Is innovation too rapid for capitalism?

A question that has puzzled economists is why productivity often drops on a wave of innovation. This happened most recently in the dotcom boom, but an economic historian will be able to give you other examples.

One explanation, from Schumpeter’s “creative destruction” is that capital has no way of picking winners at the early stages of technical development (think Alta Vista, Friends reunited and MySpace).

So a great deal of productive capital and labour just gets poured down dead ends and ultimately unsuccessful competitors like Betamax.

Currently there is huge wealth being poured into AI and robotics, of which driverless cars are possibly the most prominent example. Many of these design will fail.

And then how long before something else promises to revolutionise personal transport and requires another ocean of investment to secure leadership in?

If the pace of innovation continues to increase, as more people get better educated and computing power increases, will capital find itself rolling ever larger dice in a casino with fewer and fewer lights on?


Given the massive drops occuring in both the capital and labour required to produce a mass market product, it may be that capital becomes a relatively insignificant element in production.

Capital may well occupy a position similar to the landed aristocracy. Various accumulated piles of wealth will be protected by regulation and return assured through access to power. (think CAP or leasehold laws).

Increasingly we see returns from lobbeying as a source of corporate profit growth. The average profit margin of US corporations has been rising across the board, and the average rising fastest in areas of high regulation (Telecoms, Pharma, Media).

This indicates the competition is not working, and rather than new players entering to undercut the existing ones, the incumbents are gaining an increased share of wealth produced by tailoring laws to their advantage.

Increasingly start-ups in medicine and software aim not so much to make profits as to be bought out, often with the design of being bought out by an established incumbent.

They are not trying to compete as such

Similarly established incumbents work to gain global market share (thus increase their nominal capital value) rather than make a profit.

If this pattern continues, rapid innovation, declining cost of production, regulatory protection of profit centres; then capital may act more like land once did. As a way of incorporating successful people and enterprises into the establishment.

To be capitalised in future be a badge of success similar to being landed. The reward for developing a novel way to organise information or transform data into meaning.

And capital itself, rather than being the motor force in a slowly evolving economic system, may find itself relegated to a similar place in the chain of production as land, critical for many things, but ultimately a small contributor to profits in most cases.

Code is king now. And we may need a new magna carta to restrain the new King.

Transparency, services and shame

So what does Google know about you?

And what doesn’t it? And what of Facebook. Or the two together.

You can the guess the NSA knows even more. 300 likesi? They might know you better than you know yourself. Get back to Delphi.

This provides an unprecedented form of power. The type the Catholic church sought to build with the Confession. Only, collected passively without your awareness.

And so Civil Liberties campaigners of a traditional mind have sought to limit state surveillance, get exceptions for doctors and journalists, etc…

But this is as silly as putting cooks in a  kitchen and asking them to only make salad. Someone will turn on the gas at some point.

In 1215 when we dreamed up the idea of sending people to London to keep an eye on the King there wasn’t much to keep an eye on. Were taxes going up? Was there about to be war? Most of the rest was done locally under Feudalism. Although, “is the King about to declare me a heretic” also became a prominent concern later, spurring the development of parliamentary democracy.

Unfortunately, the complexity of state has grown far beyond the capacity of 650 people to scrutinise effectively. Ministers are just temporary managers, unskilled and in post for six months, maybe a two years. All sorts could be going on in the murky basements of Whitehall that never sees light, let alone the Pentagon. Large corporations are largely a black box, especially if held privatelyii.

A far better idea is to turn these tools, which are primarily page crawling scripts and databases, on the state and other powers themselves.

To make the entire workings of all organisations over a given size or value (bureacracy, government, large corporations and NGOs) open to the scrutiny of all citizens.

And essentially, this is the only solution, because we know that this power exists, and we know that it is used. The only balance is to be able to use this power universally to know who knows what and what they doiii.

The ready answer is to open it all up. It’s done on computers, the meeting rooms have webcams, it’s all on networks. The hardest part of the step is cultural.


If we had this balance, to know everything the state knows, and what it knows about us, then it might remove much of the concern with state information gathering. Or private sector information gathering for that matteriv

And this reduced concern might make it possible for state organs other than the security services to develop ways to use both big data and individualised data with public approval.

They know who you are, why should you ever fill in a form again?

Tailored, individualised services, delivered with user interaction and feedback are possible this way. A system such as this, with feedback being a key, could improve rapidly.


If we get mind bendingly radical and go beyond transparency of institutions to the transparency of individuals, we have a solution to a question that social thinkers agonised over at the dawn of mass society. The death of shame. A powerful motivator of human behaviour and the source of “virtue” for manyv.

With anonymity you have no shame. Have a look at

We have also become addicted to the anonymity of cities, the web and globalisation. We all have our own ring of Gyges. Whether it is in not confronting the child who dug for the flash memory in your phone, the sweat shop worker who bought you that Primark top, trolling someone with threats and abuse or sponsoring violence. With anonymity there is far less shame.

