Archive for the ‘Economics’ Category

Why a punch in the face* is the appropriate response to use of the phrase “business model”

Saturday, January 8th, 2011
fist
Seiken by Kurmis / CC BY

The utterer of “business model” has attempted to raise their status with a superfluous word and has only confused whatever the issue at hand. The utterer is probably among the confused. The listener obtains only entropy and lower relative status. A punch serves to equalize the situation.

In inappropriate conveyance of status, “business model” bears likeness to beginning a statement with “So, ”:

Starting a sentence with “so” uses the whiff of logic to relay authority.

Ugly stuff.

Vivek Wadhwa, my favorite TechCrunch writer, seeks to educate the confused (strikethrough added):

Developing the right product is hard. But what is harder is building a good business model.

However, this and other uses throughout the article only demonstrate the superfluousness of “model”.


*metaphorically
with scare quotes, or snarky tone, is ok; beware of inadvertent homage

Dear Jean Quan,

Sunday, January 2nd, 2011

Congratulations on your election and tomorrow’s inauguration as Oakland mayor.

I ranked ahead of you, but in truth my expressive rationale for doing so could just as well have favored you: a progressive Asian American woman represents a defining characteristic of what makes Oakland special and its future just as much as does a green lesbian (who is also an American and a woman, but such is identity politics).

Expressiveness aside, expectations for positive outcomes from your term as mayor are pretty low (note emphasis on outcomes; everyone knows you’ll put in more hours than recent Oakland mayors). Oakland still has a terrible crime problem, and city finances are beyond terrible. I suspect if there were betting markets on outcomes related to these problems, current prices would predict that under your leadership crime will get worse (relative to comparable cities; of course national trends may determine absolute direction of change), chief police will quit, the city will teeter on bankruptcy, your response will be to ‘social program us to death’, and you will be a one term mayor, succeeded by Kaplan, Joe Tauman, or .

Low expectations can be a blessing, if you’re willing to take steps to smash them and secure your re-election and legacy as Oakland’s most successful mayor in decades.

First, crime. Blaming the problem on poverty, racism, poor schools, unemployment, etc., isn’t going to cut it, neither as discourse nor as the stereotypical actions resulting, loosely characterized as “building youth centers”. Most voters aren’t that stupid (well, they are, but in other directions when it comes to crime). Fortunately, one can be a good progressive, acknowledge that crime is a major problem, especially for the disadvantaged, and take smart, progressive-compatible steps to smash crime. Check out Progressive Change Campaign Committee co-founder Aaron Swartz’s essay on crime:

Such things are a frustration for white suburbanites, but for poor people stuck in the ghetto, they’re a nightmare. Crime is yet another disadvantage and a particularly noxious one at that. Even aside from all the other indignities suffered by the poor, just imagining life in a crime-ridden neighborhood is enough to make your skin crawl.

So there’s the question: How can we have less crime with less punishment?

Here are the no-brainer steps you can take on crime:

  • Do not get caught saying anything that could be construed as “blaming society” for the problem or that the solution consists of “building youth centers”.
  • Work with Batts to actually fight crime; defer to his expertise at every opportunity.
  • Provide high-minded leadership on protecting civil liberties; on this defer to nobody. However, limit riot-bait to national and global issues. For example, city proclamations calling for bringing George W. Bush to justice and the like will only cause rioting on right-wing talk radio, leaving Oakland neighborhoods and businesses unscathed.

Next, finances. Similarly no-brainer suggestions:

  • Repeat early, loudly, and clearly that Oakland has an unsustainable spending problem, and everyone, especially your loyal allies in and funded by city government, are going to feel immediate pain.
  • Immediately push through cuts, primarily to areas you favor politically, sparing police and maintenance as much as possible.
  • Immediately push through revenue increases, e.g., tackle mis- and under-priced parking.

