Author Archives: Diane Coyle

State-sponsored cyber-crime

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The Larazus Heist by Geoff White is a fascinating exposition of North Korea’s role in unleashing large-scale hacking and cybercrime on the world, in its efforts to bypass sanctions and bring in money to the benighted (literally) country. The subtitle spells it out: From Hollywood to High Finance: Inside North Korea’s Global Cyber War. The author is an expert cybercrime journalist, which ensures the book is a cracking read. An early chapter describes the 2014 ransomware hack of Sony Studios, which had started trailing a movie portraying Kim Jong Un in unfavourable light. But the crimes reported are mainly about the intersection between hacking and the banking system, and organised crime, because the money has to be laundered and conveyed to North Korea or at least to places the regime can spend it. So as well as an elite computer hacking corps, the book describes the process of laundering cash through Macau casinos, or Sri Lankan charities, withdrawing notes from ATMs in central India, and trucking tonnes of cash around the Philippines. And then there’s crypto, the land where grift meets large-scale crime.

Apart from the book being a terrific read, what conclusions to take away? That too few people have really internalised the advice not to open email attachments or click on links. That the mesh of banking regulation increases the burden on the honest without much hindering the criminals. That economists/finance folks pay far, far too little attention to the criminal economy (one consequence of the profession’s laziness in studying only data that can easily been found online – looking at small questions with cool econometrics where the lamp happens to be shining, rather than the big, important questions). And that everybody should be very worried about cybersecurity. I learned so much from the book about the vulnerability of everyday life to online attacks from a hostile state like North Korea – and no doubt the other obvious potential attackers. The Wannacry impact on the NHS is a sobering example.

Finally, the book is co-published between Penguin and the BBC; the World Service hosted The Lazarus Heist podcast. In this maelstrom of misinformation we live in, the BBC is more important than it has ever been.

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Platforms and information

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I was quite excited by the prospect of reading Matchmakers and Market: The Revolutionary Role of Information in the Economy by Yi-Cheng Zhang. But it didn’t quite work for me, perhaps because the intended audience isn’t clear. The reason for excitement is clear: what the digital economy does is change the possibilities for the use of information in production and consumption. As the classic Hayek article observed, ‘the use of knowledge in society’ is the fundamental challenge of economic organisation. Yi-Cheng Zhang is a physicist and more relevantly the honorary director of Alibaba’s Complexity Research Centre. I hadn’t heard of this but it sounds like it should be delivering some very interesting insights.

However the book – very short – is written in a non-technical manner about how digital platforms operate. It’s key point is a concept labelled ‘infocap’, a sort of possibility frontier for the economic agent’s knowledge. There is an information asymmetry between individuals (who can’t know all there is to know about a firm’s products) and firms (who do know this but can’t know all about an individual’s range of preferences, although they can try to alter these). This is an interesting lens on the familiar platform economics but I think people who have read about platforms will not find much new, while although there are no equations the writing is a bit dense for non-specialists who haven’t read the platforms literature. (There are also loads of typos, so presumably the book wasn’t copyedited. I’m the kind of reader who feels the need to take up a pencil and correct these as I go.) I wish the book had actually been more formalized to highlight what might be new.

So, in short, I’d direct economists to the Belleflamme and Peltz text, The Economics of Platforms, and non-economists to a general read such as Platform Revolution by Marshall Van Alstyne, Geoffrey Parker and Sangeet Paul Choudary, or Cusamano, Gawer and Yoffe’s The Business of Platforms.

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The Industrial Revolution: causes, consequences

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I’m a sucker for any book about the Industrial Revolution, having grown up in its heartland in Lancashire cotton country, and have just read two. One was a re-read, of Joel Mokyr’s classic The Lever of Riches, as I wanted to refer to some aspects as I draft my new book. In particular, the many examples of time saving – for instance, “Although the paper industry is not often thought of as a typical industry of the Industrial Revolution, the Fourdrinier machine was in fact a revolutionary device. It reduced the time involved in making a given piece of paper from three weeks to three minutes.” The book focuses on the relationship between technological progress and economic growth to explore the perennial questions: why Britain? Why then?

