Joho the Blog » economics

April 25, 2014

[nextweb] The Open Source Bank of Brewster

I’m at the Next Web conference in Amsterdam. A large cavern is full of entrepreneurs and Web marketing folks, mainly young. (From my end of the bell curve, most crowds are young.) 2,500 attendees. The pening music is overwhelming loud; I can feel the bass as extra beat in my heart, which from my end of the bell curve is not a good feeling. But the message is of Web empowerment, so I’ll stop my whinging.

Boris Veldhuijzen van Zanten recaps the conference’s 30-hour hackathon. 28 apps. One plays music the tempo of which is based upon how fast you’re driving.

First up is Brewster Kahle [twitter: brewster_kahle], founder of the Internet Archive. [I am a huge Brewster fan, of course.]

Brewster 2011

NOTE: Live-blogging. Getting things wrong. Missing points. Omitting key information. Introducing artificial choppiness. Over-emphasizing small matters. Paraphrasing badly. Not running a spellpchecker. Mangling other people’s ideas and words. You are warned, people.

Brewster begins by saying that the tech world is in a position to redefine how the economy works.

We are now in position to talk about all of things. We can talk about all species, or all books, etc. Can we make universal access to all knowledge? “That’s the Internet dream I signed on for.” A lot of material isn’t on the Internet yet. Internet Archive is a non-profit “but it’s probably the most successful business I’ve run.” IA has all programs for the Apple II, the Atarai, Commodore, etc. IA has 1.5M physical books. “Libraries are starting to throw away books at a velocity.” They’re aiming for 10M books. They have about 1.5M moving images online. “A lot of the issues are working through the rights issues and keeping everyone calm.” 2M auio recordings, mainly live music collections, not CD’s that have been sold. Since 2000 they’ve been recording live tv, 24×7, multiple channels, international. 3m hours of television. They’re making US TV news searcable. “We want to enable everyone to be a Jon Sewart research department.” 3.7M ebooks — 1,500/day. When they digitize a copy that is under copyright, they lend it to one person at a time. “And everyone’s stayed calm.” Brewster thinks 20th century wbooks will never be widely available. And 400B pages available through the Wayback Macine.

So for knowledge, “We’re getting there.”

“We have an opportunity to build on earlier ideas in the software area to build societies that work better.” E.g., the 0.1% in the US sees its wealth grows but it’s flat for everyone else. Our political and economic systems aren’t working for most people. So, we have to “invent around it.” We have “over-propertized” (via Pam Samuelson). National parks pull back from this. The Nature Conservancy is a private effort to protect lande from over-propertization. The NC has more acres than the National Park system.

Brewster wants to show us how to build on free and open software. Brewster worked with Richard Stallman on the LISP Machine. “People didn’t even sign code. That was considered arrogant.” In 1976 Congress made copyright opt out rather than opt in: everything written became copyrighted for life + 50. “These community projects suddenly became property.” MIT therefore sold the LISP Machine to Symbolics, forking the code. Stahlman tried to keep the open code feature-compatible, but it couldn’t be done. Instead, he created the Free Software GNU system. It was a community license, a distributed system that anyone could participate in just be declaring their code to be free software. “I don’t think has happened before. It’s building law structure based on licenses. It’s licenses rather than law.”

It was a huge win, but where do we go from there? Corporate fanaticism about patents, copyright, etc., locked down everything. Open Source doesn’t work well there. We ended up with high tech non-profits supporting the new sharing infrastructure. The first were about administrating free software: E.g., Free Software Foundation, Linux Foundation, LibreOffice, Apache. Then there were advocacy organizations, e.g., EFF. Now we’re seeing these high=tech non=profits going operational, e.g., Wikipedia ($50M), Mozilla ($300M), Internet Archive ($12M), PLoS ($45M). This model works. They give away their product, and they use a community structure under 501c(3) so that it can’t be bought.

This works. They’ve lasted for more than 20 years, wherars even successful tech companies get mashed and mangled if they last 20 years. So, can we build a free and open ecosystem that work better than the current one? Can we define new rules within it?

At Internet ARchive, the $12M goes largely to people. The people at IA spend most of their salaries on housing, up to 60%. Housing costs so much because of debt: 2/3s of the rent you pay goes to pay off the mortgage of the owner. So, how can we make debt-free housing? Then IA wouldn’t have to raise as much money. So, they’ve made a non-proift that owns an apartment building to provide affordable housing for non-profit workers. The housing has a community license so it the building can’t be sold again. “It pulls it out of the market, like stamping software as Open Source.”

Now he’s trying it for banking. About 40% of profits in corporations in the US goes to financial services. So, they built the Internet Credit Union, a non-profit credit union. They opened bitcoins and were immediately threatened by the government. The crdit union closed those accounts but the government is still auditing them every month. The Internet Credit Union is non-profit, member-run, it helps foundation housing, and its not acquirable.

