Debt Follies

The New Monetary Regime: An Expert Panel Discusses Debt and Inflation

Written remarks from our three panelists follow below:

U.S. Fiscal Profligacy and the Impending Crisis

by David P. Goldman

The Rise and Rise of Deficit Government

by Christopher DeMuth

The Costs of Our Debt

by Veronique de Rugy

These remarks from the symposium offer a revealing analysis of US financial and fiscal policy. I include in this post the essay by David Goldman, as I believe it offers a foundation for understanding the predicament we have created with poorly conceived financial policies that are now being accelerated and amplified. I have highlighted sections in RED.

May 5, 2021

Massive demand-side stimulus combined with constraints on the supply-side in the form of higher taxes is a sure recipe for inflation and eventual recession. The Fiscal Year 2021 US budget deficit will amount to 15% of US GDP after the passage of an additional $1.9 trillion in demand stimulus, according to the Committee for a Responsible Federal Budget, a proportion that the United States has not seen since World War II.

It is hard to avoid the conclusion that the Biden Administration’s fiscal irresponsibility arises from a cynical political calculation. It evidently proposes to employ the federal budget as a slush fund to distribute benefits to various political constituencies, gambling that the avalanche of new debt will not cause a financial crisis before the 2022 Congressional elections. The additional $2.3 trillion in so-called infrastructure spending that the Administration has proposed consists mainly of handouts to Democratic constituencies.

Where is Foreign Money Going?

During the 12 months ending in March, the deficit stood at 19% of GDP. Even worse, the Federal Reserve absorbed virtually all the increase in outstanding debt on its balance sheet. In the aftermath of the 2009 recession, when the deficit briefly rose to 10% of GDP, foreigners bought about half the total new issuance of Treasury debt. During the past 12 months, foreigners have been net sellers of US government debt. (See Figure 1.) The US dollar’s role as the world’s principal reserve currency is eroding fast, and fiscal irresponsibility of this order threatens to accelerate the dollar’s decline.

The Federal Reserve has kept short-term interest rates low by monetizing debt, but long-term Treasury yields have risen by more than a percentage point since July. Markets know that what can’t go on forever, won’t. At some point, private holders of Treasury debt will liquidate their holdings—as foreigners have begun to do—and rates will rise sharply. (See Figure 2.) For every percentage point increase in the cost of financing federal debt, the US Treasury will have to pay an additional quarter-trillion dollars in interest. The United States well may find itself in the position of Italy in 2018, but without the rich members of the European Union to bail it out.

The flood of federal spending has had a number of dangerous effects already:

  1. The US trade deficit in goods as of February 2021 reached an annualized rate of more than $1 trillion a year, an all-time record. China’s exports to the US over the 12 months ending in February also reached an all-time record. Federal stimulus created demand that US productive facilities could not meet, and produced a massive import boom.
  2. Input prices to US manufacturers in February rose at the fastest rate since 1973, according to the Philadelphia Federal Reserve’s survey. And the gap between input prices and finished goods prices rose at the fastest rate since 2009. (See Figure 3.)
  3. The Producer Price Index for final demand rose at an annualized 11% rate during the first quarter. The Consumer Price Index shows year-on-year growth of only 1.7%, but that reflects dodgy measurements (for example, the price shelter, which comprises a third of the index, supposedly rose just 1.5% over the year, although home prices rose by 10%).

If foreigners are net sellers of US Treasury securities, how is the United States financing an external deficit in the range of $1 trillion a year? The US has two deficits to finance, the internal budget deficit, and the balance of payments deficit, and here we refer to the second. The answer is: By selling stocks to foreigners, according to Treasury data. (See Figure 4.) Foreign investors have been dumping low-yielding US Treasuries and corporate bonds during the past year, according to the Treasury International Capital (TIC) system. Foreign investors bought $400 billion of US equities and nearly $500 billion of US agency securities (backed by home mortgages) during the 12 months through January, but sold $600 billion of Treasuries and $100 billion of corporate bonds.

This is a bubble on top of a bubble. [Double Bubble = Trouble.] The Federal Reserve buys $4 trillion of Treasury securities and pushes the after-inflation yield below zero. That pushes investors into stocks. Foreigners don’t want US Treasuries at negative real yields, but they buy into the stock market which keeps rising, because the Fed is pushing down bond yields, and so forth.

