Baldwin Wallace University Economics Blog ... thinking out loud ...: January 2012

Sunday, January 29, 2012

…life emulating sy-fy

By kay.e.strong

Syfy is often a bell-weather of the future—a point I like to make when talking with young people who are interested in the possibilities of the future. Take for example, the 1950 movie Destination Moon, a sy-fy film focused on realistically detailing such a trip. What makes this film all the more intriguing is that it appeared seven years before Sputnik’s launch! And beyond that, Sergei Korolev would not make his proposal for an orbiting satellite to the Soviet Ministry of Defense until 1954. The film posited as futuristic: realistic spaceflight, commercial interest in space and nuke-powered rockets.

Likewise, elements suggestive of today’s reality television first popped in sy-fy. Ray Bradbury’s 1953 novel Fahrenheit 451 portrayed live audience participation programming. The Running Man (1987), a loose rendition of Stephen King’s dystopian novel, is a television show about criminals who are released to out run publically-sanctioned professional killers. Twelve years later (1998) the entire life of an insurance salesman aired as The Truman Show. Reality TV exploded…Big Brother, Survivor, American Idol...

As a genre reality television supposedly captures unscripted situations featuring ordinary people jockeying for the public’s eye. It exploits sensationalism, or better, a highly-modified form of reality, to attract viewership and generate sponsorship. Story editors coach participants into staging the desired illusion of reality. When that fails, post-production editing kicks in, gleaning the choicest event, the optimal word, the most suggestive expression. By mismatching audio and video from different footages of film, an altered chronology is proffered as reality.

If you have been alert, you’ve probably figured out that I’m no longer wandering the world of science fiction but rather life itself. Specifically, that pseudo-reality drama called American politics in which life emulates science fiction emulating life!

Take 1: Romney’s campaign pounces on Gingrich with a hashtag, “#grandiosenewt” that runs a news cycle ridiculing Gingrich. If sensationalizing minutiae is the goal, then Twitter is an elegant pimping tool for retail politics.

Take 2: Gingrich’s one-minute post-production video haranguing Romney on dishonesty drew an immediate disclaimer from Huckabee.

“Any use of an out-of-context quote from the Republican presidential primary four years ago in a political ad to advocate for the election or defeat of another candidate is not authorized, approved, or known in advance by me.”

I never liked Reality TV. I like reality TV politics even less. Why? Maybe, because it hits too close to the truth about how shallow the American psyche really is. And, sadly, no matter how many times I punch the “off” on my reality remote it refuses to shutdown. So I'm locked into a neverending loop of life emulating the worst of sy-fy!

Kay Strong, Ph.D., Southern Illinois University, M.T., University of Houston, M.A., Ohio University; Associate Professor at Baldwin-Wallace College; Areas of expertise: international economics, contemporary social-economic issues, complexity and futures-based perspectives in economics. E-mail: kstrong@bw.edu

Sunday, January 22, 2012

…the power of connection

By kay.e.strong

Much attention last week focused on the Internet Blackout, a showdown—somewhat reminiscent of the gun-slinging old Wild West—that pitted staid power-bases against an interwoven network of upstarts scattered around the globe. While designed to flex muscle over the control, distribution and access of bytes and bites, the take away is more portentous.

CBS reported: “On Jan. 18 websites like Wikipedia and Reddit staged a blackout of their sites to protest Stop Online Piracy Act (SOPA) and Protect IP Act (PIPA). Google joined the protest by blacking out their famous logo for a day. A count by the organization Fight for the Future placed the number of sites participating at 115,000.”

In perspective, the outcome fostered by 115,000 sites is a pale blush of the potential power of 582,716,657 connected sites acting in unison (January 2012 Web Server Survey - Netcraft.com).

Bill sponsor Senate Majority Leader Reid backed down whining that the twin evils of counterfeiting and piracy cost the American economy billions of dollars and thousands of jobs annually. On the flip-side, however, downloading free media content from the Internet saves American consumers billions of dollars annually, supports alternative expenditures, stirs the pot of innovation and spawns jobs in imitation industries.

The idea of protecting intellectual property is really about protecting privilege—the privilege of money and power. Money and power move lockstep in an amplifying feedback loop. Money begets power which begets money which begets… bottom line: Own the rules, own the game!

Money buys a seat at the table at which the rules are written.

The concept of intellectual property rights is antiquated—a throwback to despotic rulers positing a royal right to grant monopoly privileges. In this country IPRs are neatly package into the “lone cowboy” series, epitomizing the ideals of self-fulfillment and self-reliance. Rugged individualism glorified and reward.

But nothing could be farther from the truth. Just as spectacularly beautiful coral reefs are built from the dead skeletons of many generations of coral polyps, so are ideas. It was Bernard of Chartes (~1130) who observed: "We are like dwarfs standing [or sitting] upon the shoulders of giants, and so able to see more and see farther than the ancients."