In sum: We can use communities that last via licenes rater than the law.

Q&A

Boris: If you’re a startup, how do you apply this?

A: Many software companies push hard against the status quo. The days are gone when you can just write code and sell it. You have to hack the system. Think about doing non-profit structures. They’ll trust you more.

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December 3, 2013

[berkman] Jérôme Hergeux on the motives of Wikipedians

Jérôme Hergeux is giving a Berkman lunch talk on “Cooperation in a peer prodiuction economy: experimental evidence from Wikipedia.” He lists as co-authors: Yann Algan, Yochai Benkler, and Mayo Fuster-Morell.

NOTE: Live-blogging. Getting things wrong. Missing points. Omitting key information. Introducing artificial choppiness. Over-emphasizing small matters. Paraphrasing badly. Not running a spellpchecker. Mangling other people’s ideas and words. You are warned, people.

Jérôme explains the broader research agenda behind the paper. People are collaborating on the Web, sometimes on projects that compete with or replace major products from proprietary businesses and institutions. Standard economic theory doesn’t have a good way of making sense of this with its usual assumptions of behavior guided by perfect rationality and self-interest. Instead, Jérôme will look at Wikipedia where people are not paid and their contributions have no signaling value on the labor market. (Jérôme quotes Kizor: “The problem with Wikipedia is that it only works in practice. In theory it can never work.”)

Instead we should think of contributing to Wikipedia as a Public Goods dilemma: contributing has personal cost and not enough countervailing personal benefit, but it has a social benefit higher than the individual cost. The literature has mainly focused on the “prosocial preferences” that lead people to include the actions/interets of others, which leads them to overcome the Public Goods dilemma.

There are three classes of models commonly used by economists to explain prosocial behavior:

First, the altruism motive. Second, reciprocity: you respond in kind to kind actions of others. Third, “social image”: contributing to the public good signals something that brings you other utility. (He cites Napoleon: “Give me enough meals and I will win you any war.”)

His research’s method: Elicit the social prefs of a representative sample of Wikipedia contributors via an online experiment, and use those preferences to predict subjects’ field contributions to the Wikipedia project.

To check the reciprocity motive, they ran a simple public goods game. Four people in a group. Each has $10. Each has to decide how much to invest in a public project. You get some money back, but the group gets more. You can condition your contribution on the contributions of the other group members. This enables the researchers to measure how much the reciprocity motive matters to you. [I know I’m not getting this right. Hard to keep up. Sorry.] They also used a standard online trust game: You get some money from a partner, and can respond in kind.

Q: Do these tests correlate with real world behavior?

A: That’s the point of this paper. This is the first comprehensive test of all three motives.

For studying altruism, the dictator game is the standard. The dictator can give as much as s/he wants to the other person. The dictator has no reason to transfer the money. This thus measures altruism. But people might contribute to Wikipedia out of altruism just to their own Wikipedia in-group, not general altruism (“directed altruism”). So they ran another game to measure in-group altruism.

Social image is hard to measure experimentally, so they relied on observational data. “Consider as ‘social signalers’ subjects who have a Wikipedia user page whose size is bigger than the median in the sample.” You can be a quite engaged contributor to Wikipedia and not have a personal user page. But a bigger page means more concern with social image. Second, they looked at Barnstars data. Barnstars are a “social rewarding practice” that’s mainly restricted to heavy contributors: contribute well to a Wikipedia article and you might be given a barnstar. These shows up on Talk pages. About half of the people move it to their user page where it is more visible. If you move one of those awards manually to your user page, Jérôme will count you as a social signaller, i.e., someone who cares about his/her image.

He talks about some of the practical issues they faced in doing this experiment online. They illustrated the working of each game by using some simple Flash animations. And they provided calculators so you could see the effect of your decisions before you make them.

The subject pool came from registered Wikipedia users, and looked at the number of edits the user has made. (The number of contributions at Wikipedia follows a strong power law distribution.) 200,000 people register at Wikipedia account each month (2011) but only 2% make ten contributions in the their first month, and only 10% make one contribution or more within the next year. So, they recruited the cohort of new Wikipedia contributors (190,000 subjects), the group of engaged Wikipedia contributors (at least 300 edits) (18,989), and Wikipedia administrators (1,388 subjects). To recruit people, they teamed up with the Wikimedia Foundation to put a banner up on a Wikipedia page if the user met the criteria as a subject. The banner asked the reader to help with research. If readers click through, they go to the experiment page where they are paid in real money if they complete the 25 minute experiment within eight hours.

The demographics of the experiment’s subjects (1,099) matched quite closely the overall demographics of those subject pools. (The pool had 9% women, and the experiment had 8%).

