Beautiful Commerce: Bill Watterson on the Sacred and the Profane

Calvin and Hobbes was the comic of my childhood; there is no competition. I got my hands on every collection I could find, from Scientific Progress Goes “Boink” to Attack of the Deranged Mutant Killer Monster Snow Goons (which my beagle, perhaps annoyed at my lack of devotion to Snoopy, chewed up at the first opportunity). As a child, Calvin’s wild imagination was an inspiration; I could get lost in it for hours and it was something I aspired to in my own games, especially with fellow fans. As an adult, I’m amazed at how the comic speaks so directly to both 6-year-olds and 28-year-olds, and everyone between and beyond. I am also amazed at the care Watterson took in painting his sprawling, colorful landscapes that served no functional purpose beyond being the background to some philosophical musings of the titular characters. He is a true craftsman, a cartoonist for the ages.

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His devotion to craftsmanship is so strong that it would be all too easy to read him as anti-commerce and anti-business when it comes to the influence those things on the art of comics. Most famously, he is very anti-licensing, and as a result we have had no Calvin and Hobbes cartoons, or Spaceman Spiff backpacks. Nevertheless, I think there is more to his position, as I understand it, than this simplified story. I think that even if we cannot reconcile him with the notion that commerce is beautiful, we can nevertheless find in his arguments a version of the bourgeois virtues.

My point of reference is his 1989 speech at the Festival of Cartoon Art, “The Cheapening of Comics”. I realize I may be critiquing a 1989 version of Watterson which the man alive today may well have moved on from. In fact, I am excited by the upcoming documentary on the state of comics that he will be participating in, precisely because I can’t wait to see how his views have evolved. Nevertheless, I found the speech so interesting that I can’t help myself, I must comment on it.

The Sacred and the Golden Age

Watterson begins his speech by discussing the comics that inspired him early in his life; he does so not simply to achieve the rhetorical end of making himself more approachable, but to lay the groundwork for his argument that there is a place for the sacred in comic strips. Peanuts is the greatest example he has to offer in this regard:

Peanuts is about the search for acceptance, security, and love, and how hard those self-affirming things are to find. The strip is also about alienation, about ambition, about heroes, about religion, and about the search for meaning and “happiness” in life. For a comic strip, it digs pretty deep.

Pogo and Krazy Kat are his other two icons of pure expression in comic strip form, with different approaches but nevertheless still reaching towards the sacred. Of the former, he said “The strip had a mood, a pace, and atmosphere that has not been seen since in comics.” Of the latter:

The strip constantly plays with its own form, and becomes a sort of essay on cartoon existentialism. The background scenery changes from panel to panel, and day can turn to night and back again during a brief conversation.

From here, Watterson proceeds to lament the state of comics at that time, making the tired argument that the golden era has already passed:

Amazingly, much of the best cartoon work was done early on in the medium’s history. The early cartoonists, with no path before them, produced work of such sophistication, wit, and beauty that it increasingly seems to me that cartoon evolution is working backward. Comic strips are moving toward a primordial goo rather than away from it. As a cartoonist, it’s a bit humiliating to read work that was done over 50 years ago and find it more imaginative than what any of us are doing now. We’ve lost many of the most precious qualities of comics. Most readers today have never seen the best comics of the past, so they don’t even know what they’re missing. Not only can comics be more than we’re getting today. but the comics already have been more than we’re getting today. The reader is being gypped and he doesn’t even know it.

I do not buy this argument, for the simple reason that Watterson himself was at this point squarely in the middle of Calvin and Hobbes’ phenomenal run! Like all “golden age gone by” arguments, there is a huge survivorship bias in comparing the few from the past that have survived to the present, to the many that are alive today. Watterson thinks that comics like Peanuts must have hit the comic reading community like a bombshell when they first arrived, but it is much more likely that it was simply one among many, and its greatness was not appreciated until later. Couple Sturgeon’s Law with survivorship bias and you’ll see why these types of arguments always sound persuasive no matter what era you happen to be living in.

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Nevertheless, Watterson’s main argument is much deeper than reminiscing about the good old days. Watterson is frustrated by the state of the comics business, and its influence on the work that is getting done. I would summarize his point of view in the form of three arguments: first, the comics industry today is not euvoluntary. Second, at present, the sacred is being entirely sacrificed to the profane. Finally, comic artists and their business partners can do better, and should.

Exploitation in the Industry

Watterson argues that syndicates take advantage of aspiring cartoonists in a number of ways. The original, and cardinal sin is demanding that the cartoonist sign over all the rights to their creation up front. This preemptively takes away any leverage that the creator might have should their creation ever take off in popularity. If the creator doesn’t want to license their work, or doesn’t want to let business considerations change the direction of the strip, they can simply be replaced.

Watterson considers this a very bad bargain, and his arguments echo the tropes examined by Mike Munger and Sam Wilson over at Euvoluntary Exchange. On the Best Alternative to a Negotiated Agreement (BATNA) that a young cartoonist in 1989 had against taking the poison pill offered him by syndicates, Watterson states:

Why does this happen? As the syndicates will tell you, no cartoonist is forced to sign the ridiculous contracts the syndicates offer. The cartoonist is free to stay in his $3.50 an hour bag boy job until he can think of a better way to get his strip in the newspapers. Simply put, the syndicates offer virtually the only shot for an unknown cartoonist to break into the daily newspaper market. The syndicates therefore use their position of power to extort rights they do not deserve.

Watterson also notes the shrinking number of newspapers, and the shrinking amount of space that they provided for comics, as compounding factors. But this also illustrates the risks and costs faced by syndicates, who did the hard work to lower transaction costs to proliferating a comic across newspapers at a time when such costs were prohibitive. A brand new comic strip faced very low odds of success at the outset, and any space it took up was space that another comic, which may have actually succeeded, could be taking up. In order for the expected return of any one comic to break even, the artists had to offer up the option value of ownership.

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It need not be that way, however, as Watterson points out: the book industry offers far less onerous terms to new authors.

Now, can you imagine a novelist giving his literary agent the ownership of his characters and all reprint, television, and movie rights before the agent takes the manuscript to a publisher? Obviously, an author would have to be a raving lunatic to agree to such a deal, but virtually every cartoonist does exactly that when a syndicate demands ownership before agreeing to sell the strip to newspapers.

