Chamberlain-West

         “The Washington Consensus reforms have exposed countries to greater risk, and the risks have
         been borne disproportionately by those least able to cope with them. ...[T]he exposure to risk has
         outmatched the ability to create institutions for coping with risk.....” (Stiglitz, page 86-87
         [2002])
         One of the hallmarks of a distressed economy is the spread between the nation’s government
bond yield and the yield of comparable U.S. Treasuries It is understood that this spread can be
symptomatic of an important level of economic distress in the developing nations. Many believe that this
condition will be corrected (and prosperity achieved) by the prescription of privatization, open markets,
and proper fiscal/monetary discipline (Washington Consensus). But could socioeconomic dysfunction
have a deeper cause that will not yield to this prescription? In particular, could persistently higher
expected-risk in the planning by disadvantaged people everywhere, simply as a consequence of their
disadvantage, defeat confidence and discourage investment in education and business?
         In addressing this possibility, instant utility theory with its deeper foundation than standard utility
theory and mathematical economics is introduced. This deeper understanding is then used to produce a
parametric relationship which shows that increased expected-risks due to reduced discretionary power
results in diminished rates of investment, in personal and material capital. That is, the analysis reveals an
essential tendency for relatively disadvantaged individuals and nations to become more disadvantaged,
due to lower or secondary discretionary-power in making decisions. This finding indicates a more
definitive criterion for parity in socioeconomic interrelationships—in particular, Rawls’ stipulation that
“...there is no injustice in the greater benefits earned by the few provided that the situation of persons not
so fortunate is thereby improved” is adjusted to “...there is no injustice in the greater benefits earned by
the few provided that the benefits and discretionary-power of persons not so fortunate are thereby
improved.” In adopting this criterion it is recognized that utility theory per se, and Pareto optimality in
particular (along with utilitarianism), are insufficient due to more general or higher-level considerations
for advancing freedom and human welfare.
         This new perspective recommends a different direction. In particular, instead of traveling the
neoclassical course of unrestrained markets as the ideal or optimal, set a revised bearing by means of
institutional initiatives where the global market is suitably adjusted or moderated at the borders to offset
uneven expected risk. This would require (continuing) resource transfers from the advantaged to the
disadvantaged—within nations and between nations—for the foreseeable future, as appropriate to their
respective needs and cultures. It is understood, in this new guideline, that the disadvantaged will primarily
lift-themselves to better social and material conditions, this being operationally necessary for both
systemic and practical reasons.

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