tag:blogger.com,1999:blog-14654683482534015302024-02-19T01:51:11.448-08:00volle.com in EnglishEnglish version of <a href="http://michelvolle.blogspot.com/">volle.com</a> (in progress). Copyright under <a href="http://www.gnu.org/licenses/quick-guide-gplv3.fr.html">GNU GPLv3 License</a>.Michel Vollehttp://www.blogger.com/profile/02758819892464278158noreply@blogger.comBlogger31125tag:blogger.com,1999:blog-1465468348253401530.post-44661326687194381612015-12-11T07:01:00.004-08:002015-12-17T03:01:48.763-08:00Informatization and iconomy(This is the text of my conference at the <a href="http://www.mirlabs.net/wict15/" target="_blank">5th World Congress on Information and Communication Technologies</a>, December 14-16, 2015, Marrakesh, Morocco)<br />
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<a href="http://michelvolle.blogspot.fr/2015/12/informatisation-et-iconomie.html" target="_blank">Texte en français</a><br />
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We would like to propose here an explanation of the current economic crisis, of slowing growth and of the unemployment that hit several countries. Our thesis is based on the one Bertrand Gille offered in its <i>Histoire des Techniques</i>, published by Gallimard in the collection “La Pléïade” in 1978.<br />
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Bertrand Gille proposes to cut the history into several periods, each period being characterized by a <i>technical system</i>, the synergy of a small number of fundamental techniques. <br />
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From the Paleolithic, humans were indeed able to develop tools to complement the work of their hands, and since then many technical systems have succeeded.<br />
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Consider the last four technical systems: the agricultural system of the feudal regime gave way, from 1775, to the "modern technical system" that relies on the synergy of mechanics and chemistry. Around 1875 these two techniques were supplemented by the control of electrical energy, as well as the control of oil, creating the "modern developed technical system" whose the great firms are the most illustrative creatures. The electric motor was invented by Gramme in 1873, electric lighting by Edison in 1879, the internal combustion engine by Otto in 1884.<br />
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The "contemporary technical system" arises around 1975. It is based on an entirely new synergy: that of microelectronics, software and the Internet. The informatization of business is organized around an information system in the 1970s, the microcomputer is spreading in the 1980s, the Internet and mobile phone in the 1990s, the "smart" phone (which is in fact a mobile computer) in the 2000s. In factories, the robotics automates the repetitive tasks that were previously entrusted to the workforce.<br />
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The next steps are already underway with the synergy of mobile broadband, cloud computing and the Internet of Things; the human body is informatized with the mobile computer, implants and prosthetics; various tools (3D printer, scanner, etc.) are used to move from the virtual world to the real world and vice versa.<br />
<a name='more'></a><br />
<div align="center">* *</div><br />
Each of these passages of a technical system to another was named "industrial revolution": thus we have experienced since 1975 the "third industrial revolution", that of informatization.<br />
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Mechanics, chemistry and energy are obviously not eliminated by informatization, just as agriculture has not been replaced by the modern technical system: it was mechanized (and one can say “chemistrized”) with the development of agricultural machinery and fertilizers. The share of agriculture in employment fell sharply in France: it was 66% in 1800, 3% in 2000.<br />
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Similarly, informatization does not remove mechanics, chemistry and energy; <i>they are informatized</i>, and their relative importance in employment is reduced.<br />
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Each industrial revolution has given rise to a new society, each has had profound anthropological consequences: in the nineteenth century, the modern technical system has created the working class, capitalism, urbanization; industrialized nations entered into competition for the control of markets and raw materials, they competed to build empires and this has caused wars: those of the Revolution and the Napoleonic Empire after the first industrial revolution, the two world wars after the second industrial revolution.<br />
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The transition between two technical systems begins always with a crisis because the institutions, the organizations, the borders of social classes are shaken by the appearance of new opportunities and new dangers. <br />
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This <i>transition crisis</i> is caused by the inadequate behavior of economic actors in response to the situation that the new technical system gave rise to: the practical conditions of production and trade are indeed transformed, the change in perspective affects the psychology of people; the sociology that delimits the legitimate powers in the institutions is itself transformed, representations and techniques of thought must take into account the new nature which confronts the action. It is as if human beings arrived on a continent where they face plants which they don't know if they are food or poison, to strange animals, to an unknown geography.<br />
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Each transition crisis creates an episode of disarray. The ruling class is disoriented, strategic decisions are disorderly, companies that seemed powerful are successfully challenged by smaller companies that are more responsive and able to take advantage of new opportunities. The opinion turns against the leaders, who are judged incapable of understanding the world in which the society is immersed. Laws and regulations that were adapted to the old world, and had been developed after a patient arbitrage between various particular interests, are considered obsolete but one doesn't know by which laws, by which regulations we can replace them. The principles to which the regulators are attached become obsolete or even counterproductive.<br />
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The disorder that has gripped the minds in France in the late eighteenth century after the first industrial revolution is one of the reasons that led to the French revolution. The institutions were discredited in the 1880s and 1890s after the second industrial revolution: the Banque de l'union générale made in 1882 a resounding bankruptcy, the president of the Republic resigned in 1887 following a corruption scandal, the Boulanger crisis began in 1889, the Panama scandal burst in 1892, the Dreyfus affair in 1894, etc. Nobody then could predict the expansion that would allow France to become, in the 1900s, a leader among the industrialized nations.<br />
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This return to the past helps us to interpret the current situation. Informatization reveals a world of entirely new techniques and methods: the transition from the modern developed technical system to the contemporary technical system is much more brutal than that of 1875, which had only added the mastery of new sources of energy to the synergy of mechanics and chemistry, because the techniques of informatization are entirely new. Many people seem to wish to return to the days of hunter-gatherers; others see salvation only in the energy transition, while it is the response to a constraint and not the conquest of new possibilities.<br />
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The confusion we see today, the discredit that strikes institutions, are explained by the brutality of this transition. Most leaders are confused, not just in France: the Volkswagen scandal, the difficulties of Siemens and of the Deutsche Bank, show that the phenomenon does not spare any country.<br />
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Furthermore predators, who do note respect any rules, have no scruple, and are constantly on the lookout, are the fastest to take advantage of new opportunities: organized crime knows how to take advantage of IT to launder profits and conquer strong positions in the legal economy. The financial system has not been able to resist the temptation to perversely use the power of computing: "production of money" to which it gives itself exercises a predation on the production system – for instance, one could say that high frequency trading is a “systemic insider trading”.<br />
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The current economic crisis can be explained not by some imbalance in the parameters of the macro economy, but by the fact that informatization has changed the nature to which human actions and intentions are facing. The mission and organization of the institutions as well as the recommendations of most economists, which were adapted to the prior technical system, are affected by obsolescence. The behavior of economic actors, be they firms, consumers or States, does not meet the requirements of the present situation, the "new nature" that informatization brings out.<br />
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<i>To get out of a crisis, you have to know where to go</i>. <br />
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The “Institut de l'iconomie” I have the honor to chair has a mission to build the model of a digital economy and a digital society that would be <i>effective</i> and in which the behavior of the economic agents would therefore be <i>reasonable</i> compared to the reality of the technical system and of the nature it brings out. We are thus committed to show the <i>necessary conditions of efficiency</i>. This model we named <i>iconomy</i>. <br />
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Iconomy is not a forecast: the necessary conditions of efficiency are not sufficient conditions and the future is essentially unpredictable. It is only to place on the horizon of intuitions a benchmark that allows to guide decisions, to unite wishes around a shared goal and to end the destructive behaviors that we see today – in particular, to contain predation.<br />
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It is the representation of an economy and a society that would by assumption emerge of the transition crisis. This is to make clear, we repeat, the conditions of efficiency: a society that does not respect them will never achieve efficiency in the Contemporary Technical System.<br />
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We now present the essential features of this iconomy, then return to the present situation in order to place it in the perspective of iconomy.<br />
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<div align="center">* *</div><br />
What are the main features of the iconomy?<br />
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First, <i>repetitive work is automated</i>, whether physical or mental work: in factories, robots perform the work which was previously executed by a workforce that was the auxiliary of machine operations: the employment of workforce has disappeared, in factories we see only maintenance crews who maintain the robots and supervisors who control their operation.<br />
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The mental tasks are also automated: for lawyers, the research in the jurisprudence is effectively replaced by robots; in architecture, the work of designers and technicians is transformed by programs that facilitate the production of plans and of the documentation. The design of industrial products is similarly accelerated by 3D modeling and simulation tools.<br />
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Industrial production being the repeated reproduction of a prototype, its marginal cost is essentially that of this repetition. If repetitive tasks are automated, if the workforce is eliminated, the cost of reproduction is reduced to the cost of raw materials that is generally low: as economists say, "the marginal cost is virtually zero".<br />
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This is the case of microprocessors and memories, this is also the case of software: once the program is written, the cost of its repetition by burning CDs, or by downloading, amounts to practically nothing. It is the same for mobile phones, tablets and computers that are built around the integrated circuits and software, and presents the user with a body and a convenient interface.<br />
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The share of IT and automation grows in automobiles, aircrafts, networks, the production and transport of electricity: we talk about "smart meters" and "smart grids". The more products are computerized, the more production is automated, the more the marginal cost is low.<br />
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The cost of the initial investment is however important. It covers the design of the product, the engineering of its production, the cost of the set up of automatons and of their programs. It also covers a business engineering which we will discuss in a moment. To put into production a new microprocessor costs of the order of ten billions, the cost of production of a new operating system is of the same order of magnitude. It is the complexity and cost of these operations of design and engineering that explain the delay that the design of a new aircraft or a new car, and then the launch of their industrial production require.<br />
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Therefore the cost function in the iconomy takes a particular form: a significant sunk cost, a practically zero marginal cost. The business risk is high: the production cost is almost entirely spent before a single copy of the product has been sold and before the initiatives of the competition are known: the iconomy is the <i>economy of maximum risk</i>.<br />
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It may be objected that many startups are launching projects whose design and engineering are inexpensive because they can implement software components that can be found for a low price on the market. This is true, and it is true that some of them are successful, but then they must move to true greatness, and this involves setting up a heavy infrastructure (think to the server farms used by companies like Google or Facebook, to Amazon's software investment, etc.). The sunk cost is important in all cases, even if the company pays it after a starting phase which is itself inexpensive.<br />
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When the cost function has this form, the average cost is a decreasing function of the quantity produced. This circumstance is one in which a <i>natural monopoly</i> could emerge: a single company, the largest, dominates the world market for each product because its production cost is lower than that of its competitors.<br />
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These competitors can however survive if they differentiate their product, if each of them produces a variety that possess attributes answering the needs of a market segment. In this case, the market obeys the regime of <i>monopolistic competition</i>. For this to happen it is only necessary that the product can diversify to meet a variety of needs. This is already the case for books, music, clothing, automobiles, etc. In iconomy, this market regime extends to all products with the exception of those who, like crude copper ingots, do not lend themselves to diversification. Hence <i>the monopolistic competition is the market regime of the iconomy</i>. <br />
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This scheme differs of course from that of <i>perfect competition</i>, which remains the reference of economists and whose consequence is marginal cost pricing: this pricing would be evidently absurd when the marginal cost is zero because it does not compensate for the sunk cost. Iconomy requires that the firm sells to the average cost of production augmented by a premium that compensates the risk it took. The firm's strategy will be to gain a monopoly on a market segment, and the regulator must ensure that this monopoly is temporary: the period must be long enough for the company to make a profit that rewards its effort, but not too long because it would rest on its laurels. The art of the regulator in the iconomy is therefore to set the duration of the monopoly so that the engine of innovation is in full swing.<br />
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Diversification of a product is designed to provide each customer segment with the "quality" that suits him. We must distinguish the "vertical quality", which is characterized by the degree of finish, and the "horizontal quality" which is characterized by the diversity of parameters of products with the same finish (color of shirts, size of pants, etc.). The customer will choose based on price / quality ratios, the evaluation of quality being subjective: he looks for "what is right to me." The iconomy is an <i>economy of quality</i>.<br />
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Seeking a monopoly position in a segment of needs prompts the firm to introduce in its product services that reinforce the satisfaction of the user: pre-sale consulting, financing of a loan, rent, periodic maintenance, repairs, replacing the product at the end of its life, recycling whatever the product contains, etc. The informatization and the Internet of Things have indeed facilitated the production of such services, so much so that in iconomy any product is a <i>package of goods and services</i> whose cohesion is ensured by the information system.<br />
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We said that iconomy is the economy of maximum risk: in order to reduce the risk, the firm will build a network of partners that share the production process. The information system must ensure the interoperability of partners throughout the production process, and must further ensure the transparency of the partnership, each partner being able to verify that the sharing of expenses and revenues is in accordance with the original contract.<br />
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We summarize : in iconomy, each product is a package of goods and services developed by a partnership. The information system is the backbone of the firm: it automatizes repetitive work and ensures the cohesion of goods and services as well as interoperability and transparency of partnership. <br />
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Employment lies mainly in the design of products and the engineering of their production, as well as in the services the product includes: the workforce has been replaced by a <i>brainforce</i>. While mechanized economy did not take advantage of the brain of the workforce, which was the auxiliary of the machine and was simply asked to learn a gesture, then repeat it reflexively, informatized economy requires the brain to work in order to demonstrate initiative, responsibility, creativity, judgment: the iconomy is <i>an economy of competence</i>.<br />
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This is obvious for the jobs dedicated to the product design and the organization of production, it is also obvious for service jobs. They are too often believed to require only low skills (and deserve a small salary), but this is completely false: people who work in services must know how to interpret what the client says, they have to react wisely to unexpected events and they need a high relational know-how.<br />
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The firm can not behave whith the brainforce like it behaved with the workforce; it must delegate to operatives a legitimacy proportionate to the responsibilities it assigns, and thus give them a right to error and the right to be heard; it is necessary that the agents who have something to say to their firm - a new idea, an observation of what is happening on the market - can be heard. The hierarchical relationship, which sanctified the command function, is then replaced by a "<i>trade of consideration</i>" that also applies to the relations between the various specialties within the firm, between the firm and its clients, between the firm and its partners.<br />
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The secret of the effectiveness of the firm is then the quality of the relationship between the brainforce and a computer resource consisting of programs and documents. Informatization brings out a new being in the world of nature, the alloy of the human brain and the programmable automaton, which like other alloys has properties that have none of its two components.<br />
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Besides automating repetitive tasks, the computer performs some of the tasks that were formerly attributed to magic: through its peripheral equipment, it commands the things through words that are written in programs which are run at high speed, and that makes real previously impossible actions. The automatic pilot of a plane keeps it at length in the position that allows to save fuel, an unstable position that a human pilot could maintain for only a few seconds.<br />
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<div align="center">* *</div><br />
We characterized the iconomy as the <i>economy of maximum risk</i>, the <i>economy of quality</i> and the <i>economy of competence</i>. We said that the secret of his effectiveness was the correct articulation of the couple, the alloy formed by the human brain and the computing resource: the successful informatization of an institution, a firm, <i>is an art</i> that requires mastering technical, psychological, sociological and even philosophical dimensions: informatization enriches indeed the techniques of thought.<br />
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These results usefully illuminate the present situation. For us to get out of the crisis requires that the behavior of consumers, firms and the State comply with the requirements of the new nature that informatization brings out.<br />
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This requires that the discernment of the consumer is oriented by the search for the best “subjective quality / price” ratio, and not only by the search for the lowest price: this results in a better management of his budget. <br />
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We need the business strategy to be guided by the prospect of iconomy, the goal of the firms being the conquest of a temporary monopoly on a segment of needs in the global market.<br />
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The State must give priority to the reasonable informatization of the big systems of the nation (health, education, justice, defense, etc.) and encourage the firms to move towards the iconomy. This assumes that the reference model for the regulators is monopolistic competition and not perfect competition and pricing at marginal cost.<br />
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We need the public to understand that the essential phenomenon lies in the informatization of the productive system, not in the use of "smart" phones, social networks, etc. on which the attention focuses: informatization is not limited to the "digital" layer of applications.<br />
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The intelligence is not in computers but in the minds of programmers and users. There is no such thing as “artificial intelligence”: there is only a natural intelligence.<br />
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One should not be deceived about the risks: the main danger is not that "too much information kills information" (that was already the case with the books!), nor that "automation kills jobs". To the economy of competence corresponds full employment in a middle-class society - but it is true that this requires a transformation of the education system.<br />
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The main danger is the threat of a return to feudalism because predation, relying on the power brought by information technology, might kill the rule of law and democracy.Michel Vollehttp://www.blogger.com/profile/02758819892464278158noreply@blogger.com0tag:blogger.com,1999:blog-1465468348253401530.post-53772082068793097062014-10-01T01:34:00.000-07:002014-10-01T01:39:11.804-07:00Jeremy Rifkin, The Zero Marginal Cost Society, Palgrave MacMillan, 2014<a href="http://michelvolle.blogspot.fr/2014/09/jeremy-rifkin-zero-marginal-cost.html" target="_blank">French version</a><br />
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I ended up getting <i>The Zero Marginal Cost Society</i>, despite the disappointment felt after reading the previous book of Rifkin, <i>The Third Industrial Revolution</i>.<br />
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This book is built on a gross fallacy. Here's where it is expressed:<br />
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"Economists have long understood that the most efficient economy is one in which consumers pay only for the marginal cost of the goods they purchase. But if consumers pay only for the marginal cost and those costs continue to race toward zero, businesses would not be able to ensure a return on their investment and sufficient profit. That being the case, market leaders would attempt to gain market dominance to ensure a monopoly hold so they could impose prices higher than the marginal cost, thus preventing the invisible hand from hurrying the market along to the most efficient economy. This is the inherent contradiction that underlies capitalist theory and practice". <br />
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Rifkin believes, therefore, that marginal cost pricing is efficient even when this cost is zero!<br />
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But this pricing is only efficient if the market obeys the regime of perfect competition, <i>which implies that the marginal cost is not zero</i> (see <a href="http://www.volle.com/travaux/ecoiconomie.pdf" target="_blank">Eléments de théorie « iconomique »</a>): hence Rifkin's reasoning combines two assumptions that are mutually exclusive.<br />
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When the marginal cost is zero, the firm must of course cover the fixed cost of production and thus, contrary to what Rifkin says, offer an average price that is at least equal to the average cost (for example sell at first a new product at a high price, and then gradually lower the price). This is what happens when the market obeys the regime of monopolistic competition, that apparently Rifkin ignores.<br />
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The logical fallacy of his reasoning ruin his conclusion at the "end of capitalism". That capitalism disappears would be strange in an economy where the cost of production condenses into a fixed cost that is pure capital.<br />
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Rifkin had announced the "end of work" in 1997. In 2011 he located in new energy (wind turbines, solar panels, etc.) the "third industrial revolution". He continues to publish fallacies with this new book and many readers enjoy it greatly.<br />
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The media success of Rifkin is a painful sight for those who have, despite everything, some respect for the human nature.Michel Vollehttp://www.blogger.com/profile/02758819892464278158noreply@blogger.com1tag:blogger.com,1999:blog-1465468348253401530.post-25826179264164239822013-11-02T02:21:00.002-07:002013-11-02T02:41:11.109-07:00Travel in the country of Programming(In French : <a href="http://michelvolle.blogspot.fr/2013/10/voyage-au-pays-des-programmeurs.html" target="_blank">Voyage au pays des programmeurs</a>)<br><br>
I have a bad habit: when I do something, half of my attention is spend in watching the action in progress. This earned me a bad ranking on these tests which evaluates the intellect as the timeliness of responses.<br><br>
Enjoying a little free time in August, I went back to programming and it allowed me to do a few observations on myself. It is good to remember the episodes where one encounters obstacles (see <a href="http://www.volle.com/travaux/latex.htm" target="_blank">mon apprentissage de LaTeX</a>): it helps to avoid making the same mistake repeatedly.<br><br>
Experienced readers will find me ridiculous because I'm neither a professional programmer nor even a good programmer, but I don't mind. Those who believe that programming is an ancillary activity will stop reading me if they never read me, but I don't mind.<br><br>
<div align="center">* *</div><br>
I confess: I love programming. I am a clumsy, inexperienced freshman, but this experience gives me the joy of exploration. When it works, I am delighted to have been able to bend the computer to do what I wanted him to do - it's much more satisfying than using a program written by someone else.<br><br>
So I decided to <a href="http://michelvolle.blogspot.fr/2013/07/retour-la-statistique.html" target="_blank">program the methods of data analysis</a> that I taught at <a href="http://www.ensae.fr/ensae_engl/" target="_blank">ENSAE</a> during the 70s. At the time I did not know programming, so I used the programs written by others and it annoyed me. I had to take revenge on this ignorance.<br><br>
I know that there are excellent software for data analysis and that what I would do would bring nothing new, but my goal was not to launch a new product on the market.<br><br>
Here, highly condensed, the story of this adventure.<br><br>
<a name='more'></a>
<div align="center">* *</div><br>
I need algorithms to invert a matrix, extract its eigenvalues and eigenvectors, project onto a plane the image of a cloud of points immersed in a space of a few tens of dimensions, find and aggregate the points which are the closest at an ad hoc "distance" etc.<br><br>
These are math problems. I have lost the virtuosity of my twenties and would be a poor candidate for the exams, but no problem can withstand a night of sleep: solutions arrive in the morning, I just have to wait for them.<br><br>
I begin by correspondence analysis. I hastily program algorithms, fearing that they do not work. Miraculously, it works : I know how to compute the first eigenvector of a matrix of inertia.<br><br>
But I need the second eigenvector, the third, the fourth, I need even the general formula that provides the n-th. I enrich the original algorithm, whose length begins to look serious. I complete the calculation of the "factors", as they say, and that of the "interpretive aids" (those who know these things see what I mean).<br><br>
At this stage the mathematical problem is solved. I am pleased with myself, because my knowledge of the properties of factor analysis helps me to conceive formulas that would be a headache for a non-mathematician programmer. But I have not finished, far from it.<br><br>
<div align="center">* *</div><br>
I edit the factors in the first four axes. For the first axis, it goes fast. The second is slower. For the third, the computer stalled. For the fourth, several very long seconds pass between two successive displays of numbers - and there are a lot of numbers to display!<br><br>
It appears that solving the math problem is not enough because the math ignore duration: the world of thought is expressed in purely logical terms, an exact formula is exact for all eternity. But it is not the same with the processor because its performance is subject to physical constraints. Then it is not enough to be a mathematician if one wants to write an effective program: one should be also a physicist, be able to leave the world of pure thought and comply with the constraints of the natural world.<br><br>
My algorithm, I realize, calculates many times the same thing: to extract the n-th eigenvector it recalculates the first, the second, the third etc.. to the <br>(n – 1)-th. To calculate the first n eigenvectors, it must actually compute n (n + 1) / 2 of them... Horror: my algorithm is of order n<small><sup>2</sup></small>! After a night's sleep I see how to reduce that to the order n: I have simply to remove at each step from the inertia matrix the eigenvector I just calculated.<br><br>
The algorithm is now much shorter, I deleted a lot of rows. I thought to be a real programmer able to write an impressive code, and now my code is reduced to something very simple. I console myself in thinking that this simplicity is elegance. But wouldn't I have reach this result at first, if only I had been smart?<br><br>
<div align="center">* *</div><br>
It is not enough to have the results on the screen, in the lower half of the interface of Racket: I must also edit the graphic which will make visible the projection of the cloud of points on the plane that forms a pair of eigenvectors (also called "factorial axes").<br><br>
Now begins a haggard search in the documentation. If one can write algorithms using logical, understandable vocabulary and syntax, it happens that interfaces, interaction with screen and keyboard and relations between various modules obey a hodgepodge of conventions that pure logic will never guess and that must be learned by heart.<br><br>
To master the tricks and conventions of a programming language into his inner guts, one has to program full time. Whoever programs like me a few weeks a year is irretrievably a freshman and documentation considers him accordingly: it is made for professionals, busy and learned people who know how to read shorthand conventional notations.<br><br>
I am unable to understand how I could extract, surfing so many Web pages, a piece of code in which I had to introduce parameters whose format I had to look for, and that I submitted to a set of tests until I got a suitable graphic. I believe that it took me half a day but I'm afraid my memory is unfaithful: this passage in the dark lasted probably two or three days...<br><br>
<div align="center">* *</div><br>
At this point, the correspondence analysis is programmed. Then I see with horror that my haste played again a trick on me.<br><br>
The various methods of factor analysis - correspondence analysis, principal component analysis, discriminant analysis (and also spherical analysis, my little invention) - all use the same algorithms, only changing the way the cloud of points is defined. If I had thought a little, I would have first set a general factor analysis, and then call it in small individual programs specific for each of these methods.<br><br>
I am discouraged. I will have to redo everything in depth, because in the program of correspondence analysis I inextricably intertwined the notations for this method with the more general ones, which would be suitable for <i>all</i> methods ...<br><br>
<div align="center">* *</div><br>
Laurent Bloch, who is not a freshman, made on my program a profound observation. To link the program to the file that contains the data I used the notation suitable for clumping two programs. So said Laurent, I entered data into the program and this is not clean: I will have to master the syntax of "imports" and "exports".<br><br>
Besides, I have used only the interpreter. I will have to compile my program to produce an executable, and before that it will have to introduce the user interface: asking him the address of the data file he wants to "import" for analysis, the method he wants to use, the number of factorial axes to extract, the nature of "interpretive aids" he desires, what do I know! And I will also have to publish the results in a readable form: a pdf file, for example, through a layout in LaTeX. Then I must write a documentation, even if I am the only user, because I need a reminder.<br><br>
Laurent told me: the algorithmic part of the program, which is the only one who gives pleasure to a mathematician (and the only one on which textbooks abound), takes a few days; programming GUIs and dialogue with the user requests weeks or months of an ungrateful work for something that will look natural and easy...<br><br>
<div align="center">* *</div><br>
I understand why many programmers prefer to complicate the life of the user! First it is easier because the development of a convenient interface is a heavy job. Then isn't it immoral that the user does have only to settle in his chair to see everything happen "naturally", and that the programmer have to bend under the yoke of notations and conventions? Is it not necessary for the user to drool too?<br><br>
Once the strength of this temptation is measured, we admire programmers that provide convenient programs. They are heroes! But only those who have written some programs can perceive this heroism.<br><br>
That is why it is important that education does not focus solely on the use of computers: for a great artists to hatch, it takes a knowledgeable audience. We can not have good programs if we do not know enough about programming to appreciate the beautiful work.<br>Michel Vollehttp://www.blogger.com/profile/02758819892464278158noreply@blogger.com0tag:blogger.com,1999:blog-1465468348253401530.post-47540485008766740162013-08-01T02:08:00.001-07:002013-08-01T02:08:45.746-07:00The supidity of intelligenceFrench version : "<a href="http://michelvolle.blogspot.fr/2013/07/limbecillite-de-lintelligence.html" target="_blank">L'imbécillité de l'intelligence</a>"<br /><br />
<i>Le Monde</i> has published an enlightening article on the Snowden case (Aymeric Janier, "<a href=”keith-alexander-le-pacha-de-la-nsa_3447490_3222”> target=”_blank”>Keith Alexander, le « pacha » de la NSA</a>", <i>Le Monde</i>, July 15, 2013).<br /><br />
37,000 employees, a budget of about $ 10 billion, ultra-powerful computers, the ambition of "intercept everything about everything, everywhere" ... We guess in Alexander's behavior a bureaucratic delirium : who could refuse him budget and computation power after September 11 2001, which has spread this obsessive fear that is the <a href=”comment-lutter-efficacement-contre-le” target=”_blank”>victory of the terrorists</a> ?<br /><br />
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Intelligence is still based on a tradeoff between observation and interpretation - or, in its language, between collection and analysis. To collect many facts is useless if you do not know how to interpret them, and the skills which are necessary for analysis differ from those used for collecting and processing of data.<br /><br />
Computerization facilitates the collection, data computer itself provides powerful analysis tools. One is tempted to believe that the collection, equipped by statistics, may be enough to know everything.<br /><br />
Finance has been the victim of a similar illusion: while his art lies in the trade-off between risk and return, the power that computer technology brings has reduced the feeling of risk (but not the risk itself). This resulted, this will result in disasters. Similarly, the power that IT brings imbalances the trade-off between collection and analysis, but <i>to observe everything</i> is <i>to understand nothing</i>.<br /><br />
<b>To observe everything is to understand nothing</b><br /><br />
Looking at yourself, you see that your intellect is <i>necessarily</i> selective: in the complexity of the world we must choose at any time to see what is important to our action, and therefore to <i>do not see</i> the rest. A distracted driver who looks at the details of the landscape is dangerous.<br /><br />
We have to be sure that this selection is <i>relevant</i>, i. e. appropriate to our action, and we have to change it when the orientation of our action changes. The fact remains that a partial blindness is <i>necessary</i>: our intellect would be overwhelmed if we did not select the signals in our perception.<br /><br />
<b>Statistics and Economic Theory</b><br /><br />
I opened in the 70s the <a href=”http://www.volle.com/ouvrages/andon.htm” target=”_blank”>course of data analysis</a> at ENSAE (<a href=”http://www.ensae.fr/ ” target=”_blank”>Ecole nationale de la statistique et de l'administration économique</a>). Like the X-ray allows to see what is behind the opacity of the human body, the data analysis allows to see things that the mass of statistics hides. The results of the various methods are accompanied by "interpretive aids" which show in a few hours of work structures that a statistician, without these tools, could only perceive after months of work.<br /><br />
However the "interpretations" that are based solely on statistics are often wrong. Distributions and correlations that data analysis displays are <i>indices</i> that, as in a police investigation, direct towards understanding but are not sufficient to achieve it: indices can be misleading.<br /><br />
Interpretation will be always naive if the statistician ignores the treasure of past interpretations which condenses in the axioms and results of the economic theory. But the temptation is strong: Jean-Paul Benzécri argued that data analysis showed "the pure diamond of true nature." Econometricians themselves – even if their discipline is related to the theory – make sometimes the same mistake by precipitation.<br /><br />
<b>Information and Culture </b><br /><br />
This same situation arises in intelligence. Suppose that you are responsible for observing a Middle East country using all the resources of electronic espionage: you receive transcripts of phone calls, emails, Web accesses etc.<br /><br />
To interpret them you need to understand the dialects which are spoken in this country, but it is not enough. Interpretation requires also that you know its history and geography, its literature, its religions, that you are aware of the political situation, the biography of the most prominent personalities, the conflicts between them, the movement of ideas and opinions that are rooted in the past as in the present, etc.. This <i>culture</i> provides the concepts necessary to the exercise of your judgment, the <i>theoretical</i> basis of your interpretations.<br /><br />
A good analyst does not want an exhaustive observation which would be overwhelming: he is rather an actor in the dialectic between culture and observation. Culture guides the observation to the most fruitful fields; observation leads to specify, complete and sometimes modify the culture, and its most important lessons are those that contradict conceptual prejudices.<br /><br />
The acquisition of such a culture requires hard and long work, which can be bearable and fruitful only if it is driven by a passionate interest. This is among the British that one find the greatest number of people who are interested in other countries because they want to escape the narrowness of insularity: think to T.E. Lawrence, to <a href=”http://www.volle.com/lectures/blanch.htm” target=”_blank”>Leslie Blanch</a>, to <a href=”fawn-brodie-un-diable-dhomme-libella” target=”_blank”>Richard Burton</a>, etc.<br /><br />
But such characters are rare in the United States because Americans, believing to live in the best country of the world, have not as much as the British the need to immerse themselves in another culture. Assuming there is nevertheless one of these characters at the NSA, he can not uphold his needs in a bureaucracy that thinks only of collecting more and more observations, of accumulating more and more computing power and algorithms. More than moral indignation, the absurdity of this situation will push him to leave: it is perhaps what happened to Snowden.<br /><br />
<div align="center">* *</div>
In intelligence, as in finance, excessive confidence in computing power is accompanied by a contempt for common sense: while bad professionals drive out good professionals, delirium sets in more easily when the activity is protected by secrecy and out of control.<br /><br />
The main threat is not that everyone is naked in front of intelligence services: this was already the case under Napoleon. It is that this machine, launched like a hammer without master, begins to hit indiscriminately and make us fall, at the world level, in a new version of McCarthyism.<br /><br />Michel Vollehttp://www.blogger.com/profile/02758819892464278158noreply@blogger.com0tag:blogger.com,1999:blog-1465468348253401530.post-81992411368097015212013-06-11T02:39:00.000-07:002013-06-11T09:50:54.195-07:00Checklist of the information system <p>French version : <a href="http://www.volle.com/travaux/checklistsi.htm" target="_blank">Check-list du système d'information</a></p>
<p>To troubleshoot an engine one must seek first the most frequent failures, then move gradually towards the rarest (first ignition, then the air filter and fuel supply, then the carburetor, etc.). This allows on average to troubleshoot faster.</p>
<p>The "checklist of the information system" allows us to assess the quality of an existing system and prescribe the measures that will "help out". It begins by examining what happens on the workstation of the users, then it jumps to the other end of the information system to review the decision support system. Having taken the SI in a pincer, it moves on its architecture (organization of responsibilities, semantics). Finally, it considers the control of the information system from the point of view of the functional evolution, the technical platform and the economy.</p>
<p><b>1) Workstation</b></p>
<p><b><i>Operational information system </i></b></p>
<p>Have agents often to do manual re-keying? should they, in the same operation, connect and disconnect for various applications?</p>
<p>Are clearances clearly defined? Are the access rights of each agent automatically assigned when he identifies and authenticates its identification? must the agent identify several times in a day?</p>
<p>Is impression management effective? Are the mails sent by the company of good quality?</p>
<p>Are the agents adequately supported by the information system in the performance of their duties?</p>
<p>Does the company perform a periodic survey on the satisfaction of the users of the information system? Are decisions taken following the results of this survey?</p>
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<p>What are the phrases we hear from users about the information system? are they like:<ul>
<li>"IT is still down" </li>
<li>"I don't know how to use this application" </li>
<li>"It changes all the time, it's too complicated" </li>
<li>"the organization is nonsense" etc.</li></ul></p>
<p>or like this: <ul>
<li>"We know what we have to do"</li>
<li>"We are well equipped"</li>
<li>"Everything is well organized" </li>
<li>"The firm is effective" etc.</li> </ul></p>
<p>Do users receive any training shortly before the deployment of a new application? Are periodical "booster shots" planned?</p>
<p>Are the performance of the computer system, as they are perceived by agents to their workstation appropriate (delay of display on the screens, data processing time) ?</p>
<p>Are IT outages frequent? annoying?</p>
<p>Is user support is effective (first level help, troubleshooting, help desk)?</p>
<p><b><i>Computerized communication</i></b></p>
<p>Does <a href="http://www.volle.com/travaux/messagerie.htm" target="_blank">e-mail</a> equip every agent? Do all the users have personal addresses? Is the usage of e-mail supervised (practices monitoring, advertising of best practices)?</p>
<p>Has the company introduced an Intranet? Does it use it for for its technical and professional documentation? for internal communication? Are the documents are they well written? Properly maintained?</p>
<p>Does the firm use tools for cooperative writing, selective dissemination?</p>
<p>Does the firm equip its administrative processes with <a href="http://www.volle.com/travaux/workflow.htm" target="_blank">workflows</a> (leave and transfer requests, approval of contracts, orders for equipment and work etc.)?</p>
<p><b>2) Decision Support System</b></p>
<p>Do the leaders of the firm have a <a href="http://www.volle.com/rapports/siad.htm" target="_blank">scoreboard</a> of good quality (soberly selective, clearly commented)?</p>
<p>Does the steering committee waste time to confront inconsistent statistics?</p>
<p>Does the information system provide operational managers with indicators that allow them a daily or weekly monitoring of their units?</p>
<p><b>3) Architecture</b></p>
<p><b><i>Organization of responsibilities</b></i></p>
<p>Has the firm organized <a href="http://www.volle.com/travaux/moa_du_si.htm" target="_blank">units in charge of the quality of the information system</a> in each of its various businesses and with the CEO?</p>
<p>Do these units know <a href="http://www.volle.com/travaux/utilisateurs.htm" target="_blank">the needs of the agents of the business</a>? have they made a segmentation of this population?</p>
<p>Do they watch on how similar companies use their information systems?</p>
<p>Is there a strategic committee of information systems?</p>
<p>Are the methods used to establish the program of work for a year and to ensure the implementation of a project well defined? Are they known ans used?</p>
<p>Are the IT budgets managed by the business owners or by the IT department?</p>
<p>Are the relationship between businesses and IT suitable, both in regard to the relationships between people that to the effectiveness of their cooperation?</p>
<p><b><i>Semantics</b></i></p>
<p>Are nomenclatures (products, customers, organization etc.) and identifiers documented? Do they reside in a searchable <a href="http://www.volle.com/travaux/referentiel.htm" target="_blank">repository</a>?</p>
<p>Does the firm have a <a href="http://www.volle.com/travaux/annuaires.htm" target="_blank">directory of agents</a>? Is this directory used to manage authorizations?</p>
<p>Are the updates of baseline data immediately reflected in the applications?</p>
<p><b>4) Management of the Information System </b></p>
<p><b><i>Functional evolution</b></i></p>
<p>Did the company develop a <a href="http://www.volle.com/travaux/urbanisme.htm" target="_blank">master plan of the information system?</a></p>
<p>Has there been a communication around this master plan?</p>
<p>Can we say that the master plan was "appropriate":<ul>
<li>By managers? </li>
<li>By users?</li> </ul></p>
<p>Is the master plan updated annually? Does it illuminate the budgetary discussions?</p>
