Post Economics

Rong-Solutions

Sunday, March 26th, 2006

Here’s an Idea: Let Everyone Have Ideas in today’s NYT tantalizes and annoys. Although the article never uses the words prediction market or similar (idea futures, decision market) it seems to describe a wildly successful internal prediction market at Rite-Solutions (see below for link), though I have to wonder whether the company isn’t giving more credit to its internal stock market than is warranted (a product line suggested via the market just a year ago now accounts for 30 percent of sales — either their salespeople are expert at pushing vapor or the product was already under development) for the press.

InnoCentive, the other company profiled, seems to be a site for biologists and chemists, much like RentACoder.

The article attempts to segue between the stories:

The next frontier is to tap the quiet genius that exists outside organizations — to attract innovations from people who are prepared to work with a company, even if they don’t work for it.

I agree that’s an interesting frontier, but contracting out solutions, while good and useful, differs wildly from using a market to make or inform decisions. What could’ve been an interesting story on either company turned into another breezy zeitgeist article.

In any case, a company might want to open parts of its internal prediction market to its customers, suppliers, shareholders, or even the public. I don’t think either mentions prediction markets (I’ve only skimmed), but this would very much be in the spirit of and Collaboration Rules.

Here’s a suggestion for Rite-Solution’s stock market — get a real web site (symbol: WWW). The Flash thing at http://ritesolutions.com is from bizarro world — looks a little bit like a web site, but really slow, totally pointless transitions, and utterly unlinkable. A good reminder what the net would be like without open formats and standards.

Posted in Economics, Peeves, Prediction Markets | No Comments »

Who’s harmed by (housing) inflation?

Thursday, March 23rd, 2006

Jason Ruspini writes about a discussion of upcoming housing futures. One of the open questions about this new market is who will buy (buy long that is — use for hedging against price declines is considered obvious). I often see it implied that the only set of people harmed by housing price increases are non-homeowners. Ruspini:

The natural buyers would be prospective home-buyers, trying to ensure that they aren’t priced-out of the market, but the relative wealth of that group is – naturally – very small.

But most homeowners are prospective home-buyers. Though U.S. residents are moving less often (this was a big surprise to me) 1 in 14 homeowners moves each year and the market for second homes is booming. It seems that anyone potentially moving to better, additional, or housing in a more expensive market than their own would be interested in hedging against price increases. Add in parents who want to ensure their children can buy a home nearby, you have a large and very wealthy group.

is quoted making essentially the same mistake in an otherwise excellent article on his work recently published in the NYT Magazine:

Homeowners, he points out, have a strong incentive to stop new development, both because it can be an inconvenience and also because, like any monopolist, stopping supply drives up the price of their own homes. “Lack of affordable housing isn’t a problem to homeowners,” Glaeser says; that’s exactly what they want. “The thing you want most is to make sure that your home is not affordable if you own it. And for that reason, there’s absolutely no reason to think that little suburban communities with no businesses that are run essentially by their homeowners will make the right decisions for the state as a whole, for the business in the area, for the country as a whole.”

Actually I think it is the anti-housing homeowners who are mistaken (or very short-sighted), not Glaeser, who is probably right at least in part about their motivations.

It seems to me that except to the extent one exits the market (by selling vacation homes, trading down, or moving to a less expensive market) rising prices don’t offer homeowners much benefit apart from bragging rights and the ability to obtain larger secondary loans (which have to be paid back).

Consider car owners, or an even more extreme case, food owners. If car or food production was restricted, the price of their assets would increase. However, in a few years, or a few days in the case of food, they would have to pay in some combination of higher prices, lower quality, and lower quantity.

It is pretty clear that everyone benefits from cheaper transportation and food regardless of whether they presently have a car in the garage and bread in the cupboard and that everyone is harmed by more expensive transportation and food. I’d argue housing is much more like cars and food — consumption goods — than most people are ready to admit.

Posted in Economics, Peeves, Politics, Prediction Markets | 2 Comments »

Absurd Sex, Suicide, Migration, and Ugly Apple

Wednesday, March 22nd, 2006

Tyler Cowen asks “What is your most absurd view?” and gets an absurd number of comments.

