Global Design and Intelligent Warming

Regular vistors of L3 would probably have noticed my reservations when it comes to accepting the theory of global warming, or more specifically, that humans are the cause. With the recent decision about intelligent design, it might seem odd that I side with the scientists on this one.

Consider the similarities. Both theories are nearly universally accepted in scientific circles. Both ideas are seeped in politics. Both relate to dynamic systems. Both have huge bodies of evidence but neither can be "proven" in the lab.

But there are solid differences.

1) Politics played against evolution when the theory first appeared. Global warming scares are modern tools of politicians. The consistency lies in disbelieving what the government tells you.

2) Evolution describes a dynamic system. GW makes causal claims of a dynamic system.

3) Evolutionary theory became more sophisticated as technology developed (using DNA to demonstrate how species are connected, for example). GW theory has certainly become more complicated as computer technology improved, but its reliance on modeling the unknown does not make it more sophisticated in any useful sense.

4) The most important difference is that evolution is the best scientific theory we have that explains the origin of life. But there are far better origins of causation for changing climate (ie that it's natural and the virtue of this theory is, like evolution, it has historic evidence).

The judge was absolutely correct when he said ID is nothing more than creationism with a scientific-sounding name. When opponents perversly argued that evolution is its own dogma, they were equally, absolutely wrong. By definition science cannot be dogma. But that doesn't mean scientists are never dogmatic.

Thinkin' About Your Deficit

I've often mentioned that the only times I trackback to CF is when I disagree with her and today is no expection. She wrote yesterday that there's no such thing as a "trade deficit." This is wrong. The trade deficit exists; it's just a dumb name.

I'll agree that when people talk of the trade deficit, they're speaking of a vacuous concept. The trade deficit is an arbitary distinction between net exports and capital flow. It exists, however, because people make that very real distinction.

It would be (slightly) more accurate to say that there is no trade "deficit" because a deficit implies we have to pay it back. We aren't running up a debt because we import more than we export. CF is correct that we should ignore the media scares. At the same time, remember the English language is clunkly and silly and people call things stuff that doesn't make sense. I drive in a parkway but I park in a driveway and so on. Sementics. Technically true, but there are bigger battles to fight.

While the trade deficit exists, the real lesson is that it doesn't matter. Two reasons for this: CF's point (we can afford these imports; isn't that a good sign?) and the accounting identity. Dollars that go abroad have to end up in the US (okay they could end up in Palau or East Timor or whatever but they're too small to really mean anything). Now you could say that net exporters (like China) are putting those dollars back in the US buy purchasing government bonds, thus funding inefficient spending. That's true; that's a problem. But that's really a problem with the budget deficit, not the trade deficit, because that's something we really do have to pay back.

Smoke Freely

The Broadside had an opinion piece this week that advocated more non-smoking zones on campus. I sent the editor a reply:

Dear Editor,

I do not smoke. Like Lindsay Wolcott who wrote to you on December 5th, I find it disgusting. There is also no doubt that cigarettes are harmful to your health. Everyone knows this; most anti-smoking ads are pointless because they merely repeat this well-known fact.

Yet teens continue to smoke. Why? Imagine James Dean, the ultimate cool guy. He’s a rebel and when you’re young, being a rebel is cool. Dean smoked because authoritarian figures didn’t want him to just as such figures don’t want teenagers to smoke today. That makes smoking cool.

Not enough people understand this concept so pro-banners cite passive smoking health risks to push their cause. It would surprise few that second-hand smoking is dangerous, but there is a real difference between a child living with a pack-a-day mom and a person passing a few smokers on the street. The first could do real harm, the second likely wouldn’t do anything.

It is already shameful that we treat smokers as second-class citizens by telling them to leave large open spaces (like the JC dining area) and stand out in the cold. Pushing that boundary further so you don’t have to walk through “clouds of smoke” is inconsiderate laziness. If Ms. Wolcott is truly so concerned about her health, she can hold her breathe for the few seconds it takes to pass smokers. If, as she implies, this is truly not an option then I strongly recommend she gets her lungs checked.

Sincerely,
David Youngberg
First Year Graduate Student, Economics

Making rules about how people should live their lives a free society does not make.

The Wealth of Christmas

Economics is hard, so we shouldn't be surprised if even CF gets it wrong every once in a while.

Yesterday she posted about how Buy Nothing Day is silly and that eliminating Christmas would be irrelevant. I agree with her that BND is absurd but for a fundamentally different reason. She says that buying nothing for a day is very common. I said in an earlier post that it's actually impossible. Clearly CF does not read my blog as often as I read hers. Shame on her.

I also disagree with her on Christmas though her logic is at first sound. People have X amount of money to spend every year: eliminating Christmas won't cause people to have less money or want fewer things. But it assumes there are no benefits to crowding production. Schleifer argues that the role of implementation theory (sectors of the economy work best when they are all working together) means Christmas makes the economy more efficient. In other words by lumping our consumption and production, our efficiency is higher on average for the year than if both were smooth over the seasons.

This idea should come as no surprise to either CF or myself because we practice implementation theory as students all the time. Finals are coming up and to prepare for math, we are going through about a chapter a day. We did not study so intensely a week ago. We are crowding our production just as most students do.

If we think about it more, we can complicate it more. There are problems with Christmas. There's inefficiency with buying stuff for other people, but there's also utility asscoiated with giving and receiving. People get utility from the holiday itself while others get disutility. My gut tells me that the benefits outweigh the costs, which I think says a lot because I'm not a fan of Christmas.

But to call the holiday irrelevant based solely on an accounting identity is very incomplete.

Have A Merry Holiday

People get upset about the stupidest things. Consider the annual uproar from conservatives because Bush sends out a "holiday" card instead of a Christmas one. There is no Jesus in this card, odd for a self-proclaimed born again.

The White House reasonably responds that they send out cards to all faiths, hence they aim for a wide-appeal. That makes sense but frankly, it doesn't matter. They could send out Happy Kwanzaa cards and it wouldn't matter (but it would be funny).

This is where it gets really absurd because some find the card to be a crime against humanity. "This clearly demonstrates that the Bush administration has suffered a loss of will and that they have capitulated to the worst elements in our culture," said William Donohue, president of the Catholic League for Religious and Civil Rights.

The worst elements of our culture? That's pretty impressive for one card. One card which apparently cancels out all of Bush's references to Jesus and God, all his trips to church and all quotes from the Bible. I know if I could undo an entire culture with a folded piece of paper, I'd do it just for the thrill.

Cato the Unbounded

Cato recently launched its online monthly, Cato Unbound. There's some smart people at Cato and I promised Steve Slivinski my legions of....fan will check it out. Don't make a liar out of me!

Pondering Walter Williams: The Art of the Deal

The other day in class WW tried to convince us that the phrase "bargaining power" (especially as it pertains to wages and labor) is a vacuous statement. The argument is reminiscent of economic thought's early days, when a great debate raged over if it was supply or demand that determined price.

It's both, of course, and Williams used a similar argument. While one could demand a low wage, the other could respond with a low quantity of working hours. Price and quantity go hand in hand, just like supply and demand. Thus claims of having superior bargaining power is the same as claiming superior demand. It's meaningless.

I disagree. The bargaining process is not a one-time negotiation where a wage is presented, a quantity of labor is responded with and there's nothing beyond that except agreement or rejection. Bargaining is a process of give and take where new offers are made for a single unit. It is a process that describes how supply and demand discover price and quantity.

Bargaining power is really a comment about elasticity. As different wages are offered, different hours (explicitly or implicitly) are offered to match with it. Each negotiator has a range of prices and a range of quantities they would be willing to put on the table but without the other party giving up and walking away. The wider those ranges, the greater the bargaining power.

Suppose I seek out employment at the Cato Institute. Being a first year grad student, I know I have a small range of p's and q's to offer them because my human capital is relatively low (but still pretty good). Now fast forward about five years. I've publish a few papers and got my PhD; my ranges of p's and q's has increased. I have more bargaining power. Bargaining power describes how sensitive the size of sets of p's and q's are to changes in human capital (just as elasticity describes how sensitive Q is to changes in P). Like elasticity, bargaining power is influenced by similar determinants, most notably the number of substitutes.

It's difficult to measure human capital so it's difficult to come up with an absolute value of bargaining power. We can estimate the ranks of such power, if someone has more or less or roughly equal ranges of offers. Thus we can say if someone has superior (greater) bargaining power, just as we can say if some goods are more or less elastic than others. (We can use the word "superior" because more bargaining power is always preferred by any agent while more elasticity may be preferred or not depending on if one is on the demand or supply side.)

Pondering Walter Williams: God's Priorities

Today I again refer to Walter Williams' list of questions for us to ponder.

Question 92. d) Why do you think that the commandments: "Thou shalt have no other Gods before me" and "Thou shalt not make unto thee any graven image...." are the two more important amoung the Ten Commandments, in the eyes of God?

There are really two different but related ways to answer this: for monopoly and for legitimacy. Monopoly power is probably the one WW is thinking of so let's start with that.

