Thoughts on man and his universe
Economics
On “Special Interests”
0It is truism today that “special interests” are to blame for economic problems and corruption. But “special interests” are only a symptom, not the cause of the disease.
In a populist democracy with a mixed economy, every group that participates in the political system is a “special interest”, with the incentive and the power to use the political system to extract benefits for its members at the at the expense of everyone else. Corporations, unions, disease-awareness organizations, “minority” groups, and anyone who organizes around a common cause has the power believes that their fate or cause is more legitimate, important, and “special” than that of everyone else.
The welfare and regulatory systems are the primary means to coercively redistribute property and confer monopoly benefits to various groups. In a mixed economy, everyone is constantly on the defensive against organized groups extracting benefits from him, and on the offensive attempting to use the coercive power of the state to extract benefits from others. Interventionism creates a vicious cycle hardly unique to corporations: first a lobby tries to extract special privileges from some politically neutral group, the group hires lobbyists to defend itself, and ends up using the influence it has gained to extract privileges at the expense of another neutral group, which must defend itself in turn.
The existence of “special interests” is just a symptom of the disease: the growth of government power to a degree that allows those in power to violate our rights and steal our property for the benefits of their constituents. Populist “maverick” politicians who claim that they will “fight special interests” and “change the culture in Washington” are just attempting to subvert the power of the state to favor their particular constituency. Campaign finance regulations are just monopoly privileges created by the political élite to hide corruption from the public and make it more difficult for those without political connections and money to get elected and in order to defend themselves or join in the looting.
The only solution to the problems caused by interventionism is to end interventionism – to separate government and economy. Take away the power of the government, and you will remove both the incentive and the power of the “special interests.” As long as governments try to control people and businesses with laws that go beyond the protection of property rights, the “special interests” will have the incentive to control governments.
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Are patents stifling innovation in mobile devices?
3In 2007, I wrote why software patents are not a good idea. It’s easy to find examples of patent abuse but its not often to find a company that uses patents that stifle a whole industry. Such may be the case with the Apple iPhone.
I purchased an iPhone shortly after it came out, because I recognized that it was a revolutionary device. It was not a case of superior specifications, as many devices have better hardware. It didn’t even run on the latest 3G network until the second generation. Rather, it was a superior design, which featured an intuitive user interface that did not try to compete on the number of features but on usability. Apple fully deserves the billions of dollars it has made and will go on to make from its device.
Yet something curious has happened. When Apple introduced the iPhone, those who recognized its revolutionary potential expected the innovations and design concepts it introduced to percolate to the rest of the industry. To an extent, that is happening, but key iPhone technologies -a capacitive touchscreen with multi-touch, a 3-axis accelerometer, proximity sensors, graphics acceleration integrated integrated into the UI, and a number of other key innovations have not been found in competing products. Part of the reason for this has to do with the particular culture and expertise found at Apple, but its indisputable than the 200+ patents covering the iPhone have gone a long way to discouraging competitors, who offer alternatives lacking key features – until now.
Palm, the company who created the first popular PDA is coming out with the Palm Pre, the first device to brazenly infringe many of the key iPhone patents. Apple is already making threatening gestures, so an apocalyptic legal battle is almost certain. Palm is the first company to go against Apple head on because its status as the one-time leader in the PDA and mobile phone market makes it the only company capable of challenging Apple’s leadership. While the Palm Pre clearly borrows ideas from the iPhone, the iPhone itself uses many of the innovations first patented by Palm as early as 1996. Today Palm is a marginalized has-been for whom the Pre is a desperate gamble to save to company, but it still has the patent portfolio of a market leader.
The question of who is the bigger infringer in this battle is besides the point. The issue is that the patent system is limiting innovation to large companies who have established sufficiently large patent portfolios to pose a credible threat of retaliatory patent lawsuits. The best that new competitors can hope for in this environment is to be aquired by the giants or to establish their own patent portfolios – rather than create products than people want to use.
more statist philosophy
13 years ago
in Economics
… In economic matters, most people, including most politicians, mainstream economists, and investors unconsciously follow Dewey’s philosophical principles: reality is ultimately driven by social consensus, and the success or failure of markets depends only on the optimism or pessimism of consumers and investors. This is more than the belief that wishes and prayers affect reality – this is a belief that one’s wishes are reality – if only enough people share the delusion.
(From What you need to know about the economic “crisis”)
Two more examples:
“As long as no one knows about it, the counterfeit money we print doesn’t really exist:”
“The Bank of England will be able to print extra money without having legally to declare it under new plans which will heighten fears that the Government will secretly pump extra cash into the economy.”
“As long as we ignore the problems in your economy, they won’t really affect us:”
“South Korea set a rare and controversial example over the weekend by arresting a popular blogger who was accused of undermining the financial markets [by correctly predicting economic downturns] but worshipped by many Koreans as an online guru.”
