May 3, 2016

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Paul Mason. Postcapitalism: A Guide to Our Future. New York: Farrar, Straus and Giroux, 2016.

Paul Mason is a British freelance journalist and economics writer. He is a bold, creative thinker who challenges a lot of mainstream economic thinking. Here he has written an especially insightful and thought-provoking book, one that deserves serious attention and debate.

Mason’s title may make his book sound like a speculative, utopian work, but the future he envisions doesn’t drop out of the sky. It emerges naturally from his understanding of both the recent and earlier history of capitalism. For those who think that something as pervasive and entrenched as capitalism cannot possibly wind down, he offers this observation: “It is absurd that we are capable of witnessing a 40,000-year-old system of gender oppression begin to dissolve before our eyes, and yet still seeing the abolition of a 200-year-old economic system as an unrealistic utopia.”

Another stumbling block for readers may be Mason’s frankly Marxian perspective, although his is a revised version with no “dictatorship of the proletariat.” (Today he sees the educated and networked individual as the key agent of change.) I have some reservations about a few of his arguments, especially concerning the labor theory of value, but that hasn’t stopped me from agreeing with many of his conclusions about the future.

Capitalism’s bleak prospects

Mason begins his book by saying that “the long-term prospects for capitalism are bleak. According to the OECD, growth in the developed world will be ‘weak’ for the next fifty years. Inequality will rise by 40 per cent.”

If we keep going as we have been, we face two alternative futures, neither very pleasant:

  1. Economic globalization continues, but only the wealthy in the developed countries get much benefit from it; or
  2. Popular opposition to globalization grows, global cooperation breaks down, and more nationalist and authoritarian governments emerge, as in the 1930s. Each country tries to save itself at the expense of others, such as by putting up trade barriers to other country’s manufactured goods [See Trump, Donald].

And either way, things get worse in mid-century when the full effects of climate change and demographic change (the challenge of supporting larger and older populations) are felt.

New technologies yes, capitalism maybe not

Mason believes that a better alternative is to take advantage of the potential for new technologies to end capitalism as we know it. Economic problems such as over-reliance on fossil fuels and stagnating wages result from trying to perpetuate a system that no longer works very well. “Capitalism is a complex, adaptive system which has reached the limits of its capacity to adapt.” Although capitalism has a long history of generating technological change, it can no longer adapt to such change because it is now creating technologies that are ultimately incompatible with capitalism itself.

“Information is different from every previous technology,” Mason declares. “Its spontaneous tendency is to dissolve markets, destroy ownership and break down the relationship between work and wages.” Information is different because, unlike other means of production, it can be reproduced at near-zero cost. If I were to give you my car I would lose a car, but what have I lost if I give you an idea? It costs me nearly nothing to share these thoughts with you, so why should I expect you to pay for them? Why would people buy an encyclopedia when Wikipedia is free, or buy a newspaper when so much news is available online?

In addition to widely disseminating “information goods,” the information revolution also “adds a high information content to physical goods, sucking them into the same zero-price vortex….” In a fully automated production system, the key resource is the set of instructions for turning raw materials into finished products. “The knowledge content of products is becoming more valuable than the physical elements used to produce them.” Once the knowledge exists, many users can apply it with little additional cost.

A world of abundant information should also be a world of abundant things produced by automated, information-driven processes. That undermines capitalist markets, since “markets are based on scarcity while information is abundant.” As industrial robots proliferate, the need for paid human labor should diminish. Earlier technological innovations like the assembly line already shortened the work week while simultaneously raising living standards for workers. The more radical change Mason envisions now will free vast amounts of labor from paid employment. Much of that labor can go into voluntary but socially useful activity, whether it is caring for a loved one or making music. Consumers too should experience some liberation from capitalist markets, as more goods and services become available at little or no cost. “We are seeing the rise of non-market production: horizontally distributed peer-production networks that are not centrally managed, producing goods that are either completely free, or which…have very limited commercial value.”

