Trust and Attention in Opposition

This is a very thoughtful and interesting post by Seth Godin, who is a well-known marketing guru with a wonderful blog.

The two scarce elements of our economy are trust and attention.

Trust is scarce because it's not a simple instinct and it's incredibly fragile, disappearing often in the face of greed, shortcuts or ignorance.

And attention is scarce because it doesn't scale. We can't do more than one thing at a time, and the number of organizations and ideas that are competing for our attention grows daily.

People sometimes get more attention by doing a dance, he says, but violate trust in the process.

..those that pay the price to grab some momentary attention almost always do it at the cost of trust.

Part of it, no doubt, is that some of the main ways to grab attention are sensationalism, gossip, exaggeration, sex, glamor, or celebrity, which have never had wider respect. Linsey Lohan gets plenty of attention, but not much trust.

Much attention is tabloid. Much more is cat videos.

Another issue is attention span. It needs time and effort to build trust, which is usually a shared experience and co-evolution. The Internet, on the other hand, often gravitates towards tl;dr and 140-character tweets. The firehose of information hitting everyone means people take shorter and shorter gulps. Attention can be gained and lost faster than ever before.

The kicker is that the Internet also has a much quicker and more ruthless set of mechanisms to expose lack of trust than ever before as well, from Yelp and Tripadvisor with their customer reviews to the lack of gatekeepers who can direct and tamp down conversations.

We also have an inbuilt skepticism toward things that seem done purely for attention. Perceptions of motive is a major underlying force.

 

 

How self-actualization can produce all-or-nothing marriages

This is an interesting article in the NYT about the evolution of marriage. It argues marriage has changed in the last two hundred years as western societies have moved up Maslow's hierarchy of needs.

Our central claim is that Americans today have elevated their expectations of marriage and can in fact achieve an unprecedentedly high level of marital quality — but only if they are able to invest a great deal of time and energy in their partnership. If they are not able to do so, their marriage will likely fall short of these new expectations. Indeed, it will fall further short of people’s expectations than at any time in the past.

There have been three stages in marriage, according to author Eli Finkel. "Institutional" marriage, until about 1850, was largely a matter of mutual survival - food, shelter, and protection from violence. "Companionate" marriage, from 1850 to 1965, was more about love and companionship and intimacy, once the more basic needs were secure. And then,

Since around 1965, we have been living in the era of the self-expressive marriage. Americans now look to marriage increasingly for self-discovery, self-esteem and personal growth. Fueled by the countercultural currents of the 1960s, they have come to view marriage less as an essential institution and more as an elective means of achieving personal fulfillment.

But this has led to an all-or-nothing phenomenon.

HERE lie both the great successes and great disappointments of modern marriage. Those individuals who can invest enough time and energy in their partnership are seeing unprecedented benefits. The sociologists Jeffrey Dew and W. Bradford Wilcox have demonstrated that spouses who spent “time alone with each other, talking, or sharing an activity” at least once per week were 3.5 times more likely to be very happy in their marriage than spouses who did so less frequently. ...But on average Americans are investing less in their marriages — to the detriment of those relationships.

And so this leads to two very interesting points. At the higher levels of the hierarchy of needs, time and personal energy are much more important than before. And when it comes to self-actualization and self-expression, people's expectations matter more as well - perhaps especially when they become unrealistic or foolish. What can people do to improve theie marriages?

First and foremost, couples can choose to invest more time and energy in their marriage, perhaps by altering how they use whatever shared leisure time is available. But if couples lack the time and energy, they might consider adjusting their expectations, perhaps by focusing on cultivating an affectionate bond without trying to facilitate each other’s self-actualization.

There's perhaps wider lessons to be drawn from this. G remarked the other day that one problem with the Millenials is they have extremely high expectations of life, and then feel all the more crushed or resentful when they encounter resistance.

On one level, that story is as old as time. But it is almost a general truth that improvement often leads to turbulence and conflict and even violence because expectations have a tendency to rise faster than realization - which then produces frustration and anger. A rising Germany produced carnage in 19th and 20th century Europe. American cities burnt in riots mostly after the Civil Rights Act passed in 1964. Many developing countries like Egypt have increasingly educated youth but few jobs or positions for them.

Improvement very often produces accelerated expectations. So it means we ought to pay very close attention to how expectations change over time, rather than simply immediate income levels or distribution of income. So far as I know, there is very little data that tracks those kind of assumptions or expectations, beyond very basic things like whether people expect to earn more than their parents. It isn't a matter just of expected income, or short-term economic confidence. What kind of opportunities do people think they will have? How much security do they think they will enjoy? It must be as related to education as to current economic circumstances. It also must come from medi models How quickly and why do people scale back expectations?

This also relates to the evolution of ideas about the good life - something which I will come back to. But one clear conclusion here is, once again, the diminishing marginal utility of money at higher levels of needs. It is mainly time that needs to be invested in pursuit of happiness here, not dollars. In fact, earning more dollars actually takes away from time spent together.

This is the root of the deeper problems with the modern economy, which I've talked about a great deal before. Markets are extremely efficient at producing excludable rivalrous nonpositional goods, like croissants or cars. But if the things we increasingly want are not subject to definable property rights or depend largely on other people's behavior, like honor or reputation, then the goods we want increasingly lie outside the market sphere. That's not a criticism of markets, any more than you actively criticize a Ferrari because it can't fly. It's just a fact you can't really define a contractual tradable right to a happy marriage.

The article also represents a much more binary vision of outcomes, although it's not entirely clear why this should be seen as inevitable. As society rises up the levels of Maslow's hierarchy, does it mean that this all-or-nothing phenomenon will become more typical in other areas too? Or does it simply mean we need a rethink of use of time and it how it is related to happiness? To what extent to do people who fail to onvest enough time or energy in a relationship do so out of choice? There are certainly plenty of anecdotal stories of people who spend more time at the office to avoid spending time at home, or those who are compelled to stay in the office to keep their job.

