Post-pandemic trends in post-Brexit British foreign policy: Asia or the Atlantic?

Introduction

In January 2020, the UK had given a go-ahead to Chinese telecom giant Huawei to participate in its 5G network – with restrictions and conditions. The Trump administration conveyed its displeasure to the Boris Johnson administration. Not just the US President, but senior officials of the US administration are supposed to have said that this decision would impact economic and security relations between the UK and the US.

In the aftermath of the Covid-19 pandemic, ties between the UK and China have steadily deteriorated. As a result of increasing strains with Beijing, and the imposition of strong US sanctions against Huawei, London began to rethink its approach towards Huawei’s role in its 5G network.

First, it was decided that Huawei’s participation would be reduced to zero by 2023. In May, Britain had also proposed a multilateral grouping of 10 countries, D10 (G7+ India, South Korea and Australia), which could work collectively for reducing dependence upon Chinese technologies.

UK-China ties after the imposition of the National Security Law in Hong Kong

London further hardened its stance vis-à-vis China after the imposition of the National Security Law in Hong Kong, which, according to the UK, is a violation of the ‘one country two systems’ arrangement safeguarded by the ‘Basic law’ of Hong Kong and the Sino-British joint declaration signed in 1985. According to the Boris Johnson administration, the National Security Law will impinge upon not just the autonomy of Hong Kong but freedoms and rights of the residents of the former British colony, guaranteed by the 1985 declaration (these rights were to remain in place for a period of fifty years from 1997 – the year in which British left Hong Kong and handed over sovereignty to China).

Decision regarding Huawei

On July 14, 2020, on the recommendation of National Cyber Security Centre (NCSC), the Boris Johnson administration decided that Huawei will be removed from the 5G network by 2027. It was also decided that the purchase of 5G kits from Huawei will not be allowed after the end of December 2020.

China reacted strongly to the UK’s recent announcement, while it was welcomed by US President Donald Trump. China stated that the UK’s decision will exacerbate tensions, while the US President stated that the Johnson administration took this decision as a result of pressure from Washington. A top official in Boris Johnson’s administration stated that this decision was not driven by US pressure. Said the British Foreign Secretary Dominic Raab:

But I think that decision was made not because the US said it was a good decision but because the leadership in the UK concluded the right thing to do was to make that decision for the people of the UK.

Interestingly, some media reports suggest that British officials have stated that the recent ban on Huawei was imposed with a view to placate Trump, and the UK could revise its decision, if the mercurial US President is voted out in November 2020.

UK-Japan relations

Britain has already begun to look for alternatives to Huawei for developing its 5G network. On July 16, 2020, just two days after the decision was taken to remove the Chinese telecom giant altogether by 2027, British officials are supposed to have met with their Japanese counterparts and sought assistance for developing Britain’s 5G network. Two companies which were discussed as possible alternatives to Huawei were NEC Corp and Fujitsu Limited.

It would be pertinent to point out that in recent months Britain has been aiming to strengthen trade ties with Japan, and is also looking to secure a Free Trade Agreement (FTA) with Japan. Both countries have also been at the forefront of pitching for diversifying global supply chains.

Conclusion

While it remains to be seen whether Britain and Japan can work together for developing the former’s 5G network, the London-Tokyo relationship has witnessed an upswing in the aftermath of Covid-19. Both countries have already begun to take steps for reducing economic reliance on China. It would be interesting to see if Britain sticks to its announcement of removing Huawei from its 5G network by 2027, in case Donald Trump loses in 2020. While Britain is seeking to strengthen ties with countries wary of China’s increasing economic dominance, the former would not likely to be perceived as a mere appendage of Washington.

The Three T’s in a post-coronavirus world

As countries look to recover from the economic setback caused by the coronavirus pandemic, the three t’s – trade, travel, and technology – are likely to play an important role in getting the global economy back on the rails.

