SOROSIAN Fallibilism by David Arthur Walters

 

SOROSIAN FALLIBILISM

BY

DAVID ARTHUR WALTERS

 

Pain must always run ahead of pleasure to keep the world rolling. If there were no suffering, there would be no success. People are bound to get hurt if the human race is to progress. But perhaps the suffering can be ameliorated although it cannot be done away with altogether. A better wheel might be invented to advance civilization on its illustrious career, or at least the system we have might be tinkered with by piecemeal engineers, greased by the mechanics, and set upon new rails. In any event we might take comfort in believing that life is just a game, life being the grubstake one has to play with.

If the losers do not want to get so badly hurt by the game, then let them change the rules, advised George Soros, the man who broke the Bank of England and who ran the Malaysian and Thai currencies into the ground among other things that reportedly hurt so many people. If he had not won the money games, someone else would have. If someone else would make a killing, anyway, then why not him? Mr. Soros played his hand, but he insisted he was not entirely to blame for bringing down the card houses, for no individual investor can move a currency:

“Markets move currencies,” he said, “so what happened with the British pound would have happened whether I was born or not, so therefore I take no responsibility.”

We may or may not give him the benefit of the doubt disrespecting responsibility, but we definitely disagree with the proposition that the chips could have fallen to someone else, for he was the one man born to do what he had done. He was destined to play without regard to the social consequences, and consequently he happened to win, wherefore we can hardly blame him for his handiwork, which was the work of anonymous, invisible hands.

“If I had tried to take the social consequences into account, it would have thrown off my risk/reward calculations…. Fortunately I did not need to bother about the social consequences because they would have occurred anyway.” The anonymity of the markets, he admitted, “allowed me to dirty my hands.”

Wherefore he is filthy rich. And we do not envy him his filthy lucre, for so many people have dirty hands today that a true friend other than Diogenes would be hard for a billionaire to find.

Man makes the money but the money does not make the man. “There is more to my existence than making money,” Mr. Soros averred. “I focused on it in my career because I recognized that there is a tendency in our society to exaggerate the importance of making money, to define values in terms of money…. Having recognized the importance of making money, I may yet come to be recognized as a great philosopher – which would give more satisfaction than the fortune I have made…. The prevailing bias in favor of money and wealth is a good example of what I mean about fallibility.”

If Soros wanted to entirely exculpate himself instead of displaying his dirty hands, he might better argue that his financial manipulations did the deluded crowd a favor in the long run in this best of all possible worlds, where pre-established harmony presumably rules despite the market deviations he takes advantage of and pessimists are wont to rue. Fortunately for him, he does not believe in general equilibrium, the intuitive notion that due to opposing forces prices naturally fluctuate around a central price, the equilibrium price. The equilibrium quantity is the quantity bought and sold at that price. The mathematical proof of the theory of general equilibrium is an attempt to scientifically prove the existence of the invisible hand of God.

Nor does he believe in the efficient market hypothesis of the market fundamentalist religion, that all the information one can know about oil, for example, is already reflected in its current price; therefore it is not under or overvalued at any given time, and buying or selling it with the expectation of outperforming the market amounts to gambling. There may be market inefficiencies in efficient markets from time to time, but they will cancel each other out one way or another.

Mr. Soros exploits the inefficiencies; but the swings he makes his big killings on are more than slight, chance deviations. They are bubbles inflated by speculative crazes, which has little to do with supply-and-demand rationing; therefore the bubbles are the effect of irrational behavior, not efficient markets. In effect, the markets do not efficiently distribute the surpluses according to his notion of social justice. The losers, he says, are not adequately compensated by the winners. He stated on June 3, 2008, that the price of oil was being inflated into a “super-bubble” by a flood of money from university endowment funds, pension funds, commodity pools and commodity index funds. Although the market fundaments, the buttocks on which an allegedly free market sits, namely supply and demand, warrants an uptrend; a “bubble has been superimposed” on same, he said.

Despite his reservation about government intervention, that it introduces inefficiencies, which would seem to imply that markets are in fact efficient in some respects but not in all as market fundamentalists would have us believe, he hedged and urged Congress to intervene in the oil market to curb speculation in this case. Margin requirements, the amount of cash one must put up to place a bet for a larger amount, should be increased for futures contracts, he said, which would make them less attractive to speculators. Furthermore, pension funds should be prohibited from speculating on commodities altogether if they cannot otherwise be discouraged from behaving like a herd.

