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Einstein's Advice for George W. Bush

Any fool can make things bigger, more complex, and more violent. It takes a touch of genius-and a lot of courage-to move in the opposite direction.

Albert Einstein

Global Warming: The Scientists versus the Conservatives

Global warming is an important but confusing issue for most people because this issue has economic significance, but perhaps not as much statistical significance. Conservatives claim that statistical significance of the relationship between human action and global warming cannot be demonstrated. Much of the scientific establishment opposes this viewpoint. However, the scientific community needs to rethink how it approaches this issue.

The first thing that must come to the mind of any scientist when confronting an issue that is economically significant but statistically insignificant, is the concept of POWER. Lack of power is called “type 2 error” in statistics.

Type 2 error measures the probability of “failure to reject the null hypothesis,” given the alternative hypothesis is true. In the case of global warming, "lack of power" is the error related to the failure to reject the null hypothesis that “no relationship between human action and global warming exists," if the alternative hypothesis that "human action is causing global warming" is true.

Scientists don’t have to prove that human action is causing global warming at 95% level of confidence, even if this can be proven. All they have to do is demonstrate the “lack of power" in the conservative argument. Just because some hypothesis is statistically not significant at 95% level of confidence, does not make that unimportant in an economic sense. And given what is at stake for humanity, the huge economic significance cannot be ignored, even if the effects of global warming are statistically significant only at say 50% level of confidence.

An economically significant event that is statistically insignificant at 95% level of confidence still calls for an effective response. For example, if there is only a 40% chance that one may die after eating food in a restaurant, one would still not eat there, regardless of the fact that the null hypothesis that "the restaurant food does not cause death" cannot be rejected at 95% level of confidence. Economically significant events don’t have to be always statistically significant at 90% or 95% level of confidence for them to deserve an effective response.

The global warming debate is different from debating whether one should devote one's entire life in preparation for not getting hit by lightening. In this case, the probability of being hit by lightening is virtually zero, and so it is unwise to devote significant time and energy to deal with such an occurrence.

I don't think any climate scientist thinks that the probability of the entrapment of greenhouse gases causing severe damage to earth is so small, that no action is warranted. And yet "no action" is the typical recommendation by most conservatives and their think tanks. These conservatives are hiding behind the claim of statistical insignificance, while cleverly evading the type 2 error related to economic significance of the severe damage that can result from entrapment of the greenhouse gases.

The intellectuals are divided as “small selves” on the issue of global warming. The conservative small selves are obsessed with statistical insignificance, while the environmentalist/scientific small selves are obsessed with statistical significance. Both need to come together by focusing on the issue of “lack of power” or the type 2 error to resolve this debate. Just like buying insurance or creating conditions for elimination of terrorism (and not creating more terrorism as being done at present) are right responses for statistically insignificant but economically significant issues, taking concrete steps to significantly reduce greenhouse gases is urgently needed to avoid a potential catastrophe in the making.

The Blindness of Small Selves

John Godfrey Saxe's ( 1816-1887) version of the famous Indian legend,

It was six men of Indostan,
To learning much inclined,
Who went to see the Elephant
(Though all of them were blind),
That each by observation
Might satisfy his mind.

The First approach'd the Elephant,
And happening to fall
Against his broad and sturdy side,
At once began to bawl:
"God bless me! but the Elephant
Is very like a wall!"

The Second, feeling of the tusk,
Cried, -"Ho! what have we here
So very round and smooth and sharp?
To me 'tis mighty clear,
This wonder of an Elephant
Is very like a spear!"

The Third approach'd the animal,
And happening to take
The squirming trunk within his hands,
Thus boldly up and spake:
"I see," -quoth he- "the Elephant
Is very like a snake!"

The Fourth reached out an eager hand,
And felt about the knee:
"What most this wondrous beast is like
Is mighty plain," -quoth he,-
"'Tis clear enough the Elephant
Is very like a tree!"

The Fifth, who chanced to touch the ear,
Said- "E'en the blindest man
Can tell what this resembles most;
Deny the fact who can,
This marvel of an Elephant
Is very like a fan!"

The Sixth no sooner had begun
About the beast to grope,
Then, seizing on the swinging tail
That fell within his scope,
"I see," -quoth he,- "the Elephant
Is very like a rope!"

And so these men of Indostan
Disputed loud and long,
Each in his own opinion
Exceeding stiff and strong,
Though each was partly in the right,
And all were in the wrong!

