This is a good example of a common misconception: that physical space per person matters.
Things that actually matter:
1. Water per person
2. Farmland per person
3. Cost of housing near city centers
4. Commuting time to city centers
Thing is, while we still eat food, our economy has been, since the late 1800s, something we describe as “industrial” (and now “post-industrial”). This means that the vast majority of people have to live in cities instead of farms, because industries are in cities.
Don’t get your political information from anyone who doesn’t know we live in an industrial (post-industrial) economy, folks.
One of the side effects of living in an industrial/post-industrial economy is that, by necessity, you end up with uneven population densities. We don’t plop cities down on farmland (not if you want to eat) and you don’t try to grow potatoes in city medians.
So a pure measure of “density” is meaningless.
In an agrarian economy, land is the most important resource. In an industrial/post-industrial economy, proximity to industry is itself a kind of resource. People have to actually be able to get to their jobs. This is why in places like Silicon Valley, where housing is artificially restricted, the price of housing skyrockets. You can probably find some super cheap (relatively speaking) land a mere hundred miles away from SF, but people can’t commute that far, so they bid up the prices on what housing there is.
Of course it would be great if people could just build more housing in CA, but that’s a separate issue–regardless, if people could just move to one of those less populated areas, they would.
(By the way, South Africa is also a modern, industrial economy, which is why the idea of taking people’s farms and redistributing them to the masses is absurd from an economic point of view. South Africa is not an agrarian society, and very few people there actually want to be farmers. The goal is not economic growth, but simply to hurt the farmers.)
Many of our other resources are similarly “invisible”–that is, difficult to quantify easily on a map. Where does your water come from? Rain? Rivers? Aquifer?
How much water can your community use before you run out?
Water feels infinite because it just pours out of the faucet, but it isn’t. Each area has so much water it can obtain easily, a little more that can be obtained with effort, and after that, you’re looking at very large energy expenditures for more.
Groundwater Depletion in the United States (1900–2008). A natural consequence of groundwater withdrawals is the removal of water from subsurface storage, but the overall rates and magnitude of groundwater depletion in the United States are not well characterized. This study evaluates long-term cumulative depletion volumes in 40 separate aquifers or areas and one land use category in the United States, bringing together information from the literature and from new analyses. Depletion is directly calculated using calibrated groundwater models, analytical approaches, or volumetric budget analyses for multiple aquifer systems. Estimated groundwater depletion in the United States during 1900–2008 totals approximately 1,000 cubic kilometers (km3). Furthermore, the rate of groundwater depletion has increased markedly since about 1950, with maximum rates occurring during the most recent period (2000–2008) when the depletion rate averaged almost 25 km3 per year (compared to 9.2 km3 per year averaged over the 1900–2008 timeframe).
We’re not just “full”; we’re eating our seed corn. When the aquifers run out, well, the farms are just fucked.
There are some ways to prevent total aquifer collapse, like planting crops that require less water. We’re not totally doomed. But the idea that we can keep our present lifestyles/consumption levels while continuously expanding the population is nonsense.
Eventually something has to give. Someone has to scale back their consumption. Maybe it’s no more almonds. Maybe it’s less meat. Maybe it’s longer commutes or smaller houses.
No matter how you slice it, resources aren’t infinite and you can’t feed cities on deserts.
One more thought:
This is all technical, addressing the question of “How do we measure whether we are really full or not?”
No one has addressed the question of whether being “full” or not is even important.
You could look at my house and say, “Hey, your house isn’t full! There’s plenty of room for two more people in your living room,” and I can say “Excuse me? Who are you and why are you looking in my windows?”
This is my house, and it’s not my responsibility to justify to some stranger why I want X number of people living here and not Y number of people.
If I want to live alone, that’s my business. I am not obligated to take a roommate. If I want my sister and her husband and five kids to move in here with my husband and kids and their dogs, too, that’s also my business (well, and theirs.)
It is not a stranger’s.
Just because we can cram a lot of people into Nevada does not mean anyone is obligated to do so.
It is popularly asserted that many countries became wealthy via colonialism, essentially sucking the wealth out of other countries. This claim ignores the fact that many countries that did little to no colonizing, like the US and Germany, are richer today than countries that did extensive colonizing, like Spain and Britain.
It sounds to me like the claim is backwards. Colonialism doesn’t make countries wealthy; wealth makes countries able to have colonies.
Colonies, on net, probably lose money. I don’t have a definitive cite for this and frankly, if I did, I’d be cherry-picking because I’m sure there were colonies that did make money and there are studies that show a variety of outcomes for different countries, especially given that the term “colonialism” covers a lot of different things.
Conversely, John Keynes believed British savings would have been better employed at home in creating jobs and modernizing the capital stock of the British economy2. Marseille 1984, Davis and Huttenback 1986, Patrick O’Brien (1988), Fitzgerald 1988 and ForemanPeck 1989 followed this idea and provided evidence that colonization was costly to imperial economies. They made three arguments: first, public investments in the colonies were burdensome for French and British taxpayers3; second, the mainland private sector suffered because some private investment was diverted towards the colonies and earned lower than expected returns; and third, colonial trade led to lower productivity gains due to a lack of competition and colonial protectionism. (Marseille 1984 and O’Brien 1988). …
3 Davis and Huttenbach 1986 argue that British taxes would have been 20 percent less in the absence of empire because the United Kingdom bore most of the defense costs of the British Empire; Marseille 1984 estimates that the investment in public financial assets in the colonies amounted to 7 percent of metropolitan public
expenditures in the 1910’s, and 4 percent from 1947 to 1958; Marseille 1996 estimates that the trade deficit compensated by France’s public subsidies to the colonies represented 8-9 percent of metropolitan expenditure in the 1920s and from 1945 to 1962.
For 60 years after the 1807 act, the Royal Navy was used to enforce the British ban by shutting down the slave trade routes and seizing slave ships at sea. The West Africa Squadron patrolled the seas liberating around 150,000 enslaved Africans. The majority of the British Slave Trade was suppressed very rapidly, but as the British ships withdrew from trading the French, followed by the Spanish and Portuguese, took their place. After 1815, with Europe finally at peace, British supremacy at sea was secured, but, even with a powerful navy, suppressing the trade proved difficult, dangerous and very costly.
It was a huge task requiring co-operation from the governments of all the countries involved. Heavy subsidies were paid to induce other countries to curtail their involvement through anti-slavery treaties with Britian. Smaller amounts were also paid to numerous African chiefs to cease their involvement. The cost of maintaining the British squadron was also high. Initially ships operated out of the Cape of Good Hope but in 1819 a separate West Coast of Africa Station was created. By 1825 there were seven ships on station, manned by around 660 men. This grew to around 25 vessels by 1845 manned by around 2000 British sailors and nearly 1,000 ‘Kroomen’, experienced African fishermen.
In this article we develop a theory of costly international moral action by investigating the most expensive example recorded in modern history: Britain’s effort to suppress the Atlantic slave trade from 1807 until final success in 1867. Britain carried out this effort despite its domination of both the slave trade and world sugar production, which was based on slave labor. In 1805-1806 the value of British West Indian sugar production equaled about 4% of the national income of Great Britain. Its efforts to suppress the slave trade sacrificed these interests, brought the country into conflict with the other Atlantic maritime powers, and cost Britain more than five thousand lives as well as an average nearly 2 percent of national income annually for sixty years.
The emergence of indigenous bourgeois elites was especially characteristic of the British Empire, which seemed less capable (or less ruthless) in controlling political nationalism. Driven by pragmatic demands of budgets and manpower the British made deals with the nationalist elites.
Further, we note that the end of colonialism did not cause nations like Britain and France to economically collapse:
John Kenneth Galbraith argues that the post–World War II decolonisation was brought about for economic reasons. In A Journey Through Economic Time, he writes:
“The engine of economic well-being was now within and between the advanced industrial countries. Domestic economic growth – as now measured and much discussed – came to be seen as far more important than the erstwhile colonial trade…. The economic effect in the United States from the granting of independence to the Philippines was unnoticeable, partly due to the Bell Trade Act, which allowed American monopoly in the economy of the Philippines. The departure of India and Pakistan made small economic difference in the United Kingdom. Dutch economists calculated that the economic effect from the loss of the great Dutch empire in Indonesia was compensated for by a couple of years or so of domestic post-war economic growth. The end of the colonial era is celebrated in the history books as a triumph of national aspiration in the former colonies and of benign good sense on the part of the colonial powers. Lurking beneath, as so often happens, was a strong current of economic interest – or in this case, disinterest.”