Overall, it's a very interesting illustration of how core structures in our society, like marriage, are affected by the evolution of what people want and need as basic survival needs are taken care of.

 

Achieved and ascribed identities

Here's an interesting piece in the Guardian, in the wake of the first recorded bar brawl over Kantian philosophy: two men in Russia got into a pub brawl over Kant, and one shot the other.

Kant cropped up again earlier this week while I was having coffee at my house with David Goodhart, the director of Demos, a thinktank that describes its mission as "to bring politics closer to people". We were recording a programme about community for Radio 4, in the course of which he said something extremely interesting: that the problem with the political class, and the reason they are often so emotionally and politically distant from many ordinary people, especially in settled working-class areas, is that their identities are often achieved, not ascribed.

What he means is that politicians, like many "successful" people, have achieved success by finding a route beyond the limitations of their background. They have come to define themselves not by where they are from, their community, but through what they have achieved in terms of education, qualifications, career and personal aspiration. Community is thus often a nostalgic background hum for many successful people, but not something they are completely embedded within. And if they find a new community, it is one they have chosen, not one ascribed to them by birth.

This, in a sense, is the Kantian ideal. "How recognisable, how familiar to us is the man so beautifully portrayed [by Kant]," wrote Iris Murdoch. "Free, independent, lonely, powerful, rational, responsible, brave, the hero of so many novels and books of moral philosophy.For Kant, the human being is at his or her best when they have successfully self-authored. It's all about self-determination. For such as these, freedom is about breaking free of allegiance, of the restrictions of the local and the particular. In such a world, loyalties are simply a temporary convenience.

Autonomy is not the whole of ethics.

 

People forget how to engage attention

Here's an interesting take in the New Yorker on how and why Facebook makes people unhappy.

What causes us to feel bored and, as a result, unhappy? Attention. When our attention is actively engaged, we aren’t bored; when we fail to engage, boredom sets in. As Eastwood’s work, along with recent research on media multitasking, have illustrated, the greater the number of things we have pulling at our attention, the less we are able to meaningfully engage, and the more discontented we become.

[...] Demands on our attention lead us to use Facebook more passively than actively, and passive experiences, no matter the medium, translate to feelings of disconnection and boredom.

In ongoing research, the psychologist Timothy Wilson has learned, as he put it to me, that college students start going “crazy” after just a few minutes in a room without their phones or a computer. “One would think we could spend the time mentally entertaining ourselves,” he said. “But we can’t. We’ve forgotten how.” Whenever we have downtime, the Internet is an enticing, quick solution that immediately fills the gap. We get bored, look at Facebook or Twitter, and become more bored. Getting rid of Facebook wouldn’t change the fact that our attention is, more and more frequently, forgetting the path to proper, fulfilling engagement. And in that sense, Facebook isn’t the problem. It’s the symptom.

In a broader sense, of course, the Internet offers much more opportunity for active engagement than staring at the television. And I'm not sure the point holds more generally. I'm typing this at my usual coffee shop in New York, a city which is a huge blaring multicolored kaleidoscope of things competing for attention - which is what makes it so stimulating. So why does big city buzz inspire, but online multiple pulls of attention enervate?

It must be something to do with energy and depth and unexpectedness. Any amount of shallow celebrity gossip and trivia must depress people after a while.

It must also have something to do with the right amount of stimulus. I'm reminded of Cziksentmihalyi's idea of flow, that the right amount of challenge, at the edge of our capabilities, puts us into a state where time just seems to pass almost without noticing because you are so absorbed in what you are doing.

Still, it's such a common experience now that people pay more attention to their devices than the person right in front of them that it must point to a deeper problem beyond Facebook.

I asked G about it. She says it's like a hunter-gatherer thing. You see something shiny or interesting, and the instinct is to grab it.

 

Who will prosper in the New world?

Tyler Cowen asks in the NYT:

Who will do well? THE CONSCIENTIOUS Within five years we will are likely to have the world’s best education, or close to it, online and free. But not everyone will sit down and go through the material without a professor pushing them to do the work. Those who are motivated to use online resources will do much, much better in the generations to come.

Motivation - those who have it, those who can inspire it - is one of the main themes. It's an interesting take. I agree motivation - including incentivizing behavior - is the key issue for the emerging new economy. That's why I've been so interested in some of the classic psychology on motivation, like Maslow.

 

"Sympathy for the Luddites"

Paul Krugman says technological disruption is real, and argues redistribution is the only way to deal with it.

And the modern counterparts of those woolworkers might well ask further, what will happen to us if, like so many students, we go deep into debt to acquire the skills we’re told we need, only to learn that the economy no longer wants those skills?

Education, then, is no longer the answer to rising inequality, if it ever was (which I doubt).

So what is the answer? If the picture I’ve drawn is at all right, the only way we could have anything resembling a middle-class society — a society in which ordinary citizens have a reasonable assurance of maintaining a decent life as long as they work hard and play by the rules — would be by having a strong social safety net, one that guarantees not just health care but a minimum income, too. And with an ever-rising share of income going to capital rather than labor, that safety net would have to be paid for to an important extent via taxes on profits and/or investment income.

It's interesting evidence mainstream economics is starting to get worried about this issue. He's not providing a "but these fears have always been misplaced in the past" usual take.

The trouble is redistribution without some sense of who deserves what isn't going to fly. This is the left's problem: people don't believe equality is the same as justice (or "fairness".) We can't solve this without having some sense of what we value, or what the good life is. And liberal neutrality on that question, and its focus on material resources and income above all, makes that impossible.

Krugman's solution also assumes there will be supernormal profits, but technology may compete and innovate those away, too. In a perfect market profit is zero, after all, and tehnology is removing barriers to entry and market segmentation.

 

 

 

 

The Prevalence of Loneliness

This, from an article in the New Republic, is an indicator that things are not going well in society. How truly amazing and sad.

