Friday, September 2, 2011

What do people need more than before?

My other half was taking to me about what goods and services people don't need any more, and new things that people need. For example, people don"t really need travel agents any more. The ones that survive are largely corporate travel offices. Ten years ago there were branches of Liberry travel all over the place nearby. Not now. We have Expedia and Orbitz, where people actually do the booking themselves.

There's quite a few areas where productivity tools now mean people do what other people used to do for them. All these huge office towers in midtown used to be filled with secretaries and filists. Not any more. There is no such thing as the typing pool. People do it themselves. There has been a lot of that movement of jobs from the market back to effectively self-production. In a way people substitute their own time for spending money.

So what is increasing? What are peoples' new needs? That is such a huge and important question. I am going to argue over coming weeks and months it is steadily more things that provide experiences and engagement and transformation - changes in how people feel and think and relate to others and view the world. Adult education in a broader sense. People want to feel connected and stimulated, to have a sense of meaning and purpose.

That is longer-term, broader stuff. In immediate view, people want personal gadgets. I have found my Ipad 2 one of the most useful things I've ever bought, with whole new uses opening up almost every week.

People are connecting through social media - looking for more connection as I say above. It feels very thin, though - I have a Facebook page but hardly ever use it, in part because I distrust the privacy settings so much. Maybe I'm not in the demographic that is most attracted to it any more.

People want something to ease the minor conficts in their lives, which are mostly with other people. One major theory proposes that the human brain evolved to be so large so quickly because it needed to make fine social judgements in groups. I think much of the tone of people's day is how they get on with the people immediately around them - colleagues, bosses, subordinates at work, family and relations, friends and acquaintances. Certainly for me most negative feeling in my average day comes from skirmishes or frustrations with colleagues at work and cultural issues. Work is often the largest source of purpose and enegagement for many people. But it is also the arena for tangled webs of compeitition and cooperation and idealism and bad behavior.

People want time. On the other hand, we tend to fill too much of our time with passive activities like watching tv. Clay Shirkey in his book Cognitive Surplus: How Technology Makes Consumers into CollaboratorsCognitive Surplus: How Technology Makes Consumers into Collaborators argues that releasing this passive energy could transform society. People increasingly want to do participatory, productive things with their time - wikipedia is one example. And there are increasingly more ways to tap all this social energy, which before was just being passively entertained.

Wednesday, August 31, 2011

So what does this lead to?

So let me summarize the ways I very much agree with Sen:

- we have to think about actual lives and realized outcomes, not abstract rules and institutions alone. What matters is the substance and outcomes, not just the process.

- we need to have a wider conception of rationality - reasonableness and the test of public discussion and criticism

- impartiality is important, but not everything

- we cannot simply rule out some of the most important questions - of ends, of purpose, of comparing utility across and between people - on methodological grounds.

- many problems of social choice and collective action come about because we restrict the information about people's purposes and preferences too much. The solution to a lot of social problems (including the limits of voting) is a richer set of information.

How economics went wrong on interpersonal comparison

Sen discusses how economics moved away from adding up individual welfare, or utility , or happiness. The reason this matters is economics essentially ducked the question of what matters to people and why. For me, if you cannot meaningfully compare happiness or utility for individuals, how can you meaningfully talk about it for society?

The subject of welfare economics suffered a major blow in the 1930s when economists came to be persuaded by Lionel Robbins and others (influenced by 'logical positivist' philosophy) that interpersonal comparisons of utility have no scientific basis and cannot sensibly be made. One person's happiness, it was argued, could not be compared, in any way, with the happiness of another.

..However, since economists came, by and large, to be convinced - far too rapidly - that there was indeed something methodologically wrong in using interpersonal comparisons of utilities, the fuller version of the utilitarian tradition soon gave way, in the 1940s and 1950s, to an informationally impoverished version of relying on utility or happiness. It came to be known as 'the new welfare economics'. This took the form of continuing to rely on utilities only ( this is often called 'welfarism'), but of dispensing with interpersonal comparisons altogether. .. welfarism without interpersonal comparisons is, in fact, a very restrictive informational basis for social judgement. (p277-278)

Sen later disputes that we need to reduce everything to a single measure or source of importance in the first place:

There are indeed schools of thought which insist, explicitly or by implication, that all the distinct values must be reduced ultimately to a single source of importance. To some extent that search is fed by fear and panic about what is called non-commensurability - that is irreducible diversity between distinct sources of value. This anxiety, based on the presumption of some alleged barriers to judging the relative importance of distinct objects, overlooks the fact that nearly all appraisals undertaken as a part of normal living involve prioritization and weighting of distinct concerns, and that there is nothing particularly special in the recognition that evaluation has to grapple with competing priorities.

The fact that we understand perfectly clearly that apples are not oranges, and that their virtues as food vary in different dimensions - from pleasure to nutrition - does not keep us transfixed with indecision every time we face a choice between the two in deciding what to eat. Those who are insistent that human beings cannot cope with determining what to do unless all values are somehow reduced to no more than one, are evidently comfortable with counting ("is it more or less?") but not with judgement ("is this more important than the other?").

