Tag Archives: Social economy

How ergodicity reimagines economics for the benefit of us all

By Mark Buchanan – The principles of economics form the intellectual atmosphere in which most political discussion takes place. Its prevailing ideas are often invoked to justify the organization of modern society, and the positions enjoyed by the most wealthy and powerful. Any threat to these ideas could also be an implicit threat to that power – and to the people who possess it. Their response might be brutal.

In the real world, through the pages of scientific journals, in blog posts and in spirited Twitter exchanges, the set of ideas now called ‘Ergodicity Economics’ is overturning a fundamental concept at the heart of economics, with radical implications for the way we approach uncertainty and cooperation. The economics group at LML is attempting to redevelop economic theory from scratch, starting with the axiom that individuals optimize what happens to them over time, not what happens to them on average in a collection of parallel worlds.

The new concept is a key theme of research initiated by Peters about a decade ago, and developed with the collaboration of Gell-Mann and the late Ken Arrow at SFI, and of Alex Adamou, Yonatan Berman and many others at the LML. Much of this view rests on a careful critique of a model of human decisionmaking known as expected utility theory.

But there is one odd feature in this framework of expectations – it essentially eliminates time. Yet anyone who faces risky situations over time needs to handle those risks well, on average, over time, with one thing happening after the next. The seductive genius of the concept of probability is that it removes this historical aspect by imagining the world splitting with specific probabilities into parallel universes, one thing happening in each.

The expected value doesn’t come from an average calculated over time, but from one calculated over the different possible outcomes considered outside of time. In doing so, it simplifies the problem – but actually solves a problem that is fundamentally different from the real problem of acting wisely through time in an uncertain world. more>

Updates from ITU

Dark skies, bright future: overcoming Nigeria’s e-waste epidemic
By Eloise Touni – Nigerian law prohibits burning plastic cables, as well as acid leaching and other common methods used by John and his fellow pickers to reclaim valuable metals from discarded electronics. But minimal enforcement and a low awareness of the risks they are running means most pickers continue to regularly expose themselves to toxins that cause respiratory and dermatological problems, eye infections, neurodevelopmental issues, and, ultimately, shorter lives.

While international agreements like the Basel Convention prohibit the import of hazardous waste, unscrupulous importers and a porous customs system mean Nigeria now ranks alongside Ghana as one of the world’s leading destinations for electronic waste. The country receives 71,000 tonnes of used consumer goods through the two main ports in Lagos from the European Union and other more industrialized economies every year.

“Some of the e-waste from abroad is comprised of cathode-ray TVs, which contain lead, as well as refrigerators and air conditioners containing hydrochlorofluorocarbons, making it a threat to those who are dismantling and dealing with the products,” the UN Environment Program’s Eloise Touni says.

Plastic components, including hard casings and cables, also contain persistent organic pollutants used as flame retardants, such as polybrominated diphenyl ethers (PBDE).

These were banned by the Stockholm Convention due to their long-lasting global impacts and are regularly detected in ecosystems and people all over the world, including in Arctic wildernesses and their traditional inhabitants. more>


Updates from Chicago Booth

Are investors chronically pessimistic?
No—but that doesn’t mean they adhere to rational expectations
By Dwyer Gunn – The assumption that investors hold rational expectations of market returns is central to many asset pricing models. However, in recent years, surveys of investors have revealed that market participants’ reported expectations often deviate from the objective predictions of financial models working with large pools of data. One theory is that these deviations are the result of persistent pessimism on the part of investors: survey respondents, according to this hypothesis, are discounting the rationally expected rate of return to reflect the risk of investing in stocks.

To examine whether investors have a pessimistic bias, Oxford’s Klaus Adam, the Bank of Canada’s Dmitry Matveev, and Chicago Booth’s Stefan Nagel examined existing evidence—including surveys of individual investors, professional investors, and CFOs going back to the 1980s—to compare expected returns with realized returns.

The research suggests that, contrary to the pessimism hypothesis, investors are just as likely to be optimistic.

Investor expectations closely matched realized market returns over the full length of time the researchers examined. But at any given time, expectations tended to be procyclical: investors expected higher returns during boom times in the stock market and lower returns during market contractions, even though many asset pricing models work in precisely the opposite direction.

Thus, the apparent conformity of investor expectations to market returns on average over time actually reflected investors’ biases—alternately optimistic and pessimistic, with the two balancing each other out. more>


The end of us

By Thomas Moynihan – As ideas go, human extinction is a comparatively new one. It emerged first during the 18th and 19th centuries. Though understudied, the idea has an important history because it teaches us lessons on what it means to be human in the first place, in the sense of what is demanded of us by such a calling.

For to be a rational actor is to be a responsible actor, which involves acknowledging the risks one faces, and this allows us to see today’s growing responsiveness to existential risks as being of a piece with an ongoing and as-yet-unfinished project that we first began to set for ourselves during the Enlightenment.

