Truck and Barter

Quote of the Day

I keep trying to remind myself that failure is as important a component to a free-market economy as success. But goddamn if it doesn’t sting like a sumbitch.

- pdb

You don't say...

What do you mean, municipal wi-fi networks aren't the unalloyed good they were sold as?

Across the United States, many cities are finding their Wi-Fi projects costing more and drawing less interest than expected, leading to worries that a number will fail, resulting in millions of dollars in wasted tax dollars or grants when there had been roads to build and crime to fight.

I was recently in Pittsburgh, PA. Which has a downtown network that can be used "free" for two hours. I say "free", since I had to register. For the benefit of sending my info to the city, which I assume logged my IP and thus knew roughly where I was and more...I got slow service that could only be used in certain positions since the repeaters were weak and stationed poorly for coverage.

But, you know, it's hard to tell how these things will pan out.

If you can't beat 'em, pay 'em.

In an interesting move to combat hacking of MS Vista and Internet Explorer 7 VeriSign is offering aspiring hackers a bounty on flaws, with extra for working code exploiting flaws.

Given the number of days that IE 6 was open to manipulation in 2006 (284), this could actually be a tidy amount for someone willing to spend serious time.

Prohibition Nation

New York went trans-fat free today. And I now have a new litmus test for figuring out of if you're too much of a meddling, know-it-all, self-righteous ass to grant you any sort of assumption of intelligence: if you say you agree with government bans on trans-fats, ding, you're the next contestant on "Soft Facism TV"!

Aside from the disturbingly twisted logic it takes to think that your publicly elected officials have the right to police your favorite eating establishment's cubbards for things they don't like, let's look the effectiveness of the policy itself. How can we do that? By looking at the first country to make such a ban legit: Denmark.

Even consuming less than five grams of trans fat - the amount found in one piece of fried chicken and a side of french fries - a day has been linked with a 25 percent increased risk of heart disease.

It is still too early to tell if removing trans fat from food in Denmark has improved the country's health.

Although the Danish health ministry reports that cardiovascular disease has dropped by 20 percent in the last five years, similar reductions have been reported in other countries that are making an effort to combat heart disease by measures such as regulating the food and tobacco industries, and by educating the public about the need to exercise. In countries that are making no effort to regulate the amount of trans fat in food, heart disease rates have continued to climb.

So, if you're fool enough to lunch at KFC everyday, this might help your heart. But in the aggregate, it's not worth the greasy wax-paper it was written on. But NYC heard it, and thought it sounded like a good idea.

Something else to stick in your fryer: trans-fat is cheaper to make and lasts longer. So who does eliminating it affect? The people who consume food with high levels of processed ingredients and who do not cosume what they buy on the day they bought it, i.e., the poorer folks in society. Since the yuppies strolling through Dean and Deluca find it just a shame that people don't eat more fresh food have decided that it really is ok for people to pay a premium to satisfy their societal whims, it's now incumbent on those folks consuming fast and packaged foods to pick up more of the bill for a law that has had no demonstrable societal benefits.

Spiffy work, folks.

And if you're part of the "but natural foods are so much healthier" crowd, try this article: "Organic chicken less nutritious."

Don't want the health care system to be burdened with the costs of a generation of obese people? Then don't make me pay for what you shove down your cake-hole. Take a look at the wreck of regulation and subsidy busy-bodies akin to the ban-supporters in NYC have made of the health care system, and start cutting away the red tape.

If the people lamenting the existence of folks who adhere to the myth of creationism think so highly of natural selection and evolution, let people do what they want with whatever foods they want. After a few generations of 20-year olds having heart attacks, I'm betting people will start figuring it out.

Idea Laundering?

Corporate spin works in mysterious ways;

“So big corporations have devised a form of idea laundering, paying hundreds of thousands of dollars to seemingly independent groups that act as spokesmen under disguise. Their views wind up on the opinion pages of the nation's newspapers - often with no disclosure that the writer has financial ties to the companies involved. A few examples:

- James K. Glassman, a prominent syndicated columnist, denounced Super Size Me, a movie critical of McDonald's. Readers were not told that McDonald's is a major sponsor of a Web site hosted by Glassman.*

- John Semmens, a policy adviser at the Heartland Institute, wrote a column for the Louisville Courier-Journal that called Wal-Mart "a major force in promoting prosperity for everyone." Readers were not told that his think tank had received more than $300,000 from the Walton Family Foundation, run by the heirs of Wal-Mart founder Sam Walton.

- Steven Milloy, an analyst at the Competitive Enterprise Institute, wrote a column in the Washington Times that sided with the oil industry against windfall profits taxes. Readers weren't told that groups closely affiliated with Milloy have received at least $180,000 from ExxonMobil.”

*I didn't find McDonald's cited as a sponsor of TCS- a clarification welcome.

Belgian court fines Google

A ridiculous ruling;

“Google has been told by a Belgian court that its news service is in breach of the copyright of a group of local newspapers, in a surprise ruling that goes against existing global practice. The verdict meant that Google was forced to remove links to articles in French-language newspapers in Belgium over the weekend to avoid a €1 million (£675,000) daily fine.

The court decided that the way in which Google News operates “causes the publishers of the daily press to lose control of their websites and their contents”. However, Google said that it intended to appeal against what it described as “flawed” decision that would force it to close its news service if it was repeated elsewhere. It said that the Belgian legal action caught it unawares…”

Via AEI-Brookings’ Daily Reg-Report

Related;
Here is the actual ruling
Google's Belgium Fight: Show Me The Money, Not The Opt-Out, Say Publishers
Google could face Brazil lawsuit

Smoker’s International Airways

It’s about time you had an airline for smokers;

“With a growing number of countries choosing to ban smoking in public places, it is an idea that might seem inopportune. But Mr. Schoppmann, a German entrepreneur, is hoping to take advantage of smokers’ resentment at efforts to further curb where they can smoke by giving them their own airline, Smoker’s International Airways.

As the name suggests, the airline, known as Smintair, will probably not be for the faint of lung. The carrier, expected to begin luxury service with business and first-class seats early next year, plans daily flights between Mr. Schoppmann’s hometown of Düsseldorf and Tokyo — a 12-hour journey that, for some smokers, is simply not worth the nicotine-withdrawal headache.

“Many people simply don’t travel long distances anymore because they can’t smoke,” said Mr. Schoppmann, 55, who smokes 30 cigarettes a day in addition to the occasional cigar. “That has to be why they invented videoconferencing.”…

According to the International Air Transport Association, more than a million passengers traveled between Japan and Germany in 2004, a figure that is expected to increase by an average of 3.6 percent a year through 2009. While the majority of Japanese visitors to Germany are tourists, fully half of Germans traveling to Japan are there on business.

What’s more, about one-quarter of Germans smoke, while in Japan, 49 percent of men and 14 percent of women do, according to government surveys…”

Related;
Thank You for Smoking
Stephen Colbert - Civil Lights
One of the SMINTAIR Philosophies;

“Allowing our guests to smoke is one of the freedoms we are happily prepared to grant. Non-smokers will find the cabin air more refreshing than on any other flight with any other airline, as SMINTAIR adds fresh outside air to the conditioning system! This is more expensive, as it burns more fuel, but it is seen as an additional service to our guests.”

Competition and Pandemic Control

Recently I watched the TED speech of Larry Brilliant where he talked about the importance of ‘early detection and early response’ as key for any pandemic control plan. He also talked about the role of public databases like GPHIN in early detection of pandemics and competition it brought to reporting of pandemics. The following article from The Economist summarises some of current data sharing efforts on pandemic diseases;

“The Global Pandemic Initiative, formed in May, is a collaboration between the WHO and the CDC, together with IBM, a large computer firm, and over a dozen other groups. It is intended to develop “the use of advanced analytical and computer technology as part of a global preparedness programme for responding to potential infectious disease outbreaks.” One approach IBM hopes to take is to develop software that will help predict how diseases might spread.

Another new group wants to turn the entire process of identifying outbreaks on its head. Larry Brilliant, a former WHO official who helped to eradicate smallpox in India, dreams of an open-source, non-governmental, public-access network that would help the world move quickly whenever potential pandemics start brewing. He looks for inspiration to the Global Public Health Intelligence Network (GPHIN), an obscure programme run by the Canadian government that searches public databases in seven languages looking for early signs of disease outbreak.

Dr Brilliant, who is now the head of Google's philanthropy arm, made his wish known at the Technology Entertainment Design conference, an annual gathering in California of leading entrepreneurs and thinkers from the information-technology and entertainment industries. His speech so galvanised the gathered titans that he now has the backing of Sun Microsystems, Google and several big Silicon Valley venture-capital funds and investors. They are helping to develop a new “web crawler” that will expand GPHIN to track newspapers and internet blogs in 40 to 100 languages.

A reasonable objection to such a system is that it is based on press reports, not verified scientific data. Even so, its supporters argue that it could prove valuable. Press reports have the virtue of immediacy, and its results will always be subject to verification by the WHO and government authorities, of course. But its very existence might persuade them to act more promptly. After all, that is what GPHIN did a few years ago during the SARS outbreak, when it sounded the alarm and forced the authorities to respond. The direct result, in Dr Brilliant's words: “SARS is the pandemic that did not occur.”

Related;
A Summary of Larry Brilliant’s speech

My avian flu policy paper- Tyler Cowen

Avian Influence information; from CDC, WHO, World Bank, Wikipedia, Fluwiki, Pandemic News, BBC, National Geographic Multimedia, InterAction, US Government, FAO

Data sharing; GISAID, International HapMap Project

Support Builds For Pre-Pandemic Vaccination

Warnings of a Flu Pandemic-Web Focus from Nature

Bird flu data liberated

WHO changes H5N1 strains for pandemic vaccines

Pandemic flu: fighting an enemy that is yet to exist

Pandemic Influenza Plans- US, US States Plans, UK, Canada, New Zealand, Australia, Singapore, links to other National Influenza Pandemic Plans

Blogs; H5N1, Ethics of Vaccines

BirdLife Statement on Avian Influenza; 'Globalisation has turned the chicken into the world’s number one migratory bird species'

Analysing the Avian Flu Threat- Charlie Rose

The Economist advises Amazon

The latest edition of The Economist looks at the prospects of Amazon;

“Amazon's product range is expanding in much the same way as online sales are. As people become more accustomed to shopping on the internet, they are ordering a greater variety of goods and services from a wider range of websites. In America online sales were up by 25% in 2005 over the previous year, reckons Forrester, a research company. Travel is now by far the biggest category, worth some $63 billion last year, followed by computer equipment and software ($14 billion), cars ($13 billion), clothing ($11 billion) and home furnishings ($8 billion).

Amazon's challengers come from two directions. First, other online retailers are growing rapidly and appear in various forms. Many of the dotcoms are invading each others' turf. From auctioning people's old stuff, eBay now also hosts fixed-priced virtual shops offering new goods for sale. And Google is adding more shopping-type services, such as Froogle, a shopping-comparison service, and more recently its new Checkout payments system, which rivals eBay's PayPal.

Second, traditional retailers are rapidly getting their online acts together. This pits Amazon against giant retailers with huge purchasing power, like America's Wal-Mart and Britain's Tesco. These “multichannel” retailers make a virtue of their ability to offer both “bricks and clicks”. Many provide online customers with the option of picking up goods from the shop down the road. This is proving popular with web buyers who want things immediately or are keen to avoid shipping costs and staying in to accept a delivery. Circuit City, a big American electricals chain, expects in-store pick-ups to account for more than half its online sales this year…

The battle for downloads is becoming more intense. The market for digital music is dominated by Apple's iTunes, which is also likely to expand into video. Microsoft is entering the music-download business with a digital player, called Zune. On August 8th Nokia bought an American digital-music distributor, Loudeye, to develop its own service for its music-enabled handsets. The Finnish telecoms-equipment company says these are now selling roughly twice as fast as Apple's iPods. Video downloads are available online from some sites, such as Movielink.com, which is owned by five big film studios. News Corp's websites, including MySpace.com, are planning to sell films and shows from the group's Fox network. …

A video service could resemble a downloadable version of Netflix, a Californian company that pioneered online video rentals. Netflix's customers compile online lists of videos they want to see and receive them in the post. When the DVDs are returned in their pre-paid envelopes, the next titles are sent. With no late fees, Netflix has pummelled Blockbuster's store-based video-rental model.

Netflix is also exploring how to deliver movies online. Amazon has already copied the Netflix postal model in Britain and Germany and it has dropped hints that it may launch a postal service in America: Mr Bezos told Wired magazine last year that Amazon was well placed to do so “...and we wouldn't have to pay heavy marketing fees.” The same could be said about video downloads. Although Mr Bezos has discussed his strategy in the past with The Economist, the company did not respond to requests for an interview…

“The need to own music in a physical form, whether it's to play in other music systems, to minimise the chances of losing it or just because they like to have a physical collection, remains very strong amongst internet users,” says Alex Burmaster, the research company's European internet analyst…

a subsidiary called Amazon S3 rents out temporary storage by the terabyte to other websites…

Another Amazon subsidiary, BookSurge, is busy courting publishers to have their works scanned into digital files…

A new “e-reader” device from Sony has a special screen that mimics the way light falls on a printed page. The size of a paperback, it can store several hundred novels…

Unless the pioneer of online retailing can provide downloadable media it risks being “disintermediated”—rather as only a decade ago high-street bookshops, music and video stores were disintermediated by Amazon itself.”

My bet is on Amazon’s BookSurge.

