Tag Archives: technology

What would Galbraith think about Google?

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I’ve been grazing along the shelf of my old Penguin economics texts and stumbled on this quote from J.K.Galbraith’s (1952) [amazon_link id=”1560006749″ target=”_blank” ]American Capitalism: The Concept of Countervailing Power[/amazon_link] (in M.A.Utton’s [amazon_link id=”0140801723″ target=”_blank” ]Industrial Concentration[/amazon_link]): “The modern industry of a few large firms is an excellent instrument for  inducing technical change. It is admirably equipped for financing technical development and for putting it into use. The competition of the competitive world, by contras, almost completely precludes technical development.”

[amazon_image id=”B0010JYWD6″ link=”true” target=”_blank” size=”medium” ]American Capitalism[/amazon_image]  [amazon_image id=”0140801723″ link=”true” target=”_blank” size=”medium” ]Industrial Concentration (Modern Economic Texts)[/amazon_image]

Galbraith is talking complete nonsense, of course. As this little textbook points out in the next paragraph: “The supposed antithesis between price competition and innovation is false: they are different forms of the same competitive process. Innovation is competition.” Many is the oligopolistic industry that has failed to innovate. As Will Baumol pointed out in his book [amazon_link id=”069111630X” target=”_blank” ]The Free Market Innovation Machine[/amazon_link], big firms tend to do incremental innovation, while radical innovation tends to come from small entrants.

This is the heart of the competition debate about Google etc. Will some new entrant come along an torpedo it in the search market, or has it through its scale effectively foreclosed new entry? Critics of the EU competition authorities’ assault on Google (including this week Barack Obama – but listen here to Martha Lane-Fox demolish him) point to its continuing record of innovation; but from another perspective, that looks like it leveraging its scale advantages into new markets, something dominant firms always try to do. I’m with Tim Wu, whose fabulous book [amazon_link id=”1848879865″ target=”_blank” ]The Master Switch[/amazon_link] argues that the opportunity for new entrants to cause upheaval in technology and communication markets has always been created by a regulatory intervention.

[amazon_image id=”1848879865″ link=”true” target=”_blank” size=”medium” ]The Master Switch: The Rise and Fall of Information Empires[/amazon_image]   [amazon_image id=”069111630X” link=”true” target=”_blank” size=”medium” ]The Free-Market Innovation Machine: Analyzing the Growth Miracle of Capitalism[/amazon_image]

To be fair to Galbraith, this being one of his books I’ve not read, this summary suggests he was not relaxed about oligopoly power; however, he suggests the ‘countervailing power’ of organised labour is the way to control it. I’m all for workers having adequate bargaining power in the labour market but fail to see how that fixes a lack of competition in product markets. Google’s workers are very well treated. I wonder what Galbraith would make of these modern business titans?

Big data meets humanitarian response

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Some time ago I co-authored a report (for the UN Foundation and Vodafone Foundation) with Patrick Meier on the use of mobiles in emergencies and disasters. Patrick has just released a whole book on this subject, going much wider than the original report, [amazon_link id=”1482248395″ target=”_blank” ]Digital Humanitarians: How Big Data is Changing the Face of Humanitarian Response[/amazon_link].

The technology has already moved on considerably – the Big Data phenomenon, for one thing. Importantly, there’s a chapter covering verification techniques; while we found in the original work that crowd-sourced data (as it wasn’t yet called when we first wrote about this) was often more accurate than ‘official’ information, the more verification the better. There’s also a chapter on digital activism – the book’s website sets out all the chapters with brief summaries.

Digital Humanitarians looks like it has lots of examples and it certainly covers some very important and timely questions. Patrick blogs at iRevolution and his latest post talks about the book.

[amazon_image id=”1482248395″ link=”true” target=”_blank” size=”medium” ]Digital Humanitarians: How Big Data Is Changing the Face of Humanitarian Response[/amazon_image]

The revolution will not be disintermediated

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I’m on the road this week, University of Manchester, BBC North, and the Festival of Economics in Bristol. My book companion is Rebecca Solnit’s [amazon_link id=”1595341986″ target=”_blank” ]Encyclopedia of Trouble and Spaciousness[/amazon_link], a collection of essays. It’s as brilliant as any fan of her writing would expect.

