Yochai Benkler on the new open-source economics

In this TED Talk given back in 2005, Yochai Benkler talked about how the development of "social production" is the long term shift caused by the Internet. Examples of this include

• Linux - note that 70% of critical web servers are controlled by Linux
  
• Wikipedia (of course)
  
• Google - in the sense that they have esentially outsourced the decision of what is relevant to the web community as a whole in its page rank algorithm.
  
• Seti@home - which was for a time the most powerful supercomputer cluster in the world
  

Why is this happening? Yochai says that for the first time in history, the capital for generating and distributing information is cheaply available to everyone. Previously it was too expensive to have decentralized production. What we're seeing now is the emergence of social sharing and exchange that in some contexts it is more efficient than markets or firms. It is sustainable and growing fast.

Yochai also makes the amusing observation that money is not the greatest motivator. If you leave a $50 check after dinner with friends, you do not increase the chances of being invited back. If the dinner example is not obvious, think of sex.

The biggest disagreement I have with his view is that this is not the first time this is happening. Open source collaboration is in fact the fundamental operating model of the scientific method. Applied science and engineering is often done for economic profit and protected by patents. Basic research however is freely shared with everyone, and done more for social status and personal enjoyment than to achieve large monetary gains.

David Korten message to the Occupy Wall Street movement

David Korten, an economist, author, and former Professor of the Harvard Business School, was asked why the Occupy Wall Street movement is striking such a strong chord with such a broad base of our society.  He replied with some verysobering words "The problem is deeply structural.  There's not going to be an economic recovery, and the politicians are not going to take the actions that are necessary.   The leadership is only going to come from the people".  To the protesters he would like to say "The future depends on you.  Have the courage, the world is watching"

He also points out that the income of the middle class has been declining for some time.  We should note that this has been masked for the last two decades by the rise of two income families and a huge increase in personal debt.  These coping mechanisms have reached their limit though, which suggests that we are not going to return to the way things used to be.  Perhaps some people are beginning to realize this.  For others, this goes against their economic ideology and that makes it very hard to accept. 

Just How Inefficient is Our Society?

I was listening to a conversation about efficiency in the U.S. economy the other day. It’s actually amazing how far below our actual capabilities we are right now when you stop and think about it. I’m thinking in terms of fully utilizing our human resources.

I recently spent 11 months unemployed. I went from being an experienced and productive computer engineer to someone who produced zero net contribution to our economy for those months. I worked hard every day, but that effort was devoted to my job search routine, filling out job applications, preparing for interviews, etc. (I also did volunteer work and spent more time with my family, but I’m not counting that here.) Fortunately I have a job that allows me to be productive again, but when I look back at that time I spent unemployed I shake my head at the waste of time and effort that could have been put to much better use.

Today we have about 10% of our workforce in this situation – representing maybe a 10% waste in our productivity.  It’s hard to estimate what portion of the potential workforce is not counted in that number because they have given up or see no opportunity for a meaningful job. Some people estimate that the real number when these people are taken into account is closer to 20%. Then add a few percent more cover the people currently in prison. We can argue about adding the number of people in the military to this amount too, but that’s a relatively small number compared to other factors.

The next big factor, and potentially the biggest factor of all, is the number of people underemployed. These are people who are working at jobs that, for whatever reason, do not allow them to fully contribute to society what they are capable of. By the time you add all these factors in, our human workforce as a group is almost certainly contributing less than half of what they are capable of.

You could spend considerable time debating what portion of this is due to personal choices, cultural factors, or inefficiencies in the market. I don’t know the correct answer here. I’m sure of two things though: (1) We as a society are doing a fraction of what we are capable of and there’s room for considerable improvement, and (2) we are in a situation where there’s a considerable need for that extra human potential to solve a growing list of problems.

Positive Feedback is Making the Stock Market Increasingly Unstable

On May 6th 2010, the Dow Jones Industrial Average for the NY Stock Exchange dropped by 1,000 points in a matter a minutes in an event than has become known as the “Flash Crash”. Fortunately for people invested in the market, the Dow regained most of that loss very quickly. This was an unprecedented case, and a warning – how could the stock market change so much so quickly?


It turns out that the flash crash was caused by a single large stock trade, and the series of high frequency computer trades that quickly followed. This should be taken as a very serious warning of how unstable the market has become.

