Tuesday 8 December 2009

Hypnotists and us

While at IIMB, I attended a panel discussion on Corporate Governance and Transparency. An interesting takeaway from this discussion (and from Fin.Acc. course) was that the good guys wanting stability have always played a game of catching up over rogue behaviour by bad guys.

As from following story, it turns out that curbing rogue behaviour can end up encouraging rogue behaviour in some other form. Story picked from MarginalRevolutions (pointing out how licensing is ineffective)
Back when I was working for the Indiana General Assembly, one member...became convinced that it was crucially important for the state to address, via statute, the problem of rogue hypnotists traveling the land, preying upon unsuspecting Hoosiers. He wasn’t anti-hypnotist, mind you–he thought the government needed to protect people from unqualified hypnotists...

So the state passed a hypnotist licensing law, complete with the requisite boards, professional standards, forms to fill out, fees to pay, and so on....Then, after the law was enacted, a funny thing started happening: The state began receiving license applications from people who didn’t live in Indiana....It turns out they were doing it so they could advertise in the yellow pages and on bus-stop billboards as “state-licensed.”

This got me thinking. For starter, I am a product of two of the certified brand names - IITKgp and IIMB. So it turns out that the certification from the brands is no indicator of whether I will be a good guy or a bad guy. Ok, leave me aside. I am a nice guy. But that is not the point.

We demand transparency to have accountability. We enforce transparency through rules and laws. We take transparency as (only) means to accountability since moral conscience is not as objective. Iam not saying that all hypnotists are corrupt. But the point I see in this story is transparency alone can only be partially effective at best, and corruptible at worst (refer to use of derivatives in financial crisis and current debate on whether carbon derivatives will be the cause of next bubble). Relatively best economy is where good guys are consistently catching up over bad guys. If there is something else which can drive responsible behaviour, please comment.

I have a parallel theory. Spiritual and religious philosophers had realized this problem (i.e. transparency not guaranteeing responsible behaviour) centuries ago. Hence they themselves acted opaquely to make it easier for others to follow. They painted good economic behaviour as moral behaviour. You may say that their reason for opacity is well-meant. Or maybe it was just laziness.

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