Morals and economics

Every time I read something about Karl Polanyi’s The Great Transformation – and it’s in vogue now – I go back to my copy and confirm how much it annoys me. It’s the over-statement or pomposity that does it, rather than the broad outlines: markets mean inevitable cataclysm. “Our thesis is that the idea of a self-adjusting market implied a stark utopia. Such an institution could not exist for any length of time without annihilating the human and natural substance of society; it would have physically destroyed man and transformed his surroundings into a wilderness.” He goes on to argue that the social crises and conflicts of the early 20th century were caused by the disruption to the market and economy caused by the reactions to the market forces leading to social annihilation.

Similar arguments have been made by many others, from Daniel Bell (The Cultural Contradictions of Capitalism) to any number of left-leaning authors. The Moral Economists by Tim Rogan puts Polanyi in the context of a succession of critics of capitalism, preceded by R.H.Tawney and succeeded by E.P.Thompson, whose common territory was a rejection of utilitarianism: “The moral economists argued that the solidarities they found in Lancashire, Red Vienna and Yorkshire harbored unique promise: here social interaction was more meaningful than utilitarian analyses allowed, without becoming regimented in the way of so many contemporary social experiments.” They shared a more rounded sense of human personality than homo economicus in the utilitarian analyses, as well as a conviction about the role of social interaction and solidarity in economic outcomes. Tawney, for instance, opposed Fabian socialism because of its dry utilitarianism.

Rogan gives Polanyi a sympathetic reading, noting that he regarded Adam Smith as a moral economist, with the decline into ‘economism’ coming later – this is a reading of Smith, and emphasis on The Moral Sentiments, that has become more prominent in the past decade or so. The Moral Economists argues that the Tawney/Polanyi intellectual agenda was stymied, however, by the postwar turn away from religion in particular and traditional moralism in general. For this reason, it argues, E.P.Thompson was unable to reinvigorate the moral critique of capitalism. However, Rogan asks, surely the critics of contemporary capitalism need to restore a role for morality or virtue in a secular world?

The book ends with a section on the inadequacy of modern welfare economics based on the Pareto optimality idea, and is sympathetic to Sen’s approach. I agree about this. Rogan ends: “Politics pervades commercial societies, frustrating technocratic visionaries of the 21st century [Bell would agree about this too] just as it confounded the goat-and-greyhound utilitarians of the 19th century. … In an age of extremes, the moral economists discovered in their midst the elements of humane, solidaristic, low-key and non-authoritarian politics of reform.” Can we do the same in today’s context of extremes and the all-too-apparent flaws of the current version of capitalism?

It’s an interesting book, and I agreed with much of the argument about putting virtue back into economics, although I find ‘capitalism’ (without further explanation) an unhelpful abstraction looking across such a long and eventful timespan.

(But I’m still not going to change my mind about Polanyi.)


Still grumpy about compulsory happiness

Richard Layard has been a powerful advocate for the use of well-being or happiness as the aim of government policy for many years now. The new book he has co-authored with other happiness researchers, The Origins Of Happiness: The Science of Well-Being Over the Life Course, is a useful overview of the now-large body of empirical work exploring the links between measures of happiness (I’m going to use the book’s shorthand) and potential explanatory factors. It looks at both adult outcomes and child development. There is a substantial bibliography and excellent index. And, while not a completely easy read for the general audience – as technical jargon does slip in – it’s also very accessible.

My ‘but’ is not about the book specifically but about the advocacy of a well-being policy target in general. The applied work linking potential causal explanators to individual happiness is persuasive, and it’d be hard to argue with the kind of policy conclusions one might draw: keep employment high and stable; fund mental health care far more generously; aim to have a high trust society. Some conclusions are equally persuasive without having obvious policy implications: children need a stable and loving family more than they need a high income family; family conflict is bad for children’s well-being.

