The Mugwumpery

Another letter to the Economist:

Date: Thu, 24 Feb 2011 09:06:36 -0600
To: letters [at] economist.com
From: Dave <dave [at] mugwumpery.com>

Subject: Re “Ending the open season on artists”, 19 February

Dear Sir,

As a an “aghast” digital libertarian, I object to your presumption that stronger copyright enforcement is good or necessary for artists.

No one disputes that  artists must be rewarded for successful creation.  (Middlemen are another story.)  Copyright was a reasonably effective system when copying was expensive anyway and the means of reproduction were relatively centralized publishers and distributors, easily policed.  Now that works can be copied costlessly by any individual, the principle of limiting copying is both unworkable and inappropriate, as copying (although illegal) is not theft – because copying does not deprive the original owner of anything.

Certainly, artists must eat.  The challenge is to find new business and legal models to accomplish that without needlessly depriving the public of the full enjoyment of the fruits of creation.

Attempts to perpetuate obsolete business models by law are not the solution.

It is hard to make a strong argument in a letter short enough to get published.

My larger point is that there is what economists call a “deadweight loss” when someone who would have enjoyed a creative work doesn’t because of costs imposed by copyright.

Say we’re talking about a copy of The Beatles “A Hard Day’s Night” (which, completely off-topic, has some of the lamest lyrics imaginable – “…to get you money to buy you things“??).

Some consumers are willing to pay the asking price for the song under the copyright system.  In that case the artists get 10 or 20%, and the middlemen get the rest.  (And yes, the studio technicians, etc. need to get paid too, but not necessarily by a record company – painters seem quite able to buy blank canvas without middlemen to help.)

But more consumers (usually far more) are not willing to pay that much.  They’d enjoy having a copy of the song, but not enough to justify the price.  These people are going to be in the majority almost regardless of the price asked.  This is the deadweight loss; value that could have been realized without cost to anyone, but wasn’t.

To make it clearer – imagine we’re talking about a $1000 copy of Adobe Photoshop instead.  How many of the people who would benefit from using it are willing to pay that much?  Very few.  Yet it would cost Adobe nothing at all to let them use it for free – if that didn’t discourage those few who would pay from doing so.

Of course, under the copyright system this loss is necessary to make the system work – otherwise no one at all would pay.   And this is precicely the problem with the copyright system – it necessitates the deadweight loss to work.

As I implied in the letter, this wasn’t such a terrible flaw when copying was expensive anyway.  Records couldn’t be produced for free; paying the artist  a royalty only increased the price a little bit, so not much harm was done.   But that’s not true in a world where copying is free.

So we need a new system to reward creators for successful creation that other people value.  I can imagine a half-dozen ways to do it; so can you.  It will take some experimentation and evolution to get there, but propping up the obsolete copyright system is not going make it come sooner.

Wind turbine, 43°45’39″N 15°57’11” E

Last week I came back from a brief visit to Croatia (visiting family).

I took along my trusty iPhone, having first jailbroken and unlocked it, so I wouldn’t get whacked with AT&T’s international data roaming fees.

Over the course of 10 days, I used 44 Mbytes of data; I consider that quite moderate – a little Web browsing, minimal email, and some Google Maps. (I’d expected to use about 10x as much.)

I bought a SIM card from one of the local networks, VIP (a Vodafone affiliate, I think).

VIP’s deal was as follows: For HRK 100 (US $17.40 at today’s exchange rate), you get a prepaid SIM card loaded with HRK 100 of credit. Calls come out of that at $0.14 to $0.44/minute, depending on time of day and what network you’re calling (landlines are less). International calls are $0.47 to $1.08/minute, depending on where you’re calling (calling the US is the $1.08/min rate).

Again out of your HRK 100 credit, you can buy data service – 20 MBytes for HRK 15 ($2.61) or 100 MB for HRK 30 ($5.23). (Don’t believe me? Look here. ) I went for the 100 MByte deal, using up HRK 30 of my HRK 100 credit.  Since I only used 44 MBytes of that, the rest went to waste. I don’t really know how much credit was left when I came back to the US; but I know I was able use voice and data both in the Munich airport and in the USA using the same card.

So, 10 days’ use of the iPhone, voice and data, cost me $17.40. And I didn’t use it all up. (Service was great, by the way – much better 3G data coverage in rural areas than I get in the USA.)

Just for curiosity, I checked how much AT&T would have charged me for the same thing.

Their standard international data roaming rate is quoted as $0.0195/kByte. That’s just shy of 2 US cents per 1024 bytes, or $20/MByte. I used 44 MBytes so that would have been $879. Yes, nearly nine hundred dollars. For very light usage; I could easily have used many times more if I’d been traveling for business.

