an organization, even If it lacks a common juridical personality, as would be the case with the salaried employee within a company.

So the intermediate entity between the whole social system (capitalism, in all its soul-crushing evil, yadda, yadda, yadda…) and the individual is the organization. Even the unemployed belongs to one or multiple organizations: the agency that pays him the unemployment benefits (if there is such a safety net in his country), the newspaper where he seeks jobs or the provider that hosts the on line games he spends his days playing are all organizations he is more or less loosely attached to. The homeless person that seems to have severed every last social tie also belongs to some organization or other, from the parish or the social shelter where he sometimes sleeps to the mental health facilities where he may be eventually institutionalized. That means that, although very few can recognizably and significantly influence the whole social system, most can definitely have an impact in the organizations they belong to. Which in turn means that questions of justice, although they can be predicated of the whole social system, can only be put in practice in the institutions that mediate between such system and said individuals.

Interestingly, a lot has been written about the fairness and justice of the system as a whole: from Leviathan by Hobbes to A Theory of Justice by Rawls, including the Two Treatises on Government  by Locke, the Metaphysics of Morals by Kant, the Elements of the Philosophy of Right  by Hegel, On Liberty by Stuart Mill, the Communist Manifesto by Marx, the Responsibility Principle by Jonas, the Social System by Parsons, the Theory of Communicative Action by Habermas and Anarchy, State and Utopia  by Nozick. They all deal with society writ large: how it is ruled (or should be ruled), how decisions are made (or should be made), how property is held and transferred (or should be held and transferred -or not), what rights and duties people have as members of an all-encompassing group, what they owe to each other (the title of another book by Thomas Scanlon) and what they can demand each other. In the old Aristotelian term, they all find that justice required a certain political system, and that the definition of such system was the most meaningful contribution towards a more just world. But as to what happens when they step out of that all-encompassing group (the polity) and enter (more or less voluntarily, we will need to expand on that later on) in a smaller association, all have very little to say, apart from in general defending the possibility of individuals freely entering and leaving such association (but most authors seemed to have in mind political parties, or established churches rather than the more prosaic commercial companies that people in fact must join in a modern market-ruled economy).

Which is kind of a funny lapse, because, again, almost nobody is going to be able to single-handedly reform the whole judicial system, or seriously challenge democracy and the rule of law as organizing principles, or translate their denunciations of the free markets into more substantially redistributive institutions, but everybody has a certain level of control over how they perform their day to day work, the work they happen to do for, you know… an organization. So giving some direction of how to behave oneself in such environment would seem to be of more practical concern, and more influential, than thundering about the evils of a distributed decision making system (that happens to impersonally favor great wealth concentration at the expense of great effort and suffering from a poorly compensated majority that has to be kept in the dark about how stacked the system is against them) that has showed for some centuries to be quite impervious to any single actor’s decisions.

But before we proceed with trying to change such sorry state of affairs, I’ll have something to say about that wider critique that so many intellectuals have luxuriated in so frequently until now. To avoid being labelled a conformist (not that I would care) I’ll clarify that I don’t consider such critique lacking justification or, more pointedly, merit. I myself have dwelled at length in the shortcomings of our current system (shortcomings that don’t entirely compensate for the more abundant ones exhibited by any alternative system ever actually attempted: Two views of the system), and have even tried my hand at sketching how an better system may look like (both here: What is Anarcho Traditionalism and here: What a sunny future for humanity looks like ). I take my hat off and raise my glass to all the dreamers, the purveyors of alternative social arrangements, the utopians and the commune-founding nonconformists (between which I’ve counted myself more than once). Let’s just admit they have not been historically very successful in hastening the dawn of Heaven on Earth or, absent that, the development of a society a iota more fair and just than our current one. And what I portend to do is to hasten such a dawn (of the more just society, I leave Heaven on Earth to the Almighty) by analyzing not how everybody should behave as a member of society, and how such vast construct should be arranged (something I’m in no position to influence whatsoever, as weren’t Hobbes, Locke, Kant, Hegel, Mill, Marx, Jonas, Parsons, Habermas, Rawls or Nozick, each in his own time), but how we should act within the organizations that actually employ us, and how such smaller units should be arranged.

