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The Ethical Economy: Rebuilding Value After the Crisis
A more ethical economic system is now possible, one that rectifies the crisis spots of our current downturn while balancing the injustices of extreme poverty and wealth. Adam Arvidsson and Nicolai Peitersen, a scholar and an entrepreneur, outline the shape such an economy might take, identifying its origins in innovations already existent in our production, valuation, and distribution systems.
Much like nineteenth-century entrepreneurs, philosophers, bankers, artisans, and social organizers who planned a course for modern capitalism that was more economically efficient and ethically desirable, we now have a chance to construct new instruments, institutions, and infrastructure to reverse the trajectory of a quickly deteriorating economic environment. Considering a multitude of emerging phenomena, Arvidsson and Peitersen show wealth creation can be the result of a new kind of social production, and the motivation of continuous capital accumulation can exist in tandem with a new desire to maximize our social impact.
Arvidsson and Peitersen argue that financial markets could become a central arena in which diverse ethical concerns are integrated into tangible economic valuations. They suggest that such a common standard has already emerged and that this process is linked to the spread of social media, making it possible to capture the sentiment of value to most people. They ultimately recommend how to build upon these developments to initiate a radical democratization of economic systems and the value decisions they generate.
Much like nineteenth-century entrepreneurs, philosophers, bankers, artisans, and social organizers who planned a course for modern capitalism that was more economically efficient and ethically desirable, we now have a chance to construct new instruments, institutions, and infrastructure to reverse the trajectory of a quickly deteriorating economic environment. Considering a multitude of emerging phenomena, Arvidsson and Peitersen show wealth creation can be the result of a new kind of social production, and the motivation of continuous capital accumulation can exist in tandem with a new desire to maximize our social impact.
Arvidsson and Peitersen argue that financial markets could become a central arena in which diverse ethical concerns are integrated into tangible economic valuations. They suggest that such a common standard has already emerged and that this process is linked to the spread of social media, making it possible to capture the sentiment of value to most people. They ultimately recommend how to build upon these developments to initiate a radical democratization of economic systems and the value decisions they generate.
- GenresEconomics
186 pages, Hardcover
First published July 30, 2013
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February 16, 2017
This book wasn't exactly what I was expecting - I was expecting a book about ethical frameworks for evaluating morality in an economic system. This book is quite different, though related. The authors write from the point of view that our society is experiencing what they call a "value crisis" - we are unable to rigorously describe or measure value. They describe our transition from "Fordist" industrial eocnomy in which value is measured solely by labor time to a new information economy.
This is evident in the runaway speculative markets, and the rise of "intangibles" as a share of market prices. This is an economic crisis but also an ethical one, because there are "orders of worth" emerging in our society that we can't describe or order (sustainability, prosperity, "social responsibility", justice, etc.)
These markets are not rational, demonstrated by the fact that a) theoretical descriptions of the free market almost never apply due to regulation and oligopoly, b) markets are no longer places where individuals come together to negotiate price, rather prices are an amalgam of outputs from various technologies and processes. Furthermore, markets aren't actually value free, rather the values are incorporated as "furniture" in our conception of markets. The predominant furniture is that economic growth and increasing prosperity are good. The authors suggest that these are no longer a good representation of most of society's values.
Our social ethical systems have degenerated into postmodern relativism. This happened in part because of our declining "collectivist" attitudes - formerly, your ethics and values were largely dictated by your religion, class, trade union, etc. this has forced us to "be ethical" and reason about ethics, but our society has no method or space for the deliberation of ethics.
The authors describe some tools which may help us transform our economy into one that better reflects and quantifies our values. The primary tools are "Productive Publics" and measurements of consumer sentiment. Productive Publics are defined as "voluntary associations of strangers who are united by their devotion a common project or pursuit." Open source software projects are their favorite example, though they reference other examples as well (both truly "public" in the OSS sense, but also within corporations.) The authors suggest that productive publics can be primary producers of value in this new economy, and that social reputation systems could be used to manage relationships within and between those publics. This is an interesting premise.
