Book Club: The Code Economy, Chs. 6-7: Learning Curves

Welcome back to EvX’s Book Club: The Code Economy, by Philip Auerswald. Today’s entry is going to be quick, because summer has started and I don’t have much time. Ch 6 is titled Information, and can perhaps be best summarized:

The challenge is to build a reliable economy with less reliable people. In this way, the economy is an information processing organism. …

When I assert that economics must properly be understood as a branch of information theory, I am reffing to the centrality of the communication problem that exists whenever one person attempts to share know-how with another. I am referring, in other words, to the centrality of code.

Auerswald goes on to sketch some relevant background on “code” as a branch of economics:

The economics taught in undergraduate courses is a great example of history being written by the victors. Because the methodologies of neoclassical economics experienced numerous triumphs in the middle of the twentieth century, the study of the distribution of resources within the economy–choice rather than code and, to a lesser extent, consumption rather than  production–came to be taught as the totality of economics. However, the reality is that choice and code have always coexisted, not only in the economy itself but in the history of economic thought.

And, an aside, but interesting:

Indeed, from 1807 to the time Jevons was born, the volume of shipping flowing through the port of Liverpool more than doubled.

However:

And yet, while both the city’s population and worker’s wages increased steadily, a severe economic rift occurred that separated the haves from the have-nots. As wealthy Liverpudlians moved away from the docks to newly fashionable districts on the edges of the city, those left behind in the center of town faced miserable conditions.From 1830 through 1850, life expectancy actually decreased in Liverpool proper from an already miserable 32 years to a shocking 25 years.

(You should see what happened to life expectancies in Ireland around that time.)

A reliable economy built with less reliable people is one in which individuals have very little autonomy, because autonomy means unreliable people messing things up.

Thereafter, a series of economists, Herbert Simon foremost among them, put the challenges of gathering, sharing, and processing economically relevant information at the center of their work.

Taken together and combined with foundational insights from other fields–notably evolutionary biology and molecular biology–the contributions of these economists constitute a distinct domain of inquiry within economics. These contributions have focused on people as producers and on the algorithms that drive the development of the economy.

This domain of inquiry is Code Economics.

I am rather in love with taking the evolutionary model and applying it to other fields, like the spread of ideas (memes) or the growth of cities, companies, economies, or whole countries. That is kind of what we do, here at EvolutionistX.

Chapter 7 is titled Learning: The Dividend of Doing. It begins with an amusing tale about Julia Child, who did not even learn to cook until her mid to late thirties, and then became a rather famous chef/cookbook writer. (Cooking recipes are one of Auerswald’s favored examples of “code” in action.)

Next Auerswald discusses Francis Walker, first president of the American Economic Association. Walker disagreed with the “wage fund theory” and with Jevons’s simplifying assumption that firms can be modeled as simply hiring workers until it cannot make any more money by hiring more workers than by investing in more capital.

Jevons’s formulation pushes production algorithms–how businesses are actually being run–into the background and tradeoffs between labor and capital to the foreground. But as Walker notes:

“We have the phenomenon in every community and in every trade, in whatever state of the market,” Walker observes, “of some employers realizing no profits at all, while other are making fair profits; others, again, large profits; others, still, colossal profits. Side by side, in the same business, with equal command of capital, with equal opportunities, one man is gradually sinking a fortune, while another is doubling or trebling his accumulations.”

The relevant economic data, when it finally became available, confirmed Walker’s belief about the distribution of profits, yet the difference between the high-profit and low-profit firms does not appear to hinge primarily on the question of how much labor should be substituted for capital and vice versa.

Walker argued that more profitable entrepreneurs are that way because they are able to solve a difficult problem more effectively than other entrepreneurs. … three core mechanisms for the advance of code: learning, evolution, and the layering of complexity though the development of platforms.

Moreover:

…in the empirical economics of production, few discoveries have been more universal or significant than that of the firm-level learning curve. As economist James Bessen notes, “Developing the knowledge and skills needed to implement new technologies on a large scale is a difficult social problem that takes a long time to resolve… A new technology typically requires more than an invention in order to be designed, built, installed, operated, and maintained. Initially, much of this new technical knowledge develops slowly because it is learned through experience, not in the classroom.”

Those of you who are familiar with business economics probably find learning curves and firm growth curves boring and old-hat, but they’re new and quite fascinating to me. Auerswald has an interesting story about the development of airplanes and a challenge to develop cheaper, two-seat planes during the Depression–could a plane be built for under a $1,000? $700?

(Make sure to read the footnote on the speed of production of “Liberty Ships.”)

The rest of the chapter discusses the importance of proper firm management for maximizing efficiency and profits. Now, I have an instinctual aversion to managers, due to my perception that they tend to be parasitic on their workers or at least in competition with them for resources/effort, but I can admit that a well-run company is likely more profitable than a badly run one. Whether it is more pleasant for the workers is another matter, as the folks working in Amazon’s warehouses can tell you.

So why are some countries rich and others poor?

Whereas dominant variants of the neoclassical production model emphasize categories such as public knowledge and organization, which can be copied and implemented at zero cost, code economics suggests that such categories are unlikely to be significantly relevant in the practical work of creating the business entities that drive the progress of human society. This is because code at the level of a single company–what I term a “production algorithm”–includes firm-specific components. Producers far from dominant production clusters must learn to produce through a costly process of trial and error. Market-driven advances in production recipes, from which venture with proprietary value can be created, require a tenacious will to experiment, to learn, and to document carefully the results of that learning. Heterogeneity among managers… is thus central to understanding observed differences between regions and nations. …

Management and the development of technical standards combined to enable not just machines but organizations to be interoperable and collaborative. Companies thus could become far bigger and supply chains far more complex than every before.

As someone who actually likes shopping at Ikea, I guess I should thank a manager somewhere.

Auerswald points out that if communication of production algorithms and company methods were perfect and costless, then learning curves wouldn’t exist:

All of these examples underscore the following point, core to code economics: The imperfection of communication is not a theory. It is a ubiquitous and inescapable physical reality.

That’s all for now, but how are you enjoying the book? Do you have any thoughts on these chapters? I enjoyed them quite a bit–especially the part about Intel and the graphs of the distribution of management scores by country. What do you think of France and the UK’s rather lower “management” scores than the US and Germany?

Join us next week for Ch. 8: Evolution–should be exciting!

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Book Club: The Industrial Revolution and its Discontents, Code Economy, ch. 5

1. The Industrial Revolution and its consequences have been a disaster for the human race. They have greatly increased the life-expectancy of those of us who live in “advanced” countries, but they have destabilized society, have made life unfulfilling, have subjected human beings to indignities, have led to widespread psychological suffering (in the Third World to physical suffering as well) and have inflicted severe damage on the natural world. The continued development of technology will worsen the situation. It will certainly subject human beings to greater indignities and inflict greater damage on the natural world, it will probably lead to greater social disruption and psychological suffering, and it may lead to increased physical suffering even in “advanced” countries. –Kaczynski, Industrial Society and Its Future

The quest to find and keep a “job for life”–stable, predictable work that pays enough to live on, is reachable by available transportation, and lends a sense of meaning to their daily lives–runs though every interview transcript, from those who are unemployed to those who have “made it” to steady jobs like firefighting or nursing. Traditional blue-collar work–whether as a factory worker or a police officer–has become increasingly scarce and competitive, destroyed by a technologically advanced and global capitalism that prioritizes labor market “flexibility”… Consequently, the post-industrial generation is forced to continuously grapple with flux and contingency, bending and adapting to the demands of they labor market until they feel that they are about to break. –Silva, Coming up Short: Working-Class Adulthood in an Age of Uncertainty

The historical record confirms that the realities of the ongoing processes of mechanization and industrialization, as noted early on by Lord Byron, were very different from the picture adherents to the wage fund theory held in their heads. While the long-term impact of the Industrial revolution had on the health and well-being of the English population was strongly positive, the first half of the nineteenth century was indeed a time of exceptional hardship for English workers. In a study covering the years 1770-1815, Stephen Nicholas and Richard Steckel report “falling heights of urban-and rural-born males after 1780 and a delayed growth spurt for 13- to 23-year old boys,” as well as a fall in the English workers’ height relative to that of Irish convicts. By the 1830s, the life expectancy of anyone born in Liverpool and Manchester was less than 30 years–as low as had been experienced in England since the Black Death of 1348. –Auerswald, The Code Economy

On the other hand:

Chapter 5 of The Code Economy, Substitution, explores the development of economic theories about the effects of industrialization and general attempts at improving the lives of the working poor.

… John Barton, a Quaker, published a pamphlet in 1817 titled, Observations on the Circumstances Which Influence the Condition of the Laboring Classes of Society. … Barton began by targeting the Malthusian assumption that population grows in response to increasing wages. … He began by noting that there was no a priori reason to believe that labor and capital were perfect complements, as classical economists implicitly assumed. The more sensible assumption was that, as wages increased, manufacturers and farmers alike would tend to substitute animals or machines for human labor. Rather than increasing the birth rate, the higher wages brought on by the introduction of new machinery would increase intergenerational differences in income and thus delay child-bearing. Contrary to the Malthusian line of argument, this is exactly what happened.

There’s an end note that expands on this (you do read the end notes, right?) Quoting Barton, 1817:

A rise of wages then does not always increase population… For every rise of wages tends to decrease the effectual demand for labor… Suppose that by a general agreement among farmers the rate of agricultural wage were raised from 12 shillings to 24 shillings per week–I cannot imagine any circumstance calculated more effectually to discourage marriage. For it would immediately become a a most important object to cultivate with as few hands as possible; wherever the use of machinery, or employment of horses could be substituted for manual labor, it would be done; and a considerable portion of existing laborers would be out of work.

This is the “raising the minimum wage will put people out of work” theory. Barton also points out that when people do manage to get these higher-paid jobs, they will tend to be older, more experienced laborers rather than young folks looking to marry and start a family.

A quick perusal of minimum wage vs. unemployment rate graphs reveals some that are good evidence against minimum wages, and some that are good evidence in favor of them. Here’s a link to a study that found no effects of minimum wage differences on employment. The American minimum wage data is confounded by things like “DC is a shithole.” DC has the highest minimum wage in the country and the highest unemployment rate, but Hawaii also has a very high minimum wage and the lowest unemployment rate. In general, local minimum wages probably reflect local cost of living/cost of living reflects wages. If we adjust for inflation, minimum wage in the US peaked around 1968 and was generally high throughout the 60s and 70s, but has fallen since then. Based on conversations with my parents, I gather the 60s and 70s were a good time to be a worker, when unskilled labor could pretty easily get a job and support a family; unemployment rates do not seem to have fallen markedly since then, despite lower real wages. A quick glance at a map of minimum wages by country reveals that countries with higher minimum wage tend to be nicer countries that people actually want to live in, but the relationship is not absolute.

We might say that this contradicts Barton, but why have American wages stagnated or gone down since the 60s?

1. Automation

2. Emergence of other economic competitors as Europe and Japan recovered from WWII

3. Related: Outsourcing to cheaper workers in China

4. Labor market growth due to entry of women, immigrants, and Boomers generally

Except for 2, that sounds a lot like what Barton said would happen. Wages go up => people move where the good jobs are => labor market expands => wages go down. If labor cannot move, then capitalists can either move the businesses to the labor or invest in machines to replace the labor.

On the other hand, the standard of living is clearly higher today than it was in 1900, even if wages, like molecules diffusing through the air, tend to even out over time. Why?

First, obviously, we learned to extract more energy from sources like oil, coal, and nuclei. A loom hooked up (via the electrical grid) to an electric turbine can make a lot more cloth per hour than a mere human working with shuttles and thread.

Second, we have gotten better at using the energy we extract–Auerswald would call this “code.”

Standards of living may thus have more to do with available resources (including energy) and our ability to use those resources (both the ‘code” we have developed and our own inherent ability to interact with and use that code,) than with the head-scratching entropy of minimum wages.

Auerswald discusses the evolution of David Ricardo’s economic ideas:

By incorporating the potential for substitution between capital and labor, Ricardo led the field of economics in rejecting the wage fund theory, along with its Dickensian implications for policy. He accepted the notion the introduction of new machinery would result in the displacement of workers. The upshot was that the workers were still assumed to be doomed, but the reason was now substitution of machines for labor, not scarcity of a Malthusian variety.

Enter Henry George, with a radically different perspective:

“Like a flash it came over me that there was the reason of advancing poverty with advancing wealth. With the growth of population, land grows in value, and the men who work it must pay more for the privilege.” …

George asserted that increasing population density, (not, as Malthus claimed, population decline) was the source of increased prosperity in human societies: “Wealth is greatest where population is densest… the production of wealth to a given amount of labor increases as population increases.”  The frequent interactions among people in densely populated cities accelerates the emergence and evolution of code. However, while population growth and increased density naturally bring increased prosperity, they also, just as naturally, bring increasing inequality and poverty. Why? Because the fruits of labor are inevitably gathered by the owners of land.

In other words, increasing wages => increasing rents and the workers are right back where they started while the landlords are sitting pretty.

