Someone once joked that economists are people who see something working in practice, and then wonder if it will also work in theory. One practice that mainstream economists have long failed to explain theoretically is voting. Following the (so-called) rational choice models of Arrow and Downs, they calculate the likely net monetary benefit of voting to an individual voter, and compare that to the likely net costs to the voter. With long queues due to inadequately-resourced or incompetently-managed voting administrations (such as those in many US states), these costs can be considerable. Since one vote is very unlikely to have any marginal consequences, economists are stumped as to why any person votes.
One explanation for voting, of course, is that voters are indeed feeble-minded or irrational, unable to calculate the costs and benefits themselves, or, if they can, unable to act in their own self-interest. This is the standard explanation, and it strikes me as morally reprehensible: a failure to explain or model some phenomenon theoretically is justified on the grounds that the phenomenon should not exist.
Another explanation for voting may be that the rational-choice models understate the benefits or overstate the costs to individuals of voting. Some economists, as if in a parody of themselves, have now – in 2008! – discovered altruism. Factor in the benefits to others, this study claims, and the balance of benefits to costs may move more in favour of benefits.
A third explanation for voting may be that rational-choice models are simply inappropriate to the phenomena under study. The rational choice model assumes that citizens in a democracy are passive consumers of political ideas and proposals, with their only action being the selection of representatives at election times. Since at least the English Peasants’ Revolt of 1381, this quaint notion of a passive citizenry has been rebutted repeatedly by direct political action by citizens. The most famous example, of course, was the uprising against colonial taxation known as the American War of Independence, which, one imagines, some economist or two may have heard speak of. There’s also the various revolutions and uprisings of 1789, 1791, 1848, 1854, 1871, 1905, 1910, 1917, 1926, 1949, 1953, 1956, 1968 and 1989, just to list the most important since economics began to be studied systematically.
An historically-informed observer would surely conclude that a model of voting in which citizens produce as well as consume political ideas is likely to have more calibrative traction than one in which citizens do nothing except (if they so choose) vote. Such a theory already exists in political science, where it goes under the name of deliberative democracy. One wonders what terrors would strike the earth were an economist to read the relevant literature before modeling some domain.
People vote not only out of their own self-interest (if they ever do that), but also to influence the direction of their country, to act in solidarity with others, to elect to join a group, to demonstrate membership of a group, to respond to peer pressure, because the law requires they do, or to exercise a hard-won civil right. Only a person with no sense of history – an economist, say – would fail to understand the importance – indeed, the extreme rationality – of this last factor, especially during a year when a major political party has nominated a black candidate for President of the USA, and the other party a woman for Veep. At the founding of the USA, neither candidate would have been allowed to vote.
Not for the first time, mainstream economics has ignored social structures and processes when studying social phenomena, focusing only on those factors which can be assigned to an individual (indeed, some idealized, self-interested, desiccated calculating machine) and, within these, only on factors able to be quantified. The big question here is not why people vote, which is obvious, but why economists seem unable to recognize social structures and processes which can be clearly seen by most everyone else. What is it about mainstream economists that makes them autistic in this regard? Do they simply have an under-supply of inter-personal intelligence, unable to empathize with or reason about others?
References and Acknowledgments:
Hat-tip to Normblog.
Kenneth J. Arrow [1951]: Social Choice and Individual Values. New York City, NY, USA: Wiley.
J. Bessette [1980]: “Deliberative Democracy: The majority principle in republican government”, pp. 102-116, in: R. A. Goldwin and W. A. Schambra (Editors): How Democratic is the Constitution? Washington, DC, USA: American Enterprise Institute.
James Bohman and William Rehg (Editors) [1997]: Deliberative Democracy: Essays on Reason and Politics. Cambridge, MA, USA: MIT Press.
Anthony Downs [1957]: An Economic Theory of Democracy. New York City, NY, USA: Harper and Row.
Archive for the ‘Culture’ Category
Page 11 of 12
Social networking v1.0
Believers in the potential of Web 2.0, such as we at Vukutu, think it will change many things — our personal interactions, our way of being in the world, our social lives, our economic lives, even our sciences and technologies. The basis of this belief is partly by comparison with what happened the first time social networking became fashionable in western society. This occurred with the rise of the Coffee House in western Europe from the middle of the 17th century.