Related;
A 2001 interview with Jeff Bezos (video)
The Future of Gadgest (video)
Communicating the Skype way
Profiting from obscurity; What the “long tail” means for the economics of e-commerce
A METHODOLOGY FOR ESTIMATING AMAZON'S LONG TAIL SALES
Interview with Chris Anderson (starts at the end of the show)
Chris Anderson and the Long Tail (Econ Talk)
Screening the Latest Bestseller
Ads Coming to Textbooks;

"Now, a small Minnesota startup is trying to shake up the status quo in the $6 billion college textbook industry. Freeload Press will offer more than 100 titles this fall _ mostly for business courses _ completely free. Students, or anyone else who fills out a five-minute survey, can download a PDF file of the book, which they can store on their hard drive and print.

The model faces big obstacles. Freeload doesn't yet have a stable of well-known textbook authors across a range of subjects, and it lacks the editorial and marketing muscle of the "Big 3" textbook publishers (Thomson, Pearson, and McGraw-Hill). Its textbooks don't come with bells and whistles such as online study guides that bigger publishers have spent millions developing in order to lure professors _ who assign textbooks and are the industry's real customers."

The Herd Instinct and the rise of SUVs

Robert Frank tries to explain the rise of fall of SUVs- to a lot of people it will seem quite obvious;

“Economists increasingly recognize the importance of herd behavior in explaining ordinary purchase decisions. A case in point is the sport utility vehicle. Herd behavior helps us understand not only the explosive rise of this market segment in the 1990’s, but also its imminent collapse…

The conventional determinants of consumer demand cannot explain this astonishing trajectory. Cheap fuel was a contributing factor, but clearly not an adequate explanation, because fuel had also been cheap in earlier decades. Similarly, rising average incomes cannot have been decisive, because the pre-S.U.V. decades had experienced even more rapid income growth…

To understand the explosive growth of S.U.V. sales, we must look first to changes in demand caused by new patterns of income growth and then to how others responded to those changes in demand. Unlike the three post-World War II decades, when incomes grew at about the same rate for people at all income levels, the period since the mid-1970’s has seen most income growth accrue to the wealthy…

An important feature of the herd instinct is that people are more likely to emulate others with higher incomes. Seeing a wealthy studio executive behind the wheel of a Range Rover instantly certified it as a player’s ride. As more and more high-income buyers purchased these vehicles, their allure grew. And when other automakers began offering similar vehicles at lower prices, S.U.V. sales took off…”

For Comment; Do readers of newspapers really appreciate economists telling them things that appear ‘common sense’? How does topics for op-eds get decided? Does the writer get paid or tipped to write about certain products and issues?

Via Michael Blowhard

Wal-Mart’s CEO Lee Scott on Charlie Rose

Charlie Rose interviews Lee Scott, CEO of Wal-Mart.

Related;

Wal-Mart; The behemoth from Bentonville (a couple of book reviews)

Measuring the Wal-Mart effect;

"America is home to more Wal-Mart employees (1.3m) than high-school teachers. A typical store is manned by 150-350 people; the bigger “supercentres”, which sell groceries, employ 400-500. But even as Wal-Mart creates some jobs, it displaces others. What is the net effect? According to the company, “new businesses spring up near Wal-Marts and existing stores flourish as they take advantage of the increased customer flow to and from our stores.” Global Insight reckons that a 100,000 square-foot (9,300 square-metre) Wal-Mart creates 97 retail jobs, after the dust has settled, but destroys 30 in wholesale.”

For people outside the US, it is not very clear why there’s such a controversy about Wal-Mart in the States.

A New Carnival in Town- Carnival of Wal-Mart

The 'Business of America is Business' has started a weekly Carnival of Wal-Mart series (via Division of Labour).

The Economics of France's attempt to open up iTunes

The Economist’s Economic Focus column looks at French attempt to allow customers to play music bought from iTunes on one of the iPod's rivals;

“Put these practical difficulties aside, and ask whether France's policymakers identified a real problem. Are they right to worry about the inseparability of Apple's store and its player?

Such controversies normally turn on the analogy chosen to illuminate them: is the iPod like a CD or cassette player, or an inkjet printer? Since it appeared in 2001, the iPod has become this decade's answer to the Sony Walkman. Supporters of the French law point out that if you buy a music cassette at a shop, you can listen to it on any cassette player that takes your fancy. You do not have to play it on a Walkman. Why then can customers not listen to songs from Apple's music store on whatever player they like? Surely Apple is guilty of exploiting the popularity of its store to stifle rivals to its iPod?

The law's opponents reach for different analogies. They compare the iPod not to the Walkman, but to printers, games consoles and razors. Buy an inkjet printer, for example, and you must buy the manufacturer's cartridges to be sure that it will work properly. (Although French parliamentarians will not come to your rescue, European regulators might.) Indeed, manufacturers make much of their money from the cartridges, not the printer itself, which is often sold cheaply. Economists explain this business model as a clever way for companies to “meter” their customers, charging them according to use. If they could not tie their customers to their cartridges, they would charge more for the printer itself, and the kind of person who now uses his printer rarely would not buy one at all.

Apple's business model, however, turns this on its head. Apple makes its money from sales of the iPod, not sales of music; the printer, not the cartridge; the razor, not the blade. As Bill Shope, an equity analyst at JPMorgan, puts it, the music store is a “loss leader” that serves only to boost sales of the iPod. It is as if record stores existed only to sell record players.”

Other free-reads from the latest Economist;

The trouble with Pakistan; An unstable, nuclear-armed Pakistan, intertwined with a chaotic and Taliban-dominated Afghanistan: it is not a settling prospect. It has all happened before, of course. The result was September 11th, swiftly followed by a terrorist outrage in Delhi that came close to provoking full-scale war between Pakistan and also-nuclear India. What will happen next time?... A Survey of Pakistan, here’s a podcast of the interview with the author.

Lexington- Faith, race and Barack Obama
HOW can Americans overcome their divisions? Barack Obama, the son of a lapsed Kenyan Muslim, has some arresting thoughts. On the subject of tackling head-on “the mutual suspicion that sometimes exists between religious America and secular America”, the junior senator from Illinois delivered last week one of the best speeches of his brief career.

Genetics-The genetics of mammoth coat colour
“ICE AGE”, a film about the antics of a group of prehistoric mammals, was such a hit that Regent Street in London was festooned with Christmas lights in honour of its stars: Manny the mammoth, Sid the sloth, Diego the sabre-tooth and an irritating squirrelly creature called Scrat.

Memory formation- There may be a link between the way memories are formed and the adverse effects of sleep deprivation
Dr Tononi's hypothesis is, it must be said, controversial. Many researchers hold almost precisely the opposite opinion—that sleep serves to re-activate synapses that were strengthened during the day, and thus reinforces their strength rather than diminishing it. There is, however, a certain logical sense to the Tononi view of the world. It is impossible to remember everything, so a process of winnowing must take place somehow. The idea that, after a period of expansion, the brain pares back its workforce to become leaner and meaner is somehow rather appealing

Face value-The business of persuasion
Erel Margalit, an Israeli venture capitalist, dreams of using his dealmaking skills to revitalise Jerusalem
High-tech industries now provide around 55% of Israel's exports, and in the past ten years accounted for about 40% of its growth. Mr Margalit argues otherwise. The city's reservoir of intellectual and creative life can be tapped, he insists. A few elite institutions—the Hebrew University, the Bezalel art academy, the state-run Israel Broadcasting Authority, the hospitals, even the government—that now function largely in isolation from the city could become “a cluster of creative elements, a cohesive arena.”

Internet advertising- The ultimate marketing machine
Thanks to the power of the internet, advertising is becoming less wasteful and its value more measurable.
Within a year, however, Messrs Brin and Page changed their minds and came up with AdWords, a system based on Overture's idea of putting advertising links next to relevant search results and charging only for clicks (but with the added twist that advertisers could bid for keywords in an online auction). Google soon added AdSense, a system that goes beyond search-results pages and places “sponsored” (ie, advertising) links on the web pages of newspapers and other publishers that sign up to be part of Google's network. Like AdWords, these AdSense advertisements are “contextual”—relevant to the web page's content—and the advertiser pays for them only when a web surfer clicks. Together, AdWords and AdSense produced $6.1 billion in revenues for Google last year.

Kenneth Lay- founder of Enron, died on July 5th, aged 64

China overtakes US in Book Production

Bowker (the world’s leading provider of bibliographic information) is projecting that U.S. title output in 2005 decreased by more than 18,000 to 172,000 new titles and editions. This is the first decline in U.S. title output since 1999, and only the 10th downturn recorded in the last 50 years. It follows the record increase of more than 19,000 new books in 2004. Great Britain, long the world’s per capita leader in the publication of new books in any language, now replaces the United States as the publisher of most new books in English. 206,000 new books were published in the U.K. in 2005, representing an increase of some 45,000 (28%) over 2004.

Prices; In 2005, the average suggested retail price for adult hardcovers released by the largest general trade houses increased 3 cents to $27.55; adult fiction hardcovers decreased 7 cents to $25.01; and adult non-fiction hardcovers increased 3 cents to $28.52. Adult trade paperbacks increased 1 cent to $15.77; adult fiction trade paperbacks decreased 2 cents to $14.76; adult non- fiction trade paperbacks increased 10 cents to $16.26; and adult mass-market paperbacks increased 7 cents to $7.42. The average list price for juvenile hardcovers decreased 1 cent to $16.08. In all, the largest general trade publishers released 345 more titles as adult trade paperbacks and 301 fewer as adult hardcovers.

The latest Foreign Policy magazine ($ required) notes that China is the world’s top publisher, where textbooks account for nearly 1 in 5 books published and almost half of all purchases at the country’s 72,000 bookshops. In per capita, Britain is on top. Though overall more books are being written than ever before, people are spending more time watching television or surfing the web.

The Cost of Safe Sex

To reduce AIDS transmission, it is important that ‘commercial sex workers’ practice safe sex. In this study authors estimate the compensating differential for condom use among sex workers in Calcutta. To identify the relationship between condom use and the average price per sex act, they follow an instrumental variable approach, exploiting an intervention program focused on providing information about the AIDS virus and about safe sex practices. Using this method, they found that sex workers who always use condoms face a loss of 79 percent in the average earnings per sex act;

“In many ways the market for sex work is simply another labor market. Sex workers in the red light area of Sonagachi in Calcutta who are the focus of this paper are almost always part of a brothel under the ownership of a madam or pimp. They are required to pay fifty per cent of their earnings as rent and "protection" to the person controlling the brothel. The market is quite competitive with over 4,000 sex workers working in 3 70 brothels servicing about 20,000 clients a day. Calcutta is one of the world's largest cities with an estimated population 13 million of which 31 per cent are migrants. This results in a male dominated sex ratio with 0.83 females for every male in the population that in turn causes the demand for sex work to be consistent and high. Sonagachi is the oldest and best established red-light area in Calcutta and has been in existence at least for 150 years. It is located close to Calcutta University which provides a steady source of clients, and like many other older Calcutta neighborhoods consists of a dense network of narrow, winding streets lined by two and three story buildings. The brothels are supported by a number of restaurants, teashops, bars and other businesses that serve sex workers and their clients in the area…..While rates are to some extent determined by negotiation, the market is large and competitive and there is a good sense of the "correct" wage or price with differences arising from the sex workers age, physical attributes and her level of education.”

Some Policy implications;

“Some thought may also be given to the fact that sex workers may suffer large economic losses during the initial years of the intervention. This could be circumvented either by direct compensation or by a large scale program which results in a quick increase in condom use so that competition between sex workers does not drive down the price of safe sex.”

For Comment: Could such a compensation scheme have an effect that is not intended?

Related: The Independent goes RED

Jane Jacobs and other free reads from the latest Economist

This week’s sample of free reads from The Economist.

A Profile of Telstra’s new boss- Mr Trujillo, a Mexican-American
“He argues that Australia risks emulating the “parasitic competition” that prevailed in America in the mid-1990s when the Baby Bells (such as US West) were forced to open their local networks to newer carriers. The result, he argues, was that nobody invested and America lost its global lead in broadband deployment. America, however, saw its mistake, recognised the need for scale in the telecoms industry and is now allowing mergers that amount to a recreation of the old AT&T.” Related: John Quiggin has been critical of Telstra privatization and more on ‘Aussie Miracle’

A discussion with Edward Lucas, central and eastern Europe correspondent of The Economist on a Survey of Poland;“For the first time in Poland's history there is really no reason why the country can't thrive and prosper”. See also his blog.

Evolutionary psychology- Women can read men like books
A GROUP of scientists has discovered that women are attracted to men who are fond of children. In years gone by, that announcement might have qualified for one of the late Senator William Proxmire's Golden Fleece awards for pointless scientific research—except that what this particular group of scientists has shown is that women can tell who is and is not fond of children just by looking at their faces…

Google- Fuzzy maths
These two interlocking “engines”—the search algorithms coupled with the advertising algorithms—are the motor that powers Google's growth in revenues ($6.1 billion last year) and profits ($1.5 billion), as well as its $117 billion market capitalisation. Its horsepower is the reason why Andy Bechtolsheim, Google's first investor (as well as a co-founder of Sun Microsystems, a big computer-maker) still holds on to all his shares in the firm. It's all about advertisers “bidding up the keywords” in Google's auctions, he says. “How far this thing could go, nobody can say.” Related; See John Batella's blog

Caste, creed and community; AMARTYA SEN is just the person to write about the politics of identity and its dangers.…When Mr Sen says that identities are rarely simple, he himself is a walking example. Hindu by background, he is secular in outlook. Though Indian, he has worked mainly at British or American universities. He was born in 1933 in Bengal, whose eastern half has since changed nationality twice: in 1947, it became part of Pakistan and in 1971 it split off as Bangladesh, both times amid terrible communal violence. Professionally Mr Sen is also hard to pigeonhole. A Nobel-prize-winning economist, he believes in the free market but also that inequality is a problem. In argument, he credits his opponents with their best next moves, like a chess player. Yet his indignation, when he wants, can be savage. A related post on the Amartya Sen’s new book.

