the dismal science


I just read Oscar Wilde’s The Soul of Man Under Socialism, mostly because The Whelk has been talking about it for ages. It’s a fascinating document, because it’s so far out of its time. For 1891 it was more or less an absurdity. For 2018 it’s a practical program.

Wilde shows no interest in the actual socialism of his day; he has no enthusiasm for collective farms or factories, or indeed for any work at all. His view is that property has caused the majority of humans to lead miserable lives, and without it they will not be forced to do so.

[T]here are a great many people who, having no private property of their own, and being always on the brink of sheer starvation, are compelled to do the work of beasts of burden, to do work that is quite uncongenial to them, and to which they are forced by the peremptory, unreasonable, degrading Tyranny of want. These are the poor, and amongst them there is no grace of manner, or charm of speech, or civilisation, or culture, or refinement in pleasures, or joy of life.

As George Orwell points out in an insightful review, Wilde was making the assumption that “the world is immensely rich and is suffering chiefly from maldistribution.” This view was often unreflectively held by socialists, but when they took over they found it wasn’t so: instead, they had a huge mass of peasants and urban poor to feed, and the gewgaws found in the tsar’s palace were of no help. Wilde foresaw and deplored their solution:

It is clear, then, that no Authoritarian Socialism will do. For while under the present system a very large number of people can lead lives of a certain amount of freedom and expression and happiness, under an industrial-barrack system, or a system of economic tyranny, nobody would be able to have any such freedom at all. It is to be regretted that a portion of our community should be practically in slavery, but to propose to solve the problem by enslaving the entire community is childish. Every man must be left quite free to choose his own work. No form of compulsion must be exercised over him.

With the soul of a contrarian, Wilde looked at the cooperative ethos of socialism and found it the seedbed of Individualism. Freed of economic want, people will do as they want— creating things, mostly. He grows lyrical:

It will be a marvellous thing – the true personality of man – when we see it. It will grow naturally and simply, flowerlike, or as a tree grows. It will not be at discord. It will never argue or dispute. …Its value will not be measured by material things. It will have nothing. And yet it will have everything, and whatever one takes from it, it will still have, so rich will it be. It will not be always meddling with others, or asking them to be like itself. It will love them because they will be different. And yet while it will not meddle with others, it will help all, as a beautiful thing helps us, by being what it is.

But what about all those factories and fields, who will maintain them? No problem, says Wilde: machines will do it. In the conditions of his time, a machine might do the work of 500 men, and 499 would be thrown out of work, while one man, the owner of the machine, profited. If machines were public property, the work is still saved, but the prosperity goes to everyone.

All unintellectual labour, all monotonous, dull labour, all labour that deals with dreadful things, and involves unpleasant conditions, must be done by machinery. Machinery must work for us in coal mines, and do all sanitary services, and be the stoker of steamers, and clean the streets, and run messages on wet days, and do anything that is tedious or distressing. At present machinery competes against man. Under proper conditions machinery will serve man. 

Orwell notes drily that this was not possible in Wilde’s time nor in his own time, sixty years later. “Wilde’s version of Socialism could only be realised in a world not only far richer but also technically more advanced than the present one.”

Wilde knew that he was being Utopian; but “a map of the world that does not include Utopia is not worth even glancing at.” Well, you don’t get anywhere if you have no goals.

Wilde couldn’t offer much besides hope in 1891. But let’s play with some numbers, 127 years later. The GNP of the US is $20.7 trillion; the number of households is 126 million. That’s an average per household income of $164,000. The actual median household income is $59,000.  So complete redistribution would be a vast improvement for literally 90% of the population. (To be in the top 10%, you have to have a household income of about $133,000.)

(Household income seems like a more realistic gauge of prosperity than individual income. If (say) you were designing a UBI, I hope you’d think twice about an individual allocation— that would just make large families the new wealthy, and single people the new poor.)

At a world level, things are not so bouncy. Distribute the world’s wealth and we don’t all get to live like rich Americans. But again, things are far better than they were in Wilde’s or Orwell’s time. The average level is no longer “starving peasant”, but something like “reasonably comfortable urban dweller”.

This doesn’t mean that we’re getting there tomorrow. (This will be a relief to some of you and a disappointment to others.) But it does mean that the socialist alternative can no longer be dismissed, as Churchill once said, as “the equal sharing of miseries.” Today, the socialist alternative is not bad, and it gets better as the machines do.

To put it bluntly, that $100,000 difference between median and average household income is the tax we pay to have plutocracy.  Whatever you think are the benefits to having plutocracy rather than socialism— are they worth that much?

There are positions in the middle, of course! We actually had a system, in the real world, that raised the income of all classes and that limited inequality— liberalism. It’s not quite fair to directly compare Wilde’s ideal with any existing system; ideals are unbounded and putting idealists in charge doesn’t mean you get the ideal state. And a fair question to ask any socialist who’s read Wilde is, did you read the parts about how authoritarian socialism doesn’t get you to that ideal at all?