This is interesting, given that the BATNAs here should be similar—but perhaps they are simply not perceived as such by the respective creators in each industry. From this perspective part of Watterson’s argument could be seen as a plea for creators to take their alternatives more seriously when coming to the bargaining table. And indeed, this is the major thrust of his argument, as we will see further down.

Sacrificing the Sacred

But first, to his second argument: the potential of comic strips for inspiring agape, for allowing creators to be driven by the ethic of the craftsman, is being sacrificed at the altar of “efficiency, mass marketability, and profit, profit, profit”. He is not quite so crassly anti-commercial as he first appears, for he says early on that:

The comics are a collaborative effort on the part of the cartoonists who draw them, the syndicates that distribute them, and the newspapers that buy and publish them. Each needs the other, and all haves common interest in providing comics features of a quality that attracts a devoted readership. But business and art almost always have a rocky marriage, and in comic strips today the interests of business are undermining the concerns of the art.

Note the implication that business interests do not have to undermine the concerns of art, just that they are at present, and perhaps did not do so in the past (during his golden era of Peanuts, Pogo, and Krazy Kat). I read the “rocky marriage” of business and art as a nod to the reality of trade-offs. Sometimes a balance is struck in which great art is promoted in a profitable manner. Sometimes a balance is struck where profitable strategies are arrived at which sacrifice too much artistic integrity. And sometimes the balance of the moment is neither very profitable nor very artistic, though this balance cannot last forever. It’s getting stuck in the second balance that Watterson is afraid of.

There are several ways in which the profane has intruded upon the sacred in Watterson’s worldview. The first goes back to the ownership problem; syndicates have ultimate creative control. When they say jump, if the creator does not say “how high?” on cue, they can be replaced at a moment’s notice by someone from the sea of unemployed cartoonists out there.

The second debasement comes from merchandise licensing, which Watterson is so famous for abstaining from.

Some very good strips have been cheapened by licensing. Licensed products, of course, are incapable of capturing the subtleties of the original strip, and the merchandise can alter the public perception of the strip, especially when the merchandise is aimed at a younger audience than the strip is. The deeper concerns of some strips are ignored or condensed to fit the simple gag requirements of mugs and T-shirts. In addition, no one cartoonist has the time to write and draw a daily strip and do all the work of a licensing program. Inevitably, extra assistants and business people are required, and having so many cooks in the kitchen usually encourages a blandness to suit all tastes. Strips that once had integrity and heart become simply cute as the business moguls cash in. Once a lot of money and jobs are riding on the status quo, it gets harder to push the experiments and new directions that keep a strip vital. Characters lose their believability as they start endorsing major companies and lend their faces to bedsheets and boxer shorts. The appealing innocence and sincerity of cartoon characters is corrupted when they use those qualities to peddle products. One starts to question whether characters say things because they mean it or because their sentiments sell T-shirts and greeting cards. Licensing has made some cartoonists extremely wealthy, but at a considerable loss to the precious little world they created. I don’t buy the argument that licensing can go at full throttle without affecting the strip. Licensing has become a monster. Cartoonists have not been very good at recognizing it, and the syndicates don’t care.

Emphasis by me.

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The final sin is a variation of the first, but perpetuated by cartoonists rather than by syndicates. It is hinted at in the passage above with the mention of “extra assistants” and “having so many cooks in the kitchen”; the established cartoonist hires assistants to produce his work for him, and merely signs his name on it once it is ready to go to print.

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All of these dynamics have grown exponentially since 1989. The replaceable nature of specific creators in a franchise has been honed and perfected; turning a successful creation in one medium into every other medium conceivable has as well. And the James Pattersons are famously accused of being in a coma somewhere while a staff of ghost writers continue producing books using the highly predictable formula the actual author made his name using.

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Beautiful Commerce

I want to push back here for a moment. I am very sympathetic to the points that Watterson makes but I happen to think that the sacred and the profane work together here in more subtle ways than he allows. There is a role for immortal business-owned franchises as well as mortal creator-owned characters. Licensing can and often does coexist with legitimate creative vision and execution. I’ll admit that there’s something fundamentally dishonest about ghostwriting, but the more charitable take is that some “creators” become a brand name for a certain quality of product, making it possible for audiences to gain a degree of predictability in finding something they know they like that would otherwise be lacking.

Moreover, there is sacredness here, for creators working their way up in the world. Just as fanfiction writers today hone their writing by borrowing other creators’ characters and worlds, so too do professional writers working for Marvel or DC comics get to hone their writing—and get paid for the trouble—by writing storylines for cherished classic characters.

Given Watterson’s feelings about the potential for art in comics involving elementary school angst and goofy alley cats, he displays a remarkable snobbery towards comic books, making an offhanded reference to “miserably done super-hero comics.” But it is clear to children who grew up reading such comics that the spark of the divine can be found here, as well. You can see it in an interview with Joss Whedon getting choked up talking about his pitch for a Batman movie that got rejected—people invest a lot of feeling into these franchises, and as creators they want to make their mark.

I also reject Watterson’s special concern for licensing as a source of corruption, as it implies art is only pure when there are no external influences on the creator. He asks us how we can trust that a creator’s characters are saying what they say because of values internal to the creation rather than because it will sell well on a coffee mug, but this is all too convenient a stopping place. How do we know that Calvin said what he said because it worked well with an artistic vision rather than because Watterson didn’t want to make it marketable? This is no reductio ad absurdum—Brian K. Vaughan specifically chose the opening words for the excellent comic Saga in order to dissuade agents from thinking about optioning it for a film. And it doesn’t detract from Saga’s greatness at all—nor does Charlie Brown appearing on MetLife commercials detract from the greatness of Peanuts.

Art, like virtue, is a balancing act—you must balance internal considerations for what you desire to accomplish with the plot, how you want your characters to develop, what sort of visual impacts you want to create, and so on. These are as much a “rocky marriage” as the marriage between them and more external considerations—who your implied audience is, whether there are enough such people to pay your bills, and if so, whether your agent or the syndicate or a publisher can be persuaded as such. To name but a few.

