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.

 

 

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The information economy

I very much enjoyed reading Cesar Hidalgo’s . It’s a very original perspective on the process of secular economic growth, bringing together not only several strands of the economics literature – growth theory, institutional economics, social capital etc – but also physics, biology and information theory. So it’s certainly ambitious, and I found it largely persuasive.

[amazon_image id=”B00R3C1V0Q” link=”true” target=”_blank” size=”medium” ]Why Information Grows: The Evolution of Order, from Atoms to Economies[/amazon_image]

Hidalgo’s first point is that we are misled by thinking of the information economy as ‘weightless’ (a term I think I coined, or at least popularised, in my 1996 book The Weightless World) into forgetting that information is nevertheless physical. “Information is not a thing; rather, it is the arrangement of physical things. It is physical order.” He links the order of the economy to the order of the universe that can exist in pockets despite entropy. Economic order comes about through information embodied in things (‘crystallised imagination’) and in the way people organise themselves to apply knowledge and know-how. The first section is rather poetic. Hidalgo describes a tree as a computer powered by sunlight. “A tree processes the information that is available in its environment.” He describes a colleague at MIT who lost both his legs to frostbite while mountaineering, and built his own prosthetics: “He is walking on solidified pieces of his own imagination.”

The book goes on to consider products imported and exported by countries in terms of ‘crystallised imagination’, which requires “an enormous amount of knowledge and know-how.” Knowledge is the set of instructions – a book describing how to play a guitar – and know-how is the practical experience enabling application – the process of learning and practising playing to produce lovely music. Hidalgo introduces the concept of a ‘personbyte’ – the limit to the knowledge and know-how that can be embodied in one individual. For an economy to go beyond that requires collective organisation. He argues against the normal economic argument that economic development is the process of acquiring the ability to consumer more goods and services. “Economic development is based not on the ability of a pocket of the economy to consumer but on the ability of people to turn their dreams into reality.” (This part doesn’t wholly convince me – it’s an appealing case but surely consumption matters too.)

The book then turns to the idea of the economy as a social and technological system for amplifying knowledge and know-how, and looks at institutional economics and the role of social capital in growth in this context. Conveying know-how is difficult, and becoming more so as time goes by and the economy becomes more diverse and complex. The “computational capacity” of the economy needs to grow, but it is constrained by the ability for knowledge and know-how to be embodied in networks of people – hence the value of trust, as it makes that easier.

Hidalgo’s work on the enters here: there is a strong positive correlation between a complexity index and long term growth (over 10 years). The falling cost of communications and the emergence of standards have increased the number of long-distance market links (instead of transactions within single firms), and this know-how transfer is made far easier by high trust, which enables larger networks. Low trust economies are often characterised by more family firms and rely more on the state to spread knowledge and know-how through its support for industries.

There is a very nice analogy of the economy as a jigsaw. “Moving a complex industry is like trying to move a jigsaw puzzle from one table to another. The more pieces in the puzzle, the harder it will be to move it, as the puzzle falls apart when we fail to move all the pieces at the same time.” It is easier to move just a few pieces to another table that already has part of the puzzle in place. Thus economies mostly grow out from their earlier set of products, which embody the know-how they already have – they already have some of the pieces. The description of this process would very much appeal to evolutionary economists.

A final point that very much intrigues me is measuring growth. Hidalgo makes the same point as the final chapter of my  book, that in adding things up in terms of their monetary value we are not capturing the value of diversity: three spoons are not as valuable as a knife, fork and spoon. He says that using market price denomination to aggregate implicitly assumes there is friction-free trading; but this is often not possible, especially with stock variables. He advocates looking at the disaggregated economy via input-output tables.  “The mix of products exported by a region’s industries represents a fingerprint of its productive capacities that does not suppress the identity of the economic elements involved.”

So a highly recommended read for anyone interested in economic growth and development. The insistence on the embodied-ness of knowledge and know-how is surely correct, and also a useful corrective to overly-abstract accounts of economic development, including quite a lot of the newer institutional literature (as argues, this often amounts to the advice to poorer countries to “be more like Denmark”, ignoring the trajectory from here to there). It’s also a pleasure to read such a well-written economics book; from now on I’ll be envisioning the economy in terms of crystals of imagination.

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Information, information, information

Yesterday my dear husband (@ruskin147) interviewed César Hidalgo (@cesifoti) about his new book for next week’s edition of Tech Tent (19 June) on the BBC World Service. I’m very excited about reading this book. I’ve long been a fan of The Atlas of Complexity, on which Prof Hidalgo has worked. Besides, here is the overlap of information, complexity and spontaneous order, computing and economics – what’s not to like?

Prof Hidalgo in the BBC's New Broadcasting House yesterday

Prof Hidalgo in the BBC’s New Broadcasting House yesterday

Economists will naturally think immediately of Hayek’s famous 1945 article, The Use of Knowledge In Society, which is cited in the introduction here. Although information asymmetries are huge in many areas of economics now, I still don’t think we work out often enough or in sufficient detail the implications of information mattering so much. For years – since the mid-90s – I’ve been saying to colleagues that information technology is a profoundly important deal for economic organisation and even now too often get the reaction, well we know how to handle a transaction cost reduction in our models so what’s the big deal?

