How is our economy ordered by information? Reflections from the Open Knowledge International monthly reading group

reading-group

Danny Lämmerhirt and Mor Rubinstein share team reflections from the inaugural meeting of the Open Knowledge International Reading Group. This month’s topic examined the role that knowledge and data play for political and economic coordination. The team looked at Friedrich Hayek and Hernando de Soto and drew parallels from their work to how government information is managed and understood today.

‘Openness’ and ‘data’ have become the new spectres haunting society. From open government to open food – it seems that everything can somehow become “open” nowadays. In particular, concepts like open data seem to be a panacea promising to enable transparency and accountability, foster growth and economic efficiency, or empower civil society. The problem: these many shades of open obfuscate what we mean by “open”, what the historic, moral and political roots of concepts like open government data are, and whom these concepts eventually serve.

We decided therefore to start a reading group in which we dedicate time to share, read and reflect on literature that enables us to better contextualise our own work. We plan to organise a monthly session with interested OKI team members. In each session, we will discuss two core texts around a chosen topic. Those sessions will be shared in a blog post with the whole community. If there is demand or interest, we can open these sessions to the Open Knowledge Network – let us know in the comments sections below!

Here is a selection of topics we are interested in:

  • How was the idea of openness born and what are its moral, political and philosophical underpinnings?
  • If data is never “raw” but a result of political decisions, behavioural routines, legal frameworks or technological infrastructures – which realities of the world do data construct and how can we partake to shape the politics of data infrastructures?
  • Civil society is a term used and abused on many fronts – do we see civil society only as mere actors increasing economic efficiency?  Or is civil society expressed through political contestation?

We will try to explore and navigate the sea of unanswered question. Like every journey, we had to start somewhere. Here is a look at the content and discussion from our first session:

How is our economy ordered by information, and what roles do state and individuals play in it?

For our first session, we decided to focus on texts that examine the role that knowledge and data play for political and economic coordination. The first text, written by Austrian economist Friedrich Hayek, promotes a revival of economic liberalism and is often been seen as a fundamental text to understand the neoliberal turn. The second text by Chilean economist Hernando de Soto discusses the role bureaucracies play in facilitating economic exchange.     

Friedrich Hayek – “The Use of Knowledge in Society”

Written 71 years ago, Friedrich Hayek’s essay  The Use of Knowledge in Society tries to reinvigorate liberal economics against (socialist) central planning and the expansion of state influence. When Hayek was writing his piece, state influence had gained significant political support across the western world. Hayek drew inspiration from his close friend, Austrian philosopher Karl Popper, who is the author of the book “The Open Society and its Enemies”.  

Hayek’s essay argues that economic planning demands knowledge which cannot be found in one place within society. He questions the usefulness of aggregated statistics to manage economy. Rational calculation in a complex society needs to be executed by individuals. “The man on the spot” has context-specific knowledge and knows best how to react to uncertain (economic) developments in society. The key for Hayek is, that such knowledge is not representable in data and cannot therefore be managed by central government.

individuals

Hayek asks how we can transfer knowledge between individuals to allow for the best coordination within society. For him individuals only need one common metric – the price of products – to coordinate their actions. This common metric does not need to be understood by people. What matters is that prices are meaningful enough to coordinate people’s interactions decentrally.

What we have learned:

Two aspects are striking when reading Hayek: 1) his critique of the representation of knowledge, and 2) his emphasis on individual expertise.

Hayek criticizes the meaningfulness of abstracted, statistical representations of the world. Interestingly, he questions what other authors have called a “trust in numbers”, and the potential to manage the world at a distance using abstracted facts such as numerical representations. Hayek does not consider it feasible to transfer tacit and contextual knowledge through data.  We can criticize that he de-politicizes data by assuming that individuals do not need to understand numbers in order to coordinate actions.

However, as we will explore in later reading sessions, it is these very statistics and data that are shaped by human assumptions (political and moral) and which have politics inscribed that shape our vision of the world. Instead of reducing the interaction of human knowledge to mere price calculations, it is possible to argue that society has to re-politicize the numbers and data that shape our world and undertake critical examinations what they are measuring.

