Anomalous Presumptions

In a post based on his new book Tyler Cowen recently questioned whether revealed preferences, measured by monetary exchange, are an adequate framework for economic analysis. I’ve been planning to post further on non-monetary transactions and his quote has pushed me over the threshold.

In “The cost of money” I explored why so many network-mediated interactions are non-monetary, but I only looked at the negative side – the irreducible transaction costs of money. Now I want to explore the positive side – what do people get for contributing to open content production, such as testing or writing open source software, writing for Wikipedia, proofreading for the Gutenberg project, blogging, posting pictures on Flickr, etc.? With very rare exceptions contributors don’t get money, but rather are willing to spend money – they often have to pay at least a little for internet service and hosting, and open content production sites seem to get quite a few cash donations when they ask.

Obviously people get many things in return for their investment in content production, including such indirect monetary rewards as better jobs. However I argue that a dominant theme across essentially all kinds of open content production is esteem – the favorable opinion of one’s chosen reference group. We can see the importance of esteem in efforts by contributors to make sure they are properly credited, debates over priority, flame wars over design judgments, etc. Of course making contributions as investments in esteem is not new; we see very similar patterns in scientific and artistic communities going back at least hundreds of years.

Esteem is clearly sought in most cases for its intrinsic value to contributors, not for its instrumental value. For most of us the favorable opinion of our reference group is not a means to other ends, such as higher salaries, it is an end in itself. This is consonant with the recent research (e.g. 1, 2) indicating that happiness, in developed societies, is a function of social relationships and relative economic status, not material well being per se. I think that once most material needs are satisfied, wealth produces happiness largely by helping us to garner esteem.

If we take esteem seriously as an important source of intrinsic value, then we have gone a long way toward explaining how open content production can replace financially mediated content production. For many people, contribution to open content is a very efficient investment with returns in esteem– far more efficient than incurring the double transaction cost of converting work into money, and then money into investments in goods and services that may return esteem.

We are all familiar with the way digital networks are changing the cost of collaboration by reducing manufacturing and distribution costs for information goods asymptotically toward zero. Equally important, given this analysis, is the fact that networks dramatically increase the chance that someone can find a reference group that will esteem the contributions they can make. This is the dual of Benkler’s key point in “Coase’s Penguin” that networks allow for much better recruitment of contributors to projects based on the fit between them. Benkler emphasizes the ability of individuals to make contributions that are valuable to the project; I emphasize the esteem the reference group provides to the individual; but these are two sides of the same phenomenon.

However the replacement of money by esteem is not just a matter of efficiency. We can see this by observing that in many cases, we cannot use money to acquire major sources or indicators of esteem, such as Olympic gold medals, Nobel prizes, or even the laughter of friends. If any of these were known to be for sale they would lose all their value! I have some ideas about why this is true that I will address in a subsequent post.

Filed by Jed at 11:38 pm under Economics
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Clay Shirky in 2003 wrote a deservedly famous piece on why micro-payment systems always fail. However Shirky’s analysis stops with the psychological burden of deciding to pay for content. For the reasons noted below, I think this problem has much deeper roots in the nature of (modern) money itself.

First, money is totally fungible and portable – especially virtual money, discussed in more detail below. This makes it an extremely attractive target for fraud and theft, and produces an “arms race” between criminals and those who protect money. Furthermore, because theft or fraud of virtual money can be largely or completely automated, crimes that get even relatively small amounts from very large numbers of people can be attractive (Shirky actually references a description of one technique for this in passing).

Second, the risk of fraud (or simply error) in exchanging money for goods (or services) creates an enforcement cost for each individual contemplating a transaction. Errors are random and would tend to balance out, but the incentive for fraud, and for biasing errors, is great. (These are not really distinct, since fraud is just induced error.) Automated methods make “micro-fraud” feasible and cost effective in some cases. This is the kind of problem that Shirky addresses most directly.

Finally, most modern money is virtual, and exists only as numbers in various databases, and the only thing that keeps money from being created or destroyed is the discipline of the various institutions that maintain the databases. If this discipline breaks down anywhere, money can be created or destroyed by transactions that do not balance. If such creation or destruction becomes common enough, the failure undercuts the fundamental properties that make money work.

This sort of global transaction discipline requires a substantial enforcement effort – and therefore cost – to maintain, especially given the massive incentives to cheat.

