Michael H. Goldhaber

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.

[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.

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.

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.

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.

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

The Hyperlinked Society, the book I’ve referred to before, is a  book which shares the common faults of printed versions of conferences. Though the very word “conference” suggests the possibility of a rich dialogue among participants, the printed version tends to suggest no attention paid to each other. Here, for instance, there are two chapters on maps and the Web — the second much better than the first — each covering much the same topics, but not noticeably referring to the other.

What makes all this more problematic than it might be is that the stated subject is poorly chosen. Hyperlinks are ways to move attention from one web page to another. They are vital for the web crawlers or spiders that allow search engines to work, and without them the web as it was about 20 years ago would never have come into being. But what about everything besides hyperlinks that go along with them? Compare this topic with having a conference on the effect of screw threads on society. It would be hard to imagine modern life without the use of screws, bolts, threaded pipes, and threaded jar caps, but, still, singling out this one invention used in so many different ways would not really get you too far. Watches and plumbing both relied on screw threads, but that connection is not very revealing about how watches or plumbing affected modern society.

Likewise, from the very first, the hyperlink was merely one link in the chain of inventions that have made the Web significant. Hyperlinks would not have been of much use had they not been preceded by the personal computer, the graphical user interface, the computer mouse, packet switching and the Internet backbone. Since Tim Berners-Lee came up with the Web framework, tens of thousands more software innovations have come pouring forth. These include browsers, bookmarks, bookmark bars, cookies, java, mp3’s, file sharing, php, SQL, pdf’s, web portals, blogging software, easy to use listservs, community sites (Craigslist), on-line auctions, a whole series of search engine algorithms, e-Bay, Amazon, Yahoo! and Google, WordPress, quicktime, social media, multiplayer games, Wikipedia and wikis in general, SecondLife, VOIP, cloud computing, etc. Plus the negatives such as computer viruses, worms, spam, phishing, etc. And all sorts of hardware innovations in connections to the Internet at both ends, such as cable modems, wi-fi, smart phones, digital cameras, search-engine server farms, and so considerably on. Some of this depended on the hyperlink, and some did not. Singling out this one invention leads only to murk.

Tighter and Stronger

Attention is basically not mentioned in the conference report, even though changing the direction of our attention is what selecting a hyperlink most universally does. It is much more fundamental to see the Web in terms of attention than in terms of the technical device of hyperlinks. As each new invention of software or any other form of expression is added via the Web, the resources that can be used or rearranged for future additions grow, and the more people will find some way to channel their attention through it, leading to still more inventions, which, not so incidentally, are modes of attention getting in their own right. As is also not said, as this goes on, the effect is that new modes of attention getting and attention paying are added. No matter what personal tastes, styles, predilections, attitudes, and forms of comfort someone has, some aspect of the Web is likely to be able to fit with them, to provide channels of attention highly suited to all that. And the fit will continue to get better and better. (Even those now not linked at all, with no computers or modems, for instance, will be pulled in through new hardware initiatives and inventions as well as more complelling software of all sorts.An interesting example of how the attraction increases and changes with new resources such as Facebook and Twitter and continuous updating of minor news of each person involved is offered in “I’m so Totally, Digitally Close to You,” by Clive Thompson in the NY Times.)

These reflections suggest a key prediction, not found in the book, of course. The Internet, which encompasses the Web and more, and its attendant devices and software together are like a single giant and growing Black Hole, pulling us all in faster and faster, and ending up much more attractive than all else. And just as light is not released by an ordinary black hole, attention is more and more tightly held through this all, where instant or very fast responses are the standard. (More than ever, traveling far away in space, say to Mars, would put one out of the loop, and probably unacceptably so. While the real worlds of the Internet expand to include all sorts of “virtual worlds,” the reality of the planets fades in importance. When we travel inward to virtual worlds, we find many others there; by comparison the planets are barren, devoid of anyone who can pay us attention, and far less evocative.)

But What About the “Real World”?

David Weinberger, at the end of his piece in the book, comments on people who fear that Web users will ignore “the ‘real’ world,” and then he adds a footnote to point out that he puts quotes around “real” because there is “only one world.” His point of course is that there is nothing unreal about the Web. I wouldn’t say it is much use to assert, for these purposes, that there is only one world, for each person has a certain horizon of attention the uniquely defines what, practically speaking is this person’s world. Seeing the Internet as black hole means that the parts of it that each person connects to more and more tightly is an increasing part of that person’s reality.

