A Theory of Justice

I. Overview

Rawls in this book tried to establish the theory of justice as fairness to provide an alternative to utilitarianism and intuitionism.

He thought: “Each person possesses an inviolability founded on justice that even the welfare of society as a whole cannot override. Therefore in a just society the rights secured by justice are not subject to political bargaining or to the calculus of social interests.” According to Rawls, the society is well-ordered when it is not only designed to advance the good of its members but when it is also effectively regulated by a public conception of justice. In the society, justice exists a-priori, and then other rules follow it. Here, good is determined by “what is for him the most rational plan of life given reasonably favorable circumstances”.

He introduces the conditions on conceptions of right (23. The formal constraints of the concept of right). According to him, “a conception of right is a set of principles, general in form and universal in application, that is to be publicly recognized as a final court of appeal for ordering the conflicting claims of moral persons”.

To derive the principle of justice, Rawls used the concept of “original position”, as the other philosophers of social contract did as physics analyzes the situation assuming no friction. Rawls’s original position is a hypothetical situation in which no one knows his place in society, his class position or social status, nor does any one know his fortune in the distribution of natural assets and abilities, his intelligence, strength, and the like, nor do the parties know their conceptions of the good or their special psychological propensities. Under the circumstances, Rawls said, the principles of justice are chosen behind “a veil of ignorance”, provided that people are rational. He calls it “justice as fairness”, as the justice here is agreed to in the situation that is fair, or the participants are all equal. (p11, 3. The main idea of the theory of justice)

Then he derives two main principles of justice (P53, 11. two principles of justice).

One is justice about liberty. “Each person is to have an equal right to the most extensive scheme of equal basic liberties compatible with a similar scheme of liberties for others”. The liberty here does not include all sorts of liberties. Rawls says important among the liberties are political liberty and freedom of speech and assembly; liberty of conscience and freedom of thought; freedom of the person; the right to hold personal property and freedom from arbitrary arrest and seizures. The principle primarily applies to the basic structure of society and governs the assignment of rights and duties.

Another is justice about social and economic justice. He said: “social and economic inequalities are to be arranged so that they are both (a) reasonably expected to be to everyone’s advantage, and (b) attached to positions and offices open to all. “ This principle applies to the distribution of income and wealth and to the design of organizations that make use of differences in authority and responsibility.

Regarding the second principle of justice, when Rawls say “everyone’s advantage”, it means that the inequality satisfies two principles: efficiency principle and difference principle (P57, 12.interpretations of the second principle). Efficiency principle is in the same meaning of Pareto’s optimality. Difference principle rules that the inequality is “justifiable only if the difference in expectation is to the advantage of the representative man who is worse off”. The “open to all” means the quality as careers open to talents and equality as equality of fair opportunities.

II. Righteousness of the two principles

Rawls claims righteousness of the two principles because of its reasoning, application to the institutions and comparisons with other conceptions. (26. The reasoning for the two principles)

He argues that the two principles are the result of logical reasoning from the assumption of original position.

1. Logical Reasoning

“There is no way for him to win special advantages for himself. Nor, on the other hand, are there grounds for his acquiescing in special disadvantages. Since it is not reasonable for him to expect more than an equal share in the division of social primary goods, and since it is not rational for him to agree to less, the sensible thing is to acknowledge as the first step a principle of justice requiring an equal distribution. Indeed, this principle is so obvious given the symmetry of the parties that it would occur to everyone immediately. Thus the parties start with a principle requiring equal basic liberties for all, as well as fair equality of opportunity and equal division of income and wealth.”

That is, if I understand it correctly, in the “empty” situation, rational people chose equal liberties and equal opportunities ex-ante. So what about the ex-post inequalities that would be inevitable even under the equality of opportunity?

“If there are inequalities in income and wealth, and differences in authority and degrees of responsibility, that work to make everyone better off in comparison with the benchmark of equality, why not permit them? One might think that ideally individuals should want to serve one another. But since the parties are assumed to be mutually disinterested, their acceptance of these economic and institutional inequalities is only the recognition of the relations of opposition in which men stand in the circumstances of justice. They have no grounds for complaining of one another’s motives. Thus the parties would object to these differences only if they would be dejected by the bare knowledge or perception that others are better situated; but I suppose that they decide as if they are not moved by envy. Thus the basic structure should allow these inequalities so long as these improve everyone’s situation, including that of the least advantaged, provided that they are consistent with equal liberty and fair opportunity. … Taking equality as the basis of comparison, those who have gained more must do so on terms that are justifiable to those who have gained the least.”