Capitalists can impede this transition, but only by monopolizing information in order to restrict its free flow and maintain its artificial scarcity. Intellectual property rights will be a key issue. Society will have to balance the need to grant such rights in order to reward the producers of new knowledge, against the need to limit such rights in order to facilitate the free spread of information. In the end, Mason doesn’t think that capitalists will be able to own or control the intellectual means of production the way they have owned and controlled other means of production. “The main contradiction today is between the possibility of free, abundant goods and information and a system of monopolies, banks and governments trying to keep things private, scarce and commercial.”

Dramatic changes, conflicts and crises have been common in the history of capitalism. As profit-making opportunities have declined in old industries, capital has repeatedly sought out new markets and new technologies. Always, however, the assumption of industrial capitalism was that people would depend on the owners of centralized means of production for both employment and products. What makes the current crisis different is that knowledge is so easily decentralized, and networked individuals can create so much of value on their own. Global corporations continue to make their profits for now, but they do so increasingly by squeezing the workers and damaging the environment. New technologies that could produce more freedom and abundance for all while better protecting the planet are not yet allowed to do so.

Mason’s argument that abundance will reduce market activity and expand non-market activity makes a lot of sense to me, but I’m not sure how far to take it. The most obvious example is the displacement of human labor from manufacturing production as automation takes control. Many low-skill service jobs could also be automated, although the availability of cheap labor reduces the incentive to make the transition. But I would expect there to be a continuing market for skilled services because not everyone will be willing or able to provide them. A lot of free legal information is available online, but that doesn’t mean that everyone is comfortable being their own lawyer. And although an abundance of goods and services may make them cheaper, only if they become entirely free will the need for money and marketplace exchanges disappear entirely. While some people, especially the more educated, may experience a reduction in paid work hours as a blessing, others may experience it as the curse of unemployment or poverty. Mason’s postcapitalist world will require massive investments in human capital and a stronger safety net for the economically displaced.

The limits of neoliberalism

Standing against Mason’s vision of the future is the set of ideas and policies known as neoliberalism. That is the most recent incarnation of the free-market economics that was considered liberal in the eighteenth and nineteenth centuries, but is associated with conservatism today. Mason defines it as a commitment to uncontrolled markets, the pursuit of self-interest through the market, the small state, and a high tolerance for financial speculation and inequality. On the one hand, he credits neoliberalism for unleashing the information revolution and promoting economic development, especially in poorer countries. On the other hand, he blames the uncontrolled pursuit of profit for aggravating economic inequality and endangering the global environment.

Although neoliberal policies have brought capitalism to a crisis point, neoliberal theory is poorly equipped to understand crisis or radical transformation. Neoliberals believe that markets are essentially rational and self-correcting. If left to their own devices, they tend toward equilibrium, not crisis. For neoliberals, capitalism is just the normal state of affairs, a “continuous present.” Writing with more than a little sarcasm, Mason says that neoliberal economics has a “brilliant model for understanding forms of capitalism that do not change, mutate or die. Unfortunately these do not exist.”

Neoliberal policy and practice has kept capitalism as we know it limping along by relying on loose monetary policy, dramatic growth of the financial sector, and global imbalances between creditor and debtor nations. Specifically:

  1. “Fiat money,” which is money that a state can create freely as long as people have confidence in it, has allowed central banks to counteract stock market drops by pumping cheap money into the economy. When this money inflates the prices of stocks and other assets beyond realistic earnings prospects, boom becomes bust.
  2. As real wages have stagnated, consumer spending has been sustained more by credit and borrowing. By the time of the 2008 financial crisis, 40 percent of corporate profits were coming from the financial sector. Profits must eventually fall if they depend too much on the accumulation of debt.
  3. Neoliberal policies have created debtor countries as well as indebted consumers. “For countries that smashed organized labor, offshored large parts of their productive industries and fueled consumption with rising credit, the outcome was always going to be trade deficits, high government debts and instability in the financial sector.” Debtor nations like the United States require other countries, such as China, Germany and Japan, to be creditor countries. When the burden of debt becomes too great to sustain, countries resist and the system breaks down.

Since the recent financial crisis, neoliberal policy has turned toward imposing austerity on the debtors, while not addressing the reasons for the expansion of debt in the first place. Mason regards the economic recovery as only a temporary fix, since the underlying weaknesses have not been corrected. The real existential crisis of capitalism itself is only beginning.