Anyway, it’s a bit moot right now because it turns out the reactionaries aren’t as dead as people hoped. I could go on and on about this, but I’ll just note that though reactionaries can notch up victories, as they win they also lose. Their whole program has been to reverse the gains of liberalism; what they’ve forgotten is that perhaps the fastest path to revolution or national ruin is when reactionaries are put in charge.

If you read Wilde’s essay, you’ll probably be struck by how much isn’t about socialism, or about politics, at all. He spends long paragraphs talking about Jesus, about Louis XIV, about the novel, about the newspapers’ war on modern art. His view of art is probably the most old-fashioned part of the article: the artist is a sort of high-minded explorer who cannot be answerable to press or public. And that’s about the only role he can find for any human in his utopia. I think his imagination flags here; absent economic necessity, any number of other pursuits might thrive, to say nothing of popular art that a Wilde wouldn’t bother with.

(A final word for the people who have already tuned out and are writing their own rants about how you can’t just divide up GNP like that… as I said, it’s not happening tomorrow, and deep analyses on why are not needed. But as an ideal and a critique of plutocracy, it’s more relevant now than it was in 1891. If the alternative is “continue as things are going in 2018”, we can’t do that either; if it doesn’t end in war or revolution, then it ends in catastrophic climate change. Better start thinking about what the world should look like in 2100.)

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I came across this interview with Eric Weinstein, and it got me thinking. Weinstein is an advisor to Peter Thiel, and– wait, come back!  I know Thiel is the embodiment of everything wrong with late capitalism, but the article is only half that. It’s deeply weird and doesn’t quite know what it wants, but it does have some interesting things to say about the frivolity economy.

Candy_LargeWide

His thesis, more or less, is that capitalism should be more disruptive, and also combined with socialism. But let’s start out with the strong bit: his critique of American education.

The problem is that we have an educational system that’s based on taking our natural penchant for exploration and fashioning it into a willingness to take on mind-numbing routine. This is because our educational system was designed to produce employable products suitable for jobs, but it is jobs that are precisely going to give way to an economy increasingly based on one-off opportunities.

Now, this isn’t entirely right. It’s not that routine is the goal of education; it’s that mass education in any form involves teaching things the kids don’t care to learn at that moment. Kids actually learn quite readily if they happen to love the subject.  Plus, sometimes you can’t get to the good parts without mastering the boring bits. You can’t learn quantum mechanics without learning calculus; you can’t read Sanskrit literature without mastering Sanskrit morphology.

But Weinstein has a point.  Traditional societies didn’t educate the majority at all.  Industrial society educates everyone because manufacturing and service jobs require a high level of literacy, and jobs will resemble school in many respects… often, the unattractive respects: lots of routine and rules; mindless obedience; doing things you are not personally interested in because it’s Your Job.

You can see how this sort of education and a certain sort of society fit together nicely in the career of … my Dad.  He was bright and did well in school, though he never went to college.  He started as an assistant pressman at a major printing company, rose through the ranks to management, and ended up as an executive, an expert on technical printing problems.  He not only stayed in one industry, he stayed in one company. It was a pretty good life for him, and a definite step up from his father, who was a carpenter.

Now, late capitalism has nearly destroyed that sort of career– especially for those who never make it to management.  Weinstein takes the view that predictable, medium-affluent working class jobs are over, presumably because those are ripe to be automated.

At this point many give up and conclude that humans are worthless, or at best should just be given a stipend while the robots do all the work.  Weinstein says instead that humans should do what they’re best at: handling one-time events. Or with less jargon: doing things that aren’t easily automated, because they require adaptability and creativity.  For him this means technologists and finance people, but also inventors, artists, and writers.

I’d actually make this category far broader– see my list of professions unlikely to be taken over by AIs. It’s interesting to speculate what sort of education would focus on these skills, rather than those required to be an accountant or an assistant pressman.

This is also about the point where Weinstein dissolves into a messy set of contradictions. He’s obviously been talking to too many venture capitalists: he tells us “certain fields will need to undergo a process of radical deregulation to give the minority of minds that are capable of our greatest feats of creation the leeway to experiment and to play.”  Unreflective Thiel-worship, in other words.  Haven’t those people done enough damage?  But!  He also thinks we need to recognize the “dignity, well-being, and health” of the 90%.  He mentions a universal basic income, but so far as I can see, his bright idea is that this is tied to having jobs that aren’t necessarily marketable.  So, you can be a playwright or something, and still get paid enough to live on, and this is somehow valuable dignified recompense but it’s not, y’know, welfare.

