2111. Capital, democracy, technology, government

Economics has struggled to be free from the other social sciences, those that deal with real people and real lives. It prefers to deal with systems that can be reduced to parameters that can be measured and are free from external trends. This misses the possibility for economics  being more significant – as science and as social policy. 

Capitalism, the preferred frame for economic assumptions, is a way of making devisions. Those with capital decided what to do with it and society mostly follows along. Coffee, tobacco, automobiles, smart phones. In fact capital is a method of making decisions that parallels the weakened political form of democratic participation,  but where elections do make a difference. If we look at presidential election, they have always been close, and if the other candidate had won it would, with patronage and media influence, have had some effects. But in the background the corporate interests carry a bigger weight.

In fact we have four interlocking  ways of making decisions on the future for society.

  • Democracy votes (and is polled)
  • Capital ownership decides ( and uses the media)
  • Technologists innovate (and use the corporate form)
  • Government funds (and uses a revolving door)

To put it more starkly

  • Democracy
  • Capital
  • Technology
  • Government

Looked at this way democracy is pretty weak. We can think of these ad four vectors which can align or not. To my eye capital has come to dominate the other three and has become the major way society makes decisions, sets the amounts and directions. Because economics generally concerns itself with the capital side,  avoiding politics, innovation and government projects, it is felt to be less interesting than it could be is it treated all four. 

Davos this year might get a bit deeper under pressure from climate concerns. It will be fascinating to see how this plays out: the intensity of climate talk will be high. The question is , will anyone – anyone- dare to raise the question, not of commitments to 2050, but to actions that actually curtail – stop – some fossil fuel use in the next year. 

2107. Development without growth

Provocation 240 Development without growth

With climate change (and problems with oceans, governance, population) we need serious thinking, including economics.

If it is true that we must cut co2 7.5% per year and we are still dumping more, not less, then we are in the situation where we are either killing ourselves or must do something we can’t and wont. Any serious cut would cost jobs, lots of them, and cascading effects from there. The jobs proposed in GND are mostly energy and resource intense, and hence counter productive.

So, rethinking.

Aristotle wrote (in his book named either Coming to Be and Passing away, or more literally On generation and Corruption) that we can grow without development (adding water to wine) or develop without growth. A value creating rearrangement of what we have would be an example.

Would this be a model for no growth? Well, a value creating rearrangement is growth still. Who owns that new value? But if we did the rearranging without any further extraction (or dumping trash into the ground or into the atmosphere) we would be acting in the spirit of what he proposed.

But it would be hard. Repairing housing would take tools and materials, nails, piping. Insulation would be even more based on extractions. Bill McDonough has developed a design and development practice around making sure that the trash from any process be 100% useable as input to another project. “Cradle to cradle”.

If we did this really well: well thought, well managed, could we actually do the cut in co2? Economics, by modeling this process, could seriously help. Economics is mostly an analysis of input output input output…. , or, in the old Marx vocabulary MCMCM.. but tends to be limited to circles among the capitalists and the workers and consumers, avoiding the details for income and consumption, not noticing that the workers are the consumers, and willing to drive down wages thereby limiting consumption in a self destructive circle. Economics also avoids the obvious, that the input output circle includes the earth so that we go from earth to product to earth to product…

With the no growth approach is that many assets lose their value. For no growth to work the high earnings of the 1% up need a new model, not forthcoming from economics (I don’t see it in the AEA program abstracts.) Lots of resistance and politics at play.

Imagine that we have a four tier income regime.

Annual salaries starting with Yang’s $12,000 per year and then jobs limited to the following annual salary in 4 steps:

50,000
100,000
150,000
200,000

In such a regime would people not work hard to move to the next level and appreciate the value of the work they were doing? Perhaps voted to move up by the whole workplace or community. Be aware that cars, planes, yachts, big houses, would be very limited under any serious co2 cutting regime so the rich would have to have already given up much of what money is currently used for. Obviously this is very sketchy, but it would be terrifically helpful if it could be fleshed out.

Changes in social accounting might make this easier. In the old material culture mind-body favored body, things, fixed assets. Mind was treated as an artifact, without causal consequences. In the emerging economy digital favors mimd and the old feeling for stuff is dissolving. In the old economy change was difficult. In the new economy change is programming. Anything can change quickly in the digital culture.