“The Anticapitalists: Barbarians at the Gate” – Larry Sechrest
13 years ago
in Economics
(You can skip to the lecture’s beginning at 5:40.)
By the way, the introductory quote is from Ayn Rand’s 1970 essay “The Comprachicos.” The text is:
Observe also the intensity, the austere, the unsmiling seriousness with which an infant watches the world around him. (If you ever find, in an adult, that degree of seriousness about reality, you will have found a great man.)
Do compact fluorescent lights really save energy?
34 years ago
in Economics
Earlier this month, Congress passed a law which will essentially force the public to switch to compact fluorescent lights. (CFLs) Environmentalists and light bulb makers joined forces to boost power and profits, and perhaps sue the competition out of existence.Some people object to the narrow light spectrum and toxic Mercury content of CFL lights, but I don’t care about those things. I have replaced most of the incandescent lights in my apartment, and plan to eventually replace the rest. What I question is not the usefulness of CFLs, but the premise that switching to them will “save energy.”
As with most goods and services, the price of a utility influences the quantity I am willing to pay for. When the price of gas doubles, I reconsider taking road trips, and try to be more efficient with my driving. Likewise, when the price of electricity falls, I am more liberal with my power consumption. Compact fluorescent lights lower the cost of lightning in two ways: they use one quarter of the energy, and they last ten times as long. These innovations encourage greater usage of lighting.
I have a spiffy IKEA lamp behind my couch, but because I don’t have a light in my ceiling fan, it needs to be extra bright. Furthermore, the geometry of my living room makes it annoying to walk behind the couch every day to turn it on. By switching to a compact fluorescent light, I was able to get a 100 watt equivalent light in a 60 watt socket, and thanks to its efficiency and long life, I just leave the light permanently on. I am enjoying greater convenience, but I don’t know if I am saving any energy.
If the average consumer’s monthly lightning budget is fixed, they might compensate for the higher efficiency and lifespan of CFLs by increasing their lightning usage to completely offset any energy reduction. This would be especially true if consumers are forced to switch to CFLs by legislators rather than a desire to save energy costs. Much as auto safety regulations can lead to reckless behavior, forcing consumers to switch to more efficient lights might actually increase their energy usage.
Real entrepreneurs don’t take bribes from the state
04 years ago
in Economics
The Israeli government is trying to lure back some of the hundreds of thousands of Israeli expatriates with “tax breaks, employment and small business loans.” The campaign is set to cost $36 million a year. Israeli politicians must realize on some level that their best and brightest citizens are leaving in growing numbers because their grant experiment in utopian socialism has turned out to be a total failure. What they failed to consider however, is that to the extent that the campaign is successful, it is will bring back the wrong kind of people: those who value a short-term bribe over freedom and entrepreneurship unhindered by the interventionist state.
Traffic Jams and Bread Lines
4On my daily drive to work, I am greeted by a crawling, sprawling traffic jam on the other side of the freeway. I can’t imagine what it must be like to spend an hour or more of one’s life every day in the ridiculous drudgery of a traffic jam – I would go insane if I had to get up at 5 am for the commute, like some of my coworkers. (Luckily, I was able to find an apartment that allows me to be at work in six minutes.)
The sight of thousands of victims inching forward in mind-numbing drudgery reminded me of a similar scene from my childhood in Soviet Ukraine. A few times a month, I would go visit my grandmother in the city, and we would spend a day buying groceries.
A day was necessary, because much of it was spent in line for bread, fish, or the rare “exotic” foods like plums or oranges. Once, we waited four hours for some dried figs, only to find that they had all been sold to the revered yet much-reviled war veterans. I remember someone yelling at the store vendors and accusing them of keeping some figs for themselves and of their apathy towards our fig-less plight. The vendors shouted curses back with the same enthusiasm. Their apathy was indeed obvious, though I would not realize why until many years later.
Why should have Soviet bureaucrats care about how long we had to wait for non-existent figs? Why should the bureaucrats in charge of the Dallas roads care about the lives squandered away in the daily commute?
I know who did care about our plight: the bazaar merchants who sold us chickens and potatoes. They were tough bargainers, but they were very interested in meeting the wants of their customers. The American supermarket is a bazaar on a grand scale, where I can not only find dried figs 24/7, but a dozen other fruits I have never heard of.
We trust entrepreneurs with our bread, so why don’t we trust them with our roads? To a politician, each traffic-plagued driver is a liability, to be appeased by a some highly visible but most likely useless project. How might an entrepreneur look at a traffic jam, if the State did not monopolize transportation?
