Dealing with the transition to the information age

January 23, 2015 11:55 PM

BIG and BOT Policy Proposals (transcript) - "Many of our current economic policies originated during times of scarcity. But now, says investor Albert Wenger, we live in an era of 'digital abundance', when creating new products costs virtually nothing. To adapt to the resulting economic upheavals, we won't need just more tech, says Wenger, but some strong policies. Here he explores two: basic income guarantee and the right to be represented by a bot."

Context

• The Coming Information Age (Possible Book Outline) - "Much of the policy debate is stuck in the industrial age and amounts to re-arranging the deck chairs on the Titanic."
• Entering the Information Age - "First, do we need a catalytic event or can we get there without it? Past catalytic events were largely wars, revolutions and plagues."
• The Big Questions About The Future (Transition to the Information Age) - "Like the rise of agriculture and the industrial revolution, the digital transformation now underway will leave no aspect of human society unchanged. From jobs and wealth to privacy and the future of the nation state, what are the questions we should be asking--and trying to answer?"
• What's Ahead: The Information Age Transition - "In particular, the industrial system is built on people selling their labor and using the proceeds to buy goods (and services). But the price of labor is under tremendous pressure from machines and from globalization. Other cracks include the increasing importance of non-rival information goods and the missing prices for the environment."
• The Industrial System: Not the End of History - "The industrial system has a bunch of interlocking (complementary) components... Now, however, multiple components and their interactions are breaking down simultaneously and the patches we have applied are no longer good enough. Our financial markets have been allocating capital into vast asset bubbles instead of into productive investments. Firms themselves are hoarding capital and moving it around the globe. Earnings are highly concentrated among fewer employees with many others using debt to finance expenses (credit cards, student debt). Markets have fewer and larger companies that exert market power (sometimes in quite subtle forms such as planned obsolescence). Rich individuals and incumbent corporations exert undue influence on politics. Regulators are captured by their industries. Higher education is leaving students deeply in debt."
• Information Capital (in the 21st Century) - "One of my main intuitions about the coming changes is that 'information' will become more important than industrial, financial and real estate assets. Or put differently 'information' will be the capital of the 21st century and beyond."
• From Industrial to Information Society in Five Disappearances - "Companies were a critical way of muting incentives to achieve coordination. Now that we can share more information we can often do the same or better without having to form a company. This is especially true for systems without direct monetary compensation."

Information Economics

• Economics of Abundance - "The supply curve is now completely flat at price zero and the marginal benefit is also zero (no vertical portion of the demand curve). The argument for the latter is that the demand for most digital goods is smaller than the total population and in fact you eventually get to folks who would have negative benefit from consumption (e.g. listening to a song they don’t like). The social optimum is clearly at price zero and all net benefit occurs in the form of consumer surplus. But at price zero there is no contribution towards fixed cost. This is the dilemma that we are already facing with many digital goods such as music and news today."
• Microeconomics of the Consumer Web - "What if marginal cost approaches zero? That is, what if the supply curve approaches zero as I have depicted in Figure 2?"
• Differential Pricing and Efficiency - "The classic prescription for economically efficient pricing---set price at marginal cost---is not relevant for technologies that exhibit the kinds of increasing returns to scale, large fixed costs, or economies of scope found in the telecommunications and information industries. The appropriate guiding principle in these contexts should be that the marginal willingness to pay should be equal to marginal cost. This condition for efficiency can be approximated using differential pricing, and will in fact, be a natural outcome of profit-seeking behavior."
• Speculative microeconomics for tomorrow's economy - "The data processing and data communications revolutions shake the foundations of the standard case for the market. In a world in which a large chunk of the goods valued by users are information goods that can be cheaply replicated, it is not socially optimal to charge a price to ration demand. In a world in which cheap replication produces enormous economies of scale, the producers that survive and profit are not those that can produce at the least cost or produce the goods that users value the most; instead, the producers that flourish are those that established their positions first. In a world in which the value chain is only tangentially related to ultimate value to users - in which producers earn money by selling eyeballs to advertisers, say - there is no certainty that what is produced will be what users value the most."

