Post Economics

The futility of [un]voting

Monday, November 1st, 2004

In October posts Peter Saint-Andre makes the case that real reform comes from outside the system and that by contrast voting is futile. I’m completely on board with the former and sympathize with the latter (though I am voting this time). However, Saint-Andre errs in imagining that purposefully not voting or “unvoting” is anything but futile:

As far as I can see, the only moral option remaining to me is to withdraw my sanction and consent, in as explicit a manner as I can. Only about 40% of eligible voters turn out to vote in American elections. What if that number were 30%, or 20%, or 10%? What if the number of unvoters were greater than the number of voters? What if twice as many people unvoted as voted? Wouldn’t that expose the fact that this government (no matter which monkey is in charge) does not have the consent of the governed?

No.

  • Voter turnout is already as low as ten percent in local elections, and that’s among registered voters. I have never heard anyone complain that their local government is illegitimate because it was elected by a tiny minority of potential voters — possibly only a few percent.
  • Low voter turnout can be interpreted in many ways, including disaffection, apathy, and even contentment.
  • Not voting has never changed anything — a record even less impressive than voting. Why expect unvoting to suddenly become relevant? But what if many of those non voters became explicit unvoters? Indeed, what if! Pure fantasy as far as I can see.

Voting may be futile, but so is imagining that not voting is an effective vote against the system.

Along similar lines, from a post that appeared as I wrote this one:

One man can change the world. And he doesn’t need to vote to do it.

He also doesn’t need to not vote. I have a feeling that advocates of non-voting overestimate the relevance of voting.

Posted in Economics, Politics | 1 Comment »

Mundane floating concrete

Thursday, October 28th, 2004

I attended Patri Friedman’s talk on seasteading last night. Basic idea: build floating platforms to allow for social experimentation not feasible within established jurisdictions. Many people have had variations on that particular crazy idea. Friedman distinguishes Seastead from the rest with a focus on incrementalism.

Fun quotes (from memory):

“Don’t get distracted by new technologies”

“A picture is worth a thousand words, a million pounds of concrete means you’re serious.”

“[lack of established jurisdiction, low moving cost] holds for 71% of the earth’s surface and 99.9999% of the universe.”

Back to earth, Friedman plans to start with Baystead, a scaled-down platform for 4-10 people in the San Francisco Bay. Even if his cost estimates ($200K-$500K) are off by a factor of ten (I wouldn’t be surprised), you still have what amounts to an expensive and unique floating home, of which there are many.

New houseboat design, model for dominant mode of living in the universe, or floating nursing home*, I have to admit that I’m intrigued. My wife mentioned the other day that a new coworker lives on an oceangoing houseboat, usually docked in Alameda, but just returned from a trip to Mexico. How cool — and I have zero interest in boats as boats. Plus the cost of joining the boring cult of renting a home from a bank (home “ownership”) is backbreaking in the bay area — why not do something interesting instead?

* I tend to agree with “Brock”, who comments:

Short Answer: Small, discrete economic units (cruise ships, islands) are just never going to be efficient as large, diverse economies.

As for cheap, high-quality care, don’t forget the medical outsourcing to India & Thailand. That will take off like a rocket-ship, and also sweep the rug out from the “wandering Medical Cruiseliner” idea. That particular mountain will not come to Muhammed.

While the comment concerns a tongue-in-cheek post about nursing home cruise ships (why not, nursing homes are so expensive) unrelated to seasteading, it probably applies to seasteads. Friedman said that opposition from governments will be the main obstacle to seasteading taking off. Economic viability might be a far tougher obstacle.

Addendum: Concerning defense of a large seastead in international waters, Friedman said that deterring pirates would be easy, but not giving governments a reason to attack and proving valuable to the same is the best defense against navies. But what if the ‘stead is hated for its freedom? Won’t the terrorists and evil states be impelled by a hateful illogical logic to attack unless the ‘steaders preemptively attack first?!

