Wednesday, October 29, 2008

Reason's commenters put Reason contributers to shame

Reason Magazine, the Reason Foundation, and Cato are generally pretty okay libertarian standard-bearers, but they lose serious libertarian cred when it comes to land use. In those areas, they've been completely coopted by hacks like Randal O'Toole, Wendell Cox, and Robert Poole, who take every opportunity to bash the budding New Urbanist movement over its support of anti-sprawl land use regulations, without recognizing that the biggest part of the New Urbanist agenda is to repeal the highly restrictive minimum density zoning laws, minimum parking requirements, and other regulations that limit the sort of unregulated, organic growth that we see in the oldest and most desired parts of American and European cities today.

So anyway, it was totally unsurprising to see this article by Cox referenced in's blog, where he blames the recent subprime meltdown on New Urbanism. But what I was surprised to see is the incredible outpour of knowledge in the comments section, where various commenters methodically rip Cox's argument to shreds. Reason ought to look into its land use and transportation coverage, and instead of relying on these tired one-trick ponies, perhaps hire some of the commentators. They, at least, recognize that New Urbanism is nothing compared to the already-entrenched pro-sprawl regulations that have been in place since the advent of the automobile.

Open source hardware and the future of IP

Wired has an excellent, in depth article up about open source hardware. Open source software has changed the software business (the web has, in the last few decades, been very much run on open source software), but the leap from free intellectual property in terms of infinitely and freely replicable software to open source hardware (essentially, hardware without the patent) is a little too much for most people to make, conceptually speaking. But even though you've never heard of it, this article has convinced me that it's real, happening, and going to be a big deal. It seems that the catalyst is cheap, scalable, and increasingly nimble manufacturing operations in East Asia, who make going from plans to device a much easier task than it once was.

The idea has rammifications for the world of patents, especially on things (like hardware) that have traditionally had high R&D costs but relatively low per-unit costs – specifically, medicine. I think it's only a matter of time (and regulatory upheaval) before medicine is created using this decentralized, open source method, and finally developing countries won't have to choose between free trade and the ability to "pirate" Western medicine. The article does delve into the development issue, in discussing the transformative effects of low-cost, open source hardware for developing nations. Given that the world's very poor often spend very high percentages of their income on technology, easing its cost could be a highly effective development mechanism.

I'd quote from the article, but every word is so compelling that I couldn't choose a section to excerpt. Just read it, for your own good.

(Sorry about the drop-off in posts – I've been pretty sick since Sunday morning.)

Monday, October 27, 2008

The mayor of Moscow's foreign policy

The NYT today has a great profile of Moscow Mayor Yury Luzhkov and his penchant for conducting foreign policy. Luzhkov's nationalistic style is similar to that of the Eurasianist Aleksandr Dugin, but unlike Dugin, Luzhkov actually has a budget to back himself up. Anonymous sources within the administrated cited "hundreds of millions of dollars" as the total spending of Moscow on regions outside of Russia. These regions included South Ossetia (pre-war), which he plied with food, medical aid, "dump trucks, tents and cranes," and where he repaired a highway that was ultimately used by South Ossetian separatists during the war. And there's also Abkhazia, the old Soviet apparatchiks' favorite beach spot, where the City of Moscow has become a major investor. And though the Russian government (as opposed to the Moscow government) also contributed a lot of aid to these regions before their invasions this summer, the Times notes that "Mr. Luzhkov often seems to take the lead."

More ominously, Luzhkov has also been pouring resources into Crimea, an majority Russian port city deep within Ukraine's territory, and also home of Russia's formidable Black Sea Naval Fleet. In Crimea, Luzhkov has built housing for Russia's military, "a branch of Moscow State University" (??), as well as many other non-military infrastructure projects. He has very open revanchist views about Crimea, "[calling] for Russia to reclaim Crimea from Ukraine."

But ultimately, the article's author notes, Luzhkov "is not a member of Mr. Putin's inner circle." While Putin might find his foreign policy adventures helpful, Luzhkov himself cannot initiate a Russian military invasion simply by building roads and schools. There are a lot of differences between Georgia and Ukraine. Most importantly, Ukraine is not an alternative to Russian energy for Europe. Whereas Georgia is a competitor with Russia when it comes to bringing Caspian Sea natural gas into Europe, Ukraine is not. Secondly, Georgia is ruled by an increasingly authoritarian Mikheil Saakashvili, who has shown himself to not be receptive to Russian subjugation, whereas Ukraine's political establishment is much more vulnerable to Russian meddling.

Like Georgia, Ukraine has value for Russia: namely, its access to the Black Sea. But in the end, I do not think Russia will move to reclaim eastern Ukraine or the Crimean peninsula. It would be much less controversial to simply work to influence Ukraine's leaders (as Russia has done in Belarus), rather than launch an invasion against Ukraine. Whereas Russia could invade Georgia with minimal repercussions, an invasion of Ukraine – so close to Europe – would have a lot more consequences.

Sunday, October 26, 2008

Should we treat food more like color TVs?

Bill Clinton addressed the UN a few weeks ago, on the UN's World Food Day, and said that "we blew it" in terms of global food policy. However, this quote confused me a bit:

Former President Clinton told a U.N. gathering Thursday that the global food crisis shows "we all blew it, including me," by treating food crops "like color TVs" instead of as a vital commodity for the world's poor.

How the US treated food crops "like color TVs" is beyond me. It seems like treating food more like color TVs – which aren't subsidized, unlike commodity crops throughout America – would have been a better policy. "Vital commodities" such as food, shelter, and healthcare have a tendency to be subsidized, whereas frivolous luxuries like color TVs don't (some subsidies notwithstanding). Looking at the advances in color TVs and food in the last decades, would you rather the government treated food a little more like color TVs?