Singapore's election; The People's Action Party shows that it remains one of the world's most successful political machines. In a letter a reader comments, “Singapore's minister mentor, Lee Kuan Yew, seemed to imply that Singaporeans are trading their freedom of expression for a stronger nation when he referred to the recent political upheavals in Thailand and the Philippines in a riposte to a suggestion (from a participant in a TV debate) that a little more such freedom might actually help the city state (“A rational choice”, April 22nd). To think that Singapore would lose any of its hard-won economic development if its citizens enjoyed more freedom of expression is fallacious.” Professor Acemoglu doesn’t think Singapore is democratic.

IKEA; Forget about the Gates Foundation. The world's biggest charity owns IKEA—and is devoted to interior design.

Economics focus column- Baby boom and bust; Will share prices crash as baby-boomers sell their assets to pay for retirement? MICHAEL MILKEN will celebrate his 60th birthday on July 4th. The former “junk-bond king” is still going strong, having seen off prostate cancer, and remains as controversial as ever. The debate over whether Mr Milken deserved his jail term for manipulating the high-yield bond market he largely created rumbles on nearly 20 years later, most recently during the Enron trial, where Mr Milken's genius was championed by none other than Kenneth Lay (as the saying goes, with friends like that...). ..Jeremy Siegel turned 60 last November. The Wharton business school economist, whose book “Stocks for the Long Run” was the bulls' bible during the last bubble, is going strong too, trim and fit, with his mind as lively as ever—despite being called “demented” at last weekend's Berkshire Hathaway annual meeting by one of the firm's bosses, Charlie Munger. (“He's a very nice guy,” retorted the other boss, Warren Buffett.). Related debate at Milken Institute.

Aid to the Palestinians; Seeking a bypass, as the money runs out

The Mississippi Delta; Renaissance deferred
"According to the Southern Growth Policies Board, a think-tank based in North Carolina, the drop-out rate in 2001 among high-school students in the Delta was 5.5%, compared with 4.4% nationally. The March of Dimes, a children's charity, reported in 2002 that infant mortality was nearly 10%, compared with 7% nationally. In 2003, income per head was $20,484; the national average was $31,472."

Anti-dumping; A country that sells its goods abroad for less than they cost to produce, or for less than they fetch at home, might expect gratitude from its trading partners. More often, it is accused of “dumping”. China faced 33 such allegations between July and December 2005, according to the World Trade Organisation (WTO), far more than any other country. Not all of these investigations will result in retaliation, but some will. WTO members slapped 22 anti-dumping duties on China's products in the second half of 2005, for example.

South America; The diminishing of Brazil
Brazil's Lula da Silva has been humiliated by Venezuela's Hugo Chávez...On taking office in January 2003, Lula proclaimed regional integration to be his top foreign-policy priority. Yet Mercosur, the putative customs union established by Brazil with Argentina, Paraguay and Uruguay in 1994, has never been in greater disarray. “Brazil went for a dream of South American unity before strengthening and deepening Mercosur,” says Alfredo Valladão of Sciences-Po, a French university

Russian nationalism; Alarmist rhetoric from President Vladimir Putin; skinhead violence on Russian streets. Is there a connection?

Axis of feeble- George Bush and Tony Blair

British Politics; Gordon Brown may huff and puff, but Tony Blair will not be booted from office like Margaret Thatcher

Web 2.0; The enzyme that won

Economic forecasts; The panel has raised its forecast for America's growth this year to 3.4%, up from 3.3% predicted in April. It expects Britain to grow slightly faster this year (2.4%, up from 2.3%) and next (2.5%, compared with a forecast of 2.4% in April). The soothsayers remain divided about the prospects in Japan and Germany. The most optimistic among them think Japan might grow by as much as 3.9% next year, and Germany might grow by 2.0%. Others think growth might be as low as 1.5% in Japan and 0.3% in Germany

GENERAL MOTORS at last got some good news on May 8th. The Securities and Exchange Commission approved some accounting tweaks that turned a $323m first-quarter loss into a rare $445m profit. But GM's losses on its North American automotive operations, although halved, were still a painful $462m. And there is more bad news in the offing. A looming strike at Delphi, a bankrupt parts supplier, could have disastrous knock-on effects for GM.

Private spaceflight; Rocket renaissance.

Foreign Exchange Researves

Jane Jacobs, anatomiser of cities, died on April 24th, aged 89
“To Mrs Jacobs cities were living beings, functioning much like a body in which the streets were arteries and veins. They grew organically, as one sort of work differentiated into others, and the constant flow of innovation kept them alive and expanding. Bluntly (for she had a tart tongue, lubricated with cigarettes and beer), she dismissed “the primacy of agriculture” in human history. Cities had come first, as the natural eco-system of human beings, and only once the web of work and trade had reached a certain size was there any need for the help of the static, primitive and muddy countryside.” A related post by Boettke.

Is English Legal System Better?

British economist John Kay thinks that when it comes to legal system English law wins;

"English law is very widely used in financial services, even for transactions that have no other connection with England. English law gives much more freedom to write whatever contract the parties want than the civil law systems of many other countries. English judges, politically neutered, have been formalistic in enforcing the strict terms of contract, while courts in America pay more attention to the context of the transaction – the intentions of the parties and the reasonableness of the contract terms.

This English combination of flexibility before the event and rigidity after it is attractive to many. English courts have also acquired a reputation for giving foreigners a fair crack of the whip. These competitive attractions of the English legal system have made City of London law firms large exporters of legal services."

But England does not appear to be a good place for rich people with troubled marriages.

Related Links:

- The American Legal System in Brief
- The Economics of Contract
- Why is Tort Law like Accounting?
- Accounting for Lawyers
- The latest Law Report podcast from Radio National; lively debate recorded at the recent Brisbane Ideas Festival which looks at how evolving notions about justice and progress might produce radical new strategies.

The Entrepreneurial Economist and the Red Queen Game

This week’s Economist magazine has a summary of a session on entrepreneurship that took place at the annual AEA conference;

Most innovations are merely incremental improvements on something that already exists: a slightly better mousetrap, as Mr Baumol puts it. A rare few represent discontinuous breakthroughs, such as the incandescent lamp, alternating electric current or the jet engine. All of the above, according to Frederic Scherer, professor emeritus at Harvard, were introduced not by the regimented R&D of established corporations, but by scrappy new firms, twin-born with the invention itself. Mr Baumol ventures that most breakthroughs arise this way—the offspring of independent minds not incumbent companies. He has two explanations for this. First, radical innovation is the only kind lone entrepreneurs can do; and, second, they are the only ones who want to do it.

Chris at Austrian Economists thinks that Economist should have focused more on Kirzner’s work. It needs to be noted that Baumol uses the term ‘entrepreneur’ in the Schumpeterian sense to mean bold and imaginative deviator from established business patterns and practices, who constantly seeks the opportunity to introduce new products and to create new organizational forms. It doesn’t refer to anyone who creates a new firm ( The Free Market Innovation Machine, p. 57). Firms in this competitive milieu are forced into a sort of (after Lewis Carroll) ‘Red Queen’ game in which it is necessary to run as fast as one can in order to just stand still.

What does this all mean for policy makers who are always on the look out for ways to dole out money? There are those who say entrepreneurship is the true engine of growth. But a lot of focus on entrepreneurship like the World Bank’s Doing Business tends to focus on countries as a whole whereas everyone knows that there are many differences within the countries itself. Robert Schiller brings that issue to notice;

Economists and others often tend to look at countries as a whole and emphasize national attitudes and national policies as the main factors in encouraging or discouraging entrepreneurship. But, in fact, the national success in entrepreneurship depends on the evolution of local cultures and their interaction with national policies. Entrepreneurship can take root in culturally congenial regions of any country after economic barriers against it are lifted, and then feed on itself to grow to national significance.

Mr Baumol thinks a “touch of madness” is probably one of the chief qualifications for the job. He himself is a sculptor and artist and as he jokes in his lecture at AEI-Brookings Joint Centre there are several books written by other people with his paintings on the books’ cover. I was surprised by the similarity of his paintings with Outsider Art. The picture above is one by Sylvia Convey – an Australian outsider. May be economists would be more creative if they learned to paint.

Relate Links

- Reviews of the ‘The Free-Market Innovation Machine’, by Alexander Field, Joel Mokyr, Wolfgang Kasper, John Quiggin (Quiggin is very disappointed by the book)
- The Entrepreneur as Hero, Federal Reserve
- Lessons from telephone privatization in Argentina and the United Kingdom, William Baumol
- Some of Baumol’s contributions to Economics
- The Role of the Entrepreneur in the Economic System, Kirzner
- The Red Queen Paradox: A Proper Name for a Popular Game – Note
- Carnival of Entrepreneurship

Multimedia:
- Lecture by Baumol at AEI-Brookings; talks mostly about new approaches price discrimination – ‘price discriminatory price takers’ and shortcomings of the current approaches to dealing with monopolies, Q&A was interesting with lot of questions from FTC staff.
- The Role of Self-Interest in Economic Theory, Israel Kirzner (his lectures are never boring)
- Doing Business 2006: Creating Jobs (podcast)
- Outsider Art, Radio National Australia (download the podcast now, in a week it won’t be there)

March Madness Closes In

For the statistically minded among you who also enjoy this month of roundball, here's a comparison of nearly all the ranking systems.

Another "Wal-Mart Effect" UPDATED

Here's a surprise: Wal-Mart is all over the blogosphere.

Instapundit has links to the NYT story of Wal-Mart and the Merry PR Hacks. Meanwhile, Fast Company's blog is being guest-edited by Charles Fishman, author of The Wal-Mart Effect. Here's a story at the Economist about the book.

And, finally, the real reason I bring this up: a new working paper at NBER titled "Consumer Benefits from Increased Competition in Shopping Outlets: Measuring the Effect of Wal-Mart." (Here's an older - PDF! - version of the paper from the MIT faculty site.)

An interesting excerpt:

In this paper we estimate consumer benefits from supercenter entry and expansion into markets for food. We estimate a discrete choice model for household shopping choice of supercenters and traditional outlets for food. We have panel data for households so we can follow their shopping patterns over time and allow for a fixed effect in their shopping behavior. Most households shop at both supercenters and traditional outlets during the period. Given a model of shopping behavior we estimate the compensating variation of household from the presence of supercenters. We find the benefits to be substantial. Thus, while we do not estimate the costs to workers who may receive lower wages and benefits, we find the effects of supercenter entry and expansion to be sufficiently large so that overall we find it to be extremely unlikely that the expansion of supercenters does not confer a significant overall benefit to consumers.

UPDATE: Here are a couple more links of interest. Hausman's work is discussed by the MIT news service. (This article also links to the wonderfully titled "CPI Bias From Supercenters: Does the BLS Know that Wal-Mart Exists?") There are PDF versions of slides available that detail the work done in the working paper linked to above.

Better Living Through Better Design

In a highly cluttered visual field, people have a harder time picking out a target of interest, and often choose wrongly. Not a surprise, that. More interestingly, however, is that people tend to have high confidence that they are correct.

One might intuitively expect that as background noise created by distracters and errors increase, confidence in one’s decision plummets. But in a new study published in PLoS Biology, Stefano Baldassi, Nicola Megna, and David Burr show that just the opposite happens. When they asked observers to search for a tilted target embedded in vertical distracters and estimate the target’s tilt, the observers often overestimated the magnitude of the tilt--and did so with a high degree of confidence in their decision.

The authors used signal detection theory to make quantitative predictions about the probability that an observer will detect a target under cluttered conditions. SDT assumes the brain represents each element in a visual search display as an independent variable with its own noise. It also assumes that when the observer isn’t sure which stimulus is the target, she monitors all stimuli, and performance suffers. Thus, increasing the number of distracters (trying to find your friend on a busy street or a document on a messy desk) increases the background noise of the visual system’s representation while reducing the accuracy and reaction time of performing the task.

As a general condition, I wonder what role this might play in individual decision-making over a vast range of choices. Specifically, I got to thinking about the contentions some make about having "too much choice." (See the Barry Schwartz quote in Postrel's post.) The claim that too much choice makes people worse off, ably dealt with in Postrel's full article, leads to the conclusion that choice ought to be limited. But what if the claims of dissatisfaction with abundance are simply picking up on a different problem?

From the Innovations Report article:

The authors explain that while their study focused on "simple perceptual decisions about a single stimulus attribute," the same type of processes may also apply to complex cognitive tasks involving problem solving and memory. If people find themselves confronted with multiple events in a chaotic, confusing environment, they may decide about some aspect of the situation and be totally wrong even though they have full confidence in their decision. The consequences of such a phenomenon could be relatively trivial, explaining why professional athletes often end up wasting their time arguing questionable calls with an official.

Sounds to me like being presented with complex visual fields is a bit disrupting to a lot of people. So much so that it results in frustration. While it might not be described as "chaotic" in terms of movement, the whole aisle of toothpaste options noted by Karrie Jacobs observes in Postrel's article, as well as the vast array of items in shopping malls, car dealerships, convenience stores, the newspaper ad pages...all certainly presents a cluttered visual pattern, what with all of the conflicting colors, shapes, lettering, and advertising thrown in by the store itself. Perhaps those negatives that Shwartz says pile up are a result of the displeasing sensation from the visual information overload, and not necessarily a dislike for the amount of choice.