The most important limit on the neoliberal system is information technology, which is put to the service of the existing capitalist system in the short run, but undermines it in the long run.

And that’s just the introduction and Chapter 1! My next post will look at the historical part of Mason’s argument, his interpretation of the “long cycles” in capitalist history.


The Zero Marginal Cost Society (part 2)

September 10, 2014

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The Collaborative Commons

In 1968, ecologist Garrett Hardin published his classic essay, “The Tragedy of the Commons.” Using sheep grazing on common land as his prime example, Hardin described how the pursuit of unbridled self-interest can be expected to destroy a common resource. Each individual keeps adding more sheep, since the benefits accrue to that individual while the costs are spread among many. Eventually the land is overgrazed and many sheep die. The conclusion: “Freedom in a commons brings ruin to all.”

For many years, economists could see only two models for managing resources: the capitalist model of private ownership and the socialist model of government ownership and top-down regulation. Yet the idea of the Commons refused to die.

In 1986—18 years after Hardin’s essay seemed to put the last proverbial nail in the coffin of Commons theory—Carol Rose pried open the casket, breathing new life into what many had already concluded was a dead idea. The Northwestern University law professor entitled her salvo “The Comedy of the Commons,” a scathing rejoinder to Hardin’s earlier thesis. Her spirited and rigorous defense of Commons governance rousted the academic community, spurring a revival of Commons scholarship and practice.

Long before strong centralized states and modern capitalism, many societies did in fact manage resources like pastures, forests and irrigation systems through informal systems of rights and responsibilities accepted by all. In 2009, Elinor Ostrom won the Nobel Prize in economics for her study of what makes such systems work, at least in certain contexts. I find it easier to imagine them working in small-scale settings like extended families or villages, but larger-scale societies with high-speed communications might also pull it off. Rifkin certainly thinks so. He envisions three kinds of Commons–Communications Commons, Energy Commons and Logistical Commons.

The Battle of the Century

Rifkin believes that the first half of this century will be dominated by the struggle between “prosumer collaboratists and investor capitalists.” Rifkin’s own involvement in that struggle began in 1979, when General Electric applied for a patent on a genetically engineered microorganism designed to consume oil spills. The US Patents and Trademark Office denied the patent, but the Supreme Court awarded it in a 5-4 decision. In 1987, the patent office ruled that any genetically engineered, multicellular organism could be patented. In 2002, the Foundation for Economic Trends, of which Rifkin is President, brought together 250 organizations from 50 countries in support of a “Treaty to Share the Genetic Commons.” It declared that the gene pool has an intrinsic value more fundamental than any commercial use, and it opposed the private ownership of genetic information in principle.

Private ownership of intellectual property may be necessary if such property is hard to produce without large investments of capital. But as the costs of acquiring and disseminating information plummet–the cost of reading DNA sequences is a case in point–Rifkin sees less to be gained by organizing society on the private ownership and profit model:

Patents and copyrights thrive in an economy organized around scarcity but are useless in an economy organized around abundance. Of what relevance is intellectual-property protection in a world of near zero marginal cost, where more and more goods and services are nearly free?

Like Jaron Lanier in Who Owns the Future?, Rifkin deplores the efforts of Big Data companies like Google and Facebook to collect, own and sell vast amounts of information collected from Internet users. He expects users to fight back, not by trying to charge for the information they provide, as Lanier would have it, but by “demanding that their knowledge be shared in open Commons for the benefit of all, rather than being siphoned off and enclosed in the form of intellectual property owned and controlled by a few.”

In the realm of energy, the battle will be between a centralized energy grid dominated by large producers and a decentralized grid where users produce and distribute a lot of their own renewable energy. Just this week, the New York Public Service Commission proposed such a “distributed” energy network.

The “Logistical Commons” would have a similar decentralized organization. Instead of big companies distributing products from a few warehouses and distribution centers, more sophisticated and standardized tracking would allow many enterprises to share the same facilities as needed.

The Sharing Society

In the Collaborative Commons described by Rifkin, people will get their information more from one another and less from centralized sources. Advertising will decline as people rely more on peer product reviews. Ownership will decline in value while access to shared resources will rise in value. That quintessential example of private property, automobile ownership, will become less important as car-sharing networks expand. Peer-to-peer lending and crowdfunding will compete with bank financing.