For cradle to cradle https://en.wikipedia.org/wiki/William_McDonough

2073. Dorian and Climate change – how we think.

Provocation 224   Life threatening Dorian and life threatening economy collapsing through climate change -how we think. 

Why are a number of the economists I know  so tuned in to Dorian but not tuned in to climate change? (I am going to leave this rough, like a conversation, not giving the false appearance of being well worked out. Imagine that we are just having a cup of coffee and  chatting. )

 There are some deep similarities between the way we look at the climate, economy and  change and the way we look at Dorian . For example, the focus on numbers such as GDP and category 4 or 5.  But Hurricane categories seem visceral while   GDP a is OK for approximate calculation. GDP (and other performance measures for the economy, such as “incomes are rising”) do not get us in the gut – because it is too far away from visceral experience, and, as in this case, badly misleading. We know for example that cutting trees can contribute positively to GDP while also a loss  of wealth from the earth. But we don’t feel it the way trees falling in Barbados tears at our imagination.  In the economy our  numerics and our intuition often move in opposite directions.  House work and child care don’t count.  For hurricanes it seems like a more coherent experience.

The main difference might be that hurricanes are delivered in narrative form as a sequence,   “this then this then this”, whereas economics are delivered in equations – only “if this then this”. The narrative form is open and easy to include emerging or missing steps. In economics such things are treated as external to the system and mere disrupters of our professional stance. 

What can we learn about this? It really is a call for a deeper understanding of human feeling and cognition if we want to increase our understanding of what happens.. Our narratives about the hurricane seem fairly accurate, taken together, while for  climate change they are just touching the surface. Death  by hurricane is spoken, death by climate change is not.

One way to think about this s to compare an approach through systems thinking with narrative thinking.  I was in a meeting yesterday where a silicon valley thinker said he was relabeling himself a story teller, no longer  a systems thinker. System thinking tends to form around a single heavy model, narratives are more like  a handful of butterflies.

2065. An allegory about the modern economy.

provocation 223. aug 19

An allegory about the modern economy.

Once upon a time a small group of hunter-gatherers discovered a good sized pond and found that it was full of fish which they caught and ate and these fish became the center of their diet. The group grew and more people fished at the edge.The number of fish caught was related to the number of people fishing.The economists wrote equations. After a while of good living, space at the edge was harder to just walk up to and altercations broke out. Stronger men seemed to find themselves in the most favorable spots for an easier catch. The economists watched all this, related the population to the catch, and helped draft some rules to apportion the space along the pond’s edge. Some of the men found it better to go make fishing poles from somewhat distant saplings and trade the poles for fish. But what was not noticed, because better poles kept the catch proportional to the population of people, was that the total number of fish in the pond was going down. What they did see was that with more men fishing with better poles the catch remained reassuringly constant per person. More children wee born, more men made fishing poles. All seemed more or less ok, until. Ah, until.

After all, this is a fairy story. Until with no new pole innovations the number of fish caught was suddenly in decline, not enough to feed the fishermen and heir families and the pole makers and their families. The fish being caught were smaller and fewer. The economists had always assumed that more effort would mean more fish caught. Maybe a new technology would lead to more fish more easily caught. What they missed was that there were no longer enough fish to feed all the people. More effort, better technology, would not help. Other small groups had discovered other ponds, fields, herds and followed a similar path. There was nothing more out there.

In our time we have extracted much of the wealth from the land and the sea and sold it to the bulging population. But competition started pushing prices up, so we loaned money to the bulge – mostly against the value of their homes – to keep buying. What was not noticed was that that prices were higher, more welfare was distributed, and the people were skinnier (or fat from bad food which is the same thing) and living in increasingly poor housing or on the street. The society, having stripped the environment and the people, could no longer feed them all. Less food, more people, more debt, more anger. The economists looked for a new configuration of people and resources that would work, little realizing that there as no way to configure all the variables except possibly a wise leader who could with authoritarian verve bring land, technology, people into new equilibrium. But there was no such person in sight and what there was of “leadership” would lead to to much pushing and pulling, taking lots of time and making it impossible to get to any such new configuration and equilibrium. Any new technology would lead to the loss of jobs in old sectors and continue to deplete the environment. The old elite would look for robots algorithms and gated communities as defensible liveabe islands and this turns out to be, for lots of logistical reasons, an illusion.

So we are stuck. We can either start here and struggle for creative solutions, or just withdraw and let the curtain come down, figuratively to hide the reality from ourselves, or realistically, the drama is over.

