Download документ

Immortality And Mortality In The Economic Sciences Essay, Research Paper
Sam Vaknin’s Psychology, Philosophy, Economics and Foreign Affairs Web SitesRoberto Calvo
Macias, a young author and thinker from Spain, once wrote to me that it is impossible to design a
coherent philosophy of Economy without accounting for the (sad?) fact that we are mortals. This
insight is intriguing. It is not that we refrain from Death in dealing with matters economic. What
are estate laws, annuities, life insurance policies – but ways to cope with the Great Harvester?
But this, admittedly, only scratch the non-profound surface of the question.
The industrial revolution taught us that humans were dispensable. The process of production was
reduced to minute functional units that people could learn in minutes. Only the most basic skills
were required to successfully endure this learning curve. Thus, for as long as humans bred, the
supply was inexhaustible. Humans became entirely replaceable, interchangeable (and alienated,
in the process). Motion pictures of the period (?Metropolis?, ?Modern Times?) portray the
industrial worker as a nut in a machine, driven to the verge of insanity by the repetitiveness of
his work.
Yet, this view of human resources is fast becoming extinct in the rich Western countries.
Training periods have lengthened, expert knowledge has taken over, the main value added is
information. Humans represent a sizeable investment in education. They are no longer an
inexpensive resource .With this realization, there came about a revolution in economic relations.
Absurdly, inhuman totalitarian regimes (especially Fascism and Communism) were the first to
emphasize the importance of the human factor in the total set of means of production. The
concept of scarcity was extended (by virtually all the economic systems today) to apply to
human resources.
All resources are scarce. Economy is the science of trading off : giving up one resource in order
to get more of another. The concept of ?opportunity cost? is the first that students of economy
encounter. The classic approach included natural endowments in the group of scarce resources.
The human element was barely perceived as yet another natural resource. Now it is. The size of
the population, its life expectancy, its quality of life, health, education, income ? are all
important.
Economy is the branch of psychology which deals with behaviour patterns and with mental
processes which relate to material wealth, with the opportunities to obtain it (=access to it) and
with the processes and mechanisms underlying its attainment. Because material wealth can be
expressed quantitatively, this specific branch acquired a ?mathematical? nature, a twist not
present in other branches of the human sciences. As such, it is highly surprising that so little
formal thought was given to the issue of mortality (which is what makes the human resource
scarce).
The legal profession is positively obsessed with Death. This is why economic activities are
relegated to separate legal entities. The founders of a company are mortals ? the company itself,
immortal. This is why the concepts of last wish, legal testament, estate and inheritance are so
strong: they survive the person, they have an existence all their own. Economic theories, on the
other hand, generally assume that humans are immortal and that their economic activities and
legal entities which embody them have an infinite horizon. To some extent, this is justified by
people?s behaviour and by observing the social institutions that they form. People engage in very
long term activities even when they are very old. No 80-year old inventor will give up his
royalties just because he long surpassed his life expectancy and is about to die imminently. This
is true even if he has no off-springs. No businessman will stop accumulating wealth just because
he has enough for two lifetimes. No consumer will cease consuming simply because he has all
that he needs to properly function. The life expectancy horizon is ineffective because w all deny
the prospect of death. This denial mechanism is exceedingly strong in all of us ? we suppress the
fact that we will die one day and that many of our activities, efforts, battles and pursuits look
absolutely outlandish from this vantage point. So, economy mimics and reflects human defensive
mechanisms: it is long term, infinite in scope.
Surprisingly, as Mr. Calvo Macias commented, the more temporally finite the organization ? the
more dynamic it is. Religious establishments, which ostensibly trust in the after-life (a form of
immortality) ? are procedurally rigid, ossified, frozen. This is also characteristic of states. The
longer their past and the longer their perceived future (the Reich of a Thousand Years) ? the
more morbidly paralysed these entities and their institutions. Dynamism is closely associated
with finiteness and with the perception of mortality when it is coupled with rebellion. The rebel
does not accept his own imminent demise. He fights back by being dynamic, that is, through the
process of creation. The battle between creation and death is drawn along the lines of mortal
fear.
And, so, we can distinguish two types of economic players: those who accept death and those
who reject it. The first type is characterized by fear and anxiety as the driving force ? the second
by deep seated denial and false confidence.
Those aware of their mortality display a decrease in economic activity with the onset of old age.
They tend to attach a greater weight to their income the more recent it is. They discount future
income and attach negligible weights to it. They tend to think short term as they grow older,
towards the end of their lives they refrain from any economic activity bar trading, speculation,
arbitrage, brokering and investments in financial assets. They become less risk averse as time
passes.
Those who deny the crawling end still demonstrate an emotional attachment to wealth and to its
accumulation at an old age. They do weigh income in accordance with its expected maturity (the
more futuristic the income ? the less weight it carries) ? but they still attach some weight to it.
Dividend Discounting Models in stock valuation assume an INFINITE stream of future
dividends, discount it, add the results to get the CURRENT price of a stock. Stock in the New
York Stock Exchange (NYSE) are trading now at a p/e (price to earnings) multiple of 18.
Assuming a 35% average tax on dividends and on capital gains ? this means a person has to wait
28 years to recoup his investment. Taking into consideration risk free income (the interest
payments that the person could have received had he invested the money in Treasury Bonds) ?
the effective multiple is really 60 and above. Investors are willing to wait 60 years and more in
order to receive their money back plus a reasonable return. This is the quintessential denial of the
finiteness of life.
These two types clash and conflict. As they do, they generate the very fabric of market
economies as we know them today. Players are trading risks, speculating, investing in projects,
buying stocks ? all based on a hidden philosophies of life and death. It is this that we trade
amongst us when we do: our own mortality.