Ideological divisions in Economics undermine its Value to the Public

In October Russell Roberts, a research fellow at Stanford University’s Hoover Institution,tweeted that if told an economist’s view on one issue, he could confidently predict his or her position on any number of other questions. Prominent bloggers on economics have since furiously defended the profession, citing cases when economists changed their minds in response to new facts, rather than hewing stubbornly to dogma. Adam Ozimek, an economist at Moody’s Analytics, pointed to Narayana Kocherlakota, president of the Federal Reserve Bank of Minneapolis from 2009 to 2015, who flipped from hawkishness to dovishness when reality failed to affirm his warnings of a looming surge in inflation. Tyler Cowen, an economist at George Mason, published a list of issues on which his opinion has shifted (he is no longer sure that income from capital is best left untaxed). Paul Krugman, an economist and New York Times columnist, chimed in. He changed his view on the minimum wage after research found that increases up to a certain point reduced employment only marginally (this newspaper had a similar change of heart).

Economists, to be fair, are constrained in ways that many scientists are not. They cannot brew up endless recessions in test tubes to work out what causes what, for instance. Yet the same restriction applies to many hard sciences, too: geologists did not need to recreate the Earth in the lab to get a handle on plate tectonics. The essence of science is agreeing on a shared approach for generating widely accepted knowledge. Science, wrote Paul Romer, an economist, in a paper* published last year, leads to broad consensus. Politics does not.

Nor, it seems, does economics. In a paper on macroeconomics published in 2006, Gregory Mankiw of Harvard University declared: “A new consensus has emerged about the best way to understand economic fluctuations.” But after the financial crisis prompted a wrenching recession, disagreement about the causes and cures raged. “Schlock economics” was how Robert Lucas, a Nobel-prize-winning economist, described Barack Obama’s plan for a big stimulus to revive the American economy. Mr Krugman, another Nobel-winner, reckoned Mr Lucas and his sort were responsible for a “dark age of macroeconomics”.

 

Moreover, hard sciences are not immune from ideological rigidity. A recent study of academic citations in the life sciences found that the death of a celebrated scientist precipitates a surge in publishing from academics who previously steered clear of the celebrity’s area of study. Tellingly, papers by newcomers are cited far more heavily than new work by the celebrity’s former collaborators. That suggests that shifts of opinion in science occur not through the changing of minds so much as the displacement of one set of dogged ideologues by another.

Agree to Agree

But even if economics is not uniquely ideological, its biases are often more salient than those within chemistry. Economists advise politicians on all manner of important decisions. A reputation for impartiality could improve both perceptions of the field and the quality of economic policy.

Achieving that requires better mechanisms for resolving disputes. Mr Romer’s paper decried the pretend “mathiness” of many economists: the use of meaningless number-crunching to give a veneer of academic credibility to near-useless theories. Sifting out the guff requires transparency, argued John Cochrane of the University of Chicago in another recent blog post. Too many academics keep their data and calculations secret, he reckoned, and too few journals make space for papers that seek to replicate earlier results. Economists can squabble all they like. But the profession is of little use to anyone if it cannot then work out which side has the better of the argument.

 

Sources:

Mathiness in the theory of economic growth“, Paul Romer, American Economic Review, Papers and Proceedings, 2015.

The macroeconomist as scientist and engineer“, Gregory Mankiw, Journal of Economic Perspectives, 2006.

The moral narratives of economists“, Anthony Randazzo and Jonathan Haidt, Econ Journal Watch, 2015.

Political language in economics“, Zubin Jelveh, Bruce Kogut and Suresh Naidu, Columbia Business School Research Paper Number 14-57, 2015.

How politically diverse are the social sciences and humanities? Survey evidence from six fields“, Daniel Klein and Charlotta Stern, Academic Questions, 2004.

Does science advance one funeral at a time?“, Pierre Azoulay, Christian Fons-Rosen and Joshua Graff Zivin, NBER Working Paper 21788, 2015.