In sharp contrast with Karl Marx, … George stated that “the antagonism of interest is not between labor and capital… but is in reality between labor and capital on the one side and the land ownership on the other.” The implication of his analysis was as simple as it was powerful: to avoid concentrating wealth in the hands of the few, it was the government’s responsibility to eliminate all taxes on capital and laborers, the productive elements of the economy, and to replace those taxes with a single tax on land.

Note: not a flat tax on land, but a tax relative to the land’s sale value.

I was glad to see Henry George in the book because I enjoy George’s theories and they are under-discussed, especially relative to Marxism. You will find massive online communities of Marxists despite the absolute evidence that Marxism is a death machine, but relatively few enthusiastic Georgists. One of the things I rather appreciate about Georgism is its simplicity; the complication of the tax code is its own, additional burden on capitalists and workers alike. Almost any simplified tax code, no matter how “unfair,” would probably improve maters a great deal.

But there’s more, because this is a dense chapter. Auerswald notes that the increasing complexity of code (ie, productivity) has lead to steadily increasing standards of living over the past two centuries, at least after the Industrial Revolution’s initial cataclysm.

Quoting economist Paul Douglas, some years later:

“The increased use of mechanical appliances in offices has tended to lower the skill required. An old-fashioned bookkeeper, for instance, had to write a good hand, he had to be able to multiply and divide with absolute accuracy. Today his place is taken by a girl who  operates a book-keeping machine, and it has taken her a few weeks at mot to become a skilled bookkeeper.” In other words, the introduction of machinery displaced skilled workers for the very same reason it enhanced human capabilities: it allowed a worker with relatively rudimentary training to perform tasks that previously required a skilled worker.

…”Another way of looking at it, is this: Where formerly the skill used in bookkeeping was exercised by the bookkeeper, today that skill is exercised by the factory employees who utilize it to manufacture a machine which can do the job of keeping books, when operated by someone of skill far below that of the former bookkeeper. And because of this transfer of skill form the office to the factory, the rewards of skill are likewise transferred to the wage-earner at the plant.”

This is a vitally important pint… The essence of this insight is that introducing more powerful machines into the workplace does more than simply encode  into the machine the skills or capabilities that previously resided only in humans; it also shifts the burden of skill from one domain of work to another. … A comparable shift in recent decades has been from the skill of manufacturing computing machines (think IBM or Dell in their heydays) to that of creating improved instructions for computing machines’ the result has been a relative growth in programmers’ wages. The underlying process is the same. Improvements in technology will predictably reduce demand for the skills held by some workers, but they also will enhance the capabilities of other workers and shift the requirements of skill from one domain of work to the other.”

The problem with this is that the average person puts in 15-20 years of schooling (plus $$$) in order to become skilled at a job, only to suddenly have that job disappear due to accelerating technological change/improvement, and then some asshole one comes and tells them they should just “learn to code” spend another two to four years unemployed and paying for the privilege of learning another job and don’t see how fucking dispiriting this is to the already struggling.

The struggle for society is recognizing that even as standards of living may be generally rising, some people may absolutely be struggling with an economic system that offers much less certainty and stability than our ancestors enjoyed.

A final word from Auerswald:

… work divides or “bifurcates” as code advances in a predictable and repeatable way. The bifurcation of work in a critical mechanism by which the advance of code yields improvements in human well-being at the same time as it increases human reliance on code.

Book Club: The Code Economy ch. 1

Greetings! Grab a cup of coffee and pull up a chair. Tea is also good. Today we’re diving into chapter one of Philip Auerswald’s The Code Economy, “Jobs: Divide and Coordinate.”

I wish this chapter had been much longer; we speed through almost 2.5 million years of cognitive evolution in a couple of pages.

The earliest hominins had about the same short-term memory as a modern-day chimpanzee, which is to say they could keep track of only two operations at a time. … Our methods for creating tools gradually became more sophisticated, until we were using the tools we created to produce other tools in a repetitive and predictable manner. These processes for creating stone tools were among humanity’s first production algorithms-that is, the earliest code. They appeared almost simultaneously in human communities in most part of the world around 40,000 BC.

Footnote:

…[E.O.] Wilson refers to this phenomenon more broadly as the discovery of eusocial behavior… Wilson situates the date far earlier in human history than I do here. I chose 50,000 years [ago] because my focus is on the economy. it is clear that an epochal change in society occurred roughly 10,000 years BCE, when humans invented agriculture in six parts of the world simultaneously. The fact of this simultaneity directly suggests the advance of code represented by the invention of agriculture was part of a forward movement of code that started much earlier.

What do you think? Does the simultaneous advent of behavioral modernity–or eusociality–in far-flung human groups roughly 50,000 years ago, followed by the simultaneous advent of agriculture in several far-flung groups about 10,000 years ago speak to the existence of some universal, underlying process? Why did so many different groups of people develop similar patterns of life and technology around the same time, despite some of them being highly isolated? Was society simply inevitable?

The caption on the photo is similarly interesting:

Demand on Short-Term Working Memory in the Production of an Obsidian Axe [from Read and van der Leeuw, 2015] … We can relate the concepts invoked in the prodcution of stone tools to the number of dimensions involved and thereby to the size of short-term workign memory (STWM) required for the prodction of the kind of stone tools that exemplify each stage in hominin evolution. …

Just hitting the end of a pebble once to create one edge, as in the simplest tools, they calculate requires holding three items in the working memory. Removing several flakes to create a longer edge (a line), takes STWM 4; working an entire side takes STWM 5; and working both sides of the stone in preparation for knapping flakes from the third requires both an ability to think about the pebble’s shape in three dimensions and STWM 7.

(The Wikipedia article on Lithic Reduction has a lovely animation of the technique.)

It took about 2 million years to proceed from the simplest tools (working memory: 3) to the most complex (working memory: 7.) Since the Neolithic, our working memory hasn’t improved–most of us are still limited to a mere 7 items in our working memory, just enough to remember a phone number if you already know the area code.

All of our advances since the Neolithic, Auerswald argues, haven’t been due to an increase in STWM, but our ability to build complexity externally: through code. And it was this invention of code that really made society take off.

By about 10,000 BCE, humans had formed the first villages… Villages were the precursors of modern-day business firms in that they were durable association built around routines. … the advance of code at the village level through the creation of new technological combinations set into motion the evolution from simplicity to complexity that has resulted in the modern economy.

It was in the village, then, that code began to evolve.

What do you think? Are Read and van der Leeuw just retroactively fitting numbers 3-7 to the tools, or do they really show an advance in working memory? Is the village really the source of most code evolution? And who do you think is more correct, Herbert Spencer or Thomas Malthus?

Auerswald then forward to 1557, with the first use of the word “job” (spelled “jobbe,” most likely from “gobbe,” or lump.)

The advent of the “jobbe” a a lump of work was to the evolution of modern society something like what the first single-celled organism was to the evolution of life.

!

The “jobbe” contrasted with the obligation to perform labor continuously and without clearly defined roles–slavery, serfdom, indentured servitude, or even apprenticeship–as had been the norm throughout human history.

Did the Black Death help create the modern “job market” by inspiring Parliament to pass the Statute of Laborers?

I am reminded here of a passage from Gulick’s Evolution of the Japanese, Social and Psychic, (published in 1903):

The idea of making a bargain when two persons entered upon some particular piece of work, the one as employer, the other as employed, was entirely repugnant to the older generation, since it was assumed that their relations as inferior and superior should determine their financial relations; the superior would do what was right, and the inferior should accept what the superior might give without a question or a murmur. Among the samurai, where the arrangement is between equals, bargaining or making fixed and fast terms which will hold to the end, and which may be carried to the courts in case of differences, was a thing practically unknown in the older civilization. Everything of a business nature was left to honor, and was carried on in mutual confidence.

“A few illustrations of this spirit of confidence from my own experience may not be without interest. On first coming to Japan, I found it usual for a Japanese who wished to take a jinrikisha to call the runner and take the ride without making any bargain, giving him at the end what seemed right. And the men generally accepted the payment without question. I have found that recently, unless there is some definite understanding arrived at before the ride, there is apt to be some disagreement, the runner presuming on the hold he has, by virtue of work done, to get more than is customary. This is especially true in case the rider is a foreigner. Another set of examples in which astonishing simplicity and confidence were manifested was in the employment of evangelists. I have known several instances in which a full correspondence with an evangelist with regard to his employment was carried on, and the settlement finally concluded, and the man set to work without a word said about money matters. It need hardly be said that no foreigner took part in that correspondence. …

“This confidence and trustfulness were the product of a civilization resting on communalistic feudalism; the people were kept as children in dependence on their feudal lord; they had to accept what he said and did; they were accustomed to that order of things from the beginning and had no other thought; on the whole too, without doubt, they received regular and kindly treatment. Furthermore, there was no redress for the peasant in case of harshness; it was always the wise policy, therefore, for him to accept whatever was given without even the appearance of dissatisfaction. This spirit was connected with the dominance of the military class. Simple trustfulness was, therefore, chiefly that of the non-military classes.

“Since the overthrow of communal feudalism and the establishment of an individualistic social order, necessitating personal ownership of property, and the universal use of money, trustful confidence is rapidly passing away.

We still identify ourselves with our profession–“I am a doctor” or “I am a paleontologist”–but much less so than in the days when “Smith” wasn’t a name.

Auerswald progresses to the modern day:

In the past two hundred years, the complexity of human economic organization has  increased by orders of magnitude. Death rates began to fall rapidly in the middle of the nineteenth century, due to a combination of increased agricultural output, improved hygiene, and the beginning of better medical practices–all different dimensions of the advance of code…. Greater numbers of people living in greater density than ever before accelerated the advance of code.

Sounds great, but:

By the twentieth century, the continued advance of code necessitated the creation of government bureaucracies and large corporations that employed vast numbers of people. These organizations executed code of sufficient complexity that it was beyond the capacity of any single individual to master.

I’ve often wondered if the explosion of communist disasters at the beginning of the 20th century occurred because we could imagine a kind of nation-wide code for production and consumption and we had the power to implement it, but we didn’t actually have the capabilities and tools necessary to make it work.

We can imagine Utopia, but we cannot reach it.

Auerswald delineates two broad categories of “epochal change” as a result of the code-explosion of the past two centuries: First, our capabilities grew. Second:

“we have, to an increasing degree, ceded to other people–and to code itself–authority and autonomy, which for millennia we had kept unto ourselves and our immediate tribal groups as uncodified cultural norms.”

Before the “job”, before even the “trade,” people lived and worked far more at their own discretion. Hoeing fields or gathering yams might be long and tedious work, but at least you didn’t have to pee in a bottle because Amazon didn’t give you time for bathroom breaks.

Every time voters demand that politicians “bring back the jobs” or politicians promise to create them, we are implicitly stating that the vast majority of people are no longer capable of making their own jobs. (At least, not jobs that afford a modern lifestyle.) The Appalachians lived in utter poverty (the vast majority of people before 1900 lived in what we would now call utter poverty), but they did not depend on anyone else to create “jobs” for them; they cleared their own land, planted their own corn, hunted their own hogs, and provided for their own needs.

Today’s humans are (probably not less intelligent nor innately capable than the average Appalachian of 1900, but the economy (and our standards of living) are much more complex. The average person no longer has the capacity to drive job growth in such a complicated system, but the solution isn’t necessarily for everyone to become smarter. After all, large, complicated organizations need hundreds of employees who are not out founding their own companies.

But this, in turn, means all of those employees–and even the companies themselves–are dependent on forces far outside their control, like Chinese monetary policy or the American electoral cycle. And this, in turn, raises demand for some kind of centralized, planned system to protect the workers from economic hardship and ensure that everyone enjoys a minimum standard of living.

Microstates suggest themselves as a way to speed the evolution of economic code by increasing the total number of organisms in the ecosystem.

With eusociality, man already became a political (that is, polis) animal around 10,000 or 40,000 or perhaps 100,000 years ago, largely unable to subsist on his own, absent the tribe. We do not seem to regret this ill-remembered transition very much, but what about the current one? Is the job-man somehow less human, less complete than the tradesman? Do we feel that something essential to the human spirit has been lost in defining and routinizing our daily tasks down to the minute, forcing men to bend to the timetables of factories and international corporations? Or have we, through the benefits of civilization (mostly health improvements) gained something far richer?

Book Club: The Code [Robot] Economy (pt. 2)

Welcome to EvX’s book club. Today we’re discussing Philip Auerswald’s The Code Economy, Introduction.

I’ve been discussing the robot economy for years (though not necessarily via the blog.) What happens when robots take over most of the productive jobs? Most humans were once involved in directly producing the necessities of human life–food, clothing, and shelter, but mostly food. Today, machines have eliminated most food and garment production jobs. One tractor easily plows many more acres in a day than a horse or mule team did in the 1800s, allowing one man to produce as much food as dozens (or hundreds) once did.

What happened to those ex-farmers? Most of us are employed in new professions that didn’t exist (eg, computer specialist) or barely existed (health care), but there are always those who can’t find employment–and unemployment isn’t evenly distributed.

