Tag: Schumpeter

Alois in the middle

 

I am returning to my syllabuses for the next academic year. I am focusing more specifically on microeconomics. Next year, I am supposed to give lectures in Microeconomics at both the Undergraduate, and the Master’s level. I feel like asking fundamental questions. My fundamental question, as it comes to teaching any curriculum, is the same: what can my students do with it? What is the function and the purpose of microeconomics? Please, notice that I am not asking that frequently stated, rhetorical question ‘What are microeconomics about?’. Well, buddy, microeconomics are about the things you are going to lecture about. Stands to reason. I want to know, and communicate, what is the practical utility, in one’s life, of those things that microeconomics are about.

The basic claim I am focusing on is the following: microeconomics are the accountancy of social structures. They serve exactly the same purpose that any kind of bookkeeping has ever served: to find and exploit patterns in human behaviour, by the means of accurately applied measures. Them ancients, who built those impressive pyramids (who builds a structure without windows and so little free space inside?), very quickly gathered that in order to have one decent pyramid, you need an army of clerks who do the accounting. They used to count stone, people, food, water etc. This is microeconomics, basically.

Thus, you can do with microeconomics if you want to build an ancient pyramid. Now, I am dividing the construction of said ancient pyramid in two stages: Undergraduate, and Master’s. An Undergraduate ancient pyramid requires the understanding of what do you need to keep the accounts of if you don’t want to be thrown to crocodiles. At the Master’s level, you will want to know what are the odds that you find yourself in a social structure, where inaccurate accounting, in connection with a pyramid, will have you thrown to crocodiles.

Good, now some literature, and a little turn by my current scientific work on the EneFin concept (see « Which salesman am I? » and « Sans une once d’utopisme » for sort of a current account of that research). I have just read that sort of transitional form of science, between an article and a book, basically a report, by Bleich and Guimaraes 2016[1]. It regards investment in renewable energies, mostly from the strictly spoken view of investment logic. Return on investment, net present value – that kind of thing. As I was making my notes out of that reading, my mind made a jump, and it landed on the cover of the quite-well-known book by Joseph Schumpeter: ‘Business Cycles’.

Joseph Schumpeter is an intriguing classic, so to say. Born in 1883, he published ‘Business Cycles’ in 1939, being 56 year-old, after the hell of a ride both for him and for the world, and right at the beginning of another ride (for the world). He was studying economics in Austria, in the early 1900, when social sciences in general were sort of different from their today’s version. They were the living account of a world that used to be changing at a breath-taking pace. Young Joseph (well, Alois in the middle) Schumpeter witnessed the rise of Marxism, World War I, the dissolution of his homeland, the Austro-Hungarian Empire, the rise of the German Reich. He moved from academia to banking, and from European banking to American academia.

I deeply believe that whatever kind of story I am telling, whether I am lecturing about economics, discussing a business concept, or chatting about philosophy, at the bottom line I am telling the story of my own existence. I also deeply believe that the same is true for anyone who goes to any lengths in telling a story. We tell stories in order to rationalize that crazy, exciting, unique and deadly something called ‘life’. To me, those ‘Business Cycles’ by Joseph Schumpeter look very much like a rationalized story of quite turbulent a life.

So, here come a few insights I have out of re-reading ‘Business Cycles’ for the n-th time, in the context of research on my EneFin business concept. Any technological change takes place in a chain of value added. Innovation in one tier of the chain needs to overcome the status quo both upstream and downstream of the chain, but once this happens, the whole chain of technologies and goods changes. I wonder how it can apply specifically to EneFin, which is essentially an institutional scheme. In terms of value added, this scheme is situated somewhere between the classical financial markets, and typical social entrepreneurship. It is social to the extent that it creates that quasi-cooperative connexion between the consumers of energy, and its suppliers. Still, as my idea assumes a financial market for those complex contracts « energy + shares in the supplier’s equity », there is a strong capitalist component.

I guess that the resistance this innovation would have to overcome would consist, on one end, in distrust from the part of those hardcore activists of social entrepreneurship, like ‘Anything that has anything to do with money is bad!’, and, on the other hand, there can be resistance from the classical financial market, namely the willingness to forcibly squeeze the EneFin scheme into some kind of established structure, like the stock market.

The second insight that Joseph has just given me is the following: there is a special type of business model and business action, the entrepreneurial one, centred on innovation rather than on capitalizing on the status quo. This is deep, really. What I could notice, so far, in my research, is that in every industry there are business models which just work, and others which just don’t. However innovative you think you are, most of the times either you follow the field-tested patterns or you simply fail. The real, deep technological change starts when this established order gets a wedge stuffed up its ass, and the wedge is, precisely, that entrepreneurial business model. I wonder how entrepreneurial is the business model of EneFin. Is it really as innovative as I think it is?