Saturday, October 25, 2008

Mobile banking in the developing world and the modern-day license raj

MIT's Technology Review has an interesting article in their November/December issue about mobile banking in South Asia, and the convergence of banking and mobile phones in the developing world. Having skipped the landline/PC stage of telecom development, the developing world's connectivity needs are most often handled on cell phones and prepaid phone networks. The developing world has astonishing rates of mobile phone penetration – 44% of China's population, and 26% of India's, with much of the growth coming from poor, rural areas – as well as an enormous untapped need for banking services, which the majority of the poor in these countries lack. Mobile banking promises to enable money to be transfered, deposited, withdrawn, and even borrowed (in the form of microcredit) easily from a mobile phone, which are apparently services that would save a lot of time and work for India's poor farmers:

And to grasp how ordinary people could benefit, consider the life of the average farmer in the Bangalore area. Typically, a farmer spends hours trekking into the city for a 4:00 a.m. auction to sell his goods. The auction concludes by 6:00 a.m., after which the farmer takes an IOU to a bank, waits for it to open, and collects his money. Then he returns home, risking theft on the way. "We looked at the model and said, What if the retailer could use mChek to pay farmers electronically, and the farmer would receive notification on his cell phone?" Swamy says. The company conducted a pilot project with Citibank and a Bangalore retailer that buys fresh produce; they learned that 85 percent of the farmers attending the auction already owned cell phones. And some reported that if they could accept payment electronically, not only would they save hours queuing at banks, but they might skip the journey altogether, sending a son or a hired laborer in their place.

Though there is this enormous demand for mobile banking, the concept is still in the beta stages where it's needed most. India – land of the infamous license raj – has regulations that separate the banking and and telecom sectors:

India's regulations, unlike those of some other countries, do not allow telecom companies to enroll people in bank accounts; only banks and nongovernmental organizations, including microfinance institutions like Grameen Koota, can do that. So for now, mChek hopes to form partnerships with such organizations.

Hopefully mChek will be able to find a willing partner, but it sure would get mobile banking into the hands of consumers a lot faster if they were allowed to handle bank accounts themselves. In the absence of rules allowing mobile phone companies to enter directly into the banking sector, partnerships are necessary, but add a level of complexity to entrepreneurship that is apparently a serious stumbling block in the wider implementation of mobile banking:

Yet these efforts to graft developed-world banking onto developing-world mobile networks are not commensurate with the swelling popularity of the mobile phone itself. The larger story is one of pilot projects that petered out amid difficulties including cumbersome national regulations, unfriendly user interfaces, and an inability to make the right partnerships. "The reality of the field today is that the promise--which a lot of people understand is huge--is more in the conceptual stage," says Michael Chu. "The banking industry is very suspicious of the cell-phone industry, because they suspect that cell phones will make them obsolete. The cell-phone companies think the banks are like dinosaurs." But these players have to work together seamlessly for cell-phone-based banking to work.

...and while mChek might be succeeding, they seem to be one of the few that's been able to work through the regulations:

For mChek, then, the task now is to forge more such partnerships and navigate a shifting regulatory environment. Draper Fisher Jurvetson's Jolly says that mChek's achievements thus far are unique in India. "I often talk about [mChek] as a company that is dancing with gorillas or behemoths," says Jolly. "You have the banking sector on one side and the [telecom companies] on the other side, and then you've got the MasterCard and Visa folks, and finally the regulatory oversight bodies like the RBI. Trying to corral all of them, for a startup, is next to impossible. What mChek has been able to accomplish in India has never been done before."

In Africa, mobile phone users have found an interesting work-around to mobile banking restrictions: stop dealing in officially-sanctioned currency, and start dealing in an alternative currency, where the rules for transactions aren't as stifling. The currency of choice in many places is mobile phone credit, which can be sent and received easily and cheaply over text message (users text the code required to redeem the minutes, and the recipient can either use the minutes, or trade them on). The rise of this new mobile credit currency has parallels with the natural emergence of another currency: gold. Though at first valued for its useful properties (i.e., jewelry), the precious metal eventually emerged as a currency because people were sure others would accept it, and it was value-dense and it didn't spoil, allowing it to be used as a good medium of exchange, and store of value. Cell phone minutes have the same properties: they're easy to transfer over long distances (at a cost of only a text message), and retain their value over long periods of time.

The subsidized roads/zoning feedback loop

I've been reading this fascinating article by William Fischel at Dartmouth about the history of zoning in America. The ultimate conclusion is that zoning is a political manifestation of home value insurance and that such insurance might be valuable in lessening the exclusionary impacts of zoning, but the history that the author gives is much more interesting.

The most interesting conclusion he has is that zoning was a direct response to the freedom of the automobile, bus, and freight truck. Whereas previously the rich (always the most fervent advocates of zoning, both then and now) were secluded from the city and inner-suburb riff-raff by higher subway fares and the expense of owning and operating a car, the author argues that the coming of trucks and buses in the 1910's is what really did in unregulated land use. Apartment blocks were the bane of every wealthy single-family homeowner's existence, and they were seen as lowering housing prices and destroying the character of a neighborhood.

All well and good – an explanation that rings true even today – but there's something that I find lacking in it. Namely, the car, bus, and truck weren't the only ingredients in this whole shift: there was also the not insignificant matter of the roads they ran on. The capital costs of laying streetcar tracks were financed by sale of houses and real estate around the streetcars, and the operating costs were financed through user fees.* The roads, on the other hand, were, at this point in time, both constructed and maintained by various levels of government. Though "libertarian" writers from the Cato Institute would have you believe otherwise, the government spending binge on roads preceded the nation's first state fuel tax (passed in Oregon in 1919) by at least half a decade. As early as 1913, the costs of building roads were already weighing on state and local budgets, who didn't fund those projects out of dedicated fuel taxes. The federal government didn't start collecting user fees in the form of fuel taxes until 1932, despite passing its first highway bill in 1916, and really getting into the highway funding game with the Federal-Aid Highway Act of 1921.

If the increased mobility afforded by buses and trucks is seen as a direct result of subsidized roads, then zoning is as well. Sadly, not only was zoning driven by the subsidized roads, but now zoning begets even more roads. Populations grow but legislated densities rarely do, so the natural tendency is to build outwards rather than upwards to accommodate the change. Though our current road system may be more-or-less pay-as-you-go, looking somewhat like a self-sustaining independent free market creation, the truth is that the current patterns are only sustainable because of the zoning regulations that spread people far enough out that everyone's driveway doesn't have to open into a six-lane highway. Were the government forced to provide roads for any density that required it, it would be overwhelmed with the costs of constantly widening streets.

