Showing posts with label information. Show all posts
Showing posts with label information. Show all posts

Monday, December 3, 2018

Peter Radford — A Little Knowledge


Knowledge as a factor of production. Knowledge is broader than information. Knowledge includes tacit knowledge, skill, and critical and creative thinking. In other words, the study of knowledge involves epistemology, logic and language, psychology, and other relevant fields in addition to information. 

Information can be formalized but a great deal of knowledge cannot, at least given present limitations and future prospects through technology.

Labor as the human component of productions that complements capital (land included) had been conceived in terms of time, strength and ability to preform tasks. In this view, labor and capital are substitutable.

In the expanded view that includes knowledge in the broad sense, this is not the case. Accumulated knowledge is the bedrock on which the foundations of a society or civilization are erected. This is what differentiates the human species from other species of sentient beings with whom humans share the planet.

Accumulated knowledge is largely a commons, the shared inheritance, so to speak, of humankind. Innovation is based on adding to that accumulation. Intellectual property—patents, copyright, trade secrets and so forth — may isolate some of this innovation for a time, but eventually it all gets added to the storehouse of knowledge.

Without considering this factor and including it to the degree possible, economics remains an oversimplification that is not capable of dealing with the key factor.

The Radford Free Press
A Little Knowledge
Peter Radford


Monday, August 14, 2017

Cecchetti & Schoenholtz — Adverse Selection: A Primer

Information is the basis for our economic and financial decisions. As buyers, we collect information about products before entering into a transaction. As investors, the same goes for information about firms seeking our funds. This is information that sellers and fund-seeking firms typically have. But, when it is too difficult or too costly to collect information, markets function poorly or not at all.
This form of asymmetric information―where two parties to a potential transaction have unequal knowledge―is a particularly serious hindrance to the operation of financial markets. If, for some reason, conditions suddenly make the information asymmetry worse, the consequences can be catastrophic. In a recent post, we described how in August 2007, a sequence of events led financial intermediaries to suddenly question the quality of some securities that many of their counterparties already owned. Not being able to tell safe from unsafe, investors and institutions withdrew from lending. As credit evaporated, many potential transactions stopped taking place all at once.
Economists use the term adverse selection to describe the problem of distinguishing a good feature from a bad feature when one party to a transaction has more information than the other party. The degree of adverse selection depends on how costly it is for the uninformed actor to observe the hidden attributes of a product or counterparty. When key characteristics are sufficiently expensive to discern, adverse selection can make an otherwise healthy market disappear.
The term “adverse selection” comes from the fact that, when the hidden attributes are costly to observe, the quality of the products on offer or of the potential parties to a transaction deteriorates; that is, the pool becomes adverse relative to the full universe of goods (or counterparties) available.
In this primer, we examine three examples of adverse selection: (1) used cars; (2) health insurance; and (3) private finance. We use these examples to highlight mechanisms for addressing the problem....
Money and Banking
Adverse Selection: A Primer
Money and Banking
Stephen G. Cecchetti, Professor of International Economics at the Brandeis International Business School, and Kermit L. Schoenholtz, Professor of Management Practice in the Department of Economics of New York University’s Leonard N. Stern School of Business

Cecchetti & Schoenholtz are the authors of Money, Banking and Financial Markets.

Saturday, April 30, 2016

Nikhil Sonnad — The Stanford Encyclopedia of Philosophy: This Free Online Encyclopedia Has Achieved What Wikipedia Can Only Dream Of

A fundamental problem faced by the general public and the members of an academic discipline in the information age is how to find the most authoritative, comprehensive, and up-to-date information about an important topic.

That paper is so old that it mentions “CD-ROMs” in the second sentence. But for all the years that have passed, the basic problem remains unsolved.

