Why actionable granularity is important for policy and management of poverty, regulation and inequality: an argument in five short steps with one big upshot

1. My starting point (by way of wicked policy problems)

The ‘real world’ surely has infinitely more variables than any abstract economic model and their ‘actual’ interrelations are neither known nor, I fear, knowable.

Fritz Machlup, Austrian-American economist

I

When i say concepts like regulation, inequality, and poverty are abstract, I am saying they are not sufficiently differentiated for actionable policy analysis or management. This of course does not mean these abstractions are not otherwise actionable. Ideas about regulation, inequality, and poverty have mattered and the history of ideas is replete with cases where ideas changed our understanding of human events, situations and behavior.

What interest me here, however, are: abstractions actionable with respect to policies and management strategies undertaken right now and here. That is, cases where abstractions have been rendered sufficiently granular for decisionmaking, and where decisions have been taken in light of this actionable granularity.

What then does “actionable granularity” mean?

I have in mind the range of policy analysis and management that exists between the adaptation of policy and management designs to local circumstances and the recognition that systemwide patterns across a diverse set of existing cases inevitably contrast with official and context-specific policy and management designs.

Think here of adapting your systemwide definition of poverty to local circumstances and being cognizant that patterns may well emerge across how really-existing people identify poverty and how these patterns differ from not only system poverty formulae but also localized scenarios based in the formulae.

(In case it needs saying, the preceding two paragraphs are an effort to render my own abstractions of policy and management more granularly helpful.)

II

None of the above points seem controversial to me. Nor should it be assumed I’m privileging one type of abstractions over others. What interests me are some of the implications to be drawn for the practice of policy analysis and management. One seems both obvious and under-acknowledged.

More granularities can also render cases non-actionable for policy and management. Cases that cannot be generalized in terms of being embedded in emerging patterns or identified with localized design scenarios are rightfully called “unique.”

But then a methodological problem is when cases are treated as unique or stand-alone albeit no effort has been made to ascertain (1) systemwide patterns and local contingency scenarios in which the case are embedded along with (2) the practices of adaptation and modification that also emerge along the way with in scenario formulation and pattern recognition. From a policy and management perspective, you can say these pseudo-unique cases have been over-complexified.

III

I stress this point if only because of the messy exceptionalism associated today with “wicked policy problems”. If you think about it, a core problem with wicked policy problems is, well, the concept is not abstract enough.

2. So what? “The root cause” abstracted of contingencies

Contingency is also a way to think about alternatives, and thus adopt a skeptical approach to deterministic discourses.

Éric Monnet, French economist

When it comes to abstracting, we mustn’t forget those who go for “the root cause” in policy messes.

But which root cause? Hegelian estrangement, Marxian false consciousness, Weberian disenchantment, Freudian defense mechanisms, Sartrean bad faith, Orwellian doublethink, Gramscian hegemony, or Goebbels’s Big Lie? Or is the root cause, in that famous “last instance,” Kuhnian paradigms, Foucauldian discipline, or God’s plan or that sure bet, politics/dollars/and jerks—or have I stopped short of the Truly-Rooted Root Cause?

Root-cause explanations exaggerate and pretend an outsized clarity that isn’t there. Root causes are abstractions that wash out the differentiation brought to you by contingencies. It is one thing to say the present advances to the future it renders for itself; it is quite another thing to say the future advances to the contingencies the present affords there but not here.

Let’s see how this works for inequality, regulation and poverty.

3. INEQUALITY: People may be equal like the teeth of a comb, but what about all those different combs?

–It just isn’t that values concerning (in)equality are socially constructed. It’s that the smothering paste of macro-principles cannot stop the bubbling up and surfacing of all those contingent factors that differentiate inequalities for the purposes of really-existing policymaking and management–societal, political, economic, historical, cultural, legal, geographical, governmental, psychological, neurological, technological, religious, and more.

–So what?

The World Bank estimates over 1.5 billion people globally do not have bank accounts, many being the rural poor. Yet having bank accounts ties people into a global financialized capitalism. What, then, has more value? The rural poor with bank accounts or not? Integrated even further into global capitalism or not?