... even among the not-so-old, loneliness is pervasive. In a survey published by the AARP in 2010, slightly more than one out of three adults 45 and over reported being chronically lonely (meaning they’ve been lonely for a long time). A decade earlier, only one out of five said that. With baby-boomers reaching retirement age at a rate of 10,000 a day, the number of lonely Americans will surely spike.

I've talked before how we overlook the importance of connection and the experience of the texture of daily lived life, as if we need a "gross national loneliness" to set against GDP.

 

Work is a human right

A great essay by Walter Russell Mead, here. I disagree with his confidence about personal services sometimes, but this is good stuff, worth reading in full.

There is a horrible snobbery lurking beneath the idea that most people will not be able to find meaningful work when the age of scarcity ends. Once the working classes aren’t needed to dig coal anymore, in this view, there is nothing to be done for the mass of mankind than to sit them in front of the TV on a comfy couch with a big bag of chips. They are good for nothing else.

This is a premise which any serious theist or humanist must reject. If we believe that every human being has a unique real worth, we must also believe that every human being has a contribution to make. Keynes rather snidely remarks that few people have the talent to live creative lives; writing about the difficulty many will have adjusting to lives without toil he warns of the intense boredom that most will suffer. “Yet it will only be for those who have to do with the singing that life will be tolerable and how few of us can sing!”

Actually, a good many more of us can sing than Keynes thought; it’s just that life in the coal mines and the factories means that many people haven’t had the same chances to develop their talents that a son of privilege like Keynes did.

 

The end of entitlement

Robert Samuelson writes that the public is going through a downshift in expectations that is having deeper political consequences.

Weighed down by these contradictions, entitlement has been slowly crumbling for decades. The Great Recession merely applied the decisive blow. We're not entitled to many things: not to a dynamic economy; not to secure jobs; not to homeownership; not to ever-more protective government; not to fixed tax burdens; not to a college education. Sooner or later, the programs called "entitlements," including Social Security, will be trimmed because they're expensive and some recipients are less deserving than others.

The collision between present realities and past expectations helps explain the public's extraordinary moodiness. The pandering to the middle class by both parties (and much of the media) represents one crude attempt to muffle the disappointment, a false reassurance that the pleasing past can be reclaimed. It can't.

I don't think this is true. We still have the paradox that we have more productive capacity and underlying abundance than ever before. The problem is we have less and less clarity on how to distribute it, or what we value, or what incentives are or ought to be.

What it does mean is we need a deeper rethink of economic institutions to cope with a world in which many of the things we value most are not easily traded. Government cannot deliver what people want if we have no shared vision of what people ought to want, in their own different ways. Instead, our general discourse on rights and universal rules tends to evade the question.

"..some recipients are less deserving than others" says Samuelson. That is the heart of the problem. It is a matter of ethics, not economics. The left wants universal (unearned) rights. The right wants a changing mix of pure market allocation and tradition.

People are just not that motivated by money alone

Here's an interesting blog post on the Harvard Business Review site on how money and motivation are related: they're not.

The results indicate that the association between salary and job satisfaction is very weak. The reported correlation (r = .14) indicates that there is less than 2% overlap between pay and job satisfaction levels. Furthermore, the correlation between pay and pay satisfaction was only marginally higher (r = .22 or 4.8% overlap), indicating that people's satisfaction with their salary is mostly independent of their actual salary.

In addition, a cross-cultural comparison revealed that the relationship of pay with both job and pay satisfaction is pretty much the same everywhere (for example, there are no significant differences between the U.S., India, Australia, Britain, and Taiwan).

It puts a little more solid evidence around the argument that is made in books like Daniel Pink's Drive: The Surprising Truth About What Motivates Us.

 

Labor and Social Links

I've been working intensively on another project in the last few weeks, so blogging has been lighter here. There's a build-up of things I want to blog about and say.

I just wanted to note this column by Ross Douhat in the NYT about the decline of work, however. The transformation of work is a major theme on this blog.

If the utopia of a world without work is being achieved, Douhat says, it isn't because the upper classes can afford it and it will gradually spread down to laborers and high school dropouts. It's happening from the bottom up.

Yet the decline of work isn’t actually some wild Marxist scenario. It’s a basic reality of 21st-century American life, one that predates the financial crash and promises to continue apace even as normal economic growth returns. This decline isn’t unemployment in the usual sense, where people look for work and can’t find it. It’s a kind of post-employment, in which people drop out of the work force and find ways to live, more or less permanently, without a steady job. So instead of spreading from the top down, leisure time — wanted or unwanted — is expanding from the bottom up. Long hours are increasingly the province of the rich.

The problem with this, he says, isn't so much income or survival. People are not starving. It's lack of social integration. It's part of the wider trend of the decline of community and social links.

One could make the case that the right to not have a boss is actually the hardest won of modern freedoms: should it really trouble us if more people in a rich society end up exercising it?

The answer is yes — but mostly because the decline of work carries social costs as well as an economic price tag. Even a grinding job tends to be an important source of social capital, providing everyday structure for people who live alone, a place to meet friends and kindle romances for people who lack other forms of community, a path away from crime and prison for young men, an example to children and a source of self-respect for parents.

It's a problem of flourishing.

In a sense, the old utopians were prescient: we’ve gained a world where steady work is less necessary to human survival than ever before.

But human flourishing is another matter. And it’s our fulfillment, rather than the satisfaction of our appetites, that’s threatened by the slow decline of work.

This is an interesting take. And of course I agree that the prime question is how our institutions contribute to human flourishing, so he is going in the right direction.

But he doesn't go far enough, perhaps. There is a difference between the labor market, which is going to keep getting more productive, and a sense of vocation.

What is clearly at issue is motivation and purpose, and how you retain and encourage and cultivate them when the economy is changing. Our civil discourse has become very bad at providing that, as I've often argued , such as here.