But, of course, AT&T says if you’re going to be travelling internationally, you really ought to buy one of their “Data Global” packages – 20 MB for $25/month, 50 MB for $60/month, and $120 for 100 MB. (Recall that I bought 100 MB from VIP for $5.23.) And if you go over your monthly allowance, it’s $10/MB.

What is AT&T thinking?

Google on “iPhone international data roaming” and you’ll find lots of horror stories about multi-thousand-dollar AT&T bills from short trips. I didn’t get whacked, but what does AT&T think is going to happen when someone gets a $3000 bill after two weeks in London, or a $60,000 bill after downloading one episode of “Prison Break”? They might or might not get paid, but for sure they are going to lose a customer – forever. Each and every time they send out a bill like that.

It may be legal, but it is bad business – incredibly bad business.

One of the things that has made the US such a wealthy country is a business culture that includes the idea of a “fair price”. Although it’s generally legal to charge any price the market will bear – even taking advantage of buyer ignorance or desperation – mainstream American culture supports the notion that there is a “fair price” – the price that an informed buyer would pay in a competitive market, considering circumstances of location, quality, convenience, etc.

So, for example, Americans frown upon selling generators for $10,000 during a blackout, if they go for $1000 at normal times. Or the rural tow truck driver who wants $2000, cash, to pull your car out of the muck, just because the next closest tow truck is hours away.

Many economists wouldn’t have a problem with that – in a certain narrow sense, those kinds of price spikes (“gouging”, if you like) may be efficient. But a society in which most sellers feel revulsion toward “taking advantage” is one in which buyers are more willing to engage in transactions. If buyers feel they’re unlikely to get screwed because of their ignorance (as in the the case of AT&T here) or desperate circumstances, then there is more commerce and less effort expended in investigation of deals and precaution against getting caught by local monopolists. In short, transaction costs are lower for everyone.

I’m not advocating legislation here. But the American attitude has it merits. And AT&T is not making itself any friends or building any customer loyalty.

It’s the sunburn.  It’ll go away in a few days.  Probably.

No one else seems to be saying it, so I will.

The hysteria about run-away Toyotas is driven by a xenophobic witch hunt.

There is nothing wrong with Toyota vehicles.  They do not accelerate uncontrollably.  Ever.   There’s nothing wrong with the floor mats, electronics, etc.  Claims to the contrary are lies.

I’m not going to focus on the engineering reasons why such claims are utterly unbelievable – the chance that the accelerator, brake, gearshift, and ignition all fail simultaneously in a way that allows acceleration and nothing else, then miraculously correct themselves afterward so that there is no sign of any flaw – is as close to zero as anything gets in this world.

It is interesting that Toyota is having these “problems” only in the United States.   Not in Japan, China, or Thailand.  Not in Australia or New Zealand.  Not in the UK, not in Sweden, not in Spain, Germany, Russia, or Romania.  Not in Nigeria, South Africa, Botswana, Uganda.  Not in Canada.  Just in the USA.  Even though they sell the same cars in all these places.

And that all the publicity about deadly flaws in Toyota vehicles started in 2009, just after headlines like these:

Toyota Passes General Motors As World’s Largest Carmaker (Washington Post, January 21, 2009)

Toyota Ahead of G.M. in 2008 Sales (New York Times, January 22, 2009)

Toyota now the largest motor-car manufacturer of the world (BusinessWeek, April 11 2009)

I know what you’re thinking.  Surely all the claims of malfunctioning cars, actual crashes, etc. can’t be simply made up by jingoistic Americans annoyed that the national champion has been bested by the yellow devils.

No.  That’s not what I’m claiming.

There are something like 300 million cars in the USA.  If each one is driven once a day, that’s 110 billion trips each year.

When a driver starts a car, there is some small but finite chance she’ll step on the gas by mistake when aiming for the brake.  It’s happened to me, and to most people I’ve asked.  Most of the time we notice and think “oops – wrong pedal”, and that’s the end of it.

But sometimes, rarely, people don’t notice.  Instead they panic.  They press harder on the gas, instead of pressing on the brake.  They think they’re already pressing on the brake, and the car is going too fast.  So they press harder.  On the gas.

This doesn’t happen very often.  But 110 billion trips/year.  Maybe 20% of them in Toyotas.  It does happen sometimes.

If the driver is on a highway, usually even if this happens the driver will think to turn off the ignition.  Or put the car in neutral.  But not always.  Some people are just panicky and don’t think clearly in emergencies.  Some are bad drivers.  And even good drivers can have a bad day.

Eventually, one of two things happens – the car hits something or the driver figures out what happened and lets go of the gas.  If there is a crash, the driver may very well believe afterward, in all honesty, that there was something wrong with the car.  If there wasn’t an accident, the driver may have made a fool of themselves, caused someone else to have an accident, or got caught speeding.  Most people are honest, and will admit they made a simple mistake.  But 110 billion trips/year.  Not everyone is honest.

