amudu

Tuesday, November 15, 2011

What Is Auspiciousness

“Never in the past was there, nor in the future will there be, a man like Janaka, who had Sita as a daughter, full of all auspiciousness.” (Janaki Mangala, Svayamvara Ki Taiyari, 7)

bhayehu na hoihi hai na janaka sama naravai |
sīya sutā bhai jāsu sakala mangalai ||

What is the best for our welfare? Can there be just one thing that applies universally? If one person is puffed up by the false ego resulting from excessive material opulence and enjoyment, obviously what’s good for them will be a humbling of that pride, something to remind them that they are not in control of everything. On the other hand, someone who is destitute, barely getting by each day with a few morsels of food, can really use some security, the peace of mind that comes with knowing that material amenities will be available in steady supply. Thus what is auspicious for one person is not necessarily beneficial to another. Yet one woman’s company is so delightful that regardless of one’s position, whether they are a powerful king or a renounced yogi, everything beneficial comes as a result of meeting her. She is the ocean of mercy, the reservoir of beauty, and with love offered to her in genuineness comes the fruit of our existence.

It should be noted that even in spiritual life, which is above the temporary pitfalls of acceptance and rejection that swing perpetually like a pendulum, there is not uniformity in desires. The materialist enjoyer is referred to as akarmi in the Vedas. This word points to fruitive work, something performed for a specific benefit. The work has reactions, which are referred to as fruits, or phala; hence the translation of karma into “fruitive work”. The reactions aren’t always intended, nor are they always expected, making karma a complicated business. The enjoyments of even the cherished results don’t last forever, requiring repeated endeavor in fruitive activity.

The jnanis, yogis and bhaktas are above karma. A jnani is in search of jnana, or knowledge. In this sense there is some work applied, but it is only through the mind, so there are no visible fruits that result immediately. Rather, through theoretical exercise, the mental speculator hopefully can alter their behavior in such a way that the reactions to their work are always what they intend and that the enjoyments do not bind them in further misery. The yogis are similarly engaged in a higher cause. Through meditation they hope to block off the influence of the senses, to remain in trance so that the consciousness can stay pure.

For the karmis, yogis and jnanis the cherished rewards are not the same. For instance, the karmi considers success in their ventures to be auspiciousness. A tired worker desiring a nice vacation destination spot views a healthy bank balance and the ability to travel as favorable circumstances. The yogi, on the other hand, considers a sacred place that is quiet and peaceful as an auspicious blessing. The jnani lives off of mental speculation and the ability to accept higher knowledge. The intelligentsia class can be likened to the jnanis, so what they consider auspicious is high knowledge in the form of books and the ability to think rationally.

Only the bhaktas, however, are all-inclusive. They can follow any of the activities of the karmis, jnanis andyogis and find auspiciousness through maintaining a purified consciousness. For the bhaktas, the aim is love, the transcendental variety. When dovetailed with spirituality, bhakti is known as bhakti-yoga, ordevotional service

. Karma, jnana and meditational yoga can also be linked with spirituality, but again the conditions deemed beneficial are not uniform. For the bhakta, the only requirement is the ability to remain in divine trance, to be able to contemplate on the Supreme Lord.

How is this different from the yogis who sit in meditation? For starters, the conditions for performing meditational yoga are very difficult, so much so that the path is not recommended at all for the people of this age. These recommendations come from the Vedas and their derivative scriptures, which represent the original source of knowledge in this world. The entire world consists of various branches of Vedic culture, which started with the instructions of the Supreme Personality of Godhead that were imparted to the first created living entity, Lord Brahma. From Brahma’s teachings, the initial systems of religion

were created, and as further time elapsed from the start of creation, deviation from the original principles increased, so much so that now there are too many spiritual denominations to count.

Common to any system of maintenance is a desired end-goal. Bhakti is the summit of religious practice because it has the highest end-goal that exists: constant association with God. The Supreme Lord is a personality with divine features, qualities which provide Him pleasure and also attract the sincere souls, who are miniature versions of God. Any being that is autonomous in its movement is a small version of God, but since their exercise of that freedom is limited, they are not equal to the Supreme Person. Fear not, however, as there is no need to try to equal God. The Supreme Lord is meant to be enjoyed through His association, a link which thus represents the most auspicious condition.