Rationality and Reason

Sen also disputes the mainstream economics view of rational choice - and remember, this is a Nobel winner in economics, so it cannot be dismissed as just someone who did not understand Micro 101:

What exactly are the demands of rational choice? One answer that has gained popularity in economics, and more recently politics and law, is people choose rationally if and only if they intelligently pursue their self-interest, and nothing else.

..Since human beings can easily have good reason to also pay attention to objectives other than the single-minded pursuit of self-interest, and can see arguments in favor of taking cognizance of broader values or of normative rules of decent behaviour, [rational choice theory] does reflect an extremely limited understanding of reason and rationality.

Instead, he proposes

Rationality of choice.. Is primarily a matter of basing our choices - explicitly or by implication - on reasoning we can reflectively sustain if we subject them to critical scrutiny. (p179-180)

He later links this to deliberative democracy. Reasonableness counts for more than narrow rationality.

Look at actual outcomes , not means

Sen proposes a "capabilities" approach.

In contrast with the utility-based or resource-based lines of thinking, individual advantage is judged in the capability approach by a person's ability to do things he or she has reason to value.

[It is] a general approach, focusing on information on individual advantages, judged in terms of opportunity rather than a specific 'design' for how a society should be organized.

.. It focuses on human life, and not just on some detached objects of convenience, such as incomes or commodities that a person may possess, which are often taken, especially in economic analysis, to be the main criteria for human success. Indeed, it proposes a serious departure from concentrating on the means of living to the actual opportunities of living. (p231-233)
This is very important, and I very much agree with his focus on actual outcomes.

The Idea of Justice

One strand I have been exploring recently is theories of justice and moral philosophy. If we want to talk about the purpose of the economy and what we want from it, it turns out I had to look more closely at discussions of how society ought to be set up. Assumptions about preferences, value and utility also underlie mainstream economics.

That means I pulled one book from my shelf which I've owned for a year or two but had not got around to reading yet: The Idea of Justice by Amartya Sen (2009).

Sen is one of the giants of political theory - and also economics. He is a Nobel Laureate in economics, no less, and has taught at Oxford, Cambridge and Harvard.

His main aim in the book is to argue that we don't necessarily need conceptions of perfect institutions or an ideal social contract, as in much recent theory - especially Rawls.

There are several important points. First, since Rawls much of liberal political philosophy has revolved around "fairness". Just to clarify this first, he asks:

So what is fairness? This foundational idea can be given shape in various ways, but central to it must be a demand to avoid bias in our evaluations, taking note of the interests and concerns of others as well, and in particular the need to avoid being influenced by our respective vested interests, or by our personal priorities or eccentricities or prejudices. It can broadly be seen as a demand for impartiality. (p54)

The underlying rationale is what minimum fairness people can agree to when there is no consensus or purpose.

A basic question that Rawls addresses is how people can cooperate with each other in a society despite subscribing to 'deeply opposed though reasonable comprehensive doctrines'.

Here we have the heart of the idea of the state as a neutral, impartial arbiter.

Sen agrees with this impartiality, but also believes deducting neutral rules is not enough. He thinks it is often better to aim for a comparative ranking of situations, a partial ordering of justice, rather than focus on an ideal set of institutions and rules. Even a conception of perfect institutions and rules does not help with practical judgements in the here and now.

Moreover, even if we had perfect rules, people's actual behavior might not follow them. People might have agreed to the rules in the "original position", but they may act differently in practice. Rawls includes some limited incentives in his scheme, sure enough - the "difference principle" which says inequality is only justified to maximize the position of the least well-off - but there is little about actual behavior or incentives to behave properly in his scheme.

Sen also argues for an 'open impartiality' where outsiders and non-members of society's perspectives can be consulted in the interests of non-parochialism, an idea he traces back to Adam Smith's "impartial spectator."

Sen argues it is not enough to look at institutions and rules alone.
Should we not also have to examine what emerges in the society, including the lines that people can actually lead, given the institutions and rules, but also other influences, including actual behavior, that would inescapably affect human lives?

So what does all this mean? Sen is very much within the liberal theoretical tradition, of course. But he disputes some of the things that are taken for granted within it. I agree with him when he thinks actual emergent behavior and the lives people actually lead matters more than a system of rules.

Tuesday, August 30, 2011

Karl Marx and investment banking

George Magnus is a well-known and widely admired economist for the investment bank UBS in London. So it is interesting and surprising he is talking approvingly of Karl Marx in a Bloomberg column:

Policy makers struggling to understand the barrage of financial panics, protests and other ills afflicting the world would do well to study the works of a long-dead economist: Karl Marx. The sooner they recognize we’re facing a once-in-a-lifetime crisis of capitalism, the better equipped they will be to manage a way out of it.

