e-notes

Encouraged by the actual perusal* of a short intellectual biography of Helen Makower that I published a while ago, here an updated and significantly revised version. Makower was an economist with a fair bit of impact on 20th economics but now completely forgotten, just a few years after her death.

Link: Makower.pdf

Bibliographical details, revised biography:
Klaes, M. 2006. Makower, Helen (1910-1998). [online]. Available from www.e-notes.co.uk/pdf/Makower.pdf

Bibliographical details, original dictionary entry:
Klaes, M. 2004. Makower, Helen (1910-1998). In Donald Rutherford ed. Dictionary of British Economists, vol. 2, pp. 718-719. Bristol, Thoemmes.

* See Makower’s Wikipedia entry.

Yet another fascinating Terra Nova discussion, this time on social structures called 'guilds' in various multi-user online games. Some guilds at least appear to be based around communal forms of exchange and coordination of in-game resources, while those games offer rudimentarily instituted market exchange alongside. Which, as one commentator astutely put it, raises Coase's original point (see ' The Nature of the Firm', 1937): These islands of 'direction' survive only because the cost attached to alternative forms of resource coordination (such as auctions, in-game monetised exchange or barter) is higher.

So far so good. Not much insight can be gained from a truism (assuming, as Coase does, that the selective forces of in-game competition are strong enough to weed out inefficient forms of organisation).

A perceptive economist was quick to note that surely, the inefficiency (of guild survival, measured against the non-Coasean yardstick of perfect markets) must be due to missing credit markets (i.e. lack of efficient inter-temporal exchange). And there is of course a point to that. Credit markets don't work well in games for the same reason that monetised markets don't work well there either: games lack efficient in-game evolved property rights regimes, either because the company that owns them has programmed coercive force out of the game, or because it has programmed coercive force as the raison d'etre of the game (eternal war fare, which, as has again been astutely observed, disrupts orderly market exchange).

Given that markets are essentially trading places for well-defined and enforced property rights, as Coase has been so insistent to point out, one would indeed expect guilds to persist.

Still one of the best dicussions of the ethical aspects of online ethnogrphical research of the radical participatory kind follows a useful introduction to the topic by Terra Nova's Constance Steinkuehler.

One particularly fruitful perspective that emerged in that discussion is the idea of treating one's informants as fellow researchers, and citing them as one would any other source.

Assume the observations of these fellow researchers are published in public (as indeed they are, not the least on TN). To the extent that the ethnographer draws exclusively from those published observations, they will be able to draw up an ethnographic account unencumbered by the ethical dilemmas belingering traditional ethnographical research, whether conducted on- or off-line. True, one would have to discuss the comparative merits of different ethnographical approaches in this context. But with a range of excellent radically first-hand participant-observation studies of individual games having appeared in print during the past seven years or so, what we need is more accounts of the emerging aggregate picture. Issues that reach across individual games, issues that no individual researcher will be able to research first hand, given the time it takes to enculturate in any given game.

Thanks to isnoop we now have, in its raw outlines, a fascinating case study of the stellar rise and sudden demise of the first and most prominent GMail invites spooler service. Following Google's viral launch of their 1GB free but P2P invitation only webmail on 1 April 2004, invites began trading on eBay for $100 and more. This bubble burst eventually, but triggered a happy but transaction cost intensive passing on of invites in discussion boards by kind enough people to part with their invites for free, who responded to posts crying out for a free invite.

Isnoop realised the obvious: toil and trouble of exchanging posts back and forth, sometimes across several time zones, could be saved by matching supply with demand in a more efficient way. He set up a donations site providing a common email address to which surplus invites could be sent. The site would store the invites in a database and release on a first-come first-serve basis to those queuing up for a free invite.

Eventually, supply significantly outstripped demand, following Google's relaxation of an initially very tight grip on the network economies of the P2P invites distribution. As a result, the redistribution became open to abuse, allowing potential spammers to register vast multiples of GMail accounts. This prompted Goggle to persuade isnoop to discontinue the spooler, and with it a lucrative online ad space operation, in summer 2005.

Today, invites trade on eBay for free, although there are still a number of redistribution sites open, mostly in languages other than English, which appears to be a rather effective way to escape Google's peering eye. They have adopted slightly more complex redistribution methods compared to isnoop's original site, no doubt at least in part to make detection of coordinated redistribution more difficult for Google. Similar to the Napster to Kazaa paradigm shift, they restrict themselves to channelling email addresses of requesting parties to donors directly.

John B. Davis. 2003. The Theory of the Individual in Economics. London: Routledge.

This intriguing study of the individualist foundations of contemporary economics reads like a deceptively accessible introduction to the subject. The diligent reader will find though that this slim volume is packed with insight beneath the surface that requires time to properly digest, in a way that will only be apparent to that rare kind of reader equally widely read as the author across economics, philosophy, and the histories of these two disciplines.

