Tuesday, October 30, 2012

Virtual Economies

Diablo ΙΙΙ has recently in 2009 been estimated to be worth $3 billion. The real question is whether the value of this gaming system will increase or decrease. Will virtual economies with gaming continue on? 

For Diablo ΙΙΙ they were not as successful as maybe they had hoped for their new edition. CNN reported that many gamers were complaining about computer malfunctions that occurred while playing the game, “there are more than 4,200 Diablo III forum threads, most discussing some aspect of the game that, in players' opinion, is broken”. Others complained that the game itself was too difficult to be successful to move onto the next level, “other players go the other route, thinking the game is "broken" because it is simply too hard”
Overall I hope for our sake that we as Americans learn more valuable ways of virtual economies than through video games. 

Virtual Economics

     Most of the posts this week I assume will be about virtual economics in terms of games. This is because virtual economics is becoming very prevalent in them. However, I am curious about virtual economics and the world. As technology increases as well as globalization having an economy right at our fingertips would be pretty spectacular. Some may argue that many aspects of our current economy are and they'd be right. But I mean a global economy, an economy that connects the world. So well in that we could purchase goods and services from around the world and from many different markets as individuals. This would allow for more efficient production by companies because it would be much easier for them to test the market. It would also allow the consumers to broaden their field of view and look far beyond their borders in search of the exact item they want our need. Not only could this economy connect different markets it could handle transactions and trade.
     Increasing technology would allow for a restructured trade mechanism as well. Allowing faster less expensive exchange of goods between countries. This would increase a desire in consumers to purchase and trade items because they would not be sacrificing speed of retrieval. Not only could the trade mechanism be restructured, access to the market could as well. Not only could people with disposable income manipulate the economy, everyone could. With an influx of individuals into the market there would be a greater amount of currency in circulation. This currency would not need to be of  a specific country either and could be a virtual currency that adapts to the changes in its parent currency and other recognized currencies around the world.
    Perhaps an economy of the future lies a way off but not as far as some might think. The current system is starting to become outdated and is constantly trying to adapt to meet the market needs. At many times too it is failing to do so. Virtual economics in games might be on the verge of something really spectacular and I look forward to seeing where it goes.

RuneScape Deflation

RuneScape is a fantasy massively multiplayer online role-playing game (MMORPG) that was released in 2001. Over 200 million accounts have been created with RuneScape, and it is recognized by Guinness World Records as the largest MMORPG. RuneScape takes place in the fantastical world of Gielinor, where players work on honing 25 different skills and acquiring gold. RuneScape’s economy is extremely large, for a game, and with that comes the problem of deflation.

The basic premise behind RuneScape is that people spend time with their virtual character in order to increase that character’s skills. Once that character’s skills have been improved, they are then able to perform more advanced tasks. Things like mining, wood cutting, fishing, crafting, and fighting are all skills that characters can upgrade.  Characters can use those skills to obtain items, and those items can either be sold on the worldwide marketplace or traded to another player.

Every time you sell something in the marketplace, you receive golden coins in return. These coins can then be used to purchase new and better items. It sounds like a whole lot of fun, but the problem of deflation has become a real issue. This deflation doesn’t have a whole lot to do with the supply golden coins; in fact it is the increasing commonality of certain items that has increased the buying power of the golden coins. I am specifically referring to something called Rune armor.

A large element of RuneScape is focused on increasing the fighting ability of your character so that you can fight an assortment of monsters. The more challenging the monster you defeat is, the more rewards you receive. Part of fighting is that characters are able to be equipped with a variety of different armors. Now, of these different armor sets, Rune armor is and has been the strongest of all. Subsequently, the demand for Rune armor has always been extremely high, and because it was extremely hard to smelt, this armor was always very rare.  However, as aggregate skill of the RuneScape community has continued to climb upwards, more and more individuals have learned how to smelt Rune armor, and thus the supply has drastically increased. Something that used to cost 1 million coins now only cost 30 or 40 thousand coins.

So, I predict that in the very near future, if it isn’t already happening now, officials at Jagex (creator of RuneScape) will see a drop off in subscribers. I say this because, one of the primary draws to RuneScape was that you had the ability to differentiate yourself from your peers. RuneScape gave people the opportunity to be better than everybody else.  At this point though, the rarest of items are becoming the most common, and there is no real distinction among the players.  I feel this doesn’t bode well for the future of RuneScape. I think that if Jagex institutionalized some sort of price floor in relation to Rune armor, the subscription drop off would be much less severe. This could go one of two ways, either weaker players would be motivated to upgrade their character’s smelting abilities because they could no longer afford Rune armor, or the weaker players would become angry that they could no longer afford said armor and would leave the game. I think Jagex should give it a try anyways, social experiments are always fun.

