42. Values and value

In his 2021 book Value(s), Mark Carney made the following distinction between values and value:

“Value and values are related but distinct. In the most general sense, values represent principles or standards of behaviour. They are judgements about what are important in life, determining what actions are best to door what ways are best to live. Examples include integrity, fairness, responsibility, sustainability, dignity, reason and passion.

Value is the regard that something is held to deserve - its importance, worth or usefulness… Value is not necessarily constant but specific in time and situation… It is increasingly common to equate the monetary estimate of something with its worth and, in turn, that worth with society’s values. The subjective (or price) theory of value - once contentious - now goes largely unchallenged in economics teaching, is taken as a given in business schools and frequently determines society’s perception of deeper values.”

Carney uses this distinction to argue that the major shocks affecting the UK: the 2008 financial crisis; the Covid-19 pandemic, not quite over at the time of writing the book; and, the developing climate crisis could all be resolved by a conscious capitalism that was more committed to the set of values that make it work most effectively. His aim is to restore confidence in a capitalism that works and judging from the response of his fellow “caring capitalists” you would conclude that his recommendations would be effective. It reminds me of the phrase “muscular Christianity” defined by Wikipedia as: “a belief in patriotic duty, discipline, self-sacrifice, masculinity, and the moral and physical beauty of athleticism”. Although being a 21st century morality it lost the emphasis on masculinity and athleticism. It is not Mr Carney’s fault that the world seems to have hurtled in the opposite direction with populism in governments and in increased influence elsewhere.

My criticisms are different. Even if we put in place everything that he suggested, it would not be sufficient to be effective: boom and bust cycles will continue; we will have another pandemic that we are poorly equipped to respond to (although with a different pattern of competence and incompetence to Covid-19); and, where his proposals are weakest, we will be consumed by environmental woes, not limited to climate change.

As you would expect, his analysis is strongest with regard to the economy. He argues that we cannot allow the banks to use their privileged position (Heads they win, Tails we lose) to have all of the upside before crises and little or none of the downside after them. (The problem is worse than that; the rich are better equipped to profit from a crisis. In the USA, for example, the top 0.1% of wealth owners held 10% in 2000 and 13% in 2020. All groups in the top 10% increased their share over the same period; the cohorts in the bottom 90% all lost part of their share of the total wealth. And if we consider the distribution of income around the world, the position of the poor is worse again. Recent data shows that 85% of the world’s people live on less than $30 per day, two-thirds live on less than $10 per day, and one person in every ten lives on less than $1.90 per day. The average (median) in the USA is over $200 per day.)

Although a market believer, he is a market realist. Markets do not always clear. They are not always right. Similarly they are not always efficient. And problems in the banking sector can have significant negative impacts on the real economy. The hand of the market is always invisible but sometimes it cannot be seen because it isn’t there. As Keynes argued, where there is no motive force, we must intervene, whatever the market fundamentalists believe. Carney argues that markets do not behave ethically, which places even more emphasis on our directors and senior managers to do so. And because there are so many temptations, we need strong rules and regulations to encourage them and to penalise them when they do not.

One of the most interesting points he makes about Covid-19 is that it revealed values that may have remained hidden. Specifically, we undervalued resilience and so we prepared poorly, the support for essential workers demonstrated a great solidarity and, although the Government set great store by fairness, this contrasted with the inequalities of the impacts of Covid-19 measured by race, age, ethnicity, and so on. He concluded, quite rightly, that Covid-19 revealed, even if only temporarily, that we really do value health outcomes above financial ones. His main policy recommendation was: “Society’s choice should be guided by how it values life, the dignity of work and human flourishing today and tomorrow.”? and that governments should manage risk initially by limiting “the possibility of extreme negative events in ways that are consistent with the public’s priorities.” This is fine as far as it goes. But it doesn’t go very far. Especially if the public’s real (and often non-market) priorities are only revealed occasionally and in extremis.

Finally, the weakest part of the book; the response to the climate crisis. His introduction spells out the problem: “Now the effects of climate change are beginning to impact assets which have a market price, making the scale of the looming calamity more tangible.” Not surprisingly perhaps, his focus is not only anthropocentric but market-based. To say it is not systemic would be unfair but he focusses on the wrong system. Yes, we need political and economic systems to work together if we are to have a chance of solving not just climate problems but all environmental problems but that misses the biggest point; we need to put ecosystems first and work out what that means for states and economies, not the other way round.

I chose Mark Carney’s book for this post partly because it addresses value directly and partly because it is a good, constructive example of what I see as an effort doomed to failure. It is trying to save a dying system. This version of capitalism is eating itself. Carney is wedded to economic growth and to innovation. In the forms we currently apply these terms, they will become, sooner or later, unsustainable. We need new definitions for both (forthcoming). For the remainder of this post, I want to explain what I think are the limitations of Carney’s definitions of value and values.

Carney proposes that we need a moral code based on integrity and so on backed by effective recruitment of people with character to senior positions in the governance of nations and (for him, especially) in corporations. Where necessary, this needs to be backed by rules and regulations to keep markets honest. It would be difficult to disagree with this. But I believe he has the argument back-to-front.

I am aware of the irony of having the necessity to use language in arguing against language, at least as the primary decision-making tool. Back to the beginning: life is what is important. We are especially interested in human life. Human life can only exist in ecosystems that are too complex for anyone to fully understand. Our priority is to avoid the ruin of the ecosystems that sustain human life and, preferably, the ecosystems that support other forms of life too.

We attach value to life but also to improvement. It is in seeking the latter that all of our problems (and many of our triumphs) arise. And it is not solely because we are incompetent in reaching our goals. Compared to every other creature we are supremely effective, though not error free. No, the biggest problem is that we are even more error prone in knowing what is good for us, especially when we use language. Or, at least, we may be good at achieving our goals at a low level now at the cost of potentially systemic ruin later. We take the benefits and leave the costs for later, perhaps much later leaving future generations with the mess. Taleb refers to such an approach as: “the treacherous condition in which the benefits are small, and visible - and the costs very large, delayed, and hidden.”

Our primary evaluators are our bodies and particularly our primary emotions. They talk to us much of the time in a language that is imprecise and often contradictory - we can enjoy things that are frightening and overindulge on the things that give us great pleasure. And these are contradictions arising from a small number of very simple components. In the modern world, the emotional signals are huge in number and often very complex. One of the differences between the emotions and reason is that the emotions are approximately right, if sometimes somewhat contradictory - they are telling you something useful even if we find their combined messages difficult to decode - whereas reason can be absolutely wrong. We must try to use both emotion and reason but never forget Hume’s guidance that the emotions come first. Reason is abstraction. And so is language. They are both further from life than the emotions. Even if we cannot fully trust them, we must listen to them.

So, to go back to Carney’s integrity, fairness and so on, yes, in principle, they are what we should aspire to, but the vital messages come from life itself, the virtues are based on shared emotional messages before abstract linguistic categories, and laws, rules and especially rights are hard won, fragile agreements rather than natural, permanent entitlements. We must put the right things in the right order. We must ensure that our life on earth continues and that the lives of other species are properly respected. Our values and moralities must begin with the real and the concrete. Only then can we consider more abstract and constructed codes and they must always defer to, or at least consider, the real when they conflict.