“Davidson” submits:
One of the leading research psychologists Stephen Pinker has published a series of books titled “The Blank Slate: The Modern Denial of Human Nature”, “The Stuff of Thought: Language as a Window into Human Nature” “How the Mind Works” and “The Language Instinct: How the Mind Creates Language (P.S.)” among others which provide exceptional insight into human nature. First and foremost humans are hard-wired learning entities. Human being are not a “Tabla Rasa” or blank slate on which our environment causes the building of personality in response to external stimuli. Humans come built with curiosity or as Ludwig von Mises called it “angst” in his treatise “Human Action: A Treatise on Economics” to explore and unearth the unknown. It appears that a sense of uncertainty may be part of a set of survival genes which drive man to learn every detail of his surroundings to improve his survival. This is why once a new discovery has occurred it simply serves as the launching point for unearthing the next observed unknown. This aspect of human perception has great relevance in managing corporations using a “lean” approach or a process of continuous improvement as so clearly explained by Greenblatt in “The Goal: A Process of Ongoing Improvement” Humans are continuously curious and subsequently creative. Again I highly recommend that everyone read Julian Simon’s “The Ultimate Resource 2”. Our constant self criticism is wholly unwarranted.
As one reads about human activity in its many forms, the conclusion can be reached that there are two key aspects to human survival. These I am quite sure will be discovered at some future date to be genetic imprints because we all do this. One is the propensity to delve into the detail of things and the other is to share this for the greater good and for one’s own needs. We tend to call this the “Division of Labor” and Adam Smith explains the leverage human society gains from this in his pin manufacturing example in “An Inquiry Into the Nature and Causes of the Wealth of Nations”
“To take an example, therefore, from a very trifling manufacture; but one in which the division of labour has been very often taken notice of, the trade of the pin-maker; a workman not educated to this business (which the division of labour has rendered a distinct trade), nor acquainted with the use of the machinery employed in it (to the invention of which the same division of labour has probably given occasion), could scarce, perhaps, with his utmost industry, make one pin in a day, and certainly could not make twenty. But in the way in which this business is now carried on, not only the whole work is a peculiar trade, but it is divided into a number of branches, of which the greater part are likewise peculiar trades. One man draws out the wire, another straights it, a third cuts it, a fourth points it, a fifth grinds it at the top for receiving the head; to make the head requires two or three distinct operations; to put it on, is a peculiar business, to whiten the pins is another; it is even a trade by itself to put them into the paper; and the important business of making a pin is, in this manner, divided into about eighteen distinct operations, which, in some manufactories, are all performed by distinct hands, though in others the same man will sometimes perform two or three of them.I have seen a small manufactory of this kind where ten men only were employed, and where some of them consequently performed two or three distinct operations. But though they were very poor, and therefore but indifferently accommodated with the necessary machinery, they could, when they exerted themselves, make among them about twelve pounds of pins in a day. There are in a pound upwards of four thousand pins of a middling size. Those ten persons, therefore, could make among them upwards of forty-eight thousand pins in a day. Each person, therefore, making a tenth part of forty-eight thousand pins, might be considered as making four thousand eight hundred pins in a day. But if they had all wrought separately and independently, and without any of them having been educated to this peculiar business, they certainly could not each of them have made twenty, perhaps not one pin in a day; that is, certainly, not the two hundred and fortieth, perhaps not the four thousand eight hundredth part of what they are at present capable of performing, in consequence of a proper division and combination of their different operations.” The Wealth of Nations Book 1, Chapter 1
The exchange process occurs in markets. There are many, many markets! Markets for food, for transportation, for shelter and for investments. We tend to view these market exchanges of goods and services as exchanges of physical quantities, i.e. the exchange of currency earned for one’s labor for an automobile or for the services of a physician. This is misleading. What is actually exchanged is expertise, i.e. knowledge. Humans are knowledge machines and our survival and advancement occurs through the exchange of knowledge. Obviously no other living being does this as humans do it. Mankind has made extraordinary advances in medicine, science and our standard of living through the “Division of Labor” approach and we should not be surprised that at some future time we discover a genetic sequence responsible for this behavior. Simple logic leads one to believe that since human survival relies on those traits that propagate the species that this trait must be genetic. Although many discuss Darwin’s “Survival of the Fittest” which is mostly the rule for other species, humans have actually cared for their disabled in many cultures over many thousands of years. Humans respect creativity!! There are countless examples of disabled individuals who are highly respected and cared for by society in spite of disability because they are creative thinkers. Stephen Hawking the theoretical physicist is a notable example. Humans display anti-Darwinian behavior. Human survival is born by a strong recognition of individual contributions for the benefit to the whole of society. At the same time, however, there is a strong desire to be recognized and compensated for one’s contributions. Each of us carries these conflicting impulses falling along a spectrum which at the end points has individuals who are either mostly selfish or mostly selfless. This is the makeup of human society.
By far the largest market is that for “fairness”! The “Fairness Market” is our self governing process and represents government at all levels. Where ever an unfair situation is perceived, humans discuss it extensively and create rules by which to govern future exchanges. Government is our largest marketplace. There have been many famous individuals who have written about markets and how we should conduct ourselves. Friedrich August von Hayek and John Maynard Keynes are the two opposing sides of the broad philosophical discussion on human self governance. Hayek argued for no interference, i.e. individuals act in self interest, while Keynes argued that markets must be controlled and directed by government, i.e. leadership by the enlightened few. Neither in my estimation had it correct. What works best in any age is the free and complete exchange of information. This has been labeled the “The Transparency Effect”. Humans survive and thrive because of well functioning markets. Markets function well when information/knowledge is freely and openly exchanged the rules are simple, well known and it is in everyone’s self-interest to adhere to them.
Well functioning markets require rules. On this Hayek is incorrect! Our current turmoil is due to the elimination of what was thought to be poorly functioning rules established since the Security Exchange Act of 1934. Unfortunately it was the belief by the financial and political leadership that markets with fewer rules would somehow become better at self governing than a market having rules which appeared to be limiting free exchange. Markets are most efficient and fair when all are entitled with access to the same range of information. But, markets work best when each participant has an input and activity is not dictated from the few which cannot possibly have enough enlightenment to make correct decisions that impact all individual participants. Keynes was incorrect! The solution is to create rules that create fairness by making all that is known available to all participants. All participants having access to all possible knowledge in the marketplace can individually make the decisions that are appropriate to themselves. This necessarily means that there cannot be pockets of individuals with significant capital who can act secretly to the detriment of other participants. Today we have such a marketplace. The existence of hedge funds which have grown to such a size, nearly $2.5Tril, that through 5-40 fold leverage rival global market capitalization. That hedge funds are legally permitted to act in secret is unfair in the public marketplace. This can be easily corrected by insisting that their activity be transparent within the time frame of their influence. What happens in dark alleyways does not occur in an informed society in the light of day. The Internet can rapidly disseminate all the information one needs to make informed investment decisions. Rules are necessary and required but they should focus on improving transparency and fairness.
Let there be light!!