Coffee, first cultivated and drunk in the areas near the Red Sea, spread through the Ottoman empire during the 16th century. In Western Europe, it became popular from the early 17th century, initially in Venice, becoming known to educated Europeans roughly simultaneously with marijuana and opium. (An interesting question for marketers is why coffee became a popular consumer product in Europe and the others did not.) Because of the presence there of scholars of the orient and scientists with an experimentalist ethos, coffee first arrived in the British Isles in Oxford, where it was consumed privately from at least 1637; the first public coffee house in the British Isles opened in Oxford in 1650, called the Angel and operated by a Mr Jacob. The first London coffeehouse was opened in 1652 by Pasqua Rosee; the same mid-century period saw the rise of public coffee houses in the cities of France and the Netherlands. For non-marketers reading this, it is worth realizing that opening a coffee house meant first having access to a regular source of coffee beans, no mean feat when the only beans then grew in the Yemen and north-east Africa.
Facing competition, coffee houses soon segmented their market, and specialised in particular activities, types of conversation, or political positions (sound familiar, bloggers?), and provided services such libraries, reading rooms, public lectures, scientific demonstrations and auctions. Educated people and businessmen would often visit several coffee houses each day on their rounds, to collect and trade information, to meet friends and colleagues, to commune with the like-minded, and to transact business. The coffee houses were centres for learning and debate, just as blogs are today, as well as places of economic exchange.
What were the consequences of this new mode of human interaction? Well, coffee houses enabled the launch of at least three new industries — insurance, fine-art auctions, and newspapers — and were the physical basis for modern stock exchanges. For instance, English insurer Lloyds of London began in Edward Lloyd’s coffee house in 1688. And these industries themselves enabled or facilitated others. The development of an insurance industry, for example, both supported and grew alongside the trans-continental exploration undertaken by Dutch, English and Iberian merchant shipping fleets: deciding whether to invest in perilous oceanic voyages required some rigour in assessing likely costs and benefits if one wished to make a long-term living from it, and being able to partition, bundle, re-bundle and on-sell risks to others.
And coffee-houses even supported the development of a new science. In the decade around 1665, the modern idea of mathematical probability arose, seemingly independently across western Europe, in what is now Britain, France, Italy, the Netherlands and Switzerland. There is still some mystery as to why the mathematical representation of uncertainty became of interest to so many different people at around the same time, especially since their particular domains of application were diverse (shipping accidents, actuarial events, medical diagnosis, legal decisions, gambling games). I wonder if sporadic outbreaks of the plague across Europe provoked a turn to randomness. But there is no mystery as to where the topic of probability was discussed and how the ideas spread between different groups so quickly: coffee houses, and the inter-city and inter-national information networks they supported, were the medium.
What then will be the new industries and new sciences enabled by Web 2.0?
POSTSCRIPT: Several quotes from Cowan, for interest:
“No coffeehouse worth its name could refuse to supply its customers with a selection of newspapers. . . . The growing diversity of the press in the late seventeenth and early eighteenth centuries meant that there was great pressure for a coffeehouse to take in a number of journals. Indeed, many felt the need to accept nearly anything Grub Street could put to press. . . . Not all coffeehouses could afford to take in every paper published, of course, but many also supplied their customers with news published abroad. Papers from Paris, Amsterdam, Leiden, Rotterdam, and Harlem were commonly delivered to many coffeehouses in early eighteenth-century London. The Scotch Coffeehouse in Bartholomew Lane boasted regular updates from Flanders on the course of the war in the 1690s. Along with newspapers, coffeehouses regularly purchased pamphlets and cheap prints for the use of their customers.” (pp. 173-174).
“Different coffeehouses also arose to cater to the socialization and business needs of various professional and economic groups in the metropolis. [London] By the early decades of the eighteenth century, a number of separated coffeehouses around the Exchange had taken to catering to the business needs of merchants specializing in distinct trades, such as the New England, the Virginia, the Carolina, the Jamaica, and the East India coffeehouses. Child’s Coffeehouse, located conveniently near the College of Physicians, was much favoured by physicians and clergymen. Because such affiliations were well known, entry into one of these specialized coffeehouses offered an introduction into the professional society found therein.” (pp. 169-170).
“The numerous coffeehouses of the metropolis were greater than the sum of their parts; they formed an interactive system in which information was socialized and made sense of by the various constituencies of the city. Although a rudimentary form of this sort of communication circuit existed in early modern England (and especially London) well before coffeehouses were introduced in places such as St. Paul’s walk or the booksellers’ shops of St. Paul’s churchyard, the new coffeehouses quickly established themselves at the heart of the metropolitan circuitry by merging news reading, text circulation, and oral communication all into one institution. The coffeehouse was first and foremost the product of an increasingly complex urban and commercial society that required a means by which the flow of information might be properly channeled.” (p. 171)
References and Acknowledgments:
My thanks to Fernando E. Vega of the USDA for pointing me to the book by Cowan.
