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Podcast episode

French Journalist Guillaume Pitron argues the Digital World is Costing the Earth – EP189

French journalist Guillaume Pitron discusses his book “The Dark Cloud: How the Digital World is Costing the Earth” with guest host Tim Hughes. The book explores the environmental impact of the digital world. Pitron delves into concerns about energy usage, e-waste, and the carbon footprint of the internet. The episode concludes with a debrief of Tim by regular host Gene Tunny on the conversation. 

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You can listen to the episode via the embedded player below or via podcasting apps including Google PodcastsApple PodcastsSpotify, and Stitcher.

About this episode’s guest

Guillaume Pitron is a French journalist, author and filmmaker. He has written two books, published in some fifteen countries, about the natural resources needed for new technology. He has been invited to share his ideas in the French and international media (Le Figaro, BBC World Service, Bloomberg TV, El País, La Repubblica) and at international forums and institutions (Davos, IMF, European Commission, Unesco).

Link to Guillaume’s website:

https://www.en-guillaumepitron.com/

What’s covered in EP189

  • Introduction to this episode. (0:06)
  • What is the dark cloud? (1:27)
  • There is no digital life without rare earths. (3:54)
  • What is the real cost of digital technology? (8:06)
  • What’s the cost to the environment? (13:07)
  • What can we do as individuals to make this better? (17:38)
  • Facebook’s Lapland data center. (22:22)
  • Facebook uses hydro-electricity to run its servers. (24:25)
  • What happens if there’s no water? (28:05)
  • What is the future of the internet going to look like in 10 years? (33:18)
  • Are there any governments around the world that are taking steps forward to regulate the internet? (41:02)
  • What can be done to address this issue? (43:59)
  • What were the main takeaways from the conversation? (48:11)

Links relevant to the conversation

The Dark Cloud book:

https://scribepublications.com.au/books-authors/books/the-dark-cloud-9781922585523

Digital Cleanup Day:

https://www.digitalcleanupday.org/

Jevons paradox:

https://en.wikipedia.org/wiki/Jevons_paradox

It appears the Amiga hard drive Gene’s neighbour in the late 1980s had was a 20MB hard drive:

https://bigbookofamigahardware.com/bboah/product.aspx?id=534

Transcript:
French Journalist Guillaume Pitron argues the Digital World is Costing the Earth – EP189

N.B. This is a lightly edited version of a transcript originally created using the AI application otter.ai. It may not be 100 percent accurate, but should be pretty close. If you’d like to quote from it, please check the quoted segment in the recording.

Gene Tunny  00:06

Welcome to the Economics Explored podcast, a frank and fearless exploration of important economic issues. I’m your host Gene Tunny. I’m a professional economist and former Australian Treasury official. The aim of this show is to help you better understand the big economic issues affecting all our lives. We do this by considering the theory evidence and by hearing a wide range of views. I’m delighted that you can join me for this episode, please check out the show notes for relevant information. Now on to the show. Thanks for tuning into the show. This episode features an interview with French journalist Guillaume Pitro, about his new book, The Dark Cloud, how the digital world is costing the Earth. Guillaume visited Brisbane a few weeks ago for the Brisbane Writers Festival. I was in Adelaide when he visited and so Tim Hughes stood in for me and interview VR. I’m very grateful for Tim. First, I’m going to play the conversation between Tim and Guillaume. And then I’m going to catch up with Tim for a debrief on the conversation. I hope you enjoy it.

Tim Hughes  01:27

Okay, so welcome to Economics Explored. I am Tim, you’re standing in for your host, Gene Tunny. And we’re very excited to have with us today Guillaume Pitro. I’ve pronounced that correctly. Very well. Thank you. And Guillaume has a couple of books out that we’ll discuss. But the main one at the moment is called the Dark Cloud. So again, without any further ado, would you mind just letting us give an overview or give us an overview of the Dark Cloud?

Guillaume Pitron  01:56

Well, again, thank you for receiving me here in Brisbane, I am giving Bitcoin, just to introduce myself in a very few words, a French journalist based in Paris, I am an on the field reporter. That’s what I do most of the time, do documentaries and also write books. The Dark Cloud is my second book published by scribe in Australia. It’s basically a worldwide investigation, which took me two years on the trail of my email. Yeah, if I do send an email to you, for example, you’re sitting just less than a minute away from me, where does my email go? What is the real trip of my email between you and I, and actually, the real distance between you and I is that one metre, it’s several 1000s of kilometres, because this data will actually travel through 4g antennas, Wi Fi boxes, but also submarine cables, constellations of satellites, it will be stored in data centres maybe all around the world. So it’s a huge infrastructure that has been built over the last decades by the digital industry, in order to make us live connected. And we are not aware of the physical impacts of the so called virtual life, and also of the environmental costs of being connected. This is what the book is all about.

Tim Hughes  03:18

That some really interesting because I know that this is a subject that has been talked about quite a lot. And one of the areas that I mean, for instance, particularly here in Australia, so we have a lot of rare earths rare metals at our disposal for mining. So some of the areas that you talk about the the environmental cost, the human cost of our digital technology, our use of digital technology. What are the biggest pitfalls or what are the biggest problems? So you talk about, for instance, you know how far that email goes, for instance, what are the costs of us environmentally and a human cost.

Guillaume Pitron  03:54

For the rarest extraction? Yeah, okay. First, there is no digital life without rare earths rares is you find rare earths into your smartphone. And this is the magnet of your phone, which vibrates is made of iron, boron, and a rare earth, which is called neodymium. So you wouldn’t be able to be on silent mode, if you didn’t have rare earths to make your phone vibrates. Basically, this earth is in a way being extracted in Australia, in the Western Australia region. And most of the barriers are being extracted in China, where I’ve been several times I’ve been in rare earths mines and refining areas north of China, south of China for the last years. So I can tell you that extracting these resources is nothing but virtual, everything that is called virtual stems from a scar in the ground which are called a mine. And the refining process of the rare earth is actually very, very dirty. You need to separate the rare earth using water and chemicals. The water which is very polluted is just being rejected directly into, into the nature, it causes cancers, a lot of problems right for the human health and also for the environment. And you have in your phone not only one rare earths, but you have 60 metals in your phone, whether it’s cobalt and lithium and graphite to run the battery, but also a silver, a bit of gold, you have Indium in your phone, on your phone in gym is a mineral, which in the form of powder, makes your phone tactile, so you wouldn’t be able to leave your modern life without having an tactile screen, which is made six to indium, once again, this is being studied in China. So basically, all these metals come from mine, and it comes at an environmental cost.

Tim Hughes  05:45

So is the is the issue of the processing of those minerals. Is that where the impact is largely found mostly? Yep. And so does that vary around the world, I mean, what was the percentage of where these minerals and metals come from?

Guillaume Pitron  06:02

On the initial basis, these metals would come from third world, underdeveloped countries with less strict regulations and the one we would have, if we were in Australia, or in Europe, or in the United States and Canada, we’ve been offshoring the production of this metals for the last decades, we haven’t wanted to have this metals being extracted on our ground, I may make an exception for Australia, because you’re the world’s most producer of lithium. But most of the time, we just have preferred to let poor countries extracting these resources in a way, which is just not consistent with an environmental standards, not sustainable. So that we could just get the metal refined, cleaned. And we could say how we can use this metals for virtual and clean technologies. This is where the paradox is, I wouldn’t be able to precisely give you a figure like in terms of percentage, it depends from a metal to one another. But most of the time, you will find this resources in China, in Burma, in Indonesia, DRC in Africa, and also in South America, for instance.

Tim Hughes  07:12

So DRC, that’s predominately cobalt. Is that right?

Guillaume Pitron  07:15

Yeah, from the Democratic Republic of Congo DRC, you may extract, this is a country, which extracts and trades about 60% of the world’s cobalt production. And you have no smartphone without such a cobalt, which is being used for batteries.

Tim Hughes  07:33

So it’s really the processes in the extraction and the processing of those minerals and metals. That’s the issue.

Guillaume Pitron  07:41

Most of the environmental costs of the digital world comes from the manufacturing of the tablets, the screens, smartphones, sorry, 4 billion units are being used and speak to you right now around the world. Each of them requires such metals. So manufacturing these devices, these electronic devices, is the main cause for digital pollution. This is very first and foremost, a material pollution or resource production pollution.

Tim Hughes  08:14

I think that leads us into one of the other questions which I was going to ask, because part of the this unseen, this invisible side of our digital technology. One thing is the hardware. And then the other one, which he started off with, which is that you know that an email, for instance, appears to be of very little consequence or very little energy needed. However, that’s not the full story. The energy consumption is one of the big issues as well as that right.

Guillaume Pitron  08:40

So once I’ve said that, making a phone stands for the most important part of the digital pollution, that doesn’t mean then that watching video on streaming, or sending an email doesn’t have a cost, right? Basically, I can give you a figure of if you send an email to someone with a big attached piece like one gigabyte, we roughly consider that sending it emits about 20 grammes of co2 into the atmosphere. 20 grammes is as if I was driving 150 metres with my car in for one gigabyte, for such an email. Yeah, so basically, you see, it’s not that much, but it’s not nothing. And if you keep sending emails and emails, and we send every day 363 billion emails, mostly spams, still. And if you add to that, well, you know the costs for the environment or of you know, swiping on a dating site or watching a video, listen to music. I’m not saying here is that we shouldn’t do that. I’m no the Taliban and coming here to tell you don’t listen to music because it has enormous environmental cost. But I’m just saying, even if it’s the short impacts, little impact for each and every tiny action that you have on your phone, if you multiply that by the 4.5 billion users of internet multiplied by the number of digital interaction that they have every day, that starts meaning something,

Tim Hughes  10:12

The invisible part of it is that normally when there’s a resource involved, water, electricity, etc, we have to pay for it, you know, we pay for them as utilities. And, and so it’s clear, if we leave a tap running, we’re going to have to pay for that. So even though it’s, it’s poor management, it’s expensive. And we can see that. So it seems to be there’s a bit of a disconnect with our use of digital technology. And like I say, understanding really the real cost of this because it’s taken up elsewhere. It’s out of sight, all that information. I mean, I was thinking, for instance, I’ve got 20,000 photos on my phone, I don’t need 20,000 photos on my phone, I got 800 videos, I mean, it just accumulates. So that is sitting somewhere that’s taken up,

Guillaume Pitron  10:58

Actually, the photos on on your phone, there are in the cloud. Yeah. So I mean, you believe that these are on your phone, that may be actually, they may be stored on your phone, but they may be on your Apple drive or whatever things and actually you connect yourself from your phone to an account, which is a server, which is somewhere sitting into data centre, wherever it is. So you access the cloud, because you access the pictures, which are once again outside of your phone.

Tim Hughes  11:29

So there’s a there’s a cost to that.

Guillaume Pitron  11:32

The cloud is a data centre, whatever you use your phone, whenever you want to send an email, you’re not sending an email to someone else’s phone, you’re sending an email to someone else’s account, your Gmail account, which is stored somewhere and this person will connect herself or himself from him his phone or her phone to such a server which is stored with other servers in huge warehouses, which are called data centres. And a data centre can be can be as big as dozen soccer size of a dozen of soccer fields. And you find hubs of data centres all around the world. Washington, DC, Sydney, Paris, Frankfurt, London, Beijing, it says a commonly accepted figure that there are around 3 million data centres around the world where all of our data are stored. And these data centres, you know, cannot break down there cannot be any electricity breakdown. Because that means that you can’t access your emails. And you don’t want that right. So if you want to make sure that you get an access to whatever device, whatever internet service for 24 hours a day, you want to make sure that the data centres are running all the time that the data is being replicated in another data centre. So that if the first data centre runs out of electricity, another one is just working instead of the first one. So you duplicate the infrastructure in order to just you know, secure the service continuity of the internet. And this needs electricity to run. And this is where we realise that there’s some points where the cloud touches the ground. And when it touches the ground, it needs to be fed with electricity, which comes either from coal, or from oil, or from a solar power plant or from a nuclear power plant. And this, again, is a cost.

Tim Hughes  13:28

That currently stands at 10%. Is that right? Yeah,

Guillaume Pitron  13:31

10% of the world’s electricity is being used for digital technologies. And that figure is going is increasing at such a fast pace, that there are some, you know, estimations saying that these 10 person may become 20 persons within a decade.

