Intelligence Failure

I can still remember the story on the front page of the only copy of the Seattle Post-Intelligencer that I ever bought – it was a report on the assassination of Rajiv Ghandi, which means I must have purchased the paper on the 22nd of May 1991, when I was travelling up the Pacific coast on my way to the Cascade Mountains.

If if I ever make it back to Seattle (which I hope I do one day, because it is probably the nicest city I have ever visited) I won’t be able to buy the paper again, because, as of today, the S P-I has become an online-only operation, after 146 years in business.

The print newspaper model – where investigative reporting was subsidised by advertising sales – has collapsed, as ad revenue has migrated to the web. What will fill the news-gathering vacuum left behind? The idea that an army of bloggers will ever replace the likes of Woodward and Bernstein is patently ridiculous.

Information may seem to be more freely available then ever, thanks to the ubiquity of the internet (in the developed world at least), but the real knowledge, the stuff the Man doesn’t want us to know, will be buried even deeper in the mass of celebrity trivia and idle speculation that passes for news in the blogosphere. We are doomed to a new age of ignorance. Only musicians can save us now.

On the margins

I don’t expect that my last post, in which I proposed that the value of virtual objects is effectively zero, will have caused a great deal of consternation in the SL commercial community, since I’m guessing that not many of them are overly impressed by Marxist economic analysis.

What if we take a look at the question from a more capitalism-friendly economic viewpoint? In general, non-Marxist analysis tends to reject the idea that commodities have intrinsic value (as is proposed by the labour theory of value) in favour of a more subjective formulation; the exchange-value of an object is what it will fetch in a free market, which in turn is dependent on the level of demand and supply.

This kind of theory is popular in financial circles, since it implies that value can be generated purely by the process of exchange, and that bankers and their ilk are actually wealth-creators, rather than parasites who have grown fat on the the toil of the labouring classes. (Though we’ve been hearing less of such triumphalist talk recently).

That aside, does a supply/demand model of value give us hope that Second Life commerce can be viable in the long-term? Sadly, no. The problem lies in the concept of marginal value. According to the theory, exchange-value is determined dynamically by the balance between the prospective buyer’s desire for an item and the level of supply. That desire is not constant though – it decreases as the buyer’s stock of an object increases. A man who has no oranges might be willing to buy them for a dollar each, but by the time he has bought ten he will probably be thinking of spending his next dollar on something else, though he may be persuaded to buy another if the price drops. The marginal value of an item is what a customer is willing to pay to get one more than he has already, and always trends towards zero. It may even go into negative territory if there is a cost associated with having too many items, such as storage charges.

The marginal value of most real-world items is maintained by their perishable nature. In Second Life though items last forever, so as residents age, and accumulate more stuff, their willingness to buy new things tends to decline. Even the most fanatical fashion-victims will eventually have enough clothes, shoes, or whatever, and retailers will have to drop their prices to tempt them into further purchases.

New avatars will still need to buy things of course, but since the percentage of people trying SL who go on to become long-term residents is quite small, it seems likely that the demographic will gradually mature, and the economy will stagnate. (There will be a subsection of the population for whom shopping is an end in itself, and for them the marginal value of new items will remain consistent, but I don’t think there are enough of them to maintain a growing economy).

So there you have it. Communists and Capitalists agree: the Second Life economy is doomed. People should stop wasting time trying to run businesses that have no future, and concentrate on exploiting the real potential of virtual worlds; the chance to create new kinds of art and entertainment, and to experience the myriad different forms of interaction that the grid gives us access to.

Less than zero

What determines the value of an object in Second Life? I’ve been thinking about that since reading this article a few weeks ago. The answer given in that post – the market strikes a balance between what a vendor wants to charge and what buyers are willing to pay, based on the perceived utility – has face validity, but also a number of problems. There are often glaring inconsistencies between price and usefulness (I got my house for free; Olivia paid L$600 for her boots), objects that are practically identical can have wildly different prices (she could have got a similar pair for L$200), and there is little price stability (this week they’re down to L$50). There are factors that partially explain these anomalies; the SL market is fragmented and inefficient, there are big differences in the usefulness of virtual objects and their real-life counterparts, and the low value of the Linden dollar compared with that of user time discourages shopping around for the best deal. Even so, the model seems rather unsatisfactory.

