Our countries need us.

Published by Anonymous (not verified) on Sat, 24/02/2018 - 10:05pm in

Humanity is at a high point. What our ancestors dreamed of is slowly becoming a reality: a world without hunger in which the vast majority of mankind live peaceful and long lives. We are not there yet, but in Europe, East Asia, Latin America, and even in Africa (our cradle), mankind is emerging from dark times. People live longer, healthier, happier, and more educated lives. Paid for and organised by countries, helped by international flows of people and information.

And yet, our countries are under threat from a disconnect between the elites and the population of individual countries.

The elites are having a great time. They can live almost anywhere they want; they have access to all the food and living space they could wish for; and their children are assured a fantastic education and long lives, aided by all the ingenious inventions of our best minds. They have multiple passports and speak multiple languages, choosing where to live, love, work and die.

This luxury has come with the temptation to abandon their role as the protectors of the institutions and cultures of their countries. Many of them feel constrained by countries, part of a world elite that runs countries and manipulates countries, but is not part of them.

So they live fluid lives, avoiding the duties that countries put on them but enjoying their hospitality and privileges. They and their companies avoid taxes. They trade on internet platforms that evade the scrutiny and regulations of nation-states, which they often re-write. They complain about the stupidity of the populations and how everyone should be like the elites. They are eroding the strength of the countries that gave rise to them.

I too am part of this group, currently living in my fourth country, welcome wherever I go. I am not a billionaire or a famous actor, but part of the academic establishment, the high priesthood of our time. We come and go as we please, enjoying the best of life, working on what we want, and dreaming of even greater powers.

My kind dreams of the world empire in which we are either the emperor or at least important members of his court. This includes the climate scientists who dream of directing the resources and energy uses of the planet. It includes the AI people who dream of a world run by hybrid entities that they create. It includes the economists who dream of transnational structures that they regulate. It includes the lawyers who dream of an international legal order. It includes the businessmen who dream of a world without government.

I too dream of a world governance system that maximises the well-being of the world, for the benefit of the living and the generations to come.

Yet, I say to myself and to you that there will be no world empire and that your country needs you. Yes, your country. You can probably choose which country you want to belong to, but your chosen country still needs you.

Your country needs your help in figuring out how to maintain a tax base so that the next generation too can enjoy a good education, a beautiful local environment, a humane law, and good health. That for instance requires you to figure out how those countries can get tax out of the internet.

Your country’s less able need you to protect their history and their self-image from the attacks to their self-esteem. That requires you to write a history that does not divide the country into victims and perpetrators but that allows everyone some dignity in the story of who they are, including a dignified self-image of who their ancestors were. So help those who are now told that they and their ancestors have always been b*stards, and that all their cultural habits are evil but those of others are not. Do not add to their belittlement by talking down to them, but help them.

Muster some sympathy for the civil servants in your country and the structures around them. They are under threat from within and without. You may not like them and sincerely think they are all useless, but you can’t have a country without a functioning and thinking civil service so help them. There is no police, no universal education, no law, no defence, or even any wealth without them. Make them better and smarter. Their enemies are your enemies, so help them win.

Have a pity for those without a yacht and without a private jet who currently look up in envy at all the images of how the elites live, afflicted by the lie that they too can reach the top as long as they tow the line and obey us. Help figure out how your country and your culture can reduce the reliance on jealousy and feelings of inadequacy to motivate the new generation of workers. Do not tell them to look up to you, but help them feel adequate and valued next to you.

Spare a thought for the criminals, the drug addicted, the ignorant, the homeless, and the miserable in your country. For we now know that you can organise countries such that you have very few of these, so do not condemn them as evil beings that need to be eradicated and hidden. They are produced, not born, so help your country figure out how to stop producing them. Think of them as real humans, even if they disgust you.

In short, please do not abandon your country by evading its demands or by despising the culture of large groups in your country. You may dream of being the world emperor: that is normal. But you are needed by your country. It needs your energy, your talents, your tolerance, and your sympathy.

How to tax the platform economy?

Published by Anonymous (not verified) on Fri, 02/02/2018 - 10:35pm in

In the engine room of nation states, ie the tax departments, the coming battle with platform providers is taking shape. Uber, airbnb, facebook, linkedin, ebay, jobseek, and a myriad of specialised platform providers facilitate micro-trades that are largely untaxed by the authorities. In stead, the platform providers themselves take a cut, partially via advertising and partially via a direct fee for their services. They have taken over an activity that has mainly been provided by governments in the past: places to trade. The town square, the stock exchange, public infrastructure, and the unemployment office are relics of a past where governments were market providers that facilitated trades. Now, it is largely private companies with tax-avoidance structures that have taken on this role on the internet. That role is set to expand hugely.

This is a crucial battle that, so far, the tax authorities are losing because they have not yet grasped the magnitude of the shift. They lack the key new power that they must attain: the power to deny the operation of a platform provider in their country.

At the moment, tax authorities around the world, lead by the Scandinavians whose tax needs are high, are going the usual ‘reporting route’. They are trying to get Uber, Airbnb, and all the other ones to report the trades and the value of the trades that they have facilitated. Understandably, these companies are refusing to play ball because they of course are taxing the same trades themselves in a different way. They are competing with national tax authorities and hence their business model depends on tax evasion, so of course they refuse to help their competitors. Their lawyers make millions from refusing to play ball. The horror example for these companies is the 2015 data on Uber that had to be released to the Dutch tax authorities and that was subsequently shared with Denmark which promptly went after the drivers for added tax payments. This reflected the circumstance that the administration of Uber was in the Netherlands at that time, which allowed the Dutch to force Uber to hand over some of their data, a mistake Uber wont make again. The others too will have learned a salutary lesson from that episode.

Frustrated, the tax authorities are turning to pretty hopeless measures, such as new international treaties on the reporting of micro-trades by private entities. In a race to the bottom between countries trying to attract large companies, that is just a hopeless avenue where the authorities will always be many steps behind the tax-advisers of the big trading platforms.

What are the next moves we might then see when the tax authorities get up to speed? I think two developments are likely: full internet observation by national agencies and government-lead internet firms.

Full internet observation follows the model of China, which now has the capacity to track most of the internet activity of most of the population. That allows it to observe the trades facilitated on internet platforms, which in turn can be used for tax purposes. Those observations can be used to directly go after individual traders or can be used to go after the platform providers, simply by making their activities illegal if the platforms do not assist in tax observations. Adopting the China route would spell the end of internet privacy, but it probably works. And tax is such a key part of the nation state that it in the end trumps privacy concerns.

