You are currently browsing the tag archive for the ‘social contract’ tag.
This is Alice in Wonderland looking through the looking glass at debt management
—Rep. Greg Walden (R., Ore.), quoted in WSJ
Walden fears the trillion dollar coin solution to Republican obstruction. Mint a coin with a trillion-dollar denomination, deposit it at the treasury, and use it to buy back treasuries. No more debt-ceiling crisis. If anyone has passed through the looking glass, though, Walden and his GOP peers have led the way.
Despite having run up a terrible tab for the many programs he and his colleagues voted through. Despite having voted Nay for the Pay as You Go rule, which would have blocked any tax cuts without any off-setting tax increases or spending cuts. Walden and his peers in the Republican-led House have decided that the nation’s debt-payment should be optional.
Walden and his peers have combined a commitment to spending with a insidious refusal to pay the bills. It’s a world set in reverse, out of kilter with our expectations: where text reads backwards, chess-pieces come to life, and the White Queen can remember events before they have happened. It’s the world through the looking glass.
A trillion-dollar coin may sound far-fetched, but we didn’t arrive at it by accident.
So, Alice, what will it be?
It’s exciting to have charismatic leaders. But often the best leaders in business, in government and in life are not glittering saviors. They are professionals you hire to get a job done.
On the right, there’s something of a cultural underlay to the worldview: We are the real Americans, and they are not. Liberals want to say, We are correct on the evidence, and they are not.
—Ezra Klein, on the basic divide between liberals and conservatives – clever: via NY Mag
The fact that the English word mad means both angry and insane has repeatedly seemed to me wonderfully perceptive of it.
—Stanley Cavell, from his most recent book, Little Did I Know.
The Chronicle of Higher Education covered the book-launch and corresponding conference at Harvard, Stanley Cavell and Literary Studies, last fall. Cavell’s work on Thoreau, Emerson and Dewey revitalized these American thinkers and organized them in terms of his interest in ordinary language, American cinema, literature, and other areas. He may also be considered a mid-wife for this piece on jumping the shark.
The whole concept of expert networks is a bit of a smokescreen here because if you think about it, it’s impossible to be an analyst on Wall Street unless you have an expert network.
—James Kinnucan, Broadband Research, remarking on the media’s association of expert networks with an expanded insider trading investigation by the SEC: Interview by David Faber on CNBC. Kinnucan, of the fresh faced eager beaver fame.
Rising deficits. Burgeoning questions about economic recovery. A long shadow of war and conflict. These issues sound familiar today, but they share a common thread with the story of Eubulus in the fourth century BC in Athens.
The Athenian economy and culture had come undone. The war between the Greeks and Thebes had stretched on for many years and nearly bankrupted them politically and financially. The once tight control over the Greek city-states exerted by Sparta and Athens had withered with defeats in Leuctra in 371 and Mantinea in 362 BC, followed by the Social War. It was at that time that Eubulus took control of the Theoric Fund and engineered a remarkable recovery, the benefits of which accrued to both himself and Athens.
We find in Eubulus one of the first technocrats. Rather than pursue an imperialist policy bent on tributes, he recovers the Athenian economy through trade and investment. He incorporates the latest thinking on government and the economy from the likes of Xenophon. But today many remember him as a weak and corrupt precursor to the vigorous rise of Demosthenes and his noble resistance to Philip II of Macedon.
Today, the United States finds itself in similar circumstances. War. Economic despair. With the Obama Administration, we have a technocrat and his company in the Whitehouse. And we see the same clash, but this time, the press might call them populists or, perhaps, Republicans. Replace Demosthenes with Richard Shelby or Dick Cheney and shift the subject to the turmoil in the economy or the pervasive threat of terrorism and al Quaeda. Does the Obama administration face the same fate as Eubulus?
Eubulus gained broad influence over Athenian finances and politics through control of the Theoric fund. It is suggested that Pericles had instituted the fund to provide for festivals and various state expenditures. Perhaps most potent was the control over the amusements of the multitude. These captured the imagination of the citizens of Athens and distracted them from their wretched state. Control of the Theoric fund meant control over the access to and production of these events.
