Tuesday, October 11, 2011

Change of Pace Photo

Our little town. New York may not seem as uniquely impressive as it did ten or fifteen years ago, before Shanghai and Dubai sprouted new skylines. But it is still quite a sight.

This is looking south, with Manhattan on the right.

Controlling defection and deviance

I was talking in the last post about Stanford professor Robert Sutton's book The No Asshole Rule: Building a Civilized Workplace and Surviving One That Isn't. He says assholes are never worth the damage they do to a company, and should be changed or expelled.

This forcibly brings up the issue of how you encourage cooperation between people, and control deviance.

I discussed in an earlier post how the left tends to frustrate its desire for egalitarian social progress in practice, by refusing to deal with those who exploit or leach off society (unless they are "the rich" or "bankers").

The left/ liberal demand is to be 'inclusive' no matter what. Deviance is often explained away by structural forces or societal neglect, with little role for individual responsibility. Criminals or potential terrorists must be appealed to , and a perfect example must be set by society at large before deviants can be expected to comply. Equality is all.

This drives much of the right nuts. They believe breaking the link between individual behavior and consequences undermines the culture and demoralizes society as a whole.

Any society needs a way to deal with deviants. Not everyone can be 'included'. Some people must be "left behind,", or at least held responsible for their own actions.

How we treat the less powerful

However, the Sutton book also rightly argues that one of the best indicators of civilization is how the more powerful treat the less powerful in society. If you regularly "kick down", you are likely an asshole yourself.

And that produces a strong political force as well - a desire to be compassionate and 'just', a feeling that people should not be mistreated just because they are disadvantaged, or less educated, or less skilled. The underdog must not be kicked too much.

You want to control selfishness and deviance without becoming selfish and deviant yourself.

The trouble is I think these two instincts, responsibility and compassion, get confused or at cross-purposes. As the asshole example shows, the deviant and selfish can often be more powerful than their targets.

In fact, as Sutton discussed, more power tends to make people behave badly. Power corrupts. That applies just as much to union leaders or trail lawyers or big media as corporate CEOs or senior bureaucrats.

Sometimes the less socially powerful can also be very powerful in a small-scale, tyrannical way. A gang leader may not have the formal power or respect in society as a whole that a Senator or CEO does. But he may have more actual power of life and death over his followers, and more power to inflict unhappiness and mayhem and damage on an area.

An imam might be part of an unpopular immigrant minority. But he may also participate in forced marriages or even turn a blind eye to honor killings.

The less powerful may also be genuinely less deserving. In the standard liberal view, everyone has equal rights, and their personal history is not relevant. But what someone has done with their life and the opportunities they actually have has to mean something as well. Someone who chooses to devote their lives to crystal meth or cocaine should not get as much respect - or help - as someone who is in trouble because they have fallen sick or are injured.

Power is on a different axis than deviance. The powerless and poor are not simply because of same that fact also admirable and just and deserving.

The impulse to be very careful and suspicious when the powerful want to control the less powerful is a noble one. But "compassion" in that case can also produce social damage.

Compassion for criminals and excessively sensitive policing can condemn whole neighborhoods to be terrorized by drug lords and petty thieves instead.

Detoxifying the brand

I was partly thinking about this because I read an article the other day in the UK Telegraph about the Tory party conference in the UK. Even now, twenty years later, it claims the Conservatives still have to "detoxify" their brand. They had come to be seen by the mid-1990s as the mean-spirited, nasty party, which partly led to 13 years of Labour government.

It is very dangerous for politicians to find herself portrayed as "mean-spirited." But at the same time, society as a whole will not trust politicians who fail to deal with social problems, or believe the only answer is more government involvement and more resources.

No-one should be excluded or treated badly just because they are less powerful or influential. But people should be excluded if their behavior is irresponsible or wrong or evil. Too much value-neutrality undermines this.

The best way to deal with deviance and irresponsibility is to discourage it in the first place. Culture and socialization and moral expectations ought to deal with most of the problems long before actual sanctions are necessary.

We clearly do not want petty tyranny.

But you do have to impose some expectations at some point, or the cruel and spiteful and criminal will prevail.

Sutton says that one reason it is so important to deal with assholes is that they tend to hire people like themselves. They "breed like rabbits", he says, and the poisonous atmosphere causes other people to become assholes too, if only in self-defense.


Being civilized in the workplace

So here I am at 38,000 ft over Utah, flying out to San Francisco. I was reading Robert Sutton's The No Asshole Rule: Building a Civilized Workplace and Surviving One That Isn't.Despite its quite aggressive title, the author is a Stanford Professor who has studied the problems caused in organizations by the selfish and tyrannical.

No matter how productive an asshole is, he says, you need to change them or get rid of them. They poison a culture and cause more problems than they are worth.

He gives two keys for recognizing an asshole. The first is, after an encounter with the individual, does the 'target' feel "oppressed, humiliated, de-energized or belittled" by the person? Does the target feel worse about him- or her-self?

The second test is how they treat those with less organizational power than themselves. Do they consistently aim their venom at only their subordinates, and "kiss-up/kick down"?

