To inform, confuse, and enlighten; in economic matters as well as philosophical ones. Jørund Aarsnes and Stephan Jensen write on economics and the human condition.
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Category — Conjectures

Power Corrupts

According to this article in The Economist, recent research into the psychology of power has provided som interesting insights into the anecdotal hypothesis that “power corrupts”. In a study done by Dutch and American researchers, experiment participants in an emotionally induced position of power tended to hold themselves to a lower moral standard than participants assigned to a control group not given power. That is, they would be significantly more likely to think that it would be perfectly fine for them to cheat on their taxes while at the same time frowning upon others doing the same. There are of course ample examples of this throughout human history and present.  Ted Haggard, the former leader of one of the largest American conservative evangelical mega-churches as well as the enormous National Association of Evangelicals, condemned homosexuality while frequently purchasing sex and methamphetamine from male prostitutes. The notorious Chairman Mao (pictured above gracing a crowd of cheering Chinese proletarians with his presence) caused the deaths of more than 70 million people and demanded that the entire population of China give up private property while he himself lived a life of extreme luxury.

However, the most interesting part of the recent study suggest that the picture is more complicated. In particular, the study found that when people feel like the power they have is not deserved the picture changes completely. In fact, test subjects who felt like they had undeserved power were significantly more likely than the control group to judge themselves much more harshly than others. That is, they would think it would be more okay for their neighbor to cheat on their taxes or steal a bike than for themselves to do it.

This brings up some interesting points about leadership, both in politics and business. In a sense, the moral foundation of capitalism is the idea that you always get what you deserve – and what better way of being told you are entitled to power than being given millions of dollars to thank you for having it. Democratic government is perhaps even worse. Cheering crowds and millions of supporters marching off to vote for you on election day is hardly a way to make you feel like you didn’t deserve it.

Venetian Democracy

The Greeks and their successors emphasized education as a means to ensure moral ballast and humility. Anarchists believe that we could do away with power altogether (I’ll see you in the Hobbesian state of nature).  Personally, I like the Venetian approach.  The longest surviving republic in history partially solved the problem outlined above by using an exceedingly complicated election process featuring numerous lotteries to select people  for office. Of course, the question remains whether humble and responsible leaders selected by random are better than self-righteous ones we elect. Optimality, as always, is elusive.

 

 

February 8, 2010   2 Comments

Did Mark Twain Hate America?

Picture from http://www.jimrlong.us/

On our recent and very pleasurable trip the the United States, some of my more conservative friends who we were visiting insisted on showing us one of their new favorite movies - An American Carol. The movie is a railing if highly inconsistent criticism of any and every idea championed by liberal America anno 2008, in particular its anti-war sentiment. The main character of the movie is Michael Moore (“Malone” in the movie), who takes the role as the scrooge of 4th of july – and is visited by three ghosts, amongst them General George Patton and country singer Trace Atkins (proudly playing himself). On his way to salvation and pro-war attitudes, he is slapped in the face repeatedly by an (as always) morally righteous Bill O’Reilly (also played by himself), who warns Moore that he is abusing his freedom of speech by preaching pacifism. In particular, the film echoes conservative America by claiming that Michael Moore and his followers – by questioning the moral superiority of the United States at war [Read more →]

January 29, 2010   4 Comments

The Future Prospects of the Norwegian Krone

The authors of this blog merrily receive about 82000 Norwegian kroner (NOK, €10 000) every academic year in living support for students from the Government of Norway. As we study in Estonia and do not engage in currency hedging, our standard of living (in economic terms) is subject to the NOK/EUR exchange rate. (Estonia has pegged its currency to the Euro and is most probably joining next year)

Over at Financial Times they report that Credit Suisse has made its currency predictions for the next year and betting on the strength of the krone and selling the Euro. With the budget balance and current account surplus larger than 10 percent of GDP, lowest unemployment rate in Europe and buoyant stock and housing markets Norway looks like a sure bet. It looks like we can expect a lenient new year in Tallinn.

Of course there are certain caveats to such a prediction. Foreign exchange markets are notoriously hard to predict and from what I remember investment banks tend to fare worse than just predicting the current exchange rate. Further, as a small economy, Norway would suffer under the curse of small currencies if a new financial crisis was to arise (which many are predicting). Last, the krone correlates rather well with the oil price which might / might not be a benefit for an eventual speculator.

Thanks go to Radu, a loyal evolution-revolution reader, for sharing the FT-article.

Update (May 4th, 2010): More on the Future Prospects of the Norwegian Krone (it’s still on the way up) – New article

January 12, 2010   5 Comments