Una flor amarilla (Cortázar, 1956)

"Parece una broma pero todos somos inmortales.  Lo sé por la negativa, lo sé porque conozco al único mortal."  Con esta frase inicia el cuento Una flor amarilla de Julio Cortázar.  En un bistró de la rue Cambronne en París, un hombre que bebía para olvidar, le comenta a otro como en un autobús de la línea 95 ha conocido a un joven llamado Luc.  Este joven se asemejaba sorprendentemente "al recuerdo que guardaba de sí mismo a esa edad."  Al descubrir que Luc era una figura análoga a la suya, llega a la conclusión de que no hay mortalidad.  Las vivencias del joven eran una prolongación de su existencia.

Algunas preguntas que surgen de la lectura son:

(1) ¿Está haciendo Cortázar alusión al concepto del eterno retorno presentado por Nietzsche? ¿Cómo puede formularse este concepto como una afirmación de la vida?

(2) ¿Cómo la finitud afecta nuestra comprensión del tiempo?

(3) ¿Es la belleza (la flor amarilla) el último dique frente a la entropía?

(4) ¿Cómo cambiarían nuestras decisiones y acciones si tuviéramos certeza de nuestra inmortalidad?

El cuento puede encontrarse aquí:

http://www.literaberinto.com/Cortazar/unafloramarilla.htm

What Should Economists Do? (Buchanan, 1964)

In this essay, James Buchanan argues that the economist should focus in "the theory of markets", instead of the "theory of resource allocation" or "theory of choice".  He criticizes the vision of Lord Robbins, who considered that the economic problem involves the allocation of scarce means among alternative or competing ends.  Buchanan considers that following Robin's path is to acknowledge the study of economics as one of applied maximization, where the utility function of the choosing agent is defined in advance and choice becomes purely mechanical.  According to Buchanan, the central idea of the discipline should be the cooperative association of individuals (behaviour of exchange, trade or agreement).

Buchanan considers the model of perfect competition to have limited explanatory value except when changes in variables exogenous to the system are introduced.  There is no place within this model for the internal change driven by the Smithean propensity of men. Furthermore, he considers the market as "the institutional embodiment of the voluntary exchange process that is entered into by  individuals in their several capacities" and defines economics as the study of the whole system of exchange relationships.  Finally, Buchanan emphasises that economists should be "market economists".

Several questions arise from revising this essay:

(1) What is the main criticism of Buchanan to the definition of economics stated by Milton Friedman?

(2) According to Buchanan, what is the paradox within the theory of choice?

(3) Why Buchanan considers that the use of the term "catallactics" or "symbiotics" is preferable to the use of the word "economics"?

(4) Why the model of perfectly competitive general equilibrium excludes the social content of the individual behaviour in market organization?

(5) Why is there no explicit meaning of the term "efficiency" when applied to aggregative or composite results?

(6) What is the basic distinction between economics and politics regarding the nature of the social relationships among individuals examined by each field of study?

The essay can be found here:

http://mx.nthu.edu.tw/~cshwang/teaching-economics/econ3171/References/01-Buchanan=What%20should%20Economists%20Do.pdf

All That is Solid Melts into Air: The Experience of Modernity (Berman, 1983)

Marshall Berman describes the experience of "modernity" in the following way: "to be modern is to find ourselves in an environment that promises us adventure, power, joy, growth, transformation of ourselves and the world - and, at the same time, that threatens to destroy everything we have, everything we know, everything we are."  To explain this state of ambiguity and anguish, Berman refers to the quote made by Marx: "all that is solid melts into air".

Berman divides the history of modernity into three phases: (1) The first phase goes from the start of the sixteenth century to the end of the eighteenth, in which people begin to experience modern life; (2) The second phase starts with the revolutionary wave of the 1790s and ends in the twentieth century.  This stage is characterized by a public that "shares the feeling of living in a revolutionary age" but also "remembers what it is like to live materially and spiritually in a pre-modern age"; (3) The final phase is our own age, in which the process of modernization is so rapid and the achievements of modernism in art and thought are so spectacular that the individuals shatter into a multitude of fragments as the experiential possibilities expand.

Berman considers Nietzsche and Marx as the two most distinctive voices of the nineteenth century modernism.  Both share a modernist faith.  For example, Nietzsche asserts his faith in a new kind of man: "the man of tomorrow and the day after tomorrow" who, "standing in opposition to his today," will have the courage and imagination to "create new values."  Berman suggests that the twentieth century modernists have substituted the open visions of their predecessors by flat totalizations.  The twentieth century critics of modernity (Weber, Maurras, Marcuse) did not share the faith in their fellow modern men and women.  Finally, Berman argues that the view of an affirmative and life sustaining force interwoven with disruption and revolt of the nineteenth century modernists must be recalled to give us back a sense of our own modern roots.