In general, the release of the colonised caused little economic loss to the colonisers. Part of the reason for this was that major costs were eliminated while major benefits were obtained by alternate means. Decolonisation allowed the coloniser to disclaim responsibility for the colonised. The coloniser no longer had the burden of obligation, financial or otherwise, to their colony. However, the coloniser continued to be able to obtain cheap goods and lobar as well as economic benefits (see Suez Canal Crisis) from the former colonies. Financial, political and military pressure could still be used to achieve goals desired by the coloniser. Thus decolonisation allowed the goals of colonisation to be largely achieved, but without its burdens.
Weirdly, the arguments in favor of colonialism are often framed in terms of “burdens” that whites ought to undertake. West Africa became known colloquially as “the white man’s grave” because so many died there, eg:
To expand on this: in the Orkneys, the land was rather barren; there were no trees because there were always gales blowing, but that didn’t bother me, I enjoyed it there, I wished I could have done my entire service there, but I couldn’t. I had to go to West Africa, which was known as ‘White Man’s Grave’, which it is. Anyone who stays there for five years can expect to have something radically wrong with them afterwards, because of the climate etc.
The doctor, Harold Tweedy then found that I had blackwater fever, sleeping sickness, from the bite of the tsetse fly, and malaria, all together. … They thought that I was going to die so for good measure John Busby gave me an injection of triparcimide. This was specific against the sleeping sickness which normally requires a prolonged course of treatment, but in a miraculous manner the blackwater fever seemed to evaporate and the fevers subsided. I was very weak and yet I felt remarkably better and in a week I was put in a hammock and taken down to the sea-shore and carried through the water to a launch. The Paramount Chief and his Tribal Authority stood in the water to bid me farewell and I remember leaning out of the hammock to shake the chiefs hand and say to him that I would be back to talk that alleged murder case and other things. …
It was evening and as the sun went down over the sea as one looked westward I noticed the phenomenon of the green flash, an optical illusion which one sometimes saw. In the morning I was feeling all right but an orderly brought me some tea. It was dark. He then came to shave me; it was still dark. I just thought they started early here. Then he brought me some breakfast; it was still dark. I asked him the time. It was 8 a.m. when the sun was well up and I could not see it. I had gone blind overnight.
(Note that none of this is arguing that colonialism was a net gain for the colonized. It is entirely possible for something to be a net loss for everyone involved.)
According to the data gathered by Professor Angus Maddison in The World Economy: A Millennial Perspective, in 1600 India’s per capita GDP was $550 (1990 dollar levels), which remained the same for nearly a hundred and fifty years (the period of Mughal decline), and was slightly lower at $540 by the time the British became politically active in India in the 1750s. …
At the same time the British per capita GDP increased from $974 in 1600, to $1250 in 1700, $1424 in 1757,
In other words, India economically stagnated while Britain was zooming forward just before Britain colonized India.
So why colonize at all?
I propose that colonizing is akin to gambling. Sometimes you win. Sometimes you lose. If you can do it with someone else’s money, all the better. Some people love to gamble and will keep doing it for years. But in the long run, the house always wins.
“Colonialism will make us lots of money” sounds great, and clearly lots of people believe it. More likely, though, colonialism made some people a lot of money at the expense of a lot of other people losing money. So long as a country has lots of money to throw around or bad accounting, they can keep going, but eventually, repeat losers face insolvency and have to stop.
Society seems split into two camps on the matter of intelligence. Side A believes that everyone is secretly smart, but for a variety of reasons (bad teachers, TV, racism, sexism, etc) their true intelligence isn’t showing. Side B believes that some people really are stupid, because they are bad people, and they therefore deserve to suffer.
Out in reality, however, there are plenty of good, decent people who, through no fault of their own, are not smart.
I’m not making my usual jest wherein I claim that about 75% people are morons. I am speaking of the bottom 40% or so of people who have no particular talents or aptitudes of use in the modern economy. For any job that isn’t pure manual labor, they will almost always be competing with candidates who are smarter, quicker, or better credentialed than they are. Life itself will constantly present them with confusing or impenetrable choices–and it will only get worse as they age.
The agricultural economy–which we lived in until 7 decades ago, more or less–could accommodate plenty of people of modest intellects so long as they were hard-working and honest. A family with a dull son or daughter could, if everyone liked each other, still find a way for them to contribute, and would help keep them warm and comfortable in turn.
When you own your own business, be it a farm or otherwise, you can employ a relative or two. When you are employed by someone else, you don’t have that option. Back in the early 1800s, about 80% of people were essentially self-employed or worked on family farms. Today, about 80% of people are employees, working for someone else.
Agriculture is now largely mechanized, and most of the other low-IQ jobs, whether in stores or factories, are headed the same direction. Self-driving cars may soon replace most of the demand for cabbies and truckers, while check-out kiosks automate retail sales. I wouldn’t be surprised to see whole restaurants that are essentially giant vending machines with tables, soon.
The hopeful version of this story says that for every job automated, a new one is created. The invention of the tractor and combine didn’t put people out of work; the freed-up agricultural workers moved to the city and started doing manufacturing jobs. Without automation in the countryside we couldn’t have had so many factories because there would have been no one to work them. Modern automation therefore won’t put people out of jobs, long-term, so much as enable them to work new jobs.
The less hopeful point of view says that we are quickly automating all of the jobs that dumb people can do, and that the new economy requires significantly more intelligence than the old. So, yes, there are new jobs–but dumb people can’t do them.
If the pessimistic view is correct, what options do we have? People are uncomfortable with just letting folks starve to death. We already have Welfare. This seems suboptimal, and people worry that many of those who receive it aren’t virtuously dumb, but crafty and lazy. Makework jobs are another option. If not awful, they can let people feel productive and like they’ve earned their income, but of course they can be awful, and someone else has to make sure the fake job doesn’t result in any real damage. (If they could work unsupervised, they wouldn’t need fake jobs.) Our economy already has a lot of fake jobs, created to make it look like we’re all busy adults doing important things and prevent the poor from burning down civilization.
People have been floating UBI (universal basic income) as another solution. Basically, all of the benefits of welfare without all of the complicated paperwork or the nagging feeling that some lazy bum is getting a better deal than you because everyone gets the exact same deal.
UBI would ideally be offset via an increase in sales taxes (since the money is initially likely to go directly to consumption) to avoid hyperinflation. This is where we get into “modern monetary theory,” which basically says (I think) that it doesn’t really matter whether the gov’t taxes and then spends or spendsand thentaxes so long as the numbers balance in the end. Of course, this is Yang’s big presidential idea. I think it’s a fascinating idea (I’ve been tossing it around but haven’t had a whole lot to say about it for about fifteen years) and would love to see the independent nation of California or Boston try it out first.
UBI doesn’t exactly solve the problem of the dumb–who still need help from other people to not get scammed by Nigerian princes–but it could simplify and thus streamline our current system, which is really quite unwieldy.
Look, just… think about this for a moment. How does a group in which 65% are unemployed and can’t speak the language add anything to the economy?
You could do some sleight of hand where a few very productive workers, a random billionaire like Carlos Slim or Steve Jobs, get lumped in with a bunch of people they have nothing to do with on the grounds that they are all “Syrian,” and come up with numbers like this, but that would be a sleight of hand. It’s deceptive, and it’s obviously lumping together completely disparate groups in order to make one group look much better than it is.
How to tell if someone is lying to you with GDP:
Consider splitting the population in two. Say, Germans and non-Germans. Would GDP for one group go down?If yes, then you’re being lied to. Simply “growing” the GDP by drawing a bigger circle on the map and adding up the GDP inside of it doesn’t mean the people inside the circle have more money. It just means you drew a bigger circle.
Is this GDP “growth” entirely due to government spending to deal with the problems brought by the newcomers, like funding schools to teach them German?If yes, then it is not real spending. Everyone who was already in Germany was just taxed to provide service to non-Germans. You could do that without anyone immigrating to Germany.
Does this “growth” translate into a higher standard of living or happiness for the average or median German?
If not, you are being lied to.
If you could magically replace every one of those migrants with a German of the same age and sex, would GDP go up or down?
If Up, then these migrants are a bad investment.
If these immigrants are so great for the German economy, why were they so bad for their home economies?
Let’s summarize these varieties of “GDP” abuse: 1. Not looking at Per Capita, 2. “Growth” that doesn’t help the locals, 3. Growth that goes to elites, 4. Opportunity cost, 5. Not making any sense.
GDP is one way to measure the economy, but it isn’t the only way–and it certainly isn’t the only thing that matters.
Let us consider the simplest possible economy:
Joe and Bob are sailors who have been marooned on a desert island. They have plenty of fish to eat and two coconuts, which they use as currency. When Joe wants something from Bob, he pays him one Coconut. When Bob wants something from Joe, he pays him one Coconut.