The interview ends with Weinstein’s assurances that the Very Powerful are thinking very hard about inequality these days. And this of course is complete nonsense.  His boss, Thiel, supports the GOP, whose first order of business right now is not subsidizing playwrights, but handing the super-rich another five trillion dollars.  Whatever the super-rich say to Weinstein at cocktail parties is not the truth of their secret benevolent hearts; it’s the bullshit they tell the 10% to hide what they are really doing to the rest of us.

(As a side point, I’m not saying that the super-rich are all evil plutocrats.  Only half of them are!  Once they have all the money, quite a few rich men develop other interests, including improving the world. The class to be terrified of is the moderately rich: the mere millionaire.  They’re the ones who need more money and can’t understand any value but money and vote consistently Republican.)

What’s interesting is that there’s a bright future we could have— if we chose to pursue it. Thinkers of the early 20th century couldn’t see past the mass of uneducated peasants in their societies.  Aldous Huxley couldn’t see any alternative to keeping around a class of “Epsilon Semi-Morons”; Orwell couldn’t imagine anything nicer than spreading around the wealth such that everyone could eat but no one could go to a restaurant.  But postwar America and Europe turned out very differently from either vision.  It turned out that everyone could have a way better job than peasant, and everyone could go to restaurants.

And similarly, lots of people can’t see a future right now that doesn’t include masses of factory jobs.  They fixate on what ex-factory workers could do, and all that comes to mind is, well, factory work.  But the world is actually quite rich, and AI could make it far richer.  You really could put everyone to work doing things that are today only open to the 10%.

The thing is, you don’t do this by deregulation, disruption, and giving the super-rich more money.  Weinstein’s bosses won’t give us that bright future: no ruling class voluntarily disinherits itself.  They won’t even give us a UBI, because it would cost money.

The tricky bit is, of course, how do we get there from here? Well, it’s not going to be a quick process.  But we can’t even start on it till we 1) shut down the current wave of downright reactionaries; and 2) get rid of plutocracy.

(If you want an idea to rally around, though: UBI isn’t a bad idea, but combine it with Piketty’s 0.5% tax on wealth. You can’t get to the bright future and also keep increasing inequality.)

 

 

There’s been a lot of worry lately that robots will take all of our jobs. Should you be worried? Should you try to make friends with the robots so they treat you nicely?

omnix

This would be bad

Now, there’s a lot to say here, so here’s the tl;dr: no, this is only moderately worrisome. What you should worry about instead are:

Worries about automation go back to the beginning of the industrial revolution, two hundred years ago. But, with some major caveats, automation is good!  After 200 years,

  •  Life for the majority of people is far better. Before automation, 90% of the people lived by subsistence agriculture, one bad harvest or pestilence or war away from death. And those scourges came almost constantly.
  • Americans, as usual, focus on bad things in America, and don’t realize that these are boom times for most of the world. Global poverty is way down; it’s never been a better time to be Indian or Chinese.
  • Despite all the worries about machines taking our jobs— they haven’t. US unemployment is currently under 5%—  which is about as low as it’s gotten in my lifetime.
  • In general, pre-automation jobs sucked. There’s a tendency to romanticize lost jobs, but you really do not want to be a cotton picker, or a miner, or a laundrywoman, or a data entry typist.

The thing is, at any point in the last 200 years, an alarmist could concoct a tale of machine devastation. With modern farming techniques we don’t need 90% of the population to work on farms. Omigod that means 90% of the population will lose their jobs!  Only, this didn’t happen. Only 1.4% of the US population works on the farm today; the rest of the 90% found other jobs.

Now, the major caveat: this process sometimes goes smoothly, but sometimes is hella disruptive. It’s not pleasant when a middle-aged person has to change careers, whether it’s an 1800s agricultural worker, or a 1980s steelworker. Whole regions can be devastated and not know how to pick themselves up.

Jane Jacobs had a lot to say about what happens when the process goes well, and when it doesn’t. She calls the successful places city regions; as the name implies, these are always near big cities. In brief, this is the belt round a city where automation produces new opportunities as fast as it erodes old jobs. In a city region, there is new work to do, and it doesn’t take a lot of intervention for people to find it. (The books on India I recently read are also good introductions to this process. Poor people are amazingly entrepreneurial when they get the chance.)

You can’t count on everyone to live in a city region, but you can manage the disruption in other ways. This is where you need a strong economic safety net. You want people to be able to change jobs.  It’s not a huge exaggeration to say that the New Deal succeeded because it cushioned the disruption of industrialization. Stimulus spending spurred production and job creation; Social Security allowed people to move to where the jobs were without abandoning their old folks; unemployment insurance kept people going between jobs; the GI Bill trained people for new occupations. Europe went farther, with universal healthcare and free university education.

(Do you want a universal basic income?  Go for it, so long as you’re not actually looking to reduce government benefits. But it’s a good idea on its own; there’s no need to drag the robots into it.)