Brian Cowan [2005]: The Social Life of Coffee: The Emergence of the British Coffeehouse. New Haven, CT, USA: Yale University Press.
Ian Hacking [1975]: The Emergence of Probability: a Philosophical Study of Early Ideas about Probability, Induction and Statistical Inference. London, UK: Cambridge University Press.
Fernando E. Vega [2008]: The rise of coffee. American Scientist, 96 (2): 138-145, March-April 2008.
Knit one, purl one
A key problem for forecasting demand for new products is that people keep thinking up new uses for technologies. Who would have thought, for example, that mobile phones could be used by knitters.
How to manage creatives (not)
Managing creative talent is always difficult, but locking artists in battery farms seems somewhat extreme.
Sexapedalianism
Statistician Dennis Lindley wrote a book called “Making Decisions” which included the stunningly-arrogant sentence: “The main conclusion [of this book] is that there is essentially only one way to reach a decision sensibly.” He justifies this outrageous claim, contrary to all human experience and a moment’s reflection, by saying that, “any deviation from the precepts is liable to lead the decision-maker into procedures which are demonstrably absurd — or as we shall say, incoherent.” (page vii, second edition, 1985). There follows an account of maximum-expected utility decision theory, which is justified in the standard way using Dutch Book arguments (considerations of certain infinite gambles).
I have never trusted these Dutch Book arguments, first because we all live in a finite world, and so games in which one party is guaranteed to win after an infinitely-large time strike me as games selling pie-in-the-sky. Everyone is rich eventually when investing in a Ponzi scheme, also. And second, gambling is such a socially- and culturally-embedded practice that I cannot possibly conceive how it could be used to justify decision-making procedures claiming universal validity. (For a start, to gamble you need to believe that events in the universe are not pre-determined, something which perhaps half of humanity does not currently believe.) The statistician Cosma Shalizi over at Three-Toed Sloth has a nice parody of the advice of decision-theory ideologues here.
A: Hey, you over there, the one walking! You’re doing it wrong.
B: Excuse me?
A: You’re only using two feet! You should keep at least three of your six in contact with the ground at all times.
B: …
A: Look, it’s easily proved that’s the optimal way to walk. Otherwise you’d be unstable, and if you were walking past a Dutchman he could kick one of your legs with his clogs and knock you over and then lecture you on how to make pancakes.
B: What? Why a Dutchman?
A: You can’t trust the Dutch, they’re everywhere! Besides, every time you walk it’s really just like running the gauntlet at Schiphol.
B: It is?
A: Don’t change the subject! Walking like that you’re actually sessile!
B: I don’t seem to be rooted in place…
A: It’s a technical term. Look, it’s very simple, these are all implications of the axioms of the theory of optimal walking and you’re breaking them all. I can’t get over how immobile you are, walking like that.
B: “Immobile”?
A: Well, you’re not walking properly, are you?
B: Your theory seems to assume I have six legs.
A: Yes, exactly!
B: I only have two legs. It doesn’t describe what I do at all.
A: It’s a normative theory.
B: For something with six legs.
A: Yes.
B: I have two legs. Does your theory have any advice about how to walk on two legs?
A: Could you try crawling on your hands and knees?
Three men in a bar
A year ago, the UK Guardian newspapers ran a short article deconstructing a British TV advertisement for Strongbow beer. Watch the advert below, and then read the article. The BNP is the British National Party, a neo-fascist political party.
But what is interesting is the complex set of both politically correct and prejudiced rulings from which this ad, as well as the current Guinness one, evolved. Four blokes in a pub? No. Looks like a hooligan gang. Two blokes? No, no, no! Not that there’s anything wrong with it, but Strongbow’s not that sort of pint. One bloke? No. A loser. Probably got a book. Gotta be three blokes. Two blokes and a girl? Bloke and two girls? Too much implication of ménage à trois. Three girls? No. Too much implication of knickers round ankles at two in the morning in the town square, doubled over and urinating into a gutter. When it comes to women and pints, Al Murray’s glass of white wine for the ladies holds unironically true in adland. No, it has to be three blokes, blokes who like doing it with women so long as the “it” isn’t social drinking. Three white blokes? No. A bit BNP nowadays. Two white blokes and a bear in a pork pie hat? Too retro. Three black blokes? Now steady on. Two black blokes and a white bloke? Not being funny or nothing, but what would the white bloke be doing there?