Yes your comment should be crazy but serious too. It should refer to a view which you actually hold, but many other smart people consider untenable and bizarre.

Four of mine:

Sex and its pursuit is the cause of most personal troubles and most people would be happier with zero sex drive. Watch nearly any movie. If the characters weren’t horny they wouldn’t be in any trouble!

Through most of human history the most rational act for most individuals at any point in time was immediate suicide, given the suffering they should have expected to endure.

With respect to movement, residence and employment all humans should be as free to disregard international jurisdiction borders as they are to disregard intranational (e.g., U.S. state) borders and anything less is morally the same as South African Apartheid.

Nearly every user interface and product from Apple has been aesthetically and functionally ugly, from the orginal MacOS to iTunes. I don’t think I can blame Steve Jobs, as NextStep was wonderful. (Yes, I know OS X is derived from NextStep. They ruined it.)

Note that to the extent readiness to host certain beliefs is under evolutionary pressure my first two beliefs and perhaps the third would be strongly selected against.

Mostly I am an absurd hypocrite: I have a sex drive (but I gather it is less out of control than the average person’s), I have no intention of committing suicide, immediately or otherwise (but I think it is not absurd to expect relatively little suffering in wealthy parts of the 21st century), I live in the national jurisdiction I was born in (do I get any credit for 2000 miles away?), but I have never owned an Apple product.

Posted in Apartheid, Blogs, Economics, Peeves | 5 Comments »

SXSWi wrap

Saturday, March 18th, 2006

There were a surprising number of panels more or less concerning entrepreneurship. I only attended one of these, Sink or Swim: The Five Most Important Startup Decisions. It was very mildly amusing but as far as I could tell the only important decision discussed was whether to look for outside funding or not, a well-trod topic if there ever was one. There was even one panel on Selling (Big Ideas to Big Clients).

I understand that was mentioned in passing on many panels. Attendees coming to our booth were much better informed than in years past, part of a greater trend.

The Digital Preservation and Blogs panel I was on was interesting for the self-selection of the audience — I imagine every librarian and historian attending were present. A writeup, photo, and my narrow take.

Both accepted panels I helped conceive went very well, especially Open Science. Though an outlier for SXSW the audience Q&A as high quality. Moderator John Wilbanks did a great job of keeping a diverse panel (open access journal editor, synthetic biologist, IT standards person, and VC) on point.

Commons-Based Business Models included Ian Clarke of Revver, which encourages sharing of short videos with an unobtrusive advertisement at the end under a CC license that does not permit derivative works. This licensing choice was made so that stripping out the advertisement is not permitted. Jimmy Wales challenged Clarke to think about opening up some content on an experimental basis. Sounds like a good idea to me. I suggested from the audience that attribution can require a link back to Revver, so even modified videos are valuable. Clarke responded that advertising at a link away is far less valuable. True, but the question is whether derivative works that could not otherwise exist become popular enough to outweigh those that merely remove advertising. I suspect many derivatives would be uploaded directly to Revver, allowing the company and original creators to take full advantage of additional revenue and to become the leading site for explicit remixing of video, a la ccMixter for audio. Seems worth an experiment — Revver is in no danger of becoming the leading video site at the current rate.

I also asked Clarke about interest in his patronage system. He said Revver is aimed at the same problem (funding creators) but was easier to implement. In the same vein I met John Pratt of Fundable, which is based in Austin. I got the impression he didn’t think the service could be viral (I disagree). I’ve written about FairShare, Fundable and related ideas several times in the past, mostly linked to in my Public Goods Group Shopping post and its comments. The field is ripe for a really good service.

The EFF/CC party was very well attended, even not considering its obscure location (an Elks club). In the middle of the facility was a room of Elks members, playing cards and other games, oblivious to the SXSW crowd that outnumbered Elks even in that room. I gave a very brief thank-you speech for CC, which I closed with a prayer (because we were in Texas) to J.R. “Bob” Dobbs (because we were in Austin).