OK, but aren’t the robots different this time?  They can drive cars now! They can take your order at McDonalds! Surely all the jobs will disappear!

The first thing I’d point out is, extrapolation is a crappy guide to the future. In 1890 you could predict that the cities of the future would be buried ten feet deep in horse manure. This didn’t happen.

Second, universal AI is a huge assumption. If you look at sf and pop-sci articles, humanoid robots are ten years away, and have been for a hundred years. The first robot story appear, Karl Čapek’s RUR, appeared in 1920. Basically, intelligence is a pretty hard problem, and researchers always underestimate it. It’s easy to feel (as I did when I was an undergraduate) that a pretty good AI would be just a few semesters of work. Well, it isn’t, or it’d be done by now!

Also, I spent years as a programmer, so I know just how stupid computers are. They are great tools, mind you! But I don’t think we should scare ourselves about their abilities, at least not yet.

The better question is, what sort of jobs can computers or robots do? The general answer: jobs that are

  • repetitive and predictable
  • expensive

Automation is not, er, automatic. It takes analysis, programming, and testing, and someone has to pay for all that. That’s why a repetitive assembly-line task, done by a high-pay union worker, is the first candidate for automation.  It’s barely worth it to replace a waiter (especially since they can be hired for far less than minimum wage).

(Driving is a weird case. I think AI driving is far less advanced than it seems. As in much of programming, you can cover 90% of the work of the program and still only be 10% done.  The unexpected or difficult cases take most of the effort.)

Let’s put it the other way. What jobs are probably safe from automation in this century? Some of these, I’d wager:

  • teacher
  • physician
  • nurse
  • CEO
  • programmer
  • athlete
  • writer
  • comics artist
  • prostitute
  • craft brewer
  • video game designer
  • marketing & sales
  • legislator
  • soldier
  • actor
  • day care worker
  • hair stylist
  • product designer
  • scientist
  • thug
  • organic produce farmer
  • architect
  • call center operator
  • plumber
  • robot designer
  • robot mechanic
  • robot debugger
  • cook
  • valet
  • monk/nun
  • preacher
  • personal trainer
  • psychologist
  • web designer
  • lawyer
  • burglar
  • drug dealer
  • cop
  • spammer
  • SEO farm writer
  • AI researcher
  • anti-AI pundit

Many of these jobs, though not all, involve what humans are best at: dealing with humans. I don’t think anyone cares that their cotton be hand-picked. I think it’ll be a long time before there’s a robot you would entrust your one-year-old to all day.

I have a friend who’s an architect. I’d say his work is at least half talking to clients, and managing building projects— i.e., managing other people (contractors and inspectors). There’s that human thing again. For making the actual plans, he already uses a computer. He can already produce a plan almost as fast as he can come up with an idea.

So the better question is not “Could a robot entirely do this job?” but “What could a computer-assisted person do in this job?” Lawyers, for instance, are often still stuck in the world of paper. Automation would allow them to take on more cases. (For good or for evil.)

I’ve purposely included some “bad jobs” on the list, because the point isn’t that “things will be fine.” But I’ll get back to the grim meathook future below.

I haven’t tried to anticipate what the new jobs of 2100 might be, but we can expect that there will be plenty of entirely new things. Over 200 years, we’ve moved from an agriculture economy, to a manufacturing economy, to a service economy.  I’ve suggested before that what’s next is a frivolity economy.

Another point that I think worriers-about-robots miss: Robots and programs cost money. As one datapoint: Bitcoin mining presently consumes as much energy as the entire nation of Tunisia.

Plus, if you’re really pessimistic about the uses of humans— then the cost of hiring a human will plummet. Humans can be raised quite cheaply, without the use of high-cost metals and rare earths, and they’re really pretty versatile.

I’ve written before about why humanoid robots are a dumb idea. I realize that many people really want them, but I’d answer that they only think they want them. You do not actually want a sentient android to be your sex worker, household cleaner, or driver, precisely because a sentient android can do what it wants, not what you want. Maybe you want a robot you can talk to— but speech is a terrible medium for giving technical instructions.

We’re way too influenced here by science fiction. We grew up thinking of the Jetsons’ robot maid, or C3PO. In fact, a bulky robot maid holding 19th century tools in her 21st century manipulators is awfully poor design. Consider all the household automation we already have: dishwashers, microwaves, vacuums, washing machines. Not a single one of them is humanoid, not a single one does its tasks as a human would. Honestly, automation of the house is almost done, compared to the year 1900. But if you want more, a better model would be the room-cleaning bots seen in The Fifth Element.

Here’s another way to think about the whole situation.  Again, 90% of the population used to be engaged in subsistence agriculture. That basically means that the entire population can do what the 10% did before. Or to put it another way, there are 325 million Americans. One way to explain our economy to someone from 1800 is that we’re as rich as a country of 3.25 billion people would have been in their time.

