Oikonomics: a social life of money

Amartya Sen: Implications of "the idea of justice" for the future of money

I have just started Amartya Sen’s new book "The Idea of Justice" which in many ways is the culmination of his heterodox approach to the problems of economics and political philosophy. Sen’s approach is to start not from perfect ideals, but from comparative analysis to derive capabilities. His belief is that ‘perfect’ models blind us to what can be achieved in the real world – the life I can lead – by focusing on creating idealistic contexts which must artificially separate themselves from the social and political realities of the individual human agents who enact them.

His is also a valid criticism of thinking about ‘money’ which is too often focused around some idea of "perfect money" or the ‘idea’ of money. A one time student and collaborator with Rawls, Sen is seeking to develop a new approach to engage with the problems and injustices of modern societies without resort to abstract 'perfect institutions.  In fact, many economists would find Rawls' "original condition" and "thin conception of the good" familiar in the way it defines human actors in minimal form to enable analysis of a hypothetical social contract free from contemporary baggage.

Perhaps it is not the idea of the hypothetical contract which is the issue, but rather Rawls’ focus on human actors in the performance of justice. Rawls appears to privilege the subjective as providing the ultimate ‘objective’ view of what justice is. The problem with this approach is that at some point he must introduce additional ‘actors’ and ‘things’ into the situation to avoid his world becoming an entirely ‘alien’ or solipsist proposition without meaning in our cultural and linguistic context. As a result, his global hypothesis becomes contaminated with very ‘local’ concerns (geographically and temporally speaking) and shifts from a hypothetical state to a virtual one (an imagining of the real as opposed to some purely rational ideal) which borders on and even overlaps with the ‘real’.

Rawls later conceded that his theories were designed to make explicit and coherent the principles of justice in democratic, culturally pluralist states and appeared to move away from some of the universalist implications of his magnum opus. Sen takes that a stage further by making the context the start point for understanding how I can live the good life rather than an abstraction of what the good life is.

Certainly I can see real value in examining money both using a comparative approach to generate capabilities rather than some universal ideal. To liberate money from the subjective is the first stage in de-mystifying its meaning and practice in everyday life. The separation of  particular forms of money from the context in which it is being used removes the very meaning that drives its usage.

Sen’s hypothesis is that once this is recognized, we are freed from the pursuit of ideal institutions and instead see them as tools for the resolution of particular social injustices and problems. By transforming (e)Utopia (the good place) into Eudaimonia (living well) we look for solutions in terms of individual capabilities rather than through the imposition of institutional frameworks or solutions.

As we found in last week, this approach forces us to challenge our assumptions about how particular segments of our society use and experience money and how that use and experience changes their perception of its meaning and value to them. Hence ‘living without money’ has very different cultural interpretations depending on your perspective and any intervention involving money needs to take account of both the constraints and capabilities generated by those perspectives.

Hummus and Money

Pragmatist beat me too it with the historical account of Thomas Barker’s meet up on Wednesday for open finance.

I am not sure if I answered the advertised question – i.e. why is banking like the music industry of the nineties? – but we did have a thought provoking debate about the meaning of money in contemporary UK culture nevertheless – specifically around people who are (in my view) ‘living without money’ in what one recent research respondent called ‘the waiting room of life’.

Pragmatist is also right to focus on the two things which banks (and the music industry) don’t get or don’t want to get about our relationship with money. We don’t exchange (or share) money solely like rational economic beings and importantly neither do we aspire to be such. This is the disconnect of the Neo-liberal economic project (if such exists) – I don’t want to be an actor directed by my rational judgment, to paraphrase Life of Brian – I want to be an individual (or something meaningful in a cultural sense at least). Trying to convince me to act or be otherwise will generate counter intuitive and counterproductive responses which are designed to subvert the perceived lack of control over my own destiny (which this ironically liberal inspired philosophy requires). Rational decisions don’t make you free – just free to choose from what I am given. Discuss.

Secondly ‘financial services’ is a construct of the old model of consumer culture – the one based on material value of goods produced by willing consumers who seek a Whiggish form of utility, social progress and personal development. The problem with this model is its inherent contradictions (which Marx correctly identified would create its own self destructive tendency) but that is not too say that the death of the consumer means the end of consumption as we know it. Money can be created in the image of whatever normative values your wish for as a society as can the desire to consume. Money and consumpton are merely the means to an end - they are an Obama style 'blank canvas' upon which we can project our own values.

The shift I was trying to communicate was from what a product does to what it creates. Moving to this alternative value equation creates the opportunity for new business models and entrepreneurial activity which challenge the status quo with a new avant garde of money.

It is interesting that the most common google search that brings someone to a site discussing money is ‘Living without money’. There are forms of money it is possible to live without but to do away with the concept of money completely is to misunderstand its potential for the creation of new social and cultural value to fill the hole created by the financial crunch.

Joining in the overheard conversation!