This is exactly what happened with Audi in the early 1980s – a few reports made the media and confused or dishonest people suddenly had an excuse to blame someone else for their accidents.  Or to sue for damages.  There was nothing wrong with Audi’s cars, other than having the gas and brake pedals a little closer together than some drivers were used to.  But sensation and terror sells advertising, and most people are stupid enough to believe everything they see in the media.

So – a few Toyota drivers make this kind of mistake, and blame it on the car (mostly in honest confusion).  Happens all the time, to all makes and models of car.

But – Toyota Passes General Motors As World’s Largest Carmaker !!  For the first time in 77 years!

Some in the media, and many in politics, are carrying a chip on the shoulder – America’s champion has been shamed and defeated by the hated Asian devils!  So these claims are not ignored.  They’re hyped.  Toyota is killing people – their cars are deathtraps!  Congressmen demand NHTSA investigations.  Soon the CEO of Toyota is committing rhetorical hara-kiri in front of Congress and the TV cameras.

Of course, floor mats can get stuck.  So can accelerator pedals.  It happens to every make and model.  But Toyota’s patient explanation that there is no problem doesn’t work.  Reason never works when you’re in a witch hunt.  So to protect their reputation and avoid even more expensive punishment, Toyota reluctantly negotiates a recall to glue down floor mats and grease accelerator pedals.  Under duress – a sort of plea-bargain with the American government (which is unlikely to honor its end of the deal).

The technical term for the whole thing is bullshit.

[In the interest of full disclosure: I am a shareholder of Toyota Motor Corp.  Also of Daimler AG and Honda Motor Co., both of which stand to gain sales from this garbage.  As well, I own, among other vehicles, a Toyota Prius.  Which I am not going to drag to the dealership for a shamanistic rain-dance to make the evil unintended-acceleration spirits go away.]

I have to credit my lovely wife for this theory, who discovered it by experience with her own employees.

Urban sprawl is caused by wage-and-hour regulation.

Most places have regulations requiring overtime pay (in the US, the usual rule is 1.5x wages past 40 hours/week).

Employers usually can’t afford overtime wages, so most employees can’t earn more by working longer hours.  But many employees would rather work and earn more.

So, instead of working more hours, they spend those hours commuting from the suburbs, where housing is cheaper than in the city.  Commuting from the suburbs is a way of “working” to get a larger disposable income that isn’t regulated.

I’m willing to bet that the growth of urban sprawl closely tracks the introduction of wage-and-hour regulations.

Regulations are like squeezing a balloon – what goes in where you squeeze comes out somewhere else.  When you force people to do what you want, they tend to find other ways to get what they want.

February 14, and again we are afflicted with a swarm of these hallucinogenic creatures.

Obviously LSD wasn’t the first psychedelic.

Date: Fri, 22 Jan 2010 11:15:21 -0500
To: letters [at] economist.com
From: Dave <dave [at] mugwumpery.com>
Subject: Democracy’s decline – Crying for freedom (16 January)

Dear Sir –

About democracy (16 January) – you are quite wrong.  The one and only merit of democracy is that it allows the people to replace malign governments without bloodshed.  But this is no minor advantage – it offers the only long-term protection of personal freedom mankind has yet discovered.

The challenge is to preserve democracy while avoiding rent-seeking and pandering to organized groups seeking to benefit their own members at the public’s expense – necessary preconditions to winning electoral office.

Nobel laureate F.A. Hayek identified the core flaw of parliamentary democracy in the confusion between law in the traditional sense (rules governing interactions between people) and the running of government (budgets, taxation, etc.) and proposed separation of these powers.  (In his Law, Legislation and Liberty, particularly Volume 3, “The Political Order of a Free People”– University of Chicago Press, 1979.) Those who wish to promote and improve democracy would do well to start with Hayek’s work.

Sometimes I’m best at pointing out the obvious – this may be one of those times.

I read a sentence today in The Economist and realized why people (nerds of a certain sort, always) invent “logical” languages.

The most famous example of an artificially constructed “logical” language is probably Lojban/Loglan– but the earliest example I’ve heard of was John Wilkin’s Real Character, around 1668.  These things seem to be created by small groups of fanatics who think their language will change the world and make people more rational.

Here’s the sentence:

For the past few decades the hole in the ozone layer over Antarctica has been shifting the way in which winds move round the continent, driving them round the Southern Ocean ever faster.

Earlier in the issue there’d been something about the direction of antarctic winds reversing, so I read “way” to mean “direction”.  Later in the sentence, it becomes clear that “way” refers to speed, not direction.

“Way” is in this case ambiguous.  A better writer would have been specific and said “speed” instead.

A logical language can make this kind of ambiguity impossible.  You avoid including vague and ambiguous words and constructions, forcing writers to say what they mean (in theory, anyway).