Bob and Joe are also economists, so they keep track of their local GDP, tallying up every Coconut exchange. After two months, they have a robust GDP of 4,000 Coconuts per month–and then the coconuts sprout. For the next two months, Bob and Joe abandon the Coconut and just do favors for each other. The economy crashes. The island has a GDP of 0 Coconuts–but oddly, Bob and Joe are doing just as well and eating just as much fish as before.
You might be objecting that the Coconut Economy is a bit contrived, but it is relevant to our real world.
Over in our economy, if I hire a maid to vacuum my carpet, this is “economic activity” and it counts toward the GDP–but If I vacuum it myself, it doesn’t count. If I am hired as a nanny to take care of someone else’s children, this is “economic activity,” but if I take care of my own children, it doesn’t count. Even hiring a prostitute is “economic activity” as far as GDP is concerned, but having sex for free is not.
It is easy to see how something like “women entering the workforce” might generate a substantial GDP boost–while not actually changing anything but the location where particular jobs are done. There is no more economic value to vacuuming my carpet or yours. It’s all carpet.
There are plenty of non-economic arguments relevant here. I might be happier hiring someone to vacuum my carpet so I can spend my time on other activities, or I might be happier tidying up my own home to get everything just the way I like it. I might provide more nurturing childcare to my own children, or a professional might be able to invest in expensive toys and games that can be enjoyed by the many children in their care. People may enjoy consensual sex with their spouses more than with prostitutes–or may hate people and just want to visit the occasional prostitute. Etc.
All of these nuances of life are missed in any simple argument about GDP.
Any argument that hinges solely on what immigrants add (or subtract) from GDP is misguided because ultimately, people don’t exist to make economies better–economies exist to make people better.
Would you try to “improve” the lives of the Amish by inviting a bunch of Silicon Valley executives to settle in their area and boost GDP?
Of course not. It wouldn’t even be a meaningful exercise–the Amish are perfectly happy the way they are. Different people want different things in life. Sometimes that’s more money. Sometimes it’s community, free time, health, or nature. The Silicon Valley folks wouldn’t be too happy having to deal with the Amish, either.
About 30 years ago, economists-on-TV and pundits became convinced that the key to the economy was “spending” and therefore we had to convince people to spend more. Tracking things like “how much people spend on Christmas shopping” became an annual theme.
Of course, spending comes at a cost (future saving), and future saving comes at a cost (current consumption).
Imagine China is implementing a mercantilist policy. An American spends cash to buy goods exported from China. The Chinese recycle the money earned from exporting goods to America into buying mortgage backed securities. The American takes out a big mortgage to buy a house, mortgage bought by the Chinese. The American is effectively borrowing from the Chinese in order to fund current consumption. The net result is that America is a net seller of home equity and in return has recieved goods. The price of homes will be pushed up. In the GDP statistics this will actually show up as economic growth (since the cheap Chinese goods will push down the GDP deflator). But in reality, there has been no growth, the U.S. is simply selling off its own wealth and getting poorer.
Of course, this is what is actually happening.
The GDP numbers do not include depreciation. So if existing infrastructure is crumbling faster than it gets replaced, GDP might show the country as actually growing while in reality things are falling apart.
If the entire city of Detroit gets destroyed in riots, fires, crime waves, and ethnic cleansing, and is left in ruins, this catastrophe not show up in GDP numbers. In fact, GDP might actually increase since the destruction would spur the creation of new housing (which does show up in the numbers) and the average home price might actually fall (reducing the GDP deflator) due to violence making the neighborhoods unlivable.
GDP for GDP’s sake is burning houses down just so you can rebuild them–or importing foreigners just so you can spend money to teach them to speak your language.
Today I encountered Lesson’s less amusingly named but no less interesting paper on Human Sacrifice [PDF], whose abstract is one of the most libertarian things I have ever read:
This paper develops a theory of rational human sacrifice: the purchase and ritual slaughter of innocent persons to appease divinities. I argue that human sacrifice is a technology for protecting property rights. It improves property protection by destroying part of sacrificing communities’ wealth, which depresses the expected payoff of plundering them. … Human sacrifice is spectacular, publicly communicating a sacrificer’s destruction far and wide. Further, immolating a live person is nearly impossible to fake… To incentivize community members to contribute wealth for destruction, human sacrifice is presented as a religious obligation. To test my theory I investigate human sacrifice as practiced by the most significant and well-known society of ritual immolators in the modern era: the Konds of Orissa, India.
Of course, it is not exactly a rigorous test, but it is still an interesting case.
Leeson’s argument is not as crazy as it sounds at first glance. Suppose you have two very similar villages living near each other; neither has any particular advantage over the other. Each produces food each year, but food production varies due to natural vicissitudes. Some years village A produces more food; some years village B produces more food. Let’s suppose A has more food. Village B might decide to go steal some of A’s food. But war is expensive: B will only want to go to war if they can reasonably hope to steal more than the cost of war.
This sets up a situation where A has two potential war-avoiding strategies. A can pay off B, giving them enough of their surplus food to make them not want to go to war, or A can burn their surplus food, making war pointless.
The first option is a good idea if you have some hope of someday trading for surpluses with Village B in the future; the second option is a good idea if Village B is full of treacherous backstabbers and you’d rather burn your crops than let them have a crumb.
Burning crops is all well and good, but what if your enemies don’t believe that you’ve really burned them? What if the sacrifice is essentially fake, like Prometheus deceiving Zeus by wrapping bull bones in glistening fat? Your enemies might attack you anyway, despite your sacrifice.
Then you need a harder to fake signal, like spending your wealth on expensive trade goods which are then publicly destroyed–and the price and death of slaves, Leeson argues, is particularly difficult to fake.
There follows some math and a description of human sacrifice among the Konds (also spelled Khonds and Kondhs) of India, which I shall quote a bit:
Kond communities sacrificed humans. Their victims were called meriahs. Konds
purchased these persons from meriah sellers called Doms (or Pans) … In principle meriahs could be persons of any age, sex, race, or caste. In practice they were nearly always non-Konds. …
Every community held at least one of these festivals every year. Typically a
single meriah was sacrificed at each festival. But this was a lower bound. Kond country visitors occasionally reported sacrifices of upwards of 20 meriahs at a time
(Selections from the Government of India, 1854, p. 22). The general impression of
British officers who visited Kond country was that “the number of Meriahs annually
immolated” was large — very large — indeed, “far larger than could readily be
credited” (Selections from the Government of India, 1854, p. 28; see also, C.R.,
1846a, p. 61). …
Immolation festivals were large, raucous, three-day parties at which attendees
engaged “in the indulgence of every form of wild riot, and generally of gross excess” (Macpherson, 1865, p. 118). The villages that composed each community took turns
sponsoring the festival—purchasing the meriah and hosting the party. …
These festivals’ main event was the immolation itself, which took place on
the party’s third day. On this day the sponsoring Kond village’s head brought the
meriah, intoxicated with alcohol or opium, to a spot previously appointed for the
In some cases the victim’s arms and legs were broken to prevent his motion. After
this and some final prayers, the priest gave the word, and “the crowd throws itself
upon the sacrifice and strips the flesh from the bones, leaving untouched the head
and intestines” (Macpherson, 1865, p. 128). While cutting the victim to pieces in
this fashion was common, Konds sometimes used other modes of immolation — all
of them spectacular and spectacularly brutal — ranging from drowning the victim
in a pit of pig’s blood to beating him to death with brass bangles, always followed
by cutting him into small pieces…
The meriah thus slaughtered, the festival reached its crescendo. The chief gave
a pig or buffalo to the priest and the meriah’s seller, concluding the event. Each
of the participating villages’ representatives took a strip of the corpse’s flesh and
departed for their settlements where they shared it with their village members who
buried the flesh in their fields.
The British, of course, put a stop to the ritual–a classic act of white people destroying POC culture.
You can read the paper yourself and decide if you think the Kond case supports Leeson’s thesis.
The Kondh are adept land dwellers exhibiting greater adaptability to the forest and hill environment. However, due to development interventions in education, medical facilities, irrigation, plantation and so on, they are forced into the modern way of life in many ways. Their traditional life style, customary traits of economy, political organization, norms, values and world view have been drastically changed in recent times. …
The Kondh family is often nuclear, although extended joint families are also found. Female family members are on equal social footing with the male members in Kondh society, and they can inherit, own, hold and dispose off property without reference to their parents, husband or sons. … Children are never considered illegitimate in Kondh society and inherit the clan name of their biological or adoptive fathers with all the rights accruing to natural born children. The Kondhs have a dormitory for adolescent girls and boys which forms a part of their enculturation and education process. The girls and boys sleep at night in their respective dormitory and learn social taboos, myths, legends, stories, riddles, proverbs amidst singing and dancing the whole night, thus learning the way of the tribe.
