Monday, December 15, 2008

The financial crisis is only one aspect of a much bigger systemic crisis that encompasses the social, financial and ecological crises, says Susan George and suggests radical reforms that would create more just wealth distribution while saving the economy and the environment: an environmental Keynesianism.
Could Susan George and I be talking about the same thing?

My point was from a slightly different angle however, that the uses to which people put their money - a collective intelligence diverging between binge spending and that moving toward responsibility is what has brought the crisis about.

The structures that house the new economy need to acknowledge where it sits and where it needs to go.

Equity is key - as Susan George talks about in the video linked to above - the economy needs legs, not only that it needs roots in a sustainable environment.

I'm concerned about references to Keynes however. Keynes produced the General Theory to repsond specifically to his time. Things are different now. Information economy means that there is more emphasis on innovation than before.

What is more, the shift from information to a values-based economy means that even recently developed analytical tools are becoming outdated.

We need a new Keynes. One ready to see what's going on and propose a similarly elegant solution.

Sunday, December 14, 2008

Mathematics - the inelegant fool

You'll notice that conceiving of economies as informational flows exposes the limits of mathematical procedure.

To do so requires the fencing off of a proportion of the informational flow and then asking it to operate in a particular way (by means of a function).

To be accurate the model needs to be correct in two ways.

1) By describing the area of information fenced off - this can be done in very precise detail with matrices of ever-dizzying order but nonetheless amounts to drawing a circle by means of straight lines.

2) By describing the way this area operates - in other words the quality of the mathematical function. It is in this way that the greatest amount of contrivance and guesswork occurs. Functions are chosen for mathematical convenience not how they accurately describe the way information is flowing.

Functional quality can be likened to drawing a circle using straight lines and then using these as a design for bicycle wheels.

No one uses straight lines to make bicycle wheels. Firstly they don't work and secondly, those forced to use them are in for a bumpy ride.

What's depressing is that mathematics is not used to describe but to inform economic theory.

At school, a classmate of mine operated a scam where he would pretend to send vintage LPs to a friend who received them smashed (as they were before they entered the envelope). When questioned by the post office to verify the claim, the guy would post himself as a quality dealer and vastly inflate the records' prices. He made a lot of money this way as well as for others who would pose as bunnies to pose and receive the records.

Economics does the same thing. It not only proposes models based on mathematical theory, but verifies them in the same way. At both ends we get the same limitation describing behaviour and verifying its existence. As long as the theory is bounded by this tight mathematical system it will be forever suspended above what's going on on the ground.

What's suggested is the need for a more qualitative approach, understanding of the way organisations, people and fields of operation interact.

For this we need a syncretic approach that more greatly acknowledges sociology, anthropology and by crikey - real human existence.

Otherwise we'll be locked in a discipline that allows people like Larry Summers to rise to the top of the tree. A man who thought carbon trading was a good idea because it didn't matter so much that people in Africa got lung cancer because (guffaw!) they were hardly likely to live that long anyway.

Welcome to change we can believe in.

For this reason, this blog is beginning to look at ideas and concepts that can manoeuvre economic thinking in a direction that is more accurate and therefore more just.

Cones not castles

Heyo - I'm playing around these days new conceptions of the economy.

For the macro, micro and meso economy it's more important than ever to clear out the junk and set our ideas of how the world works with greater boldness and fortitude than we have hitherto.

The time demands it. I can't call myself a brilliant theorist but use what intelligence I have to get heads thinking in a certain way to launch their own, more thorough investigations.

In the following when using 'traditional' or new I'm not commenting where the state of modern theory is, merely demarcing what is desirable in the new theory and obsolete in the old. Much of what I say is well understood in management theory and in practice, but in greater need of permeating the slightly more trudging economic discipline, where it will have a more long lasting impact o policy and understandings of how our world is formed.

The traditional idea is that companies are like war fortresses. Directors are the captains and the organisation is conceived as a homogeneous entity making decisions as one. All occurs as one unit.

