Too big, full stop

No sooner has summer ended than it’s almost Christmas – how has this happened? In between meetings and paper-writing, I have managed to read a few things. Two thrillers on journeys to and from a family visit last week, John Le Carre’s A Legacy of Spies and one of the outstanding Mick Herron Jackson Lamb series, Spook Street – highly recommended if new to you.

On more serious matters, I’m half way through the handsome new Stripe Press edition of Mitchell Waldrop’s The Dream Machine. And I’ve finally read Tim Wu’s The Curse of Bigness. This is a very interesting, and commendably concise, history of US anti-trust legislation and enforcement. The argument in a nutshell is that anti-trust was born out of a power relations confrontation between the original trusts – Rockerfeller, Carnegie etc – and the US government: Theodore Roosevelt determined on trust-busting to establish the primacy of government power. To some extent this tradition continued after the second world war with landmark cases against AT&T and IBM. But, Wu continues, the Chicago school and especially Robert Bork defanged US anti-trust enforcement by embedding so thoroughly an economic test based on a consumer welfare standard as measured only by consumer prices. Today, with digital giants so often charging zero or low prices, this is less appropriate than ever. The time has come to reaffirm that the government, not rent-extracting monopolies, runs the country.

This is an interesting and persuasive account. It is also a specifically American one. Although the underlying economic analysis concerned crosses the Atlantic, there has never been such a narrow interpretation either of consumer welfare or of how to measure it in Europe. The test in UK law is a ‘substantial lessening of competition’ with reasonably wide discretion for the competition authority, and the guidance sets out other dimensions of welfare such as quality, range, innovation – although of course price is the easiest to measure. We have had prominent cases looking at monopsony power, such as the inquiry into supermarkets. Nor has there ever been on this side a routine acceptance that the benefits of vertical integration or horizontal merger can be assumed to be passed on to consumers – in my cases we always asked about the incentive as well as the scope for efficiencies to be passed on. And, as Wu notes at the end of the book, the UK’s market inquiry tool can be very powerful.

Having said all this – and cautioning against translating Wu’s account and other influential authors such as Lina Khan – to non-US contexts, this does not mean the question of monopoly power is not a pressing one here too. The UK has an inquiry into digital competition under way (chaired by Professor Jason Furman – I’m a member). In other markets from insurance/banking to pharma there are very powerful and profitable firms sustaining their position over long periods and scant sign that new entry is possible. As I’ve written in a forthcoming paper, the competition authorities need tools to assess dynamic, Schumpeterian competition as well as their everyday static toolkit.

Behind the technicalities, there is also the issue of political power highlighted by Wu’s book. Most economists would be hesitant to re-politicise competition policy after the dire experiences of big companies using their lobbying power to protect themselves before the present regime came into force. Two former DGs of the UK’s Office of Fair Trading, John Fingleton (here) and John Vickers, have rightly pointed to the vast expansion of arbitrary ministerial say-so over mergers in proposed UK legislation. This is a route sure to make consumers worse off.

At the same time, there are valid political questions. Some companies in a number of sectors have become simply too powerful. Paul Tucker’s recent book Unelected Power highlights these, arguing for a tilt in the balance away from technical economic analysis toward political choice. I’m not persuaded that the problem stems from the use of economics in competition policy, such that dethroning economic analysis would fix the pwer imbalance. However, there do seem to be some unresolved tensions between the economic standards for assessing competition in a market, the legal interpretations, and the politics.

Much food for thought in a short book. The Curse of Bigness is a great stocking filler for the economists and lawyers in your life.


Humanity’s future…

I read On the Future: Prospects for Humanity on the train back from the Festival of Economics. (See the #EconomicsFest hashtag – recordings will go online soon.) This short and compelling book by Martin Rees, the Astronomer Royal (and a Cambridge colleague), was a bit of a dampener on my good cheer. Our prospects are not great. It turns out that the risk of a large asteroid causing mass extinction is one of the lesser worries about our future. Other existential risks have a higher probability with the same mass death/end of civilisation impact.

Take biotech terrorism: “Whatever can be done will be done by someone, somewhere,” the book calmly states in passing. Even more exotically, another: “Scary possibility is that the quarks [produced by high energy physics experiments] would reassemble themselves into compressed objects called strangelets. That in itself would be harmless. However, under some hypotheses, a strangelet could, by contagion, convert anythign else it encountered into a new form of matter, transforming the entire Earth into a hyperdense sphere about a hundred meters across.” I gather this is a remote prospect indeed, but it takes some of the gloss off the Large Hadron Collider. Strangelets, eh.

The early scientists (natural philosophers, as they called themselves) were considered ‘merchants of light’ yet science and technology have come to seem pretty scary. This book is a perfect antidote to worrying about Brexit or Donald Trump or neo-fascism, as it offers so many much bigger problems to worry about.