Currently the web is set up to be anonymous. Which makes sense given the the traditional concern with privacy and over reach of the surveillance state, the hallmark of totalitarian systems from the Inquisition, and probably beforevi.

If the web was in fact nonymous, what Google knows about you, everyone else can too, then the reintroduction of shame would be a new motivator to sociable behaviour. There are many reputation based systems active on the web today that make use of this, from eBay onwards.

Terrified? Sunlight is the best of disinfectants.


iicf. for the problems of industrial secrecy, and an obfuscation of climate science that amounts to crimes against humanity.

iiiAfterall, if you’re a terrorist or an organised crime lord and you do look up your file to find out that the police know, that in itself creates a whole lot of new conditions.

ivIf facebook does know more about me than I know myself, finding out what it knows might prove quite useful.

v Though since Mandeville’s Fable of the Bees there has been a fine tradition that says bastards make the world go round, they keep us all busy.

vi For this to change we would have to have far tighter control over the means of violence and coercion. Which is certainly theoretically possible with self driving tanks, all though the theory that says so may be partial and flawed.

All in the mind

Trump, Brexit and all that

In anthropological terms, what we are facing is a disagreement about the boundaries of the tribe. Or a political disagreement over who is and who isn’t in our imagined community.

The educated/metropolitan/web literate “urban elites” have taken on board the idea that we are one humanity on spaceship earth.

Meanwhile outside the urban centres and in less storied minds, the size of the imagined tribe has not grown at the same pace.

Noticeably there is a fracture along the lines of age, education, and urban/rural voters.

This has bought about a division in older political groupings over the size of the group that you apply traditional political questions to.

Is political authority, or the issue of poverty to be framed on a global, national or some other level?i

And this is not, I would contend, just a simple value disagreement, but a more profound difference in mental wiring and consciousness.

If you are a squeamish liberal, look away now.

The Tribe in the Human mind

In our pyschology, lodged in our archetypes, we have an idea of wider community “people like us” which is, historically speaking, very flexible.

This wider community occupies the realm of narratives and symbols, it is the imagined community.

Our flexibility in the markers we use to ascribe kin style relations beyond kin is probably related to, or underpins our species specific propensity to tradeii.

At its most fundamental level, tribe appears to be connected to dialect, in that babies pay more attention to speakers that share the dialect of their mother

This connection with dialect is what gives the nationalist project of standardising the vernacular its genuine force in organising an imagined communityiii.

The idea of the human tribe

Since the birth of the Nation State at the very latestiv, when the French went off the Catholic Church and became humanist, there have been thinkers who have imagined a community of one humanity. This is summed up in the two phrases “we hold these truths to be self-evident, that all men are created equal” and “workers of the world unite”.

In Human Rights in particular we see an attempt to unite the human tribe under a single set of rules.

Communication and mental architecture

But this is where I must digress as this is where the view of the imagined community digresses.

In the grandly titled “origin of consciousness in the breakdown of the bicameral mind”v, Jaynes postulates that the pre-literate human mind functioned very much like that of a full-blown schizophrenic, with the left side hearing commands from the right side.

With development of writing and the appearance of foreign invaders, the mind was confronted with an external set of commands. This changed the relationship between the left and the right hemispheres of the brain to that which we know today.

One of the staggering implications of this quite staggering argument (and it is compeling) is that writing rewires the mind. Or more broadly, the mind changes through the tools it uses.

If you accept this idea it’s not long before you’re asking questions along the lines of Colin Renfrew’s “what is the effect of the Minoan invention of coinage on the Western Mind”, what does the concept of zero do, etc…..

If the advent of writing could bring about such a fundamental rewiring of the brain. What else has a similar impactvii?

Well go on then what does?

Mobile internet telephony. The library of humanity, plus software, in your pocket, with news from anybody or anywhere in an instant (if you’ve got a connection). That’s basically the power of gods to a bronze age mind.

There is a beautiful debate among the ancient greeks that the spread of literacy will be terrible because no one will be able to recite the Homeric epics from memory anymore. Alas.

And while I don’t know remember any telephone numbers anymore, I am far more aware of goings on in Yemen or the lives of a small village on an island off the coast Canada that my friend moved to, than I ever could have been before. And far more aware of this than what the family across the road does.

Childhood dependence

We know from biology that large brained animals have a longer period of childhood dependence on parents than smaller brained ones.

We have essentially doubled, or aspire to double, our species period of childhood dependence over the last 150 years, first to teenage yearsviii, then to young adult hood.

The average life expectancy for most human existence was about 19, and various bronze age chieftains have been dug up who are probably about 13 years oldix. A PhD will see you socially dependent until the age of 25. Six years past average life expectancy for most of our existence.