<p>Has the "information system portfolio" been defined in each business of the firm? Is its development is managed to ensure the scalability of the information system?</p>
<p>Are information exchanges between businesses known? managed?</p>
<p>Is the use of repositories by different businesses of the firm consistent?</p>
<p><b><i>Technical platform</b></i></p>
<p>Does IT management possess the necessary skills? Does it use the computer skills of its staff?</p>
<p>Is the implementation of a supplier's product accompanied by internal training and appropriation efforts?</p>
<p>Does technology watch allow: <ul>
<li>To know the software offering?</li>
<li>To define the boundary between what we should do with software packages and ERP, and what is best done in specific? </li>
<li>To define the boundary between what to outsource and what is best done in-house?</li></ul></p>
<p>Is the technology watch extended by small-scale trials (Linux, Web services etc..?)</p>
<p>Is the telecoms network properly sized for present needs? For future needs? Is the share of telecoms spending in the IT budget excessive, reasonable? Are telecoms solutions consistent with the state of the art?</p>
<p>Is computer architecture (Middleware etc..) consistent with the state of the art? are the necessary repairs done? Are maintenance expenses in a proper relationship with the expected repair costs?</p>
<p>Are relatively inexpensive solutions (groupware, intranet, Workflow, Web etc..) readily used by computer specialists? Do they have the skills to develop and exploit them?</p>
<p><b><i>Economy</b></i></p>
<p>Is the <a href="http://www.volle.com/travaux/effetregle.htm" target="_blank">cost function</a> of the information system known? Are accounting classifications correct (separation between operating expense and investment, knowledge of the costs of project management, knowledge of internal costs)?</p>
<p>Is the dynamics of the cost of the information system controlled (development and maintenance)?</p>
<p>Can we say that the degree of computerization of the firm is suitable? Is it sub-computerized, over-computerized?</p>Michel Vollehttp://www.blogger.com/profile/02758819892464278158noreply@blogger.com0tag:blogger.com,1999:blog-1465468348253401530.post-70534941549194842922013-06-09T10:39:00.000-07:002013-06-09T22:54:48.022-07:00An essay on industrial classifications
<p>(Article by Bernard Guibert, Jean Laganier and Michel Volle in <i>Économie et statistique</i> No 20, February 1971)</p>
<p>French version: <a href="http://www.volle.com/articles/nomenclature.htm" target="_blank">Essai sur les nomenclatures industrielles</a>.</p>
<p>There can be no economic analysis without a classification. Only a classification can give precise enough meaning to the terms that crop up so often in economic reports - "textile industry", "furniture", "steel industry" and the rest. Classifications play an absolutely crucial role, but they tend to be dismissed as tedious. They consist of tiresome lists with only the occasional intriguing oddity to break the boredom. A classification specialist is seen as a real technology geek, and has to be exactly that to answer the seemingly hair-splitting questions (s)he is faced with every day: should the manufacture of plastic footwear come under footwear manufacture or under manufacture of plastic products? What is the distinction between shipbuilding and the building of pleasure boats? Should joinery be classed as manufacture of wood and wood products or as building construction?</p>
<a name='more'></a>
<p>The authors of this essay (1), who have used industrial nomenclatures on a daily basis either at INSEE or at the French Ministry of Industrial and Scientific Development, attempt to explain and then to overcome this prejudice. Their presentation, which aims to identify the principles on which present and past classifications were built, knowingly or otherwise, would probably not be accepted by other specialists without adjustment. It does succeed, however, in turning a supposedly disagreeable topic into an accessible, even fascinating, one).</p>
<div align="center">* *</div></br>
According to Heidegger, "<i>for someone who wears glasses - a device which, depending on the distance, may be so close to him that it 'sits on his nose' - the device is, in terms of his environment, more remote than the picture on the opposite wall. It is so close that it usually passes unnoticed</i>." Commenting on this statement, Bourdieu says: <i>It is the same ethnocentrism which tends to regard as realistic a depiction of reality that owes its "objectivity" not to its concordance with the actual reality of things (since that reality is only ever delivered by way of socially-conditioned forms of perception), but to the fact that the rules defining its syntax in its social usage agree with a social definition of the objective view of the world. By qualifying as realistic certain depictions of reality (photography, for example), society is merely confirming its own tautological certainty that an image of reality which agrees with its depiction of objectivity is truly objective</i> [1]. </br></br>
This explains why the problems inherent in classifications appear superfluous, boring and pointless. It is not because they are unimportant; on the contrary, it is precisely because they are fundamental. An economist - if we may use this image - is not interested in the glasses through which (s)he sees the economy; (s)he is, however, greatly interested in what (s)he sees. If we want to see the glasses we are wearing, we first have to take them off, and that blurs our vision. Similarly, discussions of classifications lead us to view as fragile, malleable and ultimately questionable those aggregates whose robustness we used to take for granted. Dividing-lines which used to be sharp become uncomfortably fuzzy.</br></br>
Well, for once we are asking the reader to examine those glasses carefully. What do the classifications look like? How are they constructed? Which ones were used in the past, and what is happening today?</br></br>
<b><u>1 - What is a classification?</u></b></br></br>
<i>It is not a question of linking consequences, but of comparing and isolating, of analysing, of matching and pigeon-holing concrete contents; there is nothing more tentative, nothing more empirical (superficially, at least) than the process of establishing an order of things; nothing that demands a sharper eye or a surer, better-articulated language; nothing that more insistently requires that one allow oneself to be carried along by the proliferation of qualities and forms. And yet an eye not consciously prepared may well group together certain similar figures and distinguish between others on the basis of such and such a difference: in fact, there is no similitude and no distinction, even for the wholly untrained perception, that is not the result of a precise operation and of the application of a prior criterion.</i></br>
Michel Foucault, <i>Words and Things</i></br></br>
<i>I reflected that Argos and I belonged to separate worlds; I reflected that our perceptions were identical, but that Argos combined them differently and made other objects out of them.</i></br>
Jorge-Luis Borges, <i>The Immortal</i></br></br>
Although we have to start with a formal definition, even to distinguish a classification from a non-classification, the definition will not make sense until we have examined the process of construction and the habitual use of classifications.</br></br>
<b>A set of nested divisions...</b></br></br>
Let us first look at a product classification, the customs nomenclature, taking as our guide not the method adopted by its authors but the appearance of an ordinary page of this document.</br></br>
It contains a list of basic product classes: "cotton coats for women and girls", "machine screws for wood, threaded, in bulk, shank diameter not more than 6 mm", "B2 vitamins", etc.</br></br>
There are also groupings described in more general terms: "Women's, girls' and young children's outerwear", "Bolts and screws etc. and similar articles in cast iron, iron or steel, etc.", "Natural or synthetic provitamins and vitamins, etc.". These <i>first-level</i> groupings are themselves placed in <i>second-level</i> groupings: "Clothing and clothing accessories in fabric", "Cast iron, iron, steel", "Organic chemicals".</br></br>
This products nomenclature thus looks in practice like a <i>set of nested divisions</i> (2). Everything is grouped from the bottom up to a top, unspecified level which we might call "products".</br></br>
The nomenclature thus contains both highly aggregated levels and levels of detailed breakdown.</br></br>
A numerical code is attached to each basic class and to each node of the nomenclature. The numbers of all headings at a particular level have the same number of digits (they are known as the "two-digit level", "four-digit level" etc.) and the number of a "node" identifies both the node itself and higher-level groupings which contain it. Code numbers are thus allocated "top down" from the top of the tree (3).</br></br>
To summarise, a classification looks formally like a series of divisions nested within a set of elementary headings. The list of these elementary headings must itself be defined in such a way that one single item in the list corresponds to each physical object in the field of study: in other words, a last division, that of the set of <i>units</i> (4) in the field of study, must correspond to the <i>denominations</i> represented by the list of elementary headings.</br></br>
<b>From the general to the particular, or vice versa?</b></br></br>
We now have an exclusively <i>formal</i> criterion for recognising easily whether or not a text is a classification. Yet this criterion tells us nothing about the significance of classifications: the reason for their existence and how they are constructed. The formal response answers only part of the question we are asking: what is a classification?</br></br>
We can answer part of the question by looking at how the classifications are put together. We might think of constructing a classification "bottom up", i.e. starting with a list of "basic" denominations, building up a series of intermediate <i>thought-objects</i> and finally arriving at the aggregate defining the field of study as a whole; we could also take that aggregate directly and divide it up successively so as to arrive at a list of elementary headings so detailed that we need go no further.</br></br>
These two approaches, though formally inverse, are used simultaneously in practice. This is worth comparing with the Aristotelian notion of categories defined either <i>in extenso</i> (i.e. by exhaustive enumeration of the units designated by the category) or <i>in intenso</i> (i.e. by specifying the properties common to the units). If we eliminate any trivia, we can see that the categories are never compiled either <i>in extenso</i> or <i>in intenso</i>, but according to a process which in effect incorporates both of these contradictory approaches.</br></br>
The list of elementary headings is the tricky part of the nomenclature; it is here that the relationship with the concrete is closest.</br></br>
This list is not a set of <i>objects</i> (i.e. industrial, animal or human-activity products etc., according to the domain in question), but a set of <i>denominations</i>: two objects ranked under the same denomination are regarded as equivalent from this point of view.</br></br>
To be usable as a basis for a classification, these denominations must meet certain conditions:
<ul><li>as we have seen, they must be a subdivision of the set of singular units;</li>
<li>they must reflect the <i>purpose</i> of the study.</li></ul>
We know that no unit can be assimilated into another, since a sufficiently detailed examination would always lead us to perceive a difference. A denomination is constructed from properties common to the units it designates, regardless of the differences they may otherwise reveal, and we obtain a list of denominations which is longer or shorter depending on the degree of detail sought. The threshold must be set by <i>usefulness</i> criteria, i.e. by letting the <i>purpose</i> of the study determine the structure of the list of elementary headings.</br></br>
Only a usefulness criterion enables us to say, for example, whether or not we should break down cars in a product list by color. It all depends on the purpose: the distinction may be of no interest to an economist but crucial to a sales specialist.</br></br>
Moreover, the thought-objects covering the denominations are not reconstructed each time we embark on "naming" the units in a field of study. Most of such thought-objects are presented to us ready-made by the historical context in which we find ourselves, and above all the most important of them: the field of study itself (5). The compilation of a classification is thus inseparable from a point in time which supplies the definition of the object, the linguistic material, the purpose of the study - in fact more or less everything except the classification itself, which we have to compile on the basis of the given parameters.</br></br>
<b>Forms and the significance of forms</b></br></br>
The unit, the physical object situated in the field of study, is <i>formless</i> when it comes to us. The intellectual comprehension of this object gives it a <i>form</i> enabling it to be adapted to the requirements of intelligent action.</br></br>
Thus an object which is ostensibly simple, e.g. a piece of merchandise such as a car, may be seen from two different angles. It can be said to exist as a conglomerate of atoms, as a piece of matter, but the same can be said of any stone or mineral sample. Our society's observance of this object lends it an entirely different significance. The laws of fashion, aesthetics, comfort, the technical constraints it obeys according to the means available at the time, even the set of affective mechanisms it invokes - all of these turn the object into a <i>sign</i>, a <i>phrase</i> of a social language which is not expressed in words but is no less meaningful for that. So what can we say? Is a car a lump of atoms (itself a social construct - there is no getting away from this) or is it a sign? It is both, and the one <i>no less than</i> the other.</br></br>
Similarly, an economic activity can be seen from two different angles. At the most "material" level, each economic activity can be represented by an input which is turned by some process into an output. Boards and nails, once transformed by skilled hammer blows, become a packing case. Similarly, a cheque validated by a signature becomes a means of payment.</br></br>
We could, of course, try to reconstruct in our minds the way the economy works by staying at the level of a sprinkling of objects. It is clear, however, that there are better things to do than to record a multitude of particulate acts; it is even more clear that the economic act of signing a cheque has its weight in its social significance and not in its anodyne material appearance: who carries out this operation, for whom, and why? It is worth noting too that debt discharge is gradually losing its material back-up with the rise of credit cards. Thus a gap is emerging between social significance and subjective perception.</br></br>
The same applies to the more modest concept of the manufacture of packing cases. Cases are made, of course, but they have been ordered, or at least the producer is counting on a demand; but the technique used, however primitive, has a history in our society. Thus the act of production, when seen in a social context, itself becomes a sign. The same would be true of a more technically complex act of production such as car manufacture, mentioned above.</br></br>
The whole of the economy, in its apparent chaos of tangled operations, speaks to us in its own language. All these acts, an impressive mass of <i>signifiers</i>, contain something <i>signified</i>. But the signifier delivers what is signified only if it is perceived and received in the appropriate forms.</br></br>
Compiling classifications is one of the methods by which our society has attempted to draw out these forms. Classifications are an attempt to trace, amongst the chaos of signifiers, those parts whose juxtaposition we hope will reveal what they signify.</br></br>
Let us now apply these ideas to our actual experience.</br></br>
<b>Universality and univocity</b></br></br>
We have seen that each singular unit must have a corresponding denomination in the elementary list: the classification must be <i>universal</i> in the field of study; only one denomination may correspond to this unit: the classification must be <i>univocal</i>.</br></br>
These two requirements directly reflect the fact that each level of the classification must correspond to a division of the universe of singular units.</br></br>
This requirement could be seen as trivial, but it is nevertheless interesting to give it some thought, and we will quote some examples to illustrate its significance.</br></br>
An expression such as "Construction of motor vehicles and cycles" evokes in everyone a fairly vague image of a complex of establishments, machinery and workers whose activity, indistinctly grasped as being fairly complex, has its end purpose in the marketing of motor vehicles and cycles. If we sought to delimit this complex with any precision, however, we would be risking substantial variations in the boundaries of the domain according to the individual point of view. For an investor, the denomination would cover manufacturing; for a user it would also comprise maintenance and repairs. The use of a common nomenclature enables everyone - provided that it contains the denomination in question at some level - to apply a concept with an unambiguous definition. Thus, in the Economic Activities Nomenclature, the content of heading 26 (motor vehicles, cycles) is broken down over two pages. The headings of the three-digit nomenclature are [21]:</br></br>
261. Construction of motor vehicles with thermal engines</br>
262. Construction of bodies (coachwork), trailers and semi-trailers </br>
263. Manufacture of parts, accessories and spares for motor vehicles </br>
264. Repair of motor vehicles </br>
265. Manufacture of spares and accessories for cycles and motorcycles </br>
266. Manufacture of motorcycles and cycles </br>
267. Repair of cycles and motorcycles </br>
268. Demolition of motor vehicles</br></br>
The content of the aggregate is very precise. Problems arise when we consider activities which appear to belong both here and elsewhere: should garages carrying out motor vehicle repairs come under heading 264 or under 743 (garages, service stations etc.)? If we want to arrive at a strict definition of the content of a heading which intuitively seemed clear, we are obliged to solve a number of boundary problems, to amass specifications and warnings. The classification becomes more complicated and more unwieldy, and experience shows that some questions always remain in suspense.</br></br>
The choices made in delimiting aggregates have important consequences; we can try a small exercise by looking at the page in <i>Short-term economic trends</i> [15] with the textiles index. It is clear that if, when defining the "textile industry" heading, we had excluded knitted and crocheted goods and man-made textiles (e.g. placing one under "Manufacture of wearing apparel" and the other under "Manufacture of chemicals and chemical products" (6)), the trend in the textiles index as a whole would have been quite different.</br></br>
The conveniently concise terms we use to designate branches or sectors of the economy ("furniture", "textiles" etc.) therefore make no sense until we know the classification under which they are defined. If we want to draw comparisons, particularly international ones, the use of different classifications leads us to commit errors of interpretation. Readjustment calculations are possible only if we have been able to define a common level and if the data collection was enumerated in such a way that we can describe the same domain in the classifications used.</br></br>
These requirements for precise contours to be given to each aggregate, to ensure that bridges are put in place each time we are compelled to "look at" the same domain "via" two or more different classifications, are of obvious importance. All this is about quality, of course - the care given to the editing of the classification; it says nothing about what we are actually expecting of the aggregates we are intending to manufacture. It remains for us to determine the criteria which will guide us in building these aggregates.</br></br>
<b>What criteria?</b></br></br>
When faced with a classification which is perfectly clear, perfectly structured as a classification, users may well reject it. Let us suppose that we have a classification in which the manufacture of furniture and the manufacture of motor vehicles come under the same heading. This would obviously be rejected. "This aggregate makes no sense", people would say. But why?</br></br>
Another example: in the customs nomenclature of products [19], perambulators and push-chairs (87-13) are placed very close to assault tanks (87-08) because both are "vehicles". Ordinary pumps, petrol pumps and fuel-injection pumps for diesel engines, which have only their name in common, are lumped together under heading 84-10. These are classifications which seem "natural" to the authors of the customs nomenclature but are strongly rejected by the authors of the activities nomenclature [16].</br></br>
As always, the authors of this paper are using the word "natural" to denote a set of operations or attitudes which seem to them to fit together automatically; yet the different points of view prove that nothing fits together automatically. The choices made in compiling the customs nomenclature stem from its administrative function: it was created so as to enable differential charges to be applied, and must therefore be drawn up in such a way that the risk of classification error is as small as possible. It thus makes sense to use a classification which is partially mnemotechnic ("all pumps taken together").</br></br>
<b>A tool for economic analysis</b></br></br>
This example shows how the criteria used for compiling a classification are determined by its intended use. In the case of a classification whose main function is to be a tool for economic analysis, we can say that the more an aggregate covers a set of items which is coherent <i>in its depiction of the economy</i>, the more likely it is to be accepted by an economist. The more coherent the aggregate, the more easily the economist will be able to see it as a single object of analysis; the more (s)he will be able to see the object as a <i>subject</i> with its own autonomy, i.e. with a "behaviour" and with "reactions". If the economist is totally taken in by its representative quality - i.e. if (s)he regards it as the very image of reality - (s)he may go so far as to attribute to this construct the role of a "natural" subject which appears "spontaneously", "freely" in the field of perception of the "objective" observer. Thus we speak of the investment behaviour of "the steel industry", or the stockpiling behaviour of "the distributive trades".</br></br>
<b>A tool for action</b></br></br>
Let us now consider a different point of view. The classification is not just a tool for economic analysis: it is also a tool for economic action. Heads of large companies, professional organisations, government demand a breakdown likely to produce the information they need in order to take action; since their action uses existing institutions as a tool, channel or object, they often want an "institutional" breakdown.</br></br>
This "technocratic" approach, which is found as often in private organisations as in the public sector, is clearly sometimes at odds with the requirements of economic analysis <i>per se</i>.</br></br>
The historical analysis we are about to undertake shows the extent to which the various portrayals have, in order to construct their objects and economic facts, perfected criteria and classifications which serve them well. We shall also see how, since it has become possible for the State and leading players to act on economic structures, classifications are partly influenced by the structure of institutions.</br></br>
<b><u>2 - The history of industrial classifications</u></b></br></br>
The history of industrial classifications is inseparable from that of industrial statistics.</br></br>
Industrial statistics in France - and probably in the rest of the world - date from 1669. Colbert then advised that <i>the situation of the kingdom's factories be recorded in numerical terms</i> [9].</br></br>
This operation was successful only in the textile domain, which was by far the most important. Studying the information supplied posed no classification problems.</br></br>
<b>The physiocratic classification of 1788: raw materials</b></br></br>
In 1788, after a century of industrial development unaccompanied by new statistical investigations, Mr de Tolosan, <i>superintendent for commerce, exercised his office in implementing the project designed by Colbert. Expanding his own knowledge with the help of the archives of the various ministerial departments, he drew up a table of France's leading industries and accompanied this with an assessment of the products manufactured by each of them</i> [9].</br></br>
This first French industrial nomenclature is given to us in this document by the order and title of the headings. It provided the framework for industrial statistics until 1847 and therefore deserves to be looked at in some detail. Industry is placed under three main headings <i>relating to the origins of the raw materials used</i>: "Mineral products", "Vegetable products", "Animal products".
I - <i>Mineral products</i>: Rock salt and sea salt. Earthenware, porcelain. Glass and glazing. Pig iron. Lead. Copper. Ironmongery, haberdashery. Silverware, jewellery.</br></br>
II - <i>Vegetable products</i>: Stationery. Starch. Soap. Refined sugar. Tobacco. Hemp, linen, cotton, canvas and other fabrics. Linen, knitted and crocheted goods. Cotton, knitted and crocheted goods. Linen, lace. Hemp, linen, ropes, net, thread ribbons.</br></br>
III - <i>Animal products</i>: Silk garments. Tapestry, furniture. Furskins, cured goods. Woollen fabrics. Serge. Camlet. Coarse cloth. Broadcloth. Woollen knitted and crocheted goods. Hats. Silks. Silk knitted and crocheted goods. Ribbons, blonde lace, gauze, trimmings.</br></br>
This classification of industrial activities takes a "naturalistic" view of the economy in which the influence of physiocrats is tangible; human activity causes nature to "bear fruit", but the emphasis is more on nature and its fruitfulness than on the act which induces the fruit to come forth. The portrayal lies within a "natural resources" ideology.</br></br>
The criterion is applied without mercy: what we today call the textile industry is cut in half: hemp, cotton and linen are on the vegetable side, while wool and silk are found amongst the animal products.</br></br>
Note that the "furniture" heading did not mean the manufacture of furniture as it does today, but essentially the production of carpets, which were made of wool. It was therefore natural to place it amongst the "animal products".</br></br>
This nomenclature might be thought to have reflected only Tolosan's personal viewpoint. Not so; it was taken over as it stood by Chaptal, who published an estimate of French industry based on imperial statistics (7) around 1812.</br></br>
<b>1833: monographs on establishments</b></br></br>
The <i>Statistique de la France</i> was abolished in 1814; in 1833 the government reinstated the <i>Statistique générale du royaume</i> (General Statistics of the Kingdom), <i>with the approval of the chambers and to the satisfaction of all enlightened souls</i> ([9], p. XVIII). From 1839, efforts turned to extending the investigations to industry. The instructions given to the prefects are worth quoting:</br></br>
<i>The general table of licensed business operators of each department is to be closely scrutinised, and from this a list is to be extracted of producers, entrepreneurs and manufacturers whose establishments extend beyond the arts and crafts class and belong to the manufacturing industry by virtue of their nature, their scope or the value of their products…</i></br></br>
<i>Conduct a detailed survey in each district, following the ideas supplied by these documents, with the purpose of establishing, by numbers, the industrial output produced each year by each factory or mill.</i></br></br>
<i>Include, however, only establishments which occupy with their work at least a dozen workers, excluding those who employ a lesser number, which shall in general be included in the arts and crafts class whose exploration will not take place until a later occasion.</i></br></br>
<i>Gather the statistical data relating to industrial establishments either by asking the owners or directors or, if information obtained from them is lacking, by carrying out assessments on the basis of public knowledge or any other means of investigation.</i></br></br>
<i>Consult to this end all enlightened men who might supply, confirm, validate or rectify the necessary</i> information ([9], p. XIII).</br></br>
The operation was a painful one. For the first time we hear the complaint of the industrial statistician, surprised by the difficulty of his discipline, which proves to be far greater than in the other domains, and full of bitterness towards the predecessors who neglected to put together good methods:</br></br>
<i>Some factories use only one sort of raw material from which ten different manufactured products are obtained, while others, on the contrary, make only a single product from ten raw or differently-produced materials. These anomalies place great difficulties in the way of the execution of statistical tables which, essentially constrained by analogy of type, symmetry in the grouping of figures and similarity of spacing, cannot lend themselves to these enormous disproportions. Nothing similar was found in agricultural statistics, the produce of the soil being easily encompassed by such expressions; nor was this disadvantage encountered in the old attempts at industrial statistics, considering that the obstacles were constantly kept at a distance by remaining on the surface of things</i> ([9], p. XXI).</br></br>
Reading between the lines, however, it seems that the statistician's heart was no longer in it - on the classifications side, of course. This publication reveals an insatiable interest in industry, a dazzled curiosity about its performances; the statistician constantly counts and recounts everything that can be done with a given quantity of labour and effort. Yet at the same time he is discouraged by the complexity of his subject, by the shiny new diversity of activities and products and the variety of their combinations, and so he more or less abandons any attempt at an aggregate level. The data on the large divisions (mineral, vegetable and animal products) look like afterthoughts, and there is no real attempt to avoid or even to indicate double countings of sales. Comparisons with previous censuses are rudimentary.</br></br>
There are, on the other hand, veritable monographs on establishments. The following are listed for each <i>establishment</i>:<ul>
<li>the nature of the establishment, i.e. its activity; there is no indication of how it is determined;</li>
<li>the municipality in which it is situated; </li>
<li>the name of the manufacturer or producer; </li>
<li>the rental value; </li>
<li>the amount of business tax;</li>
<li>the value of the raw materials used annually;</li>
<li>the value of the products manufactured annually; </li>
<li>the number of workers (men, women, children);</li>
<li>average pay (men, women, children); </li>
<li>power units (a picturesque list): mills (windmills, water mills, horse-driven mills), steam engines, horses and mules, oxen; </li>
<li>burners: furnaces, forges, ovens; </li>
<li>machines, whose curious breakdown illustrates the persistent dominance of the textile industry: looms, others, spindles.</li> </ul>
<i>The question of confidentiality never arises</i>. Individual information is published without restriction. Moreover, if we accept that statistics consist of summarising a large number of individual information items in a single piece of information, then (apart from a few totals) the published results are not of a statistical nature.</br></br>
This splintering of industrial statistics within the very framework provided by Tolosan can be explained by the historical situation. Industry is all-powerful and the pioneers have before them a vast field of activities about which they have few inhibitions at this stage. Competition between industrialists is not yet very lively; the State contents itself with indirect taxes: there is no point in concealing one's profits, and business people are proud to be making profits and showing them off. There is both a relative indifference to being known and a keen desire to know. The whole idea is to use the workforce and the equipment in such a way as to progress as far as possible; the novelty and the unknown factor are precisely the performance level which drives this entirely new industry, which is extending its sphere of activity to the detriment of the artisans it can so easily crush.</br></br>
The performance is of far greater interest than the means. There is no need for aggregates.</br></br>
Industrial statistics scatters its figures and headings throughout the "natural" framework constructed by Tolosan, and in so doing bursts its bounds. It renounces aggregates (i.e. the classification) in order to satisfy an industry in full expansion, eager to know every detail of its performances.</br></br>
<b>1861: the products</b></br></br>
The 1861 industrial census marks a turning-point.</br></br>
First, the classification used breaks completely with Tolosan; it employs "natural" groupings based above all on the purpose of products.</br></br>
The first groupings by employer emerged in 1840. The struggle between the free-trade lobby and protectionists had led industries to form product family groups in order to defend their interests (8); attitudes had become accustomed to this viewpoint.</br></br>
This time the census targeted "all factories or mills, irrespective of size" [10]. It had become impossible to publish results by establishment: instead, the district (arrondissement) was chosen as the geographical unit.</br></br>
The large divisions of the classifications had to be abandoned because of the inextricable complexity (even then!) of integrating them (9).</br></br>
The census classification describes an industrial world which is very different from our own. Although the most highly aggregated list of headings does not look too outlandish (10), the same cannot be said of their content.</br></br>
For example:</br></br>
The heading <i>Wood industry</i> (steam sawmills, water sawmills, veneer leaf, champagne corks, ordinary corks, barrels) has next to nothing in common with what we call mechanical woodworking today: the sawmill is nowadays allocated to agriculture and corks to "Various industries n.e.c.".</br></br>
The heading <i>Lighting</i>: gasworks, tallow candles, resin candles, wax candles, tapers, corresponds to nothing we would expect today.</br></br>
The heading <i>Furniture</i> (windows/mirrors, Gobelin carpets and tapestries, Neuilly tapestries, Meaux carpets, Aubusson carpets, Amiens carpets and broadloom, Utrecht velvet, Tourcoing carpets, felt carpets, wallpaper, waxed cloth, fluted chairs, cane chairs) has nothing in common - except the chairs - with what this word suggests today. The probable explanation is that dining-room and bedroom furniture etc. was made predominantly by craftspeople.</br></br>
The same applies to the heading <i>Clothing and toilet articles</i> (strapped clogs, wooden clogs, slippers, shoes, hats [silk and felt], hats [felt and wool], felt hats, straw hats, caps, umbrellas, leather gloves [Millau], leather gloves [Grenoble], silk buttons, enamel buttons, buttons [mother-of-pearl and bone], combs and brushes, perfumery), distributed by today's classifications amongst perfumes, brush-making, the various clothing branches, hat-making, the footwear industry and glove-making - but includes nothing of what we regard as the "clothing industry" today.</br></br>
It is worth quoting, out of interest, two headings which seem totally incongruous today:</br></br>
<i>Sciences and arts</i>: white paper, white and grey paper, wrapping paper, cigarette paper, cardboard, pens, pencils, printed goods, rulers, spectacle frames, musical instruments, Jura watches and clocks, Montbeliard watches and clocks, Besançon watches.</br></br>
<i>Luxury and entertainment</i>: decorations and imitation jewellery, cabinet work, playing cards, straw work.</br></br>
This shows how dangerous it would be to try to compare one era with another without carefully scrutinising the homogeneity of classifications. This error is sometimes committed, however (as in [12], for example).</br></br>
Despite all the upheavals, the approach is generally the same as it had been in 1841. Information enabling performance to be measured is sought in each district by detailed industry. This aspect is stressed in the introduction:</br></br>
<i>The second part is devoted to the study of the economic situation of the principal industries; its purpose is to determine, in the value of any manufactured product, the shares of the capital invested, the wages, the raw materials and the general costs comprising operating and administrative costs, taxes, insurance, and lastly profits.</i></br></br>
<i>In the third section we examine, according to the elements provided by the survey, the existing relationships between raw materials and manufactured products and, inter alia, the quantity and value of the work produced by a worker, a machine or a loom. This section constitutes a type of technological statistic of industry</i> (1101, p- XV).</br></br>
<b>1895: the technologies</b></br></br>
After the victory of the free-trade lobby in 1860, mistrust deepened between employers and the State. Refusal to respond became increasingly common; in parallel, liberalism became fashionable in government circles (11). The provision of information on industry was not enforced, and industrial statistics went into a long decline which lasted until 1940.</br></br>
The middle of this period, 1895, did see an important advance in industrial statistics, however: Lucien March's processing and analysis of the population census. Since a proper industrial survey was impracticable, establishments were studied on the basis of census forms completed by the persons surveyed, on which they indicated their profession, the address of the establishment, etc. The principal activity of an establishment was determined by comparing the various forms referring to it. March made the best of a bad lot:</br></br>
<i>If one knows both the size of the labour force in an industry and the average annual wage of the workers in that industry, one can easily calculate the total wage bill. One then possesses a figure which may serve as an indicator to characterise the growth in value acquired by the raw materials in a particular industry <b>without the need to ask heads of companies questions to which many would no doubt refuse to reply</b></i> ([10], p. 11).</br></br>
The problems inherent in determining the principal activity of the establishment from individual census forms (vague denomination, integration, juxtaposition) have since become traditional, but they are set out here for the first time.</br></br>
Also for the first time we see the fleeting appearance of the association criterion: the attempt to construct aggregates in such a way that activities frequently associated within an enterprise fall within the same aggregate. Yet March absorbs this into what we call the technical criterion, according to which activities are grouped by the industrial technology used:</br></br>
<i>The industries or professions in each section are arranged <b>in an order which separates as little as possible those which are most often grouped or juxtaposed in practice</b> ... neighbouring industries in the classification are also analogous in terms of industrial processes. It is, in fact, the analogy of industrial processes that usually determines the association of several individuals in a single establishment or industrial centre. Even when a manufacturer wishes to offer his regular customers new articles whose application goes with that of the ordinary products he makes, he cannot do so without paying the closest attention to the working conditions of his workforce and machinery</i> [10].</br></br>
The classification compiled on that occasion remained in force, with a few alterations, for half a century. Its headings mix collective activities with individual ones:</br></br>
<i>The classification does not stop at the names of collective industries, but includes the names of special professions; for example, No 5460 covers couriers and delivery boys (with no other indication), but it should be noted that these are simply persons who, in the absence of adequate indications, could not be associated with the collective industry in which they cooperate; other persons of the same profession are classed under the number of the industry exercised in the establishment to which they belong</i>.</br></br>
Industrial statistics henceforth remained a by-product of censuses. A 1931 industrial survey attached to the census contained output results for the first time [11]. The classification came to be applied far less strictly than March had wished, and the mixture of individual and collective activities under the same headings made these less meaningful.</br></br>
<b>From 1940: revealing the decision-making centres</b></br></br>
After the defeat in 1940, France tried to copy the German industrial organisation model; the Act of 16 August 1940 (12) <i>turning its back on pre-war pseudo-liberalism and the abuse of individualism</i> [7], [6], bestows important powers on the para-corporative and authoritarian Organisation Committees it creates. There was rapid amalgamation between the staff of the professional organisations, of the Organisation Committees, and of the raw materials distribution departments set up by the Act of 10 September 1940 ([6], pp. 84 and 85). Major work on industrial statistics (a by-product of various activities of the professional associations/Organisation Committees/distribution departments conglomerate) re-opened the question of the activities classification.</br></br>
Collective and individual activities were separated, with individual activities placed in a separate classification known as the "occupational nomenclature".</br></br>
Work began in 1942. Since the Organisation Committees existed and were both the "social partners" to the technologists and the sole intermediaries between State and industry, the classification begun in collaboration with the Committees reproduced the breakdown by employer. The Organisation Committees had been set up as quasi-cartels [6]; in general, employers grouped themselves according to an implicit application of the association criterion, which meant placing activities in the same enterprise under the same heading: the criterion was thus unspoken and went largely unrecognised.</br></br>
This 1942 classification remained virtually unused. The work which would culminate in the 1949 nomenclature began in 1945. The two specialists responsible for compiling it were divided (13): one was already using the association criterion, while the other wanted to use the "purpose" criterion. A trace of this conflict is found in the preface to the 1949 nomenclature:</br></br>
<i>Three criteria, sometimes conflicting, inspired the classification of activities under the various headings: purpose, dominant raw material, technology. Although no hierarchy applied to these criteria, the "purpose" criterion generally prevailed. Thus, for example, the industries allied to the motor vehicle industry were classed with the latter; electricity, gas and water were juxtaposed as energy sources. However, since technology appears to take clear precedence over purpose in the real structure, the technology criterion was chosen; the manufacture of rubber footwear, for instance, was allocated to rubber production and not to footwear manufacture. Quarrying of construction materials was classed with quarrying of miscellaneous materials</i> [20].</br></br>
It was in fact the association criterion which, without ever being mentioned, decided whether, "in the real structure", "technology takes precedence over purpose".</br></br>
Classification specialists do not live in an abstract world. Although a data-collection specialist like Mr Prevot would have defended the association criterion as a means of simplifying statistical surveys, this criterion also happens to meet the needs of economists remarkably well. The Liberation regime did not, in fact, bring a return to economic liberalism: far from it. The <i>commissariat général du Plan</i> was created in 1945-46. Initial attempts at economic synthesis then appeared in a national accounts context, and with a certain amount of planning in view. The planner's view of the economy became widespread (14). This raised the problem of the statistical unit, which was to be taken into account in compiling the information necessary to economic policy.</br></br>
According to the depiction then devised, the relevant unit was the one able to react to an initiative from the center and hence possessing a certain autonomy: the enterprise.</br></br>
<i>It is clear that any attempt to describe and explain the trend in production must, if it is to be rational, feature the fundamental centers of decision-making: enterprises. A priori, any statistical system which breaks down enterprises into their technical components leaves out essential data, even if it is correctly tailored to its specific information objectives</i> ([7], p. 35).</br></br>
<b>Branches and sectors</b></br></br>
The study of classifications then expanded to assess the objects they cover. The shift in the focus of the statistician's interest sparked off the debates which took place on the contradiction between branches of <i>activity</i> (sets of parts of enterprises devoted to the same activity) and sectors (sets of enterprises).</br></br>
The starting point was in fact a portrayal of the economy in which the "individual" (the "free" agent who "acts", "reacts", "behaves" etc.) is the enterprise: a sort of "decision-making atom". If we want to divide up the economy into sub-sets with a defined "behavior", such a portrayal obliges us to form sub-sets containing a whole number of enterprises: this then leads to a division of the economy into sectors. At the time, the need for this breakdown was felt almost physically. It was not thought then that enterprises could suitably be chopped up, or that they could be too big, or that the legal boundaries did not mean much, any more than it would occur to us nowadays to split a population of human beings into sub-sets which did not contain a whole number of individuals.</br></br>
The concept of the branch did exist, however, and most of the econometric models (particularly those of Leontieff) were actually conceived within its framework. Herein lies the contradiction: on the one hand a portrayal of the economy which obliges the user to consider sectors (sets of enterprises) as agents useful to economic analysis; on the other hand an economic theory which provides appropriate models only for the study of branches, statistical entities which have no representational meaning.</br></br>
A controversy thus emerged from 1951 to 1955 between those in favor of a depiction founded on a sectoral breakdown and those who wanted a branch breakdown. Analysis of the technologies used in industry naturally fits the branch concept, as do Leontieff's models. An analysis of decisions, investment etc. falls more naturally into the sectoral framework, however. Models inspired by Mr Guilbaud tended to isolate decision-making centers and so referred to sectors. Lastly, discussions at the time also reflected the diverse behavior of heads of companies with regard to data collection on enterprises. Some preferred the branch framework, which was less transparent, while others preferred the sectoral framework, which was useful for studying the problems posed by mergers. The branch proponents included those responsible for industrial statistics and for the Plan; the sector advocates included Mr Gruson and his "team", the Finance department and some economics researchers.</br></br>
The economic table compiled in 1951 [13] following these debates was a complex one using both sectors and branches, defined with reference to product groups. An initial table showed sectoral sales by product group; another showed purchases. The procedure for drawing up these tables was so cumbersome that the sector/product cross was abandoned in 1956 [14] and replaced by the branch framework.</br></br>
<b>The advantage of the association criterion</b></br></br>
As can be demonstrated [17], the use of the "association criterion" minimises the difference between branch and sector statistics by mitigating the contradiction between sector and branch. It was thus particularly well suited to the requirements of planning, which identified enterprises as economic agents while using the resources of branch-based econometrics.</br></br>
When the nomenclature was revised in 1959, it was explicitly mentioned that:</br></br>
<i>We attempted in this project to throw more light on the branches of economic activity in which establishments or enterprises are active, in such a way that each heading covers comparable establishments and constitutes a meaningful economic unit</i> ([21], pp. 7 and 8).</br></br>
This is still a bit vague. It was not until 1962 that Mr Prevot gave the association criterion its definitive formulation:</br></br>
<i>The closer the sets of elementary activities defining branches are to the groupings of elementary activities actually found within industrial establishments, the fewer the chances of error. The identity of the activity groupings defining the headings of an industries classification with the most frequent activity groupings in industrial enterprises or establishments may therefore be deemed an essential precondition to the compilation of an industries classification</i> [16].</br></br>
<b><u>3 - The current picture</u></b></br></br>
We have already described the situations of the past. An in-depth look at the current landscape will illustrate its ambiguities and complexity.