Apparently Khonds don’t need to sleep, unlike us mere mortals. It’s just the myth of the noble savage, the peaceful egalitarian who sings and dances all night in harmony with nature.
No explanation is given for the photo of the “meriah sacrifice post.”
Traditionally the Kondh religious beliefs were syncretic combining totemism, animism, Ancestor worship, shamanism and nature worship. … In the Kondh society, a breach of accepted religious conduct by any member of their society invited the wrath of spirits in the form of lack of rain fall, soaking of streams, destruction of forest produce, and other natural calamities. Hence, the customary laws, norms, taboos, and values were greatly adhered to and enforced with high to heavy punishments, depending upon the seriousness of the crimes committed.
This is what pretty much every religion believes.
The practise of traditional religion has almost become extinct today. Many Kondhs converted to Protestant Christianity in the late nineteenth and early twentieth century due to the efforts of the missionaries of the Serampore Mission. … Significantly, as with any culture, the ethical practices of the Kondh reinforce the social and economic practices that define the people. Thus, the sacredness of the earth perpetuates tribal socio-economics, wherein harmony with nature and respect for ancestors is deeply embedded whereas non tribal cultures that neglect the sacredness of the land find no problem in committing deforestation, strip-mining etc., and this has led to a situation of conflict in many instances.
Yes, everyone knows that people who practice slash-and-burn agriculture just love nature.
Say what you will for Leeson’s theory, at least he doesn’t LIE to us.
Welcome to our final discussion of Auerswald’s The Code Economy. Today we will be finishing the text, chapters 13-15. Please feel free to jump in even if you haven’t read the book.
After a hopefully entertaining digression about Peruvian Poutine and Netflix’s algorithms*, we progress to the discussion of Bitcoin and the Blockchain. Now, I don’t know anything about Bitcoin other than the vague ideas I have picked up by virtue of being a person on the internet, but it was an interesting discussion nonetheless.
Auerswald likens blockchain to an old-fashioned accountant’s ledger; the “blocks” are the rectangles in which a business’s earnings and expenses are recorded. If there is any question about a company’s profits, you can look back at the information recorded in the chain of blocks.
The problem with this system is that there is only one ledger. If the accountant has made a mistake (or worse, a theft,) there is nothing else to compare it to in order to determine the mistake.
In the modern, distributed version, there are many copies of the blockchain. If on most of these copies of the chain, block 22 says -$400, and on one copy it says +$400, we conclude that the one that disagrees is most likely in error. Like the works of Shakespeare, there are so many copies out there that a discrepancy a single copy cannot be claimed to be authoritative; it is the collective body of work that matters.
“Blockchain” is probably going to get used here as a metaphor for “distributed systems of confirming authority” a lot. For example, “Democracy is a blockchain for deciding who gets to rule a country.” Or “science is a blockchain.”
In Rhodes’s “The Making of the Atomic Bomb,” he recounts the process by which something becomes accepted as “true” (or reasonably likely to be true,) in the scientific community. Let’s suppose scientist M is the foremost authority in his field–perhaps organic LEDs. Scientists L and N are doing work that overlaps M’s, and can therefore basically evaluate M’s work and vouch for whether they think it is sound or not. Scientists J, K, O, and P do work that overlaps a lot with L and N and a little with M; they can evaluate M’s work a little and vouch for whether they think L and N are trustworthy. The chain continues down to little cats scientists A and Z, who can’t really evaluate scientist M, but can tell you whether or not they think B and Y’s results are trustworthy.
This community of science has both good and bad. In general, the structure of science has been extremely successful at inventing things like computers, atomic bombs, and penicillin; at times it creates resistance to new ideas just because they are so far outside of the mainstream of what other scientists are doing. For example, Ignaz Semmelweis, a physician, discovered that he could reduce maternal deaths at his hospital from around 10-18% to 2% simply by insisting that obstetricians wash their hands between dissecting cadavers and delivering babies. Unfortunately, the rest of the medical establishment had not yet accepted the Germ Theory of disease and believed that disease was caused by imbalanced humors. Semmelweis’s idea that invisible corpse particles were somehow transferring corpse-ness from dead people to live people seemed absurd, and further, blamed the doctors themselves for the deaths of their patients. Semmelweis’s tragic tail ends with him being stomped to death in an insane asylum. (His mental ill-health was probably induced by a combination of the stress of being rejected by his profession; and syphilis, contracted via charity work delivering babies for destitute prostitutes.)
Luckily for mothers everywhere, medical science eventually caught up with Semmelweis and puerperal fever is no longer a major concern for laboring women. Science, it seems, can correct itself. (We may want to be cautious about being too eager to reject new ideas–especially in cases where there is clearly a lot of room for improvement, like an 18% death rate.)
Niti Aayog is working with Apollo Hospitals and information technology major Oracle on applying blockchain (decentralised) technology in pharmaceutical supply chain management to detect spurious drugs, Chief Executive Officer of NITI Aayog Amitabh Kant said here today.
Addressing a gathering through video-conferencing at the inaugural session of International Blockchain Congress 2018 for which Niti Aayog was a co-host, Kant said the organisation was working on applying the blockchain technology to pressing problems of the country in areas such as land registry, health records and fertiliser subsidy distribution m among others.
Blockchain technology can enable India to find solutions to huge logjams in courts …
With two-thirds of all civil cases pertaining to registration of property or land, the country’s policy think-tank is working with judiciary to find disruptive ways to expedite registrations, mutations and enable a system of smart transactions that is free of corruption and middlemen.
… There are three crore cases currently pending in Indian courts, including 42.5 lakh cases in high courts and 2.6 crore* cases in lower courts. Even if 100 cases are disposed off every hour without sleeping and eating, it would take more than 35 years to catch up, he said. …
On transforming the land registry system using blockchain, Niti Aayog is in advanced stage of implementing proof of concept pilot in Chandigarh to assess its potential to solve the problem of India’s land-based registry system. …
“It’s powerful because it allows multiple parties to collaborate and come to consensus without any need of third party,” he said.
*A crore is an Indian unit equivalent to 10 million.
I probably do not need to review Auerswald’s summary of Bitcoin’s history, as you are probably already well aware of it, but the question of “is Bitcoin real money?” is interesting. In 1875, Jevons, “cofounder of the neoclassical school in economics,” wrote that a material used as money should have the following traits:
“1 Utility and value
6 Stability of value
I am not sure about all of the items on this list; cigarettes and ramen noodles, for example, are used as currency in prisons, even though they are very easy to destroy. It seems like using a currency that you are going to eat would be problematic, yet the pattern recurs over and over in prisons (where perhaps people cannot get their hands on non-consumable goods, or perhaps people simply have no desire for non-consumable ornaments like gold.)
Gold–the “gold standard” of currencies–is a big odd to me, because it has very few practical uses. You can’t eat it. You can’t plant with it, cure parasites with it, or build with it. Lots of people talk about how you’d want a hard currency like gold in the case of societal collapse in which people stop accepting fiat currency, but if zombies were invading, the gas stations had run out of gasoline, and the grocery stores were out of food, I can’t imagine that I’d trade what few precious commodities I had left for a pile of rocks.
People argue that fiat currency is “just paper,” but gold is “just rocks,” and unless you’re a jeweler, the value of either is dependent entirely on your expectation that other people will accept them as currency.
For the past 40 years the world’s currencies have been untethered from gold or any other metal. National “fiat” currencies are nothing more or less than tradeable trust, whose function as currency is based entirely on government-enforced scarcity an verifiability not tethered to its intrinsic usefulness.
I think Auerswald overlooks the role of force in backing fiat currencies. We don’t use Federal Reserve Notes because we trust the government like it’s our best friend from the army who pulled us out of a burning foxhole that one time. We use Federal Reserve Notes because the US government has a lot of guns and bombs to back up its claim that this is real money.
Which means the power of a dollar is dependent on the US government’s ability to enforce that value.
As for Bitcoin:
Bitcoin… satisfies all the criteria for being “money” that William Stanley Jevon set forth… with on exception intrinsic utility and value. That does not mean that Bitcoin will grow in significance as a means of exchange, much less achieve any position of dominance. But with digital transactions via mobile phones–Apple Pay and the like–becoming ever more command the concept of a digital currency not backed by any government gaining rapid acceptance, the prospect of one or another digital currency competing successfully with fiat currencies is not nearly as far-fetched today as it was even three years ago.
The biggest problems I see for digital currencies:
Keeping value–if people decide they won’t accept DogeCoin, then what do you do with all of your DogeCoins?
Ease of entry into the market makes it difficult for any one Coin to retain value
Most people are happy using currencies not associated with illegal activity
The upside to digital currencies is they may be a real blessing for people caught in countries where local fiat currencies are being manipulated all to hell.