Jérôme shows the regression tables and explains them. Holding the demographics steady, what is the relation between the three motives and the number of contributions? For the altruistic motive, there is no predictive power. Reciprocity in both games (public and trust) is a highly significant predictive. This tells us that reciprocal preference can lead you from being a non-contributor to being an engaged contributor; once you’re an engaged contributor, it doesn’t predict how far you’re going to go. Social image is correlated with the number of contributions; 81% of people who have received barnstars are super-contributors. Being a social signaler is associated with a 130% rise in the number of contributions you make. By both user-page length and barnstar, social image motivates for more contributions even among super-contributors.

Reciprocity incentivizes contributions only for those who are not concerned about their social image. So, reciprocity and social image are both at play among the contributors, but among separate groups. I.e., if you’re motivated by reciprocity, you are likely not motivated by social image, and vice versa.

Now Jérôme focuses on Wikipedia administrators. Altruism has no predictive value. But Wikipedia participation is negatively associated with reciprocity; perhaps this is because admins have to have thick skins to deal with disruptive users. For social image, the user page has significant revelance for admins, but not barnstars. Social image is less strong among admins than among other contributors.

Jérôme now explores his “thick skin hypothesis” to explain the admin results. In the trust game, look at how much the trustor decides how much to give to the stranger/partner. Jérôme ’s hypothesis: Among admins, those who decide to perform more of their policing role will be less trusting of strangers. There’s a negative correlation among admins between the results from the trust game and their contributions. The more time they say they do admin edits, the less trusting they are of strangers in the tests. That sort of make sense, says Jérôme. These admins are doing a valuable job for which they have self-selected, but it requires dealing with irritating people.

QA

Q: Maybe an admin is above others and is thus not being reciprocated by the group.

A: Perfectly reasonable explanation, and it is not ruled out by the data.

Q: Did you come into this with an idea of what might motivate the Wikipedians?

A: These are the three theories that are prevalent. We wanted to see how well they map onto actual field behavior.

Q: Maybe the causation goes the other way: working in Wikipedia is making people more concerned about social image or reciprocity?

A: The correlations could go in either direction. But we want to know if those explanations actually match what people do in the field.

Q: Heather Ford looks at why articles are deleted for non-Western topics. She found the notability criteria change for people not close to the topics. Maybe the motives change depending on how close you are to the event.

A: Sounds fascinating.

Q: Admins have an inherent bias in that they focus on the small percentage of contributors who are annoying jerks. If you spend your time working with jerks, it affects your sense of trust.

A: Good point. I don’t have the data to answer it.

Q: [me] If I’m a journalist I’m likely to take away the wrong conclusions from this talk, so I want to make sure I’m understanding. For example, I might conclude that Wikipedia admins are not motivated by altruism, whereas the right conclusion is (isn’t it?) that the standard altruism test doesn’t really measure altruism. Why not ask for self-reports to see?

A: Economists are skeptical about self-reports. If the reciprocity game predicts a correlation, that’s significant.

Yochai Benkler: Altruism has a special meaning among economists. It refers to any motivation other than “What’s in it for me?” [Because I asked the question, I didn’t do a good job recording the answers. Sorry.]

Q: Aren’t admins control freaks?

A: I wouldn’t say that. But control is not a pro-social motive, and I wanted to start with the theories that are current.

Q: You use the number of words someone writes on a user page as a sign of caring about social image, but this is in an context where people are there to write. And you’re correlating that to how much they write as editors and contributors. Maybe people at Wikipedia like to write. And maybe they write in those two different places for different reasons. Also, what do you do with these findings? Economists like to figure out which levers we pull if we’re not getting enough contributors.

Q: This sort of data seems to work well for large platforms with lots of users. What’s the scope of the methods you’re using? Only the top 100 web sites in the world?

A: I’d like to run this on all the peer production platforms in the world. Wikipedia is unusual if only because it’s been so successful. We’re already working on another project with 1,000 contributors at SourceForge especially to look at the effects of money, since about half of Open Source contributions are for money.


Fascinating talk. But it makes me want to be very dumb about it, because, well, I have no choice. So, here goes.

We can take this research as telling us something about Wikipedians’ motivations, about whether economists have picked the right three prosocial motivations, or about whether the standard tests of those motivations actually correlate to real-world motivations. I thought the point had to do with the last two alternatives and not so much the first. But I may have gotten it wrong.

So, suppose instead of talking about altruism, reciprocity, and social image we instead talk about the correlation between the six tests the researchers used and Wikipedia contributions. We would then have learned that Test #1 is a good predictor of the contribution levels of beginner Wikipedians, Test #2 predicts contributions by admins, Test #3 has a negative correlation with contributions by engaged Wikipedians, etc. But that would be of no interest, since we have (ex hypothesis) not made any assumptions about what the tests are testing for. Rather, the correlation would be a provocation to more research: why the heck does playing one of these odd little games correlate to Wikipedian productivity? It’d be like finding out that Wikipedian productivity is correlated to being a middle child or to wearing rings on both hands. How fascinating!… because these correlations have no implied explanatory power.