Though the appeal of free tickets may have helped Eubulus enhance his position among Athenians, unlike conventional descriptions from Britannica, for example, it did not figure greatly in his rise to power. Following the Social War, which ran from 357 to 355, the annual revenue of the Theoric fund had dropped to hardly 130 talents and hardly warranted the attention of ambitious Athenian politicians, such as Demosthenes. Moreover, election to the Fund only lasted one year.
Eubulus’ rise to power marked a decisive shift in statesmanship. Through careful maneuvering, Eubulus converted the Theoric fund to the Theoric Commission. The details are unclear on how he accomplished this, but he effectively came to control the Athenian finances in their entirety. He then focused on two things. First, to increase the revenues of the state and bring about some financial stability. Second, to increase the general prosperity of all Athenians. Both of these ambitions, however, would be approached in an entirely new way, one similar to that described by the recent publication Xenophon’s On Revenues (355 BC).
Xenophon’s On Revenues argued that Athenian wealth depended on trade, not tributes. His realization ran counter to the common wisdom. Most Athenians viewed their imperial tendency as the mainspring of their wealth, and poorer Athenians believed this most vigorously. City-states that did not pay signaled lost opportunities and the continuation of the poor’s mean condition.
Xenophon proposed creating a fund to finance the engines of trade. Citizens would contribute, and “most of the Athenians will receive annually more than they have contributed.” The fund would make investments in trade and the infrastructure related to trade. These investments would result in increased state revenues, a growing economy, and the resulting wealth of the Athenians. Xenophon said, “the more people settled among us and visited us, the greater the quantity of merchandise, it is evident, would be imported, exported, and sold, and the more gain would be secured and tribute received.”
For ancient Athens, Xenophon’s ideas were a meaningful departure from the policy of imperialism and the rapacious collection of tributes. Rather than rely on the grinding effort of collecting revenues from other city-states, Xenophon proposed that Athenian economic growth through trade would more than suffice. Indeed, he specifically argued against tributes and the military adventurism that they required: “if the full revenues from the state are to be collected, there must be peace.”
Eubulus engaged Xenophon’s ideas in earnest and perhaps also improved upon them. He set about three major changes to stimulate the economy, drive revenues, and enhance prosperity. First, he moved forward with taxing the Metics, who were resident aliens in Athens. Second, he invested in the encouragement of trade and traders. Third, he raised money for direct investment in capital projects, such as the repair of walls, ports, and other facilities to stimulate the economy, support trade, and improve the lot of Metics and citizens alike.
The results would speak for themselves. Rather than raising money through eisphora–essentially tax-increases, or levies–Eubulus financed his policies with direct borrowing, so it would present less of a strain on the citizens. By the year 346, the revenues had increased to 400 talents a year, almost thirty times the revenue when he introduced the Theoric Commission in 355 and took control of the Athenian finances. And just as Xenophon suggested, he continued to pay out a small amount to Athenians every year.
Joseph Addison’s Mr. Spectator would bring Eulubus the technocrat to life in 18th century London as a paragon of the Spectator’s audience: the emerging middle class. He eulogized Eubulus in Spectator [no. 49] as one who “presides over the middle Hours of the Day.” He holds reign over the Men formed for Society, whose “Entertainments are derived rather from Reason than Imagination.” They met after those in the morning rose, met in the coffee-houses and “published their laziness,” and before the Monarchs of the afternoon or Tom the Tyrant in the evening.
The Eubulus figure at midday is the embodiment of the Addison’s trader and business-man of the coffee-house. He approaches decisions with dispassion and a keen focus on the economic end: “He does not consider in whose Hands his Mony will improve most, but where it will do most good.” These qualities engender loyalty and ambition to “speak after him” and be “wise in his sentences.” Mr. Spectator would say of those that followed his Eubulus: “Every Man is Eubulus as soon as his Back is turned.”
But just as leadership in Mr. Spectator’s metaphor would shift to the Monarchs of the afternoon or Tom the Tyrant in the evening, the political climate would change for Eubulus in 4th century Athens. The growing wealth of the Theoric fund began to arouse interest in Demosthenes, who hadn’t paid any attention to the Theoric Commission in 355. By 349, however, Demosthenes began to pressure Eubulus to finance an expedition to Olynthus, and the subsequent record of his speeches illustrate the depth of his ambitions and the measure of his opposition to Eubulus and his allies only grew as he pushed for military funds.