Is there a more objective method for calculating the intrinsic worth of virtual objects? Old Bolshevik that I am, I tend to fall back on the labour theory of value. We are interested in those objects that are produced for the purpose of exchange, that is those objects which are commodities; according to the theory the exchange-value of such items will be proportional to the socially necessary labour-time involved in their production. (Socially necessary meaning the time taken for the worker of average skill labouring under average conditions, rather than the time taken by any particular worker, who may be more or less efficient than average).

So far, so good. The value of an object appears to depend on how much work its creator puts into it, assuming they are of at least average skill, which seems fair. Virtual items are different from those in the real world in one crucial respect though – they may be copied with practically no effort. (By this I mean copied by their creator for sale, rather than pirated). However many hours of work go into making the prototype, the value of that labour is diluted, potentially infinitely, by reproduction. Thus the value of any one copy will trend towards zero.

To get around this a content creator could produce unique items, or at least very limited editions, which in theory could command premium prices. There are a couple of problems with this though; unless you are a virtual Yves Saint Laurent no one is going to pay significant sums for your work, and even if you do have exceptional prim-sculpting talent the market for such work is going to be so restricted that you are unlikely to be able to earn a living. (In the real-life fashion industry the top designers make relatively little from their haute couture collections, since the volumes they shift are tiny; the real money is in the diffusion lines). If your design skills are no better than average then you’re in an even worse spot; even if you don’t go down the mass-production route, as long as a few other producers of comparable goods do they will reduce the socially necessary labour-time for the creation of your product, and its value will inexorably decline.

Is there any empirical evidence that this theory is correct? It’s difficult to get hold of meaningful economic statistics regarding Second Life commerce, but anecdotally there does seem to be a feeling that the volume of low-price and free items available is increasing, and that the quality of the free stuff is much better than it used to be; it’s certainly significant enough to support a whole SL Freebie” blogging subculture.

Second Life is copying real life, at a characteristically accelerated pace; the declining rate of profit is on the verge of producing a crisis of over-production. In the real world the point of crisis can be postponed by expansion of credit, though when this comes unstuck, as it has done recently, things tend to go spectacularly wrong, and capitalism is forced to fall back on the traditional remedy of economic depression and/or global war, to destroy unproductive capital and create the conditions for a new round of accumulation.

I don’t think that the Second Life economy will actually collapse though; owners of chronically unprofitable virtual businesses are likely to subsidise them indefinitely, just so they can hold on to their dreams of escaping the real-life rat-race, and this constant inflow of capital should be enough to prevent a crisis. (So long as the non-virtual crisis doesn’t consume Linden Labs).

Is there a better way to solve things? My ideal would be Second Life (and real life too) operating as a cooperative, collectively owned by its residents, who would each receive a social wage, and would freely contribute their talents for the betterment of the whole virtual society. “From each according to his ability, to each according to his needs” as the saying goes. I’m sure there are a few sims running on this principle, but my feeling is that the prevailing political tendency in SL is Libertarianism rather than Communism, so it may be some time before the virtual proletarians throw off their chains.

The best laid schemes

I dined tonight on haggis, tatties and neeps, in honour of our national poet, Robert Burns. January 25th, Burns Night, is always well observed here in Scotland, and all around the world, but this year is particularly special, being the 250th anniversary of his birth.

I’m very partial to haggis at any time of the year; when I was a student there was seldom a week that went by in which I did not consume deep-fried haggis with chips at least once. As the years have passed I have come more to resemble Burns’ description of those who love this particular delicacy:

But mark the Rustic, haggis-fed,
The trembling earth resounds his tread.

so I partake of it less, and usually opt for the boiled version rather than the battered one.