The future of working from home

 Tom Goodwin, director of The Tomorrow Group & Marketing Writer and Speaker writes:

We rarely notice it, but technology moves way faster than culture. The future of work has long been predicted to be more casual and based away from the office, yet little has changed. We still largely commute daily in order to work from the same spaces and do the same things. How do we change our approach and change the way we work in the future?

As cities swell, public transport groans under the weight of demand, train prices increase, urban house prices surge and commutes lengthen, we look again to how technology can transform the modern workplace.

It’s been a unmet future promise since the 1990’s, much like the paperless office. We’ve had Skype for years, 4G allows working from the most remote of places, the promise of working from home is always on the horizon, but never been a reality. For each company that promotes it, we’ve Yahoo and Google (of all places) look to bring workers back to their motherships.

It should obviously not be like this, most of the working environment that we construct around is a legacy of the past.

We work “working hours” which are linked to the Agrarian needs of over 10,000 years ago, where working was growing crops and daylight was needed to harvest and plant them. Lightbulbs invented over 100 years ago made this irrelevant in modern working environments, yet we still work in daylight hours obsessively, even changing our clocks twice per year to aid our “need” to work in natural light.

We have a 7 day week thanks to Babylonians who 4,000 years ago thought there were 7 heavenly bodies. Yet the 5 day working week comes from just 1908, when a New England mill to accommodate the needs of Jewish and Christian’s needs for a holy day each, coined the notion of “weekend” . It’s odd to think if the Babylonians had been able to see further, how different life would be.

We work in the same places, at the same time, presumably because the industrial revolutions had factories with set roles in production lines and needed all present continuously.

Yet none of these things make any sense any more; in a world of smartphones, lightbulbs, virtual workspaces, IM, we’re held hostage by assumptions from 4,000 years ago.

But this isn’t new, we over value the impact of technology and underestimate the impact of culture, how slow it is to change. We forget in an age of fingerprint scanning, drones, 3D printing, that we still shake hands to show we’re not carrying swords, we still chink glasses to show we’re not poisoning each other, our body language reflects behavior of cavemen, we “carbon copy” people on email, heck, some people still use Yahoo, the most primitive all all human behavior.

So how do we unbundle ourselves from this oddity, the benefits of working different hours or from working from home more are massive and well documented. They would:
1) Reduce the cost of commuting, both in terms of travel costs, energy costs and environmental destruction.
2) Reduce the wasted time and damage from stress of commuting.
3) Reduce the unhappiness of such a crappy start to the day.

But most of all working set hours from the same place, after a lengthy battle to work, with photocopies humming , hampers creativity. For me the very most unlikely place to get an idea is in an office. Put me in a museum, a weird train, let me look out of the window on a plane or overhear a conversation in McDonalds and I’ll be million times more likely to spark something.

We off course still need face to face contact, ideas are nurtured in groups, thinking needs to get small and big and be pulsed through to bigger better things with other people, but often that’s the easy part.

So with this in mind I’ve three notions that can help us unleash us from the office.

1) A change in culture – the rise of management by objectives.

For some reason we bundled ” accomplishing something” and what correlates to it which is “being at work”.

If we are truly honest with ourselves, we tend to measure how hard we have worked by how many hours we’ve been at work. Sales assistants are generally paid by the hours worked, not what they sell, personal assistants don’t get paid per email or booking, but by how long they are able stand being at work. Advertising agencies / Management Consultants /Lawyers are paid by the amount of time spent on something. It’s all totally bizarre but stays in place because we’ve never been comfortable with a better way.

Because we correlate “being at work” with doing stuff, we’ve assumed that working from home was inefficient and that people abused the system. When you expect people to behave this way they do. I’ve had friends who used “WFH” as a term for a day off, it was a chance to have a big night the evening before and merely wake at 8am to announce they were online already.

The way around this is to be able to measure productivity and set goals for accomplishments. If we were paid to simple get results, we could all know that our interests were aligned and we could make decisions about the place we need to be, in order to best get that done, which oddly enough may required being in the office, but not around arbitrary hours from the Neolithic revolution.