Black unemployment rate

Since 1948, the overall employment rate has rarely exceeded 7.5%; the rate for whites has been slightly lower. By contrast, the black unemployment rate has rarely dipped below 10% (since 1972, the best data I have.) The black unemployment rate has only gone below 7.5 three times–for one month in 1999, one month in 2000, and since mid-2017. 6.6% in April, 2018 is the all-time low for black unemployment. (The white record, 3.0%, was set in the ’60s.)

(As Auerswald points out, “unemployment” was a virtually unknown concept in the Medieval economy, where social station automatically dictated most people’s jobs for life.)

Now I know the books are cooked and “unemployment” figures are kept artificially low by shunting many of the unemployed into the ranks of the officially “disabled,” who aren’t counted in the statistics, but no matter how you count the numbers, blacks struggle to find jobs at the same rates as whites–a problem they didn’t face in the pre-industrial, agricultural economy (though that economy caused suffering in its own way.)

A quick glance at measures of black and white educational attainment explains most of the employment gap–blacks graduate from school at lower rates, are less likely to earn a college degree, and overall have worse SAT/ACT scores. In an increasingly “post-industrial,” knowledge-based economy where most unskilled labor can be performed by robots, what happens to unskilled humans?

What happens when all of the McDonald’s employees have been replaced by robots and computers? When even the advice given by lawyers and accountants can be more cheaply delivered by an app on your smartphone? What if society, eventually, doesn’t need humans to perform most jobs?

Will most people simply be unemployed, ruled over by the robot-owning elite and the lucky few who program the robots? Will new forms of work we haven’t even begun to dream of emerge? Will we adopt some form of universal basic income, or descend into neo-feudalism? Will we have a permanent underclass of people with no hope of success in the current economy, either despairing at their inability to live successful lives or living slothfully off the efforts of others?

Here lies the crux of Auerswald’s thesis. He provides four possible arguments for how the “advance of code” (ie, the accumulation of technological knowledge and innovation,) could turn out for humans.

The Rifkin View:

  1. The power of code is growing at an exponential rate.
  2. Code nearly perfectly substitutes for human capabilities.
  3. Therefore the (relative) power of human capabilities is shrinking at an exponential rate.

If so, we should be deeply worried.

The Kurzweil View:

  1. The power of code is growing at an exponential rate.
  2. Code nearly perfectly complements human capabilities.
  3. Therefore the (absolute) power of human capabilities is growing at an exponential rate.

If so, we may look forward to the cyborg singularity

The Auerswald View:

  1. The power of code is growing at an exponential rate [at least we all agree on something.]
  2. Code only partially substitutes for human capabilities.
  3. Therefore the (relative) power of human capabilities is shrinking at an exponential rate in those categories of work that can be performed by computers, but not in others.

Auerswald notes:

In other words, where Kurzweil talks about an impeding code-induced Singularity, the reality looks much more like one code-induced bifurcation–the division of labor between humans and machines–after another.

The answer to the question, “Is there anything that humans can do better than digital computers?” turns out to be fairly simple: humans are better at being human.

Further:

1. Creating and improving code is a key part of what we human beings do. It’s how we invent the future by building on the past.

2. The evolution of the economy is driven by the advance of code. Understanding this advance is therefore fundamental to economics, and to much of human history.

3. When we create and advance code we don’t just invent new toys, we produce new forms of meaning, new experiences, and new ways of making our way in the world.

What do you think?

Re: Eurozine’s How to Change Human History

Some of you have asked  for my opinions on Davids Graeber and Wengrow’s recently published an article, How to change the course of human history (at least, the part that’s already happened):

The story we have been telling ourselves about our origins is wrong, and perpetuates the idea of inevitable social inequality. David Graeber and David Wengrow ask why the myth of ‘agricultural revolution’ remains so persistent, and argue that there is a whole lot more we can learn from our ancestors.

The article is long and difficult to excerpt, so I’m going to summarize:

The traditional tale of how our idyllic, peaceful, egalitarian, small-group hunter-gatherer past gave way to our warlike, sexist, racist, violent, large-city agrarian present gives people the impression that hierarchy and violence are inevitable parts of our economic system. However, the traditional tale is wrong–the past was actually a lot more complicated than you’ve been told. Therefore, there is no historical pattern and the real source of all bad things is actually the family.

The final conclusion is pulled out of nowhere:

Egalitarian cities, even regional confederacies, are historically quite commonplace. Egalitarian families and households are not. Once the historical verdict is in, we will see that the most painful loss of human freedoms began at the small scale – the level of gender relations, age groups, and domestic servitude – the kind of relationships that contain at once the greatest intimacy and the deepest forms of structural violence. If we really want to understand how it first became acceptable for some to turn wealth into power, and for others to end up being told their needs and lives don’t count, it is here that we should look. Here too, we predict, is where the most difficult work of creating a free society will have to take place.

Since “inequality begins in the family” is supported nowhere in the text, we will ignore it.

  1. What about the “traditional narrative”? Did hunter-gathers live in small, peaceful, egalitarian, idyllic communities? Or are the Davids correct that this is a myth?

It’s a myth. Mostly.

While we have almost no information about people’s opinions on anything before the advent of writing, there’s no evidence from any hunter-gatherer society we have actually been able to observe that hunter-gathering leads naturally to egalitarianism or peacefulness.

For example, among the Inuit (Eskimo), hunter-gatherers of the arctic, polyandry (the marriage of one woman to multiple men) didn’t exist because they had particularly enlightened views about women and marriage, but because they had a habit of killing female babies. Too much female infanticide => not enough adult women to go around => men making do.

Why do some groups have high rates of female infanticide? Among other reasons, because in the Arctic, the men do the hunting (seal, fish, caribou, etc.) and the women gather… not a whole lot. (Note: I’m pretty sure the modern Inuit do not practice sex-selective infanticide.)

Polyandry can also be caused by polygamy and simple lack of resources–men who cannot afford to support a wife and raise their own children may content themselves with sharing a wife and contributing what they can to the raising of offspring who might be theirs.

I have yet to encounter in all of my reading any hunter-gatherer or “primitive” society that has anything like our notion of “gender equality” in which women participate equally in the hunting and men do 50% of the child-rearing and gathering, (though some Pygmies are reported to be excellent fathers.) There are simple physical limits here: first, hunter-gatherers don’t have baby formula and men don’t lactate, so the duties of caring for small children fall heavily on their mothers. Many hunter-gatherers don’t even have good weaning foods, and so nurse their children for years longer than most Westerners. Second, hunting tends to require great physical strength, both in killing the animals (stronger arms will get better and more accurate draws on bows and spears) and in hauling the kills back to the tribe (you try carrying a caribou.)

In many horticultural societies, women do a large share of the physical labor of building houses and producing food, but the men do not make up for this by tending the babies. A similar division of labor exists in modern, lower-class African American society, where the women provide for their families and raise the children and then men are largely absent. Modern Rwanda, which suffers a dearth of men due to war and mass genocide, also has a “highly equitable” division of labor; not exactly an egalitarian paradise.

Hunter-gatherers, horticulturalists, and other folks living outside formal states, have very high rates of violence. The Yanomami/o, for example, (who combine horticulture and hunting/foraging) are famous for their extremely high rates of murder and constant warfare. The Aborigines of Australia, when first encountered by outsiders, also had very high rates of interpersonal violence and warfare.

Graph from the Wikipedia
See also my post, “No, Hunter Gatherers were not Peaceful Paragons of Gender Egalitarianism.”

The Jivaro are an Amazonian group similar to the Yanomamo; the Mae Enga, Dugum Dani, Huli, and Gebusi are horticulturalists/hunters from PNG; Murngin are Australian hunter-gatherers.

I know, I know, horticulturalists are not pure hunter-gatherers, even if they do a lot of hunting and gathering. As we’ll discuss below, the transition from hunter-gathering to agriculture is complicated and these are groups that we might describe as “in between”. The real question isn’t whether they bury a few coconuts if they happen to sprout before getting eaten, but whether they have developed large-scale social organization, cities, and/or formal states.

The article protests against using data from any contemporary forager societies, because they are by definition not ancient hunter-gatherers and have been contaminated by contact with non-foraging neighbors (I propose that the Australian Aborigines, however, at first contact were pretty uncontaminated,) but then the article goes on to use data from contemporary forager societies to bolster its own points… so I feel perfectly entitled to do the same thing.

However, we do have some data on ancient violence, eg:

According to this article, 12-14% of skeletons from most (but not all) ancient, pre-agricultural hunter-gatherer groups show signs of violence. Here’s a case of a band of hunter-gatherers–including 6 small children–who were slaughtered by another band of hunter-gatherers 10,000 years ago.

Warfare appears to have been part of the human experience as far back as we look–even chimps wage war against each other, as Jane Goodall documented in her work in the Gombe.

Then there’s the cannibalism. Fijians, for example, who practiced a mixed horticulture/hunter-gathering lifestyle (fishing is a form hunting that looks a lot like gathering,) were notorious cannibals when first encountered by outsiders. (Though they did have something resembling a state at the time.)

Neanderthals butchered each other; 14,700 years ago, hunter-gatherers were butchering and eating each other in Cheddar Gorge, England. (This is the same Cheddar Gorge as the famous Cheddar Man hails from, but CM is 5,000 years younger than these cannibals and probably no relation, as an intervening glacier had forced everyone out of the area for a while. CM also died a violent death, though.)

Or as reported by Real Anthropology:

Increasing amount of archaeological evidence, such as fortifications of territories and pits containing dead humans blown by axes, indicates that warfare originated from prehistoric times, long before the establishment of state societies. Recently, researchers studying the animal bones in Mesolithic layer of Coves de Santa Maira accidentally discovered thirty human bone remains of the pre-Neolithic hunter-gatherer with anthropic marks, indicating behaviors of human cannibalism.

The article would like to emphasize, however, that we don’t really know why these people engaged in cannibalism. Starvation? Funeral rituals? Dismemberment of an enemy they really hated? Like I said, it’s hard to know what people were really thinking without written records.

There was a while in anthropology/archaeology when people were arguing that the spread of pots didn’t necessarily involve the spread of people, as a new pottery style could just spread because people liked it and decided to adopt it; it turns out that sometimes the spread is indeed of pots, and sometimes it’s of people. Similarly, certain anthropologists took to describing hunter-gatherers as “harmless“, but this didn’t involve any actual analysis of violence rates among hunter-gatherers (yes, I’ve read the book.)

In sum: The narrative that our ancestors were peaceful egalitarians is, in most cases, probably nonsense.

  • 2. The Davids also argue that the transition from hunter-gathering to agriculture was more complex than the “traditional narrative” claims.

This is also true. As we’ve already touched on above, there are many economic systems that fall somewhere in between exclusive hunter-gathering and pure agriculture. Nomadic hunters who followed and exploited herds of animals gradually began protecting them from other predators (like wolves) and guiding the animals to areas with food and shelter. The domestication of goats pre-dates the beginning of agriculture (and dogs pre-date goats;) the domestication of reindeer was much more recent, (I reviewed a book on reindeer economies here, here, here, and here.) Again, there is no absolute line between hunters like the Eskimo who annually exploit migrating wild caribou and Lapp (Sami) ranchers who occasionally round up their herds of “domestic” reindeer. The reindeer appreciate that we humans kill off their natural predators (ie wolves) and provide a source of valuable salts (ie urine.) The origin of domestic goats and sheep probably looked similar, though the domestication of cattle was probably a more conscious decision given the bovines’ size.

The hunting of fish also looks a lot more like gathering or even farming, as a single resource area (eg, a bend in the river or a comfortable ocean bay) may be regularly exploited via nets, traps, rakes, weirs, etc.

Horticulture is a form of low-intensity agriculture (literally, gardening.) Some horticulturalists get most of their food from their gardens; others plant a few sprouted coconuts and otherwise get most of their food by hunting and fishing. Horticulture doesn’t require much technology (no plows needed) and typically doesn’t produce that many calories.

It is likely that many “hunter gatherers” understood the principle of “seeds sprout and turn into plants” and strategically planted seeds or left them in places where they wanted plants to grow for centuries or millennia before they began actively tending the resulting plants.

Many hunter-gatherer groups also practice active land management techniques. For example, a group of Melanesians in PNG that hunts crocodiles periodically burns the swamp in which the crocodiles live in order to prevent woody trees from taking over and making the swamp less swampy. By preserving the crocodiles’ habitat, they ensure there are plenty of crocodiles around for them to hunt. (I apologize for the lack of a link to a description of the group, but I saw it in a documentary about hunter-gatherers available on Netflix.)

Large-scale environment management probably also predates the adoption of formal agriculture by thousands of years.

Where the article goes wrong:

  1. Just because something is more complicated than the “simplified” version you commonly hear doesn’t mean, “There is no pattern, all is unknowable, nihilism now.”

Any simplified version of things is, by definition, simplified.

The idea that hunter-gatherers were uniquely peaceful and egalitarian is nonsense; if anything, the opposite may be true. Once you leave behind your preconceptions, you realize that the pattern isn’t “random noise” but but actually that all forms of violence and oppression appear to be decreasing over time. Economies where you can get ahead by murdering your neighbors and stealing their wives have been largely replaced by economies where murdering your neighbors lands you in prison and women go to college. There’s still noise in the data–times we humans kill a lot of each other–but that doesn’t mean there is no pattern.