* The land use situation wasn't completely laissez-faire. Real estate developers (i.e., streetcar magnates) often used their political connections to get the government to grand monopolies on streetcar lines, creating a sort of de fact exclusionary zoning code.

How will the United States eventually come undone?

Reading things like this on Wikipedia make me wonder about what the configuration of the US will look like after the inevitable break-up at some point in the future:

New Jersey is sandwiched between two large cities: New York City in the northeast and Philadelphia in the southwest; Benjamin Franklin called her "a barrel tapped at both ends". South Jersey is the area within the Philadelphia sphere of influence, whereas North Jersey is the area within New York City's influence.

Friday, October 24, 2008

The relative sizes of Apple, GM, and Alcoa

Wired's Epicenter blog has an interesting post about Apple's financial situation: thanks to their blockbuster iPod and solid laptop division, they've got $25 billion in the bank, and no debts. A normal company would buy some of its suppliers or competitors, but Apple doesn't have any competitors worth buying, and it's never been much for absorbing other companies. It's made some relatively small acquisitions in the past (that's gotta be the most convenient and unexpected article I've ever seen on Wikipedia), but nothing really looks appetizing in the current market. But anyway, the most interesting part is the "Wild Blue Yonder" section, where they list interesting but totally implausible companies for Apple to buy:

Here are some wacky ideas for companies that Apple could buy with a little more than the spare change it finds in the couch cushions: Cray ($115M), in case Apple wants to corner the market for creative supercomputer users; Alcoa ($3B), for all that shiny aluminum showing up in the new MacBooks; Seagate ($3B), in case the company feels like reinventing the hard drive; or General Motors ($3B), in case Jobs wants to reinvent the car.

First of all, it's amazing to me that Cray's total market cap (i.e., value) is less than 1% of Apple's cash on hand. And Alcoa, the aluminum multinational giant, and GM (that GM), are barely worth 10% of Apple's on hand cash. My, how the economy has changed...

Thursday, October 23, 2008

Greenspan accepts responsibility for all the wrong reasons

Alan Greenspan has come under scrutiny in the House today, being compelled to declare his culpability in the ongoing subprime mess. But what's so backwards about the whole thing is that he's being lambasted for his anti-regulatory stances, but not his years of keeping the interest rate below inflation, effectively meaning a negative real interest rate. Low interest rates supposedly buoy an economy in bad times, but can result in asset bubbles – and especially in the most valuable and long-lasting assets: houses. But no one seems very interested in taking the Fed to task on its interest rate policy – just raking it over the coals for not trying to reserve consequences of bad monetary policy, rather than attacking it for creating the bad monetary policy in the first place. And the saddest part is that Greenspan is all too willing to take responsibility for not regulating the market enough, but has shown no contrition for (and isn't being asked to by Democratic Rep. Henry Waxman, who's leading the lynching) his monetary policy, and appears to genuinely believe that lack of regulation, rather than monetary policies (among other things), were what threw the market so far off balance.

Another blow for Nabucco

The Nabucco gas pipeline suffered anther blow this week when Gazprom held talks with Romania, apparently offering to run its proposed South Stream project through Romania instead of Bulgaria. Romania was, up until now, the last member of the Western-backed Nabucco pipeline to not be in talks with or have already made agreements with Russia's state energy giant Gazprom with regards to its South Stream project, which is in direct competition with the planned Nabucco pipeline. Romanian officials have apparently concluded that, given Nabucco's dimming prospects after the South Ossetian war (Nabucco would receive gas from the upstream BTE pipeline, which runs through Georgia), it's time to consider hedging their bets with their ex-overlords. This is in stark contrast to the picture before the August war, when back in March the Jamestown Institute was predicting that Romania, though it didn't have veto power over the project, could use its position in the Black Sea to delay South Stream.

Meanwhile, Hungary – which seems to be Nabucco's biggest advocate these days – is flailing its arms, trying to the West to reconsider Iranian gas to fill the Nabucco pipeline. (Iran, the decreasingly-independent republics of the South Caucasus, and Russia are the only land routes into Europe from the gas-rich Capsian region.) But there's little chance of that happening, and Iran seems to have taken the West's rejection personally, and has publicly sworn off the involvement in Nabucco that it never actually had in the first place.

For full coverage of Nabucco's precipitously declining fortunes, check my Nabucco archives.

Wednesday, October 22, 2008

"Stochastic calculus porn to satisfy young men's urge for mathematical masturbation"

Here's Arnold Kling, in a blog post entitled "Economists with Pseudo-Knowledge", where he takes macroeconomists to task for pretending to know what the hell they're talking about. He hits on something I've been thinking since freshman macro – it's all bullshit:

My main beef with economists is that standard macroeconomics does such a poor job of describing what is going on. The textbooks models are pretty much useless. Where in the textbooks is "liquidity preference" a demand for Treasury securities? Where in the textbooks does it say that injecting capital into banks is a policy tool?

Graduate macro is even worse. Have the courses that use representative-agent models solving Euler equations been abolished? Have the professors teaching those courses been fired? Why not?

I have always thought that the issue of the relationship between financial markets and the "real economy" was really deep. I thought that it was a critical part of macroeconomic theory that was poorly developed. But the economics profession for the past thirty years instead focused on producing stochastic calculus porn to satisfy young men's urge for mathematical masturbation.

Here is a post from this past summer where I take social scientists to task for their overuse of math.

Why are the libertarian standard bearers so bad?

The Economist has an omnibus article up, mainly about the causes of the subprime crisis and its global ramifications. The article, in my opinion, spends an inordinate amount of space rehashing tired talking points about deregulation and liberalization. Disappointingly, they mention Glass-Steagall, without mentioning the drastic empirical evidence pointing in the opposite direction. They also make this doozy of an error:

The share of Americans who owned their homes rose steadily. But more buyers meant higher prices, making loans even less affordable to the poor and requiring even slacker lending standards.

