The Rent Seeking Economy(intellectual-detox.com)
intellectual-detox.com
The Rent Seeking Economy
http://intellectual-detox.com/2013/04/14/rent-seeking-economy/
131 comments
I don't think the article makes this assumption. I'd say the general thesis presented in the article is in this sentence:
"Wall Street hedge funds rarely make their fortunes by placing sound long term bets about the proper allocation of resources. "
Now, there's a lot of wiggle room in the word "rarely." I think that everyone would agree that there is some rent-seeking behavior on wall street, and everyone would agree that the banking sector plays a critical role in the economy (moving money from where it is to where it is needed, and managing risk). So the real disagreement is about the ratio.
This article seems to imply that only a quarter of wall street's activities produce economic value. That's very low, lower than I've read anywhere. However, Paul Woolley at the LSE estimates that the financial sector would be a "third to a half" of its size (see link below), though, if it were limited to the wealth-producing activities. It's a controversial statement, of course, but he's hardly alone in this estimate.
For anyone interested in this topic, I'd recommend starting with a New Yorker article titled "what good is wall street?"
http://www.newyorker.com/reporting/2010/11/29/101129fa_fact_...
And follow the links to the researchers listed to read more about the details that are not included in the New Yorker article.
"Wall Street hedge funds rarely make their fortunes by placing sound long term bets about the proper allocation of resources. "
Now, there's a lot of wiggle room in the word "rarely." I think that everyone would agree that there is some rent-seeking behavior on wall street, and everyone would agree that the banking sector plays a critical role in the economy (moving money from where it is to where it is needed, and managing risk). So the real disagreement is about the ratio.
This article seems to imply that only a quarter of wall street's activities produce economic value. That's very low, lower than I've read anywhere. However, Paul Woolley at the LSE estimates that the financial sector would be a "third to a half" of its size (see link below), though, if it were limited to the wealth-producing activities. It's a controversial statement, of course, but he's hardly alone in this estimate.
For anyone interested in this topic, I'd recommend starting with a New Yorker article titled "what good is wall street?"
http://www.newyorker.com/reporting/2010/11/29/101129fa_fact_...
And follow the links to the researchers listed to read more about the details that are not included in the New Yorker article.
Wow, that's a hell of a preamble just to bitch about Facebook.
Facebook emerged in a competitive market and was successful because it was visionary and was extremely well executed. I think that they deserve the success that they've had, and you will have to do some more convincing to show me the 'rent' that they are extracting from me.
Now if you were to ask me whether I think a closed proprietary corporate system is the ideal identity provider for the internet, I would say no. But I expect something better and more open to emerge within the next few years.
The fact remains that the internet sector is fiercely competitive and open, and America's internet sector is the envy of the world, and plenty of well managed countries have been so far unable to come close to matching it. Lumping Facebook and Google in with the financial and regulated monopolies does a disservice to your argument.
Facebook emerged in a competitive market and was successful because it was visionary and was extremely well executed. I think that they deserve the success that they've had, and you will have to do some more convincing to show me the 'rent' that they are extracting from me.
Now if you were to ask me whether I think a closed proprietary corporate system is the ideal identity provider for the internet, I would say no. But I expect something better and more open to emerge within the next few years.
The fact remains that the internet sector is fiercely competitive and open, and America's internet sector is the envy of the world, and plenty of well managed countries have been so far unable to come close to matching it. Lumping Facebook and Google in with the financial and regulated monopolies does a disservice to your argument.
Do you use Facebook because it's the best social network product, or do you use it because all your friends are using it? Can you imagine someone coming along and writing a better Facebook? One with stronger privacy controls, better UI, etc? Why hasn't anyone done it? Maybe it's because everyone uses Facebook?
The article's point on this is sound: Facebook makes a ton of money because it operates in an industry where the network effect gives it a natural monopoly. A competitor doesn't just need to build a better product, but they have to overcome the tremendous advantage of Facebook's network.
As the article points out, there is no money in competitive markets. In a competitive market, once Facebook proved the concept, it would've been flooded with clones offering the service at lower prices (less advertising). There is certainly nothing about the Facebook product itself that isn't easily copied.
The article's point on this is sound: Facebook makes a ton of money because it operates in an industry where the network effect gives it a natural monopoly. A competitor doesn't just need to build a better product, but they have to overcome the tremendous advantage of Facebook's network.
As the article points out, there is no money in competitive markets. In a competitive market, once Facebook proved the concept, it would've been flooded with clones offering the service at lower prices (less advertising). There is certainly nothing about the Facebook product itself that isn't easily copied.
People said the same things about MySpace and their lunch was eaten by Facebook.
I use Facebook because most of my friends and family are on Facebook--true. But there was a time when I did not use Facebook, but still kept in touch with friends and family. I transitioned to Facebook because it worked better than the previous technologies I used (snail mail, phone, email, MySpace, etc.).
There was nothing magically unique about that transition; it could happen again if someone makes something better than Facebook.
I actually don't think Facebook is a great example of rent-seeking because Facebook makes so little rent...Zuckerberg is rich on paper because of how he played the investment market, not the rent he charges on his product. Facebook's profits are very small.
Microsoft or Apple are probably better examples, but even those fail the typical definition of "rent-seeking", which is economic activity that is captured by regulatory exclusion. Neither Microsoft nor Apple achieved their position because the government mandated that everyone must use Windows or iTunes. They achieved their position by out-competing the alternatives.
It's true that once they were on top, they were harder to defeat. But that does not make them rent-seekers. And historically this sort of advantage tends to be pretty temporary. History is full of dominant companies that are no longer around. I remember a time when Microsoft was the feared 800 lb gorilla that no one could beat...people don't think that anymore.
I use Facebook because most of my friends and family are on Facebook--true. But there was a time when I did not use Facebook, but still kept in touch with friends and family. I transitioned to Facebook because it worked better than the previous technologies I used (snail mail, phone, email, MySpace, etc.).
There was nothing magically unique about that transition; it could happen again if someone makes something better than Facebook.
I actually don't think Facebook is a great example of rent-seeking because Facebook makes so little rent...Zuckerberg is rich on paper because of how he played the investment market, not the rent he charges on his product. Facebook's profits are very small.
Microsoft or Apple are probably better examples, but even those fail the typical definition of "rent-seeking", which is economic activity that is captured by regulatory exclusion. Neither Microsoft nor Apple achieved their position because the government mandated that everyone must use Windows or iTunes. They achieved their position by out-competing the alternatives.
It's true that once they were on top, they were harder to defeat. But that does not make them rent-seekers. And historically this sort of advantage tends to be pretty temporary. History is full of dominant companies that are no longer around. I remember a time when Microsoft was the feared 800 lb gorilla that no one could beat...people don't think that anymore.
You have it precisely backwards. It is "visionary and extremely well executed" because it got a crazy amount of investment before it became popular. Some rich people in the Valley thought it provided some social value (not to us, but to them). It became good after a ton of money was poured into it. It didn't get a ton of money because it was good....
A quote comes to mind ... Capitalism is the greatest system we know of for creating weath. It is also one of the worst systems for distributing weath.
It seems we are coming to the point where automation has significantly reduced the need for labor in producing basic commodities. It is particularly challenging when one has to advise college bound students as to what subjects offer a rewarding career. The essay speaks highly of the wages in the medical profession ... I think that part of the essay was misinformed. I don't know any medical professional who is not independently weathy and can get by on their salaries. They have massive loans to pay and if they have their own practice, they have to deal with TONS of crap .. insurance, marketing, and so on.
It seems we are coming to the point where automation has significantly reduced the need for labor in producing basic commodities. It is particularly challenging when one has to advise college bound students as to what subjects offer a rewarding career. The essay speaks highly of the wages in the medical profession ... I think that part of the essay was misinformed. I don't know any medical professional who is not independently weathy and can get by on their salaries. They have massive loans to pay and if they have their own practice, they have to deal with TONS of crap .. insurance, marketing, and so on.
> Capitalism is the greatest system we know of for creating weath. It is also one of the worst systems for distributing weath.
This is an oxymoron. "Wealth" is just stuff. Loaves of bread. Cars. iPhones. TV shows. If you create stuff but just keep it in your warehouse, it's going to go moldy and you're going to lose money. You have to distribute it to make money.
Money itself is of no value. You can't eat dollars, and mine don't sing or dance to entertain me. I suppose you could burn them for heat, if you have actual paper dollars :-)
This is an oxymoron. "Wealth" is just stuff. Loaves of bread. Cars. iPhones. TV shows. If you create stuff but just keep it in your warehouse, it's going to go moldy and you're going to lose money. You have to distribute it to make money.
Money itself is of no value. You can't eat dollars, and mine don't sing or dance to entertain me. I suppose you could burn them for heat, if you have actual paper dollars :-)
I sometimes wonder if the state of many MDs finances isn't the result of their own egos rather than any larger failing of "the system".
Most of my friends who became MDs gave almost zero thought to what they were paying for school. They also took on huge amounts of credit card debt while in school trying to live like doctors before they were doctors. Being in a half-decent pre-med or med school entitled them to ridiculous credit card offers. In their minds they were all "roughing it" by driving their parents' hand-me-down Volvos, but in reality they all had new clothes and expensive computers.
When it comes to school, most of them never looked at how much someone graduating from institution X will earn vs. the cost. They all simply wanted to go to Penn or Harvard or Hopkins. If offered a full-ride at a second or third tier institution, but no ride at a top tier school, they all took the no ride option (with one exception, and he's a very well paid anesthesiologist who came out with very modest debt).
Can I tell you how many times I've looked at what school my personal physician went to? Zero.
Most of my friends who became MDs gave almost zero thought to what they were paying for school. They also took on huge amounts of credit card debt while in school trying to live like doctors before they were doctors. Being in a half-decent pre-med or med school entitled them to ridiculous credit card offers. In their minds they were all "roughing it" by driving their parents' hand-me-down Volvos, but in reality they all had new clothes and expensive computers.
When it comes to school, most of them never looked at how much someone graduating from institution X will earn vs. the cost. They all simply wanted to go to Penn or Harvard or Hopkins. If offered a full-ride at a second or third tier institution, but no ride at a top tier school, they all took the no ride option (with one exception, and he's a very well paid anesthesiologist who came out with very modest debt).
Can I tell you how many times I've looked at what school my personal physician went to? Zero.
I think he missed one of the most obvious rent-seeking behaviors - fees. And reducing price transparency in general
Whether you are flying across the country, visiting the doctor, or trying to get Internet installed at your house, a large portion of the actual cost will probably be hidden from you. The travel industry, in particular, lives and dies by how well it hides the true cost from you.
Finding ways to make people pay more for the same things is a large and ever growing component of the economy that is fundamentally non-productive.
Whether you are flying across the country, visiting the doctor, or trying to get Internet installed at your house, a large portion of the actual cost will probably be hidden from you. The travel industry, in particular, lives and dies by how well it hides the true cost from you.
Finding ways to make people pay more for the same things is a large and ever growing component of the economy that is fundamentally non-productive.
I think one of most severe abuses is renting apartments to workers.
You buy apartments and charge people significant part of their earnings for the privilege of having a roof over their heads.
Why is that bad?
As an owner you don't live there yourself so you only have an incentive to keep the place in shape good enough to be rented. Which is usually pretty low.
The worst part is that if you can't find the people to occupy your apartment your costs are pretty low (you don't have a profit but that's not the same as money being drained from your account). So you can buy and hold apartment for years at very low cost. This creates artificial scarcity (in addition to actual scarcity) of places to live that keeps the prices up.
I think progressive property tax would enliven real estate trade. Prices would drop and more ordinary people could afford to buy one on credit instead of renting. This could save working people a lot of money so they can actually start their lives instead of slaving on their first job with just enough money to pay the rent.
Tax should be constructed in such way that holding even large apartment, or even two or three would pose no burden or almost no burden, but you might be better of selling your fifth apartment even at 50% below market price than holding it for a year.
You buy apartments and charge people significant part of their earnings for the privilege of having a roof over their heads.
Why is that bad?
As an owner you don't live there yourself so you only have an incentive to keep the place in shape good enough to be rented. Which is usually pretty low.
The worst part is that if you can't find the people to occupy your apartment your costs are pretty low (you don't have a profit but that's not the same as money being drained from your account). So you can buy and hold apartment for years at very low cost. This creates artificial scarcity (in addition to actual scarcity) of places to live that keeps the prices up.
I think progressive property tax would enliven real estate trade. Prices would drop and more ordinary people could afford to buy one on credit instead of renting. This could save working people a lot of money so they can actually start their lives instead of slaving on their first job with just enough money to pay the rent.
Tax should be constructed in such way that holding even large apartment, or even two or three would pose no burden or almost no burden, but you might be better of selling your fifth apartment even at 50% below market price than holding it for a year.
Selling your property involves paying a 5% cut to the agent, buying a property involves paying 5% in fees as points, closing costs, inspections, legal fees, etc. I would hate to do that every year or two as I moved between employers, but being able to rent an apartment anywhere in the world means I can go where there is demand for my skills.
The reason why people spend 65% of their after-tax income on rent is because people are willing to spend 65% of their after-tax income on rent. Supply and demand is a bitch, and when you fuck with it, you create massive distortions that end up enriching a small minority at the expense of everyone else (for an example, see anyone paying $600/mo for a nice 2 bedroom rent-controlled apartment in Manhattan).
And I like the idea behind a progressive property tax, but it would never, ever, ever become law in the US. Not while there is a single breath of life in any lobbyist or congressman.
The reason why people spend 65% of their after-tax income on rent is because people are willing to spend 65% of their after-tax income on rent. Supply and demand is a bitch, and when you fuck with it, you create massive distortions that end up enriching a small minority at the expense of everyone else (for an example, see anyone paying $600/mo for a nice 2 bedroom rent-controlled apartment in Manhattan).
And I like the idea behind a progressive property tax, but it would never, ever, ever become law in the US. Not while there is a single breath of life in any lobbyist or congressman.
Mobility is important but I think additional costs involved in buying/selling an apartment could be reduced if lots of properties often changed hands. There even could be whole credit products that could follow you and adjust accordingly as you swap houses. I know there's high demand for apartments in some areas but prices of most houses lost touch with what ordinary men can afford and I think artificial scarcity played a role in this. I think such tax could break a lot of currently parasitically growing rent based fortunes.
If you want to see how sick accommodation can get you don't have to look further than Japan. House there is such a valuable asset that it's often shared between three adult generations. And if you have to rent an apartment you often have to pay additional half a year of rent up front as a non-refundable gift to the landlord. http://en.wikipedia.org/wiki/Key_money
I think government should try to put as much of the real estate in hands of as many different people as it can.
I'm not saying government should hit families that own two or three apartments or houses and rent some. I just don't like the ones that hold dozens of properties (lots of them empty) barely keeping them from falling apart. That's no good to anyone, apart from them.
If you want to see how sick accommodation can get you don't have to look further than Japan. House there is such a valuable asset that it's often shared between three adult generations. And if you have to rent an apartment you often have to pay additional half a year of rent up front as a non-refundable gift to the landlord. http://en.wikipedia.org/wiki/Key_money
I think government should try to put as much of the real estate in hands of as many different people as it can.
I'm not saying government should hit families that own two or three apartments or houses and rent some. I just don't like the ones that hold dozens of properties (lots of them empty) barely keeping them from falling apart. That's no good to anyone, apart from them.
