Plato, the housing crisis and probability theory
Some additional thoughts in advance of our call tonight.
Why do we so often make short-sighted decisions that bring a little short-term pleasure and a lot of long-term misery? Why do we act so seemingly irrationally – i.e. against our own best interest (assuming our best interest is to maximize pleasure and happiness). Why in Socrates’ words are we “overcome by pleasure” and what could that possibly mean?
In the concluding pages of Protagoras, Socrates says some interesting things about virtue that end up relating to these questions above and thus to our current housing crisis.
Socrates is following an argument – somewhat against his own position (i.e. against the position that virtue is not teachable) – whereby he deconstructs virtue in attempting to understand the statement “overcome by pleasure.” He deconstructs virtue to the point that he says it’s knowledge and not just any knowledge but the knowledge of the art of measurement.
Socrates challenges the statement that we do bad things because “we are overcome by pleasure.” He says effectively that it doesn’t make sense. Why? Because something pleasurable is good or beneficial so how could we do something “bad” because it’s pleasurable to us?
We all know many instances where we as individuals and societies do “bad” things (overeat, overdrink, splurge on subprime mortgages, etc.) that feel good in the moment but cause a lot of pain in the long-term.
Socrates knows this goes on – he simply challenges that we can explain it by “being overcome by pleasure.”
He says that makes no sense.
He says the only reasonable thing that statement could mean is that we do something in the short-term that feels a little good but in the long-term creates much more misery or disease – so much more that the future pain outweighs the present pleasure. And if the future pain does outweigh the present pleasure, then that thing we have done was not done for the sake of pleasure (pleasure being so outweighed pain) but for another reason.
He also points out that short-term pain can be chosen for long-term benefit – i.e. people might elect to go through the pain of surgery so that they could attain better long-term health.
[Note that much of this part of the dialogue takes place on page 785.]
So, where is he going with this? To an interesting place. He basically concludes that we do bad long-term things not for the pleasure of the moment but because we are bad at measuring.
Bad at measuring? What?
He concludes that the good life lived means one where we can rightly choose between pleasure and pain – whenever or however those might appear (present, future, etc.).
And if choosing between these things is critical to a good life, then being able to effectively measure the relative amounts of pain and pleasure, present and future is the key.
“Well, then, my good people: Since it has turned out that our salvation in life depends on the right choice of pleasure and pains, be they more or fewer, greater or lesser, farther or nearer, doesn’t our salvation seem first of all, to be measurement, which is the study of relative excess and deficiency and equality?”
If you are able to measure well, then you are able to easily differentiate between a little happiness now (a 3 year adjustable rate mortgage for a home above the price you can afford) and a lot of happiness later (a smaller home but with a fixed mortgage that allows you to continue living in that home for many years).
Socrates never, however, addresses the one most important flaw in this argument – a flaw that every ordinary person knows is there – i.e. that the measurement is trivial when compared to the problem that “later” brings..
If you are trading a little happiness now for more happiness later, then aren’t you trading a known quantity (happiness now – however small) for an unknown quantity (the probability of a future happiness, however great – is still an unknown in the future)?
Even if I grant that the future quantity is bigger, then doesn’t the fact that it’s in the future mean it should be discounted? And so wouldn’t the rational choice be to choose the known quantity now?
That does seem like a rational choice.
But before giving up on Socrates’ argument there is one more place to go – and that is to probability theory. If we are talking about measuring the size of a possible future happiness, then we are dealing with probability theory – which does give us a way to measure the future.
Without going into probability theory here (we can discuss on the phone or at another time), I would argue that by adding probability theory then Socrates’ is right.
The key to making good decisions – decisions that benefit us and our larger society – is measurement – i.e. measuring the relative happiness vs. misery of any given set of decisions or trade-offs.
Behavioral economics and probability theory agree with Plato here and provide an intellectual framework for managing good decisions despite our tendency to always favor a “bird in the hand vs. two in the bush.”
It turns out that two in the bush can be better as long as we can effectively probabilistically measure those two birds in the bush.
Most American consumers would be much happier today – and our economy stronger – if we had not traded those two birds in the bush for the one weak subprime bird in the hand.