Dec 312008
 

Thoughts emerging from a conversation with Sandra Luft of San Francisco State U (who bears no responsibility though):

“Who am I?” Or, “Who are you?“ How we answer such questions clearly changes over time. One of the main ways, though, has been with a narrative, a personal story that describes how one ended up where one is and who one is now. The story takes in the key experiences that seemed to cause one to veer in some new directions, the milestones one passed, the actions, the forks in the road that could have led one elsewhere, the feelings that propelled one in one way or another, the chances encountered and taken or not. In these stories, at least since Freud, the earliest experiences and memories of family life have a particular place in indicating who we have become. If one chooses a more biological approach, putting genetics in a starring role, or even if one puts an emphasis on culture handed down, the story becomes interwoven with an even longer history of the family, the tribe or society. To live is to have a history, to unfold, to evolve, or perhaps to revolt against the given, by turning some corner which leads to new discoveries about oneself.

Discoveries about oneself suggest an inward quest or adventure, also taking place through the passage of time, to discover who one perhaps has been, unbeknownst to oneself, all along. Again, that is  a personal history extended over time, however, a path to a full discovery that possibly can only be completed at one’s death.

That at least is the old way of self-description and self-feeling. The new way, with and through the Internet, is not diachronic, it would seem, so much as synchronic. You are your current set of interests, contacts, Twitter postings, Facebook postings, blog postings, listserv controversies, your latest images, and YouTube videos — trapped in an eternal but changing present that gives no sense of birth or death or growing up, or even growing at all. (I’ve also touched on this in my article on the “Mentality of Homo interneticus” ) You are tied to others and you are only defined in some sort of interaction with them, but only as now. (This also ties to the notion of superself I posted before.)

How would you respond, then, to the question,  “Who are you?” — assuming it still has meaning at all? Is it an impertinence, would it simply be answered by listing all your current contacts, your recent google searches, and maybe a few of the items you have around the house or have recently purchased? Would you describe your ambitions, past achievements, etc.? Or would these be just window dressing for the sake of providing a resume? Are you just something floating in the now — a list of current attention paid and received and nothing really more?

What is the role of your physical body in all this? Is the body more than the sum of yoga classes, gyms you frequent, sexual liaisons, recent or anticipated, foods you have scarfed down in the past few weeks or recipes you plan to try soon, restaurants you plan to eat at or have reservations for? Are you the trips you already have tickets for? Or is your body merely what is on show in the photos and videos that appear on the various websites you connect to? The fact is that it becomes ever easier to present an instantaneous photo or video record of our current surrounds, physical attitudes and appearances, so  that the past is lost in “old” photo “albums” which we have no attention  to waste on excavating.

Is this simply the self of existentialism, as would be familiar to Sartre in Being and Nothingness? Yes and also no, because what gives us our immediacy, what focusses us on the now is as much as anything the inrush from many others, the constantly changing environment on the Net in which so much of life is now spent.

Who are we now? Who are we becoming?

Dec 292008
 

In yesterday’s (12/28/08) NY Times “Week in Review” section, two articles (on the same page) are worth comment.

“Boobs”

The first is “Contemplating the Boobs We Were” by Peter Applebome. He argue correctly that Americans don’t understand enough about economics. Then he suggests that this topic should be taught in high school, or at the very least students should be taught of the joys of compound interest in savings, and the pitfalls of it as debt.

There are several flaws in these proposals. While it would be salutary for students to learn the dangers of indebtedness, how many of them are likely to learn this complex lesson when the joys of credit cards seem self-evident. If one’s parents or other close adults have gotten into serious debt trouble, that might be convincing, but a lesson in class on such a subject is likely to be seem sanctimonious, stilted, boring, or ignorant of reality. Should schools teach students to forego college to avoid college loans? Can teachers — who probably have a dim grasp of this, and, in many cases, can’t get by without loans themselves — successfully get it across?

A worse problem is the supposed benefit of compound interest on savings. If everybody saves and no one spends, and few go into debt, compound interest cannot materialize as promised. Numerous presumably intelligent people now tell us we should all invest our money and not spend it, but clearly, under such circumstances there would nothing worthwhile to invest it in. This is the macroeconomic reality hidden when only the microeconomics of individual cases is discussed.

Of course, if economics became a curriculum subject for high school, what would be taught would be even more wated-down and tendentious than what is now taught as history. “Patriots” would insist on the full nine yards of total “free-market” nonsense; even Keynesianism would be too vaguely taught, because too few professional economists, much less high school teachers grasp it today.

Macroeconomics itself is far more complex, if evaluated correctly, for it should mean nothing other than the total evolution of societal interconnections. Most scholars, even of macroeconomics, do not get this, because they act as if economics as a whole is a fixed subsystem. They forget that it is subject to historical change. (In truth, they don’t so much forget this. Rather, they simply have never considered it in the first place.) That’s why it is beyond their ken that the money-market-industrial economy could give way to something else, which I of course suspect will be the Attention Economy as I have defined it in this blog and elsewhere.

Books

That brings us to the second article, “Bargain Hunting for Books, and Feeling Sheepish About It” by David Streitfeld. He argues that bookstores are disappearing, and cites  a case in which he bought a like-new book online for “25 cents” (plus, of course, “shipping and handling”) so that the author got absolutely no money.  She points out to him that she did get attention, though without using the word.

If they were in it primarily for the money, the vast  majority of authors would always have been  fools , though a tiny few have made a pretty good living at times. The main goal, I argue, has always bee seeking attention for oneself or —what amounts to the same thing — for what one thinks or has to say. Today, as competition for attention rises, and ways to seek increase too, that is even more likely to be the case.

None of this is to argue that the landscape for books, including bookstores, publishers, etc., is not undergoing rapid and in  many ways disturbing changes. As a book lover and erstwhile bookstore haunter, I am saddened at the demise of such places a Cody’s, mentioned in the article. It is possible to find many more books on line than you would in even the largest bookstore, but browsing them at present remains far from easy. Serendipity still operates, but is quite different in detail from what happens in an actual bookstore. And young people’s attention is now often subdivided in such a way that they see no reason to immerse themselves in an actual book to such a degree that they really do begin to feel the author’s way of thinking — at least partially — from the inside.

As long as we still do have something of a money economy, we should seek — and probably will find — new ways to make sure that authors we like get some support. Some of this will be semi-automatic; some of it may require new social inventions. But I don’t think we should spend too much time mourning the profit-centered kind of publishing that now seems to be perishing.

Dec 242008
 

In ancient Athens’s Agora, in medieval Venice’s Rialto neighborhood, and in small village market squares everywhere, the marketplace for ideas — that is where attention was exchanged —commingled with the market for goods. Socrates wandered around the Agora talking with his disciples and enemies, according to Plato. But he and they spent little time trying out or examining the wares, or in bargaining over goods. Others, say in Cairo’s souks up until today, spend much time engaged in conversation and in bargaining, and would be shocked and disturbed to have their first price accepted by  customer. In these cases attention and shopping are intermingled, but still separate kinds of activity. Today, in more westernized places the relationship is different but still crucial.