At some point, foreigners will have a bellyful of overpriced US stocks and will stop buying them. When this happens, the Treasury will have to sell more bonds to foreigners, but that means allowing interest rates to rise, because foreigners won’t buy US bonds at extremely low yields. Rising bond yields will push stock prices down further, which means that foreigners will sell more stocks, and the Treasury will have to sell more bonds to foreigners, and so forth.

The 2009 crisis came from the demand side. When the housing bubble collapsed, trillions of dollars of derivative securities backed by home loans collapsed with it, wiping out the equity of homeowners and the capital base of the banking system. The 2021 stagflation—the unhappy combination of rising prices and falling output—is a supply-side phenomenon. [Back to the Future of That 70s Show] That’s what happens when governments throw trillions of dollars of money out of a helicopter, while infrastructure and plant capacity deteriorate.

The present situation is unprecedented in another way: Not in the past century has the United States faced a competitor with an economy as big as ours, growing much faster than ours, with ambitions to displace us as the world’s leading power.

The source of the 2008 crisis was overextension of leverage to homeowners and corporations. I was one of a small minority of economists who predicted that crisis.

Federal debt in 2008 was 60% of GDP, not counting the unfunded liabilities of Medicare and the Social Security System. As of the end of 2020, Federal debt had more than doubled as a percentage of GDP, to 130%. The Federal Reserve in 2008 owned only $1 trillion of securities. US government debt remained a safe harbor asset; after the Lehman Brothers bankruptcy in September 2008, the 30-year US Treasury yield fell from 4.7% to 2.64%, as private investors bought Treasuries as a refuge.

The Treasury: Not a Refuge from, but a Cause of Crisis

Today the US Treasury market is the weak link in the financial system, supported only by the central bank’s monetization of debt. If the extreme fiscal profligacy of the Biden Administration prompts private investors to exit the Treasury market, there will be no safe assets left in dollar financial markets. The knock-on effects would be extremely hard to control

The overwhelming majority of over-the-counter (privately traded) derivatives contracts serve as interest-rate hedges. Market participants typically pledge Treasury securities as collateral for these contracts. The notional value of such contracts now exceeds $600 trillion, according to the Bank for International Settlements. Derivatives contracts entail a certain amount of market risk, and banks will enter into them with customers who want to hedge interest-rate positions only if the customers put up collateral (like the cash margin on a stock bought on credit) (See Figure 5) The market value (after netting for matching contracts that cancel each other out) is about $15 trillion. If the prices of Treasury securities fall sharply, the result will be a global margin call in the derivatives market, forcing the liquidation of vast amounts of positions.

Something like this occurred between March 6 and March 18, 2020, when the yield on inflation-protected US Treasury securities (TIPS) jumped from about negative 0.6% to positive 0.6% in two weeks. The COVID-19 crash prompted a run on cash at American banks, as US corporate borrowers drew down their credit lines. US banks in turn cut credit lines to European and Japanese banks, who were forced to withdraw funding to their customers for currency hedges on holdings of US Treasury securities. The customers in turn liquidated US Treasury securities, and the Treasury market crashed. That was the first time that a Treasury market crash coincided with a stock market crash: Instead of acting as a crisis refuge, the US Treasury market became the epicenter of the crisis.

The Federal Reserve quickly stabilized the market through massive purchases of Treasury securities, and through the extension of dollar swap lines to European central banks, which in return restored dollar liquidity to their customers. These emergency actions were justified by the extraordinary circumstances of March 2020: An external shock, namely the COVID-19 pandemic, upended financial markets, and the central bank acted responsibility in extending liquidity to the market. But the Federal Reserve and the Biden Administration now propose to extend these emergency measures into a continuing flood of demand. The consequences will be dire.

The present situation is unprecedented in another way: Not in the past century has the United States faced a competitor with an economy as big as ours, growing much faster than ours, with ambitions to displace us as the world’s leading power. China believes that America’s fiscal irresponsibility will undermine the dollar’s status as world reserve currency.

Here is what Fudan University Professor Bai Gang told the Observer, a news site close to China’s State Council:

Simply put, this year the United States has issued a massive amount of currency, which has given the US economy, which has been severely or partially shut down due to the COVID-19 epidemic, a certain kind of survival power. On the one hand, it must be recognized that this method . . . is highly effective. . . . The US stock market once again hit a record high.

But what I want to emphasize is that this approach comes at the cost of the future effectiveness of the dollar lending system. You do not get the benefit without having to bear its necessary costs.

A hegemonic country can maintain its currency hegemony for a period of time even after the national hegemony has been lost. After Britain lost its global hegemony, at least in the 1920s and 1930s, the pound sterling still maintained the function of the world’s most important currency payment method. To a certain extent, the hegemony of the US dollar is stronger than any currency before it. . . .

