Cybernetic dreams

I read Eden Medina’s Cybernetic Revolutionaries: Technology and Politics in Allende’s Chile because I spotted the fuss on Twitter about Evgeny Morozov’s New Yorker piece, The Planning Machine: Project Cybersyn and the Origins of the Big Data Nation. I’m not all that interested in the fuss but was very intrigued by what people were saying about the book.

It is indeed a completely fascinating history and reflection on the interaction between technology and politics, and I highly recommend it. The cover photograph gives a good flavour of the weirdness of this episode. It is the control room built in Santiago in late 1972 under the guidance of British cybernetician Stafford Beer. The control room, that is, for the economy, linking a network of telex machines in factories around the country to a mainframe computer in the capital.

While not a fully planned economy, the Allende government had nationalised substantial sections of industry and, as time went on and the American-led sanctions began to bite, planned to control key prices. It also had to contend with a nationwide strike led by businesses opposed to the leftist government. The aim with Project Cybersyn, as the cybernetic plan was labelled, was to deliver to the central authorities ample real-time information on production while allowing individual factories the freedom to make their own decisions. Government policy could be adapted quickly in response to the trends identified. In other words, it was meant to avoid the pitfalls of central planning while enabling the co-ordination benefits. As Medina puts it: “Connecting the State Development Corporation to the factory floor would … allow the government to quickly address emergencies such as shortages of raw materials and adapt its policies quickly. Up-to-date production data would also allow Chile’s more experienced managers to … identify problems in factories and change production activities in the enterprise when necessary to meet national goals.”

Apart from the obvious practical difficulties (eg only one mainframe and very few programmers), one challenge was actually modelling the economy. It is unclear what kind of relationships were written in to the code, but they must have been something similar to those embodied in the simple linear model of the Phillips Machine. For all that it was a project about managing the economy, there was just one economist on the team, according to the book. However, Medina emphasises the intended flexibility of Project Cybersyn: “The model would not function as a predictive black box that gave definitive answers about future economic behaviour. Rather, it offered a medium in which economists, policy makers and model makers could experiment and, through this act of play, expand their intuition about [the economy].” The structure embodied the cybernetic emphasis on responding to the information contained in feedback. I must say I didn’t understand Beer’s cybernetic models at all, as the language and concepts are so different from anything I’m familiar with – but then cybernetics itself comes across as rather futuristic-retro.

Beer also hoped to have a method of getting real-time feedback from the people to the government by installing ‘algedonic meters’, or dials indicating their happiness or dissatisfaction, that would be installed in community centres or public places. This part of his plan was never taken up. However, he was keen on getting public engagement with the project and even persuaded Chile’s most famous folk singer Angel Parra to write a Project Cybersyn song.

One of the divisions within the project, well-described in the book, was between the technocrats who saw it as a tool for managing the economy more effectively, and those who saw it as a means of reverse engineering politics and society on the ground. The latter group hoped workers in the factories would develop their own sense of autonomy through inputting information into the telex, and understanding in this way the part they played in the whole. “[Beer] believed that engineering a technology also provided opportunities to engineer the social and organizational relationships that surrounded it.” The technocrats tended to dominate, though, largely because of the growing difficulty Allende’s government had in sustaining its coalition. Politics didn’t co-operate with the technology.

One of the interesting aspects of Project Cybersyn is that the technologies it used were not the most advanced. The US blockade largely prevented Chile from importing more computers or sophisticated equipment. Aside from the one mainframe and the telexes, the futuristic control room used slide projectors and hand drawn slides. The fibreglass control chairs, based on Italian designs, were one of the most cutting-edge aspects of the control room. And yet the project was the most ambitious cybernetics project ever (partially) implemented.

The project Cybersyn control room

It’s hard to decide whether the people behind Project Cybersyn were crazy dreamers or just 50 years ahead of their time – what would they have made of the possibilities of the web and ‘big data’? The basic cybernetic question the project poses remains valid: can policymakers do a better job with rapid real-time feedback on economic indicators – or is the economy as a dynamic, complex system simply beyond the kind of mapping implicit in any such project? Can what is measured about the economy reshape the economy or underlying social order in turn – and what does that imply for the indicators one might try to include in a Project Cybersyn 3.0?

Fascinating questions, and a fascinating book.

PS After finishing the book, I read the Morozov column. It is a precis of the story told in Medina’s book, with a handful of extra paragraphs woven in that give his own reflections on the issues raised – including, for example, exactly the obvious ‘what could we do in the era of the internet of things’ question. If the column had actually been billed as a review of Cybernetic Revolutionaries, I don’t think there would have been any fuss. While not plagiarism, as the book is the only source mentioned, for Morozov to have given it just one passing mention in the ‘Critic at Large’ section seems ungenerous.