They have it right that rising housing prices encourage looser mortgage lending, but they don't have the reason right. The real reason is that in a rising market, a bank can be reasonably sure that even if the mortgage goes into default, the collateral (the house) will be worth more than when the mortgage was taken out, and thus will cover the principal of the mortgage. But more importantly, they know that it likely won't come to this, because rather than default and lose the extra value of the home, home"owners" are far more likely to just sell the house, pay back whatever they need to, and pocket the difference. Banks don't just loosen their standards simply because people can't afford to pay higher standards – a freshman business student who made that decision would fail.

I haven't had much respect for the Economist once I started to actually understand the issues it talked about – I agree with Andrew Sullivan that it's "a kind of Reader's Digest for the upper classes." It's disappointing that, on this crucial issue whose narrative is going to shape policy for years, the global elite's preferred "newspaper" of classical liberalism is so lacking when it comes to understanding the roots of the crisis.

But then again, even Bob Barr, in an interview on NPR (MP3 here), lays the blame of the crisis largely on the back of bad regulation – when the Economist and the Libertarian Party's presidential candidate can't even explain the statist roots of the crisis, you know that libertarianism is in trouble.

Monday, October 20, 2008

Suburbs become the city that DC never had

The Washington Post, which is pretty good at covering urban planning, has a great two-part series on possible redevelopment of Rockville Pike, a commercial road in Montgomery County, a Maryland suburb of DC. Like Reston and Tysons Corner – communities in Northern Virginia, the south suburbs of DC – the towns along Rockville Pike have been hit with New Urbanism fever, and are eager to redevelop their commercial streets into a denser urban form. Though they don't probably don't realize it, this is actually a more market-oriented approach, with developers building more dense structures than we have today if it weren't more widespread restrictions on density outside of the inner core of American cities.

But unlike Reston and Tysons Corner, Rockville Pike has the advantage of the Washington Metro's Red Line, which runs directly underneath (or something like it) the street for the length of four station stops. The line goes directly into the center of Washington, DC, and is a huge asset.

The towns, however, don't quite seem to have the ideas down. They still appear to be operating in the minimum parking mindset, enforcing rules that developers have to build more parking than they otherwise would, so as to avoid residents and customers using free city-maintained parking. They essentially offer the developers the right to build as the market demands in exchange for payments to the local coffers:

Floreen, who formerly served on the Planning Board, said there might be a way to reduce the amount of parking developers are required to provide if they are willing to pay more for greater density.

Floreen would do well to read a previous Washington Post story about minimum parking regulations in the NoVa communities that Rockville Pike seeks to emulate.

Unlike DC, these Maryland and Virginia suburbs do not always have the District's stifling height restrictions, and it is possible that a buildings 28 stories or higher could be built along Rockville Pike. The Post has a slideshow in the second article with some mock-ups of what planners want the boulevard to look like. And though the drawings always look better than reality, the only way reality will come close to the drawings is if local planners give developers the freedom to build urban buildings, without the weight of minimum parking requirements or county bribes in order to rise above the traditional suburban skyline. With all the talk of favorable tax zones and other things that amount to handouts to developers, you'd think that the planners would realize that it's their restrictions that are forcing them to have to bribe developers into building more densely.

But the potential for DC suburbs is quite good when you think about it, considering that they don't have as much competition in urban living from DC itself. Though there are areas of Washington that have distinctive urban traits, it's difficult to get over the fact that none of the buildings seem to rise much above ten stories. It isn't surprising that so many DC suburbs are adopting New Urbanism as planning guides, though it would be nice if they would recognize that recreating urbanism requires nothing more than doing away with the old Euclidean and suburban scriptures – no need to replace them with anything else!

Friday, October 17, 2008

Georgian terrorists, gas in Turkmenistan, and Putin's next power grab

In reading a headline like "Georgian Threat to Moscow Uncovered" in the state-owned Russian newspaper Izvestia, I'm startled, but not for the reasons that the FSB office that "leaked" the intelligence probably wanted. The Izvestia article reports that they received leaked communication from within the Russian government indicating that they foiled a plot by the Georgian government, disguised as Islamic terrorists, to blow up buildings in Moscow, St. Petersburg, and Sochi, and gun people down in at least Moscow.

As Stratfor notes, this is highly dubious for a number of reasons. For one, Georgia has never attacked outside of its own country, with the exception of South Ossetia and Abkhazia. Secondly, Muslims make up a small percentage of Georgia's population, and they are mostly pro-Russian.

But then there's the big one that Stratfor doesn't note: Russia has recently been given a huge incentive to cause trouble in or attack Georgia, in the form of the recent confirmation of the Caspian Sea's natural gas riches. Energy delivery, especially to Europe, and especially in the form of natural gas, is the biggest trump card that Russia has over the West. But with the confirmation of gas in Turkmenistan, the EU has also hyped expectations of connecting Europe to the Caspian region via the Caucasus. The Caucasus stand in the way of Russia's ambitions, quite literally: besides through Russia, there are only two ways to get a pipeline to Europe (i.e., Turkey or Israel): through Iran, or through the independent countries in the south Caucasus. Iran is out of the question thanks to Russia's measured support of Iran's controversial activities. And in the Caucasus, you only need two out of three to create an impenetrable bloc between the Russian north Caucasus and Iran. Russia has already cowered Armenia into not allowing Western pipelines, and with Georgia out of commission thanks to this "leaked" intelligence (or something like it), it would render Azerbaijan irrelevant.

But perhaps the most startling part of all of this is that Russia may not be bluffing: it wouldn't be the first time that they used false flag apartment bombings under the guise of Islamic terrorism as an excuse to invade a Caucasian republic. The last time they did it was in 1999: Russia's equivalent of 9/11, the apartment bombings in Buynaksk, Moscow, and Volgodonsk, and the failed attack in Ryazan that blew the FSB's cover. The Russian secret services orchestrated the attacks as an excuse to invade Chechnya, and invade they did: tens of thousands of Chechen civilians died in the Second Chechen War, and war crimes abounded. In 1999, the false flag attacks led to the invasion of Chechnya in order for the FSB and Putin to effect a virtual coup d'état in the midst of a huge national crisis. Putin was introduced to Russia, Russia loved him, and he became Russia's unelected president a few months later. If in 2008, false flag attacks (or the threat thereof) lead to the invasion of Georgia, it will be to cement control of the Caspian, in order to cement Putin's power in preparation for new power grabs.