Now I am no management theorists, but wouldn’t it be a fun exercise to think about how you would manage people in this world. What would the objectives be that people needed to accomplish? how would you monitor it? where would be need to be day to day? what are people actually doing for your business? when would people need to be in the office? how would these hours overlap? could you offer bonuses ? what do promotions look like this this world?

Many interesting questions we should all be asking.

2) Permanent Freelancing.

The idea of a job or company for life hasn’t just faded, it’s been smashed. We may assume the future generations will be job hoppers but they will likely go beyond this to work many different careers in their lifetime and often at the same time. Anyone whose spent time hanging out in painfully trendy parts of town and who dares talk to ( or WhatsApp with) someone with a deliberately asymmetrical haircut has found that people are no longer employees but jewelry makers / music producers / fashion blogger / feng shui consultant / website designer at the same time. We’re never too sure what actually pays the bill and where success lies, but that seems rather mean spirited to question.

So how do we work with this generation, how does diverse talent come together, how do we arrange a workplace around this.

It’s not been hard for me. In my company (Tomorrow), I need the very best people on the planet, to work incredibly hard for tiny amounts of time, on super interesting projects. It’s not only way more fun this way, but a future generation of experts are drawn to short, interesting, pioneering projects that they learn from. The cost of employment is slight and I get the best talent this way. We often forget in agencies that the very best people can work anywhere. If your website design agency is in a business park in Reading, you probably won’t be getting the UI star or Designer that will set the world alight, not unless you pay them incredibly, offer them the chance to work from a Montenegrin town one week and a Indonesian beach the next and offer them something they can learn from and be proud of.

So be honest with yourself, do you want the best people in the world to fit into your system, or do you want to attract the best people and give them something they value ( which is likely to be freedom not money)

3) New Environments.

Has anyone ever actually accomplished anything from a conference call? ever? Dan is always dialing in late forcing yet another re-iteration of what the call is about, Jenny is going through airport security and can’t talk and we can’t hear the call host because their hands free is crap and they are driving too fast. In 2014, the main point of a conference call is to show that you tried.

Video calls still seem awkward, how close should you be to the camera? are they still or has the video crashed? Isn’t video a bit much? Why are they looking there?

Instant Messenger is better, but why are we spending effort to ask home someones day is? Do we have to talk about the weather? Can they tell my sarcasm? This isn’t the way to ask a favor.

We’ve just not learned how to use this technology and we’ve pretended it’s not crap. So we need to use technology better but we also need a better environment to use it in. I see a new type of home office

I see this home office as a smallish space 10ft x 10ft for example, with projected images of livestreams on each wall. We may have direct video links open always to 10-20 people and other workable information on other screens.

Each person will be in super low res and blurry in real time, but have a light showing their status. In order to open a proper “gateway” to that person in full HD and with sound, you’d need to touch the screen and they’d need to accept the call, upon which a bridge is formed and a normally face to face conversation is held.

Could this be the best of both? What is this room called? How do villages and towns of the future adopt to this new working pattern?

The New Landscape.

On recent trips on trains across the UK it blows my mind how beautiful our countryside is and how dreadful our domestic architecture is. In the USA large scale architecture is typically crap, but homes ( for the middle and above) are generally well designed, optimistic, futuristic and airy, yet in the UK it’s the opposite with wonderful public buildings, adventurous railway stations, remarkable offices and the very worst new homes our planet has ever seen.

We’ve desperate calls to develop the Greenbelt, yet the question is always yes or no, never what and how? Why do our homes look like images from a 5 year olds drawing pad? Why do we hate windows? Do we need to try to replicate architectural language from the past, without any of the reasons that existed? How would a Roman temple treat a underground car port?

I’d love to see our assumptions challenged, the Greenbelt full of “digital commuter villages”, with central community work and health centers, subterranean leisure centers, vast numbers of communicable cars to subscribe to, electric self driving buses to local rail connections, decentralized power per home and above all else homes with this new “home office”

Maybe by removing every assumption we’ve ever made, we can reimagine both working from home and our entire built environment.