Rent seeking can't and won't last. You don't need to go very far - just read http://reason.com/archives/2013/04/14/the-end-of-power on the frontpage today (the comments suck however - they basically try to deny the fact that for humanity as a species, the last century has been the best ever)
The basic idea stands - too many people have more comfort, want too many things, and are harder to control - and now more than ever.
The solution to rent seeking is basic capitalism, as in the use of reason.
Ayn Rand style capitalists do worry about the letter and the spirit of the laws and of a contract, because they know it is in their best interest. They are not into rent seeking because they know the end results.
She said that beautifully : "I am not primarily an advocate of capitalism, but of egoism; and I am not primarily an advocate of egoism, but of reason. If one recognizes the supremacy of reason and applies it consistently, all the rest follows."
Ayn Rand theory and work can be seen as one implementation of John Rawl theory of justice. He added a 2nd part about equality, but he also deconstructed the opposition between freedom and equality.
Basically, you only need a good premise, then you can work on it. The premise here is reason.
The only real "competition" could be from a belief not based on reason, such as racism or a kind of religious fondamentalism - but not any kind as explained by John Rawls, just the kind incompatible with democracy. I'll put islamism in that bag (the basic idea of stoning to death women who had sexual relation outside of marriage in this day and age is not very palatable to me).
Anyway, the remedy is the same for both diseases - science (and the occasional readings of libertarian books)
If you have ideological problems with Ayn Rand, read at least about John Rawls veil of ignorance on http://en.wikipedia.org/wiki/A_Theory_of_Justice
The basic idea stands - too many people have more comfort, want too many things, and are harder to control - and now more than ever.
The solution to rent seeking is basic capitalism, as in the use of reason.
Ayn Rand style capitalists do worry about the letter and the spirit of the laws and of a contract, because they know it is in their best interest. They are not into rent seeking because they know the end results.
She said that beautifully : "I am not primarily an advocate of capitalism, but of egoism; and I am not primarily an advocate of egoism, but of reason. If one recognizes the supremacy of reason and applies it consistently, all the rest follows."
Ayn Rand theory and work can be seen as one implementation of John Rawl theory of justice. He added a 2nd part about equality, but he also deconstructed the opposition between freedom and equality.
Basically, you only need a good premise, then you can work on it. The premise here is reason.
The only real "competition" could be from a belief not based on reason, such as racism or a kind of religious fondamentalism - but not any kind as explained by John Rawls, just the kind incompatible with democracy. I'll put islamism in that bag (the basic idea of stoning to death women who had sexual relation outside of marriage in this day and age is not very palatable to me).
Anyway, the remedy is the same for both diseases - science (and the occasional readings of libertarian books)
If you have ideological problems with Ayn Rand, read at least about John Rawls veil of ignorance on http://en.wikipedia.org/wiki/A_Theory_of_Justice
>Rent seeking can't and won't last [because] too many people have more comfort, want too many things, and are harder to control - and now more than ever.
That's a rather pie-in-the-sky argument. People pursue rent-seeking because it gives them comfort, material goods, and freedom. The businessman who lobbies for monopolistic benefits, the politician who takes his campaign contributions, the copywriter who creates attack ads: they all follow egotistic interests. Wild, unregulated, snake-oil-and-corporate-trusts capitalism is no solution to these problems.
That's a rather pie-in-the-sky argument. People pursue rent-seeking because it gives them comfort, material goods, and freedom. The businessman who lobbies for monopolistic benefits, the politician who takes his campaign contributions, the copywriter who creates attack ads: they all follow egotistic interests. Wild, unregulated, snake-oil-and-corporate-trusts capitalism is no solution to these problems.
> In the modern world, natural resources are the limiting factor of production. It takes only a tiny percentage of the population to farm the arable land, mine iron ore, cut down and process the timber, and extract the oil. A somewhat larger percent converts those resources into the necessities of life – bread, vehicles, homes, roads, bridges, clothing, furniture, stocked grocery aisles, appliances, etc. The worker entering the economy has a problem. They must find a source of income so they can access resources and manufactured goods. But there are no unexploited resources and no surplus jobs to be had processing those resources. They need a job, but their labor is surplus and unnecessary.
This is the real problem. Everyone but a tiny percentage of the population is ... well ... not needed at all.
This is the real problem. Everyone but a tiny percentage of the population is ... well ... not needed at all.
Maybe I'm just thick as a board tonight, but while you wrote a lot, you don't really seem to have explained "the solution to rent seeking" as you see it. Can you expound?
The challenge for most people is to understand that less regulation results in less rent seeking. Only a large and powerful state can implement the required blocks to form monopolies. Only a powerful state can entrench the class divide between the ruled and the rulers.
The solution, then, is to reduce the size of the state and allow for less central planning and involvement.
Further to this: the size of the state and those who run it seek to gain more power. Power is delivered through votes. Thus much that passes for political debate is not based on reason, but rather emotions and feelings - people finding and leveraging biases, beliefs and BS. Virtually no modern policy making is done using reason and simple analysis - instead it is done by emotionally trying to sway the argument - the 'think of the children' model.
A triumph of reason over emotion and reduction in the size o f the state. This creates the environment where those rent-seeking cannot fool those using reason, and they lack the all-powerful controls to enforce the monopolies.
The solution, then, is to reduce the size of the state and allow for less central planning and involvement.
Further to this: the size of the state and those who run it seek to gain more power. Power is delivered through votes. Thus much that passes for political debate is not based on reason, but rather emotions and feelings - people finding and leveraging biases, beliefs and BS. Virtually no modern policy making is done using reason and simple analysis - instead it is done by emotionally trying to sway the argument - the 'think of the children' model.
A triumph of reason over emotion and reduction in the size o f the state. This creates the environment where those rent-seeking cannot fool those using reason, and they lack the all-powerful controls to enforce the monopolies.
"Only a large and powerful state can implement the required blocks to form monopolies." - now that is decidedly false; if there are any entry barriers (such as capital investments required to start), then free market naturally tends to consolidate (as it's more profitable) towards monopolies or oligopolies, which coincidentally means the end of free market in that industry. Only a powerful state can PREVENT monopolies and keep the free market economy as defined, with many suppliers and buyers setting the prices in a market instead of a monopolistic ultimatum.
For real life examples, see the classic USA situations of railway and oil magnates in 19th century - these monopolies weren't caused by the state and regulations, but by lack of it.
Of course, states can also create bad monopolies, but the solution is to change government actions, not to "disarm" the state - since in that case the bad monopolies will stay anyway, and even more monopolies will arise.
For real life examples, see the classic USA situations of railway and oil magnates in 19th century - these monopolies weren't caused by the state and regulations, but by lack of it.
Of course, states can also create bad monopolies, but the solution is to change government actions, not to "disarm" the state - since in that case the bad monopolies will stay anyway, and even more monopolies will arise.
If it is decidedly false, name one monopoly that exists without a state backing it up. I am genuinely interested because I have thought long and hard for an example, and I have never found one. It's hard enough to find a real monopoly [as oppposed to a company enjoying current market dominance], and to me, impossible to find one that exists without the help of the state.
The free market does not tend towards monopoly or oligopoly. If any one player is gaining market power and capturing a lot of consumer surplus, then competition will eventually find a route around that and supply an alternative with better value. This has been proven time and time again.
Even coming up with a situation where you need a large capital investment to get started, given a compelling enough market (which is what is created when an individual firm tends towards monopoly) then the capital formation is possible to organise.
Your solution 'change government actions' is hopelessly unworkable, this is what the original post is all about. All the while the opportunity to rent-seek is available, people with the desire to do so are going to exploit it.
The countries with the worst monopolies are those with the largest share of the income owned and distributed by the state. These monopolies harm consumers and rivals and only exist because the state is there to back them up. This goes all the way up to the very worst monopoly of them all, which is where the state is the economy, such as in soviet russia.
Reduce the size and reach of the state, and you make it impossible for rent-seeking behaviour to occur, because there is no structure to support it.
The free market does not tend towards monopoly or oligopoly. If any one player is gaining market power and capturing a lot of consumer surplus, then competition will eventually find a route around that and supply an alternative with better value. This has been proven time and time again.
Even coming up with a situation where you need a large capital investment to get started, given a compelling enough market (which is what is created when an individual firm tends towards monopoly) then the capital formation is possible to organise.
Your solution 'change government actions' is hopelessly unworkable, this is what the original post is all about. All the while the opportunity to rent-seek is available, people with the desire to do so are going to exploit it.
The countries with the worst monopolies are those with the largest share of the income owned and distributed by the state. These monopolies harm consumers and rivals and only exist because the state is there to back them up. This goes all the way up to the very worst monopoly of them all, which is where the state is the economy, such as in soviet russia.
Reduce the size and reach of the state, and you make it impossible for rent-seeking behaviour to occur, because there is no structure to support it.
"The free market does not tend towards monopoly or oligopoly. If any one player is gaining market power and capturing a lot of consumer surplus, then competition will eventually find a route around that and supply an alternative with better value. This has been proven time and time again."
I don't think I could disagree with that specific statement more than I do (even though I agree with some of your others, and your opening line). In order to accept those words I would have to ignore the existence of monarchies, dictators, cartels, and simple things like the phrase "the rich get richer." Our society and economies are structures imposed on the true mathematical and physical chaos of space and organic chemistry.
I agree with some of what you say ("Reduce the size and reach of the state, and you make it impossible for rent-seeking behaviour to occur, because there is no structure to support it."), but I would note that there are some things that individuals simply cannot do alone, the most important of which is holding the power of monopolies/oligopolies accountable. I would rather not call that government, simply a group action, but it still amounts to a common banner. Unfortunately, any organized power will only continue to claw for more power. Government won't limit itself. In that sense, I agree that it seems necessary to withdraw that power substantially and regularly from government, but I also see the renewal of that power as inevitable in order to prevent abuse in some other area. ("The price of freedom is eternal vigilance.")
Unfortunately we have a disadvantageously simple language of left vs right, all or none, (leading to extreme communism or extreme capitalism - for example, Ayn Rand vs Marx - both of which lead to the same totalitarianism), rather than focusing on the philosophical middle and economic nursery conditions where growth is possible, fair, and competitive. It is constantly necessary to destroy our last great success in order to make room for the next one (to focus on beneficial endevours). It is also our choice how long we avoid that renewal, and how big an undertaking it must be to move forward.
I don't think I could disagree with that specific statement more than I do (even though I agree with some of your others, and your opening line). In order to accept those words I would have to ignore the existence of monarchies, dictators, cartels, and simple things like the phrase "the rich get richer." Our society and economies are structures imposed on the true mathematical and physical chaos of space and organic chemistry.
I agree with some of what you say ("Reduce the size and reach of the state, and you make it impossible for rent-seeking behaviour to occur, because there is no structure to support it."), but I would note that there are some things that individuals simply cannot do alone, the most important of which is holding the power of monopolies/oligopolies accountable. I would rather not call that government, simply a group action, but it still amounts to a common banner. Unfortunately, any organized power will only continue to claw for more power. Government won't limit itself. In that sense, I agree that it seems necessary to withdraw that power substantially and regularly from government, but I also see the renewal of that power as inevitable in order to prevent abuse in some other area. ("The price of freedom is eternal vigilance.")
Unfortunately we have a disadvantageously simple language of left vs right, all or none, (leading to extreme communism or extreme capitalism - for example, Ayn Rand vs Marx - both of which lead to the same totalitarianism), rather than focusing on the philosophical middle and economic nursery conditions where growth is possible, fair, and competitive. It is constantly necessary to destroy our last great success in order to make room for the next one (to focus on beneficial endevours). It is also our choice how long we avoid that renewal, and how big an undertaking it must be to move forward.
> The free market does not tend towards monopoly or oligopoly. If any one player is gaining market power and capturing a lot of consumer surplus, then competition will eventually find a route around that and supply an alternative with better value.
This is true under the usual simplifying first-week-of-Econ 101 assumptions (which exclude economies of scale, barriers to entry, irrationality -- including imperfect consumer information about the utilities realized in purchases, interaction between markets [note that the last two interact in an important way, in that enough money derived from one market and applied to the information market can drive imperfect consumer information in a particular direction], etc., etc., etc., ad nauseum, ad infinitum), which are useful for pedagogical purposes at that stage but tend not to exist in the real world in the markets for a wide variety of goods.
This has been proven time and time again.
This is true under the usual simplifying first-week-of-Econ 101 assumptions (which exclude economies of scale, barriers to entry, irrationality -- including imperfect consumer information about the utilities realized in purchases, interaction between markets [note that the last two interact in an important way, in that enough money derived from one market and applied to the information market can drive imperfect consumer information in a particular direction], etc., etc., etc., ad nauseum, ad infinitum), which are useful for pedagogical purposes at that stage but tend not to exist in the real world in the markets for a wide variety of goods.
This has been proven time and time again.
Can you please provide an example of where a monopoly has formed with no state power involved? I am interested in this area and want to find any real world examples.
> For real life examples, see the classic USA situations of railway and oil magnates in 19th century - these monopolies weren't caused by the state and regulations, but by lack of it.
In the case of Standard Oil, the consumers benefited greatly from the practices of Rockefeller. Despite controlling 90% of the market at one point, its output quadrupled in a single decade (1880-1890) and prices of kerosene dropped by threefold over the same time period. Standard Oil was simply the best at what it did and succeeded as a result. During the early 1900s, the market shifted away from kerosene to gasoline (thanks to Ford) and there was a large amount of competition entering that market. Its market share in oil production fell from 1898 to 1906 from 34% to 11%. Yet it was only in 1911 that Standard Oil was broken up by the Sherman Anti-Trust Act (which, funnily enough, was passed in 1890: at the end of the decade of massive increases in production and decreases in price by Standard Oil). The fact is that, in this case, the market function properly in spite of government interference, not thanks to it.
Funny that you mention the railroads as well. The biggest threat to competition was not the companies in the free market, but instead railroad companies in control of the ICC, created in 1887. It was this government entity which allowed railroad companies, through law, to eliminate competition and screw the consumer by raising rates in a collusive manner.
In the case of Standard Oil, the consumers benefited greatly from the practices of Rockefeller. Despite controlling 90% of the market at one point, its output quadrupled in a single decade (1880-1890) and prices of kerosene dropped by threefold over the same time period. Standard Oil was simply the best at what it did and succeeded as a result. During the early 1900s, the market shifted away from kerosene to gasoline (thanks to Ford) and there was a large amount of competition entering that market. Its market share in oil production fell from 1898 to 1906 from 34% to 11%. Yet it was only in 1911 that Standard Oil was broken up by the Sherman Anti-Trust Act (which, funnily enough, was passed in 1890: at the end of the decade of massive increases in production and decreases in price by Standard Oil). The fact is that, in this case, the market function properly in spite of government interference, not thanks to it.
Funny that you mention the railroads as well. The biggest threat to competition was not the companies in the free market, but instead railroad companies in control of the ICC, created in 1887. It was this government entity which allowed railroad companies, through law, to eliminate competition and screw the consumer by raising rates in a collusive manner.
Yeah, you can see how this would happen if you look at Internet access in the US. Remember how, when Google announced they'd launch Google Fiber in Austin, AT&T announced an equally fast fiber rollout there. Now imagine if that first fiber rollout was being done by a company that actually needed to show profitability on its investment - there's no way that they could compete with AT&T, they'd fold before they made enough money to expand and that'd be the end of them. Which is why, until Google got interested, the US was stuck with the incumbent telecom and cable operators.