In a very Socratic way, if we intend to identify the rules for creating more just organizations we will need to start defining what justice is. The most common definition around is “giving each one his due” or “giving each one what corresponds to him”, which doesn’t get us that much closer, as we then have to inquire into what is due to each member of the organization, or what corresponds to each one, and we may to our dismay find that the answer to both is “what justice dictate they should receive”. So if we want to break from this circular definition we have two main alternatives:

·         Define justice as consisting in giving to each as they deserve, that is, what they have earned according to some previously agreed rules

·         Or define justice as giving to each as they require, that is, ensure everybody’s needs are equally tended for

Both are fraught with difficulties: determining what every member of the organization contributes to the common good (what he has earned, and thus what he in return deserves) is famously tricky (if I’m the one apportioning the rewards, I’ll likely have a strong incentive to value my own contribution and that of those close to me as more substantial than anybody else’s… anybody else would likely have a different view of such valuation, and thus of the justice of the resulting distribution); determining what each one requires independently of merit or contribution would incentivize free riding and asocial behaviors (as exemplified by the communist motto “from each according to his ability, to each according to his need” that unsurprisingly fostered a society where everybody seemed to have a lot of the latter and very little of the former).

It has to be noted that the rules we are attempting to pin down have to do with distributive justice: within the framework we are dealing with, they would be the rules pertaining how to assign the benefits the organization provides. They have less to say regarding who is entitled to give orders, what are the limits of such orders (if they are indeed somehow limited) and how much exertion those expected to obey them should apply in carrying them out. We will have a bit more to say about that kind of rules (which we could group under the header of procedural justice), but let’s first explore a bit more how the aforementioned benefits are apportioned.

One approach to determining as fairly as possible the benefits each member of the organization “deserves” is to have an impersonal mechanism setting them. If any single person could decide with complete freedom what each member, including himself, enjoys of the common product it is difficult to avoid the impression that he will have a strong incentive to overcompensate himself and those close to him (the level of “closeness” can depend on a number of factors, like family ties or similar tastes or similar personality traits or even gender or race that are generally considered germane to “just desert”, and thus should not be taken into consideration if a just distribution of rewards is to be achieved). But if there are “external”, “objective” rules that he has to apply to decide how much of such common product he gives to each member of the organization we think that there is less opportunity for “unfair” or “unjust” distributions; we tend to assume that if the rules are impersonal and “objective” enough they should produce an equitable, unobjectionable distribution. That, of course, is absolutely false: take an impersonal rule like “give 100% of the organization’s income to the tallest employee” (or the fattest, oldest, youngest, of darkest complexion, of lightest complexion, whatever) or “distribute the organization’s income proportionally to the number of days between each employees birth date and the 23rd of June of 2003”. Such rules are surely as objective as you may dream, but the distribution that may result from their application won’t be “fair” or “just” by any standard measure, and will likely result in people leaving the organization in droves, except for those favored by them (that in most cases won’t be especially deserving, or able to contribute in an especially significant way, thus causing the quick demise of the organization for lack of adequate talent).

You may suspect I have chosen some outrageously irrational samples of “objective” rules to make some point, and you would be entirely right. The lesson I want my readers to take home is this: “impersonal” rules, with a patina of objectivity around them, do not guarantee a fairer, more just outcome than just giving full discretionality to a member (or reduced group of members) of the organization to decide about how the benefits it produces should be distributed. However, most theoreticians of the matter seem to have concluded (not recently, the argument started to take shape about 300 years ago) that there is one particular set of objective rules that almost magically guarantee the fairest, most just arrangement that can be conceived. A magical set of rules that allow us to forget about the fairness of the organizational arrangements we enter into, as its application ensures we all get the best deal we could dream of. What extraordinary set of rules are those? I’ll defer to a highly regarded academic text, the eighteenth edition of Economics by Samuelson & Nordhaus, page 288:

A general-equilibrium market system will display allocative efficiency when there is perfect competition, with well-informed producers and consumers and no external effects. In such a system, each good’s price is equal to its marginal costs and each factor’s price is equal to the value of its marginal product. When each producer maximizes profits and each consumer maximizes utility, the economy as a whole is efficient. No one can be made better off without making someone else worse off…

… The basic point to see is that, because prices serve as signals of economic scarcity for producers and social utility for consumers, a competitive price mechanism allows the best mix of goods and services to be produced from a society’s resources and technology.

We could formulate what I propose to call “the Economist rule” as follows: “give to each member of the organization as much as he contributes at the margin (as much as he adds value to each good or service the organization sells)”. That is indeed “how the real world works”: the salary of every employee (or the fee every independent professional can command) determined by the market in proportion to what the consumers are willing to pay for what said employee does to whatever it is his company (or himself directly) sells. Sounds very rational, objective, impersonal and thus fair, doesn’t it? Only it is essentially bunk, and it has as much to do with how salaries are really determined in a company as the number of angels that can fit on a pin’s head has to do with the atomic weight of iron…

Let us quickly review a number of problems of the definition of “an efficient general equilibrium market-system” as defined by Samuelson and Nordhaus (and widely accepted by most economists today):