It would be wrong to assume that all specialists advocate and accept the association criterion. In reality it corresponds only to data-collection logistics and to the needs of a planned economy in a portrayal which identifies enterprises as independent agents.</br></br>
The depictions which in the past successively favored the "raw materials", "technology" or "product" viewpoints are still very useful for studying other problems; moreover, the use of classifications for regulatory or administrative purposes means adopting other constraints.</br></br>
<b>A single compromise</b></br></br>
One solution, of course, would be to use several different classifications, each tailored to a particular purpose, but all linked via a common level. The chosen route, however, was to arrive at a single compromise by arbitration between the various requirements.
<ul><li>The least common viewpoint these days advocates a classification founded on <i>raw materials or products consumed</i>: everything made from the same input would be grouped under the same heading. This criterion rests on the concept of the economy as a technique for using rare resources and on the memory of the shortages of the Second World War, when supply problems had to be given top priority. It is well suited to the examination of these problems.</li>
<li>Far more people prefer to group activities by the technology used. This approach sees things from the material and human investment angle; engineers frequently take this approach. It fits the examination of equipment problems particularly well.</li>
<li>Economists often favour the <i>product</i> criterion, which places under the same heading activities requiring very varied technologies and raw materials but supplying analogous products. The "product" viewpoint rests on a portrayal of the economy in which the market is the dominant element. It agrees with the marginalist economic doctrine currently in vogue ("demand drives supply"), and also with the idea, widespread nowadays, that market problems are becoming serious.</li>
<li>The use of the association criterion, as pointed out in the preface to the 1949 classification [20], leads to the alternate use of the above criteria. They come together as specific cases: when the most difficult task for enterprises really is to create a market, they will tend to specialise in a product and will use all possible technologies and raw materials to manufacture it. The use of the association criterion then means grouping under the same heading the elementary activities contributing to the manufacture of a single product with the help of various technologies: the priority will thus be given in this particular case to the "product" criterion. Hence the French activities nomenclature constructs the heading "games and toys".</li></ul>
Similarly, when the technology used requires heavy investment or highly specialised staff, or both, industrialists will tend to have it produce the entire range of possible products: if they are seeking to expand, exploring new markets is easier than acquiring and mastering new equipment. The association criterion would then mean grouping the manufacture of various products by the same technology and so giving priority to the "technology" criterion. The French activities nomenclature constructed the "Processing of plastic materials" heading for this purpose.</br></br>
It also happens - seldom nowadays, but that would change if there were a shortage - that the "raw materials" criterion is favored by an analogous mechanism. Hence, the French activities nomenclature contains the heading "Rubber products industry".</br></br>
To summarize, the association criterion leads to the partial use of the product, technology or raw materials criteria when these are crucial to the activities concerned.</br></br>
<b>Institutional constraints</b></br></br>
A combination of a variety of criteria - technology, material, product, and association as a compromise between the first three - requires a "preclassification". To become the official classification, this needs to be amended and compared with other "preclassifications". There are two reasons for this: technical and institutional. Let us take a brief look at the technical reasons, followed by a longer look at the institutional ones:<ul>
<li>Classifications are expected nowadays to last for some time (usually ten years). Clearly a classification must fit not the industry of today, but the industry which will prevail in five years' time. We therefore have to make assumptions about the trend in industrial structures. Moreover, the pointers given by the association criterion have to be interpreted from the point of view of their statistical meaning. Lastly, there must be good consistency with foreign classifications. This obligation, though technical, is already halfway to the institutional viewpoint.</li>
<li>Those responsible for classifications tend to adhere increasingly to the institutional view, claiming that <i>the classifications studied have more than just statistical or informative aims, since they also serve management and legislation, and compiling a classification does not mean constructing a theoretical tool for an abstract definition of reality. The classification is essentially a tool for management, for data collection and processing, and for study</i>. A complex task is thus defined. The classification must be a management tool: what we need is not an instrument of pure ("abstract") knowledge, but something that gives managers - "decision-makers" - the easiest means of collecting and analysing data.</li></ul>
The classification is not <i>directly</i> a decision tool; it is directly a study tool, even though the goal of the study is not pure knowledge, but to meet the needs of the decision-makers.</br></br>
For the decision-makers to need pure knowledge - a finely-tuned, purely theoretical instrument - would be no contradiction, but there are several reasons why this does not happen. The main one is doubtless that theoretical knowledge progresses very slowly and is not easily constrained to meet predetermined deadlines, whereas the need for action is always urgent. Action-takers thus see institutions as the quickest and most easily available framework, even if its contours are questionable.</br></br>
Let us take as an example something that really exists but shall remain nameless. Let us consider a branch of industrial activity that resembles a set of activities which were rightly juxtaposed a long time ago, but have since seen such technical transformations that, from the point of view of pure economics, the aggregate ought to be broken down, most activities placed under other headings, and only a small core kept under the original denomination.</br></br>
The economist, armed as it happens with an association criterion, is ready to make a high-handed cut, but the decision-makers do not like it. The branch which has disappeared from the economic landscape is still there as an institution. The industrialists, linked by a sort of family bond, continue to meet under the banner of a professional organization which is both their club and their representative in dealings with the State, the trade unions, other associations affiliated to the CNPF, and with foreign colleagues and competitors; this organization has a professional journal which is read, which influences the profession, etc.</br></br>
All of this does not rule out internal conflict or the slow decay induced precisely by economic change, but the branch still exists as an institution, as a spokesman for its decision-makers; and ultimately, this aggregate which is of no interest to the pure economist may be a valued and noteworthy partner for a planner or the head of a large company.</br></br>
Moreover, the institution itself would not easily tolerate being erased as an economic aggregate, and is good at voicing its opposition.</br></br>
Another example: the classification serves to define the scope of certain regulations, certain subscriptions; it is used by government to compile records which may be extremely voluminous. Changing it may provoke earthquakes, and therefore change is avoided as far as possible. This institutional constraint is less obvious than the former, but it exists nevertheless.</br></br>
<div align="center">* *</div></br>
Thus we see that classifications are at the heart of the contradiction between scientific and administrative activity. The latter may take scientific form, since it uses the tools provided by science, but its aim is short-term and medium-term action that cannot tolerate the slow advance of science.</br></br>
Classifications pose, and also solve in their own way, a problem of compromise between two contradictory points of view, each of which is valid.</br></br>
These two points of view are no less interdependent for being contradictory, however. As the first section attempted to show, the framework of the portrayal serving statistical practice cannot avoid being closely linked to the very general findings which govern such portrayals, and hence, in particular, to those of economics. The problems posed by this interdependence appear as soon as we get past the purely formal aspect of the "classifications" object and start thinking about its meaning. The second part sought to demonstrate how this interdependence showed itself historically, but also how it came to be mediatised by what is commonly known as administrative inertia and red tape. A compromise on the tools of statistical practice, here classifications, was always reached between the requirements of current theory and the practical and institutional means available to statistical agents or those they interview: hence the ultimate ambiguity and difficulty not only of classifications, but also of the collection and presentation of statistical results in the framework they define.</br></br>
<b>Moving parts</b></br></br>
In industrial statistics, the statistical individual itself is hard to pin down. A human being can be identified unambiguously by her civil registration number, including her place and date of birth and serial number, but a business is built on shifting sand: its location, activity and name may vary. It is only ever a place through which individuals, materials and money flow, but this place is as volatile as an eddy in a stream.</br></br>
Nothing is stable. No matter how we split up the industrial economy - by unit size, region, activity - it will always be made up of moving parts. Constructing sampling frames for enterprises is a shot in the dark: the concepts used are vague and always questionable. We saw an example of this with classifications.</br></br>
If we re-read the publications of industrial statisticians of the past, or even those of today, we are struck by the disproportion between the difficulty of the object and the paucity of the means employed to study it, whether the object is professional organizations or government. Yet we never wanted to recognize the difficulty. We believed that counting was enough; basically we assumed that a goods item was a simple, obvious object - which it is not! - and that simple methods would enable us to cope with its production.</br></br>
We often find both surprise and consternation flowing from the pen of the industrial statistician about the difficulty of his object and the fuzzy indications it yields. It seems that he himself set out in all confidence and found himself confronted by a monster of complexity.</br></br>
It is thus an illusion that has to be abandoned. Industrial statistics is a difficult domain. Although the pioneers that have explored it for the past thirty years have done the bulk of the work, we have not yet emerged from their era.</br></br>
We must not therefore be surprised if, as Desrousseaux [8] says, the most sensible discussions of the industrial economy are often those of literary economists. In the absence of a really sophisticated method of portraying industrial reality, the statistician has to rely on tools which are still far too rudimentary.</br></br>
<b>Progress under way</b></br></br>
It is to be hoped that the current methodological progress will encourage a dialectic between the quality of data and the adequacy of their interpretation. In all, grasping the imperfection of statistical methods is a measure of the possibility of correcting them. And if one symptom of the scientific character of a methodology is the cumulative nature of its progress, industrial statistics methods would seem promising. This is why, despite all the difficulties discussed theoretically in the first section and historically in the second, the sheer imperfection of quantifying certain industrial phenomena has an air of scientific validity, provisional as are all scientific conclusions.</br></br>
There is a striking contrast between the high-quality and refined use of data and the scant attention given to the molds in which these data are set. But the solidity of the product depends on the quality of the mold. The very plan of the industrial statistics edifice is formed by this mold: the classifications. That edifice, like industry itself, is a site of constant and unpredictable change.</br></br>
The theoretical and administrative problems of the years to come will be arduous. Statistical investigation needs finer, more precise and higher-quality tools. The emerging discussions on this subject testify to the existence of these needs, whose development portends systematised effort which will compensate for the qualitative imbalance between considerations of form and of content.</br></br>
Bernard Guibert belongs to INSEE's "Economic records and classifications" subdivision. Jean Laganier and Michel Volle have been placed by INSEE at the disposal of the French Ministry of Industrial and Scientific Development (Statistical Office of the Miscellaneous Industries and Textiles Directorate).</br></br>
<b><u>Bibliography</u></b> </br></br>
<b>Philosophy of knowledge</b></br></br>
[1] Pierre Bourdieu: <i>Éléments pour une théorie sociologique de la perception artistique</i></br>
[2] Michel Foucault: <i>Les mots et les choses</i></br>
[3] Henri Lefebvre: <i>Logique formelle, logique dialectique</i></br>
[4] Gaston Bachelard: <i>Le rationalisme appliqué</i></br>
<b>Economic history and economics</b></br></br>
[5] Roger Priouret <i>Les origines du patronat français</i></br>
[6] H.W. Ehrmann <i>La politique du patronat français (1936-1955)</i></br>
[7] Claude Gruson <i>Origines et espoirs de la planification française</i>, Dunod 1968</br>
[8] Desrousseaux <i>L'évolution économique et le comportement industriel</i></br>
<b>Statistical results</b></br></br>
[9] <i>Statistique générale de la France</i> "Industrie 1847"</br>
[10] <i>Statistique générale de la France</i> "Industrie, enquête de 1861-1865 ", Paris, 1873</br>
[11] <i>Statistique générale de la France</i> "Recensement de 1896. Industrie"</br>
[12] <i>Statistique générale de la France</i> "Enquêtes annexes du recensement de 1931", Paris, 1935</br>
[13] SEEF "Les comptes de la nation pour l'année 1951"</br>
[14] SEEF " Les comptes de la nation pour l'année 1956"</br>
[15] INSEE, <i>Tendances de la conjoncture</i>, No 8, 1970</br>
<b>Articles on classifications</b></br></br>
[16] J. Prévot: "<i>Réflexions sur les problèmes des nomenclatures statistiques d'industries et de produits", Informations statistiques</i> Nos 1 and 2, 1962. </br>
[17] Benier, Giudicelli, Grosmangin, Guibert, Laganier, Masson, Pietri, Rousseau, Volle: "<i>Une construction des objets de l'analyse économique, les nomenclatures de l'industrie</i>", paper drawn up for the French Ministry of Industrial and Scientific Development</br>
[18] Benier, Giudicelli, Grosmangin, Guibert, Laganier, Masson, Pietri, Rousseau, Volle: "<i>L'analyse des données et la construction des nomenclatures d'activités économiques</i>", Annales de l'INSEE, No 4.</br>
<b>Classifications</b></br></br>
[19] <i>Nomenclature douanière</i> (French Customs Nomenclature)</br>
[20] <i>Nomenclature des activités économiques</i> (French Economic Activities Nomenclature) (INSEE, 1949)</br>
[21] <i>Nomenclature des activités économiques</i> (French Economic Activities Nomenclature) (INSEE 1959) </br></br>
<b><u>Footnotes</u></b>
(1) "Essay: A work in prose, very freely structured, dealing with a subject which it does not treat exhaustively". <i>Le petit Robert</i>.</br></br>
(2) A division of a set E is a family of sub-sets such that the union of all the sub-sets forms set E and the intersection of two separate sub-sets is empty. A division is said to be embedded in another if any sub-set of the first is included in one of the sub-sets of the second. An order relationship (higher or lower levels) can be determined between the divisions which determine a classification [17].</br> </br>
(3) For the examples we have quoted, the code numbers used in the customs nomenclature are:</br>
29. Organic chemicals.</br>
29-38. Natural or synthetic provitamins and vitamins, etc.</br>
29-38-23. B2 vitamins.</br>
61. Clothing and clothing accessories in fabric.</br>
61-02. Women's, girls' and young children's outerwear.</br>
61-02-49. Cotton coats for women and girls.</br>
73. Cast iron, iron, steel.</br>
73-32. Bolts and screws etc. and similar articles in cast iron, iron or steel, etc.</br>
73-32-21. Machine screws for wood, threaded, in bulk, shank diameter not more than 6 mm.</br></br>
(4) Depending on the domain, an individual may be a human being, an animal, an activity, a commodity etc. For some authors, only this list of elementary headings constitutes the classification, to the exclusion of any idea of groupings. We will not make this view our own.</br></br>
(5) Two questions then arise: what is the theoretical significance of the classes thus distinguished, and what is the the relevance of their particular structure and that of the field as a whole? What, for example, does the thought-object structure of an autonomous economic field mean from a theoretical point of view? Is it relevant in terms of a theory embracing the whole socio-economic field?</br></br>
(6) Man-made and synthetic textiles are, in fact, classed as chemicals in the German nomenclature. </br></br>
(7) The <i>Statistique de la France</i> had been reinstated by Bonaparte in 1800. The published results were systematically calculated at the level of the Empire as a whole, of which France proper was only a part. Chaptal therefore had to make estimates in order to assess the size of French industry.</br></br>
(8) A single industrialist may very well be both a protectionist of his/her products and a free-trader in terms of raw materials and production factors: this was then the case with textile manufacturers [5].</br></br>
(9) "The administration had very much hoped to be able to draw up a detailed classification by type of industry. Yet on many points and chiefly in the large manufacturing establishments, since the various operations involved in the full execution of an industrial product were found together in the same factory, each branch of industry had not always been designated. For textiles, for example, we had often lumped together, under the same heading, combing, spinning, weaving, finishing, etc.; and for metallurgy blast furnaces, forges, foundries and so forth. We therefore recognised the impossibility of drawing up a detailed classification, and had to be content with forming general groups, taking care to make a clear separation between dissimilar industries" [10].</br></br>
(10) <ol><li>Textile industry. </li>
<li> Extractive industry. </li>
<li> Metallurgy. </li>
<li> Metal objects. </li>
<li> Leather industry. </li>
<li> Wood industry. </li>
<li> Ceramics. </li>
<li> Chemical products. </li>
<li> Building. </li>
<li> Lighting. </li>
<li> Furnishings. </li>
<li> Clothing and toilet articles. </li>
<li> Food. </li>
<li> Means of transport. </li>
<li> Sciences and arts. </li>
<li> Luxury and entertainment. </li></ol>
(11) " The ideas of a high-ranking official of the time ... were strictly liberal. The idea that the State could usefully intervene in economic life was forcefully rejected." [7].</br></br>
(12) Known as the "Bichelonne Law".</br></br>
(13) Mr Prevot and Mr Duon.</br></br>
(14) Note that "planner" does not necessarily mean "statist". Professional organisations and large companies had - and still have - exactly the same representation.
</br></br>
Michel Vollehttp://www.blogger.com/profile/02758819892464278158noreply@blogger.com0tag:blogger.com,1999:blog-1465468348253401530.post-22066333969053609552013-06-01T08:35:00.000-07:002013-06-09T11:21:49.939-07:00The limit of statistics
In French : <a href="http://michelvolle.blogspot.fr/2013/06/la-limite-de-la-statistique.html" target="_blank">La limite de la statistique</a>.</p>
We know that statistics is not appropriate to describe a small population. We can certainly count the individuals who compose it, but it will be virtually impossible to go from description to explanation.</p>
In fact, explanation requires that we find in the statistical observation clues that guide us to causal hypothèses, between which we will choose based on the accumulation of past interpretations provided by the theory.</p>
We find these clues in comparing the distribution of a character between different populations (eg, comparing the structure of age between two countries or between two times in the same country) and in looking at the <a href="http://volle-en.blogspot.fr/2013/04/critique-of-correlative-reason.html" target="_blank">correlation between characters</a> within the same population.</p>
One can always extract a representative sample in a large population, that is to say that distributions and correlations observed in this sample are not substantially different from those that could be observed on the entire population because the clues they provide lead to the same hypotheses.</p>
Here is the test that will tell if the size of a population is sufficient to interpret its statistical description: <i>that population must be able to be considered a representative sample drawn from a virtual population of infinite size whose structure is explained by the same causes that the population considered</i>.</p>
<div align="center">* *</div></p>
Some populations are therefore not "statistisable" (please forgive this neologism). For sure we can count their individuals and calculate totals, averages, dispersions and correlations, then publish it all in tables and graphs: but this morass will be impossible to interpret, we cannot move from this description to an explanation.</p>
This is the case, for example, for much of business statistics: it often happens that the production of a branch or sector is concentrated in a few large companies whose number is too low for this population being “statistisable".</p>
There is a remedy: if it is impossible to interpret a statistical description, we will use the monograph. The search for causal relationships at work in the population will no longer consider distributions and correlations, but consider each individual case in its particular history.</p>
Of course history never provides more than assumptions, because the past is essentially enigmatic, but after all statistics also provides in the best case only assumptions... but they are not of the same nature, and the monograph requires a depth of investigation which statistics does not require.</p> Michel Vollehttp://www.blogger.com/profile/02758819892464278158noreply@blogger.com0tag:blogger.com,1999:blog-1465468348253401530.post-2458175897976576492013-06-01T02:31:00.000-07:002013-06-01T08:02:49.721-07:00The world of nature is ultra fractal In French : <a href="http://michelvolle.blogspot.fr/2013/05/la-nature-est-ultra-fractale.html" target="_blank">Le monde de la nature est ultra fractal</a></p>
Whatever the scale at which they are considered, fractals have the same degree of complexity. This is for example the case of the coast of Brittany: whatever the scale of the map, it is shredded. Magnify the detail of a fractal reveals a pattern similar to that of the entire drawing.</p>
Examination of a natural object - whether the whole universe or a speck of dust - let appears, when the scale is changed, a series of views of the same complexity - but unlike Fractals they are not similar.</p>
Consider the universe. Its geometry is non-Euclidean (space is curved). At the level of everyday experience the geometry is Euclidean. We find clusters of molecules in the grain dust examined by electron microscopy. Later we will encounter atoms, then the probability waves of quantum mechanics. Farther particles appear. We could go on, we could also select other scales ...</p>
In the thinnest detail of nature lies, as in a fractal, a complexity which is equivalent to that of the whole. However each of the scales follows a peculiar geometry. This adds another kind of complexity to the complexity of the fractal. Nature, being essentially complex, is "ultra-fractal."</p>
<div align="center">* *</div></p>
The examination of any physical object - your hand, a pencil, a speck of dust - can never achieve a detailed and complete description. This despairs those whose only absolute knowledge can satisfy the thirst for knowledge, but "absolute knowledge" is a mirage consisting of words that should not be juxtaposed.</p>
The destiny of every human being is the both comic and tragic theater of the dialectic between the ultra-fractal world of physical, human and social nature and the world of values that animate his intentions. . This dialectic is <i>the action</i>.</p>
To act he doesn't need an absolute knowledge: he needs only a <i>relevant</i> knowledge, that is to say a knowledge that is adequate to the action he intends to achieve. This knowledge, being expressed in a finite number of concepts, will always be <i>simple</i> compared to the complexity of nature.</p>
The concepts that are necessary to driving - identifying obstacles and signals, anticipating the behavior of other drivers - select for example, in the complexity of the visual spectacle, a finite number of events. It is the same for all our actions: explicit thought is always simple and it is best to reserve to nature the qualifier "complex" ("complex thought", expression dear to Edgar Morin, is an oxymoron) even if a thought can be <i>complicated</i> in the sense that its acquisition requires a long apprenticeship. By cons the process of elaboration of thought is complex because the brain belongs to the world of nature.</p>
<div align="center">* *</div></p>
The contrast between the simplicity of thought and the complexity of nature invites to postulate that this complexity is <i>unlimited</i> (that is to say not only infinite as a right line, but <i>without limit</i>). This hypothesis is an axiom because we can neither prove it nor demonstrate the opposite.</p>
This axiom has the consequence that any mathematical theory, that is to say any logical structure based on a non-contradictory battery of axioms, is the model of a phenomenon belonging to the world of nature: thus the non-Euclidean geometries, created as an exercise in pure logic, provided subsequently a model for the geometry of the cosmos). If this was not the case, this theory would be a limit to the complexity of nature.</p>
A mathematical theory can wait a long time or even never encounter the phenomenon it models because, being not revealed by experiment has revealed, this phenomenon remains is buried in the complexity of nature: but we are sure it exists. This confers to the math a radical realism, with an obvious caveat: if any mathematical theory models a phenomenon, it does not model all phenomena. It follows that the ambition of a "Theory of Everything" in physics is a mirage. Michel Vollehttp://www.blogger.com/profile/02758819892464278158noreply@blogger.com0tag:blogger.com,1999:blog-1465468348253401530.post-40794916614183047242013-04-28T09:50:00.003-07:002013-06-09T11:24:09.566-07:00Two utility functions In French: <a href="http://michelvolle.blogspot.fr/2013/04/les-deux-fonctions-dutilite.html" target="_blank">Deux fonctions d'utilité</a><br />
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The classical economic theory (Debreu, <i>Theory of Value</i>, 1959) is based on three elements: the <i>utility function</i>, the <i>production function</i>, the <i>initial endowment</i> that divides ownership of the goods among actors. Starting from these elements one can deduce the vector of relative prices that, directing the exchange, guides the economy to a Pareto optimum.<br />
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The elegant simplicity of this model provides it a great power. The general equilibrium is detailed in partial equilibrium, each market being the scene of a supply and a demand. This can be completed by introducing the time: the production function is then modified by the investment. <br />
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In "A Suggestion for Simplifying the Theory of Money" (<i>Oxford University Press</i>, February 1935) John Hicks proposed however to fill a gap in this theory. He noted that each agent has actually <i>two</i> utility functions: one describes the satisfaction that comes from consumption, and the other one describes the satisfaction that gives him the possession of a patrimony. <br />
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Assets can be classified according to their liquidity. Money, which is the pure liquidity, is readily usable and implies no risk but provides no income. Illiquid assets provide an interest or a rent, but their price is changing: their possession presents a risk of depreciation. <br />
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It would be foolish to prefer to another an asset which is both more risky and less profitable. The ranking of the most liquid assets (currency) to the least liquid (buildings) is normally also a ranking based on performance (less profitable to more profitable) and according to risk (less risky to more risky).<br />
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The structure of patrimony which an agent desires is determined by its <i>expectations</i>: the demand for money is explained by the need for a convenient way to pay for daily expenses and also to quickly seize opportunities, it cancels if the agent expects a sharp decline in the purchasing power of the currency. The agent will also desire to own a property, which is illiquid because its sale requires time, if he anticipates a rent or an increase of the price. <br />
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The utility of patrimony is not detached from the utility of consumption: it addresses the need to ensure the level of it in the future despite the uncertainties.<br />
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Expectations give to the prices of assets a dynamics that differs from that of the price of consumption. For the latter, the interaction of supply and demand results in a price that reflects a static model. By cons the price of assets obeys a powerful dynamic. <br />
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If indeed most agents expect that the price of an asset will grow, they wish to acquire it and demand will raise its price: this will strengthen their expectation. A symmetrical evolution occurs if a lower price is anticipated. The change in the price continues until, for often fortuitous reason, anticipation changes sign. <br />
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While the price of a product intended for consumption tends to its equilibrium value, the price of an asset will fluctuate widely, the phases of pessimism succeeding to phases of optimism, and cross without stopping the equilibrium level - if one can define it.<br />
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If we can assume perfect information of economic actors regarding current prices, it can not be the same for expected prices because the future is inherently uncertain. The inter-temporal equilibrium is a second best equilibrium under the constraint of the law of anticipation p<sup>a</sup> = f(p<sup>h</sup>) that binds the expected price p<sup>a</sup> to the historical prices p<sup>h</sup> (Jean-Michel Grandmont, <i>Money and value</i>, 1983). It may happen that this second best equilibrium is so far from the optimum that the economy is experiencing a structural crisis (mass unemployment, under-investment): it is then said to be in a <i>disequilibrium</i>. This is currently the case. <br />
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<div align="center">* *</div>
Keynes (<i>General Theory</i>, 1936) created the concept of disequilibrium by introducing expectations in economic reasoning. <br />
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Neoclassical economists believe that expectations are <i>rational</i>, that is to say random but not biased. They assume that the price of assets is as stable as the price of consumer goods, and gives at each moment an accurate measure of their value: the disequilibrium is impossible. However, the volatility of asset prices brings an experimental refutation of their hypothesis. <br />
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Other economists (André Orléan, Jean-Noël Giraud) believe instead that the "true value" of a good does not exist, whether it is an asset or a consumer product: the price is according to them a psychological phenomenon or the result of a power struggle. <br />
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We can overcome this opposition if we consider that each agent has two utility functions - one for the consumption, one for patrimony - and that the dynamics of the market leads to price stability for the former, to volatility for the latter. <br />
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Michel Vollehttp://www.blogger.com/profile/02758819892464278158noreply@blogger.com0tag:blogger.com,1999:blog-1465468348253401530.post-82916220246730273752013-04-18T04:53:00.000-07:002013-05-01T09:49:46.872-07:00Creative intelligence(Tranlated from: <a href="http://www.volle.com/opinion/creation.htm" target="_blank">L'intelligence créative</a>)<br />
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Creativity is a mystery. As we tend to spontaneously reproduce our conditions of existence we are fundamentally conservative, even those who call themselves "leftists." How is it then that we may yet evolve?<br />
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In any business, in any institution, conservative forces are struggling to ensure the sustainability of the organization and, as we well know, the leaders never understand anything new. The economic reasoning is not enough to explain why so many <a href="http://www.volle.com/travaux/moteur.htm" target="_blank">innovations</a> happen: for an enterprise embarks on a new project it is not enough that innovation seems profitable, the potential profitability must also have been <i>understood</i> or at least glimpsed. How leaders "who never understand anything new" can nevertheless understand finally the value of an innovation?<br />
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These two mysteries are similar to the one the evolution of species confront us. If parents pass their genes to their children, how is it that one species can evolve, that forms life takes can diversify? The answer, as we know, lies in the <i>mutations</i>: genes are not transmitted all the same.<br />
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Mutations are random, most of them are harmful and their carriers disappear. Some, however, are so positive that they will benefit their holders in the competition for reproduction: hence evolution.<br />
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Does not happen in our minds, in our institutions, a phenomenon similar to this one that would explain the creative thinking in the individual and the innovation in the enterprise?
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We believe that the mind resides entirely in concepts and in the logical relationships between concepts, that it is entirely explicit. “Ce qui se conçoit bien s'énonce clairement”, said Boileau, "What is well conceived is stated clearly.” But this is wrong or rather incomplete. Before thinking explicits itself in concepts, before it goes into shape, it gropes in the dark.<br />
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The association of ideas, which explicit thought should banish, is driving this phase of preconceptual thought. It is like manure that we do not eat of course, but that nourishes plants that feed us and is indispensable to their growth.
In moments of relaxation or reverie before or after sleep, or when we indulge in our bathroom, ideas, images, impulses succeed in our mind. The cerebral gland that produces them spontaneously, as well as endocrine glands secrete hormones.