In the broad theoretical picture, which comes handy as it comes to science, the incidence of that entrepreneurial business model can be measured and assessed as a probability, and that probability, in turn, is a factor of change. My favourite mathematical approach to structural change is that particular mutation that Paul Krugman[2] made out of the classical production function, as initially formulated by Prof Charles W. Cobb and Prof Paul H. Douglas, in their common work from 1928[3]. We have some output generated by two factors, one of which changes slowly, whilst the other changes quickly. In other words, we have one quite conservative factor, and another one that takes on the crazy ride of creative destruction.

That second factor is innovation, or, if you want, the entrepreneurial business model. If it is to be powerful, then, mathematically, incremental change in that innovative factor should bring much greater a result on the side of output than numerically identical an increment in the conservative factor. The classical notation by Cobb and Douglas fits the bill. We have Y = A*F1a*F21-a and a > 0,5. Any change in F1 automatically brings more Y than the identical change in F2. Now, the big claim by Paul Krugman is that if F1 changes functionally, i.e. if its changes really increase the overall Y, resources will flow from F2 to F1, and a self-reinforcing spiral of change forms: F1 induces faster a change than F2, therefore resources are being transferred to F1, and it induces even more incremental change in F1, which, in turn, makes the Y jump even higher etc.

I can apply this logic to my scientific approach of the EneFin concept. I assume that introducing the institutional scheme of EneFin can improve the access to electricity in remote, rural locations, in the developing countries, and, consequently, it can contribute to creating whole new markets and social structures. Those local power systems organized in the lines of EneFin are the factor of innovation, the one with the a > 0,5 exponent in the Y = A*F1a*F21-a function. The empirical application of this logic requires to approximate the value of ‘a’, somehow. In my research on the fundamental link between population and access to energy, I had those exponents nailed down pretty accurately for many countries in the world. I wonder to what extent I can recycle them intellectually for the purposes of my present research.

As I am thinking on this issue, I will keep talking on something else, and the something else in question is the creation of new markets. I go back to the Venerable Man of microeconomics, the Source of All Wisdom, who used to live with his mother when writing the wisdom which he is so reputed for, today. In other words, I am referring to Adam Smith. Still, just to look original, I will quote his ‘Lectures on Justice’ first, rather than going directly to his staple book, namely ‘The Inquiry Into The Nature And Causes of The Wealth of Nations’.

So, in the ‘Lectures on Justice’, Adam Smith presents his basic considerations about contracts (page 130 and on): « That obligation to performance which arises from contract is founded on the reasonable expectation produced by a promise, which considerably differs from a mere declaration of intention. Though I say I have a mind to do such thing for you, yet on account of some occurrences I do not do it, I am not guilty of breach of promise. A promise is a declaration of your desire that the person for whom you promise should depend on you for the performance of it. Of consequence the promise produces an obligation, and the breach of it is an injury. Breach of contract is naturally the slightest of all injuries, because we naturally depend more on what we possess that what is in the hands of others. A man robbed of five pounds thinks himself much more injured than if he had lost five pounds by a contract ».

People make markets, and markets are made of contracts. A contract implies that two or more people want to do some exchange of value, and they want to perform the exchange without coercion. A contract contains a value that one party engages to transfer on the other party, and, possibly, in the case of mutual contracts, another value will be transferred the other way round. There is one thing about contracts and markets, a paradox as for the role of the state. Private contracts don’t like the government to meddle, but they need the government in order to have any actual force and enforceability. This is one of the central thoughts by another classic, Jean-Jacques Rousseau, in his ‘Social Contract’: if we want enforceable contracts, which can make the intervention of the government superfluous, we need a strong government to back up the enforceability of contracts.

If I want my EneFin scheme to be a game-changer in developing countries, it can work only in countries with relatively well-functioning legal systems. I am thinking about using the metric published by the World Bank, the CPIA property rights and rule-based governance rating.

Still another insight that I have found in Joseph Schumpeter’s ‘Business Cycles’ is that when the entrepreneur, introducing a new technology, struggles against the first inertia of the market, that struggle in itself is a sequence of adaptation, and the strategy(ies) applied in the phases of growth and maturity in the new technology, later on, are the outcome of patterns developed during that early struggle. There is some sort of paradox in that struggle. When the early entrepreneur is progressively building his or her presence in the market, they operate under high uncertainty, and, almost inevitably, do a lot of trial and error, i.e. a lot of adjustments to the initially inaccurate prediction of the future. The developed, more mature version of the newly introduced technology is the outcome of that somehow unique sequence of trials, errors, and adjustments.