The second possibility is for the government to re-enter the market for platforms and set up its own internet firms for micro-trades and social media. It can simply copy the best examples on the internet for how to set these things up. Again, China shows the way with Alibaba competing with Amazon for trading platform business. In a settled market, the transition to new government platforms will come with losses, but authorities can appeal to national pride to get support from their populations and companies cannot compete with that. For micro-trades within a country or tax region (the US and, in the future, the EU) that should work. For international trades, one should expect more difficulties because government-backed firms from different countries might then directly compete with each other, which in turn might lead to competency battles and new dispute resolution mechanisms.

The poverty of voting

Published by Anonymous (not verified) on Sun, 21/01/2018 - 11:58pm in

A post by John Burnheim.

About ten months ago, John Burnheim wrote to me in terms I’ve reproduced on this blog previously. John was one of the early movers in academia exploring the limitations of electoral democracy with his book Is Democracy Possible published in 1985 and then decades later with his book last year The Demarchy Manifesto. After a long academic career, he’s still gnawing on the bone of how we might make democracy work better in the modern world. And after many quite lengthy exchanges with me by email, he’s writing posts for us here at Troppo. Here’s his first post. There will be more to come:

The poverty of voting

Votes carry very little information, but often give form and content to power. It is sometimes seen as virtue of voting that it hides the motives and understandings that motivate a person to vote in a certain way. From this point of view, a vote is a piece of power. A system of voting determines how many of those pieces of power constitute a valid power that overriding all the other votes and binds the other voters to accept that decision. A constitution determines what matters are being decided by voting and who is entitled to vote.

The voter is thus completely free to vote as she likes, answerable to nobody, in a fully secret ballot. Even In the case of a public ballot, the voter is not required to offer any justification for how she votes. The vote is valid no matter what her motives. If others are entitled to criticise or retaliate; it is because of other undertakings or relationships. The secret ballot is pure liberty, an exercise of power answerable only to one’s own conscience. Advocates of the secret ballot often assume that the voters have a soundly based conscience on the matters on which they may vote and that he danger to be avoided is that others will try to intimidate them into voting against their better judgement. Advocates of public voting often see voters as inclined to vote privately for reasons they cannot defend.

Whatever the weight of such considerations, most systems of voting invalidate votes that are blatantly bribed. Obviously, where to draw the line between what is an agreement to cooperate with other voters or a justifiable tactical move in a wider context and what is simply advantaging oneself at the expense of the common good is often difficult and to some extent arbitrary. But the principle is clear: any authority that the result of a vote can claim rests on its being a distillation of the genuine opinions of the voters about what the collective that accepts that authority should do. Voters are no entitled to use their power for other purposes.

On the other hand, it is asking too much of voters to expect that each of them would have considered every factor that is relevant to a sound collective decision in most circumstances. The tacit expectation in most voting is that most voters will be inclined to vote for or against any proposal by weighing up the benefits they or others about whom they are particularly concerned would on balance be affected by its implementation.

One clear deficiency in such an assumption is that a majority may vote on a particular proposal for a variety of relatively small balances of advantage or disadvantage to them, outvoting a minority for which much more important consequences are at stake. The effect of voting is that it invites voters to treat public goods as if they were private goods, each voter paying attention only to their own costs and benefits. A great deal of libertarian thinking welcomes this consequence, believing that nothing should count as a public good unless it is beneficial to the majority of citizens.

In fact, many goods that are financed by public funds and available freely to any citizen are vitally important to some minority who cannot otherwise provide themselves with them. Obvious examples are many public access facilities for disabled people or observatories for astronomers, playing fields for some sports and so on. In fact, a host of such public goods can make a crucial contribution to our identities if we pride ourselves on the collective achievement of a network of facilities that greatly expand the opportunities our community offers all its citizens. In this perspective, an important advantage that must be credited to any public good is the contribution it makes to the sort of collective achievement we value and with which we wish to be associated.

An intrinsic characteristic of voting is that it divides voters into winners and losers whenever it falls short of unanimity. Such division is exacerbated when it is exploited by the ideologies of political parties competing for a term in government responsible for choosing, regulating and funding by taxation the whole spectrum of constructed public goods. In the electoral process, each party is constrained to define its program by playing up the features that appeal to the section of the electorate that benefit them and vilifying their opponents’ proposals. Politics becomes a scramble to decide “who gets what”. So, public goods are demoted to the status of the spoils of conflict.

The saving grace of this adversarial system is that it makes it possible for the voters to change the government in a genuinely competitive election. That is an important constraint on extremism and ensures that in the long run governments are responsible to the voters. There are increasingly many “singing voters” who will be attracted by less partisan policies. Governments, realising that many voters no longer accept that their being forced to choose between bundles of policies does not show that they support all those items, increasingly accept that they should consult public opinion before acting in controversial matters. So, they spend billions on reports that tell them what to do, while opinion polls tell them how much they can get away with.

In this situation, what seems to be required is a completely independent and open forum that would discuss particular problems and what could be done to solve or ameliorate each of them. The politicians would be faced with a discussion that had a claim to represent public opinion. Perhaps then they might find themselves competing with their opponents by claiming to be best suited to implementing what public opinion wants.

I hope to discuss in a later blog how such a forum might operate. It would, I believe, be best suited to questions which are not matters of what the electorate would like to see done, but of matters where the public needs to get right what needs to be done to avoid impending dangers. Other questions may call for other approaches.

Back Issues No Longer Available

Published by Anonymous (not verified) on Sun, 14/01/2018 - 1:29pm in

We’ve had several people contact us recently asking about back issues of Whotopia and which issues are, and aren’t, available. Just to remind everyone, Issues 1-28 plus the 2008 Spring Special and the 2013 Summer Special are all out of print and no longer available to download.

However, Issues 29 to present are still available to download.

We don’t have any plans to make those out of print issues available.

Why Blockchain has no economic future.

Published by Anonymous (not verified) on Mon, 13/11/2017 - 8:31pm in

[expanded from the post on JohnMenadue]

When Bitcoin went public in 2009 it introduced to the world of finance and economics the technology of blockchain. Even the many who thought Bitcoin would never make it as a major currency were intrigued by the BlockChain technology and a large set of new companies have tried to figure out how to offer new services based on blockchain technology. It is still fair to say that very few economists and social scientists understand blockchain, and governments are even further behind.