·         There isn’t anything like “perfect competition” in most markets, starting with the labor market (where the number of weekly, monthly and yearly hours is capped by law; the state taxes those hours differently depending on the industry and legal status of the worker; there are in some jurisdictions floors to how much can be offered per unit of work -minimum wage-; there are vast asymmetries in negotiating power between the parts, even in the face of collective bargaining from the workers, and information about salaries in other industries or in other firms within the same industry is typically very difficult to come by) and including the energy market, the travel market, the manufactured goods market, the health market, the residential building market, the personal (domestic) services market, the agricultural market and the financial market, at a minimum to try to reduce externalities and protect consumers and the environment  

·         Neither producers nor consumers are in any meaningful sense “well-informed”. Even in these times of apparently easy access to “all of humanity’s knowledge”, when any conceivable piece of information is “just a click away”, you would be surprised by how little executives know about what their customers value, what they workers demand, what their machines can realistically produce and what their productive processes yield

·         A direct consequence of the above is that the much vaunted coincidence of marginal costs with marginal prices that sets the overall production level for each firm is but a mirage. To begin with, it presupposes a production function where the costs slope upwards (the cost of producing an additional unit grows with every additional unit produced) and a consumption function where the utility (and thus what the consumers are willing to pay) slopes downward (as they derive less satisfaction from every additional unit consumed), which is theoretically pleasant to contemplate, but not that frequent in real life. In real life not only production and consumption functions can slope in whatever direction (depending on demand elasticity and the amount of fixed vs variable costs) but are more discrete than continuous, so they may not even intersect in any meaningful sense (so firms necessarily produce either less or more than what the public is willing to consume at the price they ask for, and there is no “natural” way to adjust prices to make demand and supply coincide, having to resort to rationing, queuing, perpetual inventories or semi-permanent overcapacity)

·         Although I can grant that companies (or suppliers in general) know what maximizing benefits consists in (benefits are measured in money, and although money can get pretty metaphysical, i.e. how much are Apple’s benefit really worth, if it finds no attractive investment to park them into and all it can do is sit on top of them as a growing and useless pile of cash?, at least everybody can agree that if firm A earns more money than firm B in the same amount of time, it is generating more benefits) I firmly believe that there is no such thing as “maximizing utility” for consumers. What the f@%k is utility? How does it compare between different people? And for the same person between different moments in time? I know, I know the standard answer of economists: “revealed preferences”, so utility is exactly and precisely measured by what the people is willing to pay for each unit of satisfaction. Rather than go in a furious rant that would take me far away from the original goal of this post, I’ll just point that such argument is rather circular, and using the fact of people paying a certain price for something as a justification that such price is the right measure of the value of such something is the very definition of question begging, and introduces in the explanandum the very explanans that we are trying to define.

In summary, if there is no such thing as “perfect competition”, no such thing as “well-informed” producers and consumers and no such thing as meaningful “utility maximization” through the information provided  by prices, can we say with a straight face that the “market mechanism” ensures a just and fair distribution of the companies’ rewards? No, we definitely can not. Which means we can not abdicate our responsibility of fairly rewarding our fellow employees by discharging the decision on how much to pay them to the market, assuming that if we pay them a “market salary” we are doing good and all is well. Because such “market salary” is an empty ideological construct (“ideological” in the worst, most Marxist sense of the word: a deliberate attempt made by those that benefit the most from the current system to justify it and thus better impose it on the many disadvantaged by it). Nothing new here, as I’ve already developed most of my objections to the supposed application of economic logic to real life here: Shortcomings of economic "science" and here: Shortcoming II (some drollery)

So we are back at square one: we quickly dismissed the possibility of a distributive justice based on needs, as it compromises the viability of the organizations that adopt it by attracting and rewarding free-riders and moochers. We have just dismissed the possibility of a distributive justice based on desert, as the supposedly objective criteria used to determine the amount of desert of each individual is highly suspect, and ends up leading to tremendously well paid top executives profiting handsomely from the squalor and exploitation of the majority of the workforce.

What I would suggest is that we better dismiss distributive justice altogether, and confine it to a wider organization (the whole state, which uses its power of taxation to achieve a more just distribution of the whole social product). For smaller, economic organizations (firms and companies) I would argue that it is procedural justice the one that we must be concerned about, and the one that defines if they are fair to its members or not. And to define the “right” sort of procedural justice and how it should be understood I propose to look not at the classical economists and utilitarians (Hume, Smith, Mill), but to a figure that only recently has been vindicated as having something relevant to say about organizations. None other than the German philosopher Immanuel Kant.

Which will require an additional post, as this is already too long (well, this looked since the beginning like a to part installment, I’m sure you already saw this coming)…