If we continue to automate predictable high-repetition tasks, maybe another 90% of current jobs disappear.  But the population will live like today’s 10% do. Their standard of living will be far higher, and their jobs on the whole more interesting than today’s. (Of course we’re writing sf at this point, so you’d might as well look at my attempt at an sf future.)

That doesn’t mean we won’t have a grim meathook future. Piketty has warned that our future might look like… the 19th century, when most income and wealth went to a tiny class— and not even a class of innovators and entrepreneurs, but a useless rentier elite. And of course right now as I write, a clown car of reactionaries is trying to take away tens of millions of people’s health care, while the clown-in-chief is demonizing trans men and women in uniform.

But that’s the thing: grim meathook future is a political choice. Automation is just a form of productivity increase— and productivity gains do not have to go entirely to the rich. They used to help out everyone.  Around 1980, American voters decided to stop helping out everyone, and help out only the top 10%.

If that continues, the future will be grim, robots or no.  But it’s not the nature of automation that is the threat. It’s whether we manage it under plutocracy or not.

 

 

Just finished The Silk Roads: A New History of the World, by Peter Frankopan (2015)– an ambitious, disappointing book.

At times I tried to imagine the author’s elevator pitch. It doesn’t match the subtitle: it starts with Alexander the Great, so it’s already leaving out half of history. It barely covers Africa or the Americas. It’s very roughly about “East-West relations”, mostly involving trade, though it’s not very strong on China or India. It more or less focuses on the countries at the crossroads of Eurasia: the Middle East, Persia, Central Asia– only it never really tells their stories coherently. It sort of promises to retell European history with a focus on how it involved those regions, but then it has long detours into pretty traditional European history and contemporary US politics.

The last chapter talks about sudden evidence of wealth and grandiose architecture in Central Asia… but doesn’t bother to explain where it came from. The previous chapters were a quick retread of recent history in Iraq, Afghanistan, and Iran. He states that ancient history from the Silk Road on illuminates present concerns… but falls far short of demonstrating how. It is relevant to understand the early history of Islam, and he does go over that, but earlier chapters on, say, early Christianity east of Syria don’t tell us much about why they’re building spectacular airports in Astana, besides the wan truisms that trade is important and the lifestyle of rich countries affects people thousands of miles away.

There was probably a better book buried in here, but it needed a lot more focus and a more consistent theme. An out-and-out history of Persia and Central Asia, for instance, probably would have covered what he wanted to talk about, with far more coherence and depth. It can certainly be argued that Westerners could learn more about this part of the world… but for long chapters he ignores it himself, instead giving resumes of Viking raids, or Hitler’s mountain retreat, or the Spanish conquest of Mexico, or Zheng He’s expeditions.

This isn’t to say it’s terrible. Any traipse through history is likely to turn up something new, and he does have some interesting stories and theories. I did find the bits about early Christianity interesting; the link between the EIC and the American Revolution is a good point for my book; he also mentions that the Islamic concern with the direction of Mecca stimulated advances in geometry and astronomy. Which is a good reminder for conworlders: seemingly trivial bits of doctrine can have unexpected and unintended secular effects.

If you don’t know much about early Islam, this would probably be a good introduction… though there are better ones.

A couple more complaints, though.  One, the maps are less than helpful. He likes maps with lots of arrows showing movements of things, and the results are hard to read.

Plus, I think he’s too credulous about reports of riches and high living. Whether today or millennia ago, big buildings and the lifestyle of the rich get a lot of attention. But these are perfectly compatible with near-starvation for the 9/10 of the population that works the fields. Azerbaijan, whose airport so impresses Frankopan, and which has significant oil reserves, has a per capita income less than that of Peru. He also talks about the luxuries of ancient Rome (most of them imported from the east). But other books I’ve read emphasize that, the mass of people lived on the edge of disaster, and urban life never put forth deep roots anywhere west or north of Italy– which is why the west couldn’t survive the shocks of civil war and barbarian wandering. Similarly, his accounts of Silk Road traders neglect to mention that the actual number of merchants and the amount of goods privately traded was pretty small.

 

 

 

In your blog you mentioned that “the CEO system for running corporations is a dangerous anachronism.” I was wondering what you would replace it with – in your perfect world, what system would you design for building and running a global business and ensuring its continuity from one generation to the next? What other cultural or economic changes would go along with the new system if it were implemented throughout society? (E.g. would there still be brand-name identification of consumer products?)

—Geoffrey

zorg

Not the ideal

Great question; I’m not sure I have a great answer. But that’s because we need a whole lot more experimentation. Anti-monarchists couldn’t necessarily describe parliamentary democracy in 1700, either.

