Baumol meets Marx

I read Jason Smith’s Smart Machines and Service Work: Automation in an Age of Stagnation because there was a positive discussion of it on Twitter. I’d describe it as a mash-up of Baumol (‘cost disease’) and Marx (‘exploitation’).

The first part of the book is a rant about technology and why today’s tech will not increase productivity. It channels Robert Gordon and criticises economists like Erik Brynjolfsson (or before him Paul David) for arguing there are delays between innovation and the productivity effects they produce.

I have the same problem with this as with Gordon’s magnum opus: it might turn out to be correct that today’s techs have no productivity impact, but focusing only on digital entertainment and communication devices is completely unpersuasive. Vaccines, hello? The wave of biomedical innovation like the development of mRNA vaccines has rested on the plunging cost of gene sequencing, enabled by computation applied to massive amounts of data. Lab benches, test tubes, and also computers. The transition to green energy supply will require large-scale computation to manage storage, networks and grids. Additive manufacturing has many potential applications including printing organs and tissues. These applications are genuinely slow to emerge: large additional investments in equipment are needed, the organisational and ethical hurdles are high, other discoveries might be required to make them economically viable. We’re lucky so much of the prior mRNA research had been done before 2020.

Anyway, the book halfway through then turns to the growth of the service sector, the automation of routine tasks, and the debate about the potential impact on jobs. It looks back, too, at the well-known decline in middle-income jobs and growth of the contingent workforce. Having introduced Baumol’s familiar ‘cost disease’, it then turns to a Marxist analysis. Having never learned Marxist economics I found this quite interesting but heavy going, as it has its own jargon. Still, it is surely right to consider the impact of automation in the context of power struggles, or class conflict.

The book has some sections where it pauses to ask what is actually meant by ‘productivity’, a question of evergreen interest to me. It touches here on the issue of time use and time saving in services, and on activities crossing the production boundary, making it hard to measure ‘true’ productivity. As it points out, many previously household (uncounted) activities became marketed during the 20th century (‘commoditised’), and are often low-pay and precarious. However, the book then veers back to the more abstract class struggle.

All in all, I found the book quite interesting for its novel (to me) perspective, and it is well written. But much of the (non-Marxist) economic literature it draws on will be familiar to many people enticed by the subject matter. What it adds to the technology debate is, quite rightly, the issues of power and deregulation of the labour market,  beyond discussions of gig platforms. But it didn’t tell me anything new about the productivity puzzle.

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White elephants and icons

I just read a marvellous 1980 book, Great Planning Disasters by Peter Hall. The first half of the book consists of specific case studies. To qualify, the cases have to have been costly, involved processes of planning by public authorities, and have been perceived by many people to have gone wrong. Those included are London’s third airport saga (indeed), London’s ‘motorways’ (no, they don’t exist),  Concorde, San Francisco’s BART system, and the Sydney Opera House. Also included are two schemes that looked like they would be disasters but turned out not to be: California’s new university campuses and the British Library.

One of the interesting things about the book is having an additional 40 years of hindsight. The London airport saga continues, with Heathrow now having not just a 4th and indeed a 5th terminal but still not an additional runway. Stansted has become London’s 3rd airport, sort of, though we have the bijou London City as well. Concorde alas is no more: I remember still the exhilaration the crowd I was in felt at an open air concert in Kew Gardens felt when it flew overhead toward Heathrow, after the announcement the small fleet would be retired. The British Library has been a clear success. The Sydney Opera House had to have a major refurbishment. But as I ask my students when we discuss cost benefit analysis, do you think it should never have been built: is it an icon or a white elephant?

The second part of the book draws out the themes from the case studies, discussing it from the perspective of the actors and their incentives: affected communities, bureaucrats and politicians. One theme in all the case studies is that major projects take a long time to conceive, plan, approve and fund, and during that time political actors change, as does the zeitgeist. Individuals can have a big impact. One striking example is that an influential and forceful advocate of locating the new British Library next door to the British Museum (where he was chair of trustees) became an influential and forceful advocate of its actual site next to St Pancras when he was made chair of the new national libraries’ board. Technology changes too, costs rise – always – and demand forecasts over decades are almost sure to be wrong, albeit in an unknown direction.