The other is Maxine Berg and Pat Hudson’s new book Slavery, Capitalism and The Industrial Revolution. It’s a synthesis of a lot of recent research on Britain’s role in the slave trade and the economies of the Caribbean, and the interaction between slavery and empire and the way the Industrial Revolution in Britain took shape. I’ve read enough about the Industrial Revolution that I’d come across quite a lot of the material before – such as the links between compensation paid to slave-owners after abolition and the growth of financial services and funding of investment and consumption in Britain. The Bank of England has a fascinating working paper on compensation payments, and the UCL project is magisterial. The authors repeat the claim that the debt the government issued to pay compensation wasn’t paid off until 2015 – understandably, as the Treasury tweeted to that effect – although it’s more accurate to say that low interest rates then enabled the  redemption of some consols.

But in any case the book does a terrific job of presenting a synoptic view of the role of slavery in answering the Why Britain? Why then? questions. History is over-determined, in retrospect. Searching for ‘a’ cause is doomed to fail. This book does not make that claim, acknowledging other explanations in the mix. It offers, though, an important perspective on an aspect of the Industrial Revolution that has only relatively recently come into focus.

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Numbers, objectivity and meaning

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I’ve carved out as many empty days as possible this summer to make significant headway with my next book, and as well as writing I’ve been re-reading some golden oldies. One is Theodore Porter’s classic Trust In Numbers: The Pursuit of Objectivity in Science and Public Life. For those who haven’t read it, it’s a historical exploration of the pursuit of quantification in economic domains (accounting, cost benefit analysis) as an expression of objectivity. A core argument is that the assertion of quantified objectivity is a signal of a group’s lack of power rather than the opposite; powerful groups or people expect to have their judgment trusted.

This is counter-intuitive if one has read so often that the deployment of numbers is the way social and political power is exerted by economists and others. But the case Porter makes is persuasive, certainly as far as the historical origins of quantification go. He also acknowledges that objectivity has become a desired characteristics of societies governed by the rule of law: “A decision made by the numbers … has at least the appearance of being fair and impersonal. Scientific objectivity thus provides an answer to a moral demand. … Quantification is a way of making decisions without seeming to decide.” But he adds: “Objectivity lends authority to officials who have very little of their own.” So numbers have the dual purpose of signalling impartiality and thereby giving authority to the number-producers: “The reputation of accounts and statistics for grayness helps to maintain their authority.”

My book will be anything but gray. It is looking at how economic statistics are constructed and how inadequate they have become as metrics of social progress (or its absence) given the technology-driven changes in the structure of the economy as well as the imperatives of making the environment count. These changes have been under way at least since my first book The Weightless World was published 26 years ago, but the social process of constructing the statistics is a slow one, carried out within the expert community of national statisticians. Thinking about how to replace what we have now – given the issues I highlighted in GDP – involves some deeply conceptual and philosophical questions.

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Preoccupations

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I enjoyed a little book of essays by Amartya Sen, The Country of First Boys. This is a collection of reprints from articles in The Little Magazine in the early 2010s. Collections of this kind tend to be slightly repetitive because columnists have certain preoccupations they circle back to (certainly including me!). In this case, it is democracy and freedom, the importance of free speech in enabling public reasoning, identity, gender inequalities, and of course development, education and poverty. On the other hand, it is a highly accessible and enjoyable summary of some of Sen’s work.

Some points leapt out at me (reflecting my own current preoccupations). One was the example of Kerala, which has become one of the highest per capita income states in India, having been one of the poorest. Universal and good education and healthcare were a key part of its development. “Central to this understanding is the critical importance of social infrastructre in facilitating economic growth,” Sen writes (pxlix). “The role of infrastructure – physical and social – in economic performance has been a neglected subject in policymaking.” Another point was the role of ‘countervailing powers’ in ownership – a multiplicity of private owners (aka competition) but also other models – co-operatives, public ownership, independent bodies. Diversity of organisation rather than just diversity of views. This in the context of media, but – having been business model agnostic – I now think it makes for healthier competition in any market to get away from monocultures.

Anyway, a nice book for summer evenings reading in the late sunshine.

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