Consumer spending is what is said to keep the American — and therefore the world’s — market economy afloat. In recent years this has required most consumers to go into debt, either through home loans, credit cards or both. Today it is increasingly hard to get such loans, because all the banks are afraid of lending. Meanwhile,  a substantial and growing  proportion of Americans have no way to take on more debt and still pay it back. But even if that were not so, consumption might not head up forever. In a previous post I discussed the attention costs of consumption. But there is another side to consuming, which helps explain why Americans have loved to shop. It can be described as simply this: Shopping is an avenue for getting attention. At, least, it seems to be that, sometimes even when it’s not. Let me list some of the ways shopping offers attention.

Illusory Attention

Yesterday I went to the hub of shopping in the Bay area, the few blocks around Union Square, SF. Within fairly easy walking distance is everything from the extremely downscale Burlington Coat Factory to the upscale Barney’s New York. Also, Bloomingdales, Nordstrom’s, Macy’s, Nieman-Marcus, H & S, and Saks Fifth Avenue, along with Crate and Barrel, Apple, Virgin Records, Border’s Books and many other name-brand chain stores, along with a number of discount jewelry stores and many others. Together these emporia function as a kind of gigantic museum of what designers have designed, technologists have implemented, musicians and artists and jewelers and writers have created— all as curated by the store’s buyers and display managers. Plenty of things to pay attention to, but by the same token a great deal of illusory attention. (Illusory attention is the attention you feel you are getting, as if in direct address to you, when in fact the creator in question is unaware of your specific existence or very nearly unaware of it.) You could receive illusory attention by going to an actual museum, say, but you get much of the same just by looking around in stores and shops, or eating in restaurants, especially those with notable restaurateurs or chefs behind them.

Being Attended to While Shopping

Another thing happens, at least minutely, when you shop. The salespeople pay at least a little and sometimes a lot of attention to you. You expect to be noticed and perhaps cosseted; you expect to be smiled at, thanked, perhaps complimented on your taste, told what you should and should not buy, offered reassurances that the possible recipient of your purchase will love it. (It doesn’t seem to matter that the clerk offering such assurances knows absolutely nothing about the intended recipient of a gift; they just know the recipient will love it, and sometimes this remarkable knowledge evidently seems compelling and reassuring to the customer.

Attention Paid to Gift-Givers

A high proportion of all purchases are made around the now traditional gift-giving holidays, and many  — though by no means all –are actually bought as gifts. Some of these gifts were requested, but many are shots in the dark, which may or may not turn out to be something the recipient actually wants or is happy to have. Many such gifts end up never used, instead stored away and forgotten, a kind of Keynesian boost to the world’s market economy, but still hoped to bring about some kind of gratitude and attention paid to the giver. This is so even if the giver is merely fulfilling what she or he takes to be an expectation. The recipient will probably also give a gift in return, unless she is a child or if some other inequality makes reciprocation difficult. Thus many gifts can be viewed as a frilly, inarticulate form of exchange of attention, a concrete demonstration of love, or something of the sort.

Shopping as Part of a Creative (and Therefore Potentially Attention-Getting) Act

A large number of things purchased are for display to others in some form. Such is obviously the case with many clothes, those not purely utilitarian, or maybe even those. But this also holds for furniture for electronic devices, for foods, whether to be combined into something cooked for others or merely as a display as the purchaser herself eats them in semi-public. Cars are also in this category. Sometimes the way things bought are combined is intended to be a kind of artistry, and of course our bodies and what we have on them have been the main way we get direct attention in the world,. This accounts for gyms, cosmetic surgery, ordinary cosmetics, jewelry, shoes,  diet foods, tattoos and more.

Purchasing of the Means for Expression that Will (It is Hoped) Get Attention.

Here I mean everything from art supplies to iPhones, including cameras, musical instruments, computers and much software, even sound and video systems for home use but also to show off our discoveries to friends and others. Even a substantial portion of business-related (and thus deductible) purchases are in this category. In addition to giving such things to ourselves, we can also give them to others with the intent that we will share in some sense in the attention that goes to the expression thereby made.

Attention-Seeking in Other Ways Competes with Shopping and Will Do So More

As I have discussed before, the act of shopping itself of course takes up the shoppers attention, and so the extent it can be done is limited. Further, as I also pointed out, making any use of anything one buys requires further attention. But shopping also takes money, and with money growing increasingly questionable and perhaps hard to get hold of, means of seeking attention that rely less extensively or not at all on shopping would be much sought substitutes. They are certainly available, at least for those who have Internet or cell phone access and the like, and I think that if and when the smoke clears for the money-market economy, non-monetary attention- seeking  activities will be more prominent. The advantages of shopping as a means of getting attention will quite probably permanently lessen.

The Challenge

Less shopping equals less employment, barring massive government intervention. That would yield lowered money incomes for many. That too will make the Attention Economy more important. But just as the musicians and writers of today want to be heard and read as much at least as they want to be paid, the technologists and designers and so forth will want their works widely distributed if possible, so that they can be appreciated.   I f life is not to get totally imbalanced, ways must be found to see that the good things in life are not reserved for only a small group that has managed to hold onto money or have good money incomes.  Plenty of attention will go to whoever figures out how to make this work. The time to start thinking about it is now.