I will argue that blockchain has no economic future in the regular economy. I will give you the bottom-line, then describe blockchain, discuss its key supposed advantages, and then take it apart as a viable technology by giving you a much more efficient alternative to the same market demand opportunities.

The bottom line for those not interested in the intricacies of blockchains and public trust

The essence of my argument is that a large country can organise a much more trustworthy information system than a distributed network using blockchain can, and at lower costs, meaning that any large economic role for blockchain is easily displaced by a cheaper and even larger national institution.

So in the 19th century, large private companies circulated their own money, in competition with towns and princedoms. In that competition, national governments won, as they will again now.

The reason that the tech community is investing in blockchain companies is partially because some are in love with the technicalities of blockchain, some hope to attract the same criminal and gullible element that Bitcoin has, some lack awareness of the evolution and reality of political systems, and some see a second-best opportunity not yet taken by others. But even in this brief period of missing-in-action governments, large companies will easily outperform blockchain communities on any mayor market. Except the criminal markets, which is hence the only real future of blockchain communities.

Why does politics matter? The key point is that nation states are the answer to the question of the production of mass trust. Nation states are unique good at creating trust, much better than any other entity, including all manner of networks, has ever been. Political scientists, who are very rare in Silicon valley, have known since Weber that the nation state is uniquely capable of producing mass trust, far better than any political competitor, and certainly far better than the anarchistic constructs of the blockchain adherents. This is why nation states run internationally trusted currencies, education qualifications, health insurance, life insurance, land registries, identification systems, etc.: most of the things the tech community believes blockchain will do on the internet are already done much better and much cheaper by nation states outside of the internet. Nation states will show their superiority on the internet too, and probably quite soon, and that will be the end of the blockchain bubble.

The temporary advantage blockchain communities have is that at the moment profit margins on a lot of ‘trust-involving’ nation state activities are too high because of political corruption, which for instance is rife and entirely normal in the banking sector. So because the nation state has allowed itself to slack off when it comes to money, blockchain communities might help to drive down the rent-seeking profits currently made in banking and several other sectors, like a disruptor technology. But it cannot truly economically compete against a well-organised state system so its uses will be limited to the times and places where political corruption is rife. As such, it is not entirely useless.


                The intricacies of blockchain.

What is a blockchain? We need to distinguish between blockchain technology, a blockchain, and a distributed set of computing users that use blockchain technology.

Blockchain technology at heart is just a procedure used by several entities to decide upon certifying a cache of information. The certified information is a ‘block’ and the chain refers to the sequence of blocks that has been certified. The blockchain is then the stock of certified information.

If one interprets this generously, a lot of things people and organisations do could be called a blockchain technology. People exchanging emails could be said to make a blockchain, with email systems certifying the ‘blocks of information’ (emails) sent. One could include the basic procedures of stock exchanges that also have procedures to ‘clear’ the transactions and certify them at regular intervals.

These activities are not of interest here because they do not correspond to the word ‘blockchain’ as it has entered our language since Bitcoin. I just want to solely talk about blockchain in the context of a distributed (ie. not formally coordinated) set of computing users.

Even within this much more limited sense, one could say blockchain goes back far longer than Bitcoin, for instance by pointing to the clearing mechanisms used between banks for the transactions of the clients of these banks: every day (or more frequently), banks ‘clear’ the account between them that have been altered by clients sending money from an account at one bank to an account at another. Equal streams cancel out and unequal streams get resolved via a system of common financial drawing rights for banks.

The interbank clearing system is highly coordinated and regulated, so I do not want to include it in the discussion. What is then of sole interest here is blockchain technology as it pertains to a set of distributed users that lack an overarching single authority. To keep the phrases short, I will simply presume this targeting for all further uses of the word blockchain, and I will usually drop the word ‘technology’ as well where the meaning is clear.

In essence, a blockchain is then the procedure followed by a set of computing users who all keep track of the same information sent to them as a group by any ‘client’ in the world that is recognised by these computing users as legitimate ‘clients’. That set of computing users agrees on a common protocol (the blockchain) for receiving information, sending information, and distributing rewards to these computing users for keeping track of all the information sent to this set by clients.

The rest of the blockchain technology as introduced by Bitcoin is a story of cryptography, hashtags, blocks of information and layers of verification (2-block delays versus 6 block delays, 10 minute block creation, etc.). Ingenious as the cryptography is[1], the only insight we need for this article is that it indeed is possible for ‘entities already in the system’ to prove they are a particular ‘entity in the system’, ie a registered client. That proof is essentially a password and comes with all the benefits and disadvantages of a very complicated password: it can be forgotten, stolen, tortured out of someone, ignored, and mislaid. There is nothing inherent in the system that ties a registered client to a person’s identification card in a country or in a bank. In that sense, one can be both anonymous and yet prove ones identity as a registered client. This is a feature of cryptography though, not blockchain.

From an economic point of view, blockchain is just the protocol agreed between the computing users who all supply the same service, and the economically interesting aspect is not the procedure but the economic possibilities of a distributed set of computing users doing the same thing.

The Bitcoin network allows anyone to become a registered client and to be sent bitcoins by any other registered client. All that the bitcoin computing users do is keep track of which registered client has sent how much of their bitcoin holdings to other registered clients, and thus who currently owns how many bitcoins. There is no mapping from registered clients to passports.

Bitcoin is particularly inefficient and costly in that its key computing users (‘miners’) get given additional bitcoins on the basis of how much computing power they waste whilst keeping track of bitcoin transactions. It does this via a kind of open tournament in which the more computing waste you put in the more likely you win. As such, it is one of the most inefficient systems of tracking one can devise in that the whole of the expected value of additional bitcoins is wasted in terms of computing power. Its spectacular inefficiency makes it a nightmare for those who abhor wasted fossil fuels (real Greens hate bitcoin) and makes it a totally losing proposition compared to much cheaper-to-run single-point financial systems, like a land registry, marriage registry, and systemic banking.

However, the spectacular inefficiency of Bitcoin is not a feature of all blockchain technology or of digital currencies, only a feature of how the bitcoin community has organised itself. A government could organise the same service without this inefficiency pretty much within a month. So let us not waste more time on Bitcoin and its many idiosyncracies (10 minute blocks, etc.) that would not feature in a much more efficient version of blockchain, but focus on the more important inherent features of the economic role of blockchain.