At the end of the trade show Rob Kaye alerted me to the giveaway of every book at a well-respected computer publisher’s booth to “cool geeks” or similar. 5-10 years ago this would’ve really excited me, but this time I was mostly concerned about bulk and weight. I took a few. I suspect they’ll be among the last computer books I obtain, free or otherwise.

James Surowiecki gave a presentation which I did not attend but I hear focused on prediction markets. I should’ve made the time to attend simply to see the crowd reaction. Several of the latest sites cropping up in that field certainly look like they were designed by potential SXSW attendees — circa 2004/5 generically attractive web applications. I should have some posts on that topic soon, starting with Chris F. Masse’s 2005 Awards.

Posted in Advertising, Books, Creative Commons, Economics, Open Access, Prediction Markets, Public Goods, SXSW | 2 Comments »

Admit defeat, not error!

Saturday, February 25th, 2006

William F. Buckley admits that the U.S. military adventure in Iraq is a defeat, but willfully fails to learn anything from it.

It is healthier for the disillusioned American to concede that in one theater in the Mideast, the postulates didn’t work. The alternative would be to abandon the postulates.

His two postulates amount to an assumption that wherever the U.S. intervenes people will act in accordance with U.S. politicians’ wishes. Nevermind that this doesn’t even work within the U.S. jurisdiction.

Buckley attributes defeat soley to “Iraqi animosities.” Even if that were the sole cause blame can be pinned firmly on U.S. politicians who were very well aware of Shiite/Sunni/Kurd/Christian/etc. “animosities” as leveraging these was a major component of U.S. policy toward Iraq after the 1991 . However, Buckley ignores economic mismanagement, and doubtless many other idiocies endemic to political management, nevermind military-political management. To do so would be to accept blame and teeter on the edge of admitting error.

If Buckley hopes to fence off his “postulates” (and thus U.S. policy) from criticism by admitting defeat in this one instance I hope he fails miserably, but I fully expect he and other advocates of interventionism will succeed in this subversion of truth. The long history of poor outcomes of U.S. intervention in the Middle East, elsewhere, and within the U.S. jurisdiction (domestically) is forgotten completely and is never learned from.

I have probably suggested too many times that prediction markets could help remind voters that the most likely outcomes are not those predicted by politicians.

On a related note: So what if Iraq splits? A jurisdiction is not a sacred entity.

Via Mike Godwin. You must check out Godwin’s awesome site design. (Don’t worry, I still hate Macs.)

Posted in Economics, Iraq, Peeves, Politics, Prediction Markets | 1 Comment »

Free as in free pollution parking

Saturday, February 25th, 2006

Tyler Cowen cites Donald Shoup’s The High Cost of Free Parking, which claims that “On average [in the U.S.] a new parking space has cost 17 percent more than a new car.” If I were lured by the temptation of urban policy I would certainly read this book.

I gather Shoup’s argument is that if zoning did not require minimum numbers of spaces and if market rates were charged for parking there would not be wasteful spaces built in uncongested areas and it would be possible to find parking in congested areas.

Shoup probably covers this, but one of the baneful effects of free or underpriced (e.g, cheap area parking permits in San Francisco) is opposition to dense development. Additional residents mean more competition for spaces, giving residents all the reason they need to go into mode, leaving a stunted cross between (vile place) and the wonderful Sanhattan it could be. (Of course there’s much more to story. I’d point to some Matt Smith columns and a feature published on the 50th anniversary of the founding of the United Nations in San Francsico in the if its archive search weren’t so broken.)

Certain control freaks now want to swing from requiring a certain number of parking spaces to prohibiting more than a certain number of spaces. How about letting people build or not build however many spaces as they see fit? The problem is not under- or over-provision of private spaces, it is the underpricing of public spaces.

How about auctioning area parking permits — what politician doesn’t love a windfall? Existing permit holders could share in the windfall as power dictates. New residents would pay market prices. I’m sure Shoup has many more and better thought out proposals.

A related urban transport micro-rant: is an atrocity. No faster than buses and far more expensive, dangerous, space-wasting and inflexible, light rail serves only monument-building fantasies. If a real is infeasible just add or upgrade buses.