The three requirements the authors list—”authoritative, comprehensive, and up-to-date”—are to information what the “impossible trinity” is to economics. You can only ever have one or two at once. It is like having your cake, eating it, and then bringing it to another party. 
Yet if the goal is to share with people what is true, it is extremely important for a resource to have all of these things. It must be trusted. It must not leave anything out. And it must reflect the latest state of knowledge. Unfortunately, all of the other current ways of designing an encyclopedia very badly fail to meet at least one of these requirements….
Quartz
The Stanford Encyclopedia of Philosophy: This Free Online Encyclopedia Has Achieved What Wikipedia Can Only Dream Of
Nikhil Sonnad
ht Miles Kimball at Confessions of a Supply Side Liberal

Tuesday, July 28, 2015

Kate Aronoff — Have reports of the death of capitalism been greatly exaggerated?

Late last week, economic journalist Paul Mason, whose Channel 4 blog has been one of the best English-language sources for making sense of the ongoing Greek crisis, published an excerpt from his forthcoming book in The Guardian. It announces that the end of capitalism has begun and that (spoiler) it doesn’t look how we thought it might. The 20th century old/new leftist dream of some crisis-sparked proletarian revolt, he argues, has been battered by neo-liberalism and, now, is being replaced by a steady trickle of viable, largely technology-fuelled alternatives to the current economy. “Capitalism, it turns out, will not be abolished by forced-march techniques,” Mason writes. “It will be abolished by creating something more dynamic that exists, at first, almost unseen within the old system, but which will break through, reshaping the economy around new values and behaviors.”…
But as Leah Hunt-Hendrix and Astra Taylor noted recently for The Nation, there’s no ready-made path from information to liberation. “Our high-tech tools are constrained by market incentives and government surveillance interests that are often intertwined,” they wrote. “We cannot think about surveillance without paying keen attention to the corporations that benefit from it and the deep inequities that result.” Not only is there a barely-hidden world of workers making the digital revolution possible, but tech itself is already being used to serve the interests of those driving our current, vastly unequal economy. It deserves noting that some of the biggest fans of decentralization — technological or otherwise — are right-wing libertarians, who would be as happy to see workplace protections stripped as they would to see a new start-up food co-op take root….
Mason’s call to “direct all actions towards the transition — not the defense of random elements of the old system,” to focus solely on building alternatives, is a false dichotomy. If Syriza’s project in Greece has shown anything, it’s that combining a broad-based solidarity economy with political power is deeply threatening to neo-liberalism, the top brass of which will risk self-implosion to stamp it out. Acting alone, Solidarity for All didn’t provoke a sadistic backlash from Greece’s creditors. Syriza’s victory at the polls, its leadership’s presence at the negotiating table in Brussels, and the egalitarian populist parties grasping at state power across the Mediterranean did — but neither the challenge nor the solution could exist without the other.

 If the early 20th century labor heroine Lucy Parsons were alive now, she might add an addendum on to the statement she’s best remembered by: “Never be deceived that the rich will permit you to innovate away their wealth.” Today’s movements will need to be at least as creative as the forces they’re taking on, and be building solutions that are even more so. Post-capitalism is coming, but a new and even more disruptive tradition of organizing will have to clear the way first.
Open Democracy
Have reports of the death of capitalism been greatly exaggerated?
Kate Aronoff

Friday, July 24, 2015

David F. Ruccio — This is the end of capitalism?


Response to Paul Mason, The end of capitalism has begun.

I give Mason's argument more credence that Professor Ruccio does, but I agree that technology is not enough.

Nevertheless, technology is highly significant in Marx's analysis, which is based on historical materialism and economic infrastructure as foundational. Feudalism was chiefly agricultural and capitalism was mainly industrial. In fact, in time agriculture itself was mechanized and became agribusiness.

I harbor little doubt that the transition from the Industrial Age to the Information Age will be as transformational as the transition from the Agricultural Age to the Industrial Age. This implies an economic realignment as well.

How that will manifest is remains unclear, since the world is still operating largely in terms of capitalism and industry.

We are witnessing emerging opportunities and challenges and how these are met will determine the next moment in the historical dialectic. What's coming will be different from capitalism but what it will look like is too early to tell.