If the brain has 100 billion or so neurons and each has from 10 to 1000 connections to other neurons, if this period of dependence adds just one more synapse to each neuron then increase in possibilities is enormous, if it adds a few, then it possibly equates to a whole new structure.

Spellcheck a racist

Racism correlates inversely with education in humanities. That is, if you study people to any level you are less likely to group people by skin colour or think that people who appear different are a problem.

The act of reading gives you access to the minds of others and allows you to form better representations of other minds in your own mind. This (percieved) increased understanding removes layers of uncertainty and provides comfort. It also improves your spellingx.

LGBT emphasises this connection beautifully in choosing an acronym as a political label, presupposing good literacy.

“the abuse I been getting since Brexit, I’m more offended by the spelling than the racism”

The modern metropolitan

Spreadsheets, animation programs, web graphics, live video feeds and speaking to people who aren’t physically there may dramatically rewire the connection structure of the human brain.

Combine this with living in the environment of a mobile web connected metropol with travel connections across the world in a day(ish) and you have all the ingredients for a mind that is aware of a single planet.

We have not arrived at this view of a human tribe simply through philosophy, as Buddha did, rather the tools and theories we use shape our minds.

It may be the photo of the earth from space, or the metaphor of the tempestuous butterly and global news feeds.

It may be that with global supply chains and communication you can meaningfully speak of having a connection to someone anywhere.

More fancifully, it may be that the surplus brain capacity freed up by mobile telephony/computing allows more space for thinking about more people, and thus an expanded notion of the tribe.

Systemic causation

One key concept to grasping macro dynamics it is the idea of systemic causation, the impact of constraints,incentives and distant chain reactions on the behaviour of the agents within a system and the emergent behaviour of the system.

This is not a concept that we are hard wired to appreciate. We are hard wired to see patterns in things and with a basic understanding of cause and effect. But we essentially work backwards from effects to causesxi.

To understand systemic causation you ideally need a grasp of non-linear dynamics and a super-computer. But without the these, you are relying on the intuitive, parallel processing structure of your right brain. And if you feed it inputs from all over the world, your understanding of the world may reflect thisxii.

Brexit voters

If you ask Brexit voters what they’re complaining about, many will say wages, jobs and immigration. “They come ere taking our jobs”, “they work for a pound less an hour” etc…

There is in the experience of many a correlation between wage stagnation and rising immigration. This taken to be a causal relationship. There is another between free trade and poverty.

However, immigration and wage stagnation both share cheaper logistics as an underlying cause. Cheaper logistics increases the affordability of international travel for people, and allows companies to export manufacturing jobs to countries with cheaper labourxiii. But that’s macro-economics, which is not supplied as a Jungian archetype.

However there is also a concept of the tribe, which is supplied in the hardware.

I have no experience of talking to Trump voters, but in my experience of talking to Brexit voters, their perspective is local, they know the street where their grandparents lived, their world is relatively homogenous, the information environment is locally focused, the connectivity an age away from the capital, and they have a more or less no grasp of systemic causation. And I can say that here, because they never will have read this far.

It amounts to a different way of looking at the world. Whatever the cause.

And this may be why the hyper-connected journalists and macro-informed politicians let out a collective “what-on-earth” in the face of anti-globalist populism.

And it may explain why two non-politicians, Trump and Farage, who speak a different political language, have been so politically successful.

It may be very difficult to occupy any high office and maintain a mindset blind to macro-dynamics.

Jaynes writes that the Oracle of Delphi relied on illiterate peasant girls who could talk in tongues after inhaling the gas coming through the rock. The Oracle eventually packed up in the 4th century AD because it became impossible to find a girl who had not been exposed to writing in one form or another, and thus petrol fueled prophecy perished in the Peloponnese.

It may in a generation or two become impossible to find someone who has not been exposed to the web, persistent use of computers and the obliteration of space by satellite,

However until that time, we are likely, for whatever reason, to see a basic division in politics along the lines of whether you think humanity is one or not.

Given Nationalism is anachronistic, both administratively and in demarking fields of communication, it is likely to morph. The racism of Alt-Right, whitey unite, represents an expansion on the imagined community relative to the nation.

It may take an Alien invasion along the lines of the Watchmen, it may take the invention of another source of energy as in Jeremy Rifkinds empathic civilisation, it may take the achievement of DNA rights, or it may in fact proceed as a result of our widened field of experience and newly freed up brain capacity.