Now let’s put these problems in the context of “frictionless” network activities. Exponential declines in the cost of network bandwidth, storage, and computation are driving the cost of producing and distributing many services and information goods toward zero. The costs of processing transactions involving virtual money can ride these same exponential cost curves down toward zero. However the cost of enforcing honest monetary transactions cannot follow the same cost curve. Enforcement cost is constrained by the potential for fraud and error, and we can’t just depend on automated enforcement mechanisms because they are always open to automated theft and fraud.

The result is that as information goods and services become cheaper, they encounter a threshold where their price is so low that the enforcement cost of monetary transactions is greater than the value of the transaction. At this point there are two alternatives: they can stop following the declining cost curve, or they can be transferred through non-monetary transactions. While some goods and services have stopped following the curve, many have become “free” (i.e. supported by advertising and/or voluntary contribution). Advertising is a common example of a non-monetary transaction – the consumer “pays” some attention to the ad in exchange for the good or service. Voluntary contributions are more subtle, but we can consider them transactions in which the consumer “pays” attention to the producer themselves – the way we pay performers with applause and credit.

In one sense this is a normal, economically rational process, and it certainly fits Coase’s general framework of transaction costs. The peculiar thing about this case, however, is that it excludes money itself from the transaction process on fundamental economic grounds, indicating that there are intrinsic problems with using monetary value as a metric for transactions.

Note that as the likelihood of significant loss through fraud or error increases, the minimum value for feasible transactions also increases. It is especially hard to judge the value of contracting for unique goods. Thus in cases of one-time production of information goods such as software, encyclopedia articles, or commentary on current events, the threshold will be much higher than for transactions with frequently replicated outcomes.

Understanding transaction costs in general, and the cost of money in particular, helps a great deal in explaining why so much of the landscape of information goods and services has transitioned so rapidly toward a “free” (i.e. non-monetary) approach. However costs to consumers can only be part of the story. There must also be benefits to producers, and that is a separate (and possibly more important) issue, which I’ll discuss in a later post.

Filed by Jed at 3:52 pm under Economics
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In an interesting post Joel on Software discusses many examples of specific “leaky abstractions”, and how our daily work as software developers requires us to understand, not just the abstractions we work with, but the underlying mechanisms that maintain them (and that fail in some cases).

I’m sorry to say that in my experience, philosophers tend to treat abstractions as though they behave as defined, and tend to ignore the actual mechanisms (typically made out of human cognition and social interaction) by which those abstractions are maintained.

As a result, they don’t seem to have good conceptual tools for dealing with the inevitable “leakiness” of all abstractions. Of course an implicit point of Joel’s article is that our abilities to maintain abstractions allow us to ignore this leakiness most of the time — and some disciplines, such as mathematics, for example, have suppressed the leaks very well. However I think we could find ways in which even the best understood mathematical abstractions leak, though I won’t argue that point here. It would be interesting to rank disciplines by how well they manage the leakiness of their abstractions.

Philosophy has a different relationship to leaky abstractions than most disciplines, because it is mostly about abstractions (rather than mainly about the things the abstractions describe). The inherent leakiness of abstractions raises substantive issues throughout philosophy. It can’t be regarded as a “boundary problem” that can be ignored in “normal” situations, as it can in most disciplines (except during rough transitions). Note that this need to pay explicit attention to mechanisms of abstraction also applies to computer systems design — good system design has to manage leakiness, and must accept that it cannot be eliminated. This is true for the same reason — system design is about abstractions, and only indirectly about the things those abstractions describe.

Filed by Jed at 2:50 pm under Philosophy,System design
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After posting my ignorant non-argument about philosophical theories of reference, I was happy to see a post on The Use Theory of Meaning at The Leiter Reports that seemed highly relevant, with abundant comments. Alas, on reading it I found that it was unhelpful in two ways. First, generally the arguments seemed to assume as background that the meaning of linguistic expressions was universal (much more on this below). Second, the discussion was obviously confused – by which I mean that participants disagreed about the meaning of the terms they used, how others paraphrased their positions, etc.

If the first problem is correct, then the whole discussion is fairly pointless. Furthermore I think the first problem creates the conditions for the second, because an assumption of universal meanings for expressions is so far from any actual situation in language that an attempt to base theories on it is likely to lead to chaos.