We see that the US dollar, as the most important national currency in the international payment system, may still persist for a long time even after US hegemony ends. Since this year, the US has continued to issue more currency to ease the internal situation. The pressure will eventually seriously damage the status of the US dollar as the core currency in the international payment system.

America has enormous power, but the Biden Administration and the Federal Reserve are abusing it. And China is waiting for the next crisis to assert its primacy in the world economy.

Risk-Free? No Such Thing.

‘There is no such thing as a risk-free world’

Excellent interview. Some excerpts:

There are sections of the public health and scientific community that have become infected with the general level of fear and anxiety in the population. You see that very clearly in the recent open letter signed by teaching unions and various behavioral scientists – more or less a coalition of the anxious – demanding that face masks be mandatory in schools until at least 21 June. These people are looking for a risk-free world. Anybody who understands the nature of risk knows that there is no such thing. The eradication of risk comes at unacceptable social and economic costs wherever you try to do it.

The propagation of fear is visible not just in advertising but also in the constant reiteration of certain symbols. You will find public health specialists say that they know masks don’t achieve very much, but they do remind people that there’s a pandemic going on. They address the question of how to keep people in a constant state of fear. 

Democracy is messy, it’s uncontrolled, it can be disruptive. But all of those things are actually really important for a good society. It’s out of the messiness that creativity and change and innovation come. We are erring too far towards elitist control, which is what edges us closer to the Chinese model of the party and the party scientists decreeing what a good life for citizens is and devising systems and structures to enforce it. That should concern us.

Is Social Media Destroying Democracy?

It doesn’t seem so long ago when the promise of an inter-connected world was all the rage, with the free sharing of information being praised as the dawning of a new age for global communication and community. An audacious young Mark Zuckerberg praised his nascent social network, proclaiming that “Connecting the world is really important, and that is something that we want to do. That is why Facebook is here on this planet.”

The equally precocious founders of Google offered a mission to Do No Evil while organizing the world’s information to make it universally accessible and useful. Likewise, their youthful optimism gushed about “the potential for technology to remake the world into a better place.” Early outcomes were hopeful, as Facebook’s network grew quickly to more than 2 billion users, while the Arab Spring was heralded politically as “the Twitter revolution,” and “google” became a verb.

But how fast the wheel has turned. Today we find ourselves blaming social media for disseminating misinformation as propaganda (“fake news”), destroying objective journalism, invading user privacy, corrupting elections, enabling and fomenting ideological extremism, canceling political dissent by censoring free speech, cornering markets and suppressing competition, crushing small businesses, and harming the physical and mental health of its users. Whew!

No, it really hasn’t been that long. It’s like we’ve imbibed a heady drug, woke up, and found ourselves addicted, wondering how we got here and how to break this compulsive habit before it breaks us. To paraphrase David Byrne, “How did we get here?”

There are two things we need to understand to better answer this question. One is the nature of social interaction, individually and socially, and how that flows from our behavioral instincts. Second, is how the business model and logic of large-scale social media networks manipulate and profit from those natural instincts.

Man is by nature a social animal” – Aristotle, Politics

As Aristotle noted, humans crave social interaction. As young people, we seek the approval of elders and peers as a form of bonding and belonging. We form families, tribes, neighborhoods, and communities to fulfill this instinctual need for social engagement and mutual protection. Modern social networking technology feeds on that need, but what technology offers today differs from centuries of traditional social interaction in terms of scale and the implications for identity, trust, and commitment.

Evolutionary psychologist Robin Dunbar has observed that human face-to-face relationships have an upward bound of about 150 relationships before dissipating. Beyond that we lose track of our personal networks, so institutional structures must be established to cohere the community network. We understand intuitively that friendships formed through in-person relationships are fundamentally different than “friends” on Facebook. Nobody has 6000+ “friends.” Friends connected through online social networks (OSNs) are too easy; requiring little or no commitment. As the degrees of separation increase, peers on OSNs become virtually anonymous. So, as defined by trust and commitment, our social media friends are not really true friends at all. OSNs have allowed us to make connections that live on the other side of the globe, so we don’t really ‘know’ who we are engaging. What this means is that on social media we are able to shed the constraints of reputation, integrity, and trust. This opens up social engagement to all kinds of malicious intent.

