The Algorithm Society and Its Discontents; & BRIEFLY NOTED: For 2023-03-06 Mo
Reciprocity, redistribution, democracy, market, bureaucracy, and... algorithm?; "appointing any Democrat to the Federal Reserve is politicization", sources say; Glory Liu on the reception of Adam...
FOCUS: PROJECT SYNDICATE: The Algorithm Society and Its Discontents
Modern civilization was built by adding markets and bureaucracy to other, much older modes of human organization: redistribution, reciprocity, and democracy. But the rapid rise of governance by algorithms could represent another epochal shift – and it will not be for the better.
BERKELEY – In my view, the most profound and insightful work of political economy written in the 2010s was neither a journal article nor a monograph nor a book in the traditional sense. Rather, it was an online symposium. In Red Plenty: A Crooked Timber Book Event, scholars and intellectuals, convened by political scientist Henry Farrell, used a new mode of print-communication to react to Francis Spufford’s very interesting book Red Plenty.
Spufford had analyzed the Soviet Union’s stunningly unsuccessful attempt to use bureaucracy and mathematics to build a better society than could be achieved using markets. Yet every time I return to Red Plenty: A Crooked Timber Book Event, I am struck by its contributors’ insights into the insurmountable dilemmas generated by the modern market economy itself. I am also still struck by how successful the “book event” was in using new technologies to drive a qualitative shift in how we communicate and come to understand the world together.
I have been thinking about these issues because Farrell recently published a new article, “The Moral Economy of High-Tech Modernism.” He and the sociologist Marion Fourcade argue that the internet and its progeny (what they call “high-tech modernism”) are changing the world in ways that are as profound as the rise of the market economy and the bureaucratization of society under the modern state.
This argument concerns the very foundation of human society. As individuals, we humans are each weak and helpless. Only with the knowledge that we gain from life within a culture are we able to survive. But to have a culture or produce anything, we need to organize and coordinate ourselves in a collective intelligence and distributed entity. For thousands of years, we generally have had three different modes of maintaining such organization.
The first is redistribution: information, resources, and useful products flow into a centralized pool and then flow out again in the form of assigned tasks, tools, rewards, or social support.
The second mode has been reciprocity: each household is linked to a few others in long-term gift-exchange relationships that tend toward a rough balance. And, because there are only six degrees of separation in most human societies, one unit’s needs will affect the actions of many others.
Lastly, there has been democracy: people use debate and discussion to reach a rough consensus and achieve broad-based support for an agreed-upon plan.
Of course, each mode of organization entails a mode of distribution and authorization, to answer the question of who should get more of the good things (who should be “more equal” than the others). With redistribution, power accrues to the one at the center of the system; with reciprocity, to those with the most resources and friends; and with democracy, to those with the silver tongues.
With the coming of modernity, we added two more modes: the market economy as engineered by the business class; and bureaucracy, as engineered by the modern state. The market is unmatched as a tool for crowdsourcing solutions to problems. But, in practice, its scope is limited to satisfying the demands of the rich, by ensuring the efficient use of those things that just so happen to command a market price.
Similarly, bureaucracy is uniquely powerful and capable in its ability to classify and standardize things, which allows it to see the bigger picture in ways that a reciprocity or redistribution system cannot. But, of course, it also can give rise to many inefficiencies.
Our mighty, but deeply flawed and unequal civilization was built by adding markets and bureaucracy to our three original modes of organization. But now, Farrell and Fourcade warn that we are adding a sixth mode: the algorithm.
According to techno-optimists, a society of algorithms would be much better than anything we can hope to create with markets and bureaucracy. Unlike a market, an algorithm is not restricted to seeing only the money demands of the rich and the money costs imposed by those who have managed to claim property rights. And unlike a bureaucracy, an algorithmic society will not force you, a square peg, into a round hole.
No longer will “experts” decide what category you should fall into. Instead, affinity groups will spring up spontaneously from the revealed preferences expressed by people’s words and actions. Resources will be mobilized to serve each individual by tapping into the unique power of economies of scale.
Is this a hope that we should all share? To be sure, when bureaucracy arrived as a new mode of organization, it erased tacit forms of knowledge, disrupted the messiness of people’s lives, and forced people into categories that were most useful to those holding the levers of power. Equally, markets introduced massive, costly new externalities by prioritizing the needs of the rich. But is there any good reason to think that an algorithmic society would fix these flaws, or that it would not introduce new, massive problems of its own?
The economics Nobel laureate Daniel Kahneman’s concept of thinking “fast” and “slow”can help us see what is at stake, here. An algorithmic society would serve only our “thinking fast” side, constantly seeking “engagement” – meaning fear and rage. Just as markets cater to the rich, algorithms cater to our worst impulses.
A clickbait society is no one’s vision of Utopia. Yet that, I fear, is where current trends are carrying us.
