Monday, October 08, 2007

On Policies and Paradigms

I have often come out immensely frustrated after discussions about Left Vs Right, globalization Vs localization, "Small is Beautiful" Vs "Big is Useful", etc, as I am sure you must have often also felt. Much of the frustration stems from the fact that we tend to confuse between various issues, or analyze in terms of symptoms instead of causes, or overly generalize and simplify matters. This short writeup is meant to put some structure to this debate, which at least I have found to be useful when thinking or discussing about such hotly debatable topics. My goal in writing about it is to help me state my thoughts clearly, and not to advocate any particular approach when having discussions.

Let us consider the topic of globalization Vs localization. Globalization refers to the current trend of increased trade linkages across the world, which is claimed to lead to lower prices of goods and services for all. Localization refers to pretty much the opposite argument where stress is placed on local production and consumption of goods. The definitions can of course be expanded, depending upon the context of the discussion. For example, globalization can be equated with free market economics that relies on the "intelligence" of the market to place a correct price on the conversion of raw material and natural resources to value added goods and services. Localization can be considered as a more "humane" economic system where resources are considered as commons, and nobody consumes more than what they need, thus leading to an adequate supply of resources at a fair price for everybody.

The important point is to realize that whatever be the definitions depending upon the context of the discussion, we are talking about two different paradigms here, that is, globalization and localization. Each paradigm has its own set of assumptions, risks, and objectives, which cannot be equated. I am referring here to Kuhn's theory on the structure of scientific revolutions, where he suggests that rival paradigms are incommensurable, that is, "it is not possible to understand one paradigm through the conceptual framework and terminology of another rival paradigm".

To explain this further, the paradigm which justifies globalization, henceforth referred to as the globalization paradigm, assumes that the value-addition process of converting raw material to finished goods can be given the correct price. Relocation of different parts of the process to places which do it most efficiently will lead to lower prices of the finished good. This can happen if there is fair competition in the market, and complete information is freely available to all the agents in the market. Now, if any of these assumptions are violated, which they are, then the objective of operating in this paradigm are not met. Similarly, the localization paradigm has its own set of assumptions. The local governance systems will ensure that the commons are not used unfairly. Local economics will interact with each other through a self-organized process, and exchange goods and services which they cannot locally produce. Sufficient thought will be placed in the value-addition process so that labor is rewarded according to its worth. These are also very strong assumptions, and you will quickly realize that neither of these paradigms can be considered as an absolute truth, and more importantly, cannot be compared to each other in a scientific manner because the objectives are different.

Note that objectives of either paradigm can also be to influence factors which encourage people to operate within that paradigm, that is, paradigms themselves can be selfish and meant to reinforce themselves. Thus, an objective of the globalization paradigm can be to influence governments to embrace globalization, which is actually what globalization tries to do through trade organizations and other mechanisms! Localization is no different.

So, given that these are two opposing paradigms, let us see how we can understand the rationality of actions such as policy decisions made by governments, or democratic protests that take place against these policies, etc. But before going on, consider the word rationality used above. Rationality is itself specific to a paradigm, because actions considered rational within a paradigm might be irrational in the other paradigm. When we cannot compare the two paradigms with each other, we cannot evaluate the "rationality" of an action in some absolute sense. This is exactly my point, that we can argue about the rationality of an action only within a particular paradigm, globalization or localization in this case. I believe that it is important to agree upon a common paradigm when having a discussion, or at least to have the realization that there are opposing incommensurate paradigms.

Therefore, at this point, it is better to direct the discussion along one of two different directions. Either change the topic of discussion to first focus on finding common parameters based on which the different paradigms can be compared, if at all. Once there is consensus, analyze the action in both the paradigms. Note that by finding common parameters, there is a huge risk of mis-interpretation. You might have invented your own new paradigm in doing so! But any how, at least the discussion will not be as frustrating as when both parties cannot even agree upon common parameters for comparison, and only cause a mutually irritating cacophony of heated arguments. Alternatively, select a particular paradigm, preferably the one in which the world is operating, and analyze the action in that paradigm.

Taking this alternative route, whatever paradigm is selected, the actions such as government policies can be analyzed on two metrics: intra-paradigm effects and extra-paradigm effects. Intra-paradigm effects are those that influence the assumptions or operational factors to meet the objectives within the selected paradigm. Extra-paradigm effects alter variables to move towards the objectives of the opposing paradigm. Let us talk about two characteristics of intra- and extra-paradigm effects: robustness and efficiency. Robustness refers to the state of stability produced by the action -- does it lead to a more or less stable state of the system. For example, free-trade agreements that caused a drop in international cotton-prices resulted in anti-globalization protests, leading to a less stable state. Efficiency of an action refers to how well it meets the objectives of the paradigm. Thus, free-trade agreements which reduced the prices were an efficient action. Typically paradigms have an objective of reinforcing themselves and opposing other rival paradigms; therefore, actions that produce more extra-paradigm effects can be considered to be less robust, and actions that produce more intra-paradigm effects can be considered to be more efficient within the paradigm under consideration.

The rationality of an action can thus be justified on how efficient and robust it is, where efficiency and robustness can be measured based on the intra- and extra-paradigm effects produced by the action. An action can be accompanied by other supplementary actions which can help balance out the efficiency and robustness of the action. For example, incorporation of appropriate insurance policies and commodity futures for poor cotton farmers would have reduced the impact of falling cotton prices on their livelihoods, and led to fewer protests. This supplementary action would have preserved efficiency without compromising robustness. Based on this, I next mention four interesting thoughts which could lead some productive discussions.

1. Actions can some times produce a paradigm shift, that is, the extra-paradigm effects of an action could get so large that it could tip over the entire system into changing its operating paradigm. For example, worldwide anti-globalization protests could tip the governments into adopting a localized paradigm. This would be extremely disruptive however, marked by conflicts and other intermediate highly unstable states. Alternatively, actions could slowly cause a paradigm shift, moving gradually towards the adoption of a new paradigm. For example, if localization or "Small is Beautiful" is considered to be a "better" paradigm in which the world should operate, that is, in some absolute "truthful" sense of leading to a better world, then actions could be chosen to produce minor extra-paradigm shifts while simultaneously producing intra-paradigm shifts so that the action remains acceptable in the current globalization-paradigm. Over time, these actions could aggregate to peacefully and non-violently tip the world into the localization-paradigm though a paradigm shift!

2. Are policies formulated scientifically within a paradigm more rational than policies based on democratic politics? The voting behavior of people in a democracy is actually considered to be highly irrational because of a lack of information and excessive complexity of modern societies, and science could possibly improve the situation. But where should a line be drawn between the relative influence of science or democratic voting on policy formulation, especially when science and democratic voting might be operating in different paradigms? Policies formulated scientifically would in fact depend upon the paradigms in which the scientists are operating, which could be different from the paradigms that the electorate desires.

3. Combining the thoughts on policy science and paradigm shifts, can policies be chosen scientifically to deliberately push the system into a paradigm shift? This would actually amount to hacking the democratic system! Assuming that the localization paradigm is better than the globalization paradigm in some absolute "truthful" sense, is the democratic system capable of choosing the right paradigm in which to operate? Does the voting behavior of largely ignorant people cause intra-paradigm effects or extra-paradigm effects or just a confused muddle of both leading to useless oscillations? I believe it is important to think about this question because it could reveal how and what roads to choose that lead to a better world in an efficient and robust manner.

I would again like to state that my goal in writing this was only to help me state my thoughts clearly, and not to advocate any particular approach when having discussions.