 

Abundance and Self-Realization

I'm looking at Robert Fogel's The Fourth Great Awakening and the Future of Egalitarianism, starting here.

Distribution of income matters less than distributiion of "spiritual resources", he says. That means there is a tendency in the "Fourth Awakening" to refocus on the individual again, rather than material conditions in society as a whole.

I have often talked about abundance on this blog, such as here and here. Fogel also emphasizes the saturation of material goods.

Our society is so well saturated with consumer durables, in fact, that even the poorest fifth of households are well-endowed with them. Consequently, the era of the household accumulation of consumer durables, which sparked the growth of many manufacturing industries in the many decades following World War II, is largely over in the United States. p189

So where are things going? Meaning becomes more important as survival challenges recede.

Today, people are increasingly concerned with what life is all about. That was not an issue for the ordinary individual in 1880, when nearly the whole day was devoted to earning the food, clothing and shelter needed to sustain life. A half century from now, perhaps even sooner, when increases in productivity make it possible to provide goods in abundance with half today's labor, the issue of life's meaning, and other matters of self-realization, will take up the bulk of discretionary time. p 191-192

Health and leisure time will be the focus of the future economy, although, he says, it is difficult to foresee the details.

The point is that leisure-time activities (including lifelong learning) - volwork - and health care are the growth industries of the late twentieth century and the early twenty-firsty. They will spark economic expansion during our age, just as agriculture did in the eighteenth century and the early nineteenth and as manufacturing, transportation and utilities didin the late nineteenth century and much of the twentieth. The growing demand for health-care services is due primarily, not to a distortion of the price system, but to the increasing effectiveness of medical intervention. p201

What does self-realization mean? Interestingly, Maslow is not mentioned at all, nor are the older classical ideas about virtue in any detail. Instead, Fogel develops his own list.

To those philosophers who have developed the concept, self-realization means the fullest development of the virtuous aspects of one's nature. ..Of all the maldistributed spiritual resources, sense of purpose may be the most important. p205

Others include "a vision of opportunity", "a sense of the mainstream of work and life" which means a sense of where opportunities are and how to pursue them. There must be "a sense of community", an "ability to engage with diverse groups", which entails an "ethic of benevolence". As self-realization is often achieved through an occupation, a "work ethic" and "sense of discipline" are required, as well focus and a "capacity to resist the lure of hedonism". There needs to be a "capacity for self-education", a "thirst for knowledge". an "appreciation of quality", and some "self-esteem." p205-206

To this updated list of virtues he adds a sense of balance or, as Aristotle would put it, the golden mean.

Each of the fifteen spiritual resources just outlined must be possessed in moderation. There is an optimal amount of each spiritual resource, which will vary from one individual to another. Too much of a sense of purpose turns dedication into ruthlessness. Too little sense of purpose may cause one to be uncompetitive in a given pursuit. p207

It isn't quite a virtue ethics, perhaps, as it is more a list of desirable psychological attributes, being well-adjusted rather than arete or excellence. But it comes close. It is not utilitarian, nor based on more simplistic ideas about happiness. It is certainly reconcilable with older virtues such as courage or temperance or practical wisdom. It is also reconcilable with other ideas we have looked at, such as the evolution of the economy from manufacturing to services to experiences to, finally, transformation of individuals, or the requirements for individual flourishing.

What it does not do (and no book can do everything) is explain what happens to labor markets and economic incentives when material needs are saturated. How might a post-scarcity economy work? How will people make a living?

In all, it is quite a radical book for an academic economist. It is also politically quite eclectic - egalitarian, but taking religion seriously; interested in the condition of the poor but skeptical of government intervention. It asks the right questions, even if the answers are not wholly developed.

The basic conclusion is income is no longer a suitable end-point for policy discussions. Nor are national income statistics. Like the rich sons of Athens two thousand years ago, the nature of the good life is the main question that confronts us once material needs are saturated. Even some Nobel Prizewinners in Economics can see that.

 

 

 

Happiness versus Meaning

Here's an interesting article in the Atlantic. New research confirms what Victor Frankl famously wrote about following his experience in Nazi concentration camps: a sense of purpose is deeply necessary to people, even more so than immediate happiness.

Research has shown that having purpose and meaning in life increases overall well-being and life satisfaction, improves mental and physical health, enhances resiliency, enhances self-esteem, and decreases the chances of depression. On top of that, the single-minded pursuit of happiness is ironically leaving people less happy, according to recent research. "It is the very pursuit of happiness," Frankl knew, "that thwarts happiness."

This is why some researchers are cautioning against the pursuit of mere happiness. In a new study, which will be published this year in a forthcoming issue of the Journal of Positive Psychology, psychological scientists asked nearly 400 Americans aged 18 to 78 whether they thought their lives were meaningful and/or happy. Examining their self-reported attitudes toward meaning, happiness, and many other variables -- like stress levels, spending patterns, and having children -- over a month-long period, the researchers found that a meaningful life and happy life overlap in certain ways, but are ultimately very different. Leading a happy life, the psychologists found, is associated with being a "taker" while leading a meaningful life corresponds with being a "giver."

"Happiness without meaning characterizes a relatively shallow, self-absorbed or even selfish life, in which things go well, needs and desire are easily satisfied, and difficult or taxing entanglements are avoided," the authors write.

How do the happy life and the meaningful life differ? Happiness, they found, is about feeling good. Specifically, the researchers found that people who are happy tend to think that life is easy, they are in good physical health, and they are able to buy the things that they need and want. While not having enough money decreases how happy and meaningful you consider your life to be, it has a much greater impact on happiness. The happy life is also defined by a lack of stress or worry.

Most importantly from a social perspective, the pursuit of happiness is associated with selfish behavior -- being, as mentioned, a "taker" rather than a "giver."

People want to contribute to something.