If you can’t say anything nice, then don’t say anything at all.”  ~ Aesop (c.620-560 BC)

Gossiping and lying go hand in hand.” ~ Proverb

Whoever gossips to you, will gossip about you.” ~ Spanish Proverb

Comparing OSNs to traditional gossip networks can provide valuable insights. As these quotes show, gossiping has a long, checkered history. In traditional societies, the human propensity to gossip can serve a useful purpose in reinforcing a community’s cultural norms and values by calling attention to and ostracizing those who violate those norms. These practices can range from the harmless to quite ruthless, all in the name of solidifying the community under those accepted norms. It’s how the traditional community survives and maintains stability. Individuals living in modern liberal societies often find such conformity stifling. But gossip can also be positive, promoting one’s good character, as indicated by the phrase, “Your reputation precedes you.” (The key here is how we value reputation.)

Scientific studies show the reward center in the brain—the caudate nucleus—is activated in response to gossip, especially malicious gossip. For instance, subjects seem to be amused or entertained by celebrity scandals. We all know this form of Schadenfreude as the basis of the business model for supermarket tabloids, as exemplified by the modern fascination with the British monarchy and its human foibles.

Furthermore, studies have shown that subjects get a dopamine hit from superficial engagement on social media. The likes, the emojis, the comments, all offer instant gratification that somebody out there approves of us or at least notices us. Popularity metrics signal our status on the social media hierarchy. All this feeds our sense of self-worth and self-esteem and helps shape our identity. This dopamine rush is exploited by social media user interfaces in order to provoke and prolong user engagement on the platforms.

By appealing to our base instincts social media has transformed itself into this role of spreading gossip, but on a far larger scale with far less restraint. In this respect, Facebook and Twitter have become little more than global gossip networks, where those gossiping and being gossiped about have no relationships to a shared community. We see this today in the attempts to cancel those who disagree with an accepted narrative or ideology, where perceived transgressors are set upon by Twitter mobs and trolls. We see it with teenage bullying and exploitation. We see it with constant virtue signaling.

With large-scale, anonymous networks, where no one can be held accountable for attacking another, bad behavior becomes far too easy and tempting, perhaps irresistible. Peoples’ careers and lives are being destroyed by what can be viewed as an unserious game with very serious consequences. In one study conducted in Germany, researchers found that Facebook’s own engagement tools were tied to a significant rise in membership in extremist organizations. In the US, Facebook has been blamed, rightly or wrongly, for the rise of white supremacist groups.

Paradoxically, this scaling effect, enabling anonymity and lack of accountability, is what really makes today’s social media anti-social. There is no trust or reputational capital to be lost and removing these constraints can bring out the worst in us. OSNs have developed to the point where we are getting all the negative effects of gossip with fewer of the positive effects of shared community promised. In this respect, large-scale OSNs make no sense as a social institution. Nevertheless, the psychological and emotional allure of online social engagement is overpowering, while the financial power associated with OSNs is formidable. In terms of economic power and global reach, our social media giants can go head-to-head with most countries. The top five company valuations on US financial markets are all Big Tech, with Google and Facebook ranked at #4 and #5.

The Primacy of Technology

The big social media platforms today, such as Facebook, YouTube, and Twitter, make money through targeted advertising, creating specialized interfaces to keep users engaged and collect as much data as possible to sell to targeted advertisers. The more users, sharing more information flowing through the network, the more advertising revenues increase along with company valuations.

With this profit incentive, the OSN platforms’ engagement strategies go beyond user-initiated behaviors, using AI machine algorithms and click-bait to solicit engagement among users by suggesting friends, games, similar content, contests, and memes. This is why Facebook asks users to play what seem to be silly games: such engagement, no matter how meaningless, can become instantly monetized. Most of these interactions are fairly innocuous, but, because sensationalism and conflict attract engagement, many are meant to provoke political conflict or collusion. In addition, the engagement strategies depend upon keeping attention siloed. If users are regularly exposed to different points of view, if they develop healthy habits for weighing fact versus fiction, they will be tougher targets for engagement.

At best, OSN click-bait strategies and target algorithms yield an endless cacophony of digital noise to compete against any positive human interaction. At worst, and most often than not, we get warring tribes that only venture outside their walled silos to engage with the enemy.

Furthermore, social media is a winner-take-all industry as OSNs have become virtual monopolies through network effects. Much like national languages and computer operating systems, the more users on the network, the more new users want to join the party, the more personal data is harvested, and the more valuable the growing network is to advertisers. This creates a significant barrier to entry for competitors, where any successful new platform is quickly swallowed up by the giants, as when Facebook bought up WhatsApp and Instagram, and Google purchased YouTube.

