I first heard the 'sand in the gears' phrase used to describe James Tobin's proposed currency transaction tax, and then later in connection with the securities markets. Here's a 1994 Kansas City Fed paper on the latter subject.
Tobin's intent was to slow down the currency markets by imposing a penalty on short-termism whereas later proponents looked on it as a revenue generator.
I didn't agree with the first goal on the grounds the projected efficacy of the tax was probably overstated and I used to use the second idea as an opportunity to quote something Churchill said about governments, when he was on the outside looking in, after 1945. More on that in another post.
Meanwhile, the whole efficiency of the markets (and business, and the economy) question does intrigue.
It sometimes seems proponents are pitching efficiency for efficiency's sake which just seems: a) foolish, with its connotations of amiable silliness and: b) foolhardy with its connotations of, well... stupid.
And that long intro brings us to Ms. Kaminska's latest post at Dizzynomics:
Too much efficiency?
Testing some thoughts. Nothing concrete. Mostly inspired by a frequent question I ask myself: do I actually add value to the economy as a journalist/thinker/writer?
My growing concern — in a nod to David Graeber’s larger bureacracy thesis – is that probably no, we journalists don’t add all that much value at all. At least not compared to the much more useful people in society. And not compared to what we used to before the signal to noise ratio started to be drowned out by the abundance of information.
If the economy is to be efficient it has no room or time for journalists. We are information and idea arbiters. Presenters of concepts and information that penetrate through people’s thought silos for the sake of opening minds, informing viewpoints and in many cases inspiring changed perspectives.
Efficient systems however don’t like flux or changing viewpoints. They like predictability. Indeed, the only sort of flux tolerated by an efficient system is one that can be guided strategically and anticipated all the way thought. Too many unexpected independent ideas and the efficiency and predictability of the system might be disrupted. To an efficient system the most destabilising thing of all is a radical shift in groupthink.
Today, however, the system is structured to drown out alien ideas (apart from those sponsored for the sake of predictable guidance and agenda) and keep them trapped within like-minded filter bubbles where ideas self-corroborate each other rather than challenge themselves. In such a world a professional idea trader loses his purpose. The ideas presented only end up flowing to the sort of entities who would already be inclined to think that way.
But it’s not just free-thinking that a truly technical and efficient system can’t afford. Efficient systems can’t afford any type of creative entity. Journalists, artists, musicians, writers, sportsmen and so on are all a luxury in an efficient system.
And whilst true non-manufactured free-thinking creatives are the first to disappear in an efficient system, an efficient system demands more. Next in its sights will be the bureaucrats, the administrators, the rentiers, the bankers and last of all the purposefully damaging or non-cooperative.
With that in mind, here are some thoughts about the digital economy’s obsession with efficiency and why it ultimately might clash with the interests of our human selves:...MUCH MORE
- While information technology clearly has the potential to facilitate great abundance through efficiency, I’m not sure if there might not be a much graver cost to society as a result of it?
- “You see the computer age everywhere but not in the productivity statistics” — perhaps for a reason?
- Could the problem be that information tech redistributes wealth rather than grows it? Less is more is the mantra, but perhaps in some cases less is just less?
- What really is the point of a frictionless life? And why are technologists so obsessed with getting rid of friction? Don’t billionaires who have everything purposefully seek out frictions to overcome? Building mountains et cetera? Perhaps some frictions should be protected? Life is to some degree one giant friction.
- If you can’t depend on growth you have to depend on “efficient” redistribution. But redistribution means some people have to go with less so that other people can have more....
She has other bullet points including the tough to argue with (see AMZN pic* after post):
- Profit is dependent on inefficiency. Too much efficiency annihilates profits and reduces all value-add output to break-even levels.
- Fintech is trying to transfer the banking class into the coding class, in an attempt to make it look more useful for society than it really is and protect its rent flows according.
- The FT’s Chris Giles made a wonderful point last week:
The anonymity of cash helps to free people from their governments and some criminality is a price worth paying for liberty.There were a couple reasons that caught my eye.
Firstly, I hadn't been sure where she came down on the whole question of how important vindicating the rights of a single person, lowborn or high, rich or poor, actually is, if we are to avoid the worst of humankind's proclivity toward the totalitarian impulse and secondly, the Giles piece was a contradiction of one of the funniest things I've seen on the pink pages in ages, namely August 23's
"The case for retiring another ‘barbarous relic’":
Could a world without cash make for a much-improved economy?
...The second feature of cash is that, unlike electronic money, it cannot be tracked. That means cash favours anonymous and often illicit activity; its abolition would make life easier for a government set on squeezing the informal economy out of existence.
It is in this spirit that Kenneth Rogoff, the former chief economist of the International Monetary Fund, has argued in these pages for abolishing high-denomination banknotes such as the €100 and €500 notes....And the reason this piece is so funny?
It's writer is anonymous.
If interested, do read the comments on it, they're feisty and erudite and ironic and spooky and funny and everything they should be in response to a garbage proposal.
Here's a letter the piece elicited:
Your case against cash simply does not stand up*Here's the current state of efficiency at the intersection of the physical and the ephemeral, Amazon's latest fulfillment center, version 8.0. This one opened two weeks ago in Baltimore, via the Baltimore Sun:
Sir, I was appalled at your supposed “case” for eliminating cash, which you yourselves describe as the people’s “go-to safe asset” (“The case for retiring another ‘barbarous relic’”, editorial, August 24). And what is your case?...MORE