Baumeister and his colleagues would agree that the pursuit of meaning is what makes human beings uniquely human. By putting aside our selfish interests to serve someone or something larger than ourselves -- by devoting our lives to "giving" rather than "taking" -- we are not only expressing our fundamental humanity, but are also acknowledging that that there is more to the good life than the pursuit of simple happiness.

It's worth reading the whole article.

 

The Fourth Great Awakening

I read Robert Fogel's The Fourth Great Awakening and the Future of Egalitarianism over the holidays, and it is a very interesting book. Fogel is a Nobel Laureate in Economics (1993) , mostly for his earlier quantitative economic history and study of the historical economics of slavery in the US. Perhaps he felt liberated to write a much more original book, published in 2000. Yet it is based on deep knowledge of US history.

He focuses on the impact of the waves of religious revival in the US on broader growth and public policy. The main challenge for egalitarianism now is not material redistribution, he says, but the maldistribution of "spiritual resources."

The agenda for egalitarian policies that has dominated reform movements for most of the past entry - what I call the modernist egalitarian agenda - was based on material redistribution. The critical aspect of the postmodern egalitarian agenda is not the distribution of money income, or food, or shelter, or consumer durables. Although there are still glaring inadequacies in the distribution of material commodities that must be addressed, the most intractable maldistributions in rich countries such as the United States are in the realm of spiritual or immaterial assets. These are the critical assets in the struggle for self-realization. p2

Traditional measures of income inequality are inadequate. They ignore consumption of leisure and improved health, for example.

They focus on a variable - money income - that currently accounts for less than half of real consumption and that in a generation may account for less than a quarter of real consumption. Such measures shed little light on the most intractable forms of poverty (those related to the unequal distribution of spiritual resources). Nor do they bear on the capacity of individuals to overcome the social estrangement that undermines their quality of life. p3

So a politics based on income transfers is exhausted. That naturally leads to consideration of the good life.

A good place to begin a consideration of the content of a postmodern egalitarian agenda is with Socrates' question, What is the good life? That was a crucial question not only for the sons of rich Athenians but for the sons of the landed rich throughout history. Freed of the need to work to satisfy their material needs, they sought self-realization in public service, military adventures, philanthropy, the arts, theology, ethics and moral philosophy. p2

Naturally, I felt a huge sense of recognition and agreement at this point, as I believe that without some sense of the good life public action is empty. Fogel adds another twist. State action cannot redistribute such spiritual resources.

Realization of the potential of an individual is not something that can be legislated by the state, nor can it be provided to the weak by the strong. It is something which must develop within each individual on the basis of a succession of choices.

The quest for spiritual equity thus turns not so much on money as access to spiritual assets, most if which are transferred and developed privately rather than through the market. Moreover, some of the most critical spiritual assets, such as a sense of purpose, self-esteem, a sense of discipline, a vision of opportunity, and a thirst for knowledge, are transferred at very young ages. P4.

This is very much in tune with what I have been arguing on this blog. The main challenges we face are more ethical than economic now, about how people can be helped realize the good life and what kinds of behavior should be rewarded. It is surprising to see such a clear statement in this vein from an academic economist - although economic historians consistently seem more heterodox and interesting than mainstream model-builders.

We will look at more tomorrow, especially his emphasis on how ethical concerns develop over time.

 

 

 

The Importance of Stocks and Depreciaton

 

We're looking at Double Entry: How the Merchants of Venice Created Modern Finance by Jane Gleeson-White, starting here. Book-keeping evolved into accounting as outside investors needed assurance that dividends were paid out of actual income, not capital.


Railways and factories also wore out, however, which led to another important concept: capital stock and depreciation.

The advent of the corporation raised several other key accounting issues; for example, how to calculate the declining values—due to wear and tear—of large investments in machinery, rails, rolling stock (or railway vehicles), and so on. This problem gave rise to the concept of depreciation.

It took a long time for accountants to come to terms with depreciation and properly accounting for assets. And this is still a problem, she says, when it comes to the environment since many assets are free.

This is because until recently economists have assumed that natural resources are so plentiful that any loss of them is insignificant, not worth counting. They assumed that natural resources like water, soil, forests and air were free gifts of nature.

But just as the nineteenth-century railway entrepreneurs had to learn that human-made capital—rails and machinery—wears out and must be depreciated, so some economists are beginning to understand that nature’s capital is also subject to wear and tear and depletion. Cambridge University’s Professor Sir Partha Dasgupta is one economist who is critical of the GNP and its use to judge the progress or otherwise of nations. He argues, ‘as so many economists have already done, that GNP’s main weakness lies in the fact that it is insensitive to the depreciation of capital assets’. And from an environmental point of view, this is critical.

The Modern Economy is about Stocks

This is no doubt true. But she perhaps over-emphasises environmental gaps to the exclusion of other social assets like trust or quality of life.

The larger point is we are often too focused on flows rather than stocks, including the depreciation of assets (stocks meaning an amount, like a stock of wheat, rather than an equity share like the stock exchange.) This is a basic economic distinction we often forget. As Dasgupta says, we need to be sensitive to the depreciation of capital assets.

We are much better at being conscious of flows of income rather than the valuable stock of assets which produces that income. Yet many of the great economic challenges of our era have more to do with stocks than flows of income. Many or our capital assets, such as the knowledge required to build an Intel processor or the song "Hey Jude" do not depreciate in the traditional way. They may have to be re-learned or passed on, but they do not wear out.

So what happens when the stock of our valuable assets, properly defined, gets disproportionately much larger than money income flows? In many ways, our prime objective should be to increase the stock of assets. Income and distribution are secondary factors , especially of many of the benefits flowing from those assets are free. Some of our political thought gripes towards this, especially those who think capitalism should be left unfettered to create wealth which government can then redistribute. But that often confuses income with value.

We will come back to this point another time.

Finally, Gleeson-White emphasizes again how the numbers may often conceal deeper uncertainties.