The first cited commandment is a way to clear out all existing competition. "Dump all your other objects of worship." The second is to establish a lasting monopoly, a barrier to entry. "Not only can you not keep your objects of worship, you can't make any more." Remember, "thy God am a jealous God."

Without competition, God gets final say on everything. Pretty sweet deal.

But it is also possible that God's pursuit of monopoly power wasn't power for its own sake but for legitimancy. It's hard to get everyone to follow the rules if some people think the rule-maker could be wrong. Thus we see God not only as the one true deity but as the ultimate moral authority (even though he gets jealous at times). Weird.

Clarification On MR

Tyler Cowen is having us, his students, write up our own questions for our final to post in the comments section of his blog. After contributing my question, I later scanned the other ones until I came across this one by Brad DeLong:

The United States, with a GDP of some $12 trillion a year, currently has a current-account deficit of $750 billion a year composed of a $750 billion trade deficit and a balanced flow of factor incomes. Making your own rough back-of-the-envelope projections of U.S. GDP growth and of real interest and profit rates over the next twenty years, answer the following question: If the trade deficit stays constant as a share of GDP over the next twenty years, how large--both in 2005 real dollars and as a share of U.S. 2025 GDP--will the current-account deficit be in 2025? Why might one argue that this trade deficit is "unsustainable"?

I thought this question was funny, not because it's a bad question (it's a good one in fact) but because a) Brad DeLong is not a student in our class and b) the nature of the question is very different from the topics we've been covering and from the other questions that were asked.

A couple of lines down I noticed the comment, "Brad DeLong is one of your students? Weird."

Naturally I thought this was very funny because I was thinking the exact same thing so I replied, "Yeah and given his question I can tell you he's been skipping class." The point of the comment was to establish what I found to be an hilarious juxtaposition between what he thought we were focusing on (projected growth calculations) and what we were doing (pretty much everything besides that).

It would appear not everyone thought this way. Robert Schwartz commented "Say something snarky about Brad Delong and your post will be taken down on this blog and his." To be sure, Prof. Schwartz, I don't mean it as "snarky," merely good humored.

The whole episode speaks to the immense confusion I feel when I think about the hierarchial nature of academia--a place where ideas are supposed to flow freely. There are things to say about that, but it's a post for another time.

Sticking It To Stigler

George Stigler wrote a piece on the economics of information sometime back inwhich he described reasons that determine the scale of cost of search (as in for the best price of a product). He listed several relevant factors: the number of buyers and sellers, the ratio of price of good to income and the geographical size of the market.

It annoys me, though, that he paid no attention to technological development as a factor, which can increase the size of the market but at the same time can increase the amount of search. Lo and behold while I was reviewing old micro final exams I stumble onto this sentence we're asked to comment on:

"According to the search model of George Stigler, the rise of the Internet should increase the amount of time that consumers spend searching for good prices."

The move is technically ambiguous because while sellers and buyers have increased (more search), the geographic area has also increased (less search). The second part isn't important, though, because the whole point of considering the geographic size is to include the cost of moving from place to place, which has actually decreased. But the author only talks about geographic change, not effective geographic change.

Seeing this question, I found myself shaking my fist at the paper loudly saying, "Damn you Stigler for not including technological change in your determining criteria for the cost and amount of search a consumer endures for the pursuit of the best price of a particular good or service."

I wonder how long I've been such a big economics dork?

Try Buying Nothing For a Day. I Dare You.

With Thanksgiving winding down there's growing anticipation in the streets and homes of DC. I'm surrounded by an edgy silence. It's like a simmering Jamaican soup, calmly sitting on the stove but possessing enough fire and passion to melt the coldest of hearts. I can feel the energy in the air; it's absolutely palpable.

Tomorrow is one of the biggest shopping days of the year: Black Friday, so named as it tends to bring retailers into the fiscal black. It is an exciting day and while I prefer to avoid the crowds I do like to stop by the malls and breathe in the wonderful ordered chaos. It's a holy pilgrimage for economists.

And now that I live in a real city, I might get lucky and spot some "Buy Nothing Day" protesters. I doubt I'll actually see any because the Adbusters group doesn't seem to protest consumerism in the US (but they seem to be very popular in Europe in Canada). Their rather ambitious goal is to buy nothing on Black Friday to protest the evils of people purchasing gifts for their friends and family. The horror, the horror.

I really hope to see them so I could tell them they are hypocrites. They didn't “buy nothing” that day. Virtually nobody "buys nothing." Here's a list of things at least one protestor will buy tomorrow.

-Gas
-Car maintenance (depreciation)
-Electricity
-Food
-Drink/Water
-Cigarettes
-Lighters (for the cigarettes)
-Butane (for the lighters)
-Markers (they carry big signs)
-Posters (again, the signs)
-Clothes/Shoes (depreciation)
-Bus/cab/subway fares
-Cell phone minutes
-Pay toilets

No doubt people will say that they didn't buy those things today, but I argue they did otherwise their entire protest is meaningless. If we define "buying" as merely the exchange of money between hands then buying doesn't happen nearly as much. You don't buy something if you paid with a credit card (you write the check much later). Since I doubt the make the distinction between credit cards and cash, they must mean "buying" to be "engaging in an activity that promises payment." Consumption. Because of the protesters activities tomorrow, they will or did buy certain goods and services. In every relevant way, they are buying things. Ironically, you are less of a consumer if you stay at home and watch TV.

Say what you will about the mall-shoppers tomorrow. At least they are being honest.

A World Without Patents

This past weekend I went to the SEA conference in DC and had a wonderful discussion with economist Howard Baetjer of Towson University.

Howie wrote a wonderful article in the Review of Austrian Economics called "Capital As Embodied Knowledge" (pfd here). Capital, he says, get its value because it's infused with knowledge, thus other people can use it even if they don't understand the technology. I can use my car even though I can't even change my oil. If I had no knowledge of how computers work, I could still use one just fine.

We got to talking about patents and how screwy they are. For a long time I always figured patents as a necessary evil. Yes, they are subject to terrible abuse but I couldn't think of an alternative to protecting intellectual property. He suggested re-enginneering, say software, to encrypt it better so its patent is protected.

This is where it gets really interesting. I realized that what he's proposing is the seperation of service (what the technology does) and technology (how it works). This is what patents basically do: seperate service from technology. Patents allow people to enjoy what a technology does but disallow the replication of that technology. Firms cannot "reverse-engineer" a patented item (usually). But if there were no patents, they could (and do).

In a world without patents, the costs of reverse engineering is their grace period (not the length of the patent). Thus, I propose firms will adjust their behavior to get the most out of the technology they developed.

First, they will attempt to make it as hard as possible to reverse-engineer the product by doing extra work to seperate service from implementation. I call this practice "black-boxing" because you want to turn your product into a "black box;" all the people know is what comes from it (the service), not how it works (implementation). We can imagine firms hiding circuts, creating false relays, adding "self-destruct" programs (overheat the circuts if the case is broken) and maybe even coating the inner-casing with a tough structure that's physically hard to remove.

Second, firms will engage in multi-incremental technology growth. With patents, marketing the absolute latest makes sense because no one else can make that technology. Without patents, firms will not release a product the moment they perfect the slightest improvement because that will be easy to reverse-engineer. Instead we'll likely see new products that not only contain generations of a particular improvement, but several of them at once. With all these leaps in one product, it becomes exponentially more complex to figure out how it works. (Think of the difference of giving a six-shooter to the founding fathers and giving them a machine gun.)

Third, firms will reduce their prices faster for new technology because they want to get a bigger foot in the door. With patents, they have greater monopoly power (because they know when their power ends). Without patents, their length of their monopoly power becomes uncertain; it would be as if they are competing with a company even before they replicate the technology.

Fourth, all of these things will encourage corporate espionage, and that's just cool.

Fifth, there will be more focus on technology with greater originality and novel approaches. Reverse-engineering such technology is harder because you're less certain where to start.

All of these things would, of course, increase the costs for firms, (just like removing a licensing law increases the costs). I do not think firms will embrace this change in law. However, it is possible it could work in their favor if they black-box and spy well enough.

If You Ever Thought Your State Was Sad

At least you're not from Idaho. Earlier this month, Maddox gave a nice rant about his potato-farming neighbor. The most telling bit of evidence is the recent resolution the Idaho house passed to commend the movie, Napolean Dynamite, which was filmed in the state.

Here are some of the things they cite as why they honor the film.

"tater tots figure prominently in this film thus promoting Idaho's most famous export"

"Uncle Rico's football skills are a testament to Idaho athletics"

"Napoleon's bicycle and Kip's skateboard promote better air quality and carpooling as alternatives to fuel-dependent methods of transportation"

"Pedro's efforts to bake a cake for Summer illustrate the positive connection between culinary skills to lifelong relationships"

"Kip and LaFawnduh's wedding shows Idaho's commitment to healthy marriages"

"Napoleon's tetherball dexterity emphasizes the importance of physical education in Idaho public schools"

There are many more but the best part of the list concludes with

any members of the House of Representatives or the Senate of the Legislature of the State of Idaho who choose to vote "Nay" on this concurrent resolution are "FREAKIN' IDIOTS!" and run the risk of having the "Worst Day of Their Lives!"