Tim Hughes  13:48

Okay, so it appears to me that like it seems to be, amongst other things, it’s very much an efficiency situate or an efficiency problem. So for instance, like, if emails and pictures and everything was physical, and we could see them, and we were to put them in our backyard, our backyard would become very messy very quickly, we would be compelled to tidy up. This is out of sight. It’s somewhere else we need to as consumers be aware that there’s a cost to this, which is I guess where you’re coming from? Is that right? This is a sure this is a big message. I mean, very much it opened my eyes massively like this. I had no idea. I knew it was something but again, I didn’t really know what understand these terms cloud, etc. A very fanciful or ethereal, whereas in fact yet as you’re pointing out, they’re real.

Guillaume Pitron  14:36

And this is what’s interesting what you’re saying because that maybe that makes me rebound on Education Day, which has been created a couple of years ago by an Estonian lady. She’s an activist, and she created I forget her name right now, but he she created the first World Digital cleanup day. So basically, you’re not going to go into the streets to clean the rubbish on the sidewalk. You’re going to go back to your phone and your computer, and you’re going to follow a course it’s going to take you a couple of hours during that specific day, usually takes place in March depends from countries to countries in my country, France, it takes place in March. And basically, they’re going to tell you how to clean, not your room, or the sidewalk, but to clean your email to clean your cloud. And you’re going to realise that on the rubbish of your cloud, there had been for years old pictures and old videos, yeah, which were still being, you know, kept in the cloud, running thanks to electricity, and you just didn’t know them. So how do you clean that? And how do you actually make a good contribution to the environment by following such a course. But as you said, it’s about cleaning your digital world in a way. The name of the girl is Anilee Overal.

Tim Hughes  15:51

So could you say that again.

Guillaume Pitron  15:54

Anilee Overal, the Estonian militants who created this world digital cleanup day.

Tim Hughes  16:01

That’s really cool. Because it strikes as being an education, which I guess is a big part of your message is like to let people be aware of it, because people will generally do the right thing. If they know,

Guillaume Pitron  16:12

Oh, yeah, we’re turning virtual. Everything is dematerialised, your paycheck in is a cloud. Okay, why not about the cloud, you know, people don’t really understand what that really means. They don’t understand that all these virtual things are really material, very physical. And the first challenge here, as you say, is to educate. And we are just at the beginning of this process, where we just try to understand what this reality is all about. And how do we educate the young generation, the climate generation, they want to do good, they’re on strike on the Fridays, telling me not to take planes and not to eat meat. But actually, they’re spearheading such kind of a pollution. And they’re just not really aware of that. And so the very first challenge is to make people understand that this is becoming big.

Gene Tunny  17:03

Okay, we’ll take a short break here for a word from our sponsor.

Female speaker  17:09

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Gene Tunny  17:38

Now back to the show.

Tim Hughes  17:42

Part of this is this efficiency, you know, reducing the waste and stopping the habits that produce more waste, you know, so, for instance, if you’re taking photographs to delete the ones you don’t want and try and minimise the ones that you keep thinking about what you send as an email, trying to minimise all of that. And should we be deleting as we go far more because I know that my email for instances and there is this with spam, and all sorts of other things. It’s a massive, I can’t imagine what percentage if it’s easy to put a number on it, it’s okay, if you don’t have one, but spam obviously contributes a lot to it. There’s so much unnecessary information being stored, it’s clear. So we can do some things as individuals, are there any technical or is tech coming to the party with this to try and make it a little bit more efficient.

Guillaume Pitron  18:32

First, where you could do run the next World Digital cleanup day course, maybe all the picture that we’re talking about, I’m just talking about my own example. Yeah, my phone is an iPhone seven, I don’t have much space into my iPhone seven, which is a good thing. So I don’t change my phone. So that, you know, I’m running out of space at some point, so that I have to take my pictures out of the cloud. And I just put them on a hard drive on an external hard drive. And that doesn’t cost much more to the environment that just storing it in this device that puts less picture on the cloud. What you could do personally, individually to, which is a very important thing is to keep your smartphone and other computers as long as you can. Yeah, I mean, once again, my example iPhone seven, I bought it three years ago, it was a secondhand phone already. And for the last three years, I’ve broken it seven times, four times the screen twice, I had to change the battery. And one time I had to change the main button. But that could be repaired. And actually, I still have the same phone and maybe I can keep it for three more years. And maybe once I don’t want it anymore. I can resell it. If we all do this rather than changing our phones on average, every 18 months, 24 months. Yeah, it’s a huge it’s makes a world of a difference because this main pollution impact, which is once again, the manufacturing of the phone, you can developer to issue keep your phone twice as long. So that’s a very important thing to do. And then you ask me another question, which I forgot

Tim Hughes  19:59

well I was going to, part of that was what the tech companies are doing. Like if they’re on board with this, I mean, because clearly, so for instance, in that regard, they’re looking to sell phones, you know, as a business, they’ll be looking to sell their hardware. So, and I know that, in many areas, the quality of many things has dropped in our printers, for instance, like it’s cheaper to buy a new printer than No, nobody gets one fixed anymore, which is an awful waste of resources. And it’s a really bad way of, you know, going around business for us as custodians of this planet, if you like, you know, so is there anybody in the tech space that’s looking to make this better.

Guillaume Pitron  20:39

It starts being something which companies care about, and they care about it, because first, it costs money to change devices every two years, it costs money to run your data on electricity for service company, the digital devices, and running the digital part of the company may account to 30% of the consumption of electricity of such a company. And it’s also becoming a reputational issue you want to have in your company’s new brains from the new data generation very much worried about the, you know, environmental impact of everything they do. You need to have a message here, and you need to do actions. And I’m very much invited myself by companies, which are just like, we want to be better in a way. And suddenly we realise that there is this new chapter of human pollution, which is digital, how do we cope with this? What do we do? And obviously, they’re starting to understand that. And Google and Facebook and Amazon are very much into these things now, because they don’t want to be seen as being ecologically non friendly companies. You know, when you have Greenpeace, you’re flying a huge balloon over the data centres. And the headquarters of Google in California. And what’s printed on the balloon is How clean is your cloud? That is the good for the reputation. So they want first to green, their electricity mix. They want to say, oh, okay, we need electricity. But this electricity come from solar panels and wind turbines. It doesn’t emit any co2. They do offsetting also, which is kind of a problem, in a way kind of a scam. Because you never know, where’s the trees being planted in? I can tell you many more stories about that plane is claimed, basically, yeah, very much. And also, what Facebook is doing is very interesting. Facebook has been moving some of its data centres for European consumers to Lapland, they moved it close to the Arctic Circle to cool your data, because your servers, the servers where your data is, are actually heating to 60 degrees Celsius, that need to be cooled back to 25 degrees. So either you use an air conditioning system, which is very much energy intensive, or why don’t you move the cloud to places where it’s just naturally cold. So your exercise videos of cats and other emails are literally sleeping under metres of snow in the nose of Lapland, where I’ve been? Alright, I’ve been there. I’ve been to send a data centre not inside I was just outside of it. Yeah. But basically, I was where my Facebook account is. Well, the good news for Facebook is to say, well, not only is it cold, so I use less electricity. I don’t need air conditioning devices. But the thing of the thing is, they say whatever electricity I use, it comes from agile electricity plants.

Tim Hughes  23:21

So this is they’ve got one in Sweden. This is face but would you like to tell us more about about that the hydroelectric plants so I’ve

Guillaume Pitron  23:28

been there. I took a train from Stockholm crossed the Lapland in order to meet my friends, because we’re all there. literally speaking. Yeah, there was a lady in the train. And she came to see me she was just she just wanted to discuss her number. She was a tourist. And she said to me, okay, you want to travel? What are you doing here? And I said to her what I was doing and she looked at me she was just like, this is gonna cycle literally speaking, I went to this data centre couldn’t get in and took my stuff on a picture with all this huge warehouse behind thinking my WhatsApp account is here. My I don’t have an Instagram account. Our Instagram accounts are here. My Facebook accounts are here my 600 and something friends are literally here. This is where all of it is. It’s not for the European, the African Middle East consumers, okay for your designers truly, I believe they are storing US States probably in Oregon, where Facebook is. Okay, the data centre from Facebook is in Oregon. So basically there was a story and then I figured out but so the electricity comes from the Lhuillier river. And this is on that reverse that back in the 60s, some electricity dams. Hydroelectricity dams have been built, not for Facebook because no one at the time knew that Facebook would come to an existence, but Facebook is still using this electricity infrastructure in order to actually run my Facebook account. And I found out by travelling through Lapland, that back in the 60s Is the Swedish state had dried up. So small little river for about 15 to 20 kilometres. And this is the driest. This is the longest river ever dried up by human activity in Western Europe, in order to change the direction of the water and feed this hydroelectricity dam, there’s a guy here, a horrible Mo, I had an amazing countering with him because he’s no is in 60s, but even for the times back in the 60s, where suddenly from one minute to the other, this part of the rivers a smaller river just ceased to exist. It’s just disappeared, and is still crying for this Lost River. And is writing is trying to attract Facebook attention, saying, Have you got a single ID about the impacts of running the electricity that makes today your infrastructure work? So that was amazing story that was in place before? Yes, Facebook is not responsible for the, for the building of such an infrastructure. But Facebook does still today use such an infrastructure. And it keeps this river still dried up today.

Tim Hughes  26:15

I mean, I guess, um, any hydroelectric plant that was in Australia, there’s the Snowy Hydro plant down the snowy mountains. I think it’s 2.0. Now, I’m not too sure. But that has been going since the 50s. I believe like a you know, it’s and now they are big, any damage or anything is gonna have consequences, I guess for downstream. It’s the waterways of the world are getting very much challenged by agriculture and the taking of lands and everything. So it’s sort of getting into into different areas in some ways. But what we’re talking about in many ways is resources and not not wasting those resources. And so the amount of electricity used to fund our digital technology, our habits is significant and growing. So water is also one of those resources. Yeah, that’s getting that’s getting challenged. Sorry, gone.

Guillaume Pitron  27:10

No, no, because we are surfing on internet, we are looking videos and streaming. But let’s take it literally these expressions, these phrases, literally, we literally wouldn’t be able to surf on internet, if there was not water for real.

Tim Hughes  27:28

And now when you mean as a resource,

Guillaume Pitron  27:32

as a resource for making the electricity producing the electricity as part of the process as a resource for refining the metals that are being used in your phones and other servers as cranes as a resource for running the air conditioning systems, the data centres, a big data centre may use as much as 600,000 square metres of water every year. So you need such a water for making internet work. And yeah. Is there risks that at some point, you couldn’t serve anymore on internet? Because there is no water?

Tim Hughes  28:06

Well, this is I guess, with any resource, it has to be managed wisely. And with water. There was something with the NSA in America. So we had a quick chat about this before we started recording. So would you mind? Sure, just telling the listeners,

Guillaume Pitron  28:20

the National Security Agency stores that are from everyone. And back, I think it two sons 13 as they started to run their biggest data centre, and they made it run in the city of Bluffdale, which is in the state of Utah. As you will understand this data centre needs water in order to run the cooling systems. The thing is, we are in Utah, which is the secondary states of the United States, some local journalists started to ask the question to the NSA. But what is your consumption of water? The NSA would first reply, I don’t want to tell you because if I tell you how much we are consumed, that will tell you information about how much data store, okay. Eventually, they found out and the NSA replied, and it was clear that the NSA was not consuming that much water, taking water out of the Jordan River, which is just running through Bluffdale city, Byrd suddenly some NGO militants, and we’ve had the moment where it was Snowden hadn’t made the revelations about all this surveillance politican stuff. And they start to think but if the NSA doesn’t have water, there is no operations anymore. What if we strike an action on courts in order to forbid the state of Utah to make water available to the NSA? What if we could afford or to the NSA? Maybe this is the actual tool of the NSA. And if there is no water, we just stopped as a server and stuff, because this is the resource that is being needed for surveillance, which is an amazing story, right?

Tim Hughes  29:58

So with that, so Same with the water would be diverted towards civilian use or towards the NSA is that there

Guillaume Pitron  30:05

was no such a conflict of usages. Okay. So once again, there wasn’t so much question of consumption, so the water would have probably remained in the Jordan River and whatever kind of things. But once again, if the water cannot be fueling the NSA the same way as oil can be fueling a motor of a car. You don’t run this system anymore. And there was a thing a bit crazy ID that this NGO militants were having. They were being supported by also by a local senator or local parliamentary member to stop the civilians literally by by just stopping the availability of such an important resource for such a panopticon.