Anyway, Auerswald envisions a world in which blockchains (with coins or not) enable a world of peer-to-peer authentication and transactions:
By their very structure, Peer-to-peer platforms start out being distributed. The challenge is how to organize all of the energy contained in such networks so that people are rewarded fairly for their contributions. …Blockchain-based systems for governing peer0to0eer networks hold the promise–so far unrealized–of incorporating the best features of markets when it comes to rewarding contribution and of organizations when it comes to keeping track of reputations.
In other words, in areas where economies are held back because the local governments do a bad job of enforcing contracts and securing property rights, “blockchain”-like algorithms may be able to step into the gap and provided an accepted, distributed, alternative system of enforcement and authentication.
(This is the point where I start ranting to anyone within earshot about communists not recognizing the necessity of secure property rights so that people can turn their property into capital in order to start businesses. Without that seed money to start a business, you can’t get started. Even something simple, like driving for Uber, requires a car to start with, and cars cost money. If you can’t depend on having money tomorrow because all of your property just got confiscated, or you can’t depend on having a car tomorrow because private property is for bourgeois scum, then you can’t get a job driving for Uber. If no one can convert property to capital and thus to businesses, then you don’t get business and you have no economy and people suffer.
Communists see that some people have property that they can convert to capital and other people don’t have said capital, and their solution is to just take everybody’s stuff away and declare the problem fixed, when what they really want is for everyone to have enough basic property and capital to be able to start their own business.]
But back to Auerswald:
Earlier… I alluded to the significant advance in democracy, science, and financial systems that occurred simultaneously during …the Age of Enlightenment. That systems of governance, inquiry, and economics should have advanced all at the same time… is no coincidence at all. Each of these foundational developments in human social evolution is, at its core, an algorithm for authentication and verification. …
It is only because of the disciplinary fragmentation of inquiry that has occurred in the past century that we do not immediately perceive in the evolved historical record the patterns connecting systems of authentication and verification in politics, science, and economics as they have jointly evolved. … Illuminating those patterns has been the point of this book.
Chapter 14 begins with a history of Burning Man, which the author defends thus:
Still, it makes for an interesting case study in the building of cities (and why laws get enacted): Like everything about Black Rock City, the layout is the product of both planning and evolution. Cities are what physicists refer to as dissipative structures: highly complex organisms worse existence depend on a constant throughput of energy. If you were to close down all bridges and tunnels into New your City … grocery stores would have only a three-day supply of food. The same is generally true of a city’s other energy requirements. All cities are temporary, and they survive only because we feed them. …
The evolution of Black Rock is for urbanists what a real-life Jurassic Park would be for a Paleontologist. We really have no idea what the experience of living in humanity’s first cities might have been–whether Uruk in Mesopotamia or Catalhoyuk in Anatolia. And yet all cities also have elements of planning. Where Black Rock City has its Larry Harvey, London had its Robert Hooke and Washington, D.C., had its Pierre L’Enfant. Each had a notion of how to bound a space, build symmetry and flow, and in so doing provide a platform where the human experience can unfold.
I have a somewhat dim view of “Burning Man” as a communist utopia that’s only open to rich people, filled with environmentalist hippies leaving an enormous carbon footprint in order to get high with a close-knit community of 70,000 other people, but maybe my sight is obscured from the outside.
The question remains, though: will code be a blessing, or a curse? What happens to employment as “traditional” jobs disappear? Will blockchain and other new platforms and technologies make us freer, or simply find new ways to control us?
The advance of code reduces individual power and autonomy while it increases individual capabilities and freedom.
So far, Auerswald points out, there has been good reason to be optimistic:
In 1990, a staggeringly high 43 percent of people in the “developing world,” approximately 1.9 billion people, lived in extreme poverty. By 2010, that number had fallen to 21 percent. …
For the past two centuries, the vehicle for that progress has been the continual capacity of economies to generate more and better jobs. … “Gallup has discovered that having a good job is now the great global dream … ‘A good job’ is now more important than having a family, more compelling than democracy and freedom, religion, peace and so on… Stimulating job growth is the new currency of all leaders because if you don’t deliver on it you will experience instability, brain drain, sometimes revolution…
There is something concerning about this, though. “Jobs creation” is now widely agreed to be in the hands of national leaders, not individuals. Ordinary people are no longer seen as drivers of innovation. People can start businesses, of course, but whether those businesses survive or fail depends on the government; for the average person, jobs are no longer created by human ingenuity but awarded by an opaque power structure.
Thus the liberal claim that “structural racism” (rather than “individual racism”) is the real cause of continued black impoverishment and high unemployment rates. In a world where employment is granted or withheld by the powerful based on whether or not they like you, not based on your own innate ability to make your own economic contribution to the world, then it is imperative to make sure that the powerful see it as important to employ people like you.
It is, in sum, an admission of the powerlessness of the individual.
Still, Auerswald is hopeful that with the rise of the Peer-to-Peer economy and end of traditional factory work, not only will work be more interesting (as boring, repetitive jobs are most easily automated,) but also that people will no longer be dependent on the whims of a small set of powerful people for access to jobs.
I think he underestimates how useful it is to have steady, long-term employment and how difficult it is for individuals to compete against established corporations that have much larger economies of scale and access to far more relevant data than they do. Take, for example, YouTube vs. Netflix. Netflix can use its troves of data to determine which kinds of shows customers would like to watch more of, then hire people to make those shows. This is pretty nice work if you can get it. YouTube, of course, just lets pretty much anyone put up any video they want, and most of the videos are probably pretty dull, but a few YouTubers put up quality material and an even smaller few actually make a decent amount of money. YouTuber PewDiePie, for example, holds the record at 61+ million subscribers, which has earned him $124 million. But most people who try to become YouTube stars do not become PewDiePie; most earn very little. And why should they, when most of them are amateurs low-budget amateurs with no data on what audiences are interested in going up against other TV options like Orange is the New Black, Breaking Bad, and yes, PewDs himself?
I have a friend who is a very talented amateur clothing designer and dressmaker. I have encouraged her to open a shop on Etsy and try sell some of her creations, but can she really compete with Walmart, The Gap, or Nordstrom? Big Clothing has a massive lead in terms of factories mass-producing clothes for sale. (Her only hope would be to extremely upscale–wedding dresses, movie costumes, etc.)
So what does the future hold?
In the next round of digital disruption, tasks that can be automated (the “high-volume, low-price” option resulting from ongoing code-driven bifurcations…) will yield only small dividends for most people. The exception is the relatively small number of people who will maintain the platforms on which such tasks are performed…
The promising pathway for inclusive well-being is humanized work (the “low-volume, high-price” pathway resulting from ongoing code-driven bifurcations…) this pathway includes everything about value creation that is differentiated, personal, and human.
In his Conclusion, Auerswald writes:
To be human is to think critically. To collaborate, to Communicate. To be creative. What we call “the economy’ is one extension of these activities. It is the domain in which we develop and advance code.
But the singularity approaches:
We are not at the center of our cognitive universe. Our own creations are eclipsing us.
For each of us, redefining work requires nothing less than redefining identity. This is because production is not something human beings do just to consume. In fact, the opposite is true. We are living beings. We consume in order to produce.
Well, that’s the end of the book. I hope you have enjoyed it as much as I have. What do you think the future holds? Where do you think code is taking the economy? What are the best–and worst–opportunities for growth? And what (if anything) should we read next?
*An Aside On Netflix and the use of algorithms to produce movies/TV:
…consider the fate of two films that premiered the same night at the 2015 Sundance Film Festival. … One of these films, What Happened, Miss Simone? was a documentary about singer and civil rights icon Nina Simone. That film was funded by Netflix, whose corporate decision to back the film was based in part on insights algorithmically gleaned from the vast trove of data it has collected on users of its streaming video and movie rental services. The second film was a comedy titled The Bronze, which featured television star Melissa Rauch as a vulgar gymnast. The Bronze was produced by Duplass Brothers production and privately financed by “a few wealthy individual” whose decision to back the film was presumably not based on complex impersonal algorithms but rather, as has been the Hollywood norm, on business intuition.
I’ve often wondered why so many terrible movies get made.
A documentary about a Civil Rights leader might not be everyone’s cup of tea (people like to say they watch intellectual movies more than they actually do,) but plenty of people will at least abstractly like it. By contrast, a “vulgar gymnast” is not an interesting premise for a movie. Vulgarity can be funny when it is contrasted with something typically not vulgar–eg, “A vulgar mobster and a pious nun team up to save an orphanage,” or even “A vulgar nun and pious mobster…” The humor lies in the contrast between purity and vulgarity. But gymnasts aren’t known for being particularly pure or vulgar–they’re neutral–so there’s no contrast in this scenario. A vulgar gymnast doesn’t sound funny, it sounds rude and unpleasant. And this is the one sentences summary chosen to represent the movie? Not a good sign.