But in time we may all catch up with what Buddha saw 2,500 years ago, we are one connected humanity on spaceship earth.

iThe educated urban left came to view humanity as one and shifted their traditional concern with poverty and inequality to the global south, development, etc…And in the case of the Green Movement, beyond to animals and ecosystems. This meant a. the national working class (who also suffer from the decline of unions as an institution in which to practice politics) were seen as relatively well off in comparison b. immigration and the export of jobs were tolerable trends in that they reduce global inequality. Whereas others do not include those beyond these shores as a legitimate part of the calculus.

ii Beneficial exchange with non family members. It has been argued that this is one behavioural feature that allowed homo sapiens to outcompete nehanderthals – we had wider trade networks, according to what archaeologists dug up from where with each. And you might add inclination towards water which probably enabled the trade. And you might say Crows trade too, I’ve seen it on Facebook. But chimps and gorillas don’t as far as observed.
If the underlying archetype is about which other primates will behave in a familiar way, it would help to explain how strikingly large strikingly large extended communities propagated in the form of religion and empire with very rudimentary forms of transmission and communication.

iii It is probably Stalin, in his wisdom who shall we say, executed this project across the most diverse population base.

iv As far as I know there is nothing in the Taoist texts against the idea of a single humanity, not to say cosmos, and Buddha essentially came to the same conclusion.

v Though slightly later, as Gore Vidal seeks to dramatise, something quite profound appears to have happened to the human mind, or at least, the minds of some humans in around the 6th century BC when Socrates, Zoroaster, Buddha and Confuscious were all alive within the space of a human life.

vii The Bible itself, not so much from it’s content, as from its structure, can be seen as a mind-altering information technology. It was the first piece of writing widely reproduced and distributed as a book and not a scroll. This allowed the development of the index. And the citation of chapter and verse.
There is also a suite of 16th century technology in clocks, optics and the printing press that radically changed stucture of the world and arguably the human mind. Ushering in science and globalisation.

viiiIt has been argued that “the invention of childhood” occurred in the Victorian era, and this would coincide with a period when the administrative classes of empire would have to be able to develop a mind that handled international thinking.

x There is an irony about liberal print media pouring their hearts out in long essays trying to affect the campaign when those who need swaying don’t read.

xi A brief tour of the history of causal explanations for the weather show that we can make-up nigh on anything for an accepted cause.

xii“If you only have a hammer every problem is a nail”. We have a very wide range of tools. If there is one cognitive artefact, one tool that the mind can internalise as a metaphor that helps to understand systemic causation it is arguably the hyperlink. The idea that this is linked to that which is served from some distant place to the screen in front of you.

xiiiIn my brief experience shipping commodities it cost as more to move a ton of tea from Folkestone to London than it did to move it from the hills Southern India to Folkestone.

Dead Babies

“Capitalism is dead baby, communism is dead baby, liberalism is dead baby, nationalism is dead baby.”

“Why do you keep talking about dead babies?”

There’s been a bit of confusion in politics of late. Talk of unresponsive elites and demagoguery. Of dysfunctional economy that channels profits to the top. And the response that seems most popular is a retreat into tribalism and exclusion.

The political playbook still comes from the dawn of mass society, the late eighteenth century ideologies, the founding fathers of America and the French revolution, classical economics, and the nineteenth century responses of nationalism, bureaucracy and communism and of course, the system of capitalism.

The problem is that all these ideas are rendered broken in the face of globalisation and the microchip.

Population growth exploded with the development of chemical fertiliser in the 1920s, but it was after the logistical developments of the second world war that the global system began to take on its characteristic interdependence and rapid transmission. This created a whole host of novel dynamics that societies and governments have been grappling with since. But it is only with the advent of the microchip that we have a genuinely game changing tool to address them.

In Marxist terms, we have a new mode of production,. And we are witnessing the immune response of ideologies fatally infected by the microchip.


To start with the big one. Capitalism is a legal system that allows individual rights to private property. And makes those property rights all encompassingi. The corollary is that the system favours people with large accumulation of property, or “capital”. And that these big chunks of cash are what get things done.

Capitalism is not under threat from the traditional enemy, which is an alteration of property rights by state ownership. Individual property rights are spreading and becoming more encompassing.

Rather Capitalism is in technical terms, dead, because cash is no longer king. It is not large investments of capital that are behind the giants of modern business, as it was in the industrial age of mines, mills and investment in rail. It is design and software code. And capital chases these.

In that the cost of reproduction and storage of digital goods falls on the end user, the amount of capital required to produce a global product is negligible in relative terms. The factories have been built, the capital accumulated, now they both seek purpose from design and marketing.

What counts is the ability to turn information into something meaningful, be that a brand or an algorithm.

Unfortunately the legal system is set up for the production of physical goods. Some of it is not appropriate. And to simply extend the model for physical goods into the the sphere of intellectual property is likely to bring about unintended consequences.

There are other problems with capitalism that are related to the collapse of its supporting ideologies in nationalism, bureaucracy and liberalism.

Code is king, not capital. Capitalism is dead baby.


Curiously the fist to drop, when in theory, central planning should have been greatly enabled by the microchip and we are familiar with what it offers the surveillance stateii

And while ultimately it is likely that the logic of the micro-chip allows more effective co-operation from a system of distributed power and input, a social parallel processing, this is not what did for Communism.

What did for Communism was the problem of incumbency. Well studied in business, that large corporations fail to exploit disruptive technologiesiii. Power tends to cling to and defend the familiar system that produces the power and makes the powerful actors expert and high status.