It tries to strike a positive note by saying science and tech offer potential solutions too. Martin Rees thus ends by calling for scientists to engage more with philosophy. I think they should be engaging more with social scientists. The barriers to taking action to safeguard humanity from any devastating effects of climate change or AI are not mainly about science and technology, but rather about what people believe and how they behave.




Gods and Robots, myths and machines

In one of those lucky dip moments I picked Adreinne Mayor’s Gods and Robots: Myths, Machines and Acnient Dreams of Technology off the pile. What a good move. I know nothing about ancient Greek mythology but it turns out that not only are the myths rip- roaring tales of sex and violence, they are also stuffed with automata, robots and cyborgs. Pre-digital, clearly, but vividly imagined. And even in some cases (simple automata) possibly even real.

Mayor writes: “Homer’s myth reminds us that the impulse to ‘automate’ is extremely ancient. … The myths demonstrate that automata were thinkable, long before technology made them feasible.” And even in the time of Homer and Hesiod raised questions about free will and the difference between humans and not-humans, nature and artifice. Myths were sort of the sci-fi of their day.

Mayor concludes by suggesting the myths provide food for thought today as we grapple with the same questions as raised by AI. Indeed, all the more so as the day approaches when technology brings some of the things dreamt of by the ancient Greeks out of the realm of myth and into reality.

Brilliant book.


Algorithms and humans

If I were recommending one book for a general reader about the brave new world of algorithmic decision making and AI in particular, it would be Hannah Fry’s Hello World: How to be Human in the Age of the Machine. The ground it covers will be familiar to AI/ML experts, but for anyone else this is a terrific and – importantly – balanced introduction to the issues. There are other books around that are great on the concerns – Cathy O’Neill’s Weapons of Math Destruction leaps to mind as one aimed at the general reader. But these tend to skate over the other side of the story. There are also somewhat denser reads, such as The Master Algorithm. But Hello World is a really clear, informative introduction.

Sandwiched in between a general intro and conclusion, the bulk of the book is a series of chapters covering different issues (the locus of decision-making power,  and the role of data) and domains (the justice system, medicine, cars, crime and art). There were points in most of the chapters that made me stop and ponder.

If you wanted to criticise the book, you’d probably say it’s great on the problems and questions, light on the solutions, but that would be most unfair. Algorithmic decision making sheds an unforgivingly bright light on the trade-offs and choices our society already makes. They look far more unpalatable when we’re forced to confront them in such a stark way – because the decisions are so fast, because they are not fudged, because machines are not inconsistent in their judgements, and so on. We are all grappling with the challenges. So if you have an uneasy feeling you ought to know more about this, Hello World is a good starting point.


The future of capitalism?

The Future of Capitalism, Paul Collier’s new book, is not a small subject. In fact, the first half of the book is largely retrospective, looking at how capitalism got into today’s mess. There is a particular focus on the loss of moral compass in the organising structures of collective life – the family, the firm, the state. This echoes a number of authors identifying growing individualism, fed by the ideology of ‘the market’, as a corrosive force progressively undermining the conditions that enable it – Bell’s phrase ‘the cultural contradictions of capitalism‘ encapsulates it neatly.

Collier – a distinguished economist whose career has centred on developing economies –  expresses this critique with eloquence and conviction. He has a particular focus on the role of economic theory in validating self-serving behaviours such as bosses paying themselves hundreds of times more than their workers, and sketches an alternative approach to economics which embeds social norms and social influences on preferences. He blames the utilitarian and Rawlsian approaches to ethics, and advocates the communitarian alternative. I’m not persuaded by communitarianism, but surely you have to be pretty obtuse – a banker, maybe – to disagree with the diagnosis. Nobody thinks capitalism is doing just great at the moment.

It is of course harder to address the challenges than to diagnose them, and in a short book like this you can’t expect a detailed policy agenda. The book identifies three divides to be tackled: between successful global cities and ‘left behind’ places (although he deoesn’t use this term); between the skilled, well-paid, globe-trotting elite and the rest; between the rich and poor countries. It ends with the observation that capitalism is the only economic order capable of creating mass prosperity, but that it has not worked to do so since the 1945-70 period. This skates over the evident failings of postwar capitalism, which created the conditions for the ideological turn of the 1970s: inflation, shoddy nationalised industries, insider-outside labour markets and so on. Still, the suggestion here is that what’s needed is a combination of a rediscovery of ethics by political leaders (I’m not holding my breath on this front) and the shaping of identity around a shared sense of belonging to a place (rather than the more abstract ‘nation’ or identity-politics groupings).

This left me feeling a bit depressed. I can’t shake the feeling, despite only listening to the news while hiding behind the sofa these days, that it will take some cataclysmic event to reset current political dynamics. Another aspect of the turn to individualism in the 1970s was the existence of an intellectual framework on which to hang the political transformation, and I don’t see as yet a sufficiently broad and consistent alternative to the isolated individual, self-interested, rational choice model. Something for us economists to work on – as indeed Collier and others have started to do.