Dec 192009

[Note: I recently took part in a conference in New York at the New School University on “The Internet as Playground and Factory,” chiefly organized by Trebor Scholz, a professor there. What follows are my reflections afterward.]

As with others, if a bit belatedly, I join in offering kudos to Trebor Scholz and everyone else involved in bringing about and running the conference, handling the complex logistics, volunteering their time, etc. The conference was a success for me in stimulating a lot of thoughts, introducing me to some quite interesting new people, as well as renewing a few old friendships. What I heard from Catherine Driscoll, Gabriella Coleman, Fred Turner and Chris Kelty seemed especially fresh and insightful, and it was probably no accident that the last three spoke in a session delightfully moderated by Ted Byfield. There were more than a few other talks I was sorry to miss. However, based on the majority of the sessions I ended up attending, including the final plenary — and maybe I chose badly — what I heard had also had a negative side, which I think is worth addressing.

The Internet is arguably the largest collective creation of humanity in all of history. In various degrees it has incorporated an ever-growing series of inventions, modes of participation and very widespread involvement in one or another of its forms, from e-mail to blogs to social media to search engines etc, etc. All of this activity I think fits neatly under the broad rubric of work and/or play, to which the conference seemingly was addressed. Yet I think from Trebor’s intro on, the conference on the whole mischaracterized this vast and unparalleled achievement, seeing it as primarily a source of profits for capitalists. The prime evidence, beyond an ideological bias in favor of such views, comes from the fact that corporations officially own many websites and try, sometimes with some success to make money, principally by selling advertising and by offering data they collect as tools for advertisers.

In order to be outraged at this, a number of speakers at the conference take it for granted or loudly proclaim that very bad results can come from this, including the highly nonsensical claim that extracting data on from the actions, say, of Facebook users, amounts to infinite exploitation. This is a total misuse and misunderstanding both of what goes on with advertising and of Marx’s (anyway antiquated) formulations. Marx would have laughed uproariously at this absurdity, I suspect.

Incidentally, the same person who made that bizarre claim misstated Google’s stock policy — falsely asserting that employees do not own shares — and misunderstands Facebook’s terms of service — implying that the company asserts rights to use personal creations in other settings for its own reasons, rather than to permit users to post pretty much where they expect to while still acknowledging their ownership of their own “intellectual property.” In each case, the bias is towards making capitalism re the Internet seem considerably worse than it actually is.

It is not just one person’s shocking incomprehension that is at issue, for a number of other speakers focussed on the practice of collecting data from users as the basis for their intense criticism of the Internet, as well as for proof that it is fundamentally a capitalist tool. Advertising is an annoyance at best, in my view, but the idea that there are some highly vital data about personal preferences that advertisers can grab hold of and somehow influence purchases strikes me as exaggerated, unimportant and of basically trivial impact on individuals. That’s so even assuming, which is often not the case, that these data are at all useful in drawing Internet users’ attention to what is advertised. These ads rarely work, because we are already inundated with too many ads, leading us to ignore them however they are presented. Further, knowing that somebody was interested in a category of item or service as recently as as a few minutes ago may be utterly useless in reaching that person now, because they quite likely already made a relevant purchase and do not want more ( A new suit? A new mortgage? A new plane reservation? —Too late, already chosen or rejected.)

Likewise, we are supposed to be very worried about governments finding out our political convictions or other damaging information. Since when do inquisitions bother with accurate fact collection? Domestic spy agencies from the KGB to the FBI act on the basis of misunderstandings, rumor, innuendo, outright lies, prejudice, corruption, etc. By asserting that “Big Brother is Watching” we only help spread the paranoia that in Orwell’s novel the slogan was designed to create. Detailed and precise data collection has very little to do with it.

Anyway all such data collection is done only because capitalist firms have found few other ways to make the Internet — and the services through it that people enjoy — pay for themselves. Advertisers and governments are always desperate for new tools, but that doesn’t imply that the tools on offer will be of any great use to them, or even that very much will be paid for such data or for very long. Meanwhile, the Internet keeps functioning in other ways of much greater import. As I have long argued, and find more valid than ever, the Internet is primarily a system for individuals to obtain attention for themselves, even if they do make use of channels provided by corporations. (By the way, Lenin supposedly said, more or less, “the capitalist will be happy to sell you the rope you will use to hang him;” why do I suspect some at the conference would say, ”Don’t buy the rope; the capitalist will make a profit” ?) Using these tools adroitly we may get some form of socialism, or we may simply find that those who do use them have created a new kind of post-capitalist class economy. In the latter case, would-be supporters of socialism would certainly need to understand the new system if they hope to make progress in their preferred direction. For those wearing the heavy blinders that many did at this conference, no such enlightenment would be possible.

