Life of Joy

Objections:

I don't know the study's methodology.
It's not published in a legitimate peer-reviewed journal.
How many independent investment funds does, say, Barclays have? Dozens? Hundreds? Each of those funds should be appropriately diversified, within the funds' guidelines. Each fund has a couple percent of its investments in each company. Is that a problem?
The capital used for those funds is yours, and mine, and all of us 401(k) holders. It's not a conspiracy if everyone rules the world.
They're fear-mongering: all of that diversification means there's crossover, but they also say that they hold a lot of the major companies. Of course--there are huge problems with investing in small business for them. Privately traded companies aren't held to the same reporting standards (the SEC). They're less liquid. It's hard to manage small investments when you have $5B to invest.
This looks like a Pareto distribution. The 80/20 rule.
If you don't like Pareto charts, think of it this way. The article says, "It turns out all of the investors in the world hold all of the investments." Scandalous!
The point of this research is to scare people into thinking there's a secret cabal of power. How would someone in that secret cabal actually exercise their alleged power? Does an investment fund manager call up his competitors, the other investment funds managers, and say, "We each own 2% of this company, let's all get together and appoint ourselves to the Board, so we can. . ." Er, what, exactly? I think some commenters in the article do try to make that point.

What is this problem you're a part of?

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sabrinamari.livejournal.com

All good issues and much for me to pursue. Thank you! : )

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I read this whole article so differently. Here are my responses to your points. I don't want a dig-in argument, I'm just interested in how we read the same article so drastically differently, and hope to understand where you're coming from. You are clearly way more au fait with finances than I am, from the way you write, so you may have to use small words for me :D

1 & 2: The study hasn't yet been published. It will be published in Plos One, which a) is peer-reviewed, and b) seeks to get its peer-reviewed articles even more peer-reviewed for other science journals. We should be able to see the methodology laid out there. I prolly won't understand it, but hey...

3. Don't have an answer to that, though it may be illuminated by reading the actual peer-reviewed study in Plos One when it's published.

4. Two points: a) the study doesn't claim a conspiracy, b) I'd say that there's a difference between putting your 401k into a scheme and being in control of it. A complex relationship between small investors (who, let's face it, don't have a heck of a lot of choice when it comes to how to accrue income for their old age) and the people who make the decisions at board level.

I also recognise that ownership is a complicated question.

"Yaneer Bar-Yam, head of the New England Complex Systems Institute (NECSI), warns that the analysis assumes ownership equates to control, which is not always true. Most company shares are held by fund managers who may or may not control what the companies they part-own actually do. The impact of this on the system's behaviour, he says, requires more analysis."

As the commenters in the NS article say, this study is a really good springboard for further analysis.

5.Who's fear-mongering? The NS article remains value-neutral, the study team's not quoted as saying anything that could be quoted as fear-mongering. The nearest we see in the whole thing is:

"Concentration of power is not good or bad in itself, says the Zurich team, but the core's tight interconnections could be. As the world learned in 2008, such networks are unstable. "If one [company] suffers distress," says Glattfelder, "this propagates."

"It's disconcerting to see how connected things really are," agrees George Sugihara of the Scripps Institution of Oceanography in La Jolla, California, a complex systems expert who has advised Deutsche Bank..."

Perhaps I am reading the article wrong? I just don't see anything outrageous going on in the whole thing.

6. I haven't the first clue about Pareto :D

7. I don't see them saying this at all, I see what they're saying in 5.

8. I'm fascinated by this, mainly because I don't see where you got it from.

"One thing won't chime with some of the protesters' claims: the super-entity is unlikely to be the intentional result of a conspiracy to rule the world. "Such structures are common in nature," says Sugihara.

Newcomers to any network connect preferentially to highly connected members. TNCs buy shares in each other for business reasons, not for world domination. If connectedness clusters, so does wealth, says Dan Braha of NECSI: in similar models, money flows towards the most highly connected members. The Zurich study, says Sugihara, "is strong evidence that simple rules governing TNCs give rise spontaneously to highly connected groups". Or as Braha puts it: "The Occupy Wall Street claim that 1 per cent of people have most of the wealth reflects a logical phase of the self-organising economy.""

The article further states that by analysing and testing the system, economists and systems analysts can make it more stable.

In short, I honestly don't get where the reaction that the study's set up to create fear and bolster conspiracy theories. I've read it through a number of times, and see that being explicitly rejected.

There are a host of reasons why we might have read it so differently - time of day, when we ate, the chairs we sat in, our political affiliations, our different educational and professional backgrounds (you clearly have both, I'm getting over my maths phobia!)... I think it's possible I'm mistaken, possible you are, possible that we've both misinterpreted some bits, and highly likely that you have a better insight into it than me.

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First, thank you for disagreeing with me, and for being so rational about it. This was the second or third link to this article I had seen, and in my skeptical zeal, I went too far in criticizing it.

(I thought of another criticism, which is confirmation bias: they expected to find a concentration of ownership, and they did).

1-2. I read parts of the PloS One website, and I was skeptical. But I'm not an academic, and can't judge journals other than by reputation.