Their dominance grants Facebook and Google immense bargaining leverage over publishers, content creators, and other stakeholders, who often have no choice but to hand over their own proprietary data to satiate the platforms’ thirst for content. This bargaining power has crushed many creative professions and independent publishers. As far as users who provide all this valuable content go, well, they get a free profile page and a few tools to deepen their engagement.

When it comes to business practices and power over the global internet, Big Tech is unrivaled. As plainly stated by one recent study:

Facebook and Google use their dominant position as gatekeepers to the internet to surveil users and businesses, amass unrivaled stores of data, and rent out targeting services to third parties who can then target content – from ads for shoes to racist propaganda – at users with a perceived precision unrivaled by any other entity. …The longer users remain on the platform – hooked on sensationalist content, which the platforms’ algorithms prioritize – the more money Facebook and Google make from advertising.[1]

Despite the apparent toxicity of these social media platforms, for those who wish to fulfill a sincere desire for wider social connection and engagement, there is no other game in town. Without meaningful competition, Big Tech has transformed their platforms not to help us communicate, but to addict us to their services in order to sell more advertising. For the rest of us the result has not been the promised congenial, global community, but rather a malevolent battle for primacy and survival.

The result is that Big Tech has acquired its own acronym for its five biggest players—the FAANGs—referring to Facebook, Amazon, Apple, Netflix, and Google. Fangs have never been warm and fuzzy.

The Nature of Political Engagement in Democracy

As suggested in the title of this essay, we need to address what all this means for political democracy. Current events might give us a clue, from a previous summer of ongoing urban riots across the country against local government and law enforcement to a protest at the Capitol in January against the 2020 presidential election that turned violent. The chaos in both cases can be traced to the role of social media provocation and coordination.

Democracy is a form of political order that relies on a social choice mechanism called voting that seeks to support and manage self-government. The social choice challenge is always how to distill an inestimable number of personal preferences and interests down to a single pragmatic social policy agenda. It’s not a simple task, nor an obvious one. Neither an authoritarian hierarchy nor a chaotic populist mob accomplishes the objective. Democracy is a messy business, as Churchill said, the worst of all possible political systems, except for all the alternatives.

American democracy is built on a decentralized structure that seeks to best fulfill the goal of self-government while adhering to our stated values of liberty and justice. This is an especially difficult challenge in a large population made up of diverse cultural, ethnic, and racial groups spread over a large landmass, like the USA.

When systems grow large and complex, nature, technology, and history show us that the best way to manage is to decentralize the process. So, in the US we have fifty states made up of thousands of counties and municipalities to decentralize government. What is also required to facilitate the process is a method of ranking policy priorities that can converge on a workable ordering of those priorities. The final condition is a voting process that allows people to compromise on the big issues and find convergence on decisions the entire population finds acceptable, if not ideal.

Our decentralized system of representative governance seeks to fulfill these objectives while also imposing some necessary trade-offs. Our voting system of winner-take-all plurality yields a two-party system where the winning strategy is to acquire more than 50% of the vote. This design eschews proportional representation with a multitude of competing interests by forcing voters to set priorities and move toward a centrist coalition. This design seeks a majority mandate through a process acceptable to the minority as well, the incentive being to capture the center of American politics.

After capturing that center through elections, the governing coalition must then govern the entire populace while adhering to the accepted process to maintain legitimacy. This requires, above all else, convergence through compromise.

The beauty of a two-party system is that voter choices are forced towards the center of compromise to be successful, so a winning strategy will appeal more to commonalities among voters rather than differences. The alternate idea of proportional representation and multiple parties creates more responsive but fragile coalitions, whereas with a dominant centrist coalition, the two-party structure creates greater stability with greater resistance to change.

Naturally, this process favors the status quo (i.e., conservatism?) rather than change (progressivism?) and thus the trade-off is unappealing to those agents of change among us. Understandable, but all societies survive by following time-tested values and practices until they no longer serve, so the burden of change is always on those eager to embrace it. While time is on their side, the change agents often cannot wait.

Given America’s profile as a large country with a large culturally, ethnically and racially diverse population, democratic governance is no small task. Convergence is far easier with a smaller population, a smaller land area, and a more homogeneous culture, with shared racial and ethnic identities. The USA has none of these advantages, but, starting with a relatively small population and land area, the designers of the US Constitution displayed remarkable foresight in their design.

So, the million-dollar question is whether our social media technology is making our task easier or more impossible?