Those clinging to the mythology of IPRs are clinging to vestiges of the old economy, one in decline. In It’s Alive: The Coming Convergence of Information, Biology and Business (2003), Christopher Meyer and Stan Davis describe the economic life-cycle as gestation, growth, maturity and decline. In this final phase enterprises are unable to adapt to new ways of organizing work, they thrive for a time but the period of exuberant growth has ended. Industries have consolidated but profitability is a function of oligopoly power and organization skills rather than growth or innovation.

In their earlier book Blur: The Speed of Change in the Connected Economy (1998), Meyers and Davis highlight the power of connectivity, speed and the rising importance of intangibles characterizing these three as “the derivatives of time, space and mass.”

The Creative Commons has been operational since 2001, thanks to Lawrence Lessig et al. Open-sourcing—that is, free access and redistribution of digital code, media and the like—has long been a silent partner of Internet growth. Engaging collaborative synergies (peer production, massively multiplayer online games (MMOG) and alternate-reality games (ARG) and ResearchGate) is at the heart of new production models, while prosuming (coined by futurist Alvin Toffler in 1980) and freeiums are fast becoming the business model of necessity.

The old economy—hinged together by antiquated rules—daily draws closer to its expiration date. The Internet has proven a worthy opponent in its first spar with those seeking to hold together the old money-power base. May openness and innovation live a long and prosperous life!

And just in case the new kids on the block decide to get cocky; be reminded:

“All comparative advantage is temporary. Some advantages last longer than others, but all sources of advantages have a finite shelf-life.” (Beinhocker 2006, 329)

Monday, January 16, 2012

…my special message to Romney

By kay.e.strong

On January 6^th Romney was overheard delivering this Special Message to Europe:

“No, not a single cent. Europe got into this trouble on its own, and has to get out of it on its own. Germany, France, Italy. They all have the resources to pay their debts. They can solve the crisis, invest and start to grow again, possibly through (creating) a real market economy. The United States has to take care of its own crisis, and will not give a single dollar for saving Europe.”

Seriously, if gigantic red flags are not bursting wildly in your head, then perhaps you’re suffering from the same degenerative memory-eating microbe as Romney.

Hello, Mitt…in what silver-spooned luxury resort spa were you bunkered during the fall-out from the great American-engineered subprime mortgage crisis? You don’t remember it? It went something like this---the US at its epicenter.

American dream legislation ups low-income home ownership
Housing speculation and ballooning housing stock
US housing bubble bursts
US interest rates rise; housing prices peak
Precipitating defaults and foreclosures; furthering drops in home values
Stock market falters
Banks freeze; Washington Mutual, Wachovia and Lehman Brothers go bankrupt
Consumers drained of “paper” wealth; consumer confidence tanks
Consumers repress spending urge; job blood-letting begins
Federal Reserve slashes interest rates to zero; injects liquidity into the financial system
Congress passes assorted rescue packages
Unemployment rate at 8.5% (BLS); unofficial estimate closer to 15%
US poverty rate above 16%
US debt ($15.2T) to GDP ratio is now a 100+%
Fed balance sheet swell to over $2T total assets

And here we are in 2012…government deeper in debt; consumers deleveraged of assets and jobs!

The good news: were not alone! By 2007 the tentacles of the American-born crisis had reached deep into the heart of Scandinavian country. Iceland went bankrupt. International investors lost billions on their holdings of subprime mortgage derivatives. Foreign stock markets flagged. Credit tightened worldwide. Trade slowed, driving growth rates south. European governments pumped the stimulus lever. And European central banks coordinated effort with the US to stem the global contraction.

Does any of this sound familiar, Mitt? I appreciate history is not everyone’s strong suit.

But the mark of a true 21^st century statesman is the ability to see the world as it is…in its full 360 degree panorama mode where local disturbances propagated outward, generating impacts at regional and global scales. Global connectivity through our markets (financial, product, currency) has woven the livelihood of our communities together. Our well-being is highly contingent upon those over whom we have neither authority nor control.

Europe is not your neighbor’s pregnant daughter…and she certainly did not get into this trouble on her own!

Sunday, January 15, 2012

…social symbiosis

Bykay.e.strong

I have to be honest…I have long considered the political scene in this country tantamount to a Barnum & Bailey sideshow (despite having majored in political science)!

“Come one, come all! Witness the amazing ‘missing link’ blathering on about nothingness, the snake oil salesman switching pitches faster than an Indy 500 driver changes gears on a dry straight-away, the spineless and the mental midgets from all walks of life! Come one, come all. And do be amazed!”

But I recently stumbled across a candidate in touch with World 3.0…Elizabeth Warren, whose run for Romney’s US Senate seat in 1994 failed but is back on the November ballot in Massachusetts. Warren brings to the table a fresh perspective, one involving the world as we experience it… complex, interconnected and adaptive. In September as the OWS movement was gaining momentum, Warren astutely reframed the “greed is good” mythology into one of modern day truth: social symbiosis.