In original position, people are disinterested each other, and they do not care about the motives of others, but about the fact of inequality from the viewpoint of justice. Then, he says, the inequalities are allowed only if they improve the situation of everyone including the least advantaged one. It is like the maximin principle in game theory, the principle to maximize the payoff when it’s least, i.e. to minimize the severest damage. He says the principle is out of the nature of original position, where participants do not see probability distribution of the events in the future (“darkness” in his term).

“To begin with, the veil of ignorance excludes all knowledge of likelihoods. The parties have no basis for determining the probable nature of their society, or their place in it. Thus they have no basis for probability calculations. They must also take into account the fact that their choice of principles should seem reasonable to others, in particular their descendants, whose rights will be deeply affected by it. These considerations are strengthened by the fact that the parties know very little about the possible states of society. Not only are they unable to conjecture the likelihoods of the various possible circumstances, they cannot say much about what the possible circumstances are, much less enumerate them and foresee the outcome of each alternative available. Those deciding are much more in the dark than illustrations by numerical tables suggests. It is for this reason that I have spoken only of a relation to the maximum rule.”

Rawls’s approach, using original position to derive justice principles, was an alternative to the common ways of establishing ethical theories: one is to begin with the first principle and then derive the body of standard and precepts, the method called Cartesian approach; another is to introduce definitions of moral concepts in terms of presumptively non-moral ones, and then to show by accepted common sense and the sciences that the statements thus paired with the asserted moral judgments are true, naturalism approach. He argued both common approaches have defects. He said, “There is no set of conditions or first principles that can be plausibly claimed to be necessary or definitive of morality and thereby especially suited to carry the burden of justification. On the other hand, the method of naturalism so-called must first distinguish moral from non-moral concepts and then gain acceptance for the definitions laid down. For the justification to succeed a clear theory of meaning is presupposed and this seems to be lacking.” Thus he developed the alternative, and let the source of justification on its entire conception and how it fits in with and organizes our considered judgments in reflective equilibrium. (87. Concluding remarks on justification)

2. Application to the institution

Part Two of the book tries to show that the two principles provide a workable theory of social justice and are compatible with reasonable demands of efficiency, by applying the two to some main questions of social justice: conscience, toleration and the common interest, political justice and constitution, the principle of participation, political economy, the problem between generations, time preference, duty and obligation, majority rule, civil disobedience, etc.

3. Comparison with other conceptions

According to Rawls, the other principles (utility, intuition, etc) will lead to institutions that the parties would find intolerable, as when we follow utilitarian principle, we would see some minorities sacrificed for the sake of majority.

III. A few remarks

He limited his discussion of justice into the scope of social justice, or the justice applied to institutions. He said, “the principles of justice for institutions must not be confused with the principles which apply to individuals and their actions in particular circumstances. These two kinds of principles apply to different subjects and must be discussed separately”. That part is criticized by feminism, which says “the personal is social”. Indeed, Rawls may have failed to recognize that the personal relationship represents the society and the personal and social discussions cannot be separated. That said, the feminism’s arguments will not destroy entire structure of Rawls’s proposition. Rawls did not explicitly exclude the feminism issues, and his theory can be feasibly applied to the “social issues” in personal relationship.

The criticism from economists such as Kenneth Arrow seems to be correction rather than criticism. I don't think Rawls had formal economics training, and although his usage of the maxmin principle may be inappropriate, that error would not hurt the essence of his argument.

I think the strong criticism is what communitarian such as Sandel and Taylor made, as they cast doubt on the reasoning itself. Rawls used the conceptual “original position”, or empty space, to develop the two principles. The criticism is toward the setup itself. Indeed, physics made significant progress thanks to its setup of abstraction; theory is developed in the frictionless world, and then it’s applied to the reality. However, in the discussion of the issues deeply related to human beings which innately has values, aspirations, minds, etc., would that be the right setup? I would support the view of communitarians, as I believe that the concept like justice is what is out of humanity and thus that to abstract the considerations that make us human would lead to the false conclusion. With that said, though I now see the communitarian criticism to be plausible, I cannot provide the alternatives to come up with the universal and general justice theory. Maybe the good time to read “Justice” authored by Sandel.

