MAIN IDEA:

The main idea of this book is to review and retell history of American “Great Society” that was supposed to end poverty and instead turned into nothing else than huge expense on bureaucracy and handouts, often resulting in increased misery of poor. Here is how author defines her objectives: “For today, the contest between capitalism and socialism is on again. Markets do promise strong growth; we do live in a creative society, the most creative in the world, creative enough to lift the nation to new heights. Yet new, progressive proposals bearing a strong resemblance to those of Michael Harrington’s and his peers’, from redistribution via taxation to student debt relief to a universal guaranteed income, are sought yet again. Once again, many Americans rate socialism as the generous philosophy. But the results of our socialism were not generous. May this book serve as a cautionary tale of lovable people who, despite themselves, hurt those they loved. Nothing is new. It is just forgotten.”

DETAILS:

Introduction: The Clash

Author starts with the story of Michel Harrington – socialist and author of the book about poverty “The Other America”, which prompted this discussion among American upper classes of politicians, bureaucrats, and intelligentsia. Author briefly describes how this discussion turned into political action resulting in massive expense on variety of government programs that often ended in complete failure.

New Frontier

1. The Bonanza (1960-1962)

This chapters starts with discussion of very popular TV series “Bonanza”, which author characterizes as one of attempts to answer to the key question of early 1960s: What to do with the newly found huge American wealth? Author briefly describes some key points of the New Deal, which seemingly established harmony between big government, big corporations, and big labor. Then she looks behind the façade at fight between corporations vs. unions vs. government and individuals who were involved at the highest levels. Author specifically looks at GE, which leaders Lemuel Boulware, Ralph Cordiner, and Charlie Wilson strongly rejected socialist ideas, supported capitalism, and later got Ronald Reagan involved in their effort, creating popular GE theater. Government responded by Justice department investigations and via its TVA administration attack against Reagan. Unions initiated strikes. It all ended with defeat for GE after massive intervention of Kennedy administration. It also killed Reagan GE theater and pretty much ended active ideological support of capitalism by big corporations

2. Port Huron (1962)

This chapter is about famous student statement. It turned out that it was not some spontaneous expression of students’ feelings and ideas, but union organized and financed political action. The organizer was UAW boss Walter Reuther. Author retells history of his life, including his work in USSR after which he came out as convinced anti-communist, while retaining his believes a socialist. Then she moves to Tom Hayden, other personalities, discussions, and final result – Port Huron Statement was directed against military, supported unions, and three of Roosevelt’s four freedoms, missing freedom of worship. It also spawned SDS organization. After that author moves to relationship between Reuther and unions with Kennedy and then Johnson administrations.

Great Society

3. Great Society (May 1964)

This chapters starts with campaign of 1964 when Johnson and media succeeded in turning Goldwater into warmonger, while preparing huge expansion of government that was supposed to raise society to the new heights. This would be massive expansion of New Deal that democrats failed to achieve before.  Author describes Johnson’s legislative success and a few failures, such as inability to eliminate “right to work” at federal level.

4. Revolt of the Mayors (January 1965)

Here author describes struggle between local, state and federal powers using example of LA democratic mayor Sam Yorty. The struggle was about many issues, not last of them civil rights. The problem was that federal government dealt with abstractions when forcing all to be equal is always good, while mayors dealt with realities when middle class neighborhoods like Watts were turning unlivable, so middle class evacuated in mass. Author looks at multiple programs imposed on cities by federal government and analyses their consequences, including Watts riots.

5. Creative Society (August 1965 – January 1966)

This starts with NASA and its achievements, then moves to the story of Intel and birth of Silicone Valley prompted by equity compensation in startup high tech businesses. Then author returns to politics of the period: attempts to declare welfare as property, civil rights, and right to work fights.

6. Interlude: Looking for Socialism (September 1965 – January 1966)

Here author describes Tom Hayden’s unsuccessful attempt to initiate viable political movement for socialism. At the time American attention turned to Vietnam war, which prompted powerful political movement against it that leftists pretty much took over. They revived communist propaganda similar to “I saw the future and it works”, promoting beauty of totalitarianism in Soviet Union, China, Cuba, Vietnam, and elsewhere. Author describes travels of Hayden and others to North Vietnam that was celebrated by American intelligentsia, rather than punished as support for the enemy.

7. Housing Society (January 1966 to July 1967)

This chapter looks at HUD and massive housing programs that were supposed substitute old poorly regulated housing created by independent efforts over long period of time with government planned state of the art, well regulated and controlled projects that would force on poor much better quality of life than they could produce themselves. Author describes political and legal actions that extended eminent domain beyond any conceivable limit and for all practical purposed deprived poor of what little residential property they had, substituting it with a place in government owned hosing with lots of strings attached. Author describes these strings and impact they had on destruction of family and overall way of live. Author also describes war against landlords, which led to elimination of any incentive for private investment into housing for poor and implementation of complete bureaucratic control.

