Morality versus social welfare

The attraction of this book lies not in the answers it provides but in the questions it asks

Kaushik Basu is an economist who has been a teacher, chief economist to India’s finance ministry and to the World Bank. When he takes off his ultraliberal political hat he is a formidable theoretical economist. This book once again reveals that side of him.

It’s got a catchy title which is as wrong as it is right. After all, if the circumstances are conducive I can think very clearly and rationally that I should commit suicide. The liberals are quite confused about individual freedom in this case.

That said, it is an extremely engaging book if you are inclined to look at the world the way game theory does. Game theory, now sadly in disuse, used to be a huge endeavour indulged in by some of the top brains in mathematics and economics. It tried to see what rational behaviour means and what sort of actions follow or should follow if everyone behaves rationally.

Unfortunately, it remained a theoretical exercise in deductive puzzle solving because, as Amos Tversky and Daniel Kahnemann showed, people are generally quite stupid and actually behave irrationally.

Basu says that actions based on morality, either of the whole group or of its members need not always lead to an improvement in welfare, either now or in the future.

They won the economics ‘Nobel’ for saying that. Kaushik, like his mentor and PhD guide at the London School of Economics, Amartya Sen, has always liked puzzles. And game theory is a lot about puzzles.

Like Sen he is also a superb expositor and can explain complex ideas in a number of very accessible ways. This book demonstrates that in ample measure.

Its sheer width is enough to convince you that this is not pop economics. It bases itself on something more ephemeral than data — philosophy.

In India we tend to think of philosophy in metaphysical terms but the western philosophical tradition concerned itself with more earthly problems. Thus, they could ask: “Do frogs feel pain”?

This book follows that tradition.

THE DESIGN

Basu explains at the very start that he has followed an inverted pyramid structure in this book. That is, he goes from individual behaviour to group behaviour and their implications for global behaviour.

Happiness, he then says, lies in using reason and avoiding emotion in whatever action you undertake. Well, that sounds reasonable but what if a person falls in love with a person who doesn’t reciprocate, at least not immediately? Should you, like that Scottish king Robert Bruce, keep on trying and press your case?

Basu says you can but should act ‘as if you were that person’. In my example that would mean the one who doesn’t care for your amorous attentions. That is, think like the other person.

The application of reason might tell the person to lay off but will that make him or her happy, especially if he or she believes that the object of his or her

Title:

Reason to be Happy: The

Unexpected Benefits of Thinking

Clearly

Author:

Kaushik Basu

Publisher:

University.

Torva

MEET THE AUTHOR Kaushik Basu

is Professor of

Economics and Carl Marks Professor of International Studies at Cornell affections might undergo a change of heart?

However, and fortunately, Basu doesn’t labour on with the happiness thing. Instead he gets into a fascinating discussion on the interfaces of logic and philosophy.

All sorts of philosophers and logicians flit across the pages which makes the book truly a connoisseur’s delight. Thus, the attraction of the book lies not in the answers it provides but in the questions it asks.

For example, Basu asks what’s the point of jogging or any other form of exercise. He says that the answer lies in which is better: the nonjogging time which may reduce your lifespan or jogging which may increase it.

I should add a personal anecdote here. The owner of the newspaper I was working for 32 years ago asked me once what my life objective was. I said it was to maximise leisure. He said that way you will minimise your earnings. Which did I choose?

GROUPS AND MORALITY

This is an important subject both socially and politically. It’s the most contextual part of the book. Basu says that actions based on morality, either of the whole group or of its members need not always lead to an improvement in welfare, either now or in the future.

It’s a complicated argument that he puts forth which I have tried to summarise in 50 or so words. But I think I have got the gist of it right. This is a variation on an old formulation in social choice theory that the sum of individually maximised utilities don’t necessarily maximise social utility.

Basu is also very concerned about rising income inequality and has a new idea for fiscally neutral income transfers. He calls it the Accordion Tax which has an automatic trigger for imposition. The rich will be taxed to subsidise the poor.

This is great except that it’s subject to his own analysis that moral action today need not necessarily lead to better outcomes tomorrow. The communists have repeatedly proved that.

Nevertheless, as Paul Samuelson once wrote in a foreword, bon apertif. Do read the book. I promise you will enjoy it immensely.