The association of ideas does not follow a logical order. Awakened by the assonance of words, by the similarity of images, it follows random paths with respect to the order of things: it is like a plow that plows and plows again the ground, like a hand that beats a card game.<br />
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Among the ideas and images that scroll in our mind, most have no interest: they would be as harmful as are most of the genetic mutations. A few are potentially fruitful: the association of ideas has compared things it would be useful to bring together, suggested ingenious approach that we would never have thought of.<br />
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But to identify potentially fruitful ideas in the flow of those that the cerebral gland produces spontaneously we must also know how to sort them: it is the role of what I call <i>creative intelligence</i>, which assumes a sensitivity of a very peculiar type and also the intervention of memory.<br />
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<div align="center">
* *<br />
</div>
Some people perceive <i>relief</i> among the ideas: they will see the ingenious idea emerge as a peak, as a summit whose appearance arouses in them a strong <i>emotion</i>. Some have described the glare, the dizziness that the idea whose intuition anticipates the fertility gives rise to. This emotion engraves the idea in <a href="http://www.volle.com/lectures/yates.htm" target="_blank">memory</a>: it will henceforth guide the effort and the action.<br />
<br />
But not everyone is sensitive to the relief of ideas: some people, puting on the same level all the suggestions that their brain secretes in relaxation, are equally indifferent to all of them. In their minds, Everest itself would not seem to emerge from the sea level and their associations of ideas, not eliciting any emotion, remain without consequence.<br />
<br />
Others perceive relief but it is misplaced, as on a map that would be established by a misinformed geographer. They will then fall in love with sterile ideas selected by a caprice: they try but nothing will come of it.<br />
<br />
<div align="center">
* *<br />
</div>
The excitement at the fruitful idea is similar to aesthetic emotion: the person who appreciates the beauty and harmony of a work of art or an artifact sees this work, this, object, to detach and shine on the background of undifferentiated perception. Those who are deprived of this sensitivity can not even catch a glimpse of what it is.<br />
<br />
We can simulate the association of ideas on the computer: it can randomly jump from a document or an image to another, it can stir files. But could it feel a relief, anticipate the consequences of a rapprochement and finally select the most promising ideas? This requires, it seems, the sensitivity and anticipatory capacity which only we humans possess - or at least some of us.<br />
Michel Vollehttp://www.blogger.com/profile/02758819892464278158noreply@blogger.com0tag:blogger.com,1999:blog-1465468348253401530.post-61817890914585298262013-04-17T03:00:00.000-07:002013-04-19T03:02:30.203-07:00e-conomy (Translated from <a href="http://www.volle.com/ouvrages/e-conomie.htm" target="_blank">e-conomie</a>).<br />
<br />
This book was published in 2000 by Economica, 49, rue Héricart, 75015 Paris, ISBN 2-7178-4073-7<br />
<br />
The "e-conomy" is based on the synergy between microelectronics, software and network. It is also called "new economy" because it changes the competition on the market, the internal organization of firms and their cooperation.<iframe align="right" frameborder="0" marginheight="0" marginwidth="0" scrolling="no" src="http://rcm-fr.amazon.fr/e/cm?t=sitdemicvol-21&o=8&p=8&l=as1&asins=2717840737&ref=tf_til&fc1=000000&IS2=1&lt1=_blank&m=amazon&lc1=0000FF&bc1=000000&bg1=FFFFFF&f=ifr" style="height: 240px; width: 120px;"></iframe><br />
<br />
This is certainly an "immaterial economy" but this characteristic stems from another, more fundamental: the cost of production being virtually independent of the volume produced, it is paid from the initial investment: e-conomy is a "sunk cost economy."<br />
<br />
This has profound consequences on the economic equilibrium.
The plants are automated, employment lies in design and distribution. The distribution of income is not connected to employment. Enterprises are organized around their information system and differentiate their products to build niche monopoly. Trade occurs through electronic intermediation. The investment being risky, competition is global and extremely violent.<br />
<br />
Modeling the "e-conomy" enlightens the game of competition in microelectronics, software, network and in the sectors that use these technologies: broadcasting, airlines, trade. This allows to interpret the evolution of information systems and to diagnose some obstacles.<br />
<br />
The "e-conomy" is highly effective but its power can lead to disaster if it is treated in the manner of "laissez-faire". It is therefore necessary to go beyond the economic dimension to consider the requirements of ethics and social cohesion.<br />
<br />
<a href="http://volle-en.blogspot.fr/2013/04/table-of-contents-of-e-conomy.html" target="_blank">Table of Contents</a>: full text access.<br />
<br />
<a href="http://www.volle.com/travaux/ouvrages.htm" target="_blank">List of my books</a>Michel Vollehttp://www.blogger.com/profile/02758819892464278158noreply@blogger.com0tag:blogger.com,1999:blog-1465468348253401530.post-10458858366600207742013-04-17T02:00:00.000-07:002013-04-19T09:25:51.701-07:00Table of contents of e-conomyThis book was published by Economica in October 2000. Some details would of course need to be updated, but the structure of the model and of the reasoning remains relevant. <br />
<br />
Most of the texts are in French. I shall translate them progressively into English.<br />
<br />
Foreword<br />
Acknowledgments<br />
Preface<br />
<br />
<b>Part I: The model</b><br />
1 - <a href="http://volle-en.blogspot.fr/2013/04/e-conomy-chapter-i-overview.html" target="_blank">Overview</a> (in English)<br />
2 - <a href="http://www.volle.com/ouvrages/e-conomie/rendements.htm" target="_blank">Increasing Returns</a><br />
3 - <a href="http://www.volle.com/ouvrages/e-conomie/stc.htm" target="_blank">Contemporary technical system</a><br />
4 - <a href="http://www.volle.com/ouvrages/e-conomie/mono.htm" target="_blank">Monopolistic competition</a><br />
5 – <a href="http://www.volle.com/ouvrages/e-conomie/couches.htm" target="_blank">Layer Model</a><br />
<br />
<b>Part II: Areas</b><br />
6 - <a href="http://www.volle.com/ouvrages/e-conomie/informatique.htm" target="_blank">Computing</a><br />
7 - <a href="http://www.volle.com/ouvrages/e-conomie/audiovisuel.htm" target="_blank">Audiovisual</a><br />
8 - <a href="http://www.volle.com/ouvrages/e-conomie/dimensionnement.htm" target="_blank">Dimensioning</a><br />
9 - <a href="http://www.volle.com/ouvrages/e-conomie/telecom.htm" target="_blank"">Telecommunications</a><br />
10 - <a href="http://www.volle.com/ouvrages/e-conomie/aerien.htm" target="_blank">Airlines</a><br />
<br />
<b>Part III: Uses</b><br />
11 - <a href="http://www.volle.com/ouvrages/e-conomie/si.htm" target="_blank">Information System</a><br />
12 - <a href="http://www.volle.com/ouvrages/e-conomie/obstacles.htm" target="_blank">Obstacles</a><br />
13 - <a href="http://www.volle.com/ouvrages/e-conomie/commerce.htm" target="_blank">E-commerce</a><br />
14 - <a href="http://www.volle.com/ouvrages/e-conomie/nations.htm" target="_blank">Relationship between nations</a><br />
15 - <a href="http://www.volle.com/ouvrages/e-conomie/perspective.htm" target="_blank">Putting in perspective</a>
Michel Vollehttp://www.blogger.com/profile/02758819892464278158noreply@blogger.com0tag:blogger.com,1999:blog-1465468348253401530.post-87855590451910917392013-04-17T01:59:00.000-07:002013-05-01T09:50:54.233-07:00e-conomy, Chapter I : Overview(Translated from <a href="http://www.volle.com/ouvrages/e-conomie/vue.htm" target="_blank">Vue d'ensemble</a>).<br />
<br />
<i>Nota Bene</i>: we use here the term "model" in a sense different from that given to it by econometricians. We want to draw the consequences of a few simple principles (CTS, production function with fixed cost) and compare them with observational data: this allows us to use some mathematical tools and terms such as "exogenous" and "endogenous". By cons we have not built a quantitative model involving a detailed and complete formalization of assumptions and allowing to test them systematically: this work is a preliminary to such a formalization.<br />
<br />
<b>CTS, automation and fixed costs</b><br />
<br />
Following an approach inspired by the work of Bertrand Gille<sup><a href="#fn1" id="ref1">1</a></sup>, we consider the synergy proper to the "contemporary technical system" or CTS (microelectronics, automation, computer) that characterized the economies of rich countries from the 70s. <br />
<br />
This synergy gives the production function a "fixed cost" structure, which means that the cost (almost) does not depend from the quantity produced: it is easy to check that in the case of electronic chips or of software which are essential and fundamental products of the CTS.<br />
<br />
<b>Differentiation and monopolistic competition</b><br />
<br />
The “fixed cost production” function would imply for the market of each product a natural monopoly structure, where only one company can survive. In order to avoid this risk companies seek to differentiate the product as much as they can, that is to say as much as the demand can handle (for a product to be differentiated, it is obviously necessary that there exist a demand for different varieties of this product).<br />
<br />
The existence of cross-trade between countries reflects this differentiation. Let us quote one of the favorite examples economists use: if the cars were not differentiated, trade in cars would not exist between France and Germany because for the same price clients would not go looking abroad a model identical to the one they can find at home. Undifferentiated goods (pig iron etc..) are not subject to cross-trade.<br />
<br />
Companies enjoy on each variety a niche monopoly on the border of which they compete with suppliers of other varieties. <i>Monopolistic competition</i> is endogenous to the model: at the equilibrium the number of varieties produced is determined, as well as their price and the quantity sold of each variety. <br />
<br />
The peaceful symbolic of any equilibrium model should not conceal the potentially violent phenomena of creation and destruction that renew the actors. These phenomena will be illustrated by sectoral examples.<br />
<br />
<a name='more'></a>
<b>Employment lies in design and distribution</b><br />
<br />
Automation removes the jobs related to physical production. Emcployment in the factories lies in a few maintenance and conditioning jobs. Skilled jobs are needed to design new products, develop new varieties and define competitive production techniques. Other skilled jobs are needed to ensure the distribution of these products and keep the "front line" in front of the customer. <br />
<br />
Employment is organized into three layers: design, concentrated in limited geographical regions, and distribution, distributed everywhere close to the customer, are the two most numerous layers. The job required for physical production is low or even negligible<sup><a href="#fn2" id="ref2">2</a></sup>.<br />
<br />
<b>New distribution of wealth</b><br />
<br />
The CTS is the richest economy that humanity has known, because the automated production provides in abundance necessary or enjoyable consumer goods. However, the distribution of this wealth is not obvious. Wage labor, which provided almost automatically the distribution in a mechanized economy whose production required many jobs, can no longer fulfill the same role in an automated economy where physical production is (almost) without a job.<br />
<br />
Underemployment, with the breakdown of social cohesion that accompanies it, is a risk in the CTS economy: there is no <i>a priori</i> guarantee that the sum of employment in design and distribution ensures full employment. New forms of distribution, closer to rent, become necessary to ensure that all persons in society enjoy an equal access to wealth.<br />
<br />
The search for equity implies a deliberate action, because the only mechanism of CTS can as well, and with a high probability, result in an unfair society.<br />
<br />
<b>E-commerce and mediation</b><br />
<br />
The population is segmented according to various categories of needs and faces a diversified production. It is not easy for consumers to navigate and choose the variety that best meets their needs. Education of the demand, which results jointly of identification of needs <i>and</i> of knowledge of the offer, is difficult. The abstraction which consists in taking the demand as a starting point for the economy would be here excessive.<br />
<br />
<i>Mediation</i> is a form of trade that is endogenous in the economy of the CTS: the mediator is one who is able to <i>find</i> offers that match the <i>needs</i> of a client (so it contributes to the formation of the demand) while minimizing the costs of transaction. He facilitates the customization of the commercial relationship. <br />
<br />
Mediation uses the tools of electronic commerce: networks, computers, smart cards, call centers, databases etc. The lower cost of production of these tools is the engine of CTS, whose technologies attract therefore both production and trade. <br />
<br />
<b>A risky economy</b><br />
<br />
The fixed cost production function implies some risk for a business, since the entire production cost is spent before the first unit of the produt is sold. Moreover, the boundary ranges for the market of each variety (and for the company that produces it) is subject to price competition and innovation. Hence it can happen that the investment does not find its reward in the market if for example an unexpected competitor raids the demand that the firm anticipated by providing a better quality/price ratio through product or process innovation.<br />
<br />
A powerful spring is stretched in the fixed cost production function. He relaxes in situations of competition and extreme risk, the corollary of which is a research of security pushing the companies to form partnerships. They will be also tempted by illegal maneuvers aimed at ensuring market. The violence of the competition, the return to "feudal" forms in relations between companies, are endogenous to the model. The result is a need for clarification of the ethical issues, as well as a legislative frame and judicial practices.<br />
<br />
<b>Changes in business organization</b> <br />
<br />
Changing business organization is endogenous to the model. The generalization of computers and networks, triggered by their decline in price and the efficiency they provide, facilitates the emergence of transverse organizations that limit the number of hierarchical levels, decentralization to the base of a right to decision, the implementation of <i>a posteriori</i> control and report procedures.<br />
<br />
The information system evolves towards the personalization of the customer relationship and the integration of the customer in the information system of the enterprise. This development increases the mediation and contributes to transform the business relationship. <br />
<br />
<b>Globalization of the economy</b><br />
<br />
The globalization of the economy is endogenous because the cost of transport undergoes a significant drop in benefiting from CTS. Barriers that resulted from the distance disappear or fade.<br />
<br />
Assuming for pushing the idea to the extreme that transport costs are zero, no geographical limitation precludes the ubiquity of goods. Institutional barriers can be overcome: as the location of production sites is irrelevant in the model (because transport and physical production cost nothing), it is easy to install abroad assembly or even production plants to produce models of cars or computers. Globalization is not an exogenous dimension of the context: it is endogenous to the CTS economy.<br />
<br />
Globalization contributes to the risk perceived by the company: it is difficult to protect its investments by an active technology watch when the potential competitor is on the other side of the world.<br />
<br />
<b>Crisis of adaptation</b><br />
<br />
The above transformations build despite their diversity a coherent whole. They involve a disruption of our institutions (credit, distribution and redistribution, training, insurance, etc.) because they result from a development well suited to the mechanized industrial economy, to a production function and a type market equilibrium that are not those of today.<br />
<br />
Our societies are facing a crisis of adaptation. This crisis is endogenous to the model, once the gap is measured from the equilibrium conditions of the economy of the CTS to those the institutions inherited from the recent past provide<sup><a href="#fn3" id="ref3">3</a></sup>.<br />
<br />
<b>Representation: a layer model</b><br />
<br />
To consider both the future situation, the present situation and the transition, we will use a <i>layer model</i>. This type of model, invented to represent the architecture of computers and telecommunication networks, is historically consequential to the CTS. It allows to represent the articulation of various simultaneously requirements needed to run a program or to communicate, and avoid sterile but always reappearing questions on the classification of these components in the hierarchy of importance.<br />
<br />
<div align="center">
* *</div>
<br />
We have, with this model, both an explanatory scheme - the list and diversity of endogenous show - and the type of representation that corresponds to it (layer model).<br />
<br />
However all is not endogenous to the model. It does not account for exogenous such as natural resources and population, the evolution of which imposes an impact that a practical analysis must consider. It does not aim, even remotely, to cover the entire cultural, moral or philosophical problem.<br />
<br />
Such gaps can not be used to refute the model: a model can not claim to represent and explain everything. It did its job properly if it illuminates a small but well-chosen space, and if the border of validity that surrounds this area is unambiguously defined. <br />
<br />
The diagram below presents an overview of the model and of the causal relations it contains. The boxes on the heart of the CTS are surrounded by a thick line. <br />
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEghuh8kKu_84NvR_LaTM6RJNCZB4Tk5YU4tUMnjJOEh4PPrTFOq0FhsOQckiz_ecNnqlmje4z7qg7FlOXlSUSGvq5Xvxa9CLNqTkOwd2AVOeXODvPY-qQaC_SVd3nubpbjyBgTxRm4vHQ0/s1600/iconomy.jpeg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="372" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEghuh8kKu_84NvR_LaTM6RJNCZB4Tk5YU4tUMnjJOEh4PPrTFOq0FhsOQckiz_ecNnqlmje4z7qg7FlOXlSUSGvq5Xvxa9CLNqTkOwd2AVOeXODvPY-qQaC_SVd3nubpbjyBgTxRm4vHQ0/s400/iconomy.jpeg" width="480" /></a></div>
<br />
<sup id="fn1"><a href="#ref1">1</a></sup> Bertrand Gille, <i>Histoire des techniques</i>, Gallimard, La Pléiade, 1978.< br/><br />
<sup id="fn2"><a href="#ref2">2</a></sup> Pascal Petit, <i>Technologie et emploi : ce qui a changé avec les TIC</i>, Cepremap, 1997.< br/><br />
<sup id="fn3"><a href="#ref3">3</a></sup> Pascal Petit and Luc Soete, <i>Is a biased technological change fueling innovation</i>, Cepremap, 1997.< br/><br />Michel Vollehttp://www.blogger.com/profile/02758819892464278158noreply@blogger.com0tag:blogger.com,1999:blog-1465468348253401530.post-16413458336010420612013-04-16T07:23:00.000-07:002013-05-01T09:51:22.290-07:00Critique of correlative reason (Translated from <a href="http://michelvolle.blogspot.fr/2009/06/critique-de-la-raison-correlative.html" target="_blank">Critique de la raison corrélative</a>).<br />
<br />
Statistics provides counts, averages and totals; it also provides a measure of dispersion for quantitative variables, the standard deviation; finally it provides a measure of the relationship between quantitative variables, the <i>correlation</i> (for qualitative variables, the equivalent of the correlation is the chi2).<br />
<br />
I spare the reader the mathematical expressions of these concepts: they are found in textbooks.<br />
<br />
When there is an affine relationship (Y = aX + b) between two variables X and Y the absolute value of their correlation coefficient is equal to 1: they are "correlated".<br />
<br />
When no such relationship exists, the correlation coefficient is equal to zero: the two variables are not correlated. When the relationship exists but is fuzzy, the absolute value of the correlation coefficient lies somewhere between 0 and 1.<br />
<br />
<div align="center">
* *</div>
Confronted to the descriptions statistics provide, we are like those children who always want to know why things are as they are: we want to know the <i>causes</i>. <i>Felix qui potuit rerum cognoscere causas</i> [1]!
<br />
<a name='more'></a>Nevertheless some statisticians (Karl Pearson in the wake of Ernst Mach, Jean-Paul Benzécri) criticize the concept of cause because any causal explanation involves assumptions they believe "subjective" or "ideological". They cultivate statistics without causality and push to the extreme, sometimes to the mystic, the contemplative position of the statistician : Benzécri thinks that the observation of correlations reveals "the pure diamond of true nature".<br />
<br />
Yet when they must <i>act</i> - driving their car, brushing their teeth etc. - they certainly anticipate the results of their action, which implies to postulate a causality...<br />
<br />
We will continue regardless of their objections.<br />
<br />
<div align="center">
* *</div>
<br />
Correlation is an <i>indication of causality</i>: if X is the cause of Y, <i>maybe</i> X and Y are correlated; conversely if X is irrelevant to Y, <i>maybe</i> their correlation will be zero.<br />
<br />
We must say "maybe" because:<br />
<ul>
<li>corr (X, Y) = corr (Y, X): being symmetric, the correlation does not indicate the direction of causality, it does not distinguish the "predictor" and the "dependent variable";</li>
<li>there may be functional relationships that are not affine: the correlation does not tell all;</li>
<li>there may be a functional relationship (including affine) between two variables when they are not connected by a causal relationship;</li>
<li>there may be a causal relationship between two variables without showing any obvious functional relationship;</li>
<li>the notion of "cause" itself is open to several interpretations, located at varying degrees of depth.</li>
</ul>
<b>Nonlinear functional relationship</b><br />
<br />
Consider for example a mobile launched in vacuum and subjected to the action of gravity. The equation of its movement in a suitably chosen reference is X = (1/2) gT<sup>2</sup>.<br />
<br />
Suppose we observe X and T at regular intervals, the positions of the mobile building a "population" on which we construct a statistic.<br />
<br />
If the observed values of T are symmetric with respect to zero the correlation between X and T is zero: it is the case when there is a symmetrical relationship of the second degree.<br />
<br />
Thus the nullity of the correlation can either be due the independence of two variables, or it masks a functional relationship which is not affine.<br />
<br />
A clever statistician will see that the speed of the mobile and time are correlated since V = gT and that will put him on the trail of a correct modeling. But not all statisticians are clever.<br />
<br />
<b>Functional relationship without cause</b><br />
<br />
A similar phenomenon may be the cause of two others that appear correlated without there being a causal relationship between them.<br />
<br />
In episodes of economic growth (or decline), for example, many variables are correlated without being connected by any causality because they are driven by a similar trend.
<b> </b><br />
<br />
<b>Cause without apparent functional relationship</b><br />
<br />
If the evolution of a variable causes changes in the value of another variable, there will obviously a functional relationship between them but this can be hidden by a time lag: we won't find this relationship if we observe the two variables on the same date, and in order to find it one would have to shift one variable some weeks or months.<br />
<br />
This is the case for example in the relationship between inventory levels and production, between demand and investment etc. The clever econometrician knows how to identify such shifts, the naive econometrician (they exist) sees nothing.
<b> </b><br />
<br />
<b>Stages of causality</b><br />
<br />
Take the example of the mobile in free fall. If we consider only positive values of T a correlation between X and T appears. Can we say that T is the cause of X?<br />
<br />
The naive answer is "yes": the more time passes, the more the mobile goes down. But a physicist, thinking deeper, will say that the cause lies not in time but in the acceleration of gravity g.<br />
<br />
He may also go further and explain this acceleration following Newton g = km/d<sup>2</sup>: this provides a model of more general scope. He may also explain the force, following Einstein, by the curvature of space and gravitational waves. String theory provides further hypotheses to explain the propagation of these waves...<br />
<br />
Hence the cause can be found in various theories, each of which considers the phenomenon with assumptions of different depths. It is the same, of course, in economics: the expression of the cause it is necessary to retain corresponds to the the scope, the depth of the model that we built.<br />
<br />
Let us add that at the same level of depth a cause can still articulate several solidary layers, each one of them obeying a logic of its own (see <a href="http://volle-en.blogspot.fr/2009/03/aristotle-and-business.html" target="_blank">Aristotle and the Business</a>).
<b> </b><br />
<br />
<b>Economics and Econometrics</b><br />
<br />
Econometrics is based entirely on the exploitation of correlations: Logit models that econometricians are fond today or elementary forms of regression give what is necessary for calibrating equations and producing projections.<br />
<br />
Econometrics may thus be subjected to the ambiguities of correlation. Learned econometricians know how to avoid pitfalls - as the overall correlation of variables between them, and with time, during periods of growth or recession, or as offsets that mask correlations etc. - but it remains difficult to avoid them all.<br />
<br />
Econometrics is not enough to identify causalities at work : we must know the economic theory and be skilled in the choice of assumptions. An economic model is nothing but the staging of a beam of assumptions.<br />
<br />
<div align="center">
* *</div>
Pure statistical description calls interpretation, which involves: <br />
<ol>
<li>to be are aware of the choices that led to the observation, to know for what action it was organized;</li>
<li>to be aware of the extent of defects of data (eg that any population census has a bias of about 1 %, or 600 000 people in France);</li>
<li>to possess a theoretical background sufficient to interpret correlations by cleverly choosing the assumptions about causality.</li>
</ol>
____________<br />
[1] Virgil, <i>Georgics</i>, II, 489.
Michel Vollehttp://www.blogger.com/profile/02758819892464278158noreply@blogger.com0tag:blogger.com,1999:blog-1465468348253401530.post-7696823871791279592013-04-16T00:20:00.000-07:002013-05-01T09:52:02.129-07:00How to use Big Data(Translated from <a href="http://michelvolle.blogspot.fr/2013/01/comment-utiliser-le-big-data.html" target="_blank">Comment utiliser le Big Data</a>)<br />
<br />
Stéphane Grumbach and Stéphane Frénot have published in <i>Le Monde</i> on January 7, 2013 an article that develops what is often said about Big Data: "<a href="http://www.lemonde.fr/idees/article/2013/01/07/les-donnees-puissance-du-futur_1813693_3232.html" target="_blank">Les données, puissance du futur</a>."<br />
<br />
It is true that the Internet provides powerful editorial means to the institutions that produce statistics, it is also true that the observations collected by computer processes allow novel usages. One should of course be aware of the new possibilities and new dangers that entails.<br />
<br />
The authors of this article, however, handle with too few precautions the semantic bombs that are the words "data" and "information." Phrases such as "to digitize everything", "information society", "mass of data", "a resource little different from commodities such as coal and iron ore" are actually deceptive, because by encouraging to consider data according to their volume they slide down the slope of the "information theory."
<br />
<a name='more'></a>Shannon, who likened the information a message brings to the logarithm of its length after compression, said "meaning does not matter." The impressive strength of this statement can not hide its absurdity.<br />
<br />
Here's what I was taught by the <a href="http://www.volle.com/ouvrages/metier/metier.htm" target="_blank">professional practice of statistics</a>: <br />
<ol>
<li>"Data" are in fact <i>selective observations</i>: they are not "given" by nature but defined <i>a priori</i> by an observer so that their <i>measure</i> can then be "given" to the computer.</li>
<li>The "information" gives to the brain of the person who receives it an "inner form" which procures him the ability to act. This ability can however come true only if the data are <i>interpreted</i>, which requires applying a <i>causal link</i> between the concepts whose measurement was observed. </li>
<li>The sharpest <a href="http://www.volle.com/ouvrages/andon.htm" target="_blank">data analysis</a> doing no more than exploring <a href="http://volle-en.blogspot.fr/2013/04/critique-of-correlative-reason.html" target="_blank">correlations</a>, one must be proficient in the <i>theory</i> of the observed domain for being able to infer from correlation to causation . </li>
</ol>
A few words on the last point: a theory is the treasure of previous interpretations, condensed in the form of causal relationships between concepts – and this treasure has to be free of dogmatism, pedantry and narrowness that are all diseases of the theory.<br />
<br />
Anyone who ignores the theory will inevitably fall, as happened to me, in any of the naivety that the experience of theorists had long identified. The observation that data procures was itself based on a (sometimes implicit) theory which provided its concepts, and whose it is important to have at least a hunch.<br />
<br />
Operation of intelligence agencies shows that the interpretation (which they call "synthesis") is <i>much more</i> important that the collection of data: it is better to collect a few well chosen data, that ons is able to interpret, rather than to be crushed by a massive collection.<br />
<br />
If we neglect this Big Data will bring only confusion. It is dangerous to place value only in the volume of computer storage and the power of data processing. By cons if one knows how to do data will be indeed a resource - and therefore, as stated by Grumbach and Frénot, an issue.
Michel Vollehttp://www.blogger.com/profile/02758819892464278158noreply@blogger.com0tag:blogger.com,1999:blog-1465468348253401530.post-82485414583206586172013-04-15T08:47:00.000-07:002013-05-01T09:52:32.864-07:00What is a "concept"? (Translated from: <a href="http://michelvolle.blogspot.fr/2013/03/quest-ce-quun.html" target="_blank">Qu'est-ce qu'un concept ?</a>)<br />
<br />
"What is a concept? " asked once a friend of mine. I had used this word while we were talking about economy.<br />
<br />
This friend has suffered like me philosophy in the last year in high school. She may not have been paying attention, it may be that his teacher was a mediocre philosopher or poor teacher. To understand the philosophy, told me a philosopher who thought of his own experience, one must have reached at least the age of thirty years, have formed a family, have children and practice a profession ... What can we understand at the age of eighteen?<br />
<br />
I admire the choice and depth of the readings of this friend, if not their extent, but this fine and intelligent person kept so unpleasant memories of the course of philosophy that she close her ears when she hears one of the terms of the technical vocabulary, in particular "concept".<br />
<br />
It is therefore normal that she does not know what it means. I begun to understand it when, working at <a href="http://www.insee.fr/" target="_blank">INSEE</a>, I questioned the relevance of the <a href="http://volle-en.blogspot.fr/2013/04/an-essay-on-industrial-classifications.html" target="_blank">classification of activities</a> and the relationship between statistics and economic theory.
<br />
<div align="center">
* *</div>
"A concept, I said, that's an idea associated with a definition."
As it meant nothing to her, I had to develop.
<br />
<a name='more'></a>"Everyone, I said, has an <i>idea</i> of what a circle is: it is a regular round whose nature provides examples. The outline of the full moon, the section of a branch of a tree are circles. This idea, which is associated with an image, helps to recognize a circle when we see it but not <i>reason</i> about the circle in order to explore its mathematical properties.<br />
<br />
"For this, it must be defined. Several definitions are possible: the circle is the set of points in the plane equidistant from a given point, or the set of points in the plane from where we see a segment at a right angle, or the closed line with a given length which encloses the largest planar surface, etc. These definitions are equivalent because we can pass from one to the other by a demonstration.<br />
<br />
"To possess the concept of a circle, one has to know one of these definitions. It may be that one of these definitions provides a more convenient starting point for the demonstrations: it is this one that will retain a mathematician concerned with elegance, that is to say efficiency.<br />
<br />
"It is the same for the triangle: we easily recognize one of them when we see it, but it must be defined if we want to show that the sum of the angles is 180 °, determine the formula for the surface, say whether two triangles are equal or similar, and so on.<br />
<br />
"Ideas do not lend themselves to any conceptualization: Aristotle himself said that we should not try to define everything. Of all the faces we recognize that of the beloclassification of activitiesved person, but it would be impossible to condense it into a definition."<br />
<br />
<div align="center">
* *<br />
</div>
Having said that concepts are, I thought I should go further to show what they do.<br />
<br />
"The concepts, have I said, are a fundamental element of any theory. In economic theory, for example, the basic concepts are the consumer, the company and the product, and they still cover other concepts. "Product" for instance develops in final product, intermediate product, capital good, which develop themselves in a nomenclature that could go to infinity if we did not have to abstract the detail in order to reason. The grain of the nomenclature depends on what you should <i>do</i>: when the hiker of the city sees only "trees," a forester sees "birch, beech, oak, pine etc." among which he still distinguishes subcategories.<br />
<br />
"To the nomenclature of concepts theory adds <i>causality</i>: in economics, the value of consumption is thus a function of household income and savings behavior, the production cost will depend on factor prices and quantity produced, the investment will depend on the cost function, anticipated demand and interest rates, etc.<br />
<br />
"Concepts and theories are not reserved to the intellectual life: they are present in everyday life and practice. When we learned to drive a car it took us assimilate concepts and causalities to use gearbox, brake, accelerator, and to know how to select in the image that appears on our retina the signals necessary for driving.<br />
<br />
"It is therefore wrong to believe that concepts are a matter of pure philosophy and that the theory can be used only by theoreticians. Our daily work is based on the concepts and patterns of causality that education and experience have formed. The intellect relies however, to illuminate a special area on few concepts that bind long chains of reasoning while everyday life, which confronts us with the diversity of nature, involves many concepts on which reasoning process with quick little steps or even short-circuit.<br />
<br />
"Concept" and "theory" are instruments of our daily lives. Isn't it true, moreover, for the intellectual activity itself? When we claim that there is a bulkhead between theory and practice, aren't we the victims or accomplices of the interested pedantry of academic corporations? "<br />
<br />
<div align="center">
* *<br />
</div>
My friend said she understood what I was saying but it would take her time to "realize" it, to "understand that it is real." I conceive that she needs to think at leisure: didn't it took me a few decades to clarify what is a concept, what is a theory, and what they serve?<br />
Michel Vollehttp://www.blogger.com/profile/02758819892464278158noreply@blogger.com0tag:blogger.com,1999:blog-1465468348253401530.post-86318130171297260212013-04-15T01:39:00.000-07:002013-05-01T09:54:13.249-07:00An essay on industrial classificationsArticle by Bernard Guibert, Jean Laganier and Michel Volle, published in <i>Économie et statistique</i> No 20, February 1971<br />
<br />
(Translated from: <a href="http://www.volle.com/articles/nomenclature.htm" target="_blank">Essai sur les nomenclatures industrielles</a>)<br />
<br />
There can be no economic analysis without a classification. Only a classification can give precise enough meaning to the terms that crop up so often in economic reports - "textile industry", "furniture", "steel industry" and the rest. Classifications play an absolutely crucial role, but they tend to be dismissed as tedious. They consist of tiresome lists with only the occasional intriguing oddity to break the boredom. A classification specialist is seen as a real technology geek, and has to be exactly that to answer the seemingly hair-splitting questions (s)he is faced with every day: should the manufacture of plastic footwear come under footwear manufacture or under manufacture of plastic products? What is the distinction between shipbuilding and the building of pleasure boats? Should joinery be classed as manufacture of wood and wood products or as building construction?
<br />
<a name='more'></a>The authors of this essay (1), who have used industrial nomenclatures on a daily basis either at INSEE or at the French Ministry of Industrial and Scientific Development, attempt to explain and then to overcome this prejudice. Their presentation, which aims to identify the principles on which present and past classifications were built, knowingly or otherwise, would probably not be accepted by other specialists without adjustment. It does succeed, however, in turning a supposedly disagreeable topic into an accessible, even fascinating, one.<br />
<br />
<div align="center">
* *</div>
According to Heidegger, <i>"for someone who wears glasses - a device which, depending on the distance, may be so close to him that it 'sits on his nose' - the device is, in terms of his environment, more remote than the picture on the opposite wall. It is so close that it usually passes unnoticed."</i> Commenting on this statement, Bourdieu says: <i>It is the same ethnocentrism which tends to regard as realistic a depiction of reality that owes its "objectivity" not to its concordance with the actual reality of things (since that reality is only ever delivered by way of socially-conditioned forms of perception), but to the fact that the rules defining its syntax in its social usage agree with a social definition of the objective view of the world. By qualifying as realistic certain depictions of reality (photography, for example), society is merely confirming its own tautological certainty that an image of reality which agrees with its depiction of objectivity is truly objective</i> [1].<br />
<br />
This explains why the problems inherent in classifications appear superfluous, boring and pointless. It is not because they are unimportant; on the contrary, it is precisely <i>because they are fundamental</i>. An economist - if we may use this image - is not interested in the glasses through which (s)he sees the economy; (s)he is, however, greatly interested in what (s)he sees. If we want to see the glasses we are wearing, we first have to take them off, and that blurs our vision. Similarly, discussions of classifications lead us to view as fragile, malleable and ultimately questionable those aggregates whose robustness we used to take for granted. Dividing-lines which used to be sharp become uncomfortably fuzzy.
Well, for once we are asking the reader to examine those glasses carefully. What do the classifications look like? How are they constructed? Which ones were used in the past, and what is happening today?<br />
<br />
<b>1 - What is a classification?</b><br />
<br />
<i>It is not a question of linking consequences, but of comparing and isolating, of analysing, of matching and pigeon-holing concrete contents; there is nothing more tentative, nothing more empirical (superficially, at least) than the process of establishing an order of things; nothing that demands a sharper eye or a surer, better-articulated language; nothing that more insistently requires that one allow oneself to be carried along by the proliferation of qualities and forms. And yet an eye not consciously prepared may well group together certain similar figures and distinguish between others on the basis of such and such a difference: in fact, there is no similitude and no distinction, even for the wholly untrained perception, that is not the result of a precise operation and of the application of a prior criterion.</i> (Michel Foucault, <i>Words and Things</i>).
<i> </i><br />
<br />
<i>I reflected that Argos and I belonged to separate worlds; I reflected that our perceptions were identical, but that Argos combined them differently and made other objects out of them.</i> (Jorge-Luis Borges, <i>The Immortal</i>).<br />
<br />
Although we have to start with a formal definition, even to distinguish a classification from a non-classification, the definition will not make sense until we have examined the process of construction and the habitual use of classifications.