Trade

Even in the midst of the pandemic, countries have been in talks regarding Free Trade Agreements (FTA’s). The UK is seeking to sign an FTA with not just the US but also Japan, so as to buttress the bilateral economic relationship and get entry into the 11-member Comprehensive Partnership for Trans Pacific Partnership (CPTPP). Vietnam’s national assembly also ratified an FTA with the European Union known as EUVFTA (European Union Vietnam Free Trade Agreement) on June 8, 2020. According to the FTA, the EU will lift 85% of its tariffs on Vietnamese exports, while the remaining tariffs will be removed over a period of 7 years. Vietnam on the other hand will lift nearly half (49%) of its import duties on EU goods, while the rest of the tariffs will be removed over a period of 10 years.

The CPTPP is also likely to expand in the near future. Japan is seeking to get Thailand, Taiwan, Indonesia, and the Philippines on board. Tokyo’s aim is to reduce dependence on China by creating an alternative set of supply chains through multilateral networks.

Technology

In recent weeks, there has also been a growing debate with regard to creating new technologies, so that the dependency upon Chinese technologies is reduced. One important step in this direction is the UK’s suggestion for creating an organisation, called D10, which consists of the original G7 countries plus India, South Korea, and Australia. The aim of the D10 is to provide alternative technologies so that dependence upon Chinese technologies is reduced.

At London Tech Week, a report titled “Future Tech Trade Strategy” was given by British Trade Secretary Elizabeth Russ. Russ spoke about a new £8 million initiative which would enable British companies to expand tech ties with Asia-Pacific countries, especially Japan and Singapore. British companies will also be assisted by tech experts stationed in its high commissions and embassies in these countries.

Travel

In recent days, the resumption of international air travel has also also been an important matter of discussion. Three members within the 11-member CPTPP – Japan, New Zealand, and Australia – have already been in talks for resuming air connectivity. Japan is also likely to ease its entry ban from countries like Vietnam and Thailand where Covid-19 cases have reduced.

Singapore, another member of the CPTPP, is also in talks with South Korea, Malaysia, and New Zealand for resumption of air connectivity. (Singapore Airlines and Silk Air have been flying passengers from select destinations in Australia and New Zealand to Singapore’s Changi Airport throughout the pandemic.)

China, too, has been seeking to revive air travel. While China has recently set up a travel corridor with South Korea, it has also signed an agreement with Singapore for reciprocal travel for essential purposes – business and official. Initially, this arrangement will be for 6 provinces – Shanghai, Tianjin, Chongqing, Guangdong, Jiangsu, and Zhejiang (travellers will need to apply for a visa in advance, and get tested for the corona virus both before departing for China and after arriving there).

Vietnam, which removed its lockdown at the end of April and resumed domestic flights, is also reviving international travel with a few select countries, such as South Korea (South Korean students can enter the ASEAN country through a special permit).

The EU is seeking to resume air connectivity with non-EU countries by the 1st week of July (the EU has already opened travel within EU member states), and it is likely that air connectivity with countries considered low risk will also resume shortly.

The resumption of travel will of course be undertaken on a step-by-step basis. Japan, for instance, has indicated that it will open its air connectivity with other countries in stages; first for businessmen, then students, and finally tourists. What is fascinating to observe is that the narrative with regard to the three t’s is not being set by the West, it is being set by Asian countries. Even within Asia, it is not just a China-driven narrative. Japan is playing an important role and, from within ASEAN, it is not just Singapore but Vietnam as well which has emerged as an important stakeholder.

Conclusion

In a post-corona world there are likely to be a number of changes, with geopolitical and economic dynamics in Asia likely to witness a significant shift.

What is also interesting to note is that travel and technology – two of the three t’s – were broadly thought of as key ‘soft power’ tools prior to the Covid-19 pandemic. Post the pandemic, there will be a strong ‘hard Power’ component to these two t’s. While in the context of travel, each country will be cautious with regard to opening up air travel, and stick to linkages with countries that have managed to control the corona virus; as far as technology is concerned, due to the rising tensions with China, the creation of alternative technologies is likely to be viewed as a security requirement (trade, the third t, had already acquired a strong strategic component even before the outbreak of the pandemic).

Evolution in Everything: Handwriting

There’s a whole set of simple but profound lessons that, if I were being lazy, I might call “the economic way of thinking.” We move through a hand-me-down world, solving some problems and creating new problems, adjusting and adapting, and shaping the world that we pass on to the next generation.