The following questions arise from reviewing this essay:

(1) Why Marx considers that life is radically contradictory at its base? Can Marx be considered a modernist?

(2) What is Nietzsche's dialectical motion perspective of modernity?  How is this view related to the traumatic events that Nietzsche called "the death of God" and "the advent of nihilism"?

(3) Can the inner tensions of modernism be the primary source of its creative power? Should individuals struggle to reduce the contradictions and ambiguity of modernism?

(4) Why can the view of the nineteenth century critics, such as Nietzsche, Marx, Tocqueville and Kierkegaard, be considered as open ended?

(5) In what does the "One-Dimensional Man" paradigm consists? Do you agree with it?

(6) According to Berman, what is the main flaw of pop modernism?

(7) How do we reconcile our desire for clear and solid values to live by with our desire to "embrace the limitless possibilities of modern life and experience that obliterate all values"?

Berman's book All That Is Solid Melts into Air: The Experience of Modernity  can be found in the following Amazon's link:

http://www.amazon.com/All-That-Solid-Melts-into/dp/0140109625

Portfolio Selection (Markowitz, 1952)

In this seminal paper, Harry Markowitz is concerned with the investor's choice of a portfolio given his relevant beliefs about future performances of financial assets.  Markowitz considers the rule that the investor considers the expected return as desirable and variance of return as undesirable. 

Markowitz favours the expected returns - variance of returns (E-V) rule, which states that the investor should diversify and maximize expected return.  The author emphasizes the importance of diversification in a portfolio and the consideration of the intercorrelation among the returns from securities.

Markowitz was awarded with the Nobel Prize in Economics for his work on portfolio theory and the analysis of the optimizing investor's behaviour.  As an anecdote, Markowitz ended his Nobel Prize Lecture with the following paragraph:

"Finally, I would like to add a comment concerning portfolio theory as a part of the microeconomics of action under uncertainty.  It has not always been considered so.  For example, when I defended my dissertation as a student in the Economics Department of the University of Chicago, Professor Milton Friedman argued that portfolio theory was not Economics, and that they could not award me a Ph.D. degree in Economics for a dissertation which was not in Economics.  I assume that he was only half serious, since they did award me the degree without long debate.  As to the merits of his arguments, at this point I am quite willing to concede: at the time I defended my dissertation, portfolio theory was not part of Economics. But now it is."

Some of the questions related to this article are:

(1) Why Markowitz rejects the hypothesis that the investor does (or should) maximize discounted return?

(2) Does the law of large numbers insure that the actual yield of a portfolio will be almost the same as the expected yield?

(3) How can an efficient portfolio be characterized?

(4) Why is it important to consider uncertainty in the analysis of optimizing investor behaviour?

(5) Are mean and variance proper and sufficient criteria for portfolio choice?

(6) According to Markowitz, why the rule E-V serves better as a guide to investment in comparison with "speculative" behaviour?

(7) In practice, do individual investors tend to manage a diversified portfolio?

The article can be found here:

http://www.gacetafinanciera.com/TEORIARIESGO/MPS.pdf

Corporate Control, Insider Trading, and Rates of Return (Demsetz, 1986)

In this article, Harold Demsetz presents the hypothesis that the differences in ownership concentration observed across firms respond to the benefits and costs of monitoring management.  Demsetz and Lehn (1985) find that ownership is more concentrated in firms exhibiting higher firm-specific risk. 

A higher firm-specific risk implies a larger demand for controlling shareholders.  These controlling shareholders require a compensation for assuming greater firm-specific risk.  An important part of this compensation comes from the acquisition of a comparative advantage in exercising control, which allows for the possibility of pecuniary and nonpecuniary returns.  Furthermore, Demsetz argues that insider trading offers a secondary compensation to controlling shareholders.  According to Demsetz, the wealth transfers generated by the insider trading can be viewed as a cost borne by minority shareholders to promote more effective monitoring of the firm.

Some questions related to this article are:

(1) Do institutional owners have the incentive to monitor management in the absence of investment specialization?

(2) What benefits motivate investors to specialize their investment in a single firm with high firm-specific risk?

(3) Why do firms with lower firm-specific risk exhibit a higher dispersion in ownership?

(4) How is the firm-specific risk related to the profit potential of insider trading?

(5) What are the equity problems that arise from insider trading profits?

(6) Are controlling shareholders entitled to a higher rate of return than the one of minority shareholders?

(7) Is Demsetz's argument that legislation seeking to reduce insider trading profit makes it more difficult to maintain controlling ownership interests so useful for monitoring purposes, valid?