Here is a clear example of this assumption of “universal meaning”: William Lycan in Some objections to a simple ‘Use’ theory of meaning says “[A rule for the meaning of a name must be] a rule that every competent speaker of your local dialect actually obeys without exception, because it is supposed to constitute the public linguistic meaning of the name.” “A rule that every competent speaker… obeys” is universal in just the sense I mean.

Now, this simply isn’t an accurate way to look at how people actually use language. I hope any readers can see this if they think about some examples of creating and understanding expressions, but I’m not going to argue for it now – maybe in another post. I can imagine all sorts of responses: Chomsky’s competence stance, claims that we have to talk that way to have a meaningful (!) or useful (!) theory, statements that it is some sort of harmless idealization (of a different sort from competence), etc. However given the messes in the philosophy of language now which are (in my opinion) largely due to this background assumption, and the concrete results in linguistics and machine learning that show we can get along just fine without it, I reject any such claim. Again, I’m not going to try to substantiate these bald claims right now – but I’m confident I can, and the Steels paper in the earlier post is a good example.

As my earlier post says, what we actually have is a population. To take the story further, each member has dispositions (rules if you will) about how to use a term, how to compose terms to create more complex meanings, or decompose expressions to recover their meanings, etc. But the dispositions of each member of the population will in general be different in all sorts of ways from those of other members. There is no requirement that these dispositions be completely describable, any more than your disposition to shape your hand as you reach for a cup is completely describable – though they might be remarkably consistent in some ways. As a result, no matter how narrowly we define the circumstances, two members of the population will quite likely differ in some details of their use of expressions in those circumstances.

Even with no total agreement in any particular, language works because (again as mentioned in the earlier post) people can resort to context and can create more context through interaction while trying to understand or make themselves understood. This resort prompts us to adjust our usage dispositions over time to bring them closer together, when we find such adjustment helpful and not too difficult. However it also implies the meaning of any given expression may depend in an unbounded way on its context.

I’ll end this with comments on two related issues. First, even apparently consonant ideas, such as Wittgenstein’s “family resemblances”, typically embed the background “universal meaning” assumption. In Wittgenstein’s metaphor the word “game” refers to a particular family, held together only by those resemblances – but the family is treated as a universally accepted meaning for the term, albeit not conveniently delimited by necessary and sufficient conditions. My use of overlapping (and largely consonant) dispositions is not equivalent to this, as I hope is obvious, perhaps with a little thought. However of course overlapping dispositions can easily give rise to meanings that fit Wittgenstein’s “family resemblances”, and the relationship between two different speakers usage dispositions for a given term should perhaps be seen as a family resemblance.

Second, such things as Gettier problems and difficulties with vagueness seem to me to arise quite directly from this assumption of universal meaning. Given the context dependence of meaning in my proposed (very fundamental) sense, it is not surprising that unusual contexts induce incoherence in our intuitions about meaning. The interpretation of our claims that we’ve seen a barn will depend on whether the listener knows there are lots of fake barns about (and knows that we know or don’t know). A population with varying dispositions about the boundaries of Everest will produce something very like supervaluation, and our actual use of language will take that into account. And so forth.

Filed by Jed at 12:57 am under Language,Philosophy,Population thinking
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Thomas Kuhn expressed grave doubts about whether the protagonists on opposite sides of a given scientific revolution even “live in the same world”. His doubts were based on many historical examples where the opposite sides disagreed deeply about the reference of important terms that they shared. In later essays he emphasized that the participants could understand each other, and rationally make choices about what theory to adopt based on reasonable criteria, but he never gave up this fundamental concern.

Kuhn’s examples from scientific revolutions are especially well documented cases of the sort of shifts of reference that occur all the time in our language. Kuhn’s analyses make clear the stakes: if we want to understand how beliefs can and should change, we need a concept of reference that adequately supports these kinds of changes, and that gives us some basis for judging whether the changes are appropriate.

We can approach the needed concept by observing that a reference can’t be understood in isolation. A speaker’s reference can’t succeed unless it picks out a referent for some listener. Success depends on a shared context; typically others understanding references or making them, but in some cases a context of the same person’s earlier or later referencing. (As a software developer, I am very familiar with the need to understand my earlier self’s choice of references – “When I named this variable, what was I thinking?”)