The EVE Investment Scam

EVE is a Massively Multiplayer Online Role-Playing Game (MMORPG) set in a futuristic world where economics, politics, science, warfare, and technology all come into play. Generally, a player can make money mining or as a corporation. One player, "Cally", decided to start a bank.

The "EVE Intergalactic Bank (EIB)" offered loans to start up businesses. Miners could get loans for expensive tools, corporations for expensive infrastructure. The bank charged interest rates on these loans and had detailed repayment plans in order to grow itself.

Cally then simply took all the money, right out of the bank. Under ordinary circumstances, a government would stop a person from doing this, or a group of angry investors would come looking for vengeance  Unfortunately, Cally made off with enough money to build an absurdly powerful warship and sailed off into space, making revenge highly unlikely. He placed an enormous bounty on his own head, daring people to come after him.

He then posted a 15 minute video mocking the employees of EIB, investors, and enemies who attempted to stop him. Luke McKinney writes on Cracked.com, "Understand: Cally is now officially smarter than every Bond villain put together, because he found a way to give an expository monologue without getting killed."

EVE has had other economic woes in its history. The raw tritanium required to produce a "Shuttle"
cost more than the shuttle itself. Players would buy shuttles (sold by NPC's) and melt them down into raw materials, then sell those materials for a profit. This was fixed, but it indicates how detailed the economy of EVE can be.

EVE's economy is so detailed that it makes it possible for players to start their own scams based on the economy of the game. All sorts of small economics problems arise in the game that the developers must fix. My personal belief is that by having the players supply the goods and services (as EVE largely does now) you can remove a large portion of this error.

Wednesday, October 24, 2012

Money in the Modern World

     Money is something that the modern world has begun to value more than anything else. Held up on a pedestal that at times becomes more important than a persons life, a persons family, and a countries success. So, where is this point where money becomes so powerful? Perhaps for you it already is or perhaps it is not. However, the fact that the money is becoming increasingly powerful makes it even more important for one to have a good understanding of it. An understanding not just on an economic level but also on personal level. Decide for example how much money you need to be happy because even the millionaires of this world are having a huge problem with this. For example there is a study where multi millionaires were questioned on how much money they needed to be happy and even though some of them had over 30 million dollars they would still say that they needed more. This thirst for money really demonstrates a misplacement of the true royalties in life. It blinds us from the problems around us and causes us to frequently stroll right by many wonderful experiences to be had and many wonderful opportunities to be embarked.
     You might ask how this happened or like myself perhaps you already know. Money = the quantity of material goods and services one can obtain. Pair this with the false predominant display that the quantity of goods and services obtained = success and it should be obvious how big this problem really is, especially in this country. With wealth distribution being that about 70% of the total wealth belongs to about 5% of the people, i'd say theres a big problem going on. Not to say that wealth should be distributed equally because I don't believe that at all. However, it is to say that this unequal distribution might be causing the wealthy to thirst for money even more being that the amount which can be obtained is so much greater than ever before.
     Different twist on the question but I think its curious to see how money is changing the mindset of the people who have the most of it.

Monetary Policy and Central Banking

Monetary policy, in its current incarnation, is conducted by the Federal Reserve System of the United States. The semi-private nature of the Fed's governance and its responsibility in maintaining the value of a fiat currency have both prompted critics to call the institution's legitimacy into question.

Critiques of central banking are based on theories that point to the limitations central bodies confront when conducting monetary policy. Among such limits is the basic problem of being unable to quantify the amount of money circulating throughout the economy. Without that knowledge, it is impossible for the rate of inflation to accurately be calculated. Inflation can be calculated, with some accuracy, as the size of the money supply times its velocity.

The problem arises when trying to determine how to measure the supply of money, or know how fast it is changing hands. Friedrich Hayek's critique of central banking rested on the insight that money is not easily quantifiable because money is not easily definable. Money(or currency) is money, we all know that. But is gold money? Yes, for some people. What about six month CD's? Those are probably money to most people, because they guarantee payment in a short amount of time. Two year CD's, on the other hand, are less likely to be considered money. Those are just a few examples. Once you consider all of the bartering, mattress saving, and currency destruction that goes on in an entire economy, you see how enormous the task of central banking becomes.

So even if a central banker was somehow able to know the exact rate of inflation(or interest rates, for that matter) which should be targeted, he or she would still have to measure his progress using flawed data. This does not, however, imply that central banking should be abolished entirely. The idea that central bankers have limited knowledge implies, instead, that their role should be limited.