The word “real,” as in “get real” is of course often used pejoratively, to imply someone is not dealing with “reality.” Reality in that formulation can mean “economic reality — i.e. the old money economy — or simply material reality, as in, say, tables, chairs and breakfast cereal. But in fact reality for each person not only continually changes but is refracted an reflected through the minds of other people. The growing Internet is increasingly the channel of that refraction and reflection, that re-pointing of attention to what now becomes most real.

“Real,” then suggests a contrast with “unreal,” but the latter can mean ideal or abstract, as in mathematical truths, or wishful thoughts, hallucinations, paranoid fears, or simply works in progress, (not yet “realized”) or simply the so-called virtual worlds instantiated by such “games” as SecondLife. If each person has in effect her own world defined by the reaches of her attention, it will contain some elements of all of these, but the parts that can be viewed as real are the parts that cannot be changed purely by that person’s wishes or emotional changes without the intervention of others, but can be changed when others agree. Within the new black hole of the web, even mathematics (or religious truths) ceases to be purely an unchangeable ideal but rather depends on agreement among a circle of others. Some supposed “real world” entities, such as prices, lose a clear claim to reality, while other entities, like global warming, which cannot be individually perceived, increase in reality, because they emerge in a new consensus. We —or rather, some of us— are more and more in touch with aspects of the old “concrete reality” that we would be kept from were it not for the Net.

How that effects our psyches I will say more of in the next installment.

Why should we elect Obama? One obvious reason is the mess the American Economy (as traditionally defined) is in right now.  Does this mean that Obama and his economic advisors will come up with good plans for reviving the economy and preventing a further slide? I suspect they would do better than McCain and his crew, but also that they will not be very well equipped themselves to understand the real problems. They come from the University of Chicago or at best are of the Robert Rubin-Larry Summers school, which in my mind makes them more part of the problem than the solution. Still Obama, if elected, will have a huge positive impact, I suspect. Let me explain, starting with a bit of history.

The Post-war Surpluses…
After World War I, the US became the leading world economy in conventional terms. This status was considerably strengthened after WWII, which had mostly destroyed other advanced economies, while building up huge reserves of demand everywhere, demand which US industry alone was in any position to satisfy. The US ran a long trade surplus, partly because it stimulated trade by foreign aid, particularly via the Marshall Plan, which aided Western European recovery after WWII. The trade surplus helped promote good factory jobs, and the money earned through such jobs filtered through the rest of the economy, keeping employment fairly robust. This was further aided by high military spending, along with other government spending such as on the race to the moon, which was often financed through borrowing.
The Deficits that Followed …
However, by the 1960’s, with the lengthy Vietnam War and a continued growth in optimistic government programs, government priming of industrial efforts expanded too much, and a cycle of inflation commenced. That problem was added to in the early ‘70’s by the formation of OPEC, which led to an abrupt rise in oil prices. That led in turn to a US balance-of-payments deficit.
Now, a strong argument can be made that a balance-of-payments deficit resulting simply from high oil prices is not much of a problem; the OPEC countries were just taking advantage of a situation they had relatively little to do with, since the oil coming out of their territory they usually didn’t even directly do much to produce, leaving that to western companies or contractors. Their spending on luxury goods or armaments or their “recycling” the money to the US by investing in US businesses only enriched some Americans at the expense of others. (In fact, to the extent that the US was the main recipient of recycled oil payments, it might even have benefited from payments made to the OPEC countries by other oil purchasers.)
The main effect in the US, then of the initial oil shocks was to redistribute money mostly upwards from factory workers to investors. But since a large portion of US investment is channeled through institutions such as pension funds, non-profit foundations, university endowments and the like, the riches from abroad were distributed more widely than to a small investor class.
However, the combination of inflation of wages through union contracts and higher oil prices caused profits from domestic industries to stagnate or fall. Then the heads of the institutional investors such as pension funds, along with bankers who stood to profit from recycled oil investments and other capitalists, pressed for a combination of measures. These included restraints on unions and higher productivity, or failing that, moving  production offshore to lower wage countries. The wealthy and would-be wealthy also pressed for lowered taxes for themselves,  In addition, a relative fall-off in US innovation led to big gains by exporters from countries such as Japan.
All of this increased the balance-of-payments crisis, since now (that is by the 1980’s) not only raw materials, but also manufactured goods were coming from abroad. How was the US able to sustain this continued trade deficit? One main reason was that the flow of attention to the US was and remains very large, though it is now shrinking fast.
The Attention Economy to the Rescue…
Being tied together via advanced communication (i.e., attention) technologies, the US is a huge and mostly inward looking audience, which means that US stars have a built-in advantage in dealing with the outside world. The larger one’s existing  audience, the more attention outsiders are likely to offer. This advantage is compounded by the fact that English, spoken as a first language by more than half a billion people, it is a second language for many hundreds of millions if not several billion more. In addition, creators in the US have figured out how to make action movies and video games that attract even across language barriers to a surprising extent.
Being  a fan makes you feel part of the most visible fan base; it also makes you eager to please the stars you care about. IN the case of American stars on the world stage, their existence exalts the whole country in the eyes of others. The net outflow of payments in money was counterbalanced therefore by a net inflow of attention payments. This meant foreigner were eager to get close to the stars by various sorts of loans or investments in the US, with Japanese investors at one point buying up Rockefeller Center in NYC and Arab investors buying stores such as Saks Fifth Avenue. Neither of these probably made a great deal of sense as strict monetary investments, but they made much sense as homage to famous and star-used institutions. In addition, living in the most advanced attention economy has come to mean living with few restrictions on expressions and a ready fan base for new stars, even if they come from abroad, in whatever field they happen to be. America now depends on this openness to maintain its place in the world.
….. But Then Came W…
All that has been eroded by  Bush administration policies, however. Its invasions of Afghanistan and Iraq, its use of torture, its condemning prisoners to Guantanamo, as well as its resistance to immigration, has eroded, and if it continues, will further erode the US attention advantage.