First, let’s review the problem. In that post, I pointed out Trump as the epitome of the terrible CEO. He’s a lazy, incurious person who’s used to unquestioning obedience for his terrible ideas, and takes every reverse personally. But he’s not much of an outlier. I’ve met plenty of much smaller-level CEOs, who have the same arrogance and inability to understand their own business. The good CEOs I’ve met are generally the ones who know when to get out of the way of their own workers— the people who actually know the work and know what needs to get done.

Many people are in love with the idea of the strong leader of uncompromising vision. We’re not so enamored of the Louis XIV or the Napoléon these days, but Americans, at least, still admire the entrepreneur who builds up a company from nothing: Bill Gates, Steve Jobs, Henry Ford, J.P. Morgan, John D. Rockefeller.

I don’t necessarily want to touch that.  On the whole, society benefits when these people build something new.  They should obey labor laws and such, but we don’t need to throw out this part of the system. What we should throw out is the notion that their heirs, or some guy with an MBA, deserve the same deference. If you worship wealth and never address inequality, as Piketty demonstrates, what you get very soon is an aristocracy of rentiers, people who never created anything yet sit on all the accumulated wealth, and whose primary incentive is the maintenance of their own comfort.

So, how do we run a company instead? Two basic approaches:

  • Put someone in charge temporarily
  • Put a representative committee in charge

For now, this comes down to your view of human nature. If you think there needs to be a strong leader (even if his power is limited or we can get rid of him), then you pick Option A. If you distrust all single sources of power, you pick Option B.

Perhaps ironically, in theory option B is what we have now, once the founder is dead. Public corporations have a board of directors, and even rules that a good number of these must come from outside the company; and they pick the CEO. In the US, the board represents the stockholders (i.e. the owners), and it is very possible for them to throw out the CEO.

There are two problems with this.

  • One, boards are in practice not very independent-minded. They’re often friends of the executives and only meet for a brief period every few months.  They’re not deeply involved in the business nor inclined to second-guess the CEO.
  • And two, what the stockholders want is basically more money right now.  This may be completely opposed to the interests of employees, customers, the community, and even investors who are thinking beyond the next 12 months.

A minimal reform is to require that some of these other stakeholders get representation. In Germany, up to half of the board represents labor, though stockholders usually get the determining vote. The idea could be expanded by giving other stakeholders representation.

There are many interesting experiments in corporate governance today, such as:

  • Valve, the company behind Half-Life and Portal as well as Steam, is famously run on near-anarchic lines. Employees literally pick which product they want to work on— and if a product doesn’t attract workers it doesn’t get made. (One does wonder if this is why they never seem to get to release 3 with any of their products.)
  • The first company I worked for is now employee-owned.  It works out well for them, and they were able to weather the 2008 recession in part because they didn’t have the huge expense of a CEO’s salary.
  • NFL management is said to be a huge swamp… except for the Green Bay Packers,  owned by a huge mass of individual Wisconsinites. They’re competitive with other teams and the team stays in Wisconsin.
  • The Mondragon Corporation, of Spain, is a remarkable co-operative firm which employs over 75,000 people.
  • We actually have plenty of examples of non-monarchical institutions: churches, universities, co-ops, many arts organizations or activist groups.

We need more experimentation to see what works. The answer to a lot of objections is going to be “Maybe. We don’t know. We need to try things out.”

The obvious worry is that discussion and representation take time, or at worst tie the entity up in knots. Democratic politics is not exactly known for calm, civilized consensus. In response to that—

  • Again, monarchs suck. We put up with the inefficiencies of democracy because one-man rule really is worse. But the inefficiencies are definitely there.
  • People get better at democracy when cultural norms evolve to support it. I’ve been in endless, unfocused meetings— people flounder if they don’t know what they’re doing. That isn’t a condemnation of the system; it just means that the transition is tricky. People who are not used to power do not automatically know how to use it.
  • There are better and worse decision-making techniques. A huge, completely open-ended meeting is one of the worst. People are better at reacting to concrete proposals than they are at coming up with them. If a proposal is rejected, it’s better for a small group to take it offline than for a large meeting to attempt to redesign it. The group needs a way to table arguments, so it is not dominated by a few eristic individuals. And so on. Heuristics will develop to smooth the process considerably.

One big caveat: democracy is not a cure-all. I think we’d be happier if we could vote who runs the company, or at least vote the current bums out. But that’s not the same as saying we’d be happy.

On the other hand, looking at modern representative democracy, we have to remember that it’s optimized for the logistics of 1790. I’m sure we could do better. One big problem, for instance, is the bundling of policies. At the federal level, there’s no way to say that you want (say) more health care and less immigration.  You can only pick between the two major bundles that are offered. Maybe we need to vote on policies more than on leaders.

Your question on brands is just part of a much bigger question: the optimum size of corporations.  I’m sure a bunch of readers are eager to tell me that the problem is not how to fix corporations, but how to get rid of them. But leftists have, to my knowledge, only come up with a couple alternatives, and they’re contradictory:

  • Nationalize them. So the organizations become massive.
  • Have workers run enterprises directly.  So the organizations must be tiny.