Everyone can be an asshole every now and then. The issue is people who are nasty and venomous as regular character traits. And the answer is not to replace them with wimps and clones, either.

I can think of one particular asshole where I work, as most people can. Fortunately, I hardly ever have to deal with him, and have made it clear I never want to. So I don't suffer on a daily basis.

But so many people do suffer because of this petty nonsense. Sutton cites research that about a third of workers in Western countries have to deal with an asshole at a point in time. And few things are more destructive of job satisfaction, daily happiness, and ability to sleep at night.

Making societal progress often comes down to making small changes that improve the texture of daily life.

People need some sense of purpose in their lives to feel happy. For many, at least some of that sense of purpose and challenge comes out from their job (even if it is a mistake to base all your aspirations on a job).

So looking for ways to identify and reduce petty tyranny is more than just a matter of workplace productivity or saving money. It's essential for making progress work for us. It is certainly more important, if you think about it, than another 3% wage growth or consumer spending in a particular year.

Human nature will always be with us and some people will always be assholes. But more cultural intolerance of such petty tyranny is a very good thing.

The step-off- the-plane test

I'm sitting here at JFK for an early morning flight. I still find it remarkable that you can sit on a plane for a few hours ..... and step off the jetway onto a different continent, into a completely different context. (G loves to tease me about feeling this way.)

But it is a routine miracle of daily life, beginning in the 1960s.

I'm heading for the west coast today.

Fifty years ago, that would have been a four day trip by rail. One hundred fifty years ago, it would have been six months around Cape Horn and the worst ocean storms in the world. Now I can complain about the airline pretzels instead while I watch the midwest roll by beneath my window.

I've been thinking about recent arguments that we have not seen much technological progress in the last three decades in daily life - with the huge exception of computers and the Internet.

This flight today will take just the same flight time as 1970, and counting in having to arrive earlier at the airport for security reasons the journey will actually take longer.

Of course, the ticketing and reservation systems have changed. Travel agents are mostly a memory. The pilots carry their charts in iPads. Efficiency has been upgraded in so many ways.

But economy class seats have not.

The availability and variety of products has grown enormously since 1970. Try finding arugula or szechuan peppercorns in a supermarket back then. We have three hundred channels on tv instead of three.

And perhaps we travel more frequently than we did. I was in this very terminal less than ten days ago going to Miami.

But if you look around at the streetscape of New York, it does not look as "advanced" to visitors as it did in 1970. Cities with a fraction of the income, like Shanghai, have a towering skyline. Dubai was pretty much a dusty fishing village in 1970 and now has its own array of glittering towers and overflowing malls.

How do we recognize a place is wealthy or advanced now, at first glance as we step off the plane?

Part of it is orderliness. The streets are clean, the subway works, the police aren't corrupt.

Part of it is aesthetic appeal. Wealth surrounds itself with beauty and culture. We were sitting in Bryant Park the other night at twilight and it was just lovely, as the light slowly faded on the surrounding buildings and the evening air was fresh. In second-tier places you get ugly concrete slabs and miles of bland or unimaginative housing.

Part of it is culture. I was at the Metropolitan Museum yesterday, that vast treasure house, and saw their exhibition on Indian Painting. (Worth seeing).

Part of it is education. New York has its world-class universities and intellectual fireworks.

But it is not as easy any more to tell how wealthy somewhere is just by stepping off the plane and looking for superhighways or a skyline.

Monday, October 10, 2011

Think about assets and wealth, not income and equality

W. Brian Arthur says that the basic economic issue is shifting from producing prosperity to distributing prosperity.

I'm not sure it's a matter of redistribution or transferring income, an argument for the welfare state. Instead, it is an issue of ownership rights and property rights. It is about the legal obligations and claims that people have.

It is already more difficult to apply many of our current legal approaches to new circumstances. Look at the way patent conflicts are breaking out in the tech world, for example. Far from enabling prosperity, the legal system is stifling it.

Nor can it be like 19th century robber barons who saw their own property rights as almost limitless, regardless of the impact on others, and who saw freedom of contract as the most important right. Henry Frick cannot be the face of the future.

We need a new social technology to complement the market.

Progress may require a new concept of citizenship and membership in a society. It isn't enough to redistribute on the basis of fairness without thinking about who deserves what.

You need equality to the extent it promotes freedom and opportunity for the maximum number of people. But this does not entail an equal right to common wealth. That still has to involve some measure of contribution or membership or merit, some sense of the concrete story behind a person.

That may sound like John Rawl's difference principle, where inequalities are justified only to the extent they raise the income level of the worst off, which is at the heart of contemporary liberal political philosophy.

It isn't. This is not about reluctantly tolerating inequality for the sake of incentives. It is about lifting the veil of ignorance (the famous device in Rawl's A Theory of Justice: Original Edition) and asking what people ought to get.

That goes against the grain of liberalism, which tends to look at dollar income (or dollar wealth) alone. Liberalism has a blind spot when it comes to people's preferences.

A better way forward is likely to be through a closer look at ownership and asset endowments, not through equality or economic rights.