Source: https://www.linkedin.com/pulse/future-working-from-home-tom-goodwin?trk=hb_ntf_MEGAPHONE_ARTICLE_POST

Western Poverty 21st Century Style

“Today,” Matt Ridley writes in his book The Rational Optimist, “of Americans officially designated as ‘poor,’ 99 per cent have electricity, running water, flush toilets, and a refrigerator; 95 per cent have a television, 88 per cent a telephone, 71 per cent a car and 70 percent air conditioning. Cornelius Vanderbilt [ 19th century American tycoon, businessman, and philanthropist who built his wealth in railroads and shipping] had none of these.” ~ Maudlin Economics

Just sayin’.

The Shadow Superpower

Just how big is System D? Friedrich Schneider, chair of the economics department at Johannes Kepler University in Linz, Austria, has spent decades calculating the dollar value of what he calls the shadow economies of the world. He admits his projections are imprecise, in part because, like privately held businesses everywhere, businesspeople who engage in trade off the books don’t want to open their books (most

bazaar
Welcome to Bazaaristan
Photos from the trillion shadow economy

successful System D merchants are obsessive about profit and loss and keep detailed accounts of their revenues and expenses in old-fashioned ledger books) to anyone who will write anything in a book. And there’s a definitional problem as well, because the border between the shadow and the legal economies is blurry. Does buying some of your supplies from an unlicensed dealer put you in the shadows, even if you report your profit and pay your taxes? How about hiding just $1 in income from the government, though the rest of your business is on the up-and-up? And how about selling through System D even if your business is in every other way in compliance with the law? Finding a firm dividing line is not easy, as Keith Hart, who was among the first academics to acknowledge the importance of street markets to the economies of the developing world, warned me in a recent conversation: “It’s very difficult to separate the nice African ladies selling oranges on the street and jiggling their babies on their backs from the Indian gangsters who control the fruit trade and who they have to pay rent to.”

Schneider suggests, however, that, in making his estimates, he has this covered. He screens out all money made through “illegal actions that fit the characteristics of classical crimes like burglary, robbery, drug dealing, etc.” This means that the big-time criminals are likely out of his statistics, though those gangsters who control the fruit market are likely in, as long as they’re not involved in anything more nefarious than running a price-fixing cartel. Also, he says, his statistics do not count “the informal household economy.” This means that if you’re putting buckles on belts in your home for a bit of extra cash from a company owned by your cousin, you’re in, but if you’re babysitting your cousin’s kids while she’s off putting buckles on belts at her factory, you’re out.

Schneider presents his numbers as a percentage of the total market value of goods and services made in each country that same year — each nation’s gross domestic product. His data show that System D is on the rise. In the developing world, it’s been increasing every year since the 1990s, and in many countries it’s growing faster than the officially recognized gross domestic product (GDP). If you apply his percentages (Schneider’s most recent report, published in 2006, uses economic data from 2003) to the World Bank’s GDP estimates, it’s possible to make a back-of-the-envelope calculation of the approximate value of the billions of underground transactions around the world. And it comes to this: The total value of System D as a global phenomenon is close to $10 trillion. Which makes for another astonishing revelation. If System D were an independent nation, united in a single political structure — call it the United Street Sellers Republic (USSR) or, perhaps, Bazaaristan — it would be an economic superpower, the second-largest economy in the world (the United States, with a GDP of $14 trillion, is numero uno). The gap is narrowing, though, and if the United States doesn’t snap out of its current funk, the USSR/Bazaaristan could conceivably catch it sometime this century.

In other words, System D looks a lot like the future of the global economy. All over the world — from San Francisco to São Paulo, from New York City to Lagos — people engaged in street selling and other forms of unlicensed trade told me that they could never have established their businesses in the legal economy. “I’m totally off the grid,” one unlicensed jewelry designer told me. “It was never an option to do it any other way. It never even crossed my mind. It was financially absolutely impossible.” The growth of System D opens the market to those who have traditionally been shut out.