Now let’s plug back in the English terms that indicate some form of motivation. So now we can say that Test #3 shows that scoring high in altruism (in the game) does not correlate with being a Wikipedia admin. From this we can either conclude that Wikipedia admins are not motivated by altruism, or that the game fails to predict the existing altruism among Wikipedia admins. Is there anything else we can conclude without doing some independent study of what motivates Wikipedia admins? Because it flies in the face of both common sense and my own experience of Wikipedia admins; I’m pretty convinced one reason they work so hard is so everyone can have a free, reliable, neutral encyclopedia. So my strong inclination – admittedly based on anecdote and “common sense” (= “I believe what I believe!”) – is to conclude that any behavioral test that misses altruism as a component of the motivation of someone who spends thousands of hours working for free on an open encyclopedia…well, there’s something hinky about that behavioral test.

Even if the altruism tests correlate well with people engaged in activities we unproblematically associate with altruism – volunteering in a soup kitchen, giving away much of one’s income – I’d still not conclude from the lack of correlation with Wikipedia admins that those admins are not motivated by altruism, among other motivations. It just doesn’t correlate with the sort of altruism the game tests for. Just ask those admins if they’d put in the same amount of time creating a commercial encyclopedia.

So, I come out of Jérôme’s truly fascinating talk feeling like I’ve learned more about the reliability of the tests than about the motivations of Wikipedians. Based on Jérôme’s and Yochai’s responses, I think that’s what I’m supposed to have learned, but the paper also seems to be putting forward interesting conclusions (e.g., admins are not trusting types) that rely upon the tests not just correlating with the quantity of edits, but also being reliable measures of altruism, self-image, and reciprocity as motives. I assume (and thus may be wrong) that’s why Jérôme offered an hypothesis to explain the lack-of-trust result, rather than discounting the finding that admins lack trust (to oversimplify it).

(Two concluding comments: 1. Yochai’s The Leviathan and the Penguin uses behavioral tests like these, as well as case studies and observation, to make the case that we are a cooperative species. Excellent, enjoyable book. (Here’s a podcast interview I did with him about it.) 2. I’m truly sorry to be this ignorant.)

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August 4, 2012

Ethanz on culture’s shaping of technology

I wasn’t sure how to title this post from a few weeks ago by Ethan Zuckerman. His own title is also inadequate: “Kenya, Power, and Questioning My Assumptions.” It’s not so much that the title is bad as that the post is too, too rich.

Holy cow, Ethan is a good writer. And this piece is superb in every direction. It’s structured around assumptions of his that were overturned by his visit to an “upscale slum” in Nairobi, exploring what might be needed from a power generating business he is involved in. (No, he’s not turning into a utilities baron.) In the course of the post, we learn at every level possible: about technology, economics, communities, Nairobi, and the persnickety ways culture shapes technology.

Ethan is special. If you know him or have heard him you already know that. So I would never want to generalize based on him. But he’s engaged in a style of writing that we simply would not have been able to find in the past, which meant that people didn’t bother writing it. Thank you, Internet!

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November 16, 2010

[berkman] Juliet Schor on sustainability and the Web

Juliet Schor, professor of sociology at Boston University, is giving a Berkman Tuesday lunch titled “Plenitude: Sustainability and the Web.” The tech and sustainability communities need a much closer relationship, she says as the talk begins.

NOTE: Live-blogging. Getting things wrong. Missing points. Omitting key information. Introducing artificial choppiness. Over-emphasizing small matters. Paraphrasing badly. Not running a spellpchecker. Mangling other people’s ideas and words. You are warned, people.

She begins by telling us about the urgency of the issue of environmental sustainability. A World Wildlife Foundation study shows the decline in biodiversity. “A massive extinction is underway.” A study of eco-footprints shows that the USA’s average is about five times the world average biocapacity per person. Countries with equivalent standards of living have about half our eco-footprint. And that’s not to mention the upward path of CO2 emissions. Although there’s been some good news recently, it’s largely due to the economic downturn, she says. To avoid climate catastrophe, we need a 90% reduction by 2050.

In the 1970s, a group of MIT modelers (associated with James Forester) showed that if industrial production continued to increase, the system would collapse right about now. It was a simplistic model and it focused too much on non-renewables. Oil did not behave the way they predicted. The economists thought we could continue to grow by de-materializing, i.e., getting more out of resources [I may not have gotten that right], but the growth of use per person has more than outweighed the decline in carbon intensity. There’s been a 45% increase in materials extraction worldwide, 1980-2005, i.e., de-materialization is not happening. North American extraction has increased by more than 66% over this period. Mainly we’re burning fossil fuels and using construction materials. A stiff price on carbon would help tremendously, but is unlikely, Juliet says.