<b><i> </i></b><br />
<br />
<b><i>A set of nested divisions ...</i></b><br />
<br />
Let us first look at a product classification - the customs nomenclature - taking as our guide not the method adopted by its authors but the appearance of an ordinary page of this document.<br />
<br />
It contains a list of basic product classes: "cotton coats for women and girls", "machine screws for wood, threaded, in bulk, shank diameter not more than 6 mm", "B2 vitamins", etc.<br />
<br />
There are also groupings described in more general terms: "Women's, girls' and young children's outerwear", "Bolts and screws etc. and similar articles in cast iron, iron or steel, etc.", "Natural or synthetic provitamins and vitamins, etc.". These <i>first-level</i> groupings are themselves placed in <i>second-level</i> groupings: "Clothing and clothing accessories in fabric", "Cast iron, iron, steel", "Organic chemicals".<br />
<br />
This products nomenclature thus looks in practice like a <i>set of nested divisions</i> (2). Everything is grouped from the bottom up to a top, unspecified level which we might call "products".<br />
<br />
The nomenclature thus contains both highly aggregated levels and levels of detailed breakdown.<br />
<br />
A numerical code is attached to each basic class and to each node of the nomenclature. The numbers of all headings at a particular level have the same number of digits (they are known as the "two-digit level", "four-digit level" etc.) and the number of a "node" identifies both the node itself and higher-level groupings which contain it. Code numbers are thus allocated "top down" from the top of the tree (3).<br />
<br />
To summarize, a classification looks formally like a series of divisions nested within a set of elementary headings. The list of these elementary headings must itself be defined in such a way that one single item in the list corresponds to each physical object in the field of study: in other words, a last division, that of the set of <i>units</i> (4) in the field of study, must correspond to the <i>denominations</i> represented by the list of elementary headings.
<b><i> </i></b><br />
<br />
<b><i>From the general to the particular, or vice versa?</i></b><br />
<br />
We now have an exclusively <i>formal</i> criterion for recognizing easily whether or not a text is a classification. Yet this criterion tells us nothing about the significance of classifications: the reason for their existence and how they are constructed. The formal response answers only part of the question we are asking: what is a classification?<br />
<br />
We can answer part of the question by looking at how the classifications are put together. We might think of constructing a classification "bottom up", i.e. starting with a list of "basic" denominations, building up a series of intermediate <i>thought-objects</i> and finally arriving at the aggregate defining the field of study as a whole; we could also take that aggregate directly and divide it up successively so as to arrive at a list of elementary headings so detailed that we need go no further.<br />
<br />
These two approaches, though formally inverse, are used simultaneously in practice. This is worth comparing with the Aristotelian notion of categories defined either <i>in extenso</i> (i.e. by exhaustive enumeration of the units designated by the category) or <i>in intenso</i> (i.e. by specifying the properties common to the units). If we eliminate any trivia, we can see that the categories are never compiled either <i>in extenso</i> or <i>in intenso</i>, but according to a process which in effect incorporates both of these contradictory approaches.<br />
<br />
The list of elementary headings is the tricky part of the nomenclature; it is here that the relationship with the concrete is closest.<br />
<br />
This list is not a set of <i>objects</i> (i.e. industrial, animal or human-activity products etc., according to the domain in question), but a set of <i>denominations</i>: two objects ranked under the same denomination are regarded as equivalent from this point of view.<br />
<br />
To be usable as a basis for a classification, these denominations must meet certain conditions:<br />
<ul>
<li>as we have seen, they must be a subdivision of the set of singular units;</li>
<li>they must reflect the purpose of the study.</li>
</ul>
We know that no unit can be assimilated into another, since a sufficiently detailed examination would always lead us to perceive a difference. A denomination is constructed from properties common to the units it designates, regardless of the differences they may otherwise reveal, and we obtain a list of denominations which is longer or shorter depending on the degree of detail sought. The threshold must be set by <i>usefulness</i> criteria, i.e. by letting the purpose of the study determine the structure of the list of elementary headings.<br />
<br />
Only a usefulness criterion enables us to say, for example, whether or not we should break down cars in a product list by colour. It all depends on the purpose: the distinction may be of no interest to an economist but crucial to a sales specialist.<br />
<br />
Moreover, the thought-objects covering the denominations are not reconstructed each time we embark on "naming" the units in a field of study. Most of such thought-objects are presented to us ready-made by the historical context in which we find ourselves, and above all the most important of them: the field of study itself (5). The compilation of a classification is thus inseparable from a point in time which supplies the definition of the object, the linguistic material, the purpose of the study - in fact more or less everything except the classification itself, which we have to compile on the basis of the given parameters.
<b><i> </i></b><br />
<br />
<b><i>Forms and the significance of forms</i></b><br />
<br />
The unit, the physical object situated in the field of study, is <i>formless</i> when it comes to us. The intellectual comprehension of this object gives it a <i>form</i> enabling it to be adapted to the requirements of intelligent action.<br />
<br />
Thus an object which is ostensibly simple, e.g. a piece of merchandise such as a car, may be seen from two different angles. It can be said to exist as a conglomerate of atoms, as a piece of matter, but the same can be said of any stone or mineral sample. Our society's observance of this object lends it an entirely different significance. The laws of fashion, aesthetics, comfort, the technical constraints it obeys according to the means available at the time, even the set of affective mechanisms it invokes - all of these turn the object into a <i>sign</i>, a <i>phrase</i> of a social language which is not expressed in words but is no less meaningful for that. So what can we say? Is a car a lump of atoms (itself a social construct - there is no getting away from this) or is it a sign? It is both, and the one <i>no less than</i> the other.<br />
<br />
Similarly, an economic activity can be seen from two different angles. At the most "material" level, each economic activity can be represented by an <i>input</i> which is turned by some process into an <i>output</i>. Boards and nails, once transformed by skilled hammer blows, become a packing case. Similarly, a check validated by a signature becomes a means of payment.<br />
<br />
We could, of course, try to reconstruct in our minds the way the economy works by staying at the level of a sprinkling of objects. It is clear, however, that there are better things to do than to record a multitude of particulate acts; it is even more clear that the economic act of signing a check has its weight in its social significance and not in its anodyne material appearance: who carries out this operation, for whom, and why? It is worth noting too that debt discharge is gradually losing its material back-up with the rise of credit cards. Thus a gap is emerging between social significance and subjective perception.<br />
<br />
The same applies to the more modest concept of the manufacture of packing cases. Cases are made, of course, but they have been ordered, or at least the producer is counting on a demand; but the technique used, however primitive, has a history in our society. Thus the act of production, when seen in a social context, itself becomes a sign. The same would be true of a more technically complex act of production such as car manufacture, mentioned above.<br />
<br />
The whole of the economy, in its apparent chaos of tangled operations, speaks to us in its own language. All these acts - an impressive mass of <i>signifiers</i> - contain something <i>signified</i>. But the signifier delivers what is signified only if it is perceived and received in the appropriate forms.<br />
<br />
Compiling classifications is one of the methods by which our society has attempted to draw out these forms. Classifications are an attempt to trace, amongst the chaos of signifiers, those parts whose juxtaposition we hope will reveal what they signify.<br />
<br />
Let us now apply these ideas to our actual experience.<br />
<br />
<b><i>Universality and univocity</i></b><br />
<br />
We have seen that each singular unit must have a corresponding denomination in the elementary list: the classification must be <i>universal</i> in the field of study; only one denomination may correspond to this unit: the classification must be <i>univocal</i>.<br />
<br />
These two requirements directly reflect the fact that each level of the classification must correspond to a division of the universe of singular units.<br />
<br />
This requirement could be seen as trivial, but it is nevertheless interesting to give it some thought, and we will quote some examples to illustrate its significance.<br />
<br />
An expression such as "Construction of motor vehicles and cycles" evokes in everyone a fairly vague image of a complex of establishments, machinery and workers whose activity, indistinctly grasped as being fairly complex, has its end purpose in the marketing of motor vehicles and cycles. If we sought to delimit this complex with any precision, however, we would be risking substantial variations in the boundaries of the domain according to the individual point of view. For an investor, the denomination would cover manufacturing; for a user it would also comprise maintenance and repairs. The use of a common nomenclature enables everyone - provided that it contains the denomination in question at some level - to apply a concept with an unambiguous definition. Thus, in the Economic Activities Nomenclature, the content of heading 26 (motor vehicles, cycles) is broken down over two pages. The headings of the three-digit nomenclature are [21]:<br />
<ul>
<li>261. Construction of motor vehicles with thermal engines</li>
<li>262. Construction of bodies (coachwork), trailers and semi-trailers</li>
<li>263. Manufacture of parts, accessories and spares for motor vehicles</li>
<li>264. Repair of motor vehicles</li>
<li>265. Manufacture of spares and accessories for cycles and motorcycles</li>
<li>266. Manufacture of motorcycles and cycles</li>
<li>267. Repair of cycles and motorcycles</li>
<li>268. Demolition of motor vehicles</li>
</ul>
The content of the aggregate is very precise. Problems arise when we consider activities which appear to belong both here and elsewhere: should garages carrying out motor vehicle repairs come under heading 264 or under 743 (garages, service stations etc.)? If we want to arrive at a strict definition of the content of a heading which intuitively seemed clear, we are obliged to solve a number of boundary problems, to amass specifications and warnings. The classification becomes more complicated and more unwieldy, and experience shows that some questions always remain in suspense.<br />
<br />
The choices made in delimiting aggregates have important consequences; we can try a small exercise by looking at the page in <i>Short-term economic trends</i> [15] with the textiles index. It is clear that if, when defining the "textile industry" heading, we had excluded knitted and crocheted goods and man-made textiles (e.g. placing one under "Manufacture of wearing apparel" and the other under "Manufacture of chemicals and chemical products" (6)), the trend in the textiles index as a whole would have been quite different.<br />
<br />
The conveniently concise terms we use to designate branches or sectors of the economy ("furniture", "textiles" etc.) therefore make no sense until we know the classification under which they are defined. If we want to draw comparisons, particularly international ones, the use of different classifications leads us to commit errors of interpretation. Readjustment calculations are possible only if we have been able to define a common level and if the data collection was enumerated in such a way that we can describe the same domain in the classifications used.<br />
<br />
These requirements for precise contours to be given to each aggregate, to ensure that bridges are put in place each time we are compelled to "look at" the same domain "via" two or more different classifications, are of obvious importance. All this is about quality, of course - the care given to the editing of the classification; it says nothing about what we are actually expecting of the aggregates we are intending to manufacture. It remains for us to determine the criteria which will guide us in building these aggregates.
<b><i> </i></b><br />
<br />
<b><i>What criteria?</i></b><br />
<br />
When faced with a classification which is perfectly clear, perfectly structured as a classification, users may well reject it. Let us suppose that we have a classification in which the manufacture of furniture and the manufacture of motor vehicles come under the same heading. This would obviously be rejected. "This aggregate makes no sense", people would say. But why?<br />
<br />
Another example: in the customs nomenclature of products [19], perambulators and push-chairs (87-13) are placed very close to assault tanks (87-08) because both are "vehicles". Ordinary pumps, petrol pumps and fuel-injection pumps for diesel engines, which have only their name in common, are lumped <i>together</i> under heading 84-10. These are classifications which seem "natural" to the authors of the customs nomenclature but are strongly rejected by the authors of the activities nomenclature [16].<br />
<br />
As always, the authors of this paper are using the word "natural" to denote a set of operations or attitudes which seem to them to fit together automatically; yet the different points of view prove that nothing fits together automatically. The choices made in compiling the customs nomenclature stem from its administrative function: it was created so as to enable differential charges to be applied, and must therefore be drawn up in such a way that the risk of classification error is as small as possible. It thus makes sense to use a classification which is partially mnemotechnic ("all pumps taken together").<br />
<br />
<b><i>A tool for economic analysis</i></b><br />
<br />
This example shows how the criteria used for compiling a classification are determined by its intended use. In the case of a classification whose main function is to be a tool for economic analysis, we can say that the more an aggregate covers a set of items which is coherent <i>in its depiction of the economy</i>, the more likely it is to be accepted by an economist. The more coherent the aggregate, the more easily the economist will be able to see it as a single object of analysis; the more (s)he will be able to see the object as a subject with its own autonomy, i.e. with a "behavior" and with "reactions". If the economist is totally taken in by its representative quality - i.e. if (s)he regards it as the very image of reality - (s)he may go so far as to attribute to this construct the role of a "natural" subject which appears "spontaneously", "freely" in the field of perception of the "objective" observer. Thus we speak of the investment behavior of "the steel industry", or the stockpiling behavior of "the distributive trades".<br />
<br />
<b><i>A tool for action</i></b><br />
<br />
Let us now consider a different point of view. The classification is not just a tool for economic analysis: it is also a tool for economic action. Heads of large companies, professional organizations, government demand a breakdown likely to produce the information they need in order to take action; since their action uses existing institutions as a tool, channel or object, they often want an "institutional" breakdown.<br />
<br />
This "technocratic" approach, which is found as often in private organizations as in the public sector, is clearly sometimes at odds with the requirements of economic analysis <i>per se</i>.<br />
<br />
The historical analysis we are about to undertake shows the extent to which the various portrayals have, in order to construct their objects and economic facts, perfected criteria and classifications which serve them well. We shall also see how, since it has become possible for the State and leading players to act on economic structures, classifications are partly influenced by the structure of institutions.
<b> </b><br />
<br />
<b>2 - The history of industrial classifications</b><br />
<br />
The history of industrial classifications is inseparable from that of industrial statistics.<br />
<br />
Industrial statistics in France - and probably in the rest of the world - date from 1669. Colbert then advised that <i>the situation of the kingdom's factories be recorded in numerical terms</i> [9].<br />
<br />
This operation was successful only in the textile domain, which was by far the most important. Studying the information supplied posed no classification problems.
<b><i> </i></b><br />
<br />
<b><i>The physiocratic classification of 1788: raw materials</i></b><br />
<br />
In 1788, after a century of industrial development unaccompanied by new statistical investigations, Mr de Tolosan, <i>superintendent for commerce, exercised his office in implementing the project designed by Colbert. Expanding his own knowledge with the help of the archives of the various ministerial departments, he drew up a table of France's leading industries and accompanied this with an assessment of the products manufactured by each of them</i> [9].<br />
<br />
This first French industrial nomenclature is given to us in this document by the order and title of the headings. It provided the framework for industrial statistics until 1847 and therefore deserves to be looked at in some detail. Industry is placed under three main headings <i>relating to the origins of the raw materials used</i>: "Mineral products", "Vegetable products", "Animal products".<br />
<br />
I. <i>Mineral products</i>: Rock salt and sea salt. Earthenware, porcelain. Glass and glazing. Pig iron. Lead. Copper. Ironmongery, haberdashery. Silverware, jewellery.<br />
<br />
II. <i>Vegetable products</i>: Stationery. Starch. Soap. Refined sugar. Tobacco. Hemp, linen, cotton, canvas and other fabrics. Linen, knitted and crocheted goods. Cotton, knitted and crocheted goods. Linen, lace. Hemp, linen, ropes, net, thread ribbons.<br />
<br />
III. <i>Animal products</i>: Silk garments. Tapestry, furniture. Furskins, cured goods. Woollen fabrics. Serge. Camlet. Coarse cloth. Broadcloth. Woollen knitted and crocheted goods. Hats. Silks. Silk knitted and crocheted goods. Ribbons, blonde lace, gauze, trimmings.<br />
<br />
This classification of industrial activities takes a "naturalistic" view of the economy in which the influence of physiocrats is tangible; human activity causes nature to "bear fruit", but the emphasis is more on nature and its fruitfulness than on the act which induces the fruit to come forth. The portrayal lies within a "natural resources" ideology.<br />
<br />
The criterion is applied without mercy: what we today call the textile industry is cut in half: hemp, cotton and linen are on the vegetable side, while wool and silk are found amongst the animal products.<br />
<br />
Note that the "furniture" heading did not mean the manufacture of furniture as it does today, but essentially the production of carpets, which were made of wool. It was therefore natural to place it amongst the "animal products".<br />
<br />
This nomenclature might be thought to have reflected only Tolosan's personal viewpoint. Not so; it was taken over as it stood by Chaptal, who published an estimate of French industry based on imperial statistics (7) around 1812.
<b><i> </i></b><br />
<br />
<b><i>1833: monographs on establishments</i></b><br />
<br />
The <i>Statistique de la France</i> was abolished in 1814; in 1833 the government reinstated the <i>Statistique générale du royaume</i> (General Statistics of the Kingdom), <i>with the approval of the chambers and to the satisfaction of all enlightened souls</i> ([9], p. XVIII). From 1839, efforts turned to extending the investigations to industry. The instructions given to the prefects are worth quoting:
<i> </i><br />
<br />
<i>The general table of licensed business operators of each department is to be closely scrutinised, and from this a list is to be extracted of producers, entrepreneurs and manufacturers whose establishments extend beyond the arts and crafts class and belong to the manufacturing industry by virtue of their nature, their scope or the value of their products</i>…<br />
<br />
<i>Conduct a detailed survey in each district, following the ideas supplied by these documents, with the purpose of establishing, by numbers, the industrial output produced each year by each factory or mill.</i><br />
<br />
<i>Include, however, only establishments which occupy with their work at least a dozen workers, excluding those who employ a lesser number, which shall in general be included in the arts and crafts class whose exploration will not take place until a later occasion.</i><br />
<br />
<i>Gather the statistical data relating to industrial establishments either by asking the owners or directors or, if information obtained from them is lacking, by carrying out assessments on the basis of public knowledge or any other means of investigation.</i>
<i> </i><br />
<br />
<i>Consult to this end all enlightened men who might supply, confirm, validate or rectify the necessary information</i> ([9], p. XIII).<br />
<br />
The operation was a painful one. For the first time we hear the complaint of the industrial statistician, surprised by the difficulty of his discipline, which proves to be far greater than in the other domains, and full of bitterness towards the predecessors who neglected to put together good methods:
<i> </i><br />
<br />
<i>Some factories use only one sort of raw material from which ten different manufactured products are obtained, while others, on the contrary, make only a single product from ten raw or differently-produced materials. These anomalies place great difficulties in the way of the execution of statistical tables which, essentially constrained by analogy of type, symmetry in the grouping of figures and similarity of spacing, cannot lend themselves to these enormous disproportions. Nothing similar was found in agricultural statistics, the produce of the soil being easily encompassed by such expressions; nor was this disadvantage encountered in the old attempts at industrial statistics, considering that the obstacles were constantly kept at a distance by remaining on the surface of things</i> ([9], p. XXI).<br />
<br />
Reading between the lines, however, it seems that the statistician's heart was no longer in it - on the classifications side, of course. This publication reveals an insatiable interest in industry, a dazzled curiosity about its performances; the statistician constantly counts and recounts everything that can be done with a given quantity of labor and effort. Yet at the same time he is discouraged by the complexity of his subject, by the shiny new diversity of activities and products and the variety of their combinations, and so he more or less abandons any attempt at an aggregate level. The data on the large divisions (mineral, vegetable and animal products) look like afterthoughts, and there is no real attempt to avoid or even to indicate double countings of sales. Comparisons with previous censuses are rudimentary.<br />
<br />
There are, on the other hand, veritable monographs on establishments. The following are listed for <i>each establishment</i>:<br />
<ul>
<li>the nature of the establishment, i.e. its activity; there is no indication of how it is determined;</li>
<li>the municipality in which it is situated; </li>
<li>the name of the manufacturer or producer; </li>
<li>the rental value; </li>
<li>the amount of business tax;</li>
<li>the value of the raw materials used annually; </li>
<li>the value of the products manufactured annually; </li>
<li>the number of workers (men, women, children); </li>
<li>average pay (men, women, children); </li>
<li>power units (a picturesque list): mills (windmills, water mills, horse-driven mills), steam engines, horses and mules, oxen; </li>
<li>burners: furnaces, forges, ovens; </li>
<li>machines, whose curious breakdown illustrates the persistent dominance of the textile industry: looms, others, spindles.</li>
</ul>
<i>The question of confidentiality never arises</i>. Individual information is published without restriction. Moreover, if we accept that statistics consist of summarising a large number of individual information items in a single piece of information, then (apart from a few totals) the published results are not of a statistical nature.<br />
<br />
This splintering of industrial statistics within the very framework provided by Tolosan can be explained by the historical situation. Industry is all-powerful and the pioneers have before them a vast field of activities about which they have few inhibitions at this stage. Competition between industrialists is not yet very lively; the State contents itself with indirect taxes: there is no point in concealing one's profits, and business people are proud to be making profits and showing them off. There is both a relative indifference to being known and a keen desire to know. The whole idea is to use the workforce and the equipment in such a way as to progress as far as possible; the novelty and the unknown factor are precisely the performance level which drives this entirely new industry, which is extending its sphere of activity to the detriment of the artisans it can so easily crush.<br />
<br />
The performance is of far greater interest than the means. There is no need for aggregates.<br />
<br />
Industrial statistics scatters its figures and headings throughout the "natural" framework constructed by Tolosan, and in so doing bursts its bounds. It renounces aggregates - i.e. the classification - in order to satisfy an industry in full expansion, eager to know every detail of its performances.
<b><i> </i></b><br />
<br />
<b><i>1861: the products</i></b><br />
<br />
The 1861 industrial census marks a turning-point.<br />
<br />
First, the classification used breaks completely with Tolosan; it employs "natural" groupings based above all on the purpose of products.<br />
<br />
The first groupings by employer emerged in 1840. The struggle between the free-trade lobby and protectionists had led industries to form product family groups in order to defend their interests (8); attitudes had become accustomed to this viewpoint.<br />
<br />
This time the census targeted "all factories or mills, irrespective of size" [10]. It had become impossible to publish results by establishment: instead, the district (<i>arrondissement</i>) was chosen as the geographical unit.<br />
<br />
The large divisions of the classifications had to be abandoned because of the inextricable complexity (even then!) of integrating them (9).<br />
<br />
The census classification describes an industrial world which is very different from our own. Although the most highly aggregated list of headings does not look too outlandish (10), the same cannot be said of their content.<br />
<br />
For example:<br />
<br />
The heading <i>Wood industry</i> (steam sawmills, water sawmills, veneer leaf, champagne corks, ordinary corks, barrels) has next to nothing in common with what we call mechanical woodworking today: the sawmill is nowadays allocated to agriculture and corks to "Various industries n.e.c.".<br />
<br />
The heading <i>Lighting</i>: gasworks, tallow candles, resin candles, wax candles, tapers, corresponds to nothing we would expect today.<br />
<br />
The heading <i>Furniture</i> (windows/mirrors, Gobelin carpets and tapestries, Neuilly tapestries, Meaux carpets, Aubusson carpets, Amiens carpets and broadloom, Utrecht velvet, Tourcoing carpets, felt carpets, wallpaper, waxed cloth, fluted chairs, cane chairs) has nothing in common - except the chairs - with what this word suggests today. The probable explanation is that dining-room and bedroom furniture etc. was made predominantly by craftspeople.<br />
<br />
The same applies to the heading <i>Clothing and toilet articles</i> (strapped clogs, wooden clogs, slippers, shoes, hats [silk and felt], hats [felt and wool], felt hats, straw hats, caps, umbrellas, leather gloves [Millau], leather gloves [Grenoble], silk buttons, enamel buttons, buttons [mother-of-pearl and bone], combs and brushes, perfumery), distributed by today's classifications amongst perfumes, brush-making, the various clothing branches, hat-making, the footwear industry and glove-making - but includes nothing of what we regard as the "clothing industry" today.<br />
<br />
It is worth quoting, out of interest, two headings which seem totally incongruous today:
<i> </i><br />
<br />
<i>Sciences and arts</i>: white paper, white and grey paper, wrapping paper, cigarette paper, cardboard, pens, pencils, printed goods, rulers, spectacle frames, musical instruments, Jura watches and clocks, Montbeliard watches and clocks, Besançon watches.
<i> </i><br />
<br />
<i>Luxury and entertainment</i>: decorations and imitation jewelery, cabinet work, playing cards, straw work.<br />
<br />
This shows how dangerous it would be to try to compare one era with another without carefully scrutinizing the homogeneity of classifications. This error is sometimes committed, however (as in [12], for example).<br />
<br />
Despite all the upheavals, the approach is generally the same as it had been in 1841. Information enabling performance to be measured is sought in each district by detailed industry. This aspect is stressed in the introduction:
<i> </i><br />
<br />
<i>The second part is devoted to the study of the economic situation of the principal industries; its purpose is to determine, in the value of any manufactured product, the shares of the capital invested, the wages, the raw materials and the general costs comprising operating and administrative costs, taxes, insurance, and lastly profits</i>.<br />
<br />
<i>In the third section we examine, according to the elements provided by the survey, the existing relationships between raw materials and manufactured products and, inter alia, the quantity and value of the work produced by a worker, a machine or a loom. This section constitutes a type of technological statistic of industry</i> (1101, p- XV).
<b><i> </i></b><br />
<br />
<b><i>1895: the technologies</i></b><br />
<br />
After the victory of the free-trade lobby in 1860, mistrust deepened between employers and the State. Refusal to respond became increasingly common; in parallel, liberalism became fashionable in government circles (11). The provision of information on industry was not enforced, and industrial statistics went into a long decline which lasted until 1940.<br />
<br />
The middle of this period, 1895, did see an important advance in industrial statistics, however: Lucien March's processing and analysis of the population census. Since a proper industrial survey was impracticable, establishments were studied on the basis of census forms completed by the persons surveyed, on which they indicated their profession, the address of the establishment, etc. The principal activity of an establishment was determined by comparing the various forms referring to it. March made the best of a bad lot:<br />
<br />
<i>If one knows both the size of the labour force in an industry and the average annual wage of the workers in that industry, one can easily calculate the total wage bill. One then possesses a figure which may serve as an indicator to characterise the growth in value acquired by the raw materials in a particular industry <b>without the need to ask heads of companies questions to which many would no doubt refuse to reply</b></i> ([10], p. 11).<br />
<br />
The problems inherent in determining the principal activity of the establishment from individual census forms (vague denomination, integration, juxtaposition) have since become traditional, but they are set out here for the first time.<br />
<br />
Also for the first time we see the fleeting appearance of the association criterion: the attempt to construct aggregates in such a way that activities frequently associated within an enterprise fall within the same aggregate. Yet March absorbs this into what we call the technical criterion, according to which activities are grouped by the industrial technology used:<br />
<br />
<i>The industries or professions in each section are arranged in an order <b>which separates as little as possible those which are most often grouped or juxtaposed in practice</b> ... neighboring industries in the classification are also analogous in terms of industrial processes. It is, in fact, the analogy of industrial processes that usually determines the association of several individuals in a single establishment or industrial center. Even when a manufacturer wishes to offer his regular customers new articles whose application goes with that of the ordinary products he makes, he cannot do so without paying the closest attention to the working conditions of his workforce and machinery</i> [10].<br />
<br />
The classification compiled on that occasion remained in force, with a few alterations, for half a century. Its headings mix collective activities with individual ones:<br />
<br />
<i>The classification does not stop at the names of collective industries, but includes the names of special professions; for example, No 5460 covers couriers and delivery boys (with no other indication), but it should be noted that these are simply persons who, in the absence of adequate indications, could not be associated with the collective industry in which they cooperate; other persons of the same profession are classed under the number of the industry exercised in the establishment to which they belong</i>.<br />
<br />
Industrial statistics henceforth remained a by-product of censuses. A 1931 industrial survey attached to the census contained output results for the first time [11]. The classification came to be applied far less strictly than March had wished, and the mixture of individual and collective activities under the same headings made these less meaningful.
<b><i> </i></b><br />
<br />
<b><i>From 1940: revealing the decision-making centers</i></b><br />
<br />
After the defeat in 1940, France tried to copy the German industrial organization model; the Act of 16 August 1940 (12) <i>turning its back on pre-war pseudo-liberalism and the abuse of individualism</i> [7], [6], bestows important powers on the para-corporative and authoritarian Organization Committees it creates. There was rapid amalgamation between the staff of the professional organizations, of the Organization Committees, and of the raw materials distribution departments set up by the Act of 10 September 1940 ([6], pp. 84 and 85). Major work on industrial statistics - a by-product of various activities of the professional associations/Organization Committees/distribution departments conglomerate - re-opened the question of the activities classification.<br />
<br />
Collective and individual activities were separated, with individual activities placed in a separate classification known as the "occupational nomenclature".<br />
<br />
Work began in 1942. Since the Organization Committees existed and were both the "social partners" to the technologists and the sole intermediaries between State and industry, the classification begun in collaboration with the Committees reproduced the breakdown by employer. The Organization Committees had been set up as quasi-cartels [6]; in general, employers grouped themselves according to an implicit application of the association criterion, which meant placing activities in the same enterprise under the same heading: the criterion was thus unspoken and went largely unrecognized.<br />
<br />
This 1942 classification remained virtually unused. The work which would culminate in the 1949 nomenclature began in 1945. The two specialists responsible for compiling it were divided (13): one was already using the association criterion, while the other wanted to use the "purpose" criterion. A trace of this conflict is found in the preface to the 1949 nomenclature:<br />
<br />
<i>Three criteria, sometimes conflicting, inspired the classification of activities under the various headings: purpose, dominant raw material, technology. Although no hierarchy applied to these criteria, the "purpose" criterion generally prevailed. Thus, for example, the industries allied to the motor vehicle industry were classed with the latter; electricity, gas and water were juxtaposed as energy sources. However, since technology appears to take clear precedence over purpose in the real structure, the technology criterion was chosen; the manufacture of rubber footwear, for instance, was allocated to rubber production and not to footwear manufacture. Quarrying of construction materials was classed with quarrying of miscellaneous materials</i> [20].<br />
<br />
It was in fact the association criterion which, without ever being mentioned, decided whether, "in the real structure", "technology takes precedence over purpose".<br />
<br />
Classification specialists do not live in an abstract world. Although a data-collection specialist like Mr Prevot would have defended the association criterion as a means of simplifying statistical surveys, this criterion also happens to meet the needs of economists remarkably well. The Liberation regime did not, in fact, bring a return to economic liberalism: far from it. The <i>commissariat général du Plan</i> was created in 1945-46. Initial attempts at economic synthesis then appeared in a national accounts context, and with a certain amount of planning in view. The planner's view of the economy became widespread (14). This raised the problem of the statistical unit, which was to be taken into account in compiling the information necessary to economic policy.<br />
<br />
According to the depiction then devised, the relevant unit was the one able to react to an initiative from the centre and hence possessing a certain autonomy: the enterprise.<br />
<br />
<i>It is clear that any attempt to describe and explain the trend in production must, if it is to be rational, feature the fundamental centers of decision-making: enterprises. A priori, any statistical system which breaks down enterprises into their technical components leaves out essential data, even if it is correctly tailored to its specific information objectives</i> ([7], p. 35).
<b><i> </i></b><br />
<br />
<b><i>Branches and sectors</i></b><br />
<br />
The study of classifications then expanded to assess the objects they cover. The shift in the focus of the statistician's interest sparked off the debates which took place on the contradiction between branches of <i>activity</i> (sets of parts of enterprises devoted to the same activity) and sectors (sets of enterprises).<br />
<br />
The starting point was in fact a portrayal of the economy in which the "individual" (the "free" agent who "acts", "reacts", "behaves" etc.) is the enterprise: a sort of "decision-making atom". If we want to divide up the economy into sub-sets with a defined "behavior", such a portrayal obliges us to form sub-sets containing a whole number of enterprises: this then leads to a division of the economy into sectors. At the time, the need for this breakdown was felt almost physically. It was not thought then that enterprises could suitably be chopped up, or that they could be too big, or that the legal boundaries did not mean much, any more than it would occur to us nowadays to split a population of human beings into sub-sets which did not contain a whole number of individuals.<br />
<br />
The concept of the <i>branch</i> did exist, however, and most of the econometric models - particularly those of Leontieff - were actually conceived within its framework. Herein lies the contradiction: on the one hand a portrayal of the economy which obliges the user to consider sectors (sets of enterprises) as agents useful to economic analysis; on the other hand an economic theory which provides appropriate models only for the study of branches - statistical entities which have no representational meaning.<br />
<br />
A controversy thus emerged from 1951 to 1955 between those in favor of a depiction founded on a sectoral breakdown and those who wanted a branch breakdown. Analysis of the technologies used in industry naturally fits the branch concept, as do Leontieff's models. An analysis of decisions, investment etc. falls more naturally into the sectoral framework, however. Models inspired by Mr Guilbaud tended to isolate decision-making centers and so referred to sectors. Lastly, discussions at the time also reflected the diverse behavior of heads of companies with regard to data collection on enterprises. Some preferred the branch framework, which was less transparent, while others preferred the sectoral framework, which was useful for studying the problems posed by mergers. The branch proponents included those responsible for industrial statistics and for the Plan; the sector advocates included Mr Gruson and his "team", the Finance department and some economics researchers.<br />
<br />
The economic table compiled in 1951 [13] following these debates was a complex one using both sectors and branches, defined with reference to product groups. An initial table showed sectoral sales by product group; another showed purchases. The procedure for drawing up these tables was so cumbersome that the sector/product cross was abandoned in 1956 [14] and replaced by the branch framework.
<b><i> </i></b><br />
<br />
<b><i>The advantages of the association criterion</i></b><br />
<br />
As can be demonstrated [17], the use of the "association criterion" minimizes the difference between branch and sector statistics by mitigating the contradiction between sector and branch. It was thus particularly well suited to the requirements of planning, which identified enterprises as economic agents while using the resources of branch-based econometrics.<br />
<br />
When the nomenclature was revised in 1959, it was explicitly mentioned that:
<i>We attempted in this project to throw more light on the <b>branches of economic activity</b> in which establishments or enterprises are active, in such a way that each heading covers comparable establishments and constitutes a meaningful economic unit</i> ([21], pp. 7 and 8).
This is still a bit vague. It was not until 1962 that Mr Prevot gave the association criterion its definitive formulation:
<i> </i><br />
<br />
<i>The closer the sets of elementary activities defining branches are to the groupings of elementary activities actually found within industrial establishments, the fewer the chances of error. The identity of the activity groupings defining the headings of an industries classification with the most frequent activity groupings in industrial enterprises or establishments may therefore be deemed an essential precondition to the compilation of an industries classification</i> [16].
<b> </b><br />
<br />
<b>3 - The current picture</b><br />
<br />
We have already described the situations of the past. An in-depth look at the current landscape will illustrate its ambiguities and complexity.<br />
<br />
It would be wrong to assume that all specialists advocate and accept the association criterion. In reality it corresponds only to data-collection logistics and to the needs of a planned economy in a portrayal which identifies enterprises as independent agents.<br />
<br />
The depictions which in the past successively favored the "raw materials", "technology" or "product" viewpoints are still very useful for studying other problems; moreover, the use of classifications for regulatory or administrative purposes means adopting other constraints.<br />
<br />
<b><i>A single compromise</i></b><br />
<br />
One solution, of course, would be to use several different classifications, each tailored to a particular purpose, but all linked via a common level. The chosen route, however, was to arrive at a single compromise by arbitration between the various requirements.<br />
<ul>
<li>The least common viewpoint these days advocates a classification founded on <i>raw materials or products consumed</i>: everything made from the same input would be grouped under the same heading. This criterion rests on the concept of the economy as a technique for using rare resources and on the memory of the shortages of the Second World War, when supply problems had to be given top priority. It is well suited to the examination of these problems.</li>
<li>Far more people prefer to group activities by the technology used. This approach sees things from the material and human investment angle; engineers frequently take this approach. It fits the examination of equipment problems particularly well. </li>
<li>Economists often favor the product criterion, which places under the same heading activities requiring very varied technologies and raw materials but supplying analogous products. The "product" viewpoint rests on a portrayal of the economy in which the market is the dominant element. It agrees with the marginalist economic doctrine currently in vogue ("demand drives supply"), and also with the idea, widespread nowadays, that market problems are becoming serious.</li>
<li>The use of the association criterion, as pointed out in the preface to the 1949 classification [20], leads to the alternate use of the above criteria. They come together as specific cases: when the most difficult task for enterprises really is to create a market, they will tend to specialize in a product and will use all possible technologies and raw materials to manufacture it. The use of the association criterion then means grouping under the same heading the elementary activities contributing to the manufacture of a single product with the help of various technologies: the priority will thus be given in this particular case to the "product" criterion. Hence the French activities nomenclature constructs the heading "games and toys". </li>
</ul>
Similarly, when the technology used requires heavy investment or highly specialized staff, or both, industrialists will tend to have it produce the entire range of possible products: if they are seeking to expand, exploring new markets is easier than acquiring and mastering new equipment. The association criterion would then mean grouping the manufacture of various products by the same technology and so giving priority to the "technology" criterion. The French activities nomenclature constructed the "Processing of plastic materials" heading for this purpose.<br />
<br />
It also happens - seldom nowadays, but that would change if there were a shortage - that the "raw materials" criterion is favored by an analogous mechanism. Hence, the French activities nomenclature contains the heading "Rubber products industry".<br />
<br />
To summarize, the association criterion leads to the partial use of the product, technology or raw materials criteria when these are crucial to the activities concerned.