But this is (a) completely unnecessary, and (b) doomed to failure.

It is perfectly possible to write clearly and unambiguously in English or any naturally evolved language.  It takes a little extra effort – the writer has to think about what she really means.  People fail to write clearly because they are lazy, rushed, attempting to hide their own confusion, or simply bad at expressing themselves.  These human failings will not disappear with the invention of a new language.

Evolved languages have ambiguity for good reasons – it serves the purpose of writers and speakers.  Any new language without this flexibility would quickly (assuming it were adopted at all)  grow to include it.

There’s a story on Slashdot today about “a complicated pattern that has to do with the way humans do violence in some collective way“.

Surprise.  The size and frequency of terrorist attacks follows a power law – lots of little attacks, a few big ones.

What doesn’t?  Quoting from http://en.wikipedia.org/wiki/Pareto_distribution:

The sizes of human settlements (few cities, many hamlets/villages)

File size distribution of Internet traffic which uses the TCP protocol (many smaller files, few larger ones)

Clusters of Bose-Einstein condensate near absolute zero

The values of oil reserves in oil fields (a few large fields, many small fields)

The length distribution in jobs assigned supercomputers (a few large ones, many small ones)

The standardized price returns on individual stocks

Sizes of sand particles

Sizes of meteorites

Numbers of species per genus (There is subjectivity involved: The tendency to divide a genus into two or more increases with the number of species in it)

Areas burnt in forest fires

Severity of large casualty losses for certain lines of business such as general liability, commercial auto, and workers compensation.

I could add a bunch more, but won’t bother.

Why is this considered news?  Why does it get published in Nature?  If terrorist activity didn’t follow a power law, I think that would be interesting enough to merit publication in a prestigious journal.  But this?

Is it just me, or is the quality of editorial work in science journals dropping?  I constantly see papers in Science and Nature that make the most basic scientific mistake possible – confusing correlation with causality.  And then the “quality” press such as the New York Times and the Economist pick it up and repeat the same nonsense.

See also:

• Zipf’s law
• Benford’s law

I see today that the MIT Red Balloon Challenge Team has won the DARPA Network Challenge, in a little less than 9 hours.

In case you don’t know, the challenge was for a single individual to report the locations of 10 red weather balloons moored, for a few hours yesterday, at random public places around the USA.  The idea was to see if social networks can be used to quickly coordinate the solution of difficult distributed problems.

As has become common, DARPA offered a prize of $40,000 to the winner.  This is a tremendously efficient use of government funds to do research and get challenging projects accomplished – surely it cost DARPA more than the $40k prize money just to deploy the 10 balloons and setup the website about it.  If they’d contracted the problem to a defence research organization, it’d have cost them 50x the amount or more.

The MIT team won by organizing thousands of people to report their observations, with the promise of a cleverly-allocated share of the prize money.

Goal-driven prize competitions just about disappeared for 50 years after World War II.  Prior to that, they were a common and successful way of encouraging challenging achievements – the British longitude prize that led to the development of the chronometer and the Orteig aviation prizes including the one won by Charles Lindbergh for his non-stop transatlantic flight are among the most famous.

Something about the Depression or World War II led to the decline of these prize competitions – I suspect a loss of confidence in the ability of individuals vs. large organizations to accomplish great things had much to do with it.

The Ansari X-Prize – $10M to the builder of a reusable, manned, sub-orbital spacecraft – was organized by Peter Diamandis in the 1990s,  and won by Burt Rutan (with funding from Paul Allen) in 2004.  This seems to have been the turning point for the return of such prizes.

Years ago at a business meeting in France, I said something nice about competition – some truism about how it’s a good thing and should be encouraged.  One of my French hosts mentioned to me later, “you know, in France, we are taught that competition is a bad thing”.  She was entirely serious – to her, competition was the opposite of cooperation (not of monopoly), and could only lead to a cutthroat society of winners preying on losers.

As Eric Drexler likes to say, what most people forget is that almost all competition is about who can cooperate the best.

Economic competition between firms is about who can best cooperate with customers, suppliers, and employees.  Those who cooperate best grow bigger, while the “losers” release people and and resources, making them available to other, more cooperative, organizations.

Perhaps the only significant exception to “competition-is-about-cooperation” is athletic competitions such as the Olympics – which, oddly, enjoy a much more favorable popular opinion than does economic competition.  Somehow people understand that in the field of athletics, there can be no excellence without competition.

But competition is far more important to society in the field of economics – without it, every business would resemble the Department of Motor Vehicles.  (A succinct description of Soviet communism, perhaps.  Or American public schools.)

The renaissance of prize competitions makes me optimistic about the future of American society and culture.  If both private and government organizations can use prizes to spur achievement, and be proud of it, the US may be in the process of getting it’s mojo back.