Category Archives: Development

On development

The sharing economy holds much promise. And if this article is to be believed, the lack of a centralised electrical infrastructure (among other things) in general within the African continent might prove to be a blessing in disguise. It is likely to usher in a “Third Industrial Revolution” that can overcome the growth potential of developed economies. And almost as a complement to the aforementioned article, a different report on FT lamented the strain on the power grid in London, and The UK, in general, owing to development. The rise of a new world order, arising out of either innovative ways of interactions, or greater cooperation (economic or otherwise) between underdeveloped or developing countries while the simultaneous pressure on developed countries to maintain the high standards of living they have set for themselves, primarily through achievement of great economies of scale, is the subject of fascination of theorists and practitioners alike. Visuals, showcasing development (and hope) of underdeveloped/developing countries is reflected both in bar graphs and photographs (such as the one below).

USAID

(Source: USAID)

While all that sounds impressive, there is a lacuna in the narratives. They do not delve into the meaning of development. In a way for much like other big and nice sounding words such as “human rights”, “freedom of expression”, etc., “development” tends to encapsulate a certain positivity in spirit sans precision in meaning. Indeed, if one even searches so much as the dictionary definition of the word, one is stuck in recursion (Oxford Dictionary defines “development” as the “process of developing or being developed”) or vagueness of defining terms (Merriam-Webster defines “development as ”the act or process of growing or causing something to grow or become larger or more advanced” without clarifying larger or advanced with respect to who, when or what). But of course, we do all have a fair idea of what development looks like. Visual culture, once again, plays a huge role in portraying a certain worldview of development. For example, the picture below is one of the many images that come to mind when thinking of development.

Harare_Skyline.jpg

(Source: Wikipedia)

Interestingly, the skyline shown in the picture is that of Harare, the capital city of Zimbabwe. At an exchange rate of Z$175 quadrillion for US$5 (at the time of writing), the country is hardly an ideal model for development. However, even if we disregard visual clues, the verbal ideas would hover around something more than just economic prosperity. It would also include general well-being such as adequate healthcare, low crime rate, sound public services…one gets a general idea. Indeed, these general ideas resonate in a recent speech by Helen Clark, the Administrator of UNDP (and former PM of New Zealand), when she professed the role of the organisation as a development actor was to “tackle poverty, improve governance and support the rule of law, prevent conflict and support recovery from it, and reduce disaster risk“. But the question remains – Can there be a single philosophical idea than encapsulates these different ideas and perhaps give a certain precision to its meaning? The idea here is not so much to come up with a new definition of development so as to attempt to define the philosophical underpinnings of what the term entails in our collective consciousness.

“Development” is the practice of establishing the certainty of man-made outcomes in the face of vagaries of nature.

First and foremost, it’s a practice, which means it’s a process, (a never ending one at that). Whether this practice makes perfect is a matter of conjecture. I will explain this in a while in a later section. Secondly, the aim of this practice is to tame the unpredictability of nature (the vagaries of nature). But this opens up more questions than it answers. About what vagaries are we talking here? And how does one (i.e. a society or a country) achieve this certainty?

When talking about “vagaries of nature”, it means more than natural calamities such as earthquakes, storms or lightning (although they too form the constituents of the phrase). It also means vagaries of human behaviour, considering human behaviour itself is a product of nature. Indeed, when Thomas Hobbes lamented the state of human life as “solitary, poore, nasty, brutish and short” in Leviathan, he was referring to these dire outcomes as the result of the vagaries of the nature of man. Leviathan laid the foundations for the justification of a strong sovereign by postulating that a strong government dissipates the state of nature through enforcement of social contracts, which while curtailing some aspects of complete individual liberty, brings about peace, stability, and protection from the vagaries emanating from the nature of man. In other words, Hobbes through Leviathan promulgates the mitigation of adverse results emanating out of the vagaries of the nature of man through mediating them through a strong government. However, that raises the question – to what extent? Entire subjects of study (e.g. Macroeconomics) attempt to answer this question and will continue to do so. However, a strong government is not necessarily the only way to it. Some ardent proponents of technology profess the use of technology for mediation since technology is agnostic of man’s perverse desires – an idea subjects such as Social Construction of Technology negate entirely. Various political ideologies also debate the nature of the state and the extent to which it should act as a mediator of the nature of man. Thus, there can be various means to achieve the same end. However, I digress. The point I am trying to make is, a more developed country is more adept at mediating the adverse outcomes emanating from the vagaries of the nature of man.

As stated previously, the term “vagaries of nature” also denotes natural calamities. A more developed society is more likely to develop the means to protect its people from natural calamities. Of course, we are still a long way to go from being able to save a lot of lives from utterly devastating earthquakes or cyclones, but a more developed society is more likely to reduce the number of casualties through both ex-ante measures (such as sound infrastructural design that can somewhat resist the natural calamities) as well as ex-post measures (such as quicker and far reaching medical support in case of a calamity). However, it’s not just in case of extremities, but in case of daily lives too, that developed societies are more likely to establish a certain consistency. For example, in cold areas, being able to provide for consistent heating and likewise in hot areas, being able to provide for air condition. While it may seem obvious, what needs to be understood here is not the heating or the air conditioning itself, for that is available in almost every developing society too. But what is important is the consistency with which they are provided thereby shielding the residents from the vagaries of nature and providing a typical certainty to the outcomes.