Rules-based monetary policies have been proposed as a way to rein in the excesses of central banking. Eminent proponents of such rules include John Taylor and Milton Friedman. Such rules replace discretion with an equation as a means of determining monetary policy. The knowledge problem in calculating, predicting, and modifying future inflation rates that I previously discussed will still be there, however.

A better system would seek to minimize the problem through competition. Competing banks and monetary institutions with the right incentives might provide market participants with a save haven against central bank policy failures. Moving toward such a system would not require radical changes. A huge difference could be made with small changes such as removing taxes on private banknotes, gold, silver, platinum and palladium. This would allow a market for private currencies to take hold, if they are found desirable.

We  should not, however, neglect to deal with some of the Fed's worst excesses. A limited role for the Fed would make it, as with other market participants, stick to monetary policy without conducting ill-advised interventions. Thus, the Fed's role ought to be limited to its traditional duties, including: issuing currency, conducting open-market operations, acting as a lender-of-last-resort,  and providing financial services. Simultaneously, the Fed's mandates to ensure moderate long-term interest rates and full employment ought to be repealed. The Fed should only be tasked with maintaining price stability. Also, the Fed should never be allowed to target inflation rates that are greater than targeted interest rates. This would effectively ban negative interest rates, which amount to nothing but free money to borrowers at the expense of everyone else.

Such modifications to monetary policy, while modest and incomplete, would make a difference. Rationalizing U.S. monetary policy is not a task which can be accomplished overnight, and would likely require some trial and error. Still, the enormous task of fine-tuning our complex monetary framework can't be started until its obvious stupidities are dealt with.

An Economy of Wealth, Not Debt

        "We are completely saddled and bridled, and... the bank is so firmly mounted on us that we must go where [it] will guide." -Thomas Jefferson (The 5000 Year Leap by Skousen)
        In Article I, Section 8, clause 5 of the constitution gives Congress the power "To coin money, regulate the value thereof, and of foreign coin..." The original intent of the founders was for the American dollar to be completely independent of any power outside of the American people. That is why they gave congress (the representatives of the people) the exclusive right to issue and control money. The states were not even allowed to mess with the money supply. The congress was even given the power to regulate the value of the money in the union, and as it relates to foreign currencies.
        So what went wrong? Early on, due to pressures from European and American financial interests, the power to issue money was given to private bankers under the "Bank of the United States." Then the congress allowed banks to loan out 3 many times more  money than they actually had. This would create a boom in the economy, then the banks would call for a bust and foreclose on property that the bank had furnished almost nothing for. This is called fractional banking.
        Theoretically, according the the constitution, congress could print as much money as it needed and could pay off all its debts. But under our current system, if congress needs to borrow money, it has to ask the Federal Reserve for some of their green pieces of paper called "Federal Reserve Notes." Then the Federal Reserve exchanges their green paper for some pink papers from congress called U.S. Treasury Bonds. The green pieces of paper that we borrow from the Federal Reserve is what we call U.S. Dollars. Since the Federal Reserve controls the U.S. currency and aren't held to be transparent, the Federal Reserve has the ability to print however much money it wants, whenever it wants, and give it to whoever it wants- and no one will ever know except for the few privileged parties.
        If the American people would demand that congress takes advantage of its power to issue currency and puts a stop to fractional banking, it would make the unstable monetary systems a thing of the past and push America far ahead in the world market. Jefferson, Jackson, and Lincoln all tried to do turn monetary policy around in this way, and at a time when the idea seemed to be catching on the London Times came out with this article about Lincoln's plans:
                If that mischievous financial policy, which had its origin in the North American Republic during the    
         late war in that country (The Civil War), should become indurated down to a fixture, then that
        Government will furnish its own money without cost. It will pay off its debts and be without debt. It will
        have all the money necessary to carry on its commerce. It will become prosperous beyond precedent in
        the history of the civilized governments of the world. The brains and the wealth of all countries will go to
        North America. That government must be destroyed or it will destroy every monarchy on the globe.
        (The 5000 Year Leap by Skousen)

The Political [Monetary] System

Money plays too large of a role in the modern political system. Legislative candidates who were able to raise more money than their opponents were successful 76 percent of the time during the 2009-2010 state primary elections. Similarly, in the 2004 general elections, 95 percent of House races, and 91 percent of Senate races were won by the candidate who raised the most money. Incumbency also plays a large role in elections, but most often the incumbents are able to raise more money than their competitors. In 35 states, 80 percent of the time the winners were also the monetary leaders. Suffice it to say that money is critically important in our current political system.

This naturally leads to the conclusion that certain individuals have an extreme comparative advantage when it comes to entering the political realm.  But, this isn’t the way politics was originally intended to be. The people in office representing the citizens are supposed to be those individuals who will do the greatest good for their constituency, not necessarily those with the most money. It’s hard to imagine the amount of intellectual potential that goes untapped due to such exacting barriers to entry, but I’m sure it is quite substantial.

