It is fairly uncontroversial in classic economic theory that free and fair competition is often vastly more productive than limited competition or no competition.  Many economists view a monopoly as a market failure and believe that anti-trust laws must be created and enforced in order to preserve competition.  So-called “no-bid contracts,” in which firms are granted lucrative government contracts based on cronyism rather than competition, are slammed, correctly, for costing a great deal more money than competitive contracts would cost.  As a general rule, when agents compete on the market, the goods or services that the agents are selling become more productive and/or less expensive – in other words, competition allows buyers to get more for less.

How is this related to panoptic power?  Economic competition conforms closely to the panoptic model of power.  Let us compare economic competition to the two hallmarks of the panopticon:  self-surveillance, and isolation.

In the panopticon, self-surveillance is produced within a subject by causing that subject to behave as though at any moment she might be under surveillance by a central observer.  Who is the central observer of the competitive market?  The consumer.  At any time, the consumer might evaluate the quality of the products offered up for sale by the competitors.  Competitors earn reputations based on the quality of their products, and these reputations greatly affect the profits of the competitors.  The consumer is also somewhat unpredictable, in that one never knows exactly what a consumer’s preferences might be.  Perhaps your innovative new product might become the next iPod – or perhaps it might become the next Betamax. Competitors must strive towards innovation and invention and reinvention, and must also master marketing, and still success is not guaranteed.  The point here is that competitors are always being evaluated, and they may live or die based on the results of these evaluations.  This is a powerful incentive towards self-surveillance.

In the panopticon, isolation is caused by physically separating prisoners in individual cells.  In a competitive market economy, isolation comes in the form of patents, trade secrets, and the information asymmetries that arise when competing agents each try to find and maintain a competitive edge.  If you own a restaurant, you might make the best marinara sauce in the county, but if you give away your secret recipe, that will not be the case for long.  Isolation also comes from the fact that individual agents may earn more profits through competition than through cooperation – because there will be fewer people to share the wealth.  Laws against cartelization and other forms of corporate cooperation can produce isolation effects.  In a situation where workers are competing for jobs, the workers may become isolated from each other because some wish to go on strike for higher wages while others wish to take over their jobs.

If the productive power of a competitive market is related to the productive power of the panopticon, then do the same downsides exist?  Sure.  One of these is that PD-like situations may arise in which competitors end up reaching a suboptimal equilibrium state because of their isolation.  An example of this is an industry in which advertising costs comprise a significant percentage of the industry’s income but do not effect a significant redistribution of market share for any one firm nor attract a significant number of new buyers to the market.  Each firm would be better off if no firm advertised, but if any firm advertises, they all must in order to avoid losses.  In the end every firm advertises, and the entire industry essentially throws money away.  The tobacco industry is one such example (although you won’t hear me mourning their suboptimal profits.)  There are also cases like railroads or utilities where, without collusion or intervention, redundant services may be established (imagine the case of two competing rail lines running parallel to each other).

Because the effects of panoptic power are generally experienced as difficult and unpleasant, free markets tend toward a mix of competition and cooperation.  Many agents would like to collude with each other in order to avoid the panoptic effects – in other words, break isolation to resist the power of the panopticon.  A cartel is a good example of this – competitors get together and decide that rather than compete with each other, they’ll fix prices and production at a certain level so they can all profit equally.  These cartels often result in higher prices and lower quality and quantity for goods produced – they are less productive, but they make things easier for those involved.  Labor unions are a form of cartel for workers, who agree to band together to achieve higher labor prices (wages) and shorter working hours (less production).  Such cartels and unions suffer from the risk that one agent will defect or a new agent will enter the market, thus destroying the cartel or union, and as a result an equilibrium can be reached.

The free market, which depends on competition for its functioning, is thus an example of panoptic power at work.  This is an important insight because many experience panoptic power as something which imprisons them, which calls into question how much “freedom” agents in the free market actually have and provides a theoretical framework to contrast, rather than conflate, liberty and productivity.

The name of the game is Monopoly.  The object of the game is to win.  You win by having the most net worth at the end of the game or by being the last player left after all other players have gone bankrupt.

Basically, your goal is to collect money and property – as much as possible, by any means available.

Most people are probably familiar with Monopoly, which makes it a good example for a thought experiment.

Imagine that four friends are playing Monopoly and a fifth friend shows up and asks to get into the game even though some number of turns have already passed.  How can this fifth friend be integrated into the game?

One way is to start the person the way everyone else started: at Go, with $1500 and a pair of dice.  The beginning is the logical place to start, after all.  This method presents problems, though.  The four original players have had many turns to increase their wealth and their earning potential.  Many good properties have already been bought.  Monopolies may have already been established.  Depending on how late in the game it is, this fifth player may be at some great disadvantage.  Imagine if 90% of the properties on the board are already owned.  The fifth player has virtually no chance of winning – of surviving on the board – under these circumstances.

Another way is to grant the person some portion of the money/property on the board.  You could total the value of the properties each player owns, average the totals, and then randomly assign the new player  unowned properties until that average is approximated.  You could do the same for money.  However, if there isn’t enough unowned property to do this, you’d have to take property away from some of the players who are already playing.  How can this be done fairly?  Should the property be taken from the winning player(s), or equally from all?

Another way is to simply restart the game.  This isn’t necessarily fair to the players who were doing well – their good luck and good strategy ends up going unrewarded.  However, the player(s) who think(s) he/she/they would have won can at least declare victory in this case.  I have found that generally speaking
this is the most oft-chosen option for inserting a new player into an existing game, for the simple reason that usually at least half of the players are not winning and usually the choice of methods comes down to a loosely democratic vote:  All of the players who are losing choose to restart.

