Competitive brains and centrally planned computers

I’ve enjoyed reading (late) Daniel Dennett’s Intuition Pumps and Other Tools for Thinking, although I’m very far from being an expert reader. His materialism seems perfectly inuitive to me. I have no problem thinking that consciousness is the outcome of an accumulation of brain functions and that the life on earth we observe is the outcome of evolution by natural selection rather than an intelligent Designer. I’m not sure the book will change any minds, though, or reason people out of different beliefs. (Reason can only be deployed against people already open to it.)

However, Dennett thinks the brain is something like a computer, and starting with a detailed description about computing, routines and subroutines, and how software works is certainly a useful approach – the key difference being that a computer is a bureaucracy, a planned economy in which routines form orderly queues, while the brain is anarchic, super-competitive. As Dennett put it in The Edge interview about the book:

“They’re [ie your neurons] struggling amongst themselves with each other for influence, just for staying alive, and there’s competition going on between individual neurons.”

Another lens on Biological Market Theory.

Dennett’s metaphor of the ‘self’ as a ‘centre of narrative gravity’ is nice too – there is no physical location in your body for your centre of gravity, and different shoes or gaining weight will shift it a bit, but it’s still a meaningful thing. There is no ‘hard problem’ of consciousness, Dennett argues (maybe this was why The Hard Problem was one of Tom Stoppard’s less thrilling plays).

The book is a mixture of ‘tools for thinking’, or in other words techniques for critical thought and reasoning, and applications of the tools to consciousness, evolution and free will , and discussion of the philosophical debates about these thorny subjects. It’s very clear although some parts require immense concentration, at least from me. This is why I had to give up philosophy, but this book was worth the effort. If only all philosophers could write so clearly. I’ve always suspected that – like economics – the less intelligible the philosopher, the harder they find it to explain what they’re trying to say, the less they understand it themselves.


They’re watching you

I thought I was as concerned as the next person about online privacy and the harvesting of my data by big tech companies. Then I read Exposed: Desire and Disobedience in the Digital Age by Bernard Harcourt and realised that there are people who are far more worried about it than me. This is a very emotional book, and I’m not entirely sure what to make of it. Quite a lot of the material it covers is pretty familiar – for example, it draws on Edward Snowden’s revelations and all that has subsequently been written about them, and refers to books such as Tim Wu’s The Master Switch although it was presumably written before Cathy O’Neill’s Weapons of Math Destruction.

What Exposed does is join the dots to develop a picture of a society which is – not George Orwell’s Big Brother (because it exploits desire rather than repressing it), not a Surveillance State (because it is the state wedded to the private sector titans), not Jeremy Bentham’s (or rather Foucault’s) Panopticon (because the transparency is individualized not mass) – but rather the union of all of these.

The first part of the book sets out the limitations of each of these common metaphors for the digital world, arguing that the links between corporates, spies and governments are so tight they make the old military-indsutrial complex look amateurish. The second part describes what Harcourt refers to as the ‘Expository Society’, describing our willingness to reveal so much about ourselves online. The third part goes on to paint a portrait of a dystopian social collapse, with constant surveillance destroying people’s self-esteem to create passive consumers, and the border between incarceration and constant observation blurring. (In a striking comparison, the book links willingly worn smart watches to electronic tags imposed on offenders.) The final part offers a few (but not many) thoughts on how to resist.

While there is certainly much to worry about in the digital 1984/panopticon/surveillance world, I’d make three observations.

First, this is a very American-centric book. No other country (save perhaps China?) incarcerates or punishes so many of its citizens. Few others, not even the UK, are so thoroughly marketized. Germans have a completely different view of what is unacceptable in terms of invasion of privacy.

Secondlyly, there is another side to some of the phenomena. Harcourt paints as oppressive the ability of digital platforms to match more closely people’s wishes – he callis it doppelganger logic. There is something magical about this too. I thought of The Double Life of Veronique.

Finally, we can as the book suggests take measures to stop generating so much data exhaust for the big companies and spies to hoover up – the final chapter points to some steps. But we can also expect our anti-trust authorities to look closely at the duopoly of online ad revenues, the fraud in the online markets, and we can expect our governments to protect our privacy and identity. European authorities are starting to cotton on to this. We can also shop less, use the digital platforms more to swap or buy second hand – the sharing economy could yet deliver on its promise of subversion.

The most interesting chapter to me (as a statistics nerd) is the one about the evolution from classification by group in the 20th century, and the use of actuarial logic, to algorithmic data mining to pinpoint individual characteristics in the 21st century. I think Cathy O’Neill’s book shows that we are too far away from individual knowledge, in fact, and have a toxic mess of attributing group characteristics to individuals by algorithm. Anyway, this links to the emerging debate about whether there can be too much information for markets to work – insurance markets may collapse, for instance, as insurers learn too much about individuals and move away from group risk.