As discussed above, social media is making us more tribal, more isolated from those different than us, more alienated from a common national identity. The face-to-face appreciation of each “other” is lost and technology’s depreciation of humanity allows us to cast that “other” in dark shadows instead of bright enlightenment. It is replacing true meaning with a false sense of tribal identity and differentiation. And where we cannot find this differentiation, we create it. It’s ironic that our commonalities far outweigh our differences, yet these small differences are what we magnify through much of our social media engagement.

We can easily see that these behaviors are short-circuiting our political democracy. We are creating a bimodal distribution of political preferences rather than a unified, centrist “national” one. Ultimately, we are adrift, wondering what American democracy is all about. Without the strength of conviction, we are weak and vulnerable. And as we drift, those with anti-democratic tendencies, whether authoritarian or anarchic, are harnessing these tools to overcome our institutional constraints and undermine our foundations of liberty and justice. We have seen how some of these interests have used the unique crisis of a global pandemic to advance their narrow agenda. It is particularly shocking how some narrow interests employ science as a political weapon, but then completely dismiss scientific skepticism when it doesn’t serve their purpose.

In the social media space, we are seeing censorship of opinion, even informed opinion; canceling of those we disagree with professionally and socially (this is a modern form of ostracism, banishment, and exile from the community); invasions of privacy; collusion; attacks on personal liberties; and the incitement of social disorder and chaos. What is worse is that our traditional media platforms in news journals and television/radio broadcasting have been sucked into this vile vortex, spreading propaganda as objective news.

These developments expose two serious threats to free democracy:

  • An ideological ‘tribal’ civil war among citizens inflamed by information media, making democratic compromise impossible; and
  • A danger of collusion between Big Tech and Big Govt to infringe upon constitutional freedoms and privacy by co-opting social media platforms, such as we have seen in China.

This second danger seems particularly acute as the solution recently discussed in the US Senate in response to the first danger. We cannot allow unaccountable governments to co-opt unaccountable technology platforms with the idea that “they” will make us safe. It flips the definition of a people’s democracy on its head.

Remedies?

Are there remedies that can halt this disintegration of our social and political institutions or do things just fall apart? As a free democracy, we need to defend free speech as the basis of communication and comprehension of differing viewpoints. How else to find compromise? We also need objective sources of information we can trust. And we need the integrity of objective national media.

There are many policy proposals that address the problems of Big Tech, from rewriting the Digital Millennium Copyright Act to make OSNs more accountable and liable for the information spread on their networks to breaking up the Big Tech monopolies to changing the revenue model. This essay is intended to bring attention to and explain the problem without going deeply into possible regulatory solutions, but the author’s impressions are that online “search” is likely a public good just like the public library and should be regulated like a public utility; broad and deep vertical integration of product markets is likely subject to anti-trust laws; while barriers to entry should be reduced to counter the network externalities that create quasi-monopolies and help foster greater competition and innovation in technology markets. The advertising revenue model relies on harvesting free data from users, so a more just model would share that data value with the users that create it.

But just as important is an appeal on the personal level to voluntary behavioral modifications among social media users, much like those promoted to decrease tobacco consumption. This is necessary for our personal mental health and our social peace of mind. We know the nihilistic and narcissistic behaviors we engage in on social media are unhealthy. We are fighting for attention, we are competing for status, we are allowing ourselves to become smug with our own created self-image. We are in zero-sum, finite games. But I doubt any of this brings us a sense of meaning, purpose, or fulfillment, no matter how many “likes” we get.

We also know that we crave the affirmation of our unique personal identities and a sense of belonging in our social communities. We need positive-sum, infinite games. (War is a finite game, peace is an infinite game.) Technology can serve us in this capacity, but only if we create social media that makes sense. What makes sense is small scale, inter-personal, commonality of interests, and a great deal of empathy and open-mindedness. What makes sense are positive social interactions that reward our human social and creative instincts.

Lastly, we need to reject ideological politics as personal identity. Political differences are natural, but fused with identity they become threatening and lead to self-defensive reactions. Our partisan identities should mean relatively little compared to our identities as creative, intelligent, interesting, empathetic individuals.  

Our online, interconnected world will become more so, but we need to ensure it doesn’t become a more conflicted and contentious one. We do not want a world that wages war by cyber means. More crucial, we need to ensure that technology enhances our humanity by safeguarding our treasured values of liberty and justice for all. 


[1]Addressing Facebook and Google’s Harms Through a Regulated Competition Approach,” American Economic Liberties Project, April 10,2020.