Change matters more than absolutes: (or ‘The unexpected virtues of incrementalism’)

Kahnemann and Tversky’s seminal paper on prospect theory had several path breaking insights. One in particular stayed with me because of its highly non-intuitive nature. Stated with an example, it is as follows: Say A’s net worth is Rs. 150 lakh and B’s net worth is Rs. 20 lakh, we are used to believing that A is happier than B or in economics jargon, A’s utility level is higher than B’s. (For the purpose of this argument, I am ignoring the claims of there being more to life than money. That is because this idea transcends money – you can very easily replace net worth in the above example with “units of being at peace” or “ounces of respect from fellow human beings” or some such measure of whatever you hold to be more relevant to happiness than money.)

Prospect theory does not make a prediction of this sort (A being happier than B). It is silent on who has higher utility. If pushed, the proponent of prospect theory states, “the data provided is insufficient. What was A’s and B’s net worth yesterday?”

Let us make it interesting. Say A moved from Rs. 200 lakh yesterday to Rs. 150 lakh today and B moved from Rs. 15 lakh yesterday to Rs. 20 lakh today. Now prospect theory would predict that B is happier than A. Most readers would think, “Well, this is obvious! Especially given the new information.” Stated in the whole detail, this later change of stance seems logical. However, this does not prevent almost everyone from offering the response in the first step above when the changes in net worth were not known and only current levels were known. Perhaps, in absence of the change information, we assume no change. That is fair but what is noteworthy is that we do offer an answer – which suggests that most of us think absolute levels are the predominant drivers of utility (or happiness) and while change matters, it matters only so much. It is an erroneous assumption. This is where prospect theory makes a non-trivial contribution to our understanding of ourselves.

We human beings are tuned to notice changes and contrasts. An extreme example of this is the Ganzfeld effect where the subject is exposed to undifferentiated and strictly uniform field of color for a long period of time such that the subject stops perceiving the color altogether (and even hallucinates). Our sense of color is really speaking a sense of distinction in stimuli. Take away the distinction and the brain slowly settles down into ignoring the color entirely. Most of our day-to-day judgments operate with the help of contrasts. We are highly sensitive to changes. Equally importantly, we are quite insensitive to absolute levels.

Combining these two connected ideas (high sensitivity to changes and low sensitivity to absolute levels), one can attempt to create an optimal path for maximizing utility (or happiness!) over the course of a single human life. No prizes for guessing that this path would advocate thorough incrementalism. To put the matter a bit more mathematically, we are used to thinking (in a manner ignorant of prospect theory’s observations) that the overall happiness of a person in the whole life – at least in its material aspects – is some sort of ‘area under the curve’ of material wellbeing. Hence if A moved from net worth of say Rs. 150 lakh to Rs. 200 lakh to Rs. 125 lakh to Rs. 175 lakh again over four decades of working life, each of these states lasting for say a decade each, we would calculate (implicitly) overall happiness over the four decades as 10*(150+200+125+175) = 6500 lakh-years for A. Likewise B with networth movement of say 10 lakh to 15 lakh to 40 lakh to 100 lakh over the same four decades would prompt us to suggest her overall happiness to be 10 * (10+15+40+100) = 1650 lakh-years. Clearly in this case A’s life was nearly 4 times as happy as B’s.

A prospect theory-informed first-cut attempt at the mathematics of these two individuals would work differently. Assuming A and B inherited their starting wealth the first decade has no utility value. Thereafter, A goes as follows: 10* ((200-150) + (125-200) + (175-125)) = 10* (50 – 75 + 50) = 10 * 25 = 250 delta-lakh-years. (Pardon the units, the actual units do not matter for the sake of this argument since our intent is to merely compare the two individuals.) B’s path is a bit rosier: 10 * ((15-10) + (40-15) + (100-40) ) = 10 * (5 + 25 + 60) = 10 * 90 = 900. It turns out B is nearly 4 times as happy as A.

Which prediction is closer to observed instances? I am inclined to think that it’s the latter. Clearly the above first-cut mathematics is way too simple. In real life, the absolute levels of material wellbeing matter too, all the more so in crises and in enabling risk-taking. However, it suffices to say that the dependence of happiness on change in the level of these drivers is of far more importance than we generally acknowledge.

There is another observation – and this is not from prospect theory. It is simply based on observing human beings. The capacity for happiness of every human being is finite. This means, we may have to modify our equations to put an upper limit of some sorts on happiness units in each time period, even after making it dependent on change. Beyond a threshold, a bigger increase in a happiness-inducing input (money, fame, love, peace etc) does not add to happiness. So if the change in wellbeing is beyond a threshold, the happiness from that change would max out and not increase further with the size of the change (for that period). In other words, it might be better to postpone that extra increase to the next time period if possible.

To make the mathematics a bit more explicit, I would state the following.