Communism suffered because the societies had a unitary power structure. Where capitalism, in allowing private accumulation, creates alternative centres of power, central planning couldn’t appreciate the possibilities offered by the microchip (The Russians built great planes with valve technology right up to the late 80s). This ultimately led the West to evolve more effective forms of cooperation and out compete communism economically and culturally.

Communism is dead baby.


While many believed Communism to be socialism on earth, it is probably more accurately seen as the high point of the bureaucratic system. The bureaucratic mode of production.

Bureaucracy is basically a hierarchical system that uses writing to manage societies that grow beyond tribal scale. It addresses human limitations in the volume and complexity of information, and number of relationships an individual can deal with, by making pyramids of people who pass structured information through the pyramid.

Something like it exists in most city states of the ancient world, but often done by priests. Ancient China from Confucious and later the Roman Empire developed a dedicated bureaucratic class, but the idea really takes off with the advent of the industrialisation in Europe. The automated printing press and the railway and then telegram, allowing structured information to be produced and communicated quicker and cheaper.

Bureaucracy in this period is the great ally of nationalism and allows for the development to the modern state as we know it.

However, the scale of modern society has passed the point where it is possible to manage through a paper bureaucracy. There are a dozen or more organisations with more than a million staffiv, and countless with several hundred thousand. When looking at some of the global and transnational bureaucracies you find organisations with several hundred thousand staff with a remit extending, in some cases, globally. There are people in the management who spend a lifetime trying to understand the organisation itself, let alone the organisation’s impact and purpose.

While structured information and quantative data allow the aggregation of information, these tools also necessarily abstract. Information filtered through hierarchies of global and in many cases, national scale, is becoming too abstracted and has to travel too far down endless corridors where no echo of cries outside are heard.

A system of real time monitoring is likely to fare much better. Having spent a few hundred years developing a literate skilled population, it is likely that better management information and better use of local information can be gained from open sourcing public administration, rather than centralising it.

The internet of things, ubiquitous mobile telephony and cheap cameras make this possible. This is an upside of the surveillance state once it can be prised out of the security establishments hands, and once we are culturally used to the death of privacy.

Bureaucracy has long out grown it’s effective scale. What is novel is that we have means of replacing it.

Bureaucracy is dead baby.


Bureaucracy not only enabled communism, it enabled nationalism. Nationalism is the idea that a volk (a group sharing a common culture and language) should form a political unit, and that this should be territorial. It allowed large geographical areas to have consistent government, remove internal trade tariffs and establish a dominant vernacular for communication.

Nationalism is essentially a creature of the age of steam. It’s administrative potency decreases as transnational connections become more significant and with each development of electronic communication that blurs the boundaries of national fields of communication.

The contemporary economy is a global economy. Large machines (cars, planes, washing machines) will be assembled from parts made in several different countries, without even considering the sourcing and processing of raw materials. Cross-border financials flows are some fifty times greater than the movement of physical goods. The policies and economic issues of China and America will affect workers in Chile, Australia or Nigeria.

And given the ubiquity of property rights in the world, governments are finding it increasingly difficult to tax or regulate businesses or private individuals.

Added to the very real difficulty in managing the economy is the increasing intermingling of fields of communication, the sharing of films, stories, news, celebrities shocks and horrors, and the increasing dominance of a handful of languagesi. Cultural products are increasingly being produced and consumed in the dominant languages in a self reinforcing snowball. Concern with “language death” has emerged. The death of a language is the death of a volk.

The printing press lent itself to nationalism. Digital communication lends itself to internationalism.

And this permeability of national boundaries leads to a cross over in political issues, as seen in the Brexit/Trump parallels, the fact the US president flew to Britain to make a case against Brexit and the fact that the UK parliament debated Trumps candidacy. We are separate systems only on paper, or tort at least.

Group identities based on older national fields of communication are becoming insecure and producing violence and dysfunction in the face of the increased ability of our inherently semi-nomadic species to move across the world.

Political power is about the only thing that still has the ambition, or even makes the pretence to be national. And is all the less relevant for it.

Most issues of significance occur either on a transnational/global scale or a local/personal scale. National government is becoming increasingly maladapted to the environment of the modern world as it no longer seems the appropriate scale for the micro or the macro. And this is a challenge that national government can only really face negatively, that is in making others nations weaker and more porous.

There is much evidence that people are happy in small states, and a glaring case since at least the first world war for political bodies that effectively regulate cross border or global concerns. A perennial rule of human history is that governance follows trade. And in the sphere of trade there is an increasingly potent set of bodies of governance, the WTO and bi-lateral American successors TTIP, etc…

In some ways the success of the nation state has created the conditions that render it insufficient. With companies and capital, but also people being able to move across the world, but political power constrained within national walls, of course national politicians will be out flanked.