So, it’s settled then – two white blokes and a black bloke, going down the pub to get completely and utterly, well and truly “refreshed”.
The network is the consumer
Economists use the term network good to refer to a product or service where one user’s utility depends, at least partly, on the utility received by other users. A fax machine is an example, since being the sole owner of fax is of little value to anyone; only when others in your business network also own fax machines does owning one provide value to you. Thus, a rational consumer would determine his or her preferences for such a good only AFTER learning the preferences of others. This runs counter to the standard model of decisions in economic decision theory, where consumers come to a purchase decision with their preferences pre-installed; for network goods, the preferences of rational consumers are formed instead in the course of the decision process itself, not determined beforehand. Preferences are emergent phenomena, in the jargon of complex systems.
What I find interesting as a marketer is that ALL products and services have a network-good component. Even so-called commodities, such as natural resources or telecommunications bandwidth, can be subject to fashion and peer-group pressure in their demand. You can’t get fired for buying IBM, was the old saying. Sellers of so-called commodities such as coal or bauxite know that the buyers make their decisions, at least in part, on the basis of what other large buyers are deciding. Lest any mainstream economist reading this disparage such consumer behaviour, note that in an environment of great uncertainty or instability, it can be perfectly rational to follow the crowd when making purchase decisions, since a group may have access to information that any one buyer does not know. If you are buying coal from Australia for your steel plant in Japan, and you learn that your competitors are switching to buying coal from Brazil, then there could be good reasons for this; as they are your competitors, it may be difficult for you to discover what these good reasons are, and so imitation may be your most rational strategic response.
For any product and service with a network component, even the humblest, there are deep implications for marketing strategies and tactics. For example, advertising may not merely provide information to potential consumers about the product and its features. It can also assist potential consumers to infer the likely preferences of other consumers, and so to determine their own preferences. If an advertisement appeals to people like me, or people to whom I aspire to be like, then I can infer from this that those other people are likely to prefer the product being advertized, and thus I can determine my own preferences for it. Similarly, if the advertisement appeals to people I don’t aspire to be like, then I can infer from this that I won’t be subject to peer pressure or fashion trends, and can determine my preferences accordingly.
For several decades, the prevailing social paradigm to describe modern, western society has been that of The Information Society, and so, for example, advertising has been seen by many people primarily as a form of information transmission. But, in my opinion, we in the west are entering an era where a different prevailing paradigm is appropriate, perhaps best called The Joint-Action Society; advertising then is also assisting consumers to co-ordinate their preferences and their decisions. I’ll talk more about the Joint-Action Society in a future post.
Speak now!
Following the US presidential election primary campaigns from afar, I have been struck, as have many people, by the great oratory of Senator Barack Obama. For those of us with experience in non-governmental sectors or in foreign-aid circles, his style of speaking is very familiar — it is the voice of a community organizer, creating self-awareness and encouraging group action, and doing so superbly! (As an aside, since the nuclear briefcase and the bully pulpit are pretty much the only real powers of a US President, character, judgment and oratory would seem to me far more important as criteria for assessment of presidential candidates than the details of their proposed legislative programs.)
In reading some of the commentary on Senator Obama’s important speech this week in Philadelphia on race, I came across this post by psychologist Drew Westen. In speaking about race relations and a US national conversation on race, Westen says:
“We can’t solve problems we can’t talk about . . .”
It is hard to over-emphasize just how deeply and profoundly American this view is. There are many cultures in which the majority of the population would take the precisely-opposite view — that we cannot solve problems we DO talk about, that solutions to difficult social or even personal problems can only be found by working in the background, behind the scenes, in the corridors of power rather than in public forums, where it is possible for solutions to be found and agreements reached without any loss of face. England, despite sharing a common language and a common political history with the USA, is one such culture, as are those of North and East Asia. Even when people suspect that open discussion may be needed to solve a difficult problem, they may still prefer to keep shtum, since the pain of enduring the problem may be far less than the pain of admitting its existence or of discussing it openly.