“There is nobody in this country who got rich on his own. Nobody. You built a factory out there, good for you. But, I want to be clear: you moved your goods to market on the roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police forces and fire forces that the rest of us paid for. You didn’t have to worry that marauding bands would come and seize everything at your factory and hire someone to protect against this because of the work the rest of us did. Now look, you built a factory and it turned into something terrific or a great idea. God bless. Keep a big hunk of it. But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.” [ http://www.youtube.com/watch?v=hOyDR2b71ag ]

In his 1975 book Sociobiology: the new synthesis, E.O. Wilson introduced social symbiosis as it related to the insect world, particularly, ants. By his definition, symbiosis includes all categories of close protracted interaction. When the symbiosis benefits one participating species while neither benefiting nor harming the other, it is referred to as social commensalism. Mixed flocks of birds foraging in the winter are an example of social commensalism. When both species benefit it is social mutualism. Aphids kept as “cattle” by ants exemplify social mutualism. Social Parasitism occurs when one species benefits at the peril of another. (354) Wilson writes that “[i]n its consequences on population growth parasitism does not differ fundamentally from predation.” (354)

Old-man politics is social parasitism still pumping the mythological Horatio Alger message, still relying on backroom fat cats and still shape-shifting without a morsel of conscience, misconstruing Paul’s declaration of being “All things to all people…”

Elizabeth Warren is a glimmer of a new political generation…telling Donne’s truth: “No man is an island, entire of itself...” We are social beings. We live in a symbiotic relationship with one another. We create the society in which we live. By seeing the essence of our world as social symbiosis—individuals linked through mutually supportive networks, then we take our first step in transforming it.

John Donne poem No man is an island speaks to the heart of social mutualism.

No man is an island entire of itself; every man
is a piece of the continent, a part of the main;
if a clod be washed away by the sea, Europe
is the less, as well as if a promontory were, as
well as a manor of thy friends or of thine
own were; any man's death diminishes me,
because I am involved in mankind.
And therefore never send to know for whom
the bell tolls; it tolls for thee.

Wednesday, January 4, 2012

At Last a Utilometer?

By Lewis Sage

Looks as if our colleagues in cognitive neuroscience are on the way to removing one of the most familiar limitations of microeconomics, our inability to measure satisfaction directly. Writing in the Fall, 2011 issue of The Journal of Economic Perspectives, Ernst Fehr and Antonio Rangel review recent fMRI advances that may give researchers a “utilometer,” an instrument whose metric captures that elusive feeling of wellbeing. Economists’ traditional approach to the problem has been to use the principle of revealed preference, the claim that rational people more-or-less infallibly select the most preferred option available. There are a couple of problematic assumptions underlying that model – notably the premises of rationality and precise judgment – but it’s been the best approximation for a long time. We’re a long way from abandoning the principle of revealed preference, but the underlying premises may yield to fruitful revision.

First, the issue of measuring utility directly. It seems that my brain divides the task, using different areas to paint the “before” and “after” pictures, with my ventromedial prefrontal cortex acting as my personal calculator of expected utility and transcranial wire-tapping providing a read-out. Preferences revealed in subjects’ willing to pay to receive a prospective prize (or to avoid a prospective punishment) are correlated with their levels of VPC neural activity. And, supporting economists’ habit of treating costs avoided as benefits achieved, winning and not losing are apparently measured on the same scale and with the same neuroanatomical tool. My experience of utility from actually consuming a good – as opposed to expected satisfaction – is measured elsewhere, in my orbitofrontal cortex and the nucleus accumbens. And there is evidence of a functional connection between these apparatuses: experienced satisfaction appears to be inversely correlated with anticipated satisfaction. Translation: I prefer happy surprises to disappointment. Good to know.

Peeking into the brain also provides insight into the familiar – to economists at least – concept of indifference between alternatives. Evidence in the form of activity in the dorsomedial prefrontal cortex and bilateral interparietal sulcus provides preliminary support for the “drift-diffusion” model of stochastic choice based on closeness of options. Indifference curves, for those of us who care about such things, turn out to be thick and fuzzy. Translation: the less difference between alternatives, the harder it is to choose consistently. So much for the premise of precise rational decision-making. Apparently, I don’t even know my own mind with any reliability. Which means that I’m likely to make mistakes. The good news, however, is that, if I pay enough attention, they are unlikely to be big mistakes. Comforting.

So... we can measure utility directly, if only approximately, whether we're neuroscientists or ordinary humans. And, as a bonus, I’m really pleased to learn how many internal calculators I’m able to coordinate without being aware of any of them.

Dr. Lewis C. Sage (AB Kenyon, PhD U. Maryland) likes intersections. Since 1991, he has taught Law and Economics, Mathematical Economics, and the Economics of Healthcare. A former Fulbright Fellow (Bulgaria 1995-6), he teaches an interdisciplinary Honors seminar, Enduring Questions, and is studying strategy in the NFL draft with faculty and students in Sport Management and Psychology. E-mail: lsage@bw.edu