Burns has to some extent been buried in the tartan-hued mythology that passes for our national identity, but the character of the man, and the power of his work, transcend any shortbread-tin cliché. The words of “A Man’s A Man For A’ That”, his ode to equality and internationalism, have justly made Burns a hero to movements for social justice the world over:

Then let us pray that come it may,
(As come it will for a’ that,)
That Sense and Worth, o’er a’ the earth,
Shall bear the gree, an’ a’ that.
For a’ that, an’ a’ that,
It’s coming yet for a’ that,
That Man to Man, the world o’er,
Shall brothers be for a’ that.

On a personal level, I marvel at the way Burns can conjure a profound insight into the human condition from the seemingly mundane events of day-to-day existence. I often find myself reflecting on the truth of this stanza from “To A Mouse”:

But, Mousie, thou art no thy lane,
In proving foresight may be vain;
The best-laid schemes o’ mice an ‘men
Gang aft agley,
An’lea’e us nought but grief an’ pain,
For promis’d joy!

Or this one, from “To A Louse”:

O wad some Power the giftie gie us
To see oursels as ithers see us!
It wad frae mony a blunder free us,
An’ foolish notion:
What airs in dress an’ gait wad lea’e us,
An’ ev’n devotion!

More than anything though I love Burns’ comic sensibility, his ability to prick the affectations of the pompous and self-righteous, and to lighten the heart of the honest sinner with the sympathetic recognition of human frailty. My favourite amongst Burns’ poems is a toss-up between “Tam O’Shanter” and “Holy Willie’s Prayer” , for I share both Tam’s weakness for earthly pleasures:

O Tam! had’st thou but been sae wise,
As taen thy ain wife Kate’s advice!
She tauld thee weel thou was a skellum,
A blethering, blustering, drunken blellum;
That frae November till October,
Ae market-day thou was na sober;
That ilka melder wi’ the Miller,
Thou sat as lang as thou had siller;
That ev’ry naig was ca’d a shoe on
The Smith and thee gat roarin’ fou on;
That at the Lord’s house, ev’n on Sunday,
Thou drank wi’ Kirkton Jean till Monday,
She prophesied that late or soon,
Thou wad be found, deep drown’d in Doon,
Or catch’d wi’ warlocks in the mirk,
By Alloway’s auld, haunted kirk.

and Willie’s tendency to think well of himself:

I bless and praise Thy matchless might,
When thousands Thou hast left in night,
That I am here afore Thy sight,
For gifts an’ grace
A burning and a shining light
To a’ this place.

and remembering Burns’ verses keeps me on the straight and narrow.

The pith o’ sense an’ pride o’ worth
Are higher rank than a’ that

Yes he could

I had been planning to go to bed early on election night, since I had a busy day ahead, and I was, after all, completely confident that Obama would win, but in the event I couldn’t bring myself to retire without seeing at least some of the returns. I ended up staying up until about 1.30, when the result from Pennsylvania came in.

McCain’s fading hopes of victory had rested on the idea that the white working-class voters who supported Hillary Clinton in the primaries would, faced with an Obama candidacy, switch to the GOP, or at least stay at home. If this was going to happen anywhere it would have happened in Pennsylvania, and when even Fox News called the state blue within a minute of the polls closing it was clear that the game was up.

The theory that Obama was going to turn off the Democrat base was based on a complete misunderstanding of what happened in the primary campaign. Those voters who favoured Clinton over Obama did so because they were worried about his electability, not because they thought he was too radical. There was never any significant policy difference between the candidates; if anything Clinton is further to the left. Once Obama was the candidate the party was always going to be behind him, united by a desire to defeat McCain.

Could McCain have done anything to stem the tide? Probably not, given the state of the economy and the electorate’s determination to hold the Republicans responsible for the mess. He must be thinking that he could have played a bad hand a little better though. As McCain gave a valedictory speech to the press on his campaign plane, Joe Lieberman could be seen at his shoulder, like Banquo’s ghost. Might a McCain/Lieberman ticket have prevailed? We’ll never know.

Anyway, that’s all the excitement over for four years at least, and probably for eight. I can get back to blogging about important stuff like Second Life

A message to my friends in the US of A

[Thanks to Matt Groening.]