Even accounting’s most fundamental concepts and practices, such as income measurement and asset valuation, are based on uncertainties. Accountants still cannot agree on how to define income, the measurement of which remains one of the intractable problems in financial accounting theory and practice. The valuation of assets only becomes more complex and more fiercely debated as modern global corporate structures and financial instruments become increasingly labyrinthine, and income measurement, the key to determining profits and therefore dividends, is inextricably linked to this contentious, chimerical practice of asset valuation. Nor is the crucial measurement of costs an objective process: costs are also highly contestable figures and may result as much from the collusion or rivalries of firms as from any other actuality. Accrual (or corporate) accounting—the need to allocate revenues and expenses between accounting periods and to value assets and liabilities at the end of an accounting period—raises problems which have never been solved and are probably incapable of solution. Numbers can be negotiated to make management look good. In effect, ‘accounts are used to justify decisions and to excuse mistakes’.

She concludes

In an era of international capital, when our wealth is more than ever tied up in its fortunes, and at a time when corporations, governments and financial institutions are demonstrating their fallibility on a global scale, it is essential that we are aware of the somewhat arbitrary laws of account that govern them—especially because it is in the labyrinthine workings of our accounting systems that value itself is assigned. It seems that if we want to bring our infinitely voracious consumerism into line with the resources of our finite planet, we must consider giving our planet a value that the market can recognise and account for, assign a monetary value to the oceans, air, forests, rivers, wildernesses. • Delete this highlight

(My bold). In the end, we come back to the problem of economic value. There have been many major shifts in perception of costs and decisions and stocks and accountability and depreciation. Together, they make up the modern economy.

It is time for another major shift, to cope with intangibles and abundance and our reliance on those abundant stocks. Value should not be defined by arbitrary default.

 

Small Towns and Big Cities

Happy New Year! We are back in New York after traveling to see family over Christmas. It is is great to go away, and it is also great to come back home.

We were in a small mountain town for ten days, and it was very nice. Small towns are so much more livable than they were even twenty years ago. The town is filled with good restaurants of all kinds and cuisines - perhaps not as good as New York, but not bad and much cheaper. Standards have leapt ahead in recent years.

The supermarkets are vast. We love Freshdirect here in the city, but going to those big Safeways etc felt a bit like communist era visitors to the West looking at acres of food with big aisles. You can get pretty much anything even in the sticks now. The cost of living is very low, with Walmart dragging down the price of basics.

And that is before you count instant connection with the Internet and cable and Kindle downloads. We can read the Times updated to the second in a place where you would never have seen a paper copy before. It used to be living far away from a good bookstore was a hardship. Now almost any book you want is instantly downloadable, or can be delivered within days. And the town in question has a magnificent second hand bookstore as well.

We're still happy to come back to our little apartment perched in a tower. But sometimes I feel we pay a lot to live in the big city. Perhaps the relative advantage of cities is changing again.

Of course, relative advantage is always changing. People fled downtowns for the suburbs in the postwar years, escaping apartment blocks for houses with big yards. But many still want to be within commuting distance of major cities. Despite predictions of telecommuting revolutions, jobs still cluster in the major urban centers, with property prices to match.

It has been going on a long time. The fact you can buy enoki mushrooms in a small town is a small change compared to the coming of the railroad in the nineteenth century or radio in the early twentieth. But it still feels as if the relative sophistication of the metropolis is fading.

One theme of this blog is we are approaching material abundance, indeed material saturation as a society. In fact, we tried to hint to relatives that we didn't really have room for more stuff this year as gifts, so memberships, subscriptions etc were great as an alternative. ( We got stuff anyway.) Consumption naturally shifts towards intangibles - culture, relationships, vitality.

But many of these intangibles are spread in different ways.The level of material and cultural services even in remote places is now very high. You may not have the Met Opera, but the local cinema was advertising live HD broadcasts from the Met Opera.

It used to be you would escape stultifying repression in small towns for the anonymity and freedom of the city. But that difference has narrowed too.

Cities if anything have a slight deficit in terms of material standard of living. The main advantage they still have is cultural vitality. But even that can be priced out by soaring real estate prices.

It is now easier to take your life with you anywhere. Digital goods are omnipresent anywhere with a fast connection. I wonder if that will ultimately change property calculations.

The Art of Choosing

I read Sheena Iyengar's The Art of Choosing last week. It is a stimulating and rewarding book about recent psychological investigation, often by Iyengar herself, into choice. She is a Professor at Columbia, and her work seems another prime example of the renaissance of psychology has a discipline in the last ten-twenty years. We looked, for example, at Martin Seligman's work here, and Daniel Kahneman has had a major impact on economics.

Iyengar is more interested in choice than happiness or heuristics, however.

Our deep need for choice

First, she emphasizes the profound importance of a feeling of agency, of having some control, to almost all creatures. Even zoo animals exhbit listlessness and distress if they do not have agency. One might think of a zoo as a paradise for wild animals, with food and material needs taken care of. Instead, this "perfect hotel" is anything but.

In spite of the dedication of their human caretakers, animals in zoos may feel caught in a death trap because they exercise minimal control over their lives. .. Due to these physically and psychologically harmful effects, captivity can often result in lower life expectancies despite objectively improved living conditions. Wild African elephants, for example, have an average life span of 56 years as compared to 17 year for zoo-born elephants. p11, 13

There are other examples. Lower ranks of the British civil service have worse health and die younger than the upper ranks, according to a famous piece of research, as they have less control over their daily tasks. Giving residents of an old people's home more control over trivial things - plants, movie screening times, TV - leads to significantly better outcomes in health and happiness.

This is fascinating. We need a minimal sense of control over our surroundings and workflow to be happy. A utopia that takes care of material needs but allows us no sense of control or agency is likely to be make us miserable.

A society built on keeping people in captivity is bound to be unhappy. People need to feel they have choice, or they shrivel. Material abundance alone is not enough to make people happy. It is more likely to be an existence like a captive zoo animal.