  • 2. Most hunter-gatherers did, in fact, spend most of their time in small communities

The Davids make a big deal out of the fact that hunter-gatherers who exploit seasonally migrating herds sometimes gather in large groups in order to exploit those herds.  They cite, for example:

Another example were the indigenous hunter-gatherers of Canada’s Northwest Coast, for whom winter – not summer – was the time when society crystallised into its most unequal form, and spectacularly so. Plank-built palaces sprang to life along the coastlines of British Columbia, with hereditary nobles holding court over commoners and slaves, and hosting the great banquets known as potlatch. Yet these aristocratic courts broke apart for the summer work of the fishing season, reverting to smaller clan formations, still ranked, but with an entirely different and less formal structure. In this case, people actually adopted different names in summer and winter, literally becoming someone else, depending on the time of year.

Aside from the fact that they are here citing a modern people as an argument about prehistoric ones (!), the Pacific North West is one of the world’s lushest environments with an amazing natural abundance of huntable (fishable) food. If I had to pick somewhere to ride out the end of civilization, the PNW (and New Zealand) would be high on my list. The material abundance available in the PNW is available almost nowhere else in the world–and wasn’t available to anyone before the First Nations arrived in the area around 13,000 years ago. Our stone-age ancestors 100,000 years ago in Africa certainly weren’t exploiting salmon in British Columbia.

Hunter-gatherers who exploit migrating resources sometimes get all of their year’s food in only 3 or 4 massive hunts. These hunts certainly can involve lots of people, as whole clans will want to work together to round up, kill, and process thousands of animals within the space of a few days.

Even the most massive of these gatherings, however, did not compare in size and scope to our modern cities. A few hundred Inuit might gather for the short arctic summer before scattering back to their igloos; the Mongol capital of Ulan Bator was oft described as nearly deserted as the nomadic herdsmen had little reason to remain in the capital when court was not in session.

(Also, the Davids’ description of Inuit life is completely backwards from the actual anthropology I have read; I’m wondering if he accidentally mixed up the Yupik Eskimo who don’t go by the term “Inuit” with the Canadian Eskimo who do go by “Inuit;” I have not read about the Yupik, but if their lifestyles are different from the Inuit, this would explain the confusion.)

The Davids also cite the behavior of the 19th century Plains Indians, but this is waaay disconnected from any “primitive” lifestyle. Most of the Plains Indians had formerly been farmers before disease, guns, and horses, brought by the Spaniards, disrupted their lives. Without horses (or plows) the great plains and their bison herds were difficult to exploit, and people preferred to live in towns along local riverbanks, growing corn, squash, and beans.

We might generously call these towns “cities,” but none of them were the size of modern cities.

  • 3. Production of material wealth

Hunter-gathering, horticulture, fishing, and herding–even at their best–do not produce that much extra wealth. They are basically subsistence strategies; most people in these societies are directly engaged in food production and so can’t spend their time producing other goods. Nomads, of course, have the additional constraint that they can’t carry much with them under any circumstances.

A society can only have as much hierarchy as it can support. A nomadic tribe can have one person who tells everyone when to pack up and move to the next pasture, but it won’t produce enough food to support an entire class of young adults who do things other than produce food.

By contrast, in our modern, industrial society, less than 2% of people are farmers/ranchers. The other 98% of us are employed in food processing of some sort, careers not related to food at all, or unemployed.

This is why our society can produce parking lots that are bigger and more complex than the most impressive buildings ever constructed by hunter-gatherers.

The fact that, on a few occasions, hunter-gatherers managed to construct large buildings (and Stonehenge was not built by hunter-gatherers but by farmers; the impressive, large stones of Stonehenge were not part of the original layout but erected by a later wave of invaders who killed off 90% of Stonehenge’s original builders) does not mean the average hunter-gatherer lived in complex societies most of the time. They did not, because hunter-gathering could not support complex society, massive building projects, nor aristocracies most of the time.

It is only with the advent of agriculture that people started accumulating enough food that there were enough leftover for any sort of formal, long-term state to start taxing. True, this doesn’t necessarily mean that agriculture has to result in formal states with taxes; it just means that it’s very hard to get that without agriculture. (The one exception is if a nomadic herding society like the Mongols conquers an agricultural state and takes their taxes.)

In sum, yes, the “traditional story” is wrong–but not completely. History was more complicated, violent, and unequal, than portrayed, but the broad outlines of “smaller, simpler” hunter gatherer societies to “bigger, more complex” agricultural societies is basically correct. If anything, the lesson is that civilization has the potential to be a great force for good.

Time to Invest in Polish Real Estate?

DISCLAIMER: I am probably the last person you should listen to for advice about major investments. Please do lots and lots of your own research before buying anything big. Please take this post in the entertaining thought experiment style it is intended.

I’d like to start with an interesting story about Poland’s most famous daughter, Marie Curie, and her family:

1927 Solvay Conference. Marie is in the first row, between M. Planck and H. A. Lorentz

Marie was born in 1867 in what was then the Russian part of partitioned Poland. (Russia, Prussia, and Austria had carved up Poland into pieces back in the 1700s.) Her mother, father and grandfather were teachers–unsurprisingly, her father taught math and science. When the Russians decided to shut down science laboratories in Polish highschools, her father simply brought all of his equipment home and taught his kids how to use it instead.

Because of the Russian occupation and interference in the local schools, the Poles began operating their own, underground university known as the Flying University (there’s a name for you). As a woman, Marie couldn’t attend the official colleges in Warsaw, but was accepted to Flying U.

Marie’s sister wanted to study medicine in Paris, but unfortunately their parents and grandparents had lost all their money supporting Polish nationalist uprisings, and the girls were left to support themselves. So Marie and her sister had an agreement: Marie would work and send money to Paris while her sister studied, and then her sister would work and send Marie money while she finished her education.

Marie went to work as a governess for some distant relatives, and fell in love with one of the young men of the family, Kazimierz Żorawski, future mathematician. Unfortunately for the starry-eyed couple, his parents rejected the match on the grounds that Marie was penniless.

Żorawski went on to become a professor of mathematics at Krakow University and later Warsaw Polytecnic. Marie went to Paris, married Pierre Curie, won two Nobel prizes, and founded the Radium Institute at Warsaw Polytecnic. A statue of Marie was erected here, and as an old man, Żorawski would come and sit before the image of his young love.

You didn't seriously think we'd make it through this post without a polandball comic, did you?Poland has had a rough couple of centuries. According to Wikipedia:

An unsuccessful attempt at defending Poland’s sovereignty took place in 1794 during the Kościuszko Uprising, where a popular and distinguished general Tadeusz Kosciuszko, who had several years earlier served under Washington in the American Revolutionary War, led Polish insurrectionists against numerically superior Russian forces. Despite the victory at the Battle of Racławice, his ultimate defeat ended Poland’s independent existence for 123 years.[57]

Poland was unfortunately situated for both WWI and WWII, losing 1/5th of its population in the latter. The aftermath–occupation by the Soviets–wasn’t much better, as Ian Frazier recounts in his book, Travels in Siberia:

As Russia retook Poland, many Poles once again wound up in the gulag. Some who had lived through the Nazi occupation said Hitler was nothing compared to this, and they now wished they had fought on Hitler’s side. A prisoner who had survived Dachau hanged himself when he was shipped to Kolyma. Gulag prisoners who knew the novel Uncle Tom’s Cabin regretted that fate had put them in thsi time and place, and not in slavery in the American South, a hundred years before. As Negro slaves, they reasoned, at least they would have lived someplace warm, and would have been whipped and branded but not worked to death outright. In 1945, news reached the camps that the United States now possessed the atomic bomb. According to Solzhenitsyn, this unexpected development gave hope to many prisoners, who began to pray for atomic war.

But despite all of these troubles, Poland remains one of the world’s better countries–it’s ranked 36th out of 188 nations on the Human Development Index, and has an average IQ of 99, the same as its neighbors, Germany and Finland.

Despite this, Poland is ranked only 68th in per capita GDP ($27,700, lower than Puerto Rico, which isn’t even a country,) and has had a net negative migration rate (that is, more people have left than arrived) for most of the past 60 years. (Poland lost a net of almost 74,000 in 2015, most of them to other EU countries.)

In sum, Poland is a country with high human capital whose economy was probably artificially depressed by Communism, but has been steadily improving since 1990.

Net immigration increases the number of people in a country*, putting pressure on the local housing market and raising land prices. Net emigration decreases pressure on housing, leading to lower prices.

*Assuming, of course, that fertility rates are not collapsing. Poland’s fertility rate is slightly lower than Japan’s.

Poles have emigrated to countries like Germany and the UK because of their stronger economies, but if Poland’s economy continues to improve relative to the rest of Europe, Brexit goes forward, etc., Poland may become a more attractive employment destination, attracting back its migrant diaspora.

All of which leads me to suspect that Polish land is probably undervalued relative to places with similar long-term potential.

 

The Activation Energy of Economic Activity

Both Bourgois’s In Search of Respect: Selling Crack in El Bario and Joel Salatin’s Everything I Want to do is Illegal: War Stories from the Local Food Front discuss legal difficulties faced by small-scale entrepreneurs (albeit in very different situations.)

One of the crack dealers in Bourgois’s ethnography has amassed a small fortune (for the ghetto, at least,) and wants to “go honest.” So he uses his money to open a convenience store, but gets shut down by the authorities (state or local, I don’t recall which,) because his bathroom isn’t disabled-accessible. So he went back to selling crack.

Salatin also complains about ADA compliance, particularly in the matter of parking lots (if he pours a few concrete spaces in his yard so customers can park at his farm and buy a few chickens, does he need to make a handicapped spot?) and bathrooms.

Now that I think of it, back at one of my former jobs, we had a changing room that was officially a “supply closet” because it wasn’t large enough to meet ADA standards. (Obviously I was not in charge of this business and had no control over the closet.)

Salatin’s principle complains, though, focused on food-regulation laws–What counts as organic? What is an approved butchering facility? What if you are only butchering five chickens and want to sell them to your neighbors? What, exactly, is “organic”?

The amount of paperwork and legal compliance required to add a few organic potatoes or locally slaughtered chickens to such an operation are enormous.

According to Wikipedia:

In chemistry, activation energy is a term introduced in 1889 by the Swedish scientist Svante Arrhenius to describe the minimum energy which must be available to a chemical system with potential reactants to result in a chemical reaction.[1] Activation energy may also be defined as the minimum energy required to start a chemical reaction.

360px-activation_energy-svgSome chemical reactions basically happen instantly, like if you throw sodium into water (NOTE: Don’t throw sodium into water. It will explode.) Others, like starting a fire in your fireplace, require the input of some amount of energy to get the reaction going. (Typically we supply this energy by hand, by striking matches, rubbing sticks together, or striking flint on steel.)

We can also think of activation energy in economic terms as the inputs necessary to start a business. Beyond the obvious physical requirements–if you want to produce shoes, you will need material for making shoes–we also have legal requirements. You cannot simply bake a bunch of cookies at home, walk outside, and start selling them. There are some serious food safety laws on the subject.

Now to be clear, I value clean water, food, and medicines. I appreciate that my doctors are skilled. I don’t want to end up with brain-damage just because a local entrepreneur decided it was a good idea to dump old batteries into the drinking water, and I understand that disabled people need to pee just as much as everyone else.

But at the same time, we need to make sure we are not putting in so much regulation that small-scale entrepreneurs are effectively shut out of the market, because the costs of compliance either make the economic activity completely unprofitable, or are just too high for someone trying to start a business to bear.

(Large, already-established corporations, by contrast, tend to be less impacted by such regulations both because they hire armies of lobbyists to ensure that regulatory legislation favors them and also because their profits are high enough that they have money to spare for compliance. Still, they, too, are probably impacted in significant ways.)

Anthropology Friday: Reindeer Economies (pt 2/4

Nunavutball
Nunavutball

I have been preparing for today’s anthropology Friday by tromping around in a blizzard, seeking insight into our northerly neighbors’ lives.

Apparently circum-polar people live in a state of constant exhilaration, appreciation of the sublime beauty of nature, happiness, exhaustion, and cold toes. I am reminded of de Poncins’s descriptions of the Eskimo he lived with as counter-intuitively far happier than the people he knew from tropical, sun-kissed lands. Alas, I didn’t record that passage, but here is a similar one:

I thought of the months on the trail, of the hardships and even miseries I had endued, and of a sudden I began to miss them with an intensity which amazed me and which, since then, has never left me. … God knows we were poor enough. Our poverty was total. We possessed nothing: not even the snow was our own. … But there was a cheer and a contentment in our existence which I continue to muse upon and cannot altogether explain to myself….

Day after day a wind would raise, a sign of danger would appear in the air, and we would respond together, each forgetting himself and striving in the common cause. Outside, it wanted war and flood to give man this sense of brotherhood: here it was a commonplace of life.