4a. The article says, early, "the idea that a few bankers control a large chunk of the global economy. . ." So that was the tenor of the article for me.
4b. Yes, the ownership is several degrees of indirection. Retirement investors don't usually pay much attention, but if you hold individual stocks, or even a fund, and you don't like what the manager is doing, you can (and should) dump them. Fund managers usually pay attention to performance, and if they hold enough of a company, they can ask questions of the Board and CEO.
For many people, as you quote, "ownership equals control." If true, then individual capital has the control. If false, there's no cause for concern. A point for concern would be if money managers have control over management, but that's the last point.

5. You're right, I should inspect myself for fear. I worry that ignorant people will see this article or study and make decisions (or reinforce poorly-informed decisions or values) based on a pre-conviction that The Man holds all the power and is Out To Get You. Ignorant liberals embarrass me, because they give conservatives reason to ignore us.
I did read the article from that point of view (plus the tone I said above).

6. You're smart, look it up on wikipedia. :-) It's basically the 80/20 rule: 80% of anything is verbed by the 20%. 20% of your work takes 80% of your time. 80% of your money goes to 20% of your expenses. Many people think that everything should be distributed along a bell curve, and get angry when things aren't. Many things fit more naturally along a Pareto distribution.

7. OK, I oversimplified. Maybe a touch of hyperbole. The point I was trying to make was more that it shouldn't be surprising that the largest few hundred or thousand capital companies hold so much of the world's investments.

8. There is balance in the people quoted. The last paragraph directly refutes my assertion. You're right to question my perspective on this. I have too many Facebook friends reposting ignorant stuff. I understand the outrage of OWS, and agree there's a problem with the US political-economic system, but it doesn't currently rise to the level of outrage for me.

I wish everyone on the Internet could disagree as reasonably and rationally as you do!

PS: maths won't hurt you!

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I think we should start a mutual fan club :)

So nice to have a disagreement online that remains a disagreement and doesn't degenerate into an entrenched slanging match!

I am knackered now, and have a busy couple of days ahead. I'll do my best to digest your points and see what comes up. Oh, that sounds so very, very wrong, and yet I can't think of another way to put it. How embarrassing... *Hangs head and shambles off in shame*

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sabrinamari.livejournal.com

Of course you are both smart, personable and clever. You're both my friends.

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kmusser

One of my friends posts reasons to take that with a grain of salt http://andrewducker.livejournal.com/2565185.html largely echoing your other commenter. Investment firms have lots of shares of big companies because people like investing in big companies. There's not necessarily an ulterior motive there.

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sabrinamari.livejournal.com

Thank you, dear.

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Just to point out that the article quotes the research team and commenters as rejecting any conspiracy theory. I'm not sure where the idea that they are working from such a premise comes from?

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Also, having just read your friend's piece, it doesn't debunk the study, it echoes what the study team is actually quoted as saying in the article :)

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Thank you for sharing this. I am reposting it to my journal. I have an economist friend who will jump on it if it deserves jumping on.

In the meantime, i think your instinct is correct. There is a problem!! Whether you are part of it or not is another question.

Whenever questions of inequality and power are raised, there are always people ready to scream "unfair!" at those who try to demonstrate the actual distribution of power and wealth.

The study in question may have methodological flaws and questionable assumptions, but i have looked at a lot of studies and the main problem this one seems to have is that it questions the distribution of power in the economic system. And even these investigators hope to "stabilize" the capitalistic system rather than look forward to its demise.

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This was my reading.

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I would like to understand your point. Are you saying that stabilization, in the sense of prevent economic collapse, is not desirable if it prevents the complete demise of capitalism?

What are the questions of inequality and power?

I haven't made this point before, but I agree that wealth is distributed poorly in the U.S. While the ideal in this country is to give everyone an equal opportunity to compete for those resources, it looks to me like the advantages of wealth, including education and an understanding of the values and mores that accumulate wealth, are extraordinarily difficult for the poor to acquire.

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Here is my bias. First, when i discovered the philosophy of phenomenology, i was intrigued and soon adopted it as my own. Because i was a social scientist, i was most interested in its relevance for human behavior. Then i learned that Schutz (spelling error?) developed phenomenology to provide a philosophical basis for his Banker friends who mostly following the Austrian school of economics. It puzzled me that so many obviously intelligent people (Hume, Peter Berger, etc.)applied their thinking to economics in such a counter intuitive way It was as though their commitment to capitalism was a given and any other ideas they had were to be modified until they supported it. I never became a Marxist, but i was forced to the conclusion that Marx had a better handle on the economy then any economist i knew about. However complicated macro-economics might be we cannot leave it in the hands of the Corporate boards or the mythical "market."

So my questions are Does Power bring wealth and wealth power? Can powerful entities behave in ways that benefit those with less power? Ate inequalities in power and wealth just? If not, can something be done to change the situation? What?

I believe in equal or near equal distribution of wealth. I believe in equality of outcome more than equality of opportunity. For me inequality of outcomes is itself evidence of lack of equal opportunity,

Since i, like the majority of my peers, have two hands for labor and one mouth for consumption, i ought to have a standard of living pretty near equal to that of everybody else. I don't, so something is amiss.