Unfortunately, the downturn is likely to increase the damage to the environment, since the imperative is to get people back to work by growing the economy. She says this is a stupid approach since we are getting people back to work doing what they did before, with all of its inequalities and emphasis on consumption. It would be helpful to improve the equity of the distribution of assets and income. We need to create wealth and well-being. And we should avoid top-down, innefficient or elitist solutions. “I call this plenitutde,” a new type of economic model.

As an economic model, plenitude is about:

  • A move to closed loop/clean production and consumption systems.

  • Eco-knowledge: open source transmission and ecological skill diffusion. Innovation has been based too much on using (and wasting) Nature. We should be treating nature as a scarce good. Open source is crucial for the diffusion of ecological knowledge and skills

  • Reducing the hours in business-as-usual, and building time wealth for people.

  • We need a “growing green sector of small scale enterprises, and new property forms”

  • Invest more in social capital.

She’s going to talk about two principles of Plenitude; there are four in her book.

First, we should reduce the number of working hours. From 1870 until the 1970s in the industrialized world, we went from 3,000 hours of work per year to about 1,800. Without this, we would not have been able to absorb all the labor displaced by increased productivity. But from 1973 until now, the hours of work in the US have increased, and has created a gap between us and other industrialized countries. If we can’t keep increasing the size of our economy in dollar terms, we have to reduce the number of hours. “In Europe, people are beginning to understand this.” “Given the magnitude of the climate reductions we need, the wealthy countries of the world are probably going to have to stop growing.” As soon as we get serious about targets, Juliet says, we’ll see that. “Shorter hours of work is associated with lower ecological footprint.” We should create policies that make working fewer hours more attractive to individuals and to firms.

So, what are people going to do with their new leisure time? The second principle of Plenitude is that people should begin to do more “high tech self providing” — make and do more for themselves. (It’s a phrase from Fritjof Bergman.) This will lead to green entrepreneurship, Juliet says. E.g., permaculture (more advanced high productivity agriculture), micro-generation of energy, DIY home building (low cash, low footprint). Her Center for a New American Dream is looking at all of these.

Juliet points to Fab Labs for their lower barrier to entry. She talks about the rise of sharing — home-, tool, car-, couch-sharing. The Web has reduced the transaction costs for this type of sharing. Plus the recession has changed the calculus of time and money. Transition towns grapple with what will be happening with the climate; there are 80 in the US.

Q: How adaptable are these ideas to developing countries?
A: Many have been practiced for quite a while in developing countries.
Q: That’s not the mindset of those in developing countries.
A: It is for some development groups. Not for the World Bank. Look at some of the less mainstream, more alternative groups.

Q: To what extent does the increasing use of electronics contribute to the the eco problems?
A: That is an issue. It’s a big energy consumer. Google is thinking about its footprint and is moving to renewable energy. The mindset is generally better in that sector.

Q: Google searching can also save energy because I can avoid driving from store to store looking for something. Also, the most effective development tools are the small enablers, e.g., a sewing machine or chickens. Rather than being dependent on others, people can develop their own enterprises.
A: My model is similar to that, but it’s not money-driven. Financial constraints are not the issue in developed countries. We are constrained much more by time because we work long hours in formal jobs in order to get access to housing, health insurance, and education. Why would people want to become pose-industrial peasants? They get diversity of income streams. This is especially important because we’re coming into a time of increasing uncertainty — financial collapses and climactic uncertainties. New tech allows individuals and small firms to become highly productive because of their relationships to networks.

Q: Over the past two decades, networks have risen empowering individuals, yet capital has concentrated into fewer hands. Do you see that changing?
A: We need to develop a new economic model. Peer production can help create a new kind of economy. The increased concentration of wealth has to do with state policy. What’s happening on the Internet can be the basis of a new economic model.

Q: How do you see the politics behind this movement happening?
A: My book tries to avoid dealing with politics. We live in such a politically polarized moment. But you do need a politics to get you to this place. We lack a viable and credible economic alternative to global capitalism. We have to put it together — intellectual work. At the same time, we need people doing it and living it — real life models of alternatives. It’s happening at a very local level. In the Pacific Northwest we’re beginning to see a sustainable alternative. And there are some policy elements: A single payer health system would allow people to de-link from fulltime jobs. The recession provides us with a tremendous opportunity to explore alternatives.

Q: Are there numbers about what’s going on?
A: Not many. This movement started with people with a lot of education and social capital. That’s changing. Some of the most active areas are low-income people of color. We’re seeing less of it in the white working class. It’s beginning to become a more diverse movement.