Demosthenes sounded the alarm for Philip II of Macedon’s steady approach on Greece, and Eubulus became his foil. Athens faced a real, existential threat from Philip, so caution was warranted, and Demosthenes argued ceaselessly and credibly for intervention. Eubulus had also made a strategic error. Between 355 and 351, Eubulus passed a law that mandated all excess revenues of the state would pass to the Theoric Commission, not the military’s stratiotic fund. Theoric funds could not be applied to military adventures and expenditures, and those that did would be put to death. According to Demosthenes, Eubulus had hamstrung the people.
While the Theoric Commission had done much to improve the Athenian finances, it also paid a dividend to the citizens. Demosthenes would suggest that these payments amounted to a bribe. The citizens were reluctant to give up their individual gain for the greater good. In the First Olynthians, Demosthenes begged, “With regard to the supply of money, you have money, men of Athens; you have more than any other nation has for military purposes. But you appropriate it yourselves, to suit your own pleasure.” By implication, the policies of Eubulus enervated the citizens by giving succor to their selfishness.
Historians would take up Demosthenes’ criticism and mine a thick vein of contempt for the policies of Eubulus. He became the flatterer, a man of the multitude, a man of money, not the military. Eubulus brought on, whole cloth, the decline and fall of Athens on Philip’s approach. In Matthew Arnold’s Numbers, he would quote an unnamed, though temperate German historian: “The grandeur and loftiness of Attic democracy had vanished, while all the pernicious germs contained in it were fully developed. A life of comfort and a craving for amusement were encouraged in every way, and the interest of citizens was withdrawn from serious things.” John Gillies’, in his History, called Eubulus “an artful flatterer of the multitude,” and said, “it was vain for Demosthenes to resist the popular torrent.” The 1910 Britannica laid its own accusations: “there is no doubt that he took advantage of his position to make use of the material forces of the state for his own aggrandizement.” And Theopompus of Chios, writing during Eubulus’ time in his Philippica, claimed, “Eubulus raised a great deal of money and distributed it to the Athenieans, and in consequence the city became exceedingly cowardly and exceedingly lazy during his administration.”
Plutarch would remember Demosthenes as the sole countervailing force to Philip’s advance. Eubulus hardly appears, and in his place stands the firm, steady hand of Demosthenes and his constant warnings of Philip. In his Lives, Plutarch writes, “We have nothing of this kind to say against Demosthenes, as one who would turn aside or prevaricate, either in word or deed.” Instead, Demosthenes rises as one who can make difficult, unpopular decisions: “he pursuades his fellow-citizens to pursue not that which seems most pleasant, easy, or profitable; but declares over and over again, that they ought in the first place to prefer that which is just and honorable, before their own safety and preservation.” Though many, including Eubulus, would experience Demosthenes’ attacks, Philip remained his focus.
But are these criticisms of Eubulus warranted? Yes, the Athenians were unable to repel Philip. He took Olynthus in 348 and would soon force Athens into the embarrassing Peace of Philocrates. But it was not because Athens could not advance its military, they merely had to change the law or raise a levy on the citizens. Moreover, Professor G.L. Cawkwell at Oxford has argued that a defense of Olynthus would have been a military disaster. He also shows that far from starving the military, it grew under Eubulus’ administration. Cawkwell would conclude that, no matter the rhetoric, Athens was merely out-classed militarily and politically by Philip. They could not win, for the circumstances were set against them.The circumstances, however, would provide Demosthenes his foil and color Eubulus and his company an enemy of Athens. Whether he deserved the charge did not matter.
Demosthenes’ passion and his speeches overruled history’s favorable treatment of Eubulus. Eubulus would be known as a technocrat who captured the finances and administration of Athens but lacked the gall to make hard decisions, stir the languishing tendencies of the majority, and face down the true problems of the state. The details that Cawkwell would surface were too soon overrun by the speeches of Demosthenes, his followers, and those that would wish to tell the tale. Arnold would write of Eubulus’ Athens: “Plato was right afterall: the majority were bad and the remnant were impotent.” Eubulus would become synonymous with this impotence and the fall of Athens. Eubulus, however, was neither impotent nor responsible for the fall of Athens, but with Athens no match for Philip, Eubulus’ accomplishments would be no match for the passion and speeches of Demosthenes.