8. Guns Butter and Gold (Thanksgiving 1967 to March 1968)

This chapter starts with discussion of gold and its link to dollar that was still valid at the time per Bretton Woods agreements. Johnson administration profligate spending led to gold outflow from USA. Author describes attempts to increase gold mining. It follows by the look at relationship with UK. Author also reviews multiple additional crises: political between Johnson and Kennedy clan, scary pronouncement of environmentalists that were gaining popular support, Tet offensive in Vietnam, legislative failures, and finally primaries challenge. All this together led to Johnson dropping out from running for the second full term.

9. Reuther and the Intruder (August 1968 to December 1968)

This starts with description of arrival of small foreign cars like Toyota and Volkswagen that were destined to undermine both American big automakers and their symbiotic partner – UAW. Author retells story of 1968 elections, internal struggle within democratic party, and actions of UAW boss Reuter.

Abundant Society

10. Moynihan Agonistes (1969 to 1970)

This chapter starts with discussion of unusual for liberal academic action: Moynihan joining Nixon administration.  Then author reviews events of this period somewhat via Moynihan eyes. Nixon’s cooperation with reasonable left reached the point when he supported and even tried to promote guaranteed income. However, since it would eliminate welfare system, depriving its constituents of cash flow, the proposal failed. Author also deviates a bit into history of welfare ideas all the way to Engels, Webb, and Roosevelt to demonstrate how these ideas developed in the Anglo-American world. Author describes how practically all political powers left and right rejected the idea of family assistance and how other events related to Vietnam led to complete disruption between intelligentsia and Nixon administration. The chapter ends with description of two symbolic events marking the end of era: Moynihan resignation and death of UAW boss Reuther.

11. The Governor of California (1970)

This chapter pretty much describes initiation of the new movement, which was pretty much against direction to increase welfare and government power. It starts with description of fight against integration of all LA schools ordered by judge and discussion of popular legal doctrine of welfare being property of its recipients. Author then demonstrates how it prompted growth of Reagan’s political career. Reagan strongly rejected both ideas because LA school integration would require busing, which was huge burden on middle class kids and parents. Author then describes a number of political fights in California that made Reagan a national political figure of serious statute.

12. Scarcity: Burns Agonistes (1971)

This chapter starts with the story of residual payments for actors that Reagan achieved when he was the union leader, which become less and less valuable with inflation. The author then moves to discussion of inflation and overall economic decline that become evident in early 1970s practically destroying the very idea of affordability of massive welfare state. Author discusses details of interplay between FED chairman Burns and Treasury’s Connally who tried stopping inflation and save economy with price and wage control, closing gold window, and using other measures, but were not that successful.

Coda: Demolition in St. Louis (March 1972)

This ends book on symbolic note of demolition of Pruitt-Igoe – one of the most visible and expensive projects of welfare state. More than anything else it demonstrated that human beings, even very poor, are not subject to easy control by bureaucratic machinery, at least in democratic country were, one way or another, they manage to avoid such control.

MY TAKE ON IT:

This is an interesting take on history written with typical American attitude of believe that politicians and bureaucrats had initiated welfare state, promoted, and continue promoting it because they want the best for poor. The problem is that they choose erroneous method to do it and that is why it continuously fails and quite miserably at that.

I think it is very naive view that impedes resolution of the problem. I like the expression that I read once about Roosevelt’s brain trust and other enthusiastic promoters of big government solution in 1930s: “They come to do good and did well”. I think that regardless what such people think when they start as politicians or bureaucrats, “do well” is the real engine of their effort, and key here is “do well” at the expense of productive people misleading them into believe that it is done to achieve fairness for all. The programs, projects, justifications, and promotions change but lust for power and wealth via control over government machinery of coercion is constant. Therefore, no effort to have reasonable and limited welfare programs could possibly be successful until this obvious fact of lust for power is internalized by majority and countermeasures decidedly applied.

These countermeasures should make it an impossibility to gain wealth and power over others via political or bureaucratic career, which could be achieved only by making all senior political and bureaucratic position temporary with prohibition to any conceivable cashing in upon the end of such career. In short people should obtain their wealth in public sector before embarking on political bureaucratic career or forever forfeit hope to be much wealthier than average.

MAIN IDEA:

Here is how author defines his main idea: “The technocratic illusion is that poverty results from a shortage of expertise, whereas poverty is really about a shortage of rights. The emphasis on the problem of expertise makes the problem of rights worse. The technical problems of the poor (and the absence of technical solutions for those problems) are a symptom of poverty, not a cause of poverty. This book argues that the cause of poverty is the absence of political and economic rights, the absence of a free political and economic system that would find the technical solutions to the poor’s problems. The dictator whom the experts expect will accomplish the technical fixes to technical problems is not the solution; he is the problem.”