MORAL,

So, oft in theologic wars
The disputants, I ween,
Rail on in utter ignorance
Of what each other mean;
And prate about an Elephant
Not one of them has seen!

Small Selves

Do we ever keenly observe our many selves within and without? Why do we get attached to the identities that separate us into nations, religions, races, and economic classes? Dosen't such attachment make us insensitive to the pain of others not included in our identity. For example, as an American, does one feel the pain of 600,000 Iraqis who have died since the Iraq war began in 2003? As a radical Islamist, does one feel the pain of the thousands of Americans who died on 9/11? As someone from the Indian upper middle class, does one feel the pain of the poor Indian farmers, more than 15,000 of whom commit suicides annually?

Why do we humans split ourselves in such a manner, that we stop feeling any love for another who is not a part of our "small selves?"

As individuals with small selves, we seem to recognize multiple personality disorder only when it becomes pathological. But what we may think is normal may not be so different from what is pathological, when seen from the viewpoint of the one who is fully self-integrated. A self-integrated being sees our insanity in the same way, as we see the insanity of the pathologically insane.

How can we recognize this insanity of being split, when everyone around us is also split?

This is the challenge of meditation.

Meditation is not an effort to become the whole. Meditation is the simple non-judgmental seeing of one’s fragmentation.

In that seeing, the first act of wholeness begins...

Self-Integrity

Few are those who see with their own eyes and feel with their own hearts.

Albert Einstein

Maximize Shareholder Wealth or Self-Utility?

Standard textbooks prescribe shareholder wealth maximization as the main goal of financial management. Yet, mangers are known to give themselves huge pay packages, often at the expense of shareholder wealth. This behavior is traditionally known as "agency" cost in the business literature. Agency costs exist due to only partial observability of managers' actions by the shareholders, and loopholes in the legal infrastructure. The traditional solution to this problem is to give managers bonuses and options to align their interests with the interests of the shareholders.

However, any human behavior not recognized and accepted, only creates higher order perversions. Free human beings living in free markets must rationally maximize their own self-utility. Maximizing shareholder wealth cannot be an absolute rule, but a constrained maximization, which should be subordinate to maximizing one's own self-utility. For example, if two choices both give self-utility of 100 units each, but the first choice makes shareholders richer, then the managers take that choice. Of course, due to unobservability of the managers actions by shareholders, often managers will and do maximize their own utility, at the expense of shareholder's wealth.

The ex-ante knowledge that shareholders have the right to fire or sue managers, generally keeps the managers behaving in line consistent with shareholder objectives. But its almost tautological that managers always maximize their own self-utility, even when they increase shareholder profits with some self-imposed constraints or objectives (arising due to self-integrity or greed). For example, for some managers the constraint of not hurting a worker is not a serious issue (encouraged by the draconian anti-labor laws in some states, which impose only a small monetary fine for killing a worker even with an intentional safety violation), while for other managers, not hurting another goes beyond their "small-self" fiduciary duty to shareholders, to serve their "big-self" human responsibility.

Modern capitalism sprang from the twin forces of innovation and exploitation, both feeding and reinforcing each other. These forces framed the laws of many western nations. So for example, if one knows as a manager that some labor practice causes serious arm injuries, but keeping that labor practice maximizes shareholder value even after paying for all monetary expenses for the arm injuries, then it becomes one's fiduciary duty to maximize shareholder value.

But what is legal is not necessarily what is ethical. Ethics relate to one's SELF-DEFINTION, while law is defined with respect to the system. Ethics are a function of one's individual utility function, while law is created by the dominant forces that come to rule the govt agencies. If one lives under the tyranny of Saddam, then what is ethical may be very distant from what is legal. Similarly, just because Blacks or women or men without property were not allowed to vote legally in 18th century did not make that ethical in USA. So if our rich, racist, but intelligent founding fathers designed labor laws that basically hurt the workers (small monetary fines in some states even for killing workers with intentional safety violations that maximize profits), and we continue to practice those laws, then we may end up hurting the workers to serve our fiduciary duty, but our ethical human Self may revolt at that idea.

If our human Self is much bigger than our identity as a manager at a company in a system designed to hurt the workers (e.g., meat-packing industry), or the customers (e.g., pharmaceutical industry), or the environment, it is very desirable for us to question our fiduciary duty and behave in accordance with our larger human responsibility. If we are willing to take the chance of getting sued by the shareholders or fired by the shareholders, we can see it as very ethical to try and stop practices that are known to hurt the workers, or the customers, or the environment.