Economic professors Dwight R. Sanders and Scott H. Irwin begged to disagree in a New York Times editorial dated July 20, 2008, claiming that there is no historical evidence that political interventions lower prices, nor is there more than slight evidence that speculative buying has increased prices of commodities; significant anecdotal evidence exists to the contrary in some markets, they noted. Speculators are simply convenient scapegoats, they said, for the likes of such politicians as President Harry Truman, who once said that “the cost of living in this country must not be a football to be kicked about by gamblers.”

Bob Greer, executive vice president of PIMCO, has long been arguing against an anticipated clampdown on commodity index trading in particular. Commodity indexes provide ordinary investors with the opportunity to invest or speculate in the commodities they consume. As far as Mr. Greer is concerned, traders do not have enough margin financing as it is, and index investors therefore provide the lacking liquidity necessary to hedge against prices fluctuations that are caused not by speculation in futures contracts but by fundamental, supply and demand factors.

Greer, in a letter to the Commodity Futures Trading Commission referring to his participation in an April 22, 2008 Agricultural Market Roundtable sponsored by the Commission, argued that “index investors, many of whom are also consumers of commodities, support any activity that improves the efficiency of the markets that produce what they consume…. The index investors must not be confused with discretionary commodity pools or hedge funds, who may move in or out of individual markets based on their expectations of rising or falling prices, and who might rapidly change their views. The index investor holds consistent long positions, and therefore consistently assumes prices risk which produces and inventory holders wish to mitigate…. Hedge funds and commodity pools, on the other hand, might at times contribute to more futures volatility…but these flows don’t necessarily occur on a daily basis nor in the long term do they have meaningful impact on prices levels…. On the other hand, low inventories in a commodity, which is a condition that can persist day after day, can in and of itself, be a source of increased volatility…. Index investors, with their stable long positions, could provide liquidity to any sale program and could actually be an offset to liability caused by other factors….. If a producer, or holder of inventory, had adequate margin financing, they might withstand the strong rise in prices we have seen…. Increased liquidity in the U.S. financial system…would contribute to more efficient operation of the U.S. agricultural economy.”

No doubt that if the government would keep its hands off the markets, the markets would be efficient, the competitive war of all against all would result in the most harmonious, general equilibrium, and this would at least be the best of all possible worlds, despite the damage done during volatile episodes. As Francois Voltaire’s Pangloss said to Candide: "There is a concatenation of events in this best of all possible worlds, for if you had not been kicked out of a magnificent castle for love of Miss Cunegonde, if you had not been put into the Inquisition, if you had not walked over America, if you had not stabbed the Baron, if you had not lost all your sheep from the fine country of El Dorado, you would not be here eating preserved citrons and pistachio-nuts."

Yet no less than Benedict Spinoza, in his Ethics, derided the notion of a pre-established harmony to be fully realized in the end after a great deal of cacophonous din: “There are men lunatic enough to believe, that even God himself takes pleasure in harmony; and philosophers are not lacking who have persuaded themselves, that the motion of the heavenly bodies gives rise to harmony – all of which instances sufficiently to show that everyone judges of things according to the state of his brain, or rather mistakes for things the forms of his imagination. We need no long wonder that there have arisen all the controversies we have witnessed, and finally skepticism.” Still, he axiomatically states, in ‘Proposition XXXI’: “In so far as a thing is in harmony with our nature, it is necessarily good.”

We remain skeptical; it is our nature to think therefore we are all too human; it is our nature to vainly imagine things including our selves, to speculate even on nothing, and we certainly know from the results that we are by nature fallible. Soros, who has made a fortune on the presumption that markets are not efficient, that is, on market volatility, and on the fact that expectations are not rational, summed up his philosophy in a single phrase, “a belief in our own fallibility. This phrase has the same significance for me as the dictum, cogito ergo sum, does for Descartes. Indeed, its significance is even greater: Descartes’ dictum referred only to the person who thinks, whereas mine refers also to the world in which we live.”

Human beings have been aware of their fallibility all along, long before modern philosophers invented “fallibilism” and tendentiously drew a hairsplitting difference between it and skepticism. We have good reason to have our doubts. Philosophical skepticism is nothing new; its founding professors are often misconstrued: they did not deliberately disbelieve in the existence of the ditch in front of their feet, then step forward and tumble into it. Some truths could be known, and to that extent Skeptics were then, like George Soros is today, fallibilists.