Art is the balance that is struck across all of these factors, not just the internal ones. Sometimes this means taking the Austin Kleon approach (or the one I recommend here) and keeping a day job unrelated to your art, so that what you actually create focuses primarily on striking the internal balance. That is ultimately where Watterson ended up, after he left the public limelight at the end of Calvin and Hobbes’ run.

Often, though, the things we think of as truly great were created by striking the best balance creators were capable of out in the marketplace—in partnership with the many merchants and middlemen who operate in that space. If we judge this process by the average quality of its output, for a sufficiently high standard of quality, we risk falling into the same Sturgeon’s law plus survivorship bias trap that Watterson did.

Of course most art created in the market is mediocre. Most art is mediocre, period. But the aspirational ethic of the craftsman can and does persist and thrive in an atmosphere of beautiful commerce.

Bill Watterson’s Bourgeois Virtues

Nevertheless, no morally serious conversation around creators and creations should ignore the ultimate aim of Watterson’s speech.

The last section of the speech is what you might think of as a call to arms. With a humble admission that he is not a businessman, Watterson lists a few ideas for how the comic business might be changed in order to better promote the artistic values that are important to him. One example:

But suppose someone published a quality cartoon magazine. Imagine full-color, big comics in a lush, glossy format. Why not?

This was already an established practice—though usually not full-color, at least not for every issue—in Japan. The culture of comics and animation in Japan has been different from America’s for a long time, in ways that Watterson would approve of. For instance, they do not consider comics to be primarily a children’s medium.

Watterson’s examples are laden with a lot of anti-commercial rhetoric, but when he comes to his ultimate point it’s a different story:

My point is simply that cartoons are not necessarily doomed to increasing stupidity and crude craftsmanship. With the right publishing, comics can move into whole new worlds we’ve never seen. Moreover, I think any effort to improve the quality of comics would very likely be rewarded in the marketplace. Think of the people who cut out certain comics to put on refrigerators, or to put in scrapbooks, or to send in letters, or to stick on their office walls. Give them a nicely printed, big color comic on good paper and see if they don’t jump. I think the public would respond if there was a publisher out there with an ounce of vision. For too long, syndicates and cartoonists have been congratulating themselves whenever things don’t get worse. I don’t think that’s good enough. This very weekend we’ve got syndicate executives, cartoonists, readers, and newspaper people all together. let’s knock some heads together and see what we can do. Let’s ask people what they’re doing to improve the state of comics.

Folks, if Deirdre McCloskey is right, this is the attitude that lifted hundreds of millions of people out of the subsistence farming of their ancestors. This is the vision of a better future, the willingness to imagine that circumstances are not fixed. This is the living and breathing bourgeois virtues, still with us and still very important.

And Watterson was not just talk—he walked the walk where licensing was concerned. And he fought for every square inch of Sunday comics he could get in order to be able to do his beautiful, sprawling landscapes despite the huge premium on space.

The comic industry has not stood still since 1989, as I’m sure the upcoming documentary Watterson is a part of will discuss. Creator-owned brands like Image have popped up. Webcomics have provided a new option for the creator who wants at least one project where they needn’t take into consideration marketability. Things like Humble Bundle and ComiXology and Paypal make it easier for creators to sell their creations to an audience directly, and Kickstarter makes it possible to get per-project funding up front. These things all came about from a combination of prudent business dealing and aspirations for building a better world.

I see “The Cheapening of Comics” as a prime example of how important McCloskey’s project is of reviving a morally serious conversation about the morality of bourgeois life. The bourgeois virtues are all in there, they are, but they’re stuck in the anti-commercial narratives that we’ve all been fed by the writerly class since the middle of the 19th century. It’s time to move on. Let’s begin again with a conversation on the marriage of artistic aspirations and beautiful commerce.

Redemption

A few years ago, when I was shelving books at Borders, Oprah’s Book Club—that gold standard of the book biz—had a bit of a scandal. A Million Little Pieces, a book about the author sinking into a life of drug abuse and crime and then finding redemption, turned out to be basically fabricated (Wikipedia charitably calls it “semi-fictional”). And this after Oprah’s endorsement—how embarrassing!

But why would anyone pretend to have sunk to lower depths than they really had? What is this modern fascination with redemption stories?

Redemption stories are nothing new, of course, and a taste for them is far from unique to we moderns. Witness the Prodigal Son, a story told to christendom for thousands of years. But I do think there is something particularly modern about our craving for stories like A Million Little Pieces, aside from those elements of the story which are, of course, specific to our era.

There’s an element of voyeurism and virtuous people living vicariously through other people’s stories of debauchery, of course. This less than noble but fairly harmless impulse is behind such recent successes as Netflix’s House of Cards. Or, in history, behind the success of Milton’s Paradise Lost.

But I believe that there’s more to it than that, even. We live in a morally uncertain era. Despite the continuing existence of Christianity, the West is for the most part post-christian in its moral reasoning—even among most practicing Christians. We have gone from having the laws of right and wrong inscribed in the cosmos by an Almighty God to the little gods conjured up by Reason. These little gods do not really persuade; for one thing, they rarely have anything to say about actual decisions made in the course of a human life.

What draws us to the story of redemption is the power of the virtues required to walk down that path. It takes less self-command to avoid doing drugs in the first place than it does to overcome an addiction nursed over many years. It takes less courage to “Just Say No” than to try to rebuild the trust that you have squandered, with the knowledge that at best it will take years and at worst you may never be able to get it back. It requires a greater sense of justice to take responsibility for your own actions when those actions have caused a great deal of harm, than when they have not. And, perhaps most crucially, it requires greater generosity to forgive such a person, allowing the audience to indulge in feeling virtuous after indulging in vicarious sin.

The addict and criminal struggling for redemption shines brightly, much more brightly than those who had the prudence to avoid such debauchery in the first place.

This is not healthy. The man who works three modestly paying jobs to provide for his family, and never allows himself to fall into a cycle of self-destruction, has a moral fiber a thousand times greater than those who fail to destroy themselves and manage to find their way back to the light. The woman who lives modestly for many years to get her PhD and then works hard to pay off her student loans is incalculably superior to even the greatest Saint of Redemption.