Consider, for example, Marx’s prediction of how the inherent conflict between capital and labor would manifest itself. As he wrote in “Das Kapital,” companies’ pursuit of profits and productivity would naturally lead them to need fewer and fewer workers, creating an “industrial reserve army” of the poor and unemployed: “Accumulation of wealth at one pole is, therefore, at the same time accumulation of misery.”
The process he describes is visible throughout the developed world, particularly in the U.S. Companies’ efforts to cut costs and avoid hiring have boosted U.S. corporate profits as a share of total economic output to the highest level in more than six decades, while the unemployment rate stands at 9.1 percent and real wages are stagnant.

Napoleon and other pigs will be rooting for him.

Accumulation crises are an interesting idea, of course, and just because western countries have persistently refused to behave as Marx predicted for a century does not mean there is not something to it.

Part of what has happened is a trillion people in China and India have been brought into the world economy and are getting richer, once released from the chains of Maoism and Fabian socialism. It is not, as some in the academy would argue, simply an artifact of "late capitalism" but rather - to some extent - its success in spreading even further at the expense of Marxism.

The fact is capitalism adapts and invents new wants and aims. And the state grew in the twentieth century, breaking up monopoly capitalism and providing many public goods.

That said, I have been arguing there IS a phase shift going on because the nature of our needs are changing. Accumulation produces not contradiction and collapse, but evolution. The system adapts, not revolts.

I still plan to watch David Harvey's famous video course on "Marx's Capital" at some point in the interests of open-mindedness, however.

After the storm

We are gradually clearing up our apartment after preparing for the hurricane on Sunday. The computer and stereo components have been unearthed from under a pile of towels behind the table, and put back near the windows. The go-bag has been emptied, and the breakables taken out of the closet. The first aid kit has gone back into the closet. Parents have been reassured that everything is good.

Now the threat is over, we actually have more time to think about what has happened, time which was absorbed by getting ready before the storm. There was a small but real chance that our windows could have been shattered by debris, and a large part of our apartment might have been dstroyed by wind and rain. That is an odd realization, even if it did not happen. It makes you look at the apartment in a new way.

It was officially too dangerous to go outside for 24 hours, because of the danger of flying debris and falling trees. There was no transit, and no way off the island with the bridges and tunnels closed.

It was a glimpse at a strange and different reality for a day, where many of the things we take for granted were no longer necessarily there. I'm still processing that, despite all of the news coverage now accusing Bloomberg of overreacting. (I don't believe it was an overreaction.)

It is a little like 9/11 on a much smaller and less tragic scale, in that normal routine and normal life was so disrupted temporarily. We've been sleeping longer than usual, I think because low-level emotional stress is washing out.

We count ourselves very fortunate, when we see the many people who have lost power and had their houses flooded or damaged, and the tragic loss of life in a few cases.

Hopefully we will not see a return to the go-bag-at-then-world any time soon.

"if money does not make you happy, then you probably aren't spending it right"

A very interesting paper on what makes people happy in practice (from a link in the Brooks article below.)

Top of the list is "buy experiences instead of things". Others include "help others instead of yourself", "Buy many small pleasures instead of a few big ones", "buy less insurance", "pay now and consume later", and "think about what you are not thinking about it."

The Haimish Line

A nice column by David Brooks in the NYT about how you often get more warmth and sociability in downscale places than elegant, upscale surroundings. "Haimish" (he says) is a Yiddish word meaning unpretentious conviviality.

Often, as we spend more on something, what we gain in privacy and elegance we lose in spontaneous sociability...

People are often bad at knowing how to spend their money — I’ve been at least as bad as everybody else in this regard. Lottery winners, for example, barely benefit from their new fortunes. When we get some extra income, we spend it on privacy, space and refinement. This has some obvious benefits: let’s not forget the nights at the Comfort Inn when we were trying to fall asleep while lacrosse teams partied in the hallways and the rooms next door. But suddenly we look around and we’re on the wrong side of the Haimish Line.

Sunday, August 28, 2011

Filling the sea with pebbles

I've been reading Jonathan Spence's beautiful book today,Return to Dragon Mountain: Memories of a Late Ming Man about a Ming scholar-gentleman who lost everything in the overthrow of the dynasty in 1644 (and apparently a true story.)

The gentleman Zhang Dai's grandfather , a brilliant scholar, decides to write a rhyming dictionary of all the world's knowledge, and he works far into the night for many years. Then one day, a friend brings a manuscript copy of one of the much larger, better designed dictionaries from the palace library in Beijing:

Sighing, grandfather said: "The number of books is without end, and I have been like a bird seeking to fill the sea with pebbles. What can be the point of it all?" So he pushed aside his thirty years of work and never returned to his "Rhyme Mountain." (p74)

Hurricane? What hurricane?

We didn't really experience any strong winds here. But we are still glad we prepared carefully, with go bag, flashlights, batteries,and non- perishable food supplies. And we are glad the city took it seriously. The damage was not as extensive as expected, but still enough to justify a lot of civic preparation. Hundreds of thousands have power out still.

So far so good with hurricane

The center of Hurricane Irene is now less than a hundred miles away and coming closer to New York, but the situation is not too bad in our section of midtown Manhattan. The wind is not strong enough to rattle the windows yet. We may get stronger winds later but so far it seems mostly a flood risk.