How can we say this with certainty? The Supreme Lord is described as having a transcendental body full of sweetness. He is the most beautiful, wise, strong, renounced, wealthy and famous. We are already attracted to famous and successful people, those who have bucked the odds and reached the tops of their respective fields. Beauty is attractive to pretty much anyone, as are strength and knowledge. In this way we see that God’s attractiveness is not a sectarian assertion or something that can only be enjoyed by people born and raised in a certain place. Rather, God is attractive to every single person, including the atheists who deny His existence. In the absence of personal interaction with the Supreme Lord and His brilliant features, what the living entity will find appealing are various impersonal aspects, separated energy expansions. Only in these areas are there varieties of auspicious conditions, dualities in what people find beneficial. This, of course, is because of the lack of the Supreme Lord’s personal presence.

In bhakti, the divine’s features are talked about, relished, honored, and most of all, enjoyed. When we have the most attractive person’s image within our minds, our activities will be driven towards maintaining the sight of that image. Thus the bhakta can be doing something as simple as eating and still enjoy full auspiciousness. For one king a long time ago, he was doing the odd job of ploughing a field, when in an instant he felt the thrill of a lifetime, a jolt of happiness that he had never felt before. This moment would forever change his life.

“One is understood to be in full knowledge whose every act is devoid of desire for sense gratification. He is said by sages to be a worker whose fruitive action is burned up by the fire of perfect knowledge.” (Lord Krishna

, Bhagavad-gita

, 4.19)

Why was a king ploughing a field? Wasn’t this an act of karma? If so, how could the happiness he found be the source of pleasure for others as well? Though outwardly engaged in fruitive work, this leader of men was actually doing his occupational duty, remaining unattached to the result. He was a fruitive worker who had burned up the reactions to his work by being fully in knowledge. In one sense, this wonderful king of ancient times could be thought of as a combination jnani/yogi. He had knowledge of dharma, or religiosity, which then guided his behavior. He also had control over his senses, which earned him the title Videha, which means “one who is bodiless”.

As mentioned before, the karmis, yogis and jnanis each have respective definitions of auspiciousness, conditions whose merits may not apply across disciplines. Though he was known as an expert yogi, King Janaka was actually a bhakta, or devotee, at heart. This meant that through his pious acts, he was qualifying himself to gain full auspiciousness, which would arrive on the day he would find the precious baby girl in the ground. Of all the places to find gold in the form of another human being, Janaka found his little treasure in the ground that was being tilled for a sacrifice, or yajna.

What was so wonderful about this event? How would this help Janaka’s piety? Aren’t the karmis the ones enchanted by familial attachment, which is only temporary? This was no ordinary girl. Just as the Supreme Lord is the reservoir of attractiveness, His eternal consorts possess similarly brilliant features. In many ways God’s companions are more glorious than He is, for they are completely devoted to Him. Having the audience of a devotee is the greatest blessing for the person wandering aimlessly through life in search of a higher taste, one that doesn’t leave bitter aftereffects or vanish in an instant.

The girl Janaka found was the Supreme Lord’s wife in the spiritual sky. Since God is the source of all men, He is given the name Narayana. Since He is the most fortunate entity in the world, His wife is known as Lakshmi, who is the goddess of fortune. That same Lakshmi appeared in Janaka’s sacred land to bless him, to give him full auspiciousness. Janaka was the most pious king and thus fully deserved having Lakshmi’s presence.

But why come as a little girl? Why didn’t Lakshmi just visit Janaka’s home and bless him? Bhakti is an eternal engagement; hence it is also known as bhagavata-dharma. In every other area of endeavor there is a state of maturation, where the cherished fruit is received and then enjoyed for some length of time. Bhakti is divine love, so it can never stop. The greatest blessing, the most auspicious condition, is to be able to continue one’s bhakti unabated. God’s presence and the association of His dearmost devotees

are considered universally auspicious for this very reason. Whoever comes in contact with such divine figures and knows how to make use of that association will find an eternal engagement that brings forth tremendous delights. The hungry man looking for a meal finds temporary auspiciousness by being fed a few morsels of food, but he who has a tree on his land that produces endless fruits is blessed every day. Having Lakshmi appear as a little girl in his kingdom gave Janaka a wish-fulfilling tree to fulfill all his desires.

Though he was Videha, Janaka immediately had affection for the little girl, deciding to raise her as his own daughter. Since she was found in the ground, he named her Sita. Goswami Tulsidas

, in writing his Janaki Mangala, which describes how Sita’s marriage would take place later on, remarks that Janaka is the most fortunate, and that there was never a king like him, nor will there be one like him in the future. He received Sita as a daughter, which meant that it was his obligation to smother her with parental affection. Who can imagine receiving such a benediction? People pray to have Lakshmi, or fortune, all the time, but if they misuse her benedictions, they can lose everything. Thereby Lakshmi can end up harming someone as well, if they are not deserving of her association.

