Wednesday, 4 February 2015

From Education to Economics and Back again

I'm nearing the completion of my book project, "Education and Information", and the penultimate chapter is about economics. There's a lot to say about this (another book!) - and this is very (very) rough at the moment. Blogging it in this form allows me to externalise things which have been knocking around in my head for some time. I expect it all to change.

I want to call economics into question by examining what we see happening in education. It's not just student fees and marketisation (horrible though they are): those things tend to get critiqued through an economic lens which I think is broken (the same way of thinking that brings us austerity and global capitalism also brings the so-called radical critique!). I think education (and what's happening to it) tells us something important about what economics is missing. Fundamentally, it is about 'exchange', and for this reason I focus on Whately's idea of 'catallaxy', side-stepping the free-market connotation brought to it by Mises and Hayek. We need to think about exchange in the broadest sense - not just the market, but the gift economy; financial transactions and Mauss's potlatch.

Stiglitz points out that knowledge and economy are closely related. Hayek is probably the first major economist to reconceive the discipline in terms of information, and this means that learning and economy are also highly connected (which is what Stiglitz's latest book is about). The questions are "what do we mean by information?" and then "how does learning relate to it?". That there are no satisfactory answers to either question ought to give economists pause for thought before embarking on their econometric fantasies (fat chance!); it also ought to cause Higher Education ministers to worry about what they are doing to Universities as they take their cue from deluded economists! I situate these fundamental questions in the space between two kinds of exchange: the exchange of the market (market catallaxy), which we may assume to be oriented around information, price signals, etc, and which has inspired the 'information sets' from universities as ministers try as create a market in education; then there is  'potlatch catallaxy' not considered by Hayek (but acknowledge in all but name by Mises) wherein irrational acts, generosity, love and exhuberance exhibit its own kind of logic. This was most famously studied and satirised by Veblen, but also later by Bataille (although he is never seriously considered by economists!).

The contrast between market catallaxy and potlatch catallaxy reveals two descriptions of information:
  • as an identifiable measurable phenomenon; 
  • as a structure of relations which can only be inferred. 
I argue for the latter, suggesting an empirical ecological approach based on Ulanowicz's statistical ecology. The important feature of this analysis is the emphasis that it places on dissipation and growth. Effectively, this is to negativise information: to focus on the 'not information' of an ecosystem. The dissipations of an economy are those parts of it which lose energy - through deliberation, inefficiency, consumption, reflexivity, crisis, and so on. These are the bits which on the one hand keep things together, and on the other, drive innovation and growth. What brings about the dissipations? I think it is the clash of paradigms of thought, contested values, cultures, identities, working practices, etc. Indeed, the kinds of things which are associated with institutions of higher learning and democratic government.

There is a question about practical ways forwards. Is there a way a society can challenge thinking and encourage perspectival diversity? Is there a way that analytical tools can be tools for individual experimentation, rather than governmental determination? Is there a way to explore the contradictions in one's own thought, to examine the dissipative dynamics of an institution, or to monitor the maintenance of institutional diversity? Finally, is there a way that an economic revolution might entail a learning revolution?

At the moment all we have is austerity and bad education grounded in a deficient catallactic logic. Can we do better?

Education and Exchange

The declaration of scarcity of something is the first step to turning it into a commodity. Gold and diamond declares both its physical scarcity and the scarcity of its beauty. Both scarcity and beauty convey information, but of different sorts. In considering a piece of gold jewelry, Wiener highlights the difference between information concerning the raw 'value' of gold, and the workmanship involved in fashioning it (the 'faҫon'). Wiener points out that 
"many a fortune has been lost by ignoring the difference between these two types of values, that of the gold and that of the faҫon. The stamp market, the rare book market, the market for Sandwich glass and for Duncan Phyfe furniture are all artificial, in the sense that in addition to the real pleasure which the possession of such an object gives to its owner, much of the value of the faҫon pertains not only to the rarity of the object itself, but to the momentary existence of an active group of buyers competing for it." 
At the heart of the error which Wiener highlights is the problem of economic calculation, which as Mises points out “cannot comprehend things which are not sold and bought against money.” (p 215). Mises goes on to say that
There are things which are not for sale and for whose acquisition sacrifices other than money and money’s worth must be expended. He who wants to train himself for great achievements must employ many means, some of which may require expenditure of money. But the essential things to be devoted to such an endeavour are not purchasable. Honor, virtue, glory, and likewise vigor, health, and life itself play a role in action both as means and as ends; but they do not enter into economic calculation.” 
Corporate social structures of University, school, college, publisher, academic society contrive to make education and knowledge scarce. Scarcity declarations about knowledge and skill can make it more likely that scarcity declarations about employability (representing other corporations) can further be made. Such behaviour is not new. Scarcity of knowledge, skill, opportunity and so on were the cornerstone of medieval guilds and churches, and it continues in professional bodies, trades unions, global corporations and universities Within Universities, there are sub-groups of corporate activities represented as discourses, of which economics is one that maintains the scarcity of a narrative for comprehending all the others. Nation states, schools and other social entities do not share the same corporate status. In recent years, there have been a number of significant changes to the corporate constitution of universities which have affected their relations with other corporate entities: notably, government, industry and so on. The narrative for understanding these effects belong to the economists who are in turn subject to the same changes in academia as everyone else. The question is what do these recent changes reveal about the world? How might they challenge received economic narrative?