Hayek stresses the importance of a decentral coordination of economic activities through individuals who know best how to coordinate their actions. Hayek’s ideas are closely related to economic liberalism: both are centred around uncertainty and that spontaneous, decentralised application of knowledge is best suited to bring about benefits for society. Hayek’s concept of knowledge proposes a solution to how to dispense with the need of conscious control.

numbers

While Hayek did not discuss open governmental knowledge to the masses, we can see that decentral coordination and this dialectic of social and economic liberalism has a revival in smart city initiatives,  open APIs and other technological applications. Governments may run hackathons to mobilise distributed knowledge and to create value and solve societal issues. Some authors argue that open APIs and other systems are a means of lean government – a move towards opening government’s data so that ecosystems of individual developers can take over actions normally managed within the public sector. Thus we see that openness touches upon a much larger issue – the relationship between individuals and the state – and how political power is distributed between both.

We wish to shed light on both issues – how we can understand scientific methods such as statistics (data literacy included) as well as how we can critique the political ideas behind them. Both themes eventually boil down to one question: how we define contemporary politics and the distribution of power.

Hernando de Soto – The Mystery of Capital

The second text we discussed was written by Peruvian economist Hernando De Soto. De Soto was influenced by US economists, and is known as one of the key players in changing Peru’s economic policies from Keynesian to neoliberal ones. Our recent Cadasta fellowship for the Open Data Index inspired us to read this text. De Soto champions the idea that some nations impede their economic development through defective bureaucratic systems. Since they fail to document information on (land) ownership rights, they cannot capitalise on those assets. Even though written in an almost colonising tone the text is useful to understand the (economic) importance of bureaucratic data infrastructures and why land ownership data may be key information that should be provided by the government.

bureaucracy

De Soto argues that the poorest countries already dispose of assets but cannot capitalise on them or turn them into revenue – hence they remain “dead capital”.  Developing countries often have no registries for land ownership rights, fail to document the territories on which buildings are built, or do not display business registrations. In short: the property rights of assets are not documented which prevents individuals to trade them, to enter a market, or to gain funding from the financial sector.

According to de Soto bureaucratic infrastructures are often not capable of documenting assets. The costs of registering a house are prohibitively high. If people illegally run a business on  a compound and save money to afford registration, they might be penalised afterwards for running the business. Public data infrastructures, their routines of registration, and the laws that should give people incentives to register are not attuned to process and protect legal persons and property rights. The result is that most people’s resources are commercially and financially invisible, and that informal ownership spreads.

What we have learned:

De Soto’s account has to interesting aspects. It suggests that

  1. Public information systems and bureaucracy may play an important role in fostering economic transactions that are visible to the (global) market. Here public information systems are crucial to display assets so they can be capitalised.
  2. It foregrounds (at least partially) that public information systems are shaped by laws, cultural factors and people managing and that several factors are important to make these infrastructures ready to incorporate information on a nation’s privately held assets.

Questions that still remain to be explored:

  • Can we really ignore cultural systems of bureaucracy in order to create a new order of information?
  • Is the weak bureaucratic systems in developing countries actually created because of a culture of poor infrastructure set up by colonialism?
  • Will making the invisible visible, like De Soto claims, actually help to gain financial power? What does it mean for beyond land rights? For example, does it mean that if my actions are documented online as data points they are worth more?

Next reading group sessions

For the next reading group session, we want to turn towards a critical assessment of data and their role in society. Following topics we would like to turn towards:

  • A critical theory of data?  How are data “cooked”, how do they work in the world, and how can we broaden our understanding of the infrastructures and politics that create them.
  • Civil society – an idea between economic liberty and social solidarity.
  • Fighting with numbers – how statistical activism uses numbers to change what counts
  • Uncertainty and impact: how these two ideas were born
  • New public management and the politics of audits and accountability

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