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Thank you for explaining your bias. It sounds like I correctly understood you. I'm not sure we can have constructive debate, but I'm willing to try.

I'm not able to follow your logic. I was unfamiliar with social phenomenology until I read the wikipedia article just now, but it didn't give me any hints about economics. For esoteric thought to seem counter-intuitive doesn't surprise me; that's true in several fields.

Does power bring wealth? Depends on definition of power, but there's a weak link.
Does wealth bring power? same answer
Can powerful entities behave in ways that benefit those with less power? Of course they can. Charities, philanthropic foundations.
Ate inequalities in power and wealth just? If not, can something be done to change the situation? What? Depends on your definition of "just," I suppose. It seems fair to me for one's efforts to be rewarded commensurately. It seems unfair to me when those efforts are rewarded too much or too little. I don't think CEOs contribute a thousand times more effort than their lowest-paid employees. I do think CEO pay and bonuses are coming down, as investors are questioning value.

"inequality of outcomes is itself evidence of lack of equal opportunity." This doesn't make sense to me. Give everyone an identical acre of land to farm, and some people will produce more food than others. Some work harder, some use better techniques, some share work and resources with neighbors. Equal opportunity, unequal outcome.

Most of my peers have two hands and four to eight mouths to feed.

To me, the capitalist economy is a crude and inefficient one, which requires better policing than it has had. I don't know of another system that provides a higher standard of living for the majority of participants. To allow the economy to collapse would be for thousands or millions to starve. Orderly change to an alternate system might be possible, but I don't believe it.

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When i read your first paragraph i realized that i would have to read the other five to know if we could constructive debate. Whether we should is one question. Whether we could is another, and to have to answer it in the negative would be sad. Right down to the last paragraph i felt that maybe a negative answer might be necessary.

Phenomenology is at the core of my belief system as Christianity is for some people, or pick your own philosophy of life. We construct our realities individually or cooperatively out of perceptions which are almost guaranteed to be inaccurate (since real reality is hidden behind a "cloud of unknowing" (Christian) or an "event horizon" (quantum mechanics) and comes at in bitsy pieces at the speed of light. We each do our best to organize these perceptions into some semblance of a meaningful existence'; and i have no way of knowing whether my "meaningful existence" is closer to "reality" than someone else's very different one. For someone to construct an argument for the superiority of capitalism over say, feudalism, or primitive barter out of phenomenology seems like cheating. Most people who gave up primitive barter systems to join the world economy did so under duress and not through free choice.

My specific questions about power and equality would have been answered differently.

As to the two hands and eight mouths problem i would say that 1) i sincerely hope those eight mouths are accompanied by sixteen hands, which in the ancient world would have all eventually come into use for the benefit of the community, and 2) although capitalists as sellers and politicians have many nice things to say about families, capitalism as a theory does not acknowledge the family unit all, seeing only "rational"
buyers and seller.

But there was nothing in your final paragraph with which ii could disagree, except maybe the final sentence. Orderly change to an alternative system is made impossible ONLY by our collective disbelief.

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When i read your first paragraph i realized that i would have to read the other five to know if we could constructively debate. Whether we should is one question. Whether we could is another, and to have to answer it in the negative would be sad. Right down to the last paragraph i felt that maybe a negative answer might be necessary.

Phenomenology is at the core of my belief system as Christianity is for some people, or pick your own philosophy of life. We construct our realities individually or cooperatively out of perceptions which are almost guaranteed to be inaccurate (since real reality is hidden behind a "cloud of unknowing" (Christian) or an "event horizon" (quantum mechanics) and comes at us n bitsy pieces at the speed of light. We each do our best to organize these perceptions into some semblance of a meaningful existence'; and i have no way of knowing whether my "meaningful existence" is closer to "reality" than someone else's very different one. For someone to construct an argument for the superiority of capitalism over say, feudalism, or primitive barter out of phenomenology seems like cheating. Most people who gave up primitive barter systems to join the world economy did so under duress and not through free choice.

My specific questions about power and equality would have been answered differently.

As to the two hands and eight mouths problem i would say that 1) i sincerely hope those eight mouths are accompanied by sixteen hands, which in the ancient world would have all eventually come into use for the benefit of the community, and 2) although capitalists as sellers and politicians have many nice things to say about families, capitalism as a theory does not acknowledge the family unit at all, seeing only "rational"
buyers and sellers.

But there was nothing in your final paragraph with which ii could disagree, except maybe the final sentence. Orderly change to an alternative system is made impossible ONLY by our collective disbelief.

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Picking a few points for response. . .

Mouths and hands: you said you have two hands and one mouth, you should have an equal standard of living. I was offering a counter-example: if you had more mouths your standard of living would decline. If you put children's hands to work, I don't think your standard of living has improved.

As for change, I have not heard compelling arguments (from anyone) that any different economic system is superior to capitalism. If it were clear that another system would improve the general standard of living, maybe change would be possible. Even then, it would take generations.

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