Economics – in Theory

I left my review of Paul Mason at his revelation that Karl Marx is to be our saviour.

Not a bombshell that Mason has serious left leanings. Even as a journalist he’s always worn his heart on his sleeve supporting the financially underpowered – most recently in doggedly sticking up for the Greeks against the EU, ECB and IMF.

Interesting then that the Marx he recommends is not the Marx of Das Kapital.

Marx ‘s outline draft papers, Der Grundrisse, contain his Fragment on Machines. In this he saw fundamentally that knowledge was the valuable aspect of production – the how-to of labour inputs – even as the physical aspects of work became automated, increasingly supervised by the labour. And echoing Mason’s earlier reference to universal knowledge in the info-tech wave – not so much polymathic as genuinely generic and conceptual understanding – Marx gave us The General Intellect. The ability to know how; the understanding of how things work independent of the specific economic production or technology context. Mason gives us real examples from pre and early info-tech days (telegraph operators) and the fact that knowledge involves understanding the psychology of the fellow humans in the wider system, not just the immediate technology involved.

After showing how this view fits with the labour-theory of capitalism, it brings us to an interesting question of why does a pseudoscience like economics need a theory? What’s wrong with actual documented effects, pure empirical evidence?

After a reminder of the time-axis in labour-theory, data points not being static, but representing different stages in different process instances, so they can’t simply be manipulated arithmetically, we get an Einsteinism that encapsulates the focus on conceptual “general intellect”. Labour-theory, or any worthwhile economic theory …

… belongs to a class of ideas that Einstein described as “principle theories”: theories whose aim is to capture the essence of reality in a simple proposition, which may be removed from everyday experience. Einstein wrote that the aim of science is to capture the connection between “all experiential data in their totality” – and to do this “by use of a minimum of primary concepts and relations”.

The more clear and logically unified these primary concepts were, the more divorced they would be from data. The truth of a theory is, for certain, borne out by whether it successfully predicts experience, but the relationship between the theory and the experience can only be grasped intuitively.

Mainstream economics evolved into a pseudo-science that can only allow for statements obtained through crunching the data. The result is a neat set of textbooks, which are internally coherent but which continually fail to predict and describe reality.

Fascinating. My whole agenda in there. Autistic economics for sure, but also the weirdness of causation in general. The myth of empirical objectivity, when it comes to static data and predictive theory. In the quest to appear “scientific” – a word that monopolises credibility – any socio-politico-economic theory misses what science itself fails to notice. Reality is not scientific.

This much is given. But there are a couple of more contentious points.

Information IS immaterial, as Wiener (and Dennett) say. But Landauer (IBM) was right, it’s physical representation is always physical, whether in silicon or in synapses. It’s these physical representations that may tend to zero marginal cost. The information content remains independent of its physical embodiment however.

Secondly, information is NOT knowledge. Data and information may be freely networked – without any intrinsic hierarchy – but know-how and wisdom do come in layers. Mason himself is using the universal-knowledge / general-intellect ideas. These are free to the human that has them, and whilst their distribution is not controlled by any pricing model and their information content can be “shared” democratically, marginal possession of intellectual capability to understand varies hierarchically.

He’s right about one thing however. Once such increased knowledge can be embodied in machine processes, it can be standardised in all machines. Standards (my life for the last two decades) are information products that can be freely distributed. Generic intellect is always ahead of this game – unless machines can also think. Appropriately, AI is Mason’s next topic.

Unfortunately, he doesn’t pursue this beyond increased automation, whereby not only the labour inputs, but the machines themselves – real or virtual – also tend to becoming free through “repeated applications of info-tech”. It’s the repeated algorithmic application of information patterns upon information patterns. There’s no AI; no machine thinking. But if both labour and machines (capital) lose any marginal (financial) value, effectively becoming free, what is capitalism left with?

Atomisation of Markets & Labour @paulmasonnews

Reading Paul Mason’s “Postcapitalism — A Guide to the Future” after earlier mentioning the previews and as is my wont recording some notes around the mid-way point. That is, I don’t really know his conclusions for future action yet, but as previewed it is indeed full of material I already identify with, indeed have been studying and working with for a couple of decades myself.