There are, fortunately, those who insist such is not a binary value choice. Many with bank accounts also work to change the upper reaches of financial capital. But there are also those aiming for the lower-reach specifics: Surely, bank accounts work in some instances and even then differently so.

–Insisting on case-by-case comparisons looks to be weak beer. That is, until you realize the self-harm inflicted when political possibilities are foreclosed by any macro policy narrative that abstracts the world into one that is colonized everywhere or all the time by capitalisms and their inequalities.

4. REGULATION: Learning about regulation from The Financial Times

Re-regulation of banking after a financial crisis adds significant costs to the economy and thus reduces growth, while the pre-crisis light-touch regulation undermines the very financial infrastructure necessary for economic growth.

What were indicators of positive economic growth under lighter-touch regulation—e.g., rapid uptake in home mortgages before 2008—were indicators of regulatory failure later on. Mortgages were a relatively safe asset for banks to own, until they were the source of unimaginable losses.

Overregulation is nowhere better illustrated than in comparing the nearly 2000 pages of Dodd-Frank legislation in response to the last financial crisis and the less than 20 pages of the Depression’s Glass-Steagall Act—but under no circumstances are our regulators to repeat the 1930s! Whatever, those who lobby for simplifying regulation end up making it more complex.

It’s a bad thing for regulation to try to squeeze too much risk and complexity out of banking, especially when fresh risk reduction—less leverage, more capital reserves—is itself too risky a strategy. Regulation discourages risk taking and only with risk taking do we have innovation, except when too much innovation and risk taking are encouraged as in the (re-)deregulated finance sector.

New financial instruments (one thinks of credit default derivatives) flowed to where they were not regulated, but regulated financial instruments always increase opportunities for perverse arbitrage and loopholes.

Regulators must always have the best information, even when those regulated—the banks and investment firms—haven’t a clue as to their current real-time positions. Regulators will never have the capacity to know the real-time positions of actual firms, except in those cases where firms, like Lehman Brothers, insisted regulators did have the real-time information.

Global business and supply chains are great, except when the firms are too big to fail. Country defaults are horrible, except where they work through being regulated de jure as in Argentina or de facto as in Mexico at one point.

Global markets are a permanent fact of life, but we must never suppose that the drive to regulate them for the better is just as permanent. Markets are best at price discovery, except where market efficiencies are realized because of lack of transparent discovery, as in unregulated dark pools.

In sum, what I’ve learned from the Financial Times is that always-late capitalism is in crisis because of the always-shambolic abstraction of regulation.

5. POVERTY: A question about Bt cotton

As I remember the too-ing and fro-ing over the introduction of Bt cotton in India, saving on insecticides was the putative plus and runaway GM crops the putative negative. In advance of actual evidence, the controversy struck me then as unhelpfully abstract.

All this came back to me when I read the following passage describing a recent conference paper on Bt cotton:

Ambarish Karamchedu presented on Dried up Bt cotton narratives: climate, debt and distressed livelihoods in semi-arid smallholder India. Proponents of this ‘technical fix’ position GMO crops as a triple win. India has semi-arid and arid areas where rural poverty is concentrated, with an intense monsoon season (3-4 months), making farming a challenge. BT cotton introduced around 1995, thrives here. India is the biggest cotton cultivator and Bt cotton is grown by 7 million smallholder farmers, 66 percent in semi-arid areas with poor soils and low rainfall prone to monsoon. In Telangana, 65% of farmers across all classes produce BT cotton, with good harvests for 5 years, after which they decline. Failure of farmers who face increased input prices have to resort to non-farm incomes. The triple win technological fix narrative perpetuates and exacerbates the problems it seeks to solve, and benefits farmer institutions rather than enriching farmer knowledge and practice.

https://drive.google.com/drive/folders/1VfvjJlxB9VPKQj55dNbZ_VH6oPi2IEVd

It’s that “with good harvests for 5 years, after which they decline” that grabbed my attention. Did anyone predict that particular event happening, be they proponents or opponents of Bt cotton?

This matters because in the absence of any such prediction, why not also conclude: “Well, five years is five years more than expected?” Even contingencies can be positive for the poor, right?

UPSHOT: In other words, few seem prepared to admit that the bleak state of affairs attributed to regulation, inequality and poverty is no more or less an abstraction than are the latter.