MUST-READ: Wait? What? Federal Reserve “Politicization” Watch:
The drumbeat of messaging is that to appoint a Republican to a Federal Reserve post is right and normal, but to appoint a Democrat is to “politicize” the Fed. And reporters fall for it. Every time:
Craig Torres and Bill Allison: https://www.bloomberg.com/news/articles/2023-03-01/goolsbee-pick-adds-fuel-to-partisan-tensions-buffeting-fed?srnd=fixed-income&sref=wOrDP8KX? New Chicago Fed chief has been an outspoken critic of GOP: Selection made by officials who donated to Democrats: ‘The recent appointment of a prominent Democratic economist to lead the Federal Reserve Bank of Chicago is fueling friction over political partisanship in the US central bank. Austan Goolsbee became president of the Chicago Fed in January, but only after a contentious hiring process. Bloomberg News reported Feb. 17 that two of the Fed’s Washington-based board, both of whom had been nominated for their roles by then-President Donald Trump, took the rare step of abstaining from supporting the appointment. And while the regional bank’s directors unanimously approved Goolsbee’s selection, several have a pattern of giving money to Democratic political candidates, a fact which hasn’t previously been reported. Nothing prohibits directors of regional Fed boards from contributing to political campaigns…. Goolsbee, 53, is widely considered qualified for the job…. [But his] history is providing fresh impetus to concerns that the central bank is becoming increasingly politicized, risking the independence of monetary policy from the cut and thrust of government. Goolsbee’s appointment, which was backed by Fed Chair Jerome Powell and four other governors in Washington, also raises questions about the opaque process for choosing regional Fed leaders…
No mention of the fact that Jay Powell is a Republican Worthy—perhaps the ultimate Republican Worthy. Why not?
ONE VIDEO: Glory Liu on Adam Smith's America:
Glory Liu traces how generations of Americans have read, reinterpreted, and weaponized Smith’s ideas, revealing how his popular image as a champion of American-style capitalism and free markets is a historical invention:
Very Briefly Noted:
Fernando Perez: Experimental playground with Jupyter magics to use OpenAI's GPT-3 models inside Jupyter environmements…
Lars Sandberg: The Case of the Impoverished Sophisticate: Human Capital and Swedish Economic Growth before World War I: ‘Around 1850 Sweden had a stock of human capital wildly disproportionate to its very low income level… explained in terms of religious, political, and military events of the previous three centuries...
Anna Stansbury, Dan Turner, & Ed Balls: Tackling the UK’s regional economic inequality: Binding constraints and avenues for policy intervention…
Guilherme Rodrigues and Stuart Bridgett: Capital losses: The role of London in the UK’s productivity puzzle…
Enrico Berkes, Davide M. Coluccia, Gaia Dossi, & Mara P. Squicciarini: Dealing With Adversity: Religiosity or Science? Evidence From the Great Influenza Pandemic: ‘Exploiting plausibly exogenous county-level variation in exposure to the pandemic, we provide evi- dence that more-affected counties become both more religious and more innovative…. Individuals from more religious backgrounds further embrace religion, while those from less religious backgrounds become more likely to choose a scientific occupation…
Edoardo Teso: The Long-Term Effect of Demographic Shocks on the Evolution of Gender Roles: Evidence From the Transatlantic Slave Trade: ‘Women’s participation in the labor force within Sub- Saharan Africa…. Women substituted for the missing men… [in] ethnic groups… affected by the transatlantic slave trade…. The marriage market and the cultural transmission of internal norms across generations represent important mechanisms explaining this long-run persistence…
Economist: Biden’s big bet on big government: ‘Mr Podesta is serving a third Democratic president… out to transform America’s energy economy by implementing the Inflation Reduction Act… “the largest climate and clean-energy bill passed in the history of the United States—and, I think it’s fair to say, probably the largest ever passed in the history of the world”…
Jay Kuo: When They Call for “Eradication,” It Means What It Sounds Like: ‘History has vital lessons when it comes to brazen attacks on trans identity and people…
Book Lists: Smart Thinking Books…
¶s:
Martin Wolf: The UK economy has two regional problems, not one: ‘Now the country is suffering something worse than geographic inequality: national stagnation…. The longstanding problem is the relative weakness of areas outside London and the South East. Since the financial crisis of 2007, we see a new one, however, namely the slowdown of these previously dynamic regions. Regional inequality has not become worse since then. Yet this is not because of levelling up. The country is suffering something worse than rising regional inequality: national stagnation, with even the former growth engines spluttering…. Low shares of university graduates in lagging regions are no longer a constraint. Nor is a generalised lack of finance. More plausible constraints are weak transport infrastructure, failure to support innovation clusters outside the South East and constraints on migration to London and the South East, due to costly housing…
Cheryl Rofer: Melon’s Latest Innovation: ‘In an innovative attempt to check who’s actually reading the links before they comment on Twitter, the new owner has broken all links from tweets. Additionally, images are not being allowed through to distract the serious reader and as another way to protect against child sexual exploitation. This should decrease numbers of both users and advertisers, unless they prove their loyalty by attacking the appropriate targets. Update: Some bright person has figured it out. This is from a tweet, but I won’t try to embed a tweet right now. “Twitter uses a service to capture analytics data for outbound links (using the t.co domain), and that service lost API access (presumably due to the new system that charges companies API access), so now outbound links aren’t working…
Ernest Hemingway: For Whom the Bell Tolls: ‘He looked down the hill slope again and he thought, I hate to leave it, is all. I hate to leave it very much and I hope I have done some good in it. I have tried to with what talent I had. Have, you mean. All right, have. I have fought for what I believed in for a year now. If we win here we will win everywhere. The world is a fine place and worth the fighting for and I hate very much to leave it. And you had a lot of luck, he told himself, to have had such a good life. You’ve had just as good a life as grandfather’s though not as long. You’ve had as good a life as any one because of these last days. You do not want to complain when you have been so lucky. I wish there was some way to pass on what I’ve learned, though. Christ, I was learning fast there at the end…
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"But, in practice, its scope is limited to satisfying the demands of the rich, by ensuring the efficient use of those things that just so happen to command a market price."
This is great as a criticism of the status quo. Not so much as a guidepost for reform that shifts more purchasing power away from the rich: EITC, CTC, rebated tax on net CO2 emissions, partial tax credits instead of deductions, higher marginal personals income tax rates.