Our fixation on such stories is the fault of our storytelling class, who Deirdre McCloskey refers to as “the clerisy”. I share McCloskey’s goal to revive “a serious ethical conversation about middle-class life, the life of towns, the forum and agora.” The conversation about this bourgeois life of ours has not been ethically serious since at least 1848. This does not mean that bourgeois life has been immoral—just that moral thinking on the questions that matter to our daily lives has been confused, to say the least.

We should not need to hit rock bottom to discover what a good life looks like, nor should we require others to do so. I understand the appeal of the redemption story—I have lived one myself (a very, very tame one by the standards of A Million Little Pieces). It is indeed praiseworthy to turn your life around; it should not be forgotten that many who walk down the road of self-destruction never manage to return. But whatever praise we may feel someone deserves for it must be balanced against the harm they did to the people around them, and to themselves, before being redeemed.

Norms and Freedom

In his latest book, Luigi Zingales asks why economists aren’t more willing to talk about what the optimal norms are for a successful economy, rather than focusing exclusively on what the optimal laws are. Over at Modeled Behavior, Adam Ozimek asks:

Is this a libertarian, conservative, or progressive idea? If you view the pressure of social norms as a way to restrict individual freedom, then this can easily be seen as progressive or conservative, depending on the behavior being restricted.

This question has a history behind it. In On Liberty, John Stuart Mill made it clear that he considered social stigma to be a form of coercion. This was especially so when it influenced who people were willing to do business with:

For a long time past, the chief mischief of the legal penalties is that they strengthen the social stigma. It is that stigma which is really effective, and so effective is it, that the profession of opinions which are under the ban of society is much less common in England, than is, in many other countries, the avowal of those which incur risk of judicial punishment. In respect to all persons but those whose pecuniary circumstances make them independent of the good will of other people, opinion, on this subject, is as efficacious as law; men might as well be imprisoned, as excluded from the means of earning their bread.

Thomas Sowell, a Hayekian, spent a fair amount of space in Vision of the Anointed criticizing Mill for his anti-stigma arguments. For Sowell and Hayek, norms are the very fabric of the social order. They come from a school of thought dating back to Edmund Burke, Adam Smith, and David Hume. While Mill shared much in common intellectually with the latter two individuals, on this subject he is much closer to Rousseau, who believed we were born free, only to be shackled by social conventions soon after.

This debate centers on different ideas of what coercion is. On Sowell’s side of the debate, there’s a fairly clear line–if you are doing something because of the explicit or implied threat of violence, you are being coerced. The threat of refusing to do business with someone is not coercion because no one is entitled to do business with anyone; the right to choose who I do business with is an inherent part of my freedom of association. The fact that I am choosing not to do business with you because you have taken some action or hold some belief that there is a social stigma against does not make it coercion, any more than if I was motivated simply by the fact that I think you are ugly or something.

How Norms Change

The ancient Greek sophist Protagoras argued that morality is something that human beings are constantly teaching to one another, similar to how we are constantly teaching each other language. The moral sense theorists, and more recently cognitive scientists and moral psychologists, have given us an idea of the mechanisms through which this co-learning occurs.

Most of the time we are taught to stick to a set of norms that has existed for a very long time. But moral change does happen.

Take the American Civil Rights Movement as an example. I do not think that its progress should be measured in the laws it managed to get enacted. Its progress should be measured in the extent to which it moved our moral framework.

Moral changes, like all social changes, start with small groups and spread in a diffusion of innovations-like process. Most such innovations never spread at all. This social trial and error form the basis of the engine of all institutional change, moral or otherwise.

As moral change follows the logic of the diffusion of innovations, we would expect successful revolutions to have the advantages predicted by that literature. The activists of the Civil Rights Movement did not just give speeches and publish books; they engaged in many forms of verbal and visual rhetoric, and took many dramatic actions, which put their perspective in the context of traditional American ideals and religious doctrine. Though their success constituted a change in the norms of the country, it was more likely precisely because they framed the change within preexisting norms.

The Limits of Individual Influence

If you think that you can affect great changes as a lone individual, you are setting yourself up for disillusionment. In all of social life, everyone is but a tiny part of a much larger whole. Even the President of the United States, and others with even greater discretionary authority, face constraints by the very nature of the systems they are working within. Individual impact varies dramatically, to be sure, but even the most exceptional individual’s influence will always be small compared to the scope of the system that is acting upon them. It is also probably reasonable to assume that it is highly unlikely you will become the Martin Luther King, Jr. of your particular moral movement.

Once we have given up on individual exceptionalism, we are left with the same tools that human beings have been using for as long as we have formed groups. You cannot hope to shape the moral compass of a nation with a single blog post, but you are influential within the group of 100 or so people you are most closely associated with, and especially the 15 or so people in your inner circle–see Paul Adams on this subject, and his book for a more thorough review of the literature.

You must also accept that this group will have as much or more influence on you as you have on them. In both how you influence and are influenced by them, your social groups are the venue for your participation in all social change, including moral change.

Participating in Change

Dan Klein once said that he felt like he shouldn’t be in GMU’s economics department, where there were plenty of people who already agreed with him, but instead should go to a more mainstream department where he could work to change minds. This is a misunderstanding of how minds are actually changed. If Klein went to such a department, he would probably just become marginalized within that community. Rather than increasing his influence, it would almost certainly reduce it.

At GMU, a community of libertarians has formed, and a culture has developed within the department. Students who go to grad school there are immersed in that culture while they are pursuing their degree. They integrate into and are influenced by that culture to varying extents. Many then take that culture with them when they move on to other things. This is not unique to GMU’s economics department–all academic departments develop a culture of some kind, which acts upon and is acted upon by the students that pass through it.

We tend to have a broadcast model of influence in our heads–we think that by writing blog posts and going on TV we will change people’s minds. But the vast majority of influence happens at the level of a community. This is true even in exceptional cases–Marginal Revolution may be an influential blog, but the economics blogosphere as a community has more impact overall on the parameters of the discussions than any one of its members. Tyler Cowen’s biggest individual impact on this discussion is as a member of a community of high visibility individuals, such as Paul Krugman and Scott Sumner.