Aside from the highly practical use that this line of thinking has in actually inserting new players into existing games – a situation I have encountered in life from time to time – we can also consider the larger implications, like when we insert new players into the more realistic economic systems presented by, for instance, the economy.  Imagine, for instance, that half the population of some country was playing some game analogous to Monopoly – attempting to acquire money and property and personal enrichment – for years, or decades, or centuries.  Imagine then that the other half demanded to be inserted into the game.  How would we fairly insert these newcomers?

Obviously this question is not simply theoretical.  Various large population groups have been granted property rights in our history – women, for instance, and blacks – rights which amount to $1500 and a pewter thimble.  These groups were then allowed to compete freely with the people who already owned almost all of the property, people who were busily going through the Monopoly winning strategies of bankrupting whoever they could and consolidating and developing their assets.

Just letting someone into the game doesn’t establish fairness.  These groups weren’t really given a chance.  Even those who did start off with some property – many former slaves were given land during Reconstruction, and women could always inherit an estate from a husband or father – were still at a disadvantage.  Imagine starting a game of Monopoly with a house on Baltic Avenue when another player has hotels on Boardwalk and Park Place.

In the game of the American economy, women, blacks, and immigrant groups have had to claw their way up from the bottom with the help of luck, charity, and government aid.  It’s no wonder that the players who are already winning want to deny entry to immigrants, why they fought to keep women from having the right to own property.  It’s no wonder that the players who aren’t doing so well want to restart the game and distribute everything evenly.  But when we assess some data – the wage gap between men and women, for instance – it’s important to keep in mind that some of the players started late.  If women owned half the property and controlled half the wealth in the American economy, would there still be a wage gap?

And before we say that some group has had enough opportunity to improve their lot, let’s ask ourselves how many turns we would need before we caught up in a game of Monopoly if we started fifty turns late.

Again, no solution presents itself.  What is fairness?  How can all players be satisfied with a solution?  Certainly whatever happens, it will require the cooperation of people who don’t currently acknowledge that there is a significant problem with how the game was set up in the first place.

One of my goals in this blog is to examine the interplay between certain postmodern theories and certain economic theories that, due to certain political and demographic realities, might never be considered together. In Constituting Feminist Subjects, Kathi Weeks points out that there is a “paradigm debate” between modernists and postmodernists that makes it difficult to constructively combine elements of, for instance, Foucault and Marx. However, someone whose area of interest is feminist politics would be highly likely to, in their course of study, come across somewhat favorable accounts of both of these thinkers. Perhaps socialist feminism and postmodern feminism would be presented as opposing movements, but they oppose each other only in their approach to meeting ostensibly similar goals. Thus the logic of Weeks’ attempt to bring some degree of reconciliation to the two.

This same student of feminist thought would be very unlikely to encounter certain other
theories, thinkers, or schools of thought, or if they were encountered, they’d be likely to be presented negatively, misrepresented, or dismissed as irrelevant for one reason or another. This is not an attack on the feminist movement – merely an observation that, in any movement or school of thought, there are areas of particular interest that are studied in great depth, and there are areas of no particular interest that are not studied at all. I could easily level the same critique against economics. In fact, I arguably already have, when I said that Libertarian thought needed to be reevaluated in the face of certain postmodern theories. I’ve spoken a bit about some of the formulations of power that will inform this project of deconstruction and reconstruction, so now, I’d like to talk a little bit about the economic side of things. My project here is to begin to lay the foundations for my postmodern theory of economics.

According to Merriam-Webster, the definition of economics is “a social science concerned chiefly with description and analysis of the production, distribution, and consumption of goods and services.” Let’s deconstruct this definition a little. What is a good, and what is a service? The definition implies that these things are produced, distributed, and consumed. When we think about what these words mean to us, we think of mass-marketing, of a consumer economy, of production in factories, of distribution centers. Most importantly we think of money, of supply and demand, in other words, of price. The mainstream of economic thought deals only with things that have a price, things that are bought and sold. Money is the ultimate measure by which economic success or failure is determined. As many feminists have noted, this leads to a tendency to ignore or erase the goods and services that are not bought and sold for money. For example, the work of a housewife does not have a readily identifiable price, and so mainstream economics ignores it.

Carl Menger, founder of the Austrian school of economics, deconstructs the nature of goods. He specifically rejects a definition of goods based on an inherent property of the thing. Rather, he claims that a thing acquires “goods-character” under certain circumstances based on the needs, perceptions, and abilities of the subject or subjects who regard the thing as a good. Menger admits that these characteristics could conceivably describe “family connections, friendship, love, religious and scientific fellowships, etc” although he also admits that he has his doubts as to whether these things are really goods. In any case, Menger’s work makes the important point that the traditional definition of goods is overly limited, and that it ignores things that have obvious value – things that obviously meet human needs. His work also opens the door for us to include things like human relationships, love, friendship, et al. in our economic analyses.

Although Menger made these claims in Principles of Economics, a book published in 1871, most economists continue to ignore the “goods-character” of relationships, of the many services Weeks describes in her overview of “women’s labor,” and of countless other things that people use to satisfy their needs.