Dec 212008
 

A couple of years ago, I pointed out that in some ways money was losing its hold on reality. Routine activities and producing things to which can be assigned some relatively stable amount of money now occupy far less than majority of human effort — while more and more energy goes into the new attention economy, which is only loosely connected with money or markets. At the same time, the growing financial sector takes on the possibility of treating money as a pure symbol, without any underlying or inherent meaning. Financial money can grow or shrink, and this has real effects in what is left of the market economy, but many of the shenanigans within finance do not really do anything beyond the purely symbolic. Now the future of money has become more imbued with the excesses of money’s dream life. To the extent that markets do require money, they also require mechanisms for the insertion of money where needed, and that depends on trust, which is the basis of all loans, investments, etc. Trust is now rapidly leaving the system. The mysteries of derivatives, of the vast variety of new financial instruments, and of things like hedge funds are a perfect cover for the most rudimentary sorts of scams, including the recently unveiled Ponzi scheme of one Bernard Madoff. (A Ponzi scheme requires ever-more investment into it, as current investments are used to pay earlier participants, though this is only necessary if the early investors actually take money out. Like roulette bettors who just let their money ride on a certain bet as winnings pile up, investors in a Ponzi can be fooled by entirely fictional increases in their holdings to leave all their theoretical winnings in, and they might also be likely to add more to the fund, and tout it to their friends. ) Madoff, who caught many who should have known better, as well as a considerable number who could not have been expected to see through his deviousness, was actually apparently quite limited in his methods of covering up his scheme. To whit: he claimed nearly the same yearly growth from one year to the next, which after a few years becomes statistically very unlikely. A more astute Ponzi scheme could vary the growth. This has its limits, of course. You wouldn’t want your Ponzi scheme to issue reports that are too downbeat, because then investors might leave. Still, greater sophistication in reporting incomes so as to evade questions certainly seems possible. Thus, how do you know that your next investment vehicle will not turn out to be a Ponzi scheme or something perhaps honest but hare-brained? The obvious answer might seem to be to diversify investments. But in the Madoff case, some investors thought they were investing in different funds entirely. Any company can do what it likes with any extra cash on hand, so how do you know that an apparently reliable company that makes what seems like a real and straightforward product is not investing in some other dubious scheme? Even a company which does nothing of the sort must take increasing risks in new investments as the climate of creativity heats up. You cannot rely on this year’s popularity to get a company through competition that might not even exist yet but will be quite evident in a few years. The speed at which new kinds of products and services can be put on offer renders the “long term” increasingly short. This past year also shows that such supposedly safe and durable investments such as land and raw materials like petroleum can be highly speculative, because speculating on futures in all such areas can play havoc with the prices there too, if at a high enough level. The net result of all this is that trust has fallen to lows not seen since the Great Depression. But new means of speculation, based on the likes of the Internet and advanced computation are not likely to disappear. Thus a return to “fundamentals” cannot be counted on — ever again. Regulation is unlikely to be astute enough to keep track of all the new means of engaging in new kinds of investment, and nothing can stop these except a complete freeze of the monetary system. That’s where we may well be headed. Alternatives to money and the wide-open market are likely to proliferate.”>pointed out that in some ways money was losing its hold on reality. Routine activities and producing things to which can be assigned some relatively stable amount of money now occupy far less than majority of human effort — while more and more energy goes into the new attention economy, which is only loosely connected with money or markets. At the same time, the growing financial sector takes on the possibility of treating money as a pure symbol, without any underlying or inherent meaning. Financial money can grow or shrink, and this has real effects in what is left of the market economy, but many of the shenanigans within finance do not really do anything beyond the purely symbolic.

Now the future of money has become more imbued with the excesses of money’s dream life. To the extent that markets do require money, they also require mechanisms for the insertion of money where needed, and that depends on trust, which is the basis of all loans, investments, etc. Trust is now rapidly leaving the system. The mysteries of derivatives, of the vast variety of new financial instruments, and of things like hedge funds are a perfect cover for the most rudimentary sorts of scams, including the recently unveiled Ponzi scheme of one Bernard Madoff. (A Ponzi scheme requires ever-more investment into it, as current investments are used to pay earlier participants, though this is only necessary if the early investors actually take money out. Like roulette bettors who just let their money ride on a certain bet as winnings pile up, investors in a Ponzi can be fooled by entirely fictional increases in their holdings to leave all their theoretical winnings in, and they might also be likely to add more to the fund, and tout it to their friends. )

Madoff, who caught many who should have known better, as well as a considerable number who could not have been expected to see through his deviousness, was actually apparently quite limited in his methods of covering up his scheme. To whit: he claimed nearly the same yearly growth from one year to the next, which after a few years becomes statistically very unlikely. A more astute Ponzi scheme could vary the growth. This has its limits, of course. You wouldn’t want your Ponzi scheme to issue reports that are too downbeat, because then investors might leave. Still, greater sophistication in reporting incomes so as to evade questions certainly seems possible. Thus, how do you know that your next investment vehicle will not turn out to be a Ponzi scheme or something perhaps honest but hare-brained?

The obvious answer might seem to be to diversify investments. But in the Madoff case, some investors thought they were investing in different funds entirely. Any company can do what it likes with any extra cash on hand, so how do  you know that an apparently reliable company that makes what seems like a real and straightforward product is not investing in some other dubious scheme? Even a company which does nothing of the sort must take increasing risks in new investments as the climate of creativity heats up. You cannot rely on this year’s popularity to get a company through competition that might not even exist yet but will be quite evident in a few years. The speed at which new kinds of products and services can be put on offer renders the “long term” increasingly short. This past year also shows that such supposedly safe and durable investments such as land and raw materials like petroleum can be highly speculative, because speculating on futures in all such areas can play havoc with the prices there too, if at a high enough level.

The net result of all this is that trust has fallen to lows not seen since the Great Depression.

But new means of speculation, based on the likes of the Internet and advanced computation are not likely to disappear. Thus a return to “fundamentals” cannot be counted on — ever again. Regulation is unlikely to be astute enough to keep track of all the new means of engaging in new kinds of investment, and nothing can stop these except a complete freeze of the monetary system. That’s where we may well be headed. Alternatives to money and the wide-open market are likely to proliferate.

Dec 082008
 

I have long maintained that paying attention to someone (or that person’s expression) amounts to aligning your mind to that someone’s. In seeing the world from their point of view, you partially “become” them. This can be through listening to and trying to understand their sentences, through reading something they have written, through looking at a picture or work of art that they have created, through watching them play a game such as golf or football, etc. To the extent you do take on their viewpoint,  you want what they want. And so on.

Recently, an experiment (reported by Benedict Carey in the NY Times) was described in an online science journal under the title  “If I Were You: Perceptual Illusion of Body Swapping” that demonstrates the ease with which seeing (in this case literally from another’s point of view) makes you feel you are they. A commenter, Alan Peters, said the following: “I have been doing research at Johnson Space Center in Houston with the NASA Robonaut robot for a number of years. One way that the robot can be controlled is through direct telepresense.{sic} That is, the operator dons a VR helmet, data gloves, and some other sensors. The operator sees through the robot’s stereo camera “eyes”. Any motions the operator makes with his/her arms and hands are reflected by the robot. In that way it is possible to control the robot in highly dexterous manipulation tasks. After operating the robot for a short period of time, one feels quite like the robot is one’s self. At least that’s how it felt to me. It was interesting to watch the world through the robot’s eyes. The first time I operated the robot, I could see this bearded, out-of-shape, older guy with a potbelly, sitting on a chair, wearing a helmet, and moving his arms around. It was me, of course. Didn’t seem like it though. And frankly, I didn’t look so good to me. I feel much better than I look! After having finished operating the robot, I always watch myself taking the VR helmet off. I am in the robot until the *instant* my eyes loose contact with the display. Then I have the uncanny sensation of snapping back into my own body. It’s quite an odd feeling, not unpleasant, but unlike anything else I’ve experienced.”

All this demonstrates how fully, and yet how easily we can take on the persona of another, or as I put it aligning our minds to that other. No other model of attention paying makes much sense.

Nov 252008
 

We can expect our ever-greater immersion in the web and the Internet to alter our psyches —and so, our world. [These thoughts were engendered by my nearly simultaneous reading of Jaques Lacan’s Ecrits and the book, “The Hyperlinked Society” that I mentioned in earlier posts Michel Bauwens had asked me to read, as well as an article by Clive Thompson that I alluded to earlier. Each book/article was only vaguely suggestive at best, so don’t blame any for this.]

