Monthly Archive for February, 2008

Optimal power structures

I recently wrote that:

Hierarchies [of power] allow for genuine decision making over the endless, cacophonic debates of pure democracy, but they come at the cost of hampering information flow (at an extreme, it becomes unidirectional) and making people at the bottom feel ineffective or inconsequential.  As a society, we seem to have settled on the idea of power being locally hierarchical, but globally competitive between those separate hierarchies.

I hypothesise that hierarchies are the constrained-optimal power structure for most, if not all, collaborative human endeavours. I imagine the optimal height and breadth of the hierarchy to be a function of the two, possibly intertwined, technologies at play: that used to aggregate individual beliefs to arrive at decisions, and that used to combine individual efforts to produce the output.

I likewise hypothesise that social networks are the optimal power structure for most, if not all, competitive human endeavours, with beliefs propagating across the network and decisions being made by individual nodes. I imagine the optimal network parameters (number of links per node, weighting per link, etc) to be functions of how similar the output of individual nodes are and the costs of maintaining each link.

Note that if the aggregate output for collaborative endeavours is a linear function of the output of each individual, then a hierarchy can be seen as a special case of a network with asymmetric link weightings: A takes more account of B’s view than B does of A’s.  This raises the intriguing possibility of the two types of model being able to be nested.  Do linear aggregation functions represent a definition of competitive endeavours?

I argue that these hypotheses are true on the simple basis that they are what we observe.  Collaborative efforts are always hierarchical.  Competitive efforts interact through networks.  I’d invite any examples of counter-factuals.  If there are any counterfactuals – if, for example, a power structure exists that is highly hierarchical (tall and narrow) when the optimal structure is much more network oriented – then the key question is ‘Why doesn’t it change?’.  Why doesn’t the Coase theorem kick into gear?

There’s an obvious question of where and how democracy fits into my framing of the world.  I imagine democracy as being something based on a social network.  For any given shock (i.e. news), once the network of opinions stabilises, democracy is just the formal counting of which nodes believe what.  Within this, though, I make a distinction between two different types of pure democracy. When the network is uniformly connected and every link carries the same weight, then every person truly carries the same value to the overall decision.  By contrast, when the network is not uniformly connected and/or weights are different across links, then even if individuals get an equal vote each in the decision, their opinions will be biased towards those individuals with more links and more weights.  Nevertheless, both situations count as “pure” democracy.  Obviously any type of representative democracy represents a hierarchy.  Even in the upper level where the democracy is played out there are sub-levels of deferred power.  Witness the machinations and power-plays of the UK’s House of Commons.

Web 2.0 sites such as Wikipedia, Digg, Slashdot and represent an interesting experiment here because while they are clearly collaborative to some extent, they each claim, to varying degrees, to be purely democratic.  The users both contribute content and decide which contributions are most important.  There is an ongoing debate over who contributes most to such sites.  One view, from people such as Aaron Swartz, argues that:

[Outsiders] make one edit to add a chunk of information, then insiders make several edits tweaking and reformatting it. In addition, insiders rack up thousands of edits doing things like changing the name of a category across the entire site — the kind of thing only insiders deeply care about. As a result, insiders account for the vast majority of the edits. But it’s the outsiders who provide nearly all of the content.

By contrast, Chris Wilson (of Slate) notes essentially the opposite view:

Palo Alto Research Center’s Ed Chi, the scientist who determined that 1 percent of Wikipedians author half of the content, told me he originally hypothesized that the site’s most energetic editors were acting as custodians. Chi guessed that these users mostly cleaned up after the people who provided the bulk of the encyclopedia’s facts. In reality, he found the opposite was true (PDF). People who’ve made more than 10,000 edits add nearly twice as many words to Wikipedia as they delete. By contrast, those who’ve made fewer than 100 edits are the only group that deletes more words than it adds. A small number of people are writing the articles, it seems, while less-frequent users are given the tasks of error correction and typo fixing.