As is typical of most academic conferences, a great many of the papers only discuss trivia because that is the route to academic success. This seems particularly true in the sorts of theories put forward under the guise of cultural studies; I found it indicative that after the conference several people think the most exciting thing that occurred was a discussion of in terms of Said’s “Orientalism” as applied to a miscellany including the “Mechanical Turk” and and Chinese ‘World-of-Warcraft gold” hunters. The point is not wrong, and it may reveal a bit of bias, but given that numerous participants in Internet firms hail from or work in various Asian countries and are treated with just about the same respect as anyone else, the charges of Orientalist exoticization seem overwrought and beside the point. This is simply not anything to get excited about except for scoring purely academic points. It says nothing about the value of the Internet, or even about how it might better promote international exchange and understanding.
Along the same lines, another conference participant is fond of asserting that billions of people have been dispossessed by capitalism. As he uses it, this seems more a rhetorical stratagem to criticize capitalism than any indication that he wants to try to see how the Internet might be used to help ameliorate that suffering. In some ways capitalism is to blame for such immiseration, but the situation is complicated. So many would not be suffering were it not that since the advent of industrial capitalism population has grown rapidly as famines and infant mortality have been much reduced, even in the worst-off countries. This due in part to better food distribution, higher crop yields, better hygiene, vaccination, some spread of drugs such as antibiotics, and the like, for which capitalism certainly deserves some credit.

In most social systems historically, there were many who were supernumerary; in the past most such people were killed in infancy, starved to death or had to to take up vows that kept them from reproducing. Less of that happens now, though they still live with much less than others in the same culture, and very often live permanently quite close to starvation. It is a huge and horrendous problem, but not one that should be used for scoring purely rhetorical points. The Internet does hold out great promise in this regard, but that is not a promise that many at the conference seemed much interested in investigating, forwarding or even discussing.

Another comment at the final session, from Jodi Dean, struck me. It is that she had finally been convinced by Christian Fuchs that “communism” cannot be achieved without “computers.” One reason this struck me is that it is such an old idea, dating back to the 1950’s, when the Soviets and others — such as the Western economist Wassily Leontief — in fact devoted considerable efforts to investigating how to use mainframe computers to do better with central planning. But I also found it odd that in the context of this conference Professor Dean would say “computers” rather than “the Internet,” which has much more promise in terms of bringing about some sort of participatory socialism.

Jodi Dean is well-known for promulgating the thought of “communicative capitalism” to describe the Internet,,etc. It’s very easy to claim that whatever change has occurred is just some new sort of capitalism, but this hardly an analytic success, as I see it. Of course any term can be stretched to mean whatever one chooses, but hiding distinctions in this way is not necessarily perspicuous. To be sure, Dean is far from alone in engaging in such broad use of terms like capitalism and capital. “Human resource” people widely speak of “human capital,” though it hard to see how a human a can be capital (for herself), and certainly not simply by being educated as they imply. Likewise, Pierre Bourdieu was fond of such terms as “cultural capital,” which again is certainly not capital in the Marxian sense, and does not suppose the same sort of exploitation as plain old capital. Many on the left, such as David Harvey, and many not at all on the left take most changes in the life around them to be proof of the continued strength of capitalism, when an entirely different possibility is utterly neglected. Inflating a formerly precise term in this fashion should be avoided if one wishes to speak with any sort of intellectual or analytic precision, certainly in a conference such as this one. But that is not widely done.

All this highlights for me that what some cleave to as “theory” does not seem deserving of that name. I started out my professional life as a theoretical physicist, and as I changed fields still referred to myself as a social theorist. I love theory, if it is good theory — of many sorts from astronomical to zoological, from political to literary theory. By good theory I mean a search for new understanding , often through new concepts of what the world is, how it works, how it can work, and what it should be. Such theorizing has to be self-examining, subject to doubt and critique, always a bit tentative, and certainly constantly tested for its coherence and meaningfulness against new ranges of experience, as well as in comparison with other theories. It should of course strive to be rational, but it can never and probably should never be that purely. To get anywhere, not all hypotheses can be put in question at the same time, yet nothing should be beyond examination. Theory must always be seeking to add new kinds of observations and predictions, examining how it comports or contrasts with other theories, whether it can be improved in its logic and strength of conclusions, where it is on possibly shaky grounds , in what ways it can be useful rather than merely descriptive or pejorative, when it is prematurely reductionist, when it can no longer easily be extended, when there are aspects of the world it has has overlooked, etc.

Good theory must always be — to use a favorite post-modernist term — transgressive —as well as audacious, surprising and offering up new concepts, which lead to new percepts. But even the best theory, by the time it is articulated and typeset, is surely wrong in some significant aspects. It always must be subject to critique, modification, enlargement, and eventual abandonment. Any textual formulation of it is by no means Holy Writ. It is not to be quoted with an air of devotion, or as if by itself it stands for or can prove anything.

For too many people at the conference, I found, too much is taken for granted; too much is asserted without compelling argument; existing texts are treated as if sacrosanct and unarguably correct, as if they were bits of the Bible and we were fundamentalists; and metaphoric or analogical points are taken for logic or careful analysis. (Though thought — as Derrida among others has indicated — can never fully escape metaphor, that is no reason not to seek to do so.) Again, too much that is said seems to be intended as nothing other than academic preening. That leads to highly mistaken assumptions, focussing on trivia, unwarranted smugness, and other irksome behavior. It makes intrinsically intelligent people come off as fools or jerks.