Almost a quarter century ago, Sherry Turkle presciently described the personal computer in the title of her book “the Second Self.” This was before the graphical user interface and before the web, when  most computers still had green or black screens in which text appeared in one typeface. Those early personal computers responded to and seemingly added to the manipulations  or programming attempts of their users — especially the children that were Turkle’s focus, in such a way that they seemed to be an extension of self, yet not quite the same as oneself.

The second-self notion is now even more apt, except that the connection between device and (first) self is even tighter than that.  Like mirrors, one’s computer — along with PDAs, smart phones, etc. — is a projection and reflection of oneself, a kind of necessary auxiliary to one’s own memory, personality and intentions. Certainly today, all sorts of one’s preferences and personality are reflected back to one.

Taking in Our “Objects”

As psychoanalysts understand, those we pay attention to end up becoming part of us, what they call our objects. Everyone has some internalized image or model of primary caregivers, the first people to whom we paid attention, the ones to whom we generally paid most attention in our most formative years, and also those to whom we primarily looked for attention. But we also introject in this way everyone we pay attention to, whether in direct conversation, in the classroom, by reading, on the stage or movie or TV screen or whatever.  Since each person’s world is formed by her own patterns of attention paying and desires for attention, the self as a psychological phenomenon is largely composed of the taking in and partial integration of all these moments.

Unconsciously at least, there is no sharp division between yourself and your “objects.” Your parents and everyone else you pay significant attention to shape you to some degree, and in ways you cannot easily be aware of. You  take in attitudes, emotional stances, ideas, ways of speaking and moving, and much else. You react also, and those reactions of loyalty, love, anger, fear, disgust, need,  hate — and, as a result of the latter ones, guilt — also form you.

Now comes the computer, (along with smart phones, PDAs, and such) which greatly integrates both your own sense of self, through mastery of various computer skills, through your own attempts at expressions, through lists such as address lists of who is important to you, and in the case of the Web, your bookmarks, hyperlinks, your connections through e-mail, blogs, comments, multiplayer games, virtual worlds such as Second Life, lists, social networks, etc. You are tied through attention and partial attention to and from a wide range of others. As Clive Thompson points out this now means that through such services as Facebook newsfeeds, Twitter (and, I would add, e-mail, listservs, text messaging and cell-phoning) you are quite constantly in a mode of attention paying with many ”objects.”

What happens here, fairly clearly is that the boundaries of self change. You draw in others, and you too are drawn in. What was your introjected object, the set of conscious and repressed impressions of those close to you, is extended now through the immediacy of what is stored in your hard drives or on the Internet. What is inside your own mind and what is in your computer becomes less and less clear sharply separated, less and less permanently one or the other. Likewise,the boundaries between your own computer and the entire Internet keep becoming more and more permeable, so that the difference between your world and yourself, between your objects and yourself becomes less and less evident.

Dwelling

An analogy to bear in mind is home (and sometimes workplace as well). One of the main reasons it is important not to be homeless is that home is a place full of resonances of our attachments to others, from those who live with us there, to the evidence of the attention we have paid and of those who have paid attention to us, in photos, in books, in all manner of artifacts we associate with one person or another. Home is also, ideally a place of refuge and insulation in which to sort through and revisit the various interactions we have had in the wider world. It is also a place to which those who seek our attention, want to pay attention to us,  or — most often— both, know how to at least attempt to reach us. So your home also represents or extends yourself, or that of all the selves who share this space with you — usually your family.

To a considerable degree, one’s neighborhood and larger community are an external extension of this, an area where selves merge and boundaries are somewhat fuzzy. Roughly speaking, the farther from home you go, the sharper the boundaries between self and others. On the Internet, however, distance as such is irrelevant. Even such boundaries as exist we easily move across when we so desire. We are more and more part of a single super-self, at the same time attempting, at least if old enough, to maintain our individuality through exclusion of real attention to certain others, in fact most others. In sizing and shaping our world to our own internal rhythms, we enlarge and entangle ourselves, until self and effective world become nearly one.

The Superself in Action

People today constantly check to  see whether anyone is remembering them at the moment, paying them attention through trying to contact them, while in so doing these others are to receive attention at the same time. The computer or smartphone is an extension of oneself, far more, say than an old-fashioned telephone or an actual mailbox, and the other appears within this “second self” this extension of self, this hyper mirror, or, one could say this portable parent, the partially introjected mother. The other appears then, already introjected, already swallowed, as it were into the complex interiority one now feels. Further moving in this direction are the social networking sites, the virtual worlds one might inhabit,the blogs one regularly receives or reads, the comment lists to the blogs, etc. If the laptop or desktop or smart phone is in effect within the boundaries of oneself, then paying attention becomes an increasingly internal kind of act.

I have previously described the act of paying attention as aligning with the mind (or even the bodily movements or emotions ) of the attention receiver. This alignment is now even more apparent, occurring as it does within the extended confines of one’s own minds. Attention becomes a relationship with one’s own objects, even though there is a mutuality which also allows these objects to represent real others.

Onwards

As I suggested before, with its constantly added affordances, the Internet draws more and more of us in, and draws each of  us in further and further, tying us more and more directly to the others who in some way connect to us, in some way gain our attention and vice versa. Our social networking pages, such as Facebook, for instance,  come to resemble a partial census of our internalized objects, both reminding us of them when we check out our own pages, and revealing part of our superself to others who care to check. Those who do will overlap their own superself, so that the Net becomes an ever tighter set of pseudo-synapses that ultimately join us all.

New political loyalties as well as other convictions about how the world must change will grow out of this, and already are doing so. The Obama campaign and the widening commitment to oppose global warming are examples. Increasingly, I suspect, a new kind of psyche emerges from all this, and with it a new way of interacting with, and in fact defining, the world.

A superself in some ways is the essence of a god, the shared, communal transcendent sense of what is good, right, mete, just, and at the same time unstatable, mystical. So in all likelihood, the Internet will not only be the basis of a new economy but the holy space of a new, empowering and powerful religion that will draw more and more of us in.

Oct 312008
 

Having discussed the new strangeness of money as such, I will now turn the most money-dependent sector— finance. But before getting into details, let me make a point about banks and attention. Money flows in the same direction as attention does, and so, right now stars — that is, large scale attention getters — generally have high monetary incomes. But having money incomes doesn’t lower the net attention they have, because attention itself can be thought of as being “stored” in the memories of those who pay it. The more attention you pay someone the more you remember and the more likely you are to pay additional attention. And whenever you do pay attention you tend to have a certain urge to satisfy the attention-getter’s wants.

So despite their high money incomes, stars do not really require conventional banks, because their attention is stored in others’ minds, to be tapped more or less at will. The more attention you have gotten in the past, the easier it is to do this. At the same time, if you have never had attention, your money is not a very good guarantee that you will get attention when you need it. So, as attention transactions gain increasing prominence, the entire financial sector will have a less and less important real role to play. But instead of shrinking, this sector has burgeoned of late, which brings up a second mystery.