DETAILS:

PART ONE: THE DEBATE THAT NEVER HAPPENED
Chapter One: Introduction
Author starts this with imagining routine, for developing countries, application of government power to move farmers from their village to another place happening in Ohio. Then he stresses that such raw and cruel power application in developing world would occur under direction of Western technocratic elite, which finds it inconceivable in their own countries. Then author presents his claim that technocratic approach of forcing people to do “right things”, whatever it is, is not working regardless of how much money provided as “help” to support it. Author also discusses in this introduction what he wants to achieve with this book, anticipating accusations that he expects to be pointed at him, and provides a detailed list of what this book is not about.

Chapter Two: Two Nobel Laureates and the Debate They Never Had
The laureates here are Gunnar Myrdal – promoter of soft authoritarianism with socialist central planning and Friedrich von Hayek – promoter of freedom, not only as value of and in itself, but also as source of economic prosperity.

Author then discusses debates that representatives of these two polar views should have, but never did:

• Debate on the Blank slate versus Learning from History
• Debate on the Well-Being of Nations versus that of Individuals
• Debate on Conscious versus Spontaneous Solutions

Finally, author states that Authoritarian point of view obtained practically unanimous support of intelligentsia, while its supporters, especially Myrdal understood that large scale planning does not work neither logically nor practically. So the only way to promote it is to avoid debates at any cost.

PART Two: WHY THE DEBATE NEVER HAPPENED-THE REAL HISTORY OF THE DEVELOPMENT IDEA
Author starts here from referring to Truman’s initiative to start foreign aid in 1949, which is considered the starting point of the process and then reject this idea and demonstrates that it had its roots in colonialism and locates its formative years between 1919 and 1949. This part reviews the development and implementation of Authoritarian, expert led development idea in three areas: China, Africa, and Colombia.

Chapter Three: Once Upon a Time in China
Author start this chapter with introduction of two economists: Condliffe, who supported free development and H.D. Fong who supported authoritarian model. Then he analyses role of racism, which was widely accepted among western intellectuals, who believed that people of “inferior” races could not develop their countries without external direction and control. Author also discusses consequences of Versailles treaty and its system of mandates. Author then moves to discuss development in China where revolution brought to power socialist Sun Yat-sen who fully supported idea of authoritarian development. Author then reviews role of American experts who brought in money from Rockefeller foundation and network from YMCA. He also looks at creation of the Institute of Pacific Relations (IPR) under leadership of H.D. Fong that start looking for development projects in China to implement authoritarian model. Author also discusses attempts to promote democratic development by Condliffe and Yuan-li Wu, which were not successful. All this ended, however, with communist takeover of China in 1948.

Chapter Four: Race, War, and the Fate of Africa
This is the story of another not very successful attempt of expert led development, this time in Africa under leadership of Lord Hailey. This one was driven by idea to save British colonies in Africa by preventing race war that was brewing from the mid of the century. There is interesting narrative here about contradictions between British and Americans when British blamed Americans for racism, while American could not stand even idea of Empire. Author then briefly discusses how out of all this was born African nationalism with strong authoritarian tendencies. As representative type author uses Kwame Nkrumah.

Chapter Five: One Day in Bogotá
This chapter moves to Latin America to trace development of Authoritarian, expert driven development in Colombia. Author starts with two events of April 9 1948: selection of Colombia as test case of development by World Bank and assassination of popular leader Jorge Caitain, which triggered long period of massive violence. Author also trace development US attitudes to Latin America during this period.

PART THREE: THE BLANK SLATE VERSUS LEARNING FROM HISTORY
This part starts with the story of Bill Gates claiming achievement of dramatic improvements in fighting child mortality in Ethiopia. Author looks at this in details and finds that it is pretty much result of poor statistics, which does not allow any serious analysis of results. Author evaluates this as example of “Blank Slate” attitude when experts believe they can apply technical solution to the country without any accommodation of its specifics such as history and cultural values.

Chapter Six Values: The Long Struggle for Individual Rights
Here author looks at history of emergence of individual values and consequently democracy. He tells the story of fight between Emperor Barbarossa (1154) against cities in Italy some of which were able to retain their rights and some were conquered. This difference in history is still shows now in prosperity levels of these places. Author then discusses collectivist values, which always are values of rulers and aristocracy versus individualist values, which lead to the freedom. He traces how individualistic values moved after expansion of trade. First from Mediterranean to Atlantic: from Italian cities to Dutch and British, and then to America. Author also analyses different effects of autocracy vs. democracy on values and how it impacts behavior. He specifically looks at case of Asian type of collectivist values, using the story of British man of Chinese origin Henry Lee who became Lee Kuan Yew – the Singapore autocrat who established seemingly very successful form of political autocracy combined with business freedom. Here author provides an interesting analysis of trust between people in different societies:

At the end of chapter author contemplates on individual rights and values being an end in itself and then discusses findings of research on what poor really want, which turned out pretty much the same that rich and definitely includes freedom. He then points out that tradeoff between freedom and autocrat led prosperity is often illusionary and burden of prove is on experts who promote such tradeoffs.