Now, the federal government realized that money was making elections (and subsequently politics in general) unfair. So, since 1867 there have been over 20 different attempts at reforming campaign finance. However, none of these reforms have ever been very effective, allowing those pesky politicians the ability to find all sorts of loopholes. Part of this is due to the current structure of the Federal Elections Commission (FEC). Right now, the FEC is made up of three Democrats and three Republicans. This often leads to partisan deadlocks on reform proposals. Understandably, if no reforms are being passed, and current reforms are not being policed then money creeps back into the picture.

I believe however, that new reforms should be passed. These reforms would make the political system a whole lot simpler, and allow all sorts of individuals an opportunity at politics. Part of this process would be removing the current FEC, and creating a new, independent FEC free from partisan issues. This way people with great ideas for the country wouldn’t be discouraged from entering the system solely on the basis of money. It might simply be that people with more money are better loved by voters, but I doubt it.

Tuesday, October 23, 2012

Bitcoins and hoarding

bitcoins are certainly very alluring, especially to one such as myself who is concerned with privacy and finances. bitcoins allow a person to make anonymous transactions with a digital currency. It is generally used (as of now) for trading drugs on places like the Silk Road, a TOR hidden service, but is also used for more legal transactions as well. bitcoins have been gaining popularity for a short while now since their inception, but unfortunately bitcoins will not be able to survive as a currency because of the issue of hoarding.

In fact, despite bitcoins huge surge in popularity, bitcoins have been made out as a way to make money, rather than to trade. In other words, instead of being used as a currency, bitcoins are today mostly seen as (and traded as) an investment. The reason for this is that the value of bitcoins, in terms of USD, has been skyrocketing at an exponential rate. In July 2010, after the website Slashdot ran an item that introduced the currency to the public (or at least the public enthusiastic about new technologies), the value of bitcoins jumped tenfold in five days. Over the next eight months, the value rose tenfold again. Many people came to view holding Bitcoins as a way to make a quick buck; 1 dollars worth of bitcoins now would be worth 100 dollars in just a year. As a result, many—probably most—Bitcoin users are acquiring bitcoins not in order to buy goods and services but to speculate.

The problem with having the Bitcoin economy dominated by speculators is that it gives people an incentive to hoard their bitcoins rather than spend them, which is the opposite of what you need people to do in order to make a currency successful. Useful currencies are used for trade, that's what makes them successful. But if you buy bitcoins hoping that their value will skyrocket (as anyone investing in bitcoins would), you're not going to be interested in spending those bitcoins, because if you did you would then lose out when the value of bitcoins rises. Instead, you're going to hold onto them and wait until you can cash out.

The way bitcoins are designed makes them conducive to this sort of thinking. Bitcoins are permanently limited; there will never be more than 21 million bitcoins in existence (The total number of coins is a result of the system's initial rules governing how many bitcoins miners could earn, and how often). Bitcoin's limited money supply is what makes it so attractive; the currency cannot be debased as money can when central bankers print more of it. The flip side is that if the demand for bitcoins rises, for whatever reason, then the value of bitcoins will necessarily rise as well. So, if you think that bitcoins are going to become more and more popular, then—again—it's foolish to spend your bitcoins today. The rational thing to do is hoard them and eventually sell them to new users. But that means there will be fewer bitcoins in circulation (and more in people's virtual wallets), making them less useful as an actual medium of exchange and making it less likely that businesses and consumers will ever see bitcoin as legitimate.

This problem is compounded by the fact that bitcoins are not spent for living. We already have a government backed currency that we can use, so spending bitcoins is not necessary. This means that a person can hoard their bitcoins as much as they want and only spend them once their price has jumped to a peak point in it's volatile price compared to the US dollar.

Essentially, bitcoins are not conducive to a spending environment, and as such cannot ever become a popular form of currency. Likely bitcoins will eventually die off and only ever be used in illegal transactions and by diehard bitcoin fans.