Recollecting the story of how we came to care about our own extinction helps to establish precisely why we must continue to care; and care now, as never before, insofar as the oncoming century is to be the riskiest thus far.

The story of the discovery of our species’ precariousness is also the story of humanity’s progressive undertaking of responsibility for itself. One is only responsible for oneself to the extent that one understands the risks one faces and is thereby motivated to mitigate against them.

It was the philosopher Immanuel Kant who defined ‘Enlightenment’ itself as humanity’s assumption of self-responsibility. The history of the idea of human extinction is therefore also a history of enlightening. It concerns the modern loss of the ancient conviction that we live in a cosmos inherently imbued with value, and the connected realization that our human values would not be natural realities independently of our continued championing and guardianship of them.

But if human extinction was first spoken about in the 18th century, where was the notion prior to this point? What about the perennial tradition of end-of-the-world scenarios coming from religion? For a start, prophecies concerning religious apocalypse provide us with a final revelation upon the ultimate meaning of time. Prognoses concerning human extinction, instead, provide us with a prediction of the irreversible termination of meaning within time. Where apocalypse secures a sense of an ending, extinction anticipates the ending of sense. They are different in kind – not degree – and therefore different in their origins.

So, why was human extinction and existential catastrophe not a topic of conversation and speculation prior to the Enlightenment? more>

Tackling precarity in the platform economy—and beyond

To focus on online platforms in isolation would miss the point that they are part of a wider phenomenon of spreading and intensifying precarity at work.

By Sacha Garben – In our increasingly digitalised world, a crucial role is played by online platforms. These platforms—dynamic websites which constitute digital public squares or marketplaces—affect the economy and our society in various ways and their regulation (or lack thereof) is increasingly the subject of public and political debate. Whether it be the way in which Facebook deals with personal and public information, the influence of Airbnb on our habitat, Uber’s effects on the taxi sector or the working conditions of Deliveroo couriers or tech-workers on Amazon Mechanical Turk, the ‘disruptive’ effects of the activities of the platforms regularly make headlines.

A key social problem is the labor status of those working in the online-platform economy. These drivers, riders, cleaners, designers, translators, technicians and others are often formally contracted as independent and their working arrangements tend to exhibit features which are difficult to square with the traditional employment relationship. These include use of their own materials (such as the driver’s car), autonomy concerning working hours (logging into work via a smartphone app), the short duration of the relationship (translation of perhaps a single sentence) and its multilateral character (the platform linking the producer and consumer).

At the same time, the worker may well be economically dependent on the platform work, the contractual independence can be constructed in rather artificial ways—such as if a driver works full-time for a platform for several years yet remains formally contracted per journey—and the platform can exert significant control over the work and the person performing it.

Furthermore, their ‘independent’ status often means platform workers lack the benefit of the social, labor, health and safety protections which in most countries are connected to an employment contract—even if their precarious working conditions and socio-economic position very much require such protection. more>

Updates from ITU

If we want to solve climate change, water governance is our blueprint
By Elizabeth Taylor – The phrase “fail to prepare or prepare to fail” comes to mind as we enter an era in which governments and communities must band together to mitigate climate change. Part of what makes our next steps so uncertain is knowing we must work together in ways that we have – so far – failed to do. We either stall, or offer up “too little, too late” strategies.

These strategies include cap-and-trade economic incentive programs, like the Kyoto Protocol and other international treaties. Insightful leaders have drawn attention to the issue, but lukewarm political will means that they are only able to defer greenhouse gas emissions-reduction targets in the future. A global crisis demands global commitment. How can we work together to face a universal threat? What of the complex challenges that demand unified monitoring and responses?

One principal impediment is the lack of coherent technical infrastructure.

Currently, our arsenal for facilitating collective action is understocked. Our policies are unable to invoke tide-turning change because they lack a cohesive infrastructure. In the absence of satisfactory tools to make them happen, our policies and pledges become feelgood initiatives rather than reaching full effectiveness.

What tools might lead us to act collectively against climate change? It’s easy to focus on the enormous scale of global cooperation needed, or the up-front investments it will take to mitigate the crisis. But as the writer E.L. Doctorow reminded us, we can’t be intimidated by the process: “Writing a novel is like driving a car at night,” he said. “You can see only as far as your headlights, but you can make the whole trip that way.”

We don’t have to possess all the answers as we set out to save our communities. We don’t have to know exactly what we will meet along the way. At a minimum, we must only understand how to use our headlights to see the first few feet ahead of us.

So what is the first step on our path?

It is the substance that underpins our industry, health and survival. It remains a central source of conflict around the world, yet it also creates partnerships. Our first step is water.

Water challenges us with issues of scarcity, quality and distribution. It may seem to be a local issue, but combined with local tensions and a globalized economy, water governance is set to become one of our greatest tests of diplomatic finesse and technological synergy.