In a Nietzchean world, nations are increasingly becoming pots of wealth to be looted by nimble and unscrupulous actors, the experiences of Perestroika and IMF sponsored financial imperialism offering a technical manual for rapacious elites.

The idea of a sovereign nation state is an anachronism. Nationalism is dead baby.


Liberalism emerged as a concern in England in the Glorious Revolution, Cromwell and all that. It’s primary concern was to limit the power of Kings and the Church. Against these it favoured increasing the power of merchants and the press.

Well, they got that doneii, and now we are all too familiar with the problems caused by a powerful merchant class and media. There are even many who lament the decline of the church as an institution of pastoral care and moral authority.

You can elegantly slice liberalism into two traditions, one of economic liberalism, which deals with free trade, laissez-faire, property rights and essentially the interests of merchants. And one of cultural liberalism that deals with free speech, freedom of conscience and tolerance, essentially the interests of the press (the persecuted press were in bulk of cases theological, the Reformation and all that),

In America these two strands translate into left and right wing, but originally they are part of the same political alliance.

Economic Liberalism has three insurmountable problems, one of systemic management, one of distributive efficacy and one existential.


Free trade and private property rights, combined with instantaneous information transfer and cheap logistics create a system that is too fluid and too immense to remain stable. Wrecking ball capital becomes tsunami capita and without effective stops, such as suspension of trading, the feedback loops become destructive. Self-organising systems are not self-governing systems and may organise pathologically.

It is one of the great narrative fictions of our culture that markets are not systems created by law, and this fiction is un-affordable, even for financiers. To ensure the continued reproduction of the system, there has to be limits to its freedom and fluidity.


Automation and the internet are creating conditions where less jobs are needed and global markets can be captured by monopoly institutions. We have reached the point where billion dollar companies need no workers. To continue with the idea that human labour is the source of just reward will become surreal. With property rights so all encompassing, and labour an unnecessary commodity, vast swathes of humanity will receive nothing. I’m not sure that’ll really work out that well.


The idea that everybody left to their enlightened self interest will produce the best result, that the invisible hand will take care of it all, is challenged by the fact that humanity is not good at calculating long term pay off, and that we have imperfect information, not so much about our choices, as about the long term impact of those choices.

This short-sightedness, combined with the scale of humanity’s global impactiii mean that unregulated rights to exploit and trade will probably lead us to boil ourselves like the proverbial frog in a saucepan.

It’s us or economic liberalism.

Economic liberalism is dead baby.

Many people are declaring the death of cultural liberalism, and if so, we may as well call time on civillisaiton, pack up and go and store gunpowder, but roughly speaking the argument goes like this..

How can we tolerate free speech now the unwashed and the infidel can actually make themselves heard?

Cultural liberalism is not an optional value in mass society. We could not maintain a unitary value system in 1500, it takes enormous delusion and oversight to think that we can achieve it in the modern world with a population twenty times the size, with or without migration and and the influence of foreign ideas.

However for the first time in a long time we are actually being called on to exercise liberal values and to the surprise of many, this actually takes some high minded effort. Not simply to stereotype, rest in cognitive bias and happily dismiss the other alien. We actually have to use the energy demanding cerebral cortex, this is too much to ask of some, especially those who are simply liberal from conformism.

In that it allows a critique of power, liberalism helps society to evolve at a faster rate, and this is necessary as the pace of change increases.

The challenge to cultural liberalism is not particularly new, the response to intolerance in a tolerant society is a question as old as the idea itself. It’s only confusing if you read liberalism as a rule book not a value set. The perennial answer is they can say what they like but if they pick up a stone you hit them with a jackboot and put the key somewhere awkward. Mildly inconsistent with core principles but omlettes on the menu.

This leaves cultural liberalism in the West as essentially a conservative programme, one that seek to protect and implement existing law.

You could call this a death, if it is, I hope it’s a kind of transcendent Jedhi death where it goes to form part of the fabric of the universe.

For liberalism to have a radical agenda it needs to return to the core concern of restraint of arbitrary power, but rather than simply focus on church and state, it needs to include restraint of arbitrary commercial and media power, and probably that of algorithms and AI too.

To implement the new agenda it has the micro-chip, and the concept of open-source. Which points to some of the key political battle grounds of our time – the order/disorder spectrum, or possibly the order vs. interconnection spectrum – anarchy vs. authoritarianism and the transparency vs. secrecy – surveillance vs. privacy spectrum.

For those who doubt this prognosis I can only offer the further commentary and programatic instruction of Monty Python

The king is dead. Long live the king.


Capitalism has existed with various groups denied property rights – slaves, colonial subjects, women, but it aims to give the individual undivided rights over property, that is rights to use, manage, profit from, sell, rent, etc…. which in previous legal codes were held it separate titles. E.g feudal land rights.