But the debate over who contributes to Wikipedia and Digg is not of particular concern to me per se.  My concern is the power structures of these sites and that is quite recognisable.  Wikipedia has guiding editors who can lock pages down.  Digg and Slashdot both employ moderators that get veto power over the user-voting.  There is a formalised, structural hierarchy.  What is interesting is that there also seems to be an informal hierarchy based on the volume of user contributions.  The users that contribute more also get more of a voice when decisions are made.  Quoting Chris Wilson’s Slate article again:

The influence of these members was particularly apparent last month. After Digg tweaked its secret sauce, top contributors noticed a decline in influence—fewer of their submissions became top stories. The super Diggers published an open letter of grievances and threatened to boycott the site. The changes in the algorithm, the Digg execs said, were meant to bring a more diverse set of stories to the site, and they begged for patience from the top Digg contributors. (Thus far, a shaky truce has endured.) The takeaway: Digg’s brass believe that the site, which purports to be the product of a broad-based community, will cease to run smoothly if a microscopic percentage of its user base stops participating.

The reasons for this are simple enough:  Without the top contributors, the overall value of these sites would plummet.  They therefore have far more bargaining power with the formal power structures of the site owners.

Two weeks to go

Continuing on my theme of predicting that the winner among the pledged delegates will win the Democratic Party’s nomination because the super delegates will (probably) flock to the leader among pledged delegates in order to build the appearance of unanimity and avoid a floor fight at the convention (see here and here), I’ve updated my table. I’m now using the data from Real Clear Politics for no particular reason beyond ease of extraction.

Date Barack Obama: running total Barack Obama: share of pledged delegates Hillary Clinton: running total
3 Jan (IA) 16 51.6% 15
8 Jan (NH) 25 51.0% 24
19 Jan (NV) 38 51.4% 36
26 Jan (SC) 63 56.8% 48
5 Feb (Super Tuesday) 906 50.8% 876
9 Feb (LA, NE, WA, Virgin Is.) 1012 52.1% 931
10 Feb (ME) 1027 52.2% 940
12 Feb (DC, MD, VA) 1134 53.2% 996
19 Feb (HI, WI) 1185 53.6% 1024


The RCP data still include estimates and don’t include 56 delegates that have nominally already been allocated (26 are with Edwards, 30 RCP aren’t willing to estimate one way or the other, but since 10 of those 30 are in Hawaii, it seems safe to say that they’ll break for Obama overall). For the sake of simplicity, let’s assume that the 56 break down as 30 to Obama and 26 to Clinton (that’s 53.5% of them to Obama). That gives us 1215 for Obama and 1050 to Clinton to-date.

There are 988 pledged delegates to go (giving 3253 in total). To win the pledged delegates race, a candidate needs 1627. That means that Obama only needs 412, or 41.7%, of the remaining 988 to-be-pledged delegates. Clinton needs 577, or 58.4%, of the remainder.

As an indication of how tough that will be, Clinton’s best vote performance so far was 57% in New York. She has only managed to break 55% of delegates pledged in 9 out of 37 primaries/caucuses so far and that’s including American Samoa that only had three delegates to give. If she is going to do it, her wins in Texas (193 to-be-pledged delegates) and Ohio (141) will need to be huge. I just can’t see it happening.

The polls do have Clinton up with 50.2% vs. 42.6% in Texas and 52.7% vs. 38.0% in Ohio on average. That’s a pretty big undecided gap, but I can’t see it all breaking for Clinton given the apparent movement towards Obama in the more recent polls. By comparison, the betting markets at InTrade put Obama at a 68% chance of winning in Texas and a 49% chance of winning in Ohio. I suspect that the betting market is a little overly pro-Obama, just as it was in the lead-up to New Hampshire, but just like in New Hampshire, I think that although Hillary Clinton will win the headline vote, she’ll barely win in the delegates pledged.

So, my prediction: Come the 5th of March, Obama will still be ahead in pledged delegates and will probably still be ahead after adding in the ridiculously apportioned super-delegates by the Main Stream Media estimates. Look for it to be all over bar the shouting in two weeks.


Note to self: When commenting on somebody’s opinion, recognise that they may notice what you say.

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Skills vs. Education

I’m no Andrew Leigh or Andrew Norton when it comes to thinking about education and the economics thereof, but what the hell … I wrote the following back in 2005 for some reason and thought it worth sharing:

I see some confusion about the differences between ‘educated’ and ‘skilled’ that I think many people are unappreciative of, unaware of, or quite deliberately gloss over. In part, I guess, it’s affected by the hodgepodge of meanings attached to the word ‘education’ itself. It’s certainly the acquisition of something, but is it ‘skills’, or is it ‘An Education’ (capitalisation deliberate)?

