More to markets than selfishness

My recent Atlantic review of Yochai Benkler’s new book on cooperation and selfishness is heavy on the assumption that evidence of our lack of selfishness poses a real problem for standard free-market models of human behavior. And it surely does. A couple bits from the review:

The Penguin and the Leviathan seeks to dismantle the pervasive assumption that humans are motivated primarily by narrow self-interest. This is a seductive axiom, from standard economic analysis to fields like public-choice theory and game theory.


While most readers should be amenable to this conclusion, it is hard to overstate the extent to which it clashes with economic dogma. Nobel Prize-winning economist and New York Times columnist Paul Krugman chastised his profession in a 2009 essay for “mistaking beauty for truth,” claiming that economists had “turned a blind eye to the limitations of human rationality.” This vision of rationalityassumes the very narrow version of selfish motivation that Benkler deflates, and yet it continues to be central to the practice of economics.

But there’s another aspect here that I had hoped to weave into the review but didn’t because of length and complexity. And that is, basically, that selfishness is only one of the two big, high-level reasons why markets work better than planning. The other piece, arguably of equal if not greater importance, is complexity. Here’s Arnold Kling in a Q&A with (yes) himself:

Q: Why are so many intellectuals hostile to capitalism?

A: Because many intellectuals do not have first-hand knowledge of economics. They have heard that “incentives matter,” and this confirms their impression that capitalism is based on greed. Even intellectuals with training in economics take away from “incentives matter” the message that “we” (meaning intellectuals making policy) should manage, or at least tweak, everyone else’s incentives.

Q: How would you break down that hostility to capitalism?

A: By de-emphasizing “Incentives matter” and instead emphasizing that “unintended consequences matter.” That is the message of Adam Smith. It is the message of Hayek. Once we embed people in complex economic and political systems, selfish intentions can turn out well (because of competition), and good intentions can turn out badly (because of imperfect knowledge).

Dismantling the assumption of selfishness raises problems for free market economics, but one still has to grapple with the Hayekian emphasis on complexity, information, and unintended consequences. I’ve written about this before, as I think the internet also raises some important questions on that assumption too. From that post:

Markets prevail over central planning in large part due to the stupidity cognitive constraints of central planners.  We can only gather and process so much information.  Which means our actions have unforeseen consequences, the future is hard to predict, etc.  Here I’ll lean on Cass Sunstein channelling Hayek in his book Infotopia:

Hayek claims that the great advantage of prices is that they aggregate both the information and the tastes of numerous people, incorporating far more material than could possibly be assembled by any central planner or board… For Hayek, the key economics question is how to incorporate that unorganized and dispersed knowledge.  That problem cannot possibly be solved by any particular person or board.  Central planners cannot have access to all of the knowledge held by particular people.  Taken as a whole, the knowledge held by those people is far greater than that held by even the most well-chosen experts. (pg. 119)

I go on to throw out some thoughts on how the internet is changing the way in which we think about information overload, and how that might be relevant to markets. But the point I want to make here is simple: my review focuses on the problems with selfishness as an assumption, and how that matters for economics. It’s a mistake to ignore the Hayekian side of the free market coin. So, even though I couldn’t fit it in the review, I wanted to raise it here. If I were a free market economist and I wanted to dismiss Benkler, I’d use Hayek.


Not all internet intellectuals are created equal

Evgeny Morozov has a brutal review of Jeff Jarvis’s latest book up at The New Republic. Here’s a quick bit:

HAD JARVIS WRITTEN his book as self-parody—as a cunning attack on the narrow-mindedness of new media academics who trade in pronouncements so pompous, ahistorical, and vacuous that even the nastiest of post-modernists appear lucid and sensible in comparison—it would have been a remarkable accomplishment. But alas, he is serious. This is a book that should have stayed a tweet.

There are at least a dozen equally harsh parts. As it turns out, I’m not a big Jarvis fan. I’ve tried to read his blog before but found it tiring. Morozov uses Jarvis as an intellectual punching bag, picking vapid quotes and highlighting misinterpretations of more serious scholars. To some extent any “public intellectual” can be criticized for not bringing the depth of academic work to bear on the subject, but for my money if you’re looking to balance seriousness and accessibility you can do better than Jarvis. I go to Clay Shirky and Jay Rosen for slightly brainer but still public-facing thoughts on much the same subjects. (Here’s something recent from Shirky that I liked.) And of course, one can go more academic still into Lessig, Benkler, Wu, Zittrain, etc.

More importantly, someone could write a similar screed against anti-internet thinkers like Carr and Keen. But they’d be picking on the weak ones, rather than taking on more able opponents like Morozov or Matt Hindman. So what’s Morozov’s real beef?