Scientifically, that insight means a fundamental uncertainty: once the actual implementation of an entrepreneurial business model, such as EneFin, gets inside that tunnel of learning and struggle, it can take on so many different mutations, and the response of the social environment to those mutations can be so idiosyncratic that we get into really serious economic modelling here.

I am consistently delivering good, almost new science to my readers, and love doing it, and I am working on crowdfunding this activity of mine. As we talk business plans, I remind you that you can download, from the library of my blog, the business plan I prepared for my semi-scientific project Befund  (and you can access the French version as well). You can also get a free e-copy of my book ‘Capitalism and Political Power’ You can support my research by donating directly, any amount you consider appropriate, to my PayPal account. You can also consider going to my Patreon page and become my patron. If you decide so, I will be grateful for suggesting me two things that Patreon suggests me to suggest you. Firstly, what kind of reward would you expect in exchange of supporting me? Secondly, what kind of phases would you like to see in the development of my research, and of the corresponding educational tools?

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[1] Bleich, K., & Guimaraes, R. D. (2016). Renewable Infrastructure Investment Handbook: A Guide for Institutional Investors. In World Economic Forum, Geneva.

[2] Krugman, P. (1991). Increasing returns and economic geography. Journal of political economy, 99(3), 483-499.

[3] Charles W. Cobb, Paul H. Douglas, 1928, A Theory of Production, The American Economic Review, Volume 18, Issue 1, Supplement, Papers and Proceedings of the Fortieth Annual Meeting of the American Economic Association (March 1928), pp. 139 – 165

A flow I can ride, rather than a storm I should fear

My editorial on You Tube

I am in an intellectually playful frame of mind, and I decide to play with Keynes and probability. It makes like 4 weeks that I mess around with the theory of probability, and yesterday my students told me they have a problem with Keynes. I mean, not with Sir John Maynard Keynes as a person, but more sort of with what he wrote. I decided to connect those two dots. Before John Maynard Keynes wrote his ‘General Theory of Employment, Interest, and Money’, in 1935, he wrote a few other books, and among them was ‘A Treatise on Probability’ (1921).

I am deeply convinced that mathematics expresses our cognitive take on that otherwise little known, chaotic stuff we call reality, fault of a better label. I am going to compare John Maynard Keynes’s approaches to, respectively, probability and economics, so as to find connections. I start with the beginning of Chapter I, entitled ‘The Meaning of Probability’, in Keynes’s Treatise on Probability,   

‘Part of our knowledge we obtain direct; and part by argument. The Theory of Probability is concerned with that part which we obtain by argument, and it treats of the different degrees in which the results so obtained are conclusive or inconclusive. In most branches of academic logic, such as the theory of the syllogism or the geometry of ideal space, all the arguments aim at demonstrative certainty. They claim to be conclusive. But many other arguments are rational and claim some weight without pretending to be certain. In Metaphysics, in Science, and in Conduct, most of the arguments, upon which we habitually base our rational beliefs, are admitted to be inconclusive in a greater or less degree. Thus for a philosophical treatment of these branches of knowledge, the study of probability is required. […] The Theory of Probability is logical, therefore, because it is concerned with the degree of belief which it is rational to entertain in given conditions, and not merely with the actual beliefs of particular individuals, which may or may not be rational. Given the body of direct knowledge which constitutes our ultimate premises, this theory tells us what further rational beliefs, certain or probable, can be derived by valid argument from our direct knowledge. This involves purely logical relations between the propositions which embody our direct knowledge and the propositions about which we seek indirect knowledge. […] Writers on Probability have generally dealt with what they term the “happening” of “events.” In the problems which they first studied this did not involve much departure from common usage. But these expressions are now used in a way which is vague and ambiguous; and it will be more than a verbal improvement to discuss the truth and the probability of propositions instead of the occurrence and the probability of events’.

See? Something interesting. I think most of us connect the concept of probability to that experiment which we used to perform at high school: toss a coin 100 times, see how many times you have tails, and how many occurrences of heads you had etc. Tossing a coin is empirical: we make very little assumptions and we just observe. How is it possible, then, for anybody to even hypothesise that probability is a science of propositions rather than hard facts?