I was less familiar with the work reported in the book on education, and am not sure what to make of these sections. The empirical claim is that additional years of education contribute relatively modestly to individual happiness, and this is almost outweighed by the negative effect of comparing oneself to others: “Extra education brings considerable benefits (direct and mediated [via higher income]) to the individual. But these are substantially offset by the negative effect of one person’s education on others in the peer group.” In contrast to the received wisdom, in other words, education has negative rather than positive externalities. Maybe, this chapter concludes, it’s ok to continue with higher education because there will perhaps be some civic benefits. The unwritten coda is that the authors might like to see the education arms race halted – just as they want to policies to end the income arms race, for their conclusion is that people in the main care about their relative status, and the only way to stop this making them unhappy is to stop them trying.

Less jawdropping is a chapter on the influence of schools on children’s well-being. Its conclusion is that there is great variation between schools, and a good school has a far better impact on children’s well-being, attainment and behaviour than a similar amount of money spent by the individual family. The result doesn’t seem to be due to individual teachers, so the cause lies in the institutional context. This seems interesting and well worth further exploration, especially given the wide variation between schools.

The book’s main message is the same as the original Easterlin paper: rising incomes do not translate into rising happiness, and we could all be happier if we stop pouring our energies into positional outcomes such as income, where we compare ourselves with other people. Anyway, the argument goes, the psychological mechanism of adaptation or habituation moderates the benefit of rising incomes. Therefore policymakers should aim to increase happiness, not incomes. This seems illogical to me: if we are all going to return to a happiness set-point after a period, why bother with policies trying to increase happiness? (And never mind the point that happiness data by construction range from 0 to 10, with the great majority of people in the top half of that range; while income measured by real GDP is an analytical construct that can in theory rise without limit. Am I missing something here? It rarely gets mentioned in the discussions of the happiness lit.)

In sum, I’m in full agreement with the authors about policies to improve some of the factors that clearly affect people’s well-being. But I still don’t want well-meaning economists and psychologists (all with PhDs) trying to make people happy, utilitarian engineers of souls – still less politicians.

I also just read Animals Strike Curious Poses by Elena Passarello and was hugely disappointed. It had rave reviews, and is about the relationship between humans and animals. Although she obviously knows a lot – and some sections of the book were very interesting – it’s massively over-written and veering into the kind of creative writing task you set school children: “Write about how it feels to be a woolly mammoth being hunted.”

Price: £12.33
Was: £12.99



Civilisation: primeval slime to Mars

I finished Daniel Dennett’s From Bacteria to Bach and Back, and personally have no problem with his view that human consciousness is an evolved characteristic built over time from the ground up, and that human culture evolves too, starting with language and continues through memes. In other words, it’s all cranes, not skyhooks. Some people are obviously troubled by this argument. I lack the technical knowledge to evaluate all the detail here. It fundamentally seems far more plausible to me than the alternative.

As a matter of logic, this requires me – and Dennett – to take seriously the argument that computers/AI could evolve minds and consciousness. He puts some weight on the importance of embodiment – but that might be possible although we’re not there yet. Computer vision would be different from ours, but then so is flies’ vision or cephalopods’.

More of an issue, it seems to me, is that computers/AI are very energy-hungry compared to our brains: at the moment, Dennett writes, computer intelligence is parasitical, depending on humans to feed them a lot of energy and otherwise maintain them. What’s more, computers don’t have to struggle or compete: “Down in the hardware, the electric power is doled out evenhandedly and abundantly; no circuit risks starving. At the software level, a benevolent scheduler doles out machine cycles to whatever process has the highest priority, and although there may be a bidding mechanism … this is an orderly queue, not a struggle for life.”

So for now, I’ll stick to thinking Singularity-talk is mystical hype; but will try to keep an open mind on this question.

I’ve always had a soft spot for memes. Dennett uses words as the paradigmitic examples. It reminded me of a jokey line I read once about libraries being the dominant life form on Earth because they are so good at finding new hosts who will start to accumulate books.