Monday, October 15, 2012

Unintended Consequences

     Unintended consequences surround us everyday and are something I tend to see very readily. When I make a decision I think less of the current ramifications and more of the long term or end result. However, often in society we see less of the long term and more of the short term. This although somewhat of a side street is in my opinion an important example of unintended consequences. Where a government spends money endlessly to provide current relief and does not seriously consider the long term ramifications. Another example would be everyday actions. Anything from buying a smoothie to eating snack. Although simple all of these hold unintended or anticipated consequences.
     The trick to the whole untended consequences is to first get a wrap on them in your everyday life. Look at the things which seem to hold blanket obvious results and I am sure you will see all the possible consequences which go along with them. So managing and deciding how to base your decisions becomes even more of a trickier task. To be able to analyze and decide the best decision, one which holds the best short term gain and also incorporates the long term effects.
     A prime example of times where unintended consequences are frequently overlooked is when we go to parties or social events such as dances. At which you generally become more focussed on making the night fun therefrom, becoming wrapped up in the short term goals and not any long term effects. As most of you know these times in which we completely overlook unintended consequences generally bring problems for us in the future.
     Finding a good balance in my opinion is absolutely key. This is not to say that there can ever be a perfect balance even in our own lives but instead to say that with some practice one can make decisions that are geared more towards appeasing both the short and long term, instead of making decisions which are just focussed on one or the other. Unintended consequences are truly something that shouldn't be overlooked but in many cases is. The decisions always have a trickle down effect of consequences some good and some bad. Through work and determination we can collectively try to make day to day decisions with there untended consequences in mind, in the hopes of creating a clearer and better structured future.

Knowing the Consequences

Unintended consequences hamper the efforts of well-intentioned policy-makers everywhere, whether they choose to recognise them or not. They occur due to issues inherent to the implementation of said policies. The main issue, widely cited among classical economists and roundly ignored among other schools, is the Friedrick Hayek's signature "knowledge problem."

Hayek popularized the notion of a knowledge problem burdening central planners in his seminal essay, "The Use of Knowledge in Society." In it, he discussed how central planners, who oversee economic activity from a high perch, necessarily have less knowledge about particular local events and situations than economic actors at ground level. Therefore, the means by which central planners can achieve benevolent outcomes is necessarily limited.

This problem is worsened by Hayek's observation that most knowledge is situational and descriptive, not statistical or strictly based on easily-communicable facts. So while a naturalist would have an easy time listing the height, weight and attributes of a particular bird species, it would take a lifetime for him to understand a particular bird's personality and environment so well that he could predict it's actions. Extrapolate the problem of understanding one actor, the bird, to an entire economy of actors, and you'll see why economic planning is such a Sisyphean task. This also helps explain why economic forecasting is notoriously unreliable.

The problem for economic thinkers and planners is not strictly one of methodology. An economist who conducts his forecasts with a perfect methodology would still be handicapped by the ignorance that Hayek described. Whatever economic facts they were able to obtain would be finite, while the knowable information would be infinite.

This problem extends, naturally, to regulators. Economic policy is based finite knowledge but comes with infinite implications. This observation does not, however, imply that regulation(or for that matter economics) is a worthless endeavor. Instead, it merely implies that a regulator has limited tools to achieve benevolent outcomes. Therefore, the number of problems which they should attempt to correct should also be limited. Among them are market failures, such as prisoner's dilemma problems, where market actors tend toward poor outcomes in spite of superior knowledge. The consequences of an intervention in such cases, in spite of their unforeseeable nature, will have a fighting chance of being positive,

Unintended (but Favorable) Consequences

Unintended consequences seem to surround every institution that society has ever created. Some of these consequences are favorable, while others are negative. It is often the case that the negative consequences of societies well minded decisions find themselves in the limelight. Well, Dr. Harvey Cushing is a prime example of someone whose research had far more important results than the unintended consequences.

Harvey Williams Cushing (1869-1939), the father of modern neurosurgery, was an American neurosurgeon and a pioneer of brain surgery techniques. It is to him that credit for the discovery Cushing’s syndrome is attributed. In the early 1900’s, Cushing developed many basic methods of operating on the human brain. This established him as a forerunner in the field, and it was under his influence that neurosurgery became a new an autonomous procedure.

One of Cushing’s greatest achievements as a surgeon was his advances in the area of intracranial tumors. Before his time, a tumor on one’s brain almost certainly led to a risky operation ending in death. However, Cushing was able to greatly increase the survival rate of patients that had undergone dangerous tumor operations. It can be noted though, that research carries with it failure. Behind any success there are innumerable failures. In Cushing’s case, his failures almost certainly lead to the deaths of his patients. In fact, several have been noted.

I would posit then that Cushing’s research, although well intentioned created negative unintended consequences. But, I’m fairly certain that even the staunchest supporters of life (entailing almost all of us) would agree that Cushing’s research was pivotal to the medical field, and yielded far greater benefits than costs.  All of this to say, while many decisions are foolish and under thought, unintended consequences are a necessary part of societal advance. 

Unintended Consequences

The law of unintended consequences has long been a force to be reckoned with. Economists, for centuries, have understood that actions might have noble intentions, but often times have bad outcomes. For this reason, carefully examining the potential economic impact of a piece of legislation is one of the most important (and, unfortunately, rarely performed) functions before passing that piece of legislation.

