Chyden Finance: profit from hypocrisy

In the spring of 1987 the Whole Earth Review published an article by Italian economist, Carlo M. Cipolla, titled, “The Basic Laws of Human Stupidity” (pp.2-7), which provides a very useful rubric for categorizing human action.

Cipolla’s presentation takes the form of a 2×2 matrix, with one axis representing loss or gain to oneself and the other axis representing loss or gain to others as a result of one’s actions.

This yields four basic categories of transactions:

Civilized: I gain, you gain

When both parties benefit from a transaction, Cipolla dubs this ‘intelligent’, although I prefer the term ‘civilized’. One can be unintelligent in the conventional sense and still behave in a civilized manner. Civilized transactions are the basis of mainstream economic analysis. When you buy a loaf of bread, you give up a bit of money that you value less than the bread that you walk away with, and the grocer gets a bit of money that he or she values more than the bread that you walk away with. Both parties in a civilized transaction give up something of lesser subjective value, in exchange for something of greater subjective value.

Victim: I lose, you gain

When one engages in an act that results in a loss to oneself and a gain to the other party, Cipolla dubs this ‘helpless’, although I prefer the term ‘victim’. One sees this sort of thing, e.g., when a young child is outwitted by an older sibling into giving up candy or a toy, or when a subordinate in a bureaucratic organization works for a supervisor who takes credit for the subordinate’s achievements. In the former case, the child is genuinely helpless, in that he or she is immature and unexperienced. In the latter case, the adult individual who stays in a dead-end job or an abusive relationship for a long time is not helpless and has chosen to live as a victim.

Evil: I gain, you lose

The contrapositive of the the victim, Cipolla dubs ‘bandit’, although I prefer the term ‘evil’. The essence of evil is harming others for one’s personal pleasure or gain. In the example above, the older sibling and the supervisor behave as bandits, benefiting at the expense of someone else, and their intentions and actions are evil.

Stupid: I lose, you lose

For Cipolla, the most pernicious of the four categories is the one that he dubs ’stupid’. Stupid individuals drive recklessly and cause car crashes, costing all parties involved and benefiting none. Stupid transactions tend to catch one completely off-guard. They make no sense to us, and no one benefits. The stupid individual is dangerous because his or her actions are inexplicable.

Stupid is worse than evil.

Following Cipolla’s logic, the mugger is evil; the suicide bomber is stupid. Likewise, a culture based on a sense of supremacy is evil; a culture based on the worship of death is stupid.

In similar fashion, a lot of government policy starts out evil, and ends up stupid.

More on this last point later.

CWE