The norms developed within the communities of which we are a part are then subject to the dynamics of the diffusion of innovations–they could gain mainstream adoption, they could remain niche, or they could hit some middle point between the two extremes. They could persist for long periods of time at whatever level they attain, or they could flame out quickly and disappear.

To the extent that you are encouraging certain norms within your community which could eventually diffuse beyond it, you are participating in the process of moral change.

Stories of Progress and Stagnation

I grew up around computers and have always taken it for granted that we lived in a time of enormous innovation and growth. Within my lifetime, my family has gone from something that looks like this:

To all individually having iPhones, which are enormously more powerful machines, connected to the Internet, and robust platforms for a huge variety of independently developed software. Never mind our various laptops and desktop computers!

It seems to me that from around the point that the term “web 2.0” was coined to the market crash of 2008, the story about the state of things that most people accepted was the one I was inclined to accept by default; that we lived in an era of accelerating progress. That every year would see huge leaps over the previous year, and the year after that would see a leap of similar relative magnitude, and this would go on indefinitely.

There have always been stagnationists, but it’s only in the last couple of years that stagnation stories have started to become fashionable again. Tyler Cowen deserves no small amount of credit, as The Great Stagnation made an enormous splash when it came out in January of last year. While discussions of the recession up until then had been made up almost entirely of diagnosing the financial bubble, post-TGS discussions had to face the possibility that our present predicament might be part of larger, more structural trends. Regardless of whether the book changed anyone’s minds directly, there can be little doubt that it played a huge role in setting the agenda.

The debate that has emerged has fascinated me, both as someone who is deeply interested in our propensity to tell stories, and simply because it is extremely hard to determine who is correct.

The Death of Ambition and the Modern Game of Inches

Tyler Cowen credits PayPal founder and venture capitalist Peter Thiel with inspiring the story behind The Great Stagnation. Recently, Thiel debated Google Chairman Eric Schmidt on the subject of technology and progress. One section of that debate that made the rounds in the economics blogosphere concerned Google’s $50 billion in the bank.

Thiel argued that “if we’re living in an accelerating technological world”, Google should be able to invest that $50 billion in technology in a way that returns their investment many times over. Even if Googlers are claiming that we live in an era of progress, their actions speak to a more pessimistic assessment.

Thiel believes that we live in a deterministic world in which progress is made by making big bets on enormous projects. Part of the reason we no longer pursue some ambitions is that we have all become indeterminists; our resources are all tied up in hedging against uncertainty. Even though the tech sector is characterized by progress so stable and relentless that we refer to several specific trends as “laws”, the players are, if anything, more indeterminist in their worldview than average.

Google’s low-yielding $50 billion is the ultimate symbol of this. Google made nearly $10 billion in profits in 2011, and almost all of that came from search, their core product. Thiel’s argument is that if Google believed that we lived in a time of accelerating technological progress, where $10 billion a year breakthroughs were just lying around waiting to be invented, they would be spending every penny they had on attempting to make those breakthroughs happen.

More important than the cultural change, however, is the fact that public policy has systematically outlawed ambitious projects of any sort. From the debate with Schmidt:

The why questions always get immediately ideological. I’m Libertarian, I think it’s because the government has outlawed technology. We’re not allowed to develop new drugs with the FDA charging $1.3 billion per new drug. You’re not allowed to fly supersonic jets, because they’re too noisy. You’re not allowed to build nuclear power plants, say nothing of fusion, or thorium, or any of these other new technologies that might really work.

So, I think we’ve basically outlawed everything having to do with the world of stuff, and the only thing you’re allowed to do is in the world of bits. And that’s why we’ve had a lot of progress in computers and finance. Those were the two areas where there was enormous innovation in the last 40 years. It looks like finance is in the process of getting outlawed. So, the only thing left at this point will be computers and if you’re a computer that’s good. And that’s the perspective Google takes.

Further down, responding to criticism of the financial sector, he adds:

I disagree with the premise behind the question that there’s some sort of tradeoff between finance and other areas of innovation. I think it’s easy to be anti-finance at this point in our society, and I think the reality is we have an economy that got very lopsided towards finance, but it’s fundamentally because people weren’t able to do other things.

So, if you ask why did all the rocket scientists go to work on Wall Street in the ’90s to create new financial products, and you say well they were paid too much in finance and we have to beat up on the finance industry, that seems like that’s the wrong side to focus on. I think the answer was, no, they couldn’t get jobs as rocket scientists anymore because you weren’t able to build rockets, or supersonic airplanes, or anything like that. And so you have to ‑‑ it’s like why did brilliant people in the Soviet Union become grand master chess players? It’s not that there’s something deeply wrong with chess, it’s they weren’t allowed to do anything else.

In short, we have grown risk averse in both our culture and in our policy.

Science fiction writer Neal Stephenson is firmly in the stagnationist camp, and he definitely believes it is all about risk aversion. He has written:

 Innovation can’t happen without accepting the risk that it might fail. The vast and radical innovations of the mid-20th century took place in a world that, in retrospect, looks insanely dangerous and unstable. Possible outcomes that the modern mind identifies as serious risks might not have been taken seriously — supposing they were noticed at all — by people habituated to the Depression, the World Wars, and the Cold War, in times when seat belts, antibiotics, and many vaccines did not exist.

In Stephenson and Thiel’s story, true innovation is risky, bold, and visible, while what passes for innovation in modern times is peanuts by comparison. Stephenson pointed to the ongoing competition to build the world’s tallest building as an emblematic example of the problem. These days the tallest building in the world is only a few inches taller than the previous record-holder, and only holds the record for a few months as another slightly taller building is always being constructed in near parallel.

What Stephenson wants is for us to build a structure several orders of magnitude larger than anything that’s ever been built before; a structure that will hold the record for decades before it becomes technologically possible or financially conceivable to surpass it. To Stephenson as well as Thiel, that is what innovation should look like.