This rosy picture of the future depends, of course, on the assumption that high productivity and general abundance will have made rugged individualism largely obsolete. People won’t feel as strong a need to rely on what is mine, but will be more comfortable benefitting from what is ours.

When the marginal cost of producing additional units of a good or service is nearly zero, it means that scarcity has been replaced by abundance. Exchange value becomes useless because everyone can secure much of what they need without having to pay for it. The products and services have use and share value but no longer have exchange value.

Rifkin does acknowledge two main threats to abundance that we will need to overcome: climate change and cyberterrorism.

A human transformation

Taking a very long view of history, Rifkin connects revolutions in communications and energy with revolutions in human consciousness:

The great economic paradigm shifts in human history not only bring together communication revolutions and energy regimes in powerful new configurations that change the economic life of society. Each new communication/energy matrix also transforms human consciousness by extending the empathic drive across wider temporal and spatial domains, bringing human beings together in larger metaphoric families and more interdependent societies.

The latest communications and energy revolution takes this process farther than ever before:

Is it not possible to imagine the next leap in the human journey— a crossover into biosphere consciousness and an expansion of empathy to include the whole of the human race as our family, as well as our fellow creatures as an extension of our evolutionary family?

Seeing society as a Collaborative Commons makes it easier to see the entire biosphere as a Commons as well:

By reopening the various Commons, humanity begins to think and act as part of a whole. We come to realize that the ultimate creative power is reconnecting with one another and embedding ourselves in ever-larger systems of relationships that ripple out to encompass the entire set of relationships that make up the biosphere Commons.

Finally, Rifkin contrasts the new “social entrepreneurialism” with the “commercial entrepreneurialism” that has been embedded in capitalist markets:

The new spirit is less autonomous and more interactive; less concerned with the pursuit of pecuniary interests and more committed to promoting quality of life; less consumed with accumulating market capital and more with accumulating social capital; less preoccupied with owning and having and more desirous of accessing and sharing; less exploitive of nature and more dedicated to sustainability and stewardship of the Earth’s ecology. The new social entrepreneurs are less driven by the invisible hand and more by the helping hand. They are far less utilitarian and far more empathically engaged.

I am inclined to be skeptical of utopian visions, and I’m usually willing to assume that capitalism will continue, although hopefully with some egalitarian reforms. Rifkin’s extrapolations from current trends do not seem unreasonable, however. The fact that we can’t seem to create enough gainful employment to distribute the benefits of our own productivity does not bode well for capitalism. How long will people accept a system that maintains technologically unnecessary scarcities for the many while generating great abundance for the few? The fundamental principle of the Collaborative Commons, that all people have access to valued resources so they can both produce and consume, may prove irresistible.

After reading Lanier’s Who Owns the Future?, I had second thoughts about my own information-sharing activities because of concerns about the companies that collect and sell information that people provide for free. Rifkin helped restore my confidence that sharing is a good thing, and that the sharers will ultimately prevail over the monopolizers. One can certainly hope so.

The Zero Marginal Cost Society

September 8, 2014

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Jeremy Rifkin. 2014. The Zero Marginal Cost Society: The Internet of Things, the Collaborative Commons, and the Eclipse of Capitalism. New York: St. Martin’s Press.

Jeremy Rifkin is the president of the Foundation on Economic Trends and a leading thinker on the transition to a more sustainable global economy based on new energy sources and infrastructure. In this latest of his many books, he predicts that capitalism will gradually decline and be largely supplanted by what he calls the “collaborative commons,” a system based on common access to cooperatively managed and shared resources. This sounds pretty utopian, but he bases his argument on some very real changes that are already occurring in how we produce and share information, obtain energy, and make things.

Rifkin’s version of the decline of capitalism is not based on its supposed failure, but on its success. The relentless quest for profit leads producers to raise productivity in order to lower unit costs and attract more buyers. Their competitors are forced to do the same. If the process is carried to its logical conclusion, productivity moves toward “the optimum point in which each additional unit introduced for sale approaches ‘near zero’ marginal cost…making the product nearly free.”