<b><i> </i></b><br />
<br />
<b><i>Institutional constraints</i></b><br />
<br />
A combination of a variety of criteria - technology, material, product, and association as a compromise between the first three - requires a "preclassification". To become the official classification, this needs to be amended and compared with other "preclassifications". There are two reasons for this: technical and institutional. Let us take a brief look at the technical reasons, followed by a longer look at the institutional ones:<br />
<ul>
<li>Classifications are expected nowadays to last for some time (usually ten years). Clearly a classification must fit not the industry of today, but the industry which will prevail in five years' time. We therefore have to make assumptions about the trend in industrial structures. Moreover, the pointers given by the association criterion have to be interpreted from the point of view of their statistical meaning. Lastly, there must be good consistency with foreign classifications. This obligation, though technical, is already halfway to the institutional viewpoint. </li>
<li>Those responsible for classifications tend to adhere increasingly to the institutional view, claiming that <i>the classifications studied have more than just statistical or informative aims, since they also serve management and legislation, and compiling a classification does not mean constructing a theoretical tool for an abstract definition of reality. The classification is essentially a tool for management, for data collection and processing, and for study</i>. A complex task is thus defined. The classification must be a management tool: what we need is not an instrument of pure ("abstract") knowledge, but something that gives managers - "decision-makers" - the easiest means of collecting and analysing data. </li>
</ul>
The classification is not <i>directly</i> a decision tool; it is directly a study tool, even though the goal of the study is not pure knowledge, but to meet the needs of the decision-makers.<br />
<br />
For the decision-makers to need pure knowledge - a finely-tuned, purely theoretical instrument - would be no contradiction, but there are several reasons why this does not happen. The main one is doubtless that theoretical knowledge progresses very slowly and is not easily constrained to meet predetermined deadlines, whereas the need for action is always urgent. Action-takers thus see institutions as the quickest and most easily available framework, even if its contours are questionable.<br />
<br />
Let us take as an example something that really exists but shall remain nameless. Let us consider a branch of industrial activity that resembles a set of activities which were rightly juxtaposed a long time ago, but have since seen such technical transformations that, from the point of view of pure economics, the aggregate ought to be broken down, most activities placed under other headings, and only a small core kept under the original denomination.<br />
<br />
The economist, armed as it happens with an association criterion, is ready to make a high-handed cut, but the decision-makers do not like it. The branch which has disappeared from the economic landscape is still there as an institution. The industrialists, linked by a sort of family bond, continue to meet under the banner of a professional organization which is both their club and their representative in dealings with the State, the trade unions, other associations affiliated to the CNPF, and with foreign colleagues and competitors; this organization has a professional journal which is read, which influences the profession, etc.<br />
<br />
All of this does not rule out internal conflict or the slow decay induced precisely by economic change, but the branch still exists as an institution, as a spokesman for its decision-makers; and ultimately, this aggregate which is of no interest to the pure economist may be a valued and noteworthy partner for a planner or the head of a large company.<br />
<br />
Moreover, the institution itself would not easily tolerate being erased as an economic aggregate, and is good at voicing its opposition.<br />
<br />
Another example: the classification serves to define the scope of certain regulations, certain subscriptions; it is used by government to compile records which may be extremely voluminous. Changing it may provoke earthquakes, and therefore change is avoided as far as possible. This institutional constraint is less obvious than the former, but it exists nevertheless.<br />
<br />
<div align="center">
* *</div>
Thus we see that classifications are at the heart of the contradiction between scientific and administrative activity. The latter may take scientific form, since it uses the tools provided by science, but its aim is short-term and medium-term action that cannot tolerate the slow advance of science.<br />
<br />
Classifications pose, and also solve in their own way, a problem of compromise between two contradictory points of view, each of which is valid.<br />
<br />
These two points of view are no less interdependent for being contradictory, however. As the first section attempted to show, the framework of the portrayal serving statistical practice cannot avoid being closely linked to the very general findings which govern such portrayals, and hence, in particular, to those of economics. The problems posed by this interdependence appear as soon as we get past the purely formal aspect of the "classifications" object and start thinking about its meaning. The second part sought to demonstrate how this interdependence showed itself historically, but also how it came to be mediatised by what is commonly known as administrative inertia and red tape. A compromise on the tools of statistical practice, here classifications, was always reached between the requirements of current theory and the practical and institutional means available to statistical agents or those they interview: hence the ultimate ambiguity and difficulty not only of classifications, but also of the collection and presentation of statistical results in the framework they define.<br />
<br />
<b><i>Moving parts</i></b><br />
<br />
In industrial statistics, the statistical individual itself is hard to pin down. A human being can be identified unambiguously by her civil registration number, including her place and date of birth and serial number, but a business is built on shifting sand: its location, activity and name may vary. It is only ever a place through which individuals, materials and money flow, but this place is as volatile as an eddy in a stream.<br />
<br />
Nothing is stable. No matter how we split up the industrial economy - by unit size, region, activity - it will always be made up of moving parts. Constructing sampling frames for enterprises is a shot in the dark: the concepts used are vague and always questionable. We saw an example of this with classifications.<br />
<br />
If we re-read the publications of industrial statisticians of the past, or even those of today, we are struck by the disproportion between the difficulty of the object and the paucity of the means employed to study it, whether the object is professional organizations or government. Yet we never wanted to recognize the difficulty. We believed that counting was enough; basically we assumed that a goods item was a simple, obvious object - which it is not! - and that simple methods would enable us to cope with its production.<br />
<br />
We often find both surprise and consternation flowing from the pen of the industrial statistician about the difficulty of his object and the fuzzy indications it yields. It seems that he himself set out in all confidence and found himself confronted by a monster of complexity.<br />
<br />
It is thus an illusion that has to be abandoned. Industrial statistics is a difficult domain. Although the pioneers that have explored it for the past thirty years have done the bulk of the work, we have not yet emerged from their era.<br />
<br />
We must not therefore be surprised if, as Desrousseaux [8] says, the most sensible discussions of the industrial economy are often those of literary economists. In the absence of a really sophisticated method of portraying industrial reality, the statistician has to rely on tools which are still far too rudimentary.
<b><i> </i></b><br />
<br />
<b><i>Progress under way</i></b><br />
<br />
It is to be hoped that the current methodological progress will encourage a dialectic between the quality of data and the adequacy of their interpretation. In all, grasping the imperfection of statistical methods is a measure of the possibility of correcting them. And if one symptom of the scientific character of a methodology is the cumulative nature of its progress, industrial statistics methods would seem promising. This is why, despite all the difficulties discussed theoretically in the first section and historically in the second, the sheer imperfection of quantifying certain industrial phenomena has an air of scientific validity, provisional as are all scientific conclusions.<br />
<br />
There is a striking contrast between the high-quality and refined use of data and the scant attention given to the molds in which these data are set. But the solidity of the product depends on the quality of the mold. The very plan of the industrial statistics edifice is formed by this mold: the classifications. That edifice, like industry itself, is a site of constant and unpredictable change.<br />
<br />
The theoretical and administrative problems of the years to come will be arduous. Statistical investigation needs finer, more precise and higher-quality tools. The emerging discussions on this subject testify to the existence of these needs, whose development portends systematized effort which will compensate for the qualitative imbalance between considerations of form and of content.<br />
<br />
The authors : Bernard Guibert belongs to INSEE's "Economic records and classifications" subdivision.
Jean Laganier and Michel Volle have been placed by INSEE at the disposal of the French Ministry of Industrial and Scientific Development (Statistical Office of the Miscellaneous Industries and Textiles Directorate).<br />
<br />
<b>BIBLIOGRAPHY</b><br />
<br />
<b><i>Philosophy of knowledge</i></b><br />
<br />
<b><i> </i></b>
[1] Pierre Bourdieu, <i>Éléments pour une théorie sociologique de la perception artistique</i><br />
<br />
[2] Michel Foucault, <i>Les mots et les choses</i><br />
<br />
[3] Henri Lefebvre, <i>Logique formelle, logique dialectique</i><br />
<br />
[4] Gaston Bachelard, <i>Le rationalisme appliqué</i><br />
<br />
<b><i>Economic history and the economy</i></b><br />
<br />
[5] Roger Priouret, <i>Les origines du patronat français</i><br />
<br />
[6] H.W. Ehrmann, <i>La politique du patronat français (1936-1955)</i><br />
<br />
[7] Claude Gruson, <i>Origines et espoirs de la planification française</i>, Dunod 1968
[8] Desrousseaux, <i>L'évolution économique et le comportement industriel</i><br />
<br />
<b><i>Statistical results</i></b><br />
<br />
[9] Statistique générale de la France "Industry 1847"<br />
<br />
[10] Statistique générale de la France "Industry, survey of 1861-1865 ", Paris, 1873<br />
<br />
[11] Statistique générale de la France "1896 Census. Industry"<br />
<br />
[12] Statistique générale de la France "Ancillary surveys to the 1931 Census", Paris, 1935<br />
<br />
[13] SEEF "National Accounts for 1951"<br />
<br />
[14] SEEF "National Accounts for 1956"
[15] INSEE, Tendances de la conjoncture (Short-term Economic Trends), No 8, 1970
<b><i> </i></b><br />
<br />
<b><i>Articles on classifications</i></b><br />
<br />
[16] J. Prévot: "Réflexions sur les problèmes des nomenclatures statistiques d'industries et de produits", Informations statistiques Nos 1 and 2, 1962.<br />
<br />
[17] Benier, Giudicelli, Grosmangin, Guibert, Laganier, Masson, Pietri, Rousseau, Volle: "Une construction des objets de l'analyse économique, les nomenclatures de l'industrie", paper drawn up for the French Ministry of Industrial and Scientific Development<br />
<br />
[18] Benier, Giudicelli, Grosmangin, Guibert, Laganier, Masson, Pietri, Rousseau, Volle: "L'analyse des données et la construction des nomenclatures d'activités économiques", Annales de l'INSEE, No 4.
<b><i> </i></b><br />
<br />
<b><i>Classifications</i></b><br />
<br />
[19] Nomenclature douanière (French Customs Nomenclature)<br />
<br />
[20] Nomenclature des activités économiques (French Economic Activities Nomenclature) (INSEE, 1949)<br />
<br />
[21] Nomenclature des activités économiques (French Economic Activities Nomenclature) (INSEE 1959)<br />
<br />
<b>NOTES:</b><br />
<br />
(1) "Essay: A work in prose, very freely structured, dealing with a subject which it does not treat exhaustively" (<i>Le petit Robert</i>).<br />
<br />
(2) A division of a set E is a family of sub-sets such that the union of all the sub-sets forms set E and the intersection of two separate sub-sets is empty. A division is said to be embedded in another if any sub-set of the first is included in one of the sub-sets of the second. An order relationship (higher or lower levels) can be determined between the divisions which determine a classification [17].<br />
<br />
(3) For the examples we have quoted, the code numbers used in the customs nomenclature are:<br />
<ul>
<li>29. Organic chemicals;</li>
<li>29-38. Natural or synthetic provitamins and vitamins, etc.</li>
<li>29-38-23. B2 vitamins.</li>
<li>61. Clothing and clothing accessories in fabric.</li>
<li>61-02. Women's, girls' and young children's outerwear.</li>
<li>61-02-49. Cotton coats for women and girls.</li>
<li>73. Cast iron, iron, steel.</li>
<li>73-32. Bolts and screws etc. and similar articles in cast iron, iron or steel, etc.</li>
<li>73-32-21. Machine screws for wood, threaded, in bulk, shank diameter not more than 6 mm.</li>
</ul>
(4) Depending on the domain, an individual may be a human being, an animal, an activity, a commodity etc. For some authors, only this list of elementary headings constitutes the classification, to the exclusion of any idea of groupings. We will not make this view our own.<br />
<br />
(5) Two questions then arise: what is the theoretical significance of the classes thus distinguished, and what is the the relevance of their particular structure and that of the field as a whole? What, for example, does the thought-object structure of an autonomous economic field mean from a theoretical point of view? Is it relevant in terms of a theory embracing the whole socio-economic field?<br />
<br />
(6) Man-made and synthetic textiles are, in fact, classed as chemicals in the German nomenclature.<br />
<br />
(7) The Statistique de la France had been reinstated by Bonaparte in 1800. The published results were systematically calculated at the level of the Empire as a whole, of which France proper was only a part. Chaptal therefore had to make estimates in order to assess the size of French industry.<br />
<br />
(8) A single industrialist may very well be both a protectionist of his/her products and a free-trader in terms of raw materials and production factors: this was then the case with textile manufacturers [5].<br />
<br />
(9) "The administration had very much hoped to be able to draw up a detailed classification by type of industry. Yet on many points and chiefly in the large manufacturing establishments, since the various operations involved in the full execution of an industrial product were found together in the same factory, each branch of industry had not always been designated. For textiles, for example, we had often lumped together, under the same heading, combing, spinning, weaving, finishing, etc.; and for metallurgy blast furnaces, forges, foundries and so forth. We therefore recognised the impossibility of drawing up a detailed classification, and had to be content with forming general groups, taking care to make a clear separation between dissimilar industries" [10].<br />
<br />
(10) <br />
<ol>
<li>Textile industry.</li>
<li>Extractive industry.</li>
<li>Metallurgy.</li>
<li>Metal objects.</li>
<li>Leather industry.</li>
<li>Wood industry.</li>
<li>Ceramics.</li>
<li>Chemical products.</li>
<li>Building.</li>
<li>Lighting.</li>
<li>Furnishings.</li>
<li>Clothing and toilet articles.</li>
<li>Food.</li>
<li>Means of transport.</li>
<li>Sciences and arts.</li>
<li>Luxury and entertainment.</li>
</ol>
(11) " The ideas of a high-ranking official of the time ... were strictly liberal. The idea that the State could usefully intervene in economic life was forcefully rejected." [7].<br />
<br />
(12) Known as the "Bichelonne Law".<br />
<br />
(13) Mr Prevot and Mr Duon.<br />
<br />
(14) Note that "planner" does not necessarily mean "statist". Professional organisations and large companies had - and still have - exactly the same representation.Michel Vollehttp://www.blogger.com/profile/02758819892464278158noreply@blogger.com0tag:blogger.com,1999:blog-1465468348253401530.post-69315902428557697102013-04-15T00:17:00.000-07:002013-05-01T09:55:32.698-07:00Understanding the iconomy(Translated from: <a href="http://michelvolle.blogspot.fr/2013/04/pour-comprendre-liconomie.html" target="_blank">Pour comprendre l'iconomie</a>)
<i> </i><br />
<br />
<i>Notice to the Reader:</i> This text is well suited for those who accept the austerity of abstraction. Others will deem it probably poor and too assertive.<br />
<br />
<div align="center">
* *</div>
To <i>understand</i> today's economy, which is obviously <i>complex</i>, one must define a few simple concepts that will allow to build an argument (see <a href="http://volle-en.blogspot.fr/2013/04/what-is-concept.html" target="_blank">What is a "concept"?</a>).<br />
<br />
To generate these simple concepts requires a complex <i>meditation</i> fed by experience, conversations and readings. The long journey of this meditation leaving no trace in the dryness of the concepts, only the comment can provide them a little heat.<br />
<br />
We will therefore proceed <i>more geometrico</i>. We first present six concepts that provide a theoretical framework for modeling today's economy, then nine concepts that give a content to this framework. Then we cite each concept followed by the comment that explicit it.<br />
<br />
<div align="center">
* *</div>
<b>Six economic concepts</b><br />
<ol>
<li>the purpose of <i>economy</i> is the material well-being of the population; </li>
<li>any action deemed necessary or advisable by society is carried out by an <i>institution</i> of which it is the <i>mission</i>;</li>
<li>the mission of the <i>enterprise</i>, economical and industrial institution, is to effectively produce useful things; it ensures in the biosphere the interface between society and nature; </li>
<li>the <i>fulfillment</i> of the mission of an institution requires an <i>organization</i> that has a dialectical relationship with the mission; </li>
<li>the <i>State</i>, institution of the institutions, define their missions, instigates their creation and regulates the dialectic of the mission and the organization; </li>
<li>an <i>industrial revolution</i> transforms the nature, and therefore the mission of the institutions and the practical conditions for their organization. </li>
</ol>
<b>Nine concepts for understanding the contemporary economy</b><br />
<ol>
<li>the production system is based on the contemporary technical system (CTS), whose fundamental techniques are microelectronics, software and the Internet; the CTS succeeded in 1975 to the modern technical developed system (MTDS);</li>
<li>the emergence of the CTS sparks a cascade of anthropological consequences;</li>
<li>repetitive work is automated; </li>
<li>the bulk of the effort required by the production is achieved during the initial investment; </li>
<li>market obeys the regime of <i>monopolistic competition</i>;</li>
<li>products are <i>packages of goods and services</i>, each developed by a <i>network of partners</i>; </li>
<li>the material well-being of the consumer depends on the <i>quality</i> of its consumption;</li>
<li>predators are skilled users of CTS; </li>
<li>the crisis is due to the inadequacy of the behavior of economic agents to the productive system that the CTS brings out. </li>
</ol>
<a name='more'></a><div align="center">
* *</div>
<div style="text-align: center;">
<b>Six economic concepts</b></div>
<br />
<b>1) the purpose of <i>economy</i> is the material well-being of the population</b><br />
<br />
This goal is <i>limited</i>: the material well-being is neither happiness nor equity, nor the power of the nation, whose research requires other concerns and approaches.<br />
<br />
This limitation makes sense: no intellectual discipline, no kind of action can embrace neither the totality of human destiny nor all the needs of a society. Those who think that the economy should encompass happiness and fairness slip into the ditch of <i>economism</i>, which claims that the economy can or should meet all the needs of humankind.
<i> </i><br />
<br />
<i>Nota Bene</i>: (1) the material well-being has grown so rapidly during the "thirty glorious years" that it has been confused with happiness. This confusion is renewed today, symmetrically, in attempts to evaluate a "gross national happiness" (2) economic efficiency does not guarantee equity, whose research must refer to other criteria: a slave-holding society may indeed be Pareto-optimal (see John Rawls, <a href="http://www.volle.com/ouvrages/e-conomie/perspective.htm" target="_blank">A Theory of Justice</a>).<br />
<br />
Societies that pay little attention to the material well-being have reached a high degree of civilization: their values culminated in military courage, in the worship of the gods, in a frugal wisdom. The effort that our society devotes to the economy results from an arbitration between different values and it may happen that it considers legitimate to sacrifice a portion of material well-being in order to strengthen the mental well-being called "happiness", approaching equity or protect the nation, as stated by the creator of the science of economics itself: "defense is of much more importance than opulence" (Adam Smith, <i>The Wealth of Nations</i>, Book IV, Chapter 2).<br />
<br />
The material well-being of the population is the <i>welfare of the consumer</i> to whom the interests of the producer - that is to say, of the enterprises, their owners, their leaders and their employees - must be subordinated. The <i>axiom of Smith</i> is more important to economics as the infamous text on the "invisible hand":<br />
<br />
"Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to only so far as it may be necessary for promoting that of the consumer. This maxim is so perfectly self-evident that it would be absurd to attempt to prove it"(Adam Smith, op. cit., Book IV, Chapter 8).<br />
<br />
The material well-being is the subject of an intertemporal arbitrage: investment, being subtracted from the consumption share of the production, reduces the immediate well-being in order to increase the future well-being.<br />
<br />
<div style="text-align: center;">
* *</div>
<br />
<b>2) any action deemed necessary or advisable by society is carried out by an <i>institution</i> of which it is the <i>mission</i></b><br />
<br />
The human being is in a dialectical relationship with physical and biological, but also human and social <i>nature</i> in which he is inserted, which he manages and which appears before him both as a resource and as an obstacle. This dialectical relationship is <i>action</i>.<br />
<br />
An action can be individually: hand washing or even breathing is already acting and transforms nature at a very small scale. But the effects of individual action are confined to a narrow sphere. All <i>historical</i> action, that is to say an action that could have consequences in the whole society, requires the intervention of a collective structure that has been <i>instituted</i> for this purpose: an <i>institution</i>. For example the text of a writer, a most highly individual creation, is inconsequential in terms of society as long as it has not been published by an editor or on the Web, which are institutions, in order to be made available to readers.<br />
<br />
The individual brain is the natural place of birth of any new idea, even though it may happen that the same idea is born simultaneously in several brains. An idea, however, remains purely verbal if no institution <i>incarnates</i> it in the world of facts and things. Here appears a dramatic dialectic because - we'll see why later – the institution refuses at first the new idea, then sometimes appropriates it suddenly, most often deforming it. Woe to thNota Benee inventor who lack farm lucidity and humor!<br />
<br />
Hence the historical deployment of human destiny implies an institutional overtaking of individual thinking and action. It is a fact that some, like Sartre, refuse or ignore: "Sartre was never resigned to the social life as he saw it, that he felt unworthy of his idea of human destiny. He never abandoned the hope of some sort of conversion of all men together. But he never thought in his integrated system the in-between, the institutions between the individual and humanity,” (Raymond Aron, <i>Mémoires</i>, p. 954).<br />
<br />
Family, enterprises, public services, the large systems of a nation (education, justice, health, defense), the State etc. are institutions. Language itself, that each generation inherits from the previous and transmits to the next after having improved or deteriorated it, is an institution. Sometimes an institution works without anyone having a clear idea of a mission whose origin is lost in the mists of time: then it is healthy to make an effort to <i>recover the mission</i>.<br />
<br />
<div align="center">
* *</div>
<b>3) the mission of the <i>enterprise</i>, economical and industrial institution, is to effectively produce useful things; it ensures in the biosphere the interface between society and nature </b><br />
<br />
The enterprise is <i>the economic institution</i>: its purpose is that of the economy. It is also an <i>industrial</i> institution, taking “industrial” according to its etymology which is "ingenious productive action." Hence its mission contains two objectives: (1) it must produce <i>useful</i> things, that is to say things capable of contributing to the material well-being of the consumer, (2) it must produce <i>effectively</i>, that is to say using at best the resources that nature provides.<br />
<br />
Alternative definitions of the mission of the enterprise are often proposed. The most common is "to maximize the profit" or, equivalently, "to produce money." But as money is not consumed, it is not a product: it is a <i>tool</i> to invest and ensure the sustainability of the enterprise, those intermediate goals contributing to the goal of economy. We hear also that the enterprise's mission is to "create jobs," but the goal of the enterprise is not to be a nursery of employees.<br />
<br />
It may happen that the profit is appropriated by the owners or managers of the enterprise, or by networks of allegiance formed among the employees. The axiom of Smith being violated, this action leaves the regime of the economy into that of <i>predation</i>, which consists in consuming products or appropriating a patrimony which the predator seizes by force. In any society balanced exchange and predation are intertwined but the reasoning must distinguish them, although at certain times predation has been closely associated with the evolution of the economy.<br />
<br />
The enterprise is interposed between the world of nature, where it draws its resources, and the society to which it provides its products : it plays in the biosphere the role of an interface between these two worlds. For this interface to be effective it is necessary that the institution "enterprise" be multiplied in a multitude of <i>enterprises</i> in the plural, because it is in confrontation with the practical needs of consumers and the complexity of nature, so on the spot, that it is possible to define useful products and effective solutions for their production.<br />
<br />
It is also necessary that the enterprise takes into account the <i>disutility</i> of the waste it injects in nature (greenhouse gas emissions, toxic waste) for their control, and recycles its products at the end of their life, which is as important as the production itself (more precisely: they are part of the production of utility). To neglect that is a predation against the natural patrimony.<br />
<br />
While immersed in the business market, where it buys its inputs and sells its products, <i>the interior of the enterprise is not a market</i>. Thus the enterprise is analogous to a living cell bathed in its environment and whose membrane acts as a selective filter. The membrane of the enterprise is on the one hand the <i>first line</i> that manages its relationship with customers, suppliers and partners, and fulfills a function of translation assuming the dialectic of the market and the organization, and on the other hand the R & D that explores the world of nature for designing products and the techniques necessary for their production.<br />
<br />
<div align="center">
* *</div>
<b>4) the <i>fulfillment</i> of the mission of an institution requires an <i>organization</i> that has a dialectical relationship with the mission</b><br />
<br />
In order to effectively realize and embody the mission of an institution, it is necessary that this institution has an <i>organization</i> that defines procedures for collective action and allocate responsibilities between people. While the mission indicates <i>what to do</i>, the organization indicates <i>how to do it</i>: it considers the concrete practice and specifies vocabulary and rules of action, defines the sequence of tasks that make up its process and assigns them to different people.<br />
<br />
The implementation of an organization is a significant investment. Once set it will inevitably tend to emancipate itself from the mission, because humans are always tempted to substitute to the mission the formalism of procedures and the perspective of career. It can happen that a public service is the prey of a corporation: an army whose mission is to defend the nation turns against her to establish a military dictatorship, an education system whose mission is to instruct minds, to educate citizens and train people skills, turns into a nursery for adolescents, etc.<br />
<br />
The same phenomenon occurs in enterprises: internal procedures are often considered more important than customer satisfaction as agents comply with the criteria by which they feel or believe they are considered. It also happens that the procedures fossilize in practices contrary to the mission: the general direction will be the scene of a power struggle between networks of allegiance, waste treatment or recycling of products will be neglected, priority will be given to display a profit, cost accounting sparks between services a rivalry that destroys their cooperation, etc.<br />
<br />
Thus mission and organization are in a dialectical relationship: if the organization is <i>necessary</i> to achieve the mission, its tendency to emancipation must be compensated by a permanent reminder to the mission. The daily life of any institution is the dramatic conflict that arise from this dialectic: beside examples of clear dedication to the mission which are still too uncommon, we often find abuse of power, sterile formalism, shocking hypocrisy and the stubborn refusal of the innovative idea - which sometimes becomes sudden, erratically, a new fashion.<br />
<br />
These vexations are the inevitable price one must accept to pay for the <i>incarnation</i> of the mission into reality. Some people, being overly sensitive to these vexations, hate everything that is institutional. They always prefer new institutions which, while they remain at the level of ideas, can maintain their purity. An organization will however be necessary if the project is carried out, and the idea will be forced to painful compromise. Their desire for purity will push them to abandon this idea and to develop other projects: this often irrelevant idealism is for the best and the worst one of the engines of history.<br />
<br />
<div align="center">
* *</div>
<b>5) the <i>State</i>, institution of the institutions, define their missions, instigates their creation and regulates the dialectic of the mission and the organization</b><br />
<br />
The State is often defined by the legislative, executive and judiciary powers whose society must require separation according to Montesquieu. These powers overlap with the sovereign functions: external and internal security, issuance of currency.<br />
<br />
But what is the <i>mission of the State</i>? It is to be, said <a href="http://fr.wikipedia.org/wiki/Maurice_Hauriou" target="_blank">Maurice Hauriou</a>, "the institution of institutions": the State is responsible for identifying the missions that a society deems useful or necessary, to ensure that institutions are created and organized to accomplish them, then to continually remind these institutions to their mission by a regulation that compensates for the tendency of the organization to empower and limits the temptations of the predators.<br />
<br />
As it is also an institution, however, the State possess necessarily an organization that tends to emancipate itself from the mission. Among the men who run the State one must distinguish the <i>politician</i>, who is satisfied by the power that the organization confers, of the <i>statesman</i> who maintains and directs the organization in the service of the mission. Statesmen are rare, as rare are true entrepreneurs in the enterprises and real strategists at the head of the armies, but they are the ones who <i>make history</i>.<br />
<br />
Being the agent of the whole society, the State attaches importance to material well-being of the population but he must arbitrate between this issue and others that we have discussed: mental well-being (and hence culture) equity, national defense etc.<br />
<br />
Thus it is not appropriate, as the most dogmatic Liberals do, to reject any intervention of the State in the economy, or to refuse that the State submit the economy to non-economic imperatives. One should nevertheless not grant the State the monopoly of economic decision, because the economic institution par excellence is the enterprise, materialized by the multiplicity of enterprises that can accomplish their mission freely on the spot.<br />
<br />
Regulation must preserve freedom of enterprise, punish the predation and unravel the rigidities of the organization. Its definition being difficult it may actually be tempted to encroach on the freedom of enterprise: some States felt obliged to organize the whole economy as if it formed a single enterprise, the Plan having the monopoly of decision. If such an approach may be appropriate to conduct a few large projects, it involves a distance to the opportunities and risks that arise on the spot that is not compatible with efficiency.<br />
<br />
Like any institution the State can be ignored and hated. Many people refuse to take the hassle that causes the dialectic between its mission and organization, the defects of its operation and the behavior of politicians. Statesmen themselves are rarely appreciated in their lifetime: Richelieu and Mazarin were hated and it took a long time for France to recognize what they had brought.<br />
<br />
<div align="center">
* *</div>
<b>6) an <i>industrial revolution</i> transforms the nature, and therefore the mission of the institutions and the practical conditions for their organization</b><br />
<br />
Each period of history is based, according to Bertrand Gille (<a href="http://www.volle.com/lectures/gille.htm" target="_blank"><i>Histoire des techniques</i></a>, Gallimard, La Pléiade, 1978), the synergy of a few basic techniques that form a "technical system". An "industrial revolution" is the passage from a technical system to another and then from one period to another.<br />
<br />
There were three of these revolutions in the last centuries: the first, circa 1775, gave rise to the <i>modern technical system</i> based on the mechanics and chemistry, succeeding the <i>classical technical system</i> which was primarily agricultural. The second, circa 1875, gave rise to the developed modern technical system (DMTS) that combines mechanics and chemistry which an energy more convenient than steam (electricity, oil). The third, circa 1975, gave rise to the <i>contemporary technical system</i> (CTS) that we examine below.<br />
<br />
In an industrial revolution the relationship between society and nature is changed because new opportunities and new risks appear before the initiative of action. We can say that <i>nature itself is transformed</i>: it is like a new continent whose flora, fauna and geography do not resemble what we knew before.<br />
<br />
The missions of institutions must then be redefined and give way to new institutions. The rule of law and democracy are born with the first industrial revolution, which led to the emergence of new sectors (such as the production of capital goods). The large modern enterprise was born with the second industrial revolution. After the army and navy he military had to create an air force and, recently, an army of the cyberspace.<br />
<br />
Being purely practical the organization undergoes more important changes because of the changing conditions of the action: the new technical possibilities require skills able to exploit them, the product catalog is transformed as well as the process of production.<br />
<br />
Hence the transition from a technical system to another is a time of turmoil and confusion. The first entrepreneurs who know how seize the new opportunities make impressive gains while most enterprises remain prisoners of the organization to which they are accustomed. Social classes, facing a new horizon, lose their familiar landmarks. The legislative and judicial systems being slow to take into account the emerging realities, predators take advantage of their weaknesses. The education system continues to train skills which economy does not need.<br />
<br />
An economic crisis being caused by he inadequate behavior of economic agents (government, business, consumers) to the reality of the production system, it is inevitable that transition periods are also periods of crisis and not only economic crisis: years 1770-1780, 1830-1840 and 1870-1880 were in France periods of despair, even if their prepared a boom that nobody saw coming.<br />
<br />
<div align="center">
* *</div>
<div align="center">
<b>Nine concepts for understanding the contemporary economy</b></div>
<b>1) the production system is based on the contemporary technical system (CTS), whose fundamental techniques are microelectronics, software and the Internet; the CTS succeeded in 1975 to the developed modern technical system (DMTS) </b><br />
<br />
The DMTS relied on mechanics, chemistry and energy whose synergy formed the basis of the productive system until 1975. Around this date the production system began to computerize and then basic techniques became those, physical and logical, of microelectronics and network (soon called Internet) and those, semantic and logical, of software.<br />
<br />
The emergence of new technical system can be explained, as always, by several contributing factors. The oil shock caused by the aftermath of the Yom Kippur War in October 1973 caused an increase in the level and volatility of energy prices, and introduced in expectations an uncertainty which affected the credibility of the DMTS. Unrest of the late 1960s had forced enterprises to grant wage increases they wanted to compensate for an increase in productivity.<br />
<br />
Yet the computer, which had been gradually introduced into the enterprises from the late 1950s, gave finally way in the 1970s with clusters of terminals to a convenient decentralized access for the users. The notion of "information system" was proposed in the early 1970s and it seemed reasonable to link this system with those of decision and production.<br />
<br />
The CTS, which thus offered to take over, did not remove the DMTS techniques, no more than mechanization had removed agriculture in the nineteenth century. But just as agriculture was gradually mechanized while its share in the labor force decreased, mechanics, chemistry and energy would gradually computerize while their share in the labor force would decrease.<br />
<br />
Computerization has provided the enterprise with a <i>ubiquitous programmable automaton</i> (UPA). The set of processors, memory and software that the Internet provides any user forms in fact an automaton (admittedly gigantic and possibly partitioned, but still unique). It is <i>essentially</i> programmable, that is to say capable of doing everything that can be programmed. As it is accessible from any place on Earth the service is ubiquitous and this ubiquity, which does not depend on the proximity of a terminal since the mobile phone became a computer, is <i>absolute</i>.<br />
<br />
Computerization, deployment of the possibilities of the computer, is based on the alloy of the human brain and the automaton or, more precisely, of the <i>organized human being</i> (OHB) and the UPA. The OHB is the human being who contributes to the action of an institution whose knowledge is mobilized by an organization (the organization does not mobilize, fortunately, the emotional and spiritual dimensions of the entire human being).<br />
<br />
<i>Nota Bene</i>: the worker's <i>dignity</i> lies in his awareness of the usefulness of his work, his fun at work depends on the lever that the quality of the organization provides to the effectiveness of its knowledge. These are deep psychic phenomena but which are neither spiritual nor emotional: even if one is naturally attached to an institution where skill can flourish, the word "emotional" applies to relationships (romantic or family) that arouse emotions in the body.<br />
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This alloy occurs even in embedded computing where the computer is supposed to act without human intervention: it is indeed necessary that a human being designs and programs the UPA, whose operation must also be supervised because every automaton is subject to automatic random failures, and also any software whose size exceeds a few tens of thousands of lines of source code contains defects that escaped testing and cause unexpected incidents during the confrontation between the automaton and the nature.<br />
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The <i>emergence of an alloy</i> introduces a <i>new being</i> in nature: the alloy of copper and tin introduced the bronze, the alloy of iron and carbon introduced steel; computerization extends gradually the potential of the alloy of the UPA and the OHB. Like any emergence, this one has partly unpredictable consequences.<br />
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Between <i>computers</i>, which condenses in the UPA, and computerization which combines it with the OHB, the relationship is similar to that between shipbuilding and navigation: computers are or course necessary for computerization, whose success it allows and which expresses its requirements.<br />
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<b>2) the emergence of the CTS sparks a cascade of anthropological consequences</b><br />
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The computerization transforms the enterprises and therefore the economy : we will examine this in detail below. But its effects go beyond the economy: it is the emergence of an <i>ultra-modern</i> society that goes beyond modernity and post-modernity. They cover all aspects of anthropology: psychology of individuals, sociology of organizations and social classes, philosophy of the methods and processes of thought, finally metaphysics of values, orientations and fundamental choices.<br />
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It could not be otherwise since computerization has changed the nature to which individuals and institutions are confronted. Biotechnology, nanotechnology and materials science are based on the computer; the Internet has removed many of the effects of geographical distance; the human brain is associated with the automaton in productive activity; everyone can enrich on the Internet an information resource to which access has virtually no limits; the human body is computerized with prostheses building a network around the mobile phone; things computerize themselves with the Internet of Things; 3D printing decentralizes the production of goods which it provides a lightness and a solidity previously impossible.<br />
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This transformation continues apace. Evolution is explosive, a volcanic cataclysm shattering the crust of institutions and habits. What we have seen so far is almost nothing compared to what awaits us, because as say <a href="http://michelvolle.blogspot.fr/2011/12/erik-brynjolfsson-et-andrew-macafee.html" target="_blank">McAfee and Brynjolfsson</a>, "we're only at the half of the chessboard" at the 32nd box the inventor of chess received the annual harvest of a paddy field of 100 acres, but in the 64th he would have received 600 billion tonnes of rice, a thousand times the annual world production. This is the ratio between what we know today, with iPhones and iPads who impress us so much, and what we can expect in the twenty-first century. It is natural that this causes a painful loss in individuals benchmarks.<br />