The stagnationist has no problem with the ground game, but is frustrated that there doesn’t seem to have been any passing game in forty years. Meanwhile everyone is going around presenting the incremental gains as though they were big breakthroughs. Neither Stephenson, Thiel, nor indeed Cowen, are impressed. You talk about all the wonders we’ve seen since the mass adoption of the Internet, but have they really moved the needle? Just think about penicillin, anesthetics, the automobile and the airplane, not to mention all the spillover innovations that came from putting a man on the moon!

At Founder’s Fund, the venture capital firm at which Thiel is a partner, they have a saying: “we wanted flying cars, and instead we got 140 characters.”

The Value of the Unseen

There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.

-Frederic Bastiat, What Is Seen and What Is Not Seen

I see a lot of truth in pieces of the arguments made by Thiel, Stephenson, and Cowen, but am uncertain whether I buy into all of it. My natural inclination has always been to dismiss stagnationist stories, and Stephenson’s fixation with big, visible things made me all the more skeptical. The stories I have grown close to over the years frequently point out how what seems to be plain truth is often, when you take a step back, a lot less clear and sometimes completely wrong. You think, for instance, that making something as simple as a pencil is the easiest possible task, but it turns out that there’s this huge process behind it in which no individual has enough knowledge to assemble a single pencil.

Take GDP as an example. It’s a nice point of reference, but if you start assuming that GDP–or even GDP per capita–is synonymous with national wealth, you run into some serious problems. GDP is essentially just aggregate spending. When you buy an iPhone for $199.99, you are adding $199.99 to this year’s GDP. It’s a great proxy for national income but it has many recognized problems. In what is perhaps a dated and vaguely sexist sounding example, Paul Samuelson came up with the following scenario:

Take Samuelson’s example of the man marrying his maid. Samuelson’s point is that the new bride continues doing the housework without being paid. But that would not mean that the work suddenly had no market value. So, in this case, GDP actually understates the market value of all final goods and services because this particular service is no longer exchanged on the market.

The valued activity–the housework–is still being done, but because there isn’t any spending involved, it isn’t measured in GDP.

Bryan Caplan has pointed out repeatedly that the consumption done on digital devices and on the Internet is hugely mismeasured by metrics like GDP. In one post, he points out one implication of all the various network products seeing success in the market today:

In the real world, network goods visibly improve all the time. But suppose they didn’t. Suppose the Facebook of today used the same source code as it did five years ago, but still attracted new users at the same rate as it did in the real world. Many economists would be tempted to call this “stagnation,” but they’d be wrong. Even if Facebook’s source code stayed the same, the mere fact that more people are using the product causes it to be better. Why? Because the point of the product is to amusingly interact with your friends. The more friends who use it, the more amusing it is.

The upshot: Economists (and people generally) underestimate true economic growth for all expanding network products. When you measure the quality of network products, you can’t simply look at them in isolation. You have to measure what you can do with them.

There are many dimensions in which Caplan argues that our measurement biases are worse than ever, but our standard of living is actually better than ever.

Looking at my own daily life, a huge amount of my consumption is simply not counted in GDP. I consume an enormous amount of content without paying anything for it. There’s also the reverse benefit–I can write lengthy posts like this one and put them in a public place, whereas before the Internet only the lucky few who managed to get published could do anything roughly equivalent.

If we are a groupish species, and I believe we are, then the ability to connect with others and increase the number of our shared experiences is a huge benefit. Clay Shirky’s excellent book, Here Comes Everybody, discusses how modern technology has reduced the transaction costs associated with group action, the benefits of which we are only beginning to understand. In his followup, Cognitive Surplus, he described how central hubs like Wikipedia are able to aggregate a few minutes of effort from enough sources to result in one enormously valuable resource.

Even after The Great Stagnation, many defend the story that progress is accelerating. In Race Against the Machine, Erik Brynjolfsson and Andrew McAfee argue that technological innovation has been going at a breakneck pace for decades, and we’re only now entering the second half of the chessboard. Yet their vision of progress has a caveat–we are currently at a moment where technology is replacing humans in performing certain tasks faster than entrepreneurs are coming up with new jobs that humans are better at than machines. Arnold Kling said it best:

 The paradox is this. A job seeker is looking for something for a well-defined job. But the trend seems to be that if a job can be defined, it can be automated or outsourced.

Still, overall well-being is going way up as machines become much, much more efficient at providing us with things that we value for rock bottom prices. So on net, we’re seeing tremendous progress.

Radical Uncertainty

Consider a turkey that is fed every day. Every single feeding will firm up the bird’s belief that it is the general rule of life to be fed every day by friendly members of the human race “looking out for its best interests,” as a politician would say. On the afternoon of the Wednesday before Thanksgiving, something unexpected will happen to the turkey. It will incur a revision of belief.

-Nassim Nicholas Taleb, The Black Swan

If our culture has embraced indeterminacy, or more accurately uncertainty, as Thiel thinks we have, then Taleb has taken this story farther than anyone. Whereas Thiel will argue:

 Several people have successfully started multiple companies that became worth more than a billion dollars. Steve Jobs did Next Computer, Pixar, and arguably both the original Apple Computer as well as the modern Apple. Jack Dorsey founded Twitter and Square. Elon Musk did PayPal, Tesla, SpaceX, and SolarCity. The counter-narrative is that these examples are just examples of one big success; the apparently distinct successes are all just linked together. But it seems very odd to argue that Jobs, Dorsey, or Musk just got lucky.

Taleb has no compunction with arguing that they got lucky–or, at the very least, that we are incapable of determining the difference between pure luck and its opposite. In Fooled By Randomness, he conjures up a scenario in which an eccentric rich person will pay $10 million to whomever wins a game of Russian Roulette. Someone might get lucky and win, but if they keep playing, the odds will eventually catch up with them. However, if the pool of players is large enough, you will get a handful of consistent winners even after many rounds of playing the game.

In addition, in time, if the roulette-betting fool keeps playing the game, the bad histories will tend to catch up with him. Thus, if a twenty-five-year-old played Russian roulette, say, once a year, there would be a very slim chance of his surviving until his fiftieth birthday–but, if there are enough players, say thousands of twenty-five-year-old players, we can expect to see a handful of (extremely rich) survivors (and a very large cemetery).