I attended an interesting forum last week of ‘FS bloggers’ who were guests of the FT.com team to discuss blogging and, I guess, frame some of the developments they are considering with their Alphaville and Long Room blogs.

What was clear from the room was that there was no one view of blogging as some sort of literary or even loose cultural form, and perhaps that was seen as one of the strengths of blogging as an activity. It encourages anyone to try and put forward their point of view and doesn’t differentiate between those who attract 0 readers and those who attract thousands. My view is that it is very different when bloggers invoke brands or institutions from their own biography as part and parcel of their own voice and opinion – Messrs Peston and Robinson were quick to realize the effectiveness of extending their presence beyond their daily 30 seconds of on air pronouncements - perhaps the blogging equivalent of quantitative easing?

The FT was caught in the horns of just such a dilemma, but were trying to have a conversation which doesn’t really occur much to ‘ordinary bloggers’. We are interested (statcounter being my own preferred 'narcisstatistic' (sic) source) in who is actually reading our stuff, but it would seem that content is driven much more by what we are thinking than any serious desire to become overnight blogging sensations. For most, blogging appeared to function as a safety valve for our overflowing subjective thoughts rather than any attempt to create a continuous and lasting narrative with which the reader can engage. And on the other end of the telescope, I think that this is what attracts people to read blogs, many blogs, rather than becoming fans of one particular one, is that you get snippets of overheard conversation which can spark your own thoughts and ideas.

The FT brand – from its pink background to formal typeface seeks to formalize and objectify its own particular truth as something of lasting value – part of the implicit journalistic pursuit of the ‘truth’. Blogs – who range from true weblogs like Jck to the far out/satirical? subjective experiences of money is the way – represent a shifting fringe or avant garde of thoughts, links and ideas which have extended the practice of writing and the creation of language (what Potlatch calls ‘neoblogisms’) more widely in our culture than ever before. Joining the blogosphere has been to participate in the serendipity of our collective creative process rather than the creation of a new literary form.

Perhaps the most interesting part of the session was our trip round the FT newsroom and the description of the complex "industrial" process which goes into making a newspaper. Bringing the FT to play in the cottage industry of blogging will not destroy blogs but will it change the FT? Would the FT have or have had a different perspective and response to the credit crunch it if its journalists had participated more freely and widely in the blogosphere?

Kids say the funniest things - impact of the "teen scribbler" on the square mile

Morgan Stanley have ‘shocked’ the city with their ‘teenage scribbling’ about teenagers’ use of social media written by an actual real live teenager. Frankly, I am not sure whether to laugh or cry at the collective ‘dad at a disco’ reaction to what appears (in its published summary form) to be a series of sweeping statements which are a) not that difficult to believe if you have teenage children and b) get right to the heart of why markets find it really hard to predict anything useful about consumer usage of technology…

As someone who is still glowing when his T-shirt was denoted as a ‘cool’ by the teenage shop assistant in Jack Wills (the result of my daughter cunningly maneuvering my wallet into its vicinity last Saturday) I feel qualified to express a certain beggared belief that this report will form the basis of a whole series of Chinese whispers about ‘teens’ (that famously homogenous demographic!) do in their bedrooms.

It is important to emphasize that this post is not a critique of the teenage scribbler himself but a wider comment on the impact his so-called “scribbles” seem to have had on the collective consciousness of the square mile (and journalists both within and beyond!).

The Times wrote a short profile which painted a picture of a slightly reticent young man who is obviously bit non-plussed by all the attention he is getting (and has more important things to do than talk to dead media – at least according to his report!).  The narrative of his report was admirably reflective and lacking first person narrative for a 15 year old and certainly beats the usual ‘what did you do today?’ conversations that it is possible to squeeze out of your average teen, but it can hardly be called ‘ground breaking’ in what it tell us.  It also seemed to be lacking in explanation being a series of ‘factual’ statements based on thinking about conversations with his peers in the playground. But is the City really only focused in finding out the latest ‘what is’ rather than trying to ascertain the underlying ‘why’ which might actually inform investment decisions?

So while not wanting to detract from the obviously articulate (apart from one typo!) efforts of a 15 year old – his confident tone suggests he will go far in any career where a fair degree of ‘front’ is called for – it does at least provide some demonstration about how the time and perception lag between the ‘culture’ of the City and everyday life create distorted perceptions of the role and value of ‘new’ technologies.

What would Barthes make of our newly (macro)prudent money?

"Demystification" and "giving consumers more information to make ‘informed choices" are part of the government’s proposals for creating ‘micro-prudence’, complementing to our new ‘macro-prudential’ world. Aside from the growth in extreme sports around the vicinity of Canary Wharf as over-stimulated, over-sexed and over excited bankers try to let off steam in the world of "Prudence" (whether the FSA or BofE become the ‘minister of raised eyebrows’) we still seem to be living in a remarkably unreflective world when it comes to thinking about what money is and what it could be.

