Tag Archives: technology

Baumol meets Marx

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I read Jason Smith’s Smart Machines and Service Work: Automation in an Age of Stagnation because there was a positive discussion of it on Twitter. I’d describe it as a mash-up of Baumol (‘cost disease’) and Marx (‘exploitation’).

The first part of the book is a rant about technology and why today’s tech will not increase productivity. It channels Robert Gordon and criticises economists like Erik Brynjolfsson (or before him Paul David) for arguing there are delays between innovation and the productivity effects they produce.

I have the same problem with this as with Gordon’s magnum opus: it might turn out to be correct that today’s techs have no productivity impact, but focusing only on digital entertainment and communication devices is completely unpersuasive. Vaccines, hello? The wave of biomedical innovation like the development of mRNA vaccines has rested on the plunging cost of gene sequencing, enabled by computation applied to massive amounts of data. Lab benches, test tubes, and also computers. The transition to green energy supply will require large-scale computation to manage storage, networks and grids. Additive manufacturing has many potential applications including printing organs and tissues. These applications are genuinely slow to emerge: large additional investments in equipment are needed, the organisational and ethical hurdles are high, other discoveries might be required to make them economically viable. We’re lucky so much of the prior mRNA research had been done before 2020.

Anyway, the book halfway through then turns to the growth of the service sector, the automation of routine tasks, and the debate about the potential impact on jobs. It looks back, too, at the well-known decline in middle-income jobs and growth of the contingent workforce. Having introduced Baumol’s familiar ‘cost disease’, it then turns to a Marxist analysis. Having never learned Marxist economics I found this quite interesting but heavy going, as it has its own jargon. Still, it is surely right to consider the impact of automation in the context of power struggles, or class conflict.

The book has some sections where it pauses to ask what is actually meant by ‘productivity’, a question of evergreen interest to me. It touches here on the issue of time use and time saving in services, and on activities crossing the production boundary, making it hard to measure ‘true’ productivity. As it points out, many previously household (uncounted) activities became marketed during the 20th century (‘commoditised’), and are often low-pay and precarious. However, the book then veers back to the more abstract class struggle.

All in all, I found the book quite interesting for its novel (to me) perspective, and it is well written. But much of the (non-Marxist) economic literature it draws on will be familiar to many people enticed by the subject matter. What it adds to the technology debate is, quite rightly, the issues of power and deregulation of the labour market,  beyond discussions of gig platforms. But it didn’t tell me anything new about the productivity puzzle.

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Where *is* the internet?

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I’m not sure ‘read’ is the right verb for Networks of New York by Ingrid Burrington, but I looked at it this week. It’s a sketchbook of various bits of internet kit from cables below ground to antennae on rooftops, with notes about the physical kit that makes up the system getting people online, and about the ownership of the kit. I’ve been growing  slightly obsessed by how little is known about the physical internet. So far, James Ball’s The System and Andrew Blum’s Tubes are the only entries on my list of books about this. I was pleased to find out about Ingrid Burrington, who has a number of articles on this and related subjects. But if anybody knows of other books or papers about the physical infrastructure of the internet and the ownership of it (especially for the UK) I’d love to know.

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Big Tech – the contrarian view

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There’s a torrent of material to read about competition (lack of) in digital markets, which of course goes much wider than economics and law. Indeed, I’ve contributed to the many pages written, including in the form of being a member of the Furman Review team. The general theme is that Big Tech does indeed pose a challenge for competition policy, with the individual conclusions running from ‘some adjustment within current framework is needed’, all the way to ‘destroy them’.

What makes Big Tech and the Digital Economy by legal scholar Nicolas Petit so refreshing is its absolutely contrarian perspective. He has coined the phrase ‘moligopoly’ to describe Big Tech, and argues that while there has certainly been increasing competition in digital markets, there is also vigorous competition unremarked by all the commentators. I’d describe what he calls competition as oligopolistic rivalry, but the book does document the ways in which the GAFA and others compete with each other.

Some of the emprical evidence is rather interesting. For example, the book looks at what the big companies describe as the major risks facing them in their SEC filings and all but Facebook claim competition is their 1st or 2nd biggest threat – they would say that of course, but it intrigues me that Facebook doesn’t bother (number 4 or 5 in its ranking). The others do all see each other as their main rivals. Among the book’s other evidence is their high rate of spending on R&D – but I’d like to know about what it is they’re researching, though.

The ultimate question is not about current competitors, however, but about potential competitors. If you believe digital markets tend to winner-takes-all because of network effects, and you can live with concentration because of the large consumer benefits, then what matters is whether new rivals with great technology and products can take the current Big Tech markets. In that case, moligopolistic rivalry along various dimensions is not only fine but anyway inevitable.