The essential blockchain bit is multiple computing users keeping track of the same things, and agreeing with each other what to keep track of and how to run a reward system for this.

One key inefficiency is thus that you need multiple entities doing exactly the same thing. This is pure replication and a built-in inefficiency. If you had a single computing system that is already trusted, it would beat a blockchain just on the replication issue alone. Indeed, the need of the multiple computing entities to coordinate with each other on a common protocol (and changes in that common protocol, which in Bitcoin’s case have been frequent!), simply add to the replication cost. As a storage of information, blockchain is thus inherently inefficient. If one adds complications, such as blocks of information that need ‘verifying’ and with potentially competing blocks of information needing to be ‘recognised by the network’, the inefficiencies merely multiply.

So blockchain is inherently less efficient than singular systems (bespoke systems).

The ‘selling points’ that blockchain currently then has are:

  1. There is no need to register a passport as a user, meaning initial and continued anonymity is a possible feature (though not a necessary one, simply a possible feature).
  2. Blockchain offers information-sending verification and storage (you can prove what was sent when).

Note that I have not listed ‘trustworthiness here’ nor ‘impervious to meddling by officialdom’ nor ‘the information is in different places’, which are not inherent selling points of blockchain. But let us get to those issues later. For now, let us start with the second selling point: the ability of a blockchain group to offer information verification and storage.

The information verification and storage is mainly within the group of registered users: all that is offered is that you can be sure that ‘whatever controls the password of registered user X’ indeed has sent round information Y to the blockchain. It doesn’t mean that information Y is true, or that whomever used to control the password of registered user X has truly sent information Y. So the value of the information held in the network stands or falls with a large group of users whose information is meaningful to each other or is meaningful in itself.

Money holdings are meaningful within a network, so bitcoin trades are interesting to all bitcoin owners involved in trades even if no-one else is interested in them.

Inherently useful information that cannot be posted on a regular news webite is, for instance, a secret: information that nation states do not want to have in the open. Hence blockchains have a use as a signal system for spies, criminals, and journalists: they can send each other (coded) information via a blockchain without needing ever to meet or disclose who they are in the passport sense of ‘who they are’.

Sending secrets around is the original use of blockchain communities and will continue to have value as such, but it is no different in principle to sending a piece of paper to lots of newspapers and individuals, simply quicker and less traceable. Blockchain groups as such are thus natural vehicles for investigative journalism, criminal communication, slander, witch hunts, illegal political activism, disinformation, illegal streaming of movies, etc. It is within that activity that multiple computing users come with the advantage of being harder to take down for authorities.

Note that these are criminal activities, and that helping such activities is itself criminal. So the one real ‘comparative advantage’ of blockchain (they make a difficult target) would lead the computing users to be shut down if possible.

Because helping the exchange of secrets is criminal, there is no long-term money in it for the official tech community. You for instance see this with Facebook, which is simply forced to do the bidding of officialdom when officialdom finds out it has (inadvertently) done something deemed illegal or unwanted by society or the state. So we only need talk here about information that is not a threat to the nation state and hence not criminal or secretive in nature.

When it comes to the exchange of non-secretive information, we are talking about information that is interesting to people because it informs them of things that have happened or things that matter for the future, ie current asset holdings or events. Both forms of information are worth something in the larger network of individuals and entities in the economy and society.

And here is the key point: if it’s worth money to collect non-secret information in a blockchain, it would be worth just as much by any other trusted and openly accessible register. Since there is nothing inherently more ‘open’ or ‘accessible’ about a blockchain versus a regular website, registry, or information-holding public entity, there is hence no comparative advantage that blockchain has in that sphere. Except in the situation where currently large private and public institutions have so far dropped the ball or are not deemed trustworthy.

A large and trusted private entity, such as Facebook, ING bank, or Shell, could thus compete with any blockchain firm on the basis of offering the same thing as a singular computing entity. Since they need not replicate the same thing multiple times, they would be more efficient. And because they have lots of resources and structures already, they could set it up much faster and reach far more people as well. To a firm like Facebook, a blockchain community that finds something useful to collect and record is like a free provider of market information: small fish that tell the big shark where to feed next.

Why is it unimportant that a blockchain would store the same information in different places? Because a singular computing entity could do the same thing, but much more cheaply. Banks already for instance have copies of their administration in several places in cases of cyber-attacks and the like. Ditto with lots of government systems. They can simply much more cheaply choose how often to update the information elsewhere and what the protocol of that shared information is, whilst retaining the feature that information is sent only once by users to collection points, not needing to be sent round continuously or stored zillions of times. So distributed information via a blockchain simply loses out: singular entities can store an optimal amount of times, distributed groups have no such control.

Since criminal information is not interesting as a commercial blockchain application, and since singular entities are inherently more efficient than blockchains, the only remaining issue, ie the question of trust and current public involvement comes into view.

On the issue of current public involvement, one might think that governments are inherently not in the business of providing a register for, say, complicated private contracts or personal promises. The counter-point is that this is neither true, nor relevant. It is not true because governments were the first to set up actual markets in the form of market squares and common measurements in order to facilitate trade.

Over the centuries, governments can and have set up stock exchanges, asset registries, marriage registries, and even dating services. Botanical gardens are shining examples of a public how-to register of new agricultural techniques and available crops, often set up in the 19th century. Governments have also set up all kinds of entities one now thinks of as commercial, including banks, oil exploration companies, transportation companies, etc.

So it is entirely normal for governments to be entrepreneurial and market-platform involved. It is not relevant that they haven’t done this so far in all matters of the internet, because there is nothing to stop them from doing this eventually. What is odd about our time is more that governments have dragged their feet in getting involved in the same market-platform activities on the internet, which is primarily due to governments currently being rather internet illiterate and the technology being fast-paced. Governments catch up quickly though when they really want to, including on the internet, as one can see by noting the sophistication of internet surveillance by the NSA, a US government entity.

Hence it is only a matter of time before large governments get into lucrative parts of the internet, and when they do, they have natural advantages: they have more coercive powers, more information on everyone, and greater longevity than for-profit human organisation. So the US government can easily out-compete any blockchain group, any day. The fact that the US government cannot yet be bothered doesn’t mean that another government cannot step in.

