Tuesdays with a farmer - The death of surrogates - Part II

This is a continuation of my earlier post, The death of surrogates. While you can read this post individually, you might want to check it out  to appreciate this post better.

Farmer:  Just because an engineer's son might have imbibed some learning from the influence of his parents, do we let him call himself an engineer? Any surrogate, at some point of time, becomes illogical. Isn't it surprising that a planet full of rational people continue to build more and more robust structures of surrogates?

Take the case of Marketing. We love calling every customer group as a segment. There is no such thing as a segment. You make up a segment because it is inconvenient to deal directly with the customer. At some point, the segment becomes real and the customer is forgotten. You start dealing with the segment, while in actuality you are dealing with the customer.  The surrogate becomes bigger than  the customer. Look at any metrics. Everything you measure. The meanest mean  or the GDPs of the world. 

Aren't they surrogates of real? They are supposed to represent value of a certain kind. Eventually the focus shifts only towards the number. E F Schumacher once said that GDP grows when a small business goes out of business. It also grows when a big business makes an unfair profit. 

Yet we keep saying we have to increase the GDP. That which we never intended turn out to be the outcome of this devotion towards GDP. If we say that GDP is increasing, then everything seems fair. Isn't it just a metric? It is just one way of measuring something. It is a surrogate.  It doesn’t mean that those whose GDP is high are great nations and those whose GDP is low are lousy ones. Because of such surrogates, our mentality itself has changed. That is the magic of surrogate. It becomes bigger than the real.

 Look at currency. It is a representation of value. Very convenient, but extremely inefficient.  Why is it convenient? Because you don’t have to worry about it.  Everything is measured in terms of currency. Everything will have a dollar value. Who says that? We simply agreed. A shirt will cost some dollars. A table will cost some dollars. A job will cost some dollars. A job which is dangerous will cost more. And death will also cost you dearly. What do you get when you die? You will get some bucks. Everything is equated to monetary value.

If you look at currency, it is the base surrogate of value. After sometime, we forget that value is really what we wanted. Now we have agreed that currency is what we want. It doesn’t really matter whether I want value or not. There is a huge amount of inefficiency that is actually injected into the system by introducing the currency. 

If I were thirsty, I would buy a water of bottle for 10000 bucks. While petrol may be so cheap in Iran that you may wash your car with petrol. Water is expensive there. Selling bottle of water for 10 bucks everywhere across the planet is bad economics. Because it ensures that there is lots of value everywhere. Somebody has to pay more and somebody else has to pay little. Finally the bottle of water doesn’t get the value it deserves, higher or lower. If you take the whole system, there is sheer loss at each transaction. Because currency is fixed and price in turn is fixed by it. 

If you look at nature, it doesn't have any currency. There is no intermediary. Transactions happen directly. We never have a material intermediary called as currency.

 Student: It seems everything we measure becomes a surrogate. I am reminded of Galileo's line, "Measure what can be measured, and make measurable what cannot be measured." Aren't we always trying to measure something? I am not sure how do I distinguish between measuring something and surrogacy.

Farmer: There are many parts of human life which are not measurable in numerals.  They are measurable in experience. They are experientially measurable. The urge to have a number for an experience is a game of the mind. No great philosopher would say measure everything. Buddha didn’t say measure everything. He just said, Experience everything.  You don’t have to measure if you start experiencing.    
  
Student: When we look at the old barter system model, didn't we move over it as we weren't getting the right value for whatever we sold?

Farmer:  The problem with barter is not that people didn’t get value. The problem was, it ensured that the market always remained  local.  If you wanted something that wasn’t locally available, you were at loss. Actually, barter is extremely efficient. It ensured that both the parties are happy for what they got. Somebody had easy access to wheat and no horse. While somebody had 12 horses and no wheat. It was easy for him to give the horse away and get valuable wheat. He could decide really how valuable it was.  When he went home, he got exactly what was valuable. The problem with barter, being a local phenomenon, you could only deal with horse and wheat and all that were available in the local market. You have a currency because it ensures you stretch beyond local.  

Broadcast also started with the same idea that if you extend the market beyond the local, you cant really have this one-to-one correspondence. So you had one-to-many kind of medium to deal with the bigger market. Currency enabled you to deal on a standardized level at a larger market scale.

Student:  If I look at the whole spectrum of economics, I feel, it has been trying to measure the value of life and opportunity.  Isn't economics focused on measuring every possible thing?

Farmer: Measuring something doesn’t mean forcing a value. We are always  looking for value. We are not looking for a unit. You may do this because it is convenient. But we must understand that there is a cost involved. At an economic level, they are saying that it is better that we forgo efficiency for convenience. We will have a cost if we forgo efficiency for convenience. Economics doesn’t say that value of the money is important, it says the units are important. Its like what econometrics say, let us assume this is one of unit of this.  After sometime, let us assume becomes this is it.
 

2 comments:

ravijr said...

Nhaice!! 

New thoughts altogether!

Venkataraman said...

thanks ravi!