As Mason indicates “big business” has been looking at the democratising nature of information connectivity on more networked peer-to-peer, bottom-up or individual-node-outwards means of exchanging value for quite some time. He credits Drucker (as I often do) as one of the first to recognise how this game-changed traditional capitalist economic models since copiable & shareable information is NOT a scarce resource controlled by supply and demand pricing. IPR is an “artificial” legally enforced arrangement – or not for those who go open-source or creative commons routes. Without supply and demand pricing the value exchanged is “social capital” between individuals and their self-identified groups. Hierarchies are gone from such socially networked arrangements — or are they? I’ll need to come back to this point.

So for now, not only does networked information undermine resource pricing models, its ubiquity runs more and more deeply through more and more “products” and their positive “externalities”. All “markets” are affected, not just those explicitly in information products.

Much of this is not new, after Drucker, himself after Kondratieff (*), Schumpeter and Parker-Follett, Mason also credits Kevin Kelly and many of the visionary celebrities of the “wiki” generation. Business, tech business or otherwise, is of course continuing to find the best angles to extract financial value from the impending Internet of Things. But few have yet really adapted to a post-capitalist situation where financial gain based on monetary value is no longer the main part of economic reality. “We” are really valuing networked social value.

The “we” is important too.

Mason is an economist, and in building to the above assertions, he gives us a good history of national currency value relationships with any tangible markets. Gold-standard, Bretton-Woods, banking reserves and so on. And a great deal of fascinating — and scary — stats of relative wealth and growth through the 4th Kondratieff wave.

Agreements between nations have been crucial to the stability of economies — gentleman’s agreements or formally institutionalised rules. Globalisation in the broadest business sense, international freedoms of and access to human and physical resources, already weakens such inter-nation controls, and of course a globalised network of socially communicating individuals further destroys their power.

One of Mason’s threads is that this “atomisation” of individuals — both as labour and as consumers, was largely engineered by traditional (and neo-liberal) capitalist free-marketeers, as a means of minimising costs and maximising revenues for their traditional businesses. What is not being addressed is the fact that this same atomisation of networked individuals has undermined the pricing model for future business, beyond those that make hay from their near monopolistic tech positions. The Googles, the Amazons etc. But of course since the social values are moral rather than financial a monopolist can be just as effective if they choose a free-to-consume business model. The Wikipedias, the Androids and Linuxes. Ownership as a choice is no longer easy to enforce and exploit if any one or more players chooses not to play that game.

Value becomes (always was) a matter of morality, not finance.

But individuals appear on the supply side of the market too. Labour has lost its solidarity. We have lost our common identities. Demographies are simply post-hoc statistics. (Interestingly, it was Paul Mason I was quoting when I used the expression “bogus identities” in my Identity Politics piece. Mason was using it in the context of Greece vs Euro and the migrant crises.)

Many useful quotes recorded from the first half of Mason’s book, and his Chapter 4 on “The Long Disrupted Wave” is recommended in its own right for the assembly of evidence it presents, but for now this:

[This story so far] is just another way of saying what Benkler and Drucker understood: that info-tech undermines something fundamental about the way capitalism works.

[However] none of the writers I’ve surveyed above achieves [a description of what the dynamics of a post-capitalist world would look like].

But what if somebody did anticipate the information-driven fall of capitalism? What if someone had clearly predicted that the ability to create prices would dissolve if information became collectively distributed and embodies in machines? We would probably be hailing that person’s work as a visionary. Actually there is such a person.

His name is Karl Marx.

Time to read on. [Continued here …] [And finally here …]

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(*) Kondratieff? I’ve always referred to as Kondratiev, and I see on Wikipedia the former redirects to the latter spelling too?

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Additional Reference Notes to be elaborated:

P6 they knew didn’t work. P11 basel 2 license to game the system P15 trust p24 British miners Foucault Minitel p25/26 network squared smile outside market. – Virtual trophy virtue – p77 final observation markets outside current economy. P79 on. The long cycle. Positive national story. P85 Shannon Turing Drucker. Strategic innovation – profit driven production. P86 automation. P90 all parties gaming Keynes. P91 neoliberal atomism – got it. P99 winners and losers part of downswing. P102 Globalisation winners & losers. P112 Drucker post capitalist society knowledge the resource. Universal educated person not polymath, but metamath understanding pure concepts. And federal peer to peer network. P115 networked types yes, but knowledge is about knowing not info overload. P117 and on economy of raw materials and instructions not finished products. IPR legally and socially enforced. Shareable not consumed – Dennett info independent of physical representation. IPR is about prevention. Apple mission. Breathless Kelly dot com boom etc. P125 digital exceeds analogue missed conceptual point. IOT prophets of pc. Goodwill. Wiki quality hierarchy.