Words ought to be a little wild, for they are the assault of thoughts on the unthinking
- J.M. Keynes

Saturday, 21 July 2012

Ayn Rand and the fallacy of individual success

Everyone thinks they’re John Galt. It’s called the self-serving bias. Succinctly, people believe that their success is solely due to their efforts and talent while failure is someone else’s fault. This partly explains the uproar over Obama’s “somebody else made that happen” remarks.

Although he is catering to his left-leaning support base, he has a point. And it is that success is not solely due to the individual. No one enters the world fully developed and functional. There are various people and situations which influence and mould the individual and make him/her into the person that he/she is. Parents, teachers, peers and even strangers shape a person’s worldview and attitude. They also impart the necessary skills for achievements later in life. John Galt wasn’t hit by lightning upon being born and thereby endowed with all of life’s skills and education at birth. His drive and motivation were probably the result of his upbringing and interaction with teachers and friends during his formative years. Presumably his brilliant invention had something to do with the knowledge he gained at college.

For the sake of argument, let us assume that these broad external influences are part of the individual. This way we can re-internalise success and credit the individual for it. Therefore success is due to the individual’s talent in combining advice, help and support from parents, teachers and peers along with acquired knowledge and skill. However it is still not a sufficient condition for attributing success solely to the individual.

In a modern economy, division of labour and the inter-relationships which are spawned by it make the concept of strictly individualistic success laughable. Even the stereotypical hedge fund manager who is considered a practicing preacher of unfettered capitalism and threatens to run to low tax jurisdictions at the drop of a hat depends on others for his wealth and success. His decisions which earn him the combined GDP of several poor countries per annum are based on information crunched by an army of analysts. This information is provided by an army of reporters and both armies use tools built and maintained by a third army of IT workers. This is not even considering the use of electricity, water supply and other infrastructural services. True, the provision of all these services is assumed to be based on voluntary exchange and beneficial to all parties involved in the exchange. But the point is that the very visible success of the hedge fund manager is extremely fragile. Its continuation requires everyone to play their part properly. Poor analysis, incomplete information or systems failure can lead to ruin. There is a reason why the species Hedge-fundus Magnificus is not found in sub-Saharan Africa.

To re-internalise success requires that we again broaden the scope of the individual. It can be argued that successful people have a talent for selecting suppliers, distributors, co-workers, etc which ensures their success. I.e. they largely create their own inter-relationships. But even these heroic assumptions are not sufficient to attribute success solely to the individual.

This is because an individual cannot be the sole cause of his success when his very existence and that of his enterprise is made possible by the state. Humans cannot exist in isolation, collaboration is essential for human survival. The evolution of human civilisation is an evolution of the state and forms of government; starting from a tribal chieftain to the multi-organ government of modern economies. There may be debate on the optimal range of functions that a government can undertake but there is no doubt that the government and public sector are an essential part of the modern economy. Either directly or indirectly they enable entrepreneurs to savour the fruits of their enterprise.

As an example, an island of John Galts would still have to collaborate to ensure a minimum level of public services such as order and defence. Without a police force, some perceptive John Galts will compute that returns to crime have shot up to infinity (as the product of probability of being caught and punishment has dropped to zero). Mayhem will soon ensue. Moreover, lack of an army will entice some failed ‘welfare’ state to expropriate resources from the island without fear of retribution. But only a police and army are not sufficient. They will also have to create some organisation which ensures contracts are enforced and property rights respected. Then they will have to provide checks and balances to the power of police, army and other organisations to stop them from misusing that power. Very soon the island of intrepid John Galts will be drowning in “bureaucratic red tape”.

Stressing on individual rights and limiting the power of government are noble aims which must be pursued. But the debate must not be framed as government versus the individual. Neither extreme is workable. As John Stuart Mill said, everyone who receives the protection of society owes a return for the benefit.

It is unfortunate that Randian philosophy has seeped so deeply into political and economic debates. Despite her high priest committing apostasy, the influence of Ayn Rand on policymakers shows no signs of subsiding. Idiotic attempts to loosen monetary policy in the face of a liquidity trap are a testament to this pernicious influence. When mythical John Galts are too scared to invest, lowering interest rates to zero or guaranteeing loans made to them isn’t going to have any effect. Government expansion, both in peace and war, was largely responsible for ameliorating and finally resolving the tragedy of the last Great Depression. It was then taken to an extreme, setting up the reaction where now practical men of affairs have become slaves of a defunct playwright rather than a defunct economist. What a tragedy.

P.S. I am not a fan of Obama. And I am even less of a fan of the right wingers who seem to be dominating Republican policy. It was well put by JS Mill that conservatives are not necessarily stupid but most stupid people are conservatives.

No comments:

Post a comment