Maybe the problem is just that we have really bad graphic design.

Journal Ranking By Google?

A new method for ranking science journals is being proposed. What's it based on? Google, of course.

The most popular index of a journal's status is the ISI Impact Factor (IF), produced by Thomson Scientific. It counts the total number of citations a journal's papers receive, and divides it by the number of papers the journal publishes. But the rise of online journals, coupled with sophisticated search engines that permit rankings of web resources, is triggering a wave of other measures. Last year, for example, physicist Jorge Hirsch of the University of California, San Diego, proposed a metric called the h-index for assessing the quality of researchers' publications (see Nature 436, 900; 2005).

Now Johan Bollen and his colleagues at the Research Library of Los Alamos National Laboratory in New Mexico are focusing on Google's PageRank (PR) algorithm. The algorithm provides a kind of peer assessment of the value of a web page, by counting not just the number of pages linking to it, but also the number of pages pointing to those links, and so on. So a link from a popular page is given a higher weighting than one from an unpopular page.

Only hearing second-hand information about the way tenure review goes for academics, I was under the impression that the relative "importance" of the journals in which one might publish also has a big impact on tenure decisions. Ranking systems then seem to be deeply involved in the way research occurs if it impacts who gets financial support either throught grants or university support.

My question is whether the "PageRank" metric might be highly vulnerable to information cascades and manipulation in much the same way as Google's process for ranking sites.

Do Kids Have Too Much Choice?

Normally I'd hold in special suspicion those who suggest that there is too much choice in the world. That the alternative means I would be required to trust another person to make that decision about when there is "too much" entirely negates the argument. Abundant choice is the result of the lack of such a figure. The alternative is day-long queues for the One Kind of Toilet Paper.

But does this hold when it's children making the choice? A recent study suggests requiring girls to take math and science courses might produce more women computer scientists.

For the purists among you: yes, I agree that in theory it might be better to have all education pivately funded and thus avoid the stifling question of what the state is requiring our children to learn. But you tell me when a serious coalition in Congress (here or whatever you might have abroad) is about to vote to end public schooling and I'll jump on the phones to help drum up support. Any takers? No? Ok then...

I'm not sure strapping kids into science classes is a great way to proceed, but this does provide some evidence (to my mind) against the seemingly widespread belief that some children just don't have to take certain classes if it's not their "preference". (Personally, I was allowed out of math classes in my sophomore year of high school because I finished the lowest requirements and evinced an aptitude for other areas. I'm paying dearly for that now.) If this is even partially accurate, it's a damning picture of schools as well as the general state of pedagogy for public education. Dismissing a certain canon of subjects for softer material and trying to make school only about "critical thinking" skills obviously results in some poor consequences:

Instead, it seems that restricting the choices available to adolescents, and making it mandatory for all pupils to study maths and science subjects throughout their secondary education, correlates with a higher proportion of women going on to study computer science at university.

"The principle of being free to pursue your preferences is compatible and coexists quite comfortably with a belief in essential gender differences. This essentialist notion, which helps to create what it seeks to explain, affects girls’ views of what they're good at and can shape what they like," said Charles.

She goes on to say that the implications for policy are clear: rather that letting kids discard subjects too soon, governments should insist on more maths and science for everyone, for longer.

"As other research has repeatedly shown, choices made during adolescence are more likely to be made on the basis of gender stereotypes, so we should push off choice until later," she concludes.

For a simultaneously hilarious and tragic view of what the permissiveness in education has done to technical skills, try this.

Just as interesting as the results of the study, however, is the point about early-age decisions being made along gender-stereotype lines. Does this mean that all those people learning about how to teach kids to learn how to learn and who refuse to "box anyone in" are actually producing grown-ups with stronger, not weaker, stereotypes about gender roles? Would it be these people that we should put in charge of the variety of cereal?

New Pull Prizes On the Way

Pull prizes like the Ansari X-Prize have some intuitive appeal to me. I like the idea of private fundraising for work that's been historically ceded to the government. I was glad to hear that more prize competitions are on their way.

Get Better at eBay

From Knowledge@Wharton, an article on bidding behavior in online auctions:

Would you like to go on an Internet auction site and know how much to bid for a certain item -- and also know that you didn't overpay for that item? How about when you sell an item in an online auction: Would you like to know what price to set that ensures you don't leave money on the online table?

Wharton marketing and statistics professor Eric T. Bradlow can't provide specific answers. But he does offer guidance on the behavior of potential buyers in a new study entitled, "An Integrated Model for Bidding Behavior in Internet Auctions: Whether, Who, When, and How Much," recently published in the Journal of Marketing Research. Bradlow, who is also academic director of the Wharton Small Business Development Center, co-authored the study with Cornell marketing professor Young-Hoon Park. "To the best of our knowledge, this is the first attempt to model formally the behavioral aspects of bidding behavior for the entire sequence of bids in Internet auctions," the authors write.

Here's a a draft of the paper.

My Own Private Andromeda

The privatization of space research and exploration appears to be continuing apace. Here are a couple notes on recent work in areas often considered solely the domain of government.

1) Space Elevator gets the nod from the FAA.

" The LiftPort Group, the space elevator companies, announced September 9 that it has received a waiver from the Federal Aviation Administration (FAA) to use airspace to conduct preliminary tests of its high altitude robotic "lifters."

2) From Wired news, a company is looking to get a Mars community up and running in 20 years.

"All companies set goals, but newly formed 4Frontiers is eyeing some expansive horizons. The company's mission: to open a small human settlement on Mars within 20 years or so.

Sure, it may sound far-fetched. And the company's initial plans are a lot more terrestrial than ethereal, like developing a 25,000-square-foot replica of a Mars settlement here on Earth, then charging tourists admission.

But the people behind the venture are quite serious -- as serious as the $25 million they want to raise from investors."

The actual success or failure of the various projects isn't as important to me as the fact that there seems to be reasonably strong interest within private industry in making a run at space.

NOTE: This entry was edited for content by the author. I have done so in the interest of keeping well clear of conflicting interests between myself, my employer (whom this website in no way represents), and clients. This was done without reference to anyone/anything but my own judgement. If anyone has questions on the previous content, or would like a fuller clarification, feel free to write me at ian@theurlforthissite-dot-com.

Borders Doesn't Want to Sell Me Books

Sometimes I feel bad for the small bookstore owner, noting their courageous competition against superstores like Borders, discount warehouses, and Wal-Mart. But it's clear to me that independent booksellers almost always beat the big boys in service, and that service must never be compromised.

Case in point: Last night I searched online and found that the Borders store nearest to my workplace carried in stock a Thomas the Tank Engine book I wanted for my son. Then I saw this:

In theory, Borders will find the book to verify that it is still in stock, reserve it for you, and email you back within 2 business hours. Sounds like a time-saver, so I did it.

And an hour after opening, the store indeed sent an email with this disappointing message:

Thank you for your online reservation request. We're sorry to say that the remaining stock of the item you requested has been purchased since our last online availability update. You may want to check online to see if there are other items that will meet your needs. Your local store will also be happy to special order the item, if you wish.

To make a long story short, I checked online again, and the book was still in stock. So I went to the store, and within 30 seconds I found the book I had reserved, exactly where it should be in the Children's book section. Surprise, surprise.

Did Borders employees even bother to check the shelves? I'm not surprised. My previous encounters with Borders elsewhere were also sub-par.

Collaborative Cheaters?

Apparently, a number of econ grad sudents at UVa are being investigated for cheating.

An “alarmingly large fraction” of the first-year class of economics graduate students at the University of Virginia were involved in a cheating incident that came to light this month, according to the department chair.

Department officials said that some problem sets from textbooks used in introductory graduate economics courses have answer keys online. At least one student found answers for a course taken by all first-year students, and apparently shared the information with classmates. Though the solutions were apparently available, David Mills, chair of the economics department, said students should have “known it was off-limits,” but that they instead “used it without the professor being aware.”

My initial reaction was "is finding the answers online strictly cheating"? Sure, it would be better if everyone were motivated by the rush one might feel at getting through a particularly tough problem on their own, but let's be honest here. If the problem sets said "no outside materials can be referenced", then I can see where the online search was a violation. But I'm betting it was a lot less clear than that. No truly devious methods were used to find the answers, and I believe the professor should have had some expectation that, if he were using problem sets taken straight from a text, answers might be available (much like the beloved tradition of providing answers for the odd-numbered questions in the backs of math textbooks)from the same source. Again, if warning against it was given, then the case for cheating would be clearer.

That aside, however, in re-reading the lede, I was struck bu the first three words encapsulated in quotes above: "alarmingly large fraction". Two options here: one person found it, and the information spread; multiple people had the same idea and each spread the word, though to a smaller group each. Either way, I find it fascinating that in the competitively-driven world of grad school economics there was still an individual propensity to reduce the advantage held by the person or persons who originally found the solutions.

Supposing that the line was clear and that using the solutions should be considered cheating was obvious to all involved, what aside from some sense of altruism could account for the original discoverer increasing the level of information in others, considering that the marginal person added to the "group in the know" increases the chance for being discovered? And what about the loss suffered from a reduction in class standing by not being the only person to score, say, in the top 1% (providing that the person is smart enough to make a few errors to reduce suspicion)?

Another Idea, Free For the Taking

(Whoa. Been a while. But then, traffic's been up since I've been gone. Maybe I should take that as a sign...just not now...)

Via Division of Labour I saw this odd article at FindLaw.

According to a recent study, many consumers are unaware that price discrimination occurs over the Internet. But apparently, it does.

The Internet allows shoppers to easily compare prices across thousands of stores. But it also enables businesses to collect detailed information about a customer's purchasing history, preferences, and financial resources -- and to set prices accordingly.

So when you buy an airplane ticket or a DVD online, you may pay a higher - or lower - price than another customer buying the very same item from the very same site.

I can't claim to be someone who is shocked at the notion of price discrimination. In fact, I tend to think a free-wheeling allowance for such things would do a world of good in a lot of cases. (To wit: weight is the single biggest factor in determining how much fuel an airplane uses, which in turn is one of -- along with wages -- the biggest determinants of the cost of operation. Imagine how much better off we'd all be if airlines charged tickets according to combined passenger weight. Not just you, but the luggage you bring as well. Lighter loads, less fuel use, lower ticket prices. The marginal person isn't decisive between one flight being profitable and one not, but the aggregate benefits could be considerable, and worth spreading out over all the passengers.)

The article at FindLaw strikes me as yet another example of knee-jerk "My God, there ougtta be a law!" reactions so popular when someone encounters something that doesn't satisfy their desire for everything everywhere to be totally blind to the existence of differences between people. But it is decently written.

Even if you find such things distasteful, there really is no need for regulation. In fact, this would seem to be a great new opportunity for people with dramatically better programming skills than I. Why not simply start writing programs that alter the contents of Cookies to match whatever characteristics go along with the lowest possible prices? I can imagine small programs that scour databases (wiki?) of data on commerce sites and take whatever people report as displaying lower prices during shopping. Places like MajorGeeks and SnapFiles have gigs of programs designed to wipe out cookies from your machine. Why not put them to a little more work?

Not Enough Choice!

Too much choice getting you down? Not me. I don't know about you, but I frequently find that "the market" doesn't provide exactly what I am looking for, i.e. the stores don't carry a supplier's full line of products, i.e. there's not enough choice to make optimal decisions.

My most recent disappointment along these lines was looking for 20 lb. white 100% cotton paper, the least expensive and lowest quality I could use when handing in my dissertation to GMU:

Cotton papers come in a variety of weights. 20, 24, or 28-lb papers are most suitable. 32-lb paper is fine as well, though it will cost substantially more than the others.

This is my cost effective choice, yet this (in white), at about twice the price (and quality), is the only in-store option. Yet, that additional quality is worthless to me...

I should note that all paper options are available online, at about the same cost, so my paper choices are really limited in the short-run...

Make War, Not DVDs

The Blu-Ray vs. HD-DVD fight has a chance to take a more...collaborative turn.

I still don't think a new DVD format is going to be terribly popular for a while, since the benefits of switching formats yet again seem to be quite small. Not that many people have a home entertainment system that can do justice to the leap from DVDs to even higher precision. Unless you can offer some serious changes from current DVDs (much as CDs did over tape), I'm betting it stays in the realm of HD-TV and lingers on as a toy for the early adopters and true afficianodos.

But that's just my guess. I'm often wrong.

Here's a funny quote from the story:

"The most important thing to understand here is no one really wants a format war," said the source who asked not to be named.

No, not "ha-ha" funny. Funny in that way that makes me scratch my head. Truth be told, I wouldn't mind a format war at all. SInce I have absolutely no plans to invest in yet another player and yet another copy of a movie I really did think I'd watch enough times to warrant buying on disc, I'd be more than happy to see the two sides slug it out. Make them better, cheaper, faster, whatever. I'm not paying. And if I finally do cave in and buy the new format, I'll be far more likely to believe I've gotten the better technology. Betamax might have been better for images, but it wasn't a better system.

No, the companies don't want the format war, since there's a chance one of them might lose. Me, I say the ability to have winner and a loser is better incentive for a company to try harder. So, ladies and gentlemen, have at it.

Foreign Affairs on Broadband

Much like my reaction to the odd little piece from Lawrence Lessig, I find this article in FA magazine a bit...slippery.

The article strikes me as little more than a long-winded whinge about how the US' broadband network isn't the crown jewel of the world anymore, and it's all the government's fault for not doing enough.