The typical philosophical definition of reference elides this need for context. For example, the Stanford Encyclopedia of Philosophy begins its article on reference by saying “Reference is a relation that obtains between expressions and what speakers use expressions to talk about.” The article continues with an exploration of the relationship between expressions (typically words) and things; speakers drop out of the picture. And listeners were never really in the picture.

The causal theory of reference in a way admits this need for context, but quickly jumps to defining rules for using very stereotyped historical context to pick out the correct target of a reference. In effect, the elision performed rhetorically in the article is performed formally in these theories of reference – speakers and listeners are simply carrying out their formal roles (more or less perfectly). Reference depends only on the very narrow aspects of the situation specified in the formal account.

This may work as an approximation to the use of some kinds of references in stable, unproblematic situations, but it fails badly in situations where the references of terms are unstable, murky, and being negotiated – that is, in precisely the sort of situations Kuhn documents, and more broadly, the sort of situations where we need to understand how reference actually works! This seems to me to be a philosophical case of looking under the lamp-post when we know the car keys were dropped in the alley.

Other philosophers have taken this goal of a formal account of reference as valid, but then either deemed it “inscrutable” (Quine) or vacuous (deflationists). In either case, we are left with no useful tools to interpret or judge situations involving reference conflict or change. This would be a case of denying that there ever were such things as car keys, or if there were, that they did anything useful.

I think Kuhn suffers from a related problem. He seems to have felt that formal accounts fail in scientific revolutions (as they clearly do), and that only a formal account could explain reference. So during revolutions something very mysterious happens, and people come to live in “different worlds”. Within each world reference could perhaps be formally described; across worlds formal descriptions break down.

Let us use our original intuition to take the analysis of reference in a different direction. “Reference is a relation that obtains between expressions and what speakers use expressions to talk about.” If a speaker is using an expression to talk about something, then there is a listener (at least hypothetically) who will have to understand it (correctly) for the speaker to be successful. Correct understanding, in this sense, means that it picks out an aspect of the world that satisfies the purposes of the speaker. This is the minimal context of reference.

Considering this context leads to a view of reference which is neither formal nor useless. Expressions in context do refer. Given enough context, people are very good at figuring out what a speaker refers to. But the aspects of the situation that could be relevant are unbounded and the process of figuring out can’t be specified by a fixed set of rules. In particular, if participants find that their ability to refer successfully is breaking down for some reason, they resort to searching for potentially relevant new aspects of the situation, and arguing about what sort of rules should be followed – behaviors characteristic of scientific revolutions, as well as other episodes of belief and meaning change.

In this account, even though no complete formal account of reference is possible, reference is not mysterious, opaque or incomprehensible. In fact, the process of achieving consensus on the reference of terms is simple and robust enough that it has been implemented in populations of robots. In these experiments, each robot did live in a “different world” – each robot sensed and classified the world in a unique way. Furthermore, there was never a fixed procedure for them to negotiate agreement on which terms to use. But very quickly, through rough pointing and a desire to coordinate their references, the whole population converged on common terms, often after some disagreement (i.e. different subgroups temporarily agreed on different terms). Under some circumstances (such as a large influx of new robots who didn’t know the consensus terms) references again came “up for grabs” and sometimes got reassigned. None the less, the terms used during any given period of consensus did refer; a speaker could use an expression to pick out a piece of the world, and a listener would reliably guess the correct referent.

In some sense, I am pointing at (but by no means adequately setting forth) a causal theory of reference. However the causal process is one of approximate (and shifting) consensus in a population of speaker/listeners, not one that can be stereotyped as “dubbing” or reduced to any other formal account based on specified factors. I hope my description gives some sense of why I think this addresses Kuhn’s concerns. In addition it provides a natural way to address issues of vague reference, reference to fictional entities, etc. — but such bald assertion needs some followup which won’t be forthcoming right now.

I have a sense, however, that this account would be profoundly unsatisfactory to most philosophers who are concerned with reference. If such a philosopher finds it unsatisfactory (in its goals and means, not its current state of extreme sketchiness), my question is Why? Why have philosophers spent so much effort on such problematic formal approaches, when a relatively simple account based on actual (and simulated) use of reference will do the job?

Filed by Jed at 6:02 am under Language,Philosophy
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