This is where your tax dollars are going.

Seeing the Light

Have you ever heard of Rattenberg, Austria? Yeah, neither have I. Not until today at least.

With a population of 440, it's the smallest town in Austria and exists in perpetual darkness during the winter months. With the looming shadow of the romantically named Rat Mountain blocking their sun, the people are naturally upset.

Founded in the 1300s, the town's dismal placement made sense because it helped defend them against marauders. (Though I thought the best defense would be on the mountain, not behind it, but what do I know?) Marauders aren't common anymore so naturally adjacent towns sprang up when the region stablized.

Instead of taking the cue and moving, the people of Rattenberg have decided to build an array of thirty mirrors to redirect sunlight to their town. Keep in mind, this won't be the whole town; only certain areas will be bathed in light.

Granted, that would look really cool from a distance but then you look at the $2.4 million dollar price tag. It's about $5500 per person, and that doesn't include maintainence.

The EU plans to foot half the bill meaning people smart enough to live in cities with sun are paying to bring the sun to those too cheap/lazy/stupid to move one town over.

In the US we have these things called ghost towns. Austria should remember some communities deserve to wither and die.

Delaying The Action

For reasons I don't quite remember (I think it had something to do with how old great writers were when wrote their great works), Chris Nelson, someone else and myself were wondering how old Adam Smith was when he wrote The Wealth of Nations. This was several months ago.

I saw Chris this evening at the SEA conference during an IHS gathering and he reminded me of my task. Belated, here are the results.

Adam Smith was baptized June 5, 1723 (exact birthday unknown).

He published The Theory of Moral Sentiments in 1759 when he was about 36.

He published The Wealth of Nations in 1776 when he was about 53.

I guess that gives hope to the procrastinators.

Miracle Whipped

There may be fairies at the bottom of the garden. There is no evidence for it, but you can't prove that there aren't any, so shouldn't we be agnostic with respect to fairies?
--Richard Dawkins

Last night during the Caplan-Iannaccone debate about the rationality of religion, Prof. Iannaccone made a rather amazing argument for a trained mathematician: he told us miracles proved themselves.

A virgin birth is a crazy idea because every other birth at that time was non-virginal. "But that's the whole point," Iannaccone said. "It's a miracle."

Is that all you need, Professor? Someone to tell you something amazing is happening? If I tell you I've seen those fairies Dawkins refers to, will you build altars at your garden? Will I be your new God?

If a miracle is by definition unprovable and supernatural, how can we possibly tell if it's a miracle? We can't, which makes them rationally useless.

Fire At GMU

The Foundation for Individual Rights in Education announced today that it's challenging the recent activity of my new school, George Mason University. In late September, GMU student and Air Force veteran Tariq Khan protested some visiting military with a sign saying "Recruiters Lie."

Even though Khan's sign as forcibly taken by another student, campus police arrested the protester. Khan apparently violated GMU Policy 1110 which "applies to the sale and distribution of products, goods, food, beverages, services, and newspapers by GMU and non-GMU organization and individuals." The school cites the purpose for the rule: "to protect faculty, staff, students, contractors and University guests from commercial and non-commercial exploitation and harassment, preserve the aesthetic atmosphere of the University, avoid disruption of the University’s educational mission and to promote safety and security in University facilities and on University grounds."

I had no idea we needed protection from being told stuff.

FIRE's campus profile of GMU can be found here.

Captain Progress

I remember Captain Planet, that 90s cartoon about saving the environment. Then I learned economics and I cringe when I read some of their old plots. Consider this gem:

NO SMALL PROBLEM
With landfills overflowing, Sly Sludge is ready to cash in on his new garbage reducing ray. But when the Planeteers threaten to expose his operation, Sludge shrinks them down and buries them in a sea of refuse. In jeopardy from toxic trash, and seagulls the size of jumbo jets, our heroes have to do some serious recycling in an effort to engineer their way out of their new "world of waste!"

Wait, reducing garbage is bad? Is it because he's making money or because he's not recycling? Talk about missing the industry for the firms.

I would love to make a comic about Captain Progress or maybe Captain Profit and the Profiteers. I'll develop this as the ideas come, but I'll need someone who can draw.

Dawkins Wisdom

If you have a few minutes today, I suggest scanning Richard Dawkin's entry at Wikiquote. His kernels of wisdom are near infinite. For example,

"Justifying space exploration because we get non-stick frying pans is like justifying music because it is good exercise for the violinists right arm."

Gas-Tastic

"...perhaps in the absence of hurricanes and other phenomena that shift the demand for oil upward, prices naturally drop," said CF yesterday as she pointed out a trend we are all seeing at the gas pump: prices are falling.

But it would be wrong to claim that this short period is indictive of a larger trend, just as pundits were wrong when they screamed doomsday only a few months earlier as gas prices rose. What is causing oil prices to fall now is the result of a game of catch-up. It takes a good six months for petroleum to go from ground to gas station. Even though oil companies pumped more oil when gas prices started to rise, we are now only seeing those benifits; supply is merging with demand.

It's true that prices naturally drop, but we have to look at a much longer time period. Check out this graph from wtgr economics.



Note that oil prices were falling for about the fifteen years before the creation of OPEC in 1973 and have been stochastic ever since. A non-market organization made prices flucutate, it seems, not the market itself.

Consider now the role of tar sands and oil shales, two sources of oil the industry didn't consider profitable until not too long ago. The former source is pretty evenly split three ways between the Mid-East, Venezuela and Canada and makes up about 2/3 of the oil reserves in the world. The latter is mostly in the US--1.2 trillion barrels worth. Oil companies are extracting or planning to extract oil from these sources, a process that becomes more worthwhile as prices and volatility rises. As this production increases, OPEC will become less significant and prices will then follow the trend we saw in the pre-OPEC days. Imagine a newspaper headline in the year 2025 reading,

"Though NA Net Oil Exports Continue To Rise, Congress Worries About Falling Gas Prices"

Fricking Gas-Tastic.

Windfall Tax Nothing But Hot Air

The Tax Foundation has a lovely graph describing the 1980s establishment of a windfall tax.

This is of course the statist's argument against the tax, which I think misses the point. The goal of government shouldn't be to make money but to create a framework within which others can make money.

Fandom of the Opera

Today I made the transition from Firefox to Opera web browser. Firefox was incredible when it was released. Tabs. Google search in the browser itself. Quick links. But now those revolutionary additions are the standard and imitation pushes the web browser product forward.

Enter Opera, which recently became free. I wasn't too keen on switching browsers but after the 100th time of not being able to view media because I lacked the right plug in, I though I'd give it a serious shot. I'm now hooked. Opera has the following advantages.

1. It comes with all the plugins you'll need to view web movies, etc. This was a main reason why I switched as FF doesn't come with any.

2. I like to multitask when I'm online and to keep all the webpages straight, I want to group similar tabs together. FF puts the tabs in the order you've created them and won't let you switch. Opera does; it's very nice.

3. Adding bookmarks is less awkward in Opera than in FF; where you are putting a link is much more clear.

4. It might be my imagination but I think Opera runs faster.

There might be other things Opera has; I'm still exploring it. Not yet sure what the "rewind" and "magic wand" does yet. You can download Opera for free here.

NOTE: Mike just told me I've been using an old version of FF; the new one lets you move tabs. Didn't solve the other problems I have with it, though.

I Completely Missed It

Walter Williams was on 20/20 on Friday. 20/20's been doing a weekly series about the seven sins and last night's was greed. Naturally they talked to my micro professor.

I was able to watch a segment of the episode on the 20/20 website which had him in it. I don't know if this was the extent of his participation or not but here's his quote:

Normally in our country those areas where people are motivated the most by greed are the areas we are most satisfied with. Supermarkets. Computers. FedEx. Those areas where people say we're motivated by caring are the areas of disaster in our country. Such as education. The post office. City garbage collection. Police services.

It reminds me of a book I'd like to write someday: The Ethics of Greed because greed generates the incentive that makes our economy work so well. And because it works so well, people can have greater freedom and choices, they live longer, they can do more with their lives, they are safer and they are happier (yes, happiness is hard to measure but I bet if you stuck one of those unhappy people in a third world country for a month, they'll stop complaining so much about rush hour). All of these things are what the great philosophers have been trying to accomplish for thousands of years (Plato's Republic comes to mind) and greed, the least likely of candidates, makes it possible (as well as the right institutions). How amazing is that?

Other People's Money

Was surfing Wikiquote and found these great words by Milton Friedman.

There are four ways in which you can spend money. You can spend your own money on yourself. When you do that, why then you really watch out what you’re doing, and you try to get the most for your money. Then you can spend your own money on somebody else. For example, I buy a birthday present for someone. Well, then I’m not so careful about the content of the present, but I’m very careful about the cost. Then, I can spend somebody else’s money on myself. And if I spend somebody else’s money on myself, then I’m sure going to have a good lunch! Finally, I can spend somebody else’s money on somebody else. And if I spend somebody else’s money on somebody else, I’m not concerned about how much it is, and I’m not concerned about what I get. And that’s government. And that’s close to 40% of our national income.