The Banking Mystery and the Suspects

In the next-to-last post, I discussed the rapid growth of productivity in typical industries that provide standardized goods and services. The financial sector, you would think, is among the most amenable to automation, since all that is involved is handling and recording the digits that represent money. And that has happened in practice:ATMs; automated credit card accounting; electronic stock exchanges and brokerage services; online banking: etc. In other words, most parts of normal financial transactions are exceedingly automated and require very little actual human attention.

However, the relative size, income, and employment of the financial sector — in this country and others — has grown and grown. Investment banks now spend an increasing portion of their efforts on trading for their own accounts. As with most hedge funds, this typically involve using sophisticated computer programs to find ways to cash in on slight fluctuations or small trends in the financial markets. Banks also package and trade in derivatives that are connected by complex algorithms to the underlying investments in such entities as standardized goods-producing companies, government bonds or real estate.

Derivatives are supposedly financial instruments intended to help minimize risk. If risk really were minimized, the possibility of gaining vast profits would presumably disappear, since profit is supposedly a reward for successful risk taking. To put it another way, if risk were so minimal, many would enter the market for the relatively small gains, which then become even smaller on average. But risk is of course not actually minimized. One reason is that the mathematics of risk minimization, like other mathematical economics, assumes that the basic conditions they describe or even just assume are somehow fixed and unchanging, or that everything had been taken into account in finite equations. Of course everything has never been taken into account; soothing generalities stop working; small risks can add up to huge ones; and risk takers, on average end up with what they came in with or less.

These risks can be taken only because the huge fund of worldwide savings that have no reasonable way of being invested in safe industrial growth  still search for growth somehow. The financial manipulations offer the appearance of such growth, even though it would certainly seem that unless they create money out of nothing, all they earn is merely taken in a game of poker in which someone else — someone with less good financial choices — actually loses.

I am agnostic about whether money is or is not in fact created, since central banks can increase the money supply through lending, and the financial houses who sometimes obtain amazing-appearing returns do so by being highly leveraged, hugely borrowing. Of course, if money can be created out of nothing, it can also disappear just as easily, and there is no reason to suspect that on net that does not happen, so as to balance everything out. (One way it disappears is when overall markets —whether of stocks or housing —  fall, certainly wiping out “paper gains.” A recent report I saw stated that two trillion dollars worth of “actual wealth” has been wiped out with declining real estate prices? Actual wealth? The houses of course are still there, for the most part, and standard economics teaches that the actual value of something is the current market value, so of course the wealth that disappeared was entirely notional, even though it was a notion central to many people’s financial planning. So much for finance, I guess.)

Of course, even if the money that is destroyed equals the money created, most players do not end up even. The banks, hedge funds, and brokerage houses probably have enriched their shareholders, and certainly their main partners and and a large subset of their employees, essentially by grabbing for themselves an ever-larger share of total incomes in each country. These unequal shares of income then head back into the global money fund, for they mostly are not used for buying things.

The Home-Run Kings

A considerable proportion of people employed as “quants,” analysts, traders, and brokers receive many times the monetary income of others with similar talents employed outside finance. They receive much of this in bonuses, supposedly connected with the profits of the firms or the departments of firms they work for. Yet, of the hundreds of billions of dollars made in the last few years by the major investment banks, even more has been lost this year alone. Nonetheless, far from being expected to pay back their past years’ oversize earnings, those still employed might even be paid similar bonuses this year. Some percentage of these bloated bonuses are however used for buying luxuries of all sorts, which does increase employment and to an extent greater than the mass-produced goods sector can do does spread wealth around a bit. (As I discussed last time, luxuries are highly attention-related.)

To some extent the financial stars seem to think of themselves in a manner analogous to sports superstars. The latter generally sign multiyear contracts with teams that offer high remuneration even if the player or team should experience a prolonged “slump.” Similarly, financial stars, good at playing a game of their own, think they deserve healthy bonuses even if they have lost fortunes instead of  gaining them.

Another way to look a the rococo rise of the financial sector and its complex and unstable “products” and its “masters of the universe” is in the same terms as that of the nobles in say the period of Louis XIV of France. He had inherited a country full of the heirs of actual fighting feudal nobles, but he confined them to Versailles and turned them into dandies who did his bidding as they vied with each other for the most luxurious and remarkable clothes and hairdos, the best coaches and castles, etc. The competition that had taken the form of fighting was now both exaggerated and highly artificial. As they strolled through Versailles and its environs , the nobles wore bejeweled and beauteous swords and daggers, and in some cases knew how to use them, but these swords were no match for the muskets, pistols, and cannons in use by that time by actual armies. We can think of the stars of the financial sector as for the most part playing comparably decorative roles, even though apparently involved in what is most central and important for the old economy, namely money.

“Safe as Houses”

I think the complicated play-acting of the financial sector was bound to lead to an eventual fiasco, many orders of magnitude larger than, say, the Long-Term Capital Management fall of 1998 or the Enron catastrophe of 2001. As the finance sector continued to grow in apparent wealth,  more and more people would have come to depend on its inherent fallacy, until some point was reached where it proved quite incapable of actual delivery. However, the fact that the actual fiasco involved ordinary people’s homes and their putative value only helped both prolong an untenable situation and led to the effects oft ultimate crash being far more far-reaching.

If someone were to tell you that some standardized kind of good — whether it be a car, a computer or a corkscrew — could never go down in price but will always grow in value, you would consider them insane. After all, ordinary industrially produced goods become ever easier to replace,  wear out, become obsolete, or just lose their panache. But for some reason when similar optimism was expressed about very nearly mass-produced homes, too many people were willing to take the pronouncement as quite sane. “Real property” requires land, and supposedly “they aren’t making land anymore.”  Unfortunately, that statement is nonsense in several ways.

In the first place — as anyone who has ever looked at open houses offered by realtors or developers should know — much more than with ordinary mass-produced goods, they aren’t selling material objects, they are selling dreams. These are dreams of refuge, privacy, independence, marital concord, healthy and happy children, visits by friends and family, comfort,  warmth, praise from one’s friends, attention from strangers, beauty, ease, neighborhood, community, good schools, convenience — along with other emotionally tinged and historically contingent prospects. Dreams are subject to change, and the reality that supposedly underlies them can easily change too. An easy commute can become congested and overlong; neighbors can turn out not be nearly as nice as the ones one left, community spirit may not exist or may not welcome one; or an area with enough water for nice lawns can be affected by permanent shortages, especially as climate changes. And the gadgets, appurtenances, style and substance of a house or condo can become obsolete, come to seem ugly, or just fall apart.

What about that idea that the amount of land is fixed and invariable, so that, with a growing world population it is in increasingly short supply, and therefore intrinsically worth more and more? It just doesn’t hold water. The value of land, quite obviously, depends on where it  is and how it is looked upon, and both those things are subject to change, down as well as up. Land that was once highly desirable can become noisome and polluted, or just out of fashion, as home designs or sub-divisions can.  And, in effect, new land can be created every time it seems desirable — say — to live closer in to other people — perhaps in high-rise buildings rather than in a suburban houses. (Some land actually is “reclaimed” — created— from bodies of water or marshland, and though ecologically that might be undesirable, it still happens.)