However, the basics of information suggest that it will be distributed and networked, which implies a new approach to politics, economics and political economy. There is at last the potential for scaling up popular participatory democracy based on an informed electorate.

I suggest this is the takeaway.
As with the end of feudalism 500 years ago, capitalism’s replacement by postcapitalism will be accelerated by external shocks and shaped by the emergence of a new kind of human being. And it has started.
We don't know yet what that new kind of human being will be like, although we can get a sense of it by observing the difference between those who grew up in the analog age and those who have grown up in the digital age. It's a different "head."

Occasional Links & Commentary
This is the end?
David F. Ruccio | Professor of Economics University of Notre Dame Notre Dame

Friday, July 17, 2015

What's Equally Likely? The End Of Both Capitalism ... AND ... Communism.

   (Commentary posted by Roger Erickson)

Or both?

The End of Capitalism?

Killer point. Existing markets are based on scarcity while information is now abundant.

[Note: that doesn't mean that THINKING is abundant. :(

And yes, imagination is more important than data, yet this may well take 5 generations longer than this author imagines.]

vs


Killer point. Capitalism is based on arbitrage of cheap labor provisioning abundant demand, while informed labor is no longer cheap, and aggregate demand is no longer abundant.


What's equally likely? The end of both.

Sunday, June 14, 2015

What Is Value? What Is Money? — A Conversation with Cesar Hidalgo


Weekend reading. Up and comer at MIT's Media Lab. What the new generation is like.

Edge
A Conversation with Cesar Hidalgo [8.28.12]
CESAR HIDALGO is an assistant professor at the MIT Media Lab, and faculty associate at Harvard University’s Center for International Development. His work focuses on improving the understanding of systems by using and developing concepts of complexity, evolution, and network science. He is also the founder and driving force behind Cambridge Nights, a series of online video interviews with academics who discuss the way in which they view the world.

Friday, June 12, 2015

Diane Coyle — Information, information, information

Yesterday my dear husband (@ruskin147) interviewed César Hidalgo (@cesifoti) about his new book Why Information Grows: The Evolution of Order from Atoms to Economies for next week’s edition of Tech Tent (19 June) on the BBC World Service. I’m very excited about reading this book. I’ve long been a fan of The Atlas of Complexity, on which Prof Hidalgo has worked. Besides, here is the overlap of information, complexity and spontaneous order, computing and economics – what’s not to like?
The Enlightened Economist
Information, information, information
Diane Coyle | freelance economist and a former advisor to the UK Treasury. She is a member of the UK Competition Commission and is acting Chairman of the BBC Trust, the governing body of the British Broadcasting Corporation

Tuesday, January 13, 2015

Michael Sankowski — Scott Sumner has a New Job


On NGDP futures and market monetarism, and why it won't work. Mike has thought about this for some time and interacted with Scott Summer and others on it. He summarizes his conclusions.

MMR
Scott Sumner has a New Job
Michael Sankowski

Monday, August 4, 2014

Bill Mitchell — Information is dangerous for neo-liberals


Chiefly about the situation in Australia but applicable pretty across the board in Neoliberal Land, where the play book is essentially the same. In the US it's even worse, where certain advocacy within the right of free expression can get one on a no-fly list, or labeled as a suspected terrorist for intelligence to surveil. This extends to whistleblowers and the press. As communications channels expand with technological innovation, so do governments' attempts to control and even subvert them.

Bill Mitchell – billy blog
Information is dangerous for neo-liberalsBill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at the Charles Darwin University, Northern Territory, Australia

Thursday, January 30, 2014

David Andolfatto — A bit more on the economics of Bitcoin

One could argue that the USD is at least partially backed by its ability to discharge real tax obligations. But bitcoins truly are purely fiat in nature (they have no intrinsic use in either consumption or production). Does this mean that the value of bitcoins must eventually crash to zero (their fundamental value)? No.