On the other hand, someone like Janaka was so pious that he was desirous to love God and His devotees without hesitation. What better way to allow for that love to continue than by giving him Sita as a daughter? The Supreme Lord knows all. He watches the behavior of the pious and sees whether or not they are qualified for receiving full auspiciousness. In addition to raising Sita as his most precious daughter, on the day of her marriage Janaka would receive Narayana Himself, in the guise of a warrior prince named Rama, as a son-in-law.

Though Sita is Lakshmi and thus a divine figure, Janaka’s love for her never stops. He found real auspiciousness by gaining the ability to practice bhakti as a way of life. To extract his heartfelt emotions, Lakshmi came herself to play the role of his daughter. The king made the most of the opportunity by increasing his bhakti more and more, so much so that he is today considered one of the twelve authorities on devotional service. As Tulsidas states, there is no king like him, and by the same token, for the pious there is no auspiciousness like that of Sita’s association. Just remembering her, her devotion to Rama, and the gloriousness of her father, the mind can find peace, comfort and happiness in any situation.

In Closing:

Something as auspicious do I take,

But not for others also does it make.

One side is looking for much wealth,

While another wants less for mental health.

That Janaka found greatest fortune is true,

Gives happiness to all men, both me and you.

Chance to love Sita in affection, God’s wife,

Keeps flame of bhakti alive, gives eternal life.

Keep on searching past, present and future,

But won't find man like Janaka, king like no other.

King's greatest fortune came from Sita alone,

For she would bring Shri Hari to his home.

Is Neuroscience the Death of Free Will?

By EDDY NAHMIAS

Is free will an illusion? Some leading scientists think so. For instance, in 2002 the psychologist Daniel Wegner wrote

, “It seems we are agents. It seems we cause what we do… It is sobering and ultimately accurate to call all this an illusion.” More recently, the neuroscientist Patrick Haggarddeclared

, “We certainly don’t have free will. Not in the sense we think.” And in June, the neuroscientist Sam Harris claimed

, “You seem to be an agent acting of your own free will. The problem, however, is that this point of view cannot be reconciled with what we know about the human brain.”.

Such proclamations make the news; after all, if free will is dead, then moral and legal responsibility may be close behind. As the legal analyst Jeffrey Rosen wrote

in The New York Times Magazine, “Since all behavior is caused by our brains, wouldn’t this mean all behavior could potentially be excused? … The death of free will, or its exposure as a convenient illusion, some worry, could wreak havoc on our sense of moral and legal responsibility.”

Indeed, free will matters in part because it is a precondition for deserving blame for bad acts and deserving credit for achievements. It also turns out that simply exposing people to scientific claims that free will is an illusion can lead them to misbehave

, for instance, cheating more or helping others less. ^[1]

So, it matters whether these scientists are justified in concluding that free will is an illusion.

Here, I’ll explain why neuroscience is not the death of free will and does not “wreak havoc on our sense of moral and legal responsibility,” extending a discussion begun in Gary Gutting’s recent Stone column

. I’ll argue that the neuroscientific evidence does not undermine free will. But first, I’ll explain the central problem: these scientists are employing a flawed notion of free will. Once a better notion of free will is in place, the argument can be turned on its head. Instead of showing that free will is an illusion, neuroscience and psychology can actually help us understand how it works.

Leif Parsons

When Haggard concludes that we do not have free will “in the sense we think,” he reveals how this conclusion depends on a particular definition of free will. Scientists’ arguments that free will is an illusion typically begin by assuming that free will, by definition, requires an immaterial soul or non-physical mind, and they take neuroscience to provide evidence that our minds are physical. Haggard mentions free will “in the spiritual sense … a ghost in the machine.” The neuroscientist Read Montague defines free will as “the idea that we make choices and have thoughts independent of anything remotely resembling a physical process. Free will is the close cousin to the idea of the soul” (Current Biology 18, 2008).^[2]

They use a definition of free will that they take to be demanded by ordinary thinking and philosophical theory. But they are mistaken on both counts.

We should be wary of defining things out of existence. Define Earth as the planet at the center of the universe and it turns out there is no Earth. Define what’s moral as whatever your God mandates and suddenly most people become immoral. Define marriage as a union only for procreation, and you thereby annul many marriages.

The sciences of the mind do give us good reasons to think that our minds are made of matter. But to conclude that consciousness or free will is thereby an illusion is too quick. It is like inferring from discoveries in organic chemistry that life is an illusion just because living organisms are made up of non-living stuff. Much of the progress in science comes precisely from understanding wholes in terms of their parts, without this suggesting the disappearance of the wholes. There’s no reason to define the mind or free will in a way that begins by cutting off this possibility for progress.

