Sorry, this post in Italian only. I am holding a seminar (open access, in Italian) on the frontiers of collaborative public policies; and participate in the kickoff meeting of a research project on complexity science (invitation only – but I might be able to get you in, in English). Machine-translate for details.

La prossima settimana sarò a Venezia. Lunedì 23, insieme a Luigi Di Prinzio, Silvia Rebeschini e gli amici della Scuola di dottorato Nuove tecnologie dell’informazione territorio-ambiente, faremo il punto sulle frontiere delle politiche pubbliche collaborative al tempo della crisi. A quasi un anno mezzo dalla pubblicazione di Wikicrazia, queste frontiere sono in rapido movimento, e ha molto senso fermarsi un momento per aggiornarne le mappe. Info pratiche qui.

Il seminario è ovviamente collaborativo. Se avete delle esperienze di politiche pubbliche collaborative e volete condividerle (in un formato sintetico, per stimolare la discussione) scrivete a Silvia: srebeschini[chiocciola]gmail[punto]com.

Martedì e mercoledì mi fermo in laguna. Sarò ospite dell’European Center for Living Technology per l’incontro di inizio del progetto MD – Emergence by Design, nell’ambito del quale dirigerò lo sviluppo di un software per assistere i managers di comunità online (nome in codice: Dragon Trainer). L’incontro dell’ECLT non è aperto al pubblico, ma se ti interessa questa roba prova a scrivermi e vedo se riesco a farti entrare.

“You are a radical!” In my brooding teenage years, my father would mean this as a criticism. In the world we grew up in, being average was a good thing: the backbone of society was the middle class: ethnic majority, a high school diploma or a run-of-the-mill college degree, a steady job, a mortgaged apartment, 2.3 children and a trade union membership card. That’s where you wanted to be: in with the sensible people, under the protection umbrella of NATO and the European welfare state.

The dream of stability and social inclusion of a large chunk of the population (if certainly not all of it) was good while it lasted. But it seems like the hegemony of moderate thinking came with one very big string attached: the collective inability to recognize the rise of global problems (rampant inequalities, climate change, the feral rich, the surveillance society) and deal with it effectively, thinking out of the box. It is not so much a matter of knowledge (though of course we do need more, better knowledge); for at least some of those problems the science is there, as Stewart Brand pointed out (see also the video above). The cognitive capacity of the median elector, not so much.

So what do we do? In terms of response speed and value for money, far and away the best option is to call in the radical thinkers, and give them much more latitude and resources. We have some unused capacity there: as Vinay Gupta recently pointed out, many of the really important problems and most of the candidate solutions to attack them are being investigated by many interesting people. Almost all of them are poor, because their projects lie outside the fundable sphere (by this Vinay means that they are practically unthinkable by the sensible, dominant middle class decision makers in academia, business and government). That capacity could be used to shape an almost evolutionary policy response: give these people the space to prototype their ideas, deploying a lot of them in a controlled testing environment, each with limited funding. Try everything: geoengineering, space colonization, energy-sufficient communities, reputation as currency, you name it. Then drop what does not work, and follow up on what does. Iterate. Nassim Taleb would call this angling for positive Black Swans: each of these ideas has a small probability of bringing about enormous, off-the-scale benefits, so they should all be made small investment in, not cutting ourselves out from those benefits.

Given all that, we should all hail NESTA’s recent call for the radicals that could potentially transform British society. It is the first time I see the R-word used with a positive meaning in a public policy context. And it is no surprise it’s NESTA (the British National Endowment for Science, Technology and the Arts), whose CEO Geoff Mulgan is one of the most interesting policy makers that I know of. The call is not very operational: there are no significant resources, or explicit plans to give the radicals some true leverage. But it is a start. I forecast a wave of increasingly radical thinking in public policy, as scientists and policy wonks hang out more together, and some of the hybris of the former rub off onto the latter. Let’s hope it’s not too late.

According to Business Insider, the Khan Academy has just raised an extra 5 million dollars in funding. It was started in 2004 by an MIT graduate called Salman Khan, who started tutoring his cousin in math via Yahoo’s Doodle notepad. It went so well that other members of his family asked him to do the same, so Salman decided to record his lectures as videos and upload them onto YouTube. At this point, of course, they could be shared, and they were. This way of learning became very popular, and seven years later the Khan Academy is a well-funded charity that draws 39 million page views a month.