The Japanese government played a critical part in these developments. It made well-considered and timely decisions to allot cost-free spectrum for each new mobile-phone generation. In so doing, it gave up badly needed revenue, but it retained full control over the terms of licensing and the flexibility to reassign spectrum according to future technological developments. In 2007, the government is expected to announce new spectrum allocations for the fourth-generation broadband mobile phones planned for 2010. Meanwhile, to protect consumers, the government has set important conditions before granting a service license, insisting that a carrier's network cover a certain area of the country and guarantee a certain level of service (with minimal dropped calls or interference, for example).

By contrast, U.S. mobile-phone policy was born of a colossal blunder from which the industry has yet to recover fully. In the early 1980s, after the management consultancy McKinsey estimated that there would be little demand for mobile phones and a small prospect of profitability, the FCC carved the United States into 734 tiny mobile-phone districts. It handed out two provider licenses in each district: one automatically went to the regional telephone company, and the other was drawn by lottery. The resulting infrastructure was cripplingly fragmented. It could not support nationwide calls, and inefficiencies and expensive connection rates translated into sky-high charges for customers.

By the use of juxtaposition, the implication is that the higher costs of mobile phone usage in the US is somehow a lack of the government imposing "important conditions". Rather than letting a number of standards compete, it's simply better for the government to subsidize one network language and have everyone's money pay for it, so that those who use it (the early adopters) don't face too high a price for entry. This leaves the government in the position of having to continually monitor the system to see what's necessary for the next generation of phones. The future of companies is tied up intimately with the decisions of the government. Why doesn't this bother people who fear the imposition of biases from massive corporations? NTT DoCoMo has far more money to spend on R&D and lobbying efforts -- is it a surprise that their standard is the one to be picked by the government? Let me propose a straw-man, just for the fun of it: what would be the reaction to the US government suggesting, every time the policy is reviewed, that Verizon just happens to have the best standard, and since it already covers the entire nation as a result of the government deciding that it had the best system last time, to go ahead and subsidize Verizon to roll out the new kind of service?

Why is innovation, and the cost thereof, something to avoid?

My "favorite" part of the entire article:

Sadly, U.S. mobile-phone competition is still based on price and the extent of a company's coverage rather than the kind of advanced data services available in Japan and elsewhere.

Ah, yes. It's just too bad that the US consumer has to make decisions based on such archaic things as prices. Don't we all realize that subsidized cell-phone coverage (as the Japanese government and Euro-nations have done in abundance) would make it possible for us to buy soda with our phones!!! A life steeped in the grand mosiac of simple push-button interactions is being denied us by a government that refuses to get more involved.

In addition, the article uses a metric that I find as problematic here as when it's used to argue for greater government participation in health care: "access". The question, as framed by the FA article, is about how many people could potentially use the network -- not how many people actually do. Greater access is not synonymous with greater use, as any health policy researcher is likely to tell you.

Here's another slipshod bit of reasoning:

In 2001, Robert Crandall, an economist at the Brookings Institution, and Charles Jackson, a telecommunications consultant, estimated that "widespread" adoption of basic broadband in the United States could add $500 billion to the U.S. economy and produce 1.2 million new jobs. But Washington never promoted such a policy. Last year, another Brookings economist, Charles Ferguson, argued that perhaps as much as $1 trillion might be lost over the next decade due to present constraints on broadband development. These losses, moreover, are only the economic costs of the United States' indirection. They do not take into account the work that could have been done through telecommuting, the medical care or interactive long-distance education that might have been provided in remote areas, and unexploited entertainment possibilities.

The economic study isn't the issue -- the expansion of the idea is. "Long distance eduation in remote areas"? Well, noting that Japan is smaller in size than California (roughly 150,000 sq. mi. vs 163,000 sq. mi.), this distance is considerably different when we have to think of vast swaths of the country as "remote". And it is at those places the author simply leaps from access to uptake that are more likely to face larger hurdles: namely the costs of a computer that could take advantage of long-distance learning. Undoubtedly some people would be thrilled to have it, but is the serious suggestion here that the poor, remote areas of Texas, Wyoming, North Dakota, Colorado, Kansas, Mississippi, and the rest simply the cost of a cable modem away from an economic boom? Can you really do manufacturing, farming, or welding through telecommuting? Or could it be, rather, that information-economy based jobs are located in population centers that are already well covered by cell phone and broadband access? And might it be that Japan, with considerably less physical size, has a far larger share of its population engaged in "knowledge" work (finance, consulting, programming, and so on and so forth)? The density of population centers, as well as the incidence of the kinds of users (people simply surfing the net vs. those running small businesses out of their homes) makes a large difference that the FA article seems to simply ignore. For comparison's sake, Tokyo is on par with Poughkeepsie.

As a final note (yes, I know, you're relieved to hear that), I would suggest a refresher course in political economy for Thomas Bleha, as this section is woefully problematic:

By 2010, the [President's Information Technology Advisory Council] should also aim to make available high-speed broadband access to two-thirds of all U.S. households for $30 to $35 per month. The key to reaching this goal is the government's taking the lead in creating a strongly competitive environment for DSL, cable, power line, and newer wireless broadband technologies. The more these technologies compete among themselves, the sooner Americans will have access to faster, cheaper broadband service. And with enough competition, there should be no need for government financial incentives.

His suggestion seems to be that these incentives would simply...fade away. How often does a privileged group allow the source of its privilege to simply wither away? Because the benefits of the policy accrue to such a small group, and the costs to such a large group (everyone else), we can expect to see whomever it is that has been given a cheap ride to fight for continuing the policy, with little coherent effort against them.

Despite how much it costs the US, and impacts farmers around the world how is Bush doing on simply reducing those farm subsidies?

Philly Wifi: 40 Bucks Makes All The Difference?

Oh, well then. That's so much better than I first thought:

Though Philadelphia is seeking help from private companies to build the system, a nonprofit organization would own it and sell wholesale access to Internet service providers, which would market it back to city residents and businesses at capped rates expected to run between $16 and $20 per month.

It's not that the city government of Philly is going to provide free wireless to downtown. Instead, the city has created a non-profit organization that will control access in order to sell it to ISP providers who then get the privelege of selling access to customers at rates defined by...yes...the city. Because, after all, the more layers of opaque, non-responsive bureaucracy one can put between customers and the people who "set" prices, the better.

What does all this accretion of regulatory reach and manpower provide for the city (at about three million at year for the next five years)? Wireless access at...wait for it...$20 a month instead of $30-60. Even taking the high side of the range, is it really possible that the one thing blocking the traditionally underserved from getting internet access is truly $40? Or could it be the lack of computers in the first place? Perhaps I'm wrong about this, but my view of the average individual in the communities on the lacking side of the technology gap is that these aren't people/families sitting right at the margin, waiting for broadband access to drop a couple of dollars to finally get online. Local businesses do fine with limited internet access all over the country -- a phone line is all that's needed to take credit card transactions.

Councilman Frank Rizzo sums things up nicely:

"If this government did a great job filling potholes and plowing the street ... then I'd say 'Go for it,'" said City Councilman Frank Rizzo. "But I know what goes on under the rocks, and I'm just not confident."

Rizzo predicted that the final cost of the system will far exceed the city's initial estimates. He also said the city shouldn't be venturing into the Internet marketplace at a time when it is cutting services at public libraries.

The only quibble I have is that, apparently, the city government isn't -- from what I can tell -- actually responsible for doing anything in this set up. They picked a price, blocked off an area, and said "build it for $15 million, or go away". Down the line, it's not government employees that will fix the boxes on streetlights, it's the workers from the company that built the infrastructure responding to complaints filed to the non-profit board who has to get in line with all the other complaints being filed at the company. And when the price is capped for each area, do you really think the company will respond with the same speed as they might for customers with a choice? So all the city government has to do is see that the $16-20 rule is enforced and sit back and congratulate each other on a job well done.

So, for the privelege of paying a few dollars less a month, Philly gets slower service, unclear lines of responsibility, and service that will likely be spotty and quickly outdated at best. Or you can just write off those tax dollars and buy better service for yourself. For those who don't service will be $20, for those who do, it's $60+your share of tax expenditures. Good enough for government work!

The upside? Might provide an interesting experiment on community attitudes and pressures towards/against mistreatment of common pool resources when you look at which streetlight-top-wifi boxes break most frequently, or go missing altogether.

Open Source In Brazil

Brazil: Free Software's Biggest and Best Friend

SÃO PAULO, Brazil, March 28 - Since taking office two years ago, President Luiz Inácio Lula da Silva has turned Brazil into a tropical outpost of the free software movement.

Looking to save millions of dollars in royalties and licensing fees, Mr. da Silva has instructed government ministries and state-run companies to gradually switch from costly operating systems made by Microsoft and others to free operating systems, like Linux. On Mr. da Silva's watch, Brazil has also become the first country to require any company or research institute that receives government financing to develop software to license it as open-source, meaning the underlying software code must be free to all.

My initial reactions are two-fold. First, I wonder if this is something akin to cell phone usage in developing countries. Since the cost of landlines and maintenance plus the wait time to get one from the government are all so high, cell phones are quickly becoming commonplace in areas that hadn't had phones of any kind. Is free software for computers going to make computer access spread more rapidly than if these people and places all had to pay license fees to Microsoft, Apple, or whomever?

Secondly, there's a difference between someone knowingly contributing to the open-source stock of code, and someone being forced to give over innovations to it. Perhaps since the companies and institutes that are developing software with the suppose of government aid would have otherwise seen their products become owned by the state the open-source licensing regulation isn't necessarily an impediment to advance. If that's not the case, though, and these companies were simply getting support without the expectation that their work would be forfeit, I'd worry that declaring it all open-source upon creation will stifle some of the work. Without the ability to retain rights and thus make some sort of return, the incentive to produce may be dampened.

ACT vs. SAT

On the advice of my unbelievably dedicated guidance counselor, I took the SAT and the ACT:

Most students will score about the same on both tests.

My advice: Underachievers, take the ACT! It seems clear to me that many top-performing kids are hyper-stressed, and can't deal with another test. But those of you who find yourselves way down in the class rankings, and can't understand why high school is stressful for so many, may find the marginal benefit way higher than the marginal cost.

H/T: The other Craig Newmark.

Space or Aeronautics: Is there room for government in either?

As most people know by now, big cuts are coming down the pike for the aeronautics division of NASA, as the administration chooses to refocus funds on the space mission of the agency. The agency will be looking more towards competitive sourcing as a way to develop projects. Not a terrible thing, in my mind, though I do think there are still a few things NASA is right to have under its jurisdiction.

All this happens, of course, at the same time that private initiatives into reaching space are increasing their tempo. Fast Company has an interesting piece on a company called SpaceX and their Falcon I, looking to put small payloads into orbit on a budget far below the traditional cost. (I promise it won't be all Fast Company, all the time. I just recently found their blog.)

If industry is the place to turn for aeronautics innovation, and the private sector is responding to the success of SpaceShipOne, then what exactly is it "we" are hoping public fund expenditures will achieve?

Organic to Ordered: The Wrong Direction?

If you haven't, yet, you really ought to read Prof. Kiesling's three posts on institutional change: one, two, three.

Done? Good. Now, take a read through this concise discussion of the loose organization of internet "governing bodies." Then (yes, there's more), take a quick gander at this short note about rising sentiment to have the control of the internet centered at something like the UN.

Yeah, I got shivers too.

No, it's not truly competing groups, but I do think the differentiation between controlled, centralized organization versus a more organic growth illuminates the potential hazards of something like the above occuring (over and above it actually being the UN that decides it should run the internet).

T&B Makes the C List!

According to this post, the C List of bloggers include those that get between 150 and 1000 hits a day. Of course, there is still the discrepancy between "visits" and "hits", but since T&B's traffic has ticked up and is now running between 700-800 visits/1000-1300 page views a day, I think we qualify.

Does this mean we get invited to parties with Stephen Baldwin now? (And, if so, do A-Listers go to even better parties? Cuz, you know, there's someone I'm dying to meet. Incentives matter, my friends. Just don't tell my fiancee.)

UPDATE: Unforgivable, really. I forgot to mention that I found the link via Newmark's Door.

Last Handout to Clarksville?

I try to keep politics out of my posts for this site. In this one case, I'll just mention that I've been less than enamoured with Bush's budgetary policies. Which is a way of saying that I found this bit of news all the more refreshing:

Bush Budget to Scrap Subsidy for Amtrak-Sources

WASHINGTON (Reuters) - The Bush administration will for the first time propose eliminating operating subsidies for passenger train operator Amtrak as part of a push to cut budget deficits, people close to the budget process said on Tuesday.

I recently took a trip to Savannah, GA, from DC on Amtrak. Aside from being thrilled and grateful that it didn't derail, I spent most of the time simply stunned that it had been allowed to function for so long. At the height of holiday travel, the train was maybe 60% full coming out of DC, and got worse as it got further south. In general, the train system is tedious, slow, and most importantly, priced very similarly to air travel for the distance that I wanted to go.

I won't be sorry to see this thing shut down. Since Amtrak only owns the Northeast corridor tracks (the rest being owned primarily by private companies like CSX), I'm guessing that area (which also has the nicest trains, best times, and most convenient stations) won't be shuttered entirely. If there's no demand to cover the cost that it takes to run the railway, I can see no reason to continue paying to keep the system in place.