Joking. What I want to mention is something I overheard one student telling another as people left the lecture. From memory:

I was with him until he mentioned building a library. A patriot missile or something could stop an attack, but the media companies will never let him get away with that. Boom!

Friedman had said that one of many things a seastead community could do is host a digital library of all the works of humans free for the inhabitants. Kind of funny that someone thought that copyright violation is the one thing sure to provoke a violent response. I guess that’s the kind of image one obtains by persecuting one’s customers.

Posted in Economics, Intellectual Protectionism, Politics | 7 Comments »

Programmers’ National Party

Sunday, October 24th, 2004

A couple days ago I linked to Peter Mork. Later I noticed that Mork has some postings on immigration that I find agreeable.

Here’s a quote from his latest, The One-Day Window:

A few months back I received a large manila envelope in the mail which I thought was junk mail. But to my surprise, as I opened it up, I realized it contained a photocopy of a letter to the editor I wrote to the WSJ that had been published a month before. My closing paragraph was highlighted and on the side margin was a note telling me that I should learn about “the real costs of immigration”. The letter was from The Programmers Guild and they implored me to read their newsletter, which was also enclosed, to learn about the true costs.

Unfortunately, it seems they ignored the true point I was trying to make. How is it that if I was born only 30 miles south of where I am currently sitting that this would deny me the right to enter into a voluntary agreement with a U.S. employer? This question has never been answered to my satisfaction.

And it won’t be. Change “only 30 miles south of where I am currently sitting” to “with skin a shade darker” or “with slightly different genes” to unmask the perverse injustice of movement and work only by state permission.

Like white miners in South Africa the last century most first-worlders are scared of competition and racist. There is no moral excuse.

Posted in Apartheid, Economics, Peeves, Politics | 3 Comments »

Richard Epstein’s open source leavings

Sunday, October 24th, 2004

Richard Epstein has an absolutely terrible column in the October 21 Financial Times: Why open source is unsustainable. Epstein begins with the oh-so-original observation that

Intellectual property often creates strange bedfellows on the left and the right sides of the political spectrum.

Left and right may not be the proper characterizations for those referred to, and the alliance isn’t at all strange — it reoccurs often when personal freedom, civil liberty, what have you is threatened. The war on drugs and war in general are two prime threats that motivate reasonable people to become “strange bedfellows.” Open source is perhaps slightly odd in that it is a uniting opportunity, rather than a threat.

On the left, many socialists oppose private property in all its forms.

Many? Possibly some Maoists or similar retreads, but then I’m not very familiar with hard core communist ideology, and those types aren’t very common these days. As far as I know most syndicalists or anti-market anarchists admit to some personal property. Run of the mill socialists certainly do not oppose private property in all its forms.

On the right, some libertarians, such as Tom Bell of Chapman Law School,

Right, schmight. Anyway, links to Tom W. Bell and his copyright writings. Also see Tom G. Palmer and Stephan Kinsella.

are deeply suspicious of the use of intellectual property to block the right of other individuals to think and speak as they choose. While they regard private property as acceptable for physical resources that cannot be used by everyone at once, they draw the line at intellectual property, which can be copied at close to zero cost.

Amazing common sense. Intellectual property (I prefer one of “intangible goods” or “intellectual protectionism”) is a taking of the rights of owners of tangible property, who are denied any use of their real property that infringes on the rights of IP owners.

All this anti-IP rhetoric begs one question: how do we produce IP in the first place?

A question sidestepped by Epstein for the remainder of the article. Aside: perhaps any issue that demands (or rather, for which some demand) government attention in some form — regulation, subsidy, prohibition, etc. — can be thought of as a public goods problem. However, just because something is a public good doesn’t mean that it is not also a private good — production of open source software being just one example. Lynne Kiesling has some musings along these lines, starting with electricity network reliability.