…So Now we Need O.
Due to his race, his personal background, his intelligence and relative youth, Obama’s election, just by itself, will markedly change perceptions of the US. If he is bold enough to follow through on his promises to change foreign policy, especially  around Iraq and  in terms of increased diplomacy, as well as in areas such as global warming, he will greatly increase the world’s willingness to pay attention to everything American. The 200,000 person crowd he attracted last week in Germany, plus the excitement about his candidacy in much of the world already attests to this. He may be a “rock star” but that is just what we need.

Crash-free No Longer

In a recent post, I discussed the current problems re sub-prime mortgages and the credit crunch in connection with ignorance in high finance and in general. The complex entities that are investment banks, which were supposedly highly knowledgeable as organizations, actually were quite in the dark, quite ignorant in fact, when it came to the mortgage problems. I argued that someone has to be knowledgeable and interested for a problem to be understood — some specific person, that is. An organization that has no one paying attention can’t function in a knowing way, in other words, and as we move further towards an attention economy, there are additional reasons to stay ignorant of what is not essential to grab an audience at the moment. As I was thinking about those issues, it occurred to me that there seemingly was a clear counter-example, namely the complex organization that is responsible for the fact that there have been no major US airline crashes since 2001.

Now, airline crashes are prevented by a combination of knowledge of what keeps planes airworthy and prevents collisions, and this knowledge as embedded in a mixture of physical  instruments, physical mechanisms and careful adherence to complex inspection and control protocols that make sure the instruments and mechanisms  are in good working order and are used correctly. But this too does not happen without there being dedicated people who pay attention to keeping all these protocols actually functioning. In the piece I was drafting, I was going to write that if no crashes occur over a long enough period, inevitably attention will shift and the the protocols will stop being followed so assiduously, so that eventually further air crashes will  occur, even though we now apparently know extremely well how to prevent them. We will lose that knowledge as active knowledge  over the course of time, because we just won’t think we need to know it if we never have crashes to remind us.

Well, it now turns out that in fact this disintegration had already begun. Luckily enough, there was enough redundancy left  in the inspection system — apparently, in this case Congressional oversight— for someone to notice that the chief federal agency in charge of airline safety had stopped doing its job. In fact, the successful period of no crashes was already the result of past momentum, not current care.  It could be that the alarm caused by the recent revelations will keep someone connected with the system making sure for awhile that it holds together, but for how long? Currently, American Airlines is in financial trouble and passengers are very annoyed because many flights have had to be canceled while forgotten inspections are finally performed. How many times would this have to happen, before passengers would insist that inspections are not really necessary? The inspectors in this way might eventually be forced to be more lax until an actual crash occurs. You cannot have knowledge without attention, but the need for attention also promotes ignorance, as I showed earlier.