Now, here is the thing with John Maynard Keynes (and I address this passage to all those of my students who struggle with understanding what the hell did John Maynard mean): John Maynard Keynes had a unique ability to sell his ideas, and his ideas came from his experience. Whatever general principles you can read in Keynes’s writings, and however irrefutable he suggests these principles are, John Maynard tells us the same kind of story that everybody tells: the story of his own existence. He just tells it in so elegantly sleek a way that most people just feel disarmed and conquered. Yet, convincing is not the same as true. Even the most persuasive theorists – and John Maynard Keynes could persuade the s**t out of most common mortals – can be wrong. How can they be wrong? Well, when I fail to own my own story, i.e. when I am just too afraid of looking the chaos of life straight in the eyes (which is elegantly called ‘cognitive bias’), then I tell just the nice little story which I would like to hear, in order to calm down my own fear.      

Let’s try to understand John Maynard Keynes’s story of existence, which leads to seeing probabilities as a type of logic rather than data. I browse through his ‘Treatise on Probability’. I’m patient. I know he will give himself away sooner or later. Everybody does. Well, let’s say that according to my experience of conversations with dead people via their writings, each of them ends up by telling me, through his very writing, what kind of existential story made him tell the elegantly packaged theoretical story in the title of the book. Gotcha’, Sir Keynes! Part I – Fundamental Ideas – Chapter III, ‘The Measurement of Probabilities’, page 22 in the PDF I am linking to: ‘If we pass from the opinions of theorists to the experience of practical men, it might perhaps be held that a presumption in favour of the numerical valuation of all probabilities can be based on the practice of underwriters and the willingness of Lloyd’s to insure against practically any risk. Underwriters are actually willing, it might be urged, to name a numerical measure in every case, and to back their opinion with money. But this practice shows no more than that many probabilities are greater or less than some numerical measure, not that they themselves are numerically definite. It is sufficient for the underwriter if the premium he names exceeds the probable risk. But, apart from this, I doubt whether in extreme cases the process of thought, through which he goes before naming a premium, is wholly rational and determinate; or that two equally intelligent brokers acting on the same evidence would always arrive at the same result. In the case, for instance, of insurances effected before a Budget, the figures quoted must be partly arbitrary. There is in them an element of caprice, and the broker’s state of mind, when he quotes a figure, is like a bookmaker’s when he names odds. Whilst he may be able to make sure of a profit, on the principles of the bookmaker, yet the individual figures that make up the book are, within certain limits, arbitrary. He may be almost certain, that is to say, that there will not be new taxes on more than one of the articles tea, sugar, and whisky; there may be an opinion abroad, reasonable or unreasonable, that the likelihood is in the order—whisky, tea, sugar; and he may, therefore be able to effect insurances for equal amounts in each at 30 per cent, 40 per cent, and 45 per cent. He has thus made sure of a profit of 15 per cent, however absurd and arbitrary his quotations may be’.  

See? Told you he’s got a REAL story to tell, Sir Keynes. You just need to follow him home and see whom he’s hanging with. He is actually hanging with financial brokers and insurers. He observes them and concludes there is no way of predicting the exact probability of complex occurrences they essentially bet money on. There is some deeply intuitive mental process taking place in their minds, which makes them guess correctly if insuring a ship full of cotton, for reimbursable damages worth X amount of money, in exchange of an insurance premium worth Y money.

The story that John Maynard Keynes tells is through his ‘Treatise on Probability’ is the story of the wild, exuberant capitalism of the early 1920ies, right after World War I, and after the epidemic of Spanish flu. It was a frame of mind that pushed people to run towards a mirage of wealth, and they would run towards it so frantically, because they wanted to run away from memories of horrible things. Sometimes we assume that what’s can possibly catch us from behind is so frightening that whatever we can run towards is worth running forward. In such a world, probability is a hasty evaluation of odds, with no time left for elaborate calculations. There are so many opportunities to catch, and so much fear to run away from that I don’t waste my time to think what an event actually is. It is just the ‘have I placed my bets right?’ thing. I think I understand it, as I recently experienced very much the same (see A day of trade. Learning short positions).

The very same existential story, just more seasoned and marinated in the oils of older age, can be seen in John Maynard Keynes’s ‘General Theory of Employment, Interest, and Money’. I read the ‘Preface’, dated December 13th, 1935, where the last paragraph says: ‘The composition of this book has been for the author a long struggle of escape, and so must the reading of it be for most readers if the author’s assault upon them is to be successful,—a struggle of escape from habitual modes of thought and expression. The ideas which are here expressed so laboriously are extremely simple and should be obvious. The difficulty lies, not in the new ideas, but in escaping from the old ones, which ramify, for those brought up as most of us have been, into every corner of our minds’. The same line of logic is present in country-specific prefaces that follow, i.e. to national translations of ‘General Theory’ published in Germany, France, and Japan.

