From Hans Morgenthau’s classic text on international relations, Politics among Nations: The Struggle for Power and Peace:

The theory, in other words, must be judged not by some preconceived abstract principle or concept unrelated to reality, but by its purpose: to bring order and meaning to a mass of phenomena which without it would remain disconnected and unintelligible. It must meet a dual test, an empirical and a logical one: Do the facts as they actually are lend themselves to the interpretation the theory has put upon them, and do the conclusions at which the theory arrives follow with logical necessity from its premises? In short, is the theory consistent with the facts and within itself?

Here are a few posts I’ve done on theories, models, and evidence:

• Notes on theory, evidence, and social science
• 3 very different views of economic models
• More on how to think about economic models
• Econ 101 and model thinking

In the new Foreign Affairs, Felix Salmon reviews Darkness by Design: The Hidden Power in Global Capital Markets, by political scientist Walter Mattli. Salmon and Mattli share the view that more competition among stock exchanges has been bad for financial markets. Here’s Salmon:

Up until that point, the exchange was a mutual society: firms could buy seats, and the exchange was owned by its members. After 2005, it demutualized, stopped selling seats, and became just one among many exchanges, most of which were owned and operated by enormous global broker-dealers–think Credit Suisse, Goldman Sachs, and Merrill Lynch–that had spent limitless hours and dollars on lobbying the SEC to push Reg NMS through. Rather than being a utility owned by its members, the NYSE was now a profit-maximizing entity like all the other exchanges.

There’s a parallel here to today’s tech platforms. They’re big and powerful, and some argue that they should be broken up. But would more (but smaller) platforms be a good thing? Would competition help?

Salmon and Mattlie argue that having a marketplace (the stock market) competing in a market of its own (the market for trades) has lots of downsides. Whatever you think of that in the context of stock exchanges, it’s worth considering for tech. Would competition between mini-Facebooks shift power toward advertisers and, as a result, further erode privacy? What might the mini-Facebooks do in order to win the business of key publishers or to gain access to particular markets?

Of course, none of the tech platforms are currently run as mutual societies. And so the conversation tends to be about either breaking them up to encourage competition, or regulating them as utilities.

But, just for the fun of it, imagine what a mutual society model might look like. What if Twitter were run for the benefit of its users, with major publishers “buying seats” and individual users electing representatives to advance their interests? You can imagine all sorts of reasons that might not work. (A version of this has been proposed.) But as Salmon and Mattlie suggest, counting on competition between platforms isn’t always a good thing either.

“The News Corp arrangement would allow headlines from properties in its Dow Jones unit… to appear in the Facebook news section, linking to the publications’ sites. For nonsubscribers, links to Journal stories that are behind the site’s paywall would trigger a prompt for the reader to sign up.”

Facebook is apparently paying publishers for the right to link to their stuff. Is that a good thing? Of course, it’s good for publishers to get revenue from quality reporting. But since when do you have to pay to link to content? Why would Facebook suddenly do that? One theory is they’re simply paying for reputation. They want the media to think better of them and trying to undo the damage they’ve done to journalism’s business model is one way to do that. But the alternative is scarier. If paying to link became the norm, Facebook is one of the few organizations well-heeled enough (and with enough bargaining power) to pull it off. The blogger, the independent newsletter writer, the small-time magazine — none of them can afford to pay to link to The Wall Street Journal.

I’d love to see Facebook paying news organizations for syndication rights to the content itself. But there’s a reason we don’t require payment to link (in the U.S. at least). It’d be bad for the internet, good for Facebook, and it’s unlikely to solve journalism’s business model problem.

This comes from Rebecca Henderson, professor at Harvard Business School, in a 2017 talk on the future of capitalism:

The intuition is that we pretty much know there’s a better way to manage the firm. It involves high trust, work groups, communication, high integrity, treating people with respect, doing continuous improvement. Again, I’m telling you nothing new. This is what Toyota brought to the Western world. What we have now is data from thousands of firms across every major nation showing that the correlation between these practices and productivity is very robust.

Some of my previous posts on management are here. More on the work she’s referring to here and here.

She brings this up to ask the question: why don’t these practices diffuse? Here’s her paper offering some answers. Here’s related work.

Politifact’s Bill Adair writes:

In my courses at Duke, I begin each semester with a diagram I call the “Continuum of Journalism,” which includes a range of journalistic genres: op-eds, investigations, fact-checks, you name it. The continuum could easily be rebranded “The Bias Meter.” At one end is what I’ve labeled “Objective News”—stories that strive to present all points of view. At the other end is “Opinion,” which includes articles by columnists, op-eds, TV and film reviews, and newspaper editorials. Pieces on the “Opinion” end of the spectrum help us to explore our feelings on issues and sharpen our political views; they soften our perspectives, or crystallize them. We like bias in these types of articles, and know to expect it.

I wouldn’t use the term “objective news” to mean what he’s using it to mean. Maybe “straight news reporting” or “traditional news reporting” or something. And that approach, whatever you choose to call it, is not free from bias. But this spectrum is still useful. It’s not bias on the horizontal axis, but the extent to which the author is relying on a process designed to constrain or deemphasize or balance out their own individual assessment. In opinion, the whole point is to offer that assessment. In analysis, it’s the author’s assessment, tempered by a desire to explain competing perspectives from reliable sources. In straight news reporting, that authors’ and editors’ perspectives still play a role (no one is bias free) but the reporter follows a process designed to emphasize established facts that can be clearly attributed. (To better clarify this distinction I’ve been mulling over an analogy to regularization in machine learning. I’ll try and write that up soon.)