One of the arguments for the handouts I traditionally see is that it brings the rail to almost on par with road and air travel, since those systems get a good deal of government support through paying to build and re-pave roads or improving the national airspace system. Of course, the government consumes far more of these services than it does the rail way. In terms of the airspace system, as I've noted before, there is a serious coordination issue at stake that make it (to some extent) worth spending the money to avoid the potential downside of coordination failure. Additionally, the airspace system is running at near capacity, which means that dollars spent go towards expanding capacity, throughput and performance of a heavily taxed system. While I do think there is plenty of room for the private sector to function here, if we're going to ignore debating first-best solutions, and some form of handout is going to be made, it seems a far better use of money to push the limits of air travel than to pour money down the black hole of rail travel.

In any event, I appreciate the cut in subsidies. Now, on to farms, airlines, textiles, anti-dumping legislation and...what, too hopeful?

More GMail Invites to Give Away

For those that are interested, I've got 6 more GMail invites to dole out.

Leave a comment if you're interested.

Rain, sleet, snow or privatization

Andy Kessler wrote an opinion piece in the February Wired, "Stom the US Mail!" (UPDATE: Now published) Ironic that this article arrived, delivered by the US Postal Service into my government regulated, USPS approved, postal receptacle.

Andy's primary argument is that if the US Postal Service is privatized or dissolved, the mail will still be delivered. The nationwide package delivery companies would be likely to pick up the slack or buy the Postal Service assets to continue offering inexpensive postal service.

The existence of at least 3 major international shipping companies is proof that the postal service no longer benefits from government protections. All three companies have networks of infrastructure that deliver packages to ANY home or business in the United States and most of the World.

Over Christmas, I discovered that FedEx Ground service was in fact less expensive and faster than USPS Priority to most of my destinations. I was also able to track my package for constant updates. USPS tracking has yet to deliver any information on my packages until after they arrive.

I think every reasonable person with faith in the free market believes that under a condition of competition, consumers will benefit from cheaper services and more innovation. Why have we continued to ignore the postal service monopoly?

Another postal pet peeve, I have about 300 $0.32 stamps. These stamps are no longer good for mailing a letter. My investment in 1999 should have appreciated. If only adjust for inflation, shouldn't $0.32 5 years ago be worth $0.37 today?

To be fair to all involved, the USPS claims they are as efficient as a private business in this response to another editorial.

Andy's article is excellent I recommend picking up a copy of Wired. I will post the link when it becomes available.

Is Disaster Relief A Zero Sum Game?

Clare Short seems to be suggesting it is. The former International Development Secretary suggests that independent relief efforts by the US and its coalition (Japan, India, and Australia) detract from the work of the UN:

“I think this initiative from America to set up four countries claiming to coordinate sounds like yet another attempt to undermine the UN when it is the best system we have got and the one that needs building up,” she said.

“Only really the UN can do that job,” she told BBC Radio Four’s PM programme.

(Note: I'll forego more response to the suggestion made by Short that the US has traditionally been bad at responding to international disasters by noting one thing: Darfur.)

A fuller argument -- and it's not one that Short is making here, really -- is that there are benefits to housing the relief efforts under singular control. With a unified command structure, the relief efforts would, I think Short would agree, benefit from potentially greater information sharing and coordination of efforts as well as wasted efforts being avoided. Transaction costs of working across organizational boundaries would, in effect, be reduced through limiting the number of people calling the shots in responding to the crisis. Work done outside of this central structure incurs a loss from gaps in mismatched work or useless expenditure in duplicated efforts; the opportunity cost of this loss is the value the money/capital could have had in being put to efficient use.

Trouble is, things don't always work that way. Especially in cases such as disaster relief, flexibility and response time, and specialization of skills become important factors to consider. The sheer scope of the disaster means that a lot of issues have to be addressed, from clean water to bacteriology to housing to food distribution, electricity, communications, and many, many more. Centralization limits the number of people with authority to allocate resources, and thus limits the the amount of knowledge that can be held at any one level. Even if the role of superiors is largely managerial (that is, subject experts are still the ones making informed judgements, and look only to the leadership for yea/nay decisions or administrative assitiance), the ratio of leader/doer could be dangerously small and declining as new responsibilities occur. For instance, as the death toll climbs in multiple countries, the sheer number of people involved in the relief effort climbs. The leaders of sub-organizations find themselves competing for an ever-diminishing resource: the time and attention of superiors. A more decentralized system allows for workers to focus on their area of experise, and not have to wait in line to get the go-ahead to act. Additionally, the incentives for leaders of sub-organizations changes, perhaps subtly, towards presenting information that would raise the priority level of their subject-area in the eyes of the ultimate decision makers. This isn't to say that relief workers would be self-aggrandizing; rather, between the person working to secure safe water and the person working to prevent the outbreak of contagious disease there could be competition for the superior's time manifesting itself through the presentation of information in an attempt to make one subject appear more pressing than the other. The decision-maker then has to know enough to weigh comparative advantages of both efforts. Certainly people need water, but if you can make do with X amount, is that of lower priority than worry about the onset of disease that could kill another 50,000 people? How many will die without the water, though? And which system will better use this or that 10, 20, 100 people lined up and ready to work, right now? A decentralized system avoids some of these problems (not all of them, by any means; the question is one of scale).

Of more interest to Short, apparently, is the accrual of reputation based on the response efforts. Each new independent responder somehow de-ligitimizes the work of the others, according to what I can make of this view. Is the worry that people may respond on their own in the future, once they've seen that the US has chosen to work on its own? If the decentralized system proves as or more effective, what is the possible loss to the world by not having the UN coordinate it all? Shouldn't the concern be over what method best serves the people of South East Asia?

More DVD Price Wars

Remember that in early October, Netflix raised its price to $22 for it's monthly service, only to have Blockbuster enter at $20. Netflix countered at $18, and blockbuster countered at $17.50. Well, they're still going at it (rr):

How low can you go?

Like a contestant in a limbo competition, Blockbuster Inc. on Wednesday lowered the price bar for the second time in two months in its war with DVD rental rivals on the Internet.

The video chain slashed the monthly fee for its online subscription service to $14.99 from $17.49, undercutting Netflix's $17.99 rate and the $15.54 charged by Walmart.com, the online branch of retail giant Wal-Mart Stores Inc...

Blockbuster started its online service in August; it has 500,000 subscribers, compared with Netflix's 2.5 million..

Also, while Blockbuster promises 30,000 titles, and Netflix claims 25,000 titles, WM has only 16,000 titles. At the relevant margins, to whom does it make a difference?

The Thing to Say!

One Mr. Mele Kalikimaka Turner brought some Christmas cheer to a few people in Hawai'i this weekend--those willing to pay for it, that is.

HONOLULU - A shortage of Christmas trees in Hawaii has raised prices to more than $200 each, drawing complaints from cost-conscious shoppers who are eager to buy trees before the holiday.

Tree buyers camped outside a shopping center hours before dawn on Saturday to await a shipment of 130 noble firs flown in from Oregon. A crowd of more than 200 people had gathered by morning, when a salesman announced the trees would cost $165 to $200 each.

Consumers complained that was at least twice the price charged just a few days earlier. In previous weeks, trees sold for $30 to $70.

To me, $200 for a live, healthy fir tree on a tropical island 2400 miles from the US just a week before Christmas sounds like a pretty good deal. Sadly -- and really, you could have predicted it -- Mr. Kelikimaka Turner was labeled a "gouger" by some:

"I am not gouging," said Turner whose first name means "Merry Christmas" in Hawaiian. "It's a fair price for the time and energy. There's a lot involved in bringing a tree to Hawaii."

Sounds about right to me. And the best part of the story is the nicely encapsulated description of the mutual benefits of exchange:

"He thinks he's got us because he's got the trees. But we have the money, and maybe we won't pay," shouted Barbara Taylor of Honolulu.

Merry Christm...er, mele kalikimaka!

Sweetcream Economics?

Fascinating story on NPR this morning about the rise in cow-sharing arrangements in order to acquire fresh, or "raw" milk. Apparently, getting milk straight out of ol' Bessie is illegal in all but 28 states, unless you happen to own your own cow.

From what I can surmise by reading the CDC reports linked to from the above page, the potential of disease from unpasteurized milk, apparently, is enough of a concern to make sure people aren't allowed to go straight to the source. (Were I an immature person, I might make a joke about the bureaucratic desire to wean folks off the natural teat and onto that of the state. Luckily, I'm not.) The other bit of insight from reading one CDC report is that the burden of proof has somehow landed on the potential seller:

Persons who drink unpasteurized milk and milk products might believe that these products taste better, provide greater nutrition than pasteurized products, and/or decrease the risk for various medical conditions (4). However, the benefits of consuming unpasteurized milk and milk products have never been validated scientifically (5).

Questions: Given that plenty of other unpasteurized items (juice, for one) are far more readily available, not to mention the numerous things that are dangerous on ingestion food object or not, is the potential for disease large enough to warrant making the sale illegal? And, why is it incumbent on the seller to prove that there is scientific validity for health claims in order to avoid a regulatory requirement (the pasteurization)?

For those with an interest in cow-leasing, I'd suggest starting with some interesting discussions on the economics of cow herds. If you like what you see, you can move on to investigating various schedules for the acutal costs of beef cow leasing. I imagine the process is similar for milk cows.

And, until someone can get Don Boudreaux to hurry up on his policy changes, here's your FDA warning to make sure I'm in compliance.

Home Entertainment Coordination Games: The DVD Wars

Looks like there's another fight heating up for home entertainment formats: HD-DVD vs. Blu-ray.

"The problem is that we're getting into another round of format wars and until it shakes out, consumers are not likely to buy much of anything," Michael Gartenberg, research director at Jupiter Media, told TechNewsWorld.

"Enthusiasts and getting to market first don't matter," he said. "The enthusiasts are going buy no matter what. If they pick the wrong format, they'll buy again. It's the mainstream that matters."

While DVD players a getting closer to making VHS a thing of the past, I think it's going to be a while before people buy into an even newer format for DVDs even if everyone comes to an agreement and picks a single format.

My quibble with the second quoted paragraph: actually, enthusiasts can matter a great deal, depending on what they're enthusiastic about. In the VHS v. Betamax fight, some early adopters heralded the higher quality of Betamax. But there were enough early adopters who cared a bit more about price and availability than overall quality, and out went Betamax. Of course, someone else had to sort of settle on a format to put in video stores, but if my memory serves, there were plenty of places that had movies in both formats. The Betamax players were just enough more expensive that my folks got a VHS player since they couldn't really see the difference in quality (and honestly didn't care that much about it -- their switch to DVD came when they realized they soon wouldn't be able to buy their favorite movies on VHS). So, if there are enough early-adopters who decided to care about some feature of Blu-ray over HD (or vice versa), it may well tip the scales in favor of one format or another.

Math Prizes

I'm bad at math. Or, at least, I'm slow at math. Well, maybe I'm not slow all the time so much as mechanical and lacking insight. Ok, to be precise, what I am is a fine example of the true mediocrity of the US public education system.So now I'm running to play catch up, and I'm liking it. Which is a too-long way of saying I find this very cool:

Why do the unsolved problems of maths matter?

To commemorate the occasion and provide a suitable launch for mathematics into a new century and a new millennium, one hundred years later, the newly-formed Clay Mathematics Institute (CMI) of Cambridge, MA, devised its own list of old nuts that have yet to be cracked and formally announced it at the Collège de France in Paris on 24 May 2000 in a lecture entitled “The Importance of Mathematics”. While to some the latter might sound like an obvious oxymoron, there are some circumstances surrounding this list of problems which indicate that this is not just mathematics for mathematics’ sake.

For one, the founder and sponsor of the CMI is not himself a mathematician, nor did he read maths at university. Landon T Clay is a Boston businessman who believes maths research is underfunded and would like to see a wider dissemination of mathematical knowledge. Then, there is also the attractive price tag of $1,000,000 attached to each of the seven problems to be won by the first person to demonstrate a correct solution. So if you thought maths couldn’t make you rich and famous, think again!

The list of problems itself has been carefully selected to include not only the most difficult ones, but also the ones whose solutions would have a relevance to areas of mathe-matics and the other sciences beyond the one in which the problem was originally for-mulated, hopefully leading to further serendipitous discoveries en route. Thus, far from being formal exercises, the seven prize problems are widely considered the most important problems in mathematics.

These sort of pull-prizes seem to work well. I've always thought it would be a more interesting way to go about science funding for not only NASA, but medical research and more. I'd always appreciate a little competition behind the ways my tax dollars get parceled out.

Link via Political Theory Daily Review.

An Oversight?

Well, the polls are up for the Weblog 2004 Awards. And what I find more disturbing than the lack of a nomination for T&B is the complete lack of a Best Econ Blog award.

Is it really such a dismal science that it doesn't even merit its own category?

The Internet and the Commerce Clause

Last week I made note of a Wahington Post article regarding VoIP and the barriers to expansion that have kept providers out of some states. You can read the original short post at My Street.

In summary, Vonage won an FCC ruling that state regulators do not have authority governing internet phone service. The FCC would like to keep the power of regulation to itself. Specifically, Michael Powell declared, "...several technical factors demonstrate that VoIP services are unquestionably interstate in nature." I have watched Michael Powell make many anti-free market decisions in the past, but I wholeheartedly support this move.

Vonage and other VoIP providers are able to provide service to the entire world by shipping product from one office. This is clearly interstate business. Improved communications, and more specifically the Internet, has enabled many companies to instantly expand a local market to a global market. Even from thousands of miles away these companies introduce competition, new services and better quality for their customers.