One can learn a lot about the conceptual context of the theory of the individual in economics. At its original core the Cartesian dualism between autonomous human subjectivity and objective nature, the platonist foundations of this subjectivity being replaced by Locke's grounding of it in sensory experience. It was the Lockean individual that became the corner stone of the neoclassical tradition in economics, with the subsequent development of this tradition responding to the tensions inherent in Locke's conception. The outcome, a theory of the abstract individual as the locus of axiomatic choice, did away with Locke's psychological subjectivism, as an attempt to clarify individual choice. The unintended result, according to Davis, was a theory of the individual that had become disassociated from human psychology altogether. More strongly even, he attests the absence of a coherent and explicit account of the individual in modern economics. He accepts that there is an 'abstract individual' conception present, but argues that ultimately, this conception is not powerful enough to distinguish between 'single person' and many person' individuals. It fails to sufficiently individuate its individuals.

Davis draws here from Hume's critique of Locke's idea of personal identity. As an empiricist sceptic, Hume failed to detect his self as a substance, but instead attested a collection of various ever changing perceptions. Applied to economics, one has no grounds for attributing a preference ordering to an individual since there is no theory of the individual apart from this ordering. Hence, the economic self could well consist of many competing selves. And indeed recent economic literature has begun exploring the implications of this point, to the extent that the market without may be matched by a market within, leaving the question where one individual ends and the other starts a moot question.

Ironically, Davis points out, ensuring a unified self in this literature boils down to solving an internal 'social choice' problem through the imposition of a dictator. But since the internal and external world of choice are formally equivalent, why prefer docators here while markets there?

Let us just follow one dimension of John Davis's overall argument here in a bit more detail: The core conception of the individual in economics, her suggests, has recently shifted from early neoclassical subjectivism to computational functionalism. Computational functionlalism, as a theory of mind, holds that brain states are computational states of mental algorithms, and that two individuals share the same type of mental state if they function in a causally equivalent way in respect to their physial environment.

The new economic individual is therefore a preference computing programme that can be implemented in different entities, without prejudice whether these entities are individual human beings, particular 'modules' within a human brain, economic entities such as firms and markets, or non-human entities such as animals, machines, or Martians. No wonder thus that rats have proven in (controversial) experimental settings to epitomise revealed preference theory just as well as that subset of our contemporaries that ensures that there is never a ten dollar note on Times Square ('Even if there was, somebody would have already picked it up'). An interesting point of contact here to Mirowski's [i]Machine Dreams[/i], who argues that markets should be regarded as a prime species of algorithmic life (noting that in experimental settings, zero-intelligence computational agents have appeared to be indistinguishable in aggregate terms from human agents).

One of the many fascinating issues Davis raises in this context is that the theory of preferences that lies at the heart of Arrow's theory of social choice, and Arrow-Debreu general equilibrium theory may constitute an attempt to create a fully extensionalist economic semantics. Whereas Quinean extensionalist semantics rules out propositional attitudes, this new preference theory rules out subjective value judgements, to the effect that choice is the result of a mental algorithm. This is the origin of course of behavioural economics as it is called today, where, following the footsteps of Herbert Simon, choice is simulated my computer programmes.

Davis finds that with economists abandoning general equilibrium and axiomatic preference theory in the 1970s as core components of contemporary economics, economics keeps evolving around a plethora of alternative conceptions of individuality, none of which have evolved into a new dominant perspective. They share, at lest in the mainstream literature, a more or less pronounced calculative bias, which prompts Davis to point to Searle's criticism of computational functionalism. Meaning as a form of consciousness differs radically from the idea that we are driven by mental software that directs our economic behaviour. Davis turns thus to semantic externalism as starting point both for an alternative theory of the individual and an alternative economics.

Susan G. Sterrett. 2006. Wittgenstein Flies a Kite. A Story of Models of Wings and Models of the World. New York: Pi Press.

An ambitious stab at intellectual history, the protestations of the author not to stereotypically fit that genre notwithstanding. Wittgenstein dabbled in aeronautical engineering, and was interested in 'heavier than air' flying machines around the time they were invented. Sterrett presents a convincing case for paying more attention to Wittgenstein's interest in scale modelling in this context. Her claim, that empirical scale models in the field of aeronautics inspired his theory of language as presented in the Tractatus, holds some credence and is developed in an engaging and detailed way. Whether or not Wittgenstein drew this inpiration first and foremost from a particular article on the methodology of scale modelling that he failed to acknowledge is another matter though. Notwithstanding all the rhetoric in the book in favour of this hypothesis, it rests on speculation and series of coincidences as they are typically motivated in the genre of intellectual history. Depending on one's scale, everything resembles everything else in some respects. Starrett succumbs to this seduction of cross-idea resemblances throughout the book. And why the recurring refrain to coincident occurrences in Wittgenstein's birth year?