I just stumbled on a lovely example in an article about ballpoint pens and the end of cursive. A technological change changed the nature of handwriting, but the structure of human capital lagged behind. Specifically, the widespread adoption of ballpoint pens meant the old way of writing–how to hold the pen, how to form the letters, etc.–was poorly suited to the tool being used. This should have been an opportunity to test unchecked assumptions (e.g. about what the “correct” way to write is) but instead an inefficient practice (cursive writing with a bic pen) persisted in the face of increasing obsolescence.

I particularly like the idea of trying something new (fountain pens) can lead to a realization that some old method has a lot more going for it than was obvious to the non-alert.

I wonder how many other mundane skills, shaped to accommodate outmoded objects, persist beyond their utility. It’s not news to anyone that students used to write with fountain pens, but knowing this isn’t the same as the tactile experience of writing with one. Without that experience, it’s easy to continue past practice without stopping to notice that the action no longer fits the tool. Perhaps “saving handwriting” is less a matter of invoking blind nostalgia and more a process of examining the historical use of ordinary technologies as a way to understand contemporary ones. Otherwise we may not realize which habits are worth passing on, and which are vestiges of circumstances long since past.

How the Ballpoint Pen Killed Cursive

Learning takes time. So in a dynamic society, it’s natural that there will always be some sort of practice outliving its utility. The only other way I see is stagnation: no new methods, no new problems, and we eventually setting into a “making the best of it” equilibrium.

The discovery of each of these inefficiencies creates some pocket of entrepreneurship. Sometimes it’s a massive, market oriented bit of entrepreneurship–like Bic industrializing the process of making cheap, reliable pens. Sometimes it’s a niche community of hobbyists (who might be incubating the next big thing). But that entrepreneurial reaction to inefficiency is pretty exciting. Realizing how my bad handwriting is the outcome of a technical problem makes me want to try fountain pens.

Nightcap

  1. China’s race to find aliens first Ross Anderson, Atlantic
  2. What happens if China makes first contact? Abhijnan Rej, Diplomat
  3. Is coronavirus a preview of alien life reaching earth? Jeffrey Kluger, Time
  4. A beautiful photo essay of some old, abandoned airplanes Zero Anthropology

A Reflection on Information and Complex Social Orders

In the year 2020, occidental democracies face a time of lock-downs, social distancing, and a sort of central planning based on epidemiological models fueled by testing methodologies. An almost uniform consensus on the policy of “flattening the curve and raising the line” spread worldwide, both in the realms of politics and science. Since the said public policy is not for free, but nevertheless it is out of discussion, the majority of the efforts are focused on gathering data concerning the rate of infection and fatalities and on achieving accurate and fast methods of early detection of the disease (COVID-19). The more the data is collected, the more efficient the policy of “flattening the curve” will be, i.e.: minimizing the economical costs. Technology -in a broad sense- seems to be the key ingredient of every successful policy.

Nevertheless, since the countries that undertook the said task are democracies -and they were urged to do so because they are democracies-, there is a lot more than data provided by technology to take into account. Science and technology could reach a conclusive study about infection and fatality rates, but the outcomes of the societal discussions about the value of life and the right of every individual to decide upon the way of conducting their own plans of life will always remain inconclusive. Those discussions are not only philosophical and, fundamentally, are not only to be conducted in the terms of an academic research, since the values at stake entitle every human being to have their own say and, at the same time, are so deeply rooted in the upbringing of the individuals that seldom they might be successfully articulated -and surely that is why such questions are of philosophical interest.

In the race to determine the political agenda, technology plays with a significant advantage over philosophy: in times of emergency, conclusive assertions -despite proving right or wrong afterwards- enable political leaders with a sense of determination that any philosophy can hardly achieve. It is true that philosophical considerations mark the legitimate limits of science and its uses, but the predictable models and plausible scenarios depicted by the technology might lift the barriers of what had been considered at the time as politically illegitimate, i.e.: to describe a given situation as a state of exception.