When Demosthenes finally met Philip II of Macedon, he was said to have fainted at the sight of him. The man who Plutarch introduced as the accomplished orator, the one who overcame stammering pronunciation by speaking with pebbles in his mouth, who recited speeches while running or going up steep places, so he could discipline his voice, was so overwhelmed by Philip that he crumpled to the floor.
Demosthenes captured the hearts and minds of many with his warnings and imprecations, but he failed to be the statesman that was Eubulus. His only success was in the failure of Athens and Greece to hold back Philip, for he would become known as the one relentlessly exercised over Philip’s advances. Athens’ failure would be Eubulus’ failure, and the blame would work to embellish his story with tales of corruption and weakness.
Today, we have the Obama administration. Technocrats. Their countless economic advisors. The studied decision-making before committing to Afghanistan. The appeals to reason on and practical pursuit of healthcare reform. The Keynesian logic behind the economic stimulus package. Each decision and initiative was flanked by support from experts and thought leaders, together evoking the story of Eubulus. Nonetheless, one only has to watch the Sunday morning news shows to see Demosthenes’ agenda played out by the vocal remnant of the Republican consensus in the hopes that Obama might be forgotten, like Eubulus, regardless of the cost.
Doc Searls frames danah boyd’s recent talk on privacy at SXSW as a loss of control. The internet’s applications and engagement with society have resulted in a loss of control over one’s privacy. But this is misleading. It suggests that one might have had control in a more personal setting – that an in-person meeting might charter one’s ability to shut another up, impounding the information forever. Did we ever have that level of control? No.
But Searls has tapped into something. It stems from a fundamental disquiet around the social contract that Eben Moglen describes in Freedom in the Cloud with Facebook, among other social networks: “I will give you free web hosting and some PHP doodads and you get spying for free all the time.” He’s tapped into the disquiet around actual control over the architecture of social interactions. It’s control, not the lack thereof, that is startling.
The architecture of social interactions, to be sure, is a loaded phrase. For our purposes, it can be simplified and thought of along three dimensions. First, it reflects the conditions under which one might share information. One might share a status update with Friends on Facebook or tell a colleague of a weekend about town over coffee. Second, it speaks to how another might absorb the information – ranging from listening carefully to surveillance of Friend’s wall on Facebook. Third, it is shaped by how people think about their audience. Are these systems for addressing individuals or groups? A person or a public? boyd’s talk glances upon this, but does not tease out its underlying influence on sharing and surveying.
It would be wrong to say that we ever fully controlled sharing or surveillance in any of the real world interactions of which boyd speaks wistfully. These encapsulate a flexible, mutable set of considerations and circumstances that one might make or be subject to with each interaction. Should I tell so and so? Is this the right place for it? Will someone overhear? What will they do with the information once they have it? We can edit ourselves, choose the conditions of how we share information. But we have to make compromises. We can make judgments around the setting and the person. We might even influence how they treat the information. But we don’t control what they do with that information. We may be careful, but we don’t really control any of it.
Social networks and interactions on the internet, however, introduce actual control over how we share with and survey one another. Control amounts to the easy ability to publicize what boyd calls personally identifiable information and personally embarrassing information. There are two parts to this: the ability to share more effectively and pervasively; and the ability to listen and survey more broadly. It’s not that we are giving up control, as boyd says. We didn’t have it in the first place. It’s that we’re seeing it for the first time. Control is over publicity, not privacy, and it sits with whomever or whatever has the information.
A discrete email might feel selective and appear to impound the information forever, but it can just as easily be circulated to another and another and another. That email or Facebook photo or blog post, unlike hearsay and the slow erosion from memory of a coffee-shop confession with a close acquaintance, can circulate with alarming ease and absolute fidelity to the initial confession. Indeed, systems on the internet don’t so much impart control over privacy, but over publicity. In a matter of keystrokes, damaging, embarrassing or otherwise hilarious information can be shared, surveyed, and shared again – increasingly open to the deliberate or serendipitous surveillance of many more people than might otherwise be intended. Each digital footprint stirs with potential energy.