The information economy has already taken much of the profit out of some industries by making it so easy to obtain certain commodities; music and news are prime examples. Rifkin believes this is only the beginning:

The near zero marginal cost phenomenon has already wreaked havoc on the publishing, communications, and entertainment industries as more and more information is being made available nearly free to billions of people. Today, more than one-third of the human race is producing its own information on relatively cheap cellphones and computers and sharing it via video, audio, and text at near zero marginal cost in a collaborative networked world. And now the zero marginal cost revolution is beginning to affect other commercial sectors, including renewable energy, 3D printing in manufacturing, and online higher education. There are already millions of “prosumers”— consumers who have become their own producers.

In Part I, Rifkin reviews the history of capitalism, emphasizing the connections among energy sources, communication and transportation at each phase. The First Industrial Revolution depended on steam, printing and railroads; the Second Industrial Revolution relied on oil, the internal combustion engine and the telephone. In both cases, the trend was toward concentrations of economic power. “Vertically integrated corporate enterprises were the most efficient means of organizing the production and distribution of mass produced goods and services.” For a time, the only alternative to capitalism seemed to be another form of centralized power–state socialism.

Rifkin expects the Third Industrial Revolution, with its reliance on renewable energy and global electronic communications, to reverse the centralizing trend and distribute power more widely:

A new communication/energy matrix is emerging, and with it a new “smart” public infrastructure. The Internet of Things (IoT) will connect everyone and everything in a new economic paradigm that is far more complex than the First and Second Industrial Revolutions, but one whose architecture is distributed rather than centralized. Even more important, the new economy will optimize the general welfare by way of laterally integrated networks on the Collaborative Commons, rather than vertically integrated businesses in the capitalist market.

To put it simply, people will rely less on big corporations to meet their needs and more on one another.

A new infrastructure

When economists have thought about improvements in productivity, they have usually thought in terms of better machinery or better trained workers. However, economist Robert Solow found that changes in energy sources and infrastructure accounted for the greatest leaps in productivity. The Second Industrial Revolution was possible because of the electric grid, telecommunications network, interstate highway system, oil and gas pipelines, and water systems (all of which required government initiatives, by the way). Rifkin believes that the world is on the verge of a similar revolution that will take human productivity to a dramatically higher level.

First, he sees the creation of “a renewable-energy regime, loaded by buildings, partially stored in the form of hydrogen, distributed via a green electricity Internet, and connected to plug-in, zero-emission transport.” The cost of solar energy is now dropping exponentially, just as the cost of computing already has. All of the energy annually used in the global economy could be supplied by much less than one-tenth of one percent of the energy that reaches Earth from the sun. Rifkin expects 80 percent of our energy to be from renewable sources by 2040.

Another key development is the “Internet of Things,” which will connect “every machine, business, residence, and vehicle in an intelligent network,” enabling all of them to work smarter. Rifkin doesn’t provide detailed examples, but he cites studies that estimate the potential productivity gains:

Cisco systems forecasts that by 2022, the Internet of Everything will generate $ 14.4 trillion in cost savings and revenue.  A General Electric study published in November 2012 concludes that the efficiency gains and productivity advances made possible by a smart industrial Internet could resound across virtually every economic sector by 2025, impacting “approximately one half of the global economy.” It’s when we look at each industry, however, that we begin to understand the productive potential of establishing the first intelligent infrastructure in history. For example, in just the aviation industry alone, a mere 1 percent improvement in fuel efficiency, brought about by using Big Data analytics to more successfully route traffic, monitor equipment, and make repairs, would generate savings of $ 30 billion over 15 years.

Up until now, industrial manufacturing has required a lot of capital and large, vertically integrated organizations to produce goods economically. The development of 3D printing is changing that, making possible a transition “from mass production to production by the masses”:

Software— often open source— directs molten plastic, molten metal, or other feedstocks inside a printer, to build up a physical product layer by layer, creating a fully formed object , even with moveable parts, which then pops out of the printer. Like the replicator in the Star Trek television series, the printer can be programmed to produce an infinite variety of products. Printers are already producing products from jewelry and airplane parts to human prostheses. And cheap printers are being purchased by hobbyists interested in printing out their own parts and products. The consumer is beginning to give way to the prosumer as increasing numbers of people become both the producer and consumer of their own products.