The more fundamental concept behind goods and services, then, are human needs. Goods and services are not useful in a universal or a priori sense due to their inherent or essential properties. Rather, they are useful to a particular entity because of that entity’s needs. And behind the production, distribution, and consumption of these goods and services, there are people producing, distributing, and consuming. Who are these people, and why do they produce, distribute, and consume? The people are acting agents, and they produce, distribute, and consume goods and services in order to meet their needs. Therefore one could say that in a broader sense, economics is the study of how people act to meet their needs.

However, I think the word “needs” is problematic. I prefer to follow both Lacan and Mises, among others, and use the term “desires.” “Needs” are things that people cannot live without, like food, water, shelter, etc. Desires are what people want. People desire specific foods, specific drinks, specific shelters. People desire things that they don’t need in order to live. People even sometimes desire some things more than life – think of a person who gives his or her life for a cause – and so desires can outweigh needs.

So for now we can talk about economics as the study of how people meet their desires. Earlier I described these people as “acting agents” – a term I’ve used before in my descriptions of metonymic power. Underlying the concept of an acting agent are questions of agency (to what extent to we determine our own actions?) and identity (who are “we” in the first place?) that I will not go into just yet. Let me just address any concerns with this approach by proposing an amendment to the commonly held definition of “action.” Usually, action refers to a behavior that was done on purpose, as opposed to a behavior that was done by accident. Picking up a glass of water is an action; spilling a glass of water that you were not aware of is not an action. I would like to specify that “purpose” is not necessarily a conscious purpose. In other words, actions may not be the result of a conscious process. Suffice it to say that they are the result of some process, or of different processes, and that at this time I would like to leave open the possibility that these processes are conscious or unconscious, individual or social, freely chosen or determined, or that they break out of these dichotomies entirely.

So the question of who or what is acting shall be deferred (but only temporarily) and we shall simply state now that it is possible to observe individual and group behavior and try to discern some purpose to the behavior, to account for the behavior in some way.

We started by deconstructing a definition of economics, changing its terms to suit broader and deeper meanings, and in doing so arrived at some fundamental observations and the questions raised by them. Now let us reconstruct economics based on these observations.(1)

We can observe individual and group behavior and try to discern some purpose to the behavior – in other words, why does the person or group behave in this way? We can infer that there is some underlying force that prompts the behavior, and we can call this force “desire.” We could also call it need, impulse, drive, will, or any host of other terms with different backgrounds and implications. So we can say that people (individually or in groups) act to satisfy their desires, based on our observations, as long as we remember that we must restrict or expand the definitions of desires and actions in order to fit our observations.

If an action implies a desire, it also implies an expectation of a causal relationship between the result of the action and the satisfaction of the desire. In other words, people behave in ways that they expect will make them better off. It is important to remember that this expectation is also not necessarily a conscious process. When a dog barks near us we might have a fight-or-flight reaction: we jump, our norepinephine is released, followed by adrenaline, we look around to assess the threat. We do this because of our instincts, not our conscious minds. Our instincts may not think, or have expectations, precisely in the way we think about thinking or expecting as conscious processes. However, (we infer that) our instincts developed in response to situations in which following those instincts led to better results than not following them.

(Can evolution be looked at in economic terms? Of course. We can do cost-benefit analyses of various evolved traits and see which are likely to give a survival advantage. We can attempt to approximate the expected value of a trait. We can track various traits and various competing organisms and observe which of them have the highest market share, and from that information make conclusions about which strategies are strong and which are weak. Economic competition and evolutionary competition function exactly the same way. We can’t say that an individual mutation has a “purpose” in that mutations are accidental, but we can say that the purpose of life seems to be survival based on the behaviors of living things. We can’t say that a trait has an “expectation” in that evolved traits are not conscious, but we can say that past success leads to an expectation of future success.)

To recap:  we have behavior + purpose = action, where purpose = desire + expectation.  When we frame economics as the study of how people act to satisfy their desires, we take the desires as given.  The reason for this is simple: economics is not concerned with what the desires are.  Ethics, psychology, and many other fields are dedicated to the question of why people want the things they want, and what, if anything, they ought to want instead.  Economics is concerned, rather, with what people do given certain desires.  Remember, in our economic epistemology, the only way to know what desires are – or even that desires are – is to infer them from behaviors.

Before I finish I’d just like to bring two terms to the table and define them very specifically using the construction of economics I’ve presented here.  These terms are utility and value.  Menger discussed “useful things” – this usefulness is what I will call utility.  Marx called it use-value.  Utility is how useful something is – the perceived capacity of a certain item to satisfy a desire.  Remember, as Menger said, this is not owing to any specific property of the item in question – rather, it is the person’s perception of the item that gives it utility.  Utility is subjective: it is based entirely on the evaluation of the subject, because useful always means useful to someone.  Utility is also independent – an item’s utility is not based upon the utility of any other item, or on any other observable or quantifiable amount.  Some economists have adopted the convention of “measuring” utility in units, called utils – but I resist this and any attempts to enumerate utility, because it leads us to think of utility – and therefore desires – as subject to the laws of mathematics.  Utility is only discoverable by observation of an action – we can ony say an item was useful if someone used it.  We can’t measure how happy that use made them, nor how well their desire was satisfied – these things are subjective and unquantifiable.

Value is how much something is worth.  Like utility, value is also subjective – something is always worth something to someone.  Unlike utility, value is relative.  When we say an object is worth something, we always need a “something” for comparison.  Value is only discoverable through observation of an exchange – if someone trades one of Object A for three of Object B, we can say that that particular Object A was worth less to them than three Object Bs.