Technological Unemployment

• Thinking About Employment - "Part 1 illustrated how agriculture and manufacturing, the two historically large areas of employment, have collapsed over time. Part 2 drilled into the services sector which today accounts for the bulk of employment to show that many categories there have stopped to grow and are under pressure from the twin forces of automation and globalization. Why does all of this matter? My overriding argument is that we have not found a new source of jobs. The result is an unprecedented pressure on wages that is the primary driver of the astounding growth in inequality in the United States."
• Computers and Skilled Labor (Substitutes or Complements?) - "As the price of computers drops further and as firms have done a lot of substitution of skilled labor for unskilled labor, the substitution of computers for skilled labor will start to dominate. That is the period we are entering now and it will start to put wage and employment pressure on skilled labor which until now experienced a lift from computers."
• Computers and Wages (The Great Divergence) - "To the extent that I am right that much of the current demand for skills that work with computers are because they ultimately substitute against unskilled labor we should not expect the benefits for skilled labor to last forever. Instead, we will gradually see computers substituting for those as well and only top management (and capital) continuing to benefit. And so the current idea that we can somehow educate our way out of this divergence without the need for more profound changes in how we think about income is likely deeply flawed."
• Unbundling of the Job - "Do people need jobs or can we deliver what jobs provide some other way and in a potentially unbundled fashion? The 'jobs of a job' include income, structure, social connections, meaning, and at least in the US, access to healthcare."
• It is OK to Worry about Work (& Doesn't Make you a Luddite or Socialist) - "In fact if we want to look at history for a lesson we would do well to keep in mind that industrialization was incredibly ugly and had us go through lots of revolutions and two world wars."
• Lump of Labor: Certainly a Red Herring (And Possibly not a Fallacy) - "One can legitimately worry about the transition even if one believes that the Lump of Labor fallacy is in fact a fallacy. So let me posit for a moment that it is a fallacy (more on that later). Even then the adjustments in the labor market are likely far slower than the displacement effects from automation."

What's Next

• Age of Abundance - "What could go wrong?"
• Age of Abundance Expanded - "My basic premise is that we already have the capabilities necessary to provide everyone in the world with quality food, shelter, clothing, mobility, and access to the Internet."
• The Changing Income Distribution - "If the previous pattern is any indication, we can eventually all wind up better. But there are two important caveats: [1] Eventually could be a long time (in the case of the industrial revolution it would seem to have been 60-70 years [2] It might get a lot worse (especially in the US) before it gets better (the data between part 1 and part 2 above should provide some indication)."
• A World (Online) Without Money - "The main thrust of my arguments will be that abundance will be a feature of the physical world, but I would be the first to admit that we are a long way off from that. In the meantime though, we can look to the online world for some clues as to what abundance might look like. Online (at least on the margin), the cost of resources is already sufficiently close to zero so as to not matter. One of the interesting possibilities that this holds is doing away with money."

Public Policy

• On Balance Sheet Recessions and the QE Trap - "The world's leading central banks have added massive amounts of liquidity to the financial system, yet global economies are still stumbling their way through a weak recovery."
• On Secular Stagnation - "Is capital getting commoditized?"
• All will be well provided we allow more technology - "We need far higher productivity for the shrinking percentage of people who are going to be working."
• The Legal Olympian - "Cass Sunstein and the modern regulatory state."
• Protect People, Not Data - "This is what we really need to be working on — creating the social norms, economic conditions and laws and regulations that remove the stigma and the threat. We need to focus on protecting people from the potentially negative consequences of data about them, not on working harder and harder to protect their data."
• Rewriting the Tax Code - "The code should be published both in human readable and machine readable formats. It should be easy to build and maintain systems that calculate and/or collect taxes... Lots of data should be required by the code to be made available for the public to analyze the effectiveness and impact of the tax system."
• Germany's Successful Labor Subsidy - "Germany has the concept of 'Kurzarbeit', which literally translated means 'Shortwork'. It is a program that permits companies to keep employees partially employed with the government funding some (but not all) the balance to their most recent paycheck. This allows companies that are going through a period of difficulty to retain human capital. Conversely it allows the employees to maintain their skills and experience and stay current in the labor market. Put differently, the premise of the policy is that for some types of qualified jobs it is better for the government to subsidize employment than to provide unemployment benefits."
• Job Quality is about Policies, not Technology - "Any job can be a 'good job' if the worker and employer can coordinate on a good equilibrium. Costco coordinates on a high-wage, high-benefit, high-effort, low-turnover equilibrium. Sam's Club coordinates on a low-wage, low-benefit, low-effort, high-turnover equilibrium. Both companies make money, but one provides better jobs than the other. So as technology continues to displace workers, think about how to get *all* companies to coordinate on the 'good' equilibrium rather than pining for lost days of manly steelworkers or making the silly presumption that we will literally run out of things to do."
• Blame the rise of the plutocrats on politics not capitalism - "Education ought to be the great leveller. But in the US it too is run for the rich. Schools are funded through local taxation, so well-heeled neighbourhoods get well-heeled schools, while poor ones are left behind."