Our brains are the most complexly organized things in the known universe, just the sort of thing that could eventually make sense of why each of us is unique, why we are conscious creatures and why humans have abilities to comprehend, converse, and create that go well beyond the precursors of these abilities in other animals. Neuroscientific discoveries over the next century will uncover how consciousness and thinking work the way they dobecause our complex brains work the way they do.

These discoveries about how our brains work can also explain how free will works rather than explaining it away. But first, we need to define free will in a more reasonable and useful way. Many philosophers, including me, understand free will as a set of capacities for imagining future courses of action, deliberating about one’s reasons for choosing them, planning one’s actions in light of this deliberation and controlling actions in the face of competing desires. We act of our own free will to the extent that we have the opportunity to exercise these capacities, without unreasonable external or internal pressure. We are responsible for our actions roughly to the extent that we possess these capacities and we have opportunities to exercise them.

These capacities for conscious deliberation, rational thinking and self-control are not magical abilities. They need not belong to immaterial souls outside the realm of scientific understanding (indeed, since we don’t know how souls are supposed to work, souls would not help to explain these capacities). Rather, these are the sorts of cognitive capacities that psychologists and neuroscientists are well positioned to study.

This conception of free will represents a longstanding and dominant view in philosophy, though it is typically ignored by scientists who conclude that free will is an illusion. It also turns out that most non-philosophers have intuitions about free and responsible action that track this conception of free will. Researchers in the new field of experimental philosophy

study what “the folk” think about philosophical issues and why. For instance, my collaborators and I have found that most people think that free will and responsibility are compatible with determinism, the thesis that all events are part of a law-like chain of events such that earlier events necessitate later events.^[3]

That is, most people judge that you can have free will and be responsible for your actions even if all of your decisions and actions are entirely caused by earlier events in accord with natural laws.

Our studies suggest that people sometimes misunderstand determinism to mean that we are somehow cut out of this causal chain leading to our actions. People are threatened by a possibility I call “bypassing” — the idea that our actions are caused in ways that bypass our conscious deliberations and decisions. So, if people mistakenly take causal determinism to mean that everything that happens is inevitable no matter what you think or try to do, then they conclude that we have no free will. Or if determinism is presented in a way that suggests all our decisions are just chemical reactions, they take that to mean that our conscious thinking is bypassed in such a way that we lack free will.

Even if neuroscience and psychology were in a position to establish the truth of determinism — a job better left for physics — this would not establish bypassing. As long as people understand that discoveries about how our brains work do not mean that what we think or try to do makes no difference to what happens, then their belief in free will is preserved. What matters to people is that we have the capacities for conscious deliberation and self-control that I’ve suggested we identify with free will.

But what about neuroscientific evidence that seems to suggest that these capacities are cut out of the causal chains leading to our decisions and actions? For instance, doesn’t neuroscience show that our brains make decisions before we are conscious of them such that our conscious decisions are bypassed? With these questions, we can move past the debates about whether free will requires souls or indeterminism — debates that neuroscience does not settle — and examine actual neuroscientific evidence. Consider, for instance, research by neuroscientists suggesting that non-conscious processes in our brain cause our actions, while conscious awareness of what we are doing occurs later, too late to influence our behavior. Some interpret this research as showing that consciousness is merely an observer of the output of non-conscious mechanisms. Extending the paradigm developed by Benjamin Libet, John-Dylan Haynes and his collaborators used fMRI research to find patterns of neural activity in people’s brains that correlated with their decision to press either a right or left button up to seven seconds before they were aware of deciding which button to press. Haynes concludes

: “How can I call a will ‘mine’ if I don’t even know when it occurred and what it has decided to do?”

However, the existing evidence does not support the conclusion that free will is an illusion. First of all, it does not show that a decision has been made before people are aware of having made it. It simply finds discernible patterns of neural activity that precede decisions. If we assume that conscious decisions have neural correlates, then we should expect to find early signs of those correlates “ramping up” to the moment of consciousness. It would be miraculous if the brain did nothing at all until the moment when people became aware of a decision to move. These experiments all involve quick, repetitive decisions, and people are told not to plan their decisions but just to wait for an urge to come upon them. The early neural activity measured in the experiments likely represents these urges or other preparations for movement that precede conscious awareness.