2059. Economic formalism vs economic theory.

 Provocation 221 Economic formalism vs economic theory.

Much recent critique of economics has been on its formalism – more interested in the equations than in reality,   and hence  not a terrific science . The alternative to formalism is theory (narrative). Sounds strange. How are formalism and theory different, are they not the same?

Formalism usually raises the question how can I express this data in a set of equations, what is goin on with  the numbers.. Theory asks what is really going on here, what is happening outside the numbers.?

The difference is subtle. Take “capital”. No quantitative questions come to mind, but what is it leads to questions: who owns it, how does it affect society, are there alternatives? Same with “ownership” “property” or “land”. Formalism tends to work with what is (data sets) whereas theory pushes intuition and metaphor into the unknown.

To encourage a bit more playfulness in economics, here is a simple tool.

IMG_0142.jpg

What comes in and out of the economy? Try a few of your own. Things will occur to you. Better questions, interesting answers. Obviously any such diagram is incomplete, the question is, is it fruitful?

Most economists assume relevant reality is “in the economy”, but the simple circle suggests that much of importance economically is usually treated as outside the economy. Such an assumption is very limiting on creating better theory.

 

comments much appreciated. doug@dougcarmichael.com

Post 2027. The lawful and the unique. Economics avoids the unique.

Provocation 2013. The lawful and the unique. Economics avoids the unique.

Science has taken the view that things that can be made into “laws” are worthy of science. Unique events not so.

Mary is standing by herself on the livingroom floor. Newton’s F=MA tells us how much she weighs.

But Mary sees  Jane’s dropped handkerchief, which suggests a drama. 

Economics deals with things like the first but ignores (as unscientific) things like the second.  Bt real life, including economic life is vastly more made up of events  like the second. This is important for climate change discussions. Economics talks easily about shifting energy source from fossil to wind and solar but does not discuss how Harry will need to get rid of the family’s gas heater an replace it with electric. Who pays? How many such heaters have to be made? How long will it take?

If science was  interested in the world  it would explore both kinds of events. In that sense science is not scientific but ideological. 

post 2054 cascading effects in economic shifts

Cutting energy use to stay under 2 degrees will have cascading effects. The energy for commuting for example, lets say cut enough that some people can’t get to work (as we know people drive increasingly long distances). The building they drive to also un-heatable and coolable. Not useable. What happens? Mortgage doesn’t get paid, anks fail, product of the company doesn’t get delivered..A stable structure comes apart as fast as pickup sticks. We have built to get rid of redundancy and to rely on “just in time” supply chains. These are not very resilient.
Is there any coherent discussion of cascading effects in economics?

Post # 2051 big data vs unique event.

We are in a paradox, first amassing big data to intercorrelate everything and tying all the data sets together into one giant machine (Mirowski ).

At he same time we are missing the big thing going on – the undoing of the planet – that we needed to know. The who, what why and when – and alternatives.
How can these two co-exist? Doesn’t the promise of the first – knowing everything – expect to know the one thing that we needed to know?

How much of economics is just filling in the gaps in the fabric (like exporting the Chinese person recognition software to Chile and tyying the results to consumer data sets) and how much is struggling for insight into the overall situation?

Post # 2039 Leisure and economics

Provocation #207. Leisure and economics.

Early economics was concerned with the well being of society, of all the people. This was limited because people acquiesced to the view that the population was divided between the rich and the poor and then into capitalists land owners,  and the laborers. But there was still a vigorous discussion about how the product should be distributed among them. Smith, Ricardo, Coleridge, Mill and many others in the nineteenth century were involved in complex social relationships – dinners and clubs –  that discussed theses issues. (Read Catherine Gallagher’s The Body Economic life, death and sensation in political economy and the Victorian Novel).

Jumping ahead to WW2, three emerged the view that the hope of technology was to eliminate drudgery and create leisure. Bad work should be done by machines. Women were to stay home (alone) with labor saving devices, the men wre to go to work to earn enough to buy the house to house the machines and their attendant wife. A living family evolved in a few decades into a machine of production and consumption. Tech was supposed to keep making this better, providing relief. What happened?