The book didn’t win me over in the sense that I concluded there is no reason to be concerned about digital competition. Without intervention, it’s hard to see anybody rivalling Google in search, or Apple and Android in mobile operating systems. To be fair, the author doesn’t argue that there’s no cause for concern, quite. He is issuing a useful warning that we should think carefully and in detail about what harms we believe Big Tech is causing. This book is a distinctive corrective against the current tendency toward groupthink on this subject. As we said right at the start of the Furman Review, Big Tech has brought many benefits, and there is growing evidence about how much people value its products. Anyone certain they know Big Tech needs fixing should read this more nuanced argument with an open mind.

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Are humans or computers more reasonable?

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This essay, The Long History of Algorithmic Fairness, sent me to some of the new-to-me references, among them How Reason Almost Lost its Mind by Paul Erickson and five other authors. The book is the collective output of a six-week stint in 2010 at the Max Planck Institute for the History of Science in Berlin. That alone endeared it to me  – just imagine being able to spend six weeks Abroad. And in Berlin, which was indeed my last trip Abroad in the brief period in September 2020 when travel was possible again. I started the book with some trepidation as collectives of academics aren’t known for crisp writing, but it’s actually very well written. I suspect this is a positive side-effect of interdisciplinarity: the way to learn each other’s disciplinary language is to be as clear as possible.

The book is very interesting, tracing the status of ‘rationality’ in the sense of logical or algorithmic reasoning, from the low status of human ‘computers’ (generally poorly-paid women) in the early part of the 20th century, to the high status of Cold War experts devising game theory and building ‘computers’, to the contestation about the meaning of rationality in more recent times: is it logical calculation, or is it what Herbert Simon called ‘procedural rationality’? This is a debate most recently manifested in the debate between the Kahneman/Tversky representation of human decision-making as ‘biased’ (as compared with the logical ideal) and the Gerd Gigerenzer argument that heuristics are a rational use of constrained mental resources.

How Reason… concludes, “The contemporary equivalents of Life and Business Week no longer feature admiring portraits of ‘action intellectuals’ or ‘Pentagon planners’, although these types are alive and well.” The arc of status is bending down again, although arguably it’s machine learning and AI – ur-rational calculators – rather than other types of humans gaining the top dog slot nowadays. As I’ve written in the economic methodology context, it’s odd that computers and also creatures from rats to pigeons to fungi are seen as rational calculators whereas humans are irrational.

Anyway, the book is mainly about the Cold War and how the technocrats reasoned about the existentially lethal game in which they were participants, and has lots of fascinating detail (and photos) about the period. From Schelling and Simon to the influence of operations research (my first micro textbook was Will Baumol’s Economic Theory and Operations Analysis) and shadow prices in economic allocation, the impact on economics was immense. (Philip Mirowski’s Machine Dreams covers some of that territory too, although I found it rather tendentious when I read it a while ago.) I’m interested in thinking about the implications of the use of AI for policy and in policy, and as it embeds a specific kind of calculating reason, thought How Reason Almost Lost its Mind was a very useful read.

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Technology old and new

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For the usual kind of slightly random reason, I re-read David Edgerton’s excellent book The Shock of the Old this past week (having read it when published in 2006 as he was an interviewee on an Analysis I was presenting [http://news.bbc.co.uk/nol/shared/spl/hi/programmes/analysis/transcripts/27_07_06.txt]). It’s generally aged very well, and is of course a necessary corrective to technology hype. The main argument is that the history of technology tends to be told as a a breathless account of inventors and shiny new inventions, rather than the more representative but complicated story of economic conditions and uneven diffusion and use. So at any moment in time, many overlapping technologies serving the same basic needs will be in use around the world.  What’s more, the same hype gets recycled. For example there’s a quotation from George Orwell in 1944 complaining that people were over-hyping the ‘death of distance’ due to the airplane and radio, when the same claims had been made before 1914!

It is undoubtedly true that different technologies overlap in use, and indeed there’s quite a large economics literature about diffusion and the need for complementary investments before inventions and innovations deliver productivity benefits.  To this extent, Edgerton is railing against an imaginary foe. He is also very sniffy about the concept of ‘weightlessness’, which he misinterprets as a claim about declining employment shares for primary and secondary sectors of the economy. It is not this, but rather a description of the distribution of value added in the economy, and one that has been borne out fully by trends in the past 2 or 3 decades.

The other point that he seems to me to under-play – oddly, given his emphasis on the importance of contest for the use of technologies – is that they are all social. There are countries unable to provide a reliable electricity supply not only because they are low or mid-income but because they do not have the institutions to support the complex supply arrangements: not just sub-Saharan Africa but also California. Or take the book’s example of the Pill, which it argues is an incremental change in contraceptive technologies. Yes and no. Each of the Pill’s characteristics – women in control, reliable, and not requiring a fitting by a doctor – might seem a small shift from condoms, douches, IUDs and diaphragms, but together they did deliver a compelling new method and a radical change in social relations.

Having said all this, The Shock of the Old is a bracing corrective to techno-hype, something certainly still needed.

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