Read my review of Tooley's The Beautiful Tree over at The Freeman. If ever there were a living argument for greater educational freedom, it's made by the actions of real people in the developing world.
I am honored to have my piece included with the work so many incredible writers and thinkers. The editor is an easy person to work with and is as much an editor as a mentor to young writers. Getting to participate in this project rescued 2009 for me, I think. The anthology comes out in May 2010.
Next year, folks, is going to be a good year. Let's make it happen.
Remember Coase's The Nature of the Firm? In it, Coase asks a really important question: why do people organize into firms? In other words, why isn't there a totally "free" market in labor? Why do organizations take on scales that result in higher costs? Coase's answer is "transaction costs". It costs more to coordinate actions among people who have disparate skill sets, live in different locations, have various levels of abilities, need to contract with each other and hammer out details of these agreements, etc.... then get them all together to accomplish something profitable. Simply said, it becomes worth it for people to give and take orders. So up to a certain point, organizations with major components of hierarchy are simply less costly to organize. But this cost structure is changing rapidly due to Web 2.Whatever.
Check out Here Comes Everybody. Yes, Shirky's is another "look how new media are revolutionizing everything" book. But among other things - I'm only on Chapter Three - Shirky has been able to articulate the revolutionary change in the structure of transaction costs when it comes to organizing. If you can organize without organizations at increasingly lower costs, the world is a very different place. The nature of the firm is going to change--perhaps not utterly, but considerably. I take away from this a kind of techno-optimism not only about seismic shifts in the nature of human organization, but in the nature of government and our ability to rein it in. For example, if new media are changing things for firms and orgs, will it also change the logic of collective action a la public choice theory?
Ironically, I've been asked to write a review of Here Comes Everybody for a print journal.
My friend Michael Strong has a great interview on this NY Times blog. Check it out. (And in case you missed it, here's my review of his book.) My favorite part of the interview:
Just as a painter needs paints, paintbrushes, and a canvas, an entrepreneur needs key institutions, including property rights, rule of law, and the freedom to create. In order to plan a venture, in order to create new value through a new vision, one must be able to determine what resources one will be allowed to use (well-defined property rights), what the rules will be for using those resources (rule of law), and significant freedom with respect to how to organize and manage those resources (economic freedom). Nineteenth-century classical liberals were clear that these tools were the foundations of the entrepreneurial wealth-creation machine that had made the U.S. and Britain the first societies in the world in which the masses experienced a steadily improving standard of living.
A century of Marxist hostility to the foundations of capitalism has obscured the fact that throughout the developing world, property rights are insecure and ill-defined; the processes through which contracts are adjudicated is often obscure and unpredictable; and there are severe constraints on the extent to which entrepreneurs can create and manage their enterprises. The Fraser Institute’s Index of Economic Freedom, shows that by objective measures (which include institutional measures of property rights, rule of law, as well as the freedom to create), the entire developing world has less economic freedom than Scandinavia.
I like his bet proposal to Jeffrey 'drop money from the heavens like manna' Sachs, too:
G.D.P. per capita correlates with levels of economic freedom, and increasing levels of economic freedom increase average rates of long-term economic growth. There is little evidence that government-to-government foreign aid increases average rates of economic growth.
In order to get Sachs to acknowledge this, I propose that we compare G.D.P. growth of three sets of 20 nations, 20 years from now:
Sachs 1: The 20 nations that have received the most government-to-government foreign aid as a percentage of per capita G.D.P.
Sachs 2: The 20 nations that have experienced the greatest percentage growth in government (in honor of Sachs’s claim that large government does not inhibit growth).
Strong: The 20 nations that have experienced the greatest increases in economic freedom as measured by the Fraser Economic Freedom Index.
Foreign aid may do some good (occasionally) or it may do some harm (usually), but no amount of aid will ever create a dynamic economy in the absence of the Entrepreneur’s Toolkit. Due to Sachs’s prominence in the poverty alleviation debate, until he acknowledges the role of economic freedom in alleviating poverty, he should be regarded as the leading cause of poverty in 2025.
Most people think politics boils down to different answers to the question: how do we make the world a better place? According to idealist Michael Strong, the first step is to ditch the politics. The second step in making the world better – that is, progressing in areas like human happiness, environmental health and overall well-being – is to eliminate what can only be described as some of our cultural baggage.
Consider what we’ll call the “Zero-sum Three”:
1. Manichaeism—People are good or evil and the world is black and white; 2. Pessimism—The glass is half empty (and it’s usually somebody else’s fault); and 3. Statism—Government can and should solve all of our problems. It’s easier to hope and pray (to bureaucracies) than to “just do it”.
Be the Solution, a new book by FLOW co-founder Michael Strong, is as much about liberating entrepreneurship as it is a serious critique of the Zero-sum Three. And by Strong’s lights, entrepreneurship is more than just making money. Much more. Drucker and Hayek? Meet Maslow and the Mahatma.
Stuart Kaufmann is one of my intellectual heroes. So is Friedrich Hayek. You'd think by this article, Stuart Kaufmann had never read Hayek.
The path to maximum prosperity will depend on finding ways to build economic systems in which new niches will generate spontaneously and abundantly. Such an approach to economics is indeed radical. It is based on the emergent behavior of systems rather than on the reductive study of them. It defies conventional mathematical treatments because it is not prestatable and is nonalgorithmic. Not surprisingly, most economists have so far resisted these ideas. Yet there can be little doubt that learning to apply these lessons from biology to technology will usher in a remarkable era of innovation and growth.
I've always wondered why complexity scientists can be a bit squishy when it comes to economics and politics. Most lean left (read: hierarchical, top-down) and don't generally cross-pollinate their ideas across disciplines, much less apply said ideas as a template to other domains. But a dose of Human Action (Mises) or Law, Legislation and Liberty (Hayek) I suspect would supply an antidote to too much pro-government fetishism. Or simply a transfer of concepts to economics, as Kaufmann seems to be exploring.
It's not clear, from the SciAm article cited above that Stuart Kaufmann is a Hayekian. Here he seems to be talking about organizations, rather than whole economies (although by "control," he may be satisfied with the application of rules):
We do not yet know what makes some systems more adaptable than others, but research on complexity has yielded some clues. Some of my own work on physical systems called spin glasses suggests that the level of central control over subsidiary parts of a system is an important consideration. Too much control freezes the system into limited configurations; too little causes it to wander aimlessly. Only systems that hover on the border between order and chaos exhibit the needed general stability and capacity to explore the universe of possible solutions to challenges.
But in both examples of that rather coyly academic prose above, one can see flashes of a man who understands that centralized control and design cannot spin out the iterative wonders of the market. Macroeconomic wizardry is so much mathematical masturbation in the face of continuously cascading chains of spontaneous self-organization. These excerpts suggest a mind who would be comfortable with Austrian economics. Just as Hayek was influenced by biology and cybernetics, Kaufmann might find much to savor in Hayek (and the Institutional Economics of Douglass North.)
If you have time, dear reader, here is Kaufmann presenting his ideas on the nature of innovation in the economic sphere. He blends it fairly well with the insights of biology. Enjoy.