Boing Boing » economics

Forging £1 coins is apparently profitable

Cory Doctorow — Thu, 23 May 2013 00:36:22 +0000

Three men have been convicted of forging £1 coins. The London Police Detective Inspector even got all quippy about the sentencing ("These three men are organised criminals who were intent on undermining the UK monetary system. There is nothing fake about the reality they must now face of life behind bars." -- yes, yes, very clever DI South) but what fascinates me about the story is that it can somehow be profitable to forge £1 coins.

I got passed a fake pound shortly after I first moved to the UK, almost ten years go; it was a foil-wrapped plastic slug. Not realizing it was fake, I tried to buy something with it at a corner shop and the cashier pressed it edge-on on his counter and the foil split open, revealing the green plastic disc inside.

From the sound of this article, these fakes were solid metal, which, I think, would make them more expensive than the fake I got. When you add the costs of the materials, the wages for the manufacturing process, warehousing, the discount for counterfeit cash, etc, it's hard to believe that this was worth anyone's while.

On the other hand, it's probably easier to go on counterfeiting when you're passing very small denominations as most people (me included) won't bother going to the cops over a mere pound; and it's much harder to remember where a given pound coin came from than a £20 note.

The court heard Fisher, of Rags Lane in Goffs Oak, Hertfordshire, Sullivan, of Bancroft Chase in Hornchurch, east London, and Abbott were arrested during an undercover police operation in Essex last May.
Police found a storage container with 1.6 million metal discs inside and fake coins equivalent to £20,000.
Fake coins equivalent to a further £30,000 were found in a nearby car.

Three men jailed over 'largest' fake £1 coin plot [BBC]

(Image: Yet another forged pound coin, a Creative Commons Attribution (2.0) image from pahudson's photostream)

In-game hyperinflation

Cory Doctorow — Tue, 21 May 2013 14:55:32 +0000

Here's a totally amazing and fascinating story about hyperinflation crashing the economy of Blizzard's massively multiplayer online RPG Diablo 3. Blizzard blew its economic strategy for Diablo 3 by making the "sinks" (places where gold is taken out of the economy) unattractive, adding in real-money-for-stuff trades, and then letting a bug run wild. Before you knew it, players were loading up virtual wheelbarrows full of virtual gold to buy virtual bread:

This was demonstrated when, in a message board entry prefaced by stating “Sell Equipment before Patch 1.0.5 Hits!” (a patch is a piece of software added to an operational program or application as bugs are found, changes desired, or ways of improving performance discovered), a player warned that,
Blizzard just announced that the drop rates for [certain] items are going to be doubled … if you haven’t already, you should consider converting your current gear to cash … since real $ [are] the best hedge against gold devaluation[.][11]
If historical cases of hyperinflation — real, and now virtual — have one thing in common, it is the instinct among its victims to blame the symptoms rather than the disease. The Austrian economist Hans Sennholz noted that during the German hyperinflation, “intrigue and artifice” were believed to be at work.[12] Similarly, a handful of Diablo 3 players, frustrated about the decimation of their purchasing power, expressed increasing suspicion of manipulation and conspiracy theories.
[W]hy [are] certain items priced [s]o astronomically high? Many of them are not even that good yet cost 100’s of millions of gold. … I have about 45,000,000 gold saved up [and] check every few days to see if I can get any upgrades that are worth the gold, but … everything is vastly overpriced … clearly controlled by the gold sellers.[13]

In case you missed it, I wrote a book about this.

A Virtual Weimar: Hyperinflation in a Video Game World (Thanks, Tom Keller!)

Bruce Sterling on startups' role in helping the global rich get richer

Cory Doctorow — Mon, 29 Apr 2013 16:09:18 +0000

Bruce Sterling's speech from NEXT Berlin is a blast of cold air on the themes of startup life, disruption, and global collapse. Bruce excoriates the startup world for its complicity with the conspiracy of the global investor class to vastly increase the wealth of a tiny minority, and describes the role that "design fiction" has in changing this.

Bruce Sterling on Fantasy prototypes and real disruption | NEXT Berlin (via Die Puny Humans)

Why the most horrible apple in the world is also the most grown

Maggie Koerth-Baker — Fri, 26 Apr 2013 21:10:46 +0000

Despite almost universal agreement that basically defines "so boring as to become disgusting", the Red Delicious apple continues to be the most-grown variety in the US. More than 50,000 bushels of the vile things are turned out every year. This story by Rowan Jacobsen in Mother Jones explains the Red Delicious' undeserved success and follows the stories of entrepreneurs who are trying to bring back varieties of apple long lost to the consumer market.

Austerity economics only works if you make an Excel formula error

Cory Doctorow — Thu, 18 Apr 2013 16:22:55 +0000

A new paper called Does High Public Debt Consistently Stifle Economic Growth? A Critique of Reinhart and Rogoff by Thomas Herndon, Michael Ash, and Robert Pollin from UMass Amherst tries and fails to replicate the classic work on austerity, Carmen Reinhart and Kenneth Rogoff's 2010 Growth in a Time of Debt.