-Fox News interview 2004

Bullets Aren't Economic-Proof

Last night on the West Wing, the live debate strayed to the topic restricting bullet sales the same way we restrict gun sales. It reminded of me of a Chris Rock bit where he proposed a high tax on bullets so people couln't afford to kill each other.

These sound like nice ideas, but they lack an anchor in reality. Bullets are little more than hunks of metal. If the state makes it hard to buy them, you can bet a black market will arise overnight. Mafias and gangs will sell bullets to fund their activities in the same way they sell drugs or they sold alcohol during prohibition. Artifically kicking up the price of bullets will move money away from the accountable law-abiding firms and into the hands of crimminals.

That's only the beginning. When it's worth it to learn how to make bullet and it's profitable to buy the equipment, it's a very short jump to making the bullets we really don't want people to have such as those that pierce armor. (Yes these bullets are circulated anyway but they will become much more common and easy to get.)

Alcohol, drugs, prostitution, guns; these are all things where there was some kind of government control on them and every single one of them got their very own black market. Why should we think bullets are any different?

Vinick For President

I just watched the debates on NBC and Vinick is now my guy for President. His closing speech was a classic argument for libertarian values.

There was a lot of great ideas touched on the debate; my head is still swimming. One thing I did want to comment on was Vinick's take on the worldest poorest countries. He was right in the sense that a major hurdle for these downtrodden are the oppressive taxes they bear. And they bear them because the local governments have loan payments.

I would not doubt that, but there are even more core issues, most notably is that the governments themselves suck. They are not only havens for corruption, they deny the basic economic infrastructure needed for a successful economy. Creating a legal business is like pulling teeth so entrepreneurs are forced to establish costly illegal businesses. Thus, they can't secure loans. They can't advertise. They have to bribe countless people just to stay open, nevermind making a profit.

This speaks to an earlier part of the debate when Santos reminded us that the key to limiting illegal immigration was for the government to improve economic conditions. Of course since he's not running for President of Mexico, that was a worthless promise. Didn't even say how this would be accomplished. Now if he would listen to his opponent (or me for that matter) he'd have something to tell President Fox.

For those of you who didn't see the debate, I strongly recommend you find a copy and watch it. There was some great libertarian themes in it.

Million Dollar Idea #906

I was reminded the other day about a conversation I had with an old undergraduate professor of mine. He insisted that greeting cards were Giffen goods--you buy more as the price increases. He reasoned that because the price is printed on the back of the card, people fearing being called cheap by a loved one go for the higher price.

What he's missing, of course, is that such reasoning is not holding all things equal. The value of the card went up because the price went up, thus they are completely different goods. The same could be said of shopping at buying designer jeans rather than Old Navy--the price has inherent value; it sends a signal.

Pushing the point even more yields a wonderful business opportunity (assuming my prof's greeting card purchasing concerns are common). Make very cheap greeting cards with a fake price on the back: say five dollars. Then, at the factory, put a sticker over the fake price with the real price on it: say fifty cents. Add instructions on the sticker: "Peel To Impress."

The only problem is success will be the mark of failure as brand name trumps all. But you could always come up with fake brand names and then put the real brand name on a sticker, too. It's genius!

Want more? Send me fifty dollars.

Pecuniary Printing

Forbes posted this nice piece on Google Print by Nick Schulz from TCS. One of my favorite points:

The way the current copyright law works, I can take a book out from any library, read it and write a review of it for publication on the Web site I edit or in the pages of Forbes.com or anywhere else.

Google Print is just more of the same. To those that say people shouldn't make money off their work not only forget that's been true long before Google or even Amazon (reviewers have been doing this for a very long time) but they miss the big point. It doesn't matter. It is completely absurd to claim that getting a check for doing a job is morally worse than being compensated solely by the person's own sense of satisfaction.

Pecuniary gains and non-pecuniary gains both make people better off; the distinction is meaningless for this argument.

Why Dudes Become Ladies

Deirdre McCloskey is a wonderful economist, focusing on rhetoric (something we do need work on). Most interested in economics know that much. Slightly fewer people know that Deirdre was born Donald and underwent a sex change operation in the 1990s.

I was talking about this to a friend of mine yesterday who did not know this fascinating piece of economic trivia and we stumbled upon the question of what factors (besides the obvious) determine if a person engages in this expensive and life-altering surgery.

Donald, I pointed out, used to be a burly Scotish man. The last person you would except to become a woman. (And to my surprise, the transition went very well: pictures here).

But I remember watching TLC once and they had a thing about sex changes--some turn out to be very bad (person looks like a man in a woman's body) while others were so great the girl became a stripper.

I naturally starting thinking about what physical attributes might make the man-to-woman transition easier and see if it's a predictor. Height would be a big factor. Bone structure, too (but that's harder to measure). I'm not really familar enough with the procedure to guess beyond those.

So if we assume that the deep urge/feeling to become a woman is randomly distributed among the population we could check if the average height of transformed women is lower than the average height of men (though there may be a confounding factor there). We could also see if there's a correlation between the average height of a country and the percent of the men that undergo the procedure (though again there are confounding factors).

Hmmmm. Maybe I'll change my dissertation plans.

Check Out That Alpenglow

I'm having a dictionary thing lately.

Today's word of the day from dictionary.com is alpenglow. It means:

"A reddish glow seen near sunset or sunrise on the summits of mountains."

Note that's not any glow--only reddish ones--and it's not on the horizon of just any landscape--only mountain summits. The word comes from German words meaning "glowing Alps."

There's something to be said about the economics of language. Spontaneous order. Creative destruction. Technological development. Cultural evolution. Signs of wealth and poverty. If I was a language person, I would use foreign vocabularies to estimate the economic strength of the corresponding regions. But I have trouble with English as it is.

Anyone wanna test Cowen's Second Law (there's a literature on everything)?

When Black Is White

Today's word of the day from dictionary.com is virago. It has two meanings.

1. A woman of extraordinary stature, strength, and courage.
2. A woman regarded as loud, scolding, ill-tempered, quarrelsome, or overbearing.

"Virago" gets the reward for the most ambiguous word in the world.

Fads and Fortunes

While re-reading Fischer Black's Noise, I was reminded of his theory of business cycles: economics downturns are due to firms poorly estimating what people want. When this mismatching occurs at a great scale, recession hits.

Tyler Cowen isn't much of a fan of this theory; by the law of large numbers, the successes should cancel out the failures. I've argued this point with him, saying that the LLN only works if the agents are independent. It makes sense that they are not--entreprenuers don't live in vacuums. He reasonably asked, "What sort of connection between all these agents is so strong that it could intitate such a downturn?" To that I had no answer.

I still don't have one per se, but I just thought about the other side of the equation.

The LLN argument only works if both the firms and the consumers are independent. I may not be able to nail down a common link between firms but cultural exchange is something consumers do in abundence. Personally, I've been introduced to (and in some cases became obsessed with) restaurants, televison shows, movies, music, games, books, food, clothes and so forth. I've also shared most of these new wonders with others.

These sort of information linkage mechanisms create crowding around a particular good or service which leaves average or unadvertised alternatives without a market. Because Mike introduced me to Firefly, I spend time and money on it; a void is filled that I might have filled with some other substitute. Ideas that would have been consumed or supported are crowded out by more popular ones. Failure occurs; money is wasted. Fads (fashionable products that are later abandoned) aggrevate the downturn because these once-popular goods fail (thus any resources spent on expanding the line are also wasted).

This could help explain why the business failure rate for fashionable products (clothes, restaurants, television shows) is so much higher than industrial products (to which popularity plays less of a role). As someone who wrote a guide on dining in the DC area, this is an argument I'm sure Prof. Cowen can at least appreciate.

Finding Dollar

Tyler Cowen's suggestion that for our upcoming macro test, we study "every waking hour" is proving to be actually kind of fun (thus far). One thing it got me doing is looking up stuff I've always meant to look up.

At the top of that list are non-US countries that use the dollar for their local currency. Whenever I get in a dicussion about why the trade deficit doesn't matter (because countries can't spend our money domestically, thus it ends up back here), these exceptions always enter the conversation. Now I finally have memorized which ones they are.

-East Timor
-Ecuador
-Marshall Islands
-Palau
-Federated States of Micronesia
-Northern Mariana Islands
-El Salvador
-Lebanon (Lebanon also has the Lebanonese pound which is used interchangably with the dollar at a rate currently pegged 1500 to one.)

All countries that have an extremely mild (except Ecuador which I count as "very mild") impact on the global economy.

First Look at RBC

In studying for my macro exam Monday, I've decided to summarize some macroeconomic theories for this next week of blog postings (as well as be active on Wikipedia).