The rising claim that privacy is dead, boyd suggests, imbues these systems with a prejudice for publicity. Fulfilling Moglen’s social contract, social networks design their systems to increase the velocity of sharing and improve the powers of surveillance. The obvious example comprises the PHP doodads from Moglen’s quote, but the counterpart is how social networks change how people present themselves and the information they share. It’s a change that shifts participation toward publicity.
Social networks orient one’s sharing and surveying toward groups, not individuals. The orientation levels one’s relationships according to various categories of access. One group can see only your public profile. Another, your entire wall and collection of embarrassing photos. But everyone is addressed in the same way through status updates, postings: each according to their clearance, and without regard for who they are individually. A user wrestles with the idea of the public, not the idea of a friendship.
boyd characterizes Twitter accordingly and starts to draw a distinction from Facebook. She suggests Twitter “evolved to be primarily about those seeking an audience and those seeking to follow or contribute to a public in some way.” Users invent a persona and participate in a system designed for publicity. She argues that Facebook, however, is “still fundamentally about communicating with a specific set of people who are, by and large, your friends.” But suburban Facebook’s engineering, through likes, posts, zombies, encourages addressing a group, a public, not an individual — even before the recent changes in privacy policies that accidentally may have led to some over-sharing by unsuspecting users.
Sharing with a public, surveying a public – these activities engage the public. They not only depend on the public, they drive publicity. boyd warns us with a distinction, “there’s a big difference between something being publicly available and being publicized.” But the shift toward control in the architecture of social interactions erases the difference between publicly available information and publicized information. Public information is publicized information.
The shift that we’re observing is one toward greater control, not less. Enhancements to one’s ability to share and survey information introduce massively distributed control and gear the engines of publicity. With each individual arranged as a node in the network, equipped to survey and share as they wish, oriented to an ever changing public, we are seeing a shift toward control, not away. And with it, the realization that more control means more publicity.
The PEW Project for excellence in journalism recently published its annual survey on the state of the news media. The report framed readers of online news media as mysterious strangers with dubious habits and few loyalties. They read promiscuously. They spend little time with the news online. And they are quick to abandon any site that might ask for compensation. Online journalism is in trouble.
The business of connectivity, however, is thriving. Both video and internet access, whether it’s through Verizon or Comcast or another, continue to increase penetration and, seemingly, price, and the FCC’s 100 Squared initiative will spread access wider and push it deeper than before. But the PEW project pits an underfunded online news media against the mysterious stranger who doesn’t seem to recognize or care for their impact on or the consequences for the media or perhaps the higher goals of journalism itself.
How can the fate of internet access and online media be so divergent? They’re actually intertwined. It’s not that we’re not paying for news. We are. Internet access bundles the full array of sites, services, and entertainment online with the physical connection, just like cable. But unlike cable, it doesn’t pay for the privilege.
Cable and the internet are a lot a like. Both are networks. Both distribute entertaining and educational programs and services. Both are actually bundles. But unlike the cable bill, which must pay out to the various networks, the internet bill doesn’t pay the panoply of sites across the internet. It pays only the ISP.
Cable bundles content in a way that’s immediately obvious. The guide shows a raft of networks, and with digital cable, many of these programs are available on-demand. Cable permissions the content, pays the rights-holders, and distributes it over a proprietary network — all for a monthly fee. These networks and programs are the complement to the cable network.
The internet portion of the bill, whether it’s from the telecom company or the cable company, appears to do none of that. It’s billed as pure connectivity that terminates in an ethernet connection. The ISP may market tiered levels of access, so an online gamer can experience a faster connection and lower latency than someone who only needs to check their email and stream The Daily Show. Everything about how it’s billed, marketed and promoted would suggest it has only priced connectivity, but it’s not just selling connectivity. It’s selling a bundle, just like the cable side of the bill, and that bundle includes the manifold benefits of all the sites, services, and entertainment of the internet.
Bundles solve one very important problem for companies – pricing. Not every customer will value any one product or service in the same way. A price for one customer might be too high; for another, too low. One could price each good or service to suit each customer, but price discrimination on this order is inefficient and becomes costly with each transaction. Over an entire portfolio of products or services, however, variances in customer perception begin to even out. No customer may value any one product or service, but taken as a the whole, the bundle may be valued similarly by all. Erik Brynjolfsson argues that bundles provide greater pricing efficiency and higher profits, and with digital information goods — the internet — the bigger the bundle the better. This is the power of the bundle.
