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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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.

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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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.”

“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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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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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.)

[Tags: morocco economics gv ]

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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.

[Tags: economics obama michelle_obama health_care health_insurance health_reform new_yorker infohist james_surowiecki atul_gawande mariana_cook ]

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

[Tags: economics lolcat humor ]

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I hear he also writes for a newspaper…

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

[Tags: paul_krugman economics ]

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From Greg Mankiw‘s blog:

From a freshman physics quiz given at Princeton a few days ago:

Problem 1. A famous thought experiment in economics involves dealing with a financial crisis by dropping money from a helicopter.

Ben Bernanke, Federal Reserve Chairman and former Princeton Economics Professor, decides to try this out over his old hometown. With his helicopter flying 1.0×10^1 m above the center of Fine Tower and in the direction of Nassau Hall, Ben gently releases a briefcase containing $1 million. Using the information that (i) Fine Tower is 6.0 × 10^1 m high, (ii) Nassau Hall is 1.5 × 10^1 m high and (iii) the centers of the two buildings are 3.0 × 10^2 m apart, and ignoring air resistance as you normally would:

a. [2 pts] How fast should Ben’s helicopter fly so that the briefcase lands in the center of the roof of Nassau Hall?

b. [1 pt] How long is the briefcase in the air?

c. [1 pt] How fast is the briefcase moving when it hits the roof of Nassau Hall?

d. [1 pt] How much faster would the financial relief have reached Nassau Hall if the briefcase had contained $2 million instead?

Thanks to Princeton Professor Shivaji Sondhi for sending this along.

Greg is an economics professor at Harvard.

[Tags: bailout physics economics humor ]

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I don’t understand economics or the current crisis. I thus don’t trust my own judgments about who to believe. But Paul Krugman’s concerns and analysis strike a chord. So do Eric Hovde‘s in the Washington Post.

Since I lack the education and background to understand the crisis and its context, I find myself thrown into rudderless thinking, where I find myself swayed by people who I already tend to agree with (= Krugman), who are able to pain a coherent picture, and whose broad premises seem in line with mine. In short, I feel pretty helpless not just about the crisis about even how to understand the crisis.

[Tags: paul_krugman eric_hovde economics crisis ]

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