Chapter Seven Institutions: We Oppress Them If We Can
Here author discusses oppressive institutions, which experts usually support, claiming that forcing people into some kind of behavior or organizational structure they do not want, leads to quick material improvement. Author looks at few case studies that demonstrate that cost of oppression is high, while benefits are dubious or non-existent. Author provides a very interesting data based on history of African tribes that either were victims of slave trade or avoided this, demonstrating that history of oppression carries long lasting damage to culture and attitudes, making it much more difficult to prosper. Interestingly enough, it relates not only to oppressed, but also to oppressors.

Chapter Eight: The Majority Dream
Here author looks at two places: New York and Colombia. Both places started as colonies with slavery. Author traces one street block in New York – Greene Street, who owned this place, how they lived, and what they did. He traces how this place initially was owned by aristocratic family of Bayard whose economic power was based on slavery and sugar plantations back when New York was New Amsterdam. However, by 1780s they lost this property due to changes in economy and mass influx of immigrants, opening it to succession of businessmen whose well being was based on prosperous free economy. Author briefly retells history of Erie canal that made New York into huge hub for trade between American plains with their agricultural production and Europe with its advance manufacturing. Author also traces economic development of refugees Sephardic Jewish family Seixas, who prospered for centuries in this place and still do.  Finally, author looks at change in infant mortality and how democracy positively impact this parameter.

PART FOUR: NATIONS VERSUS INDIVIDUALS
This starts with interesting example of how differently could be perceived the same fact by people with authoritarian and collectivistic mindset from individualistic. The fact is migration of professionals, in this case doctors from poor countries to USA. From authoritarian point of view: “America is Stealing the World’s Doctors”, indicating attitude that doctors are less than human, rather kind of commodity produced by the “World” so their migration is equivalent to “America is Stealing” this commodity. From individualistic point of view doctors are human and if they decide that America is better place for them to live and work, then it is just indication that America has better society, at least for doctors. Author also makes important point that authoritarian attitude treats individuals from different countries differently – nobody would even think to say that prominent American doctor was stolen by Africa if he would move there from USA.

Chapter Nine: Homes or Prisons? Nations and Migrations
This chapter is about migration between countries and nationalism. Author’s position is that migrants from poor authoritarian countries to rich and democratic West reduce overall poverty in the world, expand protection of individual rights, send money back home in excess of any official help to their countries and do other nice things. Author also discuss limits and negatives of nationalism.

Chapter Ten: How Much Do Nations Matter?
Here author discusses impact of national policies on economic development- research project that he worked on at the beginning of his career. The point is that it does have significant impact in extreme cases, but generally within limits of normalcy such impact is only marginal. Generally, it is more function of luck and circumstances, so except for periodic good or bad exceptions, the condition of nation is pretty stable. This brings author to discussion of measurement of these conditions and their changes, noise vs. signal, measurement errors, and such. Here is author’s overall conclusion: “In the debate on the prerogatives of nations versus the rights of individuals, the case for the former depended on development that happened mainly at the national level. Yet nations do not matter for development as much as the development community says they do. When they do matter, it is sometimes in a bad way, as we have just seen with Aleppo disease and trade-destroying borders. The worship of national growth success has often led to giving the national state more powers to pursue this success. The extreme emphasis on national growth performance is misguided, for it shows little evidence of paying off—or even of any way to know whether the national strategy really is paying off or not, according to questionably measured growth rates. The casualties as usual are the individual rights suppressed in the name of the nation’s collective pursuit of success.”

PART FIVE: CONSCIOUS DESIGN VERSUS SPONTANEOUS SOLUTIONS
Chapter Eleven Markets: The Association of Problem-Solvers

Here author presents an opposite way of thinking of contemporary high-level bureaucrats such as president of world bank versus thinking of Adam Smith and other supporters of freedom. Author discusses Smith’s approach as “Problem-Solving System” that includes such parts as division of labor, gains from trade, gains from specialization, and other features of free market. However, author stresses that it would be mistake to look at it as market vs. government problem. It is rather about individual rights vs. state power. Here is author’s formulation:” We have now reached another crucial moment in the argument of this book. The technocratic approach—solutions by experts—arguably gives us the worst of all worlds. Having experts in charge of solving society’s problems turns things over to agents who face neither a market test nor a democratic test. If they get the knowledge (including localized feedback) wrong, they suffer neither economic nor political penalties. If their solutions should happen to work, they get neither economic nor political rewards. So, there is nothing to spur them on to scaling up successes any more than there is anything to motivate them to kill off failures. The Invisible Hand spurs development through the virtuous circle of specialization, learning by doing, and gains from trade. The Invisible Hand guides nonexperts to something they are good at doing. They start selling it, and they get even better at it thanks to learning by doing. Trade allows them to keep increasing the scale of the virtuous circle, selling more and more, learning to do it better and better, till they take the world market by storm.”