Assume 20 pageviews (videos) make up one student’s day of schooling; assume further 25 students in a real-life classroom, and 22 days of school in a month. That means that the Khan Academy takes the place of a very large 3500-classrooms school, being taught by, at most, ten extremely skillful teachers. Plus, each student can proceed at their own pace, with no need to sync with others that might prefer different speeds or learning times. Given the well known limits of traditional education as a learning method, it is easy to foresee continued success for endeavors of this kind.

That’s a big deal. According to the CIA’s World Factbook, 4.4% of the world’s GDP was spent on education in 2007. And world GDP was recorded at 75 trillion dollars in 2010 (in purchasing power parities). That means that the world market for education provision is worth something like 3.3 trillion. The Khan Academy’s successes may be a sign that a significant fraction of that market is going to get commodified, fast. When that happened to the music industry, it lashed back, hirinfg lobbyists to build legal barriers around its stream of revenues and lawyers to sue high school kids guilty of unlawfully sharing music files. I am not looking forward to what happens when universities get wind that they are being bypassed. Students in countries like the UK, where university tuition fees stands at three thousand pounds per year, are certainly going to want to bypass them: the alternative is getting into student debt, and the financial crisis is teaching us a thing or two about debt. Things could get ugly.

Marco De Rossi, the young founder of the Italian peer-to-peer online school Oilproject, dreams of putting online, on video every lecture of every course of every university in the country for free viewing. He certainly has the community to do it: what he needs is a one-line piece of legislation, that puts squarely in the public domain the intellectual property rights of taxpayer-funded university lectures. My guess is that it is now or never: either this legislation is made now or the education lobbyists will lock it down for good. Until the next Tahrir Square.

There is no denying that we economists are hardly everyone’s favorite characters. Our discipline is known as “the dismal science”; we are accused, in a more or less implicit fashion, of supporting the worst excesses of rogue capitalism; some of the most senior and best known members of the profession are known by the media with comic books supervillain nicknames like “Doctor Doom” (Nouriel Roubini) or “The Black Swan” (Nassim Taleb). This does not happen to linguists or astronomers.

Just like science in general, economic science has its share of skeletons in the closet: ideologies that were given a coverage of objectivity; wildly off-the-mark forecasts; policy prescriptions that failed to prevent, and even caused, much suffering and poverty. But just as many were the intellectual victories, the extraordinary inventions, the valuable contributions to human prosperity. I think this dualism is inevitable, because political economy is the offspring of moral philosophy: Adam Smith, that many regard as the father of the discipline, wrote a Theory of moral sentiments that he cared for just as much as for the more famous Wealth of nations. And moral philosophy is no walk in the park: it is a minefield, in which you have to make terrible choices with every step you take. Liberty or equality? Meritocracy or stability? Like Jedi Knights in Star Wars, moral philosophers and their cousins, economists, are always exposed both to the light and the dark side of the Force.

Recently I chanced to read Joseph Stiglitz’s Towards a General Theory of Consumerism: Reflecions on Keynes’s Economic Possibilities for Our Grandchildren (in this book and Elinor Ostrom’s Governing the Commons. Stiglitz deploys standard neoclassical theory like a true master to illuminate a problem we don’t think enough about: why is it that, though they could in principle afford to, modern societies do not choose to work less, exchanging some consumption for leisure time. Among other things, Stiglitz shows how elementary extensions to the standard model lead to reverting its result: for example, in a two-sector model it is not always true that increasing salary in one of them leads to an overall reduction of labour supply. To me, that inspires awe for the power and the flexibility of the model, and not a little embarassment for the unsophisticated way it is often wielded in common political discourse.

Ostrom tells of the efforts of several human communities, from Switzerland to the Philippines, in coordinating to manage common resources like fisheries, forests or irrigation systems. Successes, failures, institution provision through self-organization and reform attempts from outside are analyzed with theoretical rigor, explanatory power, radical thinking and empathy.

Joseph, Elinor, thanks. This is the Light Side economics, the one I wanted to study as a young man and that makes me proud of being somehow related to great thinkers like yourselves. If you organize a parade to affirm the pride of being economists – modeled on the Gay Pride, which seems to have worked well – you can count on me to show up.