Barthes would recognize the reality of myth making and political discourse which underpins this narrative of ‘prudence’ – one that seeks to control the individual to protect the stability and security of the state which is being written into the myth of both the market and money. It is the narrative of money as housekeeping conjuring images of pickle jars full of pennies.

But where is the challenging critique? Why are money and markets treated as natural and not seen for its essential historical /cultural nature? Surely markets should not be treated like some natural phenomenon to be tamed or insured against like a hurricane; they are social and cultural things. In seeking to ‘demystify’, we mythologize; in seeking to make ‘transparent’, we merely jargonize (just read the KFI of your mortgage for example). Barthes’ acute critical pen unlocked the way everything from detergent (and "deep" cleaning) to wrestling were just mythologies – historical accounts masquerading as natural science – and boy could we do with his analysis now.

The dominant mythology of money is ‘money as utility’. We need money like we need water, energy and of course, now, like we need broadband (!!!). Water, energy and broadband are seen as too important and necessary for our ‘well-being’/’votes’ to completely hand over to the market to provide. Although we have lived with the (largely failed) attempts to put them in the domain of a ‘free market’, I don’t think that anyone would feel that it had been a success or that they even operate as ‘markets’. I am still flabbergasted by the tiny minority of people who realize a) that there is an energy market and b) can describe how it works. The best yet was a person who thought that her Scottish Power came south to her home by truck….

The problem with this narrative is that it places the control of ‘production’ not with individuals ‘making money’ from their entrepreneurial spirit or sheer physical labour, but in the hands of banks who have the status of nuclear power plants – prone to overheating and toxic spills, but it would make a real mess of everything if you let them fail!

These huge credit factories are seen as making our everyday lives possible channeling money around the grid as efficiently as possible. Of course the reality is very different with bottlenecks, overloads and meltdowns happening right and left. The result is that we no longer attach an individual moral or even social responsibility to our USAGE of money. Just as the idea of using energy sustainably leaves us feeling cynical and blaming others so our use of credit money has much the same issues.

Demystifying money would not involve giving me more information about its role as a utility (and how to wire myself into the grid without electrocuting myself), but instead would challenge the dominant politically derived mythology which sees money purely as an economic good transmitted around the economy creating health, wealth and happiness. It would establish ways to demonstrate how money can be created and used in less intensive forms – ‘organic capital’ if you like. Now I am not advocating the type of localist politics of the currency innovators (i.e. treating the only ‘real’ community as a geographically local one – another myth) but rather encouraging the growth of virtual communities (such as zopa.com) who allow individuals to use and control money outside of the national grid/macro economy. Just as with energy, these initiatives would make us less dependent on global insecurities affecting individual well being but perhaps more importantly would enable the next generation of entrepreneurs to emerge who would see money as an essential social good created not in the ‘dark satanic mills of Canary Wharf’ but out of the relations and exchanges of everyday life. As for what this could look like in reality? Watch this space!

"Macro prudence" and micro uncertainty

An excellent post from Stumbling and Mumbling linking Richard Feynam’s perspective on physics as an analogy for what sort of knitting economists should stick to. Essentially Feynam saw the practice of physics as solving micro problems from which a larger, simpler, explanatory theory might (and he would emphasize the word ‘might’) emerge, but just as likely any solution merely revealed another ‘layer of the onion’. Likewise economists, Feynam might argue, should avoid aiming for some unifying law to explain the world when their descriptions of events are so open to interpretation and ambiguity.

The new theme of ‘macroprudence’ which seems to be emerging as driving the basis of future financial regulation smacks of the same potentially hubristic perspective; i.e. that looking at the stars tells you something about the future (otherwise known as confusing astronomy and astrology). It also continues the ideology that rational decisions are those which bear the most sustainably profitable fruit in the long run. However, it seems a long stretch even for the philosopher kings of Threadneedle street to fight against the alternative short term individualistic rational perspective of the City and engender a long term, collective or perhaps (?!) moral philosophy amongst the traders and barrow boys.

If macroprudence means a renewed focus on the plumbing of the financial system and economists becoming the IT dept of our money superhighways then I don’t have a problem with it. However, if it means economists trying to ‘plan’ for the future and second guess the economy then one or two alarm bells start ringing.

Coming back to the physics analogy might be useful for a second. Classical economics gives a cogent description of the economy just as the models of classical physics give a fairly accurate description of the universe, however both lack the ability to predict or even explain events with any certainty because both must ignore the fundamental uncertainty (call it free will, irrationality, culture, luck, probability, etc) at the micro/quantum scale. Feynam, in his book "QED" (describing Quantum Electrodynamics in a paperback page turner style) describes the ‘complex dance’ of light photons when they interact with a glass surface to reflect back to an observer. Arguably the focus of observers of human life should be on understanding this complex dance in more detail rather than looking for a theory of everything that will avoid the creation of a ground hog style mess in the future?