However, there is still a dominion in which philosophical considerations might have high expectations of winning the competition against technology: the making of the abstract criteria to judge the fulfillment of the due procedures to be followed by the authorities given the account of the data gathered by the technology. Such philosophical considerations on which base authorities should personally account for their decisions, despite having been discussed by academics and writers, have being treated for centuries in particular legal procedures that crystallized the standards of conduct of the Civil Law (the diligence of a good father of a family, or of a good businessman, etc) or Common Law concepts (the reasonable person, the ordinary prudent man of business) or more recent -in terms of the evolution of the law- formulae, such as the Hand’s rule.

Such legal standards, concepts or formulae do not oblige the political authorities in their public sphere, but they perform as an incentive to be taken into account by the agent who is invested with the public authority; since he, eventually, will be personally accountable for his decisions. Moreover, those legal parameters to judge the personal responsibility of the agent in charge of the political authority are a true guarantee for the public servants, more reliable than the changing public opinion measurements to be provided by the technology.

Notwithstanding the Realist assertion about the division between law and politics might earn certain relevance in times of turmoil, individual rights and legal procedures should endure in the long run, in order to work as a benchmark to judge the personal performance of the political agents.

Such times of political and social upheaval are useful to test political theories and doctrines as well. Certain strains of Political Liberalism -particularly Classical Liberalism- have been largely criticized for -supposedly- trying to replace the political with the law. However, the law is there to remind the political agents that the state is an abstraction run by individuals who are expected to be personally accountable for their decisions. In this case, the true function of the law, although conceding that it should remain outside of the political sphere, is to provide the correct incentives for the political agents, who are not mere abstractions -and so, maximize their own plans- to take their own decisions. If technological devices might be the key instruments for public policy, the rule of law is its inescapable framework -or at least so it is, of course, for every democracy.

Broken Incentives in Medical Innovation

I recently listened to Mark Zuckerberg interviewing Tyler Cowen and Patrick Collison concerning their thesis that the process of using scientific research to advance major development goals (e.g. extending the average human lifespan) has stagnated. It is a fascinating discussion that fundamentally questions the practice of scientific research as it is currently completed.

Their conversation also made me consider more deeply the incentives in my industry, medical R&D, that have shaped the practices that Cowen and Collison find so problematic. While there are many reasons for the difficulties in maintaining a breakneck pace of technological progress (“all the easy ideas are already done,” “the American education system fails badly on STEM,” etc), I think that there are structural causes that are major contributors to the great slowdown in medical progress. See my full discussion here!

Nightcap

  1. The extractive colonial economy in Java Dell & Olken, NBER
  2. Modernity and art in the Near East Lara Arafeh, The Grey Area
  3. Tales of socialism David Henderson, EconLog
  4. Space aliens as culture heroes Nick Nielsen, Grand Strategy Annex

My Startup Experience

Over the past 4 years, I have had a huge transition in my life–from history student to law student to serial medical entrepreneur. Essentially, I have learned a great deal from my academic work that taught me the value that we can create if we find an unmet need in the world, create an idea that fills that need, and then use technology, personal networks, and hard work to create novelties. While startups obviously tackle any new problem under the sun, to me, they are the mechanism to bring about a positive change–and, along the way, get the resources to scale that change across the globe.

I am still very far from reaching that goal, but my family and cofounders have several visions of how to improve not only how patients are treated but also how we build the knowledge base that physicians, patients, and researchers can use to inform care and innovation. My brother/cofounder and I were recently on an entrepreneurship-focused podcast, and we got the chance to discuss our experience, our vision, and our companies. I hope this can be a springboard for more discussions about how companies are a unique agent of advancing human flourishing, and about the history and philosophy of entrepreneurship, technology, and knowledge.

You can listen here: http://rochesterrising.org/podcast/episode-151-talking-medical-startups-with-keith-and-kevin-kallmes. Heartfelt thanks to Amanda Leightner and Rochester Rising for a great conversation!

Thank you!

Kevin Kallmes

Be Our Guest: “Liberty, Government, and Technology: 2019”

Jack Curtis is the latest to submit a piece for NOL‘s “Be Our Guest” feature. A slice:

We will compare China, Russia and the United States. China is a post-communist police state that has never experienced democracy. Russia is a post-communist, quasi democratic republic devolving back into a police state. And the United States is a traditionally democratic republic. Excepting the vagaries of disparate cultures, their three governments seem increasingly similar, revising themselves to adopt the new technology. However, these revisions have not originated only within governments; they also reflect the gradual confluence of the underlying societies.