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<b>3) repetitive work is automated </b><br />
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Each component of the alloy formed by the EHO and the APU has its own qualities: the success of the alloy requires their sound articulation.<br />
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The automaton performs tirelessly repetitive tasks so tireless 7 days/7 and 24 hours/24, with the only exception of interruptions for maintenance, but it is unable to interpret an unexpected situation and take initiatives for which it has not been programmed. By cons repetitive tasks quickly tire the human being, but he is able to improvise in order to cope with the unexpected.<br />
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Computerization implies to automatize all those repetitive tasks that occur so frequently that the effort required by automation be reasonable. Automation of repetitive physical work is manifested by the generalization of robots in factories; repetitive mental tasks (documentation retrieval, visual quality control, etc..) are also automated.<br />
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As a result, manpower is replaced in enterprises with a "brain power", only the mental faculties of the human being being in principle mobilized: judgment, initiative, judgment, understanding of situations and people, decisiveness and responsibility, etc.<br />
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This has consequences in the structure of employment. In a automatized factory are only involved supervisors and maintenance crews. Employees, in their majority, work at the interface between the enterprise and the outside world: in the R & D that conceives the design of products and the tools necessary for their production, and in the first line that handles the relations with customers, suppliers and partners.<br />
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<b>4) the bulk of the effort required by the production is achieved during the initial investment</b><br />
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The physical production being automated, most of the effort that the production of a good requires is in the design of the product and in the programming and implementation of the automaton: hence the effort is concentrated in the investment phase that precedes the actual production.<br />
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It follows that the marginal cost of producing a good is negligible compared with the initial <i>sunk cost</i> - unless of course the raw material used for the production is very expensive, which is not generally the case.<br />
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The cost of services provided by the first line is also a <i>cost of dimensioning</i>: it is dimensioned as a network, depending on the volume of work anticipated.<br />
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It results that the cost function of a typical computerized enterprise is characterized by <i>increasing returns to scale</i> because the average cost decreases as the number of units produced increases. This fact is upsetting for the economists: John Hicks, who was probably the best of them in the twentieth century, believed that to renounce the assumption of diminishing returns amounted to "the wreckage of the greater part of general equilibrium theory "(Value and Capital, Oxford University Press, 1939, p. 84). We will see that we may avoid this wreckage.<br />
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<b>5) the market obeys the regime of monopolistic competition</b><br />
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When returns to scale are increasing, and if the cost of factors and the production techniques are the same for all enterprises, the one which produces the largest quantity of a product may foreclose its competitors by selling cheaper than their cost production. We then say that the market for this product is subject to the regime of <i>natural monopoly</i>: ultimately it will be fully served by one enterprise alone, others will disappear.<br />
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These other enterprises may, however, survive by <i>differentiating</i> the product in <i>varieties</i> characterized by their attributes in order to respond to different needs. Among other consequences this differentiation is manifested by cross-exchanges of the same product between two countries: if the automobile, for example, did not include different varieties, the French would not buy German cars and the Germans would not buy French cars.<br />
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Quality can take two forms: "vertical" differentiation class varieties according to their degree of finish and thus their cost of production, "horizontal" differentiation distinguish varieties that have the same cost of production but differ in attributes (eg : blue shirts and pink shirts).<br />
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If every enterprise offers the variety which suits a customer segment, it enjoys on this segment a niche monopoly. In the space of needs some customers are at the boundary between two segments: the enterprises that this border separates are there in price competition. Then we say that the market is subject to the regime of <i>monopolistic competition</i>.<br />
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With the exception of a few very simple products like a pig iron, most of the products are suitable for differentiation to meet diverse needs. When returns to scale are increasing, economic equilibrium is thus established in most sectors under the regime of monopolistic competition.<br />
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The model which schematize this equilibrium is no more complicated than the model of pure competition: in the case of horizontal diversification, for example, its endogenous are the cost function of the product and the consumer's budget and utility function, the latter showing the distribution of preferences in the space of needs; the exogenous are the number of varieties and the price.<br />
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This mathematical model illuminates the reasoning but does not fully reflect the contemporary computerized economy, where innovation is alive. In fact the market obeys a <i>dynamic of monopolistic competition</i> rather than a equilibrium. If we represent the space of needs by drawing in a plan the areas of monopoly do not take the form of a peaceful honeycomb cutting, but rather resembles bubbles that arise on the surface of a boiling liquid and struggle to expand, then explode to give way to others: this is for example what we are witnessing on the market of smart phones with the competition between Apple, Samsung, Nokia etc.<br />
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<b>6) products are <i>packages of goods and services</i>, each developed by a <i>network of partners</i></b><br />
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Almost all of the cost of production of a variety is spent during the initial investment phase. This investment is a bet based on anticipating the needs of the consumers and initiatives of the competition. Quality competition also pushes up the cost (the cost of a video game increased by several orders of magnitude). The production of a new microprocessor costs ten billion dollars, the cost of a new operating system is of the same order of magnitude.<br />
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As a result, the economy of CTS is <i>the economy of maximum risk</i>. The enterprise that has spent most of the cost of production before receiving the first response from the market may lose its bet if the consumer does not like the product or if a competitor wins its market.<br />
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The need to share the risk is therefore imperative: most products are developed by a <i>network of partners</i>. The installation of such a network requires a <i>business engineering</i> which states the division of responsibilities, costs and revenues between the partners.<br />
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Computerization has also enabled a strong growth in <i>services</i>, <i>temporary</i> disposal of a good or of a skill, to the point that some believed that the economy which emerges would be essentially <i>servicial</i>. In fact the production of goods continues but now they are accompanied by services: automobile, which was the flagship product of DMTS, surrounds itself with counseling, financing, lease, warranty parts and labor, troubleshooting, maintenance, replacement etc., the quality of which is a differentiating factor as decisive or even more than are the attributes of the car itself.<br />
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Products are now <i>packages of goods and services</i> or pure services. Cohesion of the package, as well as interoperability and transparency of the partnership, are provided by an <i>information system</i> that is central to the strategy.<br />
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The Internet of Things finally associates to each good an identifier that allows to follow it during its life cycle: this has implications for logistics, maintenance, traceability, replacement and recycling at end of life.<br />
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<b>7) the material well-being of the consumer depends on the quality of its consumption</b><br />
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Economists are used to represent the well-being of the consumer through an increasing ordinal "utility function" U = f (x<sub>1</sub>, x<sub>2</sub>,...), depending on the <i>quantities</i> consumed x<sub>1</sub>, x<sub>2</sub>,... of the products 1, 2...<br />
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Consumer satisfaction, however, depends also on the <i>quality</i> of the product: a farm raised chicken is tastier than a battery chicken, hence you can not say "a chicken equals a chicken."<br />
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Consumer satisfaction is measured not by the only quantity consumed but by something like the product quantity * quality: if the quality is higher the consumer can be satisfied with a lesser quantity. Sometimes he even does not give importance to quality: it is not necessary for him to have multiple copies of the same book or the same disc, but he wants that those he acquires are interesting.<br />
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When each product is diversified in varieties the satisfaction of the consumer will be all things being equal higher if the number of varieties that it can access is greater: the division of the market being thinner, he may find a variety closer to its needs.<br />
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Therefore in an economy where products are diversified in varieties wealth is not defined by the quantities that the customer can consume, but by the diversity of varieties that he can access. This results in a redefinition of well-being and, consequently, of the value itself. This is for economic theory a radical challenge because it affects its very root.<br />
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<b>8) predators are skilled users of CTS</b><br />
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Predators, being vigilant, alert and on the lookout, are the first to take advantage of CTS. The computerization and the Internet offered the finance powerful automata, able to play simultaneously on all the financial centers of the world. The sensation of risk being diminished temptations were irresistible and good professionals, those who remained attentive to the risk / return tradeoff, were ousted of the market. Computerization and the Internet are at the origin of the financial crisis.<br />
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Organized crime took the opacity of the computer and complicity interested banks to launder profits and seize entire sectors of the legal economy and even, in some regions, seize political power itself. Corruption, which is endemic in the economy of maximum risk, could also take advantage of the discretion afforded by computerized laundering. The rule of law and democracy are thus faced with a resurgence of feudalism: the ultra-modern economy is paradoxically attempted to revive the values of feudalism and even those more archaic of the tribe (see <a href="http://michelvolle.blogspot.fr/2011/03/entrepreneurs-et-predateurs-conflit.html" target="_blank">Entrepreneurs et prédateurs, conflit frontal</a>).<br />
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The appropriate model to represent the contemporary economy is no longer that of the balanced exchange, where nobody can be forced to accept a transaction without compensation, but another more complex which reflects the dialectics of balanced exchange and predation.<br />
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To contain the predation supposes to establish by law and in the judicial system safeguards which reduce temptation by increasing the likelihood of a sanction. This issue is important for society because the rule of law is a <i>necessary</i> condition for economic efficiency:
"commerce and manufactures can seldom flourish long in any state which does not enjoy a regular administration of justice, in which the people do not feel themselves secure in the possession of their property, in which the faith of contracts is not supported by law" ( Adam Smith, <i>Wealth of Nations</i>, Book V, Chapter 3).<br />
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<b>9) the crisis is due to the inadequacy of the behavior of economic agents to the productive system that the CTS brings out</b><br />
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One must distinguish the economic crises that are <i>cyclical</i>, similar to accordion shots of traffic on a busy road, and those that are <i>structural</i>. When structural crises begin, one can believe that this is the beginning of a cycle and that business will soon resume as before: this is what we thought in 1975. Years must pass for the structural nature of the crisis to become clear: the economic measures have no effect while the production capacities are underutilized, investment slows and unemployment rises.<br />
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A structural crisis is explained (1) by a change in the productive system, (2) by the inadequacy of the behavior of economic actors (enterprises, consumers, State) to the productive system which emerges and which they do not understand.<br />
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This is what happened in the 30s: the production system DMTS had been brought to a high degree of efficiency by Taylorism and by the innovations demanded by the war, but enterprises and consumers had returned after a short period of hubris in the 1920s to the habits of caution and saving which are appropriate to an agricultural economy subject to the vagaries of climate. Lack of opportunities stifled the economy: Keynes solved this problem by creating the theory of expectations.<br />
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A similar diagnosis can be done on the contemporary economy. It stifles because neither enterprises nor consumers, nor the State behave so that it can deliver its full effectiveness. Effective behaviors, although informative, are exceptional.<br />
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An economy in crisis it is <i>in desequilibrium</i>. The economic equilibrium is like that of a vault: its different parts must meet and support each other in the keystone. If the behavior of firms is one that meets the CTS, but not the behavior of consumer, efficiency can not be achieved and it is even more so if several players are faulty.<br />
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We call <i>iconomy</i> an economy that, by hypothesis, has reached an equilibrium in the CTS. Consider the economic actors in contemporary France one after another to see what separates them from iconomy:<br />
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<i>The enterprise </i><br />
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The organization of most large enterprises congeals around habits which are difficult to shake off and that keep them away from the iconomy: <br />
<ul>
<li>whereas in the iconomy repetitive tasks are automated, many enterprises have refused organizational effort that it requires and relocated production to low-wage countries in order to continue as before;</li>
<li>whereas in the iconomy the key challenge lies in the quality of the product and the relationship with customers, business effort is often focused on lowering the cost of production;</li>
<li>whereas in the iconomy products are packages of goods and services, many enterprises refuse to deploy services that contribute to the quality of their product. Supreme absurdity, some entrust to subcontractors the relationship with their clients;</li>
<li>whereas in the iconomy product development is carried out by a network of partners many enterprises, being imperial, prefer subcontracting rather than a partnership of equals;</li>
<li>whereas in the iconomy the information system is central to the strategy, many enterprises consider IT as a cost center that should be compressed;</li>
<li>whereas in the iconomy the enterprise must practice an<b> </b><a href="http://michelvolle.blogspot.fr/2009/12/pour-un-de-la-consideration.html" target="_blank">exchange of consideration</a> with the “brain power”, most managers behave in an authoritarian manner towards people who work in the field.</li>
</ul>
There are even among the larger enterprises any whose strategy and methods are already those of iconomy, but they are a tiny minority. It has always been so after the industrial revolution: in the early nineteenth century the enterprises which were effectively mechanized were rare.
<i> </i><br />
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<i>The State </i><br />
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The organization of government as the same defaults that in the enterprises. Moreover the State struggles to carry out its mission of “institution of institutions” on a field that the emergence of CTS has transformed: <br />
<ul>
<li>while the productive system of the iconomy should be <i>the priority</i> to the statesman, "society problems" which are not negligible but of second order monopolize the parliament;</li>
<li>while iconomy relies on computer politicians consider it as a technique without strategic importance and focus on the most superficial aspects of computerization ("digital sector," effects on media, individual usages etc.);</li>
<li>while full employment can be achieved in the iconomy only by increasing the number and development of enterprises, the State runs out to "save jobs" in obsolete activities; </li>
<li>while iconomy would restore the balance of accounts of the State, the measures taken to limit the deficit of the budget counteract its emergence; </li>
<li>while the quality of large systems (education, health, justice, etc.) is a necessary condition for the iconomy, they remain prisoners of bureaucracies and corporations whose inertia opposes computerization; </li>
<li>whereas in the iconomy the regime of the market is monopolistic competition, regulators believe that only pure competition can lead to efficiency and they prohibit the creation of monopolies;</li>
<li>while iconomy claims that the legislative, executive and judicial powers act to contain predation, the State is slow to define the laws and deploy the judiciary skills which are necessary.</li>
</ul>
<i>The consumer</i><b> </b><br />
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The consumer bears its share of responsibility in the crisis, but one must recognize that advertising and distribution play an important role in its behavior: <br />
<ul>
<li>whereas in the iconomy his discernment orients him to the variety of a product that suits him best, he is fooled by misleading denominations and presentations;</li>
<li>whereas in the iconomy the choice of a variety results from a price / quality ratio, he is seduced by an advertisement that focuses its attention on the price alone;</li>
<li>whereas in the iconomy consumption is selective and sober because quality oriented, the utility function still gives a great place to quantity.</li>
</ul>
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This certainly incomplete list of mistakes indicates the effort that is necessary to achieve the iconomy. Like any economy in equilibrium, this one will experience full employment, balance of trade and balance of the accounts of the State. It will also experience strong growth through innovation. However this growth will not be measured by GDP - which is quantitative - but by an indicator of the material well-being of the population.<br />
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The strategic priority for enterprises today is not to cut costs, to generate profit nor to satisfy the shareholders, but to take advantage of CTS to efficiently produce useful things, to carve on the world market a niche monopoly protected by the secrecy and renewed by innovation.<br />
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Strategic priority for the government is not to respond in a hurry to the symptoms of the crisis, but to take it from its root and favor the emergence of the iconomy. This implies that the whole society shares a clear vision of the third industrial revolution, that is of the opportunities and risks brought by computerization.<br />
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Some say that the future of the economy lies in renewable energy. It is true that oil, which is a convenient fossil energy at low cost, has been instrumental in the economic growth until 1975, and it is also true that the price is now high, volatile, and that this will be worse with the rise of a shortage.<br />
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But the new form that the CTS procured for the production function and, correspondingly, for the cost function is a more radical change than that of the price of a factor of production, even if it is brutal. Deeper still, the <i>transformation of nature</i> brings by the CTS changed the conditions of economic equilibrium: issues that the price of energy and global warming raise should be asked in the context of this new equilibrium and not by ignoring it.<br />
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These questions should not mask the risks that the CTS confronts society: risk of a return to the feudal system; risk of a long human sacrifice by extension of the crisis; finally risk of an assimilation of the human being to the computer, implicit in some attempts of the "artificial intelligence" and similar in principle to that of totalitarian regimes that have aspired to create a monstrous "new man " by equating the human being to the machine.<br />
Michel Vollehttp://www.blogger.com/profile/02758819892464278158noreply@blogger.com0tag:blogger.com,1999:blog-1465468348253401530.post-89611665241135760502011-12-18T08:46:00.000-08:002013-05-01T09:56:00.654-07:00François Jullien, Zhong Yong, Imprimerie Nationale, 1993<a href="http://www.volle.com/lectures/zhong.htm" target="_blank">French version</a><br />
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<iframe align="right" frameborder="0" marginheight="0" marginwidth="0" scrolling="no" src="http://rcm-fr.amazon.fr/e/cm?t=sitdemicvol-21&o=8&p=8&l=as1&asins=2110812583&ref=tf_til&fc1=000000&IS2=1&lt1=_blank&m=amazon&lc1=0000FF&bc1=000000&bg1=FFFFFF&f=ifr" style="height: 240px; width: 120px;"></iframe>François Jullien gives, by publishing this translation, an important contribution to our understanding of Chinese philosophy and its relationship with our own philosophy. <br />
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The goal of Western philosophy is <i>knowledge</i> enriched after Kant by the <i>critic of knowledge</i> [1]. The goal of Chinese philosophy is <i>wisdom</i>, <i>shēng</i>. But the wisdom of the Chinese lies in an articulation of the personality that is strange for us - not because it would not exist by us, but because we do not give him any attention. <br />
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Our culture followed two paths to knowledge: at first the truth revealed by Scripture and dogma, and then from the Renaissance Science constructed by combining theory and experimentation. Our intellectual history is marked by the rivalry between these two approaches but the Chinese have followed neither one nor the other. <br />
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One of the presentations of their philosophy is the <i>Zhong Yong</i> (pronounce <i>Djong Yong</i>) which, with the <i>Interviews </i>of Confucius, the <i>Mencius </i>and the <i>Great Learning</i>, was used for a thousand years to train Chinese scholars. It is written in the indirect style favored by the Chinese: where we would use definitions and deductions they prefer hint and suggestion. One can hardly understand this text if one does not access to a comment. <br />
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<b>Differences between Western thought and Chinese thought </b><br />
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The Chinese do not share our conception of a transcendent God, origin and explanation of the world. Their "religion" is a cult of the process by which nature renews itself and they call fidelity to this process <i>dao</i> (pronounce <i>tao</i>), the "way" [2] . This fidelity is expressed by a simple maxim whose implications are endless "be human". This maxim directs first to compassion, solidarity or humanity <i>ren</i> [3] (pronounce <i>ien</i>), then by concentric circles to solidarity with animals, plants and finally with all of nature. The Wise discovers, deep in his own personality, a universal solidarity that directs beyond the accidents of his individuality. <br />
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To the exploration of these immanent depths our theology preferred transcendence, revealed truth and a discipline of thought which is based on dogma. Did it not take the risk to make an idol of ideas? The intimate discovery of God relativizes however any dogma and any statement of truth – and so our theology could, if it was modest (but can it be modest?), hear the lessons of Chinese wisdom. <br />
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The scientific approach, based on free discussion and hypothesis testing (or more precisely, says Popper [4], on their "no falsification"), produces <i>practical</i> truths: even in its most theoretical stages it is action-oriented. Practical truth are not asked to be absolute but to respond reasonably to a need, to the demands of a situation. Mathematics itself is a gym that trains the mind to respect the principle of non-contradiction - a principle that experience meets always, albeit in a sometimes confusing manner, but from which imagination frees often itself. <br />
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All scientific work presupposes a prior <i>intention</i>. If the scientific method gives objective results, it is within an area which has been previously chosen. The intentions of the researcher directs his eye to its target. <br />
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Coding is essential for every action-oriented thought because the action requires a thoughtful conceptual structuring of experimentation. We can always ask after the fact (1) why it was deemed necessary to encode some aspect of the real world and not another, (2) why that aspect was coded following some classification and not according to another : an infinite number of different classifications were <i>a priori</i> formally possible. The answer to this question requires to use the <i>pertinence</i> criterion, which concerns the adequacy of coding to <i>action</i> and hence links the conceptual structure to a prior intention. <br />
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Then the question of truth resolves into that of pertinence of concepts. The issue of pertinence has endless implications, but leads to consider a problem which, being practical, is at our level: does it exist a process that would promote the accuracy of our action, the pertinence of our judgment?<br />
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<b>Priorities of the Chinese Wise </b><br />
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The Chinese Wise knows that before a world which is entirely open to us, but whose key we do not possess, our eyes can be affected by prejudice, presumption and the blinders of specialization. He thinks that we can maintain a living relationship with the world, and act usefully on it, if we are enough open-minded in order to collect and interpret the signals it emits so we can orient our action favorably while respecting the spontaneous tendency of things (<i>shì</i>). <br />
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He seeks to be able of producing an appropriate response in front of each situation. He favors a middle position (<i>dàn</i>), not by taste of golden mean or mediocrity but in order to mobilize conveniently, according to the necessities of the situation, each of the extremes of thought and action. It will thus be, according to the situation, violent, submissive, active, lazy, etc.<br />
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The Chinese are rarely interested in concepts: they are more sensitive to the intention from which the conceptual structure results, a structure of which they believe mind must be free to avoid freeze. Any person who is aware of this crucial intentional step can adhere to their wisdom. It is difficult for us to understand them because we are accustomed to mingle the practice of abstraction with the abstract which is necessarily cast in the mold of formal rigor. We want under the pretense of "rigor" ignore the informal preliminary stages, fed by intuition and association of ideas, where we forge intentions without the strength of which neither perseverance nor concentration required by research would have been possible. <br />
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(See also "<a href="http://www.volle.com/opinion/theologal.htm" target="_blank">Le coeur théologique</a>"). <br />
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[1] Immanuel Kant (1724-1804), <i>Kritik der reinen Vernunft</i>, 1781 <br />
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[2] Lǎo Zǐ (fourth century BC) (pronounce Lao Dze), Dao De Jing (pronounce Tao Te Djing), <i>The Book of the Way and Virtue</i>. The comment of Claude Larre is useful (Desclée de Brouwer, 1977), but he translates shēngrén as "holy" and not as "wise". <br />
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[3] This ideogram symbolizes otherness by associating the word man (ren) at number two. <br />
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[4] Karl Popper (1902-1994), <i>Logik der Forschung</i>, Julius Springer Verlag, Wien 1935Michel Vollehttp://www.blogger.com/profile/02758819892464278158noreply@blogger.com0tag:blogger.com,1999:blog-1465468348253401530.post-41098468456581591432011-03-04T06:42:00.000-08:002013-05-01T09:56:36.162-07:00Is France really in debt?<a href="http://michelvolle.blogspot.com/2011/03/la-france-est-elle-reellement-endettee.html" target="_blank">French version</a><br />
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To determine whether or not France is in debt, and at what level, we shouldn't look at the report "Government debt / GDP" that - this report is a chimera, see "<a href="http://volle-en.blogspot.com/2010/10/misleading-indicator.html" target="_blank">A misleading indicator</a>"- but the debt of France all actors together, then adding the debt of businesses, households and the government towards actors outside our borders.<br />
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Banque de France publishes an annual "current account" which describes the exchange of goods, services, income and current transfers with the outside. The balance of this account is that France borrowed (or lend) each year. His examination will show us that France is not in debt, at least for now ...<br />
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This balance is measured in current euros. If we want to show its intensity, we have therefore to compare it to a stream in current euros. The ratio which seems the most significant is "current account balance / GDP in value," ans the series available on the websites of INSEE and Banque de France allow us to calculate it from 1949 to 2010. <span class="google-src-text" style="direction: ltr; text-align: left;">Chart</span> 1 describes its evolution: <br />
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<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEikVFQWehZoZ5rU0e9cqZufIzuz-YSB3F5EpLDD_7hxHmjJCm4Y-jh6hUBd-0pN242i6Np_h_qh9rzkHCKV-fJn2qMCTpT_j89ay9PFrpLrCN0zvmQIG8L-ezaWJILVdkd0eLnO-52qgR9W/s1600/dette1.bmp" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEikVFQWehZoZ5rU0e9cqZufIzuz-YSB3F5EpLDD_7hxHmjJCm4Y-jh6hUBd-0pN242i6Np_h_qh9rzkHCKV-fJn2qMCTpT_j89ay9PFrpLrCN0zvmQIG8L-ezaWJILVdkd0eLnO-52qgR9W/s1600/dette1.bmp" /></a> </div><div align="center"><i>Chart 1: Current Account Balance / GDP</i> </div><br />
Until the early 1990s the curve is very rugged and to interpret it would require a historical analysis. The evolution from 1990 on is by cons highly readable : negative in 1990 (-8 billion euros), the balance improves afterwards continuously . It becomes positive in 1992 (3 billion) and increases to its maximum in 1999 (43 billion). Then it decreases rapidly and becomes negative in 2005 (-8 billion). It is at a very low level in 2009 and 2010 (-37 and -40 billion, an annual indebtedness of about 2% of GDP). <br />
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The 1990s have been good years in terms of the debt of France but this advantage was reduced after 2000. From 2005 on, France fell into debt each year a little more - that is to say it was more likely to consume more than it produces (and invest, but investment was relatively low in recent years). <br />
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<div align="center"><span class="google-src-text" style="direction: ltr; text-align: left;">* *</span> * * </div><br />
For sure such a situation is not healthy because a country can not live indefinitely beyond its means. But all this relates to the annual <i>flow</i> of indebtedness, what about the level of the <i>debt?</i> <br />
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To evaluate this level, one has to accumulate the yearly current account balance. This accumulation is measured in nominal value, as always with debt, and old values count little compared to recent values because the latter are swollen by inflation. <br />
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The debt of France was certainly not zero in 1949, but its nominal value was low in front of the recent nominal flow. Let us therefore do as if it were zero: the balance of assets and debts of France is represented by the cumulative current account since 1949 as shown in chart 2: <br />
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<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi2eRhq3seq9ONhxryhXX47-FnL8_d0vpO18WuzOWBxyeQrWCzNj9TJY7z76mKqHkk1eCo9l0Fi_AgIE2s6F1QX9-CX8cfiNQ6Py46eYhRwXfREgvRKbaaI0LrcAuU7HKrQux8i91li0keI/s1600/dette2.bmp" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi2eRhq3seq9ONhxryhXX47-FnL8_d0vpO18WuzOWBxyeQrWCzNj9TJY7z76mKqHkk1eCo9l0Fi_AgIE2s6F1QX9-CX8cfiNQ6Py46eYhRwXfREgvRKbaaI0LrcAuU7HKrQux8i91li0keI/s1600/dette2.bmp" /></a> </div><div align="center"><i>Chart 2: Balance of claims and debts of France</i> </div><br />
<span class="google-src-text" style="direction: ltr; text-align: left;">Surprise !</span> If we trust this indicator, France is not in debt today. But it will probably soon ... <br />
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The curve is very flat until the early 1980's because the image of past values is compressed by the inflation that followed. The debt increased in the 1980s and reached a maximum of 42 billion in 1991. Afterwards assets accumulate: debt cancels in 1996 and France becomes increasingly creditor, a maximum of 198 billion being reached in 2004<span class="google-src-text" style="direction: ltr; text-align: left;">.</span> Then the flow of debt reduces quickly the assets, and at the end of 2010 France is creditor of only 47 billion. <br />
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One can draw two lessons from this quick exercise: <br />
1) the current situation is not good: France borrows some forty billion per year, or 2% of its GDP, and this can not continue indefinitely; <br />
2) however, it is still a creditor of 47 billion euros vis-à-vis the rest of the world, thanks to the stock of assets accumulated during the 1990s and that has not yet been entirely spent. <br />
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If the current trend is unfavorable, the fact remains that for the moment France is not in debt, on the contrary. But if this trend continues the stock of assets will soon be spent: one can expect that France will <i>actually indebted</i> in the course of 2012. <br />
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<div align="center"><span class="google-src-text" style="direction: ltr; text-align: left;">* *</span> * * </div><br />
Finally, let us mention a necessary precaution: we acted <i>as if</i> the current account balance was a certain value. But Banque de France publishes each year an "errors and omission" account whose amount is not negligible and there is no guarantee that errors are compensated. <br />
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Our conclusion is probably <i>qualitatively</i> correct in so far as the magnitude of the current account balance is correct, but the <i>quantitative</i> assessment of the current balance of debts and assets is necessarily imprecise - but no more than the ratio "Government Debt / GDP" that everyone speaks of, and that is logically absurd.Michel Vollehttp://www.blogger.com/profile/02758819892464278158noreply@blogger.com0tag:blogger.com,1999:blog-1465468348253401530.post-38339383418889087692010-12-15T08:54:00.000-08:002013-05-01T09:59:01.368-07:00WikiLeaks and Informatics<a href="http://michelvolle.blogspot.com/2010/12/wikileaks.html" target="_blank">French version</a><br />
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WikiLeaks causes two diametrically opposed reactions: for some it is a criminal enterprise that puts democracy at risk. For others, there is nothing new in the documents that WikiLeaks publishes. But if these opinions are both negative, they clearly contradict each other: how could WikiLeaks put democracy at risk if it publishes nothing new? Those who express both critics are ridiculous.<br />
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Sarah Palin thinks Julian Assange is as dangerous as Osama bin Laden. Rush Limbaugh says that “back in the old days when men were men (…) this guy would die of lead poisoning from a bullet in the brain”. Joe Lieberman told reporters of <i>The New York Times</i>, who publish comments on the news published by WikiLeaks, are bad citizens. Newt Gingrich thinks Assange engaged in a military attack against the United States. <br />
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In France, Nicolas Sarkozy says that WikiLeaks provides "the highest degree of irresponsibility". The Minister Eric Besson believes that it "endangers the diplomatic relations". The Prime Minister Francois Fillon accuses it of "theft and deal in stolen goods"... <br />
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In order to clarify this, I went on <a href="http://wikileaks.liberation.fr/cablegate.html" target="_blank">http://wikileaks.liberation.fr/cablegate.html</a> and spent a few hours reading the news that the U.S. embassy sent to the State Department. <br />
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Wikileaks holds 251,287 cables it publishes steadily since November 28, 2010. On December 20 1,788 cables were published. <br />
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<div align="center">* *</div><br />
I found that this reading contradicts the two opinions mentioned above: these mails contain things that are both interesting and new, and their publication increases rather than damages the prestige of American diplomacy. <br />
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<a name='more'></a>They show that U.S. diplomats are intelligent, competent and balanced. Their cables are written for helping help those who are unfamiliar with a foreign country to understand it, to know the intentions of its leaders and the issues to whom they are sensitive. <br />
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These diplomats write very well. Their vocabulary is simple and they clearly explain complex things: their cables are masterpieces of pedagogy. <br />
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Do the French diplomats have the same talent ? I do not know, but I fear that the national taste for literary pretension takes them sometimes away from the efficient simplicity, this summit of art that Americans often reach. <br />
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<div align="center">* *</div><br />
Their cables begin with a summary that will allow the reader in a hurry to know if it is worthwhile to delve into details. The development follows a plan marked by subtitles that will help him get straight to the topic of interest. <br />
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The description of the facts is objective, the interlocutors are quoted <i>verbatim</i> and vividly. Analysis, explanations and hypotheses are separated from the observation of facts. Finally a concluding paragraph exudes a general lesson. <br />
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I noticed the notes of interviews with leaders of the French Left before the presidential elections of 2007: <a href="http://wikileaks.liberation.fr/cable/2005/10/05PARIS7360.html" target="_blank">Michel Rocard</a> on October 24, 2005, <a href="http://wikileaks.liberation.fr/cable/2006/02/06PARIS1031.html" target="_blank">Ségolène Royal</a> on February 8, 2006, <a href="http://wikileaks.liberation.fr/cable/2006/05/06PARIS3360.html" target="_blank">Dominique Strauss-Kahn</a> on May 16, 2006. I also noticed the report of a conference of <a href="http://wikileaks.liberation.fr/cable/2005/07/05PARIS4760.html" target="_blank">Francois Hollande</a> at the "Cercle des Ambassadeurs" on June 30, 2005, the report of May 15, 2009 on <a href="http://wikileaks.liberation.fr/cable/2009/05/09TELAVIV1098.html" target="_blank">organized crime in Israel</a>, the portrait of <a href="http://wikileaks.liberation.fr/cable/2008/05/08TEGUCIGALPA459.html" target="_blank">President Zelaya</a> by the ambassador in Tegucigalpa (Honduras) on May 15, 2008, that of <a href="http://wikileaks.liberation.fr/cable/2007/07/07HARARE638.html" target="_blank">President Mugabe</a> by the ambassador in Harare (Zimbabwe) on July 13, 2007 etc. <br />
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It is interesting to see how the leaders of the Left appear one after the other at the U.S. Embassy and multiply declarations of friendship. The ambassador is watching and weighing: "Hollande does not project as a leader implementing a clear program of action (…) He did not demonstrate the confidence or talent for galvanizing others to action that voters look for in a candidate. His comments on issues focused on general diagnoses, not concrete remedies. (…) which raises the question as to whether Hollande is preparing Jospin's return, even if unconsciously". Strauss-Kahn is "the most capable and qualified candidate among the Socialists, [but] he lacks the fire in the belly that would propel him to victory. He is one of those who would clearly be better governing than campaigning -- and therefore may never get the chance to govern".<br />
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<div align="center">* *</div><br />
I'm far from having finished this reading that I recommend to everyone interested in international politics. <br />
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It reminded me of a passage from a book by Henry Kissinger (I quote from memory): "When I was no longer in the administration, I read the newspapers only because I had no more access to reports - and then I did not know anything was happening. " <br />
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For once, the citizen can look over the shoulder of the rulers. This opens a narrow window through which we would be wrong not to cast a glance - especially we French, who are so willingly opposed an alleged "secret défense" whenever an investigation could thwart a powerful person. <br />