Good news: a research project I helped to write has been approved for funding by the European Commission’s Future and Emerging Technologies program. The project is led by one of the scientists I admire the most, David Lane, and rests firmly in the complexity science tradition associated to the Santa Fe Institute. We intend to attack a big, fundamental problem: innovation is out of control. Humans invent to solve problems, but they end up creating new and scary ones. Which they tackle by innovating more, and the cycle repeats itself. Cars improve mobility, but they come with global warming and the urban sprawl. Hi tech agriculture mitigates food scarcity, but it also gives rise to the obesity epidemics. To quote one of our working documents:

While newly invented artifacts are designed, innovation as a process is emergent. It happens in the context of ongoing interaction between agents that attribute new meanings to existing things and highlight new needs to be satisfied by new things. This process displays a positive feedback [...] and is clearly not controlled by any one agent or restricted set of agents. As a consequence, the history of innovation is ripe with stories of completely unexpected turns. Some of these turns are toxic for humanity: phenomena like global warming or the obesity epidemics can be directly traced back to innovative activities. We try to address these phenomena by innovation, but we can’t control for more unintended consequences, perhaps even more lethal, stemming from this new innovation.

We want (1) build a solid theory that concatenates design end emergence in innovation and (2) use it to forge tools that the civil society can use to prevent the nefarious consequences of technical change. It does not get any bigger! And in fact we got a stellar evaluation: 4.5 out of 5 for technical and scientific excellence and 5 out of 5 for social impact.

The project commits to building Dragon Trainer, an online community management augmentation software. The idea is to make a science of the art of “training” online communities to do useful things (like policy evaluation), just as you would train an animal too large and strong to push around. I am responsible for producing Dragon Trainer, and it is quite a responsibility.

I am superhappy, but worried too. Taxpayers foot most of the bill, and this makes it even more imperative to produce the absolutely best result we can. I will need to work very, very hard. I am seriously thinking of devoting myself to full time research for a couple of years starting in 2012. Does this make sense? What do yo think?

The Fondation pour l’innovation politique 2011 report on World Youth contains the graph reproduced above. Opinion polls need to be taken with a very large pinch of salt (people tend to lie when responding), but it is enough to give you pause. It’s gone full circle: ten years ago the establishment was pro-globalization and the young protested against it. Now the establishment gives signs of uneasiness about globalization, and the young embrace it. What gives?

Quite possibly, Joseph Stiglitz was prophetic in his 2002 book: globalization has been seriously mismanaged, but over and above mismanagement it is generally beneficial, as it provides for previously unthinkable opportunities. Youths worldwide – significantly, more so in the developing countries – are simply recognizing this.

Yet there may be another, more unsettling explanation: that the young (especially the educated ones) are switching their allegiance away from their countries – less and less able to give them a meaningful life, less and less interested in doing so – and over to their peers. The globalized economy and society is where the opportunities are: where will the young stand if it comes into conflict with the old nation states?

The financial crisis has broadened the scope of the economic policy debate. Pressed by their respective public opinions, world leaders need new ideas, fast. Despite this, one might be surprised by the way German Chancellor Angela Merkel and French president Nicholas Sarkozy dusted off the idea of a levy on financial transactions. Nowadays journalists are calling it Robin Hood tax, but in the 90s it was called Tobin tax and it was part of the intellectual arsenal of the anti-globalization movement. Even then, it was old news: Nobel laureate James Tobin first proposed it in 1972 (the original formulation was aimed at transactions of foreign currency).

The idea is to tax sales of financial assets (equity and/or bonds and derivatives) with a low rate (0.01-0.05%). That’s meant to be too low to discourage the migration of capital from low-yield to structurally higher yield assets (such as from equity in a stagnating company to equity in a highly profitable one), because such a shift happens only once, and the cost of the levy is quickly offset by the increased yields: this way, the market maintains its efficiency property. But such rate is high enough to discourage speculation, that is based on buying and quickly reselling the same assets.

The main practical problem with a Tobin tax is that, unless it is introduced everywhere at the same time, speculators can elude it simply moving to a financial market that does not levy it. In fact, some variants have been tried out in Sweden in the 80s. Results: low revenue, a sharp drop in transaction volume and eventual migration of many of the most active titles from the Stockolm to the London stock exchange. The tax was eventually abolished. So it does not work, right? Why bring it back into the debate?