Do read the rest, and I must point out that Jack has been a long time reader of NOL. For that I am personally grateful. It’s nice to be able to link up and collaborate like this.

Submit your own thoughts to us. Be our guest. Tell your friends, too.

Nightcap

  1. Slavery as free trade Blake Smith, Aeon
  2. Yay Democracy Dollars Robin Hanson, Overcoming Bias
  3. Edward Snowden’s education Christian Lorentzen, LRB
  4. American hillbillies Jacques Delacroix, NOL

Financial History to the Rescue: On Bitcoiners’ Many Troubles

This article is part of a series on bitcoin (and bitcoiners’) arguments about money and particularly financial history. See also:

(2): ‘Rothbard’s First Impressions on Free Banking in Scotland Were Correct’, Joakim Book, AIER (2019-08-18)
(3): ‘The Harder Money Wins Out’, Joakim Book, NotesOnLiberty (2019-08-19)
(4): ‘Bitcoin’s Fixed Money Supply Is a Weakness’, Joakim Book, AIER (2019-08-28)

It is unfair to expect technologically savvy bitcoiners to also be apt and well-read monetary economists. By no means do the skills and experiences of either have to overlap. Through the rise of Bitcoin with its explicit central banking challenge and attempt to become a worldwide currency, the subject matter of the two groups has unexpectedly clashed. All arguments that support or attack bitcoin is a head-first dive into monetary economics – sometimes exhuming centuries-long disputes among monetary economists and often blatantly distorts and overlooks money and banking arrangements of the past.

We can’t have that, can we.

One of the most delightful events in the libertarian world is the monthly Soho Forum debate run by Gene Epstein. Yesterday’s splendid showdown between Profs. George Selgin and Saifedean Ammous on the suitability of Bitcoin as a Medium of Exchange is bound to get some serious traction once the recording is on available only – look out for that!

A great debate for anyone interesting in monetary system and monetary economics more generally, this was probably the best and most entertaining of many Soho Forum debates I’ve watched. It’s a good format that forces speakers to engage and respond to one another’s arguments, which makes a two-hour conversation on something as technical and intricate as Bitcoin’s monetary role an absolute delight; even those of us deep into this nerdy rabbit hole can learn a lot and walk away with a trove of inspiration.

Channeling that inspiration into long-form, multi-part reviews of the relevant financial and monetary history is exactly what I’m going to do!

One question I often get regarding my research interests (banks, money and financial markets in the past) is the mildly offensive but absolutely correct question to ask: who the f— cares?! Bitcoin and the question of monetary regimes are perfect examples that make financial history relevant: the rise of crypto questions the fundamentals of monetary systems, systems that very rarely change. Naturally, the financial historian has an edge here, having a lot more nuanced knowledge about past monetary and financial arrangements and their operations. History becomes our (only) laboratory, to which the financial historian typically has a lot to contribute.

Moreso than other topics, fundamental questions of monetary regimes are explicitly pitted against other possible regimes – by their nature comparative and always informed by historical experience. It takes about two-and-a-half sentences before debates over money invoke some reference to financial and monetary history – as they should, since they illustrate how some (aspect of) a different monetary regime worked. Frustratingly enough, there’s a good chance that the speaker has mindboggingly little idea of what s/he’s talking about!

That’s where I like to come in. To a roomful of aspiring monetary economists at Cato’s Alternative Money University in July this year, Randall Wright‘s response to why he does monetary economics at all (“to debunk all this B-S!”) generalizes pretty well.

I’m gonna use this post to review some of the mistakes Saifedean made yesterday – and use it going forward as an updated collection of future posts on the topic, especially as I go through Saif’s promising book, The Bitcoin Standard: The Decentralized Alternative to Central Banking. The aim here is to respectfully clarify the parts of the Bitcoin arguments where I’d like to think that I have a comparative advantage – financial and monetary history – and to better develop my understanding of the monetary theory involved.

