Saturday, June 19, 2010

Economics 19/06/2010: Ideas that (allegedly) will change the world 1

Forbes Magazine has published a list of 25 ideas that will change the world in the 21st century. The list is available here. Let's take a look. Some are quite interesting, others are banal...

I’ll be blogging about it over the next few days.

Number 1
"In coming years, increasingly larger amounts of capital will come into the financial system. ...India, China and a few other developing economies will attract a much larger portion of foreign savings. …This increased flow of capital presents us with a unique opportunity to transform [Indian] society. …the financing, investment and risk management needs of companies and governments are growing in size and complexity, and financial institutions should have the ability to support this growth.”

[So far, nothing new – investment into Brics has been growing steadily and the trend is likely to continue for some time assuming:
  1. Massive Government-fuelled credit and spending expansion in China continues
  2. Massive Government spending-fuelled expansion in Brazil continues (for the record – Brazil’s fiscal deficit is reaching beyond 13% per annum at the time of rapid economic growth – if one ever had a more pro-cyclical fiscal policy than that and didn’t end up in ditch afterward, do let me know)
  3. India can supply significant translation of internal growth into external and expatriable revenue for companies without either running a massive inflation or grinding to a halt on the back of collapsed exports demand
  4. Russia returns to robust growth – though in the case of Russia, there is little chance the country does not really attract massive external funding outside extraction industries.
But the thing about these countries swallowing a greater share of Western savings is probably true, for some time. Not sure if it will last through the 21st century]

“Technology will play an important part in this transformation, because it has the ability to break access barriers and bring down transaction costs to a fraction of what they are today. …One such transformational change will come from mobile payment systems.” [An interesting, but not very ‘futuristic’ view – the view that few would disagree with]

“Technology will enable Mutual Funds to sell and service much smaller investment units and insurance companies to sell much smaller policies than they are able to do now. [Alas, mutual funds industry is hardly a cutting edge stuff. Especially since ETFs offer much more at much lower costs. And they do not need any new technology to offer their services to smaller investors] …Similarly, processing small loans and small insurance claims will become faster and easier... Databases with credit histories, and Unique Identification systems will allow financial institutions to reduce risk when they make loans or provide other financial services.” [I am not sure that risk management is a matter of technology bottlenecks. While computational and data processing power can help, it can’t alleviate the problems of modelling and pricing risk, or the problems relating to catastrophic risks, or the much more salient – from Bric’s perspective – problem of basic individual risks inherent in the client base. Machines might change the modes of analysis, but they can’t change the default probabilities of people.]

“The impact of technology is not limited to retail financial services alone. At the core of the financial system where equity, credit, currency and other risks are traded, we need deep, liquid and resilient markets. Technology is helping these markets enormously, and playing an important role in improving efficiency of capital allocation and risk management.” [Yes, but… the speed of order systems in world’s leading exchanges is now so much faster than the speed at which information is delivered to the public and even recorded, that we have clearing and disclosure systems operating at slower speeds than booking systems. It is a serious concern]

[I am not really convinced the idea of India’s and emerging markets financial revolution is… well… all together so revolutionary. Looks like a simple linear projection of a trend.]

Number 2: the emergence of non-English language based cultures on the web.

“…culture does get transmitted; the early adopters, eagerly working on the [African languages] Internet, say, will also be speaking English or French, and they will transmit best practices. It won't take as long as it did the first time. …You already have the 3G mobile network so basically you just need a device to connect. The questions are what devices they will use to connect and when those devices will become affordable. Like with telephony, where people who have never had a landline leap straight to mobile phones, we will see people who have never had an Internet connection leap straight to broadband.”