It’s not quite that simple. It (probably) does not work to stop speculation and generate fiscal revenue. But it could work well for a different goal: driving the more instability-generating fringes of the financial sector (the same ones that make money off that instability, as Nicholas Taleb reminds us) off the country. Their flight can be painful: these are wealthy taxpayers, who supposedly bring prosperity. But it also could be liberating, because the financial sector has become politically very powerful: this (1) makes it very difficult to make economic policy, because the super-rich veto any move that does not imply benefits for them (as Nobel laureate Joseph Stiglitz reminds us); (2) enhances economic inequality, exasperating the non-super-wealthy 99% of the population; and finally (3) it is not even clear that having these rich guys around does bring much prosperity. They sure don’t pay much taxes: Warren Buffett recently declared that his tax rate is lower than his cleaning lady’s.

Are we looking at a cultural shift? Granted, the man in the street never trusted finance, and never understood it. But this is news to me: two world leaders of the standing of Merkel and Sarkozy aligning with people like tax expert and progressive blogger Richard Murphy – who applauded their joint proposal as “a welcome and overdue move [...] if the feral banking economy is to be brought under control” (with the Guardian’s blessing). Why, in the 90s Attac’s militants campaigning for the Tobin tax during G8 meetings were treated as a disturbance by the police forces of those same states.

I am tempted to read this story as the final battle between two different organizing principles, nation states and global finance. Am I seeing ghosts?

In my book Wikicrazia I claim that the public sector, society’s system to pursue the common good, can be made smarter by mobilizing the citizenry’s collective intelligence. Accessing collective intelligence entails enabling a large number of individuals to coordinate on some common goal. Normally, this is done by means of online commmunities, that use the Internet as their technological infrastructure and where interaction is mediated by some kind of social bargain, with somebody to resolve conflicts and keep the group focused on the goal.

There’s a problem here. On the one hand, online communities cannot be run by top-down command and control: it is exactly the free action of their different participants that make online communities so incredibly effective in processing large amounts of information. On the other hand, public policies have by definition a goal which is set exogenously with respect to the community itself: whereas Facebook users are on Facebook to hang out, and it does not really matter what they do with it, the users of Peer to Patent are there to process patent application; those of Kublai to write up creative business plans; those of Wikipedia (not a public policy, but similar in this respect) to write an encyclopedia. Community managers, myself included, are trapped in this dilemma: practically the only way we have to figure out the social dynamics in our communities is to spend an unreasonable amount of time participating in them, and we try to steer them by rhetoric and persuasion. We end up navigating pretty much by gut feelings. And as communities scale – even to just a few thousand participants – it gets really hard to understand what is really going on.

I thought our work would improve a lot if we could augment our ability to read social dynamics of online communities by using software. In essence, a policy community is a social network, and as such it can be represented by a graph with nodes and links, and studied mathematically. The community’s social dynamics should be encoded into the mathematical characteristics of the graph that represents it: for example, the creation of a cohesive group of senior users in Kublai in 2009 was picked up by the crystallization of a structure called k-core. If we managed to build some sort of dictionary that maps social dynamics onto mathematical characteristics of the graph, we could use network analysis to detect community dynamics that are invisible to the eye, because they happen at a scale too large for human participants: and this would work even for very large communities, at least in principle.

I intend to develop this software as my Ph.D. thesis. Colleagues at University of Alicante and the European Center of Living Technology will help. I call it Dragon Trainer, because doing policy through an online community is like training a dragon, an animal too large and dangerous to order around. If you are interested in learning how we plan to do this, you can watch the video above (12 mins).

The more I use the Internet, the more I grow fascinated with networks, because they behave in unexpected, counterintuitive ways. They seem to summon order from chaos as if by magic. Consider the web: large masses of amateurs who don’t know each other and have no command structure should produce some kind of shapeless informational blob, right? Wrong. Day after day, people and content inexorably self-organize in such a way that they are one or few clicks away from each other. Building an exhaustive map of the Internet is impossible, but finding any one thing in it is quite easy. It is a bit like sticking your hand in the proverbial haystack and finding a needle, every time.