If we can properly align local and global water governance and management, we can prepare the tools, the organizational blueprint and the political momentum needed to solve climate change. more>


Updates from Adobe

Maria Brzozowska Makes Magical Realities
By Jenny Carless – “My aim is to empower my audience as active storytellers,” Maria Brzozowska says. “It’s very valuable for me when my audiences are able to relate to my illustrations and create or find pieces of their own stories. It’s like an invisible connection between us.”

The Ankara-based artist and book illustrator describes her art as a merging point of fantasy and reality—what she calls magical realism.

“My illustrations allow the audience to encounter new, unknown lands where there is no definite time or space, and in doing that, return to a sense of possibility that we lose as we grow up,” she says.

Brzozowska grew up in a household of creatives, so in many ways her career was an inevitability, she says.

“I remember being encouraged to look at the world through different perspectives and to ask myself ‘what if?’,” she recalls. “Many of the answers to that question I found in the endless possibilities of being a visual storyteller.”

She spent time experimenting with various media before finding a balance between a digital and traditional styles. She started with a digital approach, but with practice and patience developed her manual skills. “The more confident I became, the easier it was for me to do most of my work by hand,” she says. more>


Optimizing for Human Well-Being

By Douglas Rushkoff – The economy needn’t be a war; it can be a commons. To get there, we must retrieve our innate good will.

The commons is a conscious implementation of reciprocal altruism. Reciprocal altruists, whether human or ape, reward those who cooperate with others and punish those who defect. A commons works the same way. A resource such as a lake or a field, or a monetary system, is understood as a shared asset. The pastures of medieval England were treated as a commons. It wasn’t a free-for-all, but a carefully negotiated and enforced system. People brought their flocks to graze in mutually agreed- upon schedules. Violation of the rules was punished, either with penalties or exclusion.

The commons is not a winner-takes-all economy, but an all-take-the-winnings economy. Shared ownership encourages shared responsibility, which in turn engenders a longer-term perspective on business practices. Nothing can be externalized to some “other” player, because everyone is part of the same trust, drinking from the same well.

If one’s business activities hurt any other market participant, they undermine the integrity of the marketplace itself.

For those entranced by the myth of capitalism, this can be hard to grasp. They’re still stuck thinking of the economy as a two-column ledger, where every credit is someone’s else’s debit. This zero-sum mentality is an artifact of monopoly central currency.

If money has to be borrowed into existence from a single, private treasury and paid back with interest, then this sad, competitive, scarcity model makes sense. I need to pay back more than I borrowed, so I need to get that extra money from someone else. That’s the very premise of zero-sum.

But that’s not how an economy has to work. more>

Consumerism isn’t a sellout – if capitalism works for all

By Richard V. Reeves – The essential thinginess of capitalism has been one of its most-criticized features. Materialism, and specifically consumerism, are almost always used as pejorative terms. Nostalgic conservatives, egalitarian progressives and environmentalists loudly agree on at least one thing: we are just buying too much stuff.

They’re not wrong. The U.S. self-storage market is already worth $38 billion, and growing fast. Almost one in ten households are now renting extra space. One feature of late capitalism is that many of us have more things than we have space for things.

At its best, however, consumerism is a powerful, positive force. It allows for the expression of identity, it can hold sellers to public account, and it drives new thinking and development. But this is only the case when consumers are being served fairly in the market. Today, there is a pressing concern about whether the forces of “bigness” – a trend toward fewer larger companies – combined with a reluctance on the part of governments to intervene in consumer markets, is dampening innovation and narrowing choice.

Before worrying about whether the market is serving consumers, we need to agree that it should. Critiques of consumerism have to be taken seriously before examining whether contemporary capitalism is friendly to consumers. These critiques usually come in four types: moral, aesthetic, financial, or environmental.

The moral critique of consumerism is that the acquisition of things displaces more worthwhile activities or priorities. Instead of shopping, we should be spending time with friends and family, in places of worship, or in nature. more>

Updates from Chicago Booth

Free markets for free men
By Milton Friedman – Do free markets make free men, or do free men make the free markets?

That might seem like a play on words or a purely semantic question, but it is not. It is a very real and very important question, and I think it contributes a great deal to understanding the kind of world we live in, and might live in.

One’s offhand impression is to say, “Well it must be free men who make free markets.” There’s an element of truth in that, but I think to a far greater extent, free markets make free men and not the other way around.

It’s true that there have been free men who have made free markets. The founders of the United States were free men who believed in individual and personal freedom, and they set up a constitution that was designed to preserve free markets.

But many people who regarded themselves as free men have produced totalitarian societies. The intellectual creators of the Soviet Union would have called themselves free men and would have said that they believed in individual and personal freedom. Yet they created not free markets but controlled markets. more>