Economic Life & Everything Else

Picketty, Rifkin and the future of prosperity

<![CDATA[Thomas Picketty's Capital in the 21st Century is drawing much deserved praise. I’ve also been reading Jeremy Rifkin’s The Zero Marginal Cost Society, an envisioning of a post-Capitalistic collaborative commons, which deals with a scenario Picketty describes but cannot project in his economic analysis, because it assumes unlikely progress in clean energy and technological gains that, even after all we’ve seen in our lives, may not be plausible. Rifkin’s vision, which proved extremely compelling in The Third Industrial Revolution and his popular writings on the impact of the Internet, may be an important element of the future economy. Picketty’s analysis suggests we need that vision if we are to sustain anything close to the prosperity we are used to in the West as economic opportunity spreads.
Picketty’s findings that inequality is a structural feature of capitalistic societies suggests that, if we do not put policies in place to modulate the level of inequality, the economy will eventually collapse in social unrest. Equality of opportunity — access to knowledge, education, and the basic requirements of life — is the soundest foundation for an unequal but fair outcome. I wholeheartedly agree with Picketty that the U.S. in particular has failed to continue to invest in providing that fair start to its citizens.
In Rifkin’s model, the cost of producing the next copy of virtually anything, except for the cost of materials, will be negligible in the future, because of the increased efficiency of production, logistics and support systems due to digitization, transportation and communications innovations. Meanwhile, the cost of inventing the next new thing will remain high, and it is in that innovation space that fortunes will be made, as investment and risk are part and parcel of any innovation. So, someone may discover a new drug at a very high cost, but the cost of reproducing that drug, once it is discovered, will be very low. Wealth will be made in volume, so to speak, selling lots of copies of that initially expensive design for the drug in the form of pills or injectables, a little each time the product is delivered. The paydays for those innovations happen before the wealth is actually earned, as the startup is sold to the public, which can harvest the projectable, but still uncertain, profits of distributing that innovation.  Sounds very much like what we have today, right?
But it is not, it represents a segmentation of economic activity into innovation and reproduction. Rifkin’s innovators will continue to have huge paydays, the copiers of innovation — even within the company doing the inventing — will be living on marginal improvements in their income and what they can reap in terms of improved standard of living and buying power due to the efficiencies. A new organizational model, the collaborative collective, in which costs and benefits are shared, sometimes literally in the sense that a purchase may be shared by many people, will fill in the “gap” between wealth and sustenance. Think car-sharing or serial re-use of products. I would call this “public hand-me-downs” as a kind of shorthand for the idea that someone buying a car may pass it along in a structured agreement to others; one may buy a new car every year for the enjoyment of it, but the car comes with a built-in sharing network that will distribute the residual value of the vehicle to others as the first buyer moves on to the next car.
Here’s where Picketty’s findings come back to present the real challenge. If inequality is a structural feature of markets — and it is, Picketty shows as incontrovertibly as an economist can — the innovators will increasingly separate themselves from the other citizens of their countries in order to increase the efficiency of their capital investments — they will seek out low-tax or special tax situations for physical plants and ethereal innovative thinking will no longer have a home in a nation. Vast differences in pay today will continue to translate into growing inequality in the future. Rifkin’s notion of a collaborative commons co-existing with an innovation economy describes what will happen to the ordinary person in any country: They’ll be left to fend for themselves as the wealthy pursue innovative opportunities anywhere on the planet. In those local lobes of the Marginal Cost Society, poorer citizens will have to share goods they could not afford alone. I think Rifkin’s projection of the collaborative commons is a picture of the post-national capitalism that will give the wealthiest people a perpetual and increasingly closed range of options that others do not share, even if that is not his intention — he’s simply projecting the economic model that is emerging in response to pervasive inequity. The new transnational aristocracy  will get these options without sharing their fair share of the cost of sustaining a nation, its legal system, its rights and the burdens of citizenship.
Wealth is going trans-national, beyond the control of any organizational model. Picketty’s inequality leads to the necessity of Rifkin’s  collaborative commons, because everyone in today’s upper middle-class down to the poorest of people will be competing only for a fraction of the marginal cost of production while innovation becomes the province of the super-wealthy. The gains from innovation will continue to accrue to the wealthy and economic mobility will be a very rare phenomenon.