In 1935, John Maynard Keynes had lived the exuberance of the 1920ies and the sobering cruelty of the 1930ies. He felt like telling a completely new story, yet the established theory, that of classical economics, would resist. How can you overcome resistance of such type? One of the strategies we can use is to take the old concepts and just present them in a new way, and I think this is very largely what John Maynard Keynes did. He took the well-known ideas, such as aggregate output, average wage etc., and made a desperate effort to reframe them. In the preface to the French edition of ‘General Theory’, there is a passage which, I believe, sums up some 50%, if not more, of all the general theorizing to be found in this book. It goes: ‘I believe that economics everywhere up to recent times has been dominated, much more than has been understood, by the doctrines associated with the name of J.-B. Say. It is true that his ‘law of markets’ has been long abandoned by most economists; but they have not extricated themselves from his basic assumptions and particularly from his fallacy that demand is created by supply. Say was implicitly assuming that the economic system was always operating up to its full capacity, so that a new activity was always in substitution for, and never in addition to, some other activity. Nearly all subsequent economic theory has depended on, in the sense that it has required, this same assumption. Yet a theory so based is clearly incompetent to tackle the problems of unemployment and of the trade cycle. Perhaps I can best express to French readers what I claim for this book by saying that in the theory of production it is a final break-away from the doctrines of J.- B. Say and that in the theory of interest it is a return to the doctrines of Montesquieu’.

Good. Sir Keynes assumes that it is a delicate thing to keep the economic system in balance. Why? Well, Sir Keynes knows it because he had lived it. That preface to the French edition of ‘General Theory’ is dated February 20th, 1939. We are all the way through the Great Depression, Hitler has already overtaken Austria and Czechoslovakia, and the United States are in the New Deal. Things don’t balance themselves by themselves, it is true. Yet, against this general assumption of equilibrium-is-something-precarious, the development which follows, in ‘General Theory’ goes exactly in the opposite direction. John Maynard Keynes builds a perfect world of equations, where Savings equal Investment, Investment equals Amortization, and generally things are equal to many other things. Having claimed the precarity of economic equilibrium, Sir Keynes paints one in bright pink.

I think that Keynes tried to express radically new ideas with old concepts, whence the confusion. He wanted to communicate the clearly underrated power of change vs that of homeostasis, yet he kept thinking in terms of, precisely, homeostasis between absolute aggregates, e.g. the sum of all proceedings anyone can have from a given amount of business is equal to the value conveyed by the same amount of business (this is my own, completely unauthorized summary of the principle, which Keynes called ‘effective demand’).  

The ‘General Theory of Employment, Interest, and Money’ was somehow competing for the interest of readers with another theory, phrased out practically at the same moment, namely the theory of business cycles by Joseph Alois Schumpeter. I perceive the difference between the respective takes by Keynes and Schumpeter, on the general turbulence of existence, in the acknowledgment of chaos and complexity. Keynes says: ‘Look, folks. This, I mean that whole stuff around, is bloody uncertain and volatile. Still, the good news is that I can wrap it up, just for you, in an elegant theory with nice equations, and then you will have a very ordered picture of chaos’. Joseph Alois Schumpeter retorts: ‘Not quite. What we perceive as chaos is simply complex change, too complex for being grasped once and for all. There is a cycle of change, and we are part of the cycle. We are in the cycle, not the other way around (i.e. cycle is not in us). What we can understand, and even exploit, is the change in itself’.

Where do I stand in all that? I am definitely more Schumpeterian than Keynesian. I prefer dishevelled reality to any nicely ordered and essentially false picture thereof. Yes, existence is change, and any impression of permanence is temporary. My recent intellectual wrestling with stochastic processes (see We really don’t see small change) showed me that even when I use quite elaborate analytical tools, such as mean-reversion, I keep stumbling upon my purely subjective partition of perceivable reality into the normal order, and the alarming chaos (see The kind of puzzle that Karl Friedrich was after).

A vision of game comes to my mind. This is me vs universe. Looks familiar? Right you are. That’s exactly the kind of game each of us plays throughout time. I make a move, and I wait for the universe to make its own. I have a problem: I don’t really know what kind of phenomenon I can account as move made by the universe. I need to guess: has the universe already made its move, in that game with me, or not yet? If I answer ‘yes’, I react. I assume that what has just happened is informative about the way my existence works. If, on the other hand, I guess that the universe has not figured yet any plausible way to put me at check, I wait and observe. Which is better, day after day: assuming that the universe made its move or sitting and waiting? I can very strongly feel this dilemma in my learning of investment in the stock market. Something happened. Prices have changed. Should I react immediately, or should I wait?