It is unfortunate that those critics of transformation of education into a ‘market’ tend to adopt the received economic narrative which is also upheld as the basis for effecting those transformations in the first place. Stiglitz, for example, presents an argument for creating a ‘learning society’ by relating prosperity, innovation and productivity and situating their causal nexus as the learning engendered  in a society. Producing impressive data relating growth and levels of education, Stiglitz uses an armoury of econometric techniques which situate education at the heart of a model of idealised agents. Stiglitz has been a powerful critic of the marketising forces of education; yet at the same time uncritical of the theory-practice gaps which open up within his own discipline as one tries to reason about the deeply complex processes of skill development.   The acquisition of human capital, return on investment, productivity rises. 

Andrew McGettigan, in his analysis of recent UK Higher education policy remarks that:

“Education is being re-engineered by stealth through a directed process of market construction, each move designed to protect the elite and expose the majority, At the same time, the gamble involves running the risk of subprime degrees. Existing quality assurance, which has its faults, is supplanted by ‘value for money’ a ‘risk-based’ system, and a regulator tasked with promoting competition.”

Such worries about ‘quality’ are predicated on an economic intervention whose efficacy is partly tied up with instruments of assessment together with economic thinking that concerns the 'production function' of education. The provision of resources for education, how it should be paid for, who should pay for it, what its benefits are, and so on form the nexus of these arguments. On both sides of the debate, rational predictions are made for the access to higher education, for the long-term social effects of policy. Criticism of policy is often made on economic grounds: that the new system of ‘loans’ is more expensive than the previous system, and so on. Yet very little of this is supportable, and much of it is quickly shown to be false: the UK education minister, David Willetts, predicted that Universities charging the highest fee available to them would look ‘rather silly’. It turned out that few worried about such appearances: looking silly became de-rigueur!

Accounts of the costs of Higher Education in the US are well-documented. As the UK government closed the door to state funding of Higher Education, so student clamour for education and the eye-watering amounts of debt entailed by it has increased. Who thought this would happen? At the same time, institutions of Higher Education have established themselves as business, with their leaders stylising themselves as ‘captains of industry’, on salaries to match. The UK government didn’t expect that students would not be ‘choosy’ about the price of what it was they were getting into. It appears to break a rule of common-sense economics: the higher the price, the greater the demand. So what does education tell us about economics?  It is not just the extent to which education can work as a market, but the extent to which education relates to the broader economy and civil society.

Central to these questions is what happens in educational exchange as students bargain large sums of money (which many haven’t yet earned) for imagined increases in social status brought about through certification. What might this tell us about other daily transactions in life? Mises, in introducing the subject of ‘catallactics’ with the aim of trying to delimit the scope of the subject of economics, says that
“The classification of actions according to their various motives may be momentous for psychology and may provide a yardstick for a moral evaluation; for economics it is inconsequential. Essentially, the same is valid with regard to the endeavours to restrict the scope of economics to those actions which aim at supplying people with tangible material things of the external universe. Strictly speaking, people do not long for tangible goods as such, but for the services which these goods are fitted to render them. They want to attain the increment in well-being which these services are able to convey. But if this is so, it is not permissible to except from the orbit of “economic” action those actions which remove uneasiness directly without the interposition of any tangible and visible things. The advice of a doctor, the instruction of a teacher, the recital of an artist, and other personal services are no less an object of economic studies than the architect’s plans for the construction of a building, the scientist’s formula for the production of a chemical compound and the author’s contribution to the publishing of a book.” 
Attempting to reorient the discipline around the problem of exchange, he argues that
“The subject of catallactics is all market phenomena with all their roots, ramifications and consequences. It is a fact that people in dealing on the market are motivated not only by the desire to get food, shelter, and sexual enjoyment, but also by manifold “ideal” urges. Acting man is always concerned both with ‘material’ and ‘ideal’ things.” 
It is precisely into the conflict between the material and the ideal that nascent educational markets find themselves operating.

Economic Calculation and Education: Investigating the “signal”

Hayek's concern for catallactics involved him in delving into decision-making processes on the market. Going to university is a decision faced by an increasing number of people across the world. How does a person decide to use their time and spend their money on educating themselves? What problem does the decision to engage in education solve? The grounds for decision are variously described as rational processes which determine the possible pay-offs of different courses of action (and its various nuanced versions – particularly that of Simon’s Bounded Rationality), and those theories of decision which consider it in the context of deeper anthropological evidence for giving, potlatch, and so on.

When we start to think about decisions, we have to ask “When do we know a decision is a decision?”, “Do decisions solve problems?”, “How do we recognise a problem?”, “What is an opportunity for making a decision?” There are different approaches to this: for example, Nigel Howard, whose work concerns political behaviour, regards problems as ‘paradoxes’ which require resolution in some form. Herbert Simon focused on the grounds for action and the redefinition between problems and strategies (so, for example, I might not have a clear idea of a problem, but might have a strategy for addressing it). At a deeper level, Marxists would argue about the motivation for deciding things, or identifying problems, as being rooted in class struggle and human emancipation; existentialists would examine similar territory with regard to psychological factors – the need for self-fulfilment, individuation, and so on. However we do this, we have to ask, “are decisions always solutions to problems; is agency decisive? Is agency rational?”