Thursday, October 16, 2008

Did the US government really invent the internet?

As a postscript to a recent blog post about the history of the government's role in technological innovation, I argued that the US government drove the development of the computer not because it was inherently more able to do so efficiently, but rather because it had a monopoly on talent, and the regulatory power to exclude competition. But it turns out that I may have been too quick to concede that government really was the driver behind the Internet. Lew Rockwell lists a whole bunch of private-sector innovations key to the Internet (except I guess the mouse), all of which preceded the Defense Department's ARPANET project, which started only in 1969:

IBM and ATT had major labs and were vitally interested in computers talking to one another as early as the late 1950s and early 1960s. Bell Labs invented UNIX in 1969; it made the internet possible. IBM invented FORTRAN and hard drives in 1956. Bell transmitted packet data over lines in 1958. Texas Instruments invented integrated circuits in 1958. In 1961 Leonard Kleinrock published a paper on packet switching networks. Bell Labs made the first modem in 1961. The mouse was invented in 1963. Digital Equipment Corporation produced the first minicomputer in 1964. In 1965 time sharing at MIT and mail command started. Intel began in 1968. The year 1966 saw the first use of fiber optics to carry telephone signals.

But as Rockwell correctly notes, even these are tainted by the ties between most of these companies and the government in other fields (which in turn might have subsidized and spurred these innovations).

Net neutrality and Wired's wishy-washy libertarianism

By most measures, the Internet is one of the most libertarian spheres of the economy. This is qualified by saying that this only applies to the non-wireless forms*, but nevertheless, internet access and content delivery are relatively competitive and free markets. Net neutrality advocates, however, are looking to change this, by forcing ISPs (this mostly applies to last-mile providers) to not discriminate with regards to bits – that is, allow all content through, and do not charge different prices for different content.

Though exaggerated, the fears of ISPs using non-neutral practices to throttle traffic are not unfounded – some ISPs have been filtering BitTorrent traffic in some way or another). But BitTorrent users and providers don't exactly have much clout, and so it cannot be that they are the only force behind the movement which has won the support of the soon-to-be president Obama. Valleywag believes that that huge ad company that also happens to have a search engine (Google) is in favor of the legislation because they believe that ISP's will eventually try to bite into its ad revenues by demanding more to move Google's bits around the Internet:

It's all about net neutrality. What's "net neutrality"? As far as we can tell, it's a bunch of rhetoric that amounts to regulations that affirm Google's God-given right to avoid giving Internet service providers a cut of advertising revenues. An Obama presidency would mean Google can save money on lobbying fees. Well, times are tough, and every penny counts. It's good to know that even the saintly Vint Cerf votes on pocketbook issues. He's the father of the Internet, and he approved this message.

What's interesting about net neutrality, though, is that it's incredibly popular among the internet literati, despite its anti-libertarian core. Wired magazine, which the cloud at Wikipedia says adheres to "strong libertarian principles," is unabashedly in favor of net neutrality legislation. In their Obama vs. McCain scorecard they award McCain a D for opposing net neutrality, and give Obama an A for supporting it. Interestingly enough, on their scorecard of five issues, they reward the libertarian position with good grades only twice (in the spectrum and H1B visas sections), while awarding good grades for statist positions on three other issues (broadband [read: broadband regulation/subsidization], investment in green tech, and net neutrality). They left out a bit one – intellectual property (where Wired favors of the libertarian approach) – though they slightly redeemed themselves by mentioning it a few days later.

When you think about it, it's kind of pathetic that Wired is supposedly the standard-bearer for techno-libertarians, when its editorial opinions on the hottest issues in technology of the day are split 50-50 between libertarian and statist. As an alternative for political ideas (Wired, despite its politics, is still an excellent source of tech/science news and analysis), may I suggest the inspiration for this post – the Technology Liberation Front blog, which bills itself as a "tech policy blog dedicated to keeping politicians' hands off the 'net and everything else related to technology."

*The electromagnetic spectrum, over which all wireless communication travels, can handle a lot, but for about a century the federal government has strictly controlled its use, creating spectacular inefficiencies and blocking out huge majorities of the spectrum to open uses à la wi-fi.

Markets in everything: Bulgarian blood edition

Surely this would be a fine edition to the Markets in Everything series: in Bulgaria, apparently black market blood dealers stand outside of hospitals and vend their wares.

As in Russia and some other Balkan nations, corruption has seeped into the fabric of life. Sofia has a thriving black market for blood outside hospitals, where patients’ families haggle over purchases with dealers, according to Bulgarian news reports that track the prices.

Black market trade in human medical parts is not at all unique to Bulgaria. See here for a WSJ discussion of the ethics and economics of the human organ trade.

Monday, October 13, 2008

The NYT on food

The NYT Magazine's subject this week is food, a topic that's nice to see covered in the Times, since it's an issue around which liberals and libertarians have common cause. The main article is about government food policy as it relates to the environment, health, and energy, and while much of the article recognizes the anti-libertarian policies that exacerbate America's addiction to high-calorie, low-nutrition foods, I can't help but think that the author doesn't spend nearly enough space discussing them. While he mentions some government distortions that I didn't even know about – after WWII, the government "encouraged the conversion of the munitions industry to fertilizer" – his list of remedies is heavy on the feel-good liberal policies that don't seem like they'd really do much, or are kludges to a problem that could be fixed with outright legislative repeal. Included on this list are such symbolic measures as putting more importance on the White House chef and converting parts of the White House lawn to modern-day "victory gardens." Also, the author digs into the dark underbelly of land use policy, and advocates "agricultural enterprise zones" and wants developers to have to write "food-system impact statements." But couldn't his ultimate goal – more farmland – be achieved in a more libertarian way, by say limiting the amount of zoning- and parking regulation-inspired low density sprawl that encroaches on farmland?

It's as if in the first half of the article, the author lays the blame at the feet of government for interfering with energy, transportation, and food policy, but then in the second half of the article, he tries to redeem himself to the liberal NYT crowd with wishy-washy crowd-pleasers like locovorism and giving food stamp recipients half price access to farmers' markets.