What you always miss out on when citing examples of people like Steve Jobs whose success seems so improbable at the individual level is that, with a big enough “cemetery” of people making similar attempts but failing, the probability of having a few people like him increases. Moreover, after the first success there is some preferential attachment, so to speak–while most startups that get funding do not succeed, the vast majority of startups don’t get any funding. Jack Dorsey’s first success increased the odds that even a stupid sounding idea would get funding the next time around, which increased his odds of succeeding. Now, there are a lot of people in a similar situation who did not then go on to have another success, but again, if the cemetery is big enough, you will end up with a few Jack Dorseys.

Again, the point is not to argue that everything is pure luck. The point is that the role that randomness plays in anything is unknowable. We have stories that persuade us to a greater or lesser extent, but in the end there is enormous uncertainty. Take the very debate over whether we are in a stagnation or a period of accelerating progress. The debate is very robust; with a great deal of evidence brought to bear on both sides of the argument. And everyone can think of alternative stories to fit the data–when I brought up Thiel’s conclusions about Google’s large cash horde, people immediately came up with alternative interpretations.

In Taleb’s world, progress and ill fortune are not smooth trendlines in either direction; they are lumpy. You get big, sudden breakthroughs, and huge, unexpected catastrophes (think of the turkey). So it can seem for a very long time like we’re going in either direction, and then one dramatic event today can have more of an impact on our well being than the past thirty years combined. In a way, the relatively short period since the onset of the Industrial Revolution is a big, dramatic event in the timescale of human history, and there is no guarantee that it will last. The progress could stop tomorrow, or the gains could be completely reversed by some countervailing dramatic event–say, nuclear war or a particularly virulent disease. Or, conversely, we could be at the foothill of a positive breakthrough of such a magnitude as to make the past 200 years look like nothing. There is simply no way to say.

F. A. Hayek was also a proponent of radical uncertainty; he believed that the only possible path to progress was through rote trial and error. It is possible to do the big things that the stagnationists want to see, but you’d better be prepared to see some colossal failures along the way. This begins to look more like Stephenson’s story about the role of risk, and there is certainly some overlap here.

But Thiel’s deterministic worldview is well outside of that overlap. Contra Thiel, the economist Frank Knight believed that the world is filled with irreducible and unquantifiable uncertainty. What’s more, Knight believed that progress was made and profit was found by entrepreneurs who deliberately sought out niches that had high degrees of uncertainty.

In this story of uncertainty and lumpy progress, Google’s $50 billion makes a lot of success. In a direct response to Thiel, Arnold Kling pointed out that under high uncertainty there is a high option value to waiting to invest.

Picture two possible scenarios–one in which Google develops the next big breakthrough in-house, another in which someone else develops it and Google acquires them. Google is clearly pursuing a lot of the former–famously, they are developing wearable computing and they have already clocked hundreds of thousands of miles on their fleet of automated cars. But their tens of billions of dollars in the bank suggests that they believe the big breakthroughs are going to come from outside of Google, rather than through their internal process.

This is frustrating to a hard determinist like Thiel who thinks we should be able to see what’s coming down the road and simply invest that $50 billion in it. But ultimately this is no different than any other make or buy decision that firms face; and how that split is made is a question that economists have analyzed since Coase. The fact that Google is sitting on so much money, from the perspective of this particular story, does not imply that they think we’re in the middle of a stagnation. Rather, it implies that they believe the market is more likely to supply the next $10 billion a year breakthrough than their own internal processes. That could speak to the weakness of their internal processes, or it could simply mean that the market is that much better at developing big breakthroughs than a single corporation could ever be.

Alex Tabarrok asked who will make the future if Google is just waiting for it. The answer provided by this story is that many players, in many firms, scattered across the market and across time will make the future, and many will do so in the hopes of a big payday from Google.

Cycles of Control and Resistance

This is the last story that I will examine here, and it comes from my former classmate Eli Dourado.

To really understand Eli’s story, you have to understand his larger framework. Despite the fact that economically-saavy libertarians believe very strongly in the power of incentives, most still seem to harbor the notion that the practical path forward for policy reform is through persuasion. And there is a story to be told in which this strategy has seen some success, with the neoliberal revolution for example.

In Eli’s framework, the incentives against governments adopting libertarian policies in a broad way are simply too powerful to overcome in the long run. Think about the big spam botnets. Botnets build up over time and become a low cost way to send people spam emails. After a while, one or two botnets will account for the vast majority of all spam. Security groups will get together and work to get one of the top ones taken out, and it will result in a big short term payoff–a recent takedown resulted in an estimated 50% drop in spam.

But the cost of building up a botnet is low enough, and the payoff for spam with an infinitesimal success rate is so high, that it doesn’t take long before the volume of spam is right back to where it was before the takedown. In Eli’s world, most good policies are like botnet takedowns–short term gains but a wash in the long run.

With that in mind, here’s is Eli’s more specific story about innovation:

First we need to differentiate between two kinds of innovation and think about their effects. The first kind of innovation is geared toward brute maximization of production. It is typically centralized and makes use of economies of scale. Examples might include an assembly line factory or a big, coal-fired power plant. Because these innovations tend to be centralized, they introduce points of control. The capital is typically fixed and therefore easy to tax and regulate. It’s well known in the development literature that it’s really hard for governments to control rural peasants who live off the grid. Once they move to the cities and plug into centralized services, it is easier to require them to send their children to school, for instance. Because these innovations introduce points of control, I will call them technologies of control.

On the other hand, not all innovations are about brute maximization of production. Some are about producing things that we already know how to produce in ways that have ancillary benefits. An important ancillary benefit is evading control. Examples of these innovations include 3D printers and solar power. The evasion of control that is possible with 3D printers is the subject of Cory Doctorow’s short story Printcrime. And portable solar power cells can make people harder to control by supplying electricity without the need to register an address, have a bank account, stay put, and so on. These are obvious examples, but control can be evaded through more subtle innovations as well. I will call innovations that circumvent points of control that can be used by governments or monopolies to exploit, tax, or regulate technologies of resistance.

Eli explicitly splits the difference between The Great Stagnation and Race Against the Machine. He posits that the Industrial Revolution was all about the technologies of control–people clustered into dense urban populations, and were employed in mass numbers by factories that produced on a scale that was unprecedented in human history. We saw massive improvements in the standard of living of industrializing nations in the blink of an eye.