As you might have guessed already, What Happened, Miss Simone, did very well, and The Bronze was a bomb. It has terrible reviews on IMDB and Rotten Tomatoes. As folks have put it, it’s just not funny.
Davidowitz notes in Everybody Lies that the industries most ripe for “big data”fication are the ones where the current data is not very good. Industries where people work more on intuition than analysis. For example, the choice of horses in horse racing, until recently, was based on pedigree and intuition–what experienced horse people thought seemed promising in a foal. There was a lot of room in horse racing for quantification and analysis–and the guy who started using mobile x-ray machines to measure horse’s heart and lung sizes was able to make significantly better predictions than people who just looked at the horses’s outsides. By contrast, hedge funds have already put significant effort into quantifying what the prices of different stocks are going to do, and so it is very hard to do better data analysis than they already are.
The selection of movies and TV pilots to fund fall more into the “racing horses picked by intuition” category than the “extremely quantified hedge funds” category, which means there’s lots of room for improvement for anyone who can get good data on the subject.
Incidentally, “In 2015… Netflix accounted for almost 37 percent of all downstream internet traffic in North America during peak evening hours.”
Welcome back to EvX’s book club. Today we’re reading Chapter 11 of The Code Economy, Education.
…since the 1970s, the economically fortunate among us have been those who made the “go to college” choice. This group has seen its income row rapidly and its share of the aggregate wealth increase sharply. Those without a college education have watched their income stagnate and their share of the aggregate wealth decline. …
Middle-age white men without a college degree have been beset by sharply rising death rates–a phenomenon that contrasts starkly with middle-age Latino and African American men, and with trends in nearly every other country in the world.
It turns out that I have a lot of graphs on this subject. There’s a strong correlation between “white death” and “Trump support.”
White vs. non-white Americans
American whites vs. other first world nations
But “white men” doesn’t tell the complete story, as death rates for women have been increasing at about the same rate. The Great White Death seems to be as much a female phenomenon as a male one–men just started out with higher death rates in the first place.
Many of these are deaths of despair–suicide, directly or through simply giving up on living. Many involve drugs or alcohol. And many are due to diseases, like cancer and diabetes, that used to hit later in life.
We might at first think the change is just an artifact of more people going to college–perhaps there was always a sub-set of people who died young, but in the days before most people went to college, nothing distinguished them particularly from their peers. Today, with more people going to college, perhaps the destined-to-die are disproportionately concentrated among folks who didn’t make it to college. However, if this were true, we’d expect death rates to hold steady for whites overall–and they have not.
Whatever is affecting lower-class whites, it’s real.
Auerswald then discusses the “Permanent income hypothesis”, developed by Milton Friedman: Children and young adults devote their time to education, (even going into debt,) which allows us to get a better job in mid-life. When we get a job, we stop going to school and start saving for retirement. Then we retire.
The permanent income hypothesis is built into the very structure of our society, from Public Schools that serve students between the ages of 5 and 18, to Pell Grants for college students, to Social Security benefits that kick in at 65. The assumption, more or less, is that a one-time investment in education early in life will pay off for the rest of one’s life–a payout of such returns to scale that it is even sensible for students and parents to take out tremendous debt to pay for that education.
But this is dependent on that education actually paying off–and that is dependent on the skills people learn during their educations being in demand and sufficient for their jobs for the next 40 years.
The system falls apart if technology advances and thus job requirements change faster than once every 40 years. We are now looking at a world where people’s investments in education can be obsolete by the time they graduate, much less by the time they retire.
Right now, people are trying to make up for the decreasing returns to education (a highschool degree does not get you the same job today as it did in 1950) by investing more money and time into the single-use system–encouraging toddlers to go to school on the one end and poor students to take out more debt for college on the other.
This is probably a mistake, given the time-dependent nature of the problem.
The obvious solution is to change how we think of education and work. Instead of a single, one-time investment, education will have to continue after people begin working, probably in bursts. Companies will continually need to re-train workers in new technology and innovations. Education cannot be just a single investment, but a life-long process.
But that is hard to do if people are already in debt from all of the college they just paid for.
Auerswald then discusses some fascinating work by Bessen on how the industrial revolution affected incomes and production among textile workers:
… while a handloom weaver in 1800 required nearly forty minutes to weave a yard of coarse cloth using a single loom, a weaver in 1902 could do the same work operating eighteen Nothrop looms in less than a minute, on average. This striking point relates to the relative importance of the accumulation of capital to the advance of code: “Of the roughly thirty-nine-minute reduction in labor time per yard, capital accumulation due to the changing cost of capital relative to wages accounted for just 2 percent of the reduction; invention accounted for 73 percent of the reduction; and 25 percent of the time saving came from greater skill and effort of the weavers.” … “the role of capital accumulation was minimal, counter to the conventional wisdom.”
Then Auerswald proclaims:
What was the role of formal education in this process? Essentially nonexistent.
New technologies are simply too new for anyone to learn about them in school. Flexible thinkers who learn fast (generalists) thus benefit from new technologies and are crucial for their early development. Once a technology matures, however, it becomes codified into platforms and standards that can be taught, at which point demand for generalists declines and demand for workers with educational training in the specific field rises.
For Bessen, formal education and basic research are not the keys to the development of economies that they are often represented a being. What drives the development of economies is learning by doing and the advance of code–processes that are driven at least as much by non-expert tinkering as by formal research and instruction.
Make sure to read the endnotes to this chapter; several of them are very interesting. For example, #3 begins:
“Typically, new technologies demand that a large number of variables be properly controlled. Henry Bessemer’s simple principle of refining molten iron with a blast of oxygen work properly only at the right temperatures, in the right size vessel, with the right sort of vessel refractory lining, the right volume and temperature of air, and the right ores…” Furthermore, the products of these factories were really one that, in the United States, previously had been created at home, not by craftsmen…
“Early-stage technologies–those with relatively little standardized knowledge–tend to be used at a smaller scale; activity is localized; personal training and direct knowledge sharing are important, and labor markets do not compensate workers for their new skills. Mature technologies–with greater standardized knowledge–operate at large scale and globally, market permitting; formalized training and knowledge are more common; and robust labor markets encourage workers to develop their own skills.” … The intensity of of interactions that occur in cities is also important in this phase: “During the early stages, when formalized instruction is limited, person-to-person exchange is especially important for spreading knowledge.”
The ideal Head Girl is an all-rounder: performs extremely well in all school subjects and has a very high Grade Point Average. She is excellent at sports, Captaining all the major teams. She is also pretty, popular, sociable and well-behaved.
The Head Girl will probably be a big success in life…
But the Head Girl is not, cannot be, a creative genius.
Modern society is run by Head Girls, of both sexes, hence there is no place for the creative genius.
Modern Colleges aim at recruiting Head Girls, so do universities, so does science, so do the arts, so does the mass media, so does the legal profession, so does medicine, so does the military…
And in doing so, they filter-out and exclude creative genius.
Creative geniuses invent new technologies; head girls oversee the implementation and running of code. Systems that run on code can run very smoothly and do many things well, but they are bad at handling creative geniuses, as many a genius will inform you of their public school experience.
How different stages in the adoption of new technology and its codification into platforms translates into wages over time is a subject I’d like to see more of.
Auerswald then turns to the perennial problem of what happens when not only do the jobs change, they entirely disappear due to increasing robotification:
Indeed, many of the frontier business models shaping the economy today are based on enabling a sharp reduction in the number of people required to perform existing tasks.
One possibility Auerswald envisions is a kind of return to the personalized markets of yesteryear, when before massive industrial giants like Walmart sprang up. Via internet-based platforms like Uber or AirBNB, individuals can connect directly with people who’d like to buy their goods or services.
Since services make up more than 84% of the US economy and an increasingly comparable percentage in coutnries elsewhere, this is a big deal.
It’s easy to imagine this future in which we are all like some sort of digital Amish, continually networked via our phones to engage in small transactions like sewing a pair of trousers for a neighbor, mowing a lawn, selling a few dozen tacos, or driving people to the airport during a few spare hours on a Friday afternoon. It’s also easy to imagine how Walmart might still have massive economies of scale over individuals and the whole system might fail miserably.
However, if we take the entrepreneurial perspective, such enterprises are intriguing. Uber and Airbnb work by essentially “unlocking” latent assets–time when people’s cars or homes were sitting around unused. Anyone who can find other, similar latent assets and figure out how to unlock them could become similarly successful.
I’ve got an underutilized asset: rural poor. People in cities are easy to hire and easy to direct toward educational opportunities. Kids growing up in rural areas are often out of the communications loop (the internet doesn’t work terribly well in many rural areas) and have to drive a long way to job interviews.