Anyway, back to Ingold and the domestication of the reindeer:

“The second chapter deals directly with the nature and process of animal ‘domestication’. … My central contention is that the source of pastoral property relations lies in the particularistic, social bonds established through the incorporation of animals into a domestic division of labour; and hence that a precondition for the direct transition from hunting to pastoralism is the capacity of animals to function both as labour and as a source of food and raw materials.”

[EvX: You say “Cultural Marxism is just a conspiracy theory.” I say, “What the hell have you been reading?”]

“It may reasonably be assumed that where a pastoral economy has arisen directly out of predatory herd exploitation, the animals’ ‘main importance lay in their meat-producing qualities, as wild animals did not form wool or produce large quantities of milk’… In other words, such an economy would be based on slaughter products rather than those which can be obtained from live animals. It is true that wild herbivores can be milked, if only with difficulty, but the yield barely exceeds the animals’ own calving requirements, and could not form the staple of a pastoral diet.

“Now, it may fairly be objected that most modern forms of pastoralism are based on the production of milk rather than meat, and therefore that a precondition for their emergence must have been the initial taming and breeding of animals as milk-producers in connection with developing agricultural systems. Milch pastoralism is thus a secondary phenomenon … which would have arisen through the migration of men and herds into arid and uncultivable regions where the animals could not survive without human assistance.”

reindeer being milked
reindeer being milked

EvX: Since we don’t know actually how pastoralism arose, I must object that this is speculation. To counter: it is simple to make the yield exceed the animal’s calving requirements by eating the calf and then milking the mother; second, mammals can easily increase milk production in response to increased nursing/milking–domestication not required. Indeed, it is easy to imagine a grieving hunter-gatherer man whose wife has just died, desperately in need of milk for his infant, looking at a nursing doe and having a flash of inspiration.

“Reindeer pastoralism has the double distinction firstly of having emerged in regions far beyond the climatic limits of agriculture, and secondly of having remained confined within the original zone of distribution of the species. It is possible, therefore, that the reindeer is unique in having constituted the object of a direct transition from hunting to pastoralism. This would account for some of its most obvious peculiarities as a pastoral resource: its apparent ‘wildness’, both morphological and behavioural, and its relatively poor milk-yielding potential. It is probably true to say that in historic times the reindeer has been the only animal to form the basis of an exclusively carnivorous pastoralism.”

picture-9a

EvX: Speaking of milk, I’d love to try reindeer milk. Imagine the cheese and butter it would make!

Wikipedia has a short page on reindeer cheese, with this quoted historical description:

Reindeer cheese, of which we present two illustrations taken from a paper by Barthel and Bergman may be called the richest of all whole milk cheeses, as nearly half its weight consists of butter fats. It is, in fact, a rich cream cheese. It is yellow on the outside and white on the interior, except in the neighborhood of the numerous cracks, where it is also yellow. When cut into, the white rapidly changes to a golden yellow. The taste is very mild, very creamy, and the cheese melts very easily in the mouth, with the fine aroma of the reindeer milk; it easily becomes rancid and then acquires a strong odor and a burning taste.

Unfortunately, Wikipedia also notes that reindeer only give 1.5 cups of milk a day. I’m not sure how reindeer calves survive on that.

In Finland, a cheese called Leipajuusto was traditionally made with reindeer milk:

The milk is curdled and set to form a round disk from two to three centimeters thick. After this, leipäjuusto is baked, grilled or flambéed to give it its distinctive brown or charred marks. …

Traditionally, leipäjuusto was dried and could then be stored for up to several years. For eating, the dry, almost rock hard cheese was heated on a fire which softened it and produced an especially appetizing aroma. Even today, the cheese may be dried by keeping it in a well ventilated place for a few days. It has a mild flavour.

Continuing on:

“Whereas for the gatherer a crop unharvested is equivalent to a crop planted, the cultivator must reserve a portion of the harvest for replanting… Consequently, the inception of cultivation entails new social relations of production, which establish control by solitary groups over the fields they have laboured to prepare, and control within each group over the storage and distribution of the crop… It is these social relations, rather than new techniques, which provide the impetus towards population growth and surplus production under cultivation. …

“It is obvious that a discontinuity precisely analogous to that between gathering and cultivation cannot be posited in the case of animal husbandry. A ‘harvested’ animal is a dead one, and dead animals do not reproduce. They cannot therefore be ‘replanted’.”

EvX: This distinction makes no sense. A grain of wheat, once ground up and eaten cannot be planted. A cow, once eaten, cannot reproduce. But the cow’s mother, who birthed it, may continue producing more calves: she is not used up. By contrast, the stalk of wheat is used up at the end of the season; a new one must grow from seed the next year. In both cases, you eat some portion of your resource–seeds or cows–and hold some portion in reserve so it can reproduce. But I am complaining; let’s look for the good parts:

“Both cultivation and milch pastoralism increase the efficiency of the energy conversions yielding calories for human consumption: in the first case through the substitution of slow-growing woody plants by fast-growing weedy plants, in the second case through a shift from meat-production to milk-production. Moreover, the maintenance of tame milch animals requires a relatively intensive labour input, and increasing overall yields permit the support of higher populations. Thus, within limits set by the abundance of pasture, a positive correlation obtains between animal and human population numbers, and the spread of milch pastoralism represents an accommodation to the increase of both.

“The dynamics of carnivorous pastoralism are different in every respect. Its adoption in place of hunting harnesses no new material or energy inputs, nor does it improve the efficiency of ecological production. A wild animal is as good a converter of pasture to meat as a pastoral one.”

EvX: DATA PLEASE. Are raising cattle and hunting bison on America’s Great Plains more, less, or equally efficient? Do the few commercial sellers of buffalo burgers find pasturing and hunting buffalo equally efficient?

Comanche Nationball
Comanche Nationball

I don’t have any data on this (if you do, I’d be happy to see it.) Wikipedia estimates that 30,000 to 40,000 horse-mounted Comanches, living primarily off the Buffalo chase, lived in the southern Plains in the mid-1800s. But the Comanches are only one of many groups; SettlersInTheWest estimates a total of 75,000 Native Americans lived in the Plains in the mid-1800s.

But prior to the introduction of the domesticated horse by the Spaniards, hunting (on foot, assisted by dogs) was much more difficult, and total plains population must have beenlower. According to Wikipedia:

It was the Comanche, coming to the attention of the Spanish in New Mexico in 1706, who first realized the potential of the horse. As pure nomads, hunters, and pastoralists, well supplied with horses, they swept most of the mixed-economy Apaches from the plains and by the 1730s were dominant in the Great Plains south of the Arkansas River.[18] The success of the Comanche encouraged other Indian tribes to adopt a similar lifestyle. …

The farming tribes also hunted buffalo, deer, elk, and other game. Typically, on the southern Plains, they planted crops in the spring, left their permanent villages to hunt buffalo in the summer, returned to harvest crops in the fall, and left again to hunt buffalo in the winter. The farming Indians also traded corn to the nomadic tribes for dried buffalo meat.

With the arrival of the horse, some tribes, such as the Lakota and Cheyenne, gave up agriculture to become full-time, buffalo-hunting nomads. …

1280px-alfred_jacob_miller_-_hunting_buffalo_-_walters_371940190So domestic horses + huge herds of animals definitely tip the initial economic balance away from farming and toward hunting. The problem here is that it is really easy for humans to drive all of the buffalo over a cliff and then run out of buffalo.

(Paleolithic hunters didn’t have horses, but they still might have wiped out most of the ice-age megafauna.)

According to Beef Industry Statistics, there are about 619,000 farms/ranches currently specializing in raising beef cattle, and a further 300,000 presumably in dairy. Assuming that each of these farms supports at least three people (farm couple plus child,) that’s about 2.7 million people directly engaged in pastoralism, though of course not all of these people live in the Great Plains. To this number we should add all of the people who consume beef and milk but aren’t engaged in raising cattle, just as Comanche tribes included women, children, and old people who were not personally involved in hunting but still enjoyed eating the meat hunters brought home–which I suspect is most of America’s other 300 million people plus many folks abroad:

Value of total U.S. beef exports (including variety meat) equaled $6.302 billion down from $7.135 (billion)
Top export markets for 2015 (in order): Japan, Mexico, Canada, South Korea, Hong Kong, Middle East (U.S. Meat Export Federation)

Historic range of the American Bison
Historic range of the American Bison

Pre-1800s, Wikipedia estimates that there were 60 million American bison, who ranged from New York to Florida, into Mexico, up through Canada into Alaska, into the Rockies, northern California, and eastern Oregon. Beef Industry Stats counts 92.0 million US cattle in 2016.

These cases aren’t exactly analogous, especially since today’s people have very different technology than pastoralists in the 1800s or 500s had, but it’s the data I can find, and it suggests that pastoralism is more efficient, long-term, at producing both animals and humans.

But back to Ingold:

“The reindeer, although independent by nature, is amongst the easiest of animals to tame. It is of gentle disposition, of manageable size, and appreciative of the comforts that association with man can provide. Above all, it is ‘a highly social creature, impressing its friendship on man’ … Consider, for example, the domestic reindeer of the northern Tungus, which is kept in small herds for milk, riding and pack transport. It is said to be ‘of a very mild and kind nature . . . attached to man and especially to those who use it kindly, speak to it, caress it, and generally pay attention to it’ … Every deer has a name, which it recognizes, and its particular characteristics are intimately known (p. 35): ‘The intimacy of relations makes the Tungus love the reindeer nearly as human members of the family, and when a Tungus is alone he may talk to the reindeer which, according to the Tungus, can understand’…

Ingold's diagram, from the book
Ingold’s diagram, from the book–human resource-exploitation ranges on the left, reindeer migration paths on the right.

“Moreover, the animals are not herded. ‘The Tungus’, Shirokogoroff tells us, ‘have no shepherds’ (1929:33). Rather like the domestic pigs of the Maring, the Tungus reindeer are allowed to forage freely in the environs of the human camp or settlement, for they generally return of their own accord, even after an absence of several days, and despite ample opportunities to defect to the wild population. Whereas the pig returns for its ‘daily ration of garbage and substandard tubers’ … the reindeer returns for a lick of salt and human urine, for both of which it has a peculiar craving. In summer, when the deer are plagued by swarms of mosquitoes, the Tungus make life more bearable for their animals by lighting smudge fires in camp, or even by admitting them inside their tents, whilst in autumn and winter the camp provides the only refuge against wolves.”

EvX: This is quite similar to the theory that dogs and cats became domesticated because they initially found it convenient to live in close proximity to man, this association selecting without conscious human decision or even desire for “tame” animals who desire to be near humans.

There are other species that have also become somewhat “tame” by virtue of their close association with human settlements, such as rats and pigeons, but these animals have no traits that people find useful and so are seen as pests.

samiball1“… the care of the herds is entrusted almost entirely to women and children, leaving the men free to hunt and trap, or to loaf. At dusk, when the deer return to the tents of their owners, it is the mistress of each household who deals out shares of salt to her particular charges. During the fawning season, she must keep a close watch over the pregnant does to prevent their leaving to give birth in the forest, for the constant attention bestowed on fawns from the moment of birth is crucial to the establishment of enduring bonds of tameness. After fawning, she milks the does regularly, making from the milk a kind of gruel used as children’s food. When the deer come into rut, does and fawns have to be kept alternately within enclosures, in order to bind the does to camp and to prevent their
abduction by lustful bucks, including undesirable intruders from the wild population. …

“Amongst those peoples of the taiga who do not milk or ride their domestic reindeer, the relationship between man and animal is rather less close. The Sel’kups of the Taz region, for example, use their deer only for draft purposes in winter, to transport household effects between successive hunting and trapping sites. … Those with very small herds can keep them in the vicinity of their fishing sites throughout the summer, building substantial stalls of logs and bark to provide the animals with a shelter from the mosquitoes and the heat of the sun.

“… it is usual to allow the animals to go their own ways after fawning, rounding them up again only after the first snows of autumn. Each owner, in effect, must ‘hunt his own herd’, tracking the domestic deer as he would wild animals … a large proportion of each year’s fawns may be sired by wild bucks…

“The hunting peoples of the tundra and tundra—taiga margins differ from their taiga neighbours both in the scale of their migrations, of hundreds rather than tens of miles, and in the extent of their dependence on the wild reindeer as a subsistence resource. Though the possession of draft animals enables a people such as the Nganasan of the Taimyr Peninsula to cover the entire range of migration of the tundra reindeer in their annual cycle, their predatory association with massed herds creates special problems which are not encountered in the taiga, where the wild reindeer is both more dispersed and of relatively minor economic significance compared with other forest game. During the autumn migration, the most critical period of the hunting year, the Nganasan have to drive their own herds away from the path of the travelling column of wild animals to prevent their being carried along in its wake…

“Indeed, the attitude of the Tungus towards their tame reindeer mirrors that of the Nuer towards their cattle. Like the Tungus, the Nuer keep small herds of tame beasts for the products and services they yield during their lifetimes, but whereas the Tungus obtain the bulk of their subsistence from wild game, the Nuer staples are milk and millet. In neither society does the number of domestic animals greatly exceed the size of the human population. Nuer slaughter their cattle only for sacrificial purposes or in times of severe famine, but ‘any animal which dies a natural death is eaten’, evidently with some enthusiasm.”