Clearly though, real estate and housing related securities have a certain aura of security among people who don’t stop to think “concretely” of how very abstract the notion of ever-rising home prices is and always has been. The twenty-somethings who serve as the basic laborers in the field of investment banking may have had no knowledge or experience of land bubbles, but more mature people in those businesses seem to have been equally willing to be fooled by what they should certainly have understood better.

What makes mortgages even less reliable investment was little examined: in a typical case of foreclosure,the costs and right offs apparently can amount to upwards of 30% of the face value of the mortgage. The sliced, diced packages of mortgages seemed to lower the chances of such danger, while in fact making any analysis of risks much harder. The invention of newer and newer mortgage “products” that allowed introductory teaser rates with later sharp rate increases simultaneously gave investors the feeling that they would get good returns while greatly enlarging the pool of new home buyers. This further inflated housing prices, making the investments seem even more reliable. The chances of catastrophic failure grew ever larger.

And of course, all this would not have happened had it not been that all this funny money were chasing good investment opportunities while actual industrial growth could not offer nearly enough of an outlet. At the same time, the mortgage mess, etc.,would have been much less problematic if incomes had been less unequal. In that case, there would have been less money chasing investments, but more chance for ordinary people to pay more ordinary mortgages. That, however, is just what things once were like, in the US anyway. Whether they can be like that again, I tend to to doubt.

In a subsequent post, I will add to the prognostications and solutions I offered earlier.

Oct 232008
 

In the previous post, I pointed out that money is of great importance  only when the world is dominated by standardized goods and services. One essential of standardization is  that goods or services of a certain type are interchangeable. This ton of wheat equals that one, this 100 watt lightbulb equals that one, this kwh of electricity equals that one, and so on. In some cases (actually even in these cases) one has to specify more to get an acceptably  equivalent product or service, sometimes much more. For instance, 50 cycle per second, 220 volt  electricity is not equivalent to the 60-cps, 110-volt kind. Still, in both these cases, only a few numbers define the electrical service, and there are still huge numbers of completely interchangeable kilowatt hours of each kind of electricity available depending on where you get service.

As the electricity example indicates, much standardization is based on the growth of science and scientific measurements. But of course such measurements extend beyond science. Consider, let us say. men’s size 16-and-1/2, 34 white no-iron Oxford cotton, button-down, long-sleeved dress shirts (this is in American measures; to find equivalent European measures, e.g., a conversion table must be used). Any large men’s store will carry such shirts, and quite often a variety of styles and brands within the category. The different styles will not generally be exactly the same fit, and the prices will not be exactly the same either, though all the shirts of one size, style and brand will be identically priced. Also,the most expensive shirt of this general description will probably be priced at no more than about five or ten times the cheapest. The more expensive ones probably carry designer labels. You pay more because this designer adds a certain “class” to the clothing — a classiness that should be reflected in how you will appear to others. Men occasionally and women quite regularly seek out designer brands of clothing of all sorts, and some of it departs quite a bit from being highly standardized. Here, a large part of the markup in price is a kind of payment to the designer as a result of the attention she or he has gotten. (Wearing such clothes, you can hope to get a little of the attention that “rubs off” as much of it heads for the designer.)

Money’s Two Components

Thus, we can think of both goods and services as having two components in their prices: the standard component — in which the designer is indistinguishable from the herd, as if the item were not specially designed at all — and the attention part.

This is in accord of course with what Kevin Kelly reminded us I had indicated earlier about the fact that if you gain attention, you will also be able to have money flow to you. As with goods, in a sense we have to conceptualize the money we keep track of as having two components, the standardized component and the attention -connected component. A certain proportion of money transactions are completely standardized: wages of industrial workers used to buy standardized goods, and the profits that go to those who own and run such businesses. Other money transactions, such as buying designer jeans or contributing to the campaign of a political star are more mixed or virtually all attention related.

How Much Money Goes With How Much Attention?

Now let’s observe a couple of peculiarities of the attention-paying component. If people pay you attention, you generally can, if you want, receive money, and generally speaking the more attention you get, the more money you can pull towards you. This is as true of Damien Hirst, the artist, as of Osama bin Laden, the terrorist, or Giorgio Armani the clothing designer. For all three, in addition to the money, there are the fans —and the enemies too. (If bin Laden had no enemies, he would have far fewer fans, and probably the same goes for Hirst, even though in his case the enemies are not out to kill. To some degree, you receive attention by standing out, which has to mean in some way opposing the norm, the standards, and thereby, you also create some enmity.) However, a key point is there so no way to assign a definite monetary value to having a certain amount of attention.

Another thing one might hope to do with attention is buy it. Advertisers try it all the time. Some educators try to bribe their students to pay attention with offers of cash. One generally tries to buy the attention of any sort of professional — doctor, lawyer, editor, psychotherapist, tutor, architect — whom  one hires. But, in all these cases, there is no necessary correlation between the amount of money one pays and the amount of attention one gets. This is also true for the services of chefs, restaurant servers, flight attendants, etc. Are they really acknowledging who you are and what you really want when you ask, or are they to a greater or lesser extent treating you as just another random customer, with perhaps the same uniform politeness and smiles they would show anyone else? That depends you: Can you win or have you won their true attention?

A Side Remark About Luxuries

A corollary to all this: Luxuries (of the kind one buys) are basically non-standard goods or  services. They generally have large components of star connections —works of art, designer clothes, restaurants with renowned chefs, and so on. Thus the money flows to stars, to a good extent, even though they may mostly recycle it. In addition, many luxuries imply that the recipient gets a great deal of personal attention, which like any attention, cannot be relied on equally by all purchasers. Still the purchase of luxury goods, because of their usually less assembly-line production do employ more people than the standardized goods and services that the average person can mostly hope for.

Back to Money and Attention

Meanwhile, advertisers pay for the size of audiences for the surrounding attention-getting material, but that by no means guarantees how many in the audience will pay the slightest attention to the ad. Still less does the money paid indicate how many in the possible audience will be moved enough by the ad to buy what is advertised. (A very attention-getting ad often draws more attention to its creator than to the product advertised. We may not know the name of this person, but we will think to ourselves “what a clever ad,” meaning “I like the mind behind this.” )

Two Conclusions to Remember

Neither through attracting nor being sold does attention go with a definite amount of money. So as attention-paying and seeking and even receiving all grow in importance   we can expect two results:

1. A larger and larger fraction of all the money in circulation will go to net attention-getters, i.e., stars;

And

2. This growing non-standardized relationship to money will render definite amounts of money more and more meaningless in most cases.

Money Gets Stranger

We now have a situation in which in the rough way this happens, less and less money, comparatively, goes to the invisible, non-stars —such as factory workers, who churn out the standardized goods, along with many kinds of service worker — while a relatively larger fraction flows to attention-getters, even fairly modest attention getters such as typical doctors or lawyers or yoga instructors.

