Truck and Barter

Public Education

Conservatives are often accused of wanting to destroy public education, but most don't; libertarians are much more forthright in their desire for government to get out of the education business. Being a libertarain conservative, I'm open to a compromise that at least breaks the monoploy. An article in the New York Times points to Dayton, Ohio where my dream is coming to a reality(Thanks to Joanne Jacobs):

Forty charter schools have opened in Dayton, and nine more have received preliminary approval for next fall. That would give this city of 166,000 people about as many charter schools as are in New Jersey, which has a population 50 times larger.

Today 26 percent of Dayton's public school students are enrolled in the taxpayer-financed but privately operated schools, a rate far higher than in any other American city.

Academically, few of the charter schools have proved to be any better than Dayton's public schools, which are among Ohio's worst. Now the authorities are warning that the flow of state money to the charters, $41 million this year, is further undermining the traditional school system.

The article says that the competition has sparked reform, but charters don't outperform the government run school system. If a charter isn't performing to a certain level, that school should be closed or at the very least have its funding removed. The same should be said for school district schools.

Open Source In Brazil

Brazil: Free Software's Biggest and Best Friend

SÃO PAULO, Brazil, March 28 - Since taking office two years ago, President Luiz Inácio Lula da Silva has turned Brazil into a tropical outpost of the free software movement.

Looking to save millions of dollars in royalties and licensing fees, Mr. da Silva has instructed government ministries and state-run companies to gradually switch from costly operating systems made by Microsoft and others to free operating systems, like Linux. On Mr. da Silva's watch, Brazil has also become the first country to require any company or research institute that receives government financing to develop software to license it as open-source, meaning the underlying software code must be free to all.

My initial reactions are two-fold. First, I wonder if this is something akin to cell phone usage in developing countries. Since the cost of landlines and maintenance plus the wait time to get one from the government are all so high, cell phones are quickly becoming commonplace in areas that hadn't had phones of any kind. Is free software for computers going to make computer access spread more rapidly than if these people and places all had to pay license fees to Microsoft, Apple, or whomever?

Secondly, there's a difference between someone knowingly contributing to the open-source stock of code, and someone being forced to give over innovations to it. Perhaps since the companies and institutes that are developing software with the suppose of government aid would have otherwise seen their products become owned by the state the open-source licensing regulation isn't necessarily an impediment to advance. If that's not the case, though, and these companies were simply getting support without the expectation that their work would be forfeit, I'd worry that declaring it all open-source upon creation will stifle some of the work. Without the ability to retain rights and thus make some sort of return, the incentive to produce may be dampened.

Yao is Irrelevant

Don Boudreaux links to Bryan Caplan's clear explanation of the danger of misinterpreting averages, and writes about an example he uses in Econ 101:

I use average height to explain to my students the problem with taking averages at face value. Suppose the average height of my class of 200 students is calculated and turns out to be 5’8”. Then let Yao Ming walk into the classroom. Because he is 7’6” tall, he will increase the average height of people in the classroom – but do nothing to the heights of any individual in the classroom.

The logic makes sense to me, and is a good point to make, but adding one person with an extreme attribute to a large group will usually have little effect on the resulting mean value.

I made that point when measuring the average hourly pay of Wal-Mart workers. Adding in the $10 million salary of WM's CEO H. Lee Scott increases the hourly wages of a million Wal-Mart employees by about half a cent an hour. This is irrelvant for almost all purposes. As I wrote, the median and the mean are close enough for all but nit-picking.

I'll make the same point with adding Yao to Econ 101. 7’6” Yao Ming will raise the mean height of Don's 5’8” 200 student class by approximately .11 inches. The new mean is 5’8.1’’. All this means is that whether or not Yao is added is irrelevant for almost all purposes of measurement -- but is extremely important for fielding a basketball team from Don's students.

(Here's the arithmetic: 200 students at 5'8'' yields 13600 total inches. Adding in 7'6'' Yao yields 13690 inches. Dividing by 201 yields 68.11 inches on average -- or 5'8.11'')

Solar Hampered By Silicon Shortage?

An article on Wired News makes the claim that a shortage of silicon might be getting in the way of a boom in the use of solar energy.

As demand for clean energy continues to grow, the solar industry forecasts millions of photovoltaic systems will dot the landscape by the end of the decade. However, a severe shortage of the silicon used in the systems threatens to dampen solar's growth.

According to a recent solar-energy report from the nonprofit Energy Foundation, the U.S. solar industry could grow by more than $6 billion per year if the technology becomes cost-competitive with electricity from fossil-fuel sources.