Hence it is perfectly possible that, say, the government of Germany steps in if big money can be made by offering a contract-registry service to everyone in the world. It simply hasn’t occurred to them yet and that particular market probably is not that lucrative, but they’d clean up if they would. Indeed, I hereby advise the German government to offer world-wide registry services on wills, land registries, contracts, and micro-credit deals.

Ditto for large companies, really. As I said before, in the 19th century, large private companies circulated their own money, in competition with towns and princedoms. In that competition, big companies won from loose alliances, and governments won from big companies, and they will win again.

Then, finally, the matter of trust. It has been argued that we can trust a distributed network of computing users who use blockchains as their communication protocol, but not governments.

Bitcoin is a good example of how this argument on inspection falls apart. For bitcoin, and any other blockchain, to be a trusted information storage registry requires over half the computing power in that community to be aligned on recognising the truth as the truth, and not to take the wrong information as the truth. If over half the computing power in the blockchain has a different orientation, the whole information registry can be corrupted and used in another way.

So if Bitcoin is captured for a few hours by a high-computing entity within the network, that adversary can spend bitcoins as many times as it can manage in those hours, exchanging it for value outside of the network. If an adversary has even longer, permanent, control of more than half the computing power, it can indefinitely corrupt the information in the blockchain, which could be disastrous if, for instance, the blockchain registers the land holding of all farmers in Africa.

So who does one really trust when it comes to Bitcoin? One trusts the incentives of over half the computing users (miners) that operate Bitcoin, which boils down to a couple of former anarchists and several large firms in Russia and elsewhere.

What is there to prevent several computing users to team up to corrupt the blockchain? In principle, nothing. And there is also no counter-move because there is no outside authority that one can turn to. Hence Bitcoin is a prime example of an economic rent that is susceptible to what economists call ‘insider takeover’. Indeed, one could argue it has already been taken over by a clique that now runs it for its own reasons, merely keeping several computing users nominally separate whilst in reality operating as a cartel. A cartel that hires desinformers to ridicule opponents and keep itself going.

Do we see similar things in the rest of the economy? Of course we do, and economists thus speak of the oil cartel, the chip cartel, the pharmaceutical cartel, etc. And we don’t trust any of those cartels to do the bidding of the general population. The idea that we should trust the cartels of arms manufacturers to advocate world peace is no less ridiculous than the idea that we should trust bitcoin or the next blockchain cartel, whatever it sells. We trust individual companies to look out for their own material interests, and the same would hold for a distributed network of computing users running a particular business.

So the anarchist mythology that you read online about the great trust we could have in distributed networks is pure and unadulterated nonsense. The only question is which adherents of the mythology are ‘useful idiots’ and which are running a con-trick on the gullible.

Why then do we trust nation states more than anything else when it comes to our physical safety and the biggest investments in our lives (education, housing)? Because in some sense the government represents us, the whole population of a country. It has immense power over us whilst it is in actuality made up of us. A common idea of ‘us the nation’ is then used to bind the nation.

Nation states thus force the whole population into a common state ideology via media and education, the army and taxation. Buying and selling a house means trading the property rights recognised by the nation state. Entering university means buying a government-guaranteed signal of education. Driving a car means driving a government-guaranteed piece of private property, involving state registries of cars and car licenses. Pretty much anywhere you look in your own life, the government is the guarantor of the most trust-sensitive bits: who owns what and who looks out for the community as a whole. No one else has an army to defend populations. No one else has police to ensure property and the rule of law. And we partially control it via democracy and political participation. So it is the entity that floats on public trust and is the best at generating it. The fact that it sometimes abuses that trust does not take away from the fact that it is best at producing it.

Hence I hope you see the basic con-trick played upon those told that we should trust a 1000 computing users spread over the world more than the governments we vote for and form part of. Only those with a reason to fear governments need to trust unknown entities they cannot see or influence.

Blockchain activity is the modern version of fool’s gold. It has no long-term future in the regular economy. It cannot compete with either large companies or governments and as such only has temporary disruptor value.

[1] It really took me a while to figure out the logic and the uses of the cryptography technology, such as for the importance of AND/OR steps in hashing and step six and 7 in the SHA1 hash function (the adding of lots of zeros and the original message length to the binary recoding of the underlying password). It took me a while to figure out that the key to understanding these steps is whether you can reverse engineer the original password that begets the hash-outcome. The AND/OR steps create (close to) infinitely many ways in which you back up the tree. Combine that with the presence in the target sequence of mainly zeros and the original message length (which could be replaced with any other agreed sequence of characters plus some function of the original message), the AND/OR steps make it difficult to choose the right reverse AND/OR paths to hit that sequence.The odds of hitting such a sequence when randomly reverse-engineering the AND/ORs is so small that even with immense computing power one wouldn’t hit on the truth in normal time.

Let’s have another World War!

Sometimes, it feels like 1910 all over again.

Then, a confident Germany was the up-and-coming industrial power house, fearing an even more up-and-coming Russia, with the UK and France desperately holding on to their colonial empires.

Now, a confident China is the up-and-coming industrial powerhouse, fearing an even more up-and-coming India, with the US and its European allies desperately holding on to its global empire.

Then, an international in-bred elite was holding on to far more wealth than it deserved in term of productivity, leading them to support extremism, nationalism, and populism as a means of holding off the tide of socialism and mass discontent.

Now, an international in-bred elite is holding on to far more wealth than it produces, supporting Clinton and Trump, Boris and Macron.

Then, science was threatening to re-structure the world of work radically, with automobiles and telephones making the world a far smaller place than it was before, and with new technology leading to widespread loss of jobs in agriculture and basic trades.

Now, science is re-structuring the world of work radically, with long-distance trade in services and IA driving out the procedural cognitive jobs that keep the peasants and tradesmen of this age busy: administrators, middle-management and I-follow-orders professionals.

Then, belief in magic was still rife, with new migrants in the US and Australia burying shoes in the foundations of the new houses to appease the spirits, and with romantic nationalism blossoming on the Balkans to kick-start a jolly-good-scrap.

Now, belief in magic is even more rife, with witch hunts, fake news, and fairytales in the US (#MeToo, ‘great again’, and DSM V), where the masses reject the notions of innocent till proven guilty and the idea of rationality, and with romantic nationalism blossoming in Scotland, Catalonia, Padania, and god-knows-where.