This is especially well illustrated in the example of welfare programs. Many welfare programs are designed with the intention of helping someone currently out of work by providing for them while they search for work.  This is certainly a noble intention, especially considering that many children out there depend on a parent to provide for them in the first place. Without welfare, providing for a family of 5 could be an incredible challenge to an unemployed worker.

The unintended consequence is that people don't go back to work. They stay on welfare for as long as they can. Take, for example, Denmark. Denmark's unemployment benefits lasted for 5 years. After 5 years, employment for people who were on unemployment benefits spiked then dropped off sharply afterwards. When Denmark reduced unemployment benefits to 4 years, the exact same thing happened; When unemployment benefits were about to run out people went back to work.

If the goal of unemployment benefits is to get people employed, it doesn't work. Why? Because people can make money easier on welfare than they can by working; Their incentives to work are greatly reduced while they have the option of welfare open to them. Once you're using these benefits and spending the day how you please working a job just doesn't seem as attractive, especially if those benefits outweigh the compensation you would receive for working.

Essentially, everyone policy that the government institutes will have consequences, and the ones that are not immediately seen on the surface of the policy can potentially be negative, as in the example of welfare. These consequences are, more often than not, negative. Unfortunately, because of how the American government is designed, politicians are more inclined to develop laws and policies that will have great looking intended consequences but terrible unintended consequences.

Saturday, October 13, 2012

Unintended Consequences

            Teachers can make or break a class but with the protectionism provided by unions several unintended consequences occur. The idea of protecting teachers’ rights is great but unintended problems occur: bad teachers are protected among the mix of excellent teachers. Campbell Brown raised awareness against the movement of unions according to the New York Times when she posted several comments that “teachers union must stop protecting those who commit sexual misconduct with children” and “it is impossible to not see that we have a broken system that is in need of change”. Brown points out that the public education system is not working and ironically according to Myron Lieberman this is true, “the most striking feature about the explosive growth of the teacher unions is that it has occurred during reported declines in student achievement and huge increases in spending for public education”.
            During this time of growth two major unions were established: the National Education Association (NEA) and the American Federation of Teachers (AFT). The NEA was founded in 1857 and leaned towards college education while the AFT was founded in 1897 and supported the individual lives of teachers, “with the explicit aim of improving teachers’ salaries and pensions”. Present day these unions still exist and most teachers are content but there are some that challenge the form of the public education system.
            Overall teacher unions have satisfactory benefits but misleading unintended consequences such as the protectionism of bad teachers.

Thursday, October 11, 2012

Newton Stole my Bike

I sure hope none of you ever used calculus.


People who think that ideas = property probably never had a bike stolen from them when they were a kid.  If someone steals your bike, the thief has your bike and now you don't.  If someone 'steals' your idea, congratulations!  The thief has your idea, and now you still do.  'Theft' of ideas makes the world a better place for everyone.  Especially if they are good ideas!


Monday, October 8, 2012

The Common Law Tradition of Intellectual Property

Defining property rights in a tangible physical property(i.e. land, water, stuctures, objects, liquids, and air) sometimes precludes the protection of intellectual property(which include patents, copyrights and tradesecrets). Advocates of that Rothbardian definition consider IP to be an illegitimate form of property because they use the legal system to prevent other individuals from engauging in voluntary acts of exchange and production. This line of thinking is rooted(mistakenly, I believe) in a misunderstanding of the nature of property rights and societal institions. This misunderstanding is informed by a misreading of the history of the free market and the common law tradition which beget it.
Without delving too far into a broader understanding of property rights, it is important to understand how they came to be. They aren't always obvious human rights(no human rights really are) and they don't always interact in an internally consistant manner while allowing for a working market economy.
The modern definition of property rights dates back to Roman Law. Ideas like first possession, that if I choose to claim unowned property it now belongs to me, were first applied in a formal manner there. Roman Law also gave us the idea that land would be owned privately but beaches and bodies of water would be common. This was because the area of a beach, and its contents, was difficult to define due to it's changing nature.
The genius of common law, which picked up such concepts, is that it allows for these rights to evolve through precedent as innovation allows new practices to be adopted. Common law allowed for new legal rights and concepts such as IP to come to being as mass communication and industrialization made them practical and prudent. With a secure patent system in place, British and American industries were allowed to invent and industrialize while communicating openly. Before that time, elaborate efforts to hide inventions and methods of production were common. Leonardo DaVinci, a product of the pre-IP world, was notorious for such secretive practices.
The genious of IP, while it is sometimes flawed, is that it has allowed for a high degree of competitiveness in a global market economy without stifling openness.

