Tag: Adam Smith

Borges’ Dream

One of the earliest promises of a large-scale computer network was that it would make the dream of a digital library possible.  It seems as if that vision is slowly, hesitantly coming alive.

Those of us who are interested in issues of literacy and access to knowledge have been closely following the growth of what are called E-text (Electronic Text) projects.  The broad aim of these projects is to translate information from traditional paper media to electronic media to make such texts available over global computer networks.  The benefits of such a “translation” are enormous, both for the scholar and the individual.

Perhaps the most important aspect of these projects is their ability to preserve fragile documents that might otherwise be lost.  Printed paper is subject to numerous hazards, is difficult to reproduce and eventually deteriorates.  An Electronic book, however, can be reproduced at the push of a button and is exceptionally cheap to store.  At $.50 per Megabyte of magnetic storage media, it costs only a dollar to store 1,000 pages of text.  Since it is easy to copy electronic-texts it becomes unnecessary to physically ship books through the post, one has only to send a copy of the original (a perfect copy, no possibility of a generation loss unlike photocopies) over a network to the person who is interested in the content.

None of these things are new, many people have been aware of them for decades, but we are seeing a proliferation of such libraries only at the present time.  This is partly due to the increasing importance of computer networks in our society and the technological advances made over the past few years.  As computers and networks become ubiquitous it is only a matter of time before a large part of the knowledge now contained in, and constrained by, the shelves in our libraries will become mobile.

In an electronic library one would not be told “the book has been checked out”.  At an electronic book-store no book can be sold-out, no book can be out of print.  Yet these possibilities force us to ask other questions, specifically ones related to copyright.  If it is possible to make a perfect copy of a book by pushing one button, how is one to enforce copyright laws.  This is an important question and it is being tackled by publishers the world over as they experiment with solutions like encrypting the text or making it viewable only with software that would not permit copying.  Solutions will be found by those who have the greatest incentive to develop them, namely publishers.

Most E-Text projects today concentrate on books that are no longer protected by copyright, i.e. they are under public domain.  So one can find the complete works of William Shakespeare, Aesop’s Fables or Adam Smith’s “The Wealth of Nations” in digital libraries across the globe. Most of these libraries do not charge users access fees, in a sense it is not worth doing so.  Managing a fee-structure would probably cost too much.  Since these projects are largely run by volunteers and with the assistance of donations, there is no desire to earn revenue from them. In any case, translating a book to E-text is so cheap that it is not necessary to charge for access.

There are a number of problems with the vision of large scale digital libraries.  It is uncertain whether many people will make the transition from reading books printed on paper to those on viewed on screen.  There are concerns that large amounts of time spent in front of antiquated computer screens may be harmful to the eyes.  With the present level of computer technology it’s difficult to see how you could curl up in bed with a electronic book.

A particular concern today is the accessibility of E-Texts.  Some E-Text projects store books in one format and others decide to present them in others.  It is possible that some books may not be accessible to certain people because they lack the software necessary to view them.  It is possible that certain formats that are popular today (HTML for instance) may not be around forever and we wonder what will happen to E-Texts stored in those formats.  Hopefully tools will develop that will permit translation between different formats.

Some of these concerns might be invalidated as technological advances are made, others may not.  It is difficult to imagine a world without paper books (though this might just save our forests), and I for one will hold on to every volume I own.  What is perhaps more likely is that this medium will compliment the traditional paper media.  It certainly has many advantages, it is cheaper, easier to transport and copy and increases access to rare and out of print books.  One point that is often not made is that electronic books are accessible to disabled persons (such as the blind) while the printed page may not be.  These are all significant advantages and I do expect to see many more electronic texts in the future.

But perhaps the factor that will convince most of us of its superiority is the fact that students might be able to read books on computers for far less than it would cost to buy them.

More information on Electronic Texts, and links to various digital libraries can be found at http://www.nyu.edu/pages/advocacy/info/etexts.html

Computer Advocacy @ NYU http://www.nyu.edu/pages/advocacy/

This post was originally published in the Washington Square News

 

Capitalism, Socialism and Democracy

Review of “Capitalism, Socialism and Democracy“, Joseph A. Schumpeter;
Harper Torchbooks, 1976; ISBN: 0061330086

The man of system… seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chessboard.  He does not consider that the pieces upon the chessboard have no other principle of motion besides that which the hand impresses upon them; but that, in the great chessboard of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature might choose to impress upon it.  If those two principles coincide and act in the same direction, the game of human society will go on easily and harmoniously, and is very likely to be happy and successful.  If they are opposite or different, the game will go on miserably and the society must be at all times in the highest degree of disorder.

