[e-cvs] cvs commit: e/doc/talks/pisa/paper index.html
markm@eros.cs.jhu.edu
markm@eros.cs.jhu.edu
Thu, 27 Dec 2001 04:02:07 -0500
markm 01/12/27 04:02:07
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remove. This thought experiment led directly to seminal work responsible
for much of the modern world of interactive systems that we now take for
granted.</p>
+ <p align="center"><i>It is easy to turn an aquarium into fish soup,<br>
+ but not so easy to turn fish soup back into an aquarium.</i></p>
+ <p align="right"><i>--Lech Walesa </i></p>
<p>The 20th century performed a similar experiment on a grand scale, tying
large bricks to large societies with the best of intentions, but with
vastly tragic consequences. Only by learning from this experiment may
@@ -227,8 +230,7 @@
13 years olds easily compromise hundreds of fatally gullible computers
used by others -- may not be stable, once knowledge of an alternative
becomes widespread.)</p>
- <h3><b><img src="images/3-hubs.gif" width="347" height="212" align="right"></b><a name="nohubs"></a>The
- Brick of Missing Hubs</h3>
+ <h3><a name="nohubs"></a>The Brick of Missing Hubs</h3>
<p>So many bricks have been removed, how can third world poverty remain
as persistently intractable as ever? Free speech is not enough. The end
of Communism is not enough. The universal desire for capitalism has proven
@@ -236,37 +238,40 @@
when the Berlin Wall fell, was that, once government was out of the way,
the market would bloom and take care of the people. This has proven tragically
wrong. What else is missing, what other bricks must be removed?</p>
- <p>It seems clear that another brick is the one that distinguishes low-trust
- from high-trust societies [<a href="#Fukuyama95">Fukuyama95</a>]. Trust
- relationships directly impact what types of business relationships are
- possible. Fukuyama makes many highly perceptive observations about different
- <i>cultural</i> attitudes and proclivities towards trust, and shows how
- these differences seem to explain some of the observed differences in
- the patterns of businesses that arise in these cultures.</p>
- <p>To understand how first world societies can function requires something
- more than Fukuyama's analysis. After all, in the first world strangers
- can meet, trade, do business, negotiate and sign contracts, despite lack
- of any prior knowledge of each other. How is this possible?</p>
+ <p>Another important brick is the one that distinguishes low-trust from
+ high-trust societies [<a href="#Fukuyama95">Fukuyama95</a>]. Complex cooperative
+ arrangements require trust. The kinds of trust relationships that are
+ possible directly impact what types of business arrangements are possible.
+ Fukuyama makes many highly perceptive observations about different <i>cultural</i>
+ attitudes and proclivities towards trust, and shows how these differences
+ seem to explain some of the observed differences in the patterns of businesses
+ that arise in these cultures.</p>
+ <p>But to understand how first world societies can successfully function
+ requires something missing from Fukuyama's analysis. After all, in the
+ first world massive numbers of strangers meet, trade, do business, negotiate
+ and sign contracts, despite lack of any prior knowledge of, or reasons
+ to trust in, each other. How is this possible?</p>
<p></p>
<p>De Soto's earlier book, <i>The Other Path</i> [<a href="#deSoto89">deSoto89</a>],
tells a complementary story. De Soto can also be understood as explaining
- differences in economic organization according to differences in the ability
- to engage in economic activities that require trust. However, de Soto's
- emphasis is not culture but institutions, or their lack. De Soto's portrayal
- of the poor of the third world is not one of culturally-based low trust.
- Rather, it is the painful lack of the various widely trusted intermediate
- institutions (or WTIIs) that catalyze commerce at a distance in the first
- world, and that we normally take for granted.</p>
- <p>Trust relationships can be thought of as analogous to the airport hub
- and spoke pattern (Figure 3). Many small local networks are interconnected
- on a wider scale through major hubs. Although this pattern is a partial
- centralization, it is not a hierarchy -- there is, for example, no central
- hub of hubs. Logically, it is peer to peer, but it is built with a backbone
- architecture due to the economics of the system. The Net itself has mostly
- the same architecture, as does the highway system. In all cases, a sparsely
- connected actual network acts for most purposes like a densely connected
- network. From any airport you can fly to any other airport, almost as
- if there were flights between every pair of airports.</p>
+ differences in economic organization according to differences in the possibilities
+ for trust. However, de Soto's emphasis is not culture but institutions,
+ and their lack. De Soto's portrayal of the poor within a the third world
+ village is not one of culturally-based low trust. Rather, it is the painful
+ lack of the various widely trusted intermediate institutions (or WTIIs)
+ that catalyze commerce at a distance in the first world, and that we normally
+ take for granted.</p>
+ <p><b><img src="images/3-hubs.gif" width="347" height="212" align="right"></b>Trust
+ relationships can be thought of as analogous to the airport hub and spoke
+ pattern. (Figure 3). Many small local networks are interconnected on a
+ wider scale through major hubs. Although this pattern is a partial centralization,
+ it is not a hierarchy -- there is, for example, no central hub of hubs.
+ Logically, it is peer to peer, but it is built with a backbone architecture
+ due to the economics of the system. The Net itself has mostly the same
+ architecture, as does the highway system. In all cases, a sparsely connected
+ actual network acts for most purposes like a densely connected network.