Tim Hughes  30:48

Right. Okay. So the implications are far reaching, basically. Yeah. Okay. I want to circle back to the question of efficiency. So cryptocurrency? I guess that’s included in our digital technology very much. I know that the the energy consumption for cryptocurrency to perform is really high. I’ve heard statistics that it takes the same amount of energy as Portugal, as a whole country does for all the transactions to happen, especially for the Bitcoin. Yeah, because last year, I think it was last year Aetherium managed to develop a new way of doing their transactions where it’s massively undercut, I think it was 99.9% reduction. That’s right. So that kind of tech, technical, technological improvement, if you like that efficiency, is there anything on the horizon in other areas where we might be able to clean up our act by just reducing the amount of power that we need to run our digital technology,

Guillaume Pitron  31:47

the data centre industry must no respect some specifications, which are being called the P e, u e, the power unit efficiency. So basically, it is a ratio that tells you how much power you need, in order to run a server to run a certain amount of data. And this PUE can be very high, maybe close to two. And then you can go as low as as low as 1.2, which shows that your data centre is kind of more eco friendly. And the more we are going with, you know, investments in researchers, the more the PU E is going down, and the more it’s a good news and the more the industry can say, Look, we’re doing efforts in order to store our data and to run the internet in a more efficient way in a more ecologically friendly way. And once again, this is important that is good. This industry tries for reputational reasons for money reasons to do better, I think is we can take that for granted because we consume more and more and more data. So at the same in the same by the same token at the same time. We keep discovering new ways of using the internet. Yeah, this is new cryptocurrencies. This is maybe tomorrow creating new avatar in the metaverse this in requesting, asking questions to the chat boat chat GPT for Yeah, that’s

Tim Hughes  33:12

the new thing. AI is a massive new one. Definitely arising introduction to this.

Guillaume Pitron  33:18

Yes. And, you know, 10 years ago, we would not have thought that we would be speaking in 2023 about you know, Metaverse and Chad GPT. For what is internet going to look like in 10 years? Nobody knows. But it’s going to be crazy. We are just in the, you know, very early ages of the internet. We’re just turning. We’re just discovering this new technology. Where will it take us in the future? I don’t know, what I’m absolutely sure about is that is going to make us produce more and more and more data. And this is what a techno profits from the Silicon Valley, an American techno profits, cause the Internet of Everything is advocating for the Internet, everything, the internet, the internet of everything is basically we’re going to connect everything, my glass will be connected, your body will be connected with sensors, animals will be connected trees will be connected, we’re going to connect everything because everything that is connected, produces information, produces data speaks to someone else, or some or something else, which is connected. And that is information, which is money and which is power. So we are in a world where on one hand, technologies are getting much better, and much more efficient, very good news. But on the other hand, there is a rebound effects. Oh, because I don’t have any impact on the internet because for each data I produce, it has less and less impact. Why don’t I just you know, produce and consume more data. And the other dynamics here is the fact that in the next 15 years, humankind with will probably produce and consume 50 times more data than what it does today. So there is a race here between the tech nology, which is getting much more efficient, and the fact that our usages of such technologies are getting exponential. So this is where the big story comes. figures tell us that in the next 10 years, the 10%, electricity consumption of the digital world might become 20. And the four persons of co2 emissions, which is more than planes might become eight persons. Yeah, I’m not sure. But if these figures are true, that means that the race is being lost by the technology, and that we consume more new data than the technology is able to offset them in a way,

Tim Hughes  35:35

how much difference can we expect to make through changing our own habits? Like is that just not going to be enough like, because I can’t imagine the way that you say that the way that data is coming to us, it’s coming more and more from different directions. It’s unmanageable, in many ways, on a personal level, to sort of having a habit all in order. What’s the best we can do here? I know, we know, we sort of touched on this week we go back to it. And do we really have to depend, for instance, on the technology changing to suit us, you know, like, rather than us changing our habits to try and manage that amount of data.

Guillaume Pitron  36:12

You’re asking me a difficult question. Yeah. And I wish I would be able to answer to you in a clearer way. But when I look at the way we are using Internet today, when you want to look at the ways young generation is spending, its time, you know, sticked to talk in other kinds of devices. I don’t think there is anything here that relates to the very basic wisdom we should be having while using such devices. And I don’t think any of these new technologies are being offered to us in the future. Whether it’s Metaverse new cryptocurrency is the niche, next version of chat boat would make us use the internet in a more sober way. So I’m a bit worried in a way that we behave like child’s in front of this technology were so much impressed by what they can do. And we don’t want to change our habits. Now, there are limitations, which are starting to appear into the debates, limits to the way we will be using internet in the future. The first one can be ecology, as I speak with you right now, okay, so whenever I am on such devices, I have an impact on the planet. So that may, in the future, play a role in changing your habits, first and foremost, keeping your phone longer. Second, is democracy. We have seen states, including in Europe, trying to, you know, frame the use of certain social networks, because it spreads hatred, because it’s pray to fix news. And we want to protect a beautiful value, which is democracy. So you want to make sure these social networks don’t go too far in the face of such a value, which is democracy. And there’s certainly mutations that I see coming, right now is health, whether it’s your physical health, spending your days on your couch, watching a video on your phone, or whether it’s mental health, and we can’t count today, it’s the number of scientific studies, which are being produced, telling you how that much affects your attention capacities, such tic toc and other kind of things. I would like to believe that ecology, health and democracy may be some hurdles to just keep using these devices, without any real thinking about the impact that they may have. That makes a

Tim Hughes  38:43

lot of sense, because it can feel very insignificant as to what your own contribution might be to a solution such as this problem. But the reality is that we shouldn’t underestimate market pressure. So you know, companies, individuals, demanding or asking of the tech of the companies who are providing the services in this hardware, that they’re not happy with it, they’re not okay with it, and they want it to change. So that kind of pressure coming from the bottom up, is quite likely the thing that will most likely change what happens,

Guillaume Pitron  39:15

I very much agree with you. And we live in such a contradictory age in a way because on one hand, what I’m telling you, in my view, make sense is debatable. But I think we know we can understand this message. And on the other end, everyone understands that the country which in the future will be the most powerful in the cyberspace, cyberspace will, you know hold many strings of the future of geopolitics. So if you want to keep running in this race that we’re all watching right now between the United States and China, you need to be up to date with these technologies. 5g has come to France. And there’s not been such a big debate over the impacts of the environment of 5g antennas. The French that said, but we need to have our own 5g devices. Why not because they know what 5g will be used for. We have no ideas or roughly an ID. But because we don’t want to have Chinese 5g networks installed in France, with potential spying capabilities. So it’s all about geopolitics, accelerating towards the 5g is just because you want to remain independent, sovereign, technologically, independent from the countries, and you will still want to play an important role in the future of geopolitics. So, in a sense, what you were saying just a minute ago is so interesting, because we are codes in this contradictions involved in makes sense, but geopolitics. And independence from other powers makes a lot of sense, too. And I would like to be Macomb my president, or I would like to be Albin ease, and be able to see clearer in the future. How do I make a choice between these two contradictory messages?

Tim Hughes  41:02

That some as funny because that leads me into volley one is going to be one of my, my final questions. So I appreciate the time you’ve given us today. Is there any other any governments that are doing anything in this space, are making positive steps? In my view, what usually happens is what we mentioned before where it’s like, it’s the pressure from the voters, the people at the market demand, you know, that is often the most powerful things. And I think governments around the world are struggling to keep up with this, the speed of this technology. So things are being implemented before legislation can catch up with it. But are there any governments around the world who were making steps forward to try and take responsibility for the direction that this is all going in

Guillaume Pitron  41:45

from an environmental standpoint? So

Tim Hughes  41:47

all all of it really like? Health? Because I think the health perspective you mentioned is really, really valid, because the health implications from this are really quite strong, mentally and physically.

Guillaume Pitron  41:57

I have in mind the example of China, where, you know, there has been some regulations enacted by the state saying that when your Chinese teenager I think I’m not sure when you listen, under 1414, one four years old, you don’t have the right to use tick tock more than like 40 minutes a day.

Tim Hughes  42:17

And is that a regulated it within the household? Or is it on the devices? That’s I wouldn’t be able to tell you because there’s a parent, I know how challenging it is, but it’s not that they can’t be done. But I know, there’s challenges

Guillaume Pitron  42:30

the fact that the state says so in a know how the SLO is being respected. Yeah, tells you something about how the Chinese government can care in a way about the mental health of the young saying, all right, it’s fine to a certain extent with after that, you might get into trouble from mental viewpoint. In the United States, an average a young in the United States is spending seven hours and 22 minutes on internet every day, outside of school. So I would probably mention the Chinese state in terms of environment, the French are doing something right now they have passed a law, which is the first law in the world. I don’t say that they could infringe on here. But basically tackling on a general manner, globally is a question of the impact of internet on the environment. And so there have been many things being decided, whether it is that, you know, the tech companies must inform their consumers about the number of data that have consumed and what it means in terms of co2 emissions. There are some specifications to the data centres, and all this kind of thing. So that is, I think, a good thing that’s just starting, mostly North European countries, Germany are very much in advance when it comes to regulating such kind of ways of using internets, including on the environmental angle. But for the rest of the world, this is just an unknown subject. Yes.

Tim Hughes  43:59

And then that’s good to know that those things are happening in those countries, which is, which is a good start. And I guess it’s sort of points towards the fact that whatever needs to be done, clearly hasn’t been done on any level at the moment, just yet. But whatever can be done. Well, one of the things I guess about this as building awareness, which is what you’re doing is educating, making people understand what the issue is, and what the implications are around the world. The problems with the environment and the human costs that come with this. So that then we can take responsibility for this individually and as communities and countries etc.

Guillaume Pitron  44:36

Yeah, and this is why I quote Stephen Hawking in the beginning of the book, when he says the future is a race between the growing power of technology and the wisdom with which we’re going to be able to we’re going to be able to use it. And the such wisdom can only start with understanding with education. It’s a paradox that the knowledge economy and the knowledge technologies don’t make you knowledgeable about the way the work kind of products is going to take years before we understand all these technologies, which are being up in the air, or donor their feet buried into the ground in the form of wire networks, or laying in the depth of the oceans, in the form of submarine cable optics is going to take years before we really, you know, put some names figures and descriptions over this Leviathan, which we just don’t have an idea of because we haven’t sensed it with our senses. It’s huge battle coming in here, in order to to understand that enormous ecological challenge coming for the decades to come.

Tim Hughes  45:44

Well, that sounds like a good place to wrap this up. Do you have any further closing comments on that gear?

Guillaume Pitron  45:51

Pretty much. I don’t want to be looking like someone was coming to make lessons of normal. Because I use internet every day. I need internet’s to write my books. And I need you to podcast what I’m talking to you about. So I’m going to tell you, you know, you should feel guilty whenever you open your email account, or whatever kind of things. That’s not the position I can hold. And I really would like to make you understand that I’m adopting every day myself, I’m questioning myself all the time. But I keep always in mind this ID, this which is new to us, which is that whenever we will use internet in the future, we’re going to have to make something which we have never done, which is a cost benefit analysis.

Tim Hughes  46:38

Actually, that’s a really good question that I will put to Jim, because that’s his area of expertise. And so the book that you have is the dark cloud. Yep. And that’s now available, we’ll link to everything in the show notes, with some of the things we’ve talked about. And the Estonian activist will make sure she gets a link there. And you also have the rare metals war. So you have you’ve got my first book published was truly a couple of years ago. And I just want to thank you for the work that you do. Because I think it’s so important, you know, and it’s so easy to not be aware of this, I for one was somebody who had a feeling you get a general feeling that things aren’t always as they appear, and that there’s a cost. But thank you for bringing to light, the cost of our digital technology. And also, I would encourage all of us to have these conversations more and to know that it is something that will grow. And that we have a responsibility as we’re here now on this planet to ourselves and future generations to try and sort out this issue sooner rather than later. And if that then comes to how we might vote and what we might do with our personal practices with digital technology. We have the power. We have the power, we have the power. So Graham Photron. Very, merci beaucoup. Merci. Merci. And and thanks for everyone for listening. We’ll have everything in the show notes. And we’ll look forward to seeing you next time. Pleasure. Thank you.

Gene Tunny  48:11

Tim, he is good to be chatting with you again,

Tim Hughes  48:14

playing good to be here, Mike.

Gene Tunny  48:15

Thanks for filling into me for the conversation with Guillaume that was, that was great. I really appreciated it. You had a good conversation with Gam about his book, The Dark Cloud.

Tim Hughes  48:27

Yes, it was fascinating. I really enjoyed it really enjoyed it. Thanks for giving me that chance. And

Gene Tunny  48:32

overall, I mean, how do you think? Or how do you think it went? What were the main takeaways for you?