Why worry about the growing dominance of such digitalism? The reason should be obvious. As Internet-driven explanations crowd out everything else, our entire vocabulary is being re-defined. Collaboration is re-interpreted through the prism of Wikipedia; communication, through the prism of social networking; democratic participation, through the prism of crowd-sourcing; cosmopolitanism, through the prism of reading the blogs of exotic “others”; political upheaval, through the prism of the so-called Twitter revolutions.

Morozov specifically references Benkler here:

Of course, there is no denying that the Internet alters our ideational and cognitive landscapes. A civilization that prides itself on building a Wikipedia is likely to have certain ideas about democratic participation, cooperation, research, expertise, and human nature. (The title of a 2009 talk by Yochai Benkler, the smartest Internet utopian and in many ways the anti-Jarvis, captures the stakes quite well: “After Selfishness: Wikipedia 1, Hobbes 0 at Half Time.”)

think about Yochai Benkler’s work in a slightly different way. Rather than crowding out, it’s opening doors. We don’t re-interpret collaboration through the prism of Wikipedia, as much as Wikipedia gives us a lens to better understand collaboration. As with all good science, the metric is usefulness. I get Morozov’s worry here, but don’t think it need apply to the quality work being done by serious scholars. In that sense, the problem is the abusers of digitalism, not digitalism itself.


Review: The Penguin and the Leviathan

I have a review of Yochai Benkler’s new book up at The Atlantic today. Here’s the gist:

Benkler had described and classified the possible motivations driving Wikipedians in his 2006 tome The Wealth of Networks, in which he analyzed the Internet’s impact on the economics of information. In his new book, The Penguin and the Leviathan, Benkler builds on the lessons of Wikipedia to explain why humans cooperate, and to debunk the notion that we are compelled singularly by mere selfishness. The book is, in his terminology, a response to Wikipedia’s greatest gift. In taking aim at selfishness, Benkler puts in his crosshairs a fundamental tenet of modern economics, and this, ultimately, is what lends the book its relevance and gravity.

It’s a good book, and here’s my bottom line:

Benkler’s guidelines are useful at the micro level, but they are not far enough along to provide much guidance at the macro level. Whatever the merits of the Washington Consensus, it is an actionable macroeconomic agenda in a way The Penguin simply is not. This is not a criticism of Benkler himself, as he has done as much as anyone to push forward these lines of inquiry. But, given his framing, one cannot help but feel frustrated knowing that universal selfishness is both empirically wrong and yet necessarily at the heart of how we make decisions about economic policy.

Benkler’s work is both a formidable refutation of the assumption of narrow selfishness and a useful guide to building successful cooperative projects. And while the false assumption of selfish rationality will for now continue to guide the formal modeling of the macroeconomy, The Penguin and the Leviathan equips readers to begin changing the public conversation on the question of how humans work together. It is comforting to be reminded that most of us are not fundamentally selfish. It is long past time that our institutions in business and government realized as much.

I have some related thoughts to blog on this that I couldn’t fit into the review, but in the meantime, I wrote about much the same subjects last year in my post Markets and Networks.


Peer Production and the Medium Chill

If you haven’t read Grist’s David Roberts on his idea of “The Medium Chill” go do so now. David is a great writer on energy politics – my day job – but I’d venture to say this is my favorite post of his. He’s also collected others’ responses here and here. I want dive into one dimension that has been mentioned only briefly. First, here’s David:

The medium chill involves what economists call satisficing: abandoning the quest for the ideal in favor of the good-enough. It means stepping off the aspirational treadmill, foregoing some material opportunities and accepting some material constraints in exchange for more time to spend on relationships and experiences.

The case for this is quite compelling in my view. And David’s main reasoning behind it is that many people would be happier this way. If we all worked less, we’d get to spend more time with loved ones, perhaps we’d exercise more, make more friends, devote time to our hobbies, etc. And there’s good psychological research suggesting that these things are quite important to our happiness and mental well-being. There’s actually good reason to think that achieving some level of mastery at work is an important source of happiness, but it’s unlikely that we have to spend 60 hours a week to derive that benefit, nor should we accept that work is the only context in which to achieve that sense of mastery. That gets me to what I want to explore: how the medium chill might also make us, in some sense, more productive. David hits on that briefly in one of his follow-ups:

More and more labor is shifting into informal/voluntary non-market contexts, a trend that’s both inevitable and desirable. Clay Shirky once said of Wikipedia that it is “best understood not as a product with an organisation behind it, but as an activity that happens to leave an encyclopedia in its wake.” More voluntary activities will leave useful social resources in their wake in coming years, especially when the first large cohort of computer-literate retirees arrives.