There’s a nice section on the importance of social trust at the end of Bacteria/Bach, citing Paul Seabright’s wonderful Company of Strangers. Trust is the invisible glue of human societies, Dennett writes, and much too recent to be a hard-wired natural instinct. “We have bootstrapped ourselves into the heady altitudes of modern civilisation, and our natural emotions and other instinctual responses do not always serve our new circumstances. Civilisation is a work in progress and we abandon our attempt to understand it at our peril.”

Looking at the news these days, that isn’t a very optimistic note on which to end. And yet yesterday brought the amazing launch of Space X’s Falcon Heavy. Astonishing. Perhaps we’ll end up on Mars while the computers colonise Earth.



Optimizing bacteria & the value of information

One of the most exciting moments in my World Economic Forum experience was meeting Daniel Dennett, who was the first person to turn up to hear me talk about measuring the economy – he’s the distinguished Father Christmas-bearded chap on the right.

Daniel Dennett listening to meIt’s only quite recently that I read his Intuition Pumps and Other Tools for Thinking. Now I’m half way through the more recent From Bacteria to Bach and Back.

It’s interesting in part because of the read-over to economics. For example, the book talks about the reverse engineering approach to evolution – how come this creature has this feature? “Reverse engineering is methodoloigcally committed to optimality considerations,” Dennett writes. (NB this does not mean simplistic ‘just so’ stories.) The control circuits of an elevator have been top-down designed for good reasons, while the control proteins of bacteria have been bottom-up ‘designed’ (that is, evolved in their environment) for good reasons too. In economics optimisation is presented as an assumption about top-down choices, but maybe it’s more useful to consider it as a bottom-up description of how people decide to act, given their environment.

When the book turns to information – ‘a distinction that makes a difference ‘ – Dennett makes the link with economics explicit. Like other biological information, economic information is semantic information of some us to us. How useful depends on individual context – the value of information lies in the receiver. This means it can’t be measured in a non-arbitrary way (although its usefulness can often be empirically confirmed). Dennett also argues that semantic information does not need to be encoded to be useful, obvioulsy a claim of relevance to the debate about AI. (He spoke about this in Davos.)

This is interesting as it was an issue discussed in the recent ESCoE seminar by Richard Heys (on a paper I co-authored) about the price of telecommunication services. As a sort of thought experiment, we calculated a unit value index for these services – revenues divided by the volume of data used in bytes. This index declined 90% in the five years to 2015. But, one strand of the discussion went, not all units of data are equal; some are far more valuable than others. Of course. But the value is in the eye (or bank account) of the user, and what other signal of value could we select other than the decision to use?

This reminds me that I’ve been meaning to write, since I read it in October, about Jason Smith’s interesting e-book A Random Physicist Takes On Economics. I find it very hard to write about books in the Kindle app as I can’t page through them (though it seems there’s now a paperback); so all I will say is that it’s worth reading for its observations on the methodology of economics. I share some of its reservations – above all, the trouble macro has with aggregation. It also made me think about the role of context or environment, and why this might be more influential than individual choice processes in determining economic outcomes. Smith alludes to the literature on biological market theory, pointing out, though, that this does not rest at all on the utility of biological agents, be they pigeons or fungi.



An impulse buy

I was just passing through the Blackwell’s on campus here when I spotted Lorenz by Captain Jerry Roberts. I’m a sucker for books about the code breaking efforts at Bletchley Park. I loved the wider and gripping account of intelligence efforts in the UK during the war, Most Secret War by R.V Jones.

This book is about breaking the Lorenz (rather than the Enigma) code. Captain Roberts (whom my husband met) died in 2014 but the book was just published last year. War is often the crucible of innovation but we often think of material technologies (canned foods for Napoleon’s armies, Teflon in the Cold War/space race). The immaterial technology of codebreaking and computing was surely by far the most significant, though?