Then, dooms-sayers were having a field day, ranging from Halley’s Comet that was prophesised to swallow up earth in its 1910 visit, to regular Armageddon following the sinfulness of the times.

Now, there are even more doom-scenarios with widespread support, ranging from the threats to our climate to Islamic fundamentalism to the take-over by robots.

Then, the corrupt were in power, with monarchies, landed aristocrats, oligarchs, and self-congratulating scientists dominating the West, glorifying wars and preaching purity.

Now, well, need I really say it?

So, shall we have another jolly good scrap then to blow away the cobwebs?


The #MeToo moment: another disaster for the Democrats?

Published by Anonymous (not verified) on Mon, 30/10/2017 - 7:50am in

The #MeToo flood of stories of women who feel abused by men – ranging from lurid stares to straightforward rape – seems like a disaster to me for the Democrats. Not because of the stories themselves, but because of how the progressive media and commentators have reacted to it. It has turned into open man-bashing which will cost the Democrats both votes and funding, whilst buying precious few female votes.

Let’s talk about the man-bashing first.

How did the Huffington Post, that bastion of progressivity, report the issue? It ran with a story by an editor that said

“Women can turn the whole internet into a list of “Me toos,” but it won’t make a difference until men ― all men ― acknowledge how they perpetuate misogyny and commit to making a change.”

This is textbook sexism: ‘all men … perpetuate misogyny’? I should be fired within ten minutes if I asserted that ‘all women’ were guilty of something that bad, but instead of this editor being instantly fired and then derided by senior Democrats, this openly sexist man-bashing has gone unpunished. It’s not too late, you know, this editor could still be fired tomorrow or next week. But it’s not going to happen and that is poisonous for the Democrats. This is their issue and their newspaper, and an editor of it openly advocates male-hatred of the kind that is illegal in many countries. The fact that half of white women voted for Trump despite him being the groper-in-chief tells you not many women change their vote on this issue, but white men have deserted the Democrats in drove and this open hatred of them will keep them away.

Am I over-reacting, picking on an isolated case of zealotry? Nope, the Huffington Post piece was a common reaction amongst the progressive commentariat. Leah Fessle in Quartz thus got away with saying that “our culture raises all men with toxic ideals about masculinity.”

Again, textbook sexism. If she were a man saying similar things about ‘all women’ in the same newspaper, instant unemployment and public humiliation would have been his fate. Again, it’s not too late to fire her next week, but it won’t happen.

The alt-right is having field day with the reactions in the progressive media to the #MeToo revelations. The Us National Review makes the simple head-line ‘metoo train wreck calls all women victims all men toxic abusers’. They have a point, but I think the problem is not the stories of the #MeToo women, which are varied and thus can be read in many different ways. The problem is the open anti-male hatred that supposedly progressive media have subsequently engaged in. Here is an example of the more elaborate points made on an alt-right site:

“The following Guardian listicle, titled “Men, you want to treat women better? Here’s a list to start with,” is a good example of the aforementioned problem.

  • Don’t expect women to be “nice” or “cute” and don’t get upset when they aren’t those things.
  • Do you feel that any woman on earth owes you something? She doesn’t. Even if you’re like, “Hm, but what about basic respect?” ask yourself if you’ve shown her the same.
  • Involve women in your creative projects, then let them have equal part in them.

That’s right, ladies! Don’t ever bother being pleasant, respectful, or even displaying that you care about basic personal hygiene to your colleagues and the people you meet throughout the day, but everyone, especially men, should nearly wet themselves in enthusiasm upon meeting you, and include you in all their business-related projects and discussion panels. And in case you poor gullible men were expecting a simple show of gratitude or at least a smile in return — sorry to ruin your hopes, but the author includes the following demand:

  • If you do the right thing, don’t expect praise or payment or a pat on the back or even a “thank you” from that woman. Congratulations, you were baseline decent.

In the great progressive West, the job of men is to be the unappreciated servants of frigid and entitled women brainwashed by the Amy Schumer school of How To Be A Fat Empowered Slut. ”

You see my point? What is amazing is not this alt-right response, which of course is over-the-top itself, but more that newspapers like the Huffington Post, the Quarts, and the Guardian (which I am a subscriber of) indeed publishes male-bashing stuff. Just think about how misogynistic and sexist the phrase ‘Do you feel that any woman on earth owes you something? She doesn’t. Even if you’re like, “Hm, but what about basic respect?” ask yourself if you’ve shown her the same.’ truly is. The author should, of course, be fired tomorrow, but she won’t be.

The open anti-male hatred currently tolerated in supposedly progressive newspapers does a lot of damage to the progressive brand. This open sexism is not just against the ideals of the progressive movement, it is also electorally short sighted. Men don’t like being openly abused and most women don’t truly hate men either, so you lose with both genders.

The progressive Dutch newspaper that I read (‘de Volkskrant’) thus looked on in bemusement at the American reactions to the #MeToo moment, with a commentator calling it ‘humourless one-dimensional puritanism’.

One even reads harsher assessments of the sentiments involved, such as by a self-styled philosopher on twitter saying “The #metoo campaign is just the dialectical guilt response of 150 million neurotic women for having read #Fiftyshadesofgrey. With pleasure.”

The open male-bashing is a huge loss for the Democrats and the alt-right is having a field day on that score.

But there is also a funding loss looming, I think. Weinstein was a rich lefty who gave the Democrats a million. Did he get any support from top Democrats in his hour of need? Nope, they let him drop like a stone. No testimonials about how he was such a good guy previously and that he would now surely see the error of his ways. No statements about the things he funded and the convictions he showed on other important issues. At least, none that I saw.

Of course, you might say he got it coming. Me, I will wait for courts to decide the issue because I do not trust trial-by-media on this topic.

But from a Democrat funding perspective, it’s a train wreck. What do you think other male millionaires, who outnumber the female variety by a huge multiple, are going to think? Do you think they will like the Democrats more, feeling looked after and amongst loyal friends who believe in innocent-till-proven-guilty? Or do you think they will feel that they are suspect for being powerful males, rapists until proven otherwise?

What should senior Democrats have done then? Show sympathy to the women of #MeToo, of course. Formulate where they want communication in possible sexual encounters to move towards. And leadership by speaking up for men in general, openly and massively decrying anti male-sexism in progressive newspapers.