Anyway, I’m immensely looking forward to reading this and will report back.

[amazon_image id=”0241003555″ link=”true” target=”_blank” size=”medium” ]Why Information Grows: The Evolution of Order, from Atoms to Economies[/amazon_image]

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Taking information seriously in economic policy

Earlier this month I wrote about Joe Stiglitz’s Jean-Jacques Laffont speech at the Tiger Forum, which was based on his new book with Bruce Greenwald, .

[amazon_image id=”0231152140″ link=”true” target=”_blank” size=”medium” ]Creating a Learning Society: A New Approach to Growth, Development, and Social Progress (Kenneth Arrow Lecture Series) (Kenneth J. Arrow Lecture Series)[/amazon_image]

Stiglitz won his Nobel Prize for his massively important work on asymmetric and missing information – how this shapes institutional structures, including markets. His Nobel Lecture is well worth the read.

This book builds on the information-based approach, and links it to other work on endogenous growth theory, which sees the process of growth as a cumulative process in which knowledge builds on earlier knowledge. This makes ideas (including those formalized as ‘intellectual property’) and people (to whom ideas are attached) the key to economic development. Stiglitz and Greenwald introduce industrial policy to endogenous growth models. They cover, among other areas, trade policy, intellectual property regimes, industrial strategy, and competition policy. It’s a somewhat technical book – there are quite a few equations and models at I would say advanced undergraduate level –  although one could skip those bits and still follow the argument.

I agree with the authors’ motivation for this book. They write: “Everyone today speaks of the innovation economy or the knowledge economy, and there have been important advances in the analysis of, say, patents and patent races, and network externalities, to take but two examples. But the full implications …. for the neoclassical model have still not been taken on board. And the implications for policy have been even less absorbed into mainstream thinking.” They go on to point out that it is 40 years since Stiglitz’s work on information questioned fundamentally standard economics results such as the existence of equilibrium, or the uniqueness of equlibrium, but little has changed in the standard approach. I doubt that any ‘mainstream’ economist would challenge the importance of the results on asymmetric information, non-linearities in growth and so on, so it is a puzzle that so few have taken the implications seriously. No doubt the answer lies in the sociology of the profession and academic incentive structures. My sense is that this is now changing.

This book takes the implications of information externalities forward into specific policy areas. It argues that not only can we not presume that a market economy is efficient, but also that industrial and trade policies can demonstrably increase social welfare. “Learning externalities are pervasive and it is a mistake not to take them into account.”

While not agreeing with every specific policy prescription they make, information, knowledge, learning – whatever you want to call it – definitely does change the prism for assessing structural economic policies. Maybe Prof Stiglitz will next write the popular book that makes this shift in perspective accessible to the policy world.

Prof Stiglitz and me at the TSE TIGER Forum

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Information underload

In his classic book , Daniel Dennett said: “A scholar is just a library’s way of making another library.” I’ve always loved that inversion of conventional thinking about causality, and sometimes even muse that as friendly bacteria in the gut are to humans, we humans are becoming to computers or the internet.

[amazon_image id=”014016734X” link=”true” target=”_blank” size=”medium” ]Darwin’s Dangerous Idea: Evolution and the Meanings of Life (Penguin Science)[/amazon_image]

The line from Dennett is quoted in James Gleick’s . It’s been a very enjoyable read, covering some of my favourite territory in a well-written way. This includes the long-run effects of the  telegraph, Charles Babbage and Ada Lovelace, Alan Turing’s codebreaking work, Norbert Wiener and cybernetics, Claude Shannon’s information theory. The book had some angles that were new and quirky – for example, I like the point that lots of newspapers named themselves The Telegraph, following on from The Bugle, but none chose The Telephone. I liked it that Turing and Shannon had met in 1943, one devising codes and the other breaking them, but because of wartime secrecy had been unable to discuss their work. There’s a good section on Godel’s incompleteness theorem and why this relates to computation, although drawing quite a lot on Douglas Hofstadter’s  and .

Overall, though, there was little that’s new here (at least if you share my obsessions and have read so many other books on this territory, from Tom Standage’s  to George Dyson’s ), and I could not find really find a line of argument. There’s a general theme that everything is about information, right down to genetic code and the meaning of life; that information is the fundamental idea that should shape how we think about the physical universe and all of life, rather than energy. Maybe. There’s a long section on entropy that tries to underpin this thought. But I think that just as our forbears saw everything via mechanical metaphors, information is the framing metaphor of our times.

So, an enjoyable, meandering read, ideal for a flight. But not, for me, living up to the praise heaped on it by other reviews such as this in The Guardian or this (rather more tempered) one in The New York Times. And of course it won the Royal Society Winton Prize, a major achievement. So maybe it’s just me. I wouldn’t discourage anybody from trying it.

[amazon_image id=”0007225741″ link=”true” target=”_blank” size=”medium” ]The Information: A History, A Theory, A Flood[/amazon_image]

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