Q: How about how the educational system could be helpful? All you hear is jobs, jobs, jobs. And how undergrad economics is taught is not on the same planet as what you’re talking about. We’re part of the problem here at Harvard.
A: How to make change in universities? Let’s just take economics. It’d be very useful if scientists actually began to take more of a role in the university in talking about what students should be taught about planets and its management, which includes economics. Humanists won’t be listened to on this. The disproportionate role of economists in running these universities…
Q: Half of the Harvard student body takes the party-line econ course.
A: Econ depts generally have one person working on environmental issues. This is a civilizational emergency, and we have depts of 70 people, 69 of whom pay no attention to this. And the one who does is probably funded by the energy industry.

Q: Do we have time to travel this path?
A: On the one hand, we can look at what’s happening and say it’s getting worse — e.g., Citizens United — and say it’s hopeless. Or we can step back and ask what we need to build. It’s going to be ugly. So we need to build a movement that will counter a corporatized, fascistic vision of green, or a scenario of non-green. We need to be constructing a much more humanistic, egalitarian world that will really be good for people, and will give people more freedom, more community, more safety, more security. That’s all we can do.

A: What’s happening in tech is not on the radar of the sustainability groups. They’re still trying to think about their web sites. The transformative power of tech has not struck them yet — transformative of knowledge transmission, how we live our lives, and the economic model. In the tech world, there are lots of people who care about sustainability. More institutional connections would help. In the tech world, people meet and things happen, and that’s part of how we’re going to get to where we need to. We need lots of innovation.

Q: Do you see the Admin’s regulations about moving MPG up as a model?
A: That’s taken decades. I’m more advocate of new techs that leapfrog over marginal change initiatives. And that’s part of how we shorten the timeline for reaching our Plenitude goal.

Q: You say mostly highly educated are involved in this movement now. How do we move ahead and expand the movement?
A: We could start out hiring people at 80% time.
Q: The Net makes knowledge more available, but how do you help people get formal education?
A: Policies could help … [Couldn’t hear parts]

Q: I’m a Ph.D. student in econ. The politics of making the shift should not only be concerned with reducing the influence of big firms, but reducing the influence of some of the big economists.
A: Economists have started taking a lot more money from financial corporations. The field has been corrupted by money. Twenty years ago, a student of mine did a report on the boards of directors that Harvard’s faculty is on. That’s never revealed when they testify, etc.

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November 17, 2009

[berkman] Samuel Bowles on property rights in the information age

Samuel Bowles is giving a Berkman lunchtime talk called: “Kudunomics: Property rights for the information based economy.” He wants to look at how institutions are likely to evolve in the “weightless economy.”

NOTE: Live-blogging. Getting things wrong. Missing points. Omitting key information. Introducing artificial choppiness. Over-emphasizing small matters. Paraphrasing badly. Not running a spellpchecker. Mangling other people’s ideas and words. THIS TALK WAS ESPECIALLY DIFFICULT for me and certainly contains howlingly wrong misrepresentations of SB’s ideas. You are warned, people.

“In an economy based primarily on embodied and relational wealth, individual property rights are difficult and socially harmful to enforce.” Adam Smith’s invisible hand fails in important ways. SB says that that’s not a new idea. The new idea is that we should be able to gain insight about the evolution of institutions by studying the reverse transition from the Late Pleistocene forager economy to the agrarian economy. So, SB thought he should run that history backwards, which he may get to talking about in today’s session. The forager economy may provide clues for the weightless economy of the future.

SB puts up an equation explaining wealth, which I could not follow or capture, a cobb-douglas production function. [I hear Ethanz typing. He’s certainly doing a far better job liveblogging this than I.] One point: Once we domesticated animals, we turned wealth into something we could own. Network wealth = the value your connections bring you. The number of people who will help you in your field, share food, etc. Embodied wealth = the value of what’s in your head that’s actionable by your body. [I’m not sure I got that, and I’m certainly paraphrasing.]

The basic idea of the invisible hand theorem is that good fences make good neighbors. Arrow and Debreu showed in 1953 that competitive market allocations will be optimal (in the Pareto sense), but only if the markets are complete (“the effects of the actions of economic actors on one another take the form of contractual exchanges”) and increasing returns to scale are absent or small [I don’t know what that means]. “Under these assumptions, goods will be priced at their marginal cost which will equal their true scarcity (social marginal cost): p=M =SMC” SB is going to show that that is not true in a weightless economy.

Much of the economy – the grain and steel economy — fits this invisible hand theorem. It works best if the goods are tangible, easily measurable in standardized ways. In this classic economy, there was sufficient competition.

But, it’s different in weightless economies, where there’s high first-copy costs, and low marginal costs. E.g., it costs a lot to produce the first copy of a CD but very little for the rest of the copies. E.g., the first copy of Windows 97 cost maybe $50M, but the second copy cost $3.

In the weightless economy, enforcing property rights paradoxically force a violation of the invisible hand theorem: You let someone charge $20 for a cd the marginal cost of which is $0.85.