Anyway, I’m not going to wear an Apple watch, will check my Firefox add-ons, and will use Olio to give and take rather than sell and buy. Exposed goes over the top but it’s surely right that citizens need to worry more about privacy and digital power.


Pricing progress – yes please

I pounced on Eli Cook’s new book, The Pricing of Progress: Economic Indicators and the Capitalization of American Life. The author is an historian, and I enjoyed reading the historical detail, which traces the evolution of economic measurement of the US economy from Alexander Hamilton on. The early chapters set up a contrast between the use of ‘moral statistics’ – essentially detailed social statistics – in public discourse and policy in the earlier part of the period and the forerunners of the economic statistics we are used to today. Hamilton was an outlier in his day, the book argues, in seeking to price everything. It was not until the late 19th or early 20th century that the commercial mindset predominated. And Cook – like many modern critics of capitalism from Polanyi on – regrets that shift.

This framework means the book sees more continuity than I (and others) would between pre-World War 2 statistics and modern ones. Cook’s argument about that continuing essence is this: “One of the key elements that distinguishes capitalism from previous forms of cultural and social organization is capital investment, the act through which basic elements of society and life – including natural resources, technological discoveries, cultural productiond, urban spaces, educational institutions, human beings and the fiscal nation state – are transformed (or capitalized’) into income-generating assets valued and allocated in accordance with their capacity to make money and yield profitable returns.”

It seems to me there are two separate arguments here. One is about the spread of money as a metric. Concerning the ‘moral statistics’ of the mid-19th century, Cook writes: “Moral statistics did not measure social welfare in units of money, as the American people’s general disdain of the pricing process held strong through the 1840s.” Indeed, he notes an ‘explosion’ in the use of the word ‘priceless’ in the 1830s and 1840s – although this was a sign, perhaps, of this approach coming under pressure. The book portrays the 1850s as “a watershed decade for the pricing of progress”. This is a well-aired debate, to which the economist’s response as always been that it is impossible to weigh up trade-offs without measuring in common units, and money is at least as good as any other. Anyway, this dislike of money as the metric of value of culture, natural resources etc will resonate with many readers.

The point about regarding all of these things as income-generating assets is a distinct one. The book starts by defining this – just like the theory of a company’s market cap – as the net present value of the stream of future earnings. The first example is the shift (in 17th and 18th century England) from seeing land as a forum governed by traditional relationships to the enclosure of land and its valuation estimated as a multiple of expected rents. The book sometimes uses ‘capitalization’ with a different meaning – often, just ‘aggregated’. It does acknowledge right at the end that modern (system of national accounts based) economic statistics are different from predecessor statistical frameworks such as those of William Petty or Thomas Jefferson: “There is one important difference between GDP and some of the previous forms of capitalization documented in this book.” That is, of course, that GDP pays no attention to asset values at all. All that matters is the current flow of resources, no matter what the inter-termporal trade-offs or depreciation.

This seems at least as important a watershed as the transition to valuation based on market prices: if only we had capitalized natural resources then we might not be in the current dangerous environmental situation! It is true that at in microeconomics the ‘capital’ metaphor has persisted and spread – we have human capital, cultural capital, social capital etc. Some of these are more persuasive than others – natural capital is as real as physical capital. I find the concept of human capital and investment in one’s capabilities a useful one, though Cook disparages it. And – being an economist – would argue we should be doing more pricing of assets we ‘value’ (in the normal everyday sense) in order to take more care of the future than has been the case for the past 70 years or more. The more we ‘capitalize’ the future benefits nature will give us, by looking at the value of tomorrow now, the better we will look after the assets.

So although there is a lot to enjoy in The Pricing of Progress, the elision of monetization and capitalization is confusing and frustrating. It lasts up to the final page, where Cook criticizes Donald Trump for comparing running America to running a business. I agree – but would not describe it remotely as a “capitalizing vision for America,” as Cook describes it. On the contrary, Mr Trump seems to have no concern at all for America’s assets, as he and his family extract as much value short term as they can. Read this book for its insights into the growth of a commercial mindset in 19th and early 20th century America, including the role of slavery, but I don’t think it adds a lot to the current debate on economic measurement.

Price: £18.72
Was: £23.95

Competition, competition, competition

Grazing along my bookshelf this morning, postponing getting to work, I found ‘Industrial Concentration‘ by M.A.Utton in the Penguin Modern Economics series – 1960s/70s paperbacks for the people providing overviews of different fields in the subject. This one was published in 1970 and it’s fascinating as a window on the historical evolution of competition policy.