Some of you will be screaming “Marxist” or “Leftist” by this point, but I want you to suspend that for a moment. I am not calling for any particular program to respond to this phenomenon, rather I am saying we need to recognize it and factor it into our thinking. If reasoning based on well documented historical data is not allowed because it suggests an ideology, we’re never going to make any progress. We’ll just argue over ideological ghosts. Communism was a spent notion before the Soviet Union, even if it seems to be threatening to rise again in the Age of Putin. Put that behind us and begin to reason about how to establish a fair foundation for competition from any economic level of society, which will increase economic and mobility, and you have a chance to stem the tide if inequity. Why?
Because inequity can eventually destroy our societies. The Economist argues effectively for aiming for a measure of overall material well-being, as it both acknowledges inequity and dismisses the inevitability of revolution due to inequity. I think the editors at The Economist are being a bit glib about the impact of inequality; our memories are conditioned by extraordinary progress in technology, organization, energy production and much, much more, and they minimize what it would be like to recognize stark inequity in one’s own life. But stark inequity is what all but the top .06 percent or so of the population experience as a growing reality in their lives. Yes, the quality of our lives may be improving overall, but the disparities are increasing, too. An accurate measure of material well-being, even one predicated on the buying power of a population relative to the value of their currency, as Picketty suggests, would be a far better basis for policy analysis.
In the long run, we’ll all be dead, Johnny Depp’s transcendence notwithstanding. But I worry for my children and children’s children that, if inequality continues to expand from today’s near-historically high levels, they will be relegated to something similar to slavery. They will have choices, but they will be property of the innovators’ influence, having to endure the kind of capricious and arbitrary exercises of power and wealth that we are familiar with today. Donald Sterling’s an example of it — because he has money, he feels entitled to denigrate blacks without remorse. Fortunately, the NBA did not grant him a pass, as he has been granted during thirty-plus years of documented racism. This time, inequality was not rubber-stamped. However, we see this kind of personal expression of indifference to the values of anyone with less money across society. Sterling, or the idiotic pro-slavery rantings of Cliven Bundy, a Nevada rancher who succeeded in avoiding payment for use of public property but thinks blacks would be better off if they were still slaves, down to the local bigotry of the Boy Scouts against gays, and calls for the wealthy to have a greater say in politics than others (one-dollar-one-vote and venture capitalist Tom Kleiner’s ridiculous arguments that the rich are persecuted) to the imposition of religious tenets on the employees of private companies, which is headed to the Supreme Court in the case of Hobby Lobby, where the owners insist everyone should live by their moral decisions; all these are not isolated examples of poor judgment or bad taste. They are evidence that inequity is rising and the most fortunate of today’s families are seeking to ensure they are always on top of the economic pile. Surely, that’s rational at one level, but when it becomes ideology it becomes poison to society.
The crisis will come when wealth divorces nation, building its own systems for enforcing contracts and seeking to avoid any cost not directly related to the product they want to invent or manufacture. At this point, national investment in opportunity, which is one of capitalism’s greatest features, will be undercut completely. High personal wealth will exist extra-nationally and we’ll hear howls about the unfairness of paying any taxes at all, but wealth will still want everything it can get for free from the nations where it chooses to do business. The only logical solution is policy that establishes a baseline of opportunity, with completely free access to education and information for anyone at any stage of life, because, as capitalism has proven, we never can predict where the next great idea will come from. This is not an argument for life-long welfare, just lifelong education, which is a tenet of post-industrial civilization. Policy can ensure opportunity is (more) equally distributed, that it not retreat to become the playground of a very few families. If we fail in this effort, we would complete our return to pre-Industrial life, but with television to entertain us.
Read together, Piketty and Rifkin paint a range of potential economic outcomes we may see in the future, but it is certain that the disappearance of inequity in opportunity will not come to pass without the political courage to stand up for an equal start, even as we accept unequal outcomes. Bully for the innovators, who should profit from their hard work. Yet  let’s remember that Teddy Roosevelt, a conservative, finally had to recognize and stand up to the inequality of his time in order to lay the foundation for a century of unprecedented growth with less inequality than at any time in history.]]>