My additional thought is that the proof of two principles is weak. Only several pages are spent for the proof, in this thick 500+ pages book. Without using any axiom, he just deduces his conclusion by using common sense. According to him, the development of two principles is “obvious” in the “original position”, but I could not understand what logical reasoning made it obvious. To introduce what is general and universal, one should start with the premise and process that are also general and universal.

A final tiny comment is that this book is verbose. Unfortunately, this prolixity seems to make the concept less clear to me.

Reference

John Rawls, "A Theory of Justice" (revised edition), Belknap Press of Harvard University Press, 1999 Sep 30

Abduction

Introduced by Charles Sanders Peirce, abduction is a way of logical reasoning. The form of reasoning is as follows:

• There is a surprising fact C
• If H is true, the existence of C is natural and reasonable
• Thus hypothesis H exists

Relationship and difference among three logical reasonings

Including abduction, there are mainly three types of logical reasoning, i.e. deduction, induction and abduction. There relationship of three types of reasoning in scientific discoveries is as follows: one lead to a hypothesis through abduction, then one logically prove it using deduction, and finally they prove the applicability of facts through empirical research (induction).

Following mathematical logical rule, deduction is strict and strong reasoning. Using deduction, one can come to the conclusion from premise almost straightforwardly. There is little chance of making fallacy when one is trained to make deductive reasoning. However, using deduction only, one cannot get to the leaping conclusion such as scientific discovery and innovation.

Induction and abduction can lead to the leaping conclusion, but the big difference between them is that whereas inductive reasoning just leads to general conclusion by summing up individual facts, abductive reasoning introduces hypothesis, which is critical in scientific theory or innovation. Bertrand Russell emphasized the importance of hypothesis in criticizing excessive emphasis on induction. He said:

“Bacon's inductive method is faulty through insufficient emphasis on hypothesis. He hoped that mere orderly arrangement of data would make the right hypothesis obvious, but this is seldom the case. As a rule, the framing of hypotheses is the most difficult part of scientific work, and the part where great ability is indispensable. So far, no method has been found which would make it possible to invent hypotheses by rule. Usually some hypothesis is a necessary preliminary to the collection of facts, since the selection of facts demands some way of determining relevance. Without something of this kind, the mere multiplicity of facts is baffling.”

Bertrand Russell, A history of western philosophy (4^th printing), pp544 – 545

Conditions of abductive hypothesis

Peirce said there are four conditions in abuductive hypothesis.

• The hypothesis is the most likely one among others
• The hypothesis is simple, and using the hypothesis the facts are more simply described
• The hypothesis can be tested
• The cost of testing the hypothesis is lower than testing others

Rule of thumbs of abduction

Although the organized rule of introducing hypothesis is not in place even now, curiosity, creativity and imagination must be there. Innovators and scientists come up with new ideas from usual lives, as they don’t lose curiosity in things and find surprising facts in ordinary set-up. So, in a sense, the training to be innovative is not to lose child-like wonder. Creativity and imagination often come from the knowledge and experience in different fields.

Deductive method under the name of “logical thinking” has gained popularity in business society. Granted, deductive reasoning is prerequisite in everything, but we need to know the limitation. As computers would soon replace the role of deductive reasoning, Deduction alone is not enough to survive in 21^st century. Now is the time to learn abductive reasoning.

Reference: 「アブダクション」(Japanese)、 米盛裕二、勁草書房

Qualities of innovators

To be innovative, one has to (1) choose right issues, then (2) conceive new solutions and then (3) take actions. To choose right issues, one needs to observe and question. To come up with new solutions, one needs to associate different things and network with others. Then implement. Here I summarize five qualities of innovators in three categories.

1. Observing and questioning: choosing right issues

Observing

Innovators are good at observing things. Here, observing is not just seeing; it is the deed to find out implications. Like an anthropologist, they spend relatively long time to observe the issues. One way to be a good observer is to experience the situation. This way you get much information in very short time. That may be why many innovators love to do field studies.

Questioning

Innovators often ask questions, especially “why” and “what if” sort of ones. They often question “the unquestionable”, as Steve Jobs asked “why personal computers need a fun?” When you continue to question the issues, you’ll probably get to the essence of issues.

2. Associating and networking: coming up with new solutions

Associational thinking

The art of innovation is connecting different things. According to Einstein, it is “combinational play”. Pattern of associational thinking is said to be: substitute, combine, adopt, magnify, minimize, modify, put to other use, eliminate, reverse and rearrange.