This is what we should expect with simple decisions. Indeed, we are lucky that conscious thinking plays little or no role in quick or habitual decisions and actions. If we had to consciously consider our every move, we’d be bumbling fools. We’d be like perpetual beginners at tennis, overthinking every stroke. We’d be unable to speak fluently, much less dance or drive. Often we initially attend consciously to what we are doing precisely to reach the point where we act without consciously attending to the component decisions and actions in our complex endeavors. When we type, tango, or talk, we don’t want conscious thinking to precede every move we make, though we do want to be aware of what we’re doing and correct any mistakes we’re making. Conscious attention is relatively slow and effortful. We must use it wisely.

We need conscious deliberation to make a difference when it matters — when we have important decisions and plans to make. The evidence from neuroscience and psychology has not shown that consciousness doesn’t matter in those sorts of decisions — in fact, some evidence

suggests the opposite. We should not begin by assuming that free will requires a conscious self that exists beyond the brain (where?), and then conclude that anyevidence that shows brain processes precede action thereby demonstrates that consciousness is bypassed. Rather, we should consider the role of consciousness in action on the assumption that our conscious deliberation and rational thinking are carried out by complex brain processes, and then we can examine whether those very brain processes play a causal role in action.

For example: suppose I am trying to decide whether to give $1,000 to charity or buy a new TV. I consciously consider the reasons for each choice — e.g., how it fits with my goals and values. I gather information about each option. Perhaps I struggle to overcome my more selfish motivations. I decide based on this conscious reasoning (it certainly would not help if I could magically decide on no basis at all), and I act accordingly. Now, let’s suppose each part of this process is carried out by processes in my brain. If so, then to show that consciousness is bypassed would require evidence showing that thosevery brain processes underlying my conscious reasoning are dead-ends. It would have to show that those brain processes do not connect up with the processes that lead to my typing my credit card number into the Best Buy Web site (I may then regret my selfish decision and re-evaluate my reasons for my future decisions).

None of the evidence marshaled by neuroscientists and psychologists suggests that those neural processes involved in the conscious aspects of such complex, temporally extended decision-making are in fact causal dead ends. It would be almost unbelievable if such evidence turned up. It would mean that whatever processes in the brain are involved in conscious deliberation and self-control — and the substantial energy these processes use — were as useless as our appendix, that they evolved only to observe what we do after the fact, rather than to improve our decision-making and behavior. No doubt these conscious brain processes move too slowly to be involved in each finger flex as I type, but as long as they play their part in what I do down the road — such as considering what ideas to type up — then my conscious self is not a dead end, and it is a mistake to say my free will is bypassed by what my brain does.

So, does neuroscience mean the death of free will? Well, it could if it somehow demonstrated that conscious deliberation and rational self-control did not really exist or that they worked in a sheltered corner of the brain that has no influence on our actions. But neither of these possibilities is likely. True, the mind sciences will continue to show that consciousness does not work in just the ways we thought, and they already suggest significant limitations on the extent of our rationality, self-knowledge, and self-control. Such discoveries suggest that most of us possess less free will than we tend to think, and they may inform debates about our degrees of responsibility. But they do not show that free will is an illusion.

If we put aside the misleading idea that free will depends on supernatural souls rather than our quite miraculous brains, and if we put aside the mistaken idea that our conscious thinking matters most in the milliseconds before movement, then neuroscience does not kill free will. Rather, it can help to explain our capacities to control our actions in such a way that we are responsible for them. It can help us rediscover free will.

FOOTNOTES

[1]

It’s not clear what exactly drives these behavioral effects

of telling people free will is an illusion. Along with the two psychologists who originally discovered these effects, Kathleen Vohs and Jonathan Schooler, philosopher Thomas Nadelhoffer and I are currently following up on this research to better understand what information leads people to alter their beliefs about free will and how that then influences their behavior.

[2]

In an influential article

, Joshua Greene and Jonathan Cohen, similarly conclude, “Free will, as we ordinarily understand it, is an illusion.” They reach this conclusion in part by assuming that people ordinarily understand free will and responsibility to require dualism (i.e., a non-physical soul) and libertarianism (i.e., powers to cause decisions without being caused to do so).

[3]

See

Nahmias and Murray “Experimental Philosophy on Free Will: An Error Theory for Incompatibilist Intuitions” and Nahmias, Morris, Nadelhoffer, and Turner “Is Incompatibilism Intuitive?” which, along with other x-phi work on free will, have recently been discussed in articles inScience

and NewScientist

Eddy Nahmias

is an associate professor at Georgia State University in the department of philosophy and the Neuroscience Institute. He is the author of many articles, including “Scientific Challenges to Free Will” and “Intuitions about Free Will, Determinism, and Bypassing.” He is the co-editor of the book, “Moral Psychology: Historical and Contemporary Readings,” and is currently writing another, titled “Rediscovering Free Will.”