Cohen and March’s distinction between problems, opportunities, solutions and people is a useful starting point for characterising a decision. A problem is something which invites a solution, although many problems in corporate life, as Cohen and March argue, are avoided or overlooked for the sake of individual survival and conformance to institutional custom; an opportunity is the requirement to make a decision; a solution is a technique, capacity or practice which can be applied to addressing problems, but which exists apart from any particular problem to be solved. Whether decisions are made by oversight, or solution, whether people flee from them, or not, there is a background of information. If Cohen and March are right that most decisions do not solve problems, then the suggestion is that this information confuses people, or renders them incapable of making any kind of decision. The relationship between the information environment and the strategies that people engage in involves a variety of signals which ground decision-making. In economic decision-making, signalling - in terms of prices or other aspects of information such as public accounts, profit warnings, etc, is studied as a way of making sense of economic exchanges. Signalling theory also addresses the topic of educational qualification an example of how signals work.

The choice of a new employee is an important decision for a company. On the one hand, there is a decision to solve a problem of capacity in the organisation. There is also the problem of addressing the selection criteria of the job specification; This is a problem of avoiding being sued for unfair recruitment practices! Then there is the problem of selecting somebody who fits the organisational culture (who fits in); then there is the problem of extracting enough information by formulating questions to ask a candidate; then there is the problem of selecting by qualification. Not all of these problems are solved in the recruitment process. Indeed, the different problems often conflict with each other. The candidate’s problem is that they need a job. They are supplied with some information about the criteria and the problems of the employers in selecting their candidate. Some problems of selecting the candidate are not solutions to problems. Top amongst these is the criteria that the candidate should have a named qualification from a university. This decision solves the problem of ‘too many candidates’, but everybody who has been involved in a recruitment process knows that the requirement for educational qualification is a not a solution to too many candidates, but a solution to too many people – any of whom may or may not be appropriate for the job: the ideal candidate may not have the requisite qualification.

Education and money are both sources signals: for purchasers, for employers, credit rating agencies and so on. The signal given in the university funding debacle was that to not charge the full fee was a signal of deficient quality and consequently a risk to purchase. The central question about such signals concerns the information which is transferred: is a signal a ‘transfer’ of information, or does its dynamics depend on mechanisms of deeper interpersonal communication, prior knowledge and learning? The signalling of information when an individual is looking to choose a new employee appears to be dominated by the ‘problems’ that the different actors have: the problems of employers, the problems of applicants. Educational certification presents itself as a device for solving those problems (but certification is a solution looking for a problem). There are also the opportunities – the time-points of the interview, the CV sifting, the moments of interaction, the elevator pitch, and so on, where certain opportunities present themselves.

Signals and Scarcity

The illusion of scarcity is a powerful means of making people worried. “You’ll have to hurry with your decision – they’re going like hot cakes!” In Beck’s language, we live in the ‘risk society’. “You won’t get a job without a degree”, and we worry. The question remains as to how the illusion of scarcity is created, what does education do with regard to creating the illusion of scarcity? If knowledge is not scarce, does an education system have to create its scarcity? Furthermore, what is the nature of this worry? 

Salesmanship depends on association between problems and opportunities, situating solutions as the means to address these. Education positions itself as the nexus of the individual worries about their future, the opportunity of availability of funding and time for study and the solution of a degree certificate with regard to the personal success of the individual. Payday lenders do much the same. An alliance is made between the problems of the individual (lack of money, worries about the future) with the presentation of an opportunity ("special offer – only days to go!") and a solution ("take out our loans!"). These factors exist in a feedback relation. The "thing that people worry about" – is shaped by the provision of opportunities. So, with regard to the fulfilment of an employment position, the need to fulfil function x is an implicit declaration of the knowledge to perform function x, whose scarcity is partly determined by the institutional context within which x arises.

The issue is what actually happen at these moments: at the moments when an opportunity (artificially created as a scarce moment) is presented with a solution (a constructed declaration of scarcity or general deficiency) and a problem (some anxiety relating to the tension in an ontological engagement in society). What results is an exchange. The orientation between problems, solutions and opportunities are fundamentally different whether we look at gift economies or we examine market economies. Early accounts of bartering and acquisition of goods and services suggest that what Mauss calls ‘potlatch’ becomes as important as the exchange of equivalent goods and services. A comparison between the two is shown in the table below:

Market Catallaxy
Scarcity: wanting, possessing, worries about status
Problem-neutral, object scarce,
Acquiring – symbolic order of expectations
Offers, market conditions
Potlatch Catallaxy
Social imbalance, worries about position
Exuberant wastefulness
Communal gatherings, rituals, feast days, etc

The potlatch belongs to a deeper magical tradition. Contagion, sympathy, harmony are the drivers within this system. Duty, obligation and exuberance are the means of thinking. Transference of knowledge, health, happiness by religion and various forms of magic – whether sympathetic or contagious – characterise the status of different individuals in a society. Ancient services followed this model of giving. Sacrificial rituals were ways in which enlightenment and security could be guaranteed by virtue of gifts to the gods. The rationality of economic analysis since Smith has rested on codifications brought about by money but which in turn sit on something more ancient.