Most of the theories we've encountered pertain to the business cycle. Ideally, a business cycle model exhibits three key ideas: it's persistent over time, sectors of the economy move together and there are changes in the labor supply. Because real business cycle theory does best with these, it is most popular.

Of course that doesn't mean it's very accurate. RBC, developed by Robert Lucas, Finn Kydland and Edward Prescott, is deeply rooted in rational expectations and independent of money supply. Indeed, people do not make mistakes in this economic model; downturns happen with productivity shocks. As people adjust to productivity shocks, the economy recovers. Thus all changes are exogenous.

I think that last point is one of the weakest points of RBC. All changes are exogenous? If all shocks are exogenous, then where does technology come from? Does that mean that people who are working on new technology are not included? Or just those technology-pursuing activities? But shouldn't they be included because it's rational to pursue technology? Technology shocks are both endogenous and exogenous in RBC; it can't be both.

There are other problems, mostly labor related. It also has zero predictive power; what counts as a "productivity shock?" How do you weight shocks against each other? How long does a shock last?

Yet it's still the mainstream theory. Go figure.

The World Wide Way?

Today I discovered the Global : Ideas : Bank, a website dedicated to posting users' random ideas for the world to see and discuss.

I was almost going to put it aside and sign up later (so I could comment) when I saw this entry (safe to say I signed up soon after):

The Problem:
Most of the time when we are surfing internet, we face the problem of find the information we need(What we are looking for).
The Social Invention:
A standard layout for website should be created which enforce the new website development to follow that standard layout. I than way [I think this way (?)] we will alway find the information more quickly and without any sort of hasle of search again and again.

Also some sort of engine can be develop which shows the information on the web site in a consist manner (Embebed with the internet browser). [sic]

Very fitting that just minutes before I had re-read The Idea Trap.

The End of Serenity?

Tyler Cowen cited briefly why he doesn't expect a Serenity sequel: low box office. Since its release date (September 30, 2005), Serenity's total box office sales are $22.1 million domestic, $3.6 overseas. That's a $25.7 million revenue versus a $39 million production costs.

These numbers, however, are not perfect as they don't include earnings from preview screenings, and there was a lot of them. Too many, in my opinion; Mike, for example, saw the movie twice before it was even released. Combine this with the low rewatching value (thanks to the death of a certain character), I'm sadly not surprised by the numbers.

Presumably, the powers that be are including preview revenues and Joss will point out the (hopefully) strong DVD sales, but I'm not optimistic.

The Power of All of Them

North Dakota may be one of the first of a growing pool of states that will require licenses for selling on eBay.

According to this CNN article, "applicants must pay a $35 fee, obtain a $5,000 surety bond and undergo training at one of eight approved auction schools, where the curriculum includes talking really fast."

Thank God most people have at least half a brain; most of the slashdot comments recognized the stupidity of the law in all its forms.

But they overplayed the harm it does to the small businesses that use eBay as a forum for sales. Yes, the auctioneer schools benefit. Yes, the state benefits. But in the long run, the businesses benefit because it will make their competition (non-firms selling on eBay) virutally non-existent. Granted, this plan only works if most other states adopt similar rules.

I'm also constantly puzzled as to if people think some behavior is a good thing, why there needs to be a law that requires people to act certain ways. "Gordon Krance, president of the North Dakota Auctioneers Association, said the group has no position on whether people who are paid to sell others' goods on eBay should have an auctioneer's license. But he said sellers could benefit from attending auctioneering school."

If they'd benifit, then why do you need to force them to go?

Hat tip to Mike for the link.

Cost and Costlessness

Not more than a minute ago as I walked up the stairs to the office, a guy clearly from some student organization offered me a free T-Shirt. Barely thinking, I turned him down.

No doubt this was not his first rejection in this matter and I'm sure on several occasions he and his peers mused as to why anyone would refuse anything that's free.

Beyond the fact that I didn't know what organization was or what the shirt said (it was drapped over his sweaty shoulder, which was probably another reason I refused so quickly), I can think of several reasons why people would turn down free things, all of them related to non-pecuniary costs. For your benefit, sweaty guy, here they are.

1. I still have to carry the shirt. Granted shirts don't weigh a lot but space in my bag is limited.

2. I have to store it somewhere. Again, my dresser isn't that full but it's not so empty I won't have to move it out of the way of quality clothing.

3. If the shirt said something I didn't care for ("Fair Trade Now," "Rush X Faternity" or "I did your mom last night"), I get disutility from not only having it but from having touched it or even knowing it exists.

4. This goes double if someone I know saw me accept the tainted item.

5. Often accepting a zero-priced item includes an annoying rant about how great Y organization is and how I should join or otherwise support them. Sort of like telemarketers but harder to hang up on.

6. They weren't operating from one of the school's kiosks, thus making their organization all the more shady.

7. While the length of time is small, I could be doing something else when I'm grabing the shirt and finding a place to put it.

TANSTAAFL.

Who Hid the Master Plans?

Government can be surprisingly uncoordinated (even for government). In Alaska, they built a road to nowhere. In Arizona, a new school's short a road. Sounds like someone wrote the wrong state abbreviation somewhere...

Greatest Wikipedia Page Ever

There are over 450,000 Wikipedians. It only takes two to have a lame war.

Pondering Walter Williams: Price of Life

For our micro class, Prof. Walter Williams created a list of questions for us to ponder over the course of the semester. With our first test looming, I broke out the packet and came across this particularly interesting one:

30. a) Is life priceless? What evidence can you offer to support your contention?

My short answer is "No, because people die."

Granted, this is a little simplistic; sometimes people would pay anything to save someone but they can't because of natural or legal barriers. So my slightly longer answer is "No, because life-sustaining goods cost a finite amount."

Food, for example, costs a measurable number, even the healthy stuff. If life was priceless, then food would cost a great deal more. Indeed, nothing is priceless. When I went to the Natural History Museum and saw the Hope Diamond, I overheard a guard responding to a woman's question of the object's worth. "It's priceless," he said.

But we know the government doesn't think the diamond is priceless because if it did, they wouldn't risk showing it to the public; they would keep it hidden at all times to make it that much harder for thieves and revolutionaries. Similarly, if human life was priceless, we'd never risk leaving our homes and be 100% risk averse. We clearly are not so careful.

Crimminally Poor

Tonight, Bill Maher talked to Ann Coulter, author of such conversation-elevating books like How To Talk To a Liberal (If You Must) and Treason: Liberal Treachery from the Cold War to the War on Terrorism. She said a lot of crazy things but the one that really stuck out for me is when she said crime and poverty were unrelated.

Few variables better correlate with crime; the research I've done on this matter suggests that poverty explains about 20% of the crime rate. Poverty was my best predictor (also checked execution laws, unemployment and education).

The two certainly makes sense; poor people have less to lose (for the case of robberies) and more to escape from (for the case of drug "crimes"). Some of them even have loads of free time. You could probably make the case that there's a confounding variable that's causing them both, but such are hard to come by. Both factors are pretty fundamental. Besides, that doesn't mean they are unrelated. A simple regression shows there's some kind of connection between the two, even in the unlikely event that it's an indirect relation.

I guess acknowledging a role of poverty bars Coulter from directly blaming yet another one of societies ills on liberals.

What's In a Name?

A few weeks ago, Prof. Williams opened our micro class with one of his random economic thoughts: do you own your reputation? Before you say "of course," ask yourself if you own other people's opinions about you as that's all a reputation is.

The concept is a little strange to wrap your head around because your actions strongly influence others' thoughts. When Tom Cruise acted like an arrogant prick with the Today Show's Matt Lauer a few months ago, the vast majority of the population started thinking of him as an arrogant prick. But that does not mean you own your reputation; if you did, no reputation would go bad. You can only influence it; the effects are ultimately determined by the minds of others.

Similarly, I ask "Do you know your name?" Before you shout back, "Of course, it's MY name!" recall that it's also YOUR reputation; if sementics were a determinant of ownership, I would own my parents. Anyone that's ever been to my house would know that is not the case.

A name is nothing more than a way for others to identify you. The only time you use your own name is to signal to people who you are. Just like repuation, you can influence what you are called, but the result isn't up to you. When P. Diddy renamed himself Diddy for the absurd reason that "the P was getting in the way" of his fans, we all went along with it. We chose to call him Diddy. Why should he own what other people choose to call him?

For contrast, suppose Castro wanted everyone to call him "His Holiness." Or if Mr. Bush declared his new name to be "Gandhi." I can't see society going along with it. You name is your name because that's what everyone chooses to call you. They just happen to call you the same thing.

I Speak, You Speak, We All Speak

Stumbled on this page about modern newspeak. My favorite entry:

Jungle - Replaced by Rainforest. A Rainforest is a happy place where Disney characters dance and sing ... a jungle is a scary place with lions, tigers, malaria and natives that want to cut off your head and boil it for dinner... who in their right mind would want to save that!?! (Original Emphasis)

What Would Julian Simon Say If He Saw Serenity?