Life & Everything Else

Lobal Economics

<![CDATA[I was riffing on some neologisms last night in Facebook comments…. But here, I can add a picture of a Riemann space to help clarify my point about the way personal and global networks become optimized in non-linear ways to produce substantial influence within the global economy.
— Snip —
RiemannSpaceDon’t get your orthogodoxy in my face, orthogodoxical man. Once you start thinking lobally, you’ll be beyond the local and, even, the hyper-local to the lobal personal influence networks that build trans-national+multi-local-node markets and movements (these can be visualized as a collection of Riemann spaces, crumpled up balls of relationships that tie the world together in fundamentally local ways that defy the orthogodox thinker, who lives in a three-dimensional conceptual space inadequate to understanding the spidery links that make a lobal world), such as the diamond industry, the various “silicon” places connected to one another on the telecom grid like Columbian-era ports are a map of the major and minor sea routes, or the dawning realization of the political importance of global warming to personal identity that is going on now. The word “lobal” also conjures the way the brain develops in mammals, which is a lyrical and biological image at one time.
The next step is to think of some of these crumpled networks as partially tangled, crumpled together, if you will. The global economy grows these new lobes of influence, and they may be inter-related.

Life & Everything Else

The Cows, a story from the future

<![CDATA["Cli-Fi” is a new genre in fiction. Here’s my first and intentionally ridiculous shot at it. If you enjoy this, please donate to, an excellent, and often funny, news and commentary site about climate events and sustainability. I’ve become a supporter and you can, too.
The Cows
The following article was discovered in  a time capsule buried at an as-yet unidentified university campus in the former Western United States.

