Monday, June 24, 2013

homo socialis

Everyone is familiar with homo œconomicus, the greedy economic agent that brings an economy to its most efficient allocation under perfect circumstances. But circumstances are less than perfect (externalities, imperfect competition, lack of commitment, asymmetric information, etc.) and Adam Smith's invisible hand needs a little help from some authority. Through regulation, taxation, subsidies and punishment, that authority can try to get closer to the first-best allocation, but at a cost.

According to Dirk Helbing, this cost is now overwhelming, because in current societies top-down management of an economy is not computable anymore. One should rather find a bottom-up approach, following the craze about Web2.0 and social media. Thus enters homo socialis, an economic agent who is very aware of all the ills of unfettered markets. If this sounds like one of those revolutionary solutions that would end world hunger, it is. It even comes with a new type of money, a must for these types of exercises.

So, how does this work? Homo socialis is an economic agent with other-regarding preferences. He needs institutions that allow him to express such preferences instead for reverting to the greedy homo œconomicus. Hence the institution of "qualified money" that rewards good behavior by this friendly and altruistic market participant by giving him "reputation." But if he is that altruistic, why does he needs such rewards? That is not clear. And who gives them? Is there any budget constraint here? It would really help to formalize a little bit all the author's ideas, but it is quite confusing. For example, the value of qualified money depends on its history. In other words, every single banknote may have a different value, depending on the context in which it was used. How is that simplifying the problem of complexity?

Helbling gives as as example the management of traffic lights in a city, a rather bizarre example. In the homo œconomicus scenario, an authority sets traffic light patterns and does not adapt them when lines become too long somewhere. In the homo socialis, this adaptation happens, presumably from a feedback coming from car drivers. Why the restriction in the first scenario? In fact cities do have feedback rules in place (notice the cameras along the roads?) without the drivers needing to do anything. But foremost, why such an example? It is unrelated to the question at hand. The argument that the computation would be too complex for a central planner fails because at least he has a complete picture. Individual car drivers suffer from a lot of asymmetric information when taking decisions, even altruistic ones. Note also that the example does not use the crazy qualified money scheme.

What a confusing and confused paper. You would think this would be a first draft for someone who works for the first time in the area. But no, except for the methodological silliness and conceptual errors, this paper is actually quite well written and the literature well researched, including 22 self-citations.


Anonymous said...

i fully agree.

the problem is that the author is very high regarded in the "quantitative sociology" camp and has ideas to change the whole world and more.

Anonymous said...

Correction: Helbing is a physicist who decided to turn his talents to formal modeling of social processes. This does not make him highly regarded in "quantitative sociology" camps (whatever that means). I'd wager that most quantitative sociologists at top programs have never heard of the guy.