A hostage to fortune

I have to admit that it looks as if I was completely wrong about Barak Obama’s electability – there doesn’t appear to be any way that he can lose now. In my defence I would say that I couldn’t have imagined just how badly the GOP would screw up their campaign. With one decision – picking Sarah Palin as his running mate – John McCain threw away the single biggest advantage he had, his ability to criticise Obama’s lack of experience. Palin has done all that could be expected of her, shoring up the core Republican support, but I cannot fathom how McCain’s strategists ever thought she would be able to appeal to voters beyond the conservative base. McCain himself has tried to pose as both the elder statesman with the wisdom to lead, and the iconoclast who would shake up the establishment, and has failed to convince on either count.

The main factor that has helped the Democrats more than might have been anticipated though is the state of the economy. Back in the primary season it did look like there was trouble brewing, but no one foresaw that the federal government would be taking over the banking system. Now that even the Bush administration believes in state intervention in the economy on a massive scale, McCain’s jibes about Obama’s “socialism” don’t carry much weight.

Could the Republicans try to steal the election by outright fraud? Right-wing pundits have been advancing various theories about how the opinion polls could be wrong, and why we shouldn’t be surprised if McCain does much better than is expected, and you don’t have to be too paranoid to see that as an attempt to prepare the public for an unbelievable result. It seems to me though that the trouble this would cause – I would anticipate serious civil unrest if McCain is declared the winner next week – would far outweigh any advantage to the ruling class of keeping Obama out of the White House. Despite all the Republican rhetoric Obama is no radical, and there is no evidence to suggest that his administration would be seriously inimical to the interests of American capital. Some special interests – defence contractors and oil companies foremost among them – may have to trim their profit forecasts a little, but for the bulk of US corporations it will be business as usual. They are likely to be much more worried about the general economic situation than the prospect of an Obama presidency, and anyway, of the two candidates, he seems to have the firmest grasp of what is actually going on, and what needs to be done to keep US capitalism on the road.

I still think Hillary Clinton would have made a better candidate, and a better president, but I doubt I’ll be feeling too disappointed next Wednesday.

View from afar

According to this article in the Guardian yesterday, “People around the world are pinning their hopes on Barack Obama in next month’s presidential election”. Polls in various countries revealed big majorities in favour of Obama – most notably Switzerland, not usually regarded as a bastion of socialism, where 83% preferred Obama, against 7% for McCain.

The surveys also showed that “Only a minority in the countries surveyed describe relations with the US as friendly”, a legacy of the Bush years that US voters will hopefully bear in mind come November. Though of course that information might influence the section of the electorate that McCain is appealing to in a way exactly contrary to the expectation of European leftists like me.

Favorite T

The McCain/Palin campaign has a new tactic; if reality is too uncomfortable, simply create your own alternative world. Glenn Greenwald covers it nicely.

Other news: some Obama supporters don’t like Sarah Palin very much. Now clearly the language is somewhat objectionable (though not to John McCain), but it’s not like they’re issuing death threats or anything. What’s amusing though is how the right-wing bloggers are getting into a lather about how this sort of thing is ignored by the liberal MSM. That’ll be why I had to read about it in that obscure journal the Los Angeles Times.

It’s the end of the world as we know it

I woke up this morning to find that I now have a bank account with the government. This is quite a development, when one considers that the institution that I previously dealt with was until a few weeks ago considered one of the pillars of free market capitalism in this country, and not a basket case that has had to be nationalised to save it from bankruptcy.

I should be feeling fine, I am after all a hard-core leftist, and have marched many a time calling for the commanding heights of the economy to be seized by the state. It’s hard to feel good though, when “depression” stops being something that you can treat with Prozac, and starts being something that will throw millions into poverty.

I’ll probably be OK personally; I work in the public sector, and everybody seems to be a Keynesian these days, so I don’t think my job will be cut. They might even give me a raise, in the hope I’ll rush out and buy a new house. There will be no shortage of business anyhow; human misery is the lifeblood of my profession.

At least REM will be happy; they must be raking in the royalties now that every news show is playing their song over footage of stock traders looking shocked and people queuing up outside banks.