Cultural differences

However, cultures differ quite radically in how they think about choice. Most cultures emphasize collective needs and approval over individual needs. The United States, not unexpectedly, is at the individualist extreme.

She contrasts this with the SIkh wedding of her parents in India. All choices were made by the families and tradition. The first time the groom saw the bride was when he lifted her veil after the marriage ceremony.

These cultural predisposotions affects workplace behavior too. She studied worldwide employees of Citibank, carrying out the same tasks. They differed significantly in the amount of choice they perceived they had on their jobs, and how much they preferred management to exert.

 

"Freedom from" versus "freedom to"

She traces such cultural attitudes back to a more fundamental difference over "freedom from" versus "freedom to", which she says Erich Fromm postulated in his 1941 book Escape from Freedom (which I read as a teenager). "Freedom from", said Fromm, is "freedom from the political, economic and spiritual shackles that have bound men,", especially others interfering with the pursuit of our goals. "Freedom to" is an ability, the ability to "attain certain outcomes and realize our full potential."

A system tending too far in either direction can limit people's opportunities, Iyengar says. Capitalism tends towards "freedom from", but not everyone will have access to all the choices available. Communism tends towards "freedom to", including equality of outcomes rather than opportunities. The problem is there is little incentive to work harder or produce more, and it requires a strong government which may become corrupted by power.

She found strong differences still endure between West and East Berliners in her research, for example.

.. people's long-held assumptions about fairness can't simply be swapped for another set of beleifs. I consistently found that West Berliners, like Westerners in general, understand the world through the lens of "freedom from." On the other hand, East Berliners, and in particular the older people, focused on "freedom to", even though communism was now only a memory for them. p65

The American dream is all about "freedom from".

People who see themselves and others as having high personal control tend to favor "freedom from", not only because it provides more opportunities to attain their personal goals but also on grounds of justice - those who put in the most effort will be rewarded, while those who slack off won;t be able to ride on anyone else's coattials. p68

Americans as a whole arguably believe more wholeheartedly in "freedom from" than any other nation.. The basic premise is no one can stand in the way of your highest aspirations, provided that you have the ambition and skills to realize them. p70

This matters because it might mean potentially fundamental and irreconcilable cultural differences in what people believe about the good life, which is a primary interest of this blog. The good life in the Confucian tradtion would be very different from the good life in the Jeffersonian tradition, so perhaps it is better not to think about it at all.

Freedom to what?

I don't think that's true, though. The fact of abundance, the end of the struggle for material survival, is a challenge to every culture, whether one contronts it on an individual or social level. We face "freedom from" the traditional limits of material and social scarcity. That is a massive change from the lot of humanity for all the thousands of generations before we solved the "economic problem".

Since the 1960s, many of the traditional limits in society have been lifted. What have we achieved with it? TV and the welfare office.

We have abundance. Then the question is - what do we actually want? And "Freedom from" in isolation doesn't say anything at all about that. It suffers the traditional liberal blindspot about where preferences and tastes and wants and desires and pleasure actually come from.

How do people find what they want, especially when older cultural institutions like the churches are in decline? What cultural influences or standards influence what people want to do with their lives after it becomes genuinely a matter of choice? Iyengar doesn't go into this.

For example, we looked some time ago at economist Tibor Scitovsky's work. People want the right level of stimulation, he argues, but it has to be genuinely novel stimulation, not simply quantitatively more. How do we achieve a system where there is more genuine choice, rather than people running faster and faster on hamster wheels for more of the same?


But at the same time, simply accepting traditional or collective notions of what "freedom to" means seems alien to our tradition in the West, and at risk from technological and cultural change. There is an impoverished group of choices for "freedom to".

In the past, "freedom to" has often meant spoilt aristocrats fighting futile dramas of status and prestige and honor, or rich trust fund kids subsiding into drugs and nihilism. It has meant religious extremism and monastric austerity and self-denial. At present, it often means crystal meth in small towns and people thinking of the office cubicle as a second home. In practice, it can lead to alcoholism and divorce and loneliness and pursuit of celebrity. As John Stuart Mill once pointed out, much rests on the quality of what we want.


There is, in fact, a longer history to these ideas. "Freedom from" is analagous to "liberty", whereas "freedom to" is more consonant with older ideas of "freedom", where being free has a positive meaning. (This reminds me of one of David Hackett Fisher's books, Liberty and Freedom: A Visual History of America's Founding Ideas (America: A Cultural History)which I must look at again. ) America was at the forefront of liberty in the eighteenth century, with lingering social consequences. It ought to be at the forefront of what freedom means now.

Everyone has to answer the question of "what next?". Perhaps the Woodstock Festival or the ABC Fall Line-up or the Google free snackbar in their Silicon Valley offices is the highest point people will ever achieve. Perhaps not. We do not discuss what we should aspire to any more, beyond egailtarianism.

 

"Freedom to" is not necessarily egalitarian or traditionalist

Iyengar's conception - and the traditional view - of "freedom to" is too limited. "Freedom to" is not necessarily socialist or egalitarian. It is not necessarily about minimal provision for all, or Rawlsian maximin welfarism. After all, we've seen that Aristotle's account of the good life has been criticized since for being so unconcerned with equality.

Instead, I think this is an example of where we have taken such a wrong turn. As soon as any suggestion of material sufficiency or abundance has appeared, the first response has been equal distribution. It seems to set off an egalitarian mania, in terms of welfarism and rights and taxation. Yet egalitarianism is not the only vision of the good life, or indeed, a particularly inspiring or just one.

There are deep potential problems with "freedom to", particulalty if people are coerced into a state vision of what it means. But once "freedom from" has been achieved, the only alternative to more discussion of "freedom to" is an unthinking default socialism or nihilism. We need a new conception of "freedom to" that will also correspond to an answer to the conundrum of "value" in economics which we were discussing recently.

I think that has to be centered on people developing their skills and capacitiies to their full potential, and that has to be connected to a conception of virtue and the good life.