Of course, if we abuse our power and spend company money on installing the most expensive diamond studded carpets in our offices, then we will most likely get fired. But since we know that that outcome is a possibility, we will most likely not engage in such actions using our utility function. But we still use our own utility functions to make such decisions and not the shareholders' utility function. Our utility functions calculate, ex-ante, the possibilities of getting fired or sued or whatever, depending on the actions we undertake.

So in conclusion, we may very often see it as our BIG-SELF HUMAN responsibility to serve the exploited workers, naive customers, and the environment, and not solely focus on maximizing shareholder wealth, by taking the chance that we may get fired or sued. Of course, we do what we can to increase shareholder wealth to the extent it does not compromise with our self-integrity. No one can force one to maximize someone else's utility. One may feel "self-richer" in not compromising with one's integrity, than someone else who may be a millionaire but may injure or kill a couple of workers every other year.

Rich and Poor

Though outwardly few are rich and many are poor, even the few rich are inwardly as poor as most of the outwardly poor. What makes one rich is not just wealth and power but the richness of the inner Self. A self-rich person can never be a slave to another. She cannot do anything that sacrifices herself for another's utility, whether it is the King of Saudi Arabia or shareholders of Halliburton. A self-rich person empowers other selves, because the wealth of selves multiplies when you make others inwardly richer. Self-richness can happen to anyone, anytime, from mother Teresa to Warren Buffett, from a stripper to a bartender. Effort is the method of becoming outwardly rich, effortless seeing of oneself is the way to become inwardly rich.

What is No Self?

No-Self consciousness is experienced when cravings and aversions arising from a small self end. No-self moments happen unexpectedly, since expectations are creations of a small self. A melody heard after many years, a beautiful sunset seen on a vacation, an unexpected gift from a stranger, all lead to the experience of the no-self moments. Meditation can make the most ordinary moments seem extraordinary because it shifts one's consciousness from the cycle of small-self desires and frustrations to the enjoyment of pure witnessing of that which is unfolding. This witnessing has no ego, no personality, it just IS. The only difference between ordinary existence and extraordinary living is that no-self moments happen rarely and accidentally under the former, and frequently and consciously under the latter.

Self-Cooperative Games

Most people understand only two types of games. Games in which competition wins, and games in which cooperation wins.

The more gross games of life on the lower levels of Maslow's hierarchy are best played with the spirit of competition in which free markets do well. The subtle games of life on the higher levels of Maslow's hierarchy are best played with the spirit of love in which cooperation wins.

Communism is a game in which love is forced by the method of cooperative game theory. Capitalism is a game in which individuals are free to maximize their unidimensional utilities using non-cooperative game theory. Since love can never be forced, and unidimensional utilities are unreal, neither system has brought lasting peace and well-being to humankind.

But games don’t have to be divided only between cooperative and non-cooperative game theory models.

By allowing a multi-dimensional utility, such that one's utility is a positive function of another's utility, one can play a third type of self-cooperative game in which cooperation results endogenously even when individuals behave in rational self-interest. Economists don’t have a monopoly on the definition of “rational,” and their small-self attempts to define “rational” have kept them imprisoned in their prisoner’s dilemma games. The schizophrenic nature of the Nash equilibrium in a prisoner’s dilemma game is easily seen once humans embrace their big-self multidimensional utilities.

Self-cooperative games allow both love and freedom, as they use multidimensional utilities and are free of any force of coercion by the government agency. In these games one loves out of one's freedom, and feels free because one is loved.

The challenge for economists and politicians is to create conditions through human values-based education, elimination of poverty, etc., such that the self-cooperative games don't devolve into self-destructive games in which one's multidimensional utility is a negative function of another's utility.

The number of people playing self-destructive games has grown exponentially (e.g., terrorist groups, communal rioters, revengeful nationalistic citizens, etc.) over the past quarter century. Unless economists and politicans acknowledge the existence of multidimensional utilities in the real games played by human beings, they will fail in solving the problems of war and terrorism.

Only if we acknowledge that multidimensional utility functions exist, can we take appropriate actions to encourage such utilities to have positive weights for others' utilities? Creating conditions that influence multidimensional utility functions to have positive weights of others' utilities is needed as much as increases in the GDP. Unfortunately, economic and political thinkers remain obsessed only with the latter.