In the new conception, boundaries are softened. The organisation is defined as a community of participation (see Leve and Wenger). There is a centre which has greater control over the actions of the community and a periphery, which has less. Alongside managers and employees we can now include in the community of practice contractors and consultants, each participating at different levels of the community.

Leve and Wenger talk of the CoP as a mountain but it may be more helpful to think of it as a mountain to take into account power hierarchies. Well-established employees could thus be at the centre of the circle but at the bottom of the mountain - well respected and powerful in their community but uninfluential in the upper management sphere.

In this way, it makes sense to talk about nested hierarchies and spirals. Nested hierarchies (after Wilbur) suggest that the peak cannot do without the lower levels but upper levels contain more power (when applied to the political realm).

Spirals are used to link these hierarchies together. For example an experienced employee may have a low official position but work as a competent information node for upper levels (perhaps being a reliable lunch partner for a higher level manager).

Note that we're talking in terms of information flows and nodes. The nodes owe as much to their access to information as they do to their personal qualities which give them saliency within the organisational framework.

I'm throwing these concepts as I write, as they illuminate a holistic perception of organisations and how they behave. Please relax your hold on each particular conception and keep in mind the behaviour of the whole - a mountain or cone of dynamic information.

People matter in so far as their qualities determine the way the information flows round the cone. It is also an acknowledgement of how these qualities direct and suspend information flow that can help us to build better cones or better still - flatten them!

When we conceive of organisations as informational networks the need for hierarchies dissolve. Each community of Practice can be broken down into smaller ones, with the whole seen as an alliance of its composites.

That information runs from the base to the tip is vital for organisational health - to use the knowledge that the base accumulates with the insight and perspective gained from the tip.

So much emphasis is placed on codifying knowledge - endless series of reports and consultations, that informal information flows are under-acknowledged as a resource to direct organisation - I'm talking here of established management technique, the pros have always known where to get their intelligence from.

Acknowledging informal knowledge flows would help to redress current pay imbalance. These are currently designed as compensation for personal responsibility and power. By softening this definiton, and acknowledging the strength of the community in generating and channelling knowledge to its required position, we recognise a greater equity in wage distribution.

(This idea builds on the work of Gareth Orr - working in the realms of organisational science)

A last point for this entry - informational cones and communties of practice are not just a way of thinking about organisations. They can be used as a conceptual tool to describe individuals, departments, organisations, conglomerates, industry sectors, economies and trading groups - each seen as a conglomeration of cones of a lower level of magnitude.

Thus we can better see the relations of each part as connected to the whole. An exercise in boundary softening between individuals, organisations and nations to increase understanding and thereby economic justice.

Tuesday, December 09, 2008

The Environmental Shoe Horn

A quick point before I shuffle off to bed.

Climate change is such a stick thin end of the environmental debate. The ecological devastation wrought by the way we live - essentially because of the divoroce of demand from its consequences - is so much wider than carbon emissions.

No doubt dumping billions of tonnes into the atmosphere hasn't helped Mother Gaia sustain her elegant balance but the way the world has become carbon obsessed is laughable.

Need an extra flight - then offset it a little better...worried about your country's emissions - farm them off to the third world. This excellent interview by George Monbiot with the UN's leading climate change officer describes how the Clean Development Mechanism (proposed by the vastly over-inflated Al Gore) vastly ramps up the charges of cleaning up through a wad of bureaucracy that distributes the revenues to God knows where.

It's frightening and entirely expected. In the same way as PFI, ID cards and nuclear power are worldwide used as mechanisms to make sure public money goes into specifically few hands, not to mention control of these systems, so is carbon trading.

Environmentalism has been shoe horned into its area of greatest profit and so issues such as resource use and bio-diversity get slumped to the bottom of the pile.

Is this a premeditated state of affairs or the result of our collective ignorance?

I'm afraid that the one conjures the other. We had better get ready to look.
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