The middle part of Epstein’s column is a morass of classic fear, uncertainty, and doubt regarding open source software, all terribly uninformed. A few counters:

  • Open source does produce excellent non-server software. If you aren’t reading this in Mozilla Firefox chances are you’re missing out big time. Also see OpenOffice, the GIMP, the GNOME Desktop, Inkscape, Scribus, Eclipse and many more.
  • Individual hackers have been and always will be incredibly important and productive in ways Epstein and DeLong probably just don’t get, but open source is now integral to many of the largest for-profit software concerns (e.g., IBM and Oracle) and software consumers (e.g., Wall Street).
  • Even if they did hold water, a serious anti-open source commentator would not use anti-GPL arguments as the linchpin of their anti-open source argument. Three open source applications stand above all others in terms of market share: BIND, Sendmail, and Apache . None of these are GPL’d.

This quote from Epstein is good for a chuckle:

But how do the insiders, such as Linus Torvalds, cash out of the business that they built? And in the interim, how do they attract capital and personnel needed to expand the business? Traditional companies have evolved their capital structures for good reason.

Torvalds didn’t build a business, not that we have to worry about him eating. Rather than speculating in the abstract, Epstein should study how successful open source companies have actually expanded their businesses. And how and why traditional companies have seen it in their best interest to pay developers to work on open source.

So what does Epstein really want? That comes at the very end of his column:

But suppose this analysis is wrong. One clear policy implication remains: this novel form of business association should succeed or fail on its own merits. The do-or-die question is whether open source offers a low cost solution to particular problems. Ordinary companies will make just those calculations, but government agencies may be swayed to take a different tack, as has been suggested by a number of EU studies. That temptation should be avoided. Governments are bad at forcing technology by playing favourites. If open source is less effective than proprietary software, that gap should not be ignored by positing some positive network externalities that come from giving it a larger base. Proprietary systems also show positive network effects from increased users, as software designers are always attracted by a larger installed base. It’s a tough world out there, in which no one should be exempted from the general competitive pressures of the marketplace. The fiduciary duties of government to all citizens demand no less.

I love Epstein’s subtle abuse of the word implication.

I strongly agree that government is terrible at picking technology winners. That’s why I’ll probably vote against California’s stem cell research bond, despite being strongly in favor of any and all uses of fetal stem cells.

However, to the extent government is a technology consumer, it ought to be an intelligent consumer. Julian Sanchez made an excellent argument for open source in government — especially in government — two years ago in a column titled Open Source and Its Enemies:

With proprietary software, government’s potentially standard-setting procurement choices give it the role of market kingmaker.

A certain recipe for inefficient rent seeking behavior.

Posted in Economics, Intellectual Protectionism, Open Source, Politics, Public Domain, Public Goods | 7 Comments »

World Intellectual Freedom Organization

Thursday, October 14th, 2004

an organization for a good future

In 1998 I registered wifo.org (wayback June 2000 copy) with the intention of using the platform to mock the World Intellectual Property Organization and promote the study of production of nonrivalrous goods, with a decided bias against government-granted monopolies in such goods. My battle against life in the late 90s was mostly a losing one, so I never carried through.

Anyway, I now recommend you sign the Geneva Declaration on the Future of the World Intellectual Property Organization AKA “Proposal for the Establishment of a Development Agenda for WIPO” offered by Argentina and Brazil to the WIPO General Assembly last week. I’m not thrilled with all of the language, but upon first read it looks quite excellent given my low estimation of UN documents. Excerpt:

At the same time, there are astoundingly promising innovations in information, medical and other essential technologies, as well as in social movements and business models. We are witnessing highly successful campaigns for access to drugs for AIDS, scientific journals, genomic information and other databases, and hundreds of innovative collaborative efforts to create public goods, including the Internet, the World Wide Web, Wikipedia, the Creative Commons, GNU Linux and other free and open software projects, as well as distance education tools and medical research tools. Technologies such as Google now provide tens of millions with powerful tools to find information. Alternative compensation systems have been proposed to expand access and interest in cultural works, while providing both artists and consumers with efficient and fair systems for compensation. There is renewed interest in compensatory liability rules, innovation prizes, or competitive intermediators, as models for economic incentives for science and technology that can facilitate sequential follow-on innovation and avoid monopolist abuses. In 2001, the World Trade Organization (WTO) declared that member countries should “promote access to medicines for all.”