There is no easy answer to the conundrum of how to avoid great disasters. The book recommends taking care with forecasting techniques, having regard to distributional consequences (and how this affects the politics), and communicating the uncertainties. I think the conclusion I draw, having been thinking about this, is that planning big projects is a political, not merely a (complicated) technical, decision. That makes two things important: building enough consensus, and aligning all the interventions that could make a project a self-fulfilling success. Oh, and multiplying the initial cost estimates many times over, except not too much to scare people from approving and investing in the first place.

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Epic reading

Well. It’s been a slow blogging start to March because I’ve been reading Yuri Slezkine’s 1000-page The House of Government. What an amazing book.

It’s an account of the Russian Revolution and the early years of Lenin and Stalin up to the second world war. The book is unlike anything I’ve read before, and is utterly compelling. It braids together an argument presenting early-Soviet Bolshevism as a millenarian religious sect, the sequence of events that led up to the Terror to a large degree as reflected in literature and literary debates, and the perspective of the families who lived in the House of Government, the huge mansion blocks opposite the Kremlin that housed the nomenklatura. The extent of the sources on which the book is based is simply staggering, from archival records to newspapers to personal letters and photographs, and evidently also many conversations with people who had been children at the time. The fact that throughout many hundreds of pages we have met and seen the wives and children makes the final section – parents arrested in the night and never seen again, young children sent to orphanages after their early years of privilege – incredibly affecting.

The device of using the building as the lens on history is what makes the personal thread so effective, but clearly also means this is – despite its length – an incomplete account of early Soviet history. Indeed, it assumes a lot of background knowledge, which I could more or less dredge up from 1st year comparative politics. Nor do I know what I think about Bolshevism as a sect of true believers: it seems plausible in some ways, but again is unlikely to be the whole story. At least, other forms of Marxism are available.

But you shouldn’t approach The House of Government as you would an ordinary history book, even though the people are real, and their words from letters and diaries are quoted at length. It’s obviously a very personal interpretation. I did end up thinking that along with Svetlana Alexeivich’s Second Hand Time, this book opened an emotional window on the USSR that help understand it current-day Russia: traumatic historical events cast a long shadow. Get ready to read an epic. And to read it with a table or pillow to prop it on.

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Railways and culture

The Europeans: Three Lives and the Making of a Cosmopolitan Culture by Orlando Figes is a history of the emergence of a common European culture in music, art and literature in the late 19th century, told mainly through a narrative about three people: leadingopera singer Pauline Viardot (no, me neither), her husband, manager and also expert on Spanish art and music Louis Viardot, and the Russian novelist Ivan Turgenev, who ended up in a menage a trois with the Viardots.

For me, though, rather than this domestic drama, the main attractions were the railways, the publishing techniques and business models, the intellectual property debates, the great exhibitions. All the splendid artistic creations rested on these physical and institutional structures. Some artists and novelists learned to market themselves effectively to ensure commercial success – Zola was one for example, while poor Turgenev was far less worldly. The book even tells of a 19th century superstar economics effect, driven by technology on the supply side and the emergence of mass demand on the demand side, Sherwin Rosen avant la lettre. The Franco-Prussian war started to break the shared culture, and of course the first half of the 20th century torpedoed it. The book is a cracking read.

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Big conversations

I met Vikas Shah when I was working at the University of Manchester (where he is an honorary prof in the business school) and among his many impressive characteristics was that in his spare time from being an entrepreneur and suporting voluntary organisations and engaging with the university, he had a website, Thought Economics, where he posted interviews he conducted with a huge range of people. What’s more, the interviews were always very thoughtful: he brought out the best in the many people he talked to. The list includes novelists (eg Elif Shafak), business people (eg Steve Ballmer), academics (eg Noam Chomsky), astronauts (Chris Hadfield), philanthropists (eg Melinda Gates), politicians (eg F W de Klerk) sportspeople, poets…. an amazing cast list. I was so impressed that Vikas had just started doing this out of interest simply by emailing people to ask if they’d take part.

Now he has brought out a book, Thought Economics, which pulls out themes from the interviews, such as identity, injustice, democracy, leadership. Each is divided into several questions posed to a number of respondents, such as ‘How does adversity shape who we are’, or ‘Are leaders born, not made?’ It’s a really interesting read, focused on the ideas not the personality, and giving the selected answers space to breathe. I commend the website – Nitin Sawhney and Nicola De Benedetti are recent interviewees, for instance – but the book is a great way of catching up with previous interviews.

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