[An interesting point, but again, hardly revolutionary. In fact, most of hardware referred to above is clearly already in place or being put into action. Its price is collapsing rapidly, including in emerging economies. African consumers of mobile data are pretty much identical in their patterns of consumption to those in the West or Asia. The question is about ‘software’ of culture, of language. A person, say in Africa, can opt for the use of a local language and local culture, drawing on few thousands in terms of potential market for their ideas and content. Or the same person can opt for English or French or Spanish or Chinese. Foreign language merging with foreign culture will not only open the culture up to a larger scale market, but it will also lead to more interesting interaction between language and culture, potentially leading to a development of (at first) non-convergent sub-cultures that will inhabit the web alone and will have only loose (or even superficial) connections to the original culture itself and to the language-based system they utilise on the web. Now, that’s a revolutionary idea – not a transformation of existent cultures, but their mutation into new cultures. The next question is – following convergence of communications, will there be a convergence of atomistic new web-based cultures? Will the web lead to the emergence of a truly global, non-localized culture? And here is another ‘futuristic’ idea for you that comes off the same core – once convergence of technologies and communications takes place, the next step will be to merge these with biological systems. Then, new cultures – until then existent solely in the virtual world – will become physical – or biological. What happens next? Imagine your children’s computer games acted out in real physical universe? May be not by 2030… but what about by 2050?]

Number 3:

“There is a strange paradox at the heart of human nature. We humans are the most sociable creatures on earth, with a remarkable ability to cooperate with one another. … Human beings are also creatures of unparalleled ferocity. No other animal is capable of the horrors--the wars, genocides, torture and oppression--that we have regularly visited upon our fellow human beings. This is all the more perplexing because killing does not come easily to us. …What goes on in the human mind to make… brutality possible? We dehumanize our fellow human beings when we convince ourselves …that they are less than human... The immense destructive power of dehumanization lies in the fact that it excludes its victims from the universe of moral obligation, so killing them is of no greater consequence swatting a mosquito, or poisoning a rat. If dehumanization is a key factor in war and genocide, we ought to be working very hard to prevent it.”

[This is more like a real 21st century challenge, although the humanitarian dream has been with us for a very, very long time. One interesting aspect of the entire idea of finding a ‘cure’ for cruelty and inhumanity is that all, even theoretical, ones seem to lead to a mind control and totalitarian suppression of thought in general. And the article on the topic linked above leaves absolutely no clues as to how we can resolve the truly horrific problem of dehumanization without actually dehumanizing ourselves in the process.]


Anonymous said...

How does seeking to achieve the goals of humanitarianism lead to mind control and totalitarian suppression of thought? I'm not sure I follow your argument here on this point. Can you give an example in history where this has happened?

TrueEconomics said...

You probably mis-understood me, or I was not clear enough. The goals of humanitarianism are fine. No one would object to them. The methods used are also so far fine, although some of them, such as self-censorship (practicesd in the likes of Germany and Japan) or collective victimhood promotion as culture (e.g. Ireland) are damaging in the long run. The problem is that in order to deal away with the propensity to commit violence in a comprehensive fashion, as the linked article proposes we pursue, require much more drastic measures to achieve humanitarian objectives. Measures that have not been tried on a large scale, new measures. In fact, article doesn't even suggest any measures whatsoever, other than 'research and more research'. As these are unknown, I can only comment on the attempts made in the past to rectify one or other intrinsically human traits. And all of these involved some sorts of coercion.

I am not saying 'humanitarianism is bad'. I have no opinion on this other than simple 'be careful what you wish for'. I am saying that radical alterations of human behaviour usually lead to more trouble.

Does this explain?

As far as illustrating with past examples. Some come to mind. USSR was built in explicitly 'humanitarian' doctrine. We know that led. In most totalitarian societies, the state monopolizes power to kill, and then brags about the lack of crime in the streets. We know where that leads. People today often claim to be 'humanitarian' as a basis for their arguing that certain parts of the society must be given greater protection of their rights (and even guarantees of the privileges) in the name of humanitarianism - without giving a penny to the fact that their 'humanitarian' ideals require someone else to part with their rightfully earned income or privilege or rights. Think of South African laws on business ownership.

The idea that something - e.g. a law of re-allocation or censorship - can be justified by the objectives of a noble ideal (e.g. humanitarianism) is extremely dangerous, in my view. In the end, such practices destroy even those they allege to benefit.

Anonymous said...

Paraphrasing with logic theory:

True + False = False

On the subject of removing violence from society here's a fascinating TED talk (6 mins) by neuroscientist Jim Fallon about violence in the context of genetics.
He has an interesting theory how violence perpetuates more violence in a society.

Science will either bring us closer to the humanitarian goal, or it will destroy us.