What is the positive message? I think they should have seized the opportunity to talk about the need for men and women to be clear about when they want sex and when they don’t. “No is no, yes is yes, and don’t mess with maybe” should be the mantra. That would lure the Republicans into the mistake of saying “Just say ‘no’” (which is of course what the evangelicals have said): the Democrats should win on the issue of sex.

It’s not too late, they can still unite and show leadership, but don’t hold your breath.

The mishandling of the #MeToo moment by the progressive forces thus shows both a lack of leadership amongst the Democrats and a lack of ideas in that movement. There is a total failure to recognise that their narrative should be inclusive and emotionally warm, not exclusive and puritanical. They are going down a road with few votes and fewer sponsors. Trump’s re-election has just gotten a big boost.


Information and the structure of institutions: W. H. Hutt edition

Published by Anonymous (not verified) on Tue, 26/09/2017 - 4:42pm in

Fredrick Hayek was onto something fundamental in stressing the centrality of information flow to economic functioning. But because his consuming passion was on the (undoubted) evils of Soviet-style central planning, ‘the market’ always figured as the deus ex machina, a kind of all-purpose get out of jail card for solving the problem of using the knowledge and information distributed throughout the economy. However, the world we encounter defies such simplistic solutions for at least two reasons.1

First, although central planning obstructs critical information flows about relative scarcity that markets routinely generate, the conflict of interest between buyers and sellers in a market makes them fertile ground for deception. Just look at the carnival of misinformation in nineteenth-century patent medicine ads to get some idea of what a truly free market in information looks like. So governments stepped in. Today they mandate truthfulness in advertising and the mandatory disclosure of information to consumers and investors and various other safeguards. Yet, as I’ve been writing about for decades as I’ll elaborate below, there are plenty of other ways we could coax more information into the public domain from markets. Second, government could be doing a lot more to improve flows of information and know-how within its bureaucracy and between it and the wider world.

But first let me share a brief, but, I hope enjoyable detour I made the other day when hunting down an excellent 1942 Hayek essay on the evils of scientism.2 I was intrigued to find an enthusiastic fellow traveller of Hayek’s suggesting we dramatically curtail firms’ existing private rights and privileges in markets – all in the interests of better information flow. Though I think the specific ideas he proposed are vague and summary, he nevertheless reminds us that there was a time when these ideas were debated on their intellectual merits, rather than according to the cut one’s ideological jib. As I’ll try to show, we could do with a little more of that today.

From a working-class background, William Harold Hutt found his way to the London School of Economics where Hayek had quite an impact in the 1930s. Hutt’s views towards labour unions weren’t so dissimilar to Lord Wellington’s – for him unions were just another combine – as illegitimate in helping workers collude against their bosses as business cartels colluding against their customers. He proposed that “the survival of the democratic system may not be dependent upon a general recognition of the illegitimacy of privately motivated coercion in all forms.”

Nevertheless, he argued that there should be no general business “right to privacy” except where it rewarded experimental innovation (which is the economic rationale for patents and copyright):

[I]t is clear that the most efficient conceivable working of society, from the purely administrative point of view, is one in which the privacy or secrecy which surrounds the affairs of ” firms ” has been overcome. Conventional business secrecy certainly appears to be inimical to the most effective functioning of contemporary institutions. …

To give objective clarity to the assumption let us imagine that auditors declaring profits have become independent State servants, and that, in the endeavour to abolish secrecy, the law has … granted to the public, competitors, co-operant concerns and consumers’ organisations the right actually to have access (through expert agents if required) to the accounts of any private undertaking. …

If such reforms were administratively and politically achievable, the social gain which would arise from them is obvious. They would enable entrepreneurs, whether standing in a competitive or in a co-operant relationship to one another, to make their plans and enter into commitments with access to incomparably more complete data.

His goal to promote a ‘refashioning of “the framework of the property system … with a view to enabling diffused and decentralised entrepreneurship under conditions of much fuller knowledge” is both intriguing and, it seems to me, correct, at least in principle. To some extent, we’ve taken his advice concerning publicly listed firms which face onerous disclosure requirements, though most of this is based on investor protection rather than Hutt’s more general Hayekian point that freer information flows better inform both producers and consumers enabling generally better decisions by both. On the other hand, the practical question that arises from Hutt’s musings is what incentives his proposed regime might unleash – which could degrade the quality of the information being released and push information hoarding into more informal channels. Alas, he doesn’t consider this.

Nevertheless the whole idea of trying to engineer a knowledge commons that is wider and deeper than the price system seems worthy of consideration.3It’s in that vein that I’ve proposed a range of initiatives to take advantage of the non-rivalry of information to build new public goods, from public-private digital partnerships in myriad areas to initiating a cooperative search for standards around which those who perform best would have an incentive to publish their own data – for instance their employee engagement data. All of these initiatives would not remove any existing rights from businesses but might nevertheless make possible whole new worlds of transparency and data sharing.

Despite all their talk about innovation, these things are not talked about by senior figures, because … well they’re not talked about by senior figures. As Paul Krugman calls them “Very Serious People” have a sense for what’s important, and that’s defined by what comes up in those conferences on Australia’s future prosperity or for even more serious people, at Davos. Naturally enough the passage of these ideas into polite discussion awaits my being awarded a Companion of the Order of Australia (Very Serious Person Division). When that does happen, I will insist that before any traditional initiation ceremonies at Government House, the Governor-General personally open the OvertonWindow and pop them through.

Hutt would have well understood the value of the open data agenda for government. And large benefits to our economy and our wellbeing await if we can finally make some real progress, not just by accepting recommendations from the recent Productivity Commission report into data availability and use but by following through on them. (Nearly a decade ago government accepted similar recommendations from the Government 2.0 Taskforce report I chaired but then failed to properly follow through). As the PC’s   chairman Peter Harris mentions, its report is “something of a new departure” for the PC breaking away from its traditional fondness for property right based solutions in favour of attending to the basic architecture of information flow – as Hutt was proposing for business at large. Let’s hope our bureaucracy and their political masters are similarly prepared to address the issues on their practical, rather than their ideological merits.

Finally Hutt puts me in mind of another issue in the way we structure government that has received far less attention than it deserves – the terms on which information and knowledge are generated and used in the public service. We currently have a large number of bodies providing independent information and expertise with a view to that information and expertise being shared publicly. That goes for the Australian Bureau of Statistics, the Bureau of Meteorology, the Productivity Commission and substantial aspects of the job of the Reserve Bank of Australia. And yet most of the government’s investment in generating information and expertise is made within departments of state which report to partisan ministers and accordingly keep that knowledge largely confidential from the public. We need to become more intentional about that division of activities within government just as the reform years from around 1980 to 2000 saw us become far more intentional about separately articulating the provision of services from their funding and their regulation.