Three things are widely held to be true in the western world today: first, that we live in a more or less strictly capitalist society; second, that, except possibly for some sort of socialism, nothing other than capitalism is possible; and third, that capitalism is much to be preferred to socialism. (What socialism is generally taken to mean — especially in the US, but increasingly elsewhere — is usually some variant of Stalinism. With this definition, if the first two hypotheses are taken as correct, a good argument can indeed be made for the third.) Many or even most participants at this conference reject only the third hypothesis, pointing to or taking for granted the evils of capitalism, while also leaving unstated and little thought how a humane socialism would work. But how do we know that our system is primarily capitalist? Certainly not just by assertion. Nor by metaphor. And equally not by superficial observation of capitalist forms and notions, for the question has to be what other forms might be present at a less explicit level. In other words, without new concepts we cannot clearly perceive what is around us.
But having made the conceptual break with capitalism, perhaps most participants find it too hard to take a further step; perhaps many of you already feel yourselves too far out on a limb. Or, as I suspect, an adherence to Marxism is enough to secure a comfortable academic niche, so why even think of questioning it? One can publish endless papers finding some way to criticize, say, the Internet as inherently and irrevocably capitalist, without having to have any thoughts of doing anything about it. (One speaker even sneeringly joked that he was going to use Facebook to organize a march on Washington in favor of single-payer health care. Many smaller but effective organizing projects have in fact been accomplished through Facebook, but the built-in sneer evidently better preserves his academic pretenses.)

That’s not how to do good theory. The humanist tradition quite honorably has taken up exact quotation, and a desire to get back to the text, in the case of poetry —in the largest sense — or in studying what a particular author thought or said. Such activities are commendable, but they should not be mistaken for theory, any more than a portion of a painting or snatches of a symphony would be . Not even a mathematical formula, not even “E equals m c- squared,” can rest in that light.

All this is true of scientific theories, but it is even more vital to consider when dealing with theories that refer to the state or the future of humanity, for through its own actions the human word is in endless flux. What were indisputable “laws” cease to be, what was the state of affairs has changed. Marx himself wrote in 1851, “The tradition of all dead generations weighs like a nightmare on the brains of the living.” Whatever he exactly meant by that then, it has value for us only if reinterpreted to apply to now. Marx’s own work and that of everyone who came after him — in whatever tradition — is today part of a similar “nightmare.” To live now, we must be fully awake to now, not letting the clanking chains of our dreamt ghosts entrap us in fears and formulations of the dead past., not the past of the1860’s, nor the 1960’s, nor even more recent times.

Sep 082009

Paul Krugman in Sunday’s NYT has an article entitled “How Did Economists Get it so Wrong?”

It’s fine as far as it goes, I think, but it misses so much, since it just focuses on financial economics. No mention of the growing wealth inequality in the US and its effects, such as forcing people to buy on credit, or using their homes a piggy banks (as long as the price was supposedly rising). No mention of the problem with the assumption that existing workers who lose jobs once they get moved abroad can find good new ones. No mention of the dubious belief that more international trade is always a good thing. and no thought at all that standard economics won’t adequately describe the actual world forever (or even now).

Jul 092009

I wrote this years ago, and just stumbled on it:

You can be a big star, or a successful achiever in any field, but still feel that no one really understands you, that no one pays attention to what you really are or what you really want to express, perhaps because you are afraid to express it. In that case you get very little attention, or so it must feel. Your life is meaningless, since no meaning is conferred on it by others — in ways that feel real to you.

Could this be Jackson’s pain?

Jul 092009

The war between Google and Microsoft is really heating up with Google’s promise of a new operating system and Microsoft’s new bing or ping or whatever it is. Out of sheer lazniness in trying Ping, I searched an article I wrote a decade ago in Wired. In both google and bing I found a Polish article referring to my work. Each search engine allowed a translation. bing’s was “As Michael Goldhaber: the importance of our lives is expressed, which spend us other. Without devoting attention life would be worthless,” whereas Google’s was “As Michael Goldhaber writes: The meaning of our life is a criticism that we spend more. Without attention to the force would be negligible .” Quite a competition, wouldn’t you say?

As nearly as I can tell, what I actually said was “Meaning is conferred by others through paying attention. Without attention life is not meaningful.”

May 112009

I am not a big fan of the numerical sociologists of the Internet , Fang Wu and Bernardo A. Huberman., but I thought for a bit they had finally come up with something interesting with their paper “Persistence and Success in the Attention Economy”. Their data reveal a seeming paradox: the more videos a person uploads on YouTube, the less likely the video will be an attention success, that is will garner more than 1% of all downloads for videos uploaded in that week. They make it seem that persistence in continuing to upload new videos in that situation is foolish at best.

What they ignore is that seeking attention does not automatically mean seeking the widest possible audience. Given the popularity of Youtube overall, there are probably many specialized audiences, and it could well be that persistent up-loaders are seeking and even have found a substantial niche audience, even though it be less than 1% of the undifferentiated total. They also ignore that uploading a video takes very little effort, is free, and may be intended just for friends or relatives. What this study really demonstrates is only that individual motivation cannot be determined just by numerics. An actual look at the videos of the “persistent” up-loaders would probably offer more insight into the aims behind them.