He would cry, probably. At least at the beginning. Serenity, based on the cult-hit series Firefly, opens with a teacher telling the history their civilization. The story is Earth runs out of resources and the everyone travels to a new solar system to put down roots.

But Julian Simon points out that we'll never run out of resources. As raw inputs become more expensive, it becomes economical to develop alternatives. This has been the history of human civilization. And why doomsayers have claimed that we will run out of everything from food to flint, they have always been wrong.

But Simon isn't completely right. We won't have to abandon a resource-dry earth no matter what because his theory is contingent on free minds in a free society. If government controls resources (as it did in the USSR and as the US continues to do more of) we really could run out of resources. That is the great craziness of the doomsayers: they become right if we follow their advice.

Watch An Order Emerge

I love organization. I like putting things in their place and creating a framework to work in. But it's a bitch to implement and maintain. There's always exceptions, there's always new places to put more of the same thing. Thank God for wikis.

Wikis are web sites made up of pages than anyone can change, including pages for organization. Wikipedia, the world's largest encyclopedia, is easily the most famous of these sites. But few people know you can make your own wikis for any topic you'd like at wikicities. Currently there are over 500 wikis on wikicities.

After a long trial, I was finally able to launch my own wiki for the World of Darkness. (It's actually very easy to make a wikicity wiki; I ran into some trouble because I wasn't the only one to make a wiki for this.) The World of Darkness is a game series created by White Wolf publishing; my wiki is for fans to published their own ideas genre.

Today is the Wiki's first official day (I posted its existence on various forums early this morning) and already we see order emerge. All I did was advertise it a bit and establish a basic framework (mostly through example). Slowly I'm seeing people fill the holes I left as they contribute. To witness this world evolve, check out its recent changes page. (AtLastAwake is me.)

There is a lesson here that cannot be understated: wikis are economies in their own right. Motivation is generated not by the profit from a job well done, but the prestige from your fellows and the satisfaction of creation. There's no private property, but there's no scarcity either (granted there is some scarcity, but such exceptions have very close substitutes). I think one of the reasons people don't appreciate the beauty of spontaneous is that they can't witness order emerge from on high. Wikis, at least, are a close substitute.

Current Number of Unused Gmail Invites

48. If you want one, let me know.

Defending the Tyrants

Mike sent me this link to a commentary by Tina Rosenberg about China's role in the internet for its citizens.

Its immense, compulsive, authoritarian role.

Because the country's such a powerful potential market, many companies (Microsoft, Yahoo, etc) are setting aside basic rights and ethics in order to stay in the market. For example, the government asked them to reveal names of those reporting on stuff they don't want reports on. One such person (Shi Tao)--who used a Yahoo e-mail account to e-mail a story to a friend--now sits in jail.

No doubt these companies are doing crappy things, but are they the root cause? Rosenberg thinks so: "It was the force of capitalist profits, not Communist law, that compelled Yahoo to hand over Shi Tao."

What? Let's read that again.

"It was the force of capitalist profits, not Communist law, that compelled Yahoo to hand over Shi Tao."

That's right; she's blaming the companies, not the government, for putting an innocent woman in jail. It's the government that's to blame. In the heavily competitive world of a globalized economy, a company's long term future's at stake if they don't get in on the big markets. I'm not defending what they did, just explaining why they did. The Communist Party, however, has no excuse and they are the ultimate cause.

The claim gets even more inaccurate when you understand what capitalism means:

an economic system in which all or most of the means of production are privately owned and operated, and where investment and the production, distribution and prices of commodities (goods and services) are determined by the influence of supply and demand in a market, rather than by the state or the collective [Emphasis added]

Thus when the government tells private citizens how to run their company, that portion of the product (in this case privacy) isn't really capitialism.

Rosenburg is making the classic mistake of equating the pursuit of profits with free market economics. It's sloppy and she should be ashamed of the Orwellian government she implictly defended.

It's Almost As If Climate Is a Dynamic System

Jason at Productivity Shock did some research about hurricane activity over the past seventy years. The downward trend from the 60s to the 90s is most telling.

Note that in the original data, even the 60s didn't have two close together, suggesting why we are having an "epidemic" all of a sudden. Some one should tell climatologists that one decade does not indicate a trend.

What I'd really like to see is data for all hurricanes. But so far that search is not yielding data...

Full Nelson

The sheer plethora of ways economic idiocy manifests is astonding. Consider Willie Nelson's appearence on Real Time with Bill Maher.

According to Prof. Nelson, the key to any economy is their production of raw materials: food, oil, coal, and so on. To ensure the existence of these industries, government must fund them; the more taxpayer money they get, the better off we all are. Nelson goes so far as expressing anger that "only" 60%-70% of our farmers' income comes from taxpayer money.

It's a load of crap, but not an unfamiliar load. Nearly every yahoo who thinks they understand the economy points to one key industry that makes "the whole thing work." Some praise the holy tech sector. Some idolize Manufacturing. Some bow down to the Almighties of finance and savings. Willie worships the God-like power of raw materials.

To be sure, raw materials are important, but they are not everything. Gas is useless without the tankers to transport it. Food won't do a lot for someone who has cancer. Coal mines need phones to communicate with power plants. It's all connected; artifically bloating one sector puts strains on all the others without adding anything.

The key is that everything has costs. Unneeded farmers don't stare into the abyss; they do something else, filling in gaps that previously existed. Giving them a reason to do otherwise not only pulls them away from a valuable function, it puts resources (people, time, money) into something we don't need. And we don't need more food.

When The Pen Picks Up The Sword

Guilds rarely work well with freedom. Concentrated power leads to pride and with it a desire to undertake zero-sum games. I recently learned of the growing legal battle between the Authors Guild and Google Print. Here's the e-mail I sent to the Guild:

Dear Authors Guild,

I was very surprised to read your press release concerning your recent legal action against Google Print. Your claims are misleading and inaccurate. For example, you say "Google is reproducing works still under the protection of copyright [which is] a plain and brazen violation of copyright law." That's not true. Reproduction of copyrighted material is perfectly legal under many circumstances, including excerpts. This exactly how the company publishes such material barring expressed permission from the author. You should be happy Google is making it easier for people to access the written word; real writers want their works read. Instead, you are betraying the craft by attempting to extinguish the free flow of information.

As an aspiring author and an avid reader myself, I want to let you know that I will never join your organization because of this disgraceful stunt. Whenever I consider purchasing a book, I will reference your site and firmly boycott any publication devised by one of your members. I will pass on this advice to my fellow Ph.D. students and I am certain many will follow my lead.

Your actions make me ashamed to be a writer.

Sincerely,
David Youngberg

I, of course, sent it using my gmail account.

To Anyone Who Thinks Companies Don't Care About Safety

Look at Jet Blue. Today they were on the news because one of their plane's couldn't land right and their stock plummented. Then we hear there are no deaths--not even injuries--and survivors praising the pliots and stewardesses for their competence. Their stock gains back all its loss.

Even if Jet Blue was careful just to keep its stocks strong, so what? I'd take assertive self-interest over complacent altruism any day of the week (and I'm looking at you, FEMA).

Why the NYT Won't Shut Me Down

Citing cuts at the New York Times, in part due to internet and blog-related substitutes which crowd out their circulation, CF wondered what would happen if newspapermen started behaving like lobbyists, constructing barriers to entry. She proposed two tactics newspapers could employ: promoting a fee for spreading information or endorsing a sort of licensing for publications.

The lobbyist logic is sound but I doubt we'll see either of those problems any time in the near future for three reasons.

1) Publications benefit from blogs just as they are harmed from them. Let us never forget that journalists have gotten pretty damn lazy over the decades; removing blogs would deny them one of their prime sources for information.

2) Newspapers aren't stupid and surely many are aware that these rules would be impossible to police. Like CF, I could re-create the blog and e-mail under an assumed name. Charging me would become impossible as would shaking me down for a license.

3) For as long as the First Amendment's been around, newspapers have been citing it as a hallmark of freedom and democracy (and to defend their industry). In way they are now victims of their own success; if they start screaming information should be controlled, the bullshit will be clear even to the public.

Of course in the long run, any or all of these could fall to the wayside. But for now, let's enjoy it while it lasts and not worry.

Fake News Gets More Fake

Let me start by saying I love the Daily Show. It's funny, it's insight and it's smart.

But sometimes it's not so smart; take last night's piece by new correspondent Dan Bakkedahl on "Bumvertising."

What the hell's bumvertising you ask? Developed by Benjamin Rogovy, bumvertising involves renting the space below the signs homeless people hold on street corners. Just under the "Will work for food" on cardboard, you'd see a glossy, green poster with "PokerFaceBook.com: Meet players, find games, get connected."

The ads work--PokerFaceBook's sign ups noticably increased with bumvertising--and since it's not much more work for the homeless, they gladly accept the three-dollars-a-shift pay. Rogovy even thinks there may be spillover benefits. "Bums will incur higher revenues from donations after showing the initiative to seek out semi-legitimate employment. Many of the vagabonds of PokerFaceBook.com's Bumvertising campaign remark that they are receiving more comments and questions than ever."

