Gridlocked

Gridlock Economy
Trapped in Fragments

A couple of months back I stumbled upon this book by Michael Heller (a lawyer), Gridlock Economy. It raised a very interesting question in the introduction and convinced me to borrow the book. The book went on to look into different parts of the modern economy where hurdles to economic activities are created because of structures built within the modern economy used to spur economic activities in the first place. It’s an irony we can’t ignore. The author framed them as a ‘Tragedy of the anticommons‘; this idea is from Michael Heller himself so the book is more or less a vehicle to get greater audience exposed to it.

Anyways, it started this way;

A few years ago, a drug company executive presented me with an unsettling puzzle. His scientists had found a treatment for Alzheimer’s disease, but they couldn’t bring it to the market unless the company bought access to a dozen patents. Any single patent owner could demand a huge payoff; some blocked the whole deal. This story does not have a happy ending. The drug sits on the shelf though it might have saved millions of lives and earned billions of dollars.

I thought this is exactly the sort of problem that is going to plague the field of microeconomics in the modern world. The world’s complexity naturally mean that the mesh of technological advancement, legislative hurdles and logistical difficulties in the market would introduce new problems for us to solve. I didn’t quite manage to read much of the book but I’ll try to spend some time researching stuff in this area soon. Meanwhile, USA still probably going to continue being the hot bed for patent disputes.

The Bigger Brother

Monster
Not so cute...

A search query on Wikipedia for ‘Big Brother‘ offers a disambiguation page that offers a link to their ‘Authoritarian personality‘ article. Today, we sometimes allude to the concept of ‘Big Brother’ when we talk about our governments but we hardly picture the government being authoritarian, perhaps just more of nannying. Today’s problem for the world, however, is that our Big Brothers are getting too big, as Leader of The Economist this week pointed out.

The cover of The Economist features a big fat monstrous lump attempting to devour a corporate executive reflecting their perception of how appallingly huge and scary governments have become. As a matter of fact, developed world governments might have taken up to much of economic breathing space because of the recent events and will need to scale down their footprint more. It’s always easy to get involved in many activities in the economy but difficult to pull out. The Briefing talks about state spending ballooning and makes a fierce assault on the weaknesses of government.

One of the case mentioned was their failure to make good use of management consultants, who ends up being portrayed as conman treating “the public sector as dumping grounds for airy-fairy ideas”. Oh well, in a crisis everyone suffers, even the management consultants themselves are not doing well.

Public Education

pexels-olia-danilevich-5088022

Traditionally education has been mostly funded by the governments, at least mass education. Things didn’t start out this way of course; education started out as some sort of pastime for the rich kids and subsequently became a tool to distinguish the aristocrats and peasants, serving the function of supporting what was eventually called ‘high culture’.

In fact, education wasn’t so focused on writing, reading and arithmetic in the beginning – it consists mostly of life-skills like archery, horse-riding, a little hand combat, a couple of classics. But then people realised that civilized behaviours helped cultivate deeper relationships between people and improved interactions between strangers whose education has resulted in some sort of informally synchronized norms. Crude traders therefore decided to become ‘educated’.

As technological advancement made education an economic necessity, government started to intervene in the market for education. Theoretically speaking it is because the rising external marginal benefit resulting from education so the good becomes more of a market failure as the potential positive spillover effects increase. Mass education became important as the educated bunch tend towards a critical bulk. When everyone around you are educated then the cost of not being educated rises. When all your trading partners consist of educated people who demand certain standard of conduct when doing business, then there’s more pressure to be educated. Government spending on education thus climbed, but in a good way.

It’s then a pity that budget deficits caused by the economy education have been helping to support all the while is causing funding for education to be slashed. Yet like what is mentioned The Economist article, this is an important opportunity for private sector education providers. For-profit education might sound like a bad idea since they have all the incentives to dish out qualifications to those with ‘financial quality’ and shun the poor smart ones; this is the moment for them to correct their image and raise their standards of education to those of public education; this selectivity will benefit them long after a boom in private-section education industry.

Shock Doctrine

Shock Doctrine
Got shot by shock

I’ve previously read Shock Doctrine and written a review on my personal blog; it was a time before ERPZ started and became active. Here’s a reproduction of the original review:

After 2 months of reading I finally finished Naomi Klein’s powerful book, Shock Doctrine. It was a long ride deep into the dark old mines of history on the different ‘economic revolutions’ all around the world: Argentina, Chile, China, Russia, Bolivia and Poland. It was a book that was written with intentions to put down Milton Friedman, clearly anti-corporatist and in some sense, anti-globalization. From this book I understand finally how the term ‘anti-globalization’ have been mis-interpreted by so many people, even myself. I once thought that it means being against the integration of cultures, economies and companies but then I realised it gets way deeper than that.

The idea of anti-globalization is usually used to mean being against the way the phenomena is taking place in our world, that inequality is rising and corporates are like taking over the world while people in poor countries work in sweatshops, suffer in silence and endure the hardship only to realise generations later that nothing changes. It is the discovery of a certain helplessness in the bottom layer of the world. Shock Doctrine is clearly about that, and more.

In a clear but otherwise way too long writing, Naomi presented a very complete picture of how pure ideology-driven economist are used by corporates and government to advance their self-interest. And of course, in a capitalistic perspective, self-interest is just profit and money. She didn’t over turn free market theories on how a perfectly free market is able to dilute power and increase freedom but she did show that the approach that allows for extreme free market is not exactly compatible with democracy and worst of all, economist have been naive about how a free market can be brought to exist. Case after case cited in the book, firms are privatize just be selling it out to the private sector without proper valuation of the assets and this hasty act would not only delay the attainment of a market equilibrium that would be at least more socially optimal but also create new forces that increases the inertia of the market. In other words, it makes the market less free.

In the area of corporate America and politics, Naomi is suggesting that the corporate people have penetrated politics too deeply with CEOs becoming civil servants in top positions of the government and politicians being lobbied by powerful companies with CEOs receiving incomes more than 400 times the average person on the street. And because of that, government becomes ran like corporations, public sector jobs being slashed and direct public spending is reduced while outsourcing (locally, giving contracts to companies) all the functions that can be done by the private sector. Worst, it is infected by a touch of cronyism; and this probably explains why contracts are rarely distributed by bidding and that the contracts concentrate in the hands of the few big firms that are always ‘aiding the government’ with ‘planning’.

It has been a good read anyways and while Naomi Klein has a rather extreme stance, my reading of Joseph Stiglitz (Globlization & its Discontents as well as Making Globalization Work) have helped me appreciate the gravity of the matters she was talking about and I could understand her thinking. As always, the writer do give us a gleamer of hope about what the future may turn out to be when the ‘Shock Wears Off’ and how we can prevent similar stuff from happening again. I would recommend this book for people who have no fear of heavy non-fiction reading, a thorough interest in learning how and why corporate America is seen in bad light.