An important note here is that someone can make claims about their utility and value judgments, in other words, about their preferences – but in the case of value, these claims cannot be verified, and in the case of utility, they can’t even be properly understood (for instance, how do you explain to someone else exactly how much you like to eat an apple?)  The only way we can infer what people desire in an economically rigorous way is by observing their behavior.

It is of paramount importance, however, when considering these observations, to recall Frederic Bastiat’s words:  “the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.“  When looking at an exchange, what is really being exchanged?  Let’s use the Traveler’s Dilemma as an example.  The game theorist expects a “rational” player to play (2), assuming that the person values money and (2) is the play that will result in the greatest amount of money.  Instead the TD player more often picks (100), valuing the chance to win more money over the certainty of winning very little money, or alternately values losing a small amount of money over losing a large amount of money.  What is being “exchanged” here is not just money, but chances, certainties, potentials, and opportunities.  Money can be seen, and so many economists make the mistake of seeing only money.

*****

(1): I’d like to acknowledge my indebtedness to praxeology as presented in Human Action by Ludwig von Mises, whose methodology I closely followed in establishing a foundation for a new construction of economics.  I am in many places simply refining his positions and insights with postmodern tropes, although I believe that this will come to represent a substantial deviation from his work by clarifying some of his underlying assumptions and thus demonstrating the conditional nature of some of his conclusions.

One place where the question of power has had a great effect on society is the relationship between employer and employee. Marx portrayed this as a class struggle, between the proletariat – those laborers whose physical activities produced value in the economy – and capitalists, whose role is to organize the activities of those laborers. Marxism generally holds that the capitalists do not produce value through their activities, and instead exploit the laborers by making profits (that is, unfair monetary gain) from the work of the laborers, who receive wages worth less than the value of their work.

The question Marxism must answer, then, is: how do the capitalists maintain this exploitation, if they are indeed adding nothing of value? Why do the laborers allow the capitalists to exploit them? Clearly, the capitalists must have some power over the laborers.

What is the nature of this power? To begin, the capitalists own the means of production. They may own land, tools, supplies, or other property that the laborers cannot obtain due to political or economic factors. Modern ownership of land goes back to feudalism, where all property rights flowed from the king, down through the nobility, and usually stopping there but occasionally ending in yeoman farmers. And of course colonial American plantations are a perfect example of workers laboring to make profits for a plantation owner who was granted the land by a monarch or the monarch’s representative. And plantation workers – often indentured servants or slaves – are a perfect example of the exploited worker who does not and cannot own property and, as a result, whose work benefits another. Furthermore, the system of property rights at the time of colonial America was so extensive that one person could own another, in the form of indenture, or slavery.

Aside from simply condemning this system as evil, it is worthwhile to analyze it further. The system of property rights is a way of organizing some or all of the things in the world (people, places, objects) so that each thing is accounted for in some way. This can be viewed from a functionalist perspective – in other words, the function of fertile land is to be farmed, and so it is up to the nobility to make sure that it is farmed so the people do not starve, and it is similarly up to the peasants to do the actual farming, for the same reason. In this way, power is not simply a tool of privilege, but a tool of productivity. As society advanced, the economy evolved, and the nobility was replaced by a more efficient system of administration. People who were better at organizing the means of production were allowed to be in charge, and to grow rich from their success, and these people are Marx’s capitalists. Capitalism proved more efficient at organizing productive power than its predecessors (mercantilism and feudalism) , but the power relationship that existed under feudalism was never really abolished. Instead, it is simply better organized.

One of the ways that the system is better organized is that it is better at sorting people based on their productive capacities. It is by no means perfect – the system is still marred by things like gender, class, and race discrimination – but it is certainly better than a system where a son of a farmer is automatically also a farmer. The system provides people with a range of options and then rewards those who choose the options that enable them to be more productive.

The individualism that comes with a system in which individuals feel that their lives are created by their choices provides a certain amount of resistance to metonymic power. Metonymic power involves a displacement of agency and an abdication of personal or individual responsibility. Individualism encourages people to take individual responsibility for their lives, and a broader range of choices provides people with a sense of agency. So in a sense, capitalism can be seen as a substitution of productive power for metonymic power – individuals become more productive (producing productive power) and also gain a sense of their own agency (reducing metonymic power). Another way of saying this is to say that the economic sphere has gained power while the political sphere has lost power.

The fact remains that under capitalism, laborers still find themselves the subjects of a form of power. The difference is that while metonymic power is explicitly linguistic (or at least semiotic) – the acting agent thinks of an action as having originated from a symbolic agent – productive power is more phenomenological: it is felt, experienced, performed, and quite difficult to express linguistically. In other words, while a peasant can express any number of symbolic agents (God, the King, his feudal lord, duty) to explain why he continues farming, and thus make it very clear that he is under the effects of a power relationship, the worker is denied these symbolic agents, and is left only with the idea that his labor is a personal choice, that he could choose to do something else, or nothing at all, that nobody is forcing him to work, and thus is told that he is the one with the power. And so we come across arguments that say that the laborer and the capitalist both have power – the capitalist offers wages, the laborer offers work, and thus an equitable bargain is struck, with no force, threat, or coercion – and the productive power that organizes the labor by organizing the laborer is obscured and hidden.

I have spoken a great deal about this productive power, but I have not yet described what productive power is. My answer, which I will elaborate upon later, is that productive power is disciplinary power, which is panoptic power, which in turn is inverted, or reflexive, metonymic power. I have teased you all a great deal with this answer, which opens up more questions than it answers. I believe my meaning will soon become clear.