Source: The New York Times
http://opinionator.blogs.nytimes.com/2011/11/13/is-neuroscience-the-death-of-free-will/

Posted by
Robert Karl Stonjek

Just before accident

Controversy over efficiency of share markets

A reader of the previous week’s My View on ‘Playing the Share Market Game: Play it according to Rules’ has taken issue with economists for not using mathematics to present their ideas precisely and failing to come up with theories acceptable to everyone alike.
As a result of this second implication, he has claimed that economic theories presented by one economist are subject to dispute by others and therefore, economics has become a subject without a consensus.

Economists may not be sound advisors

The criticism of this reader is valid in the sense that the observed absence of consensus among economists leads to confusion rather than enrichment of knowledge. Economists taking two different views at two different times or giving vague answers like ‘on the one hand, this can happen and on the other, this can happen’ have frustrated most of the pragmatic politicians who need quick fixes to issues.
Therefore, the angry US President Harry S Truman is reported to have demanded a ‘one handed economist’ according to the book of quotations (available at http://quotationsbook.com/quote/11809/).
The way economists form their theories too has been subject to criticism by cynical politicians: as reported by Charles Wheelan in his ‘naked economics’, the US President Ronald Reagan is reported to have described economists as people who see something in practice and then wonder whether it would work in theory too, a process similar to putting the cart before the horse. They are also accused of being too much dogmatic and theoretical.
A joke that has widely circulated has the following story about economists: two economists walking down the street see a $ 100 bill in a gutter and one wonders whether it is a 100 dollar bill and the other quickly dismisses his speculation saying that if it were a 100 dollar bill, it would have been picked up by someone already.
What it means is that, according to economists, people are all rational and rational people will quickly exploit profit opportunities and not leave a valuable asset unused. It also explains why economists are poor; they can advise others how to make money but they themselves are not good at picking up profitable opportunities.
So, according to many, economists are not the best people who can give sound advice to others.
Limitation of mathematics in presenting the real world
The criticism levelled against economists on the ground of not using mathematics for formulating economic theories is not exactly correct. Economists like Kautilya in the 4th century BCE or later day economists like Adam Smith in the 18th century CE did not use mathematical equations to explain their economic logic, but more modern economists, from the time of Yale University academic Irwin Fisher who published ‘The Nature of Capital and Income’ in 1906 and later ‘The Theory of Interest’ in 1930, started to use mathematics extensively to present their economic logic more cogently.
Following Fisher’s tradition, many of the economists who presented theories of investment in the first half of the last century were all mathematically and statistically inclined academics. For instance, Austria-born Oskar Morgenstern and Hungary-born John von Neumann solidified the rational behaviour of investors in maximising their return through the maximisation of an expected utility in an equation filled publication titled ‘Theory of Games and Economic Behaviour’ in 1944.
However, it was left to the Massachusetts Institute of Technology economist Paul Samuelson to incorporate mathematical logic to economics in 1947 by rewriting his doctoral dissertation ‘Foundations of Economic Analysis’ in mathematical form. Since then, mathematics came to stay permanently with economics; any economic theory or paper which did not use mathematics was simply ignored by mainstream economists.
However, mathematics has its own limitation of explaining the real world which we live in. Mathematical logic which is also called Aristotelian Dualistic Logic could explain only two events, namely, ‘yes-no’ or ‘true-false’. This meant that an equation could have a solution or it cannot have a solution; there is no any intermediary state of events. In contrast to this two-dimensional world, the real world is multi-dimensional and hence, cannot be properly explained by simply using mathematical logic.
To explain the real world, it is necessary to use a logical system like ‘fuzzy logic’. Taking this limitation into account, the writer recalls that a professor at Simon Fraser University in Canada, a great mathematician himself, used to print the following restriction in his question papers on Advanced Microeconomics: ‘answer this paper without using mathematics or technical terms’. He believed that, when properly used, words had a greater power in conveying human ideas clearly to others.