The main thing one needs to be such a “prosumer” is access to the information that the printer needs to create an object, and that information is likely to be widely available in the information age. Rifkin also anticipates the expansion of low-cost education, as more learning occurs through “MOOCs”–massive open online courses.

The future of work

Rifkin acknowledges the potential of higher productivity to destroy millions of jobs by reducing the need for human labor. Jobs are disappearing because of a major structural change in the economy, not just because of a temporary recession or relocation of factories from one country to another. Although in the past, technological changes have created as many jobs as they destroyed–for example, creating factory jobs to replace farm jobs or white-collar jobs to replace blue-collar jobs–Rifkin does not see that substitution process continuing. The new information technologies are threatening white-collar and service jobs as much as manufacturing jobs.

The last book I discussed, Jaron Lanier’s Who Owns the Future?, argued that humans have to defend themselves against the smart machines by fully monetizing their own information contributions, that is, by charging for every idea, data, photo, etc., they share. Otherwise, a few owners and users of Big Data will get rich while the rest of us get poor. Rifkin’s solution is almost the opposite. He doubts that the capitalist, profit-centered model will work very well for anyone, and that all of us will end up exchanging information and things at little or no cost. Eventually, more of our time will be devoted to pursuing non-material ends, since obtaining the material necessities of life will have become so easy in a zero marginal cost world. While Lanier advocates a more thorough commodification of information, Rifkin expects less commodification and more sharing.

This will not happen overnight, and Rifkin makes an explicit distinction between time frames. “In the short and mid terms…the massive build-out of the IoT [Internet of Things] infrastructure in every locality and region of the world is going to give rise to one last surge of mass wage and salaried labor that will run 40 years.” A big part of this will be the transition to renewable energy sources and the conversion of existing buildings to use them. But in the latter half of this century, he expects most human labor to shift to nonprofit activities of one kind or another.


Who Owns the Future? (part 2)

August 21, 2014

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First of all, an apology to my followers, whose summer was no doubt ruined by my failure to post for two months. I have been suffering from a medical condition that prevented me from working at my desk, but I am much better and cautiously resuming my regular routine.

When I was so rudely interrupted, I was discussing Jaron Lanier’s book, Who Owns the Future? You may recall that Lanier is worried about how the new information society is shaping up. He takes the humanistic view that information comes ultimately from people, but he complains that too few people are being compensated for the information they provide. Instead a relatively small number of corporations are getting rich by scooping up vast amounts of data and finding ways to profit from it. Online music services make money while fewer individual musicians can make a living. If present trends continue, Lanier foresees massive losses of middle class jobs and an even greater divide between rich and poor. The “winner-take-all” economy is also a threat to democracy, since the distribution of political clout will parallel the distribution of money.

Lanier’s hope for the future is based on his conviction that human beings remain the basic source of economic value. He rejects the alternative view of inevitable human obsolescence, which he describes this way: “We ordinary humans are supposedly staying the same…while our technology is an autonomous, self-transforming supercreature, and its self-improvement is accelerating. That means it will one day pass us in a great whoosh. In the blink of an eye we will become obsolete.” This view is well represented in the darker forms of science fiction, where “people have been rendered absurd by technological advancement.” Lanier prefers the sunnier kind–think Star Trek–where “a recognizable human remains at the center of the adventure.” He regards books like Martin Ford’s The Lights in the Tunnel as the economic equivalent of dark science fiction. “He sees jobs going away, and proposes that people in the future be paid only for consuming wisely, since they eventually won’t be needed for producing anything.” One possible economic future is a vast welfare state, where the few who make most of the money have to subsidize the spending of the many in order to keep the economy going. The political economy might vacillate between winner-take-all capitalism and socialism for many years before arriving at the rational solution, finding a way to compensate ordinary people for the information contributions that only human beings can make.

If ordinary people would really be earning enough to do okay–and with the dignity of having earned if–if only we instituted complete enough accounting, why not do that instead of bouncing between moguls and socialists? Why pay a stipend to people who would actually be earning it if we were honest? The only reason is that you have to undervalue people if you want to support the fantasy that artificial intelligence is a free-standing technology. We are sacrificing ordinary people at the pyramidion of our temple.