Tim Hughes  48:39

I was fascinated by what he had to say. And I really appreciate the fact that he was able to bring attention to this issue, because it’s clearly a big issue. And it’s growing. And I thought it was a really good thing to talk about. And to continue talking about because no doubt this is an ongoing problem that we need to work with.

Gene Tunny  48:57

Yeah, it’s important to raise this as an issue. It’s still unclear to me exactly how big a deal this is and how much we should worry about it. I guess what he’s highlighting is that the digital world is not necessarily providing the environmental benefit that people 30 years ago or 20 years ago may have thought it was we moved away from having paper, you know, paper based offices and, and also having more services delivered online rather than us having to travel somewhere or, you know, travel or conferences or whatever. So he’s highlighting that this increasing digital footprint that’s having an environmental impact. I think that’s an important point. It’s still unclear to me exactly. How big a deal this isn’t how much we should be concerned about. I mean, clearly we should be concerned about environmental damage, environmental impacts, and we have various regulations that are that are at attempting to resolve those. There is an issue with climate change, of course. And we know that internationally many countries aren’t really agreeing to on or they’re not they don’t have the framework or the policies in place to really do much about that. I mean, there’s a lot of talk. There’s not a lot of action. Yeah. So that’s, that’s possibly an area where you could argue that better policies are needed. You know, in other cases, there is, well, at least in Australia, there’s very stringent environmental protections. I guess the issue is, well, what if they do you know, that’s what Guillaume was talking about mining in the impact of mining in emerging economies, wasn’t he? So there there are issues. And so perhaps that’s something where it’s worth focusing attention on. And there needs to be there could be some international pressure to improve conditions in those those countries. Did he mention Congo? I’m trying to remember now. Yeah,

Tim Hughes  51:01

he mentioned DRC. And cobalt, most of the cobalt seems to come from there. And without a doubt, it’s the processes with getting these rare earths out of the ground, that are the issues, environmentally, and the human cost of that. So there was really, I mean, I thought it was very clear that there was some big impacts from our digital technology, our digital habits, that we should be aware of. And that can be improved on that was the big, I thought that came over really strongly. So just to repeat some of the figures, he said, 10% of the power that we use currently is running our digital technology. And that’s understandable, there’s going to be an amount that goes into it, we’re highly linked to the internet, really dependent on the all of this new technology. So it’s not surprising that there’s a cost there. However, the rate that that is expected to increase up to 20%. Within the next decade, it currently accounts for 4% of the carbon emissions, and that’s looking to double as well. So this is the tip of the iceberg in the way I guess, there were two main areas that I could see where this inefficiency was a problem. One was in the use of electricity with storing data and unnecessary data, which is, and it was something we were talking about a little bit before we did this wrap up. It’s unknown, I guess as to how much of this data that’s being stored currently in 3 million data centres around the world that Guillaume mentioned, how much of that data is necessary or not, which is, you know, can update for conjecture. But I think personally, we could all see from our own habits, there’s a lot of data that we have, that has been saved, that’s completely not necessary. So there’s an efficiency problem there for sure. That can be improved upon. And whether, you know, for any of us to go through our phones, or whatever storage, we have to retrospectively go through our photos videos is a daunting task that is unlikely to happen to be fair. So if technology can come to the help AI, with some kind of solution with this, which I know they have, they can detect duplicates, and this kind of thing. So that that kind of technology is already there, technology could hopefully come up with something quite clever to try and either compress the amount of data that we have, which is one possibility, I guess, or to somehow diminish the amount of storage that’s needed, because it’s clearly unnecessary for a lot of personal use, we don’t need anywhere near as much as we currently use. You mentioned before that it’s cheap data is cheap, which I think is great for the consumer. But this is, I think, allowing us to have bad habits of just being wasteful with the amount of things that we hold on to just in case or just can’t be bothered to delete because it’s too clunky or too time consuming currently,

Gene Tunny  53:50

well, I think you made a good point there. It’s too. It’s too time consuming. So therefore, if you’re doing this efficiency calculation, you should take into account the fact that if you were to go and clean it up, you’d have to spend all this time doing so. And yeah, I did mention when we were chatting, storage is cheap. And as an economist, I mean, as long as people are facing the irrelevant, or the proper prices at prices, which fully incorporate all the costs, then what’s the problem? I mean, if we want to have a lot of data stored online, there’s no real problem with that. I guess the issue does come if we’re not properly if businesses and are not internalising all the costs that they’re imposing on society if there are these environmental impacts that aren’t properly costed and then priced into the product so that your look that could be an issue, right? I’m not I’m not denying that. But in terms of the you know, the photos I mean, I don’t know how big a bigger deal that is and how big a part of the problem it is. And this 3 million data centres. factoid, that’s not the huge Google or Facebook data centres, there are 3 million of those around the world, he must be talking about various computers, various servers that are associated with different websites around the world. That must be what he’s talking about.

Tim Hughes  55:17

Yeah, I mean, we didn’t go into any detail of the sizes, but clearly, they vary in size, as some of the ones we did talk about with the bigger ones Facebook. Yeah, it’s an Oregon and was it Lapland I forget now, which country was part of that plan? Yeah. And Finland, one of the one of the colder regions, which makes sense, as far as energy expenditure goes, however, I thought it was really clear, like if that were those figures, as they stand 10% is a lot of power. And so there’s a real environmental impact from generating that 10% of electricity. So I think it was really clear that there were impacts big impacts already, which were only expected to grow. So I think whatever inspections can be done, they do need to be considered important, and also to be done as soon as possible. And but I do think that the big steps most likely will be technology steps, you know, somehow of reducing our capacity or not our capacity, but I need to source so much data. So if it’s a compression issue, I don’t know that

Gene Tunny  56:17

well, there is compression already. I think we’re probably solve the compression problem. They’ve got very good algorithms for compressing data. I don’t know how much more efficient we can get on there.

Tim Hughes  56:28

I mean, I’m coming from a non technical background. So I mean, you know, how, for instance, the initial computers were massive, and they became smaller and smaller to the point we had, you know, a small computer in our pocket that can take cameras has all this capability. That is amazing. Yeah. I don’t know how that happens. I just trust that, you know, it has happened. So I just go with it. And I just wonder, like, you know, hopefully, there might be some future leaps and bounds that we can do in the forms of storing data. You know, if that might be something if we might go through the same process of efficiency and finding better ways to to manage this before it gets more of a problem.

Gene Tunny  57:03

Yeah, in terms of storage technology. Yeah. Yeah, I’m not sure. I mean, I’m not an expert on that. Either. You were talking about the, the size, I mean, the compression comes into it, where you reduce something that is 10 megabytes down to two megabytes or whatever. That’s the compression. So it has a smaller storage requirements in terms of storage technology becoming better and, and cheaper. I don’t know. I’m presuming it will. I mean, I remember, back in 1989, my neighbour, Simon had a hard drive for his Amiga computer. And I think it’s stored a couple of megabytes. That was like a big deal for saw.

Tim Hughes  57:48

And that’s the thing, like, you know, neither of us are equipped to sort of see, I mean, clearly, there were constraints. And there are, you know, people are trying to no doubt make this as efficient as possible. Yeah. You know, so if, in, you know, in the meantime, what we can do, though, which are made some really good points is that, you know, we have a couple of options, you know, to store our photos or videos on external hard drives, which, like you said, rightly, before we started recording again, but that would come at a cost, to create that harddrive, etc. But the point being that, once it’s on that it’s not consuming electricity, to keep it stored, it’s not stored in the cloud, etc. So that’s one of the areas I thought was worth mentioning. And again, the digital cleanup day. So he mentioned, I think we worked out it was Anneli overall, as the Estonian activist, and, again, with whatever is at our disposal, now, we can use that technology or that little bit of time, or like, it’s okay. You know, we do the same with our gay marriage, or whatever storage we have at home, I think it’s okay to put a bit of time into into making our digital storage habits more efficient and less, less cluttered. So there’s good information on what does it digital digital cleanup day.org. So if anybody wants to check that out, there’s some good information there. So the other part of the efficiency process was back to what you were talking about with the rare earths and DRC, etc. And that was a big one big takeaway I felt was to hold on to your phone. So that’s in the hardware element of our digital habits, so phones, laptops, tablets, etc. The production of those is where all of this comes into it. And so if we can hold on to our phone, get it fixed. I think GM said he had an iPhone seven, and getting it fixed, meant that he wasn’t then getting the latest one, they’re all perfectly good. I don’t have to have quantum leaps of technology. With these things. You can do everything with, you know, a model that’s a few years old. And so there are definitely things we can do to to help with these current issues and to try and slowed down that dependence on requiring more energy to store and the issues that might come from extraction of these rare earths from different parts of the world.

Gene Tunny  1:00:09

Yeah, I’ll have to look up and put in the show notes. What that the size of that Amiga hard drive was it probably, I think it was a bit more than a couple of media or

Tim Hughes  1:00:19

anything I just said, Jane, are you just thinking about that? You’ve been thinking about that for a while. Sorry. That’s totally fine. I’m used to it. I’ve got three kids. But yeah, so quantum leaps in that regard in a relatively short period of Yeah, exactly.

Gene Tunny  1:00:41

Exactly.

Tim Hughes  1:00:45

That’s another big point, I thought was really interesting was the value that you put on democracy, you know, that we have the opportunity in democratic societies to make change. I thought that was a good point.

Gene Tunny  1:01:01

Yeah. Yeah, I think well, certainly is. Yeah, we hope that the changes are sensible. So I guess the challenge here is to come up with sensible policy recommendations and not just react to the fact Oh, there’s a lot of data, we’re using a lot of energy for the digital world? Well, of course, we are because we’re role online now. So what’s the actual problem? I think we’ve got to make sure the policies are addressed at where the so called market failures are addressed at tackling those who were not properly pricing the costs of, of the environmental impacts. So that’s what I would say.

Tim Hughes  1:01:44

I think one of the main points was this is out of sight. So we’re not we’re not aware of this cost, in power, or in environmental and inhuman impacts. It was just bringing it to the fore to bring it into view, I guess, you know, with with rubbish that we do household waste, etc, we can see that it gets picked up. And it’s it still goes into areas that we may not be so aware of. But we’re aware of that daily. Yeah, contribution to. And I guess this is like there’s a digital landfill that we need to be take some responsibility for. And I guess that was what I felt from from.

Gene Tunny  1:02:24

Yeah, look, I think he makes some good points. So I think it was a good conversation. And from doing the some reading on this, in preparation for our chat, I discovered that there isn’t really a lot of information or a lot of analysis of this. And there’s a great article I found on data camp.com that I’ll link to that goes through the impacts of digital technology in it right. And in that they write despite recent progress to improve corporate transparency, there’s still significant data gaps and blind spots and the evidence of environmentally relevant digitalization impacts, which I think is true. So it’s something that further research would be useful on.

Tim Hughes  1:03:04

Yeah, yeah. It’s a big subject, and no doubt one that’s going to stay with us for as far as we can predict at the moment. So yeah, it was it was good to get that perspective on it.

Gene Tunny  1:03:15

Very good. And one thing I liked about his book is he, he does talk about the economics of it. He talks about the Jevons paradox. I don’t know if you came across that I needed and talk to him about about that. But the idea is that as we become more efficient in something, rather than using less of it, we can actually end up using more of it because it’s, it’s cheaper, so electricity as we become more efficient, and well, if we become more efficient with electricity, so the use of electricity, more efficient lighting and refrigerators and washing machines, then those savings we just ended up, you know, getting more appliances in we that gives us some room to to use more electricity. And it can be that we ended up using more sounds like

Tim Hughes  1:04:03

Parkinson’s Law where yeah, we fill up the available space to do whatever we can. So if we have more money, we spend it if we have more, fill it.

Gene Tunny  1:04:12

Yeah, so I’ll put a link in the show notes on the Jevons paradox, which was originally discovered by a British economist Stanley Jevons. Thing was William Stanley Jevons in the 19th century with regard to coal. So I’ll put some I’ll put a link in about that. And that might be a good topic to cover in a future episode.

Tim Hughes  1:04:34

And there was a cost benefit analysis that Guillaume mentioned.