Sunday, October 12, 2008

Criminal heroes

I'll always have a soft spot in my heart for criminals who expose government malfeasance. In recent news we have two good cases of this: the first are the Somali pirates who unknowingly tried to ransom (and seem to be succeeding) off a ship transporting weaponry from the Ukrainian government to probably rebels from South Sudan, in contravention of an agreement that ended (but apparently not for long) the decades long Sudanese civil war.

The second example of the noble criminal (I guess the pirates weren't actually that noble – they didn't realize they'd be exposing such a scandal) is the kid who hacked into Sarah Palin's e-mail account. Unfortunately, he's been arrested and is in the process of being indicted by a grand jury, but without his adept hacking (well, more like Google fu), the world would never know that Sarah Palin kept a secret e-mail account, which she used to communicate with people about government matters in contravention of laws that require that all written communication about government matters be archived (and released at some point). Since Palin never told anybody about the account, obviously she wasn't planning on turning over the e-mail contents at any point. Or at least so thought an Alaska judge when he ordered Palin to recover and save all of the e-mails kept in these previously-secret accounts.

Is government really a better technology incubator than the private sector?

Wired has an article about a newly-launched commercial satellite, with the highest resolution of any commercial satellite: 41 cm (the lower the number, the better quality the image). Unfortunately, though, these images won't be available to Google (the exclusive commercial customer), or to anyone except government agencies. Dating back to the Cold War days, the federal government has prevented companies from offering commercial satellite imagery at anything near useful resolutions. However, as far as I can tell, it lifted some of these restrictions at some point "in the 1990's." According to the original Wired article, this seems to have ignited a great leap forward in commercial satellite imagery:

But only in recent years the technology became available to the public and businesses while concurrently making dramatic strides in coverage and resolution. For example, when Google Earth launched in 2004, its imagery was low-res and spotty. But by March 2006, a third of the world population could get a bird's-eye view of their own homes in high resolution.

But like I said, don't count on getting the 43 cm resolution that's available to government agencies – Google only gets pictures at resolutions of 50 or above. While this 7 cm differential isn't too big, it'll get bigger in a few years when the company is supposed to launch a satellite that can take pictures at a resolution of 25 cm, which of course will only be available to the government. And though I couldn't find any figures from recent years (as it's still a classified national security matter), it seems that as far back as the late '90s, the private Federation of American Scientists estimated the US government's resolution capacity to be 10 cm, and even better if they dip the satellite down closer to earth.

And this isn't the only case where government technical expertise runs laps ahead of the private sector. The Wired article quotes a backer of the project noting that hi-res satellite imagery is part of this longer tradition, "[j]ust like the internet, just like GPS, just like telecom." And indeed, this has become a popular meme these days: in the second presidential debate, Obama claimed that one of the reasons that the government needs to intervene in the green energy market is that government intervention has in the past has produced the beginnings of the most profound technological developments of the century. But why? Well, in the case of wartime inventions (which is what Obama references), a lot of it can be attributed to a crowding-out effect: as we still see today, government jobs often pay more than the private sector for technology jobs, and thus their presence will dampen entrepreneurship in the private sector.

But also, the government can do something even more pernicious: outright ban private sector development of a certain technology. This is what clearly happened in the case of hi-res satellite imagery, and which also happened in the same way with GPS. GPS was outright banned for public consumption in the US until the early '80s, and even then, was only available at the relatively useless accuracy of 400 feet. It wasn't until 2000 when Clinton (seemingly unilaterally?) ended the signal degradation and allowed the civilian GPS market to flourish, though it's unclear if today the military has better capability because they invest more in it, or because they restrict/degrade the civilian signal.

And the last category that the satellite company representative mentions – "telecom" – has had similar restrictions on its adoption. As Tim Wu explains in a NYT op-ed, wireless adoption (the next exciting frontier in telecommunications) is hampered by government policies which restrict access to the bandwidth over which wireless signals of all kind are carried:

After physical wires, the other major way to move information is through the airwaves, a natural resource with enormous potential. But that potential is untapped because of a false scarcity created by bad government policy.

Our current approach is a command and control system dating from the 1920s. The federal government dictates exactly what licensees of the airwaves may do with their part of the spectrum. These Soviet-style rules create waste that is worthy of Brezhnev.

Many “owners” of spectrum either hardly use the stuff or use it in highly inefficient ways. At any given moment, more than 90 percent of the nation’s airwaves are empty.

The solution is to relax the overregulation of the airwaves and allow use of the wasted spaces. Anyone, so long as he or she complies with a few basic rules to avoid interference, could try to build a better Wi-Fi and become a broadband billionaire. These wireless entrepreneurs could one day liberate us from wires, cables and rising prices.

Just something to think about when someone tries to tell you that only the government can make the investment necessary for innovative technologies like satellites, computers, or the internet. The private market, either due to outright restrictions or the siphoning away of talent by the federal government, is often not given the chance.

Thursday, October 9, 2008

The Orange Revolution turns red

I haven't posted much about the political crisis in Ukraine, because I thought it was pretty cut and dry, and I sort of forget that not everyone follows Eastern European politics as closely as I do. So, essentially what has happened is that the South Ossetian war has frightened the people of Ukraine, as well as its political establishment, and the already shaky "Orange" liberal coalition partners – Yushchenko and Tymoshenko – have been divided. Tymoshenko and her bloc refused to share in Yushchenko's condemnation of the Russian actions in Georgia, and she's given in to the heavy pressure to ally herself with Russia, at least for the moment. Ukraine has a sizable Russian minority, and an even larger amount of people in the eastern half of the country who have pro-Russian sentiments. Crimea has a bare Russian majority, and is home to Russia's formidable Black Sea Fleet, and as such could be vulnerable to the same sort of Russian revanchism that happened in Georgia.

Anyway, President Yushchenko has dissolved parliament, and new elections will happen in a few months. Tymoshenko's political stars are clearly on the rise, and in the midst of the crisis she's been to the Kremlin to negotiate Ukraine's natural gas deals with Russia, an issue near and dear to Ukrainians' hearts since Russia shut off gas pipes to Ukraine around New Years 2006. While in Moscow, Tymoshenko pushed for closer ties between the two countries' big state energy concerns – Naftogaz and Gazprom. This was seen as a power play by Yushchenko's supporters, as it came in the middle of this political crisis that was directly related to Ukraine's relations with Russia, and tensions flared when Yushchenko's supporters alleged that Tymoshenko really went to Russia to get the backing of the Russians, who still play a very active role in Ukrainian politics.