To an entrepreneur, each tired and miserable driver is a goldmine, an income opportunity waiting to be exploited. The misery of the driver is an unmet need, a value waiting for the right mind to come along and provide it. The idea of a traffic jam would be obscene in a free market: millions of unsatisfied consumers are an irresistible magnet for the right investor.
Are our roads really as bad as Soviet bread lines? They certainly get far more funding (from money taken from more productive enterprises), but the incompetence can be staggering.
I tried to go the bike shop across town today, and ended up stuck in traffic. The lane on the right of me was a HOV lane. It was created by city politicians with good intentions, I’m sure, but since the vast majority of drivers ride alone, it only ends up constricting the lanes available for traffic. Once the volume of cars per lane reaches a critical mass, the traffic slows to a crawl. Do you think political pressure or a calculation by a traffic expert made that decision? Federal funding regulations require new city highways to dedicate an HOV lane, despite studies (from the very highway I was driving) that indicate “a 41-56 percent increase in injury accidents.” Does anyone care?
On the right side of the highway, several lanes on the left were closed for an accident earlier in the day. It had taken most of the day to clean up, and the roads were still closed several hours after the accident. A hundred thousand drivers were stuck in traffic, but who cares? Certainly the police in the cars blocking the road didn’t, and neither did the road workers. Why should they – they are stuck at work, so why should commuters get home any sooner? Maybe they were waiting for someone in dispatch to wake up, or perhaps they preferred to wait till traffic died down to drive home themselves.
By the time I made it to the bike shop, it had closed, so I stopped by to meet some friends at a sandwich place. It was getting late, and the waitress looked busy and tired from long day, but when I walked in, she walked over, smiled, and asked, “How can I help you?” Sure beats waiting in line for figs.
(Read more on how private roads could work.)
Private Roads
1I often hear arguments from skeptics of capitalism about roads being a “natural” monopoly, so I decided to write up a fictional account of how a private road system might function. Needless to say, this is just one potential scenario that markets might create. It is impossible to say what arrangement entrepreneurs would actually organize.
(more…)
0
8 years ago
in Economics
The lesson that we should draw from the results of the Telecommunications Act of 1996 is that efforts to partially privatize the industry are likely to retain those elements of regulations that benefit concentrated interests in business most.
If this point is not immediately evident to you, I highly recommend you read “The Question of the Cable Monopoly“
Yet another communist “utopia”
09 years ago
in Economics
Check out these Satellite photos of North Korean prison camps.
Then read this: Death, terror in N. Korea gulag.
Microsofts and standards compliance…
0Here is a quote from an email I sent out on the Brazos Valley Web Design listserv regarding Microsoft’s lack of compliance with the W3C standards:
I think that it’s helpful to realize that Microsoft’s browser is in effect a de-facto standard, which by overwhelming user preference is preferred over the W3C-compliant Mozilla. If you think of MS as the U.S. and W3C as the U.N., it’s easy to see that the “consensus” of a bunch of undemocratic, oppressive regimes is not any more valid that the individual judgment of the freest, richest nation on earth. The analogy is better than you might imagine, since both the US and MS are being derided precisely because of their virtues (freedom and successful products) by nations/companies that are failures precisely because of their flaws (tyranny/bad products.)
The Antitrust Racket
09 years ago
in Economics
Check out this blog from initium:
In 1977, Congress passed the Hart-Scott-Rodino Act, a law intended to make life easier for FTC and Antitrust Division officials in deciding which mergers to prosecute and stop. Under HSR, all mergers worth at least a certain value (approximately $50 million under the current law) must be reported to the government prior to consummation. This “pre-merger notification” grants the government a waiting period to decide whether they wish to act against the merger. In most cases, the waiting period is terminated early, and no official action is taken. In a handful of cases-less than 2%-the FTC or Antitrust Division will seek conditions to allow the merger or attempt to stop it outright. Such official action generally results in a “consent agreement,” where the merging companies agree to surrender a portion of their assets to a third-party chosen by the government.Every Hart-Scott-Rodino “notification” must be accompanied by a filing fee. For mergers valued at less than $100 million, the fee is $45,000; for mergers of more than $500 million, the price is $280,000. The fee is non-refundable, and the monies collected from said fees are what finance the $330-plus million of the FTC and Antitrust Division budgets not financed by direct appropriation.
In other words, the government is forcing businesses to pay for the very antitrust enforcement that is targeted directly against their interests. This is a classic racketeering scheme. A business is forced to pay protection money to a thug who could turn against them at any time.
Marxism
09 years ago
in Economics
Interesting article on Marxism at the Economist.
Here is the conclusion:
Anti-globalism has been aptly described as a secular religion. So is Marxism: a creed complete with prophet, sacred texts and the promise of a heaven shrouded in mystery. Marx was not a scientist, as he claimed. He founded a faith. The economic and political systems he inspired are dead or dying. But his religion is a broad church, and lives on.
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