Gene Tunny  1:04:38

Well, I think he was saying that you really need to do a cost benefit analysis on any measures to deal with these issues. Was that what he was saying? Or you’d want to do a cost benefit analysis of our use of digital technology? Now my feeling is, it’s going to come out in favour of the use of digital technology,

Tim Hughes  1:04:54

for sure. And he was very clear with that, that he’s not against it, like he uses it. And so it’s not a question of, for or against, it’s a question of better use of and better practice in how we, how our hardware is made, and, and also being mindful of how much power is being currently used. And to see that, you know, wherever we can be more efficient in that whole process that we do what we can. And that was where the democracy sort of comes in, you know, we can, as voters, you know, this is something through discussions through this kind of discussion. And the kind of, you know, I guess this is the awareness that Guianas bringing to us. And it’s just making sure that we can have these conversations and talk about it so that, yeah, at some point, it can be better, or we can be less wasteful.

Gene Tunny  1:05:48

Absolutely. And I think he does the point that we’re not going to solve all these environmental challenges. If we just move to renewables and EVs, there’s still going to be environmental impacts that we need to think about. I think that’s a that’s a good point. So anything else, Tim, before we wrap

Tim Hughes  1:06:03

up? No, I really enjoyed it, Gene. And thanks again for giving me the guest spot. I really enjoyed it.

Gene Tunny  1:06:09

Oh, of course. Thank you, Tim. And one thing I should note, as you please check out the show notes, I might put in the the capacity of that Amiga hard drive for 1989. I may have underestimated underestimated that but it was very low relative to what they are now is quite incredible. Was it eight or 20 megabytes? I’m struggling to remember, but I’ll do some research on that. Very good. The 80s wonderful time. Okay, Tim? Yes. Thanks for your time. today. It’s been a pleasure. Right. Oh, thanks for listening to this episode of Economics Explored. If you have any questions, comments or suggestions, please get in touch. I’d love to hear from you. You can send me an email via contact@economicsexplored.com Or a voicemail via SpeakPipe. You can find the link in the show notes. If you’ve enjoyed the show, I’d be grateful if you could tell anyone you think would be interested about it. Word of mouth is one of the main ways that people learn about the show. Finally, if your podcasting app lets you then please write a review and leave a rating. Thanks for listening. I hope you can join me again next week.

1:07:29

Thank you for listening. We hope you enjoyed the episode. For more content like this or to begin your own podcasting journey. Head on over to obsidian-productions.com

Credits

Thanks to Obsidian Productions for mixing the episode and to the show’s sponsor, Gene’s consultancy business www.adepteconomics.com.au

Full transcripts are available a few days after the episode is first published at www.economicsexplored.com. Economics Explored is available via Apple PodcastsGoogle Podcast, and other podcasting platforms.

Categories
Podcast episode

The Invisible Hand: economic, religious, or mystical concept? w/ Dan Sanchez, FEE – EP185

The Foundation for Economic Education’s Dan Sanchez argues that the invisible hand is a legitimate economic concept and not a religious or mystical one, as some critics of economics claim. Dan and show host Gene Tunny discuss the efficient organization of economic activities by the market mechanism in a decentralized way, without the need for a central planner. The conversation turns to TikTok and economic engagement with China. 

Please get in touch with any questions, comments and suggestions by emailing us at contact@economicsexplored.com or sending a voice message via https://www.speakpipe.com/economicsexplored

You can listen to the episode via the embedded player below or via podcasting apps including Google PodcastsApple PodcastsSpotify, and Stitcher.

What’s covered in EP185

  • Introduction to this episode [0:06]
  • Dan’s article on the “invisible hand” [2:06]
  • The production of a pencil is like an orchestra without a conductor [5:25]
  • Is the invisible hand the hand of God? [8:34]
  • What is the problem with central planning? [12:27]
  • Central planners don’t like the idea of economic laws because they circumscribe their utopian dreams [15:45]
  • Dan’s views on big tech [19:23]
  • Is there a case for regulation or a ban on TikTok? [23:32]

Links relevant to the conversation

Dan’s bio: https://fee.org/people/dan-sanchez/

Dan’s Twitter handle: @DanSanchezV

Dan’s article on “How Atheist Anti-Capitalists miss the point”:

https://fee.org/articles/how-atheist-anti-capitalists-miss-the-point/

Von Mises book on the economic calculation problem

https://mises.org/library/economic-calculation-socialist-commonwealth

Article about problems with Soviet shoe production:

https://www.econlib.org/archives/2009/09/soviet_shoes.html

Bio of 19th century British free trade advocate Richard Cobden who Dan mentions:

https://en.wikipedia.org/wiki/Richard_Cobden

Transcript:
The Invisible Hand: economic, religious, or mystical concept? w/ Dan Sanchez, FEE – EP185

N.B. This is a lightly edited version of a transcript originally created using the AI application otter.ai. It may not be 100 percent accurate, but should be pretty close. If you’d like to quote from it, please check the quoted segment in the recording.

Gene Tunny  00:06

Welcome to the Economics Explored podcast, a frank and fearless exploration of important economic issues. I’m your host Gene Tunny. I’m a professional economist and former Australian Treasury official. The aim of this show is to help you better understand the big economic issues affecting all our lives. We do this by considering the theory evidence and by hearing a wide range of views. I’m delighted that you can join me for this episode, please check out the show notes for relevant information. Now on to the show. Hello, thanks for tuning into the show. In this episode, I chat with Dan Sanchez about the invisible hand, the efficient organisation of economic activities by the market mechanism in a decentralised way, without the need for a central planner, the great Scottish Enlightenment economist and philosopher Adam Smith observed, every individual neither intends to promote the public interest, nor knows how much he is promoting it intends only his own security and by directing that industry in such a manner, as its produce may be of the greatest value, the intense only his own gain. And he is in this as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Is the invisible hand a legitimate economic concept or is it instead of religious or mystical concept as some critics of economics argue? My guest this episode, Dan Sanchez argues vigorously against those critics. Dan is the director of content at the Foundation for Economic Education. The foundation is one of the world’s leading pro free market think tanks, and it’s been operating since 1946. Okay, let’s get into the episode. I hope you enjoy my conversation with Dan. Dan Sanchez, from the Foundation for Economic Education. Welcome to the programme.

Dan Sanchez  02:06

Thanks, Gene. It’s great to be here.

Gene Tunny  02:07

Excellent. Dan, I was keen to get you on the show to chat about an article that you wrote for fi recently in the world in the last few months. So how atheist anti capitalists missed the point why they’re wrong, to sneer at the invisible hand and, and our pencil. To start off with Dan, could you just explain what you were reacting to? So what was the sneering that was being done at the invisible hand? And, and eyepencil, please,

Dan Sanchez  02:40

yeah, well, I tried to make it evergreen, partially because this is a criticism that is levelled at eyepencil and about free market economics in general, a lot. And another thing is that I just didn’t think that the I don’t even remember the author of the book that was in the latest smear, and the latest attack on Leonard Reid’s eyepencil was then I just wanted to sort of make a blanket case against that kind of line of attack. And what the line of attack is, is that is that free market economists believe in the invisible hand, that there’s a line and a pencil that says, Since only God can make a tree, I insist that only God can make me. And therefore free market economics is invalid, because ultimately, it is based on faith instead of reason. And that it relies on some kind of a supernatural divine intervention for the free market to work. So it was that line of attack that I wrote my article to counter attack.

Gene Tunny  03:55

Rod, okay, I didn’t realise there was that line in eyepencil, I’ll have to go back and have a look at it to see the context. eyepencil is a great article that explains how no one no one person knows exactly how to make a pencil. There’s all of these, you know, hundreds of or however many people 1000s of people involved in the supply chain and the production from the growing of the timber, and the mining of the graphite, and the assembly of all the components into into a pencil. And that’s all coordinated by the market system. I mean, what Adam Smith and you know, the, the invisible hand, this is this metaphor from Adam Smith. That’s about how he sees as there’s, it’s almost as if there’s an invisible hand at work in how the market coordinates people and we owe our DNA to the self interest of the butcher and the baker. So yeah, that’s what that’s broadly speaking, correct. isn’t enough characterise that, right?

Dan Sanchez  04:57

Yes, that’s exactly right, Leonard. Reid is actually the founder of the organisation that I work for the Foundation for Economic Education. And he wrote this classic essay I pencil. And really what it is, is it’s a, written from the perspective of a pencil, like the pencil is the narrator. And the pencil is giving his family tree, his ancestry. And the point that he has to make is that, as simple as he is, like a pencil is not a super high tech product. But as simple as it is, its production is vastly complex, really, involving millions and perhaps 10s, and millions and hundreds and millions of people in its production, because you might think that the components are relatively simple, because there’s wood, and then there’s the lead and the eraser, but each one of those components had to be manufactured. And oftentimes, those the capital goods that were used to manufacture that they have to be manufactured, and it just keeps radiating out and out. And when you really trace what it all that goes into the production of a pencil, it is an orchestration of millions of people. But it’s an orchestra without a conductor. And that’s the, that’s the marvel that eyepencil really reveals is that there’s no mastermind, there’s no central planner, a lot of people would like to be central planners, they’d like to centrally plan pencils, and they’d like to centrally plan everything, but it is way too complex for them to be able to do that. And yet it happens every day without a central planner, because of the market price system. And, and that market price system is very orderly. But it’s not order that comes from the mind of any single participant of it, that that it’s an order that emerges out of the interactions of all these people pursuing their own little corners of order. And so there’s a transcendent order that emerges out of that. And so Adam Smith and Leonard Reid characterise that as, as sort of like an invisible hand, because all these wonderful things are coming out of the market, like a pencil, that wasn’t the intention of any single participant of it, a lot of people involved in producing things that go into producing a pencil, don’t even realise that they’re contributing to a pencil. So like someone who is, you know, manufacturing an axle that goes onto a truck, that ships the wood that ends up in the pencil. That person never thinks about his work as contributing to pencils. It’s not his intention, it’s not his order. But the market price system coordinates that all so that he actually does very effectively contributes to a pencil. And so like Adam Smith said, that it’s as if an invisible hand is ordering people’s actions to yield results. That was not any intention of their own. That you could see that that Leonard Reid and Smith and and also Frederick Basia that you could see like the hand of God in that, and that’s where the critics pounce because the critics say, Aha, you’re talking about God so therefore, everything that you’re saying is invalid. But in my article I explain how, how that actually is not a valid criticism.

Gene Tunny  08:57

Broad Okay, so we’re Smith and last year and read with a religious Did they say they compared the market mechanism to the to the hand of God is that what is that correct?

Dan Sanchez  09:09

Yes, they were all they were all Christian. And Leonard Read had that line that I mentioned, Frederick Basquiat in one of his essays warned against, quote, rejecting the order, God has given it, referring to the market and cautioning against social schemers who, who want to reject that order. And so a lot of free market thinkers see that there is something divine in it, that the order of the the world including the social order, is because of God it was created by God. But the thing is, is that even people who maybe are atheists and who who disagree with with Basquiat and read, they have no cause for disagreement with their conclusions, because as I explained in the article, the way that they reach their conclusions, was not through recourse to any kind of divine intervention. And it was not like God exists, therefore, the free market or anything like that, they reach their conclusions through economic reasoning, and through observations about human nature. So when, when Adam Smith explained the invisible hand and the workings of the market, he talked about the division of labour and exchange and prices and incentives and, and the logic of the market, resulting in that. Similarly, when Leonard Reid talks about eyepencil, and the wonders of the market, again, it’s all about about human action and exchange and the prices that result from it and the coordination that results from that same thing with with Bostian. And they think of that order as having been created by God, but, but they don’t say that, like, it relies on continuous divine intervention all the time. And they don’t rest their conclusions on, you know, holy scripture or anything like that. And so, in my article, I compare it to Sir Isaac Newton, Isaac Newton was also Christian, and was also religious, and also saw something divine in the physical order that he was describing. And that, I think there’s a double standard here, because these, these critics, they, they wouldn’t then say that, you know, Isaac, Newton’s physics were invalid because of, of his, you know, religious perspective. Because his optics and His laws of motion and everything that they were derived from using reason and using experiments and using observation, and they don’t have that criticism for him, because they don’t have an axe to grind against physics, they have an axe to grind against capitalism. And so they’re going to level this unfair attack, in this case and not in the other.