Before prospect theory, happiness over life of t_max years would be as follows:

Where L is the level of material wellbeing (or level of fame or level of self-actualization)

This prevalent but naïve hypothesis would suggest that a billionaire is 1000 times happier than a millionaire. Or to switch to fame as a source of happiness, the person adored by 1 million people is 100,000 times happier than a person adored by say 10 individuals.

After prospect theory the equation is nuanced as follows:

Where DeltaL/Delta_t is the discrete change in level of material wellbeing (whatever driver of happiness you choose – money, fame etc) across two successive time periods and Delta_max corresponds to the maximum change in wellbeing upto which humans are happiness-sensitive to the change.

To get a bit less mathematical and bit more lyrical, it is more happiness-inducing to get to the summit of life using the long-winding steps than using the helicopter (if one is available). It may seem tempting to prefer the helicopter so that one can quickly get to the summit which can then be enjoyed for longer – rather than wasting time on the steps. However, our dual hypotheses above (prospect theory and finite capacity for happiness) predict that the one-time happiness of getting to the summit is likely to be overshadowed by the cumulative happiness of the multi-step path. Also, the summit itself is likely to lose its ability to induce more happiness over a short period of time (because there would be no increase from there on).

Is there a real life implication of this thought? Maybe! To put it simply, if one has the flexibility of organizing the improvements in one’s drivers of wellbeing, it is optimal to organize them into a gradual increase mode than to maximize the jump. Also, since absolute levels of happiness-drivers matter much less than we are used to thinking of, the hurry to maximize absolute levels is probably suboptimal use of our limited resources (time, energy, bandwidth, goodwill etc). Presumably, this could inform some decisions related to trade-offs in career decisions, location preferences or social standing pursuits.

High time for direct democracy?

When I came across the idea and mechanism of democracy as a child, i naturally asked why there are representatives voting on our behalf for making laws. As a child, I thought it rather indirect and cumbersome to elect a representative who supposedly would represent your wish in the process of law-making. (just to be clear, i was not a visionary child for having asked this because firstly i was old enough - maybe 12 - and secondly many of my friends also asked similar things then)
As I grew older and learnt more about parliamentary democracy i realized that it is probably the only workable system owing to the large population of the country and the rather complicated business of making laws. I was also a bit confused about the executive branch and the legislative branch because the Indian system has these overlapping - the party in majority in Lok Sabha anyway forms the government often drawing the ministers from the Lok Sabha (sometimes Rajya Sabha) MPs. As I learnt more about the US system with its very clear demarcation between the congress/senate and the cabinet (or whatever they call the group of the president and his men/women as various secretaries), I realized that the executive function is clearly a 'job' - with specific skill requirement and specific tasks to be carried out from morning to evening every day. On the other hand the legislative function is not a matter of skills (in the conventional sense of the term) but of knowing and representing the wishes of a certain section of population (in most democracies, this is geographically divided.) Also, the legislative function is not a job but more so a membership of a conference of sorts which takes place a few times a year in the parliament.

There were, till recently, sound reasons why we had to stick to a system of representatives being elected for the latter i.e. legislative function. Switzerland has demonstrated that direct democracy can work - but it's an example often ignored because of the small size and relative opulence of Swiss population - not to mention their neutrality in international conflicts - which makes the legislation far less cumbersome than say India's or Malaysia's.
However, has the time come to revisit this system of representative democracy? Does our communications and identification technology at present not allow us to set up a system of voting on all important laws directly? And I mean that question for the country of the size of India - along with the limitations of partial illiteracy, imperfect connectivity and a part of population still below poverty line, While it may sound audacious, it is easy to see that the implementation does not require any technology that is not already in existence and widespread. Aadhar cards with mobile phones and a suitable app with advanced security features can enable Indian citizens to vote on everything directly.
Think of the advances in democracy! Besides the obvious benefit of getting a say in matters of national importance, there is another huge potential benefit - slicing the population eligible to vote by non-geographical criteria as well as criteria different from the static geographical cuts of today. If there is a road to be built between two cities, the populations of these two cities and the towns in between should vote on it, with far off towns having no say in the matter. Likewise if a law affects only farmers, why should a equity analyst vote on it? On tightening or loosening a security law, maybe the whole country can vote.

The doubters would say the laypersons do not always know the nuances of the law being made and they may vote with their prejudices and biases. This is a fallacious argument. I don't think most individuals (across countries, but more so in India) have very high regards for the intellectual capabilities of their representatives (for example, I personally do not know anything about the person i voted for in the previous lok sabha elections and i voted just because he was of a certain party). Secondly, even intelligent representatives (no, not shashi tharoor, there are many others!) do not necessarily get to vote as they truly wish. In US there is even a position of a 'majority whip'! In India 'high command' tells the representatives to vote one way or other. I have not heard of any noteworthy examples of MPs of any party voting against the party high command's wish and staying in the party long after that! So the next question is - do party high commands know better than the citizens what is good for the latter? More importantly, are they likely to use the criterion of 'better for citizens' as the driver of their voting decisions? If the answers to these are unclear, why not let citizens directly vote with their biases and prejudices?
There is a more constructive answer to this question though. While there may be no elected representatives making laws in such a system, there is clearly a place for formally elected 'proposers' for proposing various laws and clarifying their benefits (as well as problems with laws proposed by other 'proposers'). Some proposers then go about creating proposals and championing them while others oppose them. People hear the arguments on both sides and vote with the accumulated knowledge from these as well as their prejudices and biases. There is room to educate and debate!
(Just to be clear, the MPs are replaced by 'proposers'. There is still the need for the executive i.e. a prime-minister and the cabinet, which in effect will be elected as per the presidential system in US.)