The authors suggest using emergent sentiment patterns in social media (using sentiment analysis) to create a measure of the intangibles. They believe that public sentiment can be used to quantify a brand's corporate responsibility, agility, and so on.
This is where they really lost me. I feel some of the arguments the authors make and the conclusions draw were tenuous, and the sentiment-as-responsibility idea was the most egregious. They say the following (page 127):
What?! Perhaps I am misunderstanding their point of view, but it seems they are suggesting using sentiment as a proxy measure for all these intangibles - how can we have any confidence that sentiment rationally reflects a value like sustainability? Consumer sentiment is fickle and manipulable, and its state at any given time isn't inherently tied to a company's sustainability or agility. As a thought experiment, suppose that an energy company offered 100,000 people $100 right after embarking on an environmentally destructive project. I suspect many of those people would become ardent evangelists on behalf of the company's reputation...
This isn't to suggest that sentiment is a bad input/measure for valuation, but the idea that we should rework our economy around it seems silly.
This is evident in the runaway speculative markets, and the rise of "intangibles" as a share of market prices. This is an economic crisis but also an ethical one, because there are "orders of worth" emerging in our society that we can't describe or order (sustainability, prosperity, "social responsibility", justice, etc.)
These markets are not rational, demonstrated by the fact that a) theoretical descriptions of the free market almost never apply due to regulation and oligopoly, b) markets are no longer places where individuals come together to negotiate price, rather prices are an amalgam of outputs from various technologies and processes. Furthermore, markets aren't actually value free, rather the values are incorporated as "furniture" in our conception of markets. The predominant furniture is that economic growth and increasing prosperity are good. The authors suggest that these are no longer a good representation of most of society's values.
Our social ethical systems have degenerated into postmodern relativism. This happened in part because of our declining "collectivist" attitudes - formerly, your ethics and values were largely dictated by your religion, class, trade union, etc. this has forced us to "be ethical" and reason about ethics, but our society has no method or space for the deliberation of ethics.
The authors describe some tools which may help us transform our economy into one that better reflects and quantifies our values. The primary tools are "Productive Publics" and measurements of consumer sentiment. Productive Publics are defined as "voluntary associations of strangers who are united by their devotion a common project or pursuit." Open source software projects are their favorite example, though they reference other examples as well (both truly "public" in the OSS sense, but also within corporations.) The authors suggest that productive publics can be primary producers of value in this new economy, and that social reputation systems could be used to manage relationships within and between those publics. This is an interesting premise.
The authors suggest using emergent sentiment patterns in social media (using sentiment analysis) to create a measure of the intangibles. They believe that public sentiment can be used to quantify a brand's corporate responsibility, agility, and so on.
This is where they really lost me. I feel some of the arguments the authors make and the conclusions draw were tenuous, and the sentiment-as-responsibility idea was the most egregious. They say the following (page 127):
"And this criterion [sentiment] measures affective proximity according to a common standard that can transcend particular value horizons. From an economic point of view this approch would be rational because general sentiment is able to measure precisely what creates value in the processes in which these intangible assets are produced. And this measurement yields results that are generally valid, since with general sentiment we have a common denominator by which diverse forms of ethical capital could be compared and valued."
What?! Perhaps I am misunderstanding their point of view, but it seems they are suggesting using sentiment as a proxy measure for all these intangibles - how can we have any confidence that sentiment rationally reflects a value like sustainability? Consumer sentiment is fickle and manipulable, and its state at any given time isn't inherently tied to a company's sustainability or agility. As a thought experiment, suppose that an energy company offered 100,000 people $100 right after embarking on an environmentally destructive project. I suspect many of those people would become ardent evangelists on behalf of the company's reputation...
This isn't to suggest that sentiment is a bad input/measure for valuation, but the idea that we should rework our economy around it seems silly.
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