Decision Making as Output and Bounded Rationality

  The classical economics theories proceed on the assumption of rational agents. Rationality implies the economic agents undertake actions or exercise choices based on the cost-benefit analysis they undertake. The assumption further posits that there exists no information asymmetry and thus the agent is aware of all the costs and benefits associated with the choice he or she has exercised. The behavioral school contested the decision stating the decisions in practice are often irrational. Implied there is a continuous departure from rationality. Rationality in the views of the behavioral school is more an exception to the norm rather a rule. The past posts have discussed the limitations of this view by the behavioral school. Economics has often posited rationality in the context in which the choices are exercised rather than theoretical abstract view of rational action. Rational action in theory seems to be grounded in zero restraint situation yet in practice, there are numerous restra

Why Elitism Flourishes?


‘Old Boys Network’ flourishes everywhere. Hardly a domain exists wherein one does not find absence of such a network. Connections determine the entry into the network and merit at least prima facie seems secondary. Despite all talk about meritocracy and such like, organizations and as an extension, the society, rather discouraging old boy network seemingly encourage the same. Often, membership of such a club is a sign of growth and prosperity, rebelliousness indicates an exit from the career path. Numerous instances abound of the same. It would be interesting to decipher the flourishing of the clubs.

Clubs once formed create elitism. Yet the society is a pyramid and ideal society is greasy pyramid. Movement into upper layers of the pyramid will generate payoffs that follow exponentially increasing returns. Yet climbing the pyramid is not easy. There is constant sliding down the pyramid as each one seeks to upstage another. Hence those who manage to climb upwards would have their interests best served if they manage to erect barriers of entry that prevent the ones below climbing into their habitats. So virtually protective habitats emerge at each layer in the pyramid.

Two contrasting forces emerge. One, the need to prevent ones down from moving upwards. Second, push your own group or even as an individual upwards seeking to displace the groups above from their perch. Given its greasy, fickle, very few will successfully manage to reach the top echelon. At each layer below, the number of groups/individuals functioning will have a multiplier effect. Convergence of interests is prime for membership at each layer.

A functioning group in each layer develops a hierarchy and in the pursuit to reach higher levels of the pyramid has ostensible interest in subordinating to the groups functioning at the top. The movement is purely on the network that has been built up and any push from outside is resisted with all its might. Implied is elitism seeking to perpetuate an order wherein networks, not merit matters. Membership of the networks comes with own set of spill overs and in tournament model different actors with different motivations settle at different layers. They are foot soldiers for those at the apex to deter others from entering into the club. In return, the apex will protect the foot soldiers in terms of their growth, career, livelihood etc. There might be dissent, factions within the group demonstrating intragroup movements yet will coalesce when faced with an external threat.

The club functions as if it’s a repository of all world’s knowledge. It believes that is has the power to determine the narrative. There is sense of false pride that they are morally, intellectually, socially, economically, politically superior to the rest. There is deeper feeling that there is sense of what Kipling described as ‘White Man’s Burden’. There seemingly exists a sense of responsibility of liberating the ‘souls’ of the less privileged so as to speak. Any contrarian responses are dismissed with disdain. As they perch themselves in an ivory tower, they increasingly lose the touch of the ground realities. The realities are those what they believe are and not what exists outside.  If facts do not fit into the worldview they have created for themselves, then facts are wrong. In other words, their ivory tower is oblivious of rest of world.

The elite imprisoned in their set of grandiose beliefs often fail to detect the ever perennial ‘outsider’ seeking to innovate outside the framed boundaries. Moving beyond the boundaries the rising rebel aims to capture and further flourish the 'rebel' culture. Hollywood and popular modern music both essentially outcomes of the same. In the political world, the rise of Ram Janmabhoomi movement, the rise of Narendra Modi in India, emergence of Donald Trump or Boris Johnson all are reflective of the same. Essentially the market forces functioning in different domains act as enablers for emergence of these ‘rebel’ cultures and thoughts. The rebel in the instance is a reference to thoughts and processes that were believed to be heterodox in the current narrative but reality indicates wide acceptance of the same at the lower echelons of the pyramid. The lower echelons do not represent necessarily the lower income groups or lower in social hierarchy but represent those who are intellectually and morally supressed.  The movement from below gathers critical mass and once it breaches the same, the 'Market' allows perennial 'outsider' to capture the old boys club and inn process displacing existent elitist order.

The Russian Revolution was perhaps was an instance of destruction of an existing order as do many such revolutions just that they end up as Orwellian Animal Farm. The destruction of old elite is soon replaced by the new elite with its own sets of whims, fancies and idiosyncrasies. The cycle repeats.

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