Identity & Voting

• Wealth and Voting - "The headline sums it up: the candidate who spent more money won 91% of the time."
• Inequality, The Movie - "Income inequality has been highly correlated with increased political polarization since the mid 1970s."
• Hating Good Government - "And why this hatred of government in the public interest? Well, the political scientist Corey Robin argues that most self-proclaimed conservatives are actually reactionaries. That is, they're defenders of traditional hierarchy — the kind of hierarchy that is threatened by any expansion of government, even (or perhaps especially) when that expansion makes the lives of ordinary citizens better and more secure."
• Foundation And Big Data - "So: either our fragmenting subcultures will get better at speaking to those who don't share the same assumptions, or the inability to do so will amplify and accelerate that fragmentation, and we'll wind up with a society made of bubbles that don't understand, trust, or communicate with one another. (Any resemblance to the political culture in today's America is probably not coincidental.) Which puts me in mind of Meredith Patterson's talk 'Strategies Without Frontiers' — also strongly recommended — which is (in part) about Toby Ord's work on the 'societal iterated prisoner's dilemma.' ...in many of its simulations, Absolutists — those who reject all others who do not subscribe to their purity — eventually take over the world. (Mind you, 'Absolutist is only really a tenable strategy when there is no noise in the players' information or actions. If there is a small chance of error in information or action, then Absolutists end up defecting on each other and can never break out of this.')"
• The End of Categories - "We like to put things in categories: public versus private company; for profit versus charity; professional versus amateur; creator versus consumer; journalist versus blogger; teacher versus student; and so much more... Now, however, with the marginal costs of computation and communication nearly zero, we can reveal the underlying information and replace categories with continuums."
• Decentralizing Identity - "It is still early days for all of this, but the potential for these emerging decentralized identity systems is to further push power to the people and away from central authorities."
• After The Social Web, Here Comes The Trust Web - "Trust is shifting from humans and central organizations to computers and decentralized organizations with an underlying decentralized consensus that governs them."
• Can Bitcoin save democracy? - "If implemented correctly, the proliferation of online voting could solve one of the biggest problems in American democracy: low voter turnout. The 2014 midterms boasted the lowest voter turnout in 72 years."
• 2015 might be the year we start to get online identity right - "Alex Howard thinks 2015 will be a big year for digital government services and identity in the US. He also profiles the startup ID.me, which will provide identity software for Connect.gov."

also btw...
-Unabashed Utopia
-I Am A Peer Progressive
-Climate Change and Short Term Politics
-On technology, dematerialization & the regreening of the earth

posted by kliuless (14 comments total)

Related news : Syriza's coming performance in Greece's elections
Also, edge.org's question is a dud this year, but Peter Norvig gave a good response.
posted by jeffburdges at 1:12 AM on January 24, 2015 [5 favorites]

Wow. Just wow.




and thanks!
posted by mazola at 1:13 AM on January 24, 2015 [1 favorite]

Interesting point in the transcript: that the Basic Income would cut healthcare costs because "people" (which will be women) will take up much of the care work for nothing: the basic income will be so costly that though it can pay for food and shelter (thanks to globalisation) it can't cover services (like healthcare). But you're effectively creating free labour, so people (again, women) will provide it for free.
posted by alasdair at 1:39 AM on January 24, 2015 [1 favorite]

Wow, this is a bigger post than the top links! (And the top links are very good). Worth looking at Hall & Krugers new paper on Uber alongside this - particularly on reputational capital and its effects whcich seems directly relevant to the "API bargaining" idea.
posted by Another Fine Product From The Nonsense Factory at 2:00 AM on January 24, 2015

We'll need a basic income eventually, but it requires an ideological and economic transition that'll obviously take time.

We should right-now be progressively shortening the work week, shaving off hours every couple years.

We should immediately eliminate the overtime exemptions for administrators, professionals, and sales personnel, leaving only executives exempt from overtime rules. In fact, we could tighten the overtime exemption for even executives to require a minimum percentage ownership of the company.