I can personally understand the barriers these service providers were battling. While selling security electronics to the 50 states and Canada, I found less regulation (albeit more taxes) selling to Canada than I did selling to a nearby suburb. Each of the thousands of police districts had created a unique set of regulations and each demanded various forms of registration, taxation or fingerprinting. Sending employees to be fingerprinted in 50 states is a uniquely expenisve barrier to interstate commerce.

I hope that this FCC ruling will be one of many similar rulings to open up our markets to more competition. Satellite TV and Radio would also benefit from relaxing the localized regulation that prevent individualized content in each geogrpahy and prohibit one geography to receive content from another geography. More on this later.

Have you been affected by barriers to interstate commerce? Please share your thoughts.

Wal-Mart's Next Victims

On this page, Forbes introduces its analysis of WM's next commercial victims, after its pummeling of Toys R Us. Click for a slideshow of the 5 next big ones:

Of particular interest is how WM is becoming an ever larger retailer of gasoline:

There are 1,555 stations on Wal-Mart properties, 300 of which are operated directly by Wal-Mart's warehouse arm Sam's Club and the rest by third-party vendors like Murphy USA. Launched in 1996, its pumps already have a 3% share of U.S. retail gas sales--the tenth largest in the U.S. As Wal-Mart's share grows, the only question is whether Wal-Mart will oust its vendors and go it alone.

[Also posted on Always Low Prices.]

Cross Border Goods Arbitrage

Appearantly, a small town in eastern Germany, G�rlitz, has the equivalent of Wal-Mart in its area, Poland(If the link doesn't work go to this post at the Corner where I found it):

In addition, East Germans, to a much greater degree than West Germans, fail to see the causal relationship between their actions and the results of those actions. In G�rlitz, for example, a city on the Polish border, people normally do their shopping in Zgorzelec, on the Polish side of the Neisse, because things cost almost half as much there. At the same time, stores are going out of business in Gorlitz and more and more people are leaving because there are no jobs. Gorlitzers complain about this and expect the state to do something -- but they keep going to Poland, where things are much cheaper and business is booming, to shop, fill their gas tanks, and get haircuts.

NetFlix, Wal-Mart, Blockbuster, Cable, & now Amazon

The movie rental market is going to get quite crowded:

Netflix already has new competition in the form of Blockbuster Inc., the nation's largest movie rental retailer. Earlier this year, Netflix increased its monthly fees to $22 despite Blockbuster's entry into the market with an offer of $19.99 a month.

Netflix reversed course on Thursday and said it would cut the fee to $18 a month in response to the possible arrival of Amazon. Blockbuster soon followed suit and said yesterday it would cut its monthly fee from $19.99 to $17.49....

But even as it defends against new competitors, Netflix is preparing to open a new front in the online movie rental business. Earlier this year, Netflix signed a deal that will allow it to deliver digital copies of movies over the Internet to TiVo Inc.'s 1.5 million subscribers.

Subscribers would be able to download the movie onto the TiVo digital recorder and replay it, just as they do with television programming that has been stored on the device's hard drive.

Cable and satellite companies are already delivering similar video-on-demand services.

Google Desktop

You may now use Google to search your hard drive.

Yes!

Brains out for Bucks

According to the Washington Post, brainy game shows are now dominated by former academic quiz bowlers. One question: what took them so long? Answer: They've always been there, but the big money is bringing them out in droves:

Tom Waters, a Savannah, Ga., golf shop owner widely considered the grand master of the game, changed his view of TV game shows, which he held in disdain despite his own $12,500 win on "Jeopardy!" nearly 20 years ago.

"There was a split in the community. Some of us thought 'Millionaire' was beneath ourselves. Some would swallow pride and prostrate ourselves."

At first, Waters took what he considered the higher ground.

"Then they came back with $10 million and I thought, 'I'm less a purist than I thought,' " said Waters.

He passed the tryouts but his fingers were too slow in the first round to get into the so-called hot seat and compete for the big money.

"The biggest hurdle is blind luck," he said. "The hardest part is getting drawn. I'm amazed at the number from the quiz bowl community that got on. One night's episode, there were two people I knew on it."

Book Reimportation?

One of these days, I'll get back to some original ideas. Right now, work and life demands mean that I'm operating largely on the "reactive" side of things (yes, that's a quick dig at Scientology, something I both loathe and can't seem to read enough about).

That said, take a quick look at this post from the appropriately lauded Marginal Revolution:

The economic problem is simple: professors assign a book without worrying much about the cost that students will pay. In fact a pricey book might be a nice way to drive down your enrollment and lower your workload.

I've recently started another class in the evenings that requires a hefty textbook. (The subject is almost embarrasing to mention; suffice it to say I should have had it years ago, have essentially taught it to myself, yet need the paper documentation for future advancement.) As I learned to do WAY back in grad school (that is, a couple of months ago), I went to Amazon and looked to see if they had a copy.

Of course, they did. But what they also have is a "New and Used" section from affiliated booksellers. Usually among the first results you receive after having become enticed by the lower price for a NEW! book and clicking the link is somene selling the "International Edition" of the book you might be interested in.

Here's an example. Compare this price with the price on the second listing for Gujarati's Basic Econometrics. (Yes, I'm hawking a book I was a huge fan of. No, that's not the subject I was referring to.)

The price difference is considerable. What's off about the International Version? It's paperback, and the regular cover design is usually shrunk down so that the words INTERNATIONAL VERSION can be printed on the front. Oh, and big text on the back declaring that selling the book in the US or Canada is illegal. Other than that, nothing.

It wasn't until I tought about Cowen's post, however, until I realized that I was being a hypocrite.

I'm thoroughly against the idea of drug reimportation; something I plan to expound on further when I get the chance. Suffice it to say I think the effects would be disastrous to the single best drug research and production facility in the world: the US. And yet, here I am blatantly reimporting books. The rest of the world clearly faces a lower price for these things -- largely because of a lower demand driven by fewer higher-education facilities I would assume -- and I freely take advantage of that by buying it for less than the domestic price and slightly higher than the international one.

Now, I suppose I could make an argument that the price of the books is far more removed from the support of research and teaching that keeps good authors working at universities than is the price of drugs from the labs that find new ones or cheaper and better ways to produce existing ones. I might also suggest that international subsidies for textbooks are a bit less than those for health care and medicines, which places the issue a bit more into the realm of "price discrimination" than drug purchasing in Canada. In fact, the general system of book development strikes me as less distorted by bad incentives, taxes, subsidization, and (perhaps most importantly), slow testing and verification than is the case for drugs.

But really, were I to be ideologically consistent, book reimportation is essentially the same as drug reimportation. Of course, foolish adherence to ideology might not be the best idea, either.

Doom 3

Every so often, journalists discuss the real nature of competition--a mostly-punctuated flux of price cuts, quality enhancements, and total experience improvements--without even realizing it:

The double dose of hotly anticipated games [Doom 3 and Half-Life 2] comes at a time when computer gaming has been in a lull, eclipsed by games designed for play on specialized machines such as Sony Corp.'s PlayStation 2 or Microsoft Corp.'s Xbox. PC games make up about one-fifth of the $6 billion video-game industry, a percentage that analysts say has been slipping in recent years.

But the PlayStation 2, the most popular console, is approaching the fourth anniversary of its U.S. release, and Sony has indicated that it doesn't plan to rush its follow-up to the market. Analysts such as Vince Broady, co-founder of gamer Web site GameSpot, say that pause creates an opportunity for computer game companies to win back players looking for a new thrill....

Even for computer gamers who don't care about Half-Life 2 or Doom 3, the releases are significant because the core software, the "engine" that helps create the games' environment, will probably be licensed by other game developers for years to come. Already, the upcoming sequel to a massively popular online game called CounterStrike is to be based on the Half-Life 2 engine.

The company is a regular co-sponsor of tournaments where the most dedicated gamers come to face off in weekend-long game sessions. Linda Kohout, a marketing manager who focuses on games, estimates that a typical hard-core gamer influences as many as eight other computer purchases a year.

HP goes to the Penguins

Thought this was an interesting announcement from HP: first notebook with Linux installed.

Apart from issues about usability, I've found no one who doesn't seem to think that Linux is a better operating system in terms of flexibility and reliability. Which is why I've always been interested in why it wasn't a bigger seller. One of the usual answers would be path dependence, arguing along the lines of the story heard in most econ classes: the QWERTY keyboard versus, say, the Dvorak one. The Dvorak configuration has been shown to be more efficient, plus, it's not that hard to switch our current keyboards into that configuration. So why do we persist with inferior solutions? Are people just sort of lazy and/or dumb? (I tend not to think so, but this is often the tone I hear in economists voices when they talk about the fact that people don't regularly conform to models of rationality.)

In Microsoft, issues of (possible) path dependence have gotten big enough to warrant investigations about predatory practices and monoplist behavior. Everyone uses it because, well, everyone uses it. We've settled on an equilibrium that tends to reinforce itself, since the cost of getting out is view to be higher than the benefits gained from the move. And the more people settle into it, the harder it becomes to get out. But, is there really any good reason to stick with Microsoft, other than that fact that it's simply everywhere? If not, should we expect to see increasing migration away from Microsoft as its market share decreases since ubiquity, then, was the real strength?

Wireless net access as public good?

I've no desire to see the government get into business doing anything it doesn't already do. But every so often I see a small reminder that wireless networking just might be a huge boon to large parts of the population if it were uiquitous and cheap.

This weeked I flew to Chicago to attend the wedding of a longtime friend and now a current coworker. This, of course, meant I had to fly back to DC. Which, as luck would have it, was covered by thunderstorms. The delay set in motion a series of events that culminated in one of the flight attendants on my plane having to stop work, for she had hit the maximum hours-per-whatever that had been negotiated by her union. Of course, she lives in the DC area, and flew back on our plane with us. But we all had to wait in the plane for an hour and a half while they found another person who could staff the plane to meet FAA guidelines. The plane was one of those small things, with two seats on either side of the aisle and requires you to walk out onto what feels and sounds like the runway itself to board. Meanwhile, the reputation for baggage loss at Dulles had reached legendary proportions. (On one flight for the carrier I was on, 30 of the 49 people on the flight didn't get their baggage when they deplaned.)

Which is all nervous-making to say the least. Connections were being blown entirely. Everyone was asking if their connections in DC were delayed as well, since they understandably wanted to know if they would be able to get out again. The attendant didn't know. The pilot was trying to find an available crew member. And we were sufficiently far away from the terminal that no one could walk over to get an updated list of flights.

We were not, however, too far away for one guy and his bright idea. Airports like O'Hare have been gearing up WiFi like mad. So he powered up his laptop, turned on the wireless card, and got to the website for the air carrier. He patiently looked up everyone's connecting flight numbers to give them the new times of departure. Everyone was thoroughly grateful, and the mood of the plane eased considerably. Even the people who got bad news were resigned, and started making alternate plans calmly.

The airline couldn't do this on its own. But the ability to access the information was a major factor in keeping everyone pretty calm, and in preventing an already uncomfortable event into a shouting match (plenty of which I've seen over the years).

I taught in inner-city Chicago for a year or so, working with kids to develop technology skills. Access to the internet for research, entertainment, and basic communication skills was essential. But it was incredibly expensive for schools to get on their own. Had the issue been just the purchase of lots of wireless cards, it would have been simple. But wiring an old school isn't even a concern when the internet companies don't have local access terminals in the area. Being able to access information, to me, could be a massive shift in how schools perform, the motivation of students, and more. At this point, I have little but anecdotal evidence to support that, but buy me a beer, and I'll walk you through it all.

As the technology improves to expand distance and speed, a lot of money is going to be spent on protecting people from accessing a wireless network (since the wider the coverage, the more potential for free-riders). Sometimes I wonder if the money wouldn't be better spent on protecting individual computers, and making the wireless network something akin to the telephone in reach and ease of access.

But then, I'd never presume to tell the market how it ought to run.

Getting FAT in the Developing World

The US Patent and Trademark office has given an interesting ruling on software file structure patents that could have big implications for the developing world. The story is here.

In a decision that could have far-reaching implications -- from the fate of free software to the technology used in developing countries -- the U.S. Patent and Trademark Office (USPTO) has granted the Public Patent Foundation (PubPat) a reexamination of a recently granted patent (number 5,579,517) on the use of file allocation tables (FATs), a ubiquitous technique for accessing a file system.

The FAT file system is used in many modern devices, including those that use flash memory, and many operating systems, such as Linux and Windows . Microsoft (Nasdaq: MSFT) has been granted several file-related patents recently, and PubPat believes that all will fall if the USPTO invalidates or limits the FAT patent.

FAT and NTFS are ways to structure the underlying architecture of a computer, and thus informs how the software on the machine is used, memory is allocated, and more. That patents exist on these means that Microsoft (or any other company, technically, though it's not likely at this point) owns rights to the very foundation of a computer's architecture. Doing this allows them to set standards for the software they issue.

Of course, none of this is really a problem. Because so much of the developed world uses MS products, conflicts aren't too terribly frequent or hard to overcome. And none of this is illegal. (Much like Kevin constantly has to remind people who jump up and down screaming that Wal-Mart is "evil" that most all of Wal-Mart's practices that people find objectionable are, in fact, entirely legal, Microsoft was awarded patents legally, and has every right to demand certain standards from licensees. Whether you like this or not is another matter.) It's in the developing world that these practices are so hard to overcome.

Free operating software like Linux could, in fact, be like mana from heaven for entities that barely have enough to buy 4 year old computers, let alone make sure they have the latest editions of Office, PowerPoint, Project, or whathaveyou. Additionally, once a company, government, or individual gets locked into a certain system, it's awfully expensive to get away from continuing to use it. (Call it a form of path dependence that is based on investment in specific assets.) If a company adopts Linux, for instance, and uses the Linux file structure, not only are they agreeing to use certain software now, they have to look into the future and agree to continue, so long as MS holds patents and demands that software licensees abide by rules that eliminate the use of products by open-source operating systems.

