The economics of human ‘worth’

Incorrect valuation of people amid perfect information in contemporary Indian society

mukeshkacker

Mukesh Kacker | December 13, 2012



Contemporary Indian society is increasingly assuming a surreal quality. Every institution, individual in authority, public figure or celebrity (with honourable exceptions of course!) seems to be strangely devoid of any respect evoking quality as they all seem to send out a strange mixed signal – ‘I am important/visible and/or rich but do not deserve to be’. Traditional value systems are near extinction and one is no longer sure either about the inevitability of the victory of good over evil or about good begetting good. The feeling is akin to falling in a bottomless void where one tries to clutch at something permanent and ends up grabbing thin air instead. Success has assumed a totally different meaning and a new class of so-called successful people has emerged whose importance in society and worth in the market seems strangely divorced from substantive content. Why do societies, like the present Indian society, fail to value individuals correctly unlike stock markets which are able to correct their mistakes over a period of time?

When stock markets suddenly plunge or when they suddenly shoot up in the wake of negative or positive external shocks respectively, valuations of a number of companies listed on the market either go down or go up without any ostensible worth-depleting or worth-appreciating activities on the part of those companies. However, as the market stabilizes, valuations of most companies also stabilize and start reflecting their true financial strengths or weakness. One can venture to generalize that after the external shock unrelated to the economic activity of a company subsides, the market is able to capture its correct valuation, albeit with a time lag. In other words, though the market may get influenced by external causes and value a particular company incorrectly, it is able to steer towards its correct valuation in the long run.

Since markets are human creations one would expect a similar play in life as well, particularly in how a society values its individuals. One could not be more mistaken in this assumption, particularly in India! An independent observer would be astonished to find that (generally) in no facet of life in contemporary India is the core content or intrinsic value of either an individual or his effort correctly reflected in his market value, even in the long run. Most societies, even in the developed west, have suffered from this infirmity at some point in the past but they have been able to overcome it largely since the beginning of the 20th Century.

It is not that life does not recognize the intrinsic value of individuals or of their efforts and enterprise – there would be no human progress if that were to be the case – but there is always a huge time lag. It is as if life itself extracts a price for recognizing the true worth of an individual. History is replete with instances of achievers either being humiliated or not being recognized in their life time while the undeserving were bestowed honours and riches. Mozart, the 18th century composer-genius, died in penury while a mediocre Antonio Salieri managed to win the favours of the royal courts. Most of the great French renaissance painters, whose creations are today beyond the reach of all but the super-rich, barely managed to eke out a decent existence while they lived. Worse, their uninspiring plagiarizing contemporaries consistently commanded higher prices till the world woke up to their genius after their death. John Keats, one of the foremost Romantic poets England has produced, died at 26, unwept, unhonoured, and largely unsung in his lifetime.  Closer home we have the case of Mirza Ghalib, unarguably the greatest Urdu poet ever born, who not only struggled to make both ends meet but also suffered the mortification of being considered a lesser poet than his utterly mediocre and pedestrian contemporary Zauq.

But those were historical times when to be recognized you had to be a kowtowing courtier first. The tragedy of modern India is that it has not been able to free itself of this nauseating courtier culture which is essentially antithetical to the emergence of a merit based society. In today’s India it is not just the geniuses and achievers who have to bear the cross of their abilities. Men and women of content and worth – learning, education, erudition, creativity, manners, wisdom, ability, honour, honesty, to name but a few qualities – discover through their own separate experiences that Indian society has two different yardsticks of valuing them. It may acknowledge them as good and able but in the marketplace they will consistently be valued much less than men and women of no intrinsic content.  State recognition would also elude them.  In India, success, as a concept, draws more from perception than from reality.

Grandstanding, window-dressing, posturing, pretentiousness and even downright skullduggery, surprisingly seem to add to the market value of this new breed of successful people rather than detract from it. So we have charlatans succeeding in politics and public life, unscrupulous manipulators masquerading as captains of industry & business and underperforming time-servers rising to man sensitive top positions in government.  Cinema actors, cricketers and page-3 celebrities are not just our icons but thought leaders as well! Television channels court them assiduously and media events challenge ones credulousness by indulging in their own brand of sycophancy. Shah Rukh Khans and Suresh Rainas may be successful actors and cricketers respectively but are they our thought leaders? You only have to watch the inane debates hosted by celebrity anchors on our 24x7 news channels to realize the extent of intellectual bankruptcy that our new breed of successful people has engendered. State recognitions are a pathetic exercise in selecting cronies and courtiers and it is no secret how well-connected industrialists, businessmen and other access-rich persons lobby in the Delhi Durbar for getting Padma awards. We may blame crony capitalism for our present economic mess but it is only a manifestation of our basic culture of breeding, recognizing and promoting courtiers in all walks of life.

At the root of the problem of incorrect human valuation lies the eternal dichotomy between low/high perception of worth at the personal level and high/low market valuation at the public level. Somehow, even when perfect information about individuals is available, society and its creations seem to assign incorrect weights to sub-sets of that information leading to abysmally incorrect valuation of individuals in public life. In the financial world wrong valuation may be the result of imperfect or asymmetric information but in real life wrong human valuations exist in the midst of near perfect information. While a whole branch of economics has grown in the area of imperfect and asymmetric information, very little work has been done on situations where even though perfect information is available, human society and its creations knowingly value individuals incorrectly. Perhaps, someday a modern day mixture of John Maynard Keynes, Sigmund Freud, and John Nash may be able to explain the phenomenon of incorrect human valuations amidst perfect information.

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