Why should a company not pay overtime for a computer professional? If she possesses such business critical knowledge, then pay her to be on call to keep the excessive demands on her time off the books, and pay someone else to do the drudge sysadmin work.
posted by jeffburdges at 2:10 AM on January 24, 2015 [8 favorites]

that the Basic Income would cut healthcare costs because "people" (which will be women) will take up much of the care work for nothing

Applying this in the UK context this sounds like it would make this a pretty tough sell to the middle classes if it means giving up the NHS to establish a UBI. I wonder whether it might eventually mean Tories getting on board with a UBI by using it a match off with privatising health?
posted by biffa at 4:11 AM on January 24, 2015

Maybe the new Commie Menace will be people who not only insist on being represented by bots within markets and economic systems, but who insist that everyone should be able to select among the same bots that the wealthiest and most powerful people use.
posted by XMLicious at 5:13 AM on January 24, 2015 [1 favorite]

A basic income is something that attracts peculiar bedfellows. But really, the landscapes are very different.

Libertarians are generally supportive - for example Milton Friedman was a proponent of a Negative Income Tax, which is essentially identical in practise to a UBI. In the UK, the Adam Smith Institute has been supportive of such a UBI - but they support it from the right - as a simple, less market distorting eventual replacement for most or all government run services and benefits, such as state pensions, temporary disability allowances (ESA) and state employment centres and as a way to abolish the minimum wage and anti-firing/hiring employment regulations. (and eventually presumably all state run services)

By contrast left-wingers tend to see a UBI as a way of boosting current welfare arrangements and ending the demonisation of "scroungers". For example, the green party in the UK has a citizens income as part of its policy platform but also a guarantee that nobody will be in a position that they will receive less through the scheme than they were entitled to under the previous benefits system. tougher employment regulations and higher minimum wage and a whole host of other additional taxes to fund it.

Same scheme, but a very different landscape envisaged by their other policies.
posted by Another Fine Product From The Nonsense Factory at 5:14 AM on January 24, 2015 [1 favorite]

Ain't completely sure what you mean, XMLicious, but several similar sounding ideas :

We should pseduo-outlaw close source software. Copyright should only apply to the product of human labor, meaning compilers output should not be protected unless the source code is provided in a usable form.

We should make it exceedingly difficult for organizations to legally posses large bodies of information that they do not share with the general public.
posted by jeffburdges at 5:56 AM on January 24, 2015 [1 favorite]

It would be great if we could implement these (already proposed by other people; rather clumsily presented here; traditionally left even though the author continually disavows the label) ideas, but unfortunately the capitalists that control the economy and therefore the society would rather see the vast majority pauperized than their wealth redistributed. Wenger's question about "catalytic events" goes strangely unanswered, but attempting to answer that question is the start of strategic thinking about how we are going to get to the utopia of which he dreams.
posted by Noisy Pink Bubbles at 7:16 AM on January 24, 2015

A lot of people in the music industry talk about Google as evil. I don’t think they are evil. I think they, like other tech companies, are just idealistic in a way that works best for them.

What should I do about Youtube? (Zoe Keating)
posted by bukvich at 7:38 AM on January 24, 2015 [4 favorites]

I really think this is going to come in time. When I hear 'minimum wage' and see congressional debates over this, it sounds so 20th century to me.
posted by McMillan's Other Wife at 10:51 AM on January 24, 2015 [1 favorite]

Interesting point in the transcript: that the Basic Income would cut healthcare costs because "people" (which will be women) will take up much of the care work for nothing: the basic income will be so costly that though it can pay for food and shelter (thanks to globalisation) it can't cover services (like healthcare). But you're effectively creating free labour, so people (again, women) will provide it for free.

I am a Canadian woman. I do not have magical powers to create antibiotics or perform surgery. I can bring soup to my partner when he's sick, but I'm not sure that counts as healthcare really. I'd like to keep our government healthcare thanks.

Now, childcare! That would actually get solved by freeing up large portions of the workforce.
posted by heatherann at 5:13 AM on January 25, 2015 [1 favorite]

As always, a fascinating set of links from Kliuless.

It seems to me that politically, in the UK at least, we don't seem to have lunatic fringes and a sane centre anymore. Instead we have a lunatic centre, and on both political fringes some sane people at least.

People on both the libertarian right and the left are keen on legalising some drugs... But the lunatic centre is somehow convinced that the war on drugs is going just fine.

There's support on both the right and the left for a Basic Income, the right attracted by its economic efficiency (no benefit traps, little bureaucracy)... But the lunatic centre is convinced that you can't "give away free money" just because it's a compassionate, economically efficient way to help people.

Every election that goes past the centre parties compete to make insincere promises about how they're going to clamp down on immigration. The mainstream economic view that immigrants don't really steal our jobs has been relegated to the political fringes.

One of the big political problems we have is that common sense views of the mainstream political centre are actually completely insane.
posted by TheophileEscargot at 8:58 AM on January 25, 2015 [1 favorite]