> first fiber rollout was being done by a company that actually needed to show profitability on its investment
I don't follow your point. Do you think Google has done the investment not expecting to make a profit?
This example shows the point that it is virtually impossible to maintain a monopoly in a free market. So if one company had a monopoly on internet access, and then Google successfully enters that market, it's not a monopoly.
Short run market dominance and monopolies seem to be often conflated, but they aren't the same thing.
I don't follow your point. Do you think Google has done the investment not expecting to make a profit?
This example shows the point that it is virtually impossible to maintain a monopoly in a free market. So if one company had a monopoly on internet access, and then Google successfully enters that market, it's not a monopoly.
Short run market dominance and monopolies seem to be often conflated, but they aren't the same thing.
If we could run everything on "reason", yes, that would be great. I don't disagree, it would produce good results. The problem is, humans show time and time again they cannot be counted upon to act reasonably or rationally.
Suppose I were to argue that all our problems would go away if we had free energy. "Yes, of course" you might say. "That would solve many many problems. But we don't have free energy, and we probably never will." This is how I feel about your position.
Suppose I were to argue that all our problems would go away if we had free energy. "Yes, of course" you might say. "That would solve many many problems. But we don't have free energy, and we probably never will." This is how I feel about your position.
How is this true online?
On the internet, monopolies are natural for social networking, online auctions, classified ads, and search. Each of these require the user to go to the site with the most ads, friends, bidders or sellers, or results.
How do you think the government created an E-Bay, Google, Facebook, or Craigslist?
On the internet, monopolies are natural for social networking, online auctions, classified ads, and search. Each of these require the user to go to the site with the most ads, friends, bidders or sellers, or results.
How do you think the government created an E-Bay, Google, Facebook, or Craigslist?
Reason says rent seeking is improductive and self destructive behaviour. One will engage in such activities only if the expected returns outweights the costs, which include the destruction of the system.
A rational person will not come to this conclusion under a system where such inefficiency is discouraged - pure and perfect competition, capitalism.
Many people wonder whether capitalism is a good thing. Bring them reason, science, let them work it out and make their own basic decision. Let them fight the bad reasoning themselves, come out of their local optimas if you prefer a math analogy. Racism and religious extremism must have some value, or such behaviours would not have because so widespread. But they seem to be local optimas, or even destructive in the end, just like rent-seeking.
Here is another way to look at this - look at the immigration net flows: it seems that more people want to immigrate in capitalist countries than emigrate out of them.
If it is reasonable to doubt my deductions, is it reasonable to doubt so many people may have made the same conclusions independently ?
Read about how immigrants affiliate politically, which belief system they adhere to. Apparently a lot of them want to be paid for the fruit of their labour, and not for pure idleness, want to be left alone - and many other libertarian values.
I'm sorry if that is not a valid explain for you. It is for me.
A rational person will not come to this conclusion under a system where such inefficiency is discouraged - pure and perfect competition, capitalism.
Many people wonder whether capitalism is a good thing. Bring them reason, science, let them work it out and make their own basic decision. Let them fight the bad reasoning themselves, come out of their local optimas if you prefer a math analogy. Racism and religious extremism must have some value, or such behaviours would not have because so widespread. But they seem to be local optimas, or even destructive in the end, just like rent-seeking.
Here is another way to look at this - look at the immigration net flows: it seems that more people want to immigrate in capitalist countries than emigrate out of them.
If it is reasonable to doubt my deductions, is it reasonable to doubt so many people may have made the same conclusions independently ?
Read about how immigrants affiliate politically, which belief system they adhere to. Apparently a lot of them want to be paid for the fruit of their labour, and not for pure idleness, want to be left alone - and many other libertarian values.
I'm sorry if that is not a valid explain for you. It is for me.
To make sure we are on the same page, let me try to summarize: you are essentially saying that so long as people take into account negative externalities, rent seeking behavior goes away?
I don't disagree with your premise, but I do disagree that this will result in rent seeking behavior going away. One of the classic problems with capitalism is literally exactly this- negative externalities are not properly accounted for.
I don't disagree with your premise, but I do disagree that this will result in rent seeking behavior going away. One of the classic problems with capitalism is literally exactly this- negative externalities are not properly accounted for.
We are on the same page.
I wouldn't phrase it that way, but yes, ideally negative externalities should be internalized by individuals to make the problem vasnish.
But failing that, if individual parties may engage in negotiations to achieve better outcomes (Ronald Coasce)
Less regulation are usually a 1st thing to try in that process, to cause change by voluntary association, naming and shaming. Issues can be mitigated. But regulation is a pandora box.
There are whole parts of economics studying that - public policy and industrial organisation.
I wouldn't phrase it that way, but yes, ideally negative externalities should be internalized by individuals to make the problem vasnish.
But failing that, if individual parties may engage in negotiations to achieve better outcomes (Ronald Coasce)
Less regulation are usually a 1st thing to try in that process, to cause change by voluntary association, naming and shaming. Issues can be mitigated. But regulation is a pandora box.
There are whole parts of economics studying that - public policy and industrial organisation.
How do you explain government rent-seeking, where there is no competition? Take government pensions or teacher unions for example.
| I'll put islamism in that bag (the basic idea
| of stoning to death women who had sexual relation
| outside of marriage in this day and age is not
| very palatable to me).
1. This is like decrying Christianity as a cult because of David Koresh. Or getting angry at all Christians because the Catholic church tried to cover up the whole paedophile priest thing.
2. Even people that are part of these sects don't necessarily follow all of the rules. E.g. I've known Jewish people that ate ham.
AFAIK Stoning is from an authentic hadith. An interesting point that could be used to decrease this is Islam frowns on bitching and backbiting. So...
I'm not for or against any religion.
It's all a matter of proportion. How many Koresh are there? Enough to put beheading/stoning/etc. videos on youtube ? Islam seems to have the #1 "bad spot" at the time.
I feel very sorry about that, because as the human race it's like trying to advance without the help of a whole third of world population - and the worst thing is we do not let the people who refuse such belief system immigrate easily in democratic countries. Just look at the way muslims (and apostates) emigrating from north africa to europe are treated.
At the moment we are wasting a lot of human potential, and that's sad.
Hopefully things will change [even if I'm not sure about it when I see the "antilibertarian" downvotes posts, without even taking a minute to express why they think it does not contribute to the discussion. I guess I should know better about liberals and their so called values :-/]
EDIT: I was talking about the 1st post, about reaon, which took multiple downvotes but not a single dissenting reply in about 2 minutes. Prove me wrong, give me arguments to challenge my position - I'm begging for them.
But no, nothing at all. And my attitude is the problem ?? It's like watching a reddit gang in operation, sorry
It's all a matter of proportion. How many Koresh are there? Enough to put beheading/stoning/etc. videos on youtube ? Islam seems to have the #1 "bad spot" at the time.
I feel very sorry about that, because as the human race it's like trying to advance without the help of a whole third of world population - and the worst thing is we do not let the people who refuse such belief system immigrate easily in democratic countries. Just look at the way muslims (and apostates) emigrating from north africa to europe are treated.
At the moment we are wasting a lot of human potential, and that's sad.
Hopefully things will change [even if I'm not sure about it when I see the "antilibertarian" downvotes posts, without even taking a minute to express why they think it does not contribute to the discussion. I guess I should know better about liberals and their so called values :-/]
EDIT: I was talking about the 1st post, about reaon, which took multiple downvotes but not a single dissenting reply in about 2 minutes. Prove me wrong, give me arguments to challenge my position - I'm begging for them.
But no, nothing at all. And my attitude is the problem ?? It's like watching a reddit gang in operation, sorry
| I guess I should know better about
| liberals and their so called values
There's also the fact that he's treating Ayn Rand as a serious philosopher instead of a base political propagandist.
Read John Rawls first work, read Ayn Rand. See the parrallels yourselves. Only the first one was acknowledge by the establishment, while the second one was not.
Interestingly, they process more or less the same way, and come to very similar conclusions.
I don't need a chocolate medal given by the government to an author to decide whether it is worth reading or not. If you do, and if you hate libertarianism, read about Rawls. The guy received a medal from Clinton - that's as liberal as it gets.
Interestingly, they process more or less the same way, and come to very similar conclusions.
I don't need a chocolate medal given by the government to an author to decide whether it is worth reading or not. If you do, and if you hate libertarianism, read about Rawls. The guy received a medal from Clinton - that's as liberal as it gets.
You mistakenly believe the political spectrum stops at "big government worshiping liberals". I'm a freaking socialist, I'll abolish your private property as soon as look at you.
"Ayn Rand style capitalists do worry about the letter and the spirit of the laws and of a contract"
And Tolkein-style hobbits have hairy feet.
And Tolkein-style hobbits have hairy feet.
"She said that beautifully : "I am not primarily an advocate of capitalism, but of egoism; and I am not primarily an advocate of egoism, but of reason. If one recognizes the supremacy of reason and applies it consistently, all the rest follows."
Such a shame she let faulty premises and emotion cloud her writing and her philosophy then really.
Such a shame she let faulty premises and emotion cloud her writing and her philosophy then really.
>> (the comments suck however - they basically try to deny the fact that for humanity as a species, the last century has been the best ever)
Part of me says that the added stresses from never being happy, always want more, do rain on that parade. Maybe being "a dumb peasant" somewhere with a full stomach but otherwise no larger goals is best.
>> The basic idea stands - too many people have more comfort, want too many things, and are harder to control - and now than ever.
Yeah but they are not organized, at least not in USA. Those making bank are kicking back to the politicians that decide what system /laws us suckers have to follow. The greatest investment ever is in the political process, a million dollar donation can easily yield billions.
Part of me says that the added stresses from never being happy, always want more, do rain on that parade. Maybe being "a dumb peasant" somewhere with a full stomach but otherwise no larger goals is best.
>> The basic idea stands - too many people have more comfort, want too many things, and are harder to control - and now than ever.
Yeah but they are not organized, at least not in USA. Those making bank are kicking back to the politicians that decide what system /laws us suckers have to follow. The greatest investment ever is in the political process, a million dollar donation can easily yield billions.
Try buddhism or stoicism (I read Seneca) and you'll be happy my friend, even with less :-)
You'll even be happier to see everyone in the human race is getting more.
It even beats being dumb with a full stomach, because how good is happiness if it is based on ignorance?
You'll even be happier to see everyone in the human race is getting more.
It even beats being dumb with a full stomach, because how good is happiness if it is based on ignorance?
but it is this unhappiness that drives progress - if people are content, there would be no new innovation to try and improve the status quo. If there is no selfishness, there would be no incentive and desire to outdo your neighbour (or competitor).
So? Why should progress be a goal in and of itself? Shouldn't progress be in the service of something else? If that something else is solving unhappiness, then why do you have a problem if unhappiness is solved through other means and progress becomes obsolete? Perhaps you are just addicted to progress and future-oriented thinking and thus cannot stay happy for long.
so you assume that "solving unhappiness" is the end goal - to which i m arguing that its not. Unhappiness is but a symptom of some problem (currently, its the lack of wealth and material for 90% of the population). If for some reason, everyone managed to get converted into buhdism and not feel any of the unhappiness that they'd otherwise have felt, did the situation really improve? Aren't they just tricking themselves into thinking they are in a state of enlightenment?
There will never be a shortage of malcontents. The rebellion of the 60s sprung from the prosperity of the 50s.
Also from the hideously repressive, reactionary and paternalistic social norms of the '50s.
This really strongly depends on how you define words like "content" or "unhappiness". If you define them using the lower-brain functions, then your point stands and Total Happiness means everyone has sufficient amounts of beer and television to avoid realizing how empty and stupid their lives are.
If you define them using higher-brain functions, your point falls apart precisely because scientific progress is itself a source of potential contentment.
If you define them using higher-brain functions, your point falls apart precisely because scientific progress is itself a source of potential contentment.
On the macro level I totally agree. But on a personal level it may be different, even though we're all benefiting from inventions of those that went nuts and lost many years of sleep
I don't think there is anything wrong with rent-seeking in buddhism. Ask Steve Jobs.
There is spiritual value in "rent-seeking" beyond greed. It's just not that obvious in our "rich is evil" kind of culture.
There is spiritual value in "rent-seeking" beyond greed. It's just not that obvious in our "rich is evil" kind of culture.
I find it interesting how often extremist capitalist beliefs justify themselves as producing more for everyone and then preaching Buddhist spirituality to individuals as a way to be happy with less.
> Problem number two is that the economic system does not create incentives to produce the products or technology that generate the most utility. The economic system produces the incentive to create products where the entrepreneur can capture as much of the consumer surplus/utility created as possible.
This captures all that is wrong with most of current startups and VCs in two sentences.
I have the impression that some 2/3 of the investments are being poured into yet another social product with advertising business model. I see little money being thrown at harder problems, and literally zero at art.
This captures all that is wrong with most of current startups and VCs in two sentences.
I have the impression that some 2/3 of the investments are being poured into yet another social product with advertising business model. I see little money being thrown at harder problems, and literally zero at art.
Kleiner Perkins invested in over 60 cleantech companies. Unfortunately, their cleantech portfolio seems to be having pretty lousy results - http://www.mercurynews.com/business/ci_22385874/kleiner-perk...
I think the proportion of VC funded companies that are doing an advertising bases social product is a bit exaggerated. I'd say the majority of funding is for paid subscription based SaaS web apps and software, stuff that manages some part of the enterprise, analytics, advertising optimization, security, backups, data management, etc. etc. See, for instance, one first tier venture firm's portfolio - http://www.generalcatalyst.com/companies
However, the point remains that few VC funded companies are attacking the areas that have the most potential for raising quality of life. I do not blame the VC firms for this - they are doing the economically smart thing. Software has a much greater potential for generating the high profits of natural monopoly with relatively low capital investment costs. Cleantech simply does not provide the same returns.
In reality, the solution may be more Solyndras. Maybe we need some public institution - government or philanthropic - to grant loans at a 2 to 1 match for equity investment in companies that are tackling socially useful problems. Many of these companies will fail. But the knowledge, know how, and personal experience generated will create the base for the next round of companies, or the round of companies after that, to create products that change the world. But currently it is not rational for VC's to play the long game, because there is little chance than any particular company they invest in will capture the value created by new innovations. Since much the result of the product will end up as consumer surplus/public surplus, it makes sense that the public contribute to the initial funding if the public wants the investment to happen.
I think the proportion of VC funded companies that are doing an advertising bases social product is a bit exaggerated. I'd say the majority of funding is for paid subscription based SaaS web apps and software, stuff that manages some part of the enterprise, analytics, advertising optimization, security, backups, data management, etc. etc. See, for instance, one first tier venture firm's portfolio - http://www.generalcatalyst.com/companies
However, the point remains that few VC funded companies are attacking the areas that have the most potential for raising quality of life. I do not blame the VC firms for this - they are doing the economically smart thing. Software has a much greater potential for generating the high profits of natural monopoly with relatively low capital investment costs. Cleantech simply does not provide the same returns.
In reality, the solution may be more Solyndras. Maybe we need some public institution - government or philanthropic - to grant loans at a 2 to 1 match for equity investment in companies that are tackling socially useful problems. Many of these companies will fail. But the knowledge, know how, and personal experience generated will create the base for the next round of companies, or the round of companies after that, to create products that change the world. But currently it is not rational for VC's to play the long game, because there is little chance than any particular company they invest in will capture the value created by new innovations. Since much the result of the product will end up as consumer surplus/public surplus, it makes sense that the public contribute to the initial funding if the public wants the investment to happen.