May 012009

In earlier posts I noted that even if “Wall Street” is temporarily saved and more carefully regulated, it will be difficult to prevent a meltdown similar to the current one from happening soon again. The reason is that it will be impossible to prevent new risky ways of playing tricks to obtain high returns by manipulating digital money streams. This is under way already. Banks have found apparently legal ways to cook their books to make it look as if they are very profitable, when they still have plenty of toxic assets. This allows them to plan large bonuses so that their “talented” employees don’t head off to greener pastures (or pig farming). Paul Krugman has pointed out the dishonesty in this, but can anyone prevent this kind of shell game? The more it is played, the faster money in any form will cease to be useful. …

Here comes Facebook feudalism! …even sooner than I expected.

Mar 052009

To continue my study of the causes and possible cures of the meltdown, I want to discuss how there have seemed to be three different routes to making money.

I do this in the context of my general prediction for  over a decade, which  has been that the attention economy will eventually replace the money-industrial economy, in all variants, including capitalism. This means that money will eventually be outmoded. For an early version of this view, see here.

Attention Money

In the interim period, of uncertain length, I have suggested that money increasingly flows to those who get attention. It is simply that attention-payers (or fans) are willing to do much that attention receivers (or stars) want, including, often paying them or sending them money, or simply sending money to something such as a charity that the star supports. Thus attention that one receives is a draw for money, though exactly how much is always uncertain. Since attention itself cannot be directly quantified in precise numerical form, it is not possible to state how much attention is worth how much money. Still, the connection, though vague, is nonetheless real. Further, an attention-getter who loses what money she has gotten before is still in a fairly good position, most often, to cash in on her attention yet again, and recoup her losses.

Industrial Money

But what are these two other kinds of money? How are all three related? As I and others have said, money has  primarily been a way of keeping track of routine, standardized goods, services, labor etc. This because money itself is standardized, with one (current) dollar being just as good as any other, and the same for other currencies. (For most of its history, money, in the form of coins and bills was itself a standardized, manufactured product.) So industrial money is just money, used to buy goods and services, used to pay wages, used to allow comparisons between different kinds of goods, etc. When we think of money, this is what we tend to assume about it. Nothing new here.

But what happens when attention gains in importance as the competition for it heats up, through means such as the Internet? More and more, money becomes attention money. One effect is that ordinary wages begin to sink, relatively, since by definition, performing  an ordinary job, say in a factory, means getting very little attention. As it happens, I saw a YouTube video a few days ago, about clothing assembly workers in Bangladesh, forced to work very long hours for very low pay, only to be fired forever by the time they reach age about thirty-five  and are deemed by the managers to to be burnt out. Obviously the workers seen in  this video get more attention than the average third-world worker, or even many first-world ones. But still, even in the video intended to draw attention to these workers’ plight, the individual workers were not on the screen long enough even to be identified if seen again. Suppose one of them somehow manages to become an effective spokesperson in the west for her co-workers. Then that one worker would receive far more attention than all the rest, taken together, presently get, and might well end up in a very good position money-wise. But she would be an exception; for average industrial workers, down is the direction wages can be expected to go.

As I have explained elsewhere, consumption requires attention, and, as our attention is taken up in other ways, acts of consumption of industrialized goods and services are unlikely to grow enough to keep the world’s workers employed, which is another way of explaining the downward direction of wages worldwide. As automation, process design, and off-shoring reduce attention to ordinary workers, they also increase attention to the instigators and designers of these processes. So arises a vicious circle in which workers get still less attention and their wages relative to what stars can receive keep sliding.

The reason down-tending wages have not utterly destroyed the typical US standard of living in recent years is largely because of the existence of the third kind of money, to which I shall now turn. It is finance money.

Finance Money

Of course, finance has very long been a part of any money-based economy. Purely financial  transactions have been essential since at least, say, the 12th century, and in some instances much earlier, for such steps as: making loans necessary to carry out business; issuing funds in suitable amounts; buying and trading shares in businesses; allowing money to travel from some collection of it at point A to point B, where it could be utilized to buy something; insurance; and so on. Of course there has always been some amount of legerdemain tied into this, from desperate but clever ad hoc attempts to balance accounts somehow to knowingly false promises, Ponzi-like schemes and so forth. There have also probably always been a few operators who genuinely thought they had some great scheme to increase their or others’ wealth through sufficiently clever  financial transactions. At times, such efforts have had pretty large effects, but I suspect never at the magnitudes the recent financial debacle both resulted from and has revealed.

While there were out and out crooks — now exposed because the meltdown no longer gave cover for their tricks — more common were people who were simply over-confident, greedy, and insufficiently thoughtful about the seemingly clever things they were doing. The cleverness amounted  to finding ways to siphon off relatively small amounts from transactions made enormous by the computerization and speed of modern finance, as well as its complexity, openness to innovation and the like, all of which were fed by digitization and computerization of money transactions. If everything had had to be put in writing, worked out on paper, or sent at slow speeds from office to office, the complex monument to itself that finance has become could never have been created. However, recognizing that the speed of transactions and computations made a qualitative difference to what they were doing was never much of concern to to the financial players. Anyone who stopped to consider that, like a baseball player refusing steroids in the era before steroid use became testable and scandalous, would have probably fallen by the wayside.