Note that this is not the same as inflation, or deflation for that matter. The “money supply” may rise —possibly by orders of magnitude — while the prices of standardized goods —quickly churned out to meet whatever the level of demand — stay more or less flat. Every unit of money is of course exactly the same, and in fact quantities of money can certainly bedazzle, but all this is symptomatic of the passing of the era in which money was a bedrock part of reality. To see what is going on with it, I will next time focus on financial institutions, such as banks, where money alone is the standardized good.

Next time: banks, etc.

Oct 152008
 

SUCCESS REACHES ITS LIMITS
In my previous post on the crisis, I claimed that we are suffering from too much savings and not enough consumption. The worldwide pool of money seeking growth investments is too large to be sensibly invested in any sort of production or service-providing corporation. The reason for that is that consumption is just too low, and is not likely to be able to rise to the levels needed to sustain such investment.

In other words, because it has been so wildly successful, the industrial economy — or industrial-market money system — has pretty much reached its limits. Think of an economy in this sense as the ways in which a social system or several are knitted together through the distribution or exchange of an entity — or class of entities — both scarce and desirable. In the industrial economy those entities, primarily, are standardized goods (or standardized services), along with the standardized work needed to make them — and of course, equally standardized money.

MONEY AND STANDARDIZATION
Standardization of the things exchanged is key for a money economy to survive. If goods were each unique, their prices would be all over the map, and would mean nothing. We have some idea of the worth in money of any new pickup truck relative to a quart of non-fat milk because each is standardized to a great degree. You won’t find a new pickup truck worth only $2 if that’s the price of two quarts of milk, neither will you find a standard pickup for sale for $1 million dollars, for instance. (Unique objects, such as paintings, do have prices that vary even more wildly than that. A whole economic system revolving around paintings would not have much use to make of standardized dollar bills.)

Without predominance of standardized goods in people’s work and consumption lives, money tends towards meaninglessness. Without money, no markets, such as we know them. No stock markets either. That is where we are headed, I believe.

EFFICIENCY WITHOUT END
OK, so how does success limit the future growth of the system based on standardized goods? We do know it’s successful in the following sense. Endless numbers and kinds of such goods and services are now available, and the glory of the system is that it gets more and more efficient at doing all that. In other words, productivity is growing, in fact, the increase even seem to be speeding up. As the world grows more connected, ever more efficient means spread ever faster. New management techniques, for instance, can radically reduce the need for workers and can be learned from one industry and applied to many others in only a few years. New forms of automation spread rapidly, as computer applications is one industry are adapted to others with minimal tweaking. (Likewise, it gets ever easier to move most standardized work to wherever workers are willing to work for the least pay.)

Productivity (or, more precisely, “labor productivity”) means simply how much or how many goods or services a worker can produce in a given amount of time. No reason that can’t keep growing forever. Here’s the catch, though: Why produce what cannot be consumed?

CONSUMPTIVITY
Let’s call “consumptivity” the amount of goods and services a person can consume in a given amount of time. (A few others use this word, but I define it a bit differently than some. For me, it indicates the ability to consume goods and services, regardless of whether or not one has the money to buy.) If consumptivity cannot rise forever, then rising productivity will either lead to a shortening work day, or to growing unemployment, to the point where the entire industrial economy employs hardly anyone. That would mean the whole basis of the money economy will eventually disappear, as I shall show in more detail a little further along.

That would not be relevant, of course, if consumptivity can possibly keep rising endlessly. But it can’t. In terms of attention, here is the dilemma: with more and more efficient production, standardized goods and services can be turned out with less and less attention per item. In general, however, consumption that takes less and less attention does not make sense. There may be exceptions for strange pursuits such as hotdog eating contests, where minimal attention goes to each hot dog consumed. But most of the time, a good or service is only of real value to us if we do pay some attention for some or all of the following reasons:to learn of the item in the first place; to seek it out; to obtain it; to learn how to use it; to figure out how to keep it or access it; (most importantly) to actually enjoy or use it; to maintain it; to clean up after it; to display it to others, and so on. If the attention you pay is too little, having the actual item is no better than having the cheapest possible imitation of it. Since the total attention you can pay in your life is limited, if you keep increasing consumption there will clearly come a point when you cannot sensibly consume any more. Even if you are fairly irrational in your consumption habits, you will still reach a limit.

Here’s one example of that kind of irrationality: What if you accumulate items that you only know you have, never laying eyes on them, because mere legal possession affords you satisfaction just in case you would ever want them? (Remember it is consumption not investment, that we are discussing. However, it turns out something similar is true for as well.) First of all, even knowing you have something requires some attention, and there would surely be no value in accumulating more and more things without ever even knowing it. Besides that, as efficiencies of production and distribution increase, the satisfaction of actually owning something you never see is no different from knowing you could quickly obtain it should you ever want it. Further, if you buy it just to have it , sight unseen, you can’t tell the difference between actually having it and being told you do. Within the industrial system, someone would devise a way to sell purely notional products were this degree of over-consumption to become commonplace. That would employ almost no one.

Or what about simply buying goods not to keep, but to give away to others? It won’t avail. To make your gift be other than nonsensical, the recipients would obviously have to pay attention to them in order to derive any satisfaction. So, again, net consumption for everyone would still be limited.

And so on…This argument can be carried out at any length. The point is that per capita consumption cannot even approximately sensibly grow forever, and that means that the industrial economy eventually has to become less important.

BUT THEN ADD THE RISING ATTENTION ECONOMY
Meanwhile, the pursuit of attention for its own sake is on the rise. This includes artists, writers, movie makers, bloggers, text messagers, contributors to comments on others’ blogs, music, video or photo uploaders, listserv contributors, and so on. The number of such attention-getting attempts that do not require attention payers to pay any money keeps going up. That means , in part, direct competition for the attention that people otherwise could have spent consuming goods and services that are bought. This will bring us to the consumptivity limit even faster.

WHY NOW?
All right, perhaps I have convinced you that there will be a consumptivity limit someday. But today? Surely I can’t claim that everyone has all the goods they can consume now. Most people in the world in fact don’t have the wherewithal to buy even the minimum needed for a good life. A sizable minority don’t even have enough to eat. I will discuss inequality more in the next installment, but it should be clear that one reason a lot of people have too little is that growing productivity has made many producers — such as small farmers — economically un-viable, forcing them into greater poverty. That is precisely because consumption did not increase as fast as production, on average.

At the same time though, a substantial slice of the population of the better-off countries has already reached a limit at which their consumption of standardized goods is pretty much at a standstill, or only very slowly growing, despite the fact that they are exposed to ever more advertising. And in between there a vast mass of people who could consume somewhat more were their tastes to have a chance to develop and were the institutions that would allow them to consume more in place. However, by the time their desire to consume considerably more would match the capability of institutions — such as electrification, roads, sufficient housing, etc., —productivity would have risen enough so that they and all the others would still not be consuming all that could be produced. In other words, effectively unused capacity to produce keeps rising.