Given the way politics is practised, departments’ advice to their political masters as to what they ought do must be confidential if it’s to be frank and fearless. But that’s no reason for much of the expertise on which that advice is based not to be, in principle, publicly available. We have a fine example of the salutary effect of making authoritative expertise publicly available in the establishment of the Parliamentary Budget Office (PBO).4 The way in which the PBO’s expertise on the fiscal impact of different policy alternatives has been made available to different political parties was integral to the last election being the first since the early 1990s where the Opposition wasn’t cowed by the imperatives of media management into a ‘small target’ strategy.5

This is a small example of a larger theme that I expect many people missed in my proposal for the establishment of an Evaluator General. I proposed an Evaluator General not only to try to dramatically improve the expertise with which evaluations of government programs were conducted. In addition I thought that ultimately everything governments fund should be independently evaluated whether governments of the day like it or not. But I also wanted to better articulate two different streams of the bureaucracy. The first is dedicated to running programs and/or advising ministers on what they ought to do. This remains rightly the province of line departments which deliver their expertise not directly to the public but indirectly through political competition by serving the government of the day (to a considerable extent in confidence).

The other stream delivers public goods directly to the public via reporting to Parliament. This stream includes the Auditor General, the Ombudsman, the ABS, the PC and the new PBO. In my model, while line departments continued to advise their ministers about how we ought to proceed, the public could learn in great detail from the Evaluator General and the stream of information available through it, how we’re are proceeding. The result would be a deep knowledge commons about what was working well, what wasn’t and, as evaluation expertise grew, why and how things might be improved.

I think W.H. Hutt would approve.

  1. Indeed, there are two enduring ironies of Hayek’s embrace of markets as paragons of information flow. First, the centrepiece of Hayek’s illustration of the ‘miracle’ of the market is the way in which price information circulates. Yet this is the only information which generally flows properly between buyer and seller because they must agree to it. Beyond that, each party has incentives to mislead them for virtually all other information of import – for instance about the quality of the product or the extent to which buyer or seller can be trusted. Secondly, note that, to the extent the parties cannot suppress it, news of the price they paid circulates as an externality of market trading. Modern technology may improve the scope for concealment of price as for instance in ‘dark trading‘.
  2. Hayek used the word ‘scientism’ to refer to the uncritical aping of the methodology of the natural sciences in the social sciences in the hope that this might make them more ‘scientific’.
  3. One part of the Toyota productivity miracle was its promotion of a commons of production know-how amongst its suppliers. As I outlined in this post:

    In addition to the generous technical support it offered its suppliers, it also sponsored regular supplier wide-open days – both at Toyota and at the supplier factories. Non-cooperation in the knowledge commons was not an option for suppliers wanting to retain Toyota’s patronage. This rapidly normalised the culture of sharing and collaboration both within and between firms within the ‘family’ of suppliers, thus increasing the rate at which successful innovations spread. In the upshot, Toyota’s knowledge and learning commons was instrumental in its often doubling its American competitors’ labour productivity while exceeding their production quality.

  4. Declaration of interest – my sister-in-law Jenny Wilkinson is the Parliamentary Budget Officer.
  5. In fact, one could buy much of the expertise that the PBO provides from private economic modellers, but this has always been problematic for Oppositions because if Treasury came out with different numbers, the media would decree this to be a ‘story’. It’s much less so if the Treasury disagrees with the PBO.

The Information War Has Begun

Published by Anonymous (not verified) on Sat, 28/01/2017 - 3:54am in

Yesterday, Steve Bannon clearly articulated what many people have felt and known for quite some time when he told journalists, “You’re the opposition party. Not the Democratic Party… The media’s the opposition party.” This builds on earlier remarks by Trump, who said, “I have a running war with the media.”

Journalists have covered this with their “objective” voice as though it was another news story in the crazy first week of WTF moments. Many of those who value the media have looked at this with wide eyes, struggling to assess which of the many news stories they should be more horrified by. Far too few are getting the point:

The news media have become a pawn in a big chess game of an information war. 

News agencies, long trained to focus on reporting information and maintaining a conceptual model of standards, are ill-equipped to understand that they may have a role in this war, that their actions and decisions are shaping the way the war plays out.

When Kellyanne Conway argued that they were operating with “alternative facts,” the media mocked her. They tried to dismiss her comment that the media has a 14% approval rating by fact-correcting this to point out that this was only a Gallup poll concerning the media’s approval rating among Republicans. But they missed her greater point: there’s no cost to the administration to be helpful to the media because the people the Trump Administration cares about don’t trust the media anyhow.

CC-BY-NC-ND 2.0-licensed photo by Mark Deckers.

How many years did it take for the US military to learn that waging war with tribal networks couldn’t be fought with traditional military strategies? How long will it take for the news media to wake up and recognize that they’re being played? And how long after that will it take for editors and publishers to start evolving their strategies?

As I wrote in “Hacking the Attention Economy,” manipulating the media for profit, ideology, and lulz has evolved over time. The strategies that hackers, hoaxers, and haters have taken have become more sophisticated. The campaigns have gotten more intense. And now many of the actors most set on undermining institutionalized information intermediaries are in the most powerful office in the land. They are waging war on the media and the media doesn’t know what to do other than to report on it.

We’ve built an information ecosystem where information can fly through social networks (both technical and personal). Folks keep looking to the architects of technical networks to solve the problem. I’m confident that these companies can do a lot to curb some of the groups who have capitalized on what’s happening to seek financial gain. But the battles over ideology and attention are going to be far trickier. What’s at stake isn’t “fake news.” What’s at stake is the increasing capacity of those committed to a form of isolationist and hate-driven tribalism that has been around for a very long time. They have evolved with the information landscape, becoming sophisticated in leveraging whatever tools are available to achieve power, status, and attention. And those seeking a progressive and inclusive agenda, those seeking to combat tribalism to form a more perfect union —  they haven’t kept up.

The information war has begun. Normative approaches to challenging the system will not work. What will it take for news media to wake up? What will it take for progressives to start developing skills to fight back?