Pfffffffft

Meanwhile, what of the financial system? Could it be that the “masters of the universe” who run it are so ignorant of the actual workings of what they do that a much more complete meltdown than has already taken place is possible? (After I drafted this very post, I learned today that George Soros has just come out with a book proclaiming the breaking of a super-bubble in the money economy.)  Why the possible meltdown? What would the ramifications be? As with the Enron collapse, and as with the recent sub prime debacle, the people running things seemed awfully smart and knowledgeable until it turned out they had vastly overestimated their own knowledge, or at least convinced others to overestimate it. That can happen, perhaps, to the whole current financial system. What has happened is that just as the Internet in the broadest sense permits all sorts of new social inventions with unpredictable effects, such as Facebook, it also permits a wide variety of new financial inventions,  which in reality do nothing but allow money to be moved around in new ways, and perhaps merely create new, purely numerical wealth, wealth that can certainly be turned into goods, but which stems really from nothing other than mathematical legerdemain with various complex financial instruments.

If we look at the apparent growth of the US economy since 2001, it is quite possible that most of the so-called additions to  GDP were actually only growth in the “products” of financial firms, as measured by their overall earnings. In this case no real extra anything — except numbers — was actually created. Furthermore,  these numbers only have value to the extent that the “instruments” behind them remain sufficiently credible to enough players. In other words, financial performance can be viewed, increasingly, as indeed a performance, a form of theater, which works only while there is a sufficient “suspension of disbelief” while the audience is transfixed and mesmerized. If and when that stops, the air can just go  “pfffft” out of the balloon, in much the same way as it did for Enron.

Nowhere Safe to Park?

The new rich, the old rich, plus things like university endowments and standard pension funds —  and other forms of insurance for that matter, all have to “park” their monetary wealth somewhere. Mattresses are decidedly out of fashion, since they don’t keep up with inflation. Of late, the parking lot of choice has been more and more in these new financial forms — hedge funds, buyout firms, or other exotic schemes. The alternative is mostly more traditional forms such as corporate stocks, mutual funds, bonds or even government-backed bonds. None of these is actually secure, at present. Nor, by the way, are even the more old fashioned holdings such as gold. (Gold retains its worth only if the industrial world swallows it fast enough, which requires a high level of industrial production.) Because finance is now such a large part of everything, all these supposedly reliable old-fashioned forms of wealth can fall if the financial sector falls far enough. Hedge funds and buyout firms very much need leverage in the form of extensive borrowing, but if there is no assurance suddenly that they can pay back, the value of these funds can quickly disappear. But if that happens, ordinary stocks, also based on confidence in future performance are much more vulnerable now than in the past. Very few firms simply are made up of solid assets such as factories that have fairly definite break-up values. Instead most firms today rely on the promise of innovation yet to come to retain their current value. (For all stocks, there is a ratio of price of the stock to current earnings that is often of the order of 20 to 1. That means that for an average  investor just to break even, the stock will have to pay out the same earnings for twenty years, or alternatively the profits will have to grow over a shorter time frame. In today’s world, twenty years is a very long time horizon. Meanwhile while shorter-term growth is always risky to assume, and especially so in a downturn of any duration.)

Also, current stock valuations are very tied into the workings of the financial sector these days. For instance, bankers are constantly flying first class around the world. If banks slow down, so do airlines, and numerous other related industries. Because we no longer have a (money-based)  economy that primarily produces things, and still less, fairly necessary things, a large part of it can become completely unstuck quite fast.
Since the US government, at least, has been run on substantial borrowing even during a supposed growth period, while facing increased payouts for social services such as medicare and social security even if it does nothing. So its indebtedness may become too great to pay off. There goes the reliability seemingly safe investments such as treasury bonds. Pension funds, increasingly necessary for an aging population, since they have to rely on funds parked somewhere, yielding some  not-too-small rate of return, may not be able to hold up either. That would mean a disastrous meltdown that would strorngly affect amlost everyone in the US.

Glooom, Doom,and the Bloom of the Real Attention Economy?  Away from Money?