Matt Yglesias wrote something along these lines over a year ago:

Meanwhile, it’s more possible than ever for people’s non-commercial labors to have a meaningful impact on the world. I think open source software is exciting. I think amateur mashups are exciting. I think digital distribution of albums recorded on the cheap by people playing music for fun while holding down day jobs is exciting. I think fan fiction is exciting. I think people who work at universities and other non-profits writing blogs to inform and entertain is exciting. I think people diligently recording the progress of their neighborhood and organizing for a better city is exciting. Wikipedia is, of course, indispensable these days and Wikileaks is doing a tremendous job.

I wonder where this will take us. At the moment the cohort of people with the most opportunity to engage in non-commercial activities—retirees—is the very same cohort that’s least inclined to avail itself of digital technology. When Web-savvy people start retiring, I think we’ll see an explosion in non-commercial production. And can we extend it to other kinds of information goods beyond music and writing and brief amusing YouTube videos? Is open source pharmaceutical development possible? And if it’s not possible, what policy changes might make it possible?

Think of this in terms of the basic economics for a moment. We need to produce various useful goods and services. We rely on firms – and the market at a broader level – to coordinate the division of labor necessary to produce these things. We need managers and org charts and work plans to overcome the basic fact that, left to our own devices, we wouldn’t really be able to get much done.

That was the old assumption. It largely made sense in a world that wasn’t connected. To produce sophisticated goods requires collaboration and, pre-internet, collaboration was quite expensive. All that is changing. There’s a new model in town – what Yochai Benkler calls “commons-based peer production”, which I’ve written about here. Today, coordination within large groups is relatively cheap. That’s how we’re able to produce Wikipedia, Linux, and Ceiling Cat.

Let’s return now to the medium chill. Even pre-internet I’d find David’s formulation compelling. Even just on enjoyment alone he has a strong case. But in our new low-transaction-cost world I believe his case is even stronger. It seems at least possible that if we worked less, we would actually produce more of value. Whereas, the added spare time would have once gone almost entirely to leisure and time with immediate family or nearby friends, today much of it could conceivably be spent creating information and cultural goods like software, music, political commentary, and more. Added to all the other benefits of the medium chill, I think it sounds pretty good.


The epistemology of Wikipedia

The Atlantic tech has a great feature for Wikipedia’s 10th anniversary, featuring thoughts from a number of excellent contributors, including Shirky, Benkler, Zuckerman, Rosen and more.  Check it out.

One point of interest for me was a contrast in epistemologies offered by novelist Jonathan Lethem and Clay Shirky.  Lethem:

Question: hadn’t we more or less come to understand that no piece of extended description of reality is free of agendas or ideologies? This lie, which any Encyclopedia implicitly tells, is cubed by the infinite regress of Wikepedia tinkering-unto-mediocrity. The generation of an infinite number of bogusly ‘objective’ sentences in an English of agonizing patchwork mediocrity is no cause for celebration

Now compare that to Shirky:

A common complaint about Wikipedia during its first decade is that it is “not authoritative,” as if authority was a thing which Encyclopedia Britannica had and Wikipedia doesn’t. This view, though, hides the awful truth — authority is a social characteristic, not a brute fact.

So far, that’s basically the same critique that Lethem offers.  But unlike Lethem, Shirky offers a pragmatic version of epistemology:

Authoritativeness adheres to persons or institutions who, we jointly agree, have enough of a process for getting things right that we trust them. This bit of epistemological appraisal seems awfully abstract, but it can show up in some pretty concrete cases.DARPA, the Pentagon’s famous R&D lab, launched something in late 2009 called “The Red Balloon Challenge.” They put up ten red weather balloons around the country, and  said to contestants “If you can tell us the latitude and longitude of these balloons, within a mile of their actual positions, we’ll give you $40,000.” However, because the Earth is curved, DARPA also had to explain the Haversine forumla, which converts latitude and longitude to distance.

Now, did DARPA want to write up a long, technical description of the Haversine formula?  No, they did not; they had better things to do. So they did what you or I would have done: They pointed to Wikipedia. DARPA, in essence, told contestants “If you want to compete for this $40,000, you should understand the this formula, and if you don’t, go look at this Wikipedia article.”

Shirky’s account strikes me as the kind of pragmatism advocated by Richard Rorty, of whom I’m a big fan.  What makes something true in a post-metaphysical world?  Well, how about whether or not it helps you track down the balloons and win $40K?  Hurray, pragmatism!

I recognize all of the above is less about Wikipedia and more about philosophy…so thanks for indulging me this post. But do go read The Atlantic’s package.  Particularly Benkler’s response.  I’ll leave you with this Benkler nugget:

That, to me, is the biggest gift Wikipedia has given us; a way of looking at the world around us and seeing the possibility of effective human cooperation, on really complex, large projects, without relying on either market or government processes.