(Link in original text.)

That's a mighty big "if" in that last sentence. A lot of things might grow if the underlying technology suddently became easy and cheap to produce.

Despite the repeated calls for government action (new programs, tax breaks, rebates, etc.) by some of the interviewees, industry seems to be doing exactly what one should expect:

Homan said that from 2000 to 2004, silicon manufacturers could not justify capital investments because the price for their products in the solar industry had dropped to less than $30 per kilogram, or below many companies' costs. Demand for silicon from semiconductor manufacturers and the solar industry has increased sharply since then, and the price has nearly doubled, Homan said.

In the short run (before new plants could come online), I would think a sudden spike in demand for silicon as would be occasioned by a new government policy would only exacerbate the problem. Since silicon makes up less of the production costs of a microchip, chip makers' demand are likely to be more inelastic than that of the solar power technology companies.

Robot Game Theory

Did you ever play with Legos?

Me, I spent my time trying to find all the little tiny Lego pieces that I had lost in the carpet before my Dad stepped on one is his bare feet and ended up tossing all of them into the trash.

This guy decides to model evolution.

A little modification, and it seems like you could have your own kitchen-floor version of Hawk-and-Dove. At the very least, it's an ingenious use of everyday items to expore a complex concept. On a larger scale, and with more programming savvy, I would imagine it could be possible to test various strains of mutations, resistance, stability of equilibria, etc.

evolution

when two robots reproduce, each recieves a copy of the other’s genetic code. the outcome for each possible action for each life routine is a random choice between the two parent codes. this alone would result in some pretty booring children, given that both parents are initialized with the same code, so i added a roughly 1 percent chance that a mutation will occur for each action that is copied.

the idea is that a robot which is better capable of maneuvering around without getting stuck will have a better chance of finding another robot and procreating.

If Jason Striegel, the author of the hack, were to post his code, I just might be induced to spend a couple hundred bucks making a ton of these one weekend. Yes, it does sound fun. And yes, I do understand that I have a problem.

Choice Under Uncertainty: Policy Selection

Edmund S. Phelps of Columbia writes in the Bangkok Post:

There is a movement in medicine to require that applications for licences to sell a new drug be evidence-based. By contrast, trained economists view their discipline as having already achieved this scientific standard. After all, they express their ideas with mathematics and arrive at quantitative estimates of implied relationships from empirical data.

But economics is not evidence-based in selecting its theoretical paradigms. Economic policy initiatives are often taken without all the empirical pre-testing that could have been done.

I'd suggest extending it even further. A good deal of all policy is put into place without sound evidence to suggest that it really might work. I think it comes from a tendency to believe (rightly or wrongly) that some initiative is "unique", or at least very unlike anything that has gone on in the past. Further, explaining that generazliations from a similar, though not perfectly analagous, policy enacted elsewhere are applicable despite cosmetic differences would be, for most people, less thrilling than whatever's on CSPAN-3 at 4am.

I've remained rather agnostic on the whole Social Security reform debate because I've heard a good deal of sound arguments from both the pro- and anti- camps. I have to balance my own preference for returning decision making back to the individual with the reality that making personal accounts "add-ons" is really just another expansion of a system I have grave concerns about already. That said, neither side is swaying me with actual evidence supporting its theoretical arguments (or refuting the other side's).

My suspicion is that this is where status quo bias in most policy decisions gains a good deal of strength. No matter how messed up a system or program is now, the chance that it could be made even worse will bring out in force those people for whom things are "not too bad". It's hard to get people into the streets when a lot of the beneficiaries of a change either don't understand the change, aren't convinced of the change, or, frankly, don't exist yet. Why, to some people, are future benefits of intangibles enough to cover the present costs of things like war when the potential, tangible future economic growth of generations is not enough to restrain economic interference and protectionism?

Truck, Barter, and Exchange

Much of what I have read lately references the words of Adam Smith that inspired this blog's name.

THIS division of labour, from which so many advantages are derived, is not originally the effect of any human wisdom, which foresees and intends that general opulence to which it gives occasion. It is the necessary, though very slow and gradual consequence of a certain propensity in human nature which has in view no such extensive utility; the propensity to truck, barter, and exchange one thing for another.