Chapter Twelve Technology: How to Succeed Without Knowing How
Here author presents his point of view on what causes economic development and concludes that it is technology. Technology is another spontaneous order and author looks in details at multiple examples of its development, stressing that it is not really subject to planning or even knowledge of where its development will move, so there is no place here for government direction.

Chapter Thirteen Leaders: How We Are Seduced by Benevolent Autocrats
In this chapter author reviews so called autocratic miracles like Singapore and provides evidence that it is not as good as advertised.  Author presents two potential reasons for autocratic success:” The first and stronger variant is simply that autocrats are better than democrats for development (by development in this context we usually mean “rapid economic growth”). The second, weaker variant is that the best autocratic leaders are better for growth than the best democratic leaders, while conceding that the worst autocrats are worse for growth than the worst democrats.” The he proceeds to reject both of them using factual data and parables.

Chapter Fourteen: Conclusion

In conclusion author summaries the ideas of this book based on various stories told in previous chapters, making the point that use of government power to achieve progress generally fails like it did in Ethiopia and Uganda, while uncontrolled natural development generally succeeds as it did on Green Street.

MY TAKE ON IT:

I seldom agree with anybody to such extent as with this author. For me it is obvious that relationship between people, whether as equals with voluntary exchange and cooperation, or as superior and inferior with top down control, define economic success or failure, and generate prosperity or misery. The one important thing I think author did not pay enough attention to is parasitic character of all authoritarian regimes. The typical policy of authoritarian regime in a country with successful economy is to control whatever limited freedom it allows to its productive population, while continuously transferring wealth to themselves. In most important case such as China, which is now trying present itself as viable and even superior alternative to democratic fee market system, this parasitic character expressed by using cheap labor and unlimited power of regime to ignore environment, health, and freedoms of its own population in order to obtain investment and technological transfers from Western hosts. This was successful for a few decades with great help of western elite, which become rich from such transfer. However, at some point, and such point seems to be achieved, population in host democratic countries would recognize that such parasitic transfer has very strong negative impact on their well-being, leading to disconnect between them and autocratic parasite. It is quite possible that we already observing such disconnect expressed by raise op populist powers and resentment against both parasitic allies: foreign autocracies and domestic elite.

MAIN IDEA:

The main idea of this book is to review the last 100 years of economic thought and actions and demonstrate how they all, after quite a bit of hype, proved to be deficient and failed to produce what is badly needed: reliable, workable, and implementable economic and political organization of society that would meet requirement of the people for good system. Probably the most important point author makes is idea of revival of Arthur Bentley’s ideas about group interest in pluralistic societies.

DETAILS:

Prologue

This starts with the note that our world is very fragile and something that seemingly rock solid could be dissolved by the event in the blink of an eye. As illustration author retells the story of typical auto dealership that was created and ran by quite typical American middle-class family for decades and then was destroyed by financial crises of 2008-9. Author presents it as a example of process that he investigates in this book: “the history of our move from an institution-oriented to a transaction-oriented society.” Author also looks at raise and fall of transactional society and discuss future that he believes will be based on networking

1. Institution Man

Here author starts at the beginning of XX century when Institutional Man came into existence and then dominance. Author uses story of Adolf Berle to present ideas of institutions and institutional man that Berle developed. These ideas were pretty much in synch with New Deal and Berle presented them in a book:” The Modern Corporation and Private Property, which had two central arguments: first, that a relatively small number of corporations had rapidly come to dominate the American economy, and second, that because these corporations had so many shareholders (the biggest one, American Telephone and Telegraph, had more than half a million), they represented a historically new kind of economic institution that was not under the control of its owners. “. Consequently, these institutions in conjunction with institutions of government that would maintain leading role, should substitute private property and free market as economic foundation of society. Berle become one of the closest advisors of FDR and author describes this relationship and how it impacted American development in details. Berle died in 1971 just before all powerful corporations led by all-knowing government brought in near destruction of American economy via stagflation.