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<div align="center">* *</div><br />
It is difficult to attack legally Assange without violating the freedom of the press : if it is possible to prosecute those who like PFC <a href="http://en.wikipedia.org/wiki/Bradley_Manning" target="_blank">Bradley Manning</a> have committed leaks, the law protects the journalists who publish the documents. <br />
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So somebody sought perhaps other ways. I don't know what happened in mid-August between Assange and the two ladies who accuse him, but if those he thwarts wanted to hatch a stunt they couldn’t do it better. <br />
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As this alone may not be sufficient, the U.S. justice tries to attack Assange by showing that he conspired with Manning ("Les États-Unis souhaitent poursuivre Assange en justice", <i>Le Monde</i>, 20 décembre 2010). <br />
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<div align="center">* *</div><br />
What happens on the side of computing is much more interesting. This case is indeed a consequence of the <i>computerization of society</i>, and of the fact that one often organize information systems regardless of the behavior of humans. <br />
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After September 11, 2001 the U.S. intelligence agencies discovered gaps in their communication: information was not flowing well between the CIA, FBI and NSA, or even within each agency (see <a href="http://www.volle.com/opinion/fbi.htm" target="_blank">Le système d'information du FBI</a>).<br />
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It was therefore decided to establish a maximum exchange of information between various departments, each agent having access to the documentation of others. Eventually 2.5 million people were empowered to access all that the U.S. produce as confidential or secret documents (Manfred Ertel et al, "Der etwas andere Krieg," <i>Der Spiegel</i>, December 13, 2010, p. 94).<br />
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When the secret is shared among so many people, the likelihood of leaks is high: in fact, leaks are mechanically inevitable after a certain time.<br />
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It also happens that the deployment of the Web gave birth to an ideology of transparency (is this a good or a bad ideology? I will not enter in this debate here). This ideology uses naturally the Web, as well as the computerized defensive weapons that U.S. Agencies had neglected: security, encryption etc. It was also probably inevitable that the leakage would be discharged at one time or another in the channels of this ideology, even without a conspiration.<br />
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To protect confidentiality, one should have put in place a supervision that sorts documents, ensures selective dissemination (each agent having only access to what can be useful for his work), manages the clearances and control uses. It was obviously "easier" to make everything available to everyone - but it was insanely risky ... and probably ineffective, the agents being overwhelmed by the mass of documents. <br />
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<div align="center">* *</div><br />
In the week following December 1st WikiLeaks has been successively withdraw an accommodation by Amazon, the domain name wikileaks.org by EveryDNS, the way to collect donations via PayPal, Mastercard and Visa accounts. The maneuver was consistent and quick: it aimed to destroy WikiLeaks or at least – it's the same – to suppress its presence on the Web. <br />
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But the Web reacted. Some <a href="http://en.wikipedia.org/wiki/Anonymous_%28group%29" target="_blank">Anonymous</a>, WikiLeaks supporters, attacked “enemy” companies and politicians by a <a href="http://en.wikipedia.org/wiki/Denial-of-service_attack" target="_blank">denial of service</a> attack, the <a href="http://en.wikipedia.org/wiki/Operation_Payback" target="_blank">Operation Payback</a> saturating their sites using the <a href="http://en.wikipedia.org/wiki/LOIC" target="_blank">LOIC (Low Orbit Ion Cannon)</a> application . In the <a href="http://www.volle.com/travaux/espacelogique.htm" target="_blank">logical space</a> of the Web, an armed satellite is ready to disintegrate the opponents of WikiLeaks by sending a flood of data! <br />
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Amazon refused to host WikiLeaks? Never mind: mirror sites are proliferating. They number 2194 on December 20 (see <a href="http://wikileaks.liberation.fr/Mirrors.html" target="_blank">http://wikileaks.liberation.fr/Mirrors.html</a>).<br />
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All of this is guerrilla warfare, but here's a nuclear deterrent: Assange put in mid-July on the Internet the file "insurance.aes256", so named because it sees it as a life assurance. This file was encrypted by <a href="http://en.wikipedia.org/wiki/Advanced_Encryption_Standard" target="_blank">AES256 ("Avanced Encryption Standard 256")</a> with a 256 bits key: the most powerful supercomputer would take decades to decrypt it. <br />
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The size of this file (1.4GB) would suffice to contain several novels and it has been downloaded worldwide. Nobody could read it, but when it pleases Assange can disseminate the key. He announced he or its employees would do it if anything fatal happened to him or to WikiLeaks. <br />
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Nobody knows what is in insurance.aes256: maybe all the cables from U.S. diplomats unfiltered and containing all the names in clear, maybe revelations about Guantánamo or the Bank of America ... <br />
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Hence Assange will retain his power even if in jail, even if dead. We may like or dislike this guy – people say he has a bad temper - but we must recognize that he has innovated in strategy as much as Bonaparte did in his time. Hence the potential of the Web is deployed for better or for worse: counterfeiters have already used the same type of method for disseminating false news. <br />
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The threat is real but nations are only too inclined to defend their interestsas much - or the idea they have of it. Shouldn't we <a href="http://michelvolle.blogspot.com/2010/03/faire-de-linternet-un-pays.html" target="_blank">make the Internet a country</a> obeying the rules of democracy with legislative, executive and judiciary powers, an elected parliament, an arsenal of laws, a government, some courts and a police?Michel Vollehttp://www.blogger.com/profile/02758819892464278158noreply@blogger.com0tag:blogger.com,1999:blog-1465468348253401530.post-12019392061822810632010-12-03T10:11:00.000-08:002013-05-01T09:59:36.061-07:00The Effects of Informatization on the Economic and Financial CrisisIntervention at the <a href="http://www.aea-eu.com/2010Ankara/uk/index.asp?id_colloque=68&lang=&link=acceuil" target="_blank">Conference of the <i>Applied Econometric Association</i>, Ankara, October 4th, 2010</a><br />
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<a href="http://www.aea-eu.com/2010Ankara/DOCUMENTS/Publication/Text/Volle_Michel.pdf" target="_blank">Click here for a pdf text of this intervention</a><a href="http://www.aea-eu.com/2010Ankara/DOCUMENTS/Publication/Text/Volle_Michel.pdf" target="_blank"> </a>(149 KB, with graphics))<br />
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<b>The contemporaneous technical system</b><br />
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To understand the effects of informatization, it is useful to refer to the theory of technical systems. A "technical system" is taking place when a small number of techniques come in synergy, their alloy releasing a previously unknown effectiveness. This was the case with industrialization, which was build from the eighteenth century on the synergy between mechanics and chemistry, to which were added electricity and oil at the end of the nineteenth century.<br />
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Computerization relies on the synergy between microelectronics and software, to whom network was added in 1975: this synergy allowed the emergence of a contemporary technological system (CTS). The computer, which was previously devoted mainly to calculation, became - with word processing, spreadsheet, grapher, messaging and file sharing, then the Internet and the Web - a universal instrument that brought the assistance of the automaton to personal work as well as communication between people.<br />
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The origin of industrialization was purely technical but it had anthropological and geopolitical consequences: it has expanded the system of wage labor and gave birth to the modern corporation, to working class and class war. It has led to rapid urbanization and rural exodus, to rapid technological change and the use of scientific research, it has prompted the deployment of the education system and health system, encouraged imperialism and colonialism, caused wars which used devastating weapons provided by the industry.<br />
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It is the quality, the power of their industry which ranked the nations : those who had not been industrialized were soon dominated or colonized by the industrialized nations.<br />
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<a name='more'></a><b>What are today the consequences of the CTS?</b><br />
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The set of interconnected computers is a ubiquitous programmable automaton (UPA), able to achieve everything that can be programmed and released through the network whitout the constraints imposed by geographical distance. While industrialization was based on the alloy between hand and machine, and subjected the "manpower" to strict discipline, computerization results in the alloy between the brain and the automaton and mobilizes the skills of the "brainpower".<br />
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The organized human being (OHB) forms indeed an original alloy with the UPA: it follows a specific organization of the company and its relationships with customers, suppliers and partners. This alloy has given rise to a new continent and we can call "informatization" all the phenomena which are generated by this emergence.<br />
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It presents to action new possibilities which are naturally accompanied by new risks. In the enterprise, the deployment of "information systems" has economic effects, but also sociological (structures of legitimacy and power), philosophical (methods and techniques of thought) and finally metaphysical ("values" that give a sense to the productive action) effects<br />
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<b>Economical dimension of informatization</b><br />
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The migration from a technical system to another has consequences one can perceive only in the frame of a general equilibrium model embracing at once the initial allocations, the production function and utility function, and allowing to simulate mentally the functioning of a specific economy: studies that are devoted to only one aspect of the economy may not in fact reflect interactions that are perceptible only with a general equilibrium approach.<br />
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The automation of production has nullified the marginal cost of production, or at least make it almost negligible. This is obvious for software and integrated circuits: the total production cost is spent during the initial phase of design and investment. It is the same for networks whose cost depends on their dimensioning: marginal cost is zero when their capacity is not saturated.<br />
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The cost structure of these fundamental techniques affects products that, increasingly, incorporate computers and software (automobiles, airplanes etc.). The cost of services is itself, for a large part, a fixed cost of initial dimensioning.<br />
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When the production function of an economic sector is such that the marginal cost is (practically) zero, the regime of this sector is established either under natural monopoly or under monopolistic competition. For products that lend themselves to quality differentiation - that is to say for most of the products - monopolistic competition will prevail. This confuses some of our models, some of our habits of thought, because economic theory has accustomed us to the canonical couple formed by perfect competition and monopoly.<br />
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<b>An <i>economy of maximal risk</i></b><br />
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As most of the cost lies in the design phase that precedes the production in volume, the contemporary economy is ultracapitalistic: plans, computer programs, organizations and equipment represent a stock of labor, "dead labor", and therefore a fixed capital (to be of course distinguished from financial capital).<br />
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It follows that this economy is the economy of maximal risk. The cost of production is fully spent before the firm has sold a unit of product, and thus received the first response of the market, and while little is known about the initiatives of competitors. In addition, the cost is generally high because monopolistic competition requires quality: designing a new operating system or a new microprocessor costs the order of ten billion dollars.<br />
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The structure is changed: while the mechanized economy had a strong need for mechanized labor, it is not the same for the computerized and automated economy. Most of the jobs migrate to design on the one hand, service and customer relationship on the other.<br />
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The risk is even higher because computerization provokes a globalization of the economy: the ubiquity that the network provides embraces naturally the world, and computerization of logistics has, with the automation of handling containers, led down the cost of transportation of goods. In addition a ultracapitalistic firm seeks naturally the broadest possible market for balancing the fixed cost of production, and has to compete on the world market with other firms which have the same ambition. This ultracapitalistic economy of maximum risk is inevitably a very violent economy: he who does not will or not know how to engage in corruption is losing market shares, and predators thrive.<br />
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<div style="border: 1px solid rgb(0, 0, 0); margin-bottom: 0cm; padding: 0.04cm 0.14cm;"><span style="font-size: small;"><div style="text-align: center;"><b>Culture of the predator</b></div><br />
"I want to become a godfather, I want malls, shops and factories, I want women. I want three cars, I want people to respect me when I go somewhere, I want stores around the world. And then I want to die. But as the real ones die, those who lead for good: I want to die murdered "<br />
<div style="text-align: right;">(Roberto Saviano, Gomorra, Gallimard 2007, p. 141)</div></span></div><br />
Computerization of finance facilitates the laundering of the money that corruption and crime provide, is recycling this money in the "normal"economy and thus allowing the conquest of political and economic power by predators.<br />
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<div style="border: 1px solid rgb(0, 0, 0); margin-bottom: 0cm; padding: 0.04cm 0.14cm;"><span style="font-size: small;"><div style="text-align: center;"><b>Control of legal economy by predators</b></div><br />
"The criminal way takes over when the legal industry is in crisis. If there is a lack of liquidity, it emits false currency, and in order to get capital quickly it sells fake bonds. Competition is crushed through racketeering, imported goods escape taxes. [One can] provide customers with stable prices, without erratic fluctuations, and repay bank loans without difficulty. "<br />
<div style="text-align: right;">(Saviano, op. cit. p. 315)</div></span></div><br />
Then there exists a direct conflict between entrepreneurs and predators: both may look the same (language, clothing, lifestyle, authority) but they are guided by respective conflicting values. While the predator is fundamentally a consumer and a destructor (he feeds on its preys), the entrepreneur is essentially a producer and a creator, aware of the role of his business in the biosphere at the interface between physical nature and society.<br />
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To reduce the firm to profit maximization is to take the risk of confusing the entrepreneur and the predator in the same reprobation and misunderstanding. If the company's goal was to maximize profit, the rational calculation would guide the entrepreneur to illegal activities which are very profitable even if one deducts the risk of legal punishment: it is precisely this calculation that predators do.<br />
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<b>Financial crisis</b><br />
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The power of computers is also a trap. A computer models that can handle several thousand simultaneous equations plays well, but its results are opaque to reasoning - econometricians know that results can be erratic when the approximations are poorly controlled.<br />
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But it happened that the unification of global financial market through the network, the speed that provide automatons, the availability of algorithms that detect arbitrage opportunities, offered to finance new sources of profit while apparently reducing risks: the entire global financial system was solidary and it seemed impossible that it collapses as a whole. The apparent disappearance of risk unbalanced finance, whose core activity is the risk / return tradeoff, and promoted the mere pursuit of return. "Mr. Hudd (CEO of Fannie Mae) told its employees to take risks aggressively, or to leave the firm” (Charles Duhigg, « Pressured to Take More Risks, Fannie Reached Tipping Point »,<i> The New York Times</i>, 4 octobre 2008).<br />
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<div style="border: 1px solid rgb(0, 0, 0); margin-bottom: 0cm; padding: 0.04cm 0.14cm;"><span style="font-size: small;"><div style="text-align: center;"><b>Automation of Finance</b></div><br />
« The Wall Street titans loved swaps and derivatives because they were totally unregulated by humans. That left nobody but the machines in charge. »<br />
<div style="text-align: right;">(Richard Dooling, "The Rise of the Machine", The New York Times, October 12, 2008)</div><br />
« Since the Big Bang of the 1980s, large amounts of stocks and shares - and derivatives of them - have been traded automatically by computers rather than by humans. These so-called "algotrades" accounted for as much as 40% of all trades on the London Stock Exchange in 2006; on some American equity markets the figure can be as high as 80%. »<br />
<div style="text-align: right;">(Sean Dodson, "Was software responsible for the financial crisis?", <i>The Guardian</i>, October</div><div style="text-align: right;">16, 2008)</div>« Use of digital technology caused the present financial turmoil. »<br />
<div style="text-align: right;">(Neville Holmes, “The Credit Crunch and the Digital Bite", <i>Computer</i>, January 2009)</div></span></div><br />
Hence informatization is, if one accepts the definition of Aristotle, the material cause of the financial crisis because it has made possible and ultimately inevitable behaviors which, embodying a transformation of finalities, organizations and competition, have been its immediate cause.<br />
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<b>Immaturity of the production system</b><br />
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The constraints of security have also often been neglected. The alloy of the OHB and the UPA requires double supervision: supervision of human behavior, presenting a risk of error or malice, and supervision of the automaton, which is prone to breakdowns and whose program, necessarily finite, can not answer the limitless diversity of situations and incidents involved in any prolonged confrontation with nature. However, this oversight has often been neglected because one has underestimated the risks and given undue reliance to the computer.<br />
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Let us leave finance to consider the production system. In order to guard against the maximal risk, companies are grouping together: most products are presently developed by partnerships (or by a network of sub-contractors). Moreover, the quest for quality has prompted them to design their products as collections of goods and services: cars for example, emblematic products of industry, become a package formed by car itself and various services (advice before sales, financing, periodic maintenance, alerts, recovery in end of life), and with renting this package evolves finally towards a pure service.<br />
<br />
An information system ensures the interoperability of partnership and the cohesion of the package of goods and services. Its quality depends on the semantic relevance of the concepts he observes, on exactitude of coding, on accuracy of the modeling of processes, on reliability of supervision, on lightness that it provides to the strategy, finally on the appropriateness of the technical solutions and resources (dimensioning, skills) to all these requirements.<br />
<br />
But the facts show that the production system has not matured its informatization. This is evidenced by the rate of f ailure of IT projects that surveys of the Standish Group reveal, which would not be tolerated in any other field of engineering: only a quarter of the projects succeed properly, a quarter of them fail, half lead but with a multiplication of time and budget by a factor of three.<br />
<br />
<b>A disequilibrium</b><br />
<br />
Hence computerization is not yet mature in companies, whether in finance or in the production system. It is the same if we consider politics: at the precise moment when the economy was entering the regime of maximum risk, regulations have been removed, the safeguards dismantled, safety rules abolished, the natural law being that the one reacts first by panic when faced with a radically new situation.<br />
<br />
Panic prevails also on the consumer side, consumers being both superficial and immature. Their demand is a clumsy and unfaithful translation of their needs and instead to choose to maximize their quality /price ratio, they oscillate between the search for the lowest price and adherence to a versatile fashion that attracts them to the latest gadget: to be convinced of this fact, it is enough to visit one of the stores Apple has opened in Paris...<br />
<br />
<div style="text-align: center;">* *</div><br />
So our economy is as unbalanced as the economy of the 30s. Keynes diagnosed the causes of this disequilibrium: economic agents, who kept the habits of caution suitable for an agricultural economy, failed to anticipate the fertility of the industrial economy; hence weak demand, stifling the production system, caused a paradoxical "poverty in abundance".<br />
<br />
The contemporary disequlibrium is of another nature. It results from an imbalance of demand and institutions in a modern, computerized production system. The effectiveness of informatization is then in large part sterilized and captured by predators, and we also know "poverty in abundance".<br />
<br />
<b>A challenge for economics</b><br />
<br />
Since its creation by Adam Smith, economic theory was bound with industrialization: it is fundamentally a theory of efficiency in the mechanized economy.<br />
<br />
Informatization has however changed all the fundamentals of the economy:<br />
- the alloy of the “brainpower” and the automaton replaces, in the heart of the production system, the alloy formed for two centuries by “manpower” and machinery;<br />
- initial allocations focus on skills and know-how, and are disturbed by predation;<br />
- utility and use value depend more on the qualitative diversity of available products than on consumable quantity;<br />
- cost function has condensed in design and experiences increasing returns;<br />
- the economy is generally under the regime of monopolistic competition.<br />
<br />
The present economy requires therefore from the economists an innovation more important than these accomplished by Keynes when he modeled the uncertainty of the future and the destabilizing effect of expectations.<br />
<br />
We need to have the creative energy of Adam Smith himself if we want to formulate, as he did in his time, an economic theory that addresses the needs of the contemporary technical system and its practical consequences. We need also a corporate accounting, a national accounting and econometrics based on the redefinition of the value, usefulness and effectiveness which is implied by the emergence of the CTS.<br />
<br />
<div align="center">* * *</div><br />
<b>Bibliography</b><br />
<br />
Dodson Sean, « Was software responsible for the financial crisis? » <i>The Guardian</i>, 16 octobre 2008<br />
<br />
Dooling Richard, « The Rise of the Machine », <i>The New York Times</i>, 12 octobre 2008<br />
<br />
Gille Bertrand, <i>Histoire des techniques</i>, Gallimard, La Pléiade, 1978<br />
<br />
Duhigg Charles, « Pressured to Take More Risks, Fannie Reached Tipping Point », <i>The New York Times</i>, 4 octobre 2008.<br />
<br />
Holmes Neville, « The Credit Crunch and the Digital Bite », <i>Computer</i>, janvier 2009<br />
<br />
Marchand Olivier and Thélot Claude, <i>Deux siècles de travail en France</i>, INSEE, 1991<br />
<br />
Mounier-Kuhn Pierre, <i>Histoire de l’informatique en France</i>, PUPS, 2010<br />
<br />
Saviano Roberto, <i>Gomorra</i>, Gallimard 2007<br />
<br />
Volle Michel, <i>e-conomie</i>, Economica, 2000<br />
<br />
Volle Michel, <i>De l’informatique, savoir vivre avec l’automat</i>e, Economica, 2006<br />
<br />
Volle Michel, <i>Prédation et prédateurs</i>, Economica, 2008Michel Vollehttp://www.blogger.com/profile/02758819892464278158noreply@blogger.com0tag:blogger.com,1999:blog-1465468348253401530.post-55466907278395013852010-11-09T05:43:00.000-08:002013-05-01T10:00:27.841-07:00Pierre Mounier-Kuhn, "L'informatique en France", PUPS, 2010Translated from <a href="http://michelvolle.blogspot.com/2010/11/pierre-mounier-kuhn-linformatique-en.html" target="_blank">a French version</a><br />
<br />
This is the first volume of a monumental work that Pierre Mounier-Kuhn dedicates to the history of computing in France. It addresses research and University. A second volume will deal with the behavior of manufacturers, a third with the role of the state. <br />
<br />
<iframe align="right" frameborder="0" marginheight="0" marginwidth="0" scrolling="no" src="http://rcm-fr.amazon.fr/e/cm?t=sitdemicvol-21&o=8&p=8&l=as1&asins=2840506548&fc1=000000&IS2=1&lt1=_blank&m=amazon&lc1=0000FF&bc1=000000&bg1=FFFFFF&f=ifr" style="height: 240px; width: 120px;"></iframe>It will probably be necessary for Mounier-Kuhn to devote a fourth volume to the computerization of institutions, to what happened on the side of usages, their requirements and their relationships with scientists, suppliers and the state. <br />
<br />
Like any historical research, this one was constrained by the availability of archives and hence it considers what happened before 1975. But it is at this time that the computerization of institutions and society begun: the notion of information system emerged in the early 70s, when the requirements of the semantics of data passed before those of the calculation which they condition under the principle <i>garbage in, garbage out</i>. <br />
<br />
Mounier-Kuhn writes on the computerization <i>of France</i>, but he shows that our country, delayed by the circumstances of the German occupation, has not been a pioneer in this field. Computer technology had its source in the U.S. (and Britain), and the ideas that we French have had on compilers, operating systems, databases, networks etc. were only second hand, notwithstanding some individual exceptions. <br />
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It is therefore difficult to describe the computerization of France without going back to the reservoir of ideas and American innovation from which flowed to us a relatively thin thread. How indeed to evoke programming languages without describing their birth and that of compiling with Fortran in 1954 (cf. <a href="http://www.volle.com/travaux/originepgm.htm" target="_blank">L'émergence des langages de programmation</a>) and the problems their design faced? The same question arises about operating systems, databases, transaction monitors, etc. But then that's another story to write, upstream of the history of computing in France which, by comparison, may seem minuscule: this difficulty is inherent in the project of Mounier-Kuhn. <br />
<br />
His book demonstrates the ambiguity of the relationship between computing and mathematics. In the beginning computing is a tool for calculation, and is therefore connected to applied mathematics. Computer science tries to win legitimacy in scientific research and universities, but it meets with the contempt for applications from the "Bourbakists" which, obsessed with "purity", have transformed mathematics in an instrument of mental torture. <br />
<br />
True, algorithmic poses formidable mathematical problems: those that floating point computation arises seem even insurmountable <a href="http://www.blogger.com/post-edit.g?blogID=1465468348253401530&postID=5546690727839501385#_ftn1" name="_ftnref1">[1]</a>. But here as in other disciplines the effort, unsuccessful indeed, to conciliate with "pure" mathematicians (or at least to give to computer science the prestige of "pure" Mathematics) has pushed the formalization well beyond what is required by algorithmic. <br />
<br />
A key difference separates computing from mathematics: while they explore a <i>logical</i> world which is indifferent to the passage of time as to its emergencies, computing is <i>action-oriented</i> <a href="http://www.blogger.com/post-edit.g?blogID=1465468348253401530&postID=5546690727839501385#_ftn2" name="_ftnref2">[2]</a>. <br />
<br />
There is something pathetic in the attempt to mathematize computer science: it is painful to see this discipline, which being oriented towards action is <i>scientific</i> in the strict sense of the term, imitate laboriously mathematics in an attempt to acquire scientific reputation. It's away from his own purpose, which is essentially practical, and it does indeed reinforce the hostility felt by "pure" mathematicians. <br />
<br />
Behind the conflict between mathematics and computing lays the more general question of the criteria by which one can evaluate the scientific nature of a discipline. Those who believe that science depends on rigorous demonstrations forget that each science is suspended to principles, or axioms, which are not demonstrated and which define its realm. The realism of mathematics is that of <i>thought</i> subject to the sole rule of non-contradiction. The realism of computing is that of <i>action</i>, a meeting of nature with intentions oriented by values. <br />
<br />
Mounier-Kuhn describes in detail the painful resulting institutional vicissitudes. To the exceptional lucidity of a François-Henri Raymond contrast the careerism and pedantry of many others, as well as dreams and fantasies coming from a tote-bag of concepts: cybernetics, artificial intelligence, systems theory, fuzzy logic, complex thinking, even information theory. <br />
<br />
This history is already old and computerization has transformed the landscape. But the institutions established before 1975 are still there and their priorities remain the same: many students never hear of computer information systems (this term does not appear in the training of Ecole Polytechnique) or of the <a href="http://michelvolle.blogspot.com/2010/07/ingenierie-semantique.html" target="_blank">semantic engineering</a> that builds their foundation. They have to swallow equation on equation, and it does not prepare them to understand computing and even less computerization. <br />
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____________________ ____________________ <br />
<br />
<a href="http://www.blogger.com/post-edit.g?blogID=1465468348253401530&postID=5546690727839501385#_ftnref1" name="_ftn1">[1]</a> « Many serious mathematicians have attempted to analyze a sequence of floating point operations rigorously, but have found the task so formidable that they have tried to be content with plausibility arguments instead » (Donald Knuth, The Art of Computer programming , Addison-Wesley, 1998, vol. 2, p. 229). <br />
<br />
<a href="http://www.blogger.com/post-edit.g?blogID=1465468348253401530&postID=5546690727839501385#_ftnref2" name="_ftn2">[2]</a> « In mathematics we are usually concerned with declarative (what is) descriptions, whereas in computer science we are usually concerned with imperative (how to) descriptions » (Harold Abelson and Gerald Jay Sussman, Structure and interpretation of computer programs , MIT Press 2001, p. 22).Michel Vollehttp://www.blogger.com/profile/02758819892464278158noreply@blogger.com0tag:blogger.com,1999:blog-1465468348253401530.post-26291713361918571182010-11-07T02:06:00.000-08:002013-05-01T10:00:48.287-07:00The scale of PowerTranslation from "<a href="http://michelvolle.blogspot.com/2010/11/lechelle-du-pouvoir.html" target="_blank">L'échelle du pouvoir</a>"<br />
<br />
"Power", supreme goal, object of fantasy! To have power is to dominate the others, to dominate the world, to make a sense of his own life instead of undergoing a prescribed sense... <br />
<br />
In its pure state, power is the exercise of this authority that <i>legitimacy</i> gives to the man in power and which bows before him the head of subordinates: they will accept his decisions and obey his orders. <br />
<br />
Power encompasses however different levels corresponding to various functions: distinguishing the powers of appointment, management and orientation will help to diagnose the behavior of a person in power. <br />
<br />
<b>Appointment Power</b><br />
<br />
One first form of power lies in the delegation of plots of legitimacy. The one who can appoint the officers, distribute roles and places, is like a lord to whom vassals swear loyalty. <br />
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The French president appoints ministers, prefects, heads of departments, directors of nationalized firms - and also, indirectly, of private companies in which the state has an influence. He spreads stars on the shoulders of the military. Political power has often been reduced to this appointment power: reading <i>Les Rougon-Macquart</i> or <i>Lucien Leuwen</i>, we see that it condescended in France's nineteenth century to the allocation of tobacco shops. <br />
<br />
In a company, the CEO appoints executives and they choose, among the managers, those whose career will advance: the power of appointment ramifies like a tree.<br />
<br />
Dreams and ambitions revolve around the one who holds this power, one speaks to him with the falsetto voice caused by a tightening of the throat. The wives of the ambitious, if beautiful, offer themselves sometimes to him to further the career of their husbands: the women of Fascist dignitaries subjected Mussolini to sexual overwork.<br />
<br />
<b>Management Power</b><br />
<br />
Management power is to "run the business" under existing procedures and structures. It is the power of the Secretary General of an agency, of operational managers and, sometimes, of the assistant of the CEO. It consists in ensuring a smooth process, monitoring indicators and, if necessary, initiating corrective action. <br />
<br />
The proper functioning of the institution depends on how that power is exercised. Someone whose function is to "put oil in the wheels" may also, if he wants, put sand in order to block them. Being in a position to promote or block a hiring, a command, he can also get in the delicious (and profitable) trading of mutual services. <br />
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<b>Orientation Power</b><br />
<br />
Any institution (business, public service, government) runs a <i>mission</i> embodied in the <i>positioning</i> that defines the skills it employs, the techniques it uses, the products it develops, the customer segments it serves and the quality of service. <br />
<br />
The definition of positioning requires that the institution selects and express an orientation and these selection and expression are the responsibility of the leader (President, Minister, Director, CEO etc.). He will say, for example, if the purpose of a business is to "create value for shareholders" or to "eliminate competition", to "satisfy and retain customers," to "be a leader on the world market", to "innovate" and so on. <br />
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The orientation is manifested by the words the leader addresses to the institution (they "make sense"), by the way he arbitrates between the projects provided by the different directions as well as by his daily decisions, whose persistent accumulation determines over time the positioning of the institution. <br />
<br />
Orientation power is the most prominent and most effective form of power. It builds the foundation of legitimacy: if not oriented, every institution, every nation will indeed go astray. <br />
<br />
<b>Abuse of power</b> <br />
<br />
The man in power is well positioned to take personal advantage of his position. To dominate other people, to make them bend to his whim and to arbitrary and even absurd decisions, all this can give him a sensual pleasure. <br />
<br />
He can also take advantage of his power to enrich oneself. Even if they comply with legal forms, the extravagant executive compensations which seem to be the norm today are in fact a predation: their amount correspond to a transfer of wealth rather than to a remuneration. <br />
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<b>Relationship between the powers</b><br />
<br />
The mission of a leader consists entirely in the orientation power, in relation to which management and appointment powers are only useful tools. <br />
<br />
Sometimes a leader cannot or doesn't know how to exercise the orientation power. Then he retreats to the minutiae of management power or, worse, to the sole appointment power: while he does not fulfill his mission, he can remain important. <br />
<br />
Distinguishing these three powers helps to evaluate the action of a leader. Does he give orientations? Are they firm or versatile? Are they embodied in practice, structures and procedures, or are they only loud voices that make air vibrate? <br />
<br />
If the leader is not able of orienting, does he occupy his time with management? Or with appointments only?<br />
<br />
Appointment power, before which so many people make the bow, can provide lively pleasures: it is perhaps for keeping the party going that Nicolas Sarkozy takes such a long time to nominate the prime minister.Michel Vollehttp://www.blogger.com/profile/02758819892464278158noreply@blogger.com0tag:blogger.com,1999:blog-1465468348253401530.post-78513620812919145462010-10-29T02:12:00.000-07:002013-05-01T10:01:13.742-07:00A misleading indicatorTranslation from "<a href="http://michelvolle.blogspot.com/2010/05/un-indicateur-fallacieux.html" target="_blank">Un indicateur fallacieux</a>"<br />
<br />
We say "the debt of Greece" (or of "Spain", "France" etc.) while we talk about the debt of the Greek State (or of the Spanish, the French State). But the debt of a State and the debt of a country are two different things. <br />
<br />
Moreover, we evaluate the level of indebtedness of a State by the ratio "gross debt / GDP", selected in the Maastricht agreements. This ratio is a chimera, a monstrous concept, because it compares a <i>stock</i> of an actor (the level of the gross debt of a State) to a <i>flow</i> of <i>another</i> actor (the annual output of a country, measured by its GDP). Yet we learned in elementary school that all proportion must include things of the same nature ("do not divide leeks by turnips," said our teachers). It is surprising to see so many economists discourse pedantically on such a misleading indicator. <br />
<br />
The "gross debt" of an economic actor is less significant than its net debt, the gap between the value of its debts and the claims he has over others. <br />
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Parenthetically, there is nothing wrong with debt: any productive actor (the government itself produces services), whose work involves anticipation and investment, borrows and holds claims on other actors. The theory defines the optimal level of debt but, reality being never what the theory assumes, the most important criterion is <i>credibility</i>: an actor is <i>credible</i> if its creditors, confident in his ability to repay, are ready to renew their loans without requiring a higher risk premium. <br />
<br />
The ratio that assesses the credibility of an actor is "net debt / value of assets" because one who possesses an important asset may, if necessary, sell it in order to repay. If we are careful we calculate this ratio by weighting debts according to their due, claims and assets according to their liquidity. <br />
<br />
The national accounts do not publish such a ratio: one would have to delve into the accounts to find the data required, and neither the citizen nor even the economist possess the technical know-how - furthermore some essential data are missing: how to evaluate this component of the assets of a State that is <i>his ability to raise new taxes</i>? <br />
<br />
<div align="center">* *</div><br />
What matters however is less the credibility of a State than the credibility of the country which, besides the State, includes businesses and households: a State may, in fact, when compelled, drain the other actors of the country – politically painful and difficult, but possible operation. <br />
<br />
In the net debt of a country, internal debts are canceled since a debt of an actor is a debt of another: one has to consider only the debts and claims with other countries. Then the appropriate ratio to assess the credibility of a country is "net debt to foreign countries, all players combined / assets of the country," applying possibly the same rules of caution as above. <br />
<br />
National accounts provide an indirect measure of the net debt: the current account, balance of interest paid and received by the country, is roughly proportional to the net debt. As it is not easy to assess the value of the assets of a country, this value can be assumed proportional to GDP: it is equivalent to assuming (another rough approximation!) that the value of the annual output of a country is a constant fraction of the value of its capital. <br />
<br />
The ratio "current account / GDP", even if rough, is more consistent than the chimera "gross debt of the State / GDP" because it divides a stream with another stream and these two streams are related to the same actor. <br />
<br />
In December 2009 the OECD predicted for 2010 a current account <i>surplus</i> of 5.4% of GDP for China, 4.5% for Germany, 2.8% for Japan and a <i>deficit</i> of 2.1% for France, 2.3% for Italy, 2.4% for the United Kingdom, 3.4% for the United States and Canada. In light of this indicator, who is "strong" and who is "weak"? (see Christian Sautter, « <a href="http://www.betapolitique.fr/Oh-La-vilaine-dette-publique-49280.html" target="_blank">Oh ! La vilaine dette publique !</a> » , <i>Lettre à nos amis</i>, n° 407, March 5, 2010). <br />
<br />
One found higher ratios when considering smaller countries: surplus of 18.6% for Norway thanks to gas, 10.2% for Switzerland, 8.2% for Sweden and the Netherlands, deficit of 10% in Greece (before his austerity plan), 11% for Portugal. <br />
<br />
In Japan, the ratio "gross debt of the State / GDP" is 225%: this is far superior to the 80% of France and to the 60% of the theoretical maximum in the Eurozone, but this is not dangerous because 94% of Japanese government debt is financed by Japanese creditors who are faithful and insensitive to the ratings given by the rating agencies – in fact, as we have seen, the current account of Japan is positive. <br />
<br />
To each good indicator one can assign a limit beyond which a warning signal lights. The example of Japan shows that it is impossible to define such a limit for the ratio "gross debt of the State / GDP": hence this chimera adds no information and has no practical meaning. But it has consequences...Michel Vollehttp://www.blogger.com/profile/02758819892464278158noreply@blogger.com1