Piracy of Ideas

     After reading the articles I have a different take on intellectual property rights and the purpose they serve. The majority of the articles discussed topics of piracy and the effects they have on the world. However, I like to view the benefits which they serve from an inventor and a musicians perspective. Intellectual rights protect great ideas and do not prevent new innovation. They protect the inventors originality and allow him or her to benefit without he fear of someone stealing years of their life and work in an instant. I also do not see intellectual property rights as something that could prevent product or industry growth from occurring. In fact I think intellectual property rights push innovation into the future. This is because if someone invents something and patents it. The next person looking to create an invention in this field is forced to come up with something so much better and so different in order to avoid infringement. This pushes innovation and technology into the future in larger intervals than constant tweaks and adjustments would. I also feel that if an inventors hard work and ideas could be snatched up by a competitor there would be little advancement and drive to produce something new. People in my opinion have the right to protect their ideas because they are unique and a reflection of their time and effort.
     There are some areas around the world though where protecting intellectual property rights is a next to impossible task. With increasing technology perhaps it can be slowed. However, I do not believe it can ever be completely stopped. This is due to the fact that the world is an extremely vast place and protecting against every little pirating act would cost someone more than the actual act of piracy does. In fact, "Robert Neuwirth's" mentioned in his video, that many companies actually gain valuable insight from people pirating their products. They can make manufacturing, marketing, and many other assumptions based on the level of pirating occurring with their product. Robert also state that companies do not fear piracy because the people pirating the items would not necessarily be their customers anyway. This is because the costumers which would actually buy the products without pirating take pride in getting the real deal and without the guilt of stealing. Although many may see pirating tiny things as not a big deal, I do. For example music, although quite easy to pirate I am told, I still feel it to be very wrong. Many of the musicians who create the songs don't make much money as it is even the famous ones. So every dollar of their cut from the record producers counts for them and they benefit greatly from true fans who are willing to pay a small fraction of money to show their appreciation. To be honest if the song isn't worth a $1.99 than its probably not worth pirating anyway cause thats less than your average bottle of water from a vending machine.
     Now, intellectual property rights must remain as the name states " intellectual rights." If they defer from this standing or become abused then they have ruined the purpose in which they are supposed to serve. A sort of check and balance system even exists within U.S. patents. This is because they can only be held for x amount of years at a time. This prevents people from patenting an invention or an idea for all time. The patent process is also extremely expensive and can easily cost over 25,000 depending on the invention preventing people from patenting every little idea and invention.
    This said I can understand how people can see assigning rights to ideas as an impossible feat and I agree to an extent. However, assigning them to great ideas that revolutionize the world and are worth millions perhaps billions of dollars I think is a very useful tool. I feel that intellectual property rights also force competition to move farther with each stride into the future compared to how they would move if intellectual property rights didn't exist. However, I feel that it is currently impossible to protect everything in this world which could be considered worthy of an intellectual property right so for now use your best judgement and hopefully it guides you in an honest and respectful way.

Property is the set of things that a person can own. To say that a person owns something means that the person has the right to the exclusive control over how that object is used. A fantastic example of ownership is a human body. We all own our own bodies, that is to say we all have the right to the exclusive control over what our bodies do. To say otherwise is accept a contradiction in terms, since even slave masters can not actually control the slave. Although the slave master can indeed impose negative incentive structures on the slave to coerce the slave to doing his or her bidding, the slave must ultimately submit his or her body to the master's demands. Similarly each individual owns his or her life, labor, and less commonly appreciated his or her thoughts. No person can exercise the exclusive control over another's thoughts, and similarly each person has the exclusive control over what that person thinks. 

Now with all this in mind we must ask: what is not property? Looking at the definition provided above we see that the opposite of property is the set of things that a person can Not possess the exclusive control over how that object is used. Thus people's bodies that are not our own are not property, since for me to own some one I must have the exclusive right over how that person uses the body in which they reside, and therefore must always either ask them, or impose sufficient negative incentives on them in order to get them to do what I want. I can't simply think and have them obey. 

Another thing which is not property is the set of ideas, since no idea can be exclusively controlled. To understand why this is, consider a house that you have built. If I buy some land next to yours and build a house that is the same as yours in every detail, you still have your house, and I have my house, and we both have the exclusive right to control what is done with our respective houses. Now some would say that I've stolen from you in that I've stolen your idea. If that were the case me copying your house design would deprive you of your house design which is not the case at all. 