The suspicion that economic analysis rests on something more primitive is a view pursued by a number of thinkers in the 20th century. George Bataille, for example, influenced by Mauss, argued that the potlatch arrangements within communities were fundamental processes of assenting to the inevitability of death. Examples of these kinds of potlatch arrangements were the sexual behaviours, human sacrifice, and other forms of social pathology. The potlatch was a way of dealing with dark feelings. Bataille argued that throughout history, the regularities of human civilization involved waste, not rational productivity: from the pyramids to the palace of Versaille, from the Crusades to the world wars of the 20th century, waste appears to be the most significant feature. Arguing that such waste can be accounted for by theorising the need of human beings to expend ‘excess energy’ Bataille wrote a remarkable economic theory – although much disregarded by modern economists. There is a mystery about economic exchange, and those economists who have sought deeper than simple mathematical descriptions have numbered themselves in the discipline since its beginning.
The huge sums of money spent on education might also be considered a kind of ‘waste’: is this a potlatch? Where there is no tangible product which can be shown to result from the process, nothing that can directly be converted into money, it would appear that the underlying economic rationale for behaving in this way is far from clear. As Roger Brown argues, education is an “experience good” – something that can only been know after it has been experienced, and in order to be experienced, it has to be purchased.

Veblen’s Institutionalism and his Critique of Education

The view that education is fundamentally archaic in origin is one suggested by Thorstein Veblen. In the last chapter of his "Theory of the Leisure Classes", Veblen sees "education" as having not shaken off its sacramental origins, presenting itself to the "leisure classes" as a means of becoming 'priests' or even Shamans. Veblen argues that:

"The recondite element in learning is still, as it has been in all ages, a very attractive and effective element for the purpose of impressing, or even imposing upon, the unlearned; and the standing of the savant in the mind of the altogether unlettered is in great measure rated in terms of intimacy with the occult forces"

In the relationships between those who consider themselves 'lettered' and those who don't, there is perhaps still an element of 'impressing' and 'imposing upon' that goes on. Veblen characterises the behaviour as:

"The priestly servitor of the inscrutable powers that move in the external world [...] stand in the position of a mediator between these powers and the common run of  unrestricted humanity; for he was possessed of a knowledge of the supernatural etiquette which would admit him into the presence."

Veblen's point is not so much to drive home a point about education. It is to drive home a point about economics. His theory of the ‘leisure class’ provides the foundation for his critique of American capitalism. He argues that pretence with the leisure classes had become not only desirable, but mandated  by society in the 20th century. In mandating pretense, the engines of the education industry could be fired on the social aspirations of students. With this, so the engines of social difference and inequality of risk distribution drive the value conflicts and networks of wants and desires that (fundamentally) keep the rich getting richer. What Veblen would make of the present cult of 'celebrity' (to which many academics aspire as well as X-Factor hopefuls) is no less an aspect of the occult than high learning.
Veblen points to evidence for his association with priestliness and learning in the obsession with rituals  in the University:

"the learned class in all primitive communities are great sticklers for form, precedent, graduations of rank, ritual, ceremonial vestments, and learned paraphernalia generally."

Later he says "Even today there are such things in the usage of the learned community as the cap and gown, matriculation, initiation, and graduation ceremonies, and the conferring of scholastic degrees, dignities, and prerogatives in a way which suggests some sort of a scholarly apostolic succession."
And furthermore:

"These usages and the conceptions on which they rest belong to a stage in cultural development no later than that of the angekok and the rain-maker."

To what extent does Veblen’s critique measure up to what we see in the education system now? What he then says is a powerful acknowledgement of we would call the 'marketisation' of education:

"it is also no doubt true that such a ritualistic reversion could not have been effected in the college scheme of life until the accumulation of wealth in the hands of the propertied class had gone far enough to afford the requisite pecuniary ground for a movement which should bring the colleges of the country up to the leisure-class requirements in the higher learning. The adoption of the cap and gown is one of the striking atavistic features of modern college life, and at the same time it marks the fact that these colleges have definitively become leisure class establishments, either in actual achievement or in aspiration."

Finally, Veblen turns his focus on the leadership of institutions. Even in America in the 1920s, the pre-echoes of 21st century managerialism were present:

"it may be remarked that there is some tendency latterly to substitute the captain  of industry in place of the priest, as the head of seminaries of the higher learning. The substitution is by no means complete or unequivocal. Those heads of institutions are best accepted who combine the sacerdotal office with a high degree of pecuniary efficiency."

He goes on to say that there is a tendency for educational institutions to be run by the ‘money men’ rather than people of learning:
"There is a similar but less pronounced tendency to intrust the work of instruction in the higher learning  to men of some pecuniary qualification."

Whilst Veblen and Bataille might agree on the archaic origins of education and economy, the relationship between economic activity and educational activity remain obscure. There are many dimensions by which the economic behaviour of students might be studied: from microeconomic analysis of their motivations, to macroeconomic analysis of the social conditions which they operate in. This is not to mention the variety of newer approaches including ‘neuroeconomics’. Yet, economics itself is a discipline within the university. It suffers from a lack of prediction in its models. 