Beyond the above mandatory issues, a few less pressing but visionary actions for you to consider adding to your mayoral legacy:

  • Do everything you can to signal (and perhaps do a little of substance too) that you believe Oakland is the eco-city of the future, urban permaculture doers are heroes, and Oakland should be the world leader in marijuana business and education. Each of these increases Oakland’s specialness, and eliminates any future challenge from Kaplan. (If you’re moderately successful on the two major issues above, you also eliminate any traction Tauman or Russo might otherwise gain during your first term.)
  • Make Oakland the leader in “open” policy. There are obvious opportunities around city data, software procurement, and open licensing of city publications. The last would even help improve the article about you on Wikipedia. ☺ I and many other technology professionals and advocates of openness who live in Oakland would love to help. Some of us work for Creative Commons and other organizations with deep expertise in this area.
  • In another decade, autonomous vehicles will reshape cities. Establish some kind of an unpaid citizens committee to investigate how Oakland can prepare.

Here’s to great outcomes for Oakland, and your incredible success as mayor!

Mike Linksvayer
Golden Gate District, Oakland

Yet Another Biaxial Political Spectrum

Sunday, November 21st, 2010
state-market skepticism-confidence biaxial spectrum
SVG

Thought of while microblogging (emphasis added):

@glynmoody … I find it nice that movement gelling on both govt-skeptic and market-skeptic sides eg c4sif.org and p2pfoundation.net

As one moves toward increasing skepticism of both mechanisms, one might focus more on institutional design (wherein there is a huge space for exploration: two areas I’ve occasionally rambled about are commons and futarchy, both applicable to arrangements across state and market), as everything is broken and needs fixing. If one is much more skeptical about one mechanism than the other, one will assume the more confidence-inspiring mechanism will adequately check any problems of the other — e.g., so-called Masonomics:

At the University of Chicago, economists lean to the right of the economics profession. They are known for saying, in effect, “Markets work well. Use the market.”

At MIT and other bastions of mainstream economics, most economists are to the left of center but to the right of the academic community as a whole. These economists are known for saying, in effect, “Markets fail. Use government.”

Masonomics says, “Markets fail. Use markets.”

Presumably the prototypical Masonomist on the above spectrum would be far on the left (extremely skeptical of the state) and in the middle (somewhat skeptical of markets), leading such a person to always favor market solutions (the state being a lost cause), with more emphasis on the design of market institutions than someone merely confident in the market and skeptical of the state might. Schools of socialism that roughly mirror Masonomics must exist — “Governments fail. Use government [carefully].” — I just don’t know their names, so I put “rational socialism” on the spectrum.

It seems that from many places on the spectrum, one might beneficially increase skepticism of one’s preferred mechanism, so as to focus on making that mechanism work better, and thus “win” more in the long term. Admittedly, this might seem an awful tradeoff for an activist focused on bashing (whatever they see as) evil in the short term. Further, one genuinely interested in improving the world as opposed to making ideological points might focus on improving mechanisms that make criticism and improvement of all mechanisms easier (nothing remotely new about this observation) — these are public goods that facilitate the provision of more public goods.

Completely coincidentally (noted while writing this post), died today. His name is associated with a fairly well known . Nolan also founded the strategically unsound U.S. Libertarian Party. If it mattered at all, and weren’t in bad taste, I’d suggest it die with him!

54% chance of marijuana legalization, what chance of crime wave?

Monday, May 17th, 2010

My favorite local weekly, the (I loved their print design and long-form stories in the 1990s; after a couple ownership changes they are still good for other reasons, e.g., prolific reporter Robert Gammon) has a story (actually a blog entry, hopefully something of it makes it to print) that very concisely describes prediction markets and states that “TaxCannabis2010 is currently predicted to win” by traders at Intrade.

I’m happy to see EBX cite Intrade and that the is predicted to win, with two caveats.

The market currently gives the initiative a 54% chance of winning. That means a 46% chance of losing. Not remotely a sure thing. Closing prices chart below.

It’s utterly ridiculous to put marijuana users, farmers, sellers, etc. in jail. But this is not obvious to a number of people, or marijuana would not be illegal. I will be surprised if anti-initiative ads will claim that marijuana legalization will lead to an increase in cocaine use, a crime wave, decrease in test scores, and more. So what would really make me happy with regards to prediction markets and citation of the same would be contracts on cocaine use etc. in California conditioned on whether the initiative wins.

Creating a Culture that maximizes welfare gains from Sharing

Sunday, May 2nd, 2010

Web 2.0 Expo San Francisco 2010Thursday I’m on a Web 2.0 Expo panel that should be interesting, as I just wrote on the Creative Commons blog.