Adam Smith: The Theory of Moral Sentiments, Part 6, Chapter 2.

Schumpeter is of course aware of this argument and acknowledges its validity, yet the kind of society he conceives in “Capitalism, Socialism and Democracy” will not, he predicts, have to content with any such difficulties.  This is of course easily demonstrated in Schumpeter’s taxis.  The socialist engine is clearly much more conducive to promoting authoritarian discipline, and this is, for Schumpeter, one of its great merits.  Yet the valuation of a command economy is one of the many claims Schumpeter makes that are questionable.

Schumpeter goes to great pains to demonstrate to us the great efficiency of the capitalist system.  He is entirely convinced that Capitalism is the sole explanation for us being where we are.  With his characteristic candidness he dismisses all arguments that fail to bestow laurels on Capitalism.  Yet beginning from this conviction, Schumpeter goes on to indulge in a socio/psychological analysis and finally tells us that

“… the ever-rising standards of life and particularly the leisure that modern capitalism provides for the fully employed workman… well, there is no need for me to finish the sentence or to elaborate one of the tritest, oldest and most stodgy of all arguments which  unfortunately is but too true.  Secular improvement that is taken for granted and coupled with individual insecurity that is acutely resented is of course the best recipe for breeding social unrest.”[pg. 145]

So, beginning with an acute analysis of Marx and a piercing critique of Marxist economics, Schumpeter finally declares the Marxist prophecy to be true.

It would be quite futile to argue against any such theory, and to an extent the rest of this tract is formulated by this pivotal statement. Schumpeter has reconciled himself with the inevitability of an increasing demand for Socialism, and as he himself notes this is because “Political criticism cannot be met effectively by rational argument.”[pg. 144]  As the book progresses however, Schumpeter modifies his stance somewhat and we find various defences of Socialism that come rather unexpectedly after the first two sections of the book.  This may be simply an attempt by an eternal optimist to see a half-full glass where there is nothing at all, but this is the portion of this tract that needs to be looked at most closely.

If there is one thing Schumpeter cannot be accused of, it is lack of thoroughness.  He has challenged almost all, and answered many, criticisms of the socialist schema in this rather wide ranging book.  Yet there are a few that he has shrugged off rather flippantly and it is here that we must focus our attention.  Along with all the other dismissals that Schumpeter hands out to economists and social scientists of all persuasions, he has answered the Hayekian critique in a few sentences [185], and Mises’s reservations concerning the socialist order with equal brevity [172-3].  Schumpeter’s responses do not do justice to the Austrian critique.

Unanswered questions

Schumpeter details an elaborate plan involving vouchers and price-fixing which a socialist state could adopt in order to make distribution a “distinct operation” that “in logic at least, is completely severed from production.” [173]  Schumpeter then goes on to claim that though this separation may become a determining factor as far as the society’s attitudes are concerned, it is completely arbitrary from the economic standpoint.  By separating distribution and production, however, Schumpeter’s hypothetical socialist state is forced to find a replacement for the price system that will convey information regarding the market to those making production decisions.  The tool that is readily available is of course an efficient bureaucracy infused with an adequate amount of espirit de corps.  Schumpeter fails to realize however that a bureaucracy cannot but be less responsive than the price system.  Renouncing the market price system entails giving up the most effective information dispersal mechanism we have chanced upon.  Despite his claims to the contrary [185], this bureaucracy will not function as efficiently or rationally as the market does.  Again contrary to Schumpeter’s expectations, such a bureaucracy will not require less intelligent managers than a modern capitalist enterprise; at worst it would require omnipotent beings, and at best those with very different thinking capacities.  Schumpeter fails to tackle the problem of gathering particular information for such a bureaucracy to process, and with rather irritating confidence declares that certain macro-economic variables, and other production data would suffice.  With surprising naiivete, Schumpeter assures us that it would be possible to set up a system of incentives to ensure that the bureaucracy makes the right decisions.  Of course this only makes us ask the question of a higher authority, and in the socialist schema there is always a higher authority.  So we finally have to put this question to those on the top. What are your criteria for making decisions?  The answer can only be that there are no criteria, that there are no laws, no rules, that all decisions are made arbitrarily as the “needs of the moment” dictate.  So much is implied in the Mises-Hayek doctrine.