Gene Tunny  12:27

Yeah. Yeah. I was just thinking, Dan, I mean, I first came across eyepencil, I think it must have been in one of Milton Friedman’s books, because Friedman might open one of the chapters in Free to Choose talking about it, I can’t remember exactly. And Friedman love that example. I mean, the way Friedman always explained it in terms of the market, it provides us clear signal is that price signal that, and that’s all you need to observe in the market. And if if there’s a shortage of say, timber than the price of timber is going to increase, and that’s going to send a signal to the loggers to, to harvest more, more timber. So, yeah, he talks about that efficient signal. And, you know, 30 or 40 years ago, there were, it was much clearer that that was a better approach than central planning, because we had real life, socialist economies, the centrally planned economies still, that were failing to produce the goods and services, the consumer goods that that people wanted. And I might try and dig up some of those examples of those, you know, just the inefficiency of production, the failures to when you got central planning, and you don’t have the market to tell the factories, what needs to be produced, you have all sorts of bottlenecks and problems in production. So yeah, but we seem to lack that now those it’s not as clear anymore, because we’re not in that. There’s not there aren’t in real life. I mean, maybe there are some in Cuba and North Korea, but we don’t see we don’t hear a lot about them. But we’re very conscious of what was happening in the in Eastern Europe and Soviet Union back in the day. I don’t know if you have any reflections on that at all.

Dan Sanchez  14:12

Yeah, and even in those cases, the Socialist quasi socialist economies aren’t really fully socialist because they have recourse to market prices that are generated from capitalist economies. So the problem about socialism that you can see in eyepencil, in Leonard Reid’s discussion of central planning and my pencil but also in Ludwig von Mises is explanation of the calculation problem is that without market prices, production is just arbitrary that that there’s there’s no way of balancing one production course of action against another course of action because you just don’t have prices and you don’t have the the gun either profit and loss to know whether, you know whether one line of production is any better than another. And so it’s just arbitrary. But but at least if, if you have a socialist economy and the capitalist economy exists elsewhere, at least you can use those prices as a as a rough metric to have some kind of rationality in your production. But in a completely socialist world, it would be utter chaos, like there wouldn’t even be that so it would be even worse.

Gene Tunny  15:34

Yeah, you know, it’s good. You reminded me of that. Sorry, Ludwig von Mises the calculation problem, I’ll have to refresh. My understanding of that. It’s a very good point that that he makes there. Okay, there’s one thing I wanted to dive into with your article you write that those who try to dismiss eyepencil do not want to admit that they or their favourite social schemers cannot outsmart or outdo the transcendent order of the market, those who sneer at the invisible hand won a free hand to remould society as they please. Okay, I largely agree with you what I just want to ask you about your thoughts on, there’s a lot of concerns. Now. I mean, there’s concerns about inequality, and housing, I mean, we’ve got their housing prices are out of control, a lot of young people are concerned about whether they’ll be able to afford a house, there are a lot of particularly the millennials and the Gen z’s. They’ve got a more favourable view of socialism than then older generations. And I’m always conscious, I don’t want to have a not that I’m a boomer. But I don’t want to have that burger mentality. Like there are a lot of people who are so try to see where people are coming from. There are a lot of people who think that the market, this is a problem with the market. This is why we’ve got all of these issues. How do you respond to that? Do you think it is such a transcendent order? If we do have this perceived issue of inequality and lack of housing affordability? How do you respond to the people who are critical of of capitalism, or neoliberalism or whatever you want to call it for delivering these outcomes.

Dan Sanchez  17:24

So a lot of the times what central planners or would be central planners, what they want to do is they want to basically pander and demagogue to people to pretend that they would be able to outdo the market, and provide them with more goods and services than then the market would provide. And so they don’t like the idea of economic law, because it puts a crimp in their plans, because it it shows that there are just some things that can’t be done, just like in the realm of physics that, you know, there’s a law of gravity, a president can’t walk off the presidential palace and expect to be able to fly. Similarly, a president can’t impose price controls, and expect there to not be shortages. It’s like these these economic laws, circumscribe the utopian dreams of these demagogues and the central planners, you know, that relates to housing as well. So for example, rent control, central planners don’t want to believe in economic law, because economic law means that they can’t impose rent control, without creating housing shortages for the very people they pretend to want to be able to provide for. So that’s why they are really averse to any kind of notion of a transcendent order any kind of order that that is beyond what a central planner can can encompass, or some kind of an ingenious social reformer can’t outdo, but they do get away with it to a large degree, they are able to put one over on the people to make them think that they can outdo the market. And so they do manage to do a lot of interventions. But then those interventions create a lot of these shortages. They blame that on the market, and then that buttresses their case for even more intervention if people don’t actually understand economics. And so So yeah, it’s true that there are housing shortages, there’s lack of options for living, housing is unaffordable, but it doesn’t make any sense to lay the blame on the free market. Because when you when you trace what is causing these problems, especially in in certain areas in particular is that you, you see policies like rent control, and you see policies like zoning restrictions and all these anti production policies that that put a strict limit on the production of new houses. And if you have fewer houses, then they’re going to be more expensive. Again, it’s an economic law of supply and demand.

Gene Tunny  20:22

Okay, we’ll take a short break here for a word from our sponsor.

Female speaker  20:28

If you need to crunch the numbers, then get in touch with Adept Economics. We offer you Frank and fearless economic analysis and advice. We can help you with funding submissions, cost benefit analysis, studies, and economic modelling of all sorts. Our head office is in Brisbane, Australia, where we work all over the world. You can get in touch via our website, http://www.adepteconomics.com.au. We’d love to hear from you.

Gene Tunny  20:57

Now back to the show. One of the other concerns I hear expressed from people who aren’t sympathetic to Foundation for Economic Education, is this point about monopoly. There’s a growing concern about monopoly in well, in tech, in particular, surveillance capitalism. How do you think about that? I mean, is that part of the transcendent order? Or is that is that something malignant? There needs to be policy action, perhaps antitrust action against? How do you think about that?

Dan Sanchez  21:29

Yeah, I think a lot of the problems that we’re seeing with big tech, again, can be traced to government intervention, we saw with Twitter files, how much the FBI has been in Twitter’s DNS. And I’m sure if we ever had the YouTube files or the Facebook files, that, you know, we’d see the same results. I think that it is really short sighted, especially for conservatives to want to use the power of government and antitrust policy, to give the government even more power over these big tech companies, and expect that to solve the problem when when, if anything, that’s just going to give the government more leverage to be even more censorious against critics of the government. And so it just seems really, really short sighted to me. And the answer is to free big tech in the tech industry and social media and media in general of government and influence. Because if there wasn’t so much intervention, a lot of these behaviours, they’re doing it because of government pressure. It’s not because of, like a market demand for it. And if that government pressure was was released, I think people like freewheeling conversation and don’t like censorship. And and I think market demand would leave these these big tech companies to either them or their competitors and their successors, to not be abusive in their practices. And a lot of times big tech companies, like incumbent, like already dominant big tech companies, they actually like regulation, because it places a heavier burden on upstarts than it does on them. Yeah, even if you want, you know, giants, like like Facebook and YouTube to go under, again, you know, because of abusive practices. Again, the answer is to get government out of it. So that there’s less regulation, and there’s more room for competition.

Gene Tunny  23:32

Yeah, fair points, has feed on any thinking on tick tock, because it’ll mean tic TOCs, a company that there’s a bit of concern about in terms of privacy and security issues has feed on and you thinking on that? Is that is that a special case where there might be case for regulation, or a ban of some kind?

Dan Sanchez  23:50

Tick tock? Like, really, I think the reason why there’s so much pressure on banning Tiktok. For one thing, again, it’s anti competitive. The biggest supporters of a ban on on Tik Tok are Facebook and YouTube, because basically, they want to crush the competition. But the actual bill that would ban Tiktok doesn’t only ban tick tock it gives the government sweeping powers over monitoring and censoring the internet in general. And really, I think it is a a Trojan horse, on one hand for these big tech companies to to eliminate competition and on the other hand for governments to have even more power regulating speech, because ultimately, the biggest threat to our own civil liberties is not China. It’s the American government. Thankfully, it’s the American government that that is having this constant siege on our liberties. And this is just this is just part of that really.

Gene Tunny  24:56

That’s an interesting perspective. I thought I’d ask you Here’s it’s I mean, one of the things I’ve been trying to figure out through my conversations with people is, is China and how big of a threat is China? And does that mean we need to decouple from them? No, that’s not what we’re talking about today. I’ve had conversations with different people. And I know that the it’s a huge concern that a lot of people are really concerned about national security. But yeah, I think that’s a that’s a good point you make about the legislation and the wider reach that it could have. So I might have a closer look at that. That’s been great. Dan, thanks so much for your time. Are there any other points about your article or what you’ve been thinking about lately, you’d like to get across before we wrap up?

Dan Sanchez  25:44

Yeah, I mean, something that about I pencil that is brought to mind by the whole question of decoupling from China is that, you know, what the eye pencil story is, is a story about this vast division of labour, that is at the root of our prosperity, that millions of people are coordinating through the market system. And because of that vast coordination, that vast division of labour, because of the efficiencies of that, that is why we have hot, such high living standards, that we can have this huge population, but living better than any time in human history. And China is a big part of that. Because China, and having integrated with the global economy, that contribution to the division of labour, That is a big reason why we are as prosperous as we are. It’s also a big reason why the relations with China aren’t even worse. Because when peoples are interconnected through trade and through exchange, then that does create an interdependence. But that’s actually a good thing. Because that is what prevents wars, like once people are completely separate, then the only way that they can benefit from each other is through violence is through war. It’s like, there’s a saying that if if goods don’t cross borders, armies will, and that kind of separation, if anything, it would lead China to become even more totalitarian. Because it would create such a like a crisis situation and in times of crises, like the tyrants get are able to gain even more power. And so one thing that, you know, Leonard Read and people like Richard Richard Cobden talk about is that the more that exchange and the diverse division of labour knits people together, the more peace and cooperation and harmony and prosperity it creates,

Gene Tunny  28:00

here so Richard Cobden, an English radical and liberal politician, manufacturer and campaigner for free trade and peace. Yep. Okay. So very good. I’ll put a link in the show notes. So I remember, I’ve read some of his stuff many years ago, but it was a good, good reminder. So very good. Dan, thanks so much for your time. This is this has been really great. And I loved your thoughtful piece on on Smith, and Bastiat and what the the atheist ad capitalists get wrong. So that was excellent. And yeah, again, thanks again and keep up the great work and yeah, hope to see more of your stuff in the future.

Dan Sanchez  28:40

Thank you, Gene. I really appreciate it. Very good.

Gene Tunny  28:49

Okay, I hope you found that informative and enjoyable. I was really impressed by Dan’s insights into the invisible hand and his passionate defence of the free market. I think the main takeaway of this episode is the efficiency of the market mechanism in organising the production of goods and services. The invisible hand is a beautiful thing. Dan describe the market is bringing about a transcendent order, because the results transcend the intentions and efforts of particular individuals in the economy. As Dan noted, Smith, Bastiat and read demonstrated that transcendent order using economic reasoning and empirical observations about human nature, that demonstration did not rely at all on religious premises. Whether those men saw in that transcendent order something literally divine has no bearing on the validity of their reasoned demonstration of that order. I fully agree with Dan on that point. Dan has certainly given me some ideas for future episodes. It’s probably worth talking about the economic calculation problem posed by von Mises in a future episode. Von Mises argued socialist economies would fail because of the huge computational problems they faced They will have to centrally plan and direct the flows of resources across various industries and the distribution of products to consumers. Something the market mechanism does in an efficient decentralised way. In a future episode, it would also be useful to explore some of the failures of central planning in the former Soviet Union. There are various stories about recurrent shortages of bread and toilet paper and about uncomfortable and unfashionable shoes no one would wear but it would be good to delve into some specific well evidenced examples. I’ll see what I can do. What do you think? What either of those future episodes interests you? Let me know. And please let me know what you think about what either Dan or I had to say this episode. You can email me via contact@economicsexplored.com. Thanks for listening. rato thanks for listening to this episode of Economics Explored. If you have any questions, comments or suggestions, please get in touch. I’d love to hear from you. You can send me an email via contact@economicsexplored.com Or a voicemail via SpeakPipe. You can find the link in the show notes. If you’ve enjoyed the show, I’d be grateful if you could tell anyone you think would be interested about it. Word of mouth is one of the main ways that people learn about the show. Finally, if you’re podcasting outlets you then please write a review and leave a rating. Thanks for listening. I hope you can join me again next week.

31:33

Thank you for listening. We hope you enjoyed the episode. For more content like this or to begin your own podcasting journey head on over to obsidian-productions.com

Credits

Thanks to Obsidian Productions for mixing the episode and to the show’s sponsor, Gene’s consultancy business www.adepteconomics.com.au

Full transcripts are available a few days after the episode is first published at www.economicsexplored.com. Economics Explored is available via Apple PodcastsGoogle Podcast, and other podcasting platforms.