The new guy had a problem with this. He brought on some kind of homeless advocate to attack the idea of the destitute working for the money that goes in their pockets. He found it "exploitive" and not what they needed. With a mixture of seriousness and humor, Bakkedahl called the process "sucking the blood of the poor." (Granted, I'm paraphrasing, but it was something to that extent.)

What amazes me is that the homeless advocates clearly don't know what the homeless want. If it was degrading and evil, then why are the poor participating? If it is so horrible for them to do it, why are they doing it? Don't we want the poorest people to get jobs and contribute to society? Isn't this better than simply begging?

That's a "No" to Bakkedahl and the other guy (yeah, I can't remember the pro-homeless guy's name). They think the homeless are too stupid to make their own decisions. They think everyone else should give out of pity. How degrading.

RSS Feed

An inquiring mind wanted to know why we don't have an RSS feed. The short answer was, "wtf?" The longer answer is "I have no idea what that is." I think I know now: a way to be included in a single page people go to in order to read all the new articles of their list of blogs.

Or something like that.

Anyway, I signed us up and our feed is http://feeds.feedburner.com/ LawLegislationAndLunacy

Thanks to Jaka for the help.

My Shoes Fit Fine

I decided a while ago that my disseration for getting my PhD will involve the Ansari X-Prize as a model for technological growth. I don't plan as of yet to stray from this path but my relatively recent interest in Wikipedia has called into question my chosen path.

One of the core questions is "How do economists decribe phenomena that were once only available as a profit-making opportunity for a firm now made available through a free, decentralized spontaneous order?" Examples include file sharing, Wikipedia and Slashdot--all done by no one individual and all individuals who do it, do it for free.

Well, a Yale law professor beat us to the answer: he calls it peer production.

What a great name, because that's exactly what it is. Equals working together and taking on roles firms once did, producing what firms once produced. But you can tell Yochai Benkler isn't up on his economics, saying "it's an uncomfortable shoe for economists."

Not so. Just because it's done for free doesn't mean economists have trouble working with it. In fact, a lot of this stuff falls under the category of non-rivalrous. My consumption of Wikipedia doesn't prevent you from looking something up (sort of...Wikipedia's having bandwidth trouble due to its popularity but that scarcity is nothing compared to, say, buying a book). If I copy a music file from you, others still can, too. Technology has allowed this non-rivalry to propser on a level unlike ever before. Extra demand costs practically nothing.

The other piece of peer production includes supply items that aren't that scarce. Most people like to talk about stuff they know, thus they are willing to write for free on Wikipedia. When my computer isn't using a big chunk of its computing power, I'm fine with other people using it in the form of SETI or Skype Technologies. There's no cost (indeed, sometimes there are benefits) from producing.

The same can be said of air. For all practical purposes, air is non-rivalrous--when I enter a room you are in, you don't start gasping. It's also plentiful, produced freely by plants in abundent quantities. Thus, it's no wonder we don't pay for air. (Technically, all you need is a lack of scarcity to eliminate prices but I include non-rivalry because it really makes the abundance happen. I may like writing blog articles about economics, but I wouldn't want to write the same thing over and over again, each for a different reader.)

Peer production is a fantastic name for the many free services the Internet is providing. But it's not so new economists have to go back to the drawing board.

EDIT: I was recently informed that Slashdot writers get paid for their services. Thanks to the ever alert Mike for the heads up.

With A Snap of My Finger....

Willie L Brown Jr., former Mayor of San Fransisco, did an amazing thing tonight on Real Time with Bill Maher. He solved the poverty problem.

"If the poor people of this country," he said (and I'm paraphrasing here), "had the same resources as the corporations and Haliburtons of this country, they would not be where they are today."

No shit. If poor people had billions of dollars at their fingertips, they wouldn't be poor anymore. And if we could create money by snapping fingers, that would be a reasonable plan. But it's just a pipedream. In the real world, prosperity doesn't come from altruism. The pie doesn't get bigger because some gave their money to others. Economic pies grow when people create more; not when they are given more.

Thus the good news. The nation's down-trodden have a long list of institutional advantages that most of history's poor never had. A stable, peaceful government. Well defined private property. Easy access to employment. Easy access to entreprenuial activities. Freedom of movement (from neighborhood to neighborhood, region to region). Freedom of association. Freedom of speech. Freedom of religion. All of these translate into profit making opportunities (some more than others).

Immigrants understand this well. Most poor Americans don't, not because of their race or because they're stupid, but because they get welfare. Let's not kid ourselves; work is hard--that's why they call it work--and while there are many that take that money to move out of welfare, many others don't. That's what happens when you pay people not to do something they don't want to do.

I would like to believe, like Brown surely does, that we could pull the poor out of poverty with a snap. But Q is just a Star Trek character and despite what some may tell you, he's not real. Pretending that he is doesn't make the poor better off; it does them a disservice by telling them they are victims, not masters of their future.

Roll For Delaying Your Action

Somehow I doubt that when I get married, my wife won't accept a conditional gift on our anniversary.

But that's exactly what President Bush gave the world when he addressed the UN on their 60th anniversary yesterday. When I first read it, I was so excited. "The United States is ready to eliminate all tariffs, subsidies and other barriers to free flow of goods and services..."

Then I read the condition. "...as other nations do the same."

What a load of crap. We all know damn well that one country taking the initiative on that would be astounding. A whole region, a miracle. But everyone has to do it and they all have to do it at the same time? That's like Bill Gates saying he'll give all his money away on the condition that everyone in the world runs naked through the streets on a common day. It's what you say as a sarcastic joke. "Oh yeah, I'll eliminate all tariffs; when the rest of the world does, too!"

Take the initiative, George. Show world leaders that their economy won't collaspe if they eliminate their precious subsidies. Stick your neck out and set the example; that's what good leaders do. Don't hide behind a condition you know will never happen.

Please forgive the dorkiness of the title; I just couldn't resist.

Technology Is Fruit

Daniel Drezner's concerned; the OECD released it's education report today and the US education system in science and math, well, sucks compared to other countries.

In science and math, the U.S. is ahead of only the really poor OECD countries -- Turkey, Mexico, etc. So yes, there is reason to worry.

Worry about what? If Dan has anything in common with Thomas Friedman, he's concerned about technology loss.

Theory is if Americans don't invent the "next big thing," we'll lag behind the rest of the world. In order for us to benefit from technology we have to create/own it. That's akine to thinking that if oranges aren't grown in the US, we won't get them.

The key is trade. It doesn't matter what nationality owns technology (though it does matter for government, but that's another story); it only matters if there's free trade. Suppose Korea invents the flying car and we don't. Does that mean we don't get the benefits of them? Not if there are few barriers to trade. And if we get the benefits, who cares who owns what? Do bananas stop being bananas if they are grown on foreign soil? Of course not.

Trade, of course, requires that we have something to give up in return, but that thing could be anything the Koreans marginally value more than we do. It could be art or McDonald's or Google ads. As long as we are free to trade, relax and stop scaring everyone!

A Negative Times A Negative Is A Positive

Sometimes government ineptitude can be a good thing.

Last month I mentioned that Hawaii will be issuing price caps on the wholesale oil. I vowed to keep track of the prices and luckily I found a site that did that for me quite nicely.

After Katrina hit, I noticed something strange. Go there right now and look at the chart. Compare Hawaii's prices with the national average; notice that they don't skyrocket as the mean does even though the law went into affect the first of September. Also notice that while the price of oil does go up, it quickly goes back down. Strange because the economics suggest prices should be leaping.

Then I noticed this article. Here's a telling line: "The governor admits she's not sure the gas cap is forcing up prices because the companies are keeping their wholesale prices secret."

That's right. The goverment was able to create a law telling companies what to charge, but they have no way of knowing if the law is being followed. Thank God they are staying busy pushing string--means they can't do real harm.

Market Object Lessons

About three weeks ago, on my first day in Washington, a pick-up truck smashed into my parked car while I was looking at an apartment. I got the license plate, writing it down after begging some kids returning from school for a pencil, and contacted the police.

After they did some heavy police work (looked up the plates, contacted the house) they discovered that some unlicensed kid took his mom's car out for a wild ride that Sunday. I talked to the mom--who was very nice--and we decided not to contact the insurance agency. She didn't want to deal with the higher rates and would pay for the repairs; I didn't want to operate on the insurance company's schedule. Thus we settle a different way. This is what we call a substitute. To those that think people have to get insurance, remember that.

While I waited for the parts to come in, three different strangers offered to fix the damage. Even though the mother found a place to get it fixed, I have to appreciate how the market steps in just in case I didn't get the plate. Soon I will need to make a trip to the DMV. Somehow I imagine that if I wore a shirt that said "I need to get a Virginia license and registration," government workers wouldn't be offering to set up an appointment while I'm getting gas.

Currently my car is being repaired and I am discovering how much I hate taking the bus.

How Black Society Hurts Black Society

Everyday we encounter random laws that make us stop and ask, what the hell were bureacrats thinking? Today was no exception because I learned about a Virginia adoption law (which my source says is a common in other states) that says adopted kids have to racially match with their adopted parents. Thus white kids can only be adopted by white parents and black kids by black parents.