I post here because I’m pleased that the Web 2.0 Expo blog asked my fellow panelist Jack Herrick a version of the obvious question (once they went off-topic into copyright policy):

Kaitlin: Let’s imagine a world without copyright or the need to attribute your content source. Do you think artists and writers would be hesitant to create or able to if they can’t make money on it? How do creatives cope in this world?

Jack: There are lots of reasons people create things in this world that don’t include money. People create for personal joy, to share with others, to build reputation and myriad other reasons. I doubt the artists of the beautiful cave drawings in Lascaux, France were paid. I doubt that all artists in our future will be paid. Yet creativity won’t stop. The beauty of what the combination of open licenses and the web brings is that creators who wish to create for non-monetary reasons can now reach a broad audience and a willing body of collaborators. I don’t think we need to fear that non-monetary creation will completely replace paid creative work. But we should all rejoice that the web is offering an venue for non-professional creativity that wasn’t drawing such a large audience before.

Why isn’t this question asked more often? Note this is far from an ideal phrasing — the nut should be global welfare, not how the class we currently deem creators might cope.

Collaborative Futures 5

Saturday, January 23rd, 2010

We finished the text of Collaborative Futures on the book sprint’s fifth day and I added yet another chapter intended for the “future” section. This one may be the oddest in the whole book. You have to remember that I have a bit of an appreciation of leftish verbiage in the service of free software and nearby, and seeing the opportunity to also bundle an against international apartheid rant … I ran with it. Copied below.

I’ll post more about the book’s contents, the sprint, and the Booki software later (but I can’t help noting now that I’m sad about not getting to a chapter on WikiNature). For now no new observations other than that Adam Hyde of FLOSS Manuals put together a really good group of people for the sprint. I enjoyed working with all of them tremendously and hope to do so again in some form. And thanks to Transmediale for hosting. And sad that I couldn’t stay in Berlin longer for Transmediale proper, in particular the Charlemagne Palestine concerts.

Check out Mushon Zer-Aviv’s great sprint finish writeup.


Solidarity

There is no guarantee that networked information technology will lead to the improvements in innovation, freedom, and justice that I suggest are possible. That is a choice we face as a society. The way we develop will, in significant measure, depend on choices we make in the next decade or so.

Yochai Benkler, The Wealth of Networks: How Social Production Transforms Markets and Freedom

Postnationalism

Catherine Frost, in her 2006 paper Internet Galaxy Meets Postnational Constellation: Prospects for Political Solidarity After the Internet evaluates the prospects for the emergence of postnational solidarities abetted by Internet communications leading to a change in the political order in which the responsibilities of the nation state are joined by other entities. Frost does not enumerate the possible entities, but surely they include supernational, transnational, international, and global in scope and many different forms, not limited to the familiar democratic and corporate.

The verdict? Characteristics such as anonymity, agnosticism to human fatalities and questionable potential for democratic engagement make it improbable that postnational solidarities with political salience will emerge from the Internet — anytime soon. However, Frost acknowledges that we could be looking in the wrong places, such as the dominant English-language web. Marginalized groups could find the Internet a more compelling venue for creating new solidarities. And this:

Yet we know that when things change in a digital age, they change fast. The future for political solidarity is not a simple thing to discern, but it will undoubtedly be an outcome of the practices and experiences we are now developing.

Could the collaboration mechanisms discussed in this book aid the formation of politically salient postnational solidarities? Significant usurpation of responsibilities of the nation state seems unlikely soon. Yet this does not bar the formation of communities that contest with the nation state for intensity of loyalty, in particular when their own collaboration is threatened by a nation state. As an example we can see global responses from free software developers and bloggers to software patents and censorship in single jurisdictions.

If political solidarities could arise from the collaborative work and threats to it, then collaboration might alter the power relations of work. Both globally and between worker and employer — at least incrementally.

Free Labor

Trade in goods between jurisdictions has become less restricted over the last half century — tariff and non-tariff barriers to trade have been greatly reduced. Capital flows have greatly increased.

While travel costs have decreased drastically, in theory giving any worker the ability to work wherever pay (or other desirable quality) is highest, in fact workers are not permitted the freedom that has been given traders and capitalists. Workers in jurisdictions with less opportunity are as locked into politically institutionalized underemployment and poverty as were non-whites in Apartheid South Africa, while the populations of wealthy jurisdiction are as much privileged as whites in the same milieu.