Stock markets are inherently unstable because of positive feedback. Positive feedback is a basic phenomena in control theory in which parts of a system function to increase the size of any change in either the positive or negative direction (negative feedback works to reduce or dampen any change). The market is full of positive feedback loops . Increasing stock prices attract more investors which produces even greater increases in stock prices. Falling stock prices scare away investors which causes even greater reductions in stock prices.

It is a basic principle of control theory that when positive feedback becomes large enough, the system becomes very unstable and begins to experience wild oscillations. The loud squealing you sometimes hear when there is too much feedback in a sound system with a microphone is closely related to this.

Unfortunately, the amount of positive feedback in the stock market is increasing in size and speed each year, being driven mainly by very high speed computer trading. There was a recent story about a new transatlantic cable being laid between England and the US primarily to allow faster computer trading on the NY stock exchange by firms in London. The current cables have a 65 millisecond delay, and the new cables will reduce the delay to under 60 milliseconds. I’ll save the commentary about the tremendous amount of waste in physical resources and intellectual talent that is going into this for another time. For now, I’ll just point to it as an example of the increasing speed and strength of the positive feedback effecting stock markets, bringing them ever closer to the point of wild instability.

BP's "Top Kill" Effort Fails - This Could Be Big

This could be really big.

I just heard the word that BP's best hope at stopping the oil flow, the "Top Kill" method, has failed. I wonder about the long term consequences now. I think it is misleading to think of this as a "spill", it's way beyond that. There is now a real possibility that the flow of oil could continue for years until most of the oil in that entire oil field has been emptied out into the gulf. People who have depended on catching fish and shrimp for generations in that area now say it is unlikely that they will be able to go back and resume their livelihoods at anytime during the rest of their lives. These are some of the same people hit hard by Katrina. And this is predicted to be another bad year for hurricanes. My heart goes out to these people.

What to do about BP? Traditional fines don't seem adequate in this case. I would support a permanent ban on BP doing any more offshore drilling off the coast of the U.S. They have demonstrated that they are not capable of doing this safely. That would make the rest of the industry think more seriously about safety. What if in the end it becomes apparent that no "for profit" corporation can drill for oil with adequate safety in water that is a mile deep or more? That is a real possibility that we must be prepared to accept.

There is an argument that BP is not a "bad company", it is just doing what all companies are chartered to do under the current system - maximize their short term profits. In this argument, there are no bad or good companies, there are just companies that do what companies are designed to do. Don't expect anything else to happen when we have set up the system to produce these results.

What is the long term impact of this? Instead of thinking about this as "Obama's Katrina", perhaps it is better to think about it as "Obama's 9/11". It's an unexpected event that could end up defining his presidency and shaping his policy focus in unexpected ways. This could have implications to national policy related to energy, the environment, and possibly to the way corporations are chartered and regulated. This could be big.

Economic Recovery or Continued Addiction?

I recently came across a commentary written by Brian McLaren about the concept of economic recovery. He brings up some interesting questions about what we mean by the term “recovery”. When a drug addict hits rock bottom and starts on the path to recovery, we usually mean that this person is reforming their ways, learning from their past mistakes and moving forward to a better life without their former addiction. We don’t mean that they are trying to reestablish their more tolerable state of drug dependency similar to what they were experiencing a few months before hitting rock bottom.

Yet when we talk about economic recovery, there is disappointingly little talk in the national media about learning from our past mistakes and moving forward to a better life without the former addiction to the illusory phantom wealth from complex risky financial mechanisms, excessive debt,and unsustainable speculative bubbles. Instead, the goal of economic recovery seems to be to return to how things were a few years ago before the bubble bursts, plus or minus a few minor regulation changes. It has become a call to get back to our former addictive economic high without addressing the root problems with our addictions, with the hope that we won’t end up back in the gutter again next time. Brian McLaren goes on to discuss some of the addictions we need to face and recover from: material greed, weapons, carbon fuels, quick and easy answers, etc. This struck me as an interesting way to frame these discussions in the national debate.