This further begets the question – How is this certainty achieved? As mentioned in the beginning, it is a practice, a never ending one, for there is always something that’s left to be desired. As the well-known adage goes – practice makes perfect, except it is difficult to determine how perfection looks like. Everyone just has an idea or a visual image, much like the pictures shown above. Accordingly, metrics, some qualitative and some quantitative, are developed accordingly to be able to measure success. GDP, Per Capita Income, and other such indicators are examples of metrics that attempt to convey the amount of perfection in development that a particular society has reached. In this instance, development (rather, the idea of development) is both the result as well as the cause of the exercise in building what constitutes perfection in development. In other words, it is an exercise in both understanding and creating the idea of development. Take, for example, the GDP of a country – there is no one way of measuring GDP and it all depends on the what constitutes the “basket of goods” that results in the output that is measured. In such a scenario, development is more about politics and building that image than actual numbers. It tends to create the perception of certainty in the face of uncertainty brought about by nature.

However, there are instances in which certainty in outcomes in actual than just perceptional. This is primarily the result of analysis and being able to develop systems that counter the vagaries of nature (usually what I call a circular system, i.e. in which there is no absolute power and each entity in the system is accountable to another entity – while a perfectly circular system is impossible to implement, the more developed societies are able to achieve certainty in the face of vagaries of nature, especially those emanating out the nature of man – by making their systems as circular as possible. I intend to cover this complex topic in a separate post). Thus, when developed economies seek the help of complex analytic tools such as data science or statistics, it is an attempt to understand reality and develop systems based on the analysis. However,  my pet peeve with such an approach is that most of the top manager/politicians usually tend to treat the analysis as absolute without regarding the limitations of the models. As a result, creating development takes precedence over understanding development – and this may not always lead to optimal results.

An interesting example of this is the concept of implied volatility used in pricing derivatives. Economic stability, that in turn (partly) depends on the stability of the stock markets, is one of the hallmarks of a developed society. Implied volatility (henceforth, IV) is a perfect example of creating as well understanding that stability. As the debacle of Long Term Capital Management proved, there isn’t a certain way to predict the nature of derivatives, and certainly not using the Black-Scholes model (even if you win the Nobel Prize for it!). One of the major limitation of the Black-Scholes model was the assumption that volatility was constant – something that works well in theory but fails miserably in practice. How does one go about correcting that? By reverse engineering the model and instead using the current market price to find out the volatility. Once it is accepted as a standard, then one could reasonably impose certainty on the vagaries of the outcome. However, this is not always the case. This shortcoming can lead to the development of newer metrics and systems in place, which might resolve the current shortcoming at hand, but will open up new ones. And the entire market will attempt to move those newer systems in order to once again provide a certain certainty to the vagaries of nature. One can extrapolate this to any sphere of life. Ad infinitum. This is perhaps best put forth by the famous author E.M. Forster in his short story, The Machine Stops (a fantastic must-read).

To attribute these two great developments to the Central Committee is to take a very narrow view of civilization. The Central Committee announced the developments, it is true, but they were no more the cause of them than were the kings of the imperialistic period the cause of war. Rather did they yield to some invincible pressure, which came no one knew whither, and which, when gratified, was succeeded by some new pressure equally invincible. To such a state of affairs, it is convenient to give the name of progress.

Replace the phrase “Central Committee” with any of the terms “government”, “society”, “country”, etc. and the statement still stands.

Coming back to the initial example of decentralised electrical distribution through the development of a sharing economy, electricity is perhaps the most pertinent example to showcase the idea of providing certainty to the vagaries of nature through practice. Electricity, the phenomena, is itself a product of nature, and quite a fickle one at that. It can be found only under certain circumstances and/or in certain places. However, a mark of development is to be able to provide it consistently. It is this consistency or certainty of supply, which further enables certainty of outcomes (such as transport, enabling work, automation – pretty much anything in our lives is dependent upon consistent electrical supply), which is the sign of development. And this certainty is not just achieved against the vagaries of the “nature” of nature alone. It is also achieved against the vagaries of the nature of man. Ensuring systems that do not establish monopolies, either through centralisation or decentralisation, thereby ensuring certainty of outcome to the masses in the wake of fickle human nature.

Development is a complex topic to write about and there are various ways to approach it. The varied examples I have given in the post don’t even begin to cover the extent of which this topic could be explored. That being said, the prime philosophy behind development, rather, what is generally understood as development is not that complex a task and this is what the post intends to explain. As an epilogue to this rather long post, I would like to provide a personal example – something I hope everyone has also gone through – that of turbulence in flight. In my opinion, the invention of the convenient passenger flight is perhaps the greatest invention of the past century (probably at an equivalent with the invention of the internet, if not more). A symbol of development, modern passenger flight embodies the very concept I have attempted to explain in this post – being able to establish certainty of outcome (i.e. able to travel fast and safe) in the face of vagaries of nature (as experienced by the turbulence, not to mention the extremely harsh weather outside). This has been achieved through an immense amount of practice through the ages, setting of standards (which is both a result of analysis as well as lobbying) and understanding the “nature” of both nature and of man, before being able to achieve certainty of outcome in the face of vagaries of nature of both.

 

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