Categories
Podcast episode

Chokepoint Capitalism w/ Rebecca Giblin – EP169

Corporations such as Google, Amazon, and Live Nation are allegedly taking advantage of chokepoints in the economy, earning excessive profits. That’s the thesis of a new book, Chokepoint Capitalism: how big tech and big content captured creative labour markets, and how we’ll win them back. The authors are Uni. of Melbourne Law Professor Rebecca Giblin and writer and activist Cory Doctorow. Show host Gene Tunny speaks with Prof. Giblin about Chokepoint Capitalism in this episode. 

Please get in touch with any questions, comments and suggestions by emailing us at contact@economicsexplored.com or sending a voice message via https://www.speakpipe.com/economicsexplored

You can listen to the episode via the embedded player below or via podcasting apps including Google PodcastsApple PodcastsSpotify, and Stitcher.

About this episode’s guest: Rebecca Giblin

Rebecca Giblin is an ARC Future Fellow and Professor at Melbourne Law School, and the Director of the Intellectual Property Research Institute of Australia. Her work sits at the intersection of law and culture, focusing on creators’ rights, access to knowledge and culture, technology regulation and copyright. Using quantitative, qualitative, doctrinal and comparative methods, she leads interdisciplinary teams with expertise across data science, cultural economics, literary sociology, information research and law to better understand how law impacts the creation and dissemination of creative works.

You can follow Rebecca on Twitter: 

https://twitter.com/rgibli

Links relevant to the conversation

Where you can buy Chokepoint Capitalism:

https://amzn.to/3HohDFV

Website about the book:

https://chokepointcapitalism.com/

Transcript: Chokepoint Capitalism w/ Rebecca Giblin – EP169

N.B. This is a lightly edited version of a transcript originally created using the AI application otter.ai. It may not be 100 percent accurate, but should be pretty close. If you’d like to quote from it, please check the quoted segment in the recording.

Gene Tunny  00:00

Coming up on Economics Explored.

Rebecca Giblin  00:03

We’re sharing less and less in the value that’s that’s created by our work. And that’s happening because we’ve got these increasingly powerful corporations, creating choke points that allow them to extract more than their fair share.

Gene Tunny  00:18

Welcome to the Economics Explored podcast, a frank and fearless exploration of important economic issues. I’m your host Gene Tunny broadcasting from Brisbane Australia. This is episode 169 on choke point capitalism. That’s the name of the new book from University of Melbourne law professor Rebecca Giblin and from writer and activist Cory Doctorow. Professor Giblin joins me this episode to discuss the book. Please check out the show notes, relevant links and information and for details where you can get in touch with any questions or comments. Let me know what you think about what either Rebecca I have to say in this episode. I’d love to hear from you. Right now. It’s my conversation with Rebecca Giblin on a new book with Cory Doctorow chokepoint capitalism, thanks to the publisher scribe for sending me a copy of the book. And finally, thanks to my audio engineer Josh Crotts for his assistance in producing this episode. I hope you enjoy it. Rebecca Gibson, welcome to the programme. 

Rebecca Giblin  01:00

Hi, Gene. 

Gene Tunny  01:01

Yes, good to have you on Rebecca keen to chat with you about your new book, Choke Point Capitalism: how big tech and big content captured creative labour markets and how we’ll win them back. So to begin with, Rebecca, could you explain what’s the meaning of a choke point? And why do you think capitalism can be labelled in this way? Or there’s a form of capitalism that is chokepoint capitalism?

Rebecca Giblin  01:40

Well, competition is supposed to be fundamental to capitalism. It is supposedly about the free exchange of goods and services. But you have this new orthodoxy that’s come out in the last 30 or 40 years. When you have Peter Thiel say competition is for losers. You have Warren Buffett salivating over companies that have what he calls wide, sustainable moats, which are barriers to competition that stop that, you know, lock in customers and lock in suppliers, and stop that free exchange. And once and this is now the orthodoxy that’s been taught in business schools, people are told that if you want to make a fortune, you don’t make something, don’t provide a service, but find a way to scrape off the value of other people’s labour. And these are the choke points. So it’s where you manage to lock people in. So you lock in customers, you lock in suppliers, you use, the power you get from that. And those increased margins you get from that to do a scorched earth approach where anybody in your kill zone gets eliminated so that there are fewer and fewer choices for those locked in customers and suppliers. And then ultimately, you shake everybody down for more than your fair share. And we see these choke pointed markets in throughout the culture industries in particular, that’s what we talk about in the book to demonstrate this problem. But they’re everywhere. We’ve started seeing the term getting used in the context of all different kinds of businesses. We’ve had people talking about on social media emailing us to tell us about it. One of the more interesting ones and somebody saying this is exactly what’s happening in the global ornamental plant industry is a big plant is a problem as well.

Gene Tunny  03:28

Ornamental what? Sorry?

Rebecca Giblin  03:30

Plants, Yes. Yeah, it’s a big problem in the plant market, we discovered. And, and what we’re really trying to demonstrate here is the danger of this. And the reason why so many of us are feeling squeezed right now. It’s not our imaginations, it’s that we are being and that we need to become really aware of it if we want to change the material conditions in which we live and work.

Gene Tunny  03:54

Okay, so by many of us, are you talking about creative professionals?

Rebecca Giblin  03:59

But it goes much beyond that as well. If you’re working, or if you’re a supplier to Coles and Woollies, for example, you are dealing with a similar kind of buyer power as what we talked about in the book. And so let me mention this. This book, we talk about monopoly a bit, which is, you know, we’re all familiar with that concept, because we got a board game for that one. It’s where you’ve got a seller, that’s really powerful. So Amazon, for example, is a really powerful seller. And its relationship with consumers because it controls so many consumer markets, including the market for books, but it’s also an incredibly powerful buyer. So if you’re a publisher or an author, you you you need to go through Amazon to reach those customers. And so it’s, it’s it’s got monopsony power as well, which is where you’ve got a powerful buyer. So if you’re a supplier to Coles and Woollies, you’re dealing with people. I have to say this word monopsony, it does turn a lot of people off. It did appear a lot more often in the book in the first draft and people begged us to take it out, but we do think we can make it sexy. Technically what we’re talking about here is oligopoly, which is probably even worse, which is where you’ve got a couple of very powerful buyers. But I’m going to use monopsony just for simplicity. But that’s what you’re dealing with if you’re a supplier to Coles and Woollies, in Australia or so many other companies that have increasingly come to control their markets. And the reason why we’ve got this increased corporate concentration throughout the world is largely due to the emergence of what we call Chicago School of Economics reasoning, this, it gets a little bit wonky at this point, but this consumer welfare theory, that suggests that we should only be concerned about corporate concentration, not just because it exists, but where it has the effect of, of harming consumer welfare, which is often treated as just looking at the prices people pay. There’s many problems with that standard. And we’ve seen them the consequences of that really starting to play out now. But one of the consequences is that it really ignores the fact that when you’ve got a powerful buyer, right, it may be that the prices that the consumer pays are not affected. But that buyer has its hand in the pockets of its workers and its suppliers. And you’re it’s a little bit of a stage magic, sleight of hand misdirection where you’re looking over there at the Consumer Price, and not noticing that you’ve got somebody picking your pocket on the other. And we think I mean, it’s exactly the same end result. If you’re if you’re having downward pressure on your wages, the salary that you bring, bring in the what you get paid for your goods and your services, it has the exact same end result as higher prices at the checkout, which is that you’ve got less and less capacity to pay for what you need. And what we’re really seeing now in the current environment. And a lot of these prices, we are seeing big price increases at the checkout. And partly those are inflationary pressures. But we are seeing as well, there’s a lot of evidence of companies, these powerful concentrated industries, hiking up their profit margins and using inflation as an excuse for that. So we’re seeing higher prices at one end, and also these companies having their hands in our pockets at the other. And so it’s no wonder that everybody’s feeling squeezed.

Gene Tunny  07:30

Right. Okay, so you mentioned a few things there. You talked about antitrust, and I’ve chatted with Danielle Wood from Gratton about this, this issue of you know, there was this consumer welfare standard. And that meant that there may be, there wasn’t as much antitrust enforcement. But now there’s been a change, you’ve mentioned, is it Lina Khan in the States? So there’s more of a, a willingness to look at antitrust as a tool. And can we, Rebecca can ask about what mean, what companies you’re talking about? I mean, are you talking, you mentioned. Well, it’s could, though, there could be companies in the sort of more traditional economy, but it’s, is it mainly big tech? Are they these are the companies that are exhibiting the characteristics of being a choke point, capitalist, what are some of these companies?

Rebecca Giblin  08:23

Okay, so the ones that we talk about in the context of the creative industries, they go all the way through the chain. So if we think about just music to begin with, musician has to deal with the big three record labels, who control almost 70% of global recorded music rights. They own the big three records, the big three music publishers, which control almost 60% of global song rights, they structure the deals in ways that benefit their executives and shareholders, and work to the detriment of these creative workers. Then the streaming industry, which is where most of the increasingly most of the money from recorded music is generated, the streaming we lots of people know that music streaming really doesn’t pay very well. But fewer people are aware that the reason that works, the way that it does is because this is the way those big three record labels, arranged things, the streaming platforms had to have to go through those records, those record companies in order to get permission to play the songs. And in order to clear those rights, they have to enter into these deals that again, favour those record labels, again, to the detriment of the artists, and that give those those those major labels who should be far less relevant and indeed are far less relevant today than they were 30 or 40 years ago because they no longer control all of the avenues to distribution, but because they’ve got these huge reservoirs of copyrights that they’ve acquired often through buying up distressed companies very, very cheaply, that’s given them outsized power to control the future of music. And so you can see that those, the copyrights themselves create a choke point, at one point, the incredible complexity of the licencing systems that we have in music, create other choke points, because it is only Spotify and the big tech music offerings that can afford to go through the, you know, these hoops to pay that what’s demanded by the record labels and also to comply with these complex regulatory rules and that keeps lots of other companies that that could be started by people who love music and want to support artists and passionately believe in alternative ways of getting music out there. It stops them from being able to start up any kind of meaningful competition. And then if you look, and you say, Well, that’s all right, people don’t really need to make money from recorded music. No one’s really made money from recorded music except a few outliers. People make money from touring. Well, then we start looking at Live Nation, which is the behemoth in that space. It controls nearly all of the world’s largest and most prestigious music venues. It also has a music management and promotion business. And it bought Ticketmaster a few years ago to, you know, in the face of many, many warnings that what has happened would happen, the Department of Justice in the United States still permitted this merger to go ahead. Now, just think about this for a moment. Imagine you are a company. So you’re a music venue, right? And you want to book acts, you will have Live Nation tell you well, if you don’t use us for your ticketing, you won’t be able to book our biggest acts that we control through our management, business and promotion business, or, or any other kind of incredible threat that they’ve made. In the book, we talk about this we are in, we looked in an incredible range of creative industries in our research for this book. And we always gave people the opportunity to be synonymous or anonymous if they wanted to. And I think nobody took us up on that. Even when they were talking about these other really big, really scary giants like Amazon, who’s also known for not playing fair, except the people we spoke to about Live Nation. Almost all of those said that they could not be named. And they were really genuinely terrified about what kind of retribution could come if it got out that they’d spoken to us about this company. But it has a voyeurs, voyeurs view at the businesses of all of its competitors, right? If you’ve got to use Ticketmaster or if you’re a venue, or you face all of these other consequences, all of these other things that you miss out on. But that gives Ticketmaster the ability to see, well, okay, so which other acts that you are hosting are doing well, who are the artists that look like based on the ticket sales, they’re about to break out, and maybe Ticketmaster, Live Nation can jump in with its promotion and management business and snag up those acts. Now, even though they didn’t do the early investment, they can just sneak in and grab them now that they’re about to start making lots of money. And, you know, all kinds of other, you know, extraordinary advantages this gives them and we’re really seeing this play out at the moment with anyone who’s listening. Is there is there much crossover? Do you think Gene in the economics explained audience and the people who are big fans of Taylor Swift, and been waiting in a queue for days in order to get tickets to her concert? You have

Gene Tunny  13:47

Look, I have no idea. I mean, I quite like Taylor Swift. I wouldn’t line up for days to get tickets. But yeah, who knows? Tell me more.