A Green 2010 Conference and the Status of the Green Economy

I recently attended the “Green 2010” conference at the Cary Institute of Ecosystem Studies in Millbrook NY. It was the latest in a series of regular conferences dealing with the status of the “Green Economy” in upstate New York. The conference as a whole shed some interesting light on the current status of green jobs, education, and attitudes that probably apply across much of the nation.

The first observation was that the conference was well attended – a sellout crowd of about 150 people by my estimate. The crowd consisted of a wide spectrum of ages, from high school students to senior citizens. Certainly there was a strong interest in the green economy, which should not come as a surprise given the current state of the rest of the economy in upstate NY. There were several non-profit organizations trying their best to bring green jobs, and solar technology in particular, into the area. Given that there are many groups trying to do the same thing all across the country, you have to wonder how much any given area can rely on this as a big driver of future growth in their local economy. While the dream of becoming a national center for green technology is not realistic in most cases, it can be argued that the transformation to a non-carbon economy will have such a pervasive impact on society in the next few decades that there will be plenty of work to go around. The goal is to not be left out entirely.

There was a good deal of progress in education and training for green technology jobs in the community colleges and local trade school institutions. Unfortunately, even the people running these programs had to admit that at this time there were very few jobs available for the graduates of such programs. The region already has more people trained to install solar panels than the job market can support.

Clearly the most discouraging comments had to do with environmental education in general. Everyone was used to hearing that students in America were falling well behind other advanced countries in terms of math and science education. I terms of knowledge about the environment though, we are falling behind many thirds world countries too. I’m talking about very basic knowledge here – such as explaining the steps necessary for water in the ocean to end up falling as rain on the land. The majority of American grade school students could not answer this properly. Worse yet, the racial gap within American society on this topic seemed to be even bigger than with other subjects. White and Asian groups did comparatively well, but black and Hispanic groups really struggled. This racial difference even showed up in graduate studies. Based on the lack of minorities getting PhDs in environmental studies, this seemed to be one of the most segregated of all major subjects in our universities. Indeed, I took a quick informal look around at the conference attendees and found two African Americans, no Hispanics, and no Asians. The excellent work of Van Jones notwithstanding, environmental issues often seem to remain a narrow and almost cliquish concern of the white middle and upper classes. There is much work to been done.

What Are Our New Big Mega-Projects?

A recent article in the NY times commented on the lack of any big mega-projects being undertaken. The article points out that in the past we had “The Erie Canal and the transcontinental railroad.. the Hoover Dam, the Interstate System, the subway networks in San Francisco and Washington, the Big Dig in Boston ... and the list abruptly stops. For the first time in memory, the nation has no outsize public works project under way.” Such big projects, the article suggests, can have transformative effects and create significant long term improvement for the economy.

Ok, an interesting observation. But do we really have no big mega-projects under development at this time? Or are the current really big projects just somewhat different than those of the past? I would argue that the biggest development project for the last decade was the build-out of the Internet. This required enormous investments in effort and money, generated significant wealth, and is having an incredibly transformative effect on our economy and our society. I will argue that the long term transformative impact of the Internet and related technologies will transform society much greater than the transcontinental railroad or the interstate highway system. It was government funded, at least at the beginning, though private funds have taken over the still on-going build-out. The current focus now seems to be shifting to the phase of integrating the rest of our communication and business structures into the Internet infrastructure. This is also different form the past mega-projects in that it is global in scope.

What other major mega-projects are now underway? It could be argued that transforming our health care system is one such project. This also suggests another big scientific mega-project that we are in the middle of – understanding and learning how to manipulate genomes. Understanding how DNA operates and controls living organisms, and how to manipulate it is certainly a major effort that will eventually have long lasting economic and social transformative effects on our society.

If we want to focus on more physical projects though, the biggest mega-project we have just started is clearly the transformation of our energy system away from a fossil fuel based system to one that is based on less carbon intensive and more renewable fuels and overall greatly improved efficiency. Government has an important role to play in this, but like the Internet, private funding will eventually have to provide most of the funding. I’d like to think of this as the great physical mega-project of the next 20 years for our society. Its effect on the economy and our society are likely to be profound. It's something we can rally around that should be generating much more enthusiasm and pride than a comparatively limited project like the transcontinental railroad ever could.

Difference Between Capitalism and Free Markets

When people discuss the characteristics and possible reforms of capitalism and free markets, they have a tendency to use these two terms interchangeably. In reality the two are quite different things. Let me explain.