Before you claim that the KKK is far more powerful in modern society than anyone thought, understand that white people didn't advocate the law; black people did. Or more specifically, the National Association of Black Social Workers who advocated the creation of the law in early 1970s. The NABSW continues to support the policy as they stress "placing children of African ancestry with relatives or unrelated families of the same face and culture for adoption" despite the estimated 222,000 African-American foster children living today.

The claim is culture; black people have their culture, white people have theirs and NABSW would be damned if it let the two mix. But culture is a living thing and it is not up to the NABSW to say what changes and how. Moreover, they are harming black culture; foster children who hit the 18-year-old mark are thrown out in the cold world without a dime to their name. I guarentee you they don't become doctors. Out of neccessity, gangsters and low-wage workers I would bet are the most common career choices. The culture the NABSW is trying to defend is very one most foster African Americans probably don't want; they are hurting the people they are trying to protect. It's shameful; shameful and selfish.

Justice, Inc.

I was reading the Tyler/Alan e-mail exchange on slate.com concering Barbara Ehrenreich's new book Bait and Switch. Then something Alan wrote popped out: "I know no corporations interested in spreading justice."

How about all of them? On an everyday level, companies want to those that steal from them to be punished. That spreads justice. They want anyone that backs out of a contract to pay for it; that spreads justice. If the mafia (or similar organization) threatened them with violence to extort payment, they'd demand the extorters are arrested. That spreads justice. (This is why Tony Soprano doesn't have a lot of Manhattan business.)

On a more general level, companies want a safe society. Communities that are prone to theft, war, murder, lying and corruption (directed at the company or not) are not good places to run businesses. Certainly there are firms that do nasty stuff with the institutions that protect them, but that unfortunate activity shadows in comparison to the benefits they gain through an evenly weighted legal system. Spreading justice increases the number of places companies can operate safely and profitably.

To say that corporations aren't concerned about spreading justice is the same as saying drivers aren't interested in building roads.

Woot!

As of Tuesday, September 6, 2005 at 11:50am, I am a PhD student at GMU, having transfered from the master's. This is what happens when you pester the right people enough.

Let's Take a Trip!

The administration spin machine must have been asleep when the Red Cross posted this answer for why they weren't in New Orleans:

The state Homeland Security Department had requested--and continues to request--that the American Red Cross not come back into New Orleans following the hurricane. Our presence would keep people from evacuating and encourage others to come into the city.

Yeah if I knew that some people were giving out drinking water in a flooded, soon to be disease-infested hell hole, I'd be first in line.

Unscientific Method

Tonight on Real Time with Bill Maher, Bill talked to climatologist Stephan Schneider via satillete and they discussed how Hurricane Katrina was beefed up by global warming.

The logic seemed sound--more heat means bigger storms--but they made the rather hasty jump from global warming was akine to steriods for the hurricane to the human race was the steriods. In other words, we're causing the heat.

Consider this:

1) Understanding climatology cannot use controlled experiments because there's no control. We only have one planet to work off; we can't burn fossil fuels on one and not on the other and then see what happens.

2) Understanding climatology is incomplete. It's a huge, dynamic system with countless elements that top scientists have acknowledged they don't understand.

3) Climatologist generally agree that burning fossil fuels are causing global warming.

I can understand suspicious or potential avenues of inquiry or even red flags. But if you can't figure out how the world works, either through inductive reasoning (number one) or deductive reasoning (number two), then you can't claim to have a scientific conclusion.

Wikipedia Game

1. Pick a random nonfiction book off your shelf (fiction could an easier version of the game; I'm not sure).

2. Flip to a random page.

3. Choose a word/term from the page that is (a) a proper noun (b) a period-specific term or (c) a disicipline-specific term.

4. Look up said word/phrase/term on Wikipedia.

Five points if you get a stub.
Ten points if the article doesn't exist.
Fifteen points if the article doesn't exist and you create it.

You get ten things to look up.

I have no idea how hard this game is but some test entries suggest it'll be pretty difficult.

General Theory of Discovery

There are lots of things people acknowledge government shouldn't fund. Successful companies. Hitler monuments. Gigli II. Uh....

Ok so that's about where it stops.

But of all things one group or another demands we drop, pure research is something that's hard to defend cutting because it's benefits are so uncertain. Thus the NPR report I heard today that criticized Mr. Bush's recent budget cuts on NASA and the National Science Foundation.

The report opened with how pure theory of Einstein's general theory of relativity is used to make GPS work. The theory tells us that as stuff goes faster, time for that thing goes slower. Since GPS satellites orbit so quickly, they are equipped with special clocks that literaly use a different unit of time to keep in accordance with its terrestial customers. We never know how science will help us, the report concluded (and that is true), thus government has to fund science (here I have a problem).

Let us set aside the fact that Einstein didn't develop his theory at NASA or the NSF. Hell, he didn't even create it in America. The lecture was given in 1915, after he worked at the University of Zurich and the University of Prague. He didn't move to the US until the 1930s. (Even if we assume these are goverment-funded institutions (Zurich is; I'm not sure about Prague), many other universities of equal or greater prestige are not. Indeed, since private schools offer greater freedom, most universities prefer to go private, assuming they could get the funds.)

Government funded science simply isn't neccessary for a well functioning economy. Private firm innovation, X-Prize style contests and academic research easily fill the gap. And even if some great idea for some ungodly reason isn't realized because of a lack of government funding, that doesn't mean we won't benefit from it eventually.

Suppose Einstein really needed public money to develop the theory (maybe money becomes enchanted with some brain-enhancing invisible wave if it's taken as tax dollars). Decades later, the first GPS satellites go in orbit and the firms realize something is very strange. The times between here and space aren't in sink. After intense research and theorizing, they come upon Einstein's conclusion anyway. No public money spent. Necessity is the mother of invention.

Would it have taken longer? Sure would, but we wouldn't have had to fund all those projects that concluded really intersting stuff though wouldn't have a practical value for decades to come. And we could have used that money to make our world better today.

It's like when people say the $118 billion (2000 dollars) that NASA spent on the Apollo program was worth it until I point out that money probably could have been used to make huge leaps in fighting cancer.

Meals Without Design?

I just saw a very disturbing commercial.

It opens with a voice over telling a story about Ronald Regan and his take on evolution. It said that when he was president, he wanted to invite the leader of a communist government to the mansion for a great state dinner. At the end of the meal, after the sovereign praised the quality of the food, Regan would ask if the leader believed if there was a chef. The commercial shamelessly ends with "Evolution is a lie. Read the Bible."

Assuming the story is true, Regan would committing the fallacy of False Analogy. Ingredients are not autonomous agents seeking to make the perfect meal. They are merely matter (usually dead), uninterested in (and often incapable of) sacrificing themselves to feed others.

Prospering, however, is something all organisms are interested in doing. This common goal extends from the most basic of bacteria to human societies. Thus if Regan thought something as simple as a cook making a layer cake demonstrated nature cannot exist without God, then by logical extension the world economy needs a central planner to function properly. But Regan recognized that people pursuing their own self-interest can create a complex system without design. If only he recognized that ecology and eggs benedict were not the same thing.

Oil Five-O

On September 1, 2005 Hawaii will be the first state to impose gasoline price ceilings in an attempt to lower the state's higher than average gas prices.

When I first heard this story on NPR today, the economic commentator correctly pointed out that this will lead to shortages as people will want to buy more and sell less. But there are two interesting facets of the law that the commentator left out.

The first is that it's wholesale--not market--price that's capped. Thus it will be the gas stations that will bear the shortage and since they are free to set their prices, they will increase them to compensate for the lower supply. The law bent on making gas at the pump cheaper will make it more expensive.

The second little bit of info is that the government will adjust the cap weekly. Since they are trying to make it closer to the continental US, as the local market price goes up, the goverment will lower the wholesale cap, encouraging the market price to go yet higher.

I'm very interested in how this will play out over the next couple of months.

Represent!

Greetings from our nation's capital (or rather just outside it). I realized in my moving it's been a week since I last posted and I thought I'd take a few moments to use my cousin's housemate's computer to pass on something interesting I've noticed.

Every DC license plate has the words, "Taxation Without Representation." Note it doesn't say No Taxation Without Representation, as per the 200 year old slogan, but "Taxation Without Representation," as in homage to the old words and indicating such abuse is going on now.

Now I've known for a while that DC gets no Senators and no Representatives but I never knew that this was so much of an issue they would put it on their plates. But it is a big deal, and for good reason. The lack of representation for the very city that hosts the very congressmen from all over the country stinks of tyranny. DC wasn't even able to vote for president until 1963. The city's plates are one of the few things they can change without Congressional approval. (Again, the same Congress DC doesn't get any representation in.)

For the record, DC proper has a population of 553,523 (Wyoming has only 493,782) and an area of 177 km² (Vatican City has only .44 km²). So what's with the hypocracy?