If the patents that make this pattern possible are reviewed, and ultimately limited, it might be good news for developing countries trying to expand computing power at reasonable prices.*

In another example of how the software industry mirrors the drug insdustry, Microsoft regularly makes it cheap and easy for people to get licenses for their donated computers. Get 'em started on it for cheap, and there's a good chance they'll stay hooked -- and that they'll start buying the more expensive stuff. Software, this time like prescription drugs, only costs a lot for the very first one. After that, it's almost all profit.

*Lest anyone mistake my intentions, let me make it clear that I'm vehemently against patent-breaking, the abrogation of property rights, or the donation-by-fiat of goods regardless of those property rights. I bring this up to say that there are interesting trade-offs inherent in the question of property rights and the process of development. Remember, open-source software is made that way by its creators, for which I have some admiration. Their choice, not mine.

Arms Races

According to wikpedia an arms race is:

...a competition between two or more countries for military supremacy. Each party competes to produce superior numbers of weapons or superior military technology in a technological escalation.

The term "arms race" is used generically to describe any competition where there is no absolute goal, only the relative goal of staying ahead of the other competitors. Evolutionary arms races are common occurrences, e.g. predators evolving more effective means to catch prey while their prey evolves more effective means of evasion

What's interesting is the many economic relationships that are typified by arms races. Still more interesting is trying to understand the notion of equilibrium in the context of these on going battles, and asking the question is it truly a stable equilibrium, or can technological innovation move you to another equilibrium?

Take for instance code making and code breaking. In Simon Singh's excellent book, The Code Book, he describes the arms race between code makers and code breakers. But eventually code makers "solved" the problem of the keys:

One problem with symmetric key cryptography is that you must have a secure method for exchanging keys between participants. In World War II, the capture of an intact German submarine provided a codebook which let the Allies decrypt German naval messages.

The solution to key distribution came in 1975, when Whitfield Diffie and Martin Hellman proposed public key cryptography. Diffie and Hellman�s scheme, later known as asymmetric key cryptography, permits the use of two keys, one of which can be openly published and still permit secure, encrypted communications. In their scheme, anyone can know the public key without revealing the private key, as the two are mathematically related, but in a way that is very difficult to calculate (based on computing the discrete logarithm of large numbers).

While this doesn't mean that only those whom you want to read the encrypted message will be able to read it, it does require the appropriate key. While someone could guess the key this makes the guessing very hard, and doesn't provide any shortcuts. So brute force is the only methode for cracking the RSA. Will number theorists figure out a short cut for finding the prime number used in the encryption and therefore restore the balance between code makers and code breakers?

Some other examples of arms races:

Google and the people who game its ranking technology, from Delong:

When Microsoft's new search engine (which is, I am told, already crawling the web at high speed) debuts, it will be very good: it will be very good because everyone trying to artificially inflate their search relevance is targeting Google, and Google has to dissipate a huge amount of resources trying (semi-successfully) to undo the efforts of those who are gaming it, while nobody is targeting Microsoft.

Should Microsoft's new search engine garner significant market share, however, its quality will start to degrade as the game-players start paying attention to it.

Deathcare

Remember, in the long run, we're all dead.

That's why there's funeralwire.com, the self-proclaimed Leading Source for Deathcare Industry News.

I bring this up because they provide a great selection of nonscientific surveys of funeral directors--with some questions about regulation and business management.

For instance, Should pre-need counsellors be required to hold a funeral director's license? 56% of 399 respondents said yes, 36% said no.

Why should selling a contract for future funeral services (not performing services themselves) require any training or experience other than sales in sensitive situations?

Still, many funeral directors think having training in mortuary science and/or government licensing should be a requirement for such a sales position. Nope, no regulator capture in this industry...

Other questions are just as interesting. How about When a relative dies and you are asked to take the funeral how much of a discount do you give them off the price? Out of 194 votes:

0-5% 6.19% (12)
6-10% 9.79% (19)
11-20% 27.32% (53)
21-30% 10.31% (20)
31-50 11.34% (22)
51%+ 24.74% (48)
None 10.31% (20)

That's an extremely wide range of discount.

Another cool question: How long has your funeral home been in existence? Out of 180 votes:

0 - 5 Years 6.67% (12)
5 - 20 years 8.89% (16)
20 - 50 Years 15.56% (28)
50 - 100 Years 43.33% (78)
Over 100 Years 25.56% (46)

I wonder what the distribution would be for law firms and accountancies?

Also note that 85% of funeral directors are in favor of using emergency lights in funeral processions, since many cars now have automatic day running lights.

But what if your baby really is ugly?

There's a debate raging over television that I personally find fascinating. Aside from the fact that it could well impact the shows I get to watch (Alias, I already miss ya), the debate demonstrates why statistics, despite it being third behind "lies" and "damn lies" in the ranking of upsetting ways to make an argument, really are important.

Nielsen is planning on expanding the use of its PeopleMeter ratings system. The machines record all the activity a television undergoes while someone is watching it. No longer will "Nielsen Families" have to fill out little diaries with a list of shows watched for the week; now the machine records every flip between that guy that yells while cooking, those home decorating shows taking over the upper levels of my cable lineup, and an episode of JAG. Sounds like it would a great step forward for TV ratings, right?

Well, as you can tell from the article, not everyone is happy:

Nielsen's explanation: Fewer people are watching those shows than the diaries showed.

"They don't accept that," said Nielsen spokesman Jack Loftus. "You can't tell me my baby's ugly."

Of course, those stations whose shows are now lower rated are carping, but that's to be expected. The hottest under the collar, however, are minority groups. Why, you might ask? Potential under-representation, I would respond.

However, it's a little more nuanced than you might think. The problem, apparently, isn't that the new system undercounts Latinos, blacks, Asias, or anyone else, really. The real issue, according to the spokesman from this story (audio news -- I thought it would be fun to throw in a curveball) is that the within-minority sample isn't appropriately representative. By this they mean that the people targeted as, say, "Asian viewers" don't accurately represent the population. The sample is off, they contend, on the characteristics. The average Asian in the population is more or less wealthy, spends more or less time watching television, is more or less likely to speak English, than the average Asian in the sample.

This could well be true, of course. Samples are almost always off by some factor, if only because of measurement error. More likely, however, is that there are distinct selection bias issues at play. The Nielsen system is opt-in, not opt-out, meaning that in order to get a group of people to participate, they have to have chosen to do so. They select into the group, in other words. Bias -- or a difference between the values for various characteristics in the sample and the "true" values in the population -- arises because those factors that inspire someone to agree to be part of the system are functions of some characteristic that may be systematically correlated with those things that make them different from a population average. Television watching is a leisure activity. Someone who has more time to spend in front of a telelvision either can afford the time, or has nothing else to do. Perhaps those people who watch more television have more free time since the time not spent working isn't as valuable, in which case we'd expect a bias towards lower income in the participation group. Or perhaps those people who agree to participate enjoy TV because they can afford a larger set, satellite television, or more TVs in the house; we would expect in that case a bias towards higher income in the participation group. The direction of the bias (higher or lower than the population average) need not go one way in particular...the deviation itself is important here. Education might produce similar problems. More educated families might prefer to read, watch movies, or play games while less educated families might opt for more television viewing.

But there's something else I bet you're now thinking (the two of you that came this far, that is): don't lower income families have less of a chance to read, go out, or whatever, because more of them might be working and having to work longer hours? And might not more educated minority families have a greater number of English speakers, meaning that they can more fully enjoy the programming on TV? Certainly! The covariance between these characteristics is important, since they so obviously directly affect each other. The problem is, this means a potential for even more bias in the sample.

Through no particular effort of the Nielsen group, the samples they get are necessarily going to be different than the population averages. Attempts to correct for these issues while sampling can get prohibitively expensive. Perhaps the critics, then, should be more focused on just how biased the samples are. If the average in the sample is a Latino family of 4, combined income of $100,000, with all fluent english speakers, while the population average is a family of 7, single income household of $24,000 and only a couple speakers of fluency, then there might be strong reasons to change the sampling methods.

This does beg one other question, however: what’s really wrong with the sample the Nielsens use? If there is a correlation between the kind of person who participates, and the kind of person who watches more TV, might this not be an appropriate sampling to use? After all, if you force your sample to look more like the general population, you might well be biasing your results in another direction. Under such a method, you end up grouping people who have no real prediliction to watch television with those who do. In effect, you’re erasing the connection between the rating system and the amount of viewing time. (Of course, this might be desirable in its own right.) What good does it do for advertisers to look at rating numbers that take into account those people who rarely ever watch TV?

The issue here is of defining the appropriate population from which to sample. In the best case scenario, the people who become Neilsen families ought to be those who are randomly selected from among a population of people who want to be one.

To my mind, that should be the simple defense of the new PeopleMeters. If designed correctly, the system measures the television watching habits in a sample of people who most accurately represent the population of people who, on average, tend to watch a certain amount of television. After all, the ratings that come out daily, weekly, and potentially now hourly, are best read as “The share of the population watching television at this given time, was X for show Z” not “The share of the general population at this given time, was X for show Z.”

Of course, that’s a hard pill to swallow for those who see their show ratings going down. The reduction of measurement error has revealed that, perhaps, they weren’t as popular as they once thought. If the sample is representative of the television watching population, however, the best explanation isn’t that the sample is wrong -- it’s that your baby just might be ugly.

(N.B.: Here’s a link to the Nielsen site, though it is particularly unhelpful on talking about their sampling methods. Here’s an article from the always-entertaining Straight Dope column on the measurement of Nielsen ratings.)

T&B Takes Cues from Wonkette-ish Area of Blogistan

The Calico Cat has some really interesting thoughts about the market for blogs.

It even kindly mentions this humble corner of the econ-focused part of the blog world. At issue for T&B is that scandals and ribald sites such as the Jessica Cutler/Washingtonienne "event" (personally, I consider it a silly cry for attention from someone who has yet to find a modicum of respect for herself, but "skin" does, sadly, sell) generates a great deal more hits than, say, a more niche player like T&B. (Oh, if only more of the world concerned itself with economics and economics education...).

But don't let it be said that we here at T&B can't learn by example (ok, well, I can only speak for myself, but the rest of the crew appears able in numerous areas well beyond my own meager skills). In that vein, I'd like to point you to one of the more interesting applications of economic analysis I've seen recently: The Economics of Ecstasy. (NB: PDF file, large.)

As the title might imply, it's an economic analysis of the dynamics surrounding orgasms, both honest and...the When Harry Met Sally variety. It's an interesting paper, not simply for the subject at hand. Here's Slate's take on it: The Economics of Faking Orgasm:

The obvious reason to fake is to please your partner. But what about a woman who doesn't particularly care about her partner? Might she still fake? Mialon concocts a scenario—though a contrived one—where the answer is yes. Suppose Adam is very insecure and always suspects Eve of faking. Suppose the one thing Eve really hates is having a partner who's always wrong. Then since Adam always thinks she's faking, she has to fake to make him right. Eve's fakery reinforces Adam's skepticism and Adam's skepticism reinforces Eve's fakery, so we have what economists call equilibrium.

Fair warning however -- especially for Mr. Antler -- the analysis is largely centered around a game-theoretic construct. Signalling games, to be precise.

Orgasms, sex games, and econometrics. The dismal science no more?

NonProfit Slowness: The Case of the ASA

Today I registered to become a student member of the American Statistical Association. It's cheap-- $10--and with some small additional fees, I will get electronic access to a bunch of journals I otherwise would have to spend 30 minutes driving to the library to read. (My university doesn't have electronic access to the current editions of some journals).

However, the ASA will not enter my application into their system for 10 business days. Why so long? No explanation is given, although I was grateful that they warn registrants of this slow process. I was still astonished, but that feeling occurred when I forgot I was an aspiring economist.

I couldn't understand why the ASA would have a web form that immediately emails you your registration information, and not have that same information sent to their own membership database.

I should have been able to register online, and have the data immediately sent to a reviewer who could verify my student credentials and give me access in short order.

What really amazed me was that they couldn't speed things up when I called them on the phone and volunteered to go to ASA headquarters, which is only two miles from my home.

Question: Would you shop at a store that wouldn't give you an account for 10 days?

Note: As of the time of this post, the ASA website is currently offline!

If You Can't Beat 'em, Flood 'em

Echoing Steve Verdon's words disagreeing with Zimran Ahmed, I simply can't take the marginal cost of music via Napster or Kazaa to be $0, and for precisely the same reasons Steve mentions -- the costs are the effort to locate the song and then the time it takes to download several versions in the hopes of getting one good one copy. Given what else you might be doing with your computer at the time (the programs are RAM-heavy and the downloads can choke even a DSL line), the opportunity costs aren't exactly ignorable.

To emphasize this point, there is a new tactic in the market for fighting illegal downloading of music: frustrating the music pirates to the point where the effort is no longer worth the benefit of locating the song. This is done through flooding the P2P systems with bogus files that mimic real files.

A computer science professor and graduate student have been awarded a patent for a method of thwarting illegal file sharing on peer-to-peer networks by flooding the network with bogus files that look like pirated music.

The software creates bogus files with attributes -- such as file names and description tags -- that make them look like the real thing, but they are in fact white noise, low-quality recordings or advertisements to buy the song. What's more, the software sends out thousands of decoys to frustrate P2P users with fruitless downloads.

The marginal costs might have just gotten a lot higher.