Socioeconomic Decision Making Protocol
by Glen Wallace
I would categorize a decision making tree, regarding economic systems, into three main parts. Each part should be addressed in order, however, there may be some overlap between each adjoining category.
The three categories or phases to be addressed in order are:
1.) The Ethical Question -- Is the plan ethical?
2.) The Utilitarian Question -- Will the plan work if implemented?
3.) Political Feasibility -- Can the public & politicians be convinced to go along with the plan?
The first category that needs to be addressed is the ethical question -- this is where we ask if enacting a specific plan is ethically acceptable for everyone impacted by the plan. As an example of an ethically unacceptable plan or protocol, I would refer to the instance I remember reading about some 20 years or so ago about the Chinese government executing a number of business managers due to poor performance (I'm hoping they don't perform those kind of executions anymore but I don't know).
This brings us to the second category, the utility or utilitarian question. The utilitarian question asks whether the plan to be implemented will be effective in terms of improving the prosperity of the citizens of the nation or state that they will reside in. But it is important that we don't skip the first category before addressing the second. It doesn't matter how much executing or threatening to execute the business managers due to poor business performance may or may not improve the overall prosperity of the rest of the nation (I highly doubt it would help, more likely to hurt the economy) the executions are ethically unacceptable and therefore should never have gotten past the ethical consideration phase and entered into the utilitarian consideration phase.
If the ethical category had been addressed in the first place, as it should have been, then the planning stage for the Chinese execution plan wouldn't even have gotten to the second, utilitarian addressing stage and would have instead been tossed into the planning waste bin where it belongs early on. But if a plan does pass the ethical test, then we go on to ask if the plan will work -- the utilitarian question stage.
The third stage to address is the political feasibility addressing stage. In this stage we look at how or if we can go about convincing the electorate and their representatives to ascend to a given plan.
But once again it is important that we don't just jump to this stage before addressing the first two stages. That is because once the first two questions have been answered to a satisfactory extent that they pass muster, then it will be that much easier to convince the constituents and politicians of the benevolence of the plan. For it is the answers to the first two categories of questions where the arguments can be found that will convince the populace and politicians to accept the plan.
I was watching on the local public television channel a presentation by Sheila Bair, former Chair of the FDIC. And following her presentation was a Q&A session. One of the questions she was asked was whether or not the Glass-Steagall act should be reinstated. Now I'm going by memory, but I believe her answer was something to the extent that she didn't know if it was politically feasible given the current political environment. I would argue that her answer then skipped the first two categorical questions that should have been answered first regarding Glass-Steagall before addressing the political feasibility question.
There is nothing overtly unethical about the reinstating the Glass-Steagall act -- first categorical test passed. I don't think a whole lot of attention needs to be paid here towards arguing for the ethical acceptability of reenacting Glass-Steagall. I don't believe, for instance, that many people would contend that bankers have some inalienable right to engage in both traditional banking and speculative investing within the same company. I believe the strongest case is for a moral imperative that those two areas be handled by separate financial institutions as was required by Glass-Steagall. Without such separation, the systemic risk to the economic infrastructure of the nation is put at risk by the speculative bets of traders. We have come to a point where the traditional banking system of savings and lending is regarded as a necessary utility. When the ability of a bank to lend to businesses or meet the withdrawal requests of savers is undermined by the speculative division of the bank that made some bad bets, the entire economic infrastructure as a necessary utility can be put at risk. Thus, the so-called 'too big to fail' that really mean 'too important to be allowed to fail' protections may be required that call on public resources to bail out the failing bank.
For the second category, in addressing the utility question we need to look at the possibility that repealing Glass-Steagall created a financial environment that either directly led to the great recession or helped bring it about or made it that much worse. If a case can be made linking the repeal causally to the economic meltdown and great recession and that causal link were presented to the public then the third step of passing the political feasibility phase, regarding the reenacting of Glass-Steagall, would be greatly enhanced. Nobody is going to want another financial crisis; especially since we haven't even recovered fully from this most recent great recession. If the public can be convinced that reenacting Glass-Steagall will have the utilitarian value of preventing another financial crisis like we saw in 2008, then passing political feasibility will be that much easier.