2. The Time of Institutions
   This chapter moves to the next two important thinkers on economy and society: Drucker and Polanyi. Author describes Drucker’s work with GM and its struggle with Unions, Dealers, and Customers. Here author links this with initial story of auto dealership in Chicago Lawn and how it started moving from prosperous suburb of Middle America of 1950 down the hill. Author also includes into discussion financial institution – Morgan Stanley, which become key player in investment market of public offerings with shares ownership distributed to such extent that Drucker in 1976 published book” called The Unseen Revolution, in which he announced, with typical flair, that the United States was the first truly socialist country in world history. That was because the workers now owned the means of production through their union and company pension funds’ new role in the stock and bond markets.”
3. Transaction Man
   Here author presents the next thinker – transaction man Mike Jensen, economist who in 1976 in his book ”The Theory of the Firm” started promoting idea of efficient markets, heavy computerization and mathematization of trading, combined with multitude of new financial tools: “ the derivatives markets—options, futures, index funds, swaps, mortgage-backed securities; anything that could be assembled out of existing financial instruments and then priced, packaged, and traded—had gone from being insignificantly small to producing billions of dollars in activity every year, far more than the traditional stock and bond markets.” One of the most important key ideas was recognition of agent – principal problem and corresponding attempt to remove it by getting management wellbeing directly linked to the Firm’s performance. One of effects of these ideas was boom in leveraged buyouts in 1980s. Author also describes debates between this approach and newly developed behavioral economics of 1990s. The chapter also closely traces personal and professional live of Jensen.
4. The Time of Transactions: Rising
   Here author moves away from theory and personalities of theorist to practical history of Morgan Stanley and raise of financial industry.
5. The Time of Transactions: Falling
   Here author moves to the fall of Morgan Stanley, starting with the story of dramatic expansion of mortgages, especially substandard, and linking it back to Chicago lawns, auto dealership, and Obama’s bailout.
6. Network Man
   In this final chapter author moves beyond financial crises to the new network and Social media environment. He briefly retells the story of Silicon Valley and present his final hero – founder and CEO of LinkedIn Reid Hoffman. Author uses this ultimate networking company as example of emerging new economy and Hoffman’s attitudes and actions as representative for the new economic relations. Author also discusses Hoffman political views and hate of Trump and everything Trump represents.

Afterword: An Attempt to Use a Tool

Here author concisely repeat his review of century of economic thought and action development and bring another personage: Arthur Bentley and his work on “role of business in politics and of politics in the economy.” The main point in his work was to switch analysis from broad classes to much more local and limited interest groups and seek reorganization on the basis of some process of reconciliation of interests, while maintaining pluralistic character of society.

At the end author summarizes the book this way: “What all the major thinkers in this book had in common was an intolerance for organizing the country, in particular the economy, around a never-ending political struggle among non-gigantic interest groups. This meant that in each case, they upheld a pure and alluring idea that was supposed to transcend the inherent contention and untidiness of life in a democracy. Adolf Berle wanted to put the corporation under government’s dominion. He had in mind a two-player game that would begin in conflict but mature into tranquility. Michael Jensen dreamed of a society built around the discipline imposed by markets. The corporation-based American welfare state that Berle helped create was a casualty of the rise of transactions as our governing economic principle. A transaction-based society is anti-pluralist by definition because it lets decisions rest entirely with markets that move instantaneously, and it disempowers groups that aim to attain their goals through political means. Reid Hoffman’s idea of a technologically enabled, network-based society has brought with it a pluralist-sounding rhetoric about distributing power, giving voice to the voiceless, and enabling political organizing. This stands in contrast to the new economic and political world that the Internet-based networks have created thus far, which looks awfully similar to the world made by the railroads and oil companies and electric utilities in their early days of bigness. Pluralism requires institutions that will enact and maintain democratic ideals. A network society promotes a form of pluralism that is virtual and institution-free. That is impossible. Our notional turn away from institutions doesn’t mean that institutions no longer exist. People are social; they naturally form themselves into groups. The more established groups become institutions, and the less established try to influence institutions; and institutions constantly struggle for advantage against one another. To remove institutions from the tableau of how society is supposed to work is, inevitably, merely to allow the powerful institutions to become more powerful and the more vulnerable ones to weaken. This has happened in almost every area of American life. Deregulation produced the greatest concentration of financial power in American history, in six big companies. The advent of the supposedly power-distributing Internet produced the five big companies that now dominate technology. Understanding institutions as necessary is the only real protection against a few institutions becoming too powerful. The great project of organizing economic life so as to give most people a sense of security, belonging, and hope is still an urgent one. The economy we have now is not doing a good job of generating social trust, political calm, or widely shared prosperity. Instead, it has produced a series of terrifying economic shocks that have given rise to equally terrifying political upheavals fueled by voters who feel so ignored and angry that they are willing to blow up the system just to see what happens. The solution to this problem surely will not entail returning to some fondly remembered arrangement from the past. History moves in only one direction, forward. But the tool that Arthur Bentley attempted to fashion, with its insistence on understanding the world in terms of a ceaseless but often productive contention between groups, where the best outcomes are complicated and inclusive bargains, provides useful guidance. Using it properly entails understanding that most people, even people who think of themselves as cosmopolitan, even in the age of globalization and the Internet, live parochial lives. They are neither atomized individuals nor part of a great undifferentiated mass of the public. What’s in front of them are the groups they belong to and the institutions they can see and touch: the schools that educate their children, their local governments, the places where they pray, their trade associations, their ethnic organizations, their political movements. Those are their means of protecting themselves, of improving their condition, of addressing their needs as they define them. Reaching people, doing right by people, building the next good society means using these institutions. Not transactions. Not big ideas.”

