Algorithms

Peter Barnes: Capitalism 3.0 — Chapter 4: The Limits of Privatization (pages 49-63)

It’s tempting to believe that private owners, by pursuing their own self-interest, can preserve shared inheritances. No one likes being told what to do, and words like statism conjure fears of bureaucracy at best and tyranny at worst. By contrast, privatism connotes freedom.

In this chapter, we look at Garrett Hardin’s second alternative for saving the commons: privatism, or privatization. I argue that private corporations, operating in unconstrained markets, can allocate resources efficiently but can’t preserve them. The latter task requires setting aside some supplies for future generations — something neither markets nor corporations, when left to their own devices, will do. The reason lies in the algorithms and starting conditions of our current operating system.

The Algorithms of Capitalism 2.0

If you’ve ever used a computer spreadsheet, you know what an algorithm is. Each cell in the spreadsheet contains a set of instructions: take data from other cells, manipulate the data according to a formula, and display the result. The instructions within each cell are algorithms.

If you think of the economy as a huge spreadsheet, with each cell representing a producer, consumer, or property owner, you can see that the behavior of the whole is driven by the algorithms in the cells. Our current operating system is dominated by three algorithms and one starting condition. The algorithms are:
(1) maximize return to capital,
(2) distribute property income on a per-share basis, and
(3) the price of nature equals zero.
The starting condition is that the top 5 percent of the people own more property shares than the remaining 95 percent.

The first algorithm is what drives corporations. It tells them to sell as much as they can, pay as little as possible for labor, resources, and waste disposal, and make shareholders happy every quarter. It focuses the minds of managers every day. If they work in marketing, they wake up thinking about how to sell more; if there’s no demand for their product, they must create some. If they work in finance, they worry about margins and leverage. If they’re in labor relations, they bargain hard, replace long-term employees with temps, and shift jobs to places where wages are lower. All the while, the CEO feeds sweet numbers to Wall Street.

The second and third algorithms then mesh with the first. It’s the combination of these algorithms that causes the wheels of capitalism to devour nature and widen inequality among humans. At the same time, nothing in the algorithms requires or encourages corporations, either individually or collectively, to preserve anything.

This doesn’t mean people inside corporations don’t think about protecting nature, raising their workers’ pay, or giving something back to society. Often, they do. It does mean their room for actually doing such things is too narrow to make a difference. Nor does it mean that, from time to time, some brave mavericks don’t briefly flout the corporate algorithm. They do that, too. What I’m saying is that, in the great majority of cases, the corporate algorithm and its brethren are obeyed. For all practical purposes, the publicly traded corporation is a slave to its algorithm. ... read the whole chapter

Peter Barnes: Capitalism 3.0 — Chapter 5: Reinventing the Commons (pages 65-78)

Thus far I’ve argued that Capitalism 2.0 — or surplus capitalism — has three tragic flaws: it devours nature, widens inequality, and fails to make us happier in the end. It behaves this way because it’s programmed to do so. It must make thneeds, reward property owners disproportionately, and distract us from truer paths to happiness because its algorithms direct it to do so. Neither enlightened managers nor the occasional zealous regulator can make it behave much differently. ... read the whole chapter

Peter Barnes: Capitalism 3.0 — Chapter 8: Sharing Culture (pages 117-134)

The larger lesson of this chapter is that all three branches of the commons — nature, community, and culture — are under similar assault from corporations, and all need to be fortified. The means of fortification will vary with the particular commons. When commons are scarce or threatened, we ought to limit aggregate use, assign property rights to trusts, and charge market prices to users. When commons are limitless (like culture, the Internet, and potentially the airwaves), our challenge is the opposite: to provide the greatest benefit to the greatest number at the lowest cost. To create scarcity where it doesn’t need to exist diminishes rather than enlarges our well-being.

In both limited and unlimited commons, corporate and commons algorithms clash. In limited commons, the corporate algorithm says: use as much as you can as quickly as you can, because if you don’t, someone else will. The commons algorithm, by contrast, says: preserve the asset for future generations, enhance it whenever possible, and live off income rather than principal. In unlimited commons, the corporate algorithm says: restrict use and charge what the market will bear. The commons algorithm, by contrast, says: the more users the merrier, and the cheaper the better. In both situations, the commons algorithm conflicts head-on with the corporate one, and that’s just fine. Indeed, it’s precisely the point.

Commons algorithms need to be unleashed in real-time markets, where they can duke it out with their corporate counterparts. Managers in each sector will know what to do, and the public will know what to expect. If corporations keep winning, then add more property to the commons. Eventually, we’ll get the best of both worlds, and when there’s conflict, more balanced outcomes than we get today. We’ll also gain clarity about the real costs of current practices.

After we fortify, we should enhance; just as we take from the commons, so should we give back. Art and music can be reproduced by corporations, but they don’t come from corporations; they come from the commons. Folk music, country music, jazz, blues, garage bands — these are the roots of our musical heritage. We must nourish the soil in which these roots grow. This, not copyright extension, is the way to enrich culture. ... read the whole chapter