“An Education” is what some people might refer to as intellectual spinach – it’s good for you, eat it! – and is the logical extension of what the US calls Social Studies. It’s a look at history, the make-up of your society, your government, the philosophies that underpin it and so forth. It is, in essence, what used to be regarded as essential in the British upper-middle classes for spitting out a ‘gentleman’ and could perhaps be summarised as “the world and your place in it”.

Skills, on the other hand, are what make you productive and therefore, valuable, to the economy. Skills are what businesses want and to a certain extent, all they’re interested in from their workforce.

The confusion comes about because, by simple virtue of our humanity, technology progresses. The things we do continually require less effort – fewer inputs, less physical work – to produce the same output. As such, the history and future of mankind as economic agents is entirely about a progression away from the physical and towards the intellectual and with that moves the skill-requirements of industry. This has made the acquisition of skills and the acquisition of “An Education” overlap. To excel in either now requires critical reasoning and imagination.

This hasn’t escaped the politicians of the world and when they speak of a skilled workforce being needed to take the economy forward, they’re talking about intellectual skills. They see universities as factories for producing skilled workers and this grates with those in academia who see universities as secular temples – places where supplicants go to seek enlightenment.

As society has progressed and the intellectual demands of the economy have grown, we’ve seen a corresponding increase in the number of years that a person spends in schooling before entering the workforce. I don’t doubt in the slightest that when people complain that two or three extra years is just blocking a person from being productive was made with the same force back when the push first came for most people to finish grade 12 at school rather than stopping at 10. Whatever the extension, the gist of it is to emphasise the intellectual development for longer and postpone the skills training until afterwards. The latest suggestion is just to hold off on the “skills” for a masters and to work on your critical reasoning through your undergrad.

This sounds fine in theory (we live longer and we earn more in real terms, so the cost of delaying our entry to the work force pays off), but it faces an ultimate dilemma in my opinion, and not just that we’re running out of academic levels to force kids through. The years of schooling that we force on our young has now extended well past the time of their physical and, to a large extent, psychological maturing. A kid is no longer expected to buck against the unfairness of the world while welding something in a factory, but to do it at university. That’s fine so long as there’s development of some kind to be had – we’ve always tied education to development – but what about when the person is a physically, psychologically and emotionally mature adult?

The technological progress of the world is not just continuing, either – it’s accelerating. That means that the rate at which the insufficiently skilled lose their value is only going to increase and with it, the demand for mid-life education is going to grow.

Thus, to my mind, there should be an almost fundamental rethink on how we allocate the fraction of our lives in education. Instead of doing all of it in one long burst at the start of our lives, we should be doing a large part of it initially, while we physically and psychologically develop, but then spread the rest out over time as we need it. Make the start-of-life education first and foremost about surviving in society, then focus on essential, universal skills and the development of critical thinking before just touching, broadly, on your career of choice. Then work for a time before returning to study to focus and specialise.

In addition to not forcing people to stay as underling students past their maturity, this allows people to change career direction with reasonable ease and for those people who don’t find what they want at university to not be discriminated against for the rest of their lives because education is a process and not an event that they missed.

Essential skills are the things that we probably all groan about: Typing, computer-use intuition, communication skills, both written and verbal. The things, in essence, that make a productive (though boring and uninspired) office worker.

This also addresses part of the question of university funding. The argument for free education centres around the fact that students have never had a job and so can’t pay for it up-front. The argument for making them pay up-front anyway hinges on an efficient capital market that allows them to borrow against future earnings. [Note added in 2008:  I was pretty clearly ignoring the idea that parents could afford to pay the lot for their kids] Continuing education as I’ve described it would only happen after a person has been working for some time and has had a chance to save, so the problem is moot: Make them pay.