In the economy of grain and steel, market structure was a mix of competition and stable oligopoly (“competition restricted to a handful of firms”). The info economy may exhibit a serial monopoly structure, but that’s not what he wants to talk about.

SB gives a summary of what he’s said so far: Dilemmas of the weightless economy: Increasing returns on both the demand and supply side make competition difficult to sustain. This winner-take-all dynamic generates lots of inequality. The critical thing: Private firms cannot conform to the p=MC rule, and property rights are both ambiguous and difficult to enforce. The institutions that have worked well for the past 200 yrs are likely to work less well in the future.

Kudu = An antelope of some sort hunted in Tanzania for its massive caloric value. When one is killed, it’s widely shared (perhaps 2/3 outside of the nuclear family). The culture of the foraging band: generosity, modesty about one’s success, sharing. Christopher Boehm (1982) wrote that group sanction is “the most powerful instrument for regulation of individually assertive behaviors.” But mobile foraging bands “and its collectivist and egalitarian norms and properties was eventually displaced by agricultural production.” The critical fact is that that increased land productivity so that a small plot of band was productive enough to live on, which provided an incentive for putting up fences and defending it. These prop rights were not enforced by states but by some form of mutual consent.

Just as agricultural facilitated unambiguous prop rights, the info economy is reversing this process. We’re returning to the early Pleistocene economy. Most of the animals could not be domesticated. Some became more valuable when domesticated. Is an online song more like a cow or like a kudu? “Will the attempt to domesticate the modern day kudu’s prove costly and ineffective?”

Arrow: “Information is a fugitive resource.” It runs away. “We are just beginning to face the contradictions between the systems of private prop and of info acquisition and dissemination.” “If Arrow is correct, how would we expect our economic institutions to evolve under these new conditions?” Institutional change is very hard to study. There aren’t that many French Revolutions to study. He is doing Markov chain models with others at the Santa Fe Institute.

“Could between-group competition and technological advance combine to induce a new property rights revolution?” Darwin explained change via in-group revolution, while Marx looked at between-group. This is complex between there are both individual and group selection processes, so they’re almost impossible to predict using math. But you can use models. There are many quilibria. Initial conditions do not matter.

He talks about his agent-based model of institutional persistence and innovation. (You can play with his “artificial history” models here: http://www.santafe.edu/~bowles It looks like a Windows executable you can download.) He describes three strategies in the model: bourgeois (own prop and defend it), civic (share and penalize those who do not), share. [See Ethan! Or watch the webcast when it’s posted in a day or too. Sorry.]

If prop rights are stable, then an all-bourgeois society (protect what they have) is in equilibrium. Likewise if all civics. If all civics (share and punish for non-sharing), you can drift toward all sharers because they are behaviorally indistinguishable if there are not B who are trying to protect what they have. Using these parameters (which I am expressing totally inadequately and probably inaccurately), he and Jung-Kyoo Choi have run simulations. If prop rights are stable, the system tends towards equilibrium. If they are not — a bourgeois contests ownership — there is no equilibrium, although there is some moving clustering. Summary: “Evolutionary success of the ‘bourgeois equilibrium’ depends on prop rights being unambiguous.

But this is not the right way to understand the future because we don’t know how ambiguous prop rights will be, which depends on technological advances and the legal system.

Diff institutions have diff advantages. States are good at coercing, Markets allocate well. Communities handle the ambiguity of prop rights but fail where inequalities among members are very large. The problem of the info economy is that information creates both substantial ambiguity or prop rights and a lot of inequality (winner-take-all). The ambiguity makes it hard for the state to adjudicate. The inequality makes it hard for the communitarian values to succeed.

He ends by quoting Hayek: Whether central planning or competition works depends on whether you put all the pricing info in the hands of a central authority or adjust the prices by giving the pricing info to individuals. But now we have a third player: Markets and states, but also communities. Fifty years ago, people speculated that computers would solve this problem. SB says that we need a high level of info creation as well as making it available at its marginal cost. This is the question asked for hunters in hunter/gathering societies: Why should hunters hunt if they give it all away? Understanding this activity — mirrored in today’s collaborative environment — may help solve the problem.

Q: What do we know about the scalability of communities? The ambiguity seems to grow as groups get bigger.
A: How many people work on Wikipedia?
Q: The ambiguity there occurs in small groups.
A: Hunter-gatherers can’t take advantage of economies of scale or of diversity. Can moral sanctioning be done in on-face-to-face environments? We’re finding out.

Q: Can you talk about common pool resources (Ostrom)? [and two more questions]
A: The value of the network is the number of possible connections. There are therefore huge economies of scale. That’s where you get the winner-take-all from. Ostrom took some insights of Ronale Coase and extend them beyond firms, to include things such as communities. Are the motivations for sw engineers the same for hunters? Reputation. Fun.