>the solution may be more Solyndras. Maybe we need some public institution - government or philanthropic - to grant loans at a 2 to 1 match for equity investment in companies that are tackling socially useful problems.
This is just torching money. It's all very well to say you're trying to destroy value to reach a social goal, but if you throw good money after bad on failed business ideas - no matter how noble the quest - you're still making life worse off for everybody.
Any good business that provides social benefit and has revenues higher than it's costs will go on to provide the benefits for many people.
You can't just throw money at a problem and hope to make it go away. It's especially worse if you throw public money at a problem.
Creating the next round of profitable companies hinge on the people involved understanding what goes into making a company profitable. If you hire a bunch of people and get them to tip public money into dead-end projects, all you've done is trained people to waste money.
The problem in the argument you have made is that you're insisting that something like facebook doesn't improve peoples quality of life, when it's patently obvious that it does, or people wouldn't use it.
I'm going to paraphrase-quote a pg essay here, but the point stays : 'it might be lamentable that people prefer beer and football to fine wine and opera, but you can't call it wrong when they have made that choice of their own free will'.
This is just torching money. It's all very well to say you're trying to destroy value to reach a social goal, but if you throw good money after bad on failed business ideas - no matter how noble the quest - you're still making life worse off for everybody.
Any good business that provides social benefit and has revenues higher than it's costs will go on to provide the benefits for many people.
You can't just throw money at a problem and hope to make it go away. It's especially worse if you throw public money at a problem.
Creating the next round of profitable companies hinge on the people involved understanding what goes into making a company profitable. If you hire a bunch of people and get them to tip public money into dead-end projects, all you've done is trained people to waste money.
The problem in the argument you have made is that you're insisting that something like facebook doesn't improve peoples quality of life, when it's patently obvious that it does, or people wouldn't use it.
I'm going to paraphrase-quote a pg essay here, but the point stays : 'it might be lamentable that people prefer beer and football to fine wine and opera, but you can't call it wrong when they have made that choice of their own free will'.
And what if "socially useful" - which effectively means whatever the current public opinion is - is ... wrong ? We are the very same people that once believed the earth is flat, and the people that proved that walking in a straight line between two points has to be less efficient than walking in a circle (the ancient Greeks. Why ? Because a circle is perfect. Despite proving that the shortest distance is just that straight line), were probably smarter than us, at least on average.
Then it will just be a big net loss to everyone.
Socially useful actually working is predicated on people's rational thinking actually producing good outcomes, and ... well, look at our history. The argument that "this time" we'll be right seems a bit unlikely to be true, doesn't it ?
The good thing/massive problem with capitalism is that it's an "intelligent" algorithm in it's own right, and the conclusions it reaches (the balance on your and everyone else's accounts) are guided by the algorithm, which doesn't care about morals, especially not about the fickle current version (we're < 40 years removed from the prevailing opinion being that skin color determines your worth. In lots of regions that's still true, like large parts of India, or the vast majority of muslim countries).
The differences of opinion between people and "the system" are not really different from the differences between a dictator and it's subjects. Except, of course that the capitalist algorithmic dictator has several advantages. First, he cannot go mad (before you disagree, read up on a few dictators. It'll put things like the Iraq wars and the patent system in the proper perspective). Second capitalism has actual, real information to base it's conclusion on, and nobody can unduly influence it's opinions for long. Third this dictator doesn't care about race, social status, ... (imho conservatives are not fair when it comes to race and religion ("the poor are immoral" argument), liberals are not fair when it comes to social status ("the poor are dumb" argument). I don't want either to stay in power for long).
We're switching to a world in which the vast majority of the population is useless, economically. There is no reason for them to be alive, no value in it. There is no way to prevent our capitalist dictator from realizing this is so, and it will -my biology book uses the term "correct". That's the real problem.
Then it will just be a big net loss to everyone.
Socially useful actually working is predicated on people's rational thinking actually producing good outcomes, and ... well, look at our history. The argument that "this time" we'll be right seems a bit unlikely to be true, doesn't it ?
The good thing/massive problem with capitalism is that it's an "intelligent" algorithm in it's own right, and the conclusions it reaches (the balance on your and everyone else's accounts) are guided by the algorithm, which doesn't care about morals, especially not about the fickle current version (we're < 40 years removed from the prevailing opinion being that skin color determines your worth. In lots of regions that's still true, like large parts of India, or the vast majority of muslim countries).
The differences of opinion between people and "the system" are not really different from the differences between a dictator and it's subjects. Except, of course that the capitalist algorithmic dictator has several advantages. First, he cannot go mad (before you disagree, read up on a few dictators. It'll put things like the Iraq wars and the patent system in the proper perspective). Second capitalism has actual, real information to base it's conclusion on, and nobody can unduly influence it's opinions for long. Third this dictator doesn't care about race, social status, ... (imho conservatives are not fair when it comes to race and religion ("the poor are immoral" argument), liberals are not fair when it comes to social status ("the poor are dumb" argument). I don't want either to stay in power for long).
We're switching to a world in which the vast majority of the population is useless, economically. There is no reason for them to be alive, no value in it. There is no way to prevent our capitalist dictator from realizing this is so, and it will -my biology book uses the term "correct". That's the real problem.
>>>We're switching to a world in which the vast majority of the population is useless, economically. There is no reason for them to be alive, no value in it.
Then the algorithm is unfit for human use.
Then the algorithm is unfit for human use.
That's insightful but probably not the way you meant it.
Its insightful in that "everyone" or "every citizen" or whatever used to be involved in "the" economy (as if there can only be one) and its a perfect 1:1 mapping with the world or a geographic country.
That's going away. Fast.
What will 99% of the population use for an economic system? In the 3rd world there's a lot of drugs and crime, so thats possible. Whuffie or however doctorow spells it? HN Karma?
Its kinda like how the "world of warcraft" economy means pretty much nothing to the people frozen out of it (the vast majority of the human population).
Current trends show eventually 1% of the population will have a perfect 100% of the existing economy, at which point the old economy and the 1% will become completely meaningless to the 99%. Our economy will be based solely on trading wheelbarrows of firewood, or wheelbarrows of weed, or bottles of Tide, or bitcoins, or EVE ISK, or solar energy in the form of charged batteries, or oil products, whatever it is, it'll be something other than the existing federal reserve currency system which is rapidly becoming irrelevant to the world, and soon to the USA.
That's going away. Fast.
What will 99% of the population use for an economic system? In the 3rd world there's a lot of drugs and crime, so thats possible. Whuffie or however doctorow spells it? HN Karma?
Its kinda like how the "world of warcraft" economy means pretty much nothing to the people frozen out of it (the vast majority of the human population).
Current trends show eventually 1% of the population will have a perfect 100% of the existing economy, at which point the old economy and the 1% will become completely meaningless to the 99%. Our economy will be based solely on trading wheelbarrows of firewood, or wheelbarrows of weed, or bottles of Tide, or bitcoins, or EVE ISK, or solar energy in the form of charged batteries, or oil products, whatever it is, it'll be something other than the existing federal reserve currency system which is rapidly becoming irrelevant to the world, and soon to the USA.
>>>What will 99% of the population use for an economic system?
That is the problem of the modern world. Who intends to solve it? And it's not like Everything Has Been Done. Just look at the old crumbling infrastructure. Work needs to be done.
That is the problem of the modern world. Who intends to solve it? And it's not like Everything Has Been Done. Just look at the old crumbling infrastructure. Work needs to be done.
"Second capitalism has actual, real information to base it's conclusion on, and nobody can unduly influence it's opinions for long."
That would be an interesting society to live in. Your quote above is basically the opposite of the USA, which brings it pretty far from the premise of the original article.
Also the most efficient long distance navigation path is a great circle route not a "straight" line. The geometry of projecting a round-ish globe on a flat map on a large scale has always been pretty messed up, so its actually kinda unusual for long trip to have the shortest route on a map be a straight line.
One interesting startup idea related to the above is people have historically had all kinds of interesting compromise map projections, but it should be possible to compute and display an optimized custom map projection for any specified route with minimal distortion such that the shortest path really would be a straight(ish) line on that optimized map. I'm sure there's a forest of patents on this idea preventing progress of this idea, at least in the USA, see the original article, etc.
That would be an interesting society to live in. Your quote above is basically the opposite of the USA, which brings it pretty far from the premise of the original article.
Also the most efficient long distance navigation path is a great circle route not a "straight" line. The geometry of projecting a round-ish globe on a flat map on a large scale has always been pretty messed up, so its actually kinda unusual for long trip to have the shortest route on a map be a straight line.
One interesting startup idea related to the above is people have historically had all kinds of interesting compromise map projections, but it should be possible to compute and display an optimized custom map projection for any specified route with minimal distortion such that the shortest path really would be a straight(ish) line on that optimized map. I'm sure there's a forest of patents on this idea preventing progress of this idea, at least in the USA, see the original article, etc.
After The Future is a great start for anyone who wants to go deeper than the stale "capitalism bad" arguments.
PDF http://www.sok.bz/web/media/video/AfterFuture.pdf
Or give money to the publisher and I hope the author: http://www.akpress.org/afterthefuture.html
Spoiler alert - let's forget communism, quit our jobs, and work toward Autonomy.
PDF http://www.sok.bz/web/media/video/AfterFuture.pdf
Or give money to the publisher and I hope the author: http://www.akpress.org/afterthefuture.html
Spoiler alert - let's forget communism, quit our jobs, and work toward Autonomy.
Found this interview with the main points about the book:
http://vimeo.com/25367464
Good ideas here.
http://vimeo.com/25367464
Good ideas here.
A thought occurs to me- the standard historical approach to natural monopolies that people have generally been happy with is government involvement, ala power plants. Would it be insane for the government to get involved with social networking?
Would ISPs and/or cellular service be a good example of what happens when government does not get involved? I don't follow that stuff too closely, but I think both have in fact been de-regulated?
Would ISPs and/or cellular service be a good example of what happens when government does not get involved? I don't follow that stuff too closely, but I think both have in fact been de-regulated?
ISPs and cell service are exactly what happens when government gets involved. Power plants are actually less regulated.
Cell service is compeltely broken because the government "sold" radio frequency spectrum. They sold all of it. Now there is none left to sell or distribute. And now a few concentrated companies own the rights (another government construct) to broadcast on their frequencies. So there is a rigged, no competition market, because you can't erect cell towers and broadcast on any frequency anymore (at least those viable for cell service) because someone owns that frequency band.
ISPs, again, are poor government intervention - almost all of the ground wires were laid under government subsidy upwards of a hundred years ago for some phone channels, so all the current private owners of coax / phone lines almost exclusively got them from government that already laid them, and rarely ever lays them themselves (and when they do, they do slight extensions to already established backbone, they aren't laying it themselves).
In addition, these private providers will contract with local governments to provide exclusive service, and will bribe the town council to block competition from laying their own lines (or heavens forbid, the township itself own the fucking wires running under their streets). As a result, you can't lay your own cable / fiber / phone lines (unless you are Google and have billions of political pressure) and even if you could, you are at an insurrmountable competitive disadvantage because not only does your competition already have all their wire laid decades ago, they can readily drop their prices to run you out of the market because they have barely any overhead in providing your service. They are making hand over fist profit off of consistent customers that are paying year on end. And then, there is inertia, and market manipulation by the established players, to make "average joes" not consider switching providers.
On the other end of the spectrum, it is federally regulated that power companies need to be contractable, in that you can select the company you get "power" from, even though the actual power lines are carrying juice from a thousand plants at any one time, and a lot of peoples homes are feeding back into the system. It is also regulation that enables average joes to set up their own solar panels / wind turbine / generator and get reimbursed any power they feed back into the system - if power companies could do whatever they wanted, they would prevent their customers from setting up their own power backup since it hurts their profits.
In the end, it is not very complex I think - even though the examples can be - if you stifle the ability for new players to enter a market, easily, and compete with the established ones (be it through insurmountable subsidized initial investment to enter the market, actual law book regulation preventing it, or rigged business code favoring the monopoly) you direly hurt the economy by creating artificial monopolies.
Even if the monopolies do "reasonably" well (NASA, for example, basically prevented private space investment because for 30 years it was hugely funded by taxpayers to own the sector, AT&T owned phone service for 60 years by government mandate, etc) markets with only one player (don't even look further than personal computing or the Linux world - there was barely any innovation in GCC until Clang came along to provide competition, or how Firefox had to get a lot faster when Chrome became a real competitor). Competition drives innovation, and in any situation where you facilitate a one man market, you will starve innovation and improvement just by only having one force in the market, even if they have good intentions.
Competition is essential to progress. It is the fuel that produces a huge amount of improvement in every field and business. So if a government is going to craft any law, it should be to make new competition easier to found and enter a market with, not harder. The electric grid regulation makes it easier to enter the market (even if the individual power sources are heavily regulated / zoned / mandated, and the status of a player against a power company only exists for consumers to power co, not business to power co, etc - there is a lot of regulatory cruft behind the respectable outer cover) and as a result promotes competition and better prices for the consumer (the ability to "shop" your power company in a state is a huge reason US power costs are so much lower than elsewhere in the world).
It is why almost all the innovation right now is in web / computers. It is barely regulated, extremely easy to enter the market, and as a result a disproportionate amount of ideas go into it (even when other fields cry for innovation, like medicine, agriculture, telecom, etc) because the market is free and as a result it is healthy.
Cell service is compeltely broken because the government "sold" radio frequency spectrum. They sold all of it. Now there is none left to sell or distribute. And now a few concentrated companies own the rights (another government construct) to broadcast on their frequencies. So there is a rigged, no competition market, because you can't erect cell towers and broadcast on any frequency anymore (at least those viable for cell service) because someone owns that frequency band.
ISPs, again, are poor government intervention - almost all of the ground wires were laid under government subsidy upwards of a hundred years ago for some phone channels, so all the current private owners of coax / phone lines almost exclusively got them from government that already laid them, and rarely ever lays them themselves (and when they do, they do slight extensions to already established backbone, they aren't laying it themselves).
In addition, these private providers will contract with local governments to provide exclusive service, and will bribe the town council to block competition from laying their own lines (or heavens forbid, the township itself own the fucking wires running under their streets). As a result, you can't lay your own cable / fiber / phone lines (unless you are Google and have billions of political pressure) and even if you could, you are at an insurrmountable competitive disadvantage because not only does your competition already have all their wire laid decades ago, they can readily drop their prices to run you out of the market because they have barely any overhead in providing your service. They are making hand over fist profit off of consistent customers that are paying year on end. And then, there is inertia, and market manipulation by the established players, to make "average joes" not consider switching providers.
On the other end of the spectrum, it is federally regulated that power companies need to be contractable, in that you can select the company you get "power" from, even though the actual power lines are carrying juice from a thousand plants at any one time, and a lot of peoples homes are feeding back into the system. It is also regulation that enables average joes to set up their own solar panels / wind turbine / generator and get reimbursed any power they feed back into the system - if power companies could do whatever they wanted, they would prevent their customers from setting up their own power backup since it hurts their profits.
In the end, it is not very complex I think - even though the examples can be - if you stifle the ability for new players to enter a market, easily, and compete with the established ones (be it through insurmountable subsidized initial investment to enter the market, actual law book regulation preventing it, or rigged business code favoring the monopoly) you direly hurt the economy by creating artificial monopolies.