Ideas have many interesting facets, for instance as we have just seen they can be copied exactly, but another facet of ideas is that two people can have the same idea at once. This is not true for property. You and I can not both own your body, but you and I can both realize that the ratio of a circle's circumference to it's diameter is the same for all circles. If this beautiful fact were property, did I steal it from you or did you steal it from me? Clearly the case must be that we both own this thought, but the idea can not be owned since neither of us can secure the exclusive control over the idea. Thus the idea can not be property. 

Perhaps an example is in order. Suppose that you come along and say that you own an idea. I, having never thought of this idea, agree that you own this idea. If a third person overhears us, walks up to us, and claims that she has thought that idea as well, what are you to do? There is no way for either of you to prove ownership over this idea. What's worse she has your idea and so do you! Consider the case where you claim that you own a given tree. Again I, having never owned any tree, agree that this tree is yours, or at least not mine. If that same third person again walks up and claims that the tree is indeed hers, it may be possibly to establish who owns the tree. If you bought the tree and have a receipt of your purchase, this would be ample evidence of your ownership of that tree. Furthermore you would have the tree, and she would not, it's not as if she walked up with the same tree and claimed that both were hers. 

Notice how silly it is to apply the same reasoning to ideas as we to do property: if some unscrupulous person were to come to you with ideas for sale, that person could sell you that idea, and turn right round and sell another person that same idea with out having to take the idea from you! How sad you would be to have payed for an exclusive right which can not exist! Instead we understand, quite rightly, that ideas can not be owned.

This example leads us to the only way ideas can be monetized, through the control over the transference of the idea. If the control over an transference of an idea is lost, then so to is any hope of financial gain from that idea. The same is not true for physical objects, it's true that if hooligans come and cut down my tree then I've lost control of it, but this is theft (the depravation of my property from me). This situation is different then one in which those same hooligans print out a copy of my tree and place it their own disorderly yard. However those hooligans have not deprived me of the use of the wood from my tree, for example. Again we see a way in which ideas are not the same as property.

In conclusion: 

While it is a mean trick for Blizzard Entertainment to sell a box with a CD inside this box labeled Diablo 3, and then require that the game be played only while being logged on to their servers: it is the only way that Blizzard can reasonably monetize the idea of that game. In the mean time I'll take pleasure in using the words "Diablo" and "three" in sequence while not being logged on to their servers.

copyrights, the internet, and a new music market.

                                Copyrights where put in place to protect a persons or company’s right to a product to insure that no one else could copy or sell that product for his or her advantage.  The infamous legal battle between Napster and Metallica not only changed the music industry, but also how musicians look at copyrights.
                   In April 2000, Metallica sued Napster for copyright infringement for letting users of their site the ability to trade copyrighted music.  I like to look at this as the birth of a new age in music.  With the growing of the Internet, and its strength of bandwidth it is no surprise it has the ability to change a industry.  In the 2000’s we saw several musicians and bands try to combat piracy.  “System of a down” even named one of their albums “Please steall this album”.   Musicians and the music industry understood the way they did business was dying, and with how easy it had become to illegally down load music, and the loose laws that enforced their copyrighted material was coming under fire.  But who won in the long run?

                Some would say that if you like a band you will always buy the album, you want to support that band financially, so they have the ability to make new music.  But on the flip side advertising is the ultimate power in a market.  Wouldn’t you want your music provided to more people?  Downloading music gives a person the ability to sample their music before making a decision on whether to purchase it or not.  No buddy would want to purchase a car without driving it or a house without walking through it.  What if you had a option to pay what you thought that album was worth?

                Some look at it as the new frontier of music, and the band Radiohead took on copyrights, and illegal downloading.  The simply asked “What if their new album was free”.  Free how can someone make money of free?  In the case of Radiohead, they ditched their record label and simply released their album online and asked for donations off their album.  This gave people the choice,  do I want to donate money so Radiohead can keep making music I love, or I hate this album and do not want them to keep making music.  Radiohead was successful off their idea, all the money that was donated they got to keep for themselves and did not have to pay a high percentage to a record label whose sole purpose it to get people to purchase albums.

                Since Radiohead many musicians/Bands have followed their footsteps.  They understand the in ability of labels to protect their music in the 21st century, or stop the illegal downloading that goes on.  Many bands offer a free download at time of release, or will allow fans to listen to their whole album for a weekend on social media before choosing to purchase it or not.  I think this the future of music.  And shows how copyrights on music where not sully intended for the musicians, but the label companies that back them.  Yes people will lose jobs from this adaption to the Internet, but they will find new jobs that we want to see their resources used for.  The same way the Internet changed the USPS, or cell phones changed the telephone market.  In the case of donations for music it creates a perfect equilibrium for their music.  People will pay only the price they want and it clears the market, musicians are happy, fans are happy.   And big business, or the government cannot get involved because all are operating within the laws.