Humanity stands at a crossroads – a fork in our moral code and a test of our ability to adapt and grow. Will we evaluate, learn and profit from the best of these new ideas and opportunities, or will we respond to the most unimaginative pleas to suppress all of this in favor of intellectually weak, ideologically rigid, and sometimes brutally unfair and inefficient policies? Much will depend upon the future direction of the World Intellectual Property Organization (WIPO), a global body setting standards that regulate the production, distribution and use of knowledge.

As you could guess from my description of a “World Intellectual Freedom Organization” I’m very interested in “models for economic incentives for science and technology that can facilitate sequential follow-on innovation and avoid monopolist abuses.” I admit that I’d never heard of compensatory liability rules or competitive intermediators. Google knows of only a few documents with the former term, excepting copies of the aforementioned declaration.

Using Liability Rules to Stimulate Local Innovation in Developing Countries: A Law and Economics Primer (PDF) appears to be the paper describing compensatory liability rules. At a glance it appears CLR is akin to a compulsory license for subpatentable innovations (which under the current regime are all too often patented). Sounds like a reasonable potential reform.

Google also knows next to nothing about competitive intermediators, which appear to be an invention of the authors of A New Trade Framework for Global Healthcare R&D. The proposal seems to amount to R&D funded by a payroll tax. Very boring.

The X-Prize has raised the profile of innovation prizes immensely, but they are an old idea that has deserved resurrection for a long time. I recommend starting with Robin Hanson’s Patterns of Patronage: Why Grants Won Over Prizes in Science (PDF). I’ve donated a small amount ($122.45 — can you guess why?) to the Methuselah Mouse Prize and will donate more to this and other science prizes in the future — I’m very keen on the concept.

Compensatory liability rules, innovation prizes, or competitive intermediators are only three of many interesting ideas in this vein. I’ll write about others in the fullness of time.

Posted in Economics, Health, Intellectual Protectionism, Politics, Prediction Markets, Public Domain, Public Goods | 6 Comments »

Intellectual Protectionism amelioration committee

Monday, October 4th, 2004

IPac

is a nonpartisan group dedicated to preserving individual freedom through balanced intellectual property policy.

I signed their statement of principles and strongly encourage you to do the same.

However, the following mantra, excerpted from principle #1, grates:

Creators of ideas and inventions have the right to be compensated for their work

IPJustice has a nearly identical principle, #2 on their list:

Creators deserve to be compensated.

This “principle” feels to me like a nutty mix of buying into protectionist propaganda and labor theory of value* sentiments. It would be perhaps be better to say that creators should have the right to restrict access to their creations. Given a monopoly in their work, creators or their assignees may be able to extract more payment from potenential users than they could without monopoly privileges, but they certainly don’t have a right to be compensated merely for creating. If that were the case we’d have huge[r] inefficiencies from overproduction of intangible goods.

Back to IPac, they seem to be taking the sensible strategy of backing three candidates from each of the two U.S. establishment parties. I suspect Brad Carson is the only candidate in any sort of race (the other five should all easily win). I looked at Carson’s congressional web page and wondered why IPac is supporting four Republicans and two Democrats. Turns out Carson is actually a Democrat — from Oklahoma, where apparently Democrats are anti-gay marriage and pro-gun (top two stories on aforementioned site). An explanation.

* I can’t find a single excellent page on the LTV. Most are either hopelessly mired in Marx-derived argumentation, which as far as I can tell removes the most trenchant LTV criticisms by rendering the LTV meaningless (tautological) as an economic concept, trailing off into Marxian “class” analysis (the current Wikipedia page, linked above, tends toward this — I’ll shirk my responsibility to fix it for now) or are flippant dismissals of LTV that usually ignore the Marxian evasions (maybe justified) , criticizing Ricardo’s earlier LTV and often misattributing it to Marx (a page tending in that direction).