Reinhart-Rogoff is the main research cited in favor of cutting public services and spending in bad economic times. It's a big part of why the local library is shutting down, why they're kicking people out of public housing, shutting down arts programs, slashing education and public transit, and laying off public employees. It purports to show that countries with high debt-to-GDP ratios of 90 percent or more are a "threat to sustainable economic growth."

In the new Amherst paper, the authors reexamine Reinhart-Rogoff's original data and conclude that the numbers don't add up. They show that Reinhart-Rogoff cherry-picked which years of high-debt GDP they measure, that they put their thumbs on the scales with "unconventional weighting" and made a "coding error" that "entirely excludes five countries, Australia, Austria, Belgium, Canada, and Denmark." This last error -- literally the wrong formula in a spreadsheet cell -- badly skews the outcome.

Here's the tl;dr: "the average real GDP growth rate for countries carrying a public debt-to-GDP ratio of over 90 percent is actually 2.2 percent, not -0.1 percent as [Reinhart-Rogoff claim]."

Selective Exclusions. Reinhart-Rogoff use 1946-2009 as their period, with the main difference among countries being their starting year. In their data set, there are 110 years of data available for countries that have a debt/GDP over 90 percent, but they only use 96 of those years. The paper didn't disclose which years they excluded or why.
Herndon-Ash-Pollin find that they exclude Australia (1946-1950), New Zealand (1946-1949), and Canada (1946-1950). This has consequences, as these countries have high-debt and solid growth. Canada had debt-to-GDP over 90 percent during this period and 3 percent growth. New Zealand had a debt/GDP over 90 percent from 1946-1951. If you use the average growth rate across all those years it is 2.58 percent. If you only use the last year, as Reinhart-Rogoff does, it has a growth rate of -7.6 percent. That's a big difference, especially considering how they weigh the countries.
Unconventional Weighting. Reinhart-Rogoff divides country years into debt-to-GDP buckets. They then take the average real growth for each country within the buckets. So the growth rate of the 19 years that the U.K. is above 90 percent debt-to-GDP are averaged into one number. These country numbers are then averaged, equally by country, to calculate the average real GDP growth weight.
In case that didn't make sense, let's look at an example. The U.K. has 19 years (1946-1964) above 90 percent debt-to-GDP with an average 2.4 percent growth rate. New Zealand has one year in their sample above 90 percent debt-to-GDP with a growth rate of -7.6. These two numbers, 2.4 and -7.6 percent, are given equal weight in the final calculation, as they average the countries equally. Even though there are 19 times as many data points for the U.K.
Now maybe you don't want to give equal weighting to years (technical aside: Herndon-Ash-Pollin bring up serial correlation as a possibility). Perhaps you want to take episodes. But this weighting significantly reduces the average; if you weight by the number of years you find a higher growth rate above 90 percent. Reinhart-Rogoff don't discuss this methodology, either the fact that they are weighing this way or the justification for it, in their paper.

Researchers Finally Replicated Reinhart-Rogoff, and There Are Serious Problems. [Mike Konczal/Next New Deal]

Does High Public Debt Consistently Stifle Economic Growth? A Critique of Reinhart and Rogoff

(via Techdirt)

American oligopolies are the new monopolies

Cory Doctorow — Tue, 16 Apr 2013 13:57:56 +0000

Tim Wu sez, "I wrote something quick in the New Yorker about America's big blind spot when it comes to big business -- if its not a monopoly, its no problem, so highly concentrated industries can get away with whatever they want."

This blind spot is of particular significance during an age when oligopolies, not monopolies, rule. Consider Barry Lynn’s 2011 book, “Cornered,” which carefully detailed the rising concentration and consolidation of nearly every American industry since the nineteen-eighties. He found that dominance by two or three firms “is not the exception in the United States, but increasingly the rule.” Consumers, easily misled by product labelling, often don’t even notice that products like sunglasses, pet food, or numerous others come from just a few giants. For example, while drugstores seem to offer unlimited choices in toothpaste, just two firms, Procter & Gamble and Colgate-Palmolive, control more than eighty per cent of the market (including seemingly independent brands like Tom’s of Maine).
The press confuses oligopoly and monopoly with some regularity. The Atlantic ran a recent infographic titled “The Return of the Monopoly,” describing rising concentration in airlines, grocery sales, music, and other industries. With the exception of Intel in computer chips, none of the industries described, however, was actually a monopoly—all were oligopolies. So while The Atlantic is right about what’s happening, it sounds the wrong alarm. We know how to fight monopolies, but few seem riled at “The Return of the Oligopoly.”
Things were not always thus. Back in the mid-century, the Justice Department went after oligopolistic cartels in the tobacco industry and Hollywood with the same vigor it chased Standard Oil, the quintessential monopoly trust. In the late nineteen-seventies, another high point of enforcement, oligopolies were investigated by the Federal Trade Commission, and during that era Richard Posner, then a professor at Stanford Law School, went as far as to argue that when firms maintain the same prices, even without a smoke-filled-room agreement, they ought to be considered members of a price-fixing conspiracy. (By this logic, the Delta and US Airways shuttles between New York and Washington, D.C., would probably be price-fixers, since their prices do vary by how far in advance you buy, but are always identical.)