I provisionally claim that it depends. The universe moves at an uneven speed. By ‘provisionally’ I mean I claim it until I die, and then someone else will take on claiming the same, just as provisionally. Yet, all that existential instability acknowledged, there are rhythms I can follow. As regards my investment, I discovered that the most sensible rhythm to follow beats on the passive side of my investment portfolio. Every month, I collect the rent from an apartment, downtown, and I invest that rent in the stock market. I discovered that when I orchestrate my own thinking into that monthly rhythm of inflow in equity, it sort of works nicely. I collect the rent around the 5th day of each month, and for like one week beforehand, I do my homework about the market. When the rent comes, I have a scenario in mind, usually with a few question marks, i.e. with uncertainty to deal with. I play my investment game for 1 – 3 days, with occasional adjustments, and this is my move. Then I let the universe (the stock market in this case) make its own move over the next 3 – 4 weeks, and I repeat the same cycle over and over again.

I make a short move, and I let the universe making a long move. Is it a sensible strategy? From my point of view, there are two reasons for answering ‘yes’ to that question. First of all, it works in purely financial terms. I have learnt to wait patiently for an abnormally good opportunity to make profits. When I go too fast, like every day is a decision day, I usually get entangled in a game of my own illusions, and I lose money on transactions which I don’t quite understand. When I take my time, pace myself, and define a precise window for going hunting, usually something appears in that window, and I can make good money. Second of all, it is something I have sort of learnt generally and existentially: chaos is there, and I am there, and a good way to be alongside the chaos is to find a rhythm. When I follow my beat, chaos becomes a flow I can ride, rather than a storm I should fear.

My own zone of proximal development

 

Let’s face it: I am freestyling intellectually. I have those syllabuses to prepare for the next academic year, and so I decided to let my brain crystallize a little bit, subconsciously, without being disturbed, around the business plan for the EneFin concept. Crystallization occurs subconsciously, and I can do plenty of other thinking in the meantime, and so I started doing that other thinking, and I am skating happily on the thin ice of fundamental questions concerning my mission as a scientist and a teacher. The ice those questions make is really thin, and if it cracks under my weight, I will dive into the cold depth of imperative necessity for answers.

You probably know that saying about economics, one of my fundamental disciplines, besides law, namely that economics are the art of making forecasts which do not hold. Nasty, but largely true. I want to devise a method of teaching social sciences, and possibly a contingent method of research, which can be directly useful to the individual, without said individual having to become the president of something big in order to find real utility in social sciences.

I am starting to form that central principle of my teaching and research: social sciences can be used and developed similarly to geography, i.e. they can be used to find one’s bearings in a complex environment, to trace a route towards valuable and attainable goals, and to plan for a realistic pace as for covering this route. Kind of a fundamental thought comes to me, from the realm of hermeneutic philosophy , which I am really fond of, and the thought goes as follows: whatever kind of story I am telling, at the bottom line I am telling the story of my own existence. Question (I mean, a real question, which I am asking right now, not some fake, rhetorical stuff): this view of social sciences, as a quasi-cartographic pathway towards orienting oneself in the social context, is it the story of my own existence? Answer: hell, yes. As I look back at my adult life, it is indeed a long story of wandering, and I perceive a substantial part of that wandering as having been pretty pointless. I could have done much of the same faster, simpler, and with more ethical value achieved on the way. Mind you, here, I am largely sailing the uncharted waters of ‘what could have happened if’. Anyway, what happened, stays happened.

OK, this is the what. Now, I want to phrase out the how. Teaching means essentially two things. Firstly, the student gets to know the skills he or she should master. In educational language it is described as the phase of conscious incompetence: the student gets to know what they don’t know and should develop a skill in. Secondly, teaching should lead them through at least a portion of the path from that conscious incompetence to conscious competence, i.e. to the phase of actually having developed those skills they became aware of in the phase of conscious incompetence.

Logically, I assume there is a set of skills that a person – especially a young one – needs to find and pursue their personal route through the expanse of social structure, once they have been dropped, by the helicopter of adolescence and early adulthood, in some remote spot of said structure. My mission is to use social sciences in order to show them the type of skill they’d better develop, and, possibly, to train them at those skills.