But all the concentation and the mobility-reducing high capital costs made the sources of our new wealth easy targets for governments to come in and take a bigger and bigger cut. Beyond straight taxation, interest group pressures also created an incentive to exercise specific forms of control through government regulation, reducing the effectiveness of the technologies of control.

Still, the productive capacity of these technologies was such that we coasted all the way into the 1970’s before the deadweight of government regulation and taxation slowed us down. Since then, our resources have shifted to developing technologies of resistance, which is why Brynjolfsson and McAfee see accelerating innovation. It is accelerating, but it’s accelerating in a very specific area because of how difficult it is to control that particular area.

We do see welfare gains from innovation in the technologies of resistance, but they are not nearly as big as we could get with the technologies of control, were they not so bogged down with regulation. Resources are spent on creating robustness against control that would have otherwise been spent on maximizing pure economic growth, in the absence of efficiency-reducing regulation.

In this story, ideology, persuasion, and democracy will not help us. Every time the median voter swings more libertarian, we see the technologies of control begin to give us bigger gains again. But, like the botnet takedowns, it is only a matter of time before the regulations creep back in again. And we almost never see anything comparable to a botnet takedown in terms of orders of magnitudes–we see some small reforms that may be bigger or smaller in impact, but we’re talking 1% or 2% improvements, not 50% or 75%.

The only way to move to a better long run path is to change something fundamentally structural. Eli imagines an extreme version of such a change in his post on the utopia of infinite elasticity.

It’s tempting to think that the bond market is powerful because of corruption, but that is at most a proximate source of power. The real source of power is elasticity. The supply of financial capital is highly elastic; it moves around the globe in milliseconds. Try to tax it and the incidence of the tax will go elsewhere; burden it with regulations and it will flea to a more hospitable climate.

Imagine a world in which all factors of production were as mobile and elastic as financial capital. If labor and physical capital could flea instantaneously and at low cost from bad policies, there would be little danger from either the predatory or incompetent state. In short, it would be a libertarian utopia.

As with any ideal, Eli does not believe that such a world is possible to get to, but he does think that we can move closer to it. Maybe, rather than simply developing specific technologies of resistance, we can build a whole infrastructure of resistance. Maybe mass adoption of 3D printing and wireless mesh networks helps move us to a much more elastic world.

Otherwise, we will just be stuck in this race against coercion where we eek out progress in inches rather than big leaps. We may occasionally widen the gap, or set back coercion with the reform movement of the moment, but we’ll never see the enormous gains of the early Industrial Revolution on a regular basis again. In this story, you can take everything that Cato, the Hoover Foundation, and even Milton Friedman accomplished, and throw them in the garbage, and you won’t see much of a difference in the long run.

Instead of investing in lobbying, we should be investing in an infrastructure of resistance.

I have to admit that I find this to be the most fascinating story of all.

Two Arguments in Defense of Unpaid Internships

I’ve heard a lot of arguments about how unpaid internships are evil or a form of exploitation. Recently I heard some of those arguments brought up again, and I decided it was time to stand up for this much maligned position.

An Argument from Principles

Let me lay out a few scenarios for you:

  1. Five people start their own individual blogs, writing several posts a day and making them freely available online.
  2. Those five people decide they want to ditch their individual blogs and all blog together in a group blog.
  3. A small paper offers to have the five of them blog under their banner, but does not pay them to do it.
  4. Instead of 3, the five people ditch their blog and get unpaid internships at the small paper.

I would venture that most people who think there is something wrong with unpaid internships don’t think that there’s anything wrong with 1-3 above. What I would like is for those who believe there is something wrong with number 4 to explain to me what distinguishes it, morally, from 1-3. Because I can’t see it.

I suppose they could argue that there is some distinction between number 4 and the unpaid internships they don’t like. I welcome people to explain to me if that is the case.

So my first argument is simple: if there’s nothing wrong with 1-3, and there’s no moral difference between them and 4, then, in principle, there is nothing wrong with unpaid internships.

An Argument from Consequences

You can’t really talk about consequences without making a bunch of assumptions about what good consequences are. So I’m going to tread carefully here, but I think the assumptions I’m going to make are pretty reasonable and widely shared.

Of course you can’t even talk about consequences without some idea of how the world works. Rather than pretending to know more than I do, let me lay out a few more possible scenarios for you:

  1. If the small paper is forced by law to pay their interns, it won’t keep any of them; our five individuals will not be associated with the paper at all.
  2. If the small paper is forced by law to pay their interns, it will pay one of them a paltry amount and get rid of the other four.
  3. If the small paper is forced by law to pay their interns, it will pay three of them a paltry amount and not the other two.
  4. If the small paper is forced by law to pay their interns, it will pay all of them.

I think some of the people who are against unpaid internships think that the world works in such a way to make number 4 possible. I, on the other hand, tend to believe that the world looks more like 1 or 2 than 4.

This belief of mine is subject to debate, of course. For now, all I’ll say is that in the news business in particular, margins are so low that I have to think we’re much closer to 1 than we are to 2, for that particular industry at the very least.

People take unpaid internships because they gain something from them; whether it’s experience, exposure, or the fact that it’s more prestigious to have a professional publication on your resume than a personal blog. Taking the unpaid internship makes them better off, at least in the long run. Taking a paid internship obviously makes them even better off, but they won’t always have the luxury of that choice.

Readers are also better off when they have more pieces to read that they enjoy. If fewer unpaid interns at the paper means fewer enjoyable pieces for the readers, then getting rid of unpaid interns makes them worse off.

So my second argument, while slightly longer in buildup than the first, is still quite simple: if we live in a world that looks like number 1 or 2 above, and arguably even 3, then getting rid of unpaid internships makes the potential interns as well as potential beneficiaries (in this scenario, readers) worse off.

EDIT: Patrick Delaney came back with a scenario that definitely merits discussion:


@ @ Isn’t there another scenario, viz. sack existing employee and replace with unpaid intern? What justifies that?
@pxdelaney
Patrick Delaney

And discuss it we did–you can see the whole conversation here.