Even if the monopolies do "reasonably" well (NASA, for example, basically prevented private space investment because for 30 years it was hugely funded by taxpayers to own the sector, AT&T owned phone service for 60 years by government mandate, etc) markets with only one player (don't even look further than personal computing or the Linux world - there was barely any innovation in GCC until Clang came along to provide competition, or how Firefox had to get a lot faster when Chrome became a real competitor). Competition drives innovation, and in any situation where you facilitate a one man market, you will starve innovation and improvement just by only having one force in the market, even if they have good intentions.
Competition is essential to progress. It is the fuel that produces a huge amount of improvement in every field and business. So if a government is going to craft any law, it should be to make new competition easier to found and enter a market with, not harder. The electric grid regulation makes it easier to enter the market (even if the individual power sources are heavily regulated / zoned / mandated, and the status of a player against a power company only exists for consumers to power co, not business to power co, etc - there is a lot of regulatory cruft behind the respectable outer cover) and as a result promotes competition and better prices for the consumer (the ability to "shop" your power company in a state is a huge reason US power costs are so much lower than elsewhere in the world).
It is why almost all the innovation right now is in web / computers. It is barely regulated, extremely easy to enter the market, and as a result a disproportionate amount of ideas go into it (even when other fields cry for innovation, like medicine, agriculture, telecom, etc) because the market is free and as a result it is healthy.
> Cell service is compeltely broken because the government "sold" radio frequency spectrum.
Selling spectrum is precisely the approach that was espoused by free-market economists since the days of Ronald Coase. It's not "rigged" or "no competition" any more than any sort of private property is that way. It's a commons resource, and that's the classical economic approach to handling commons resources: privatize them and sell them, so the market can allocate the resource to the highest-value users. You can't farm in my back yard either--that doesn't mean anything is "rigged." It just means that if your farming is higher in economic value than my use of the property, we engage in a market transaction to transfer ownership that moves the resource towards your higher value use.
So this is my little pet area of policy, and I think selling spectrum is the wrong way to go. But then again, I'm not much of a true believer in competition or the free market either.
Selling spectrum is precisely the approach that was espoused by free-market economists since the days of Ronald Coase. It's not "rigged" or "no competition" any more than any sort of private property is that way. It's a commons resource, and that's the classical economic approach to handling commons resources: privatize them and sell them, so the market can allocate the resource to the highest-value users. You can't farm in my back yard either--that doesn't mean anything is "rigged." It just means that if your farming is higher in economic value than my use of the property, we engage in a market transaction to transfer ownership that moves the resource towards your higher value use.
So this is my little pet area of policy, and I think selling spectrum is the wrong way to go. But then again, I'm not much of a true believer in competition or the free market either.
I am a pretty extreme libertarian (kind of a nutter) and keep getting worse at it, but the reason that argument is flawed is that it assumes anyone can own electromagnetic radiation frequency. It is in the same realm as owning wavelengths of visible light. It is a government construct, like patents and copyright, that have no natural scarcity to them, but has scarcity and ownership artificially implied, enforced through violence of law.
The real free market answer is that electromagnetic radiation is information, and you can generate whatever frequency of it you want, and you assume the markets would naturally orient themselves to not interfere devices. I absolutely think that would happen - any competitive entity trying to sell radio devices would have it in their best interest to collaborate across the market to make sure device manufacturers don't interfere, but it isn't at the threat of violence but at the promise of profits people would restrict their band usage. The market would inherently optimize radio usage for the best use case of consumers, to optimize their returns. The inherent competition would create incentives to innovate ways to use less bandwidth, different bands, etc.
That is the free market approach to radio. If you start your argument with "the government starts out owning this unlimited concept of frequency" it immediately is flawed.
The real free market answer is that electromagnetic radiation is information, and you can generate whatever frequency of it you want, and you assume the markets would naturally orient themselves to not interfere devices. I absolutely think that would happen - any competitive entity trying to sell radio devices would have it in their best interest to collaborate across the market to make sure device manufacturers don't interfere, but it isn't at the threat of violence but at the promise of profits people would restrict their band usage. The market would inherently optimize radio usage for the best use case of consumers, to optimize their returns. The inherent competition would create incentives to innovate ways to use less bandwidth, different bands, etc.
That is the free market approach to radio. If you start your argument with "the government starts out owning this unlimited concept of frequency" it immediately is flawed.
I am a pretty extreme libertarian (kind of a nutter) and keep getting worse at it, but the reason that argument is flawed is that it assumes anyone can own electromagnetic radiation frequency. It is in the same realm as owning wavelengths of visible light. It is a government construct, like patents and copyright, that have no natural scarcity to them, but has scarcity and ownership artificially implied, enforced through violence of law.
So are coal and land and money. All property is a government construct. Stop pretending otherwise.
So are coal and land and money. All property is a government construct. Stop pretending otherwise.
I only support the violent maintenance of a singular kind of ownership, which is of scarce goods and resources which can not be replicated at, or at near, no cost, and whose transferral requires the giver lose while the receiver gains.
It is why I consider myself libertarian and not anarchist. Besides the fact I also think, like how Communism turned out, what we think in theory and what we do in practice are in conflict because people are still human and often do, even in selfish terms, illogical things.
It is why I consider myself libertarian and not anarchist. Besides the fact I also think, like how Communism turned out, what we think in theory and what we do in practice are in conflict because people are still human and often do, even in selfish terms, illogical things.
I am a pretty extreme libertarian (kind of a nutter) and keep getting worse at it, but the reason that argument is flawed is that it assumes anyone can own electromagnetic radiation frequency.
Nobody owns a frequency, they have the right operate on that frequency.
It is a government construct that have no natural scarcity to them
The electromagnetic spectrum does have natural scarcity, due to interference. Have you ever had trouble getting a strong WiFi signal due to neighboring WiFi? You experienced electromagnetic spectrum scarcity. Now, you are probably going to jump in and argue that if only the government didn't constrain WiFi to 2.4GHz, there wouldn't be any scarcity. The problem is, there is still very much a finite amount of useable spectrum, and in fact a lot more of it is in use than you realize.
Nobody owns a frequency, they have the right operate on that frequency.
It is a government construct that have no natural scarcity to them
The electromagnetic spectrum does have natural scarcity, due to interference. Have you ever had trouble getting a strong WiFi signal due to neighboring WiFi? You experienced electromagnetic spectrum scarcity. Now, you are probably going to jump in and argue that if only the government didn't constrain WiFi to 2.4GHz, there wouldn't be any scarcity. The problem is, there is still very much a finite amount of useable spectrum, and in fact a lot more of it is in use than you realize.
Can you explain how your argument against ownership of electromagnetic spectrum does not also apply to land, houses, cars, etc.?
I already did, but electromagnetic spectrum is not scarce. You can cheaply, easily create radio waves, the radio might have scarcity, but the waves it produces are infinitely reproducible by a recipient, easily copied, and easily reproduced. They can be encoded as information, and conveyed as such, without losing any information, and reconstructed cheaply elsewhere.
You can not "take" someones radio wave and rob them of its possession, because when they broad cast it anyone could receive it, and if you are taking enough action to "block" its transmission you are violating many other scarce goods rights like invading their property.
All the other things you listed are scarce, not easily replicated, and taking of them means the other party loses because they are inherently scarce goods. Almost anything made of atoms is scarce, and anything made of electrons or photons is not, because as a property of the universe that made of the latter can be easily replicated for almost no effort but the former takes significant effort to reproduce from modern resources.
In the same vein, if you steal the radio, I no longer have it. If I broadcast on a frequency, I am not robbing you of your ability to use it, but it generates interference. If both parties have benevolent intentions (and in the absence of such, one can prosecute the other for sabotage and extortion for using hostile interference in the same vein that a company "owning" spectrum can sue someone for using it at all) then it is in their best interests to collaborate and mitigate the interference they impose on one another.
If they have no other option, it is not fit for a state to violently prevent one from using an infinitely reproducible resource while the other gets exclusive control over its usage.
Would you be ok with the sale of the visual light spectrum? Both radio and visible light are electromagnetic radiation. Doesn't it sound absurd to have the luminance of purple light the exclusive property of some corporate entity?
Here is another thing - the consumer electronics used in the US that are under these byzantine laws about spectrum usage are not operating in a global vacuum. They are bootlegged across India, China, and other nations that don't necessarily have rigorous spectrum laws in place that are enforced. These places self organize (with bumps and issues) into using radios without the need for control of what frequencies of electromagnetic radiation you can generate.
You can not "take" someones radio wave and rob them of its possession, because when they broad cast it anyone could receive it, and if you are taking enough action to "block" its transmission you are violating many other scarce goods rights like invading their property.
All the other things you listed are scarce, not easily replicated, and taking of them means the other party loses because they are inherently scarce goods. Almost anything made of atoms is scarce, and anything made of electrons or photons is not, because as a property of the universe that made of the latter can be easily replicated for almost no effort but the former takes significant effort to reproduce from modern resources.
In the same vein, if you steal the radio, I no longer have it. If I broadcast on a frequency, I am not robbing you of your ability to use it, but it generates interference. If both parties have benevolent intentions (and in the absence of such, one can prosecute the other for sabotage and extortion for using hostile interference in the same vein that a company "owning" spectrum can sue someone for using it at all) then it is in their best interests to collaborate and mitigate the interference they impose on one another.
If they have no other option, it is not fit for a state to violently prevent one from using an infinitely reproducible resource while the other gets exclusive control over its usage.
Would you be ok with the sale of the visual light spectrum? Both radio and visible light are electromagnetic radiation. Doesn't it sound absurd to have the luminance of purple light the exclusive property of some corporate entity?
Here is another thing - the consumer electronics used in the US that are under these byzantine laws about spectrum usage are not operating in a global vacuum. They are bootlegged across India, China, and other nations that don't necessarily have rigorous spectrum laws in place that are enforced. These places self organize (with bumps and issues) into using radios without the need for control of what frequencies of electromagnetic radiation you can generate.
"If I broadcast on a frequency, I am not robbing you of your ability to use it, but it generates interference."
This sentence contradicts itself. What is "interference" if not something that robs one of one's ability to use a radio frequency?
This sentence contradicts itself. What is "interference" if not something that robs one of one's ability to use a radio frequency?
Because interference is traffic congestion, not me ripping the road out of the ground and hauling it away on a truck. If a frequency is busy, you just get noise and reduced range. The difference is that you don't have as many independent protocols running through the air as you do on the streets.
You can still use it, but your usage is diminished. On the electric grid, there is a peak voltage the line can feed to all recipients before it is maxed out and can't provide more juice. If I am on the grid with you, I'm diminishing the maximum power you can take off a sufficiently strained grid. It isn't stealing from you to use it though, and in the case of power there is very little litigation about people consuming too much electricity (from what I know).
You can still use it, but your usage is diminished. On the electric grid, there is a peak voltage the line can feed to all recipients before it is maxed out and can't provide more juice. If I am on the grid with you, I'm diminishing the maximum power you can take off a sufficiently strained grid. It isn't stealing from you to use it though, and in the case of power there is very little litigation about people consuming too much electricity (from what I know).
There's no litigation over taking too much power from the grid because the grid is clearly owned by the power company, and they get to tell you what you're allowed to do with it (within the limits imposed by regulations). If the grid were simply a free-for-all the way you're proposing radio spectrum should be, things would be quite different.
That utterly misconceives both the nature of spectrum and the nature of property rights. Every property right is a government construct--there are no such things as "rights" in the statute of nature.[1] As far as property rights go, spectrum is much more like land than it is like information. A property right in land isn't just ownership of the physical dirt--it's ownership of a particular piece of a finite coordinate space. Similarly, spectrum rights are ownership of a particular piece of a different coordinate space (the tuple (x, y, z, f)).
People can read multiple copies of a book without interfering with each other, but people can't transmit on the same frequencies without doing so, just as they can't farm the same land without interfering with each other.[2]
> The real free market answer is that electromagnetic radiation is information, and you can generate whatever frequency of it you want, and you assume the markets would naturally orient themselves to not interfere devices.
That's like saying that the real free market answer is to not enforce rights in land, and let the free market work out how to coordinate various uses of land so they don't interference with each other. There is a name for that, it's called the tragedy of the commons.
[1] A "right" deconstructed, just means some legal relationship which the government will enforce on your behalf through violence. Without government, there is no one to enforce rights, and the concept is utterly meaningless. A deer can't invoke its "right to life" when a wolf kills and eats it.
[2] This is an imperfect analogy for various reasons, but more or less true at a very coarse level of granularity.
People can read multiple copies of a book without interfering with each other, but people can't transmit on the same frequencies without doing so, just as they can't farm the same land without interfering with each other.[2]
> The real free market answer is that electromagnetic radiation is information, and you can generate whatever frequency of it you want, and you assume the markets would naturally orient themselves to not interfere devices.
That's like saying that the real free market answer is to not enforce rights in land, and let the free market work out how to coordinate various uses of land so they don't interference with each other. There is a name for that, it's called the tragedy of the commons.
[1] A "right" deconstructed, just means some legal relationship which the government will enforce on your behalf through violence. Without government, there is no one to enforce rights, and the concept is utterly meaningless. A deer can't invoke its "right to life" when a wolf kills and eats it.
[2] This is an imperfect analogy for various reasons, but more or less true at a very coarse level of granularity.
While I do think natural rights are nonsense, I disagree that property rights are necessarily a government construct. There are other institutions regulating property, with enforcement provided by the civil society.
It seems like there would be an incentive for people to build radio jammers or other ways of generating interference. They would then use those jammers to extort legitimate broadcasters - pay me $1 million or I'll ruin your broadcast. Since the extortionist has equal rights to broadcast waves, broadcasting the interference is not illegal. How would you prevent this?
Radio broadcasts - ie electromagnetic radiation - is energy projected onto other's people's property. The libertarian view should be that it can limit person's A right to project energy if it interferes with the rights of person B. If I aim powerful lasers at my neighbors house, the government has the right to intervene. If I broadcast loud sound waves at 3AM, the government has the right to intervene. If I want to build a nuclear plant that might irradiate everyone in my town if things go wrong, the government has the right to regulate it. When I broadcast radio, I interfere with the ability of others to broadcast and listen to radio. The purpose of a government is to mediate these conflicts. Predictable mediation requires establishing clear ownership rights.
Maybe you could argue the government should have allowed spectrum to be homesteaded, rather than purchased, but the end result would be similar.
Radio broadcasts - ie electromagnetic radiation - is energy projected onto other's people's property. The libertarian view should be that it can limit person's A right to project energy if it interferes with the rights of person B. If I aim powerful lasers at my neighbors house, the government has the right to intervene. If I broadcast loud sound waves at 3AM, the government has the right to intervene. If I want to build a nuclear plant that might irradiate everyone in my town if things go wrong, the government has the right to regulate it. When I broadcast radio, I interfere with the ability of others to broadcast and listen to radio. The purpose of a government is to mediate these conflicts. Predictable mediation requires establishing clear ownership rights.
Maybe you could argue the government should have allowed spectrum to be homesteaded, rather than purchased, but the end result would be similar.
Extortion is a crime and tortious interference with business is tortious interference with a business. I don't think either of those would magically vanish upon the abolition of spectrum regulations.
One thing that bugs me about pro and contra libertarian debates is that both sides do something similar: imagine a kind of Year Zero world in which somehow all laws have been shipped to /dev/null. It's a dumb debate to have. Angels waltzing with strawmen on the head of a pin.
