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.

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High hopes for growth

I’ve been re-reading (after a long time) David Landes’ The Unbound Prometheus, having found a 2nd hand copy in a Sedbergh bookshop, Westwood Books, earlier this year. It’s an interesting read, albeit showing its age (I found a 1993 edition, but the first was 1969). I’d forgotten that he looked at post-2nd world war growth in the final chapter, which also concludes with some reflections about the links between technological innovation and economic growth.

“The effective utilization of scientific and technical knowledge requires a whole sequence of decisions and action in the world of production and distribution. Pioneering entrepreneurs and managers must be prepared to risk money on the translation of ideas into commercially feasible techniques; while others must be incited by the prosepct of gain, or the fear of loss, to follow suit.” He goes on to say that the quality of management, the skills of the workforce, consumer tastes must also fall into place. “Scientific creativity is by no means an assurance of growth.” Interesting to see Paul David’s argument in The Dynamo and the Computer prefigured here. Growth is “a marriage of knowledge and action”, not the outcome of the impersonal forces of supply and demand.

Above all, growth will vary according to the particular needs, opportunities and history of different economies. Even the role of government varies greatly, Landes argues. The common factor in the postwar period, however, was, “A revolution of expectations and values. The expectations were not new; they were a return to the high hopes of the dawn of industrialization, to the buoyant optimism of those first generations of English innovators. Yet never before had they been so widespread; and never before had they been so strikingly confirmed by the facts.”

The trentes glorieuses seem like prehistory in today’s unsettled world. I’m not a techno-pessimist, and disagree with Robert Gordon’s thesis. But vision (expectations, we might say in economese) is a constant that really matters. I’ve always liked Paul Krugman’s 1991 QJE paper, History versus Expectations, on the importance of people weighting the future as more important than the past, if an economy is to grow. No high hopes, no growth.

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The responsibility of the public

It isn’t an economics book but it is about technology: I’ve just finished A Crack in Creation: The New Power to Control Evolution by Jennifer Doudna and Samuel Sternberg. It’s a terrific book, really well-written and compelling. Despite knowing nothing at all about biology or genetics, and finding some of the more technical bits quite hard going, I could follow the tale: every point is illustrated with illuminating metaphors and diagrams. And this – CRISPR and associated techniques – is such an important and far-reaching technology, I do think we should all be eager to understand it and think about the consequences. Indeed, we have a responsibility to do so.

By the time you get to the end of the book, it’s clear that this is Doudna’s aim (although co-authored, the book is written as if in her voice): she wants a public debate about CRISPR before it starts to be used to edit the human germline. She would like the debate to avoid the chasm between scientists and public opinion that afflicted GMOs, which became ‘Frankenfoods’ before the public understood that technology at all. But also to acknowledge the significance of CRISPR, with all its potential benefits to tackle diseases.

So I recommend this as a summer read. One final thought: if only Robert Gordon had appreciated that there is more to new technology than playing Angry Birds on smartphones (I exaggerate a little, but he does say the new tech frontier is all about digital entertainment), he might have seen some potential for social welfare in the future as well as in the past.

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Mobile contradictions

It’s surprising that there are not more books about mobile communications in general and smartphones in particular. Having been involved since 12 years ago on a strand of work on the economic and social impact of mobiles in low-income economies, when there was already evidence that the effects of the technology were going to be profound, you’d have thought researchers and authors would be all over the territory. Of course, the literature has grown substantially since, but is dwarfed by the work looking at digital in general, or net neutrality, for instance. It’s similar to the strange analytical gap concerning another very powerful technology with huge social effects, the spread of satellite TV in low-income countries from the mid-1990s. And while there is a burgeoning literature looking at social media, I hunger for a big picture synthesis of the social and economic impacts of the set of technologies it relies on, the smartphone and mobile broadband.

Anyway, Anindya Ghose’s Tap: Unlocking the Mobile Economy makes a welcome appearance in this somewhat sparse landscape. It’s a well-written introduction to the various ways US, European and Asian businesses are making use of mobile in developing their services. The book sets up a nice series of contradictions in consumer preferences:

  • people want spontaneity but are predictable and value certainty
  • people are annoyed by ads but don’t want to miss opportunities
  • people want choice but are also overwhelmed by it
  • people value their privacy, and also give away personal data for access to services

After an introductory descriptive section, the book turns to nine forces Ghose (a Professor at NYU’s Stern School of Business) argues are driving the mobile economy. This, the bulk of the book, is really aimed at business readers who want to think through the implications of pervasive smartphone use for their business model. There are lots of examples here of what others are already doing, and the book aregues that in many respects Asian businesses are ahead of US and European counterparts in the ways they have innovated.

The subtext throughout is essentially that too many businesses are sacrificing the long term creation of value – which would require navigating carefully through consumers’ contradictory attitudes – in favour of short-term profit or market share, for example by treating consumer data in a cavalier and exploitative manner. Businesses need to take data security far, far more seriously than they have to date, and also make sure that the service they deliver in return for data is truly of value to their customers.

In short, an accessible book with lots of colour, though definitely aimed at the business audience rather than economists.

 

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Prospects for the Swedish model

There’s an interesting new book, Digitalization, Immigration and the Welfare State, by Marten Blix of Sweden’s Research Institute of Industrial Economics. It brings together two deep trends, technology and immigration, in the context of the relatively rigid labour market structures of Sweden and some other European countries. Blix asks, what are the implications for the welfare state, the high tax, high spend social contract? He argues that the combined trends are increasing inequality, and the longstanding social support for redistribution and high taxation is eroding. Sweden has been at the forefront of both trends. It ranks high on measures of digitzation, and has taken in more refugees per capita than most other European countries. It has consequently had one of the biggest increases in income inequality in the OECD (the level of inequality is still relatively low – similar to Canada or Germany).

Ultimately, the book suggests a Swedish model of social democracy can potentially survive, thanks to the country’s high productivity and high initial levels of social capital. Sweden’s public finances are also in better shape than in many other countries. However, it certainly doesn’t look like an easy path. Absorbing the new immigrants will require a focus on enhancing their skills – and also those of the already-resident. One prescription is reducing the rigidities in the labour market and housing market. Another area where greater flexibility will be needed is in accommodating the increase in work – via digital platforms for instance – outside the traditional collective wage bargaining. Some Swedish unions are apparently working to establish employment standards on the digital platforms.

As the book concludes, however, the obstacles to the reinvention of the Swedish model – or any other social contract – are not problems of economic analysis but political obstacles. Economists often talk of the need for ‘structural reform’ when this is code for ‘politically bloody difficult.’ Immigration makes the politics harder, Blix argues: “Sweden is no longer the homogeneous country it used to be and the social contract holding people together is at risk of disintegrating.” All the more dangerous, then, he says to pretend everything is fine and nothing needs to change. The newcomers have to be brought into the fold or the future of the Swedish model looks to be in doubt.

Much of this debate is of course familiar to those of us more familiar with the UK and US economies, as is the kind of political lunge to the populist right or left that accompanies these tech and migration trends. It’s interesting to read about the challenges in the context of a country that has so long been an admired model for the centre left (and even some of the centre right). I accept that it’s essential to try the kind of policy response the book suggests, hard as that is, given the do-nothing alternative. But it’s quite hard to feel optimistic these days. Even Sweden!

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