In general, the first approach makes the problem worse. (Some public goods should be nationalized; but I do not want a government commissar, or even a People’s Soviet, deciding what books can be published or what crops can be grown.) And the second approach is largely untested, and of questionable utility for a planet of 7.5 billion people.

It might be nice if every firm was only the size of a village— 150 to 200 people.  But there is such a thing as economies of scale. Really big firms can grow corn, build computers or airplanes, and make action movies really efficiently.  A world of small firms is also, very likely, a world of high prices for consumers. There’s also the problem of competing standards. These should never be a monopoly, even a government monopoly.  And yet it’s kind of a nightmare if you have a hundred competing standards rather than two or three. And if you’re eager to break up Google, do you also want to break up Mondragon?  (They’re about the same size.)

Plus, there’s the inconvenient fact that large firms are far easier to regulate, and can be far more progressive.  A corporation with 75,000 employees can have a professional HR department, great worker amenities, and a commitment to diversity. They’d also be far easier to democratize.  Smaller firms are often run by the most conservative, cranky old despots.

Ideally we should be able to choose both options. Restaurants, for example: it’s nice to have a one-chef gem of a restaurant.  It can also be convenient to have a known brand where the type and quality of the food are predictable (and prices are cheaper).  In art, it’s great to have quirky one- or two-person projects; also to have behemoths that require hundreds of people working together.

Anyway, the one thing I’m certain about here is that future economics is going to surprise us. The modern corporation emerged only 150 years ago, with the invention of the telegraph.  (Adam Smith thought corporations were of limited utility.)  As late as the 1960s, the ideal of corporate governance was a class of professional, medium-income managers hired by the owners; the cult of rock-star CEOs paid in the megabillions was a (stupid) innovation of the 1980s. Right now things look kind of dystopian, but that doesn’t mean we’re stuck here.

What’s your opinion of [Gregory Mankiw’s] response to Piketty?

—Owen

It’s very weak; it seems like he hasn’t read the book. Even skimming the diagrams would have helped.

First, he says “r < g could be [a problem]. If the rate of return is less than the growth rate, the economy has accumulated an excessive amount of capital. In this dynamically inefficient situation, all generations can be made better off by reducing the economy’s saving rate…we should be reassured that we live in a world in which r > g…” Yet Piketty shows that r < g was true in our world, in the postwar period— precisely the period when there was not an excess of capital; capital was at a historical low. And they were golden years, precisely because r (growth) was so high and so widely shared. (Sadly, one of Piketty’s lessons is that they were also a fluke, not easily repeated.)

Mankiw notes in passing that “the average growth rate of the U.S. economy has been about 3 percent”. Ugh, no. Krugman recently provided a chart of the last 57 years:

us-historical-growth

The average growth is more like 2%— and it’s plummeted in the last few years. Rates over 2% are generally due to high population growth or developmental catching-up; developed nations will be lucky to get 1 to 1.5% in the next century.

Next, he says that a rich person faces three obstacles to passing on his wealth:

  1. he consumes a good deal of his income
  2. his wealth is divided among his descendants
  3. governments tax estates

I don’t have Piketty at hand, but I’m pretty sure he covers all three points.

  1. He shows that capital is dramatically increasing, going back to 19th century levels and showing no signs of stopping.  So consumption does not reduce the accumulation of capital.
  2. Mankiw actually assumes that “the number of descendants doubles every generation”. Seriously, does he not remember that in developed nations population growth is negative?  Or that to have a family you have to have a couple, and thus 2 children do not double the number of wealth-holders but only maintain it? To make an error this gross is a sign of flailing desperately to avoid unwanted truths.
  3. Is Mankiw really unaware that his party is in favor of reducing or eliminating the estate tax?

He proceeds to argue against Piketty’s capital tax, again ignoring that we already have capital taxes (we call them property taxes), as well as Piketty’s argument that an enormous virtue of a tax on wealth would be making wealth visible. Mankiw is pretty sure that great capital is fine, but we can hardly know for sure since capital is so easy to hide.  Before Piketty’s research people mostly focused on income because we actually have data there. Without Piketty would it have been widely realized that there is no country where capital, as opposed to income, is widely distributed in society?  The Nordic countries come close to a fair distribution of income, but they are still highly unequal in the distribution of capital.

Finally he moves on to some moral arguments.  He says “Piketty writes about such inequality as if we all innately share his personal distaste for it.” And at least Mankiw is up front about being in favor of inequality!  He certainly doesn’t have to share Piketty’s morals. But the same can be said for the rest of us about Mankiw’s morals!  Mankiw writes about inequality as if we all innately share his personal enjoyment of it.