What does this have to do with collaboration? This system of labor is immobilized by politically determined discrimination. It is not likely this system will change without the formation of new postnational orders. However, it is conceivable that as collaboration becomes more economically important — as an increasing share of wealth is created via distributed collaboration — the inequalities of the current sytem could be mitigated. And that is simply because distributed collaboration does not require physical movement across borders.

Workers in privileged jurisdictions will object — do object — to competition from those born into less privilege. As did white workers to competition from blacks during the consolidation of Apartheid. However, it is also possible that open collaboration could alter relationships between some workers and employers in the workers’ favor both in local and global markets.

Control of the means of production

Open collaboration changes which activities are more efficient inside or outside of a firm. Could the power of workers relative to firms also be altered?

Intellectual property rights prevent mobility of employees in so forth that their knowledge are locked in in a proprietary standard that is owned by the employer. This factor is all the more important since most of the tools that programmers are working with are available as cheap consumer goods (computers, etc.). The company holds no advantage over the worker in providing these facilities (in comparison to the blue-collar operator referred to above whose knowledge is bound to the Fordist machine park). When the source code is closed behind copyrights and patents, however, large sums of money is required to access the software tools. In this way, the owner/firm gains the edge back over the labourer/programmer.

This is were GPL comes in. The free license levels the playing field by ensuring that everyone has equal access to the source code. Or, putting it in Marxist-sounding terms, through free licenses the means of production are handed back to labour. [...] By publishing software under free licences, the individual hacker is not merely improving his own reputation and employment prospects, as has been pointed out by Lerner and Tirole. He also contributes in establishing a labour market where the rules of the game are completely different, for him and for everyone else in his trade. It remains to be seen if this translates into better working conditions,higher salaries and other benefits associated with trade unions. At least theoretically the case is strong that this is the case. I got the idea from reading Glyn Moody’s study of the FOSS development model, where he states: “Because the ‘product’ is open source, and freely available, businesses must necessarily be based around a different kind of scarcity: the skills of the people who write and service that software.” (Moody, 2001, p.248) In other words, when the source code is made available to everyone under the GPL, the only thing that remains scarce is the skills needed to employ the software tools productively. Hence, the programmer gets an edge over the employer when they are bargaining over salary and working conditions.

It bears to be stressed that my reasoning needs to be substantiated with empirical data. Comparative research between employed free software programmers and those who work with proprietary software is required. Such a comparison must not focus exclusively on monetary aspects. As important is the subjective side of programming, for instance that hackers report that they are having more fun when participating in free software projects than they work with proprietary software (Lakhani & Wolf, 2005). Neither do I believe that this is the only explanation to why hackers use GPL. No less important are the concerns about civil liberties and the anti-authoritarian ethos within the hacker subculture. In sum, hackers are a much too heterogeneous bunch for them all to be included under a single explanation. But I dare to say that the labour perspective deserves more attention than it has been given by popular and scholarly critics of intellectual property till now. Both hackers and academic writers tend to formulate their critique against intellectual property law from a consumer rights horison and borrow arguments from a liberal, political tradition. There are, of course, noteworthy exceptions. People like Eben Moglen, Slavoj Zizek and Richard Barbrook have reacted against the liberal ideology implicit in much talk about the Internet by courting the revolutionary rhetoric of the Second International instead. Their ideas are original and eye-catching and often full of insight. Nevertheless, their rhetoric sounds oddly out of place when applied to pragmatic hackers. Perhaps advocates of free sotftware would do better to look for a counter-weight to liberalism in the reformist branch of the labour movement, i.e. in trade unionism. The ideals of free software is congruent with the vision laid down in the “Technology Bill of Rights”, written in 1981 by the International Association of Machinists:

”The new automation technologies and the sciences that underlie them are the product of a world-wide, centuries-long accumulation of knowledge. Accordingly, working people and their communities have a right to share in the decisions about, and the gains from, new technology” (Shaiken, 1986, p.272).