We'll look at more of the book tomorrow.

 

 

 

Walking with Cavemen

I watched the BBC-produced series Walking with Cavemen on Netflix last night. It's an interesting recreation of life as it must have been for early precursors of people, in the style of a wildlife documentary.

It starts with Lucy (on the left here), a young Australopithecus Afarensis female in her twenties. She was discovered 3.5 million years later by a French-American expedition in Ethiopia. It moves up through homo ergaster and homo habilis to the Neanderthals, and the eventual appearance of us.

A few things struck me about the series. The reason some varieties of human survived, it says - us - was adaptability. Our lineage was a jack of all trades, rather than being superbly adjusted to just one particular niche.

In the final episode, the series argues that homo sapiens eventually outdid the Neanderthals and other closely related species because of our capacity for imagination. It was a close-run thing, too. The species almost died out 75-100,000 years ago. There were as few homo sapiens in the whole world then as there are orangutangs now. Only the most adaptable of an inherently adaptable lineage made it through that chokepoint.

There is one scene in which two humans bury an ostrich egg filled with water in the ground, on the off chance that they will be passing that way again and need the water. No other living thing has the foresight to imagine and plan.

In a way, that is the origin of our whole idea of wealth as well. It is a side-artifact of our motivation to plan ahead and have choices in the future. It is probably connected to contingent aids to survival.

Of course, squirrels do the same when they store nuts for the winter, and more systematically. But perhaps the difference is that is predictable behavior for predictable outcomes, and pure instinct. For us, it is more a store of adaptability and choice and material survival, because for four million years has been our distinctive specialization.

One other thing becomes very evident. The reason for the evolution of the massive human brain is not so much dealing with the external environment, but the human environment: such as reading people's intentions, motivations, propensity to cooperate and form alliances. We can cooperate, and also drive each other crazy with office politics.

The physical world is much simpler and predictable than the human social world, and needs less brainpower. Bacteria can move towards opportunities. Cats are extremely good at instantaneously calculating where to pounce. Even we are good at solving the quite complex mathematics of the trajectory of a ball thrown high in the air so we can catch it, without being aware of it. It is hardwired into our brains, even if we would struggle with the formal mechanics of ballistic trajectories.

Understanding people is the most difficult task the brain has. And that is why it evolved to be so large, despite the huge demands in terms of energy.

Dark social

This is a different view of the significance of Facebook and the social web that I only just noticed, by Alex Madrigal of the Atlantic. In summary:

1. The sharing you see on sites like Facebook and Twitter is the tip of the 'social' iceberg. We are impressed by its scale because it's easy to measure.

2. But most sharing is done via dark social means like email and IM that are difficult to measure.

3. According to new data on many media sites, 69% of social referrals came from dark social. 20% came from Facebook.

We should rewrite the history of the web, he says. People have shared ever since its early days. What Facebook does is provide a way to archive and monetize that sharing.

Art and Value

I felt like a change from political theory, so read The Value of Art: Money, Power, Beauty by Michael Findlay, an art dealer who used to be head of Christie's in New York. He discusses the art market and how art is valued, broken into commercial value, social value and essential value.

It's an interesting read. One of the things which is most striking (unsurprisingly) is the uncertainty of the enterprise. He quotes James Rosenquist, who said the process of art is " working like hell towards something you know nothing about." P175

Rosenquist also has a striking piece of advice for students:

Fine art is not a career. You may be very good and no one looks at your work until you are dead. Most artists don't cut it. I have had thirty-five assistants in the course of my fifty years as a painter and not one of them has achieved any success as an artist. What you need is luck. Nothing is guaranteed or automatic. P175

Findlay argues there is social value in art, such as the benefits for families of having art in the home, the social circles it brings, the opportunity for philanthropy and legacies. I was thinking about small-time art on holiday in New Mexico back in the early summer, and much of the value of art far from the auction houses of London and New York is social and personal in character.

Of course, as Findlay is a former leading auctioneer, his description of the commercial process of valuing art is very interesting and makes up most of what is absorbing about the book.

Naturally, considerations of quality and - especially - rarity apply. Dealers will know which private individuals own what, and which paintings may come back on the market in the next ten years. Provenance, condition, whether it was an "important" point in an artists' career, whether it has been shown in prominent musuem exhibitions, even previous ownership make a difference to valuation.

But so much has to do with titanic waves of wealth and booms in the art market. It is more a story of the vagaries (and pathologies) of the super-wealthy more than anything else, despite his occasional claims that anyone can collect art. It is a story of substantial extra spending by the auction houses on PR, glossy catalogues and private dinner parties in the last twenty years, and broad shifts in taste and fashion.

Art can overlap with branding and short-term financial speculation, although art investment funds, interestingly, almost never do well. Most of the market is still private, without public auction prices, he says. And choosing the few artists who will do well out of thousands is hard. And then sellers find the market is illiquid and the transaction costs enormous.

He comes from a side of the business which has to be able to make valuations which will satisfy IRS scrutiny for tax purposes, or insurance: a very prosaic angle of a very ephemeral and glamorous field. And purely financial motives are most often self-defeating.

The heart of it is the boundary of practical and eternal value - auction day stories and logistics and snobbery as against insight and talent and beauty.

He insists in the end perception is more important than information; art history, gallery labels, knowledge about the artist or the market are no substitute for, and can't replace, the experience of sustained attention to a piece of art.

Ultimately, he argues, there is essential value to the greatest art. it does not necessarily come from the twenty second glance that is usual in art galleries, however. Indeed, that may be the advantage of collecting and owning, he says: you get to live with a work of art. You get to feel it over time, rather than just have a right-brained summation of information in a quick glance.

Language can be a barrier. He quotes Barnett Newman: "The meaning must come from the seeing, not the talking."

It all sets up in clear terms the deeper issue of "what is value?", which economics often struggle with, as we shall see next.