Richard D. Romey. 2005. Strategic Index Investing. Leawood, KS: Leathers.

Written for a non-specialist audience, this is a useful introduction both to basic concepts of portfolio management, and to exchange traded index funds (ETFs) as an asset class. Given that ETFs have emerged relatively recently, they are not yet on the horizon of most non-professional investors. They should be, and Romey’s book underlines this point in an accessible way. They allow for powerfull diversification strategies, and have opened up significant scope for cost competition vis-a-vis the traditional investment funds market.

Romey’s discussion of portfolio investment in general is transparent and backed up by useful illustrative examples, although in terms of the finer technical points and regarding a critical reflection of the mainline investment literature against the background of alternative perspectives which may be equally relevant for the lay investor, the reader would have to consult supplementary sources. His coverage of ETFs, in particular their inner workings, is comprehensive in the light of his intended readership.

While overall, the author ends up painting ETFs in what some might well regard as overly optimistic a light, this is clearly at present the best introduction to the subject for non-specialists

The specs that brought me to Simple PHP Blog were simple: The hosting package that I had then came with PHP and Perl, but database support was an add-on that would incur an extra charge.

Which gives you a straightforward choice: either sign up to separately hosted blogware, or see whether one can actually do without a database backend. Hosted blogware did not manage to convince me: what is on offer for free will not host my domain, and the subscription services are still somewhat overpriced for the basic functionality I am looking for. This narrowed the field quickly down to Simple PHP Blog (although I do seem to vaguely remember having come across one or two ‘PHP/Perl only’ alternatives).

Uploading the installation files was relatively straightforward, much to the credit of Alexander Palmo. Yes there are still some glitches in the programme (in particular when editing long static pages: only a limited set of changes will successfully upload in one go), but it is easy to use and offers convincing basic functionality. Thumbs up!

Update 26 May, 16 June 2006:
A number of persistent bugs in my Simple PHP installation have eventually prompted me to switch first to Blogger, then to the Wordpress.com hosted incarnation of Wordpress, and finally to the real thing. The problems I experienced with Simple PHP may well have been due to server side issues, rather than shortcomings in the software itself, but I got the impression that the current version is not overly robust. It did its job though, until I lost patience, and is likely the least costly way to a blog for anybody with a hosting setup similar to the one I had when I installed Simple PHP.

The recent literature evaluating Coase’s work in the light of evolutionary economics has come to distinguish between two Coasean traditions, one appropriated by the economic mainstream, the other identifying a significant heterodox potential. It is the aim of this chapter to take the latter reception of Coase’s legacy as the starting point for exploring his contribution in the light of recent debates on an evolutionary approach to economic policy. Contrary to attempts to label Coase as an arch neo-liberal, one can identify a commitment to the primacy of institutional direction rather than decentralised allocation of resources across markets as the core building block of his outlook on economic policy. This leads to an interpretation of Coase’s approach in terms of a historico-empirical method of comparative institutional analysis, which calls both for a hermeneutical approach to economic policy evaluation, and constitutes a form of historical economics that offers an ambitious research agenda for attempts to move the conceptualisation of history in evolutionary economics beyond affirmations of the relevance of path-dependent processes. What Coase ultimately offers to evolutionary economics is the prospect of a morphological analysis, exhibiting interesting parallels to recent developments in evolutionary ‘Evo-Devo’ biology that have re-established the relevance of ontogenetic approaches to developmental processes.

Preprint: 2005-Klaes-HistEcsCoase-preprint.pdf

Bibliographical details of final and authoritative version:
Klaes, M. 2005. Historical Economics and Evolutionary Economic Policy - Coasean Perspectives. In Kurt Dopfer ed. Economics, Evolution and the State. Cheltenham: Elgar 2005, pp. 78-96.

Multiple interpretations of the concept of bounded rationality are currently employed across the social sciences and beyond. This paper studies the emergence of ‘bounded rationality’ from the 19th century conceptual field of ‘limited’ and ‘finite’ intelligence. This field broadened in the first half of the 20th century to encompass related concepts such as ‘incomplete’, ‘limited’, and ‘approximate’ rationality. Eventually, ‘bounded rationality’ became a dominant expression to address the field. We study the processes of incremental institutionalisation of ‘bounded rationality’, from its origins in the administrative sciences and politics to its present renaissance in behavioural economics.

Preprint: 2005-KlaesSent-HOPE-BR-preprint.pdf

Bibliographical details of final and authoritative version: Klaes, M and Sent, E-M. 2005. A Conceptual History of Bounded Rationality. History of Political Economy 37(1): 27-60.