Paul Krugman: Hanrahan of the Econ-Blogosphere

I’ve got a lot of time for Paul Krugman. People just love to hate the guy, or at least dismiss him as a crank and wonder what he’s going to do when Mr. Bush moves back to Texas, but the man was – for years! – practically the lone beacon of criticism of the Whitehouse in a country that seems to want to beatify its presidents. You can debate the good and bad points of the W. Bush presidency all you like, but the fact remains that America is a country that doesn’t like dissing their sitting president. It seems to make them feel dirty or “unAmerican” or something.  Try asking the Poms to lay off their P.M. for a week.

Anyway, this latest piece by Prof. Krugman got me thinking:

But the plunge in consumer confidence in recent weeks is pretty startling. The chart below shows the University of Michigan index; consumer confidence is now lower than it ever was during the 2001 recession and aftermath, and close to its worst levels during the early 90s, when the unemployment rate went well above 7 percent.

Bit by bit, the evidence is mounting that the wheels are coming off this economy.

I don’t want to dispute the facts of the brief post, just the sentiment. The “wheels are coming off”? Come on. The U.S. is probably entering, if it hasn’t already entered, a recession. That is not the wheels coming off the economy. That is a perfectly normal phenomenon and Professor Krugman knows it. It’s also arguably a necessary phenomenon and I’d be stunned if Professor Krugman didn’t know those arguments. If you want an example of an economy with the wheels off, look at Zimbabwe. Now that, to mix our tired metaphors, is a train wreck.

All of which reminded me of a famous (in Australia, anyway) poem by Patrick Hartigan (1878-1952) writing under the pseudonym of John O’Brien:

Said Hanrahan

“We’ll all be rooned,” said Hanrahan,
In accents most forlorn,
Outside the church, ere Mass began,
One frosty Sunday morn.

The congregation stood about,
Coat-collars to the ears,
And talked of stock, and crops, and drought,
As it had done for years.

“It’s looking crook,” said Daniel Croke;
“Bedad, it’s cruke, me lad,
For never since the banks went broke
Has seasons been so bad.”

“It’s dry, all right,” said young O’Neil,
With which astute remark
He squatted down upon his heel
And chewed a piece of bark.

And so around the chorus ran
“It’s keepin’ dry, no doubt.”
“We’ll all be rooned,” said Hanrahan,
“Before the year is out.”

“The crops are done; ye’ll have your work
To save one bag of grain;
From here way out to Back-o’-Bourke
They’re singin’ out for rain.

“They’re singin’ out for rain,” he said,
“And all the tanks are dry.”
The congregation scratched its head,
And gazed around the sky.

“There won’t be grass, in any case,
Enough to feed an ass;
There’s not a blade on Casey’s place
As I came down to Mass.”

“If rain don’t come this month,” said Dan,
And cleared his throat to speak —
“We’ll all be rooned,” said Hanrahan,
“If rain don’t come this week.”

A heavy silence seemed to steal
On all at this remark;
And each man squatted on his heel,
And chewed a piece of bark.

“We want an inch of rain, we do,”
O’Neil observed at last;
But Croke “maintained” we wanted two
To put the danger past.

“If we don’t get three inches, man,
Or four to break this drought,
We’ll all be rooned,” said Hanrahan,
“Before the year is out.”

In God’s good time down came the rain;
And all the afternoon
On iron roof and window-pane
It drummed a homely tune.

And through the night it pattered still,
And lightsome, gladsome elves
On dripping spout and window-sill
Kept talking to themselves.

It pelted, pelted all day long,
A-singing at its work,
Till every heart took up the song
Way out to Back-o’-Bourke.

And every creek a banker ran,
And dams filled overtop;
“We’ll all be rooned,” said Hanrahan,
“If this rain doesn’t stop.”

And stop it did, in God’s good time;
And spring came in to fold
A mantle o’er the hills sublime
Of green and pink and gold.

And days went by on dancing feet,
With harvest-hopes immense,
And laughing eyes beheld the wheat
Nid-nodding o’er the fence.

And, oh, the smiles on every face,
As happy lad and lass
Through grass knee-deep on Casey’s place
Went riding down to Mass.

While round the church in clothes genteel
Discoursed the men of mark,
And each man squatted on his heel,
And chewed his piece of bark.

“There’ll be bush-fires for sure, me man,
There will, without a doubt;
We’ll all be rooned,” said Hanrahan,
“Before the year is out.”