Education and Giving

The question of catallaxy and education is a question of examining the exchange of the witchdoctor and patient together with the exchange of the salesman and customer. There is little doubt that significant aspects of education are concerned with generosity. Intellectual generosity highlights the abundance of knowledge, the lack of scarcity, whilst on the other hand there is need to balance the pecuniary needs of institutions, and the functionalist rhetoric which maintains their viability in political systems. Under these conditions, scarcity needs to be declared. Moreover, the capacity to declare scarcity (which ultimately is the domain of the entrepreneur), or to declare abundance (which is the domain of the intellectual) are capacities engendered by education. The status of money appears to be constructed in the same way that the status declarations of the objects of the classroom and the ways that textbooks, web-pages, virtual learning environments and the other physical paraphernalia of education acquire its reality. The increasing codification of education through textbooks, certificates, curricula, and so forth have a bearing on the progress of citizens throughout the world. 

Education changes communicative competencies. Through the transformation of communicative competences arises the capacity to reformulate social relations: so positions between the master and the apprentice can be transformed when the communicative competences shift. Individuals have greater power and flexibility of communication in a wider range of domains and greater insight into the expectations of those around them. Such a capacity implicates power relations, which fundamentally are positioning relations. Money can function in a similar way in establishing a communicative competence whose generality can work with many kinds of community: money talks. It is a low-level communicative competence.

Technological transformation has delivered new means for declaring scarcity and new means for declaring abundance. The transmission of knowledge in the economy has been transformed through new technological competencies. With the transformation of the media of communication, so there has been a transformation of the means by which expectations can be communicated. The explosion of new means of communication have meant that new ways of making status declarations have emerged. For example, in the world of open source software development, a software developer may make communicative acts through their skill in programming. They may effectively make status declarations about the artefacts that they produce which might then be verified by a body of users. An active body of users of a software tool or service is in effect a declaration of capital, and at some point this declaration of capital may be financialised through floatation on the stock market. This rise of the collaborative status declaration through technology may, in effect, be seen as a particular ordering of expectations and an alignment of expectations between developers and users so that the software environment acquires increased status, which facilitates and supports the making of the status declaration. This might give the impression that knowledge is, in some way, capital, and that furthermore, exploitation of new technological means of communication creates the ground for new kinds of status declarations which can then be financialised.

The declaration of the status of new technological artefacts can be seen in the light of earlier dialectical ritualised practices which lay the foundations for the establishment of those status declarations. From the moment individuals are children and acquire ritualised practices to cope with early life, so those practices become encoded in discourses and values, and those discourses and values then become subject to technological transformations in the ways discourse is conducted, so the dynamics of value can be established. Yet behind this process lie moments where deeper, more ontologically-grounded actions might disrupt deep personal transformations. One example of where this can happen is in the actions of artists.

The YouTube artist does something remarkable online. Their videos acquire a mass following by people fascinated by the things which are done. This results in a status declaration which is of a different order from the status declarations of the activity in the open source software community. In the latter, there is a functional recognition of the capabilities of the software which will be encoded within the communications of a particular community. In the latter, there is a deeper recognition between the artist and the audience because of the ways in which irrational forces are exposed within the artistic movement. In this way, the expectations that arise behind the declaration of artworks as high value status objects can be appreciated.

Whilst an educational certificate carries a particular declaration of status from the institutional body of the University, the extent to which this declaration is accepted in wider society is disputed. As more students have acquired degrees, so the advantage of possessing one has diminished. Having said this, the networks of status declarations that are observable in other social domains like the open source software development or the YouTube artist, can tell us something about the need for a comparison between the status of entities like money and the status of a degree.

The order of expectations of society is universally codified to accept the status of the money object. In the case of the degree, this extent of cohesion in the acceptance of the status declaration is not the same. What the degree represents will depend on the expectations of individuals (particularly employers) as the student addresses their concerns. Ultimately, what the degree represents is a way of overcoming the first barrier to selection for interview. Whilst the degree certificate represents a status object declared by the institution, it is not universally upheld by the rest of society. However, this is where the other aspects of experience in the university can be valuable. This is because the University offers particular access to new opportunities for students to make and engage with new kinds of status declaration which extend their initial social status.

Catallaxy, Signals and the Dynamics of Dissipative Systems

Hayek argued that the heart of the economic process of exchange was fundamentally an information exchange. For this reason Hayek argued a planned economy, such as was envisaged by Keynes, could not work, simply because the information which enabled individuals in a market economy to make rational decisions was not evenly distributed. Any attempt to plan the economy would inevitably privilege those at the heart of power since they had the greatest information. The attempt to establish a market in education, there was an attempt to ensure that students, as paying customers, could access a variety of information about the courses and institutions they might choose to study with. This has established itself in the UK at least, as a mechanism whereby universities have to submit information about their performance against metrics concerned with assessment, employability, and so on, so as to give proper information to prospective students about the relative merits of each institution. The intent behind this policy was to ensure that equilibrium within the education market would be established with rational criteria being used for selection of different institutions. Different quality institutions would judge their market appear accordingly, and given the variegated provision of quality within the market, less presitigious institutions would charge a lower fee.