Addenda:

  • A complement or partial alternative to market prices for parking is to charge for road use as in central .
  • Anti-light rail articles.
  • Politically-controlled underpricing of water (especially for agricultural use, e.g., in California) and energy (primarily in oil exporting jurisdictions) doubtless cause far greater problems worldwide than underpriced parking.

Posted in Books, Economics, Peeves, Politics | 6 Comments »

Supply-side anti-censorship

Friday, February 17th, 2006

Brad Tempelton explains why a censor should want an imperfect filter — it should be good enough to keep verboten information from most users, but easy enough to circumvent to tempt dissidents, so they can be tracked and when desired, put away.

In the second half of the post, Tempelton suggests some anti-censor techniques: ubiquitous and . Fortunately he says these are “far off” and “does not scale”, respectively. To say the least, I’d add.

Cyber-activists have long dreamed that strong encryption would thwart censorship. is an example of a project that uses this as its raison d’être. While I’m a huge fan of ubiquitous encryption and decentralization (please install , now!), these seem like terribly roundabout, means of fighting censorship — the price of obtaining information, which includes the chance of being caught, is lowered. But someone has to seek out or have the information pushed to them in the first place. If information is only available via hidden channels, how many people will encounter it regardless of lower risk?

An alternative, perhaps less sexy because it involves no technology adoption, is supply-side anti-censorship: make verboten information ubiquitous. Anyone upset about google.cn should publish information the Communist Party wants censored (my example is pathetic, need to work on that). This is of course not mutually exclusive with continuing to carp and dream of techno-liberation.

I guess I’m calling for projects. Or one of those chain letters (e.g, “four things”) that plagues the blogosphere.

Posted in Blogs, Economics, Free Speech, Intellectual Protectionism, P2P, Peeves, Politics | 2 Comments »

content.exe is evil

Thursday, February 16th, 2006

I occasionally run into people who think users should download content (e.g., music or video) packaged in an executable file, usually for the purpose of wrapping the content with where the content format does not directly support DRM (or the proponent’s particular DRM scheme). Nevermind the general badness of Digital Restrictions Management, requiring users to run a new executable for each content file is evil.

Most importantly, every executable is a potential vector. There is no good excuse for exposing users to this risk. Even if your executable content contains no malware and your servers are absolutely impenetrable such that your content can never be replaced with malware, you are teaching users to download and run executables. Bad, bad, bad!

Another problem is that executables are usually platform-specific and buggy. Users have enough problem having the correct codec installed. Why take a chance that they might not run Windows (and the specific versions and configurations you have tested, sure to not exist in a decade or much less)?

I wouldn’t bother to mention this elementary topic at all, but very recently I ran into someone well intentioned who wants users to download content wrapped in , if I understand correctly for the purposes of ensuring users can obtain content metadata (most media players do a poor job of exposing content metadata and some file formats do a poor job of supporting embedded metadata, not that hardly anyone cares — this is tilting at windmills) and so that content publishers can track use (this is highly questionable), all from a pretty cross platform GUI. A jar file is an executable Java package, so the platform downside is different (Windows is not required, but a Java installation, of some range of versions and configurations, is), but it is still an executable that can do whatever it wants with the computer it is running on. Bad, bad, bad!

The proponent of this scheme said that it was ok, the jar file could be . This is no help at all. Anyone can create a certificate and sign jar files. Even if a creator did have to have their certificate signed by an established authority it would be of little help, as malware purveyors have plenty of resources that certificate authorities are happy to take. The downsides are many: users get a security prompt (“this content signed by…”) for content, which is annoying, misleading as described above and conditions the user to not pay attention when they install things that really do need to be executable, and a barrier is raised for small content producers.

If you really want to package arbitrary file formats with metadta, put everything in a zip file and include your UI in the zip as HTML. This is exactly what P2P vendor ‘s Packaged Media File format is. You could also make your program (which users download only once) look for specific files within the zip to build a content-specific (and safe) interface within your program. I believe this describes ‘s Kapsules, though I can’t find any technical information.

Better yet put your content on the web, where users can find and view it (in the web design of your choice), you get reasonable statistics, and the don’t get fed. You can even push this to 81/19 by including minimal but accurate embedded in your files if they support it — a name users can search for or a URL for your page related to the content.