To take one example, consider the incredibly widely adopted cell phone. Over the past two decades the phones have become a standard and useful possession for a huge swath of people the world over. In that time, the phones have added more and more functions, replacing a variety of other gadgets in the process. More and more purveyors have begun offering them, in endless models. But as sales of some models rise, those of others fall, in such away that it is quite clear that far more could be sold should the demand arise. But throughout most parts of the world where cell facilities (such as the needed towers) exist, virtually everyone has one already, and usually a pretty recent model. A few people have multiple cell phones, but there is little point in having as many as ten say. Capacity to produce them could easily rise if demand were to grow, and the phones will probably get much cheaper, but the no matter how cheap, the market is pretty much saturated.

Of course, these phones, especially of the “smart” variety greatly increase opportunities to seek, obtain and pay attention , attention that competes, as I described above, from other consumption. Even very poor people, in this way, become more linked to the attention economy than to the money economy. Change to the new system happens ever faster.

An Aside on Resources
As an aside, let me point out that resource limits do not prevent the rise in productivity. Every kind of material resource, including energy, can be substituted for with easier to make alternatives, once that particular resources becomes problematically scarce. Overall increases in productivity, if anything, speed the process of resource substitution.

CONCLUSION
We are left with not enough prospects for industrial growth to absorb world savings. Of course, if typical workers could be paid more, so that spending would be closer to the limits of consumptivity, the world would be in more balance longer. But for reasons I will discuss in the next installment, that state of affairs seems less and less achievable. And anyway, it would only slow the inevitable.

Oct 092008
 

As I write, the stock market is flatlining, credit has seized up, no one seems to know what to do, and bad times seem in store. What caused it? Not what you think. Not, basically, greedy Wall Streeters, ordinary consumers taking on loans they could not pay off, bad accounting requirements, faulty credit ratings, failures of regulators to regulate, nor a formerly too rosy outlook from the Fed. These were all surface phenomena.

What lay beneath then? One way to put it: too high a worldwide savings rate. Consumption too low. And, partly causing both of those, the rise of the Attention Economy (as I define it,  not as it has been defined by others).

We have been told for years that the savings rates of Americans are too low, that we are over-spending on consumption, and  that there is too much reliance on credit. That’s not impossible, but worldwide, the savings rate in fact has been too high, and I suspect it may have been unrealistically high in this country as well. And certainly, to have such a high worldwide savings rate, consumption has been too low. I am embarking on several posts to explain.

Swimming in a Pool of Money

Let’s talk about “savings” first. What most Americans understand about saving today is that it it really means investing one’s money or one’s retirement account (or paying into a pension plan that will invest for one, of relying on one’s employer to do the latter) in such a way that the total nest egg will grow to a tidy sum by retirement. Not everyone is fortunate enough to have such savings, and I don’t have the figures right now, but certainly a sizable proportion of people near retirement do have substantial savings — or did.

To that domestic pool of savings must be added similar things from Europe, plus, from the “developing world,”  the so-called “recycled petrodollars” and the savings of capitalists and to some extent even workers. Also we should add in the growing pies of savings held by non-profits, such as universities and foundations.

Take one example: the country of Singapore, which has experienced a very high rate of growth has a large investment fund to spend abroad. Why? Why not invest at home, or use the extra money to buy goods and services now? First of all there is no crying need or desire for more goods and services now, and second, Singapore seeks a nest egg for its own “retirement” or to take care of its own aging population.

Saudi Arabia’s population isn’t aging, but it also parks a considerable portion of petro dollars in the accounts of small group of ultra-rich princes and commoners, and also invests money abroad for its own post-oil future. (As if.)

All these investment pools seek more or less reliable “growth stocks” to invest in. It’s too much money chasing too few stocks. Even under ideal capitalism, we can’t all be capitalists; we can’t all get even moderately rich on the basis of investments in productive industries of any kind.  (Of course, the average financial planning advisor will be happy, even now to claim the opposite. It can happen for some, or at least it could, so the FA is only necessarily misleading in the aggregate. )

The more we save, the less we consume of course. Also, the more money is distributed unequally to the few rich and the many too ill paid, the less net consumption there is . The rich have money to burn, but most of them don’t want to. They want to get still richer, and of course their extra funds are part of the same investment pool.

Speedup

Meanwhile, however, firms keep improving efficiency. Labor productivity keeps going up. But overall consumption does not increase that fast. (I’ll explain what I term “consumptivity” and how it connects to attention in my next post. ) Capital productivity keeps rising too. That means that in terms of industrial-era investments, there is not enough to invest in with any realistic hope of substantial profits. And not enough industrial type jobs either.

Hence, what the NPR program “This American Life” in a special broadcast last May about the sub-prime mortgage mess calls the “Giant Pool of Money” — to wit, about 60 trillion dollars cruising the world in search of ways to become much more. That money, feeding into the collateralized debt obligations along with credit default swaps, hedge fund shares and so on, helped propel the overheated financial sector and the overheated housing market, and much else besides.

You know the rest in that regard: the silly assumption that housing prices would rise forever, the super-easy, turn a-blind-eye mortgage offerings with huge built-in rate hikes; the speculators seeing a killing buying extra homes for nearly nothing. Many Americans, some having already developed a nest egg in investments they didn’t want to touch, and others with no money to their name at all, taking on new credit based on home -price appreciation.

Many had to do this because they simply were not paid enough to support families or send kids to college. Why so little cash? One reason: no executive “worth her or his salt” wants to overpay workers or keep more on the books than necessary. That is out of fashion throughout  the profit- and non-profit sectors alike. It was partly by paying workers as little as possible that executives and investors could grow rich, after all. That led to more money in the investment pool that could find no sensible target.

Arrrrgggh! Who Stepped on the Brakes?

The old realities had given out, and the spiral might have kept on going if all those involved had forgotten all about those old truths. Instead, rates did reset; borrowers suddenly could not pay. Foreclosures began; housing prices stopped rising and began to fall, and more foreclosures ensued. Then the entire overheated banking edifice came crashing down, to be explained more carefully in my third forthcoming installment.

Such Golden Years

As to hopes for pensions and retirement status: Republicans shed crocodile tears over the supposed “underfunding” of Social Security based on the fact that retiring baby-boomers will not leave enough younger workers in the system to pay the taxes to fund the program. Democrats defend Social Security but also believe pensions and 401k’s, etc., are good bets. Of course younger workers have to do the work that will lead these investments to be profitable. If the investments are in other countries, those countries’ finances have to stay good and accessible. More fundamentally, what retirees really will need is actual attention paid to them. No national policy on pensions can guarantee that in advance, which neither party ever thinks about. Savings and pension funds and perhaps Social Security too were if not lies based on a false notion that the system as it was could keep going on on forever.

Still to come:

2. The Limits of Consumptitivty;
3. How the Attention Economy is (Semi) Incompatible with Money;
4. One Result: Banking Has to Go Bonkers
5. Any Chance of a Soft Landing? Possible humane policies for the new era