First, lest I be accused of forgetting the traditional meaning of the phrase “organized labor” I turn my attention now to labor unions and collective bargaining. The idea behind collective bargaining is that individual workers will have more negotiating power as a whole than they will singly. The theory is that, where if one person says “Give me a raise or I won’t work” that person gets fired, if an entire workforce says “Give us a raise or we won’t work” the workforce gets the raise. If, as I say, the productive power that the workers are subject to is in fact panoptic power, then the solution of breaking the isolation to break the panoptic model fits with the action of organizing as a labor union to break the power the capitalists have over the workers. In fact, the position of workers in a labor union cooperating to receive higher wages can be compared to the position of prisoners in the prisoner’s dilemma – if one or a few workers cooperate, by striking, but other workers defect, by being scabs, the striking workers get fired and the scabs get “rewarded” with their jobs (but no raise); if everyone defects the status quo is maintained, which is bad, but if enough people cooperate everyone is better off because the company grants the raises.

One could look at the organization of a labor union as a collective entity as a deployment of metonymic power on the workers’ behalf. Since, under individualism, their metonymic power was unassigned, they can easily assign it to the labor union as a symbolic agent, on whose behalf they act and in whom they vest the power to direct their activities. The deployment of metonymic power disrupts the productive power, and, indeed, we have certainly heard capitalists complaining about how unionized labor negatively impacts productivity.

So let’s talk a little about this productive power. Productive power does not so much produce things as it produces individuals, or subjects. As a simple example, under feudalism, the peasants are the King’s subjects. They have well-defined roles. One could say that the power that the King has is what causes this situation – what makes people subjects, what assigns their roles, and thus what determines what they do, who they are, what their function is. Of course, I’ve said before that the power that the King has is simply metonymic power, which constitutes the King as a symbolic agent as a result of the power the peasants vest in him. (We can see here that the specificity of these types of power begins to blur, and that these relations of power, which Foucault refers to as the “micro-physics of power,” are one way or another what constitutes and identifies individuals, and that we are all subjects of this kind of power.) In the King we see a rudimentary panoptic observer – the King makes claims to divine right, has the power to reward or to punish – but the King’s systems have not mastered many aspects of panoptic power, have not mastered isolation and self-surveillance, and the productivity that we see is likewise rudimentary.

Under capitalism, the panopticon becomes much more relevant as a model and productivity likewise increases. In another post I will argue that the free market follows a more or less panoptic model. Also, workers are much more likely to be supervised in factories than in the individual shops they had as skilled laborers in ages past; factories begin to resemble panopticons, with workers isolated and continually under threat of surveillance and punishment. Other social institutions begin to resemble panopticons as well, all with the goal of producing disciplined, productive individuals who will keep the capitalist system going.

The job of the capitalist in this system is simple: to find out what people demand, and supply it. If the capitalist does a good job he is rewarded, if not, he is punished. The capitalist has choices and options – many choices and options, because the capitalist has capital – but ultimately the capitalist must also fulfill his role in society just as the nobility had to fulfill their roles. The greater productive power as opposed to metonymic power means that the capitalist need not be a symbolic agent – the capitalist can be nameless and faceless, and thus can be anyone. The capitalist is constrained by, and serves, the same system as the laborer, with the caveat that the capitalist has more options and is thus often considered better off, or less constrained by power. The capitalist also tries to overcome power, to beat the system, by organizing – this is why we see corporations, cartelization, lobbying, price-fixing, insider trading.

I want to say a few more things about labor and power. Earlier I said that modern labor, under capitalism, is denied a symbolic agent. The modern worker can’t say “I’m a laborer because my lord told me to labor;” he must instead take responsibility for his choice to work as a laborer (instead of, for instance, doing some other job, or being unemployed). In this case, the acting agent can be said to have no symbolic agent, since the acting agent claims agency himself. However, one could also say that this is reflexive metonymy – that the “self” is the symbolic agent of the action. Can a “self” be a symbolic agent? Of course. Especially if we don’t accept an essentialist or modernist theory of the self. One could go so far as to say that the “self” is the symbolic agent of last recourse, that when we can’t figure out where the agency comes from, we simply invent a concept of “self” as a placeholder for that agency.

(In The Illusion of Conscious Will, D.M. Wegner argues that conscious will itself is simply an illusion designed by our brains to keep track of who is doing our actions. In other words, in order to remember and track what it is that we are doing, we need to develop a strong sense of self, agency, and self-agency, but in reality, our brains perform our actions without any conscious willing of those actions.)

With the panoptic model of power, the panoptic central observer becomes the symbolic agent. We act the way we do because the observer might be watching; we watch ourselves and discipline our own actions, imagining that we are being watched. This imagined observer, the observer that is a constructed response to circumstances, is the symbolic agent in the metonymic power relationship; at the same time, this observer is ourselves, since it is only in our minds. In this way we can see panoptic power as an inversion of metonymic power, or a reflexive deployment of such.

To make clear, the laborer under capitalism is denied a symbolic agent, thus makes the “self” the symbolic agent; the panoptic effects of isolation and self-surveillance cause him to work, and work in a certain way; the panoptic observer that the worker imagines is watching him, who is really just the worker himself, gets the symbolic agency; thus the productive power produces effects that the worker experiences as being imposed by an outside force; the force is imagined (symbolic) but has real effects. I’m not sure if that really was clear, but this post is now very long and has gone quite far off topic.