My strictly personal experience of learning is strongly derived from the practice of sport, and there is a piece of wisdom that anyone can have as their takeaway from athletic training: it is called ‘mesocycle’. A mesocycle of training is a period of about 3 months, which is the minimum time our body needs to develop a complex and durable response to training. In any type of learning, a mesocycle can be observed. It is the interval of time that our nervous system needs to get all the core processes, involved in a given pattern of behaviour being under development, well aligned and acceptably optimized.

My academic teaching is structured into semesters. In the curriculum of each particular subject, the realistic cycle of my interaction with students is like 4 months, which gives room to one full mesocycle of training, from conscious incompetence towards conscious competence, plus a little extra time for outlining that conscious incompetence. Logically, I need to structure my teaching into 25% of developing the awareness of skills to form, and 75% of training in those skills.

One of the first syllabuses I am supposed to prepare for the next academic year is ‘Introduction to Management’ for the undergraduate major of film and TV production. It is part of those students’ curriculum for the first year, when, essentially, every subject is an introduction to something. I follow the logic I have just outlined. First of all, what is the initial point of social start, in the world of film and TV production? Someone joins a project, most frequently: the production of a movie, an advertising campaign, the creation of a You Tube channel etc. The route to follow from there? The challenge consists in demonstrably proving one’s value in that project in order to be selected for further projects, rather than maxing out on the profits from this single venture. The next level consists in passing from projects to organisation, i.e. in joining or creating a relatively stable organisation, combining networks and hierarchies, which, in turn, can allow the sprouting of new projects.

Such a path of social movement involves skills centred around the following core episodes: a) quickly and efficiently finding one’s place in a project typical for the world of film and TV production b) starting and managing new projects c) finding one’s place in networks and hierarchies typical for film and TV production and d) possibly developing such an organisation.

Such defined, the introduction to management involves the ability to define social roles and social values, peculiar to the given project and/or organisation, as well as elementary skills in teamwork. As I think of it, the most essential competences in dealing with adversity, like getting one’s s**t together under pressure and forming a realistic plan B, could be helpful.

Good. Roles and values in a project of film and TV production. What comes to my mind in the first place, as I am thinking of it, is once again the teaching of Hans Georg Gadamer, the heavyweight champion of hermeneutic philosophy: historically, art at its best has been a fully commercial enterprise, based on business rules. Concepts such as ‘art for the sake of art’ or ‘pure art’ are relatively new – they emerged by the end of the 19th century – and they are the by-product of another emergence, that of the so-called leisure class, made of people rich enough to afford not to worry about their daily subsistence, and, in the same time, not seriously involved into killing someone in order to stay this way.

One of the first social patterns to teach my students regarding the values of film and TV production is something which, fault of a better word, I call ‘economic base’. It is a value, in this business, to have a relatively predictable stream of income, which is enough for keeping people working on creative projects. The understanding I want my students to form, thus, is precisely this economic base. How much do I need to earn, and how, if I want to keep working on that YT channel long enough for turning it into a business? What kind of job can I do whilst running such a project? How much capital do I need to raise in order to make 50 people work on a movie for 6 months? I think that studying the cases of real businesses in the film and TV production, and building simple business plans on the grounds of those cases can be a good, skill-forming practice.

Once this value identified, it is important to understand how people are most likely to behave whilst striving to achieve it. In other words, it is about the fundamentals of social competition and cooperation. A simple version of the theory of games seems the most workable, in terms of teaching tools.

The economic base for creative work makes one important value, still not the only one. Creation itself is another one. Managing creative teams is tricky. You have a bunch of strong personalities, and you want them to stay this way, and yet you want them to reach some kind of compromise. I think that simple role playing in class, paired with collective projects (i.e. projects carried out by teams of students) can be instructive.

I am summing up. I am a big fan of long-term tasks as educational tools. Preparing a simple business plan, specific to this precise industry (i.e. film and TV production), paired with training in teamwork, should do the job. Now, the easy path is just to tell students ‘Listen, guys! You have those projects to complete until the end of the semester. Just get on with it. We will be having those strange gatherings called “lectures”, but you don’t have to pay too much attention to it. Just have those projects done’. I have already experimented with this approach, and my conclusion is that it generally allows those clever ones to prove they are clever, but not much more. It is a pity to watch those less clever students struggling with a task they have to carry out over the length of one semester.

I want to devise come kind of path in my students’ zone of proximal development : a series of measured, feasible lessons, leading to tangible improvement. Each lesson covers 6 steps: i) define the project to carry out, as well as its goals and constraints, make a plan, make a team, and make them work on the thing ii) purposefully lead to a crisis iii) draw conclusions from the crisis iv) define the improvement needed v) carry out the improvement and vi) check the results.