Instead, through a variety of mathematical methods, clever programming, and the sheer speed of transactions, any number of traders, brokers, hedge-fund managers, analysts, and their ilk appeared even to themselves to be creating enormous wealth, essentially out of nothing. Those who did that best became a special kind of stars, financial stars. Even though known only to others within the fairly tight world of finance, the key innovators could make names for themselves and draw imitators as well as payments of the magnitude big public stars get. As long as we lived in that strange, somewhat phony world, the financial stars also received public acclaim, if not by name, then by a following based on the wish to emulate them, which was often to be accomplished by sending them,  or the banks and funds who relied on them, our own funds to play with.  Thus finance money, in a way is also attention money, although in the finance case, it is also the medium of stardom. Finance stars score up points in the form of money raked in in the same way that basketball players earn stardom through getting large numbers of baskets or assists.

The excesses of the financial world, though hard to justify on the basis of their effects outside finance, certainly did have some such consequences. The most obvious example was the housing built under the crazed conditions of the housing bubble. That meant construction jobs, etc., which did buck up the underlying industrial economy. But it is unlikely that the finance money will roar again anytime soon, if ever. All the attempts to bail out the major banks so that they will lend again I strongly suspect will not work. We still don’t know how to unwind the banks form the vast variety of complex financial instruments and indeterminate debts that they have accrued. If all legitimate  monetary deposits could be transferred to new, smaller banks, that might set banking back on a sounder footing, but it would still be a footing in which the fear of issuing loans would be much heightened. And with good reason, foe  growing percentage of possible borrowers would have little or no reliable collateral; with housing prices, stock prices, and secure  jobs all plummeting who is a reliable borrower? The newly sound banks would have smaller overall assets and more stringent debt limits, so they couldn’t even loan out as much. The economy once shored up by debt now can no  longer be. (By the way the call to nationalize the banks, using as a model what  Sweden did some years ago, is unlikely to help because Sweden operated within a more or less stabel European banking in environment, and the US is far too big to operate inside any kind of outward stability; if Citigroup and AIG were “too big to fail,” the US is both too big to fail and too big to succeed from this starting point. )

Meanwhile, no one dares be so profligate as the finance wizards were anytime soon again. The unregulated reliance on fancy mathematical formulations has probably received its death knell. But still, I think, no one has that much of a clue how such elaborate financial complexities can appropriately  be regulated. These are temptations that any system of transferring money, with any kind of even temporary  provisions for lending will now be prey to. As computing power and Internet capabilities continue to spread, more and more people will be in the position to manipulate money or anything replacing it as some sort of currency/indirect barter. How can all such efforts be prevented? Only by our ceasing to trust money at all, or ceasing to use it in transactions, which amounts to the same thing.
Finance money quite possibly has disappeared into the dust, never to return. But finance money, of course, is (or at least was) money, in that, for instance, the bonuses received by bankers could be used to buy whatever they wanted. That is going, or gone, as well.

From the Blank Checkbook to Facebook “Feudalism”

If money becomes less reliable or less useful  to prop up the standard of living, we would be heading fast for a pure attention economy, in which goods and services flow directly to those who have attention from those who pay that attention and who somehow provide the services. Making goods for the attention getters would also be forms of paying attention to them. In an arrangement that bears a bit of resemblance to feudalism , the attention payers will have to tie themselves to the stars in order to get any attention , including the material attention they need to live. This would not be as simple as feudalism though, in that each fan will be tied to numerous stars. The fans who do things for stars will also be called upon by these stars to do a certain amount for their fans. The world will resemble Facebook, with fans “friending” stars in large numbers, and in that way connecting too to one another.

All this is a very abstract sketch of what might happen. The details have to be filled in by further social invention. Because of the Internet, that filling in might happen rather quickly. What the world will feel like in detail when (and if) the dust clears is hard to say. Will we have restaurants, supermarkets, private houses, governments, police forces or what? Perhaps nothing that looks particularly like any of these, but instead a host of new,  not yet imagined institutions that somewhat substitute for them.  It’s too early to say for sure.

Feb 272009

Re blogged from Wednesday, August 30th, 2006 with very slight changes:
This blog focuses on the coming of the Attention Economy. Every so often, I shall remind new (and even old) readers of what I mean by this term.

The basic idea is that we are moving toward a new kind of economy, wildly different from any before.

An economy in this sense is system of actions and transactions of some kind involving scarce but desirable or necessary entities, with the multiplicity of such transactions intricately tying an entire society or several societies together.

Attention here means attention from other human beings. Because we each have limited capacity to pay attention, the amount available is inescapably scarce. The more some have, the less others must have. This is so even though attention is really quite difficult to quantify with any precision.

Attention is necessary for all humans. It is also desirable, with no limit to how much a person can actually want. As long as it seems possible to garner additional attention through the Internet and related technologies, more and more people will go after it, increasing the level of competition for it and thus the overall scarcity. This leads to a vicious circle in which attention becomes more and more sought after. Its pursuit more and more fully comes to occupy most people’s efforts.