This alternative economic system also offers the opportunity for large numbers of people to find work. No job-cutting or outsourcing is going on here. Rather, a street market boasts dozens of entrepreneurs selling similar products and scores of laborers doing essentially the same work. An economist would likely deride all this duplicated work as inefficient. But the level of competition on the street keeps huge numbers of people employed. It liberates their entrepreneurial energy. And it offers them the opportunity to move up in the world.

In São Paulo, Édison Ramos Dattora, a migrant from the rural midlands, has succeeded in the nation’s commercial capital by working as a camelô — an unlicensed street vendor. He started out selling candies and chocolates on the trains, and is now in a more lucrative branch of the street trade — retailing pirate DVDs of first-run movies to commuters around downtown. His underground trade — he has to watch out for the cops wherever he goes — has given his family a standard of living he never dreamed possible: a bank account, a credit card, an apartment in the center of town, and enough money to take a trip to Europe.

Even in the most difficult and degraded situations, System D merchants are seeking to better their lives. For instance, the garbage dump would be the last place you would expect to be a locus of hope and entrepreneurship. But Lagos scavenger Andrew Saboru has pulled himself out of the trash heap and established himself as a dealer in recycled materials. On his own, with no help from the government or any NGOs or any bank (Andrew has a bank account, but his bank will never loan him money — because his enterprise is unlicensed and unregistered and depends on the unpredictable labor of culling recyclable material from the megacity’s massive garbage pile), he has climbed the career ladder. “Lagos is a city for hustling,” he told me. “If you have an idea and you are serious and willing to work, you can make money here. I believe the future is bright.” It took Andrew 16 years to make his move, but he succeeded, and he’s proud of the business he has created.

We should be too. As Joanne Saltzberg, who heads Women Entrepreneurs of Baltimore — a business development group — told me, we need to change our attitude and to salute the achievements of those who are engaged in this alternate economy. “We only revere success,” she said. “I don’t think we honor the struggle. People who have no access to business development resources. People who have to work two and three jobs just to survive. When you are struggling in this economy and still you commit yourself to having a better life, that’s really something to honor.”

TED ALJIBE/AFP/Getty Images

Source: http://www.foreignpolicy.com/articles/2011/10/28/black_market_global_economy

Eight Critical Value Points of a Futurist

Futurist Thomas Frey writes on the Eight Critical Value Points of a Futurist:

The-Value-of-a-Futurist-815

As a Futurist, people often ask me how many of my predictions have come true. I find this to be a rather uncomfortable question. It’s uncomfortable, not because my track record hasn’t been up to par (actually, a high percentage have come true), but because accuracy of predictions is a poor way of measuring the value of a Futurist. Continue reading

Robot Ants Invade Factories to Boost Efficiency

Robotic vehicles at the Fraunhofer Institute for Material Flow and Logistics IML, in Dortmund, Germany, can mimic the thinking of ants, almost. Multishuttle Moves®, as the machines are known, use processors modeled after ants’ brains and body systems to independently navigate a warehouse, identify items to pick up, and coordinate with each other to carry each item to its designated picking station.

Each vehicle knows what to carry and where to carry it, based on installed software that crunches “ant algorithms,“ which emulate the actual behavior of ants searching for food. The vehicles’ software programs notify them when an order comes in, and then each vehicle interacts with the others through W-LAN to determine which vehicle will take on which task and where. The fleet increases or decreases its activity as the demands fluctuate throughout the workday.

Their on-board navigation systems also enable each vehicle to move freely without crashing into any objects or, for that matter, other vehicles. And via their scanners for location, acceleration, and distance, the vehicles independently calculate the shortest routes to any destination.

Fraunhofer’s researchers, who built a fleet of 50 of these robots in partnership with robotics firm Dematic, said that this suite of capabilities makes them far more efficient and economical than traditional, human-driven vehicles. Following further testing and development, the researchers said, autonomous vehicles like them could be clearing inventory in warehouses throughout Germany and beyond.

Source: Fraunhofer Institute for Material Flow and Logistics IML, Dortmund, Germany. Futurist Update Magazine, Vol 13, No 3, World Future Society