As I see my usual schedule over one semester, I can arrange like 5 such sequences of 6 steps, thus 5 big lessons. Now, I am thinking about the kind of core task to carry out in each lesson, so as the task is both representative for film and TV production, and feasible in class. Pitching the concept of a movie is a must, and the concept of a YT platform seems to be a sensible idea as well. I have two types of business concepts, and I feel like repeating each of them twice. That gives 4 sequences of training, and leaves one more in reserve. That one more could be, for example, a content store, in the lines of the early Netflix.

Good. One thing to tick off. As I am having a look at it, the same pattern can be transferred, almost as it is, into the curriculum of Principles of Management, which I teach to the 1st year undergraduates in the major of International Relations. In this particular case, the same path is applicable, just the factual scope needs a bit of broadening. Each of those complex, sequenced lessons should be focused on a different type of business. Typical industrial, for one, something in the IT sector, for two, then something really scientific, like biotech, followed by typical service business, and finally something financial.

Now, I jump. It happens all the time in my mind. Something in those synaptic connexions of mine makes them bored with one topic, and willing to embrace the diversity of being. I am asking myself what I can possibly teach to my students, in terms of finding one’s way across the social jungle, on the grounds of the economic theory which either I fully embrace or I have developed by myself. Here come a few ideas.

‘However inventive and original you think you are, you are as inventive and original as quite a bunch of other people’. This one comes mostly from my reading of Joseph Schumpeter’s theory of creative destruction and neighbourhood of equilibrium. How can it be useful? If you want to do something important, like starting a business or a social action, going for a job connected to expatriation etc.? Well, look for patterns in what other people do. Someone is bound to have the kind of experience you can learn from.

This is deeper than some people could think. As I work with my students on the general issue of business planning, this particular approach proves really useful. There are many instances of complex business planning – the ‘what if?’ sequences, for example – when emulating some existing businesses is the only sensible approach.

The next one spells: ‘Recurrent bargaining leads to figuring out sensible, workable compromises that minimize waste and that nobody is quite satisfied with’. This principle refers to the theoretical concept of local Marshallian equilibrium, but it is also strongly connected to the theory of games. Frequently, you have the impression of being forced into some kind of local custom or ritual, like the average wage you can expect for a given job, or the average rent you have to pay for your apartment, or the habitual way of settling a dispute. It chafes, and it hurts what you perceive as your own originality, but people around you are strangely attached to this particular way of doing things. This is a local equilibrium.

If you want to understand a given local equilibrium, try and figure out the way this equilibrium is being achieved. Who? What? When? How? Under what conditions does the process work, and in which cases it doesn’t? In other words, if you want to figure out the way to influence and change those uncomfortable rituals around you, you need to find a way of making people bargain and get a compromise around a new ritual.

Comes my own research, now, and the fundamental principles of social path-finding I can phrase out of that research. I begin with stating that population matters, in the most numerical sense. The rate of demographic growth, together with the rate of migration, are probably the most powerful social changes we can imagine. Whatever those changing populations do, they adapt to the available supply of food and energy. At the individual level, people express that adaptation by maximizing their personal intake of energy, within socially accepted boundaries, by maintaining a certain portfolio of technologies. Social structures we live in act as regulators of the technological repertoire we have access to, and they change as this repertoire changes.

Practical implications? You want to experience creative social change, with a lot of new types of jobs emerging every year, and a lot of new products? You need a society with vivid demographic growth and a lot of migration going in and/or out. You want security, stability and predictability? You want people around you to be always calm and nice to each other? Then you need a society with slow or null demographic growth, not much of a migration, and plenty of food and energy to tap into. You want to have both, i.e. plenty of creative change, and people being always nice? Sorry, pal, not with this genotype. It just wouldn’t work with humans.

I am consistently delivering good, almost new science to my readers, and love doing it, and I am working on crowdfunding this activity of mine. As we talk business plans, I remind you that you can download, from the library of my blog, the business plan I prepared for my semi-scientific project Befund  (and you can access the French version as well). You can also get a free e-copy of my book ‘Capitalism and Political Power’ You can support my research by donating directly, any amount you consider appropriate, to my PayPal account. You can also consider going to my Patreon page and become my patron. If you decide so, I will be grateful for suggesting me two things that Patreon suggests me to suggest you. Firstly, what kind of reward would you expect in exchange of supporting me? Secondly, what kind of phases would you like to see in the development of my research, and of the corresponding educational tools?

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