Fallibilists believe that no belief can be conclusively proved. A fallibilist must have a critical attitude, and he is duly criticized for having one, especially towards traditional values, yet there would be no progress to freedom without it. Criticism is really no sin as long as it is true to the unknown god, the negatively existent one at the core – we recall that boys in the ancient Jewish schools were whipped not for sounding the wrong answers, but for not questioning the Torah. Reason was the acid that eventually ate though everything including the most foundational of maxims and axioms; so much the better if reason dissolves the cornerstone of the edifice, and the seeker, deprived of the usual sensory objects, plunges into the abyss, where he is left alone to meditate on his ego and its divine projection. The one-god was eventually assassinated in the rationalizing process, and postmodern philosophers are now certain that the presumably enduring ‘I’ no longer exists in itself either, so the seeker, absent unity of apperception, contemplates chaos, which is to say nothing; but Nothing is good enough for those of us who eschew constructed categories and embrace the ultimate meaningless of Nothing, for Nothing is perfect, permanent, and nondenominational. Wherefore anything and everything goes. Yet we naturally need something in general to believe in, some sort of metaphysical ground to stand on, and that is why we capitalize our sweet nothing as well as our ‘I’, and remain optimistically pessimistic.

Now Voltaire, a leading light of enlightenment, was mocking cockeyed optimism with his Candide. He was, or so it is said, an admirable representative of the Cartesian age of reasonable certainty, for it was Reason, not God Almighty that illuminated enlightened minds. Indeed, the sacred images were replaced by natural images and Reason was enthroned in the great cathedral of Paris – the Revolutionary congregation guffawed out loud if God were mentioned by the minister. Yet Rene Descartes, who is considered by disgruntled postmodern thinkers to be the greatest villain behind the Enlightenment, proved the existence of God after setting forth the indubitable maxim of his own thoughtful existence, and deduced everything therefrom. His doubters said that Descartes’ tribute to the Supreme Being was perfunctory if not downright disingenuous and duplicitous, for if he believed in anything to begin with, it was that one must doubt everything. And so the Enlightenment, even when sponsored by frocked friars and other spirituals, raised doubts about received authority to the high heavens, and placed its faith in the Light of Reason, which shone freely within everyone who dared to question the royal tyranny without. Of this Rock, to which Sun-god Sisyphus set his shoulders daily, they could be more certain than the Rock of Zion.

Indeed, the cue was taken from Descartes, reputed founder of modern rationalism and inventor of the algebraic geometry behind speculators’ charts. Habits are the platform from whence reason and emotion spring. The apple from the tree of knowledge was rotten to the core from the habitual pursuit of happiness. The human world needed foundational rules to progress from chaotic corruption to law abiding order. Skepticism tries to wipe the slate clean so that the black board might be meditated upon, but systematic doubt secretly wants to find truth and tends to end in faith lest civilization perish, therefore new maxims are chalked on the board by an invisible finger – try to focus on the blackness now, erasing with an imaginary eraser any chattering thoughts that appear, scrawled in white on the board, until the premise is known. Of course one will need a halfway house to live in while drawing a blank.

“As it is not enough,” reasoned Descartes, “before commencing to rebuild the house in which we live, that it be pulled down, and builders and materials provided, or that we engage in the work ourselves, according to a plan which we have beforehand carefully drawn out, but it is likewise necessary that we be furnished with some other house in which we may live commodiously during the operations, so that I might not remain irresolute in my actions, while my reason compelled me to suspend my judgment, and that I might not be prevented from living thenceforward in the greatest possible felicity, I formed a provisory code of morals, composed of three or four maxims, with which I am desirous to make you acquainted.” The interim rules of our radical thinker were not as original as we might suppose after reading the chattering of those postmodern magpies who blame him for the nervous breakdown that spawned the mental illness of Western civilization that dislodged people from the commonsense that Descartes himself credited them with:

“Good sense is, of all things among men, the most equally distributed…. The diversity of our opinions does not arise from some being endowed with a larger share of reason than others, but solely from this, that we conduct our thoughts along different ways, and do not fix our attention on the same objects.”

Good sense informed Descartes that we cannot understand what a thing is unless the mind perceives it; that the understanding is not in the thing or the sensation of it, which may, like melting wax, change its forms and be sensed differently by all sense organs, but lies in the mental perception of it as wax in all cases. Perhaps no other constructive thinker has been less read and more derided as matter of course by his postmodern critics than Descartes, excepting perhaps Sigmund Freud. As for his interim rules, to be abided by while he doubted everything in the radical search for truth that God had assigned to him in three successive dreams:

“The first was to obey the laws and customs of my country, adhering firmly to the faith in which, by the grace of God, I had been educated from my childhood and regulating my conduct in every other matter according to the most moderate opinions, and the farthest removed from extremes, which should happen to be adopted in practice with general consent of the most judicious of those among whom I might be living…. It appeared to me that, in order to ascertain the real opinions of such, I ought rather to take cognizance of what they practiced than of what they said, not only because, in the corruption of our manners, there are few disposed to speak exactly as they believe, but also because very many are not aware of what it is that they really believe…. And I placed in the class extremes especially all promises by which somewhat of our freedom is abridged…because I did not find anything on earth which was wholly superior to change.”

