Morbid symptoms

One of the benefits of reviewing book manuscripts for publishers, apart from the obvious one of getting to read great books early, is that they generally offer a few books from their catalogue as a reward. I tend to pick titles outside the economics list. So it was that University of Chicago Press sent me a few books a while ago, including a new edition of Hannah Arendt’s The Human Condition. As economists are not all that widely educated, I’d never read it before. I thought I’d better go ahead and do so when one of my political science colleagues saw it on my desk and said, oh yes, we teach that.

41WZ7LhSBUL._SX331_BO1,204,203,200_Sadly, I wasn’t bowled over by the experience. Apart from a great new introduction by Danielle Allen, it’s mainly pretty impenetrable stuff interspersed with some tantalising rhetoric – which then doesn’t entirely make sense to me. For example, “It is in the very nature of this society itself that privacy in every sense can only hinder the development of social ‘productivity’ and that considerations of private ownership therefore should be overruled in favour of the ever-increasing process of social wealth.” Sounds impressive. Not entirely sure what ‘this’ is referring to – modern capitalism as earlier in the same paragraph? Mediaeval society as in the previous paragraph? I think this is a critique of Proudhon but am not entirely sure. Of course I haven’t read Proudhon, which doesn’t help, not the ancient Greek texts referred to so much in the book.

All this says is that I’m an economist unused to reading political theory, of course, and no doubt I’d be a better person if I had been taught this at a younger age.

I did, though, return to Gramsci’s Prison Notebooks, which I had read in my youthful radicalism, prompted by a conversation with someone yesterday who half-remembered this: “The crisis consists precisely in the fact that the old is dying and the new cannot be born; in this interregnum a great variety of morbid symptoms appear.”

Now, this does seem to speak to the modern age.

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Thinking strategically about platforms

Digital platforms have been very much a focus of policy attention of late, with reports on the problems and challenges they raise published by the UK (several, including the Furman Review), Australia, Germany, European Commission & others. The platforms these various reports discuss are the big ones, and the concerns range from competition policy to employment practices to online harms.

A terrific new book by Michael Cusumano, Annabelle Gawer and Devid Yoffie, The Business of Platforms, points out though that most of the digital platforms that are not big are dead: four in five fail. The book is aimed at people running or starting platforms, offering advice on (as the subtitle puts it). “Strategy in the Age of Digital Competition, Innovation and Power).” The book very nicely links business strategy to the underlying economic characteristics of digital, and I think is probably in this respect the best tech business book since Shaprio and Varian’s (now old, 1998) Information Rules.

It starts by pointing out that there is nothing inevitable about network effects (direct and indirect) kicking in: they have to be nurtured: “Companies and governments have to make the right srategic and policy decisions in order to drive strong network effects.” These can include technical standards, for example, or ensuring competition thrives at the right times and points. The book also distinguishes between two types of platform, requiring different strategies (although there are a groing number of hybrids). Innovation platforms create value by enabling third parties to develop products or service on top of the platform, while transaction platofrms create value by matching different sides of a market.

Key challenges for all, though, involve solving the ‘chicken and egg’ problem (because different sides of the platform depend on each other) by appropriate pricing and cross-subsidy, and figuring out a business model. (And in my view the dependence of so many on advertising is a major weakness & can’t be sustained). The book uses the framework to explore the many platform failures. It also has a chapter on how non-platform incumbents can respond to the digital challenge (it’s tough…), and looks briefly at issues such as the use and governance of data, and also the importance of working with regulators rather than against them and recognizing the responsibilities that come with (market and other) power. “Every major company we cited in this book has been the subjject of government investigations, local regulatory oversight, and intense media scrutiny.”

All in all, highly recommended. If you know the economics, the case studies and management literature covered will be informative, and if you know the business details, the economic framework should be useful. I very much enjoyed reading it.

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Industrial policy – back to the future?

Jon Agar’s new book, Science Policy Under Thatcher, is an interesting dissection – based on newly released government documents from the National Archives – of the u-turn in science policy in the UK in 1987. The campaign against cuts to government funding of research had begun a year earlier, with the launch in January 1986 of Save British Science. Agar argues that those cuts did not mark a specific science policy shift; that came the following year with three changes: a restructuring of science advice to government to increase central control of the machinery; the document A Strategy for the Science Base, which distinguished three tiers of institution, namely a few research-intensive universities, teaching-focused centres, and near-market entities; and finally – under the ideological influence of the Number 10 Policy Unit and its adviser George Guise – a focusing of government funds on pure, ‘curiosity-driven’ science and major cuts to near-market research funding, along with the privatisation of government research labs undertaking such activities.

This was a significant shift away from the previous conventional wisdom. It had emphasised the need for government-funded research to deliver identifiable economic returns. For the Thatcherites, this meant the bad old ways of winner-picking, and civil servants pre-empting the decisions of private sector managers and investors who were far better placed to take risks and judget markets. The switch to funding ‘market failure’ pure science was part and parcel of the dumping of industrial policy (a contradiction in terms, more or less, to the free marketeers).

Interestingly, we have now a policy u-turn back through another 180 degrees. And although I strongly support the need for government to engage with research across the entire spectrum from far from market to near-market, there is a danger of making the same mistakes all over again as policy makers go back round the goldfish bowl. The enthusiasm for ‘sector deals’ makes me very uneasy, as these are almost always the outcome of successful lobbying efforts, and probably encouraging anti-competitive outcomes. After all, which companies are in the ‘auto sector’ today – and which will be in 10 or 15 years? What about new entrants – how do they get in on ‘sector deals’? Similarly, although ‘mission oriented’ policy is terrific in theory – who could argue with a mission like ‘decarbonise the economy’ or ‘deliver high quality social care’ – in practice it risks translating into officials getting involved in battery technologies and enthusing consultancies with the potential new opportunities.