[amazon_image id=”1595341986″ link=”true” target=”_blank” size=”medium” ]The Encyclopedia of Trouble and Spaciousness[/amazon_image]

One essay, The Butterfly and the Boiling Point, is about the many little causes of popular rebellions that accumulate until, suddenly, large-scale protest erupts on the streets and in public squares. The title alludes to the the idea in complexity theory that the merest flap of a butterfly’s wings in one part of the world can change the path of a hurricane on the other side of the globe. Small causes turn into big consequences. But in thinking about political movements, there are many butterflies and their flaps have no consequences until there are enough separate little causes that the boiling point is reached.

Solnit discusses why popular rebellions in 2011 happened where they did – Tunisia, Egypt – but could not happen in the US. “It is remarkable how in other countries, people will simply one day stop believing in the regime that had, until then, ruled them.” Fear evaporates. There is a sudden shift in consciousness. She argues that it could be because the US lacks “symbolically charged public spaces.” The capital city isn’t a centre, and many other cities lack centres. “Revolution is an urban phenomenon,” she writes. “It’s all very well to organize on Facebook and update on Twitter, but these are only preludes. …. You need to be together in body for only then are you truly the public with the full power that a public can possess.”

The revolution will not be disintermediated?

Cybernetic dreams

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I read Eden Medina’s [amazon_link id=”0262525968″ target=”_blank” ]Cybernetic Revolutionaries: Technology and Politics[/amazon_link] in Allende’s Chile because I spotted the fuss on Twitter about Evgeny Morozov’s New Yorker piece, The Planning Machine: Project Cybersyn and the Origins of the Big Data Nation. I’m not all that interested in the fuss but was very intrigued by what people were saying about the book.

It is indeed a completely fascinating history and reflection on the interaction between technology and politics, and I highly recommend it. The cover photograph gives a good flavour of the weirdness of this episode. It is the control room built in Santiago in late 1972 under the guidance of British cybernetician Stafford Beer. The control room, that is, for the economy, linking a network of telex machines in factories around the country to a mainframe computer in the capital.

[amazon_image id=”0262016494″ link=”true” target=”_blank” size=”medium” ]Cybernetic Revolutionaries: Technology and Politics in Allende’s Chile[/amazon_image]

While not a fully planned economy, the Allende government had nationalised substantial sections of industry and, as time went on and the American-led sanctions began to bite, planned to control key prices. It also had to contend with a nationwide strike led by businesses opposed to the leftist government. The aim with Project Cybersyn, as the cybernetic plan was labelled, was to deliver to the central authorities ample real-time information on production while allowing individual factories the freedom to make their own decisions. Government policy could be adapted quickly in response to the trends identified. In other words, it was meant to avoid the pitfalls of central planning while enabling the co-ordination benefits. As Medina puts it: “Connecting the State Development Corporation to the factory floor would … allow the government to quickly address emergencies such as shortages of raw materials and adapt its policies quickly. Up-to-date production data would also allow Chile’s more experienced managers to … identify problems in factories and change production activities in the enterprise when necessary to meet national goals.”

Apart from the obvious practical difficulties (eg only one mainframe and very few programmers), one challenge was actually modelling the economy. It is unclear what kind of relationships were written in to the code, but they must have been something similar to those embodied in the simple linear model of the Phillips Machine. For all that it was a project about managing the economy, there was just one economist on the team, according to the book. However, Medina emphasises the intended flexibility of Project Cybersyn: “The model would not function as a predictive black box that gave definitive answers about future economic behaviour. Rather, it offered a medium in which economists, policy makers and model makers could experiment and, through this act of play, expand their intuition about [the economy].” The structure embodied the cybernetic emphasis on responding to the information contained in feedback. I must say I didn’t understand Beer’s cybernetic models at all, as the language and concepts are so different from anything I’m familiar with – but then cybernetics itself comes across as rather futuristic-retro.

Beer also hoped to have a method of getting real-time feedback from the people to the government by installing ‘algedonic meters’, or dials indicating their happiness or dissatisfaction, that would be installed in community centres or public places. This part of his plan was never taken up. However, he was keen on getting public engagement with the project and even persuaded Chile’s most famous folk singer Angel Parra to write a Project Cybersyn song.

One of the divisions within the project, well-described in the book, was between the technocrats who saw it as a tool for managing the economy more effectively, and those who saw it as a means of reverse engineering politics and society on the ground. The latter group hoped workers in the factories would develop their own sense of autonomy through inputting information into the telex, and understanding in this way the part they played in the whole. “[Beer] believed that engineering a technology also provided opportunities to engineer the social and organizational relationships that surrounded it.” The technocrats tended to dominate, though, largely because of the growing difficulty Allende’s government had in sustaining its coalition. Politics didn’t co-operate with the technology.