Eventually, the world became so networked and measured it was easy to observe every species on the planet in such detail that we discovered many other intelligences at work around us. We studied ourselves, and like the bees watching a returning scout’s waggle dance we eventually recognized that there are patterns of intelligence everywhere and that those patterns differ based, in part, on our measuring them. It seemed as though we were gods able to predict our future, to program events as it would be best, or from an actuarial perspective, the least risky, they turn out. We felt great, but we looked about for things and species to suspect. A tyranny of probabilistic analysis of the behavior of other species established a hierarchy of intelligences, monitoring each carefully for advancement and potential threats to humanity. We suspect the cows were the worst.
Cows everywhere stand in the same places or wander the same paths around a pasture during the day, not only lying in alignment to the magnetic North Pole, but repeating patterns of standing and walking and standing again, in the same places as each cow did previously, but at regular intervals, so it was inevitable that we recognized a time awareness, as well as a complex geometric calculus, in the bovine species.
This put the cow high on the threat list. But where  exactly did they lie  in the threat matrix relative to the eagle, dolphin and octopus, each ripe with evolutionary potential? Top scientists were deployed to discover the truth about the bovine threat. Of course, the early discovery through the analysis of webcams used by dairy farmers that cows walked and stood in patterns, is well known. It had been a matter of common sense in farming communities for decades, but the press picked up on it with the scientific discovery. Coming on the heels of the realization that dogs were actually smarter than and in greater control of subservient species than cats, the lens of concern shifted to the providers of our milk, cream and other dairy goods.
At first the studies focused on the repetitive patterns and the cows’ ability to course correct when obstacles were placed in their way. The cows variously stopped at the obstacle and defaulted to repeating only their pattern of shifting the orientation of their stance to the pole, walked around or leaped, usually accomplishing of the crushing of the obstacles. Rocks did stymie the bovines who took the latter course of action when blocked by a boulder, and many test subjects were put down in the field as a result. Moving cows to new pastures, the so-called “greener fields” studies of the 2029 to 2034 era, likewise produced unpredictable results. While almost all cows moved from one pasture to another adopted a new pattern, path and timeframe of the repetition, a few did not and instead recreated their previous pattern, path and timeframes despite differences in topography, obstacles and occasional EMP bursts set off by scientists to disrupt the bovine time axis, if one does exist.
We think we’re onto one thing when another sneaks up. At this point, there was clear evidence of intelligence, time-awareness and, it became obvious only after years of study that cows where constantly performing differential equations in their heads in order to keep perfect track of their longitude and latitude, we concluded they possessed the capacity to someday split the atom.
The course-correction epoch gave way to the confrontational behavior studies, in which man challenged cow, examining the cows’ reactions for signs of resistance or rebellion. It was mostly new ways to inflict death that researchers found. Cows were poked with eight-foot pikes, their heart rates, skin galvanic response and brain cells were monitored. Many of these studies, which took place at religious or corporate universities seeking to buttress the public’s concerns about the cows in order to distract everyone from the growing evidence of global warming, reported escalated brutality among the researchers, who ignored the primary evidence in the fact all cows that entered these programs were eventually killed in the programs in order to pursue reports that in the last seconds of a cow’s life it is terribly angry. Grant proposals poured in to pursue the question, if that fading anger recorded as cows were gored, bazooka’d, dropped on land mines or hauled into slaughter houses, as they provided a large sample of angry cows to measure, could at some point in the future be linked to the bovine capacity for complex mathematics?
One animal fought back. Unlike the chimps, orangutans and gorillas who allied to crush humanity in the popular science fiction series that reached its 49th installment in 2051, this bovine, given the name “Willard” by his trainer, would be the exception that proved the rule, as he was the only cow (or steer, as we follow the convention of adopting the feminine when referring collectively to mammals whose species are characterized by their relationship to the dairy industry. — Ed.)  when Willard tore his trainer’s adam’s apple from his neck with his bared flattened teeth. He had been savaged with a chainsaw on the hindquarters. The researchers’ abuses where chronicled in the Congressional investigations that followed.
Meanwhile, the pasture observation movement in science reasserted itself as the terminal weather effects of global warming took hold. An astonishing phenomenon associated with the heavy fogs that blanketed the unflooded valleys of western Washington was reported just as the Willard story broke in the news. The climate was ignored by most mainstream researchers, who juiced the bovine threat to win additional funding. As the general sense of doom increased, we blamed the cows for the fog.
Heavy fogs often obscured the camera views on the farms, sometimes for minutes and often for hours. We don’t know when a new behavior started, but we are certain it accelerated as the fogs have increased in frequency and tenacity. It went unnoticed for so long and all seven films we have of early fogs shows the same behavior: The cows would move when they were unobserved. Let us be very specific: No human witness or camera has been able to see the cows move. They changed their pole orientation from their standard pattern to a new one. As heavy fogs became more frequent, we discovered through additional human analysis, that sometimes the cows switched places  with one another while obscured from observation, assuming the patterns of their new “role” and carrying them on.
The cows were cagey. One could not catch them at it. Ground motion sensors failed to capture their tread against the background resonance of the busy planet. Researchers using cloaking devices to approach fog enshrouded herds were confronted by cows passively chewing, lowing and looking about, apparently disinterestedly, as teams stood by to capture no results. It became a widespread controversy, reported upon heavily before the cows died out, based on the well-worn slogan, familiar from the t-shirts, “What are they up to?” The phrase appeared as a standing banner on the news networks. There were the t-shirts worn by the on-air reporters after the fad hit the global scale. There was speculation the cows were experimenting on us. A lunatic fringe developed a theory about quantum transportation of cows by cows, perhaps not of this world, which felt to many like a plausible answer in a world that has changed so surprisingly so fast. We wanted you to know that this was one of the unsolved questions of our time, but other disasters intervened. Sorry about that.



These Mariners are good