Assets and Wealth

The main challenge is not the distribution of income, nor equality of rights, but the distribution of assets and how that evolves over time.

We have to make value judgements about assets.

We should think more about what assets people own, not just the stream of income they get from the labor market.

What assets do people currently own? Money, for sure, and investments. Real estate. Claims on future streams of income like pension rights. Human capital such as education and skills.

We have to move from looking at household cash flows (income) to looking at household balance sheets (wealth). We need to ask better questions about what wealth is.

I think there needs to be enough income flow from assets to meet people's basic needs. But it is very difficult to do this without degrading or destroying key cultural institutions, as I discussed here.

Across-the-board welfare rights or minimum incomes are not the answer. The welfare state does not work. It may be that money transfers just are not suited to this at all.

So here's the questions. How do you redistribute or reconfigure ownership towards those that deserve it? Who deserves it? And what do we do with people who don't deserve as much? What is wealth?

These questions have been almost impossible to pose, let alone answer in recent decades, because the immediate objection is you would be making some people into "second class citizens."

Sunday, October 9, 2011

Birth Pangs?

Walter Russell Mead's post on the W Brian Arthur essay is itself very interesting.

As a species, we will spend less time in the coal mines and more time in the theater, less time chopping cotton and more time writing novels.

Reshaping our social institutions and our mental habits to capitalize on the vast and unprecedented opportunities of the information revolution is going to take a lot of time, energy and creativity. The pain and drama of the shift will absorb our political system — and painful as it will be in the US, it is likely to be still more disruptive and difficult elsewhere.

But unless we get it profoundly wrong, these are birth pangs, not death agonies. The millennial generation will build a new world, and it will be an extraordinary place.

The problem is most standard analysis just isn't coming to grips with this. It is a tremendously exciting opportunity, but much can go wrong. The industrial revolution produced dark satanic mills for a century, and enclosure of the land, and faceless bureaucracy, and slag heaps, even as it transformed humanity's chances vastly for the better.

Even the most marvelous cures can have side-effects.

It is important to have hope when the economy is looking so overcast and gloomy. European banks are still tottering on the brink. But I think this is something the invisible hand of the market alone cannot deal with. It needs purposive intelligence as well.

The Second Economy

Here's a fascinating essay by W. Brian Arthur in McKinsey Quarterly (via Walter Russel Mead). I've read Arthur's book, The Nature of Technology: What It Is and How It Evolves which was excellent. Here he turns to the future.

With the coming of the Industrial Revolution—roughly from the 1760s, when Watt’s steam engine appeared, through around 1850 and beyond—the economy developed a muscular system in the form of machine power. Now it is developing a neural system. This may sound grandiose, but actually I think the metaphor is valid. Around 1990, computers started seriously to talk to each other, and all these connections started to happen. The individual machines—servers—are like neurons, and the axons and synapses are the communication pathways and linkages that enable them to be in conversation with each other and to take appropriate action.

It could lead to a much more productive and wealthy world. But the consequences for jobs could be serious. He argues the primary cause of downsizing since the 1990s has been that jobs are disappearing into the "second economy", i.e. the digital economy.

This suggests to me that the main challenge of the economy is shifting from producing prosperity to distributing prosperity. The second economy will produce wealth no matter what we do; distributing that wealth has become the main problem. For centuries, wealth has traditionally been apportioned in the West through jobs, and jobs have always been forthcoming. When farm jobs disappeared, we still had manufacturing jobs, and when these disappeared we migrated to service jobs. With this digital transformation, this last repository of jobs is shrinking—fewer of us in the future may have white-collar business process jobs—and we face a problem. ...The system will adjust of course, though I can’t yet say exactly how.

This is exactly the question at the heart of this blog. Arthur even goes on to reference Keynes' Economic Possibilities for our Grandchildren.

He has a few brief thoughts about the way forward. Maybe a major new source of jobs will be discovered, he says. Maybe we'll take more leisure time. Maybe the very idea of a job and productivity will change in important ways.

In some ways, Arthur isn't adding anything new here. Everyone can see productivity trends and automation are causing more problems for the traditional economy, and the pace of change is so fast that even if new major sources of jobs do arise, the adjustment is abrupt and wrenching. the question is what we should do about it. But at least he is asking the question.

It is actually remarkable, when you think about it, that such a distinguished researcher drom the Santa Fe Institute, publishing in a McKinsey periodical does not have a clearvsense of the way forward. It just shows how much needs to be done.

His metaphor that the economy developing a nervous system is very appealing, however.

I think he is half right in saying that the key question of the economy is moving from production to distribution. For sure, distribution matters. I think that is one reason I've found myself looking so much at political philosophy so far in this blog.

It also underlies the huge controversies on Capitol Hill about taxation and the size of the state. Income redistribution in the post-war liberal way is increasingly unviable politically, for reasons I've discussed.

But more important than distribution is the question of what we want. What is our purpose, what are our preferences, what do we want out of the economy? Simply redistributing dollars is no answer at all. Instead, it is about the ways of life we lead.