He doesn’t see anything wrong with the present state of plutocracy, but, well, he’s certainly in the 10% who gains enormously from it. For the 90% of Americans who don’t, we’ve been watching for 35 years as the gains of productivity no longer lift us up, but go only to the 10%.  Morally, he’s just wrong: it’s immoral to make the lives of the majority of the population crappier.  And intellectually, he’s ignoring Piketty’s carefully accumulated evidence that the situation is getting worse.  Is there really never a point where the rich have accumulated so much that it’s slightly bothersome to Mankiw?

And pragmatically, he’s a shortsighted fool.  Short-changing 90% of the population works only so long as the 10% have a really good story to fool the majority with. Maybe in 2014, when he wrote the paper, he could be satisfied that the Republican con was working.  Surely it’s a little harder to think so in 2016. A huge swath of Republican and Democratic voters are rejecting establishment answers— Trump and Sanders both speak to the people who feel they’ve been left behind by the 10%.  Is Mankiw happy with either a populist-nationalist or a socialist reformation?  And if inequality continues to rise, does he think the popular response won’t get far worse?

 

 

Charles Stross is my favorite living sf author, so I was happy to finally get a copy of Neptune’s Brood. In fact I foolishly decided to finish it last night, so I ended up with four hours of sleep, countered by buckets of caffein.

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It’s a sequel to Saturn’s Children, but set something like 4000 years later… which means it’s effectively a new creation. The characters are no longer androids but metahumans— the difference between machine and human has greatly eroded. The heroine, Krina, is made of metal and computers, but she breathes and eats and presumably excretes, she certainly has no problem with emotions, she can have sex, and though Stross has fun with the details of non-biological life, little in the plot depends on them (unlike the earlier book).

What the book turns out to be about is debt. It begins with a quote from David Graeber and this is not accidental. Stross talks about “fast money”, “medium money”, and “slow money”. Fast money is liquid cash and credit as we know it. Medium money is basically land and other long-term stores of value. Slow money is, well, even more long-term. It’s a currency designed an interstellar civilization that doesn’t have FTL. As transactions have to be confirmed by two interstellar banks, it’s very long-term, non-liquid, stable, and safe. Slow money is essentially an artifact of space colonization: the process is so expensive that a colony starts out in enormous debt, which can generally be paid off only in millennia— or by starting a colony of one’s own.

Krina is a banking historian, with a specialty in fraud. She moves to a system named Dojima (this is done by beaming her brain-state and downloading it into a new body) to do research and find out what happened to her missing sister, and almost immediately get caught up with a) a stalker trying to kill her, b) the Church of the Fragile, an organization dedicated to preserving biological humans, despite their comic in adaptation to modern life; c) an association of pirate underwriters. The last group is the most interesting… they do things like aggressively investigate insurance fraud, and audit cargos not to steal them but to do market interventions based on them. (Within a system, travel takes months but information travels in hours, so knowing what’s on a ship is valuable information.)

More details would either be spoilery or confusing. The plot is headlong and twisty. It all fits together pretty well, even if Krina is a bit more passive that the usual Stross protagonist.

As world building, it’s fantastic. Stross calls the book a “space opera”, which more or less means that he doesn’t want to be hassled if the science isn’t 100% plausible; but in fact there’s really nothing magical about his tech. He creates one exotic and fascinating environment after another, and Krina has to adapt to each one in turn. (At one point she become a mermaid. That might be a bit of a spoiler, but it’s on the damn cover.)

You can see why Stross is Paul Krugman’s favorite sf author: he takes problems of economics, money, and debt seriously. Krina, for instance, is instantiated as a slave— that is, she’s basically a clone of her mother, and forced to work for years to earn her freedom. This isn’t simply a bit of far-futuristic oomph; it’s actually straight Graeber, and relates to the main theme of the book: what debt does to people and societies.

I have a few quibbles, mostly related to narrative. It’s a long convention in first person novels that no one really explains why they’re writing out their story, but I think Krina is particularly messy here. She explains things that should be obvious in her world, she talks as if she’s researched her own story but doesn’t really give any metanarrative on why, the book changes to third person in a few spots, a few things are sometimes told in a weird order, as if Stross suddenly realized he needed to give some backstory to an event but didn’t feel like rewriting earlier bits.

Except in the Laundry novels, I think Stross has an ongoing problem making his antagonists smart enough. Of course we want the heroine to be smarter and later threats to be larger than earlier ones, but some of the antagonists here end up being just not very clever or dangerous.

It could be argued that Stross underestimates “Fragiles”— biological life— and overestimates how stable and durable metal and electronics are. Once you can play with genes like Javascript, who knows what limits biological transhumans have? But of course this isn’t a prediction of future development; it’s just a given of this universe that civilization has become non-biological, while (as systems do) retaining the traces of its origins.

But these aren’t biggies. It’s a fun book, it goes fast, and I wish there was a Volume Three…

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