Lanier’s solution involves using the technical capabilities of the information age to institute a more honest accounting for valuable information flows. New technologies make it easy to move information around, often divorcing it from its original context. As most teachers have discovered by now, plagiarism is a snap on the internet. However, it is also technically feasible for all information to contain a link to its original source, and that creates the potential for the originator to charge a fee for its use. The originator could set a very high price to minimize distribution–for example, to discourage one’s personal photos from being used for profit–but usually free competition would keep prices reasonable. Lanier envisions a gradual transition to a monetized internet in which more and more people are compensated for their creative participation. As people aged, they could rely more on royalties from past contributions as a source of income.

Initially, one would expect Big Data companies to resist having to pay for more of the information they currently scoop up for free. Lanier expects them to change their tune as the current economic model becomes increasingly unsustainable, and too many people are economically marginal to the information economy to sustain economic consumption. Lanier also expects a new generation of information users to make the transition:

The window to remake the digital world might only open as the baby boomers, and even me and my dizzy compatriots of “Generation X,” die off. Politics and economics might be reborn around the middle of this century once we, and probably also the “Facebook generation,” get out of the way.

I’m not convinced. So far, the young “Millennial” generation seems especially interested in sharing and collaboration without immediate economic gain. I’m not at all sure that a fully monetized information system is going to appeal to them or to future generations. Setting a price on every exchange of information (a penny for my thoughts?–no, I want $22.95) seems to be taking capitalism to a rather extreme conclusion. I have also been reading Jeremy Rifkin’s The Zero Marginal Cost Society, which imagines a very different future. I’ll be discussing it soon.

Who Owns the Future?

June 12, 2014

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Jaron Lanier. 2013. Who Owns the Future? New York: Simon & Schuster.

Jaron Lanier is a heavyweight in computer science, who among other things had a lot to do with the creation and development of virtual reality. He is also an artist and musician, and a humanistic thinker who has thought deeply about the future of the information economy. I always find it hopeful when someone with impeccable technical credentials can avoid reducing everything to computation and elevating technology over people. Lanier is clearly fighting for human value in general, and human economic value in particular. The purpose of his book is to warn us that human value is being systematically undermined in the emerging information economy, and to consider what might be done about it.

I found Lanier’s writing brilliant but a little exasperating. He writes something like he thinks, no doubt, in short bursts of creativity that come at the problem from many different directions. He has thirty-two short chapters and eight “interludes,” many of which left me intrigued but wishing for more thorough explanation. To try and lay out his argument logically, I will have to pull it together from here and there rather than covering the book from start to finish. Still, you have to love a guy who can write, “Drawing the line between what we forfeit to calculation and what we reserve for the heroics of free will is the story of our time,” and, “The spiritual challenge will remain of not losing touch with that core of experience, that little something that doesn’t fit into the aspects of reality that can be digitized,” just to quote two of his insights.

The information revolution promises to be a great leap forward in human productivity. Why is it that the economic benefits are not more obvious then, at least to the majority of people in the most developed countries? Why are a relatively small number of people making so much money while the middle class is slowly shrinking? Lanier thinks that something has gone wrong:

PCs enabled millions of people to run their own affairs. The PC strengthened the middle class. Tablets are instead optimized for delivering entertainment, but the real problem is that you can’t use them without ceding information superiority to someone else.

The information economy has taken a turn for the worse as people have come to rely on a relatively small number of companies that owe their success to the collection of vast amounts of information. Lanier believes that we have made a bad bargain with these companies, giving them too much information and not getting enough in return. We are operating partly on the idea that information should be freely shared, and partly on the idea that information is economic power. The result is often that information freely shared by the many is gathered and used for profit by the few. He believes that an information economy run that way is ultimately unsustainable, since it will eventually destroy more income-generating activity than it creates.

Siren Servers

Lanier uses the term “Siren Server” to refer to “an elite computer, or coordinated collection of computers, on a network…Siren Servers gather data from the network, often without having to pay for it. The data is analyzed using the most powerful available computers, run by the very best available technical people. The results of the analysis are kept secret, but are used to manipulate the rest of the world to advantage.” The name, of course, is a reference to the mythological sirens who lured men to their death.