Here are some points that came up yesterday:

  • The Monetary Progression of ‘Harder Money’: the brilliance of the past is that almost any account, no matter how persuasive and compelling, is bound to run into inconvenient historical facts. The world is more nuanced than can be reasonably captured by pithy generalization (yes, I realize the irony here). In a piece attacking this bitcoiner’s creation myth earlier this year, I wrote:

This progressively upward story is pretty compelling: better money overtake worse money until one major player unfairly took over gold – the then-best money – replacing it with something inferior that the Davids of the crypto world now intents to reverse. […] Too bad that it’s not true. Virtually every step of this monetary account is mistaken.

  • The Lender-of-Last-Resort role privately provided: Many Austrians and opponents to fractional reserve banking routinely believe that banks holding less-than-100% reserve against their deposits must have a government backing them, providing emergency liquidity when such banks are inevitably run upon. This is completely false. I can point to many different historical instances that privately accounted for such risks, from private clearinghouses to insurance, to the option-clause debate in Scottish Free Banking and contingent/unlimited liability institutions.
  • …which leads us to Scottish Free Banking. There’s a famous quip by Rothbard (“Rothbard’s Law“) that describes the tendency for economists to specialize in the fields they’re worst at: Henry George specialized in land, where his writing is appalling; Milton Friedman on Money, where he’s awful etc. I usually say that the same thing applies for Rothbard whenever he writes on Financial History. Very bad. And yes, I will go through his article ‘Myth of Free Banking in Scotland’
  • Saif made a distinction yesterday between the “Medium of Exchange” and the “Payment Mechanism” involved that struck me as misleading, and I didn’t get a chance to finish my reasoning with him in person – so I’ll flush it out in a piece later on. Happily for all you Free Banking fans, it involves note-issuing Scottish banks and the bigger questions of redeemability and outside/inside money.

Some additional housekeeping from yesterday:

  • Saif: “There was no real estate bubble on the Gold Standard”.
    • Yes, Selgin said, the Florida 1920s housing bubble leading up to the Great Depression. No, Saif correctly objected, that wasn’t a real gold standard, but a central bank-planned Gold Exchange Standard.
      Ok, fine – I’d agree with Saif here. How about the 1893 Australian banking crisis? Classical Gold Standard, no central bank, but a property boom and bubble-like collapse nonetheless.
    • A response might be “but fractional reserve banking!” but a) that’s a topic I’ll delve into much more, and b) this is started to sound like a No True Scotsman fallacy…
  • Saif: “Central banks hold gold – they don’t trust each other enough to hold currency”
    • Saif probably misspoke here, since he couldn’t possibly believe this; looking at any central bank’s balance sheet would instantly dispell such beliefs. Central banks generally hold no more than 5-8% of their assets in gold, and often a lot more than that in foreign currency-denominated asset. The ECB holds about equal parts (7-8% of assets) in gold and foreign currency. I routinely follow the weekly changes in the Riksbank’s balance sheet and even after a more extreme QE programe than the Fed’s (as % of GDP), it holds more FX than it does SEK-denominated assets (and no more than 5% in gold). The Bank of England technically doesn’t actually have any gold at all on its balance sheet, but holds gold in storage at its vaults (on behalf of other countries and the UK Treasury).

Bear with me over the next few months, as I make my way through Saif’s book and engage with these thrilling debates. Feel free to interrupt/comment on Twitter at any point if you think I’ve made a factual/empirical error, error in reasoning or in relevance to Bitcoin.

And yes, keep in mind that this is a respectful inquiry into fascinating topics with people who agree on like 92% of everything. Feel free to call me out for unnecessarily snarky and offensive thing as we go along – and welcome to the party!

Eye Candy: Antarctica’s countries

NOL map Antarctica countries
Click here to zoom

There are a total of 29 countries with scientific programs aimed at Antarctica.

Here is more at NOL on Antarctica. Brrrrrr!