If you’re not you should be


Xerox’s Palo Alto labs famously invented everything from the hyperlink to the scanner and went, “what to we do with that, it’s not a printer?”

ivWalmarts workforce is roughly equivalent to the population of England at the signing of the Magna Carta, 2.1 million.

iEnglish, Spanish, Arabic, Russian, Mandarin and Hindi. Sorry France, only an honourable mention, but that’s where language facism gets you.

iiThe legislative programme of human rights and tolerance also pretty much swept the West.

And this lead liberalism to be the status quo, and as such found most of its supporters were conformists (because most people are). Unfortunately, conformists are not intuitively liberal, so Liberalism found itself in the unfortunate position that many of its subscribers and would be defenders don’t intuitively know why they should support it, other than it’s the law.

While most people like to belong to a tribe of 150 people that sing the same songs and pass on their values and narratives unchallenged, that is not a reasonable expectation in an interconnected world of 9 billion people. By all means disconnect, but don’t expect material or scientific progress to come with it.

iiiHumans consume something like 40% of the biomass of the planet, which is impressive considering most of the rest of it will be bugs and bacteria. Many plant species and the vast majority of large mammals owe their existence to fact that they are human symbiots. We have already affected both the carbon cycle, and the nitrogen cycle and now produce more free nitrogen than all bacteria combined, which previously were the only source.

Better Public Services

In many areas of life we accept that experimentation, competition and replication of success will gradually lead to better results, or improved suitability to the environment. This is the basics of evolution and market efficiency.

When it comes to public services this notion meets the moral intuition that justice and fairness requires an equality of treatment, hence a universal standard of provision.

However, imposing universality prevents experimentation and can stymie adaptation to local demands, becoming a conservative break on improvement.

Some style this type of opposition as fairness vs. efficiency, but what I am concerned with is fairness vs. improvement.

While the equality of destitution is the easiest form of equality to engineer, it not the equality that most meaningfully aspire to.

How do you get experimentation, competition and replication of successful results in public services?

Having a diversity of providers that can grow and fail, as in the private sector has many attractions.

When compared with delivery by centralised bureaucracy, discrete service providers have the advantage that they have simpler chains of command with less competing priorities. They can also focus on developing their specific specialism and expertise within the organisation.

Among the problems of outsourcing to the private sector is that using public resources to pay providers who have a duty to retain part of those resources as private profit is the very definition of systemically inefficient. Money will be skimmed or the directors are not doing their legal duty.

There are also the arguments that a private sector motivations are inappropriate in many areas of public service. Prioritising greed as a motivatori does not fit well those who have a caring vocation and that introducing a financial incentive changes the values through which people judge an interactionii.

As such it makes sense to outsource to providers who do not operate for private profit i.e charities and social enterprises. In this way we retain the feature of a number of specialised, interchangeable service providers but any profits are reinvested in the organisation and service provision. Charities may also draw in additional resources to subsidise service provision, the exact opposite of what will happen if a private company is contracted.

How do we get successful service provision by community-benefit organisations?

For a market mechanism to work the customer must be able to determine which provider best satisfies their demands, and allocate resources accordingly. Without this, “bottom up” or customer allocation of resources will not produce the virtuous dynamism desired.

Similarly it is not safe to outsource any function that an organisation does not have proper understanding of in-house. Without in house knowledge you cannot know what you are buying and whether or not it is best available option.

In health care and in education it is hard for the end user to be the best judge of their own self interest. Expertise is required in the former, the latter is largely consumed by children. In these cases, and others, there is an argument for retaining the state as the customer, allocating contracts, while the citizen remains the consumer.

But the state, or more specifically the functionaries of the state, have no innate expertise. One of the state’s key roles will be to develop, retain and enhance the expertise required for it to be a effective purchaser on behalf of citizens. This is essentially means having a firm grasp on the best ways to deliver a particular service.

This requirement, combined with the dictum on outsourcing, suggests that the state should directly manage and run some service provision organisations and ideally these should be exemplar institutions that research and accumulate best practice, and indeed best personnel, from the wider service delivery system. In practice this would mean the running of flagship hospitals, schools, care homes, etc… that have a strong data gathering and research capacity.

The expertise accumulated should be used to make effective purchasing decisions, but just as important is the sharing of the expertise with the wider sector. As such state exemplar institutions should also have teaching capacity.

In this vision the state becomes a “facilitative state”, one of the concerns of which is the formation and enabling of civil society organisations. The state would create and enforce a regulatory environment combined with skills and knowledge transfer.

Designing the marketplace

Exactly what the state pays for will have a profound effect on the eventual outcomes. A classic example is the London bus contracts. Where providers are paid for how close they are to the stated timetable within six second slots and do not retain payment from or have any interest in the number of people that they carry.

Similarly, in a variety of sectors contracts could be designed not as fee per service but on outcomes, e.g. Not for performing an open heart surgery, but on the years lived (or Quality Adjusted Life Years) by a patient who presents with a heart problem. Outcomes based contracts should be possible with improved data handling.