“My second maxim was to be firm and resolute in my actions as I was able…imitating in this the example of travelers who, when they have lost their way in a forest, ought not to wander from side to side, far less in one place, but proceed constantly towards the same side in as straight a line as possible…. When it is not in our power to determine what is true, we ought to act according to what is most probable…. This principle was sufficient thenceforward to rid me of all those repentings and pangs of remorse that usually disturb the consciences of such feeble and uncertain minds as, destitute of any clear and determinate principle of choice, allow themselves one day to adopt a course of action as the best, which they abandon the next, as the opposite.”

“My third maxim was to endeavor always to conquer myself rather than fortune, and change my desires rather than the order of the world, and in general, to accustom myself to the persuasion that, except our own thoughts, there is nothing absolutely in our power…. If we consider all external goods as equally beyond our power, we shall no more regret the absence of such goods as seem due to our birth, when deprived of them without any fault of ours, than our not possessing the kingdoms of China or Mexico.”

“To conclude this code of morals, I thought of reviewing the different occupations of men in this life, with the view of making choice of the best. And, without wishing to offer any remarks on the employment of others, I may state that it was my conviction that I could not do better than continue in that in which I was engaged, viz., in devoted my whole life to the culture of my reason, and in making the greatest progress I was able in the knowledge of truth, on the principles of the method which I prescribed to myself…. I daily discovered truths that appears to me of some importance, and of which other men were ignorant…. Since God has endowed each of us with some light of reason by which to distinguish truth from error, I could not have believed that I ought for a single moment to rest satisfied with the opinions of another, unless I had resolved to exercise my own judgment in examining these whenever I should be duly qualified for the task.”

It was with this conservative plank supporting him that Descartes avowedly doubted everything, and eventually exchanged the skepticism of his age, whose intellectuals were sorely disappointed by the decrepit Renaissance, for the self-evident truths of intuition and the deductions of mathematical reasoning, a process of inference that might be applied to all the sciences. He did not mind if others followed or forged other trails, or simply wandered around aimlessly in circles or preferred to be driven hither and thither by unfilled desires; it was his specific mission, mystically revealed to him while soldiering in the Bavarian army, and after meeting Johannes Faulhaber, a mathematician and Rosicrucian, to reduce physics to geometry and mathematically connect all sciences. Descartes’ general rules for thinking clearly may be examined in his essay Rules for the Direction of the Mind, but we shall quote further from his Discourse on the Method of Rightly Conducting the Reason, and Seeking Truth in the Sciences.

“The long chains of simple and easy reasonings by means of which geometers are accustomed to reach the conclusions of their most difficult demonstrations,” he declared in his discourse on method, “had led me to imagine that all things, to which the knowledge of man in competent, are mutually connected in the same way, and that there is nothing so for removed from us as to be beyond our reach, or so hidden that we cannot discover it, provided only we abstain from accepting the false for the true, and always preserve in our thoughts the order necessary for the deduction of one truth from another.” Inspired, we enthusiastically add this aside: Those primitives who cannot count beyond three except to say that more than three is ‘many’, and who resort to superstition and myth to explain events instead of calculating probabilities, lead uncertain, relatively short, brutish lives. Anyone who can count to four certainly can be certain that 2+2=4 and so does 3+1=4, which is to say in different ways that 4=4. The chosen people, or people who choose to lead a rational life beginning with the simplest of ratios expressed as maxims and axioms, shall by reflection eventually arrive at the most golden of proportions, perhaps one expressing the unified theory of the universe, from the big bang to collapse into the black hole.

“I had no intention,” Descartes stated, “of attempting to master all the particular sciences commonly denominated mathematics; but observing that, however different their objects, they all agree in considering only the various relations or proportions subsisting among those objects, I thought it best for my purpose to consider these proportions subsisting among those objects. I thought it best to consider those proportions in the most general form possible, without referring them to any objects in particular…. Perceiving further, that in order to understand these relations I should sometimes have to consider them in the aggregate, I thought that, in order the better to consider them individually, I should view them as subsisting between straight lines, than which I could find no objects more simple, or capable of being distinctly represented in my imagination and senses; and on the other hand, that in order to retain them in the or embrace the aggregate of many, I should express them by certain characters the briefest possible. In this way I believed that I could borrow all that was best both in geometrical analysis and in algebra, and correct all the defects of the one by help of the other.”