Johan Söderberg, Hackers GNUnited!, CC BY-SA, http://freebeer.fscons.org

Perhaps open collaboration can only be expected to slightly tip the balance of power between workers and employers and change measured wages and working conditions very little. However, it is conceivable, if fanciful, that control of the means of production could lead to a feeling of autonomy that empowers further action outside of the market.

Autonomous individuals and communities

Free Software and related methodologies can give individuals autonomy in their technology environments. It might also give individuals a measure of additional autonomy in the market (or increased ability to stand outside it). This is how Free and Open Source Software is almost always characterized, when it is described in terms of freedom or autonomy — giving individual users freedom, or allowing organizations to not be held ransom to proprietary licenses.

However, communities that exist outside of the market and state obtain a much greater autonomy. These communities have no need for the freedoms discussed above, even if individual community members do. There have always been such communities, but they did not possess the ability to use open collaboration to produce wealth that significantly competes, even supplants, market production. This ability makes these autonomous organizations newly salient.

Furthermore, these autonomous communities (Debian and Wikipedia are the most obvious examples) are pushing new frontiers of governance necessary to scale their collaborative production. Knowledge gained in this process could inform and inspire other communities that could become reinvigorated and more effective through the implementation of open collaboration, including community governance. Such communities could even produce postnational solidarities, especially when attacked.

Do we know how to get from here to there? No. But only through experimentation will we find out. If a more collaborative future is possible, obtaining it depends on the choices we make today.

A Splendid Exchange: How Trade Shaped the World

Saturday, December 26th, 2009

‘s A Splendid Exchange: How Trade Shaped the World as the name implies is an engaging history of long-distance trade from the dawn of history.

The book points out that jurisdictions and other actors throughout history have chosen among trading, raiding, and protection.

By my reading, raiding in the form of piracy and literal trade war was a substantial part of the mix everywhere — and reached its pinnacle among and by the Portuguese, Spanish, Dutch, and English — until bulk goods with many sources came to dominate shipping in the 1800s. Spices that only grew in or the flyspeck were the opposite — subject to piracy, monopolization, and taxation along narrow routes and chokepoints. I have temporarily increased my consumption of the now pedestrian seeming cinnamon, mace, nutmeg, and black pepper — only available to the very wealthy in well connected cities for most of history. Raiding in the form of conquering and plundering seems even more important and persistent, e.g. the and WWII and its aftermath.

Speaking of the scramble for Africa, this book points out many times the importance of disease in shaping history. As another book I read recently more forcefully pointed out, the scramble did not occur until the easy availability of anti-malarials — before the late 1800s, European death rates in tropical Africa were too high to sustain more than fortified trading posts. Bernstein even makes the fairly astounding claim that death rates were higher for European crew of slave ships than for the African slaves the ships transported.

The civlilization-destroying blow to the New World dealt by Old World diseases (and resulting relatively unopposed European colonization of the New World) is well known, but Bernstein speculates that disease may have also given Europeans an advantage versus the Islamic world, India, and China as well. The evidence is scantier, but the Black Death may have hit those regions even harder than it hit Europe, rendering them relatively weak at the dawn of European world-wide raiding and trading. 700 years earlier sealed the long-term decline of the Byzantine Empire and created an opening for the explosion of Islam.

The last few chapters are somewhat drier reading, perhaps mostly due to familiarity. Overall Bernstein makes the case that increased wealth and decreased transport costs have swamped any political changes in their impact on long-distance trade and that trade’s measurable impact on static well being is swamped by less tangible building of relationships and transfer of knowledge that accompanies trade, and that free traders imperil free trade to the extent they ignore those who lose from trade — paying off losers would be preferable to protecting them, for world-wide trade is net positive, and the alternative risks a spiral of trade wars leading to real wars.

By the way, Bernstein doesn’t mention intellectual property at all, now a staple of trade negotiations, apart from a single passing mention of a trademark applied to Danish hog and dairy products.

Howto choose a religion

Saturday, December 26th, 2009

Why do you believe as you do? The proximate cause may be family or voluntary conversion, but what created the milieu in which your family or adopted god became one of a limited number of likely choices, as opposed to one of the thousands of religions that do or have existed and the infinite number conceivable?

The proximate historical cause seems to be violence — religious war, forced conversion, torture, slaughter or enslavement of believers in a slightly different myth.