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Walter Lipmann, public economist

A new biography, Walter Lippmann: Public Economist by Craufurd Goodwin, is a very interesting portrait of someone not all that well known now. I ended it appreciating that Lippmann was a more important figure in early 20th century America than I’d realised, perhaps a Martin Wolf of his day. The mixture of intellectual rigour and status with an ability and urge to communicate with the wider public is relatively rare, and important in modern democracies, with all their political and economic complexities. Lippmann was probably the first ‘public economist’.

I was aware of Lippmann only through his 1920 book Liberty and the News, which for some random reason sits on my shelves, and Public Opinion, published in 1922. The biography concentrates instead on his books and columns on economics and political economy, tracing the development of his thought as he watched the Depression and war unfold, and engaged with both Keynes’s and Hayek’s work. Throughout the decades, however, in an era when the old order was dying, Lippmann challenged the attractive certainties of the extremes, observing that ‘free’ markets had never existed, and that collectivism relied on censorship, spying and terror. This search for a way to manage the modern economy, and deliver to voters in democracies the economic well-being or assurance they demanded, while safeguarding liberty, remained his theme throughout, above all in The Good Society.

Lippmann sounded (in The Method of Freedom) rather like a modern behavioural economist: “The classical economists over-estimated the enlightenment which is based on self-interest and the fortitude based on self-reliance. … Imitation, the herd instinct, the contagion of numbers, fashions, moods, rather than enlightened self-interest, have tended to govern the economy.” And elsewhere, he emphasised the importance of institutions, regretting the fact that economists had not combined their powerful analysis with a ‘humanly satisfactory’ social philosophy. Economics needed to show concern not only with liberty, but with a ‘concern always for those who could not cope with modernity,’ as Goodwin puts it.

Lippmann, always interested in education and closely involved in the economics department at Harvard, was unable, though, to resist the tide of increasing specialization, to stop the schism between the humanities and social sciences, or the isolation of economics from politics, philosophy, psychology and history. What a shame.

This is a timely biography. Lippmann’s concern to navigate through the real complexities and uncertainties of a transitional, even revolutionary, economic era while avoiding the appealing, easy answers was admirable. So was his determination to explain to fellow citizens the economic debates of the day. Not surprisingly, I find the idea of a public economist very attractive. As a character, Lippmann seems slightly unappealing – brilliantly successful from his undergraduate days on and wholly plugged in to the establishment, he comes across as rather smug, although this is no doubt partly because of my anachronistic reading of his letters as quoted here. There is also perhaps a bit too much detail in the book for the mildly interested reader, although having said that it is well-written and not at all too long. Lippmann is well worth re-discovering as we continue through our own period of economic and political upheaval, and this book sheds light on what made him an important figure who deserves to be better known.

 

Hume, Keynes and wisdom

What’s not to like about a book that starts with David Hume’s contribution to economics. In Keynes: Useful Economics for the World Economy by Peter Temin and David Vines begins with a chapter on Hume’s essay ‘Of the Balance of Trade’. They argue that not only was economics born in 18th century Britain, but so too was the first economic model with Hume’s price-specie flow mechanism. This classical tradition of thinking in terms of internal and external imbalance formed the background to Keynes’s thinking about global imbalances – and, this book argues, is an essential prism on today’s global economy.

This short book (and I like a short book) aims to re-introduce the Keynes who thought with such clarity about international links to a modern audience. It includes the historical context, including Keynes’s membership of the Macmillan Committee in 1930-31 and his early thinking about the gold standard, as well as (relatively brief) mention of Bretton Woods. It goes on to walk through the basics of Keynesian international macroeconomics – the IS-LM framework, the Swan diagram showing schedules of internal and external balance, and aggregate demand and supply. There is a final chapter on ‘An International Paradox of Thrift’ which argues there is a parallel between 2014 and the fag end of the gold standard in the 1920s-30s, with too many countries trying to increase savings.

What would Keynes recommend now, they ask, answering that all of Germany, China, the US and UK should expand their domestic economies. Of course, there’s nothing novel about suggesting that Germany and China need to acknowledge the harm their ever-increasing export surpluses have been causing – I’m more surprised by the advice to the US and UK to expand their external deficits further. The book justifies this on the basis that both countries have significant stocks of overseas assets and low interest rates.

This would be a useful book for students starting out on their international macro – it’s a very clear exposition of the basic models. I’m sceptical that one can find all of the wisdom needed to solve today’s problems in re-readings of Keynes, not least because of his trite remark that “in the long run we are all dead.” We’re in Keynes’s long run now, and the flaws with a framework that has looked only at flows (GDP) and not assets (natural, physical capital) are all too plain. Still, the international Keynes is more relevant to today than the domestic Keynes, and the pre-2008 global imbalances problem is still a problem today.

  

Update: I’ve been reprimanded on Twitter for misrepresenting Keynes. It’s true that his “long run” comment was a reference to how useless it is to think about equilibrium outcomes when the world never gets to equilibrium. However, whenever I’ve seen it quoted, it has been in the sense of there being no need to worry about long-run consequences of a favoured action. Still, to be accurate, I should indeed have attributed the triteness not to Keynes but to subsequent uses of the remark.