The ISP bundles connectivity and its network of complements in the form of sites, services, and entertainment available online. The internet bundle, however, is distinguished in one important way – market power. The ISP wields market power in two ways. It’s not only a means to maintain and perhaps increase pricing with the consumer. It is also through the lack of market power inherent in the network of complements that constitute the sites, services and entertainment available online.
Market power starts with an explanation. Economists assume that within a perfectly competitive market no one competitor would have the power to raise prices for a particular good or service. If they did, customers would switch to a ready substitute at a lower price. These are the conditions of pure competition, in which a particular good or service is a commodity. Experience would suggest, however, that markets aren’t always perfectly competitive. What characterizes this divergence? Market power. In those cases, the company has the power to raise prices without losing customers to competition. At the extreme, market power may manifest as monopoly.
The market power of an ISP that has captured most of our attention faces the customer. It starts with the high barriers to entry associated with having laid the local loop in the form of copper lines, cable plant, and now fiber. These barriers limit competition, often to a maximum of two players in any particular area: a telco, such as Verizon, and a cable company, such as Comcast. Indeed, the FCC’s 100 Squared initiative admits 85% of markets have only one player, and in the remaining 15% markets much of the legacy telco infrastructure has not kept pace with the cable offering, so there is effectively one player. As the Berkman Center’s Next Generation Connectivity report suggests, these are regional monopolies and duopolies that have enormous market power over the consumer. Yochai Benkler’s recent op-ed in the New York Times, for example, drew stark parallels between the generous service offerings driven by regulated markets internationally than the relatively stingy offerings in the US.
What has drawn less attention is the effective market power ISPs have over the sites, services, and entertainment online. It’s this condition that allows ISPs to sell the bundle but keep the money.
The ISP operates as a broker and bundler between the user and the Internet. While selling the connection to the customer, the ISP also effectively provides access to the sites, services and entertainment available on the internet. Similar to a cable package, these are the complement to internet access, but unlike a cable package, the ISP doesn’t have to pay retransmission rights. Access is free, ostensibly. Who set the price? Who has market power? The ISP.
The Pew Project for Excellence in Journalism follows the thread all the way to the end customer and dismal results. Some 82% of customers are likely to go somewhere else if their favorite news site were to begin charging for access, and only 35% even have a favorite news site. To customers on the internet, substitutes may be so pervasive and available that it often does not even merit a respondent’s identifying a single one. Taken literally, only 7% of online readers would pay for access to their favorite news site.
Does that mean that customers aren’t paying for news? No. Customers are paying for news. The internet bill isn’t just for connectivity. They’re paying for the bundle – news, among other sites, services and entertainment online. The service would hardly be a worthwhile transaction for as many people as it is at $40 a month without youtube, The New York Times, Amazon. But the ISP’s market power conveys the proceeds of the internet access bill to the ISP, not the media.
Strategic default on mortgages will grow substantially over the next year, among prime borrowers, and become identified as a serious problem. The sense that ‘everyone is doing it’ is already growing, and will continue to grow, to the detriment of mortgage holders. It will grow because of a building backlash against the financial sector, growing populist rhetoric and a declining sense of community with the business world. Some people will take another look at their mortgage contract, and note that nowhere did they swear on the bible that they would repay.
I’m deeply worried about what comes from here…We don’t really have a lot of role models” for a positive outcome. One can look to Japan, which is not a heart-warming story, he said, adding “the only other role model is the Great Depression, which was ended by a very large fiscal stimulus project called World War II.
—Paul Krugman, speaking at the AEA conference on Monday, January 4th
The economy’s growth in the second half of last year was driven by a strong fiscal stimulus, including not only federal spending and transfers but also special subsidies to car buyers and to first-time home buyers. Home buying was also stimulated by a sharp drop in mortgage rates. These forms of stimulus will be missing in 2010, creating a serious cloud over the near-term economic outlook..It will be difficult to have a robust recovery as long as the residential and commercial real-estate markets are depressed and local banks around the country restrict their lending…