One of the interesting aspects of Project Cybersyn is that the technologies it used were not the most advanced. The US blockade largely prevented Chile from importing more computers or sophisticated equipment. Aside from the one mainframe and the telexes, the futuristic control room used slide projectors and hand drawn slides. The fibreglass control chairs, based on Italian designs, were one of the most cutting-edge aspects of the control room. And yet the project was the most ambitious cybernetics project ever (partially) implemented.

The project Cybersyn control room

It’s hard to decide whether the people behind Project Cybersyn were crazy dreamers or just 50 years ahead of their time – what would they have made of the possibilities of the web and ‘big data’? The basic cybernetic question the project poses remains valid: can policymakers do a better job with rapid real-time feedback on economic indicators – or is the economy as a dynamic, complex system simply beyond the kind of mapping implicit in any such project? Can what is measured about the economy reshape the economy or underlying social order in turn – and what does that imply for the indicators one might try to include in a Project Cybersyn 3.0?

Fascinating questions, and a fascinating book.

PS After finishing the book, I read the Morozov column. It is a precis of the story told in Medina’s book, with a handful of extra paragraphs woven in that give his own reflections on the issues raised – including, for example, exactly the obvious ‘what could we do in the era of the internet of things’ question. If the column had actually been billed as a review of [amazon_link id=”0262525968″ target=”_blank” ]Cybernetic Revolutionaries[/amazon_link], I don’t think there would have been any fuss. While not plagiarism, as the book is the only source mentioned, for Morozov to have given it just one passing mention in the ‘Critic at Large’ section seems ungenerous.

Who owns the future? Not you

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It’s taken me a while to get through Jaron Lanier’s [amazon_link id=”0241957214″ target=”_blank” ]Who Owns the Future?[/amazon_link] It was highly recommended to me and I found it an interesting read. But as it’s a book about digital economics by a non-economist, and therefore written in a language foreign to the way I think about the issues, it was a surprisingly difficult read. I don’t think normal people would have the same difficulty.

[amazon_image id=”0241957214″ link=”true” target=”_blank” size=”medium” ]Who Owns The Future?[/amazon_image]

The theme of the book is that the economy has developed in ways that enable what Lanier calls ‘Siren Servers’ to appropriate the past and present labour of many other people for themselves, and thereby hollow out the middle classes. This situation is the result of the way the Siren Servers – he means Amazon, Facebook, Google etc – have used the presumption that “information is free”, specifically the data they all gather about all of us and by all of us, but advertising is paid for. Lanier quite rightly points out that the customers of these titans are the advertisers, not the individual users. Lengthy user agreements that nobody reads means the corporations take no risks, only revenues.

Lanier seems to believe that eventually this economic structure will become unsustainable because it is destroying normal middle class livelihoods and there will be nobody to buy the products being advertised. The Siren Servers become so big that they eat their environment (just as the financial markets did).

His proposed solution is nano-payments attached to information generated by individuals, whether that’s their ‘data’ or their creative or digital products. “If the system remembers where information originally came from, then the people who are the sources of information can be paid for it.” He points out that HTML, although marvellously convenient, only links one way, while Ted Nelson, an early thinker about linking, argued for two-way links. This is less convenient because of the additional updating required. In fact, the book left me completely unclear how two way linking to enable nano-payments would work in practice. However, Lanier argues: “This is the only way that democracy and capitalism can be in alignment.” Without greater symmetry between supplier and acquirer of information, the information economy will collapse.

I have an instinctive sympathy with the book’s argument, but do not think the unsustainability in capitalism we all can see at present boils down to the absence of micro-payments implemented via two-way hypertext linking. One question is Jean Tirole’s: will new digital giants benefiting from network effects come along and displace Google et al? If that hasn’t happened within, say, a decade, then the time would come to regulate these vital utilities to ensure they serve the public interest. More generally, I would look at beefing up competition policy as one of the levers to loosen the political power acquired by ‘Siren Servers’ – in which category I’d include the financial sector as well as the ICT sector.

The question of distributing productivity gains to the population as a whole is not confined to the digital economy either. While it’s right to be concerned about the jobbing musicians and journalists whose jobs are being destroyed by “free” online content, there are lots of other standard middle class jobs seeing living standards decline, so the economic and political issues go far beyond what’s covered in [amazon_link id=”0241957214″ target=”_blank” ]Who Owns the Future?[/amazon_link] For of course this started some time ago with blue collar jobs. However, it’s an interesting book, and it’s always worthwhile to hear what experts in other fields have to say about economic issues, for their different perspective. I think Lanier’s diagnosis and solution will have quite wide appeal.