I do believe the system is up for overhaul - especially considering its many perversions in recent decades, across many countries - developed and developing. Instead of seeing the political choices of our times in two poles of democracy and totalitarian regimes, we are better off pushing the democratic pole further into direct democracy!

The Locus of Self

The locus of self and its implications for our understanding of ourselves as well as the society we are a part of is the topic of this article. I have written about this topic in bits and pieces in other articles preceding this. However, the topic is major enough in itself to be explored separately.

At the heart of it, the conclusion is this: we (at least as we seem to know and model ourselves as) are not residents of the brains and the bodies that we seem to be a part of. We are not outside it in a spatial sense (that would be spooky!) We simply do not have a spatial location. We are enabled by the brains and the bodies in turn. However we do not reside there.

Now the explanation. Firstly ‘we’ in the above needs definition. Let us simplify to define the singular of it i.e. I. The self that we refer to using the pronoun ‘I’ is an illusion, convenient fiction, narrative center of gravity and so on (much has been written by others as well as me on this in previous articles). Hence it does not anyway make sense to look for the location of the illusion. Where does the picture of Mona-Lisa belong? In the pixels, at the retina of the observer or in the abstract plane where that arrangement in that specific pigmentation of color for a specific species called humans has some semantic value (beauty, mystic or whatever else.)?

The self is a complex entity – even as an illusion. It is also very high up in the hierarchy. It seems so obviously mundane to us because the ‘us’ observing and commenting on it is also on the same plane as the self. This is the plane of the strange loop that Hofstadter refers to in his book. The plane of this entity is in the motion and arrangement of the hardware – the primeness and chainium being a good illustrator of it (I have written on this separately.) The hierarchy of systematization is as follows. This tree has some branches that do not grow much beyond their starting point.

 •Pre-Energy??

•Energy

•Matter

•Isolated sub atomic particles

•Atoms consisting of sub-atomic particles in a specific arrangement

•Atoms in isolation

•Molecules

•Simple molecules

•Chained carbon based molecules

•Non-self-replicating

•Self-replicating

•Without nervous system

•With nervous system

•With language and complex society

•Social institutions with causal potency

•Static societies with rigid institutions

•Individuals or simple socities without generative language

The continuity of the structure as the primary identifier of the unit

What makes an atom unique? If we tracked the existence of a specific oxygen atom, is the atom supposed to be different after an exchange of electron with another oxygen atom in forming a O2 molecule? What if it returns to the atomic state – and we have no idea whether it is the same electron that it “contributed” while forming the molecule that it got back? We do not ask such questions and some may even (partially correctly) brand them as silly. Why? Because the atom is the specific arrangement of nucleus and orbiting electrons. Till such time that arrangement prevails, there is no question to be asked about the identity of specific constituents. The constituents if you may, are fungible. The structure is the identity. Ship of Thesius if you will!

Now moving up, it is trivially obvious that this applies to simple as well as complex molecules – the atoms that make them can come and go as long as the overall structure of the molecule is maintained. One more level up and we bump into genetic material or simple organisms like Viri. Here too, it is universally acknowledged that the complex molecules that make these systems are fungible even if potent. One level up to complex organisms and we realize that even the specific cells (which themselves treat the specific molecules as fungible) are now dispensable. The higher level arrangement matters more.

With human beings, things move forward to abstractions. This is a crucial jump. It is very evident that we never think twice about someone being the same person after an organ transplant (other than brain that is – but that’s anyway a matter of fiction for now.) Entire organs have been replaced in human beings with little difference to their personality or being.

This individuality is what we need to examine to understand the locus of human self.

Where am I?

It is at the juncture that I would introduce the other inference I have reached (and some others before me have reached too.) It is as follows – it is not that animals evolves into apes that evolved into us as we know them. Instead it is the substrate of life that upgraded gradually through evolution to support more and more complex beings with increasing levels of abstraction. This continues down to the pre nervous system animals too. The Maturana model of animals and their nervous systems is relevant here. The nervous systems evolve in response to the pressures of environment. Some of them evolve sufficiently to enable linguistic domains and language. This language enables complex societies. After the complex societies and language are in place, there is sufficient infrastructure for the emergence of selves on the set. We have arrived, not evolved.

In this sense, we are aliens to the bodies. The predecessors to the bodies did not have less evolved versions of the equivalents of the selves. We showed up relatively suddenly (on the timescale of evolution.)