How are we nonscientists to profit by all this? Our reason for living is, after all, to make a profit, and the meaning of life is summed up by money, which can allegedly buy everything nowadays despite the old adage to the contrary. Take the simplest figure, for example, the line, and lay out points along the line for good measure, say, of the price of a barrel of oil; stand that line on end and relate it to another line, laid out horizontally at the base, measuring out the time, so that the point of origin for both lines is the same. The relationship between price and time is represented by points on our graph, which extends, to the left, over the past few years. We believe the current price is somehow influenced by past prices, that at least the immediate future can be foretold by examining past patterns, despite the declarations of academics who say there is no cause and effect relationship between the points along the line, that the historical movement we observe is in fact random, and that all the information in the world is already reflected in the current price, therefore fundamentalists as well as chartists are fools. But our charts visually encourage our wishful thinking. The price on June 18, 2008 is pushing $140 a barrel. We go with the trend, and take the plunge into black gold. An expert says it will go to $200 at this pace.

This just in from Reuters: Crude oil prices are set to rise further and efforts to persuade producers to increase output will not work, global hedge fund manager George Soros warned last Wednesday…. “Rather than expecting energy prices to go down somehow,” he said, “we should accept that prices must go further up first for us to be able to solve the problem…. There are huge opportunities for reducing energy consumption, but prices must go up first so as to encourage people to consume less.”

Surely, we are going to strike it rich! However, the price of a barrel fell to $112 as of August 2008, and is expected to fall much further by those who claim half its price is a speculative bubble – the Arabs agree, hence the high price at the pump is not their fault. The evil short-sellers made a bundle. But we remain positive, and double up. Have faith: Goldman Sachs announced that oil shall soon rise to $150. That confirms it! And of course we are looking at that possible $200 again and maybe more when war with Iran breaks out. If Europeans can pay $12 gallon and still get along, Americans can too!

Ah, Mr. Soros and every other sane human being born on this planet are right: we humans are fallible. Perhaps our greatest error is the utilitarian reduction of life to economic considerations, but never mind that now. If we were not fallible, volatility would not be the economic animal’s best friend and foe, and we would all have an ample supply of citrons and pistachios, or apples if you like. Who knows what is to come? Nobody! Prices have unpredictably plummeted: traders seldom jump out of windows today; they tally up their losses, recline on the psychoanalyst’s couch and tell their tale of woe: they thought they knew it all, they thought they were going to be masters of the universe, they thought their trading system was perfect, they thought this was the best of all possible worlds, but now all is for naught. The prices moved at random. The money machines backfired on them while they were sleeping. The charts, the grids, are worthless backdrops – we might as well read animal entrails, chicken bones, or heat up the carapaces of giant turtles and read the cracks, or get a monkey to throw darts at ticker symbols, or just throw up our hands and pray to the Supreme Being for the salvation of our fallible human being.

After all has been said and done, we discover that man does not live on bread alone, and the bread that sustains his body must be shared or he shall go broke. Without a high morale to live by, his utilitarian constructions are wrought in vain and the land of milk and honey shall inevitably be replaced by heaps of dung. Yes, we paraphrase the Hebrew rule; the only consolation is this: that man, when crushed as flat as matzo, is closer to the Supreme Being, the absolute power fully acquaints him with his fallibility that he might know himself better. Justice then is done. We believe this rule from on high pleases the philosopher, or rather the secular Hebrew in George Soros. Even if the Hebrew has no faith in the existence of YHWH, the negatively-existent one, he has faith in Justice that justice, the Doom of Dom, must be and shall be realized on judgment day. Let equality be our guiding principle, and we may survive the day when the proud are laid low.

Evidently we need rules to live by no matter how silly they might seem to those whose rules differ from ours; they may even appear ridiculous to us when we carefully examine them, so we simply say “This is what we do.” To know thyself is to know thy limits; it is good to know the ultimate limitation, the summary phrase of George Soros’ philosophy: it is all too human to error; we are fallible or apt to err. But self-doubt alone is hardly a formula for progress, albeit a good measure of humility is need to ameliorate the tragic consequences of pride. A more elaborate formula is needed; we might paraphrase Rene Descartes’ interim rules: Knowing that you are fallible, conquer yourself, abide by the rules and act resolutely to do the best you can to serve your kind, keeping the best personal examples in mind. One may then act resolutely to change the rules if need be.

# #