Bitcoins are information -- record-keeping devices. You can't eat my credit history either, but some companies would value (and pay for) this information nevertheless. So as long as Bitcoin conveys accurate information, its value can persist indefinitely.
That is to say, modern money is not only chartal, after Knapp, but also social credit, as Innes observed. Since money is chiefly information, digital money can serve the purpose of money if certain conditions are met. Andolfatto is mildly positive about Bitcoin in this regard.

MacroMania
A bit more on the economics of Bitcoin
David Andolfatto | Vice President, FRBSL

Chicago Fed Letter
Bitcoin: A primer
François R. Velde, senior economist

Thursday, August 8, 2013

Peter Radford — Some thoughts on economics

My instinctive entry point into economics is through business....
Economics as it exists today in its mainstream form is of no use whatever to anyone seeking to understand the reality of business. Our extant theories of the firm are failures in that they attempt to see the world through a neoclassical lens whilst that lens obscures anything remotely real from view in an effort to retain the equilibrating perfection of the closed system envisaged by Walras. The contradiction between the pursuit of equilibrium explanations and the open ended nature of the real world defeats neoclassicism at the starting gate and dooms it to subsequent nonsensical irrelevance....

In this context I have to attribute a great honor to the Arrow-Debreu effort to complete the Walrasian episode. Arrow-Debreu deserves our constant indebtedness. It shows, definitively, how the Walrasian tradition cannot be an explanation for a real economy. It achieves completion by imposing such horrendously, and obviously, unreal constraints on itself that it proves Walras wrong. It is thus great science. It is the falsification of a tradition shown to be worthless.
On another matter: mainstream economists have never adequately, in my opinion, responded to Coase’s challenge of 1937. He asked simply: if markets do what classical economists and their followers say they do, why do firms exist? They ought not. That they do suggests something is very wrong at the heart of orthodox thinking. So I add the ‘Coase conundrum’ to Arrow-Debreu as adding weight to the critique. Mainstream economics is alchemy....
Asymmetrical information is another challenge to orthodoxy that is too often ignored. Information about things is patchy in the real world. Very patchy. It is non-existent with regard to the medium and long term future. Yet this never deters the neoclassical theorists. They march along as if asymmetry was an inconvenience that can be assumed away for simplicity’s sake, rather than a dagger in the heart of their work....
Uncertainty and complexity characterize the real world. Certainty and simplicity characterize neoclassical economics. Hence it irrelevance. It is complicated though, as Arrow-Debreu shows. It has to be. Its epicycles weigh it down. But no amount of clever formalism can turn unreality into reality, just as lead is pretty tough to turn into gold. This doesn’t mean that neoclassical economist aren’t very bright. They are. They have to be to to tend to those epicycles. Newton, after all, spent more time on alchemy than on recognizable physics. No indeed, they are very bright. Just wrong. 
Real-World Economics Review Blog

This is a seminal article. Not much that we haven't said hundreds of time on this blog and in the comments, but Peter Radford ties it together very nicely — concise, precise and clear.

Note also that what is said about economics, order and entropy wrt to management also applies wrt to governing, and as Norbert Weinberg observes in naming cybernetics. It's also the basis of general system theory developed by economist Kenneth Boulding and others from related fields who understood the fundamental role of information in imposing order and overcoming entropy. See A Curriculum for Cybernetics and Systems Theory by Alan B. Scrivener for a summary of the basics.

Why don't conventional economists read this stuff, or if they do, why don't they use it?

Where I would quibble with Radford is over his assertion,
"The substitution of labor for capital or vice versa tells us that neither if fundamental. The energy and skill are. Energy and knowledge deployed to order resources for subsequent disordering. That’s the economic process." 
Is he forgetting that capital goods are also produced by labor? Labor is basic until capital goods can produce capital goods and innovate while doing so. That level of AI is still  in the dream stage of development, and even then it seems that knowledge workers will still be required in the Age of Artificial Intelligence.