Posted in Economics, Intellectual Protectionism, Politics | 4 Comments »

Markets and Election Outcomes

Sunday, September 26th, 2004

Last week (September 22) the Wall Street Journal printed “Market Gains As Bush Rises and Kerry Falls” (unauthorized copy found here).

I’m extremely skeptical that the market should be read as approving or disapproving of Bush or Kerry, or particularly responding to individual polls. There’s so much noise in the market that I’d only expect an unthinking partisan to read candidate preference from market index behavior, particularly when the two candidates who can win are so similar policy-wise (though a partisan wouldn’t agree).

However, it should be possible to design securities which explicitly tease out the effect of a candidate’s election on the market (or something else). One approach is I believe known as “conditional futures”. Three securities would do it: a) has a value determined by whether Bush wins, b) has the value determined by a market index on a date in the future, and c) has the value determined by a market index on the same date in the future if Bush wins, or zero otherwise. If c/a > b then the futures market thinks a Bush win is good for the market index in question. Alternatively b) could be determined by the value of the market on the same date in the future if Bush loses, in which case if c/a > b/(1-a) then the market thinks a Bush win is good.

You can see some claims along these lines in a play money (unfortunately) market:

(In calculations below I use last trade if available, otherwise average of bid and ask.)

bid ask last
/  /   /
61 62 61 http://www.ideosphere.com/fx-bin/Claim?claim=Bush04

Bush is likely to win.

47 48 NA http://www.ideosphere.com/fx-bin/Claim?claim=Stocks
25 30 25 http://www.ideosphere.com/fx-bin/Claim?claim=GBStok

25/.61 = 41 < 47.5 Bush win means lower stock returns? 51 53 52 http://www.ideosphere.com/fx-bin/Claim?claim=GBNuke
33 39 34 http://www.ideosphere.com/fx-bin/Claim?claim=JKNuke

52/.61 = 85 < 34/.39 = 87 Bush win means slightly lower chance of US getting nuked? CORRECTION: I misread *Nuke, which pay if the US does not get nuked. I should've written: "Kerry win means slightly lower chance of US getting nuked?" 75 77 76 http://www.ideosphere.com/fx-bin/Claim?claim=Terr10
20 74 NA http://www.ideosphere.com/fx-bin/Claim?claim=GBTerr

47/.61 = 77 > 76

Bush win means very slightly higher chance of terrorist attack in US?

Note these claims are mostly new with extremely thin volumes and probably don’t tell us much of anything at this point about the consequences of a (likely) Bush win, but one gets the idea, I hope.

Related notes:

Tradesports and the Iowa Electronic Markets (two real-money markets, though investment in IEM is limited) seem to be garnering lots of attention, at least amongst people I read. Geekmedia has yet another electoral map based on Tradesports markets for individual state outcomes (via Patri Friedman).

I think it isn’t widely known that large scale organized betting on election outcomes in the U.S. is a back-to-the-future phenomenon. I didn’t know until a few weeks ago when I encountered Historical Presidential Betting Markets while flipping through the Journal of Economic Perspectives at the newish San Jose main library (’tis very nice that it is a shared facility with SJSU, which means many more journals available to the general public). I indend[ed] to blog a summary.

Drifting:

Koleman Strumpf, one of the authors of the aforementioned paper, has also written on the effects of P2P — to much to read, too little time — and is an indie music fan. Funny quote from one of his media cites, The down low on downloads:

Strumpf, whose own tastes run toward independents, says it’ll be difficult for a study like his to measure their financial prospects. “The kind of albums that are put out by indie labels are not economically very important,” he says. “I know that must sound like a terrible statement. Believe me, if you look at my music collection, I’ve come to the conclusion that most of the music I listen to is economically irrelevant.”