Economists should necessarily disagree with each other
Now, about economists disagreeing with each other. This may seem a grave crime, but one should understand that the purpose of scientific inquiry is to find ‘a truth’ rather than ‘the truth’. Hence, a truth that is established with overwhelmingly supportive evidence today is liable to be refuted tomorrow thereby paving the way for establishing ‘another new truth’, again until it is refuted by another scientist. This feature of scientific inquiry distinguishes it from myths and has been responsible for developing human knowledge throughout history.
Thus, the London School of Economics based philosopher Karl Popper announced that ‘refutability’ of the established scientific theories is the main feature attributable to a scientific theory. If a theory cannot be refuted, then, it is not science but something like ‘an absolute truth’. Therefore, disagreement among economists, or for that matter among intellectuals in any other branch of science, is not something about which people should be worried. It is a healthy feature which is necessary for the advancement of science.
Accordingly, economic theories that have been developed to explain the operation of share markets too have been subject to debate and dispute. Instead of having a consensus, there is much controversy surrounding the behaviour of share markets as propounded by different schools of economists.
One school of economists known as the efficient market school believe that the share markets are efficient and behave perfectly in a random manner so that its future events cannot be predicted with certainty. The other school called the behavioural finance school refutes this claim.
The efficient market school
The efficient market school comes from the mainstream economics that has many convenient assumptions about the behaviour of markets and its participants. Accordingly, the market participants are rational, try to get the maximum gain for them, search for information and make carefully considered economic decisions.
The rational people have several qualities: they are always consistent in the sense that if they make a decision today, they would not change it tomorrow unless they have compelling evidence to the contrary; before making a decision, they assess both the costs and benefits of such decision carefully and make the decision only if the benefits overwhelms the costs; to do so, they acquire all the necessary and relevant information and assess that information carefully; thus, they develop a skill called ‘perfect foresight’ so that the future events are not uncertain; by behaving in this manner, they are not guided by emotions and cannot be fooled by crafty and smart people.
When decisions are made in this manner, the demand for shares is guided purely by an accurate assessment of the markets today and tomorrow. Thus, share market prices reflect all the relevant information that has been made available to the prospective investors.

A theory should be valued by its predictive power
One criticism made against this model is that the assumptions made are totally unrealistic and therefore, an economic theory developed on the basis of unrealistic assumptions is not valid. This is a fair criticism but then, if one goes by it, it challenges the whole scientific world.
This is because the real world is so complex and for a scientist to map the real world, he should necessarily make simplifying assumptions about the real world. In the choice of his assumptions, he has to take into account only the most important features of the real world and leave out many which are not so important for his main purpose.
As we mentioned earlier, the purpose of science is not to find the truth, but a truth which amply explains the real world. Hence, if the assumptions help him to attain his main objective, then, that is sufficient for him to come up with a theory that would reasonably explain the real world.
When this criticism was made against economic theories in 1940s, mainly by an economic school called institutionalists, it was the Chicago University economist Milton Friedman who answered them.
In a paper he published in 1953, under the title ‘The Methodology of Positive Economics’, he asked the question ‘so what?’ If a theory is good enough to make fair predictions about the future, then, one should not be worried about the underlying mechanism of building that theory.
A good analogy is as follows: it does not matter whether it is a small man inside the television set that gives us the picture and sound when we switch on the television set. What matters to us is whether the TV set gives us the picture and sound.
So, according to Friedman, the process by which a theory has been made may be a complete black box, incomprehensible and unknown to the person who uses the theory. For him, if the theory helps him to make accurate predictions, then, that is a sign of a good theory. So, a theory is valued from its practical usefulness and not by the realistic nature of its assumptions. This approach to science is called pragmatism.

Three off-shoots of efficient markets
Based on these arguments, three separate and independent off-shoots about efficient markets have been developed. The first is that the share markets display a random behaviour which economists call the random walk hypothesis, an analogy drawn from the unpredictable walk of a drunkard.
Since no one could predict accurately where a drunkard would place his foot next, so is it difficult to predict how the market prices would change in the next period. Though many past economists and statisticians had discovered this random nature of the change in share market prices, the credit for presenting it in a formal way goes to Paul Samuelson and a team of economists who worked under him in early 1950s.
The second off-shoot of the investment theory came from two economists, Ando Modigliani and Merton Miller who published two papers during a short span of three years during 1958 to 1961. Their approach known as Modigliani and Miller or M & M Approach presented a revolutionary idea about firms’ investment decisions.
According to them, it did not matter in what form a firm raised its funds, whether by issuing shares, bonds or using internal reserves. What mattered was whether the investment made would raise the value of the firm’s shares. If it did so, it was worth undertaking the said investment. If not, it was not worth considering the investment.
A practical problem with their approach is that a firm has to know in advance how the share market would react to its investment decisions in order to assess whether a given investment is desirable or not. Modigliani and Miller did not give a satisfactory answer to this question.
Efficient market hypothesis and its revisions
The third off-shoot was developed by the Chicago University economist Eugene Fama who published two papers in 1965, one titled ‘The Behaviour of Stock Market Prices’ and the other titled ‘Random Walks in Stock Prices’ based on his 1964 PhD dissertation submitted to the Chicago Business School. His research and publications gave birth to the now famous Efficient Market Hypothesis or EMH.
Fama argued that markets are informationally efficient and any new information released to the market would spontaneously adjust the market prices. Because of this feature in markets, no one would be able to consistently achieve super gains in the markets since information which is available to one investor is available to others as well. This is because rational investors always looked for relevant information and made use of such information in making investment decisions.
When the critics pointed out that market participants are not rational, Fama subsequently revised his EMH presenting three types of market efficiency: a weak form efficiency in which stock prices reflect all the past information, a semi-weak form in which the prices reflect all the publicly available information and a strong form in which the stock prices reflect even the publicly unavailable exclusive private information. Thus, according to this strong form, no one can earn super gains through insider trading.