One distinction it draws, certainly no longer valid, is between tough American anti-trust policy with a legacy dating back to the Sherman Act and relatively weak and new British competition policy based on 1948 legislation under the Monopolies Commission, which Utton describes as always willing to accept ‘public interest’ arguments for allowing mergers of big companies. American policy was far more willing to tackle the structure of an industry, he argues.

Hence UK business had become far more concentrated in the 1950s and 60s, although with effects mitigated by greater openness to foreign competition via trade than the relatively closed US economy. At the time of writing, the newish (1966) Industrial Reorganization Corporation (IRC) in the UK was busy promoting still more mega-mergers to create ‘national champions’, with the companies involved given a nod and a wink to say they would not be referred to the Monopolies Commission.
Interestingly, a recent Yale Law Journal article by Lina Khan argues for a return from the Chicago School emphasis on consumer welfare as measured by current prices to Sherman Act-inspired interventions in market structure, in the context of the digital giants. But it isn’t just the digital sector; there’s pretty convincing evidence of increasing concentration across the US economy, as The Economist recently summmarised.

The UK’s history of competition policy has been brighter recently thanks to the formation of the independent Competition Commission and now Competition and Markets Authority (with its excellent economists, including my son). There have been blips – notably the very bad decision during the financial crisis to make finance a sector exempt from the usual competition rules, in order to allow the Lloyds-HBoS merger. Still, the independence of the watchdog and the removal for the most part of vague ‘public interest’ considerations has been beneficial. However, vigilance is needed.

It isn’t only the challenge of ensuring the giant digital companies, with their giant network effects and economies of scale, continue to deliver for social rather than just private gain. The EU’s State Aid regime has been a massively important backdrop to domestic policy. If the Brexit train wreck continues, it will be essential to carry the regime over into domestic policy.

This is all the more important in the context of both the likely negative impact of Brexit on key sectors – there will be queues of badly affected businesses asking for special help or dispensations – and the aim of having a more strategic approach to economic policy, an industrial strategy. Nobody (in theory) wants a return to the ‘picking winners’ (ie losers) days of the IRC.

A really tough competition policy is the best way to avert this. It needs to include not just State Aid rules but also a rethink about the weak sector regulators in network sectors like water and telecoms. This is why we on the Industrial Strategy Commission have been putting so much emphasis on competition policy.

(I note the Amazon price for this book is algorithmically weird – original cover price was 40p.)


Founder of the information age

For reasons linked to book and bag size, and journey modes and lengths, I’ve been reading three books at once – Jennifer Homans’ Apollo’s Angels (a monumental history of ballet, non-portable), a biography of Claude Shannon, and Daniel Dennett’s Intuition Pumps and Other Tools for Thinking.

I’ve finished the middle one now, A Mind At Play: How Claude Shannon Invented the Information Age by Jimmy Soni and Rob Goodman, and thoroughly enjoyed it. When I described it to some friends at the weekend, to my surprise they turned out never to have heard of Claude Shannon. Those of us with interests in digital know of him as the author of a profoundly important paper launching information theory. It seems this is the first full biography, and it starts from his childhood in a small town in the midwest via wartime service in cryptograhy and then a long stint at Bell Labs to MIT. (He met Alan Turing during the war but both were doing work so secret they didn’t dare talk to each other about it.)

I’m not sure I’d seen a photo of Shannon before and he looks like a blend of Samuel Beckett and Albert Camus. He seems to have been rather reclusive, whimsical – rider of unicycles, keen juggler, creator of gadgets such as a machine to turn itself off, and so on. His most famous creation – in that it got him to public attention – was a mechanical maze-solving mouse (named Theseus) that would learn to find a piece of (metallic) cheeese. (Although, Shannon explained, the maze solved the mouse rather than the other way round. The information was in the maze, and it and the mouse formed a system.)

After 1948 when his paper was published, Shannon was a celebrity and much in demand for lectures. The book explains that he had few graduate students because most were too much in awe of him to dare ask him to supervise their work. Shannon’s paper (later a book), A Mathematical Theory of Communication picked up the idea that information is a meaningfully quantifiable entity, defined communication as the reproduction of messages, transmitted as a signal, subject to noise, to a received. Thus abstracted, all kinds of things could be interpreted as the communication of information. Importantly, Shannon introduced the role of uncertainty (information is a measure of uncertainty overcome), redundancy (uninformative but helps mitigate noise), and defined the bit, an amount of information that results from a choice between two equally likely options. A message is the elimination of all irrelevant signals from the available pool. Without Shannon’s paper, the modern era would not exist.

The book does a good job at explaining the ideas in combination with rattling good storytelling about the life of someone who was clearly an extraordinary character. Shannon settled down at MIT into an enjoyable life of making gadgets, attending conferences and playing the stockmarket. He does deserve to be far better known and this biography is a great place to start.