In general, it’s tough to network large rural areas in the same ways that cities get networked.
On the matter of why peer-to-peer networks have emerged in certain industries, Auerswald makes a claim that I feel compelled to contradict:
The peer-to-peer business models in local transportation, hospitality, food service, and the rental of consumer goods were the first to emerge, not because they are the most important for the economy but because these are industries with relatively low regulatory complexity.
No no no!
Food trucks emerged because heavy regulations on restaurants (eg, fire code, disability access, landscaping,) have cut significantly into profits for restaurants housed in actual buildings.
Uber emerged because the cost of a cab medallion–that is, a license to drive a cab–hit 1.3 MILLION DOLLARS in NYC. It’s a lucrative industry that people were being kept out of.
In contrast, there has been little peer-to-peer business innovation in healthcare, energy, and education–three industries that comprise more than a quarter of the US GDP–where regulatory complexity is relatively high.
There is a ton of competition in healthcare; just look up naturopaths and chiropractors. Sure, most of them are quacks, but they’re definitely out there, competing with regular doctors for patients. (Midwives appear to be actually pretty effective at what they do and significantly cheaper than standard ob-gyns.)
The difficulty with peer-to-peer healthcare isn’t regulation but knowledge and equipment. Most Americans own a car and know how to drive, and therefore can join Uber. Most Americans do not know how to do heart surgery and do not have the proper equipment to do it with. With training I might be able to set a bone, but I don’t own an x-ray machine. And you definitely don’t want me manufacturing my own medications. I’m not even good at making soup.
Education has tons of peer-to-peer innovation. I homeschool my children. Sometimes grandma and grandpa teach the children. Many homeschoolers join consortia that offer group classes, often taught by a knowledgeable parent or hired tutor. Even people who aren’t homeschooling their kids often hire tutors, through organizations like Wyzant or afterschool test-prep centers like Kumon. One of my acquaintances makes her living primarily by skype-tutoring Koreans in English.
And that’s not even counting private schools.
Yes, if you want to set up a formal “school,” you will encounter a lot of regulation. But if you just want to teach stuff, there’s nothing stopping you except your ability to find students who’ll pay you to learn it.
Now, energy is interesting. Here Auerswsald might be correct. I have trouble imagining people setting up their own hydroelectric dams without getting into trouble with the EPA (not to mention everyone downstream.)
But what if I set up my own windmill in my backyard? Can I connect it to the electric grid and sell energy to my neighbors on a windy day? A quick search brings up WindExchange, which says, very directly:
Owners of wind turbines interconnected directly to the transmission or distribution grid, or that produce more power than the host consumes, can sell wind power as well as other generation attributes.
So, maybe you can’t set up your own nuclear reactor, and maybe the EPA has a thing about not disturbing fish, but it looks like you can sell wind and solar energy back to the grid.
I find this a rather exciting thought.
Ultimately, while Auerswald does return to and address the need to radically change how we think about education and the education-job-retirement lifepath, he doesn’t return to the increasing white death rate. Why are white death rates increasing faster than other death rates, and will transition to the “gig economy” further accelerate this trend? Or was the past simply anomalous for having low white death rates, or could these death rates be driven by something independent of the economy itself?
Now, it’s getting late, so that’s enough for tonight, but what are your thoughts? How do you think this new economy–and educational landscape–will play out?
If the suggestion… that the economy is “alive” seems fanciful or far-fetched, it is much less so if we consider the alternative: that it is dead.
Welcome back to your regularly scheduled discussion of Auerswald’s The Code Economy: a Forty-Thousand-Year History. Today we are discussing Chapter 9: Platforms, but feel free to jump into the discussion even if you haven’t read the book.
I loved this chapter.
We can safely answer that the economy–or the sum total of human provisioning, consumptive, productive and social activities–is neither “alive” nor, exactly, “non-living.”
The economy has a structure, yes. (So does a crystal.) It requires energy, like a plant, sponge, or macaque. It creates waste. But like a beehive, it is not “conscious;” voters struggle to make any kind of coherent policies.
Can economies reproduce themselves, like a beehive sending out swarms to found new hives? Yes, though it is difficult in a world where most of the sensible human niches have already been filled.
Auerswald notes that his use of the word “code” throughout the book is not (just) because of its modern sense in the coding of computer programs, but because of its use in the structure of DNA–we are literally built from the instructions in our genetic “code,” and society is, on top of that, layers and layers of more code, for everything from “how to raise vegetables” to “how to build an iPhone” to, yes, Angry Birds.
Indeed, as I have insisted throughout, this is more than an analogy: the introduction of production recipes into economics is… exactly what the introduction of DNA i to molecular biology. it is the essential first step toward a transformation of economics into a branch of information theory.
I don’t have much to say about information theory because I haven’t studied information theory, beyond once reading a problem about a couple of people named Alice and Bob who were trying to send messages to each other, but I did read Viktor Mayer-Schönberger and, Kenneth Cukier‘s Big Data: A revolution that will transform how we live, work, and think a couple of weeks ago. It doesn’t rise to the level of “OMG this was great you must read it,” but if you’re interested in the subject, it’s a good introduction and pairs nicely with The Code Economy, as many of the developments in “big data” are relevant to recent developments in code. It’s also helpful in understanding why on earth anyone sees anything of value in companies like Facebook and LinkedIn, which will be coming up soon.
You know, we know that bees live in a hive, but do bees know? (No, not for any meaningful definition of “knowing.”) But imagine being a bee, and slowly working out that you live in a hive, and that the hive “behaves” in certain ways that you can model, just like you can model the behavior of an individual bee…
Economics has a lot to say about how to optimize the level of inputs to get output, but what about the actual process of tuning inputs into outputs? … In the Wonderful World of Widgets that i standard economic, ingredients combine to make a final product, but the recipe by which the ingredients actually become the product is nowhere explicitly represented.
After some papers on the NK model and th shift in organizational demands from pre-industrial economic production to post-industrial large-scale production by mega firms, (or in the case of communism, by whole states,) Auerswald concludes that
…the economy manages increasing complexity by “hard-wiring” solution into standards, which in turn define platforms.
This is an important insight. Electricity was once a new technology, whose mathematical rules were explored by cutting-edge scientists. Electrical appliances and the grid to deliver the electricity they run on were developed by folks like Edison and Tesla.
But today, the electrical grid reaches nearly every house in America. You don’t have to understand electricity at all to plug in your toaster. You don’t have to be Thomas Edison to lay electrical lines. You just have to follow instructions.
Electricity + electrical appliances replaced many jobs people used to do, like candle making or pony express delivery man, but electricity has not resulted in an overall loss of jobs. Rather, far more jobs now exist that depend on the electrical grid (or “platform”) than were eliminated.
(However, one of the difficulties or problems with codifying things into platforms is then, systems have difficulty handling other, perfectly valid methods of doing things. Early codification may lock-in certain ways of doing things that are actually suboptimal, like how our computer keyboard layout is intentionally difficult to use not because of anything to do with computers, but because typewriters in the 1800s jammed if people typed on them too quickly. Today, we would be better off with a more sensible keyboard layout, but the old one persists because too many systems use it.)
The Industrial Revolution was a time of first technological development, and then encoding into platforms of many varieties–transportation networks of water and rail; electrical, sewer, and fresh water grids; the large-scale production of antibiotics and vaccines; and even the codification of governments.
The English, a nation of a couple thousand years or so, are governed under a system known as “Common Law,” which is just all of the legal precedents and traditions built up over that time that have come into customary use.
When America was founded, it didn’t have a thousand years of experience to draw on because, well, it had just been founded, but it did have a thousand years of cultural memory of England’s government. English Common Law was codified as the base of the American legal system.
The Articles of Confederation, famous only for not working very well, were the fledgling country’s first attempt at codifying how the government should operate. They are typically described as failing because they allocated insufficient power to the federal government, but I propose a more nuanced take: the Articles laid out insufficient code for dealing with nation-level problems. The Constitution solved these problems and instituted the basic “platform” on which the rest of the government is built. Today, whether we want to ratify a treaty or change the speed limit on i-405, we don’t have to re-derive the entire decisions-making structure from scratch; legitimacy (for better or for worse) is already built into the system.
Since the days of the American and French revolutions, new countries have typically had “constitutions,” not because Common Law is bad, but because there is no need to re-derive from scratch successful governing platforms–they can just be copied from other countries, just as one firm can copy another firms organizational structure.