MY TAKE ON IT:

I think that it is generally good interpretation of history and economic thought. I would agree that so far none of attempts was successful in providing theoretical guidance for building better system. I also support ideas of pluralism, but I would not limit it to the group level, even small groups. I think all analysis should eventually go to the level of individuals. The group level would probably be sufficient a while ago when groups to high extent were defined by locality and commonality of personal features and therefore remained relatively stable. It is not the case now when social media and Internet made everybody connectable to everybody else in the world providing for complete instability of the groups and possibly of instant group formation on the huge scale. In my opinion the pluralism should be accepted at individual level, the one and only way to avoid tensions and conflict.

MAIN IDEA:

The main idea of this book is to reject traditional understanding of intellect, innovation, and achievement as product of individuals, their intellect and effort and provide the new paradigm: individuals are only a small part of bigger entity and it is this entity that does thinking, inventions, and all other staff. Authors also aim to supply some advice to individuals on how to realistically estimate one’s own deficiencies and mitigate them.

DETAILS:

Introduction: Ignorance and the Community of Knowledge

This starts with description of one very important technical miscalculation: underestimate of power of thermonuclear explosion by factor 3 in 1954 that led to severe adverse consequences. From here authors define their purpose as such:” How is it that people can simultaneously bowl us over with their ingenuity and disappoint us with their ignorance? How have we mastered so much despite how limited our understanding often is? These are the questions we will try to answer in this book.”.

After that they provide a number of examples of how little people know about specific details of working even simple devices and present their view of “thinking as collective action” and knowledge as being distributed among community rather than being in individual domain. At the end of introduction, they express believe that understanding of knowledge and thinking as communal activity would help overcome American political divide, help people understand view of others, and make traditional believe in individual achievement much less influential.

ONE:  What We Know

Once again authors start with miscalculation of nuclear test, this time with chain reaction, which costed life to the person who worked on experiment and made mistake. Then they move to discussion of generally poor understanding of how everything around us work, starting with simple example of zipper about which many people mistakenly think they understand how it works. Then authors describe a number of psychological research experiments demonstrating typical illusion of knowledge. Authors discuss complexity of contemporary world and technology, concluding that individuals lack detailed knowledge of anything even moderately complex and only combined knowledge of multiple people allows humans to manage the complex world they live in, while maintaining illusion that they individually understand it.

TWO: Why We Think

This is about human memory and how important for it is human ability to forget in order to be able to act meaningfully without brain completely overloaded by unnecessary junk. Authors then discuss functionality of brain in animals such as jellyfish and conclude that even at the most primitive level it provides for serious evolutionary advantages. Then they move discussion to crabs and image recognition system in humans, which provide for very sophisticated capabilities, including ability to develop abstractions that contain enough information for effective action, while cutting off unnecessary details.

THREE: How We Think

This chapter starts with discussion of causality that seems to be required to establish link between events for animals, which is somewhat different from Pavlov’s idea of reflexes. Authors then move to well established causality of human reasoning and human use of logic. They also discuss reasoning forward and backward: from causes to effects and from effects to causes. They suggest that forward reasoning is much more natural and easier than backward. At the end they discuss storytelling as the way to pass causal information. However, it is also a way to mentally manipulate reality represented by the story trying counterfactual variation and looking at what would be changing.

FOUR: Why We Think What Isn’t So

Here authors discuss how humans common sensical expectation sometime contradict laws of physics, making it impossible to have correct expectations for something one has no experience with. Authors explain it by the fact that good enough understanding of many things in reality is better than detailed understanding of a few things. Then they discuss ideas of fast, intuitive and slow, in depth thinking. They present a bunch of psychological tricks and experiment results from Cognitive Reflection Tests (CRT) demonstrating this idea.

FIVE: Thinking with Our Bodies and the World

In this chapter authors retell the story of attempts to develop AI as symbol processing program on stand alone computer. Despite partial successes the overall attempts were not successful due to the both: insufficient technological level and poor understanding of human mind. Authors describe an interesting experiment when computer traced human eye, making meaningful test limited to the point of attention and mesh for surrounding text, which turned overall text into nonsense. Nevertheless, people thought that the text is meaningful. The inference is that people are modelling surrounding environment based on narrow glimpses on its parts and combining incoming information with preexisting expectations and assumptions. Authors also discuss wholeness of human perception when emotional condition of individual plays significant role in the way information received.