Sunday, July 28, 2013

Chris Dillow — Bosses, Power & Ideology


Chris Dillow says, "Now, you might think I'm making leftist points here. I'm not sure." I can assure him that he is when he says, "This too gives bosses power, especially as it is combined with the aforementioned biases. And money flows to power." Speaking of power in the context of economics and finance is leftist by definition. Ruling the speaking of power out marginalizes the powerless, which is presumably the intent of vested interests.

That this blog even needed to written when it is so patently (and painfully) obvious also goes to show that it is "leftist" , not to mention that many vested parties will disagree with it, some vehemently.The fact is that it is just common sense, backed up with evidence. Sociologists have shown that it is hardly controversial empirically that economic behavior is institutional and that hierarchical institutions distribute power and information asymmetrically from the top down.

Stumbling and Mumbling
Bosses, Power & Ideology
Chris Dillow | Investors Chronicle (UK

Wednesday, June 19, 2013

Andrew Gavin Marshall — Meet the Elite Business and Think-Tank Community That's Doing Its Best to Control the World

The large foundations of America's industrial giants have played a truly profound – and largely overlooked – role in the shaping of modern society.
AlterNet
Meet the Elite Business and Think-Tank Community That's Doing Its Best to Control the World
Andrew Gavin Marshall
(h/t Andy Blatchford via email)

A good time to remember this from Carroll Quigley's Tragedy and Hope, (1966), Ch. 20, "The Money Power Seeks to Create a World System of Financial Control in Private Hands Able to Dominate Every Nation on Earth":
"The powers of financial capitalism had (a) far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank... sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."  
Tragedy and Hope: A History of the World in Our Time
by Carroll Quigley
Volumes 1-8
New York: The Macmillan Company, 1966
Online copy at archive.org

Carroll Quigley (1910-1977) was Professor of History at Georgetown University, member of the Council on Foreign Relations (CFR), and a mentor to Bill Clinton.




Saturday, April 20, 2013

Sascha O Becker and Hans K. Hvide — Do entrepreneurs matter?

Standard microeconomics ignores personalities, but business studies stress the importance of entrepreneurs. This column presents evidence that shows that personalities are important. Looking into the death of a firm’s founder during the first ten years of a company’s existence, the data suggest that entrepreneurs matter – they are the ‘glue’ that holds a business together.
VOX
Do entrepreneurs matter?
Sascha O Becker, Deputy Director, Centre for Competitive Advantage in the Global Economy (CAGE) and Professor, University of Warwick and Hans K. Hvide, SIRE Professor of Economics and Finance at the University of Aberdeen, Business School, and CEPR Research Affiliate

Conclusion:
All our results are consistent with a simple mechanism: entrepreneurs personally embed a major part of the value of the firm, and the entrepreneur vanishing has a large negative impact. The death of the founder appears to shift the firm outcome distribution to the left. For firms in the lower part of the outcome distribution, the consequence is a higher probability of closing down, while for firms higher up in the quality distribution, the effect will be a significant reduction in firm growth.



Monday, May 28, 2012

Reflections on a hierarchy of innovation

[Nicholas] Carr describes what he refers to as the Hierarchy of Innovation, which is loosely analogous to Maslow’s hierarchy of needs. As Carr puts it: 
“The focus, or emphasis, of innovation moves up through five stages, propelled by shifts in the needs we seek to fulfill. In the beginning come Technologies of Survival (think fire), then Technologies of Social Organization (think cathedral), then Technologies of Prosperity (think steam engine), then technologies of leisure (think TV), and finally Technologies of the Self (think Facebook, or Prozac).” 
I’m OK with the hierarchy concept and think it’s a fine first-order mechanism to understand the underlying social values driving innovation at any given stage in civil development. 
However, I think much deeper drivers are worth considering....
Presently, 125 years later, civilization is still reliant on the core energy production technologies created in the Industrial Revolution. Economies with the mastery and control of those technologies enjoy almost unlimited access to abundant and cheap energy, and it is in those societies that we see the shift in innovation so lamented by Carr in his article.
Yet the current energy paradigm, not so unlike the one based on livestock and human power, is fundamentally based on commodity fuels and highly fragmented production and distribution industries that can be owned and controlled (usually to their own benefit) by anyone with the resources and power to do to so. As such, the paradigm is defined by energy haves and have-nots; and the energy have-nots are consistently plagued by crushing poverty and disease. This disparity is growing rapidly.
 On a global basis, this imbalance is likely coming to a critical point, and, like the mid-19th century, the stage is formally set for another innovation in energy production, one that frees us from the burdens and challenges of fossil fuels and unleashes another unprecedented transformation in economies and ultimately the human condition.
Read it at Climate Progress
The World’s Energy Disparity Is Reaching A Critical Stage To Spawn Innovation
by Ned L. Harvey | Chief Operating Officer of the Rocky Mountain Institute