EvX: I am skeptical of this, simply because a cattle herd only needs 1 male for every 10 or 40 or however many females. The excess males are what we eat. Neither the Nuer nor the Tungus have any practical reason to spend energy raising excess males who will produce nothing but meat except to eat that meat.

Siberiaball
Siberiaball

“The closest approach to a pure milch pastoralism based on reindeer is found among the Todzha, a people of the Sayan mountains of southern Siberia. They keep small herds of extremely tame animals in much the same manner as the Tungus, but the milk obtained from lactating does provides the staple food for the entire summer, though it is supplemented by wild roots… The exceptional productivity of the Todzha deer is largely due to the luxuriant summer pasture in this region, which is situated so far south as to adjoin the great steppes of Middle Asia. During the remainder of the year, however, Todzha subsistence is based almost entirely on hunting and trapping.

latest-2“…according to Wiklund, ‘the Lapp milking system with its entire nomenclature was borrowed from the Scandinavians in pre-Nordic times’ … The remaining Uralic, Samoyedic and Palaeoasiatic peoples of Siberia have never systematically milked their reindeer…

“Besides the provision of food and raw materials, the uses of domestic reindeer are all concerned with transport, with the exception of their employment as decoys. Hunting with decoys is the most widespread of all techniques involving the use of tame deer, and has been recorded throughout northern Eurasia. …

“The mounted deer of the Tungus is equipped with a saddle derived from Mongol patterns, whilst the Sayan form of reindeer riding shows the clear influence of Turkic cultures native to the Altai steppe. On these grounds, Vasilevich and Levin posit two close but distinct centres of origin for the domestication of the reindeer, one amongst the ancestors of the Tungus around Lake Baykal, the other amongst the original Troto-Samoyed’ inhabitants of the Sayan mountains. Both populations underwent subsequent dispersion, retreating perhaps from military turbulence on the steppes. …

samiball1“In Lapland, where dog traction was lacking, domestic deer were harnessed singly to the small boat-shaped sledge, or pulkka, which had been designed originally to be pulled by hand (figure 15B). Thus the distinctive technique associated with the employment of domestic reindeer in Lapland, including milking and packing as well as the pulkka, may be attributed to local conditions and contacts with horse- and cattle-keeping Scandinavians, and does not discount the hypothesis that the deer themselves were initially obtained from the Samoyed.

“There is an alternative view regarding the origins of reindeer driving, which holds that it arose in imitation of the horse and ox traction of southern Siberian steppe pastoralists. …

The Greenland Norse raised cattle and sheep, but the Greenland Inuit were exclusive hunters
The Greenland Norse raised cattle and sheep, but the Greenland Inuit were exclusive hunters

“Unlike the Samoyed of northwestern Siberia, none of the Palaeoasiatic peoples east of the Yenisey uses dogs for herding. In northeastern Siberia, the mutual antagonism between dog and reindeer is such that the two can be kept together only with the greatest difficulty, for dogs can wreak as much havoc as wolves if let loose on a herd… Consequently, the substitution of reindeer for dogs is, in this region, a more or less irreversible process. However, the reindeer is wholly unsuited to the semi-sedentary maritime adaptation of the north Pacific peoples, for it has to wander in search of food, and pasture does not grow on the ice. On the other hand, the sea yields an abundant supply of storable food for both man and dog … The exclusive reliance on dog traction along the coasts on both sides of the Bering Strait must therefore have acted as a buffer, effectively blocking the diffusion of the domestic deer into North America, until their importation from Siberia at the end of the nineteenth century.

a-i-of-little-understand-it-o-o-nunavutball-with-1314788EvX: This is an interesting theory, but if a dog attacks your chickens or cattle, you remove it from the gene pool and breed dogs who don’t attack your food animals. There’s nothing magical about northeastern Siberia that makes dogs there attack reindeer–though I do note that Siberian Huskies and related Eskimo dog species have been recently back-crossed with wolves (probably to give them traits necessary for survival under extremely cold, harsh conditions,) and I wouldn’t be surprised if this wolf DNA made them more aggressive toward prey animals.

“My contention, then, is that a connection can be traced between the heart of Old World pastoralism in the steppe country of Middle Asia and the emergence of reindeer pastoralism in the Eurasian tundra. Thrusting a vast and impenetrable wedge between these two zones, the great taiga forest presents a formidable barrier rich in game but inimical to any form of extensive herding. In the course of its expansion into the forest, the predominantly milch pastoralism of the steppe becomes progressively attenuated, giving way to hunting as the dominant basis of the economy. Where meat had been a secondary by-product of keeping domestic herds for milk, in the taiga milk production becomes subsidiary to the maintenance of tame animals as means to mobility in the procurement of meat…

Reindeer calf with mother
Reindeer calf with mother

“During the Pleistocene era, steppe and tundra were merged to form a single, homogeneous zone carrying a rich diversity of big game species. The advance of the forest across this zone, following the glacial retreat at the onset of the Holocene, left only a strip of tundra in the far north whose peculiarly arctic conditions hastened the extinction of much of the indigenous fauna that could adapt neither to the forest nor to the hot, southern steppes.”

 

EvX: I think that’s enough for today; we’ll wrap this up next Friday!

Anthropology Friday: Reindeer Economies

1024px-reindeer_pulling_sleigh_russiaHello, and welcome to Anthropology Friday! Today we’re having a look at Tim Ingold’s Hunters, Pastoralists and Ranchers: Reindeer economies and their transformations. (1980)

Ingold’s book is not a colorful, entertaining account of life in a reindeer herding community, but an academic attempt to explain why (and how) some arctic peoples have transitioned to reindeer-based pastoralism and some have continued their hunting lifestyle (not a whole lot of gathering happens in the arctic.)

According to Ingold, the most well-documented (as of 1980) arctic Eurasian pastoralists are the Lapps (aka Sami,) Nenets, Reindeer Chukchi, and Reindeer Koryak. Ingold cites several authors whose works may be useful for further reading on the subject, including Manker’s “People of Eight Seasons,” Bogoras’s “The Chukchi of Northeast Asia,” and Jochelson’s “The Koryak.” (On the Nenets, I substitute Golonev and Osherenko’s “Siberian Survival: The Nenets and their story.”)

Ingold is something of a Marxist (he cites Marx explicitly in the prologue) and sets out to prove that cultures (or at least the cultures he examines) don’t evolve in the Darwinian sense because one cultural approach to economic production doesn’t actually produce more babies than a different approach, and thus there is no biological selective mechanism at work. (Rather, he asserts that there are cultural factors at play.)

“Social Darwinism is wrong” is a pretty typical attitude from a Marxist, so with that caveat, let’s head to the book’s interesting parts (as usual, I’m using “”s instead of blockquotes.) Ingold begins with a question:

“Some years ago, I undertook a spell of anthropological fieldwork among the Skolt Lapps of northeastern Finland. These people were, so I imagined, reindeer pastoralists. Yet when I arrived in the field, the promised herds were nowhere to be seen. On inquiry into their whereabouts, I was assured that they did exist, scattered around in the forest and on the fells, and that before too long, a team of herdsmen would be sent out to search for them. Well then, I asked, should I purchase a few animals myself? Certainly not, came the reply, for the chances of ever getting my hands on them again would be remote. They could, after all, take refuge in every nook and cranny of a range of wilderness extending over several thousand square miles. … What kind of economy was this, in which live animal property roamed wild over the terrain, quite beyond the ken of its possessors, and in which simple common sense appeared to dictate against owning any animals at all? …

“[W]hy, if the herds are wild, do we not find a hunting economy[?] …”

EvX: Ingold then backtracks into some necessary ecological background on reindeer and their hunters:

Odin, king of gods, flanked by his ravens Hugninn and Muninn, and his wolves Geri and Freki
Odin, king of gods, flanked by his ravens Hugninn and Muninn, and his wolves Geri and Freki

“Of particular interest is the close, symbiotic association between the raven and the wolf. Flying above the herd, the raven guides the predator to its prey, in the expectation of receiving a share in the pickings… A similarly close relation exists between human hunters and their domestic or semi-domestic dogs, whose partnership with man in the chase is rewarded with left-overs of meat.”

EvX: Man the hunter follows the wolves, and the wolves follow the ravens, and the ravens track the prey. Give man a horse, and he is formidable indeed.

O’er Mithgarth Hugin and Munin both
Each day set forth to fly;
For Hugin I fear lest he come not home,
But for Munin my care is more.[5]

–Poetic Edda

ravens_and_wolves_see_email_3-28Two ravens flew from Óðinn’s
shoulders; Huginn to the hanged and
Muninn to the slain corpses.[9]

–Third Grammatical Treatise(?)

 

Moving on, Ingold outline the traits which make the reindeer suitable for domestication. They are, first of all, herd animals, a necessary prerequisite for pastoralism. (Pigs, by contrast, don’t form large herds, preferring to live in groups of <10.) This was not surprisng; the importance of predators in making a species suitable for domestication, however, was:

“The association between a pack of wolves and a reindeer herd on which it preys is a very close one. Packs are known to follow wild herds throughout their nomadic wanderings and seasonal migrations, whilst the deer are so accustomed to the presence of wolves that only those deer in the immediate vicinity of a wolf show any concern for their safety…

“Wolves are able to gorge enormous quantities of meat in a short time, and then to go for two weeks or more without food … This ability overcomes the necessity for meat storage in the face of irregularities in food supply.”

EvX: Ingold notes that wolves generally pose little threat to healthy, full-grown reindeer, but exact significant losses among fawns.

raven-pecks-at-reindeer-carcass-scandinavia-video-id1b08577_0005“Very heavy losses are recorded among reindeer fawns during the first months of life under ‘wild’ conditions. McEwan (1959) estimated that 33.5 per cent of fawns of both sexes died in the first three months among barren-ground caribou, and similar figures (33 to 44 per cent in the first four months) are given by Nowosad (1975) for the introduced reindeer herd of the Mackenzie Delta. Among Labrador caribou, fawn mortality over the first nine months (June to March) was found to be as high as 71 per cent, compared with an annual adult mortality rate of only 6 per cent (Bergerud 1967:635). These figures, although not strictly commensurable, present a striking contrast to the 12 per cent fawn mortality recorded by Skunke (1969) during the first six months under pastoral conditions in Swedish Lapland. It is clear that the surveillance of fawns, to the extent that it confers protection from the principal agents of mortality, represents a critical factor in pastoral herd growth. …

Very young fawns may be taken not only by wolves but also by smaller predators such as fox and wolverine, as well as by birds of prey. They may also succumb to wind chill and other adverse weather conditions encountered whilst on the fawning grounds.”

EvX: Until recently, there was little in animal husbandry which quite compares to agriculture’s direct human involvement in plant reproduction, but both agriculture and pastoralism involve human effort to deter our food’s other natural predators. In agriculture, we protect plants from bunnies, worms, insects, and stampeding herds to increase yields. In pastoralism, we protect animals from death by exposure, starvation, or predation by wolves to increase herds.

(I am reminded here of my grandfather’s dog, a German Shepherd, who killed all of the male coyotes in the area and then mated with the females, resulting in litters of hybrid coydogs.)

Interestingly, Ingold notes that:
“At this stage, losses of male and female fawns are about equal… However, sex ratios in adult herds always favour females by a large margin. The figures tabulated by Kelsall (1968:154) for barren-ground caribou of breeding age show a variation of between thirty-four and sixty-four males per hundred females, despite a roughly equal ratio at birth. …”

EvX: But enough about wolves; what about human hunters? Ingold argues that it would be nigh impossible for even the most nomadic humans to actually keep up, as wolves do, with a herd of reindeer:

caribou_feed_on_lichens_and_moss-_the_bird_is_an_alaskan_raven_-_nara_-_550384“Rather, the strategy is to intercept cohorts of the moving herds at a series of points on their migration orbits. The route connecting these points may cover the same distance as that travelled by the herds, or only a small part of it, but in no case is it identical to the itinerary of any one group of reindeer. Thus, hunters will frequent one location as long as game are present or passing through, building up a store of food if the kill is more than can be immediately consumed, and moving on to another location once supplies are exhausted. The strategy requires that hunters are able to anticipate rather than follow the movements of their prey and that, once located, enough animals can be killed to tide them over until the next encounter. …

“The wolf preying on reindeer has no difficulty in locating its resource, the problem is to isolate vulnerable targets. On the other hand, for human hunters, who are not in continuous
contact with the herd, the problem lies entirely in being in the right place at the right time. Once located, reindeer are remarkably easy to kill, even with primitive equipment … Moreover, the uncertainty of location encourages hunters to kill when they can;…

“In summer and autumn, deer can be hunted with dogs: the dog scents and chases the deer, holding it at bay until the hunter arrives within shooting range. This is perhaps among the most widespread of all human hunting practices, combining the superior strength of dogs as coursers with the ability of men to kill from a distance.”