One thing that bugs me about pro and contra libertarian debates is that both sides do something similar: imagine a kind of Year Zero world in which somehow all laws have been shipped to /dev/null. It's a dumb debate to have. Angels waltzing with strawmen on the head of a pin.
I'm not going to speak on all libertarians, but my world view is pretty much that you can possess finite scarce goods and call them "yours" (things made of atoms) but with things that aren't scarce (information, once produced, is not scarce - we can easily order electrons to represent the super-majority of the information space) it is tragic and wrong to try to restrict them.
Radios are scarce, but the range and ability to produce electromagnetic waves at certain frequencies is not scarce with said radio. Computers are scarce, but digital information is infinitely reproducible and millions of people will send you a copy for free (see: torrents). This kind of stuff shouldn't be limited or restricted by artificial government constructs.
There is a difference between having a finite resource and artificially calling it "yours" and taking an infinite resource and calling it "yours. Ownership is a fundamental human right - to possess scarce resources you can call your own. It is only recently the bulk of humanity has had this right. I don't think it should be anyones right to own an infinite resource like an idea, though.
Personal opinion. I write software and think trying to sell per-copy instances of infinite information is ridiculous. In computer terms, it is the flip side to the free software coin that makes open source a whole. If you distribute a black box you shouldn't be able to try to force people to treat it some certain way, after all, you freely gave it the first time, anyone else can do with it what they will.
I still target open source since I'm not a dick and don't like giving someone a black box, but that is tangential.
Radios are scarce, but the range and ability to produce electromagnetic waves at certain frequencies is not scarce with said radio. Computers are scarce, but digital information is infinitely reproducible and millions of people will send you a copy for free (see: torrents). This kind of stuff shouldn't be limited or restricted by artificial government constructs.
There is a difference between having a finite resource and artificially calling it "yours" and taking an infinite resource and calling it "yours. Ownership is a fundamental human right - to possess scarce resources you can call your own. It is only recently the bulk of humanity has had this right. I don't think it should be anyones right to own an infinite resource like an idea, though.
Personal opinion. I write software and think trying to sell per-copy instances of infinite information is ridiculous. In computer terms, it is the flip side to the free software coin that makes open source a whole. If you distribute a black box you shouldn't be able to try to force people to treat it some certain way, after all, you freely gave it the first time, anyone else can do with it what they will.
I still target open source since I'm not a dick and don't like giving someone a black box, but that is tangential.
Economists talk about rivalrousness and excludability when classifying goods.
Rivalrous means that, to the extent I am using or possessing some good, you are not. Excludable means that I can, as a seller, prevent you from using it without payment.
Most physical goods are rivalrous and excludable. I can keep an icecream to myself and while I am digesting it, you are not. The icecream truck can prevent you taking one without payment. This meets the definition of what people usually think of as "private property".
Radio waves are rivalrous but not excludable; economists call these "common goods". These lead to -- you guessed it -- the tragedy of the commons, where individually optimal decisions lead to globally suboptimal outcomes.
Commons can't work unless agents agree to constrain themselves, or are made to constrain themselves. The former can happen by agreement, the latter by regulation.
In the case of radio, regulation has been the standard model because of the nature of the usage. Voice and vision have been analogue and the human nervous system is a poor demultiplexer, so they needed bands to themselves. Similarly for many other applications (radar, for example) , the amount of information put through a certain band has historically been low but the value high. So: regulation.
Wireless networks are an example of a commons managed by agreement; or perhaps managed by emergent phenomena. Each wireless node blindly follows some simple rules (such as randomised exponential backoff) that, in practice, make a shared medium largely usable.
edits: to clarify terms a bit
Rivalrous means that, to the extent I am using or possessing some good, you are not. Excludable means that I can, as a seller, prevent you from using it without payment.
Most physical goods are rivalrous and excludable. I can keep an icecream to myself and while I am digesting it, you are not. The icecream truck can prevent you taking one without payment. This meets the definition of what people usually think of as "private property".
Radio waves are rivalrous but not excludable; economists call these "common goods". These lead to -- you guessed it -- the tragedy of the commons, where individually optimal decisions lead to globally suboptimal outcomes.
Commons can't work unless agents agree to constrain themselves, or are made to constrain themselves. The former can happen by agreement, the latter by regulation.
In the case of radio, regulation has been the standard model because of the nature of the usage. Voice and vision have been analogue and the human nervous system is a poor demultiplexer, so they needed bands to themselves. Similarly for many other applications (radar, for example) , the amount of information put through a certain band has historically been low but the value high. So: regulation.
Wireless networks are an example of a commons managed by agreement; or perhaps managed by emergent phenomena. Each wireless node blindly follows some simple rules (such as randomised exponential backoff) that, in practice, make a shared medium largely usable.
edits: to clarify terms a bit
> I'm not going to speak on all libertarians, but my world view is pretty much that you can possess finite scarce goods and call them "yours" (things made of atoms)
If ownership only extends to things made of atoms, then you'd agree that it's totally okay for me to build my house on your land so long as it hovers an inch over the dirt and grass that comprises your ownership. Otherwise, you're claiming ownership of an incorporeal thing--the geographic coordinates that encompass not just your land but the space above it.
> Radios are scarce, but the range and ability to produce electromagnetic waves at certain frequencies is not scarce with said radio.
Ownership of spectrum is not a monopoly on the right to produce electromagnetic waves of a certain frequency. It's a monopoly on the right to invade certain areas of space with electromagnetic waves of a certain frequency. The FCC doesn't care what frequencies you transmit on in a lead-lined room on your own property.
If ownership only extends to things made of atoms, then you'd agree that it's totally okay for me to build my house on your land so long as it hovers an inch over the dirt and grass that comprises your ownership. Otherwise, you're claiming ownership of an incorporeal thing--the geographic coordinates that encompass not just your land but the space above it.
> Radios are scarce, but the range and ability to produce electromagnetic waves at certain frequencies is not scarce with said radio.
Ownership of spectrum is not a monopoly on the right to produce electromagnetic waves of a certain frequency. It's a monopoly on the right to invade certain areas of space with electromagnetic waves of a certain frequency. The FCC doesn't care what frequencies you transmit on in a lead-lined room on your own property.
> Radios are scarce, but the range and ability to produce electromagnetic waves at certain frequencies is not scarce with said radio.
I work in the wireless networking field, and my and my coworkers' experience is actually the complete opposite in high-density environments: there is an abundance of radios, and a scarcity of frequency.
Which, BTW, is one of the reasons wired networking consistently outperforms wireless - you have one and only one transmitter (in a full-duplex connection) on a given medium.
I work in the wireless networking field, and my and my coworkers' experience is actually the complete opposite in high-density environments: there is an abundance of radios, and a scarcity of frequency.
Which, BTW, is one of the reasons wired networking consistently outperforms wireless - you have one and only one transmitter (in a full-duplex connection) on a given medium.
The peak throughput in any region of space in terms of wave density is limited, but one of the reasons your coworkers are probably experiencing such scarcity is due to artificial constraints on the market.
Frequency would be scarce in highly concentrated areas in an open-frequency region, but it would be less so than if you artificially restricted access. What would naturally follow is that the demand would distribute itself (within the realm of possibility, ultra low and high frequencies have either range or bandwidth disadvantages that make them ill suited for, say, digital packet signaling).
I also wonder what kind of innovation you might see in an open band environment in terms of wifi - if you weren't limited to the few bands of 802.11, maybe routers would pop up that dynamically enable multiple transmitters (like how a modern router would have multiple antennas to transmit in parallel, maybe you would see many-hundred low power antenna radios to interface with devices over the largest clear possible frequency range available?)
Frequency would be scarce in highly concentrated areas in an open-frequency region, but it would be less so than if you artificially restricted access. What would naturally follow is that the demand would distribute itself (within the realm of possibility, ultra low and high frequencies have either range or bandwidth disadvantages that make them ill suited for, say, digital packet signaling).
I also wonder what kind of innovation you might see in an open band environment in terms of wifi - if you weren't limited to the few bands of 802.11, maybe routers would pop up that dynamically enable multiple transmitters (like how a modern router would have multiple antennas to transmit in parallel, maybe you would see many-hundred low power antenna radios to interface with devices over the largest clear possible frequency range available?)
How exactly to you propose affordable consumer hardware is going to accommodate hundreds of radios covering the entire range of useful spectrum?
They won't have to. The market would naturally have big players find it in their best interest to organize spectrum interference around their usage, and would avoid ranges used by other big consistent players in a region. The average consumer should barely see any change, besides variable range on their devices as other hardware comes up and goes down in a frequency band they use.
But for use cases that require consistent signaling, or really high throughput, enabling radios that utilize vast swaths of frequencies in parallel can increase the throughput.
But for use cases that require consistent signaling, or really high throughput, enabling radios that utilize vast swaths of frequencies in parallel can increase the throughput.
Cell service would be worse off if anyone could decide to broadcast on any frequency; just like the tragedy of the commons[1], putting more emitters in the same frequencies raises the noise floor until it's simply impossible to get a good signal to noise ratio. Fixed spectrum allocations might not appear to be the best solution, but the alternative is just much worse.
While ISPs in Canada suck, here, last mile infrastructure owners are forced to lease their infrastructure to competitors; it means that if I am unhappy with my cable provider's internet service, I can get cheaper service provided by someone else over the same physical infrastructure. As you mention, that competition is healthy, even though the infrastructure owners try to gimp their competitors in every way allowed under the law.
[1] http://en.wikipedia.org/wiki/Tragedy_of_the_commons
While ISPs in Canada suck, here, last mile infrastructure owners are forced to lease their infrastructure to competitors; it means that if I am unhappy with my cable provider's internet service, I can get cheaper service provided by someone else over the same physical infrastructure. As you mention, that competition is healthy, even though the infrastructure owners try to gimp their competitors in every way allowed under the law.
[1] http://en.wikipedia.org/wiki/Tragedy_of_the_commons
It is a short term problem though. in the long run, free spectrum would mean that in the best interests of all parties involved, they would minimize the interference. It isn't profitable for your stuff to be unusable because everyone else is using the same spectrum.
I believe the free market would naturally orient itself to correct for interference. Overused bands would be fled from, and the balance between saturation and diversity would be manifest by customer satisfaction. There would be frequent, instantaneous (in long run terms) moments of conflict where problems arise, but as a whole it wouldn't be a rigged, exploitable system by the corrupt that govern it.
But we have to argue in ifs, because we have the product of one chain of events. Maybe a system would have arisen with a benevolent market controller who charitably gave their artificially limited spectrum to use. Maybe we would have descended into chaos when our cell phone service got choppy.
We don't know because we never tried the alternative. We assume it is bad because in theory it sucks in the beginning, so we stick with what we know to be inherently flawed because we don't have the incentive to try to fix it.
I believe the free market would naturally orient itself to correct for interference. Overused bands would be fled from, and the balance between saturation and diversity would be manifest by customer satisfaction. There would be frequent, instantaneous (in long run terms) moments of conflict where problems arise, but as a whole it wouldn't be a rigged, exploitable system by the corrupt that govern it.
But we have to argue in ifs, because we have the product of one chain of events. Maybe a system would have arisen with a benevolent market controller who charitably gave their artificially limited spectrum to use. Maybe we would have descended into chaos when our cell phone service got choppy.
We don't know because we never tried the alternative. We assume it is bad because in theory it sucks in the beginning, so we stick with what we know to be inherently flawed because we don't have the incentive to try to fix it.
Actually, we have the alternative. The 2.4GHz ISM band is unregulated, which means that my old analog cordless phone causes the Wi-Fi to disconnect in half the house(and maybe my neighbors') and my microwave causes a major signal/noise ratio drop.
Sure, it somewhat works and if necessary, I can just go sit right next to the Wi-Fi router to watch some cat videos while warming some food. I'd rather have my cell phone always working, though.
Besides, if spectrum is unregulated, what prevents company X from interfering with routers from company Y, so that Y's products are perceived as flaky? I mean, even with regulated spectrum, there were still issues between LightSquared's planned broadband network and GPS[1], for example.
[1] http://www.gps.gov/spectrum/lightsquared/
Sure, it somewhat works and if necessary, I can just go sit right next to the Wi-Fi router to watch some cat videos while warming some food. I'd rather have my cell phone always working, though.
Besides, if spectrum is unregulated, what prevents company X from interfering with routers from company Y, so that Y's products are perceived as flaky? I mean, even with regulated spectrum, there were still issues between LightSquared's planned broadband network and GPS[1], for example.
[1] http://www.gps.gov/spectrum/lightsquared/
> what prevents company X from interfering with routers from company Y, so that Y's products are perceived as flaky
That is still sabotage and possibly extortion if they try to bribe the company. If they weren't providing a real good with the bandwidth they use I would imagine no court would find them not guilty of attacking the company they are targeting.
That is still sabotage and possibly extortion if they try to bribe the company. If they weren't providing a real good with the bandwidth they use I would imagine no court would find them not guilty of attacking the company they are targeting.
Doesn't mean that it wouldn't happen in your scenario, though. Corporations can and will skirt the law if they think they can get away with it and derive sufficient benefit from it.
In a free for all spectrum, it is much harder to prove that a device is interfering with another, making prosecution lengthy and complex. In the current system, if a device emits outside of its regulated band, its certification or authorization is revoked and the device becomes illegal to sell and operate. The criteria to do so are clear and evaluable from an objective standpoint, unlike interference in a shared spectrum that may or may not be willful and debatable in court.
Besides, it's not as if spectrum being freely available will magically make anyone a wireless carrier; there is still a significant up front capital expense to erect cell phone towers, routing calls to the PSTN, handling billing and support. A further proof would be that a corporation could create their own wireless carrier over the unregulated 2.4GHz ISM band by installing Wi-Fi APs and delivering VoIP over that for much less than the cost of erecting cell phone towers over an entire city, yet nobody did that.
In a free for all spectrum, it is much harder to prove that a device is interfering with another, making prosecution lengthy and complex. In the current system, if a device emits outside of its regulated band, its certification or authorization is revoked and the device becomes illegal to sell and operate. The criteria to do so are clear and evaluable from an objective standpoint, unlike interference in a shared spectrum that may or may not be willful and debatable in court.
Besides, it's not as if spectrum being freely available will magically make anyone a wireless carrier; there is still a significant up front capital expense to erect cell phone towers, routing calls to the PSTN, handling billing and support. A further proof would be that a corporation could create their own wireless carrier over the unregulated 2.4GHz ISM band by installing Wi-Fi APs and delivering VoIP over that for much less than the cost of erecting cell phone towers over an entire city, yet nobody did that.
".. the best interests of all parties involved, they would minimize the interference." is not really true - this scenario is well researched, and the usual expected result is 'tragedy of commons', where all parties suffer and ruin things for everyone until either (a) consolidation causes an effective monopoly or a strong cartel, or (b) regulation.
It has never been tried in practice. If we take the violent enforcement of artificial limitation on a non-scarce concept (radios can broadcast at frequencies and do so at variable frequencies fairly well) off the table, and the reality that in the absence of such forced regulation a major monopoly is prohibitive because, in the case of the radio industry, because there is no scarce resource here (radio waves can be produced for nigh-nothing after the investment in a radio, which is a markedly low barrier to entry) you can't have a cartel enforce dominance either without expending excessive amounts of resources to deny competitors, and they would bankrupt themselves trying to maintain dominance without actually providing anything useful and unable to extort because the ability to enter the market is too low, and without regulation, they can't create false barriers to entry.