The article can be found here:

http://www.jstor.org/discover/10.2307/1818787?uid=3737952&uid=2129&uid=2&uid=70&uid=4&sid=21100653701196

Tótem y tabú (Freud, 1912)

Freud investigó las restricciones impuestas en la sociedad del hombre primitivo, así como sus orígenes y las expuso en su ensayo Tótem y tabú.  Freud considera al totemismo como un sistema anterior al desarrollo de las instituciones religiosas y sociales.  El tótem en estas tribus primitivas es por lo general un animal temido y a la vez reverenciado.  Este animal es un antepasado y protector del clan.  Freud sostiene que el totemismo se relaciona con la muerte del padre poderoso y el establecimiento de una comunidad unida por la identificación entre sus miembros. 

La teoría supone que este padre poderoso era completamente narcisista, por lo que su amor hacia los demás se limitaba en función de la contribución de éstos a la satisfacción de sus necesidades.  Este padre constituía el ideal de cada uno de los hijos.  Pero debido a las restricciones que les imponía, éstos se asociaron y le mataron.  Entonces se originó un lazo fraternal entre ellos, mediante el cual todos los hijos tenían los mismos derechos. 

El parricidio generó un sentimiento de culpa que se ve manifestado en todas las restricciones totémicas auto-impuestas. Como Freud lo menciona, se trata de una obediencia retrospectiva.  Se podría decir que los hijos deseaban matar al padre para sustituirle, pero debido a que esto no fue posible para la convivencia en la comunidad fraternal, este deseo encontró su manifestación en cada familia.  “El hombre asumió otra vez la jefatura, pero sólo la de una familia…” Posteriormente, el padre de la horda primitiva adquiriría un carácter divinizado, el carácter exaltado de un dios.

Adicionalmente, Freud expone una evolución de la forma utilizada por el hombre para comprender al mundo.  Expone que al inicio hay una etapa animista en donde prevalece la omnipotencia de las ideas y la magia (el hombre se considera omnipotente; las leyes psíquicas prevalecen sobre las leyes de la naturaleza; se da un narcisismo intelectual).  Esta etapa es sustituida por la religiosa (en esta etapa la omnipotencia le pertenece a los dioses), que a su vez fue remplazada por la científica (esta etapa se caracteriza por el deseo de controlar al mundo exterior y así poder enfrentar los más grandes temores del hombre, entre ellos el miedo a la muerte). 

Algunas preguntas relacionadas con este ensayo son:

(1) ¿De dónde se generan los tabúes presentes en el sistema totémico?

(2) ¿Cómo el proceso de identificación se ve reflejado en los postulados del totemismo?

(3) ¿Qué aspectos de las instituciones religiosas y sociales todavía conservan reminiscencias del totemismo?

(4) ¿De dónde proviene la autoridad que tienen las prohibiciones tabúes sobre las personas?

(5) ¿Cuáles son las similitudes entre la neurosis y las restricciones tabúes?

(6) Freud propone al grado de represión como un indicador del nivel que ha alcanzado la civilización. ¿Es esta premisa válida?

Este ensayo puede encontrarse aquí:

http://www.remq.edu.ec/libros/Sigmund%20Freud%20-%20Totem%20y%20Tab%FA.pdf

Politics without Romance: A Sketch of Positive Public Choice Theory and its Normative Implications (Buchanan, 1979)

In this essay, James Buchanan presents the "Public choice theory" as a "theory of governmental failure" comparable to the "theory of market failure" that emerged from theoretical welfare economics.  Buchanan defines public choice as the analysis of the behavior of individual actors in the governmental sector (voters, candidates, elected representatives, members of political parties and bureaucrats) and the composite outcome observed.  He presents two distinct areas of research: (1) economic theory of constitutions and (2) theory of political institutions.  First, the economic theory of constitutions raises questions about how governments may be constrained.  Second, the theory of political institution analyses the demand and supply for government goods and services under different rules (theory of voting and voting rules, theories of electoral and party competition and theories of bureaucracy).  Afterwards, Buchanan proceeds to explain these two set of theories.

Public choice scholars have started to model governments in monopoly terms.  The electoral competition is viewed as a competition among prospective monopolists, bidding for an exclusive franchise.  Moreover, the successful bidder behavior is assumed to be profit maximizing.

The following questions arise:

(1) Why is it important to use the methodological individualistic approach in Public choice theory?

(2) What causes the complexity in political exchange?

(3)  Are the constitutional guarantees for free and periodic elections enough to control the range an extent of governmental action?

(4) What political decision structures should be adopted at the constitutional stage?

(5) What are some examples of the majority cycle problem discovered by Black? Under which configuration of preferences, the majority cycle problem will not arise?

(6) What is the Arrow impossibility theorem?

(7) Do the re-election possibilities keep the self-interests of politicians within reasonable range of those of the median voter?

(8) How can the conflicts of interest between the representative or agent elected to act for the group, the bureaucracy in charge of the policy implementation and the group members themselves be reconciled?

(8) Can the Leviathan be limited?

The essay Public Choice: The Origins and Development of a Research Program can be found here:

http://www.gmu.edu/centers/publicchoice/pdf%20links/Booklet.pdf