Capitalism is defined as a system of ownership of the means of production, specifically the non-labor means of production, which includes factories, tools, equipment, etc. In a capitalistic organization, these means of production are privately owned. Labor is paid a wage for their efforts, and any profits go to the owners of the capital.

A free market system is simply defined as one in which everyone is able to freely sell their goods and services with prices determined by supply and demand.

It is possible to have capitalism without a free market in specific situations. Examples include organizations that have an effective monopoly on a market – they can prevent competition from entering the market and can set prices to maximize their own profits instead of being restricted by supply and demand. Another example is the awarding of government no-bid contracts to capitalistic organizations.

It is also possible to have a free market that does not involve capitalism. Examples include the traditional farmers market or co-ops competing with each other. In both cases, the clear distinction between owners and workers that is characteristic of capitalism is gone, yet there is still a free market competition that sets prices based on supply and demand.

It’s important to keep these distinctions in mind when discussing future economic possibilities. It is possible to reform some of the major problems of capitalism while maintaining the benefits of a healthy free market, and vice versa.

Signs of Changes in Economic Attitudes?

During a recent meeting with some friends, the topic of discussion turned to economic reform. We discussed our disappointment that very little has happened in terms of economic reforms as a result of this past year's economic meltdown. In fact, some of us were wondering if this is a topic that we could legitimately express anger over. Fortunately, I'm beginning to see some indication that the momentum is finally starting to build for economic reform.

Yesterday morning I received an invitation to a major conference on Building the New Economy in Washington DC sponsored by The Campaign for America's Future. As appropriate for a conference dealing with economic transformation, registration is completely free and open to everyone. I plan to go.

While an important aspect of economic reform deals with changes to regulations, the other important aspect deals with changes to our cultural attitudes and behavior. I recently came across two optimistic examples of such changes in Good Magazine. The first is a student movement for MBAs at the Harvard Business School to take a pledge to "serve the greater good" and to "act with utmost integrity". More than 50% of the graduating class has taken the oath. The second interesting bit of news that caught my eye was a project at Google that involved employees submitting ideas to change the world and help as many people as possible. Five winning ideas will be selected and Google will spend $10 million to make them real. Are these an indication of a larger transformation happening in our society? We can hope so.

The IBM / Syracuse / NY State Green Data Center, and the Interesting Trends it Illustrates

On May 29th, IBM Syracuse University, and New York State announced an agreement to build a new energy efficient computer center on the Syracuse University Campus. Through an interesting combination of techniques, this center will use about 50% less power than typical computer data centers, making it one of the most efficient computer centers in the world. Some of the key techniques used include:

• On-site electrical co-generation system that will use natural gas-fueled microturbine engines to generate all electricity for the center and provide cooling for the computer servers.
  
• IBM's latest energy-efficient computers
  
• Use of chilled water coolers to directly remove heat from the computers much more efficiently than trying to chill the entire computer data center.
  
• Using waste heat from the electrical generation system to provide heat and cooling for both the data center and nearby buildings.
  

Beyond the technical issues, there are some interesting observations about the future trends that this illustrates.

(1) It is yet another example of the significant improvements in efficiency that are possible in our systems. Typical of such examples, it requires a “systems approach” that focuses on efficiency from the very beginning of the design.

(2) It is yet another example of how innovation is often best produced by a hybrid combination of corporate / educational / government organizations working together. (The original development of the Internet itself is another example of such such an alliance.) Reliance on a complete “free market” approach to innovation is based more on promoting an ideology than examining the actual historical data about what works the best.

(3) This is an interesting result in terms of the benefits of distributed power generation. Power generation systems must be big enough to achieve reasonable economies of scale. Yet they should be local enough so that power distribution losses are minimized, and so that the “waste heat” produced can be utilized for other purposes in the community.

(4) Timing - the announcement was made in May 2009, and the data center is expected to be completed by the end of 2009. This is an interesting result in terms of “right sizing” projects. Very large power generation stations can take many years to complete and bring on line. Nuclear power plants can often take 10-12 years. The ability to bring new technology and techniques on line very quickly is a major reason why modest sized projects are likely to be a major trend. Since technology change is accelerating, the ability to exploit new technology quickly will become an increasingly important factor.