 I have been thinking about technology and innovation lately, too, so I found the post apropos. My thinking has run more along the lines of historical eras. Humans differentiated from other animals through the development of sufficient intelligence through brain development and physical resources like a larynx capable of articulate phonation that made use communication through language possible and opposable thumbs that made tool use available. This all happen in the remote past and we are just beginning to reconstruct the biblical cultural narrative based on discoveries in archeology and anthropology.

Tools were initially used for piercing, cutting, striking and other simple operations, and fire was also domesticated. These were huge advances over other other animals, and it provided humans with an incredible advantage, especially the development of weapons technology for hunting, protection, and territorial defense and expansion. Proto-machines, which bridged the gap between tools and machines also appear, for instance, the use of the lever and pulley to amply effort and the use of the wheel to reduce friction, enabling humans to move heavy objects for construction. All of this is lost in the mysts of time, however, and what remains is monuments that still amaze. It is impossible, however, to exaggerate these accomplishments, which where as huge then as any technological advances made today, since it involved primates leaving their natural environment, to which animals had been confined, and creating an artificial environment and constructing social reality based on information.

My thinking is that technology and innovation need to be viewed chiefly in terms of the expansion of intelligence and the application of information. As a result, humanity when through several major transformations that results in different eras. The first historical era is that of agriculture, which lasted until the industrial revolution. The economy of the agricultural era was feudal, based on control of land as the means of production. The energy was provided by human and animal labor and the technology was agricultural know-how and basic tools like the plow and basic engineering like irrigation. Return on energy invested was low, and the human cost was very high indeed, for most people at least.

The industrial revolution changed all that dramatically with the introduction of labor saving devices that harnessed energy for work. Humans had used water wheels and windmills previously, but heat used in engines had not yet been exploited for transformation into work. This invention catapulted humanity onto altogether different level of functioning, with a concomitant change in society and social organization. Capitalism became dominant economically as machines replaced human and animal labor, and investment was needed to produce the capital goods that resulted huge expansion of consumer goods and also provided the possibility for more leisure, since less labor was needed for subsistence.

Clearly, the transition from the agricultural era to the industrial era, and from feudalism to capitalism, was based on a transformation that arose from a different level of information use. Similarly today, humanity stands on the brink of a new era, the age of information, also known as the age of knowledge and the digital age, as it learns to tap the potential of information directly, instead of using it indirectly through science and engineering. It is as yet unclear what effect this transition is going to have on humanity socially, politically, and economically. However, it promises to be as significant as any of the previous transformations in shaping a new humanity and civilization as the potential of human nature unfolds through evolution and displays itself in the environment.

However, the major transformations of the past, from the primitive era to the era of agriculture, and then to the industrial era have resulted in institutional transformation as well, which has been accompanied by a transformation in collective consciousness. We can expect that this transformation will lay the foundation for the major trends of this century. This is what forward thinkers are now attempting to foresee. What will be the effect of innovation in robotics, molecular medicine, artificial intelligence, and alternative energy as they are scaled, for instance? How is this era of increasing globalism going to be governed? What economic system will either evolve out of capitalism or replace it?