So far, to a considerable extent we have moved toward this new economy without any real consciousness of it. We largely analyze our affairs in the increasingly misleading terms of the old economy, in which such measures as GDP, employment and wage rates, inflation rates and the like are the key indicators. But these terms came into use in an economy dominated by the industrial manufacture of standardized goods.

One of the first such standardized manufactured goods was money itself (in the form of coins). Now, increasingly, money tracks attention. Those with a great deal of attention can easily obtain money, should they want it. Those with little attention will have a much harder time obtaining money. But this relation between attention and money may itself be transitional. When and if we fully enter into the attention economy, money may lose any significant role.

The attention economy, like any economy historically different from the industrial, market-based economy in whose terms we are all used to thinking, will have its own different implicit rules, roles, cycles, values, etc.

Feb 192009

[Note: this is another entry in my attempt to make sense of the crash and see how it is tied to the Attention Economy. Some earlier entries are here, here, here, here and here.]

I attended an informative, thought-provoking and amusing talk by Prof. Brad DeLong of UC Berkeley on Tuesday on the financial crisis “of 2007-2009” (he expects the crisis to have diminished by the end of this year). (The talk was part of the OLLI series on the crisis).

DeLong is primarily an expert on finance, and perhaps for that reason I felt his focus was a bit off. Along with most economists he seems to assume:

1. Nothing has fundamentally changed; industrial capitalism will go on much as it has “once the crisis is over”
2. There is no problem with the assumption of endless growth and endless increases in productivity, and no contradiction between these and full employment
3. The source of the crisis is fundamentally financial in nature.

I disagree with all three of these assumptions. (Of course, finance is far from my specialty. )As DeLong made clear, unlike most recessions since 1950, this one was not caused the Federal Reserve’s raising interest rates in order to dampen inflation. Further, a graph at the beginning of his talk, showing employment as a percentage of adults  (I assume from 18 to 65 years old) revealed that while employment ratios grew tremendously from 1970 on as a result of feminism and women’s  entering the workforce in droves (voluntarily or not), the employment ratio fell sharply in 2000-2002, and did not recover at all completely before this current sharp downturn.

In my view the unwarranted growth of the financial sector over recent decades, and especially more recently, covered up declining incomes among much of the populace. Further, the issuance of low cost and even poorly vetted mortgages and other forms of credit, including home equity lines, covered over the reduced buying power of ordinary workers. That arose from the more intense international and automation-related competition of the past decade and a half. Construction work cannot easily be off-shored, but it was eventually bound to come to a halt or at least sharply slowed down. So the lowered purchasing power, which  was hidden by too-great credit expansion and construction work combined, is now visible. Increasing credit and even a stimulus package, unless it is to be repeated again and again, cannot prevent this buying power reduction. Also, as labor productivity continues to rise, barring hugely increased government spending (on what?) consumption cannot reasonably be expected to rise at a rate that will allow full employment.

What of the financial  sector itself, with its rich profits in recent years and high wages and other remuneration? To be sure, capitalism requires a financial sector to move credit to new areas, etc. But how big should it be? Just as computer-based automation has cut jobs or lowered wages in other sectors, it should have done this even more dramatically in finance.  Given any fixed set of financial transactions, most steps are routine and can easily be turned over to computers, as anyone engaged in personal online banking, purchasing and bill paying should be well aware.

But rapid computation and rapid money transfers via the Internet, etc., have allowed a new  kind of financial activity, including all the vaunted derivatives. While some minimal level of trade in such things may have had beneficial effects outside the confines of finance itself, to a large extent it has become a sector that operates completely in its own sphere. The only actual connection to the rest of the world are the dividends to bank-holding-company shareholders, returns to hedge-fund investors, and the super-high bonuses paid to many finance-sector workers. Many of these gains, of course, were reinvested, and have now partly or wholly disappeared, but others were spent on various luxuries, which did create considerable employment outside the pure financial sphere.

The essential activity of this sector, however, amounts to the equivalent of shaving the coins passing through, but, using electronic funds transfer and operating digitally, the returns per finance worker appear much larger, and there are no tell-tale shaved coins to be seen. To the extent the financial activity encourages investment by outsiders in the stockmarket or other kinds of instruments, it also appears to create wealth by inflating purely financial prices, such as the prices of bundled mortgages or of many common stocks. But that mythical wealth simply disappeared in the downturn.

Risky financial shenanigans, as DeLong eloquently argued, are hard to prevent or regulate, but they can be seen as adding only mythically to the GDP. When the balloon is punctured, the more accurate state of affairs returns, though very much to many people’s discomfort.

My uses of terms such as “mythical” and “accurate” in the preceding two paragraphs is perhaps slightly slanted. If prices are what people will pay, these inflated values are no less accurate or no more mythical than any others. So let me instead suggest that in addition to what may be called industrial-product value and what might be referred to as attention value, the finance sector creates an additional sort of value of its own, call it “transactional value”, that has little basis in either of the others and has a balloon-like quality of growing until it bursts, which describes what happened recently and what can happen again. But the underlying question as to why it happened now is not fully explained by that description.