To conclude, there is power at work in the relationship between employer and employee – however, this power is much more complicated than simple domination, as it involves the interplay of panoptic and metonymic power. As I explore these models of power further, I shall be attempting to derive generalized strategies for working within and/or against these systems of power, and I hope to be able to say more about this issue, as well as to use the work that’s already been done by the organized labor movement towards that end.

It is possible to look at the universe like a giant computer. If you know the software a computer is running and all of its inputs you can predict the result. Similarly, one might think that if you knew all the rules of the universe – that is, if you understood physics perfectly and accurately – and if you knew the position and velocity of each particle in the universe, you would be able to predict the results – that is, how everything would turn out. Such a view is called determinism. When Newton first proposed that all matter obeyed certain laws, he was accused of atheism, because the obvious implication of his theories was determinism, which is a theory that leaves no place for God and no place for free will.

The question of free will vs. predestination or determinism is, of course, older than Newtonian physics, but physics is the way in which I first conceived of the question. One might ask, if God is all powerful, how can anyone act in a way God does not want? One might ask, if God knows all, then isn’t destiny written – isn’t there no way to change things? I have never been particularly into theology, but physics always fascinated and frightened me.

Some time ago I read Isaac Asimov’s Foundation trilogy, which despite its name consisted of approximately thirteen thousand books. This series is based upon the idea that there was a mathematician named Hari Seldon who was able to predict the course of history using mathematical models and a deep understanding of historical trends. I did not find this idea credible. People, after all, are far too complicated to reduce to a mathematical model. Aren’t they?

Can we predict what people will do in a given situation? If we can, what does that say about free will? If we can’t, how can we enact social change?

In Freakonomics, authors Levitt and Dubner describe a scenario in which parents were charged a small fee (I think it was $3) for being late to pick their children up from daycare. The result of this fee was that lateness increased dramatically. According to Levitt and Dubner, the fee was too low, and parents felt as though paying $3 justified their lateness. In other words, when no provision is made for lateness, the parents have to pick their kids up on time or risk their kids being scared and alone. When the daycare center charges for lateness, watching the kids for a few more minutes becomes just another service that the parent can buy, and buy they do. The point of this story is that incentives don’t necessarily work the way we think they will. There are complicated issues at stake even in something as simple as daycare. As we saw in the Traveler’s Dilemma, it’s not a simple task to predict how people will make their decisions, and sometimes rational behavior isn’t what theorists think is rational.

However, what both of these scenarios show is that despite the difficulty, despite the complications, it is possible to develop models and predictions for how people will behave. It is possible to find, with experimentation, the fee amount at which parents will begin picking their children up on time to avoid the fee. It is possible to find, with experimentation, the punishment amount at which people will begin picking the low number rather than the high number in the Traveler’s Dilemma. In other words, people’s behavior may be more complicated than we think, but it is not unreasonable. People act based on motivations, and although these motivations are often not obvious, they are there and they can be found.

Of course there will always be exceptions. There’s always room for free will. There will always be people on the far ends of the bell curve, people who defy expectations and act inexplicably. But in order to effect positive change in the world, we have to believe that we can predict behaviors for most people. We have to believe that there’s a number of dollars that will decrease the amount of late pickups from daycare. After all, isn’t this how we determine prison sentences? Isn’t there a number of years of incarceration that we believe will make the commission of murder unattractive to most potential criminals? Isn’t there a number of dollars that we believe will deter people from speeding and thus decrease the number of traffic accident fatalities?

I’ve never really believed in free will. I’ve always thought that everything is already determined by particle vectors, that everything I do is explainable by something that happened to me in childhood or by a set of circumstances that outlined my choice to such an extent that I didn’t really have a choice. And that’s why, for me, I think it is important for us to search for these motivations, search for these incentives, to build and discredit and rebuild these mathematical models to predict behavior. Because I want to set things up so that people have no choice but to make the right choices. I want a society full of people who pick 100 on the Traveler’s dilemma and pick their children up on time from daycare, and if we’re going to have that we have to pick the right game.

And that, in turn, is why it’s worth looking at something like the Traveler’s Dilemma and finding out that people will cooperate with each other as long as the risk for doing so isn’t too high. It’s why it’s worth looking at the daycare paradox to find out how much guilt is worth. It’s why it’s worth asking why people follow their king or their president against their best interests. We need to find out what motivates people. And in exploring incentives and economics, game theory and modeling, philosophy and psychoanalysis, that’s exactly what I hope to do. I hope to find a solution, a way to set up society so that we’re all playing a game that everyone can win.

In closing, right now I feel that most people are not playing a game that everyone can win. There’s a game called the Prisoner’s Dilemma. In this game, two prisoners are in the custody of law enforcement, but the police don’t have enough evidence to convict them of a serious crime. Each of them is told that they are both suspects and given the following options. If one prisoner gives up the other, that prisoner will go free and the other will go to jail for a long time. If neither of them confesses they will both serve a short sentence for whatever smaller crimes the police can put on them. If they both confess they’ll both serve a short sentence. The implications of the game are that it is better for each player, no matter what the other player does, to confess their crime. Unlike the Traveler’s Dilemma, the Prisoner’s Dilemma tends to lead to uncooperative behavior – in other words, it is much better for each player to screw the other player over, unlike in the TD in which screwing the other player leads to a greater loss.

The Prisoner’s Dilemma game describes many situations in modern life – situations in which people have a great incentive to hurt other people. If there is some way to change the rules of the game so that, like in the Traveler’s Dilemma, or many other games, people have an incentive to help other people, then everyone could benefit immensely. Changing the rules of the game is what I’m aiming for, but it’s going to take a lot of searching to find the right game and a lot of convincing to get people to play it.