The experience of the 1980s should also make those interested in science policy and industrial policy now reflect a bit before concluding that back to the pre-1987 future* is the right way forward. ‘Should the government mainly fund basic science or near-market research?’ is the wrong question. Governments of course should fund basic science, which is a classic market failure. But the policy challenge isn’t about money so much as co-ordination and facilitation – ensuring industry standards emerge fast enough and at the right level to grow new markets, enforcing competition law, using government procurement to give investors confidence there will be demand for innovations in areas such as health care or education, making sure the financial tax and regulatory system provides incentives to invest in growing tech businesses, and so on.

The overview of the 1987 policy switch is contained in the final chapter of the book, and as it contrasts with previously-published versions of Thatcher’s science policy there will no doubt be further debate about it among historians of science policy. Agar’s account seems (to this non-expert) very well documented and persuasive. The earlier chapters single out specific issues or episodes, such as civil nuclear power, the environment, and the public debates over AIDS and IVF (the Warnock Commission – my colleague Sarah Franklin and her team have done tremendous archival and interview-based research on this). The book could have done with a bit more synthesis as it’s easy to get lost in the weeds. On the other hand, the detail is deeply fascinating for anybody interested in the mechanics of government and policy-making. I really enjoyed reading it.

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*The UK government provided John DeLorean with significant fiscal incentives to produce his futuristic car – which was then only used in the movie Back to the Future

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Social butterflies?

When somebody is called a social butterfly, it isn’t usually a very positive evaluation. Social Butterflies: Reclaiming the Positive Power of Social Networks by Michael Sanders and Susannah Hume use the term in a neutral, descriptive way to characterise modern life: fluidity between social categories, more means of communication with more people, and above all amplified mutual influence – for good but also, very obviously, bad, whether that’s bank runs or fake news. As they write, “The rise of social media has sent our social instincts into overdrive.” Not so much butterflies as scorpions online, perhaps.

The book is a behavioural economics perspective on social capital – both the authors were previously researchers at the UK’s Behavioural Insights Team aka Nudge Unit. It starts with a section on group behaviour. looking at the ‘them and us’ instinct and resulting stereotyping and discrimination. It then moves on to social choice architecture – how can nudges be used to shape positive social interactions and outcomes. This includes questions such as how social norms shift, how habitual behaviours shift, how information moves through social networks, and shaping group dynamics. Then there’s a final part discussing policy interventions to build social capital: “Our aim with this book is to sketch out a roadmap to a society where there is more belonging, more trust and – we hope – less discrimination and confirmity.”

These days this seems like a forlorn hope. As the Conclusion observes, the authors started out writing in a mood of cheery optimism and then, well, stuff happened. It’s no coincidence that academic interest in social capital (including ours at the Bennett Institute) has revived after quite a long hiatus, given the state of the world and the polarisation evident in some may countries and political systems. Furthermore, they observe, social influence has negative connotations of pressure to confirm, for many people. I’m not wholly persuaded that nudge approaches are the answer to the apparent decline in social capital or trust; they turn the lens on individuals and the book is full of jolly examples of individual change. Although society is composed of individuals, perhaps collective outcomes are not best thought of as the sum of individual choices… is the solution to the problems inflicted by social media to be found in the choice architecture of Facebook and Twitter? For sure their engineering principles should take account of the social consequences but I wouldn’t want to rely on that.

Still, the book does have lots of interesting examples, relevant to people running teams or organisations as much as to policymakers. It’s engagingly written – and is for sure asking an important question.

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Cartographical, and ethical, literacy

I love books about data visualisation – the oeuvre of Edward Tufte especially The Visual Display of Quantitative Information, anything by Howard Wainer eg Picturing the Uncertain World. So I’ve very much enjoyed How to Lie With Maps by Mark Monmonier. This is an update of a classic tetbook and has been an eye-opener. Although I love maps, and althoug software means they are used far more often, I’d never really thought about them in the same mental bucket as other forms of data visualisation. The book covers everything from choice of symbols to use of colour and shade to the influence of culture and politics on maps. It’s fascinating, the interplay between the apparently technical choices made in making a 2D representation of reality and the social/political/cultural context of the mapmaker. The book will make me a far better prepared observer of the way maps are used in the media and online. Surely we could all do with some more cartographical literacy?

615hGVgBWPL._SX322_BO1,204,203,200_I also read Welfare, Happiness and Ethics by Wayne Sumner. Its aim is to defend a welfarist approach by constructing a version that addresses previous criticisms – consequentialism is out of fashion except in its everyday use in economics, although economists rearely ponder the philosophical foundations of social welfare. I’m not sure the book succeeds, but then I don’t know the answer to Anderson’s dilemma (in Value in Ethics and Economics) about the realism of ethical pluralism versus the realism of non-pluralist, consequentialist public decision-making: every actual decision implicitly makes a choice between plural values.

41YvT8kR1LL._SY346_The late, great Tony Atkinson (whose posthumous Measuring Poverty Around the World is recently out) published an article in 2001 on the Strange Disappearance of Welfare Economics. We haven’t yet answered his call to reopen welfare economics, but it’s really about time.

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