A tacit endorsement of inequality? : Reading Tyler Cowen's "Average is Over"

Tyler Cowen really likes chess.

If there’s one key take-away from “Average is Over,” that’s what I know now that I did not know before.    

What I did know before reading is that he is on the opposite side from my own in most political matters.  In fact, in the book he describes himself as a conservative / libertarian somewhere.  I didn’t mark it, but I don’t think I’m making it up.  On the blog that he shares with Alex Tabarrok, they’re not overly partisans and often look at micro issues that don’t easily devolve into “sides” that I ever readily notice.

The thesis of the book is that the middle class is going to hollow out even more, and it will be the people who can use the raw power of computers with the inherent streamlined decision process humans have evolved who will capture most of the value created in the future from the efficiencies that computerization will create.  Basically, most people are in trouble. 

He looks at the future of work by looking at the current state of chess.  If you don’t know much about the chess scene, like me, you will learn a good bit about chess in this book.  Basically, the way chess has been approached by the top players has been radically transformed by the raw computing power available and the programmers who have put together chess playing software.  The top chess players can now simulate games with top players, and analyze moves made in past matches to determine what the highest probability move to make is.  These machines can be used as training tools to make the top players even stronger.  But in the event, they are left alone with just their wits, hand against hand. 

There is a form of chess that Cowen describes that breaks down these boundaries.  Where using a computer in normal chess matches would be cheating, this new kind of chess allows collaboration with teams of players using computers to find the best move, move-by-move.  These are the ultimate players and who will figure in the future of the workplace.  You have to be able to be and create a tech –mediated team like this to be successful in the future.  Otherwise, you will be eating cat food.

I may be over-reading the book, but I have to make an admission.  Cowen lost me very early on.  The problem with the structure of the future is that there is no seeming consideration of the state until the last third of the book.  Immigration, trade, and taxation finally come up as policy decisions that have to be made.  Instead, the projection of the future Cowen draws makes it seem like it happens in the vacuum of the free market.  It feels like he is making a massive hand wave and accepting grossly divided future as fact.  The problem is that in accepting it as fact is almost the same as validating it.  Whole books have recently been written by former Nobelist in economics lamenting this very hollowing out of the middle class, and the author seems to shrug his shoulders.  Inequality is the issue, and he seems to give it a tacit endorsement.  Once I gained that feeling about the book and its author, I wasn’t able to be objective about the argument.   

A skeptical look at Bitcoin.

So, as an inhabitant of econ twitter, I have seen the conversation around bitcoin. 

I am intrigued, naturally, because it is so polarizing.  Either it is the future of trade, or it is something to be mocked.  I legitimately don’t know what he future will be, on this or any other topic.  I am pretty sure that I will have a beer soon, but that is just a highly probabilistic way of looking at it.  I digress.

I’m thinking about the new electronic currency as a currency, and I keep going back to the very textbook definition of what money is.  You have store of value, unit of account, or medium of exchange.  Here the bitcoin people seem like hard money people,  where the idea of the currency is most prominent in the people who want to hold onto it.  That is, they place higher value on the store of value aspect of the currency.  I believe that is what is driving the exchanges right now, people trading to buy into it and to hold on to it.  For me though, if that is your only liquidity, and you’re handing over dollars for bitcoin to sit on, then all you’re waiting on is the greater fool, somewhere along to buy it.  The price will keep going up until it doesn’t. 

An appreciating price of the currency precludes it, for me, from being s something you’d buy things with.  I see money not for a lump of something sitting there, but in terms of what it can buy for me (as well as the labor I performed in earning that money, what was bought from me).  I’m saving up money not to have money, but to buy a new guitar.  With bitcoin appreciating and depreciating, that complicates any purchasing decision, and if you see it going up, like these calls I’ve seen calling for five hundred dollars per bitcoin or more, then you don’t spend it.  You hoard it. 

And you hoard it, it doesn’t get spent.  This only seems to work if they exist as a supplement national currencies.  It has the problems of fiat currency that the gold people point out, that there’s nothing “backing” neither my federal reserve notes nor bitcoin.  The problem is that my taxes are paid in electronic equivalents of that federal reserve note, and that entity has an army and various civil criminal penalties to ensure that I pay that way.    

Basically then the question comes back to “Why bitcoin?”.  If I ask that, and I be honest with myself, it seems that there are two reasons you want it for exchange.  If there are more, let me know.  Either you are doing something you don’t want the state to see, or you think the state is going to fail.  (Though the state will fail, somehow the electronics infrastructure will remain in place.)  I really don’t get it.  Can someone show me the appeal?