There are some tips in associational thinking.

• Forced association: use a problem and random idea to make a possible association
• Use persona of others
• Metaphor: e.g. “What if TV watching is like magazine reading? (it was the origin of TIVO)”
• Curiosity box: you have a box in which things you’re interested in are, and when you face problems you open the box and think of associational solution

Networking

What Einstein said provides an implication on it:

“Somebody who only reads newspapers and at best books of contemporary authors looks to me like an extremely near-sighted person who scorns eyeglasses. He is completely dependent on the prejudices and fashions of his times, since he never gets to see or hear anything else. And what a person thinks on his own, without being stimulated by the thoughts and experiences of others, is even in the best cases rather paltry and monotonous. There are only a few enlightened people with a lucid mind and style and with good taste within a century. What has been preserved of their work belongs among the most precious possessions of mankind. We owe it to a few writers of antiquity (Plato, Aristotle, etc.) that the people in the Middle Ages could slowly extricate themselves from the superstitions and ignorance that had darkend life for more than half a millennium. Nothing is more needed to overcome the modernist’s snobbishness.”

Innovators are connected with people with various backgrounds or experiences many concepts, as Steve Jobs learned from Zen to invent apple's products. As mentioned before, the art of innovation comes from associating different concepts. If you want to be innovative, you’d better to have many “dots” to be connected in the future.

3. Experimenting: implementation

Innovators are good doers. Thomas Edison said “I haven’t failed. I’ve just found 10,000 ways that do not work”.

Innovative people try to prepare a prototype as soon as possible. Making prototypes first has many virtues; you can detect potential issues associated with the product, sense voice of the clients, and solicit creativities.

Another way of experimenting is taking things apart: disassemble, map out a process, de-construct an idea.

Those qualities are not product of genius, and you all can attain those qualities through practice.

Reference:　“Innovator’s DNA”, authored by Dyer, Gregersen and Christensen

Taking initiatives while working

Spoke with a businessperson who is also keen on the issues of foster homes. She wrote a book about a boy who is from a foster home and committed suicide. Yesterday, the best friend (also raised in a foster home) of the boy followed the same fate.

The biggest issue of children from foster homes is loneliness. They’re alone both when they go to foster homes and when they go out from the homes. When children go to foster homes, they are separated from all the social relationship they made. They cannot say hi to their friends, neighbors, teachers, etc. When they go out from the homes, they are again broken apart. In the name of “personal information protection”, they have no ways to know each other’s contact info. That loneliness, which we can definitely alter, is one reason of the suicide, I think.

The issues are structural, and political resolution should be in place. That said, individual initiatives are meaningful, as they promote the change to come. I will probably work with her to take some new actions.

The Will to Lead

In his final book, “The Will to Lead”, Marvin Bower starts with saying that
“I now believe that when true leaders and leadership teams are stationed strategically throughout a company, and hierarchy has been eliminated, people will be freed up to work together more effectively, efficiently, and creatively. They will exercise more initiative and get more ideas, and they will be far more likely to want to work together in harmony with one another and with optimism and enthusiasm, and to like their work. “

In his book, Marvin first describes attributes of leaders (not commander), describes four main responsibilities of leaders, and then writes about various related topics.

Regarding qualities and attributes of leading, he mentions many aspects. Those could be summarized into two categories.

Integrity. Trustworthiness is integrity in action. The way to integrity is simple - always tell the truth. If you always tell the truth, you won’t have to remember what you said. Treat people fairly. No arrogance, haughtiness and egotism. No hypocritical humbleness. No calculation. Just behave unassuming.

Sensitivity to people and situations. Listening is one of the most valuable and one of the least understood. Most captains of industry listen only sometimes, and they remain ordinary leaders. Remember that feeling of being heard is quite important. Any leader with an open mind makes better judgments, learns more of what he or she needs to know, and establishes more positive relations with subordinates and constituents. The guidance to be open-minded is never to say “no” immediately, but instead say “I’ll get back to you”.


Marvin also mentions four fundamental responsibilities of company leaders. As one who is leading an organization, I deeply agree with what he says.