Nightcap

  1. Regional politics is restraining Kurdish militancy in Iran Fazel Hawramy, Al-Monitor
  2. Ignoring Ayn Rand won’t make her go away Skye Cleary, Aeon
  3. Culture and Institutions Alesina & Giuliano, Journal of Economic Literature
  4. Medieval Robots: Magic, Nature, and Art Dylan Cahn, Origins

The minimum wage induced spur of technological innovation ought not be praised

In a recent article at Reason.comChristian Britschgi argues that “Government-mandated price hikes do a lot of things. Spurring technological innovation is not one of them”. This is in response to the self-serve kiosks in fast-food restaurants that seem to have appeared everywhere following increases in the minimum wage.

In essence, his argument is that minimum wages do not induce technological innovation. That is an empirical question. I am willing to consider that this is not the most significant of adjustment margins to large changes in the minimum wage. The work of Andrew Seltzer on the minimum wage during the Great Depression in the United States suggests that at the very least it ought not be discarded.  Britschgi does not provide such evidence, he merely cites anecdotal pieces of support. Not that anecdotes are bad, but those that are cited come from the kiosk industry – hardly a neutral source.

That being said, this is not what makes me contentious towards the article. It is the implicit presupposition contained within: that technological innovation is good.

No, technological innovation is not necessarily good. Firms can use two inputs (capital and labor) and, given prices and return rates, there is an optimal allocation of both. If you change the relative prices of each, you change the optimal allocation. However, absent the regulated price change, the production decisions are optimal. With the regulated price change, the production decisions are the best available under the constraint of working within a suboptimal framework. Thus, you are inducing a rate of technological innovation which is too fast relative to the optimal rate.

You may think that this is a little luddite of me to say, but it is not. It is a complement to the idea that there are “skill-biased” technological change (See notably this article of Daron Acemoglu and this one by Bekman et al.). If the regulated wage change affects a particular segment of the labor (say the unskilled portions – e.g. those working in fast food restaurants), it changes the optimal quantity of that labor to hire. Sure, it bumps up demand for certain types of workers (e.g. machine designers and repairmen) but it is still suboptimal. One should not presuppose that ipso facto, technological change is good. What matters is the “optimal” rate of change. In this case, one can argue that the minimum wage (if pushed up too high) induces a rate of technological change that is too fast and will act in disfavor of unskilled workers.

As such, yes, the artificial spurring of technological change should not be deemed desirable!

Tech’s Ethical Dark Side

An article at the NY Times opens:

The medical profession has an ethic: First, do no harm.

Silicon Valley has an ethos: Build it first and ask for forgiveness later.

Now, in the wake of fake news and other troubles at tech companies, universities that helped produce some of Silicon Valley’s top technologists are hustling to bring a more medicine-like morality to computer science.

Far be it from me to tell people to avoid spending time considering ethics. But something seems a bit silly to me about all this. The “experts” are trying to teach students the consequences of the complex interactions between the services they haven’t yet created and the world as it doesn’t yet exist.

My inner cynic sees this “ethics of tech” movement as a push to have software engineers become nanny-state-like social engineers. “First do no harm” is not the right standard for tech (which isn’t to say “do harm” is). Before 2016 Facebook and Twitter were praised for their positive contribution to the Arab Spring. After our dumb election the educated western elite threw up our hands and said, “it’s an ethical breach to reduce our power!” Freedom is messy, and “do no harm” privileges the status quo.

The root problem is that computer services interact with the public in complex ways. Recognizing this is important and an ethics class ought to grapple with that complexity and the resulting uncertainty in how our decisions (including design decisions) can affect the well being of others. My worry is that a sensible call to think about these issues will be co-opted by power-hungry bureaucrats. (There really ought to be ethics classes on the “Dark Side of Ethical Judgments of Others and Education Policy”.)

I don’t doubt that the motivations of the people involved are basically good, but I’m deeply skeptical of their ability to do much more than offer retrospective analysis as particular events become less relevant. History is important, but let’s not trick ourselves into thinking the lessons of 2016 Facebook will apply neatly to whatever network we’re on in 2026.

It hardly seems reasonable to insist that Facebook be put in charge of what we get to see. Some argue that’s already the world we live in, and they aren’t completely wrong. But that authority is still determined by the voluntary individual decision of users with access to plenty of alternatives. People aren’t always as thoughtful and deliberate as I’d like, but that doesn’t mean I should step in and be a thoughtful and deliberate Orwellian figure on their behalf.