I understand (from being told by several people who have done this, all in the U.S.) that adults who seek a religion or particular sect within a religion are as much choosing a congregation they like as a set of beliefs.

What if all religions were true, for this world and whatever mystical worlds each religion posits? Suspend disbelief for a second — the multiverse is a crazy set of places, so let’s allow it an infinite multitude of contradictory realities, including self-contradictory realities. Which religion would it be rational to choose? Presumably community would be a minor consideration for a rationalist, for the implications of the choice would be far greater than choosing a set of people to hang out, do business, and breed with.

Let’s evade all prohibitions on changing one’s religion by assuming one can choose to be born into the religion of one’s choice. Let’s also only consider religions that “exist” — a related fun game would be to design the best religion, assuming it would be true, but that’s a very different game.

Many religions have vindictive gods and offer a high probability of eternal torture — choosing any of those over the null choice (atheism) seems irrational. Which existing religions exceed this seemingly low bar? Which exceed it by a lot?

It would be hilarious if no existing religions beat atheism, even if they were true, but I doubt this is the case.

Micropatronage 1.0

Monday, November 9th, 2009

I last looked closely at a new / site 2 years ago, having resolved that nobody was likely to take an interesting or well executed approach to the idea that would end up making a significant impact. Since then I’ve heard in passing of a number of new projects that fit my low expectations, but also two that appear very well executed and successful on a scale large enough that it isn’t ridiculous to imagine this sort of mechanism becoming important at least for cultural production — (French; a few English links gathered here) and Kickstarter.

The occasion of this post is Fred Benenson’s announcement that he’s joining Kickstarter after having done outreach and product management for Creative Commons for the last year and a half (and involved as an intern and activist for much longer). It’s sad to see them go, but great to see recent CC alumni start or join projects that at least have the potential to be important enablers of the free and open world — in addition to Fred, also Asheesh Laroia (OpenHatch) and Jon Phillips ().

Congratulations all!

It also feels good to hire people at Creative Commons who have demonstrated some commitment and capacity nearby — Fred, Asheesh, and Jon were all examples of that, and more recently Chris Weber, who was a hacker before coming to CC.

Elinor Ostrom’s Nobel-winning Commons

Monday, October 12th, 2009

On the Creative Commons blog I highlight the connection between 2009 Nobel Prize in Economics winner ‘s work on the governance of and relatively recent work on knowledge commons, including a 2003 paper she co-authored addressing the connection.

Great choice. There are countless posts in the econoblogosphere about the prize — I’ll mention two. Paul Romer (a favorite to win the Nobel himself) praises her practice of economics, essentially as being based on an investigation of reality rather than wishful thinking (what Romer calls a “skyhook”):

They, more than anyone else in the profession, spelled out the program that economists should follow. To make the rules that people follow emerge as an equilibrium outcome instead of a skyhook, economists must extend our models of preferences and gather field and experimental evidence on the nature of these preferences.

Economists who have become addicted to skyhooks, who think that they are doing deep theory but are really just assuming their conclusions, find it hard to even understand what it would mean to make the rules that humans follow the object of scientific inquiry. If we fail to explore rules in greater depth, economists will have little to say about the most pressing issues facing humans today – how to improve the quality of bad rules that cause needless waste, harm, and suffering.

Cheers to the Nobel committee for recognizing work on one of the deepest issues in economics. Bravo to the political scientist who showed that she was a better economist than the economic imperialists who can’t tell the difference between assuming and understanding.

Alex Tabarok (who I’ve mentioned before on the related problem of private provision of public goods provides a summary of Ostrom’s work on the well-governed commons. Here’s Tabarrok’s excellent closing paragraph:

For Ostrom it’s not the tragedy of the commons but the opportunity of the commons. Not only can a commons be well-governed but the rules which help to provide efficiency in resource use are also those that foster community and engagement. A formally government protected forest, for example, will fail to protect if the local users do not regard the rules as legitimate. In Hayekian terms legislation is not the same as law. Ostrom’s work is about understanding how the laws of common resource governance evolve and how we may better conserve resources by making legislation that does not conflict with law.

This speaks directly to commons-pool (rivalrous, non-excludable) goods, but applies analogously to public (non-rivalrous, non-excludable) goods.