What is the relevance of this to business, I hear you cry out (or not, depending on your culture)? I have worked on multi-national business ventures where this particular cultural difference threatened to overwhelm any other profession-disciplinary, corporate or personal differences. In one case, a consortium of companies from the USA, Britain and Korea worked together on a joint venture where the Americans always tried to surface any problem and discuss it openly in the weekly project meetings. Both the Brits and the Koreans recoiled from this approach, and the two would often caucus together before project meetings to try to pre-empt any difficult discussions. I don’t know if the Americans on the project ever knew of the corridor-caucusing of their two partners, or why so many difficult matters were sent for “off-line” resolution, only to disappear or else be magically resolved, apparently without any discussion.
There are many wonderful qualities of American culture, and, in my opinion, openness and transparency are among these. But not everyone thinks so, and it would behoove us all in an age of global interactions and inter-dependence to recognize this.
POSTSCRIPT (Added 2008-03-21): It is also worth noting that some cultures may discuss problems publicly but only in elliptical or indirect terms. Shona culture (found in Zimbabwe and Mozambique), for example, has a highly-sophisticated use of metaphors, parables, multiple-meaning-layers, and even songs, as a means of somewhat open discussion of sensitive topics. The use of such sophisticated linguistic devices means that a speaker can intend that an utterance be understood differently by different audiences. Not an insignificant reason for his political success is that Robert Mugabe is a grand master of these multiple simultaneous registers, of being heard to say different things to different audiences at the very same time, and of clearly being heard to say without actually having said.
Globalization lives!
I was witness to a conversation this week between Japanese and Mexican colleagues who reminisced about their common experiences as teenagers in the 1990s, on opposite sides of the world, playing the same Nintendo games. I was reminded of a conversation I had once in a shebeen (a bar) in rural Zimbabwe in about 1985 with a black Zimbabwean mathematician about the many American TV series we had both seen growing up in the 1960s and 1970s, again in different hemispheres and neither of us in North America – Superman, Batman, Bonanza, The Mickey Mouse Club, etc. But it was not only American culture on our TV screens across the former British empire – we had both also seen the Japanese historical action series, The Samurai, a hit phenom in both countries.
Nominal imperialism at IKEA
Apparently, Swedish furniture retailer IKEA has systematically applied Danish names to doormats and carpets, while keeping Swedish names for more expensive items of furniture. If this pattern of naming is systematic as claimed, then it is hard to see how it could be accidental or inadvertant. If the pattern was accidental, we should expect IKEA to issue a hasty apology for any unintended offence caused, to Danes or to others. Instead, IKEA went on the offensive, with a spokesperson allegedly saying:
“these critics appear to greatly underestimate the importance of floor coverings. They are fundamental elements of furnishing. We draw worldwide attention to Danish place names with our products.”
Whatever the perceived justification, insulting your customers can never be great marketing. One of the features of colonialism is a lack of appreciation for the feelings of the colonized. Hundreds of years of condescension are manifest in those three sentences. Danes have every right to be offended.
UPDATE (2008-03-17): Spiegel Online have now retracted their original news story (the retraction is at the same address as was the article), although it is not clear from this retraction that either the original allegation against IKEA or the quoted response from an IKEA spokesperson are inaccurate. Here is the text of the retraction of the news story by Spiegel Online:
03/06/2008
Retraction
‘Is IKEA Giving Danes the Doormat Treatment?’
In the article originally published at this address, SPIEGEL falsely reported that Danish researchers Klaus Kjøller and Trøls Mylenberg had conducted a “thorough analysis” of the naming conventions at Swedish furniture maker IKEA. In fact, Kjøller was approached by a journalist from the free daily Nyhedsavisen who had inquired about why apparently inferior IKEA products had been given the names of Danish towns.Kjøller answered the question, but says he was very surprised by the “extremely exaggerated” article that appeared on the cover of Nyhedsavisen the following day, which would later get picked up by other media in Denmark and abroad, including SPIEGEL ONLINE.
“The story sounds good, but it unfortunately isn’t true,” Kjøller told SPIEGEL ONLINE on Monday. The author of the article and the editorial staff failed to contact Kjøller prior to the publication of the article.
SPIEGEL ONLINE strives to adhere to the highest standards of reporting and apologizes to its readers for the error, which we deeply regret.
— The Editors
UPDATE 2 (2012-09-14): Yet, it seems, IKEA does indeed have a naming policy in which different categories of products are given names from a particular category of real-world places and objects. Finnish place names are used for dining furniture, for instance. In this schematic, it seems that carpets are assigned Danish place names. This is certainly not inadvertent, but deliberate. Why were these products assigned those particular names?