Continuing with Auerswald and the march of time:
Ask yourself what the greatest inventions were over the past 150 years: Penicillin? The transistor? Electrical power? Each of these has been transformative, but equally compelling candidates include universal time, container shipping, the TCP/IP protocols underlying the Internet, and the GSM and CDMA standards that underlie mobile telephony. These are the technologies that make global trade possible by making code developed in one place interoperable with code developed in another. Standards reduce barriers among people…
Auerswald, as a code enthusiast, doesn’t devote much space to the downsides of code. Clearly, code can make life easier, by reducing the number of cognitive tasks required to get a job done. Let’s take the matter of household management. If a husband and wife both adhere to “traditional gender norms,” such as an expectation that the wife will take care of internal household chores like cooking and vacuuming, and the husband will take care of external chores, like mowing the lawn, taking out the trash, and pumping gas, neither spouse has to ever discuss “who is going to do this job” or wonder “hey, did that job get done?”
Following an established code thus aids efficiency and appears to decrease marital stress (there are studies on this,) but this does not mean that the code itself is optimal. Perhaps men make better dish-washers than women. Or for a couple with a disabled partner, perhaps all of the jobs would be better performed by reversing the roles.
Technological change also encourages code change:
The replacement of manual push-mowers with gas-powered mowers makes mowing the lawn easier for women, so perhaps this task would be better performed by housewives. (Even the Amish have adopted milking machines on the grounds that by pumping the milk away from the cow for you, the machines enable women to participate equally in the milking–a task that previously involved picking up and carrying around 90 lb milkjugs.)
But re-writing the entire code is work and involves a learning curve as both parties sort out and get used to new expectations. (See my previous thread on “emotional labor” and its relation to gender norms.) So even if you think the old code isn’t fair or optimal, it still might be easier than trying to make a new code–and this extends to far more human relations than just marriage.
And then you get cases where the new technology is incompatible with the old code. Take, for example, the relationship between transportation, weights and measures, and the French Revolution.
A country in which there is no efficient way to get from Point A to Point B has no need for a standardized set of weights and measures, as people in Community A will never encounter or contend with whatever system they are using over in Community B. Even if a king wanted to create a standard system, he would have difficulty enforcing it. Instead, each community tends to evolve a system that works well for its own needs. A community that grows bananas, for example, will come up with measures suitable to bananas, like the “bunch,” a community that deals in grain will invent the “bushel,” and a community that enumerates no goods, like the Piraha, will not bother with large quantities quantities.
(Diamonds are measured in “carats,” which have nothing to do with the orange vegetable, but instead are derived from the seeds of the carob tree, which apparently are small enough to be weighed against small stones.)
Since the French paid taxes, there was some demand for standardized weights and measures within each province–if your taxes are “one bushel of grain,” you want to make sure “bushel” is well defined so the local lord doesn’t suddenly define this year’s bushel as twice as big as last year’s bushel–and likewise, the lord doesn’t want this year’s bushel to be defined as half the size as last year’s.
But as roads improved and trade increased, people became concerned with making sure that a bushel of grain sold in Paris was the same as a bushel purchased in Nice, or that 5 carats of diamonds in Bordeaux was still 5 carats when you reached Cognac.
But the established local power of the local nobility made it very hard to change whatever measures people were using in each individual place. That is, the existing code made it hard to change to a more efficient code, probably because local lords were concerned the new measures would result in fewer taxes, and the local peasants concerned it would result in higher taxes.
Thus it was only with the decapitation of the Ancien Regime and wiping away of the privileges and prerogatives of the nobility that Revolutionary France established, as one of its few lasting reforms, a universal system of weights and measures that has come down to us today as the metric or SI system.
Now, speaking as an American who has been trained in both Metric and Imperial units, using multiple systems can be annoying, but is rarely deadly. On the scale of sub-optimal ideas, humans have invented far worse.
“The end result of the complex organization that was the efficient software of the Great War was the manufacture of corpses.
This essentially industrial operation was fantasized by the generals as a “strategy of attrition.” The British tried to kill Germans, the Germans tried to kill British and French and so on, a “strategy” so familiar by now that it almost sounds normal. It was not normal in Europe before 1914 and no one in authority expected it to evolve, despite the pioneering lessons of the American Civil War. Once the trenches were in place, the long grave already dug (John Masefield’s bitterly ironic phrase), then the war stalemated and death-making overwhelmed any rational response.
“The war machine,” concludes Elliot, “rooted in law, organization, production, movement, science, technical ingenuity, with its product of six thousand deaths a day over a period of 1,500 days, was the permanent and realistic factor, impervious to fantasy, only slightly altered by human variation.”
No human institution, Elliot stresses, was sufficiently strong to resist the death machine. A new mechanism, the tank, ended the stalemate.”
On the Eastern Front, the Death Machine was defeated by the Russian Revolution, as the canon fodder decided it didn’t want to be turned into corpses anymore.
I find World War I more interesting than WWII because it makes far less sense. The combatants in WWII had something resembling sensible goals, some chance of achieving their goals, and attempted to protect the lives of their own people. WWI, by contrast, has no such underlying logic, yet it happened anyway–proof that seemingly logical people can engage in the ultimate illogic, even as it reduces whole countries to nothing but death machines.
Why did some countries revolt against the cruel code of war, and others not? Perhaps an important factor is the perceived legitimacy of the government itself (though regular food shipments are probably just as critical.) Getting back to information theory, democracy itself is a kind of blockchain for establishing political legitimacy, (more on this in a couple of chapters) which may account for why some countries perceived their leadership as more legitimate, and other countries suddenly discovered, as information about other people’s opinions became easier to obtain, that the government enjoyed very little legitimacy.
But I am speculating, and have gotten totally off-topic (Auerswald was just discussing the establishment of TCP/IP protocols and other similar standards that aid international trade, not WWI!)
Returning to Auerswald, he cites a brilliant quote from Alfred North Whitehead
“Civilization advances by extending the number of operations we can perform without thinking about them.”
As we were saying, while sub-optimal (or suicidal) code can and does destroy human societies, good code can substantially increase human well-being.
The discovery and refinement of new inventions, technologies, production recipes, etc., involves a steep learning curve as people first figure out how to make the thing work and to source and put together all of the parts necessary to build it, (eg, the invention of the automobile in the late 1800s and early 1900s,) but once the technology spreads, it simply becomes part of the expected infrastructure of everyday life (eg, the building of interstate highways and gas stations, allowing people to drive cars all around the US,) a “platform” on which other, future innovations build. Post-1950, most automobile-driven innovation was located not in refinements to the engines or brakes, but in things you can do with vehicles, like long-distance shipping.
Interesting things happen to income as code becomes platforms, but I haven’t worked out all of the details.
Continuing with Auerswald:
Note that, in code economics, a given country’s level of “development” is not sensibly measured by the total monetary value of all goods and services it produces…. Rather, the development of a country consists of … it capacity to execute more complex code. …
Less-developed countries that lack the code to produce complex products will import them, and they will export simpler intermediate products and raw materials in order to pay for the required imports.
By creating and adhering to widely-observed “standards,” increasing numbers of countries (and people) are able to share inventions, code, and development.
Of the drivers of beneficial trade, international standards are at once among the most important and the least appreciated. … From the invention of bills of exchange in the Middle Ages … to the creation of twenty-first-century communications protocols, innovations in standards have lowered the cost and enhanced the value of exchange across distance. …
For entrepreneurs in developing countries, demonstrated conformity with international standards… is a universally recognized mark of organizational capacity that substantially eases entry into global production and distribution networks.
In other words, you are more likely to order steel from a foreign factory if you have some confidence that you will actually receive the variety you ordered, and the factory can signal that it knows what it is doing and will actually deliver the specified steel by adhering to international standards.
On the other hand, I think this can degenerate into a reliance on the appearance of doing things properly, which partially explains the Elizabeth Holmes affair. Holmes sounded like she knew what she was doing–she knew how to sound like she was running a successful startup because she’d been raised in the Silicon Valley startup culture. Meanwhile, the people investing in Holmes’s business didn’t know anything about blood testing (Holmes’s supposed invention tested blood)–they could only judge whether the company sounded like it was a real business.
Auerswald then has a fascinating section comparing each subsequent “platform” that builds on the previous “platform” to trophic levels in the environment. The development of each level allows for the development of another, more complex level above it–the top platform becomes the space where newest code is developed.
If goods and services are built on platforms, one atop the other, then it follows that learning at higher levels of the system should be faster than learning at lower levels, for the simple reason that leaning at higher levels benefits from incremental learning all the way down.
There are two “layers” of learning. Raw material extraction shows high volatility around a a gradually increasing trend, aka slow learning. By contrast, the delivery of services over existing infrastructure, like roads or wireless networks, show exponential growth, aka fast learning.
In other words, the more levels of code you already have established and standardized into platforms, the faster learning goes–the basic idea behind the singularity.
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.
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.
…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!
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?
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.