Some how the stuff produced that was supposed to produce leisure  caused people working harder (in my childhood a working person, say a carpenter, could afford a house and to send children to college.) The extra, which should have relieved labor, was coopted by management and ownership. Economics seems to have abetted this process, or at least stood by seeing but ignoring, or blind to the emerging reality. Falling into the logic of pleasure and pain being a single dimension as an aid to computational approaches seems to have made very small minded thinkers of most. Economics mostly seem to have supported an anti-union attitude – keeping workers from organizing – but not at all critical of the organization of capital. 

The life style of the increasingly rich has not emerged into a new civilization, but into corruption, alcohol, sex, status symbols – not into conversational salons and seminars. The elites have in fact de-educated themselves.

Aristotle was clear that a well managed estate produced a surplus, and the surplus should be used for creating leisure time, for what?  – for the study of philosophy and participation in politics (very different from our slothful view of leisure.) Discussion of the purpose of leisure was shown to be discussable – but we have not done it.

Instead of discussing how better to distribute wealth we are abandoning the poor to marginal employment, unemployment, or climate catastrophe. Any idea of organizing society for the good of all is missing from most contemporary discussions. 

Interesting to look at ways invented that led to increasing inequalities. Limited Liability is one. It removed from individuals the right to sue for damages, thus reducing their real ownership  value of what they have purchased,  because if it fails, the responsibility that should exist is vastly limited. This is an uncompensated taking to the advantage of capital. Imagine a group creating a limited liability corporation to build a large ship which unfortunately sinks in the harbor where it was just launched, and the resulting waves produce damage in the harbor way beyond the cost of the ship. The losers can’t sue for the full damages because of limited responsibility. Limited liability throughout a society, where no one is responsible for much, means there is no responsibility  adequate to the dangers taken on by the institutions of the society.

Post # 2037.

Provocation  # 206 MonopolyEconomics prides itself on mathematical sophistication, yet..

Following up on the previous Post

The functioning of the market is toward monopoly because those with power and money can acquire more power and money at cheeper prices than those with less. We sort of know this, but do we imagine our way to the outcome? Mirowski’s Machine Dreams proposed that the aim of economics is to create s a single system of all interconnected computers. Because computers are based on 0-1 the impression is given that they are already commensurate and programming can create all the useful interconnections.  

The obvious example is the blending of the data of national security with that from  broad based consumerism. The tendency is to have consumers interact with producers ont through large computer networks, in this case,  so far,  Amazon. Who among government, Google, Amazon, Apple, Microsoft will be the first to buy one of the others? We are moving toward a time when in practice, if not law, only those transactions mediated by Amazon’s computers will be legitimate, and  all produces know that the only way to reach the customers is through the amazon network.   All malls and retail outlets are going out of business and mailed catalogues reach only a Few.  

The security perspective can already identify those who are the enemies of that emerging system. The only way monopolization fails is in places where the system is somehow locally broken. 

Economics is at the center of this emergent monopoly yet it seems not to be discussed much within economics, despite how obvious it is.  Yet its graduates go off to jobs to manage  its emergence, the final realization that all data is interconnected through a single monopoly owned business protected by the national security state.

Big data will emerge as the mangement and governance structure of society. No need to vote because Amazon knows your preferences. Google has photoed your street,  it is all put together.  Who you are is now more clearly represented in the amazon-google-gov nexus than you are known to yourself. “Relax”, they say, “you are taken cae of.” But the reality is they take care of themselves with cash flow through the nexus to themselves, the  few. This fact will be hidden from the press and the networks. 

The problem with big data is that it can ferret out some measurable element that is, however small, present in much of the population, but it misses entirely what is powerful and idiosyncratic to only a few. 

The trouble is that if something goes wrong, like a hyper-energized climate that threatens major players in the monopoly tending system, no action will be taken. 

Fred Hoyle, the cosmologist, proposed in his Ten Faces of the Universe (1977) that the reson we are not visited by other planets is because no civilization as solved the political problem of how to survive internal political civil wars while developing the technical sophistication that would allow them to arrive here.

Good background to this line of thinking is in the Youtube interview by Naomi Klein of Shoshana Zuboff about her book  The Age of Surveillance Capitalism. My view is that the interview is much better than the book but  the book is rich in detail. 

Why is it, that in politics and economics, the more penetrating and and humane books are being written by women, not men?  My understanding, which could be wrong, is that women, not given access to the standard career paths, had to find other ways, and this kept them on the sidelines from which a better perspective can be gained than for those in the mainstream. Not being in the spotlight they are left freer to think.