1. Treating constituents with respect
Leaders throughout the company have the responsibility for treating all constituents as unique and valued individuals. That means they must assume the best about people rather than the worst, and act in the belief that most people who are treated fairly and considerately will perform whatever work they are doing more effectively and efficiently. In fact, a leadership culture creates the right environment for people to enjoy their work.

2. Developing constituents self-confidence and self-esteem
Every leader should recognize the importance of building self-confidence and self-esteem in his or her constituents and making them feel good about themselves. A constituent cannot be effective if he or she lacks self-confidence. Leaders let constituents feel that our lives have meaning and that what we do for a living is regarded by others as worthwhile. In other words, true leaders let people to like their work and to adjust to the new workplace. When you conduct “command management”, people would never feel self-confidence.

3. Developing Constituents
Every leader is supposed to develop his people. All leaders are responsible to their companies and to their people for developing the potential of their constituents and for bringing along new generations of leaders from these constituents. Let constituents grow. Bring them in on decisions. Delegate. Feed them responsibility. Stretch them. And change their assignments periodically. When I read this, I remember what Konosuke Matsushita, the revered founder of Panasonic said: “We produces people. We also produces electric devices.”

4. Making constituents stakeholders
All leaders must give their constituents the feeling that they have a real stake in the company’s present performance and future success. The stake should be real.

Marvin Bower

Actually, I didn't know much about Marvin Bower, a legendary figure of McKinsey. Having read the book "McKinsey's Marvin Bower", I now think that all those who work for professional firms can learn a lot from him.

Marvin joined McKinsey in 1933, and in 1947 he and three partners bought exclusive and full rights to the name McKinsey & Co. from McKinsey & Kearney. (After selling the rights, McKinsey & Kearney became A. T. Kearney) The purpose of this buyout was to focus on management consulting business, which he believes is incompatible with accounting service business which was conducted by McKinsey & Kearney. Marvin thought that there is a potential conflict of interests if one firm conducts both of those businesses. While other management consulting firms went public, McKinsey didn't, because if McKinsey becomes a listed company, the firm should work for the shareholders interests, not those of clients.

Until stepping down as managing director of the firm in 1967 and formally retiring in 1992, he brought about significant influence on the business society. Client members of Marvin's teams were 20 times more likely to rise to a senior management level (president or CEO) than were their peers. During Marvin's 17 years as manning director of McKinsey, more than 50 of the consultants evolved into CEOs of leading global companies. Even in Japan, there are many McK alumni who assume the role of senior executive of big companies.

Those accomplishments are done by Marvin's professionalism and leadership.

His professionalism was intensive. The following remark well shows his professionalism:

"We are what we speak - it defines us - it is our image. We don't have customers, we have clients. We don't serve within an industry, we are a profession We are not a company, we are not a business. We are a firm. We don't have employees, we have firm members and colleagues who have individual dignity. We don't have business plans, we have aspirations. We don't have rules, we have values. We are management consultants only. We are not managers, promoters, or constructors." (P30)

Through his action, he emphasized and taught his peers what professionalism is.

He didn't like people saying "Well, I did this job for General Motors.", because he thought it diminished the quality of the professional relationship.

He sticked to dress code, saying

"If your job is to help a client have the courage to follow the trail indicated by facts, you need to do everything you can to minimize the distractions and deviations the client is likely to take. If you have revolutionary ideas, they are much more likely to be listened to if you do not have revolutionary dress - the CEOs must have confidence in us. … Basically, the dress code all has to do with what you want to do." (P71)

Marvin was also concerned with the appearance of written communications. McKinsey had formal reports, informal reports, memorandum reports, letters of proposal, memoranda of proposal, and so on, all of which had a full and logically sufficient set of rules. Everyone in the firm used the exactly same typeface.

Marvin Bower was not only the professional management consultant, but also the leader of the firm. Though his leadership, he made the world's best consultancy and let his clients make courageous decisions.

According to Marvin, there are six value-based leadership qualities:

1. Put the client's interest first and separate yourself from the job: Always take your job seriously, not yourself. Mavin never held back the truth from a client, as that would not have been client's best interest.

2. Be consistent yet open minded:eery one met the same Marvin Bower during his long life. Strict in principle and open-minded.

3. Center problem-solving on the facts and on the front line: Marvin always insisted on gathering essential facts.

4. View problems and Decisions in the context of the whole and in terms of the immediate actions to be taken: Marvin believed that isolated facts do not lead to solutions. Having imagination and context to see where the facts lead creates solutions and paths.