Further into his talk, DeLong presented a slide stating that, of 80 trillion dollars of financial assets before the meltdown, only one trillion had been invested in bad mortgages. Nonetheless net financial assets have declined by 25%.  The other 19 trillion were, according to him, reduced because too many assets have been discounted either because of risk or because of lack of information. I see it somewhat differently. Assets, such as stocks, were overvalued before the crash on the same basis as mortgages, that is with the assumption of endless growth. For example, stocks are priced to reflect prevailing assumptions not about present profit levels continuing but about future growth of profits. In most cases these assumptions were just hopeful and not fully warranted. Because there was so much money floating around, it had to go somewhere and ended up in the stock-market, driving prices up. Anyone who had invested in a typical stock earlier saw the asset growing in value, even if there was nothing besides these more recent stock purchases underlying that appreciation in price. Similarly, new inventions and commercial real estate, as well as other sectors, had gained because of unwarrantedly rosy assumptions. Now that  it is evident that Americans are in debt and have no further home equity to draw on, they are on the whole in a much worse position to purchase anything, or even to pay off loans. Thus the current credit crunch and reduced spending are not due to jitters beyond the mortgage crisis but directly related to it.

In the question period, someone asked DeLong whether the crisis was partly caused by flat average wages since 2000. Pausing to consider this question, as if for the first time, DeLong opined that that was not a very significant factor in the current troubles. Had the questioner asked whether the growing inequality of incomes and wealth between the rich and everyone else were  partially at fault, would the answer have been the same? Had wages risen as in earlier periods, keeping pace with productivity growth, the need for borrowing would have been much less, so either ordinary people would have been able to save, or consumption would have been at a higher level. The financial sector would not have gotten so far out of balance. So a key question is, just why did wages not grow?

One answer is that the existence of home equity and easy borrowing lowered labor pressure on wages, but I doubt that is the whole answer. Workers were afraid to ask for  wage increases, because the more they took home, the greater the danger that their work would somehow be off-shored or automated. If, as I have suggested repeatedly, we are moving towards an attention economy,we are the stage in which income crudely speaking tends to reflect the attention a person gets. DeLong gets paid more than a typical factory worker, for instance, because he gets more attention. Still, he get not nearly as much attention as Alex Rodriguez, and that is reflected in the difference in their emoluments. Higher productivity would increase incomes only to the extent that the workers in the automated factories impart some essential aspects of themselves; if they are fully replaceable, they remain pretty much invisible. Within the ordinary manufacturing and services sector, only the designers of processes and products have much chance to get attention, however indirectly. But even they must compete for attention. That leads to a limit to growth. All acts of consumption are acts of attention paying, and there is only so much attention to go around.

Why has this not always been so? Because the competition for attention has kept heating up of late. Thus attention inequality and wealth inequality partly track each other. The financial wealth that is now disappearing was somewhat outside that, so attention and wealth May be even more fully aligned in the future. Insofar as this is an industrial depression, more off-shoring and faster productivity growth will coincide with further downward wage pressure and more invisibility for ordinary workers and for many corporations that do not have compelling visions at their heart.

Finally, let me add some thoughts about the stimulus and its likely effects. I’ve long been a Keynesian as far as the standard economy, so I do welcome a stimulus, and wish it were even larger. DeLong didn’t say much about it in  his talk, although generally agreeing with me so far. But he does say more on his blog. He suggests there that the ‘multiplier” could be greater than one. In other words, for every dollar the government spends in stimulus, more than dollar’s increase in GDP could result. DeLong cites studies of various American wars to argue that in the past the multiplier was about 0.8. I must say I would have thought it would have been larger. To some extent the multiplier must depend on how rapidly money turns over, that is how quickly money can move from pocket to pocket. It also depends on how  many times the money is spent in the community in question as opposed say to leaving the country. As a crude guess, we should now expect some of the money to be put into savings or to pay off existing loans, but since banks are unwilling to lend, those payments may not help create further employment. Also, money spent on standard consumer goods will partially leave the country, probably at a higher rate than in the past. Thus the stimulus will certainly put people to work but not do quite as much as is hoped.

But the idea of the stimulus package is also to help in other ways, by preparing the US capitalist economy to work better, so that further stimuli are not needed. Of that, I am skeptical. On its own, the stimulus will not do much to create greater equality. It also can do little to redirect rising attention inequality which will be of increasing importance. It will not prevent off-shoring of industrial jobs in both manufacturing and services, nor prevent increases in productivity. While I am an ardent supporter of good education, I also do not believe that increased education or even better eduction necessarily translates into high-end jobs for everyone. (See also here , third graf from the end). Some people will be able to turn their educations into getting more attention for themselves, but others probably won’t. One can hope that educators will instill a necessary sense of community, but at present that seems like a long shot.

I think we are entering a new stage of history, and we don’t yet see how it will play out well for most people.

Feb 132009

Item: In certain places, bar and bat mitzvah celebrations had become intensely competitive, with parents generally responding to kids’ needs to up the ante by spending ever-more money on more lavish and far-out parties. According to a recent report on the public radio program, Marketplace, that included having the celebrant jump through a hoop of fire or be escorted thorough a Polynesian -themed entrance by scantily clad dancing girls. In this competition for attention, the rising sensationalism meant on average no kid would get more attention than before, but the arms race was hard to stop.