Now, maybe these visions of “doom and gloom” are unwarranted. Quite possibly  the whole system will easily stave off collapse. For instance, it could be that the tremendous flexibility of Internet connection will allow credit crunches to be overcome with new kinds of assurances and money routed in new ways. It is possible that alternative currencies, informally constructed, will be able to replace the dollar. And so on. It is even more possible that the collapse will not so deeply effect the euro or the renminbi, etc. But given the still pivotal role of the US, it is also possible that the doom and gloom would spread across the globe. If so, we will suddenly begin to find ourselves in a new world. It could be that what emerges from the mess will be a much fuller Attention Economy with money playing a much less key role, and eventually virtually no role at all. That , while definitely no utopia, may be the best that one could reasonably hope for.

Here, I am of course speaking of the real Attention Economy, or Attention System, Epoch, Society or World which I have been discussing in the is blog and elsewhere for years   —  and not the advertising-based  much less important system that other people who use this term have come to mean. This real Attention Economy already is quite important, as I have tried to show earlier, when I pointed out that attention “transactions” are already far more common and influential for most people in the advanced countries than are money transactions. The standard economics profession as well as most people who focus on business have remained utterly blind to this fact. But the real Attention Economy, based of course on the scarcity and desirability —for persons— of the attention that can only come from other human beings, is entirely differently structured and organized than is the monetary, industrial-based or capitalist economy. That is why this new system  ultimately does not run on money in any form.

In the next installment, I will explain in detail why the (real) Attention Economy probably can only grow at the expense of the standard forms of the money-industrial system, and why both probably cannot co-exist for too long. This is another reason we may be headed there now. If it is coming, thought must go now into how to mitigate its bad features, while still benefitting from its good ones.

Lately, much has been written about the “dilemma” of too much e-mail. See Zeldes et al., or Krill for instance) Some write on this from the perspective of firms. They suggest that “knowledge workers” are spending too much time on e-mail, time when they could be being “productive.” The writers claim that we must deal with the “problem” of “information overload” or “infomania” as if this were something new, and as if there were a possible global “solution” to this “problem.”

I suppose the authors of these arguments would add instant and text messaging, messages over social networks such as Facebook or in Second Life, various forms of teleconferencing, and so on. I’ll just call all this e-mail for short. Also, I’m not concerned with spam here, but with e-mail that somehow seems worthwhile to the recipients. This supposed e-mail problem cannot be looked at in the ahistorical way the writers suppose, but must be seen in the context of changing economic systems. It is that context I will focus on here.

The “Prudent King” Beats Us to It
Information overload as a phenomenon is of course nothing new; the term was in use long before e-mails were ubiquitous, starting easily 30 years ago. Well over 500 years ago, although no one had heard of the term “information overload,” King Philip II of Spain along with many of his aides, were inundated with handwritten reports, requests, queries, etc. They kept this “prudent king” busy from morning to night for over 40 years. King Philip thus mostly held together a huge empire, but what made him the ruler was precisely that numerous people sought attention from him and in so doing, necessarily gave him attention in return.

Today, one of the main reasons people read their e-mail is undoubtedly because it gives them the sense of being at the center of attention — in effect the centers of of their own little personal empires. After all, each e-mail received demonstrates that someone thinks they are important enough to try to get their attention, at least apparently by paying them attention in return. E-mail appears to be addressed personally to the recipient, and often is. The very fact you have received it means someone seems to have been thinking of you. If you fail to respond, you run the risk of falling off the radar. If you make it impossible for anyone to send you e-mail, you lose a sense of your own importance in the outer world.

A Fan’s Notes

Or think of e-mail as like “fan mail.” A star can measure her worth by the amount of this she gets. She may choose to reply formulaically, but if she can stand the effort of replying —at least minimally — in person, she is likely to tighten her connection with fans. In terms of e-mails, each person becomes a minor “star,” who who would suffer a small defeat were she to disappoint one of her fans. Equally bad is to disappoint part of her apparent audience collectively, say the members of some formal or informal listserv [by an informal listeserv, I just mean a group of people who are cc’d together quite often by any one of them] or a social networks such as a grouping within Facebook. To ignore what such groups send out or never to take active part in their interchanges risks losing one’s role as a focus in that community.

This talk of stars and fans might hints that something new is happening. What? One major difference between King Philip’s day and now is simply technological. In the sixteenth century, sending messages over many miles was an arduous process from beginning to end — arduous in the hand writing, sealing, finding a messenger to to take it in general the direction of the king, and then often waiting many months for the message to reach the King’s palace, where it might languish for more months before being answered.

