Friday, March 01, 2013

A Greek bearing gifts

Another great Econtalk podcast.
Yanis Varoufakis of the University of Athens, the University of Texas, and the economist-in-residence at Valve Software talks with EconTalk host Russ Roberts about the unusual structure of the workplace at Valve. Valve, a software company that creates online video games, has no hierarchy or bosses. Teams of software designers join spontaneously to create and ship video games without any top-down supervision. Varoufakis discusses the economics of this Hayekian workplace and how it actually functions alongside Steam--an open gaming platform created by Valve. The conversation concludes with a discussion of the economic crisis in Europe.
Varoufakis is a lot of fun. Listen for his opinions on academic economics, the euro crisis, the meaning of life, happiness, and other topics.
Russ: Well, yeah. I think calculation is over-rated generally. But that puts me in a minority in the profession. The profession is going in the other direction don't you think?

Guest: Of course. Catastrophically so. And there is a fundamental difference between the social sciences and the real sciences. In the real sciences, if you tell me that Person X has published 30 articles in Nature or Science, I am prepared to take it for granted that they are very good physicists. But in our neck of the woods ... that's not necessarily the case. [ Actually physicists tend not to publish in Nature or Science, rather Physical Review or similar ... ]

Russ: I agree with you. But we are in the minority. Why do you think that has happened?

Guest: Oh, it goes back a long way. It goes back to the 1879s and 1880s, when economists entered the universities. Because they needed to prove that they are the scientists of society. And they had, they created a false science whereby classical mechanics of the 19th century were copied into mathematical models of exceptional complexity--and aesthetic beauty--and the only way of closing them, of solving the mathematics that was created, was by making assumptions which ensure that these models have nothing to do with real capitalism. So the more successful you were in creating these models which gave you discursive power and academic power in the corridors of economics departments, the more irrelevant you were in explaining the real world. It is a very peculiar failure. [ See also Brad DeLong Confessions of an economist. ]

Russ: Yeah. I have a little bit of mixed feelings about it. I think we've gone down the wrong path. And my preference would be to go back to Adam Smith. I think he had the right path, which is descriptive, narrative. I think we're more like historians than physicists and we should admit it.

Guest: Indeed. We should go back to the classical economics tradition. Whatever your political or ideological or methodological take is, I think it is exceptionally worrying to all intellectuals, who think things through, that today, Adam Smith, David Ricardo, John Stuart Mill, Karl Marx, Friedrich Hayek, even John Maynard Keynes, would never get a job at Harvard University's Economics Department. Never. Under no circumstances.

Russ: It's true.

... [Great discussion of the euro crisis] ...

... a Great Depression, in the periphery of Europe. Which already is happening in places like Greece and Spain. [?] unemployment can reach 30% soon. It's unbelievable in this day and age that we should have such unemployment rates. And this is a self-reinforcing depression in places like Greece and Spain. Either the Euro is going to break up, or you can have a large part of Europe being turned into Kosovo-like protectorates. ... But I think that the Eurozone is not going to survive that because the political pressure in places like proud nations like Italy and Spain are going to be such that the whole thing is simply going to go belly up. But the reason why we are having all this, just to cut to the chase, is because in 2010 when a country like Greece, like the Greek state went bankrupt, was that Europe refused to allow it to default within the Eurozone. This was just a crime ...

Greece had a debt that was unsustainable; and so as to make sure that Deutschebank ... wouldn't suffer more than they would have to, even though they were themselves insolvent, and relied on the generosity of the German and the French taxpayers, the largest loan in history was piled upon the shoulders of the weak and bankrupt Greek state. This was effectively a con job. The German electorate was being told that this was an act of solidarity towards the Greeks. When in reality all that was happening was that the losses of Deutschebank were being piled on the shoulders of the German taxpayers. ... Guest: The German taxpayers realized that. And when the German taxpayers realized that, they hated the Greeks; and the Greeks hated the Germans. And we've lost the plot completely. The only beneficiaries of that are the Nazis.

While we fight over $9 or $10 minimum wage, high g game designers and coders enjoy the work environment described below.
[Russ Roberts:] I'm going to read another excerpt here from the [Valve] Employee Handbook. It's subtitled "The Office." It says:

Sometimes things around the office can seem a little too good to be true. If you find yourself walking down the hall one morning with a bowl of fresh fruit and Stump-town-roasted espresso, dropping off your laundry to be washed, and heading into one of the massage rooms, don't freak out. All these things are here for you to actually use. And don't worry that somebody's going to judge you for taking advantage of it--relax! And if you stop on the way back from your massage to play darts or work out in the Valve gym or whatever, it's not a sign that this place is going to come crumbling down like some 1999-era dot-com start-up. ...


SethTS said...

Valve sounds like Athenian democracy. Great for the few full citizens, not so hot for the slaves. Varoufakis mentions this paradox: their experiment in syndico-anarchist self-organization is funded by monopoly power. The rule seems to be that a group with sufficiently high mutual trust/respect can operate in a very 'just' manner -- but that this trust is hard to achieve in large or diverse groups, and hard to sustain even where it can be achieved to begin with. Even at a place like Valve, the energy source for their interesting 'heat engine' comes from consumers and competitors constrained (for the time being) to use their Steam platform. A bit heavy perhaps to call that "slavery" -- but they aren't members of the special elite Valve club.

Btw, I think Valve is in Bellevue, WA, not Austin. Varoufakis visited the founder in "Seattle", worked there for a while, then got an academic job in Austin while continuing to consult with Valve, which probably led the transcript to say Valve was in Austin.

Have you listened to the EconTalk with Cathy O'Neil?

steve hsu said...

You're right -- I think Valve is in the Seattle area. I liked the O'Neil podcast as well, although I agree with some of the comments on the econtalk site that find her a bit naive at times.

Christopher Chang said...

There still are limits; Valve laid off a bunch of people last month...

Benjamin Espen said...

I toured Valve's previous headquarters in Bellevue a couple of years ago. I met Bay Raitt and we joked about Gollum. They have moved since, but I got the impression that everyone I talked to was quite happy to be there. The game designers were a floor up from the Steam support staff. We didn't tour their section.

LondonYoung said...

The "economist is residence" is hard to take seriously given that Greece defaulted on its bonds obligations to DB but is performing with the ECB. The information he provides can be described in a binary ... FALSE

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