Wednesday, October 28, 2009

The "Williamson- Dawkins" synthesis- the opposite mental shifts that evolutionary biology and economics had to make

This year's Nobel prize for economics was awarded to 2 economist's looking at hitherto under-explored questions in economics- Williamson won it for his work illuminating the conditions under which it is efficient to organize economic activity in the form of a firm (extending the work first done by Ronald Coase) - while Elinor Olstrom was distinctive in her exploration of the mechanisms by which spontaneous bottom up order could solve complex economic problems (such as the "tragedy of the commons") without central fiat by the state, by creating self enforcing rules and free institutions.

Williamson's work is particularly intriguing.An exploration of the way the economy functions shows that its most obvious feature is that people organize themselves into firms. However, the focus of economic theory has largely been on the actions of self-interested individuals and their interactions in the free market.

One of the big shifts in modern economic thinking is to see evolutionary biology as a better analogue to understand the economy as compared to physics (which is where economics borrowed most of its conceptual frameworks from, including the notion of an "equilibrium" et al).

( As an aside "The Origin of wealth" by Eric Beinhocker is a fantastic book to understand how the economy can be best understood with biology rather than physics as an analogue; what he terms as "complexity economics")

To bring out some aspects of the analogy- individuals in an economy work to maximize their own utility (or self-interest). Analogously, genes, in evolutionary biology work to maximize their own interest (i.e. survival)

The fascinating thing is, just as under most circumstances, it is optimal for the "selfish gene" (to use biologist Richard Dawkins evocative term) to organize itself into, well, an organism to ensure its survival (i.e. maximize its selfish interest)- it is also in the interest of utility maximizing individuals to organize themselves into firms to carry on economic activity.

The interesting contrast is that both fields made opposite mistakes historically. Economics got the unit of analysis right- i.e. individuals, but paid scant attention to the emergent phenomenon i.e. the firm. In biology, the emergent phenomenon was well understood (i.e. the study of living organisms), but they got the fundamental unit of analysis wrong (by trying to understand how actions of an organism are in its interest, while the right question to understand was how actions of an organism were in the gene's interest)

Evolutionary biology, has of course now embraced the notion of gene-centered analysis while studying organisms. Post the Williamson award, one would expect economics to pay far more attention to the study of firms, while being rooted in analysis of individual utility maximization

Extending the counterfactual- what if Netaji had survived?

As a history enthusiast, one of my favorite techniques in historiography is the use of counterfactual history. Counterfactual history posits and answers "What if" questions. (See the link for an overview)

As a technique, it is a good forcing mechanism to think through and assign the relative importance of a particular event to influence the course of actual history.

An interesting counterfactual that was posed recently was by the Indian historian Ramachandra Guha. Writing in the Telegraph, he posed a the intriguing question- What if Netaji had returned home to India after WW2- how would the course of Indian history been different?

His conjectures are pretty interesting, he states that Netaji would probably have started his own party which would have evolved as a leftist alternative to the Congress, posing a formidable electoral challenge. (Read the full article at

Extending the counterfactual- I surmise the following about the policy direction that India would have evolved towards:

  • Economy: More free market capitalism with an emphasis on wage goods, as compared to planned State directed economy
  • Foreign policy: Less "internationalist" and more pragmatic & militarist
  • Social fabric: Continued to be secular, with social welfarist measures targeting disadvantaged groups
  • Governance structure: More unitary system- with no linguistic states
  • Political system: A weak and faltering democracy
Some of these seem very counterintuitive, but my argument is as follows:

I feel that a viable leftist alternative to Nehru, would have reduced his own influence within the Congress, pushing it to a slightly right of center party. We forget that unlike its modern avatar- the Congress (I), the INC at the time of independence was a party with vigorous internal debate and multiple points of view. Nehru was undoubtedly the most popular leader, but it was because he was unchallenged as a vote getter, that he was able to shape the Congress into a leftist party with little resistance. With a charismatic Netaji as an opposition force, it would have been far more difficult for Nehru to completely takeover the Congress policy agenda. Right leaning leaders such as P.D. Tandon and Rajaji, would have carried more weight than they did. Also, right leaning Congressmen and the royal classes who left the Congress to form the Swatantra party, would have continued within, due to the real threat of a complete socialist takeover by Subhas Bose, creating further pressure for the Congress to be right of center. This would have led to a Congress party that is more private sector and free-market friendly. This coupled with the likely militarist posture of Bose given his INA-background, would have also probably led to a foreign policy that was more "pragmatic" and "nationalist" than "internationalist" ( as any move to be dovish would have been easily allowed Bose to present himself as a strong, decisive military leader, particularly after the China war).

Given that both Bose and Nehru had a secular outlook, it is unlikely that social policy would have been radically different. In terms of governance structure, I think the lack of viable pan-India alternative to the Congress, facilitated the capture of the opposition space by regional/linguisitic forces. The map of modern India culd have looked very different if 2 national parties were present as alternatives for voters.

However, the Nehruvian takeover prevented anti-democratic tendencies from gaining ground on both the right and the left. As Pavan Verma explains in his superb book "Being Indian", democracy flourished in India initially paradoxically due to the anti-democratic ethos of the elites!- since they allowed it to take root with the hubristic notion that they would have access to power far more easily than the poor. A strong leftist alternative, would have scared the ruling classes into proactive measures to secure their fiefdoms, challenging democracy.

A stronger challenge would have probably arisen from the left in the form of Bose himself- unlike the Anglophile Nehru, it is unlikely that Bose had a deep philosophical commitment to democracy itself (after all he did seek to forge alliances with the Axis powers). A restless Bose might have mounted a direct challenge to the democratic structure, with a combination of revolutionary leftist politics and military muscle (with a band of loyal INA soldiers).

Like all counterfactual history- this is very speculative. However, it actually underlines how central Nehru was to the evolution of modern India- with just one viable alternative leader- the nature of the Indian state could have looked very different.

Unconscious weirdness as an indicator of friendship

Totally random post:

I was speaking to a my roommate and close friend of 8 years last night, when he was telling me about how when he is alone he likes to pretend that he is a baby and acts like he is crying!!!

As weird as that is, as I reflect, I find that i know some extraordinarily weird quirk of nearly every person that I am close to.

Here is my random theory- everyone is weird, but keeps it closely guarded. When we are truly close to someone, we feel comfortable in revealing our weird side to them.

The degree of closeness of the friendship is proportional to the extent to which we can exhibit our weirdness

As I was thinking of the last statement- I was contemplating if I should tweet or blog about this. Given the weirdness of my post itself- and that I have several mere acquaintances reading my tweets, while most readers of my blog are close friends, the choice was obvious!