+ From any airport you can fly to any other airport, almost as if there
+ were flights between every pair of airports.</p>
<p>Similarly, in the first world, two strangers can meet and conduct business
as if they had prior knowledge of and trust in each other, by virtue of
their reliance on a mutually recognizing backbone of WTIIs. These WTIIs
@@ -285,32 +290,46 @@
escrow, exchanges and auction houses, underwriters, Consumer Reports,
Roger Ebert, courts and police, etc... The list is endless. </p>
<p><img src="images/4-low-trust.gif" width="350" height="218" align="right">From
- a simple graph-theoretic point of view, we can analyze the Fukiyama low-trust
- world (in which the fanout from each node is small) and the de Soto missing-WTII
- world (in which the hubs are absent), and immediately recognize which
- one has the greater impact on a society's effectiveness: it is the absence
- of the WTIIs that ultimately prevent society-wide trust relationships
- from forming. No matter what the culture, cognitive limitations prevent
- each of us from even knowing about, much less trusting, most of the members
- of our society. Even with high cultural proclivity for individual-to-individual
+ a simple graph-theoretic point of view [<a href="#Granovetter73">Granovetter73</a>],
+ we can analyze the Fukiyama low-trust world (in which the fanout from
+ each node is small) and the de Soto missing-WTII world (in which the hubs
+ are absent), and immediately recognize which brick has the greater impact
+ on a society's effectiveness: it is the absence of the WTIIs that ultimately
+ prevent society-wide trust relationships from forming. No matter what
+ the culture, cognitive limitations prevent each of us from even knowing
+ about, much less trusting, more than a tiny fraction of the members of
+ our society. Even with high cultural proclivity for individual-to-individual
trust, in the absence of hubs, the resulting virtual network would at
best form small islands of densely connected networks, only loosely connected
- to each other. This resembles both Fukuyama's picture of familial trust
- societies, and de Soto's picture of the networks of villages of informals.</p>
- <p>But shouldn't this be an ideal growth medium for WTIIs? Indeed, this
- is the medium in which the WTII backbone spontaneously grew in the west.
- Absent government oppression we should indeed expect it to grow here.
- However, Western-style WTII infrastructures are the result of slow growth
- processes; they build slowly over time. These WTII institutions can be
- seen as a form of capital that takes a long time to accumulate. One of
- the depressing features of the pictures painted by both Fukiyama and de
- Soto is that the only hope they see for these societies is home-grown,
+ to each other. The resulting picture resembles both Fukuyama's portrayal
+ of familial trust societies, and de Soto's portrayal of networks of villages
+ of informals.</p>
+ <p align="center"><i>The division of labor is limited by the extent of the
+ market.</i></p>
+ <p align="right"><i>--Adam Smith </i></p>
+ <p>The virtual network of Figure 3 forms one large market with great extent,
+ enabling a great division of knowledge and labor. The virtual network
+ of Figure 4 is one of many separate markets, barely connected to each
+ other, and each individually of minor extent.</p>
+ <p>But shouldn't this situation be an ideal growth medium for WTIIs? If
+ there is great market need for them, then surely there is great demand
+ and great opportunity. Indeed, this is the situation from which the WTII
+ backbone grew spontaneously in the west. Absent government oppression
+ we should indeed expect it to grow here as well. However, Western-style
+ WTII infrastructures are the result of slow growth processes; they build
+ slowly over time. These widespread trust needed by these institutions
+ can be seen as a form of capital that takes a long time to accumulate.
+ </p>
+ <p>One of the depressing features of the pictures painted by both Fukiyama
+ and de Soto is that the only hope they see for these societies is home-grown,
with each individual third world nation bootstrapping itself through all
- these steps, including the evolution of their own WTIIs. Well, it took
- a long time for us to do it. If they must do it on their own, it will
- take them a long time, a time during which desperate poverty will remorselessly
- prevail. What enablers are available now that were unavailable when the
- west made this transition? Might these be used to help accelerate them
+ these steps, including the evolution of their own WTIIs; or the reform
+ and transformation of each society's national government into a system
+ of widely trusted institutions. Well, it took a long time for the west.
+ If they must recapitulate our path, it will take them a long time as well,
+ a time during which desperate poverty will remorselessly prevail. What
+ enablers are available now that were unavailable when the west made this
+ transition? Might these enablers be used to help accelerate today's poor
through this part of the process of capital formation?</p>
<h3><a name="title"></a>The Special Role of Title</h3>
<p>In <i>The Other Path</i>, de Soto explained the informal economy and
@@ -389,7 +408,7 @@
<h3><a name="bootstrapping"></a>The Digital Path</h3>
<p align="center"><i>National borders aren't even speed bumps on the information
superhighway.</i></p>
- <p align="right"><i>--Tim May</i></p>
+ <p align="right"><i>--Tim May </i></p>
<p>Can we sidestep this brutally painful process? Perhaps eventually with
the Net. </p>
<p><font color="#000000"><img src="images/5-bootstrap.gif" width="366" height="214" align="right">For
@@ -424,7 +443,7 @@
behavior the visibility it needs to more rapidly accumulate its own reputation-capital.
</font></p>
<h3><font color="#000000"><a name="smart-contracts"></a>Smart Contracts</font></h3>
- <p>How would such WTIIs deal with the idiosyncracies of local village tradition,
+ <p>How might such WTIIs deal with the idiosyncracies of local village tradition,
the idiosyncracies that sabotage traditional governmental attempts to
capitalize village assets? By the use of smart contracts.</p>
<p><font color="#000000">In smart contracts, the program code is an operational