EvX: The domestication of the dog and its long cooperation with man is a fascinating subject in and of itself. According to Wikipedia:

The closest living relative of the dog is the gray wolf and there is no evidence of any other canine contributing to its genetic lineage.[4][5][33][7] The dog and the extant gray wolf form two sister clades,[7][8][9] with modern wolves not closely related to the wolves that were first domesticated.[8][9] The archaeological record shows the first undisputed dog remains buried beside humans 14,700 years ago,[34] with disputed remains occurring 36,000 years ago.[35] These dates imply that the earliest dogs arose in the time of human hunter-gatherers and not agriculturists.[5][8] The dog was the first domesticated species.[9][10]

Where the genetic divergence of dog and wolf took place remains controversial, with the most plausible proposals spanning Western Europe,[36][5] Central Asia,[36][37] and East Asia.[36][38]

Further:

The Newgrange and ancient European dog mDNA sequences could be largely assigned to mDNA haplogroups C and D but modern European dog sequences could be largely assigned to mDNA haplogroups A and B, indicating a turnover of dogs in the past from a place other than Europe. As this split dates older than the Newgrange dog this suggests that the replacement was only partial. The analysis showed that most modern European dogs had undergone a population bottleneck which can be an indicator of travel. The archaeological record shows dog remains dating over 15,000 YBP in Western Eurasia, over 12,500 YBP in Eastern Eurasia, but none older than 8,000 YBP in Central Asia. The study proposed that dogs may have been domesticated separately in both Eastern and Western Eurasia from two genetically distinct and now extinct wolf populations. East Eurasian dogs then made their way with migrating people to Western Europe between 14,000-6,400 YBP where they partially replaced the dogs of Europe.[16]

Indicating that: 1. Humans + their dogs likely wiped out all of the wolves in their area, the same wolves their dogs were descended from, and 2. Modern European dogs are likely descended from dogs who accompanied the original Indo-Europeans, the Yamnaya, when they conquered Europe (also Iran, India, etc.) Continuing:

Ancient DNA supports the hypothesis that dog domestication preceded the emergence of agriculture[2][5] and was initiated close to the Last Glacial Maximum 27,000 YBP when hunter-gatherers preyed on megafauna, and when proto-dogs might have taken advantage of carcasses left on site by early hunters, assisted in the capture of prey, or provided defense from large competing predators at kill-sites.[2] … The earliest sign of domestication in dogs was the neotonization of skull morphology[78][79][80] and the shortening of snout length that results in tooth crowding, reduction in tooth size, and a reduction in the number of teeth,[55][78] which has been attributed to the strong selection for reduced aggression.[78][79]

As the Taimyr wolf had contributed to the genetic makeup of the Arctic breeds, a later study suggested that descendants of the Taimyr wolf survived until dogs were domesticated in Europe and arrived at high latitudes where they mixed with local wolves, and these both contributed to the modern Arctic breeds. Based on the most widely accepted oldest zooarchaeological dog remains, domestic dogs most likely arrived at high latitudes within the last 15,000 years. …

In 2015, a study found that when dogs and their owners interact, extended eye contact (mutual gaze) increases oxytocin levels in both the dog and its owner. As oxytocin is known for its role in maternal bonding, it is considered likely that this effect has supported the coevolution of human-dog bonding.[120]

I recall asking some time ago whether the domestication of animals had influenced the evolution of human empathy. In order to profitably live and work with dogs, did we develop new, inter-species depths to our ability to understand and be moved by the needs of others?

In 2003, a study compared the behavior and ethics of chimpanzees, wolves and humans. Cooperation among humans’ closest genetic relative is limited to occasional hunting episodes or the persecution of a competitor for personal advantage, which had to be tempered if humans were to become domesticated.[75][129] The closest approximation to human morality that can be found in nature is that of the gray wolf, Canis lupus. Wolves are among the most gregarious and cooperative of animals on the planet,[75][76] and their ability to cooperate in well-coordinated drives to hunt prey, carry items too heavy for an individual, provisioning not only their own young but also the other pack members, babysitting etc. are rivaled only by that of human societies.

But what does this tell us about cat people?

Hunting dogs make major contributions to forager societies and the ethnographic record shows them being given proper names, treated as family members, and considered separate to other types of dogs.[135][136] This special treatment includes separate burials with markers and grave-goods,[135][137][138] with those that were exceptional hunters or that were killed on the hunt often venerated.[135][139] A dog’s value as a hunting partner gives them status as a living weapon and the most skilled elevated to taking on a “personhood”, with their social position in life and in death similar to that of the skilled hunters.[135][140]

Intentional dog burials together with ungulate hunting is also found in other early Holocene deciduous forest forager societies in Europe[141] and North America,[142][143] indicating that across the Holarctic temperate zone hunting dogs were a widespread adaptation to forest ungulate hunting.[135]

While browsing Wikipedia pages about dogs, I happened across this strange gem of human behavior:

In ecology, the term pariah dog refers to free-ranging dogs that occupy an ecological niche based on waste from human settlements. … All authentic strains of pariah dogs are at risk of losing their genetic uniqueness by interbreeding with purebred and mixed-breed strays. To prevent this from happening, some strains of pariah dogs are becoming formally recognized, registered, and pedigreed as breeds in order to preserve the pure type.

Eskimo (Inuit) girl with her dog -- http://www.canadianinuitdogs.com/
Eskimo (Inuit) girl with her dog

Sure, they’re feral dogs who eat trash, but their bloodlines mustn’t be sullied by mixing with common strays!

Throughout the world, wherever there are men there are dogs: the Arctic-dwelling Eskimo have dogs; Native Americans have dogs; Aborigines have dogs (even though the dogs arrived in Australia after the Aborigines;) the Basenji hails from the Congo rainforest; etc. The only major group I know of that isn’t keen on dogs is Muslims. (Though Muslims probably have mixed attitudes on the matter. After all, Verse 5:4 of the Quran says “Lawful for you are all good things, and [the prey] that trained [hunting] dogs and falcons catch for you.”)

But enough about dogs. Let’s get back to Ingold:

“Upper Palaeolithic men, exploiting herds of gregarious big game principally by battue methods, had little use for hunting dogs, whilst packs of wild dogs could scavenge the waste discarded on the sites of human kills without having to enter occupied camps. … In Europe, on the other hand, the advantages for both species of close partnership gave rise to a process of unconscious selection on the part of man in favour of those qualities enhancing the efficiency of dogs as hunting aids. This contrast could account for the fact that in the tundra and taiga regions of the Old World, hunting dogs are found only in Europe and Siberia west of the Yenisey—Khatanga divide. However, as Meggitt (1965) has shown in the case of the relation between Australian aborigines and dingoes, co-hunting does not necessarily give rise to domestication in the sense of either taming or breeding. Human hunters may equally well follow behind wild packs on their predatory forays; and dogs, as habitual scavengers, derive a concomitant return through their interaction with man.”

EvX: As a bit of an aside, Ingold notes the effects of modern technology on ancient ways:

“The introduction of the gun throughout the circumboreal region has greatly modified the balance of traditional hunting practices by encouraging solitary stalking and coursing techniques at the expense of trapping and collective ambush drives. Possession of a rifle so increases the penetrating power of the individual hunter as to enable him to obtain all the meat he needs without recourse to co-operation beyond the dyadic partnership. Moreover, the consequent dependence on external traders for firearms and ammunition tends to disrupt traditional sharing relations, so that hunting on one’s own is made not only possible but desirable.”

EvX: But back to the Deer. Ingold enumerates the variety of uses circumpolar people have fo reindeer and the difficulties with obtain sufficient fat (humans can’t eat more than about 40 or 50% of their diets as protein without going into starvation mode, and dead deer can only be preserved effectively in the winter months, so lean deer killed in the summer are not consumed very efficiently.) He then compares the nature of hunting in different climes:

“In a number of respects, hunters of the arctic and subarctic are in a very different position from their counterparts in warmer climatic zones. It is now recognized that most so-called hunting peoples derive the bulk of their subsistence from gathering, horticulture or fishing, whereas game provides only a protein supplement to the diet (Lee 1968). Consequently, hunting activity tends to be sporadic, undertaken in response more to whim than to pressing need. Once a hunter has decided to embark in search of game, he may take the first animal of whatever favoured species that comes his way (e.g. Woodburn 1968:53). No attempt is made to kill more animals than can immediately be shared and consumed in camp; meat is wasted only if the victim is too large to be consumed at once. …

“Starvation appears to be all but unknown to such people, whilst the birth-spacing requirement imposed on women by the burdens of gathering and the necessarily long period of lactation renders the growth of population almost imperceptible … Taking into account the great diversity of prey species available to human hunters in tropical biotic communities, as well as the variety of non-human predators competing for the same resources, it follows that the impact of human predation on any one species of prey must be extremely small, and that it could not possibly operate in a density-dependent way. …

1024px-archangel_reindeer3“Consider now the reindeer hunter. He is primarily dependent on a single game species: hunting is for survival. It provides not a supplement but a mainstay to his diet, as well as materials for his clothing and shelter. For this reason, as we have seen, he must slaughter more animals than he can possibly consume in their entirety. Storage over the winter months is not only possible but vitally necessary. Food may be there in nature, but certainly not spread all around. On the contrary, it is both concentrated and highly mobile; whilst abundant in one locale, it may be completely absent from another. …

“The Nganasan, for example, obtain virtually a whole year’s supplies from only four months of hunting…

“If the herds change their accustomed routes, as they frequently do, and if the hunters
fail to locate them, people may starve. …

“It follows that even if we assume a constant human population, the size of the kill will fluctuate in relation to prey abundance. …

“On the basis of repeated reports of starvation among Eskimo and Naskapi reindeer hunters in the Ungava region of Labrador, Elton inferred that the human and reindeer populations must have been subject to linked oscillations of the Lotka—Volterra type: For hundreds of years the Indian population must have starved at intervals, giving the deer opportunities to increase, then killing deer heavily until another failure to cross their erratic tracks caused more Indians to starve . . . We see here the Indian population suffering a slow cycle, lasting over a generation, in much the same fashion as the shorter cycles of the wolf, lynx, fox and marten. It is to be supposed that such cycles among the caribou hunters had from the earliest times helped the elasticity of the hard-pressed herds.”

reindeer being milked
reindeer being milked

EvX: The differences in tropical vs. arctic hunting may help explain why megafauna such as elephants and giraffes have survived in Africa and virtually nowhere else.

Ingold then goes into detail about different reindeer hunting methods, such as setting up “fences” made of flapping cloth that “funnel” the reindeer into a pen and then killing them. It seems to me only a short step from here to deciding, “wait a minute, we can’t freeze these carcases today because it’s too warm out, but if we just kill a couple of deer now and keep the rest in the pen for a few weeks, it’ll get cold and then we can kill them,” and thence to, “Hey, what if we just keep them in the pen all the time and only kill one when we need to?”

Continuing:

“At first glance, the wolf and the pastoralist might be seen to have much in common (Zeuner 1963:47, 124). Both follow particular bands of reindeer, more or less continuously. Both slaughter for immediate needs, keeping their stores of meat ‘on the hoof. Both are selective in their exploitation of the herds. …

“A herd-following adaptation may be a necessary condition of pastoralism, but it is certainly not a sufficient one. There are three critical differences between the exploitation of herds by wolves and by human pastoralists. Firstly, pastoralists protect their herds against wolves, whereas wolves never offer protection against man. Secondly, pastoralists select intentionally, whereas selection by wolves is unintentional. Thirdly, the impact of pastoral selection on different age and sex classes in the herds is quite different from that of wolf predation. …

“The selection strategy of wolves … tends to maximize the sustained yield of meat from the herd. This is achieved primarily through the slaughter of a large proportion of the annual crop of fawns … Pastoralists, on the other hand, are reluctant to slaughter fawns, though some may have to be killed for their skins. Otherwise, the rule is to castrate males surplus to reproductive requirements, allowing them to survive well into maturity; and not to slaughter females at all unless or until they have become barren. This is a strategy for maximizing not the productivity but the numerical size of a herd, or the ‘standing crop’ of reindeer. It cannot be accounted for on the basis of human demographic pressure, since the yield is no greater than that which would be obtained by a random pattern of exploitation.”

EvX: So here is Ingold’s Marxism bleeding through. He wants to prove that pastoralism supports no more people than hunting, because reindeer function like currency for pastoralists, and so they become obsessive reindeer hoarders, preferring to grow their herds rather than produce more children.

He doesn’t cite any anthroplogical/ethnographic evidence on this count, though, and I am, frankly, skeptical. I recall, for example, a study of a spontaneous economy that sprang up in a POW camp in which inmates used cigarettes as currency which they used to trade for food, and the authors noted in passing that the camp’s smokers were thinner than everyone else because they were trading away their food to get currency just to smoke. Just because something is valuable doesn’t mean you won’t consume it. Ingold wants to prove that the preference for hunting or pastoralism stems from cultural factors–do people want to be pastoralists?–and not from one or the other offering biological, Darwinian advantages in the form of producing more children, as this would support the idea of Social Darwinism, which of course is evil Nazi heresy.

But this theory is dependent on the idea that, in fact, pastoralists and hunters have the exact same number of children–which I am not convinced of.