Most of the pushers of executable content I encounter when faced with security concerns say it is an “interersting and hard problem.” No, it is a stupid and impossible problem. In contrast to web, executable content is a 5/95/-1000 solution — that last number is a .

If you really want an interesting and hard problem, executable content security is the wrong level. Go work on platform security. We can now run sophisticated applications within a web browser with some degree of safety (due to Java applet and Flash sandboxes, JavaScript security). Similar could be pushed down to the desktop, so that executables by default have no more rights to tamper with your system than do web pages. is an aggressive approach to this problem. If that sounds too hard and not interesting enough (you really wanted to distribute “media”), go the web way as above — it is subsuming the desktop anyhow.

Posted in DRM, Economics, Intellectual Protectionism, P2P, Peeves, Programming, Semantic Web | 2 Comments »

The Law of Below Averages

Friday, February 10th, 2006

I probably only noticed Alex Tabarrok’s post in my feed reader this morning because of the title similarity to Nathan’s the law of averages blog. The former has some amusing stories in comments of student cheaters foiled by their own stupidity. The gist of the post and comments is that it it isn’t worthwhile for a professor to try hard to catch and punish cheaters as cheaters tend to do poorly anyway and being perceived as a hardass obtains lower student evaluations.

I wonder how this applies to the world outside school, where compulsive excuse makers don’t receive grades every several months, aren’t working toward graduation, and negatively impact others — a student cheater at worst has a marginal impact on the grading curve, if a curve is being used — students are striving for individual reward — while a bad worker can damage an entire organization.

What means do people use to allow bad workers to “fail out” in environments where being a hardass is counterproductive or firing is nearly impossible? This applies particularly to government jobs (my only experience is second-hand), but also to a surprising extent in for-profit organizations. For a long time I thought managers were simply afraid or ashamed to wield the axe. Now, I think it is a little more complicated than that — managers have many different fears that prevent them from firing counterproductive workers.

Addendum: Last year I saw in a university bookstore a large banner hung behind the cashiers featuring a screed on the evils of cheating, a pledge to never cheat, and supposedly the signatures of the entire freshman class. Struck me as Orwellian. My guess is the message did not have its intended effect on certain students — those who had some sense that high school was prison-like and harbored some hope that college might be substantially different.

Posted in Blogs, Economics, Politics | No Comments »

Fraud of War in Iraq

Friday, January 13th, 2006

Cost of War in Iraq, a new paper from Linda Bilmes and Joseph Stiglitz, has already been discussed, at least superficially, on a large number of blogs. Comments at Marginal Revolution helpfully cite a number of related papers.

Bilmes and Stiglitz conservatively project that the total economic costs for the U.S. jurisdiction at $1 to $2 trillion. Direct budgetary costs are projected to be $750 billion to $1.2 billion. I have only skimmed the paper, which looks interesting enough, but nothing really new.

I’ve mentioned increasing cost projects several times last year and before, directly in Trillion dollar fraud (August), $700 billion fraud (July) and A lie halfway fulfilled (January 2005).

I won’t bother to explain the fraud this time, read the past posts. Hint: it involves repeatability.

One thing I’m struck by, skimming comments contesting Bilmes and Stiglitz (the political ones, not the technical ones concerning borrowing costs should be included, though they overlap) is that after the fact, I think many people would claim that the invasion was justified, economically and otherwise, regardless of the final cost. $5 trillion? (NB, that is a hypothetical, not a prediction!) It was worth getting rid of Hussein and deterring would-be Husseins. $10 trillion? Just goes to show how nasty “our” opponents are. $100 trillion? Civilization must be destroyed to save civilization!

All the more reason to be cognizant of probable costs before going to war. There’s not really a need for prediction markets here. Just multiply proponents’ estimates by ten. However, people stupidly believe words that come out of politicians’ mouths. Prediction market estimates could, ironically, provide a countervailing authority.

A better way? See Wright, Scheer, Zakaria, Hardar, Tierney, and Pape.

Posted in Economics, Iraq, Peeves, Politics, Prediction Markets | 1 Comment »

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