The logic of failure

At the talk he gave last week, Cass Sunstein warmly recommended The Logic of Failure: Recognizing and Avoiding Error in Complex Situations by Dietrich Dörner. So warmly that I bought a copy and read it on my train journeys yesterday. It’s a very good account of what goes wrong with decision-making in complex situations – including any economic context – although I wouldn’t be quite as glowing in my praise as Prof Sunstein was. Still, definitely one to read, along with Nudge, Predictably Irrational, The Invisible Gorilla, Risk Savvy, Gut Feelings etc etc., if the issue of decision-making is of interest to you.

Some of the psychological territory it covers is familiar from the now-ample behavioural economics literature. This includes the difficulty of making calculations, the salience of recent events or things we just happen to have noticed, the problem of limited attention. However, less familiar was the diagnosis of how hard many people find it to take account, not only of interactions between variables, but also dynamics – it seems almost impossible for many people not to extrapolate in straight lines, and not to be too impatient to wait for feedback.

The book uses the results of lab experiments to illustrate the point over and over, including very simple challenges like including a time delay between setting a regulator dial and achieving the target temperature. The relationship between dial and degrees C is simple and linear in this example, but only one participant is patient enough to wait for the response to her first moves of the dial before finding the right setting. This inability to wait is obviously a near-universal characteristic. Certainly, my husband has this issue with every shower he gets into despite my calmly explaining it to him many times, and ends up with the totally predictable oscillating temperatures as he over-reacts to short-term feedback. (Of course, he does have the patience to be married to an economist.)

The book concludes that people can learn to be better decision makers but concludes with a very long list of the traits that we need to acquire to achieve good outcomes in non-linear dynamic and complex contexts with limited information i.e. the world. I finished reading it feeling more pessimistic. There are many examples given of participants in experiments who concluded that it was efficient to have inflicted a famine on a country on the computer, or that a bad outcome was the result of a conspiracy (by the computer!) against them. As the world is ever more replete with instant feedback, what are the chances of getting a more patient and psychologically sophisticated politics?

Who owns the future? Not you

It’s taken me a while to get through Jaron Lanier’s Who Owns the Future? It was highly recommended to me and I found it an interesting read. But as it’s a book about digital economics by a non-economist, and therefore written in a language foreign to the way I think about the issues, it was a surprisingly difficult read. I don’t think normal people would have the same difficulty.

The theme of the book is that the economy has developed in ways that enable what Lanier calls ‘Siren Servers’ to appropriate the past and present labour of many other people for themselves, and thereby hollow out the middle classes. This situation is the result of the way the Siren Servers – he means Amazon, Facebook, Google etc – have used the presumption that “information is free”, specifically the data they all gather about all of us and by all of us, but advertising is paid for. Lanier quite rightly points out that the customers of these titans are the advertisers, not the individual users. Lengthy user agreements that nobody reads means the corporations take no risks, only revenues.

Lanier seems to believe that eventually this economic structure will become unsustainable because it is destroying normal middle class livelihoods and there will be nobody to buy the products being advertised. The Siren Servers become so big that they eat their environment (just as the financial markets did).

His proposed solution is nano-payments attached to information generated by individuals, whether that’s their ‘data’ or their creative or digital products. “If the system remembers where information originally came from, then the people who are the sources of information can be paid for it.” He points out that HTML, although marvellously convenient, only links one way, while Ted Nelson, an early thinker about linking, argued for two-way links. This is less convenient because of the additional updating required. In fact, the book left me completely unclear how two way linking to enable nano-payments would work in practice. However, Lanier argues: “This is the only way that democracy and capitalism can be in alignment.” Without greater symmetry between supplier and acquirer of information, the information economy will collapse.

I have an instinctive sympathy with the book’s argument, but do not think the unsustainability in capitalism we all can see at present boils down to the absence of micro-payments implemented via two-way hypertext linking. One question is Jean Tirole’s: will new digital giants benefiting from network effects come along and displace Google et al? If that hasn’t happened within, say, a decade, then the time would come to regulate these vital utilities to ensure they serve the public interest. More generally, I would look at beefing up competition policy as one of the levers to loosen the political power acquired by ‘Siren Servers’ – in which category I’d include the financial sector as well as the ICT sector.

The question of distributing productivity gains to the population as a whole is not confined to the digital economy either. While it’s right to be concerned about the jobbing musicians and journalists whose jobs are being destroyed by “free” online content, there are lots of other standard middle class jobs seeing living standards decline, so the economic and political issues go far beyond what’s covered in Who Owns the Future? For of course this started some time ago with blue collar jobs. However, it’s an interesting book, and it’s always worthwhile to hear what experts in other fields have to say about economic issues, for their different perspective. I think Lanier’s diagnosis and solution will have quite wide appeal.