Also, actively attacking someones broadcasts for the sole purpose of disruption is still extortion. I'm not nutty enough to think you can go total anarchy, just that artificially constructed scarcity is bad for everyone.
Also, actively attacking someones broadcasts for the sole purpose of disruption is still extortion. I'm not nutty enough to think you can go total anarchy, just that artificially constructed scarcity is bad for everyone.
If all the radio providers are somehow able to come together and arrange an allocation of channels so that they don't overlap, then they are also able to (a) not allocate any of those channels to newscomers; (b) the channel allocation guarantees marketshare, i.e., if you gain more usage you don't get more capacity, so will rise prices - it's exactly a cartel situation like OPEC.
The entry barrier is capital investment in radios - if you want to use 1800 mhz GSM band, you need to buy many millions (billions for country-wide scale) worth of radios and put them up to towers. If you want to later switch to 1900 mhz band as the first one is "polluted" - tough luck, buy new gear and install it once more. Or, in practice, if you don't get a guarantee that your devices won't work, you just don't buy them and keep out of the market.
And, as soon as you call installing a device on the same spectrum "actively attacking someones broadcasts" - then it's a pure monopoly, first-come first-serve; the first one to put up the investment and put in New York some towers with ALL the frequency channels standard phones support (it's not that much, ~triple what they're normally using) gets an effective monopoly forever, since anyone putting up any GSM tower will be a disruption.
The entry barrier is capital investment in radios - if you want to use 1800 mhz GSM band, you need to buy many millions (billions for country-wide scale) worth of radios and put them up to towers. If you want to later switch to 1900 mhz band as the first one is "polluted" - tough luck, buy new gear and install it once more. Or, in practice, if you don't get a guarantee that your devices won't work, you just don't buy them and keep out of the market.
And, as soon as you call installing a device on the same spectrum "actively attacking someones broadcasts" - then it's a pure monopoly, first-come first-serve; the first one to put up the investment and put in New York some towers with ALL the frequency channels standard phones support (it's not that much, ~triple what they're normally using) gets an effective monopoly forever, since anyone putting up any GSM tower will be a disruption.
Has your proposed scenario been tried in practise either? Saying "they would bankrupt themselves" is just supposition with no timeframe - in the meantime everyone suffers.
People are not absolutely predictable, for one, so no one can say what would happen with certainty. I can say what I think would happen. And that is because without the violence to protect them, they are nigh powerless to control the entire electromagnetic spectrum emissions range that can safely transmit signals.
In the meantime, right now 300 million plus people are suffering under an artificially controlled market for a resource that has no inherent scarcity. They are crushed by the very rent seekers this article speaks of on goods they can't truly possess without the violence of law to protect their interests, and they are given artificial advantage to abuse the regulations giving them the power to extort others.
In the meantime, right now 300 million plus people are suffering under an artificially controlled market for a resource that has no inherent scarcity. They are crushed by the very rent seekers this article speaks of on goods they can't truly possess without the violence of law to protect their interests, and they are given artificial advantage to abuse the regulations giving them the power to extort others.
if you stifle the ability for new players to enter a market, easily, and compete with the established ones you direly hurt the economy by creating artificial monopolies.
I agree with everything you say, but I think I come to a slightly different conclusion. It sounds like in the special case of natural monopolies, what we need is rather than simply trying not to stifle competitors, we need to work to empower competitors- because of the special nature of natural monopolies.
This is still a form of regulation, so it sounds like regulation is fine for natural monopolies, so long as it goes in the right "direction", i.e. regulation that opens up the market rather than closing it.
I agree with everything you say, but I think I come to a slightly different conclusion. It sounds like in the special case of natural monopolies, what we need is rather than simply trying not to stifle competitors, we need to work to empower competitors- because of the special nature of natural monopolies.
This is still a form of regulation, so it sounds like regulation is fine for natural monopolies, so long as it goes in the right "direction", i.e. regulation that opens up the market rather than closing it.
I find most natural monopolies are either the result of stupid artificial government regulation (patents, like the article mentions - doctors, farming / food / pesticides, etc) or are infrastructure monopolies. I commented to someone else, but systemically I don't think infrastructure is viable as a privatized good. It inherently has to be public, I think, in the way it acts as a foundational element of society. This includes power lines, rail, roads, and cable / phone / fiber. I don't think these wires under public roads and through private property should ever be private, but should be public, easily plugged into and utilized resources to build industries and tremendous productivity gains upon.
Natural monopolies are, by definition, not created by legislation or regulation. They emerge from the features of a market.
What natural monopolies are there then?
Basically anywhere that the structure of costs makes it more efficient for a single firm to serve a market. High upfront capital costs and low maintenance relative to capital make it hard for second entrants to follow, because the incumbent has already paid down some or all of their capital cost and can cut prices to the marginal cost of operation to drive out the entrant -- but the entrant must pay off the capital as well.
If the capital costs are low, this isn't as much of problem. With some understanding investors and creditors an entrant can match the incumbent.
But when you have to build millions or billions of dollars of stuff just to get started, that's much harder to arrange.
If the capital costs are low, this isn't as much of problem. With some understanding investors and creditors an entrant can match the incumbent.
But when you have to build millions or billions of dollars of stuff just to get started, that's much harder to arrange.
But I'm asking for a specific example of a natural monopoly that isn't the result of infrastructure (which is best not even done privately and is best a public good) and can't have its prohibitive costs to enter the result of artificial government scarcity (arguing a nuclear plant is prohibitively expensive to build because the designs are all patented, for example, falls into that category).
I just can't think of one. Almost any "natural" monopoly (roads, healthcare, power grid, network cable, etc) I think should be done by local government, not private business, because structural aspects of society aren't effective platforms for competition if they just supply the foundations to build markets upon.
Actually, I just thought of one - maybe agriculture. While it is structural, it isn't an inherent infrastructure because it has specialized purpose. The post green revolution has demonstrated (though I imagine it is the result of regulation this happens) that megafarms are the most efficient way to organize modern farming. This naturally leads to a few big players because the cost of equipment to properly maximize productivity of land has high expenses (though they aren't at a comparable scale to say, a road network, or laying fiber in a city - one tractor, plow, tiller, etc plus the seed, silos, barns, etc, but these are tools to maximize productivity, not infrastructure).
It might be the product of land ownership and zoning, but I'm only familiar with my local zoning code, which has a large Mennonite population, so most of the farmland in the region is restricted from being sold for other purposes. The midwest is a much different story that I'm not familiar with.
I just can't think of one. Almost any "natural" monopoly (roads, healthcare, power grid, network cable, etc) I think should be done by local government, not private business, because structural aspects of society aren't effective platforms for competition if they just supply the foundations to build markets upon.
Actually, I just thought of one - maybe agriculture. While it is structural, it isn't an inherent infrastructure because it has specialized purpose. The post green revolution has demonstrated (though I imagine it is the result of regulation this happens) that megafarms are the most efficient way to organize modern farming. This naturally leads to a few big players because the cost of equipment to properly maximize productivity of land has high expenses (though they aren't at a comparable scale to say, a road network, or laying fiber in a city - one tractor, plow, tiller, etc plus the seed, silos, barns, etc, but these are tools to maximize productivity, not infrastructure).
It might be the product of land ownership and zoning, but I'm only familiar with my local zoning code, which has a large Mennonite population, so most of the farmland in the region is restricted from being sold for other purposes. The midwest is a much different story that I'm not familiar with.
We're talking past each other. I'm saying natural monopolies exist; you're saying they should be done as public enterprises. Those are two related but distinct things.
I'm saying there are no natural monopolies that are not systemic infrastructure. The platforms you build other things upon are often natural monopolies, but those I argue should never be privatized in the first place, so I want to hear of natural monopolies that are not in that category to justify the argument that some economic system will orient itself where one player can heavily exploit its customer base without introducing ample room for competition due to prohibitively high barriers to entry / time to market (where these forces are significantly higher than the prospective returns).
I no longer understand what you are arguing. You want natural monopolies that aren't natural monopolies. You want them public but not public. I am sincerely lost.
So you concede there are no natural monopolies that are not structural?
That is all I'm saying. If you agree with that, we aren't arguing anything.
That is all I'm saying. If you agree with that, we aren't arguing anything.
I'm asking for a specific example of a natural monopoly that isn't the result of infrastructure
... social networking?
... social networking?
I don't buy that is a monopoly. The networking effect alone is not enough to call it a monopoly, and I think the natural end state is social networks with interoperable APIs. It is just a natural opportunity cost with a high valuation since it requires a core peer group to follow, but nothing prevents you from building a competitor. You would have a slow adoption rate, and would need to compete on features to attract the nerd crowd, which would be followed by their friends, and in a delay, the peers and family of them, but I think the market movements in social networks are more comparable to real social and cultural shifting rather the instantaneous results entrepreneurs expect.
I don't think in a decade the closed social networks will last, for the interopt reason. The value proposition of a common platform of profiles is too strong long run not to take over.
I don't think in a decade the closed social networks will last, for the interopt reason. The value proposition of a common platform of profiles is too strong long run not to take over.
"Cell service is compeltely broken because the government "sold" radio frequency spectrum. They sold all of it."
Usually the government selling something off is not cited as an example of government intervention. Most lazzei-faire types believe that is exactly what government should do - sell off the property to put it in the hands of the free market.
The actually problems are three-fold. 1) The government still owns large portions of spectrum that are underutilized 2) the government restricts changing the use of spectrum, such as changing UHF TV into 4G and 3) the government does not charge any sort of property tax based on the value of the spectrum, so there is no incentive for the spectrum to end up with the highest value use.
"ISPs, again, are poor government intervention - almost all of the ground wires were laid under government subsidy upwards of a hundred years ago for some phone channels, "
Most people in my state get their internet via cable wires laid in the past few decades.
"In addition, these private providers will contract with local governments to provide exclusive service, and will bribe the town council to block competition from laying their own lines (or heavens forbid, the township itself own the fucking wires running under their streets)."
Local governments are much closer to small market players than they are to the leviathan state. There are thousands of towns and cities, but usually only a couple cable companies in any area. The exclusivity contracts are usually given out of position of weak bargaining power.
"and even if you could, you are at an insurrmountable competitive disadvantage because not only does your competition already have all their wire laid decades ago, they can readily drop their prices to run you out of the market because they have barely any overhead in providing your service."
And here is the problem that has nothing to do with government - broadband wired internet is a natural monopoly. There are extreme capital expenses and the company that builds the first network has a huge advantage, it is usually not profitable for a second business to enter the market.
So yeah, competition is good. But initiating competition in the cable market might require government intervention. It might require the government to subsidize a second network. It might require the government to block mergers between the cable companies and content providers. And even in the best case you are probably not going to have more than two or three broadband options in one town. So the government would probably still want to regulate the internet providers as common carriers ( http://en.wikipedia.org/wiki/Common_carrier ) and ensure network neutrality.
"AT&T owned phone service for 60 years by government mandate"
Keep in mind that AT&T pretty much built its monopoly on its own. The government had the choice between breaking it up, and converting it to a regulated monopoly, and chose the latter. This may have been the wrong choice, but the country was probably better off for having at least some government intervention, and not allowing the monopoly to be completely unregulated and dedicated solely towards shareholder profits.
Usually the government selling something off is not cited as an example of government intervention. Most lazzei-faire types believe that is exactly what government should do - sell off the property to put it in the hands of the free market.
The actually problems are three-fold. 1) The government still owns large portions of spectrum that are underutilized 2) the government restricts changing the use of spectrum, such as changing UHF TV into 4G and 3) the government does not charge any sort of property tax based on the value of the spectrum, so there is no incentive for the spectrum to end up with the highest value use.
"ISPs, again, are poor government intervention - almost all of the ground wires were laid under government subsidy upwards of a hundred years ago for some phone channels, "
Most people in my state get their internet via cable wires laid in the past few decades.
"In addition, these private providers will contract with local governments to provide exclusive service, and will bribe the town council to block competition from laying their own lines (or heavens forbid, the township itself own the fucking wires running under their streets)."
Local governments are much closer to small market players than they are to the leviathan state. There are thousands of towns and cities, but usually only a couple cable companies in any area. The exclusivity contracts are usually given out of position of weak bargaining power.
"and even if you could, you are at an insurrmountable competitive disadvantage because not only does your competition already have all their wire laid decades ago, they can readily drop their prices to run you out of the market because they have barely any overhead in providing your service."
And here is the problem that has nothing to do with government - broadband wired internet is a natural monopoly. There are extreme capital expenses and the company that builds the first network has a huge advantage, it is usually not profitable for a second business to enter the market.
So yeah, competition is good. But initiating competition in the cable market might require government intervention. It might require the government to subsidize a second network. It might require the government to block mergers between the cable companies and content providers. And even in the best case you are probably not going to have more than two or three broadband options in one town. So the government would probably still want to regulate the internet providers as common carriers ( http://en.wikipedia.org/wiki/Common_carrier ) and ensure network neutrality.
"AT&T owned phone service for 60 years by government mandate"
Keep in mind that AT&T pretty much built its monopoly on its own. The government had the choice between breaking it up, and converting it to a regulated monopoly, and chose the latter. This may have been the wrong choice, but the country was probably better off for having at least some government intervention, and not allowing the monopoly to be completely unregulated and dedicated solely towards shareholder profits.
> Usually the government selling something off is not cited as an example of government intervention. Most lazzei-faire types believe that is exactly what government should do - sell off the property to put it in the hands of the free market.
When a government sells intangible information waveforms, I'd consider it intervention. Radio spectrum is not a finite resource. You generate radio waves with devices by producing electromagnetic radiation. The "sale" of spectrum implies that the government owns what is on the exact same scale as visible light, which is completely insane. But it is the world we live in.
> Most people in my state get their internet via cable wires laid in the past few decades.
I live on the East Coast, my experience is probably different. Do note that cable is much more modern than phone lines - what AT&T had laid a century ago, most cable is indeed decades old. My area was seeded with cable lines in the 60s, it was early at that too.
> Local governments are much closer to small market players than they are to the leviathan state. There are thousands of towns and cities, but usually only a couple cable companies in any area. The exclusivity contracts are usually given out of position of weak bargaining power.
I talk about this in another topic I made in this thread, and it mentions how economic systems larger than a political system can push around the politics to their own gains. The way cable companies extort local government is a prime example.
> And here is the problem that has nothing to do with government - broadband wired internet is a natural monopoly. There are extreme capital expenses and the company that builds the first network has a huge advantage, it is usually not profitable for a second business to enter the market.
Infrastructure is a natural monopoly. There are dramatic diminishing returns on laying a second redundant set of the same thing than using one thing. I personally think fiber / cable / phone wire should be publicly owned and maintained, and ISPs provide gateways to the Internet via the routing servers and DNS caches to their clients, but you can contract with anyone to provide you the connection to the backbone.
Roads separate man from animal, in that man will slave to lay roads that benefit others, but not lose competitive reproductive advantages as a result. Any other animal that would forge their environment to the benefit of the many of their species would die off from having less energy to spend breeding. As a species, we have a unique ability to build foundations of road, power, and network that enable magnitudes of productivity gains for little cost - if we collectively agree to pay and support it. It isn't something I feel works well in a private competitive market, but I am pretty libertarian. So the solution to me is not to try to create artificial incentives to waste resources laying redundant cable, but that the cable should never be private in the first place. It is laid under public roads, run over private property, and should be a public good. It even was, for a brief time, until most local governments sold them to greedy business. I don't know how to solve the extortion problem, unless it is mandated at a higher level that the smaller governments can't sell off public infrastructure like that.