Given that this didn't happen, it raises the question as to what exactly is communicated as information in an educational market. If much depends on prejudice and status, pricing is but one dimension of a complex range of psychosocial forces which bear upon human decision-making process. In other words, if the communication of price signals is to be taken as informational communication, it is at the very least a noisy communication! The praxeological perspective means that it is the overall communicative processes with others who similarly wrestle with the information environment (including prices) which must itself be a learning conversation. How are the conversations exchanged within the setting of the educational institution different from the conversations exchanged within the golf club or the stock exchange?

This becomes a problem concerning the nature of communities and the signals that are exchanged within them. How do the communities form in the first place? How did the prestigious universities, the golf club and the stock exchange come into being. More relevantly to current economic thinking and polity is how the innovation clusters of universities and industry emerge. Menger’s analysis of “industrial emergence” or Veblen’s analysis of “cumulative causation”  considered the problem in the 19th and early 20th centuries. More recently, Michael Porter has analysed the ways in which industrial clusters are formed, and this has become the central topic of investigation in other information-oriented techniques like the Triple Helix. Naturally, the topic has been of much interest to Government agencies which have to to revitalise economic areas, and stimulate productivity. Whilst the evidence for clusters of industry and universities is strong, the theoretical explanation falls foul of a number of difficult philosophical problems.

The Triple Helix is an approach to understanding industrial dynamics founded in the study of information. It is argued that the roots of clustering lie in the nature of communication and discourse, and this presents empirical opportunities to study discourse – particularly as the internet provides the means of communication between people. The essence of the Triple Helix analysis is the dynamics of communications between the academy as it is measured in academic journal articles, the industrial patent system and government regulations. Each of these dimensions carries its own presence in discourse, and each is analysable in terms of computer-analysis of the communications that pass between the different entities.  In studying the communication dynamics between Universities, Industry and Government it draws on thinking about the ‘knowledge economy’, and analysis of economic ‘clusters’ which appear to show centres of productivity and innovation centred around the location of university research, and with collaboration, spin-off and engagements sponsored by government policy. Examples of this pattern in all parts of the world from the ‘Silicon Fen’ of IT companies around Cambridge, UK, or the growth of medical companies in North Carolina. There are easy conclusions to draw, although the danger of glib conclusions which concern the promotion of higher education, the collaboration with industry, and so on, might give rise to policies which have a detrimental economic impact: when the Triple Helix speaks of ‘government’ what do they mean – local and national government is so frequently in conflict? When it speaks of Universities, again, what does this mean? Given that such clusters appear to be real, what might this tell us about the dynamics of communication and information which contribute to their formation? In particular, the question concerns the nature of the communication between these different entities and how it works.

At the heart of the Triple Helix analysis is a consideration of the entropies of words used between industry, government and universities and considers the way that discourses identify particular words and phrases and how these then are picked up by other agencies. Characterising this analysis as an analysis of expectation, with co-presence of key terms symptomatic of double-contingency in the communications system that embraces universities, industry and government. Given this approach, the identification of double-contingencies is equated to the identification of ‘mutual information’ within the communication system. These double-contingencies/mutual information measurements can be performed with the application of Shannon’s formulae for calculating mutual information. However, Shannon’s calculations for Mutual information involve two communicating parties; in the Triple Helix, there are three (and in real life, there are of course more still). This led to an important insight in the application of Shannon’s equations: that mutual information could be considered as the overlap of redundant expectations. In other words, it is the space of mutual constraint in communication which stimulates discursive interaction. However, this then begs the question as to how it is that the context for the creation of redundant expectations may be created.

The essential problem with abstract calculative approaches like clustering or the Triple helix, is that – like most theories of information – they are really theories of agency; yet the agency they concern themselves with is an idealised transcendental one. Leydesdorff's approach, which has underpinned the theoretical foundation of the Triple Helix, has drawn extensively on the ideas of Niklas Luhmann. Whilst Luhmann’s idea is a powerful one, when computationally-applied, one would have to ask “in whose interests” was a calculative approach to agency provided? Surely it is those in the position to declare the algorithms to be good! More importantly, how is it that such a calculative approach empirical? Where are the regularities which are theoretically explained? Where is the theory challenged? How can it be disproved?

However, such deficiencies in the calculative approach of the Triple Helix should not detract from the important insight into the significance of the redundant, background context of communications. Redundancy has also formed an important role in the work of statistical ecologists. Robert Ulanowicz, like Leydesdorff, has spent much time considering the utility of Shannon’s equations and applying them to the understanding of the dynamic relations between living things in an ecosystem. Starting with raw data of living things – the fact that they breathe, eat, procreate, excrete and die – Ulanowicz reconsidered natural processes in the light of information dynamics. Taking measurements for excretions, respirations, Ulanowicz  considered the flows of information:

  • From one organism to another;
  • From an organism to the environment (in ways that other elements in the environment can use);
  • From the environment to the organism;
  • From an organism to the environment in ways that are lost (dissipations)
In these dynamics of these interactions, there are:

  • those processes which establish self-regulating stabilities within an ecosystem: they effectively operate as a homeostatic system, with negative feedback between the different components;
  • those processes which catalyse existing processes, reinforcing particular dynamics to the point that some energy within the system must be dissipated. There is positive feedback between different components
These dynamics between natural entities call into question some aspects of Shannon’s equations. Shannon assumed that communication concerned the probability of predicting messages sent over a medium which was subject to interference or noise. There are a number of problems with this. Noise is assumed to be an exogenous variable whereas in an ecological system noise is endogenous, resulting from the overall dynamics of the system. Shannon’s concept of redundancy is tied to the requirement that certain repetitions are necessary to overcome the effects of exogenous noise. In Ulanowicz’s approach, the redundancy is also a product of the endogenous ecological relationships. Ulanowicz makes the case that Shannon’s measure H comprises two kinds of thing: the confirmation of a message (redundancy) and the identification of surprise, yet redundancy and surprise are mutually exclusive: one cannot be simultaneously assured of a message and surprised! This leads Ulanowicz to consider an approach which splits the H measure into two components which he labels “average mutual information” (AMI) and “flexibility”: these equate to those processes of negative and positive feedback respectively.

AMI and Flexibility allow for a relatively simple characterisation of ecological dynamics. Components may be configured in ways whereby their interactions are such that much information is lost to the environment, and their interactions of information are complex (and probably wasteful) exchanges. On the other hand, the components of the environment might be tightly coupled, whereby the components waste little. In the former case, there is high flexibility brought about by the dynamics of dissipation of the individual components. In the latter case, there is tight organisation but little flexibility. Bureaucracies might fall into the latter category, whilst artistic communities and creative organisations fall into the former.

Ulanowicz’s work is important when considering the problem of clustering and the ecologies that comprise universities, industry and government. If we focus on the dynamics of the communication system and the mutual information between communities, then the requirement to measure mutual information restricts measurement to specific discourses and terminologies. But the key issue with clusters rests in a complex network of decision-making, human experience, desires, and so on. One would have to examine not only the co-emergence of industry and universities, but the formation of cults around gurus, the establishment of monasteries, the emergence of artistic communities, and so on. To say that there is mutual information in these establishments is to say that there is some established identity that binds them together. The question is whether and when such mutual information is codified, or at least becomes a codified system of expectations.

Communities have to grow: they have to admit new membership from the outside. What is it that occurs between a new member, an outsider, and a community that the outsider makes the decision to join, and what happens within the community that adapts to their presence? This is the fundamental question of catallaxy: to admit new members from the outside.  The question concerns the experience of individuals, friendships and the conditions under which innovation occurs: it is a question about the experience of the Schumpeterian entrepreneur, the risk-taker, the person who is prepared to disrupt the status quo. Such processes can be described in many ways, from deep psychology to a ‘hypercycle’ of communication (Leydesdorff). Fundamentally, it is a question about consciousness and deliberative action. There is some agreement that anticipations and expectations play an important role in these dynamics. Within whatever context innovation occurs, there is always a flow of events in time; there is some kind prediction of future events based on past events; and (perhaps most importantly) there is the construction and reconstruction of pasts and the projection of possible futures. Radical innovators may dwell in the world of past speculations and future anticipations, but their agency works within the world of everyone else. It is only when the expectations of the entrepreneur can be codified and articulated that innovative dynamics take hold, communities grow and new connections made. 

Joining a community is a major life moment for the individuals concerned: it reflects ways of living, and expectations for the future not just for individuals, but for their families. The expectations and hopes of the entrepreneur have to be balanced with the wishes of their families, hopes for their children's education, and wishes for self-fulfilment. Identification with communities, their history, a sense of place and purpose are effectively deep coordinations of expectations. The people they are going to be with will reflect political sympathies as well as economic aims: critique remains the most powerful force in establishing social identities. With deep expectations, the ontogeny of the individual in their communication, their upbringing, their values all play an important role in the ways that new members of a community are established. Codified expectations about being an ‘immigrant’, being disabled, marking out one’s own individual difference, and judging the difference that one might make is important: innovation is often felt as a process of revolt; one would wish to be with other like-minded revolutionaries!

The communication dynamics expressed in the Triple Helix presents powerful ways of reframing the lives of innovative communities. It is argued that with more and more communication occuring on the internet that calculative approaches can be used to measure innovation and steer government policy in stimulating new clusters. However, there is a question as to what might be gleaned from considering words on the web: whilst the things that are written present themselves as tangible artefacts to be analysed, the danger is that we commit a 'mereological fallacy' in such analysis: that we focus on one aspect of communication and assume it to be representative of the entirety of human action. The mereological fallacy remains the principal difficulty with any analysis, and sits behind the distrust of many economists (including Hayek and Mises) in forms of calculation. In the final section of this chapter I want to consider place of calculation and measurement in the organisation of human welfare. 

Analytical Priorities

Analysis can be both determinative and emancipatory.  If analytical tools are only available and controlled by managers determinative analytical techniques can only reinforce power relations within the institution. In essence such a situation is that critiqued by Hayek as the pathology of the 'planned economy'. The threat to liberty is the uneven distribution of information and any attempt to use information as the yardstick to measure society will only result in privileging those with the greatest access to information. Hayek worried about the behaviour of governments and the opportunities for despots; today we might equally worry about the behaviour of global corporations - particularly those which dominate the technology landscape. Analytical determinism results in a general reduction diversity in the organisation. The assertion of dominant narratives condition the employment of certain types of people – and the management itself becomes paradigmatically skewed. In universities today, we see the power of citation indices and bibliometrics, where the employment practices of universities are increasingly skewed to the recruitment of academics who play a particular publication game of peer review, journal ranking and so on.