Behaviouralists’ attack on efficient markets
The main challenge to this efficient market school came from the behavioural finance school. Led by the Carnegie Mellon University economist Herbert Simon, this school challenged the main premise of the efficient market school, namely, that the market participants are rational.
Herbert Simon found that people are not that rational due to three impediments. First, they have no access to all the relevant information. Second, even if they have access to information, their brain power is not adequate to process that information accurately. Third, they have no time to sit back and process that information. Hence, their rationality is bounded by these three impediments and Simon called it ‘bounded rationality’.
Since people are far from being rational, they do not maximise their gains. They simply try to satisfy their desires sufficiently and Simon coined the word ‘satisfice’ to describe this behaviour combining the two words ‘satisfy’ and ‘suffice’. Hence, according to behavioural financiers, people are not maximisers but satisficers.

Prospect theory
Two psychologists, Daniel Kahneman and Amos Tversky built on Simon’s findings on limited rationality of people. In a paper they published in Econometrica in 1979, they presented their new approach as ‘Prospect Theory’ which argued that the evaluation of risky outcomes by people is often distorted because of four factors.
First, people do not seek correct information but information to endorse their beliefs. Second, people do not have the full picture of a situation and base their judgments on the very little they know about it. Third, they always attach an unnecessarily high value to small and unimportant events. Fourth, in the presence of potential gains, they become risk-averse and in the face of losses, they become risk-seeking.
Accordingly, a typical person would make more losses when the prices are falling or when there is a bearish market. In contrast, they make more gains when the prices are rising or when there is a bullish market. In terms of the prospect theory, people have a tendency to display a herd behaviour which is denied by the efficient market school.
The behaviour of the participants in actual share markets is close to what the behavioural financiers have explained. The market participants are irrational and can be led like a herd by a market manipulator. It enables some people to earn super profits at the expense of less informed investors who simply function as the exit mechanism for the crafty market manipulators. In many countries, the state run investment funds fall into this category of less informed investors.

(W.A. Wijewardena can be reached at waw1949@gmail.com.)

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TURN A NEW LEAF: MAKE YOUR IDEAS HAPPEN NOW

Fall Cleaning: Tackle Some of Those Big Ideas

It’s time to knock some of those big ideas off your lists. Let me tell you what I mean. Thanksgiving is coming up, Christmas will follow close behind it, and then the New Year will be here before you know it.

The holiday season is upon us. This is the perfect time to tackle some of the big ideas on your strategy list for 2011. It’s time for some fall cleaning.

Do you remember what you said?

What did you say that you wanted to accomplish in your business for this year? What were your sales goals, partnership goals, product creation goals, marketing goals? Pull out that list and take a look. And then make a decision to address one of those items with your best ideas and support team. Don’t do two or three–just focus on one of them, and give that one idea your all.

There’s no reason to wait.

You can begin the planning process right now. If you had the idea but never built a team to help you execute that idea, then call and email some key people. If your team started the work but it stalled for one reason or another, then get it started again. If the idea just didn’t cut it, then after careful evaluation make a decision to table it until a specific date, rework it within a specific time frame or remove it from the list right now.

It’s fall cleaning, which means we are removing the things that don’t belong and looking for a way to give ourselves a success measure by the New Year.

It doesn’t have to be complicated.

When you evaluate that one idea, the idea that you want to tackle before the New Year arrives, look for the obstacles. What stopped you from addressing it earlier this year?

Discover the holdup and write it down. Consider this quick piece of advice from Marcia Wieder, founder of Dream University and author of Making Your Dreams Come True: