Pro-Human Extremist

Extremism in the defense of humanity is no vice

Archive for July 2011

How businesses serve the greater good

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Hollywood is always on the lookout for good villains. The all-time greats are Nazis and Soviets, but they’re both long gone so they only work in movies set in the past, like Quentin Tarantino’s Inglourious Basterds. The current top villains are I think terrorists and big greedy corporations. The fact that corporations work so well as villains shows that lots of moviegoers are prepared to think the worst of the people who run businesses.

Given the number of corporations in our world, and the hundreds of millions (billions?) of people who work for them, it’s inevitable that their actions would sometimes harm others. But people today too seldom appreciate that the net effect of businesses in our world is overwhelmingly positive, so I figured it might help to enumerate the main positive effects that businesses have.

1) Businesses employ people

Okay, that one’s obvious. Most people in developed economies work for a business, rather than being self-employed. Jobs are good, because they help people feed and clothe themselves and their families. Businesses create jobs that wouldn’t exist if people hadn’t organized and funded the businesses, so the existence of all those businesses makes our world better. Governments create jobs too, but they’ve never managed to do so as effectively on as wide a scale as businesses.

Businesses in developing countries may pay their workers less than some folks in developed countries think is fair or reasonable, but they’re still paying more than their employees would make if they were working on farms, which is why their employees chose to work for them in the first place. Businesses open in developing countries because labor is less expensive there, and once the economy gets going wages start to rise.  Yesterday’s developing economies are today’s emerging economies, like China and Brazil, both of which have more than doubled per capita GDP just in the past ten years. Without businesses, the people in those countries wouldn’t now be on the road to affluence.

2) Businesses earn profits

This one may not seem as obviously good as the first, but consider who owns most of the bigger businesses and therefore gets a share of the profits: you and me and anyone who is saving for retirement. Pension funds are some of the biggest institutional investors today, and if the businesses they invest in didn’t make profits, those pension funds wouldn’t grow and the employees who depend on them wouldn’t get their retirement income. Those of us with defined-contribution pension plans each have much less invested than the big pension funds, but there are many millions of us, and if our portfolios didn’t grow then we too wouldn’t have enough to live on in retirement. All of us are depending on the profitability of the businesses we’re investing our money in.

But profits are bad, aren’t they? No—for two reasons. First, they seldom increase the prices of goods and services much. For the past hundred years, corporate profits have averaged about 5-10% of revenues, which means that goods and services wouldn’t cost much less even if businesses decided to give all their profits back to their customers. Second, the effort businesses make to maximize profits and prevent losses are absolutely essential to keeping businesses running efficiently. Without the profit motive to focus the thoughts and efforts of businesspeople, businesses would surely work enough less efficiently to increase the prices of goods and services above what they currently are. So we’d actually pay more for stuff if businesses weren’t allowed to earn profits! The profit motive is probably also the main reason that businesses create jobs and produce goods and services more effectively than governments have been able to.

3) Businesses create consumer surplus

Create what? Consumer surplus is the difference between how much you have to pay for something and how much it’s worth to you. If a jacket costs you $100 and you get enough use and enjoyment out of it to make it worth $300 to you, then in buying the jacket you got $200 of consumer surplus. If the jacket had been worth just exactly $100 to you, then you would have been equally happy either buying the jacket or keeping your $100—in economics-speak, buying the jacket for $100 wouldn’t have increased your utility.

The consumer surplus associated with any given purchase is difficult or impossible to measure, but the simple fact that we are glad to have bought something shows that there must be some consumer surplus, since our happiness tells us that we feel better off having exchanged our money for that good. And the actual consumer surplus for most of the things we buy is probably quite a bit more than we might guesstimate in this way, since mass-production and globalization have reduced the prices of things to well below the value in use and enjoyment that they actually have for us.

We may not think the jacket is worth much more than $100, because we can find other similar jackets for around the same price. But the real calculation of value should be based on how much benefit and enjoyment we get from any such jacket vs. having more money but no jacket. Jackets keep us warm and dry, and have pockets, and look nice. Wouldn’t you probably pay several hundred dollars at least for those services, if no jackets could be had for less? The difference between that much higher value and the paltry $100 we actually pay is the consumer surplus.

Not convinced yet? Consider the personal computer. Twenty years ago, people paid more money for computers that were way less powerful than today’s, with tiny hard-drives and essentially no internet access—yet they were still happy to exchange that amount of money for that benefit. Today’s computers are cheaper, and they give us access to a much wider range of more powerful software tools together with all of the information and enjoyment on the internet. There was some consumer surplus even in the computer purchases of twenty years ago, or the purchases wouldn’t have happened. A $500 laptop gives you so much more than $500 of value over the time you own it.

We take it totally for granted, but there’s substantial consumer surplus in all of the purchases we make. Why is this? Because businesses have competed against each other to make the design, manufacture, and distribution of goods more and more efficient. Their ceaseless efforts to make better products and to undercut each other on price benefit we the consumers, by giving us more and more consumer surplus with our purchases.

Are businesses admirable?

Okay, so businesses contribute to the greater good. But are businesses started for the purpose of creating jobs and consumer surplus, or for making possible the retirement of people who invest in them? No—they’re started by people who want to make money, and to some extent also by people who want to have fun by realizing a dream. They sell stock when they need more capital to expand, which is where the retirees come in. They create jobs because it’s hard to do much without employees, and they create consumer surplus because they’re constantly competing with each other.

So they serve the greater good merely as a means to an end or an unintended consequence of the desire to make some money. That means they don’t really deserve credit for serving the greater good, if that’s not specifically what they’re trying to do, right? Who cares—my point isn’t that businesses are morally admirable; my point is that their very existence makes our world better far more often than it makes it worse.

© Joel Benington, 2011

Written by Joel Benington

July 22, 2011 at 6:24 pm

Posted in economics, numbers

…and a way to become sane again

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Thousands of generations of Homo sapiens have lived and died on this planet. In that time, there have been countless natural disasters, plagues, droughts, and famines. Civilizations have risen and fallen. Stronger cultures have slaughtered and subjugated weaker ones. The collective suffering that has accrued throughout human history is beyond imagining.

Yet through all this, humanity has endured, and will endure. People have continued to live and feed themselves and look after one another, even as their world has been crumbling around them. Humans have been able to endure so much suffering because we have each other. We assist each other practically and we comfort each other emotionally. A little kindness and consideration brings great relief even in the most trying times. It keeps people from giving up even when they are sorely challenged. Humanity’s great strength is that we are all looking after the people around us, even while we are also looking after ourselves.

Sometimes, too many people have had to fight over too few resources, and the life of one has meant the death of another. But all of the violence piled up through the years is as nothing in comparison to the steady, business-as-usual pursuit of living by people working side-by-side in largely cooperative groups—in clans, villages, towns, and cities. If you were to travel to a random time and place in human history, you would almost always find yourself among people caring for themselves and their families, and generally respecting the rights of their neighbors. Horrific as it is, violence is the froth on the wave of human social existence, which works well far more often than it fails.

Because we are social animals, humanity’s existence is a succession of relationships. We are all products of our culture. That means that our personalities have been built up out of countless interactions we have had with our family, neighbors, friends, enemies, co-workers, and passing strangers. Each generation learns from the generation before it, inheriting its culture and only slowly, collectively adjusting it to fit changing circumstances.

Countless times each day, we brush up against our fellow humans and through our actions add to their accumulated sense of what it means to live a human life. “Little pitchers have big ears”—children learn more from how adults actually act than from how their parents tell them they should act. And the learning continues beyond childhood, throughout each person’s life, and we each contribute to that learning in the people around us far more often than we know.

Yes, we will each die and in time be forgotten, but while we are alive we will touch the lives of our family, neighbors, friends, enemies, co-workers, and passing strangers. Whatever large or small influence we may have on them will affect how they in turn will influence their family, neighbors, friends, enemies, co-workers, and passing strangers. And from them the train of influences will spread out contact-by-contact through and beyond our communities and down through the generations.

We are each just one atom in this vast resonating network of human interactions that is the embodiment of human culture. We probably cannot sway the greater course of human history, but we can at least control what part we ourselves play in it, for that is ultimately our legacy. We could live our lives as means to our own ends, without regard to the effects our actions have on others. Or we can live thoughtfully and with consideration, influencing the people around us in ways that we would want to be remembered for. Our actions may or may not in fact be remembered. But if our influence is good, we will benefit in some small way not only the people we have shared time with, but also other people that they influence down the road, including people who will live long after we are gone. We will have done our small part to nudge the wave of humanity down a path that will be better for everyone.

© Joel Benington, 2011

Written by Joel Benington

July 9, 2011 at 8:37 pm

Five ways to drive yourself crazy

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Think of the more than 250,000 human beings that die every day, all over the world—babies, elders, and every age in between. Think of the suffering that many of them endured before they died, or the sudden injuries that snuffed out their life without warning. Think of millions of friends and family members, who will suffer emotionally for months or years mourning their loss. Tomorrow more than 250,000 more people will die and millions more loved ones will suffer, and the day after that, and every day of your life. Catastrophes that you hear about in the news are a drop in a bucket compared to the normal, inescapable ending of human life that happens all the time. Death is a constant part of life.

Think of the unfulfilled hopes and desires of billions of living human beings of all ages. Many live year after year in poverty, with monotonous and nutritionally poor food and too little even of that, dirty and crowded housing, unsanitary water, and little or no medical care. They work with little hope of improving their hard and tedious lives or of helping their children to do so. People who are materially more comfortable still suffer anxiety and loneliness, plagued by occasional thoughts of what they have not accomplished. We dream of great success and deep satisfaction, while the vast majority of us lead lives that are at best merely adequate.

Think of the innumerable choices you have made and will make in your own life. Every choice you make is a fork in the road, leading you towards one future and away from others. Leaving the house a minute earlier or later could determine whether or not you get into an accident, or run across an old friend, or meet someone who may become an important part of your life. Every time you decide whether or not to take a job or go to school or get married or start a family, you select one future and reject a great many others. You can never know how your life would have turned out differently had you made other choices. And with every passing year your life becomes more fully determined, as it has been lived one way instead of others, until you die and it is over.

Think of how short the time you will be alive is, compared with the millennia of human existence past and to come. You can read about the past but you can never visit it. Thousands of generations of humans lived and died before you were born. A tiny fraction of them were notable enough to be remembered by history, but all of the rest were remembered only by the few people who knew them, until those people themselves died. Think of all the people long dead, of whom the only relic is a tombstone in an obscure cemetery, with dates of birth and death but little further information; or of the people whose grave markers have long since decayed or been lost, or whose graves were unmarked from the beginning. How many generations of your own ancestors do you know anything about. Can you even name all of your great-grandparents? How many things do you know about them and their lives, which they all surely lived as intently as you do yours? Unless you are exceptional, your life too will eventually fade from memory as the people who have known you age and die. Barring some unthinkable catastrophe, generation after generation of humans will live in a future that you can never know. They will experience changes in human life and human society that we cannot even begin to imagine.

Think of all the things that separate you from the other people in your life. You interact with them, but how fully do you see into their hearts, or even try to? You see the persona that each person presents to the world, and they see yours, but we all know so little of the strange inner lives even of our most intimate companions. Think of the experiences they had before they met you, the experiences they continue to have during all of the times you are not with them. When friends of yours are together without you, what sides of their personalities do they show that you never see, and how are you yourself spoken of in your absence? We make common cause with others, in relationships that may last for many years, but we retain our own separate individuality all the same. Some parts of ourselves we reveal only to a few of our closest companions, while others are known to no one but ourselves, and the same can be said of everyone we know. We share experiences with others, but we also each pursue our own ends and sometimes work at cross purposes. A single household is an unfathomable network of joint and separate perspectives and motivations. We can go for years taking our loved ones partly for granted, leaving important things unsaid, being less to each other than we could be.

© Joel Benington, 2011

Written by Joel Benington

July 6, 2011 at 8:45 pm

Posted in humanity