The Key Assets of Our Society

Dmitry Orlov wrote an interesting comparison of how much better the former USSR was prepared for a financial collapse than the current USA is. In short, much of the USSR was already functioning closer to a subsistence economy, with people making due with what could be supplied locally instead of relying almost completely on a complex interconnected national economy. Additionally, the USSR had large oil supplies that could be exported to relatively rich and financially stable neighboring countries in order to help finance its recovery recovery. As the USA undergoes a financial crisis, it doesn't have that luxury of unaffected rich stable neighboring economies to help pull it out.

While this report paints a rather pessimistic picture, I think the author misses some fundamental differences between the former USSR and the current USA. First and foremost, we have a collection of what is probably the largest, most creative, best educated, and most motivated group of civic and entrepreneurial leaders that ever existed. We have a culture that enables and even encourages a massive grass roots campaign to rebuild a new and revitalized economy. We have communications systems that enables rapid organizing and sharing of information on a level that is order of magnitudes greater than anything we had in the past . Nothing like this ever existed in the former USSR, or it could be argued anywhere else at any other time in history. Finally, though our leadership in Washington cannot act as a messiah to deliver us from all our problems, we are fortunate at this critical time to have some of the best new leadership for responding to these new problems that we've had in many decades.

Van Jones, a Yale educated lawyer and social activists, has been leading a grass roots drive to spur an economic rebuilding based on environmentally sustainable green jobs for many years now. When he was first asked if there would be a role for him in the Obama administration, he just laughed at the absurdity of the thought of himself being in a formal government position. Earlier this month he was officially appointed as a Special Advisor at the White House Council on Environmental Quality. This is an example of why there is some long term hope for building a new revitalized economy despite the prevailing short term pessimism.

The Great Disruption is Here

In what could be a landmark description of what is happening, Thomas Friedman wrote a fascinating column on March 7th in which he speculates on the question:

What if the crisis of 2008 represents something much more fundamental than a deep recession? What if it’s telling us that the whole growth model we created over the last 50 years is simply unsustainable economically and ecologically and that 2008 was when we hit the wall — when Mother Nature and the market both said: “No more.”

While this is certainly not a new theme, to see it so well expressed in a national newspaper op-ed represents a major step forward in our culture's attitude about the current situation in our society. It may be a key part of a growing rallying cry around the need for dramatic social change. He goes on to quote a number of experts, including Paul Gilding, an Australian environmental business expert, who coined a term for this period as “The Great Disruption.”

Thomas Friedman finishes by saying that both he and Paul Gilding are somewhat optimistic about our future given the changes that are starting to happen. As Gilding says, “When we look back, 2008 will be a momentous year in human history.” I'll add that in terms of a great transformation starting in 2008, let's not forget the single biggest transformative event of all that year, the November elections.

Are we really any poorer now? - part 2

In my previous append, I talked about how relationships and trust are an important part of the economy. These are things of value - economic assets just as real as factories and tools. Many of these relationships are formalized in our financial institutions, and their breakdown is directly related to the breakdown of these relationships in our economy.

Another vitally important asset in society is the attitude of people. Do people have confidence in their ability, and confidence that putting in some hard work will pay off? Or is a sense of despair and hopelessness prevalent? The general public attitude can have a tremendous impact on economic well being and growth. But attitude is something that must be built up over time. When it is damaged, as it seems to be now, it takes time to mend.

I don't want to leave this topic with the implication that our society and economy are falling apart. That would be falling into the trap of viewing all value in monetary terms. In reality many of the other components of our society are still doing quite well. I'm not aware of any data showing a significant decline in relationships between families and friends, or in the strength of churches or other civic organizations. Non-profit donations are down, and that will hurt many of them, but for the most part our non-profit infrastructure continues to do good work. Our health care and education sectors are holding together and most people still have access to them. Looking around where I live, I still have the impression that our communities are still strong and providing many of the non-monetary benefits that they were doing last time this year. If anything, for many people the hope and trust in government has increased considerably since last year. Many things of value in our society have been little impacted by the current economic slowdown.

Are we really any poorer now?

