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 reason.com'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.)

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.

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?

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.

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...

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.