As a followup to my last post, I thought now would be a good time to say some things about opportunity cost, or The OC.  Please do not confuse this with any other things called The OC.

Opportunity Cost is an economic analytical tool – a measure of the cost of a missed opportunity.  It goes like this.  Let’s say you have a dollar and you’re standing on the street at a hot dog cart.  The cart is selling pretzels for $1 and hot dogs for $1.  If you buy the hot dog, you can’t buy the pretzel.  Therefore the opportunity cost of buying the hot dog is one pretzel.  Conversely if you buy the pretzel you can’t buy the hot dog.  So the opportunity cost of the pretzel is one hot dog.  Simple, right?  At first glance this seems a trivial and reductive measure for an economist to be thinking about, but in real life, when applied to more complex situations, we can see the value of considering the opportunity cost.

Let’s try another example.  You have a dollar but you aren’t hungry, and you’ve got a year.  You can keep the dollar in your pocket and at the end of the year you’ll have a dollar.  Or you can put the dollar in a bank and at the end of the year you’ll have, let’s say, $1.05.  The average person would think that if they kept the dollar in their pocket, they haven’t lost anything, and in one sense this is true.  However, they have missed something - the opportunity to earn $.05.  The opportunity cost of holding onto the dollar was five cents.  Doesn’t seem like much, but what if it’s a thousand dollars?  A million?

The point is, when there’s money at stake it pays to consider the opportunities that you have when making choices, because in some sense, missing the opportunity to earn money is sort of like losing money, even if it’s money you never actually had.  An opportunity is worth something.  If you don’t believe me, play poker.  If you fold a hand, and it turns out at the end that you would have won if you had stayed in, you will feel like you have lost something.  What you’ve done is missed an opportunity, and the loss you’re feeling is the opportunity cost.  Folding may have been the right decision based on the odds, but you’ll still feel bad that you didn’t get the pot.

So what does opportunity cost have to do with the Traveler’s Dilemma?  Well, it’s another way of evaluating possible plays in the TD, and it demonstrates a major flaw in the models used by game theorists to “solve” the TD.

To recap, in the TD, game theory says that logically speaking, a player ought to play (2).  Many people intuitively feel that they should play higher, and (100) is perhaps the most common play, with (95) to (100) comprising the majority of plays in some experiments.  According to Kaushik Basu, (2) is the correct or best play, because of a game theory concept known as the Nash Equilibrium.  Further, (100) is the worst play, because it is the only play in the game that is “beaten” by every other play.  In other words, if player 1 plays (100) and player 2 plays anything else, player 2 will be rewarded more points than player 1.  If this logic is to be believed, (2) is a better play than (100), and people, if they are acting “rationally,” ought to play it.

But let’s look at the OC to see if that’s true.  Let’s say player 1 plays (100) and player 2 plays (2).  The rewards, then, are 0 points to player 1 and 4 points to player 2.  However, given player 2’s play of (2), the highest score player 1 could possibly have acheived by making a different play is 2, by playing (2).  Any play other than (2) results in a score of 0.  So, player 1 lost 2 points by not playing (2), or, to put it another way, his opportunity cost for playing (100) was 2 points.

Player 2, however, is in a much worse situation.  He played (2) and got 4 points.  Given player 1’s play of (100), the highest score possible for player 2 was 101, with a play of (99).  In other words, by playing differently player 2 could have gotten 101 points, but instead he got four.  That means that his opportunity cost for playing (2) was 97 points.

So, in the above example, on the face of it it seems like player 2 won – he got 4 points, while player 1 got none.  However, if you look at it a different way, player 2 lost 97 points while player 1 only lost 2.  If you consider the scale of a loss of 2 vs. a loss of 97, you see that a play of (100) is much less risky than a play of (2).

In fact, for an opponent’s play of 2, the OC of (100) is 2.  For any number between (3) and (99), the OC is 3.  And for (100), the OC of (100) is 1.  The OC of (2), however, is (Opponent’s play – 3).  That means that for any play above (6), the opportunity cost of (2) is higher than that of the opponent’s play.

So the (2) player almost always loses more money than his opponent – not that the players are losing money that they actually possessed, but money that they could have – and perhaps should have - earned.  If you ask any economist or poker player, that loss can sting just as much as a loss of cold hard cash.

The thing is, if you evaluate the Traveler’s Dilemma in terms of Opportunity Cost, the definition of improving one’s position changes, and therefore so does the Nash equilibirum.  It’s a situation where gaining money and not losing opportunity are not the same thing – and this situation probably comes up fairly often in the real economy, which is why opportunity cost is important as an economic concept.  Rational choices and selfishness, therefore, cannot necessarily be evaluated successfully using only the rubric of amassing the most gain by the end of the game.  There are other measures of success, and people do use them.  Game theorists and economists alike would do well to remember that.

Now for some real content. I came across this article in Scientific American about the Traveler’s Dilemma. To explain briefly, the TD is a game in which two players are each asked to select a number within certain boundaries (2 and 100, in the example). If both players select the same number, they are rewarded that number of points. (In the example, each point is worth $1, which makes the game of more than academic interest.) If one player’s number is lower, they are each awarded points equal to the lower number, modified by a reward for the player who selected the lower number and a penalty for the player who selected the higher number. So, for instance, if you choose (48) and I choose (64), you get 50 points and I get 46 points.