There is a painfully obvious agreement that our economy is not as good as it was 6 months ago. But from a high level, you might ask how could that be? We still have the same number of factories, the same number of farms, the same number of hospitals, the same roads, water systems, and electrical systems. We still have roughly the same number of people with the same skills and know-how. And we have almost the same amount of natural resources. There has been a slight ongoing decline in nonrenewable resources, with oil being the prime example, but that is unrelated to the current sudden decline in the economy in the last 6 months. So how can our economy be poorer in any real tangible way?

For any economy to function, what’s needed besides all the above artifacts is a set of organized relationships between the different parts of the economy. Because of a high degree of specialization, no parts of the economy are self sufficient. They all depend on a set of trusting relationships with other parts of the economy to function. The other important aspect of the economy is that it is full of time delays. A factory worker may go to work on a daily basis knowing that he won’t get paid for his effort until the end of the month. A farmer who plants a field knows that it will be several months before any crops can be harvested. When a new business is started or construction on a new factory is begun, it can often take a few years before the effort generates any profit. Investments in research can sometimes take more than a decade to pay off. In all these cases, there is a set of relationships and trust with the rest of the economy that there will be a future payback for the investment and work done today.

So yes, the economy really is not as good as it was 6 months ago, and we are really poorer. What we lost was the set of organize relationships and trust between different parts of the economy. We lost trust in many of the large institutions, and we lost trust that there will be a worthwhile future payback for current investment and efforts. Though not as tangible as physical factories and infrastructure, trusting relationships are a painfully obvious key component of a healthy functioning economy. One of the fallouts of the current economic crisis is that the vital role of relationships will be viewed with more respect from now on.

Will the Economic Bailouts Fail?

The economic bailout

Doug Muder pointed out that if you add up all of the recent economic bailout packages for our nation, including loans, guarantees, and direct investments, you wind up with something in the $5-$10 trillion range. To get a good perspective of what we just did, keep in mind that the total federal debt run up from the beginning of our nation to the end of the Clinton administration was about $5.7 trillion. Look at what we’ve added to that in just the last 2 months. It's hard to comprehend the enormity of what just happened.

Admittedly we may not have to pay all of this economic bailout package. Hopefully we won’t have to pay out on most of the loan guarantees, and hopefully we can get back most of the value of our direct investments at some point. It’s a big risk we’re taking to boost the economy. Unfortunately, it looks uncomfortably like a gambler who’s deep in the hole with debts he can’t pay off, deciding to “doubling up” on his bets in a desperate attempt to get out of the hole by placing ever larger bets. The desperate gambler adopts this approach because he doesn’t know what else to do. The end result is usually very very tragic.

The real concern I have is that this bailout package, as huge as it is, won’t work. It does little to address the fundamental problems in the economy. We will still have an enormous trade deficit with the rest of the world. We will still be spending more than we earn. Our dependency on foreign oil will still be increasing. We will still have an enormous obligation to social security and Medicare payments in the coming years that we can’t afford. Our manufacturing base will still be in decline. And the unsustainable federal deficit will not only still be there, it will be made considerably worse.

Our family has run up our own personal debt in the last few years. A major chunk of that is from investing in our children’s education. It’s an investment that we expect will pay off in a major way in the future with increased earning potential and quality of life. I don’t mind our nation also incurring a temporary increase in debt to invest in a major economic stimulus package if it really enables increase economic well being in the future. This would include investing in our infrastructure, reducing our dependency on foreign oil, other research and development, helping new business start or current ones expand. I don’t see any of that happening with the economic bailout package. There seems to be no focus on investing to improve our economy in the future. I’m afraid that we’ll see little long term benefit from the enormous gamble we’re taking. And like the desperate gambler deep in the hole, the end result will not be pleasant.

$700B Bailout Doesn't Solve Our Real Problems

I’ve been trying to figure out what to write about the current economic turmoil. I’ve stated in several past appends that the economy was in deep trouble in the near future, and we are as a nation technically bankrupt by any reasonable accounting standard. Now it appears that this view was not far off the mark.

The $700 billion bailout package passed by Congress last week was certainly much better than the original plan which actually prohibited any oversight on how that money was to be spent. Given some time, I expect an even better plan could have been created than the one that was passed. How much better, and would the delay have caused more harm than good? These are questions I am not qualified to answer. But there is a key concern that I do have about the package – namely that it won’t fix the problem.