According to Stratfor, Russia's got a "wild card" up their sleeve in the form of Ukraine's richest oligarch, Rinat Akhmetov, who is apparently the "puppetmaster" behind Ukraine's large pro-Russian Party of Regions. Stratfor says that his power over Ukrainian politics has "grown exponentially" in recent years, and that ultimately he is "firmly held by the Kremlin," which very well might use him to seal the deal in the December elections. Though at the rate it's going – with Tymoshenko having defected, and Yushchenko's approval ratings below 10% – they might not even have to use him.

Tuesday, October 7, 2008

Bargain price on genome sequencing

From Wired, apparently a founder of the Human Genome Project and his company have managed to sequence the human genome for only $5,000, a tremendous step down from its current price of $100,000. This is evidently tremendous news for genetic and biomedical research, as it will allow more people access to complete human genetic codes. Thank god that the government didn't step in earlier and decide that human genomes were too important to let cost be an option and that the government should subsidize them for use in research. Because otherwise, competition wouldn't have driven the price down to where it is today, and the taxpayers would still have to pay the $100,000, even if the user wouldn't.

Sunday, October 5, 2008

The Kremlin's neo-Nazi ways

Something that the Russian regime often uses to legitimize its rule is railing against "extremism." Often, the extremists are Islamic terrorists (which the Kremlin often creates). But sometimes, the extremists are neo-Nazi fascists. The ideology is supposedly on the rise in Russia, and Russian cities are indeed dangerous places for "blacks" (a generic Russian catch-all for Caucasians, Central Asians, sub-Saharan Africans, and whatever other unfortunate non-European looking person happens to find themselves in non-Siberian Russia). But who really benefits from this? The Kremlin seems to think it does, because according to the Huffington Post, it supported several of these skinhead groups:

Human Rights researchers in Moscow have published documents showing "Nazi skinheads are being encouraged, organized, and used by Russia's ruling circles in their own interests." And Isvestiya reported that "Nazi skinheads from an openly fascist organization, the NNP (People's National Party), were being trained at the Moscow OMON special-purpose police detachment facilities and that they were being trained specifically by OMON coaches." Several years ago Russian historian Vladimir Ilyushenko asserted that "some parties view skinheads as their reserve. The process of encouraging fascist sentiments in Russia is steered by government officials."

Showing that the alternative in Russia to Putinism is fascism is a good way of making Putinism look good. And keeping fascism alive is near and dear to the Kremlin's heart, because one of the big founding myths of the Soviet Union was its fight against the Nazis. As little sense as the fascism/communism dichotomy makes, it was very important to the USSR during World War II and in the years afterwards. While obviously Russia's terrorist machinations are nearest to the siloviki's hearts at the moment, keeping the fascism thing on the backburner is a good way to hedge against unexpected hiccups in legitimacy.

Saturday, October 4, 2008

Uzbek spy defects, brings juicy information along with him

This was apparently published a month ago, so it's not exactly news, but it's still fascinating: a high-level Uzbek spy has defected, and he brought some pretty damning information along with him. First of all, he says that Karimov himself (president-for-life of Uzbekistan) ordered the Andijan massacre:

Yakubov says Karimov directly ordered senior military officers to instruct troops to fire on protesters in the eastern city of Andijon in 2005, killing more than 1,500 people -- twice as many as rights groups estimated. Karimov has repeatedly denied that charge.

And not only that, but the terrorist group he blamed on instigating the incident was also funded by the Uzbek government:

In a related charge, Yakubov says the regime itself has propped up many alleged extremist groups and their leaders, including Tahir Yuldash, the purported IMU leader, and Akram Yuldash, the alleged spiritual leader of Akramia, the group Uzbek authorities blamed for sparking the unrest in Andijon.

...and despite propping these radical Islamists, it turns out that the 2004 terrorist attacks that won Uzbekistan so much sympathy abroad were really false-flag operations perpetrated by the Uzbek secret services:

The government blamed the explosions on the Islamic Movement of Uzbekistan (IMU), a U.S. State Department-designated terrorist group, and Hizb-ut Tahrir, an organization that eschews violence but seeks Islamic rule in Central Asia. Yakubov says that after speaking to an operational officer directly involved in the bombings, he realized that the government itself had prepared them.

False-flag Islamic terrorist attacks aren't exactly a new idea. Uzbekistan's old bosses in the Kremlin have been big fans of creating false terrorist attacks, having orchestrated the 1999 Russian apartment bombings, which were blamed on Chechen Islamic terrorist groups. And then of course, there's Alexander Litvinenko, who alleged that essentially every example of Islamic terrorism is actually a false flag attack committed by the Russian secret services.

The attacks – specifically the aforementioned 2004 bombings in Tashkent and Bukhara – worked remarkably well, and combined with Karimov's previous support of the Americans after 9/11, led Heritage Foundation scholar Ariel Cohen to declare that the bombings were all the more reason for the US to support Karimov's impoverishing and repressive regime:

Clearly, the terrorists' primary concern was not human rights. On the contrary, by provoking secular or moderate Muslim governments to take harsh measures, Islamist terrorists undermine those regimes' international reputations and drive a wedge between them and their democratic allies.

Furthermore, addressing anti-terrorist activities in Central Asia by targeting U.S. allies, abusing human-rights rhetoric and utilizing it to weaken or topple pro-American regimes is self-defeating and nearsighted. Extremists view U.S. sanctions against its allies as weakness. Such measures empower global terror networks to provoke pro-Western regimes.

A militant Islamic takeover of Uzbekistan may provide radicals a state base larger and militarily and technologically more sophisticated than Afghanistan. Moreover, demise of a secular Uzbekistan may have tumultuous consequences for all Central Asia. If Islamists overrun Uzbekistan, weak Central Asian states, such as Kyrgyzstan, Tajikistan and even the totalitarian Turkmenistan, may follow. An Uzbekistan controlled by a radical Islamist regime, emergence of a Central Asian Califate, and waning U.S. influence in the region, will leave human rights and individual freedoms worse off than they are now.