The more I study networks and the more they amaze me for their ability to organize information, in an apparently effortless way. Reading the history of scientific exploration of social networks is almost dizzying. Stanley Milgram gives random American letters for other random Americans asking the former to deliver through an unroken chain of aquaintances, and a surprising number of them reaches home in very few steps. Mark Granovetter discovers that aquaintances are more effective than close friends or family in finding us jobs. Fredrik Liljeros looks at a network of sexual contacts, and concludes that the existence of a small number of very promiscuous people renders AIDS impossible to eliminate. Nathan Eagle finds that the prosperity of a small area can be predicted from the pattern of allocation of calling time across their contacts of that area’s inhabitants (in poorer communities people spend a higher share of their calling time with one or two contacts). All these results seem independent of the actual people in the networks: in almost all models nodes are identical. All the action is in the link structure. Network papers are academic, but somewhat alien: Hogwarts comes to mind.

I am convinced that the properties of networks can help explain many phenomena that we experience every day but don’t really understand – and give us anxiety. Why do we feel surrounded by young, successful entrepreneurs (though there’s not that many of them)? Why were peer-to-peer file sharing services fatal to the recorded music industry? How does Wikipedia work so well?

My Holy Grail is to tame online social networks, forging them in a powerful, precise tool to design and deliver public policies. I have done it before in Visioni Urbane e Kublai, but a lot of time I had to steer by instinct. I was lucky, but for this to become a generalised method I need to understand it a lot better. So I study the language of networks: these days I am often at the European University Institute in Florence, to attend Fernando Vega-Redondo’s Complex Social Networks course. It’s a bit tough (I get up at 5 a.m., because Fernando usually lectures at 8.45 sharp), but so be it. I really need to understand this thing.

Antonella Noya at OECD (thanks!) pointed me to their report The Changing Boundaries of Social Enterprises, in which they attempt to render the past ten years of social enterprise in developed countries. It’s been an important ten years for this sector, from all points of view: growth, legislation and finance too. From a finance perspective, an executive summary could as follows: social enterprises are undercapitalized and find it difficult to access financial instruments other than traditional loans or grants. A lot of financial innovation was thrown at the problem.

The OECD report has an impressive list: venture philantropy, “patient” loans, crowdfunding platforms à la Kickstarter, social performance assessment tools like the Dow Jones Sustainability Indices and so on. All’s well then? Yes and no. Yes, because the problem exists and is being looked into. No, because it is being addressed in a way which is a little too reminiscent of that other wave of financial innovation, the one that gave us the 2008 global meltdown.

Consider Blue Orchard. It’s a simple idea: connect institutional investors (say, pension funds) wanting to invest ethically with microlending. How does that work? It begins with some institution making microloans. Each of them creates an asset in the balance sheet of the microlending institutions. Now this microlender takes all of these assets, packages them up and uses them as collateral to back a bond (which is a derivative product, its primary being of course the microloans) which he then sells to the institutional investor. And it’s done! The latter has been enabled to invest ethically without actually having to be able to tell which microborrowers to lend to. At the same time, the microlending institution has gained extra liquidity, and can go on to make more microlending. Great!

Or is it? The process described is called securitization. One of its effects is to separate the borrower from the final lender (in this example the pension fund). Before they got securitized, home mortgages were issued by local banks, that knew borrowers personally and could assess their creditworthiness reasonably well. If they got it wrong and the borrower found it difficult to repay the debt, the bank would do its best to get him back on track, possibly restructuring her debt: after all, she was a client, and lived in the same local community as the bank. The more prosperous the community, the better things were for the bank. After securitization, all this changed: now John Smith’s mortgage is repackaged and sold to a nonlocal lender — a pension fund at best, a very aggressive hedge fund at worst. As soon as Mr. Smith starts falling behind with his payments, this investor has no reason to be understanding: it will try to maximize its immediate gain, as he has no stake in Smith and his community’s long-run prosperity. What will the pension funds that purchase Blue Orchard’s products if they find that the returns are too low? If they decide to exit fast, what will the consequences be for the microborrowers? Could they be forced to pay their debit back or lose their assets too? Could this wipe out the social benefit of the poorest of the poor investing in themselves?

Similar questions can be asked for ethical capital markets being rolled out in some countries, like ETHEX in the UK or Bolsa des Valores Sociais in Brazil. The stock market as we know it brought a fresh stream of capital to for profit enterprises, but at the price of making them focus away from long term growth and onto quarterly results. What would happen to social enterprises once their shares (yes, some do issue shares) are traded in Wall Street or London?

These are unsettling questions. But looking the other way would be much worse: we have no choice butlook fo the answers.