SIX: Thinking with Other People

Here authors ones again return to idea of community as one thinking and feeling entity bringing in beehive as example. They compare it to human communal hunting of big animals with complex division of activities. Then they move to evolution of human brain and hypothesis of social brain, which posits that big brain developed in order to maintain high levels of communication necessary to synchronize complex activity of many individuals. They discuss unique to human feature of shared intentionality based on the work of Michael Tomasello about human interactions versus apes. Then they move to contemporary teamwork and advantages and disadvantages of “Collective mind”.

SEVEN: Thinking with Technology

This chapter is about technological enhancement of human thinking and actions, current limitations of technology such as lack of shared intentionality and situational awareness in AI. Authors review in some detail status of most popular application and speculate a bit on future of human-computer integrated systems.

EIGHT: Thinking About Science

This chapter is about popular understanding of science and its deficiencies, which they demonstrate by presenting result of questionnaires. Somewhat unusual they do not blame people, but rather present hypothesis of why it is so: “Scientific attitudes are not based on rational evaluation of evidence, and therefore providing information does not change them. Attitudes are determined instead by a host of contextual and cultural factors that make them largely immune to change.” Authors then discuss integrated character of human believes and how human causal models impact their science understanding and provide a few typical examples such as vaccination and GMO.

NINE: Thinking About Politics

In this chapter authors apply their ideas to politics starting with example for Obamacare when people had strong opinions about Supreme Court decision and poor knowledge of details of this decision. From here they move to discuss the usual problem:” not that much what one does not know, as what one knows is not so”. They use example of political research when people estimated their position and knowledge of some ideas and then explain additional details causal implications. Authors claim that it resulted in move away from extreme positions to more moderate. Then they change it to discuss in details reasoning for position, rather than causality. This approach did not move people in any direction. Authors then move to ethics, using examples of morally repulsive suggestions with no negative consequences mainly borrowed from Haidt’s work. Theirs inference is pretty much that positions based on values are non-negotiable, while based on consequences are much more subject to compromise and resolution. At the end of chapter author discuss elite / democracy problem and, while not taking clear position, provide a number of examples of negative consequences of democratically defined decisions and reference to low levels of knowledge of average person.

TEN: The New Definition of Smart

This chapter is pretty much against “lionization of individuals”, even such iconic figures as Martin Luther King and Copernicus. Authors posit that any achievements of humanity are really collective achievements, rather than individual. They discuss human intelligence, its testing, and experiments that demonstrate superiority of group intelligence over individual.

ELEVEN: Making People Smart

This starts with experiment with a group of street kids in Brazil, comparing them with schooled kids and knowledge of math. Both groups were low on basic skills like reading big number, but street kids, who live by selling and buying staff, had much better operational math skills like adding and subtracting. The bottom line: humans develop knowledge by acting, not by listening to lectures, so formal schooling mainly creates illusion of knowledge. Authors suggest to allocate a lot more attention to teaching people identify limits of their knowledge, to know what they do not know. Authors end this chapter with discussion of improvement of group learning methods to make them more fit to individual role allocation in synch with individual abilities.

TWELVE: Making Smarter Decisions

This chapter starts with discussion of low levels of financial literacy and then moves to example of explanation of the value of modification of traditional Band-Aid. After discussing a few more ideas about information vs explanation, and nudging, authors provide check list for effective communications:

Lesson 1: Reduce Complexity

Lesson 2: Simple Decision Rules

Lesson 3: Just-in-Time Education

Lesson 4: Check Your Understanding

Conclusion: Appraising Ignorance and Illusion

Here authors summarize ideas of this book:

• Ignorance is inevitable and should be mitigated by sober evaluation of one’s knowledge and skills
• Intelligence resides not in individual, but in community
• Illusion is as inevitable as ignorance and should be dealt with the same way: sober evaluation and understanding of one’s limitations.

MY TAKE ON IT:

For me it is a funny book because its ideas pretty much directly contradict my own believes that beehive or other usually used abstractions like state or society or whatever, do not have ability to think, feel, invent, and act. The funny part is that I generally agree that no human knows more than a very small part of existing information, could not survive without help from multitude of other people, and could not invent anything new without infinite number of previous inventions. I guess the difference is that where authors see one entity – collective, I see network of human individuals. Where authors see one will, intention, and actions, I see complex interplay of multiple wills, intentions, and actions some close to each other, pointing in the same direction, some diverse, pointing in different directions, and some completely opposite. Consequently, final result is combination when some actions amplify each other some counteract, and some even cancelling each other. In short, for me the object of analysis, understanding, and actions are individuals and their relations between themselves with action of the group being derivative of these complex processes. It seems that for authors the object is a group and both analysis and actions should be directed toward this abstraction.