But let’s let Ingold have the last word (for today):

“To sum up: comparing the ecological relations of hunting and pastoralism, we find the latter to be chronically unstable, and unable to support a human population any higher than the former. Indeed, human population density under pastoralism may be lower than that which could be sustained by a hunting economy. It is for this reason that the pastoral association between men and herds is unique, having no parallels amongst other vertebrates. There is no selective mechanism on the Darwinian model that could account for a predator’s stimulating the increase of its prey at the expense of its own numbers. …

“From this contrast, I deduce the ecological preconditions of pastoralism: the herds must be followed, protected against predators and exploited selectively. Comparing the pastoralist and the wolf as exploiters of reindeer, I conclude that pastoralism cannot be regarded as an ‘intensification’ of hunting, and that the transformation from hunting to pastoralism marks a step towards overall ecological instability whose rationale must be sought on the level of social relations of production.”

Entropy, Life, and Welfare (pt. 3/3)

Communism works so well, soldiers had to push Fidel Castro's hearse because the Cuban government couldn't find a working truck
Communism works so well, soldiers had to push Fidel Castro’s hearse because the Cuban government couldn’t find a working truck

This is Part Three of a series on how incentives affect the distribution of energy/resources throughout a society and the destructive effects of social systems like communism. (Part One and Part Two are here)

But before we criticize these programs too much, let’s understand where they came from:

The Industrial Revolution, which began around 1760 in Britain, created mass economic and social dislocation as millions of workers were forced off their farms and flooded into the cities.

Communism: the world's single biggest source of murder in the 20th century
Communism: the world’s single biggest source of murder in the 20th century

The booms and busts of the unregulated (and regulated) industrial economy caused sudden, unpredictable unemployment and, without a social safety net of some kind, starvation. This suffering unleashed Marxism, which soon transformed into an anti-capitalist, anti-Western ideology and tore across the planet, demolishing regimes and killing millions of people.

Reason.com attributes 94 million deaths to communism. The Black Book of Communism places the total between 85 and 100 million people. Historian on the Warpath totals almost 150 million people killed or murdered by communist governments, not including war deaths. (Wikipedia estimates that WWII killed, between battle deaths in Europe and the Pacific, disease, starvation, and genocide, 50-80 million people–and there were communists involved in WWII, also.)

cdchqnbumaaj5sjThe US and Europe, while not explicitly communist, have adopted many of socialism’s suggestions: Social Security, Welfare, Medicaid, etc., many in direct response to the Great Depression.

These solutions are, at best, a stop-gap measures to deal with the massive changes new technologies are still causing. Remember, humans were hunter-gatherers for 190,000 years. We had a long time to get used to being hunter gatherers. 10,000 years ago, a few of us started farming, and developed whole new cultures. A mere 200 years ago, the Industrial Revolution began spreading through Europe. Today, the “post industrial information economy” (or “robot economy,” as I call it,) is upon us, and we have barely even begun to adapt.

We are in an age that is–out of our 200,000 years of existence–entirely novel and the speed of change is increasing. We have not yet figured out how to cope, how to structure society for the long-term so that we don’t accidentally break it.

We have gotten very good, however, at creative accounting to make it look like we are producing more than we are.

ceumwjhviaiaquiBy the mid-1950s, the Industrial Revolution had brought levels of prosperity never before seen in human history to the US (and soon to Europe, Japan, Korea, etc.) But since the ’70s, things seem to have gone off-track.

People fault outsourcing and trade for the death of the great American job market, but technical progress and automation also deserve much of the blame. As the Daily Caller reports:

McDonald’s has announced plans to roll out automated kiosks and mobile pay options at all of its U.S. locations, raising questions about the future of its 1.5 million employees in the country and around the globe.

Roughly 500 restaurants in Florida, New York and California now have the automated ordering stations, and restaurants in Chicago, Boston, San Francisco, Seattle and Washington, D.C., will be outfitted in 2017, according to CNNMoney.

The locations that are seeing the first automated kiosks closely correlate with the fight for a $15 minimum wage. Gov. Andrew Cuomo signed into law a new $15 minimum wage for New York state in 2016, and the University of California has proposed to pay its low-wage employees $15.

There is an obvious trade-off between robots and employees: where wages are low enough, there is little incentive to invest capital in developing and purchasing robots. Where wages are high, there is more incentive to build robots.

labor_forceThe Robot Economy will continue to replace low-skilled, low-wage jobs blue collar workers and young people used to do. No longer will teenagers get summer jobs at McDonald’s. Many if not most of these workers are simply extraneous in the modern economy and cannot be “retrained” to do more information-dependent work. The expansion of the Welfare State, education (also paid for with tax dollars,) and make-work administrative positions can keep these displaced workers fed and maybe even “employed” for the foreseeable future, but they are not a long-term solution, and it is obvious that people in such degraded positions, unable to work, often lose the will to keep going.

picture-30But people do not appreciate the recommendation that they should just fuck off and die already. That’s how you get communist revolutions in the first place.

Mass immigration of unskilled labor into a market already shrinking due to automation / technological progress is a terrible idea. This is Basic Econ 101: Supply and Demand. If the supply of labor keeps increasing while the demand for labor keeps decreasing, the cost of labor (wages) will plummet. Likewise, corporations quite explicitly state that they want immigrants–including illegal ones–because they can pay them less.

In an economy with more demand than supply for labor, labor can organize (unions) and advocate in behalf of its common interests, demanding a higher share of profits, health insurance, pensions, cigarette breaks, etc. When the supply of labor outstrips demand, labor cannot advocate on its own behalf, because any uppity worker can simply be replaced by some desperate, unemployed person willing to work for less and not make a fuss.

gr2009012802033Note two professions in the US that are essentially protected by union-like organizations: doctors and lawyers. Both professions require years of expensive training at exclusive schools and high scores on difficult tests. Lawyers must also be members of their local Bar Associations, and doctors must endure residency. These requirements keep out the majority of people who would like to join these professions, and ensure high salaries for most who do.

While Residency sounds abjectly awful, the situation for doctors in Britain and Ireland sounds much worse. Slate Star Codex goes into great detail about the problems:

Many of the junior doctors I worked with in Ireland were working a hundred hours a week. It’s hard to describe what working 100 hours a week is like. Saying “it means you work from 7 AM to 9 PM every day including weekends” doesn’t really cut it. Imagine the hobbies you enjoy and the people you love. Now imagine you can’t spend time on any of them, because you are being yelled at as people die all around you for fourteen hours a day, and when you get home you have just enough time to eat dinner, brush your teeth, possibly pay a bill or two, and curl up in a ball before you have to go do it all again, and your next day off is in two weeks.

And this is the best case scenario, where everything is spaced out nice and even. The junior doctors I knew frequently worked thirty-six hour shifts at a time (the European Court of Human Rights has since declined to fine Ireland for this illegal practice). …

The psychological consequences are predictable: after one year, 55% of junior doctors describe themselves as burned out, 30% meet criteria for moderate depression, and 12% report considering suicide.

A lot of American junior doctors are able to bear this by reminding themselves that it’s only temporary. The worst part, internship, is only one year; junior doctorness as a whole only lasts three or four. After that you become a full doctor and a free agent – probably still pretty stressed, but at least making a lot of money and enjoying a modicum of control over your life.

In Britain, this consolation is denied most junior doctors. Everyone works for the government, and the government has a strict hierarchy of ranks, only the top of which – “consultant” – has anything like the freedom and salary that most American doctors enjoy. It can take ten to twenty years for junior doctors in Britain to become consultants, and some never do.

I don’t know about you, but I really don’t want my doctor to be suicidal.

Now, you may notice that Scott doesn’t live in Ireland anymore, and similarly, many British doctors to take their credentials and move abroad as quickly as possible. The British medical system would be forced to reform if not for the influx of foreign doctors willing to put up with hell in exchange for not living in the third world.

From the outside, many of these systems, from underfunded pensions to British medicine, look just fine. Indeed, an underfunded pension will operate just fine until the day it runs out of money. Until that day, everyone who clams the pension is in deep trouble looks like Chicken Little, running around claiming that the sky is falling.

There’s a saying in finance: The market can stay irrational longer than you can stay solvent.

BTW, the entire state of California is in deep trouble, from budget problems to insane property tax laws. They already consume far more water than they receive, (and are set for massive forest fires,) but vote for increased population via immigration with Mexico. California’s economy is being propped up by–among other things–masses of cash flowing into Silicon Valley. This is Dot.Com Bubble 2.0, and like the first, it will pop–the only question is when. As Reuters reported last February:

LinkedIn Corp’s (LNKD.N) shares closed down 43.6 percent on Friday, wiping out nearly $11 billion of market value, after the social network for professionals shocked Wall Street with a revenue forecast that fell far short of expectations. …

As of Thursday, LinkedIn shares were trading at 50 times forward 12-month earnings, making it one of the most expensive stocks in the tech sector.

Twitter Inc (TWTR.N) trades at 29.5 times forward earnings, Facebook Inc (FB.O) at 33.8 times and Alphabet Inc (GOOGL.O) at 20.9 times.

Even after the selloff, LinkedIn’s shares may still be overvalued, according to Thomson Reuters StarMine data.

LinkedIn should be trading at $71.79, a 30 percent discount to the stock’s Friday’s low, according to StarMine’s Intrinsic Valuation model, which takes analysts’ five-year estimates and models the growth trajectory over a longer period.

Linked in has since been bought out by Microsoft for $26 billion. As Fortune notes, this is absolutely insane, as there is no way Microsoft can make back that much money off of LinkedIn:

Source Fortune http://fortune.com/2016/06/13/microsoft-linkedin-overpaid/
Source Fortune

“Ebitda” stands for Earnings Before Interest, Tax, Depreciation and Amortisation. There is absolutely no way that LinkedIn, a social network that barely turns a profit, is worth more than Sun, EMC, Compaq, and Time Warner.

Shares normally trade around 20x a company’s previous year’s earnings, though right now the S & P’s P/E ratio is around 25. In 2016, LinkedIn’s P/E ratio has been around 180. (Even crazier, their ratio in 2015 was -1,220, because they lost money.)

Ever wonder where all of that money from QE is going? It’s turning into Ferraris cruising around San Francisco, and LinkedIn is not the only offender.

But these companies will not maintain fantasy valuations forever.

(While we’re at it: Why the AOL-Time Warner Merger Went so Wrong:

When the deal was announced on Jan. 10, 2000, Stephen M. Case, a co-founder of AOL, said, “This is a historic moment in which new media has truly come of age.” His counterpart at Time Warner, the philosopher chief executive Gerald M. Levin, who was fond of quoting the Bible and Camus, said the Internet had begun to “create unprecedented and instantaneous access to every form of media and to unleash immense possibilities for economic growth, human understanding and creative expression.”

The trail of despair in subsequent years included countless job losses, the decimation of retirement accounts, investigations by the Securities and Exchange Commission and the Justice Department, and countless executive upheavals. Today, the combined values of the companies, which have been separated, is about one-seventh of their worth on the day of the merger.)

So, that was a bit of a long diversion into the sheer artificiality of much of our economy, and how sooner or later, the Piper must be paid.

picture-5bWhen I try to talk to liberal friends about the problems of increasing automation and immigration on the incomes of the American working class, their response is that “We just need more regulation.”

In this cheerful fantasy, we can help my friend who cannot afford health insurance by requiring his employer to provide health insurance–when in reality, my friend now cannot find a job that lasts for more than a month because employers just fire him before the health insurance requirement kicks in. In fantasy land, you can protect poor people by making it harder for landlords to evict them, but in the real world, this makes it even harder for the poorest to get long-term housing because no landlord wants to take the chance of getting stuck with them. In fantasy land, immigration doesn’t hurt wages because you can just legislate a higher minimum wage, but the idea that you can legislate a wage that the market does not support is an absurdity worthy only of the USSR. In the real world, your job gets replaced with a robot.

picture-4bThis is not to say that we can’t have some form of welfare or social safety net to deal with the dislocations and difficulties of our new economy. Indeed, some form of social welfare may, in the long run, make the economic system more robust by allowing people to change jobs or weather temporary unemployment without dying. Nor does it mean that any inefficiency is going to break the system. But long-term, using legislation to create a problem and then using more legislation to prevent the market from correcting it increases inefficiency, and you are now spending resources to enforce both laws.

Just like Enron’s “creative accounting,” you cannot keep hiding losses indefinitely.

You can have open-borders capitalism with minimal welfare, in which the most skilled thrive and survive and the least skilled die out. This is more-or-less the system in Singapore (see here for a discussion of how they use personal savings accounts instead of most welfare; a discussion of poverty in Singapore; and Singapore’s migration policies.)

Or you can have a Japanese or Swedish-style welfare state, but no open borders, (because the system will collapse if you let in just anyone who wants free money [hint: everyone.])

But you cannot just smash two different systems together, heap more laws on top of them to try to prevent the market from responding, and expect it to carry on indefinitely producing the same levels of wealth and well-being as it always has.

The laws of thermodynamics are against you.

(Return to Part One and Part Two.)