Of course it is rather easy to see where Schumpeter has derived his vision of the “socialist engine” as a big enterprise from.  After all it with St. Simon that the imagery of the “one workshop” originated [F. A. Hayek, The Counter-Revolution of Science, pg. 121].  (Curiously, this is the one figure Schumpeter fails to denegrate, treats with positive veneration [307] and goes to the lengths of adopting an apologetic tone.)  Yet Schumpeter can hardly, at this juncture, defend this concept solely on the basis of its origins and he does not.  Not
surprisingly, Schumpeter has another surprise in store for us.  In perfect harmony with the refined Marxist prophecy Schumpeter declares that the capitalist system has itself created an environment where individuals are being trained to accept the all-encompassing bureaucracy.  Big business becomes for Schumpeter, the progenitor of the state economy. Ignoring all the problems such a claim presents, (the promiscuity of small businesses in new and emerging technologies, the phenomenon of consultants to provide small enterprises with the expertise they lack, the re-emergence of the self-employed entrepreneur in all fields…) it is rather amusing that Schumpeter informs us, countering Marx, of the white collar workers resistance to socialization.  The driving force behind this almost unanimous clamour for the “socialization of the economy” is Schumpeter’s (and in his view society’s) thirst for stability.  Writing in the post-depression moment, Schumpeter has perhaps been greatly shaken by, what appears to him to be, the naturally catastrophic undulations of the capitalist structure.  So Schumpeter opts for a system that places direct control in the hands of a few authorities, and by his thinking, consequently involves less arbitrariness, more “rationality”, less “creative destruction” and more stability.  The irony of it all is that Schumpeter is forced to acknowledge the need for regular changes, or repairs, to be undertaken on the socialist engine and (considering the bureaucratic aversion towards change in the absence of a direct threat to its own survival) this can only increase the uncertainty and friction he wants so much to avoid.

Even if we do accept that socialism might provide us with more stability, it becomes necessary to ask: At what cost?  Interestingly, Schumpeter has reversed Mises’ argument somewhat and in a rather fiery response to Keynesian economics and other “half-way” socialist measures, condemns them as mere platitudes that will only serve to delay the inevitable socialization of society and must be opposed by all true socialists.

But the question remains; at what cost?  Quite candidly, Schumpeter acknowledges that democracy becomes dispensable in a socialist environment.  This argument is preceded by a rather incisive analysis of what democracy is commonly understood to be and its own inherent limitations.  Yet, after concluding with this analysis Schumpeter does acknowledge that any form of democracy is quite incompatible with full-fledged socialism.  Once we are done with destroying this cherished myth, Schumpeter goes on to applaud the virtues of the socialist engine embodied in its ability to “impose hardships” [210], “eradicate the bourgeois separation of powers”, “empower social admonishment” [215], “insert the stock of the bourgeois extraction into its proper place within that machine” [207].  Sadly, Schumpeter seems to have rationalized the loss of individual freedom this would entail.  Paradoxically, he appears to be very concerned about rights abuses in Russia, yet even this concern is qualified by an elaboration on the uniqueness of the Russian situation, in that Russia was not a fully-evolved capitalist economy on the eve of the Bolshevik revolution.  None of this detracts however, from the fact that Schumpeter does not protest the subjection of the individual in the interests of “society”.  Rather, he would go as far as to suggest that such subjection of the individual is rational and desireable in that it enables society to harness the abilities of each individual more effectively.  The validity of that claim is highly questionable.

Despite all the reservations one may have about the thesis presented in the book, it is almost impossible to refuse to acknowledge Schumpeter’s thoroughness.  This book is a quite comprehensive discourse on Socialism, and one can hardly accuse Schumpeter of setting his sights too low.  It must also be said that the book is a delight to read, if only to taste Schumpeter’s irreverence.

The piece was written in Fall 1995 as an assignment in Prof. Kirzner’s
course on the “Foundations of Capitalism”.