Posted in Economics, Music, P2P, Politics, Prediction Markets | 8 Comments »

Porn Restriction Management to the Future

Wednesday, August 11th, 2004

The porn industry and porn consumers are often said to be early adopters of consumer technology, e.g., VCRs and modems. So to what extent is porn delivered with Macrovision, CSS, region codes, and other copy protection methods as relevant to the formats in question?

I searched briefly but didn’t turn up any good answers, just assertions like

We can expect DRM to become commonplace as more porn producers take measures to prevent pirating of their content.

and

I should add that the porn market is also hot for DRM, but not too many vendors want to call attention to that.

and others wondering or speculating that porn site competition will stop DRM:

Some websites have begun to encode pr0n with drm requiring you to download a license everytime you want to watch the movie. I’d just stop using those sites. They’ll get the hint when their traffic starts moving to sites with no drm. Hopefully. It doesn’t really make sense to drm a 10 second clip when it takes 20 sec. to dl the license.

I’m looking for data regarding DRM use for pornographic content. Please tell if you have any ideas or know a good place to ask, even if you’re reading this long after the posting date.

Update 20040813:Jake (last cite above) comments below that a company is already selling DRM to the porn market. Actually there are several. I’d be surprised if any DRM concern isn’t making some effort in this regard. My question has to do with whether many in the porn content industry are buying.

Tom W. Bell adds another guess:

My guess: No. Porn consumers seem content with cheaply produced and only modestly original works. Porn producers thus need not recover the sort of fixed up-front costs that plague the traditional film industry.

That’s my guess as well, but I have no evidence. Thus the query.

Posted in DRM, Economics, Intellectual Protectionism | 5 Comments »

I Hate Nationalism

Tuesday, August 3rd, 2004

Alex Tabarrok hits on a profound point:

Blogging about the convention, William Saletan hits on a profound point. It’s not just Democrats, however, the framing of “us” and “them” is perennial and it’s the expansion of “us” that is at the heart of our civilization.

Obama, like other speakers at this convention, complains about “companies shipping jobs overseas” and workers “losing their union jobs at the Maytag plant that’s moving to Mexico.” At the same time, Obama holds himself out as a symbol of a diverse, welcoming America. How can Democrats be the party of diversity at home but xenophobia abroad, the party that loves Mexican-Americans but hates Maytag plants in Mexico, the party that thinks Obama’s mom deserves a job more than Obama’s dad does? I understand the politics of it. But what about the morals?

(Emphasis added, sort of — see title of Tabarrok’s post.)

Unfortunately Obama (and Kerry with his “Benedict Arnold firms” nonsense) are far outclassed in the hypocrisy department by Bush & co.’s complete misundertanding (I can’t think of an appropriately harsh word at the moment, so misunderstanding will have to do) of freedom, and just about everything else.

Posted in Apartheid, Economics, Peeves | 5 Comments »

Sturgeon’s Architecture

Monday, August 2nd, 2004

Tyler Cowen wonders about the relative ugliness of modern buildings and offers five possible explanations. I’ll buy a version of his least favorite:

5. Perhaps contemporary suburban developments will be seen as beautiful by future generations. I’ll bet against this one, but we will see.

The boring parts of suburban developments won’t stand the test of time, literally. They’ll be razed. The parts left behind we be deemed beautiful. For example, in Sunnyvale, California, artless ranch-style homes seem to predominate, though it is hard to miss the occasional Eichler. I gather that both styles were built out in Sunnyvale during roughly the same post-WWII period. I predict that the ranches will disappear at a higher rate.

What we have at work here is an extension of Sturgeon’s Law, which says that ninety percent of everything is crap. If two percent of crap is removed each year while the good stuff has a one percent attrition rate after a few centuries there will be far more good stuff than crap left standing. Numbers for hunch illustration only.

Update: A commenter here makes the same point. The correct term is survivorship bias.

Posted in Economics | 1 Comment »

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