Capitalising providers

One chief advantage held by the private sector is greater capital and more ways to access it. In many cases community-benefit organisations are not adequately capitalised to provide large scale contracts.

The creation of a state backed national bank could address this. A state bank would act as a retail bank in the market, as in China or Singapore, it could issue every citizen with a basic bank account and facilitate benefit payments, trust funds and pensions. It could also play a role in capitalising community-benefit service providers through loans. It might also be wisely limited to this type of lending.

A semi-independent bank using its deposit base to make loans for investment in public service provision would likely lead to a lower capital requirement for the state and a reduction in public borrowing. As at least part of the liability for investment in public services would be transferred to the relevant service organisations becoming, in accounting terms, an asset, rather than a liability.

The bankruptcy regime would be critical in shaping the character of this system, but at its most basic, if the state was the primary lender it would have first call on the assets in the event of a bankruptcy.

This would ensure that public service infrastructure would return to the state’s organs when a provider failed.

Er …that’s it

So in essence this a modular vision of public service provision. One which utilises market dynamics without embedding private interest. And one in which the state’s primary role becomes monitoring,facilitating and improving independent service providers. And which solves the problem of capitalisation through a dedicated bank.

iCapitalism as system that allows individual property rights harnesses greed effectively. There are powerful human motivations that are not harnessed or rewarded as effectively. This is in part because the greed is a simple motivation to design rewards for. Nurture, heroism, curiosity are not built into our institutions in the way that greed is. This is one of the most profound challenges in any thought about social engineering.

iiSandel, Areily, Neruoscience

The internet vs. Hayek

or the Road to Surfdom

Many of the key arguments for not intervening in markets comes from Hayek. One that is particularly central is sanctity of “price”.

Hayek saw economies as complex dynamic systems that were far beyond the power of a human mind to comprehend. He believed that markets act to process a vast array of complex information about preferences, resources and capacities. And that they output this information in the condensed form of “price”. Through these price signals we are able to make coherent (rational) decisions across a range of economic activities.

Interfere with these price signals and you distort the allocation of resources in ways that will necessarily lead to inefficiencies.

So, moral arguments about your life being decided by bureaucrats aside, the government does not have the capacity to process the range of inputs that go into making a “price”, and therefore does not have the capacity to make sound interventions in the economy.

This key plank of the Hayek’s argument is clearly threatened by super-computers, big data and mobile telephony. The quest for user-data is in it’s infancy, but it looks like a healthy little monster.

It is becoming increasingly possible to gather real time information on a transaction by transaction basis in the real economy. The Internet of Things will only extend this.

The question then becomes; is it possible to gather and process information better through computing than through price?

Turning to the moral argument, Hayek assumes that the only alternative to allowing markets to facilitate resource allocation is for a centralised bureaucratic state to do so instead.

Any processing system that sought to emulate the information gathering capacity of “price” would have to be ubiquitously distributed. It would be sent data from everywhere. And this provides the possibility of an alternative to such centralised bureaucracy.

The question would be what data do these end agents send? And further, what authority they have over the pattern of resource allocationi?

So as to the question of how we arrange resource use and distributions on space ship earth, we could seek to address externalities in priceii by changing the laws that structure  marketsiii .

It is law that forms the parameters of the complex systemiv. altering the parameters should produce different emergent behaviours, that is different patterns of resource use.

The more distant and radical possibility is to create an information processing system that gathers data more richly than “price” does.

And this is the essence of the institutional design challenge facing so many established institutions. From bureaucracy to journalism.

How do you create a system that best accumulates, agglomerates, the useful contributions from a distributed contributor basev?

ICT allows novel forms of co-operation. Effective co-operation wins in complex systems. Ask the game theorists.

And as to novel forms of co-operation over ICT, ask the open-source world. Unsurprisingly, software writing already has an institutional design for the age of distributed inputs.

A journalistic platform that could emulate this would end the standard model of print journalism.

A bureaucracy that could do this would be able to deal more effectively with complexity and monitoring costs.

A democracy that could do this might be worth the name.

And an economy that could do this might be both efficient and fair.

i You could simplify authority of agents within the market system as one dollar, one vote.

ii The information the market does not process, such as the value of the planet remaining habitable.

iii Restricting certain activities and transactions, or providing subsidies or other incentives is common, but a more thorough approach would be to re-examine property rights themselves, in particular, the all encompassing nature of individual property rights. This work is underway in earnest in the sphere of intellectual property.

iv While Hayek favours non-intervention, the basic parameters of a market, such as whether apples should be apples, whether I am allowed to sell the organs of my infant labour, and whether bullets are legal tender, are determined by law. Laws allow markets to provide predictability, or at least, reasonable expectation, and this is what makes them so useful for economic activity. Constraints, not freedoms, make markets.
vWe might even evolve a system through competitive selection rather than design.