Over-Simplifying: Adam Grant's "Give and Take"

Adam Grant is apparently one of the best business school’s best professors (and so young too!) so I have to bet that the framework in this book is an over-simplificati0on of research that I am not privy to because I didn’t hunt down the notes.  

The framework is this: there are three kinds of people in this world.  You have givers, matchers, and takers.  You see that the matchers are more transactional in their work environment, takers will just walk all over you, and givers are free with their time and expertise.  The counter-intuitive turn here is looking at the amount of success each group attains.  Matchers and takers populate the middle, but you find givers at the least successful end being walked all over.  You also find the giver at the successful end, where they have gathered so much goodwill and a vast social network because they give so much.  It’s like a secular prosperity gospel.

The rest of the book is padded out with anecdotes about some of these successful givers.  We see their paths and then want to emulate them.  I think I had higher expectations, because the thing feels padded to me, and the book is only 250 pages with average spacing.  The evidence of the successful giver is anecdotal, and I felt that there was never a systematic look at how to be the right kind of giver, who falls on the positive end of the distribution.  There’s some advice, but it feels general to me be adaptable (195); don’t fall into a pattern of selfless giving (172); volunteer for unpopular tasks and offer feedback (75).  

I didn’t mark it, but I got the sense in one passage that you had to give because you wanted to give and thus create this positive karma that would come back to you like some of the people he highlights in the book.  If you gave because you wanted to create that karma, you become a matcher and thus not available to the karma.  It struck me as a paradox, because a natural giver wouldn’t even be reading this book to try to be a giver.  This book seems to be for matchers or takers in Grant’s paradigm, who want to be better by being proactive about being  a giver.  It reinforces the potential giver into a functional matcher.  Maybe I’m wrong.

One final thing that I felt was unaddressed was a person’s ability to change.  In the book, I felt that once you are identified by one of the three categories, you are there forever.  Oddly, there is a website set up that seemed to imply that change across categories was possible, something I wanted to see in the book.  The site had  a quiz to identify what group you belonged in.  I had read the book, and each question had only three possible answers so the “right” answer was obvious.  I answered as truthfully as possible, and was labeled a matcher.  I think I knew this by the first chapter.  Perhaps that’s why I was hostile to the title.  What I liked though was that the quiz allowed nuance.  I am a majority matcher with taker tendencies.  I also have giver elements.  For example, I often write uncompensated reviews for books.

It was fun being Unemployed!

From March 2010:

Having been unemployed for a long time now, I and my family are at the mercy of the continual incremental increases in the unemployment. I am grateful, but as time goes on and hiring has lagged the rebound in the stock market by a year, I become continually more pessimistic about employment in the short-term. I think the media plays a part in this. Now the news in my area trumps when there are job openings in low wage areas. A while back there was big news that Home Depot would be ramping up with several part-time openings. This is how you make discouraged workers ever more hopeless.

The vast underclass of surplus labor just has to watch in horror, hoping the government's largess doesn't end, because there are many in my boat. There are even more that have fallen through the cracks. They never were eligible for the benefits because they're inconvenient for capital to fund. I'm just waiting for my own benefits to stop. They never were big, as they represent more than a 50% cut in my former wage. However, with austerity measures in my household, we have been able to adjust to a new normal.

This new normal is not the American dream that I was sold in school and college. Many who bought into it and did well in school and studied hard are in trouble, and disenchanted with the system. These people have radicalized on both the right and the left. Our system has been built on consumption, and we hope to return to consumption, but that's not a long-term plan of any stability. Right now the market is failing many of my peers, as well as myself.

What's needed right now is a return to new deal or great society ideals. I'm losing job skills and future potential earnings by the day as I sit idle. I don't want to be idle. My background is not in any sort of heavy labor, but I would gladly dig ditches in a make-work program if that gave me the needed sense of accomplishment and creation. The main caveat is that a potential resurrection of the WPA must be new work in infrastructure or building for the common good. It must not replace work already being done or planned, the so-called 'shovel ready' projects. Right now the government is paying for my labor and getting nothing from it.

I know this would increase the cost, as the training and material costs would increase, but this would bring back a sense of self to many workers who lose who they are in a society that creates identity in your occupation. When asked to describe yourself or others, occupation tops many lists of identifiers. In our country right now, too many people are nothing.

Criticism Easier than Construction: Readng Steve Keen's "Debunking Economics"

I had been meaning to take a look at this book earlier, as the premise sounded interesting, and Keen is an interesting fellow on the blogs and twitter, but the price for a paperback was prohibitive.  I put in for my library system to pull it, and I was excited to get it and read it.

