Tuesday, October 25, 2011

Good Ideas Become Clearer over Time

Kant is known for his theory that there is a single moral obligation, which he called the "Categorical Imperative", and is derived from the concept of duty. Moral acts are those done in good will, which are done for the sake of duty. Duty is the necessity of acting out of reverence for universal law, something that you would want everyone in a situation to do.

Now, I find this reasoning rather flawed,* but my opinion on that isn't my point. In the Groundwork for the Metaphysics, of Morals Kant states that what he is saying is not the same as the Golden Rule; that the Golden Rule is derived from the categorical imperative with many important limitations. Many agree with Kant, such as radical egalitarians like Jurgen Habermas (see here), or John Rawls (see here). On the other hand, many argue that the Categorical Imperative is the same as The Golden Rule. Biologist and economist Peter Corning and game theorist Ken Binmore suggests that Kant's objection notwithstanding, the Golden rule is basically Kant's Categorical Imperative.

This seems like one of those ideas that is infinitely malleable, merely useful to give false authority to one's current pet idea. Habermas and Rawls did not want to engage in a debate on the practical issues of radical egalitarianism (its usefulness to tyrants, its impossibility, its assault on liberty), they preferred to simply defer to some famous philosopher's statement that is not evaluated merely by its consequences.

A good idea becomes clearer and more useful over time, while bad ideas become more subtle. Black-Scholes and Feynman diagrams are useful tools, taught to every beginner in finance and physics, because they explain things very parsimoniously, and because they are so clear can be extended or modified, which is the goal of every active mind. The invisible hand, the idea that inflation is ultimately a monetary phenomenon, that free markets decentralize knowledge and incentives, all simple, powerful, ideas. An idea's objective and quick decipherment enables us to avoid the systematic errors which invariably arise from prolonged entanglement. The longer we look at something vague and well-known, the more we qualify it to make it more sympatico with our prejudices.

In finance the risk premium started as volatility, became beta (covariance with the stock market divided by the variance of the market), and is now a covariance with some undefined set of proxies for our happiness (too be uncovered by powerful econometric techniques really soon). The 'risk premium' is a bad idea. Taleb's 'Black Swan' applies to anything unexpected, and as every specific outcome is in some sense unexpected, it applies to everything (except finance, says Taleb, which is ironic because presumably his 'buying cheap options' strategy supposedly reflects the profundity of his approach). He now says 'Ideas come and go, stories stay,' which makes about as much sense as anything else he says.

* I agree with Nietzsche that duty is not obvious, and often some self-serving platitude for some powerful interest, so it isn't helpful to state that something that is a duty is best. Further, it makes no sense to ignore context when applying a universal law, as when you should lie to keep Nazis from finding Jews in your basement, or when you kill a dangerous burglar, and so universal law is not obvious. Lastly, as Ayn Rand noted, ignoring the consequences of actions, and just focusing on the duty, is irrational, because we act to make things in a real world that we might as well believe really is real. Finally, I should note it is rather circular in practice, because in the end the 'universal law' is defended on utilitarian grounds anyway (eg, it will make society happier).

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