Adam Smith - An Enquiry into the Nature and Causes of the Wealth of Nations. 1776. Book I, Chapter 2

In his 1964 SEA address, What Should Economists Do? ($) James Buchanan quotes Smith's text, and get's right to it:

Somewhat surprisingly, it seems to me, the relevance and the significance of this "propensity to truck, barter, and exchange" has been overlooked in most of the exegetical treatments of Smith's work. But surely here is his answer to what economics or political economy is all about.

Economists "should" concentrate their attention on a particular form of human activity, and upon the various insitutional arrangements that arise as a result of this form of activity. Man's behavior in the market relationship, reflecting the propensity to truck and barter, and the manifold variations in structure that this relationship can take; these are the proper subjects for the economist's study.

In other words, study what people do to make economic activity successful. Notice that Buchanan cuts off "exchange" for rhetorical effect. I've noticed that many others routinely do this.

For example, Deidre McCloskey, in "What Would Jesus Spend?" from last year:

The desires of people who followed Jesus--or Mohammad or Amos, or for that matter Buddha--might well become different from those they typically now indulge. But that doesn't change how the system would work best. It would get the high-speed presses for printing Bibles by fostering a system of private property in which people's ideas and their labor seek their best employment in printing--what the blessed Adam Smith called the "simple and obvious system of natural liberty." And it would get the airplanes to Yosemite by allowing alert consumers to seek reasonable deals in travel, what Smith called the propensity to truck and barter.

While writing in Reason Dr. McCloskey uses the full quote:

Dickering, or as Adam Smith put it, "the propensity to truck, barter, and exchange one thing for another" is "a necessary consequence of the faculty of reason and of speech." Smith was vividly aware of the faculty of speech, but nonetheless confined his system to the more behavioral and observable and quantitative division of labor. Hayek, who first came upon the idea (Smith’s and the inklings of his own) when attempting during the Great War to lead men in an Austrian brigade speaking a dozen different languages, nonetheless confined his extension of Smith to the division of information.

Via AL Daily, we now find Gavin Kennedy using the phrase to describe what Adam Smith really meant:

He saw society as becoming naturally harmonious through the intense dependence of each person on the labour of every other person and taught that the propensity to "truck, barter and exchange" led to people serving their own interests best by serving the interests of others from whom they needed daily necessities.

That is his true legacy, the melding of his moral sentiments with liberty, justice and his economics. It is time his legacy was claimed back.

As I wrote last year, I still think a closer, scholarly look at why Smith uses all three words is warranted.

Photos of Economists

I've spent way too much time looking at Robert Gordon's excellent Photos of Economists, 1969-2005. My favorite -- I'm not certain why -- is the young Don McCloskey.

The Ideal Healthcare System

Don Boudreaux writes that the Canadian healthcare system -- the rules and regulations imposed by the Canadian government on its apparently grateful peons -- is inevitably dysfunctional:

And yet, many Canadians continue to fancy themselves "lucky" to be saddled with such a system for providing their health care....

How on earth can a system that invites consumers to treat a scarce good as if it were free possibly work? Isn’t it inevitable – isn’t it utterly unavoidable – that any such system will suffer dysfunctions and troubles that make consumers worse off rather than better off?

I think this both identifies and ingores the critical point about health care/insurance in modern democracies: this dysfunctional system is exactly what people want.

I am guessing that in the common wisdom of Canadians and Americans, the very archetype of a "good" health "insurance" plan -- and hence an ideal "healthcare system" -- is one in which all the care one wants comes without delay or cost. The essential principles of this ideal are very simple; in terms of the American consumer:

1) the full premia are paid by one's employer or the government

2) there is no co-payment for any office visit

3) there is no co-payment for any prescription medication

4) all pre-existing conditions are covered in full

I'd also suggest the following criteria, but these are not as important as the first four:

5) any doctor -- especially top-notch specialists -- can be seen just by making an appointment, preferably on the same day

6) all surgical, restorative, remediable aspects of dental and vision care
are completely covered

7) whatever the patient asks for -- x-rays, antibiotics, anti-depressants,
repeated toxin screening, appendectomies -- is provided immediately without question

That these criteria are unworkable in reality is irrelevant; the healthcare system in utopia is not subject to the constraints of scarcity or opportunity cost.

British Dairies: Higher Milk Prices are Good for Consumers

This post could have gone on my Wal-Mart blog, but is of more general interest.

British dairy farmers are implying that milk and cheese consumers are too stupid to realize that they should want higher prices, collusion with continental producers, and government protection from those big-bad hypermarkets!:

IF DAIRY farmers want to see an increase in the pence per litre they get for their milk, they'll have to look for help from Europe warns NFU North West Dairy Board Chairman - Ray Brown....