The fundamental basis for the current problem is that too many people have mortgages larger than they can afford. The package does nothing to resolve that problem in any way. We also have a major problem with the federal deficit. Not only is that not resolved, but it is potentially made much worse. We have a global military operation that is vastly overstretched and financially unsustainable. Again, nothing is done to address that portion of the problem. But given that this is the middle of a heated election campaign season, that shouldn’t surprise anyone.

The one bright spot is that the economic tax incentives for some renewable energy will be renewed by the new plan. They were set to expire at the end of this year. This is a really important issue for our long term economic health, so it’s at least a small bright spot in a plan that otherwise falls far short of addressing the real problems in the economy.

Falling Behind China's Energy Policy

While China and the Olympics is on everyone's mind, here is an interesting set of comments on China's environmental policies from Jim Rogers, chief executive of Duke Energy Corp.

China, he said, already leads the world in manufacturing solar energy panels. Next year the country will become the world's top manufacturer of wind turbines. Rogers said China is creating the technology and developing "the creativity and the brain power to blow by the United States" on green energy. And it is creating jobs for its future. “They are making it happen while we are still talking about it...It’s time the United States and its leaders — including the two presidential candidates — face the fact that this country can no longer claim to be a leader on global-warming and clean-energy issues."

When you add up the cost of what the United States squandered by its decisions in the last decade or so, don't forget to include this.

Economics of the Singularity from IEEE Spectrum

As I mentioned, the article that I found most fascinating in the IEEE Spectrum issue on the Singularity was the “Economics of the Singularity” by Robin Hanson, in part because I was unfamiliar with this take on the singularity issues.

He argues that we can “…view past history as a series of abrupt, seemingly unheralded transitions from one economic era to another, transitions marked by the sudden and drastic increase in the rate of economic growth.” In some sense there have already been multiple singularities on the earth. The rise of human society, the industrial revolution, the current technological revolution we are in the middle of are examples Hanson gives. Perhaps it is better to change our terminology and call these “the great transitions” or perhaps “the phase transitions” rather than the singularity. Nevertheless, we are still talking about changes as profound as the singularity.

Robin Hanson points out that when humans were basically at the hunter gather stage of social development, we were doubling in population about every 250,000 years. When the agricultural revolution happened roughly 10,000 years ago, human society started doubling every 900 years. With the advent of the industrial revolution, our overall human economy started growing even faster eventually approaching the current 15 year doubling rate. If there is another major “transition” as the result of the technological revolution reaching a suitably advanced stage, extrapolating from the past suggest that the world economic output would start doubling in somewhere from a week to a month.

Obviously doubling the world’s economic output every month seems absurd on multiple levels. After two years it would have increase by a factor of 16 million. We are currently consuming many of our renewable and non-renewable resources at rates that are not sustainable. We could not increase their consumptions by 2x or 4x, let alone 16 million times. Obviously the economic output would be completely dominated by activity that did not require substantial physical resources – such as the development of software, information, music, education, art, etc. If people are exceeding wealthy compared to today, they still could not buy all the oil or beachfront property they want. If the access to limited natural resources is controlled by market forces, then in such a wealthy economy the relative cost of any limited natural resources would climb to astronomical heights. And of course it is exceedingly hard to imagine how human society could possibly adjust to the rate of change implied by a one month doubling period.

But my point is not that predicting a major change in the economic growth rate is nonsensical. Rather it is that such a change has consequences so profound that it is hard to imagine the implications. And a truly profound transition does not require a new extreme growth rate of doubling each month. I suspect that a world economy that starts doubling in anything under 5 years very quickly leads us into a world that is profoundly different from what you could envision just by extrapolating current trends. Such a transition seems entirely plausible in the next few decades given the exponential growth rate in computer and biological technologies.

The top 6 largest banks

According to results compiled by the Boston Consulting Group, the top 6 largest banks in the world are now (in order):

1. Commercial Bank of China
   
2. China Construction Bank
   
3. HSBC of Britain
   
4. Bank of China
   
5. Bank of America
   
6. Citigroup of the United States
   

These results were for end of 2007. The values of the American banks have fallen since then. Say goodbye to the 20th century (and with it the American empire) and hello to the the 21st.