5. Inspire and require people to be the best: Marvin challenged his peers and require they to perform as best professionals. He didn't allow the associates to have lunch with friends in weekdays.

6. Communicate the values of the company over and over again to ensure that the firm will understand them, embrace them, and translate them into actions

The author, who worked together with Marvin, said his leadership is distilled six attributes:

1. Integrity/Trustworthiness

2. Fact-based visioning and a pragmatic "Monday Morning" path to turn vision into reality

3. Adherence to principles/values

4. Humility and unassuming respect for others

5. Strong Communications / personal persuasiveness

6. Personal involvement / demonstrated commitment

The final test of a leader is whether he can leave behind in other man the conviction and the will to carry on. Even in this sense, Marvin was the great leader. Founder tends to be stick to the position he established, but he stepped down as managing director of the firm, saying "If you are going to have a dynamic economy, don't let the elderly run the enterprises of the economy.". Even after he left, there were plenty of successors, and even now McKinsey is the factory of world's managers.

I truly appreciate his great life, inspiring me a lot and giving me the chance to think about my job as a professional.

Human Capital

It was Gary Becker who firstly formalized the concept of Human Capital in his book, "Human Capital - A Theoretical and Empirical Analysis with Special Reference to Education". He argued that human resources are a kind of capital, and on-the-job training, education, and the other similar activities are investments in human capital. Nowadays, many people understand the concept, but when the book is firstly published, the argument was epoch-making.

In the book, he analyzed human capital mainly by using demand-supply framework, a classical but still useful framework. Price of human capital, or one's income, is determined at the point where demand and supply curves intersect.

A supply curve of human capital is mainly determined by one's economic condition - for example, if one was raised in poor family, university education could be too costly to have. In this framework, equality of opportunities means is achieved by making supply curve identical. Practical policy would be to establish public schools, let the tuition be free, and so on.

In the framework, a demand curve is mainly determined by one's talent. Some people believe that one's income ought to be high or low based on his or her talent, the notion that Dr. Becker called "the elite approach". It may be difficult to separate demand and supply sides, because it seems that one's gift may be affected by her/his family condition (malnutrition, carelessness toward infants due to busyness, etc would severely affect one's future ability).

Professor Becker also estimated the impact of college education, by calculating annual return of it. According to him, average annual return on college education is ranged from 11% to 13%. The rangee varies based on one's social status: in United States, return on human capital investment was higher for whites and men but lower for non-whites and women, partly because, especially in those days, whites and men could promote more and enjoy more income, whereas non-whites and women could not.

This variation in return on higher education suggests that those who are excluded from opportunities would have less incentive to have higher education, because the return on investment is relatively low for those people. The variation may also explain why test scores or university entrance rates of some groups are lower than the others. For some people, getting higher score in schools may be less meaningful, because the benefit is smaller than the cost when one's inherited wealth is small: one in poor family may find it more attractive to spend his or her time for doing part-time job rather than studying.

Fuji Rock 2011

It was Naeba in Nigata prefecture, not Yamanashi or Nagano where mt. Fuji is located. That was the first thing I noticed when I attended Fuji Rock Festival first time in life, in the final summer while I'm 20s.

It was terrible environment and infrastructure, the second thing I noticed; from Echigo-yuzawa station, I waited for circa 1.5 hours to take a bus to get to Naeba. After the arrival, I waited in a long line to get my ticket exchanged to a wrist band, proof of buying a ticket. Massive rain was all over the mountains, culminating in the disastrous flood.

With that said, it was one of the most memorable events I had in 20s. The severe wether condition seems to strengthen the power of music. Anyone has experienced how the food is delicious when one is hungry. You can sense how beautiful and powerful the music is, when you're in a severe condition. Every stage was great, but if I were to pick up one, I would say that the live of Coldplay was the best (picture). It was not just the music but the mixture of all sorts of arts.

The live performance was great and everyone including me got excited, but during the live performance, I sensed as if I am a stranger in the crowd. As a person who has the experience in playing in front of people, I may have viewed them not only as the greatest artists in the world, but also as competitors or teachers. I was trying to learn from them something, while to some extent I was enjoying it. Would like to do the similar thing in the future.

Aftershock

The Great Depression and the Great Recession has one thing in common - income inequality. Robert Reich, a professor at UC Berkeley and the author of the book “Supercapitalism”, argues that the fundamental reason of the two financial catastrophes is income inequality in his recent book “Aftershock”.