"The supermarkets would not stand for it and would simply find a way to get cheaper imports of milk from the continent. Something I believe the British consumer does not want to see happen because it would not be to their long term benefit..."

"We sometimes forget in this country that a lot of our European neighbours suffer similar problems in regards to milk price. Companies like Wal-mart (who own Asda) are global so we have to challenge them as a European force and not just a British one.

"If we stand together as Europeans we can be represented by EU Trade Commissioner Peter Mandelson and he can then urge the World Trade Organisation to protect our market. But we have to do this as Europeans. There is no way we could do this as a single British entity.

"Therefore, I believe it's vitally important that our new European allies are secured very quickly."

Of course, once dairy prices are controlled by a distant political machine, the British milk consumer will have no direct say in this matter. But isn't that the point?

iTV For Me, Please

For people interested in the possibilities of the question Kevin ventures below, here's a link to an interesting paper (RR: I've done it, but I'm not going to put the file up for free) about the potentials for implementing television via broadband connections.

I really can't imagine that this isn't the way television is going to move in a few years. TiVo, and similar DVR tools, strike me as a sort of an intermediary step in the process, a slight shift towards video on demand. The stream is still set, but the box lets you grab what you want from the stream. The issue now, of course, is just moving to the point where the stream only starts when you ask for it.

The bigger issue, however, is what happens to the traditional method of paying to produce TV. I recently read a brief discussion on someone's blog (and please, if you know where, post a comment and I'll make the appropriate attribution -- I dislike "disembodied" references) about the role advertising plays in "subsidizing" the production of the paper: the revenue from people buying a newspaper doesn't cover the cost of production. Since much the same occurs for TV, the idea that people are going to call up their own shows presents a massive problem. Do you want to spend the extra time downloading a show that has 11 minutes of commercials? Fully one third of a regular sitcom download would be for advertising. Basically, you'd be paying to watch ads. Ads, of course, that you'll simply skip or fast-forward through. (And I'd give it about 12 hours before someone cracks the Digital Rights Management encoding and starts posting "edited" versions of the shows online like they do now.)

My best guess right now is that we'll get closer to some sort of iTunes-like service for television shows. The hardest part, I would think, is figuring out the pricing structure. Right now I pay something to have basic cable through a digital box so I can use the DVR. But that's hundred of potential channels I can surf. The effective price per show is miniscule right now. Are you willing to pay even $0.50 to download an episode of Everybody Loves Raymond when you had 200 channels 24 hours a day for $49.95 a month? Perhaps the payments would be per studio/"network" (in quotes, given the antiquated notion that term takes on). $2.00 a month for everything NBC has to offer. I'd welcome it, personally.

Among the major benefits I could foresee? Shows more people want, and improved ability for smaller studios to compete. Given the ability to price discriminate at such a low level, there would be far more information about the demand for certain kinds of shows. Plus, as more popular distributors start charging more to offset server loads and bandwidth usage, people might be induced to check out the lower-price options, and start stumbling on shows they might not have seen before.

Maybe this isn't all that far away, either. Check out what the revitalized Battlestar Galactica has been doing with their site. Audio commentaries (like those found on DVDs) are available, and the entire first episode is viewable, commercial-free.

[Personal plug: This is one of the most intelligent series on TV now. Whatever conceptions you may have had about the original schlock-fest, this is radically different. Strip away the standard nods to the hardcore sci-fi fan base, and nothing else - especiallly not West Wing -- comes close to having so rich a discussion about subjects ranging from the tensions between branches of government, the definition of humanity, the role of secrecy and the State, even cloning and the use of torture. Agreeing with the slant of the show isn't necessary to appreciate their willingness to make the issues messy.]

Comcast's Advertising

Speaking of Comcast, although Bob notes their quick service compared to socialized medicine, I find their advertising, which is regularly mailed to me and reproduced at left, annoyingly deceptive.

Frankly, who really cares about the $1 for one month gimmick? What's the bottom line? How much will the basic & digital cost me, after all taxes, every month. The fine print offers no assistance to the snarky consumer:

Offer applies to Full Basic and Digital service for $1.00 per month for 1 month. After promotional period, regularly [sic] monthly rates apply.

Of course, it is impossible for Comcast to list all of its prices in print advertising, given the plethora of options and plans.

They have much better pricing options online. Just entering your address brings up all the monthly rates, but does not include applicable "franchise fees, taxes and other fees" that "may" apply.