Technology has certainly advanced since then, and even since the more widespread notice of information overload thirty odd years ago. Before personal computers were widespread, sending a written or typed message was much more complex than e-mail is, and often required some sort of use of a stenographer, secretary, personal assistant or typing pool to be at all efficient. This meant that relatively few were in the position of originating letters. With e-mail has come a great democratization, but that just means far more e-mails can be sent and therefore received.

When you receive an e-mail, furthermore, it is extremely easy to open. Neither you nor anyone else has to pick up, sort, and distribute the mail. No one has to open each envelope individually or unfold and mark the letter within as received. It arrives with an automatic date and time stamp. All this encourages the flow of ever more e-mail.

Beyond the Obvious

However, change at a deeper level is also taking place. The number of people who now work or spend time in settings where they easily can send and receive e-mails has grown fantastically. Compared to King Philip’s era or even to thirty years ago, a far higher percentage of the world’s people do not have to engage in actual physical labor, such as farming (or tending flocks) rowing the galleys, carrying things and people on their own shoulders or backs or in their saddle bags, making things, being part of armies, etc.

Philip II ruled early in the development of market-based industrialization. Today industrialization is fading out in terms of the hold it has over people’s actual lives and focus. In the twenty-first century a whole new kind of economy — the Attention System (or the Attention Economy as I define it, not as in Davenport and Beck or others who think it only deals with advertising or simply the paying but not the desire for or receiving of attention) — has now come to the fore. An increasingly large — even if not formally or consciously recognized — preoccupation is the securing, individually, of the scarce attention of the rest of the world — or whatever part of this attention one can snag.

The aim in this new economy is not to be productive from the viewpoint of the firm in which one formally happens to work, which is tied to the old economy. Regardless of where one works, what is of increasing importance is the attention one receives, wherever it comes from, via networking of whatever sort. Companies can only hold themselves together if their leaders (formal or informal) can genuinely hold a great deal of the attention of both their wider audiences and of their own workers. But they cannot hope to succeed in this just by shutting off outside connections, especially today, for with the wide variety of means to to stay connected to whomever one wants — Blackberries, iPhones, browser connected e-mails (Yahoo! or Google, for instance) and the many social networks — even an employee locked into a company has plenty of ways of reaching and being reached by those outside it.

Worth Stressing?
This does not mean that the new economy is somehow stress free or devoid of competition. Quite the contrary, in fact. The total attention the world can offer is limited; thus the competition for it keeps getting hotter, once it becomes seen as desirable in any form. E-mail’s ease means that is going to continue to be relied on, and by more and more senders, many of whom will continue to seek to make their messages as irresistible as possible. The senders do want attention after all.

By age three or four, most children have learned to modulate their efforts to get attention depending on their own sense of urgency and the circumstances. One learns, for instance, not to scream at full volume at all times. Adults dealing with e-mail have mostly developed a keen if not always conscious sense of how to get attention for themselves, through their ideas, jokes passed along, pointers to others deserving of attention etc. They and their recipients will continue to refine these abilities, some with greater success than others. That is about the best we can hope for.

Each person must develop her individual ways of dealing with the overload and handling the stress. Whoever is less easily stressed or finds inner resources that allow better coping will likely do best. The limitations of e-mail mean that cultivating real relationships in person will continue to be highly necessary for some time, and finding the right individual balance among the complex of relationships, real and virtual, will be essential.

Don’t Drink the Kool-Aid

But no general contrivance to reduce e-mails (always excepting true spam) can work, whether for a firm, some other kind of association, or for the world at large. Any such attempt ignores the very value of e-mail receiving as well as sending for the individual. It ignores the rise of the Attention System (Attention Economy). Whatever contrivance is tried will surely lead to work-arounds, usually rendering the contrivance null and void in short order. If work-arounds are impossible, loyalty to whatever entity has adopted the contrivance will plummet, so its adoption will prove counterproductive. (I would guess most smart leaders intuitively grasp this anyway, so they are unlikely to adopt such contrivances in the first place. )

A Burden We’d Better Bear
Information overload really means not enough attention to satisfy everyone’s desire for it. This can only end if almost everyone agrees not to compete for attention — or if the entire technosphere breaks down in some general calamity. A peace treaty of the first sort seems far, far away. Let’s hope we escape a calamity as well. If so, then information overload or infomania will be with us for a long, long time.