The intuition that I had upon reading the rules of this game was that it would be “best” for both players to choose (100). That is certainly true from a utilitarian point of view: (100, 100) results in the highest total number of points being given out – 200. The runners up are (99, 99), (100, 99), and (99, 100) with 198. However, there are two small problems – here’s the dilemma part – that prevent (100, 100) from being the “best” choice: one, the players are not allowed to communicate, and two, the (100, 99) and (99, 100) plays result in one player receiving 101 points – an improvement, for that player, over a 100 point reward.

So, the reasoning goes, if player one predicts that her opponent will play (100), she should play (99) in order to catch the 101 point reward. Her opponent, however, ought to use this same strategy, and also play (99), in which case player one ought to play (98) in order to trump her opponent, and so on and so forth. This reasoning degenerates to a play of the minimum number – in the example, (2). According to Basu, the author of the article, “Virtually all models used by game theorists predict this outcome for TD.”

However, reality does not follow these models. When people are asked to play the TD, many of them choose 100. Many of them choose other high numbers. Some seem to choose at random. Very few choose the “correct” solution – (2) – predicted by game theory. Something’s up.

Basu takes this to mean that all of our assumptions about rational behavior need to be questioned. With my philosophical background, I happen to have different assumptions about rational behavior than the mainstream, and so for me the results of the TD are not surprising in any way. But perhaps the best way to explain why the results to not surprise me is that I am a gambling man.

Gambling is all about odds and expected value. That’s why I don’t play roulette. Roulette has a negative expected value – that is, over time, any given individual player will tend to lose money. Of course actual events always contain random fluctuations of probability that allow some people to come out even or ahead in the short run, which is why people play Roulette. People play Roulette because they enjoy taking a chance to win big money even though the odds are that they will lose. And that’s the same reason why (100) is a natural first choice for the TD.

Sure, 100 is “beaten” by every other play – if the opponent plays (99), the (100) player gets 97. If the opponent plays (2), the player gets 0. But what are the odds the other player’s going to play (2)? Not very high. According to intuition and research, odds are the other player will play a high number.

But let’s fix the odds by playing some roulette. Let’s say the opponent selects a random number. What is your expected value?

It turns out this is governed by an equation. If you hate math, feel free to just believe that the following checks out and skip ahead. Let n = your choice, k = maximum play, p = penalty, and v = expected value. (It should be noted that the minimum play should be set equal to the penalty, otherwise complexities enter into this equation.) Then

v = [(0+1+2+...+n-(p+1)) + n + (k-n)(n+p)] / (k-p)

Now, to maximize the expected value for any given choice, we take the derivative of v with respect to n, keeping other values constant,

v’ = -n – 2p + k+ 1/2

and set the result, v’, equal to zero. This gives us

n = k + 1/2 – 2p.

In our example, k is equal to 100 and p is equal to 2, which means the play with the greatest expected value is 96.5. That means that against a random opponent, (97) is the play with the highest expected value, and thus the “correct” play. Or, to generalize, the highest expected value occurs when you subtract twice the penaly or reward from the maximum play.
So we’ve got two models of “correct” behavior. Game theory says we should assume an opponent who is “rational” – whatever that means – and who will play according to that rationality, and therefore play (2). Casino theory says that if we assume an opponent who plays randomly we should play (97). Guess which one more closely models real life? Well, the answer is casino logic beats game theory logic. My theory on why this should be the case is simple: If people are presented with a game in which money is at stake they will tend to act on their experience with other games in which money is at stake, i.e. casino games. The less “rational” players will go for the thrill of trying to win big, a la roulette. The more “rational” players will evaluate the odds and go for the biggest expected payoff, like a poker player calculating pot odds or a blackjack player who counts cards.

Complicating the situation is the fact that the odds are not even. What I mean is, there is not an equal probability that each number will be selected. In fact, there appears to be a higher probability that higher numbers will be chosen – a fact that shifts expected returns for higher numbers up. Why should this be the case? Well, because, as I’ve explained, people tend to go for the big payoff and evaluate odds, which pushes them toward the highest expected value choices.

The casino theory model also explains why sufficiently large penalties push player choices down towards the minimum play. Simply put, large penalties discourage risks. Large penalties also mean large values of p, which means that expected value is maximized at lower and lower numbers. At a penalty of 49.25 or greater, (2) becomes the play with the highest expected value.

Given these considerations, there doesn’t seem anything strange at all about the results of the Traveler’s Dilemma experiments. The only thing left is to dispute the supposed “implications” of the TD for economics.

According to Basu’s somewhat incoherent analysis, libertarian economic theory claims that people will act rationally and selfishly and in doing so produce efficient outcomes. However, according to him, the rational, selfish play is (2), which, if selected by both players, leads to a total point distribution of 4, which is far less efficient in terms of outcome than the 200 points distributed by a (100, 100) play. What Basu, and many contemporary economists, fail to understand is that acting rationally does not mean doing what game theory says is best, and that selfishness does not mean striving for the greatest number of points. In point of fact, when left to their own devices in the TD, people do choose high numbers and do get an efficient outcome. What the TD really shows, then, is that in the case of the TD, people left to their own devices produce efficiency, while people who listen to self-proclaimed experts on “rationality” produce egregiously wasteful outcomes. Of course, how applicable the TD really is to other real-life situations is something worth exploring further.

I’ll have more on this topic when I get into my social cooperation theories. After all, (100) is a highly cooperative play – you’re gambling on the other player also cooperating by playing (100). Perhaps small penalties encourage cooperation and efficiency, while large penalties discourage these things – a conclusion that is certainly supported if you consider taxes to be a form of penalty and trading a form of cooperation.