However, my main piece of advice is this: If you’re interested in the book, buy it if you can.  I say that because reading it, there were so many points I just wanted to grab a pen or  a highlighter and make a note, because in the highest praise, this book engaged me and made me think.

In the book, Keen starts at the foundations of microeconomics and shows why the assumptions that the standard is built on are false, and thus the whole of the standard model is untrue.  He does a good enough job and I can remember no major holes so I have to say he did a good job.  He did well enough that I caught myself paging through my micro textbook making notes to myself like “THAT’s a convenient fiction” so I can tell he made it in my head.   He does draw the outlines of a potential new sort of economics, based on Minsky’s Financial Instability Hypothesis, but he keeps enticing the reader with a new book that so far does not exist.  That’s the book I want to read.  For me, my favorite parts of the book are the normative “What is to be done?” section that usually only takes up the last five percent of a critical text.  Here Keen just entices….or kicks the can, criticism being easier than construction. 

Unfortunately, he is attacking both the citadel and the windmill of orthodox economics, so he will be largely ignored by the professorial class. (This is one of the threads running through the text, Keen’s outsider status in spite of having his neoclassics down cold.)  As a  heterodox economist, he can take liberties like actually looking at what Marx and Keynes said.  Though as a Marxist, I was both glad he takes my totem seriously for analysis, but was made sad when he took the threads of Marx’s work and tried to pull them apart and throw out what he doesn’t like, such as the Labor Theory of Value, and keep what he wants.  You can’t disrupt the canon, Professor Keen.

But I digress.  What he does do is explain the basics that he wants to pull apart of the neoclassical edifice so well that you could extract it and make it part of a textbook if you throw some sort of trendy technological interface in there and have questions…and charts.  The major flaw to me is the lack of charts in the book.  I think graphically, and there are so few charts in here that I had to translate the verbiage into charts in my head, and there’s no telling how close what he said corresponds to what I saw in there.  If I understand right, they are accessible online, but that’s a huge disruption in my reading style.

And finally, it is not an easy book to read.  The professor acknowledges this at multiple places in the text, to a point where his self-deprecating asides takes away a bit from the overall authority that he speaks with on the topic.   

Overall, this is a very strong book that I feel any student of economics would be bettered by reading.  He or she just needs to do one thing: actually buy it so the copy is yours.

Keynes: The math is hard

Loosely associated thoughts on Keynes's "General Theory"

1) The General Theory is a landmark work in the science of economics. If you agree with the general conclusions or deny them, you cannot deny the influence of the work. This is the same with Keynes as it is with Hayek or Friedman or Fischer or Marx or Smith. This work, as the others, are part of the cannon. Keynes was wrong in places. He was right in others. Different schools of thought may disagree on which place is which.

2) Part of the power of the work is that it is set up in response to an orthodoxy that is no longer demode. Poor professor Pigou is beat over the rocks for his poor understanding of economic phenomenon. Pigou is a minor figure in history were Keynes not to attack him; instead he has an immortality that is undeniable. The only possible problem here is that Pigou is a straw man, as most contemporary readers will have to rely on Keynes's characterization of Pigou's positions.

3) To get into terms of contemporary financial debate, Keynes was in favor of a financial transition tax, which we would propose as a "Tobin Tax" nowadays. Not that I'm a Keynesian, but within the context of capitalism I tend to agree with the economists aligned with his tradition more than the other side(s).

4) This is a big point, but Keynes acknowledges that the book is intended for professional economists. There is a lot of stuff here that is opaque to the lay reader. S/he might need a class on the topic to walk him/her through the arguments. I know I had to brush off my calculus to get through large sections. It might have better to have been on a white board.

5) However, a lot of the stuff is accessible. Keynes is a good writer. He had to be, considering the group he ran with. He was the square in the hippy house, but a certain style is evident in his writing. Though a large part of the chapters is devoted to the mathematical basis of his argument, he still explains what he is talking about. This comes at the end of the chapters in surprising little nuggets. You can't escape his beautiful metaphors, especially his most famous one about the market, where the function is to find "what average opinion believes average opinion to be".


Posted 3.2.11 at http://www.amazon.com/review/R2S5ZI4PBQXZWN

On Mlodinow's "The Drunkard's Walk"

You can be back-handed and say that Mlodinow is a good writer for a scientist, but I won’t do that.  He’s a good writer, period.  He can spin a tale from nothing, or what seems like nothing.  Here, he covers what is potentially a very history of probability and it’s contemporary uses.  The title and the subtitle may over-sell it a bit, but it is a popular book.  It is quick and easy to read, but that doesn’t mean you won’t learn anything.  I for one had no idea the equals sign wasn’t invented until 1556.  I’m just glad I didn’t have math class before then.