...and then there's this cringe-worthy stab at those narrow-sighted human rights advocates:

Leftist-liberal nongovernmental organizations (NGOs) with global reach, which uphold civil rights and ignore Islamist terrorist threats, make Uzbekistan a cause celebre.

While this is a win for those of us who have been trying to show the world that Islamic terrorism is largely a red herring, the real gratification will come when the bigger and badder truths about al-Zawahiri, al-Qaeda, and 9/11 come out. But then again, to quote Star Wars, "many Bothan Russian spies died to bring you this information," but nobody was listening.

Credit default swaps and you

Don't know what credit default swaps are and why they matter? Neither did I. Till now. From Arnold Kling, via Reason:

A credit default swap is like insurance against default. If you want to buy a municipal bond or a corporate bond but not take default risk, you try to buy a credit default swap. You pay a fee, and in exchange for that fee the seller of the swap will make you whole if the city or corporation defaults.

The seller of swaps collects nice fees, and most of the time the borrowers don't default. But if borrowers do default, then the seller is like an insurance company in a town that was hit by a hurricane. [...]

Suppose I have sold a credit default swap on Sallie Mae. That means that if Sallie Mae defaults on its bonds, I will have to pay some of the bondholders a big chunk of money. One way I can hedge that risk is to sell short Sallie Mae securities..... However, the more short-selling takes place, the closer they get to default. It is a vicious cycle. Ordinarily, I do not believe that short-selling affects the price, but when there is massive short-selling that is driven by dynamic hedging, I can see where the short selling would drive down prices.

Friday, October 3, 2008

Sarah Palin: less informed than my seventh grade brother

In what looks like the stupidest Sarah Palin moment yet, Sarah Palin can't name a single newspaper, and becomes offended at the suggestion of the question and deflects, ultimately ending with a defensive, "Alaska is like a microcosm of American." Fun twist: Palin was a journalism major at the University of Idaho, and once worked for a small newspaper.

Thursday, October 2, 2008

Old Cold War friends are reunited once again, and it feels so good

Aside from Russia and points eastward, Europe's only true alternative for natural gas is North Africa. And Russia is apparently acutely aware of that, as they've begun courting Libya, initially for its gas and pipeline, but in the future probably for its vast oil reserves, too:

Gazprom is expected to sign a deal with Eni to acquire the Italian company’s stake in Libya’s Elephant oil field. But Gazprom is really after Eni’s stakes in the Greenstream natural gas pipeline, which runs from Libyan fields to Sicily and would give Russia another potential energy lever to use against the Europeans.

In exchange for the Libyan oil fields, Gazprom has theoretically given Eni access to some of the energy reserves along Russia's Arctic coast.

As the Stratfor article mentions, Libya was very close to the Soviet Union during the Cold War. Through its own apparatus and through the security services of other Eastern bloc nations, the Soviets channeled weapons and expertise to Libya, whose leaders dutifully carried out Soviet foreign policy. They armed the PLO and the Iranians after the Revolution, backed the terrorists at Munich, employed Carlos the Jackal at various points (but really – who didn't?), and generally acted as staid proxies for Soviet malevolence. After the end of the Cold War, Libya saw the writing on the wall and jumped sides, resolving tensions over the Pan Am bombing and accepting billions in western development aid. But obviously, Libya has no favorite in this fight, and is up for whatever as long as it gets security and compensation.

Wednesday, October 1, 2008

Would you like to buy this extra street?

The NYT has a story about something that I didn't even know happened: New York City selling one of its streets. The street in question is called Extra Place, extending out of First Street northwards in Lower Manhattan, but not quite reaching Second Street (i.e., it's a dead end). More accurately described as a grungy alleyway, it is a rare piece of not-yet-gentrified property in Manhattan, and it's adjacent to some luxury apartment buildings on First Street. These are owned by the developer Avalon Bay, who wants to buy the street, repave it, and "create a cleaner passageway to the shops and boutiques that are expected to open in the new buildings." They always want to "install seats, including some to be used by a cafe to which the developer expects to lease space." The city would earn money from the sale, would not have to incur any further costs with regards to maintaining the street, and would contribute to the density of Manhattan (one of its main selling points, and something that's good from both a planning, ecological, and cost-of-living perspective). Not bad for a god-forsaken strip that hasn't changed much since it was featured on the cover of a Ramones album. Of course, some residents in the vicinity are against the plan:

“There’s very little city-owned space left, and we would like the city to continue to own Extra Place,” she said. “There could be proposals to fix it up and manage it, which could be done by Avalon, but we also want to guarantee public access.”

As for the first objection – that the site ought to stay in the city's custody because "there's very little city-owned space left," what the hell is the benefit of city-owned space? Especially if it's left in the condition that it's in. As for the second part – that "there could be proposals to fix it up and manage it" – there could be, but isn't it interesting that there haven't been yet? And look, here is a proposal! And the last objection – to "guarantee public access" – is similarly stupid. Street-level property is very valuable as commercial real estate, which has to be open to the public to be profitable. I guess you could argue that those "seats" that the developers want to build are only going to be open to paying customers (although, if you look at the Starbucks model of outdoor seating or other models, we see that there's usually no one going around making sure those sitting are actually customers), but as it stands now, there are no seats for anyone to use. And I understand that it's sort of a straw man argument since, as this objector said, there "could" be plans to rehabilitate the space and keep it public, but like I said earlier, it hasn't happened yet.

Brit: leave an "acceptable dictator" in Afghanistan

Someone leaked a "coded" diplomatic cable to the French satirical/investigative (??) newspaper Le Canard enchaîné (whose website proudly informs would-be readers that the Canard deals only "avec du papier journal et de l'encre"), in which the British ambassador to Afghanistan says that essentially, the war is lost. He says not only do foreign troops only prolong the inevitable chaos before order emerges, but that increased military presence will have the "perverse effect" of creating more violence. In the cable, which was written by the deputy French ambassador and is a summary of what the British ambassador told him, British ambassador Sherard Cowper-Coles says the western forces should leave "an 'acceptable dictator' in charge of the country within five to 10 years," whatever that means.