Q: [me] What’s a community?
A: The non-state, non-market ways that humans connect and interact. [Hugely paraphrased!]
Q: [me] Is there enough in common among all those ways to enable it to be used as a factor in your model?
A: Communities have in common that they have a public thing, they have to figure how to share the benefits of this, and they;re not doing this primarily through enforceable contracts. But I don’t want to pin it down too much. Read “Against Parsimony” by Albert Hirschman.

Q: One of the child’s first words is “mine” because that it eanables it to differentiate itself from its environment. I think your theory would change if you asked if that’s a universal.
A: It’s not. Children differentiate themselves from their mother, but they don’t universally claim physical objects as their own. Private property is incredibly recent.

Q: In your agent-based model, could you drill down to see which types of prop rights are likely to be stable?
A: Yes, but not with agent-based models. Our theory lets us address this. We just haven’t done it. You should be able to look at the nature of the project — first copy costs, e.g. — and develop a typology of the sorts of things that are hard to solve, although changes in tech or law would change this.

Q: The gov’t role has be quite diff if you an economy of cows or kudus. How does this affect gov’t regulation?

A: My preliminary ideas: I don’t think it leads to more or less gov’t. It leads into different kinds of gov’t interventions. The aim is to take seriously when designing incentives you have to take into account that people have their own motivations. And if you introduce monetary incentives, you may get worse outcomes; I’ve recently written about this for Science. The solution to problems is always some combination of incentives designed by economists et al. and the moral incentives of most humans. These two are inseparable; addressing one without recognizing this can be disastrous. Some problem are solved not just by financial incentives but by some combination of people’s incentives and motivations.

[NOTE: Samuel Bowles is way more coherent than this livebloggery makes him sound. I lack the background to follow much of what he says. Much for me was like typing in the dark. So, I apologize to him and to you. And here’s Ethan Zuckerman’s far superior bloggage.]

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October 27, 2009

Broadband Strategy Week video: FCC on broadband and economic opportunity

The latest interview with a member of the FCC Broadband strategy initiative is now up at BroadbandStrategyWeek.

Elana Berkowitz is Director of Economic Opportunities for the Omnibus Broadband Initiative at the FCC.

17:20 mins

0:00 What do you do?
2:30 It’s very complicated. How do you decide what should be done by the public sector, by the private?
3:53 What’s the process by which you gather this information? Have there been workshops?
4:45 Workshops specifically on economic development?
5:37 You have all of this open input, but at some point — Feb. 17 — you have to decide exactly what you’re going to recommend…

9:15 What are the chances that what you recommend will make use of existing social networking platforms that are privately held, as opposed to having the government build, or pay for the building of, a new type of platform that perhaps repeats some of the functionality privately built ones offer.
10:42 So we’re not likely to see FaceGov or TwitGov…?
11:22 Just in case, I think I’ll take those domain names :)
12:35 So, how can the social sector get involved in this?
14:25 You come to this job right after a citizen journalism project called Off the Bus. Can you explain that and the relation between these two phases of your life?

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September 5, 2009

Bricolage

EatBees has a couple of very interesting posts (1 2) about bricolage in Morocco.

Bricolage is usually romanticized because it is a way those without resources can, through their inventiveness, make something out of scraps. But, EatBees writes about how a friend convinced him that as a integral part of Morocco’s economy, it isn’t just a sign of the culture’s inventiveness:

Bricolage…is a desperate response to a system in disrepair. My friend sees it as a sign of Moroccans’ misfortune, not as something to celebrate. Perhaps it is even a factor in perpetuating the breakdown, by accepting it as normal and multiplying it into the future. More professionalism is needed in Morocco, my friend would argue. The solution is to reform the broken-down system and do things the right way in the first place. However, this requires a material investment that is not being made; and bricolage is an engrained habit that will be hard to break.

(Thanks to Jillian York at Global Voices and Twitter. You might also want to read her post about the sense of otherness Americans (and others) can feel in Morocco.)

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January 24, 2009

The Obama tax rebate explained

James Surowiecki has a piece in the New Yorker that finally got me to understand why Obama is including a tax rebate in his stimulus package. It’s not the mere pandering to the Republicans that I thought it was. It actually sounds pretty smart.

And while you’re there, you might as well read Atul Gawande’s argument for building our health care system on what we have, rather than sweeping it all away and beginning fresh.

Then finish it all off with the dessert wine of Mariana Cook’s 1996 interview with Barack and Michelle Obama, in which the future president expresses love’s swing of mystery and familiarity. Just in case you weren’t gushy enough about the two of them.

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November 21, 2008

I can haz bailout?

LOLfed — all the economic news you want, now in LOLcat.

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October 13, 2008

Blogger wins Nobel prize in economics

I hear he also writes for a newspaper…

(Congratulations to Mr. Krugman! I guess telling the truth and being right occasionally pays off.)

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