Of course, most retail establishments do not list after-tax prices, but then final prices are obvious, as sales tax on retail goods and services is a standard flat percentage, depending on type of the good or service in question.

Companies selling goods that have multiple taxes, fees, and other charges -- like telephone, cable tv, and airlines -- can always insist that it is not their fault that the tax schemes are so complicated, but I'm not so sure the mess is to their disadvantage...

I forgot to mention that I must also thank my neighbors in our large condominium building for leaving their wi-fi networks open. As far as I know, it's illegal to run your cable TV wiring into your neighbor's home, but of course, it is not illegal to run your wi-fi internet through your neighbor's wall... what happens iif TV becomes available on demand through your internet connection?

T&B; Breaks 200,000

Sometime last night -- and we do get plenty of people through the evening, largely I suspect because of the time zone issues for those interested in the dinar -- Truck & Barter had it's 200,000th hit.

Thanks to everyone who's visited, commented, returned, and, most especially, linked to one of the facets of Brancato Industries.

Open Networks

I really should thank one of my neighbors for leaving their wireless network open for me to hop on. My own internet access went from poor before a technician "fixed" it the other day to very bad this morning to nonexistent this afternoon. I could be irritated that the problem wasn't fixed after the first visit, but the prompt service from Comcast has helped keep me calm.

Ian has posted his thoughts on Muni wifi. Carrying on some of his thoughts as I freeload on my neighbors, I am somewhat impressed by Comcast's prompt service in addressing the problem even though it's not fixed. Why some people think that government is best at delivering services is beyond me. If I was on a government network, it's not a wild guess that it would not be the next day that a technician is sent to my apartment to address the matter. After all, if in countries with socialized medicine the waiting lists lasts more months, how long long would it take to get a technician to fix my cable modem?

As Ian points out, Muni wireless does nothing to enhance competition and would mostly likely reduce broadband offerings. It's hard to compete with free, although AOL seemed to against the likes of NetZero. Right now, I'm happy somebody left their wireless network open. Thankfully, there is another provider besides Comcast in the area.

Edit: I forgot to say that while I should thank my neighbors for the free bandwith, it may cause them to close it down. It's better to have a backup,

The Betrayal Bit: Credibility, Cheap Talk, and Arrant Nonsense

Steven Pinker's essay on taboo topics reminded me of two social cliches (cliched in my work environment, anyway). I think they illustrate an interesting ambiguity (or incompatibility, and sometimes persistent confusion) about what it means to establish credibility.

Continue reading "The Betrayal Bit: Credibility, Cheap Talk, and Arrant Nonsense"

Known Unknowns

Well, this post is a bit of a stretch, I know, but all I can say is that there is a direct and negative relationship between the amount of work I have and the quality of my posting. Still and all, I think this article at New Scientist is interesting enough to point to: "13 Things That Do Not Make Sense."

Of particular fascination to me was the last one, on the question of cold fusion:

AFTER 16 years, it's back. In fact, cold fusion never really went away. Over a 10-year period from 1989, US navy labs ran more than 200 experiments to investigate whether nuclear reactions generating more energy than they consume - supposedly only possible inside stars - can occur at room temperature. Numerous researchers have since pronounced themselves believers.

With controllable cold fusion, many of the world's energy problems would melt away: no wonder the US Department of Energy is interested. In December, after a lengthy review of the evidence, it said it was open to receiving proposals for new cold fusion experiments.

Also fascinating, though, are the questions that remain not just "out there", but about the basic functions of the human body:

In her most recent paper, [MADELEINE Ennis, a pharmacologist at Queen's University, Belfast] describes how her team looked at the effects of ultra-dilute solutions of histamine on human white blood cells involved in inflammation. These "basophils" release histamine when the cells are under attack. Once released, the histamine stops them releasing any more. The study, replicated in four different labs, found that homeopathic solutions - so dilute that they probably didn't contain a single histamine molecule - worked just like histamine. Ennis might not be happy with the homeopaths' claims, but she admits that an effect cannot be ruled out.

My point? Well, mostly that I find this stuff amazing. But also to point out that, amid all the talk about the effects of economics becoming a field that looks more and more like applied math, that even those truly "hard" sciences are still facing plenty of issues for which they simply do not have a good answer, despite libraries full of incredibly hard formulas and institutes full of million dollar experiments. The lack of a perfect answer, I tend to think, isn't indictment of a method. But surely there is room for more than one. At least, that's my hope as I spend my evenings trying to catch up to, well, what feels like most 8th graders in the hopes of soon moving into more rigorous economic study...