Here are some of my posts on similar topics:

• The boundary between opinion and expertise
• A limited version of objectivity worth defending
• Journalists as analysts
• Journalism, academia, and the worst of both worlds
• My writing process

Related(ish), and something I liked a lot from a while back… Here’s Matt Yglesias on a podcast explaining explanatory journalism:

“Oftentimes to really understand the news story that just gets on your radar you have to know some things that happened months ago or days ago… Explanation is about surfacing all of that amassed knowledge that the obsessive has and then organizing it so it makes sense to an intelligent, curious person who doesn’t happen to have been following this for a long time… If you ask someone who is very well versed in a subject to explain what is going on, that person is going to offer their view. Now, hopefully they will offer it in a fair-minded way, in a calm way, they will be persuasive, they will have evidence, they might even tell you that some other knowledgable people have a different perspective on it. But if you are knowledgable and you are explaining something to someone, it’s kind of crazy to try to hive off your understanding of what’s actually important and going on here, because otherwise why did we ask you at all?

Four loosely related pieces that I’ve read lately:

A great Quartz profile of economist Mariana Mazzucato:

The central premise of Mazzucato’s work is about the role of the state in innovation. She is an ardent believer that governments should do more than play a passive role in fixing market failures, and be allowed to embrace their entrepreneurial spirit to steer the direction of innovation and economic growth.

The Richmond Fed interviews Enrico Moretti:

In the first three decades after World War II, manufacturing was the most important source of high-paying jobs in the United States. Manufacturing was geographically clustered, but the amount of clustering was limited. Over the past 30 years, manufacturing employment has declined, and the innovation sector has become a key source of good jobs. The innovation sector tends to be much more geographically clustered. Thus, in the past, having access to good jobs was not tied to a specific location as much as it is today. I expect the difference in wages, earnings, and household incomes across cities to continue growing at least for the foreseeable future.

In The Atlantic Tyler Cowen and Patrick Collison call for the creation of an interdisciplinary field called “Progress Studies”:

Progress itself is understudied. By “progress,” we mean the combination of economic, technological, scientific, cultural, and organizational advancement that has transformed our lives and raised standards of living over the past couple of centuries. For a number of reasons, there is no broad-based intellectual movement focused on understanding the dynamics of progress, or targeting the deeper goal of speeding it up. We believe that it deserves a dedicated field of study. We suggest inaugurating the discipline of “Progress Studies.”

Before digging into what Progress Studies would entail, it’s worth noting that we still need a lot of progress. We haven’t yet cured all diseases; we don’t yet know how to solve climate change; we’re still a very long way from enabling most of the world’s population to live as comfortably as the wealthiest people do today; we don’t yet understand how best to predict or mitigate all kinds of natural disasters; we aren’t yet able to travel as cheaply and quickly as we’d like; we could be far better than we are at educating young people. The list of opportunities for improvement is still extremely long.

And Nick Bloom, John Van Reenen, and Heidi Williams have an article in the Journal of Economic Perspectives on innovation policy:

Innovation is the only way for the most developed countries to secure sustainable long-run productivity growth. For nations farther from the technological frontier, catch-up growth is a viable option, but this cannot be the case for leading-edge economies such as the United States, Japan, and the nations of Western Europe. For countries such as these, what are the most effective policies for stimulating technological innovation? In this article, we take a practical approach to addressing this question. If a policymaker came to us with a fixed budget of financial and political capital to invest in innovation policy, what would we advise?

What all these pieces share, despite quite different topics and philosophies, is their foregrounding of innovation. This is, in my view, an underrated vector along which to categorize thinkers. We tend to obsess over peoples’ ideological perspectives with respect to markets or business or the size of government but we don’t do the same for innovation. We ought to. One of the most underrated divisions in politics, I’d suggest, is the degree to which people prioritize innovation and technological advancement.

Update: Cowen links to a reading list on technological progress.

Update 2: so does Collison.

And another.

Neil Irwin, writing at The Atlantic, excerpted from his book How to Win in a Winner-Take-All World:

And among economists, the evidence keeps building that the concentration of major industries among a handful of superstar firms might be connected to deep economic dysfunctions. When there are fewer employers in an industry, for example, they have more power to depress workers’ wages. Big dominant companies might focus more on defending what they have than on generating the kinds of innovations that drive economy-wide productivity growth. And the rise of superstar firms is likely related to the rise of superstar cities and the hollowing out of many local economies.

This is important and persuasive work—much of which I’ve written about in my day job as an economics writer at The New York Times. But in all the piling on, I fear something really important is missing from the conversation. The rise of superstar firms is rooted in fundamental technological and economic shifts that are mostly desirable. And policy changes aimed at limiting the downsides of corporate concentration—an important goal—wouldn’t restore an economy built on local, artisanal companies. They would instead leave us with a slightly larger variety of very big, technologically advanced companies dominating the corporate landscape.

Emphasis mine.

I’m broadly supportive of using public policy to address market power and industry concentration, but within the political sphere calls for those policies seem, in my view, to ignore the point that Irwin makes above.