Under what conditions might calculation and analysis be emancipatory? Here it is worth remarking that functionalist management sees its task in producing efficiencies, whereby the metrics by which their performance is judged show ever-increasing success. This is at the expense of those whose function becomes increasingly determined by the demands made on them by their environment. However, ecological analysis indicates that increasing efficiency comes at the cost of flexibility: that the capacity for an organisation to transform itself and adapt to shocks in the environment becomes compromised the more tightly its components are wired together. The damage that increasing efficiencies inflict on a organisation are most immediately apparent to those on the ground, not those on the 'top floor'. This damage usually manifests itself as a loss of diversity of function. The analytical question is whether the monitoring of diversity of function within an organisation is possible, and could be made available to all in the institution. Would such an analysis avoid the mereological fallacy?

Determinative analysis identifies independent variables responsible for predictable and approved behaviour. Ecological analysis aims to identify relations between components with the aim of maintaining a balance between the flexibility and efficiency of the whole. Large institutions comprise many smaller ecosystems where the performance of each is not just a function of job-role, but entails deeper social dynamics based on friendships, interests, political identities and so on. Each component will have tendencies to either become inefficient, or to lose their flexibility. Each components behaviour may become at any moment a possible threat to the whole. But is there a way of examining the performance of these components?

In Ulanowicz's ecological statistics, two fundamental measurements are made: one on the negative feedback relations between components in an ecology: we might consider this to be the stable identities of particular ecologies; the other is to consider the dissipations within an ecology, which in turn are related to managing the "excess" energy of the ecosystem resulting from mechanisms of positive feedback. Rather than talk about relations between sources of information, we start to talk about the dynamics between loci of dissipations. Within any department or component of an ecosystem, events occur against which different individuals will react. Interest focuses on relating events to responses: where do things not work? where are decisions made but problems are not solved? Where their is deliberation but no action? Additionally, the negative feedback from different organisational components tells us about the information flows within those components. How tightly-coupled are components in an ecosystem? How efficient is it? What are the information relations between one component and another? Some measure of this latter quality can be gleaned from analysis of publications which are produced in the system - these are indexes of the dynamics of mutual information.

In a dissipative system, dissipations create forces between entities within an ecosystem and between a particular ecosystem and other neighbouring systems. There are shifting points of stability and instability. Things grow and change. As this happens different processes consider the extent to which changes might be accounted for. In this way, there may be travel from point A to point B. There is also awareness of travel: in other words, a construction as to what is the cause behind the movement from point A to point B. The account as to what happens between point A and point B is important. Deeper reflection as to the causes of travel from A to B is also a cause of dissipation. The production of order out of expectations which can be seen in the discourse on anticipatory systems, means a reconstruction of the dynamics from one stable point to another. The challenge is to formalise this. Events occur according to the arrow of time; reflexivity runs against the arrow of time.
Dissipative dynamics give rise to events. Events reveal transformations. Transformations entail deep reflexive processes which in turn cause new dissipations. Dissipations interact with other dissipations. And so on. What can we know about these dynamics?

An emancipatory analytics is a spur to greater experimentation. It is an information context which does not determine behaviour but rather questions it. The fundamental problem is that most ways in which individuals engage in submitting data – through questionnaires and so on – involve them in identifying those things which are determined through negative feedback processes, not dissipative processes of reflexivity. Dissipative processes have to be inferred. However, ways of doing this structurally are possible. Documenting changing processes, and inviting individuals to explain changes is one way in which dissipative processes might be unearthed. Importantly, such a process is a process of education. It is a process of exploring assumptions, understandings, feelings, intuitions and expectations. It is a way of drawing attention to inconsistencies of thought, to clashes of paradigms all in the process of stimulating growth and development.

Conclusion: From education to economics and back again

I began this chapter by asking what education tells us about economics. In delving into the dynamics of information and exchange (catallaxy), and considering the deep problems of understanding exchange in different circumstances, a richer picture of information has emerged. This richer picture of information throws the spotlight back onto processes of human interaction, conversation and learning as fundamental to understanding economic phenomena.

Analytics need not be determinative. Indeed, it may only be so because the thinking which has deployed computers in our institutions has been predominantly functionalist. The problem of determinism and analysis was apparent to early cybernetics pioneers, who despite their own tendencies towards functionalism, recognised the danger in becoming transfixed by information systems. Stafford Beer and Gordon Pask were fascinated by biological and chemical computers: machines which made natural connections in response to different inputs, and whose behaviour could be a cause of greater reflection rather than determinative calculation. Such machines were in themselves natural ecosystems. However, what Beer and Pask didn't have at the time was a way of understanding the dynamics of those ecosystems.

The mathematical advance over the last 30 years has helped scientists gain a deeper understanding of the dynamics of diverse systems, and in particular how those dynamics depend as much on dissipation as their do on information and how their efficiency must be balanced with their flexibility. The fundamental new insight I contribute here is that such systems are inherently learning systems, and that the economic lens through which we view the social world is really an 'educational' lens, albeit one that is currently deficient.

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