And all that spending, mostly on locally provided services, was stimulative to the American (money) economy. Now, however, just when more stimulation is apparently needed, it has become more attention-getting to desist from the arms race and offer an obviously less lavish and expensive and altogether more sober sort of event, one that seems to fit the down-sized times. It just does not do to be too ostentatious in spending in the current recession (or depression). From the point of view of the capitalist economy, this is too bad. Now is when a stimulus is certainly most needed, and people who can spend, it could be argued, have a good citizen’s responsibility to do so.

Item:As the shenanigans in Washington over the stimulus package reveal, plenty of people still can’t get their minds around the idea that spending is needed to revive the economy — assuming it can be revived. President Obama, in my estimation, is himself only partially convinced of this necessity, and therefore has yet not done an effective job of convincing the wider public. He keeps appointing people who also are more culpable than corrective in changing the tide. The dual (if absurd) messages that people on Wall Street deserve high pay for their hard work —much higher of course than many other hard workers — and that saving is better than spending, that in fact too much spending seems to be what got us into this mess, collide and produce cognitive dissonance that leads to fear and inaction.

Item: workers of all kinds in China will work for much less than their US counterparts. Why shouldn’t the banks set up all their operations in China, and why shouldn’t President Obama hire Chinese economic advisors? I’m sure the latter can give just as mediocre advice as he’s getting at higher prices now.

Item: as I just said, workers of all kinds, including high qualifications are available in China and can do anything American workers can do. It’s great for the Chinese if they are employed even at their low wages, but it would be horrible and impossible for Americans to try to get by on such small wages. This is the folly of globalization. It wouldn’t be folly if there were an unlimited need for workers, but rising productivity means that is not so.

One of the things that makes the typical American economist so mediocre is the assumption that we can “get back” to steady growth for all infinity, if we only correct for ecological problems (that part’s ok). This hope ignores that we cannot sensibly consume infinitely much, so that rising productivity eventually has to cause problems. Even in a world in which everyone has a good income, in which institutions and cultural preferences and technical limitations do not limit consumption, the scarcity of attention eventually would do so. But in the real world, where incomes are already decidedly unequal, where most of the world has in fact lost ground as a result of the breakdown of ordinary agriculture as more productive western agriculture has replaced it, and where factories , etc,. get more highly productive all the time, the limiting consumption point has quite possibly already been reached. The average Chinese probably would not want to consume at the American level, or even imagine doing so, and all sorts of barriers anyway prevent that. For the world’s devalued peasants, the idea of huge consumption is still further off scale.

Actually, the turning point was some time ago, I suspect. What kept us from noticing was precisely the overheated financial sector here in the US. The Internet and the like have greatly speeded the rise of the attention economy (in my sense) but it has also made possible a vastly overheated financial sector in which large volumes of money running through could be slightly diverted in order to set up apparently substantial profits that were little more than gimmicks, even if unintentional ones, but these gimmicks for awhile were also justified in issuing mountains of loans that allowed the average person to buy much more than the average declining income would have made possible. That fed, for instance, the credit card binge and the mortgage binge that led to ever higher home prices, leading to ever more toxic mortgage deals, etc. But the collapse of that house of cards just reveals the deeper underlying problems of a bereft capitalist economy. As US consumption was what kept the entire world economy afloat at the level it was, our fall now cascades into others’ economies as well. Pulling the whole world out of it is going to take much more than has ever been seen before, and I don’t see how that more can be more capitalism as usual.

As stock prices sink and profits plunge, the firms that survive will be the ones that continue to increase productivity the fastest, which means shedding even more jobs.

Item: The bailed-out banks have been loathe to lend money to ordinary consumers, because most of them are maxed out on their credit anyway. But the same banks were willing to form a consortium to lend bailout money to Pfizer to buy Wyeth, which will lead to 14,000 layoffs, and that fact might be just waht gave the banks the confidence to lend. So much for the bailout helping keep jobs.

Many economists cheerfully believe that the US can recover its former more advantaged position by developing a more educated workforce which will more design rather than produce goods. However if the idea is that these designers will be able to command a premium for their services on the world market, that can only come about if their designs all get attention from a large part of the rest of the world. In other words, to have what passes for a high material income in an attention economy you have to rreceive a good deal of attention, in this case thorugh your designs or for your share of whatever project you are involved in designing. And there may not be (or, rather, isn’t) enough attention to go around, doing that). Actually, of course these high attention-receiving workers need not be designers; they can be novelists, movie directors, singers, sports stars, and so forth, just as well. But still, comparatively very few of these will get the bestseller kind of attention that is needed.

And other countries’ citizens will be good at starring in these ways too.

The more the old economy sinks under the weight of too high productivity and thus tremendous overcapacity, the faster will be the move towards the attention economy, as more and more people make use of the Internet to vie for attention in new ways. The vast majority of people will find themselves, in effect, to be fans, if they are not chiefly that already. But they will sink in to despair even as fans unless they feel the stars will somehow take care of them. So it is incumbent upon stars who want any kind of a stable world to worry about a pattern of goods distribution that continually improves life for those at the bottom, and does so in more or less sustainable ways. This is what we must try to flesh out, I think, if there is going to be any sort of desirable human future.