The information advantage can take many forms. More information helps an insurance company reduce risk by insuring only the healthy. More information helps Amazon automatically monitor book sales to make sure it is never undersold. More information helps Walmart calculate the lowest price it can get away with charging a supplier. More information helps an advertiser present just the right ad in the right place to induce you to click on it. Much of this may seem benign and even economically efficient. Customers get low prices and the free search engines to find them. But lower risk for those with the most information translates into higher risk for someone else, such as Walmart’s or Amazon’s suppliers. Instead of rewarding companies for taking risks, the information economy enables companies to earn the greatest rewards by using information to export risk to others.

Siren Servers lure customers with “rewarding network effects,” virtuous feedback cycles that make a company’s network more valuable as more people use it. The more people read Amazon books on their Kindle, the more publishers will put out Kindle editions. The more people using a matchmaking service, the better the chances of meeting someone you like, whether the matching algorithms actually work very well or not. But the most successful Siren Servers also hold onto their customers with punishing network effects that make it hard to leave, such as lost access to data. You don’t really own a copy of the Kindle book you “bought,” just the right to access it through a particular company.

Who will make a living?

The biggest threat from the information economy is that fewer people will be able to make a middle-class living. Lanier is by no means a Luddite who sees only the destructive impact of new technologies on work. He acknowledges that “up until about the turn of this century we didn’t need to worry about technological advancement devaluing people, because new technologies always created new kinds of jobs even as old ones were destroyed.” He is essentially an economic optimist who believes in economic growth through the creation of new wants and new value: “To lose trust in the basic inception of wealth is to lose trust in the idea of human improvement. If all the value that can be already is, then market dynamics can only be about churn, conflict, and accumulation. Static or contracting economies make people cruel and shortsighted.”

However, as the information economy has played out so far, the combination of free-flowing information and profitable consolidation of information by Siren Servers is threatening many middle-class jobs. A multitude of news,  books and music are available online, but newspapers are going bankrupt, bookstores are closing, and fewer people can make a living as journalists or musicians. And that’s only the beginning. Lanier sees online instruction as a real threat to the jobs of university professors. Publishing books online will become ever easier, but getting paid for it will be harder. Even health care workers could lose jobs to caregiving robots. “Eventually most productivity probably will become software-mediated.”

In Lanier’s view, the problem is not that humans have less to contribute, but that the human contribution is not being properly accounted for and compensated. “The most crucial quality of our response to very high- functioning machines, artificial intelligences and the like, is how we conceive of the things that the machines can’t do, and whether those tasks are considered real jobs for people or not.”

What people do

Lanier insists that smart technology depends ultimately on people. He says that “algorithms are only a repackaging of human effort.” The decisions of a caregiving robot will have to be based on the inputs of many humans making decisions in real situations. “The supposedly artificially intelligent result can be understood as a mash-up of what real people did before.” As smarter technologies increase our ability to implement our ideas, the ideas themselves will become more important than ever. Getting people to submit to surveillance and give up information for free will become more and more a matter of stealing human labor, a new form of economic exploitation.

The real problem is not human obsolescence, but a misguided philosophy that undervalues the human contribution. Or to be more precise, the contributions of most ordinary people. The same technological entrepreneurs who envision obsolescence for the masses regard themselves as Nietzschean heroes making their mark on the universe by using information collected from others. At times, Lanier refers to this as a new religion, a faith in technology and its wizards.

To put the argument very concisely, the information economy requires a more consistent association between information and economic value. Everyone must be able to receive compensation for the information they provide, and large companies must pay for the information from which they profit.

The more advanced technology becomes, the more all activity becomes mediated by information tools. Therefore, as our economy turns more fully into an information economy, it will only grow if more information is monetized, instead of less. That’s not what we’re doing….

Even the most successful players of the game are gradually undermining the core of their own wealth. Capitalism only works if there are enough successful people to be the customers. A market system can only be sustainable when the accounting is thorough enough to reflect where value comes from, which, I’ll demonstrate, is another way of saying that an information age middle class must come into being.