Rebecca Giblin  13:55

Look, the Department of Justice is investigating again, they did do an investigation a couple of years ago that we talked about in the book, where a bunch of venues who all had to be assured of anonymity in order to speak, we’re talking about Live Nation’s mob tactics and ways in which it was using its power to crush other people’s businesses. It got a fine that was just really a slap on the wrist and told really sternly not to do it again. But in this kind of context of fine is a price. The Live Nation is quite happy to pay that kind of fine in, you know, in order to get to continue its predatory behaviour. It will only be stopped if there is sort of meaningful enforcement. And the DOJ hadn’t done anything since until this Taylor Swift controversy came up. And and and we are seeing now there’s going to be another investigation. So hopefully, there’ll be some kind of more meaningful enforcement here and what we really need to see is Ticket Master broken up. That’s one of the main domain remedies were there. antitrust breaches. You can have structural remedies, which is where you break a company up or conduct remedies, which is where you sort of get them to pinky swear they won’t do anything bad. Now, unfortunately, those remedies are not particularly easy to enforce. Right. It took literally decades to break up AT&T In the United States. I was it was a Bell. I think it was Bell before it became AT&T. So there’s so many, the Bell System we concentrated. Yeah, concentrated firms the sometimes I get mixed up. And it can be incredibly expensive and lasts for decades to take these actions and we don’t have decades. And the other problem with those antitrust remedies or competition law remedies is that they work even less well when you’re dealing with monopsony rather than monopoly for various reasons. And so what we argue for in the book is remedies that we know do work in response to monopsony power. And that’s things like encouraging new entrants into the market, directly regulating excessive buyer power by limiting what they can do and by taking measures to build countervailing power in workers and suppliers.

Gene Tunny  16:21

Okay, well, I want to come back to that that point about the monopsony you said, it’s harder for antitrust act on monopsony if you meant I think you said that I’d be interested in that if you can explain why or, and also the, I guess, I’d like to ask about, I mean, is this really so bad? I mean, you mentioned that it’s, it’s captured creative labour markets. I mean, okay, I’m, I’m against a lot of the surveillance capitalism. And I think you know, where to the extent there are choke points, and they’re really bad business practices, or they’re they are, they’re relying on some. Yeah, I guess it’s IP, they’re relying on these relationships they have and they’re, they’re preventing competition from, from coming into the market. Yeah, I can see the problem with Ticketmaster. At the same time, I mean, I think a lot of these platforms have enabled a lot of people to make a living out of content creation, haven’t they? I mean, if you look at YouTube, and you look at all the podcasting platforms, I mean, there are many more people that are able to, you know, quit their jobs and become full time content creators, aren’t there. So, I mean, is there a risk that we, we, we undermine this system that has actually created a lot of benefits? I mean, how do you see it, Rebecca?

Rebecca Giblin  17:48

Let me answer that second part. The second part first, I think we are constantly being sold the idea that we can’t have the good things without the bad things, right. So Amazon is constantly telling us that we can’t have a good search engine without surveillance. But we can have a great search engine without surveillance. Google didn’t surveil us for the first several years of its existence, right. And it was a terrific search engine. We, with the access to digital technologies and the Internet, we absolutely can have global virtually instantaneous gloop at virtually costless, like zero marginal cost of distribution, supply of many kinds of creative work. So we’ve got this potential for the good things anyway, what we don’t have to have is the bad parts, the lock ins, right, these strategies that are used to create these hourglass shaped markets, so that you’ve got audiences at one end, and creators, the other and these predatory companies squatting at the NEC, were they using that power that they’ve artificially created by locking everybody in to extract more than their fair share? So that’s what I say in response to that. And getting, I’m so glad you asked me more about monopsony. Most people run away screaming from that pot. So some of the reasons suddenly tell you a couple of things about it. One reason why monopsony is so dangerous is that it accrues at far lower market concentrations than monopoly power does. So you know, when monopsony when when when a buyer controls even eight or 10% of the market, that already gives it quite outsized power over its suppliers. And that says that’s assuming that there’s no alternative buyer for that. And we saw that when Amazon started out one of its one of its as soon as it got power over the physical book market. It started exerting that to try and squeeze margin out of everybody else. And, you know, this is a famous Bezos aphorism. Your margin is my opportunity. He’s very clear about what he’s trying to do. But sometimes when you look at how the sausage gets made, it can be a little bit frightening. They created something called the gazelle project, which is exactly what it sounds like the way that a cheetah cuts out the weakest Gazelle from the herd, they went after the smaller and more vulnerable publishers to squeeze margin from them. One of them was Melville House, who lots of people have read books from. And the publisher they resisted, he said, look, if you I cannot, we cannot afford to give you what you’re asking for our business won’t be sustainable on that basis, we just won’t do it. And Amazon instantly retaliated by removing the buy buttons for all the Melville House books on its platform. Okay and now at that, at that time, I think Amazon only controlled about 8% of the market for those books. But nonetheless, Melville House was forced to instantly get virtually instantly given because without that, that eight or 10% of sales, it was just no longer sustainable. And so if you look at how much power Amazon had, when it had such a small market share relative to what it has got now, you can see how dangerous that’s become. And then if we look at other industries, in so many of them, you’ve only got, you know, one or two or three buyers that are available. And coincidentally, they often seem to have very, very similar policies and very, very similar abuses. And this is what this is what puts them in that position where they can extract so much from the people that they’re dealing with. Yeah, the other. The other thing about monopsony that I think is relevant here to why the remedies are not particularly effective, is that there’s real concern that when you regulate a powerful buyer, that maybe the reason why it’s so powerful is because it’s very efficient. And this is what Amazon argues it argues that it has this highly efficient structure, that it has these lower costs, which leads to attracts customers, which then attracts suppliers. And then there’s a better customer experience, which brings more in and sort of feeds this loop which Amazon calls its virtuous cycle, right. But what we see when we look at Amazon, and my co author, Cory Doctorow just did a terrific thread, or blog post on his pluralistic website about this a day or two ago, is Amazon increasingly is a shitty place to buy from, because most of it has been taken up by advertising. People, people know that Google and Facebook have big online advertising businesses, but not many people know that Amazon is a close third now. It shakes down the people that sell on it. For placement fees, and for the right to be shown first and for the right to be earlier in the search listings. And that means that you know, rather than getting the best search experience, the best customer experience, you’re just being inundated with ads all the time. They’re making billions upon billions of dollars from this. So the evidence is that in practice, it’s probably not from efficiency, but regulators are concerned that they might not be able to tell the difference. And that makes them hesitant, even more hesitant to intervene in cases of monopsony than monopoly.

Gene Tunny  23:24

And Rebecca, how do you respond to the argument that these companies are simply being rewarded for the innovation, they’re being compensated for the innovation, that they’ve undertaken to deliver new services to consumers, because a lot of these platforms are delivering value or consumer surplus to a lot of consumers. And, you know, providing opportunities for content creators. I’m just wondering how you respond to that argument, because as economists, I mean, we’re very much a lot of economists are sympathetic to that Schumpeterian idea of creative destruction, that wherever there are these, you know, the opportunities for profits that encourages innovation. And I mean, who knows? I mean, will these companies survive? Or will there be new innovative innovators who take over?

Rebecca Giblin  24:10

Let’s see, that’s the thing. This is another thing that we’re constantly being sold this idea, but look at Google, how much innovation does it actually manage? Alright, it made a great search engine, and a pretty good Hotmail clone, right? And nearly everything else that it’s ever provided that’s had any kind of success. It’s bought from other people who did actually innovate with its monopoly profits that it’s making on from these choke points. Right. And so, you know, Google tried really hard, and we talked about it in the book to create a Google video service, right? Absolutely failed with all of its resources and all of its smart people it could not, it’s almost ludicrous, how hard and how many ways it failed on that. And so it had to buy YouTube, right, which scrappy people above a pizza shop where they were actually doing innovation. And we see this time and time and time again, you know Facebook came to control the messaging market, and to control the way you communicate with your community and your family and your friends, not by innovating and creating the products that we want. But by buying up what’s happened Instagram for billions of dollars each when they had, you know, virtually no employees, because these tiny companies were the ones who actually doing the innovation, okay, so we don’t need not only do we not need these, these massive companies in their massive war chest to be innovating, they’re actually getting in the way of other people innovating. Because everybody knows what happens if you get in the kill zone, right? So it’s a risk, you either get bought up. And that’s like, that’s what many, many people are aiming to do. If they’re trying to innovate in this area, they know that the only exit is to get acquired by these companies, or crushed by them. And so it’s called the kill zone. And if you and venture capitalists know, we know that there is less VC investment in territories that are controlled by big tech and other powerful corporations, because of these kill zones. So Amazon, for example, burned, I think it was 200 million US dollars in a single month, undercutting and going directly up against diapers.com, in order to control the nappy market in the US. And that’s an extraordinary amount of money drove this innovative competitor absolutely under because it had access to these, these war chests from its monopoly profits and access to capital markets that this scrappy little innovator didn’t have. Now $200 million in a month to control the diaper market might sound like a lot of money. But it’s actually incredible value, because it didn’t just get rid of diapers.com it sent an incredibly clear signal to anyone else that was thinking of entering any space that Amazon has marked that you will be absolutely burnt out if you even attempt it.

Gene Tunny  27:04

Yeah, it’s a real gangster move, as they’d say, isn’t it? I mean, really?

Rebecca Giblin  27:08

Yeah, they would say no, no, it’s just it’s just it’s good, hard. It’s good fair competition. But it’s not is it? Right. And all of that. There’s extensive research on this, we see that there’s less investment, less innovation in areas where you’ve got choke points.

Gene Tunny  27:26

Okay. Rebecca, I think I should have booked you for longer. There’s been fascinating, and I’m enjoying the conversation. But yes, if, if there’s anything else? Yeah, I’d love to if you had any final points, you know, feel free to make them otherwise. We might have to, we can wrap up. And yeah, I’ll, I’ll try and connect with you sometime in the future. Because I’m sure there’ll be a lot of discussion about your book and this debate will continue on into the future.

Rebecca Giblin  27:55

Yeah, I guess the final thing I would say just to sort of sum up the ultimate message is that you know, creators, but also the rest of us are getting choked, that we’re sharing less and less than the value that’s that’s created by our work. And that’s happening because we’ve got these increasingly powerful corporations, creating choke points that allow them to extract more than their fair share. But we don’t have to put up with it. There’s lots of things that we can do to widen these choke points out once we see them for what they are.

Gene Tunny  28:25

Okay. Rebecca Giblin. Thanks so much for your time. I really enjoyed the conversation. Thank you so much.

Female speaker  28:33

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Gene Tunny  29:03

Okay, I hope you enjoyed that conversation I had with Rebecca. Overall, I think Choke Point Capitalism is a book worth reading, although I disagree with some of its assertions. Regrettably, I didn’t book Rebecca Long enough to ask her all the questions that occurred to me from reading the book, so I’ll aim to get her back on the show next year for another conversation. The book includes many compelling examples of dubious business practices by big companies. So I must admit I am somewhat sympathetic to the choke point capitalism thesis. And if you’re a regular listener, you will know that I’ve covered surveillance capitalism and problems with big tech in the past. There does appear to be scope for some antitrust action against some of the badly behaved big tech companies for sure. That said, one reservation that I have about the book is that it appears to have a wider ambition than simply acting against the market abuses of big tech. In parts, it reads like a polemic against capitalism in general. For instance, the book concludes, we’ve organised our societies to make rich people richer at everyone else’s expense. I think that sweeping statement goes too far. Like some other popular economics books I’ve read in recent years, choke point capitalism adopts to negative view of our economic system. Capitalism, after all, has lifted hundreds of millions of people out of extreme poverty in recent decades. And it has fostered a bewildering array of innovative new services that have benefited billions of people. And we still have progressive tax systems in which the wealthy generally pay much more tax than the less wealthy. Of course, many wealthy people avoid paying tax I know. But I think it’s broadly true that we still have a highly progressive tax system, at least in Australia and European countries, possibly less so in the US. Okay. Despite some reservations, I’d still recommend the book for its vivid examples of so called choke point capitalism. The book makes a useful and stimulating contribution to the important debate over the regulation of big tech. So I’ve included a link to the Amazon page for the book in the show notes, so please consider buying a copy. Thank you. Okay, that’s the end of this episode of Economics Explored. I hope you enjoyed it. If so, please tell your family and friends and leave a comment or give us a rating on your podcast app. If you have any comments, questions, suggestions, you can feel free to send them to contact@economicsexplored.com And we’ll aim to address them in a future episode. Thanks for listening. Until next week, goodbye.

Thanks to Josh Crotts for mixing the episode and to the show’s sponsor, Gene’s consultancy business www.adepteconomics.com.au

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