> Keep in mind that AT&T pretty much built its monopoly on its own. The government had the choice between breaking it up, and converting it to a regulated monopoly, and chose the latter. This may have been the wrong choice, but the country was probably better off for having at least some government intervention, and not allowing the monopoly to be completely unregulated and dedicated solely towards shareholder profits.
The early years of AT&T were a mix of government incentive and business practice. They spread so fast because everyone wanted phones, and they got subsidized to provide to everyone. It is another situation I think the correct solution would have been to go the way of roads (or maybe power lines) - public infrastructure supporting private, competitive end points. The phone lines should create a market for competition, as a foundational infrastructure an industry can be built on.
When a government sells intangible information waveforms, I'd consider it intervention. Radio spectrum is not a finite resource. You generate radio waves with devices by producing electromagnetic radiation. The "sale" of spectrum implies that the government owns what is on the exact same scale as visible light, which is completely insane. But it is the world we live in.
> Most people in my state get their internet via cable wires laid in the past few decades.
I live on the East Coast, my experience is probably different. Do note that cable is much more modern than phone lines - what AT&T had laid a century ago, most cable is indeed decades old. My area was seeded with cable lines in the 60s, it was early at that too.
> Local governments are much closer to small market players than they are to the leviathan state. There are thousands of towns and cities, but usually only a couple cable companies in any area. The exclusivity contracts are usually given out of position of weak bargaining power.
I talk about this in another topic I made in this thread, and it mentions how economic systems larger than a political system can push around the politics to their own gains. The way cable companies extort local government is a prime example.
> And here is the problem that has nothing to do with government - broadband wired internet is a natural monopoly. There are extreme capital expenses and the company that builds the first network has a huge advantage, it is usually not profitable for a second business to enter the market.
Infrastructure is a natural monopoly. There are dramatic diminishing returns on laying a second redundant set of the same thing than using one thing. I personally think fiber / cable / phone wire should be publicly owned and maintained, and ISPs provide gateways to the Internet via the routing servers and DNS caches to their clients, but you can contract with anyone to provide you the connection to the backbone.
Roads separate man from animal, in that man will slave to lay roads that benefit others, but not lose competitive reproductive advantages as a result. Any other animal that would forge their environment to the benefit of the many of their species would die off from having less energy to spend breeding. As a species, we have a unique ability to build foundations of road, power, and network that enable magnitudes of productivity gains for little cost - if we collectively agree to pay and support it. It isn't something I feel works well in a private competitive market, but I am pretty libertarian. So the solution to me is not to try to create artificial incentives to waste resources laying redundant cable, but that the cable should never be private in the first place. It is laid under public roads, run over private property, and should be a public good. It even was, for a brief time, until most local governments sold them to greedy business. I don't know how to solve the extortion problem, unless it is mandated at a higher level that the smaller governments can't sell off public infrastructure like that.
> Keep in mind that AT&T pretty much built its monopoly on its own. The government had the choice between breaking it up, and converting it to a regulated monopoly, and chose the latter. This may have been the wrong choice, but the country was probably better off for having at least some government intervention, and not allowing the monopoly to be completely unregulated and dedicated solely towards shareholder profits.
The early years of AT&T were a mix of government incentive and business practice. They spread so fast because everyone wanted phones, and they got subsidized to provide to everyone. It is another situation I think the correct solution would have been to go the way of roads (or maybe power lines) - public infrastructure supporting private, competitive end points. The phone lines should create a market for competition, as a foundational infrastructure an industry can be built on.
Well, with current technologies, radio spectrum is a finite resource. Say, 1900 mhz range GSM standard has some 300 channels available, and if your cell towers are using these channels than I can't use them at all (or we both will get just disruption).
And if you are both disrupting, neither of you are making a profit and are losing customers. It is in the best interests of all parties to negotiate usage that maximizes benefit of all parties involved.
It doesn't require the violence of law for people to come to compromise. Profit motive is plenty enough I think.
It doesn't require the violence of law for people to come to compromise. Profit motive is plenty enough I think.
I don't agree. Radio in the early 20th century in the United States was not regulated, and operated in the unregulated fashion you described, and it was a failure. What has really changed in the intervening century? Spectrum interference is still as much of a problem now as it was back then.
Allowing anyone with a small amount of money to disrupt valuable uses of spectrum would basically legalize extortion. I doubt many radio-spectrum businesses could exist in an environment where any random person with a few thousand dollars and an evil mind could legally demand that they pay up or be shut down.
You just called it what it is. Criminal extortion, and it would also be sabotage, to use a frequency band to attack another party running on it.
That doesn't magically become legal. For the same reasons you could take someone using "your" frequency right now to court, you could take someone using the frequencies you do only for the purposes of attacking the signal quality on the same basis.
And no, opening up spectrum doesn't suddenly mean everyone and their mom is buying radios and spamming electromagnetic radiation, for the same reason people don't do it today, because they can be targeted for sabotage if they aren't productively using their radio usage.
That doesn't magically become legal. For the same reasons you could take someone using "your" frequency right now to court, you could take someone using the frequencies you do only for the purposes of attacking the signal quality on the same basis.
And no, opening up spectrum doesn't suddenly mean everyone and their mom is buying radios and spamming electromagnetic radiation, for the same reason people don't do it today, because they can be targeted for sabotage if they aren't productively using their radio usage.
I don't understand, if there's no ownership of the spectrum, then on what basis would the user be able to take the attacker to court? What if the attacker says he just really enjoys spamming high-powered electromagnetic hash, but would be willing to give up his hobby for the right price?
That right there would be considered extortion in court, and like I said, it is sabotage to actively attack infrastructure to defraud a business (ie, blocking roads for trucks, building a power sink to rip juice from a local area from someone, scheduling trains to intentionally prevent someone else from using them at a certain time).
It is like any other infrastructure. You should be free to use it, and punished if you abuse it.
It is like any other infrastructure. You should be free to use it, and punished if you abuse it.
Who decides that my joyous hobby of spamming the radio spectrum is extortion and not legitimate use?
| Keep in mind that AT&T pretty much built its
| monopoly on its own
Well, no, it would be just as profitable without government intervention - it just wouldn't serve the unprofitable less populated areas for which it was subsidised.
In the major population centers the paying customer demand was easily sufficient to build the network without government. And once the network in "good" areas was built, they would still be a monopoly and be able to deny any newcomer access by dumping prices in the profitable areas if anybody would invest in a new network - if the government was weak enough to let them.
In the major population centers the paying customer demand was easily sufficient to build the network without government. And once the network in "good" areas was built, they would still be a monopoly and be able to deny any newcomer access by dumping prices in the profitable areas if anybody would invest in a new network - if the government was weak enough to let them.
So, is the government preventing AT&T and such from dumping prices in the areas where Google Fiber is investing in?
Not right now as far as I know, but yes, there already is legislation in place to protect & compensate Google if AT&T tries that.
The problem with the standard approach to monopolies is that in the long term the corporation ends up having power over government, while popular power is disorganized and diffuse. See Government's End by Jonathan Rauch or read about the Problem of Collection Action by Mancur Olson.
My current thinking is that the best route would be to alter corporate charters to give consumers voting power as the company increased in market share. So if a company had 70% market share, there might be a consumer elected board that had the power to veto anti-competitive acquisitions, changes to the terms of service, changes to privacy policies, revocation of open access, etc. If you have Congress trying to regulate the company, the company will end up controlling Congress. But an elected consumers board should have a better shot at representing the interests of the customers of that company.
My current thinking is that the best route would be to alter corporate charters to give consumers voting power as the company increased in market share. So if a company had 70% market share, there might be a consumer elected board that had the power to veto anti-competitive acquisitions, changes to the terms of service, changes to privacy policies, revocation of open access, etc. If you have Congress trying to regulate the company, the company will end up controlling Congress. But an elected consumers board should have a better shot at representing the interests of the customers of that company.
I like this idea. If any rent-seeking group achieves market dominance, the government should regulate their prices. For example, the price of prescription drugs and higher education should be set by the government. Laissez-faire capitalism only works in markets with price competition.
Ultimately, I think most industries will evolve into government regulated monopolies. Consolidation is a standard part of the life-cycle for most markets. We should embrace the efficiency that dominant players can achieve.
With regard to individuals, I think a universal basic income is the long-term solution. Let a few people become billionaires, while the masses are paid to relax at home. There is a large amount of wasted resource in industries like retail, marketing and sales. Society would probably be better off if those industries shrank.
Ultimately, I think most industries will evolve into government regulated monopolies. Consolidation is a standard part of the life-cycle for most markets. We should embrace the efficiency that dominant players can achieve.
With regard to individuals, I think a universal basic income is the long-term solution. Let a few people become billionaires, while the masses are paid to relax at home. There is a large amount of wasted resource in industries like retail, marketing and sales. Society would probably be better off if those industries shrank.
I have another viewpoint and solution proposition - I think the vast majority of the reason politicians can sanely get away with completely fucking over the many for the interests of the powerful few is because the power and influence is so far disconnected from the people themselves.
I wrote a stupidly long copy paste here: http://zannyland.blogspot.com/2012/10/political-ranting-part...
On this topic though, people should have very specific direct election of one representative, per 500 - 1500 people, who would represent them in local voting and selecting higher representatives from their elected peers (ie, a local council of 10 would select one to go to the state, the state would select maybe 3 to go federal), and higher tiers of government can't impose laws not adopted by the lower branches (1/4 of local governments can't actively oppose in legislation something proposed in the state, 1/4 of states can't oppose something federal, etc).
That way, to corrupt the whole, you need to corrupt a majority of the people to elect from themselves (because in a pool of 1500, preferably with 1 2 - 4 year office term per official, so career politicians are harder to come by) corrupt politicians to work against the publics interest. Sadly, I think the modern American public would probably do just that and fuck themselves over. It would require an independently minded, free thinking populace that can understand the world to understand forces are working against them. They aren't there now, though.
I wrote a stupidly long copy paste here: http://zannyland.blogspot.com/2012/10/political-ranting-part...
On this topic though, people should have very specific direct election of one representative, per 500 - 1500 people, who would represent them in local voting and selecting higher representatives from their elected peers (ie, a local council of 10 would select one to go to the state, the state would select maybe 3 to go federal), and higher tiers of government can't impose laws not adopted by the lower branches (1/4 of local governments can't actively oppose in legislation something proposed in the state, 1/4 of states can't oppose something federal, etc).
That way, to corrupt the whole, you need to corrupt a majority of the people to elect from themselves (because in a pool of 1500, preferably with 1 2 - 4 year office term per official, so career politicians are harder to come by) corrupt politicians to work against the publics interest. Sadly, I think the modern American public would probably do just that and fuck themselves over. It would require an independently minded, free thinking populace that can understand the world to understand forces are working against them. They aren't there now, though.
I think this article nails a lot of key points, and it is really spot on. The sad thing is not many people are going to read it because it is a lot of true words.
I don't think the economic culture of the US bred global business, though. I think the trivialization of the distance did. Glottalization meant that it would be much cheaper for a US based company to enter a fledgling market (say, McDonalds) and reestablish themselves as the market force in that area, since it has a much cheaper barrier to entry than building an entire enterprise from the ground up. The economies of scale grow faster as you approach ludicrously global scale, because you can really streamline all aspects of your business.
There isn't really a correlation with global business and competition, either - I'd say global business is only possible when corruption enables rent seeking business (which has no competition and is rigged to the market dominator) OR when there is real competition, and the global business is so successful because of the economies of scale and significantly lower market entry barriers to new regions than a brand new business.
So you could have either. We have, sadly, a lot of the first, but the second can happen to.
And global business (with competition) is good. It means the competition and economies of scale drive profits to zero, and maximize the benefit to the consumer.
The problem with global business is that when our markets and economics are global but our politics and emotions are local, those super companies have significantly more influence than a tiny group of people in an isolated pocket economy artificially cut off by an imaginary line on a map. The global business that truly connect the world extract their clout from the entirety of the species, while a countries politics gets its validation from its people.
And no country has a population, GDP, productivity, or workforce, competitive with the global one. Of course they will be corrupted by global business. Their resources are much more limited and restricted, because our politics and cultures are outdated in the face of a modern economy.
But this is just one piece of a giant puzzle. Individually, the problems are obvious, stupid, an simple, and often the work of the greedy and corrupt rent seekers. But there are millennias worth of built up greed to lead us to where we are today with the rigged system we work with, and the individual parts complement each other and support one another to maintain the whole broken game. The problem isn't fixing one part, it is figuring out how to remove the tumors before they kill the host, and there are millions of small tumors that add up to a large cancer. And as you chip at the fringes of one, the rest keep on poisoning the system, and they all have to be somehow dealt with.
I don't think the economic culture of the US bred global business, though. I think the trivialization of the distance did. Glottalization meant that it would be much cheaper for a US based company to enter a fledgling market (say, McDonalds) and reestablish themselves as the market force in that area, since it has a much cheaper barrier to entry than building an entire enterprise from the ground up. The economies of scale grow faster as you approach ludicrously global scale, because you can really streamline all aspects of your business.
There isn't really a correlation with global business and competition, either - I'd say global business is only possible when corruption enables rent seeking business (which has no competition and is rigged to the market dominator) OR when there is real competition, and the global business is so successful because of the economies of scale and significantly lower market entry barriers to new regions than a brand new business.
So you could have either. We have, sadly, a lot of the first, but the second can happen to.
And global business (with competition) is good. It means the competition and economies of scale drive profits to zero, and maximize the benefit to the consumer.
The problem with global business is that when our markets and economics are global but our politics and emotions are local, those super companies have significantly more influence than a tiny group of people in an isolated pocket economy artificially cut off by an imaginary line on a map. The global business that truly connect the world extract their clout from the entirety of the species, while a countries politics gets its validation from its people.
And no country has a population, GDP, productivity, or workforce, competitive with the global one. Of course they will be corrupted by global business. Their resources are much more limited and restricted, because our politics and cultures are outdated in the face of a modern economy.
But this is just one piece of a giant puzzle. Individually, the problems are obvious, stupid, an simple, and often the work of the greedy and corrupt rent seekers. But there are millennias worth of built up greed to lead us to where we are today with the rigged system we work with, and the individual parts complement each other and support one another to maintain the whole broken game. The problem isn't fixing one part, it is figuring out how to remove the tumors before they kill the host, and there are millions of small tumors that add up to a large cancer. And as you chip at the fringes of one, the rest keep on poisoning the system, and they all have to be somehow dealt with.
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But it's not. The financial markets direct energy towards new ideas, old enterprises and value storage. To do that, they have to allocate investment and risk.
Good risk management (or at least moderately well done) generates the best growth for the least risk. Bad risk management can be seen in several countries' stagnating GDP curves.
Nature does this too, by the way. Imagine an ant colony: It grows exponentially, because the more ants are in that colony, the more food they bring in and the more larvae can be raised. But the super organism has to make decisions, with surprisingly intelligent mechanisms, how many of the current ants to risk for food foraging, how many to hold in reserve, how many larvae to raise etc. If they do it right, they grow exponentially, but if they for example risk half of their workers on a single day and loose them to a rain fall or predator, they falter.