When we see statistics, income inequality does seem to coincide with the period of financial crises and prosperities.

The period of two crises saw unusually high income held by the wealthiest people. Top 1% wealthy individuals held more than 20% of total income generated in the country. On the contrary, in the period of prosperity (from 1947 to 1975) top 1% people had just around 10% of total income. In that era, maximum tax rate never went below 50%, people shared the growth of the productivities of the country, and individuals were able to see American dreams more than they are today.

Pendulum swings back and forth. After the period of prosperity, average hourly compensation of American workers did not increased or even slightly decreased despite the increase of their productivities. Accordingly, income of top 1% wealthy individuals began to increase again since 1975.

Why does inequality lead to the economic crisis? The reasoning is as follows: when you are an average worker, you want your living standards to keep the pace with the growth of the country, but your salary doesn’t increase at the same speed of the economy’s growth. Then to keep the game going, you have to cut your savings or borrow money from banks, and these activities pile up the huge debt. However, the game does not go on forever, and someday it will crash, leaving massive non-performing loans. This time, the final trigger was the burst of mortgage bubble.

Income inequality also leads to less consumption growth. It is logically understandable. If the marginal change of your consumption propensity on income increase is negative (I believe it would be the case for most of us), income inequality leads to lower consumption as a whole. Lower consumption means higher savings. The excess liquidity of the financial institutions is said to be part of the reasons of the latest financial crisis.

Based on the observations, the author suggests several measures to remedy current problems of the country:

1) Tax reform: reverse income tax, carbon tax, and higher marginal tax rates on the wealthy

2) Reemployment system

3) School vouchers based on family income

4) College loans linked to subsequent earnings

5) Medicare for all citizens

6) Increase in public goods

7) Money out of politics (limiting lobbying activities)

Though the author’s emphasis on the importance of income equality is understandable, to achieve it is getting more difficult in these days. Globalization and technology advancement collectively drives inequality between and within countries. Limiting companies’ outsourcing makes no sense at all, as the companies would lose in competition if they don’t conduct cost-cut as others do. New Deal program worked 80 years ago, but now we need 21^st century-version of it.

Bowling Alone

Robert Putnam, a professor of public policy at the Harvard University John F. Kennedy School of Government, presented his idea on social capital in his great book, "Bowling Alone".

Enormous statistics suggest the decline of social capital in US. Political, civic and religious participation are declining straightly. People feel less connected to their coworkers, altruism and philanthropic activities are diminished, and more now feel that people cannot be trusted.

Using statistics of correlation of events, professor Putnam explains potential reasons of the decline. The author guesses that 10 percent of the total decline is attributable to the pressures of time and money; as the economy develops people became to be busier than before and using their time for social activities may be more costly. An additional 10 percent is attributable to the suburbanization, commuting, and urban sprawl; people use more time for their commute and live in area with more strangers, making the civic engagement more difficult. Perhaps 25 percent of the decline may be due to the effect of electronic entertainment, among which TV proliferation coincides with the decline in civic engagement activities. The remaining is explained by the change in generation, the author argues; social habits and values of older generations are influenced by the great mid-century global cataclysm such as World War II, but younger generations did not explain the cataclysm.

Social capital matters, because it lessens communication costs of groups. It makes collective problems (like tragedy of commons) easy, makes communities more efficient, and empowers individuals. The author made index of social capital and evaluated the level of social capital strength of each state, and examined the relationship between the level and performance of the states. The result was striking: States with higher social capital score showed higher school performance (potential reason is children's mental health), lower murder and other criminal rates, longevity, and high tolerance to minorities (this suggests that the social capital here is not "bonding social capital" which sometimes leads to anti-outsiders, but the "bridging social capital" which brings about harmonization among different social groups). Even from practical perspectives, we can justify the importance of social capital.

Once the society looses social capital, it is not easy to rebuild it. Even though US in the last third of 19th century experienced a social capital crisis and succeeded in regaining it, we cannot apply the lessons of the past to the current problems. There is no panacea, and we need collective actions of different players: employer, urban and regional planners, politicians, religious leaders, journalists, and everyone.

The author identified the significant social change in US in this brilliant volume. The book is useful not just for understanding current status of the society, but for the way to conduct research of social capital in all other societies. Hope someone does the same analyses for east Asian countries.