The Oligopoly Problem

Elite Panic: why rich people think all people are monsters

Cory Doctorow — Sun, 14 Apr 2013 21:52:20 +0000

Here's a quote on "Elite Panic" from Rebecca Solnit, It's an idea I'm fascinated by, particularly the notion that if you believe that people are fundamentally a mob waiting to rise up and loot but for the security state, you will build a security state that turns people into a mob of would-be looters.

The term "elite panic" was coined by Caron Chess and Lee Clarke of Rutgers. From the beginning of the field in the 1950s to the present, the major sociologists of disaster -- Charles Fritz, Enrico Quarantelli, Kathleen Tierney, and Lee Clarke -- proceeding in the most cautious, methodical, and clearly attempting-to-be-politically-neutral way of social scientists, arrived via their research at this enormous confidence in human nature and deep critique of institutional authority. It’s quite remarkable.
Elites tend to believe in a venal, selfish, and essentially monstrous version of human nature, which I sometimes think is their own human nature. I mean, people don't become incredibly wealthy and powerful by being angelic, necessarily. They believe that only their power keeps the rest of us in line and that when it somehow shrinks away, our seething violence will rise to the surface -- that was very clear in Katrina. Timothy Garton Ash and Maureen Dowd and all these other people immediately jumped on the bandwagon and started writing commentaries based on the assumption that the rumors of mass violence during Katrina were true. A lot of people have never understood that the rumors were dispelled and that those things didn't actually happen; it's tragic.
But there's also an elite fear -- going back to the 19th century -- that there will be urban insurrection. It's a valid fear. I see these moments of crisis as moments of popular power and positive social change. The major example in my book is Mexico City, where the '85 earthquake prompted public disaffection with the one-party system and, therefore, the rebirth of civil society.

I've just ordered her book A Paradise Built in Hell: The Extraordinary Communities That Arise in Disaster. This is basically what I was talking about here, when I described the idea I hoped to capture in the prequel to Down and Out in the Magic Kingdom.

BOMB Magazine: Rebecca Solnit by Astra Taylor

(via Schneier)

Summary of experimentally verified pricing heuristics

Cory Doctorow — Tue, 26 Mar 2013 20:28:15 +0000

A post on ConversionXL sums up a bunch of experiments on pricing and suggests ways of combining them to best effect. All electronic goods can be had for free, so every person who buys an electronic good is essentially entering into a voluntary transaction. Getting pricing right is the best way to convince (rather than coerce) customers to pay, and to frame that payment so that it's as large as possible.

Researches found that sale price markers (with the old price mentioned) were more powerful than mere prices ending with the number nine. In the following split test, the left one won:

9 not so magical after all? Not so fast!
Then they they split tested the winner above with a similar tag, but which had $39 instead of $40:

This had the strongest effect of all.
I’m wondering whether the effect of this price tag could be increased by reducing the font size of $39. Say what?
Marketing professors at Clark University and The University of Connecticut found that consumers perceive sale prices to be a better value when the price is written in a small font rather than a large, bold typeface. In our minds, physical magnitude is related to numerical magnitude.

Pricing Experiments You Might Not Know, But Can Learn From (via O'Reilly Radar)

The Sharing Economy

Rob Beschizza — Fri, 08 Mar 2013 14:49:15 +0000

Glenn Fleishman, in his first cover story for The Economist, tracks how technology is making it easier to share everything from bicycles to basement bedrooms—for a price.

Such peer-to-peer rental schemes provide handy extra income for owners and can be less costly and more convenient for borrowers. Occasional renting is cheaper than buying something outright or renting from a traditional provider such as a hotel or car-rental firm. The internet makes it cheaper and easier than ever to aggregate supply and demand. Smartphones with maps and satellite positioning can find a nearby room to rent or car to borrow. Online social networks and recommendation systems help establish trust; internet payment systems can handle the billing. All this lets millions of total strangers rent things to each other. The result is known variously as “collaborative consumption”, the “asset-light lifestyle”, the “collaborative economy”, “peer economy”, “access economy” or “sharing economy”.

The flies in the ointment: insurance, liability, and laws that favor incumbent industries.

Twenty Four Standard Causes of Human Misjudgement

Cory Doctorow — Sun, 03 Mar 2013 04:54:18 +0000

A great post on Metafilter turned me on to "Twenty Four Standard Causes of Human Misjudgement," a classic 1995 speech by Charlie Munger (much cited, and transcribed here in PDF), in which Munger (a respected investor and partner to Warren Buffet) lays out, in plain language, the cognitive biases and blind-spots that he views as the root of much human misery.

Munger's thinking is greatly influenced by Robert Cialdini's classic popular psychology text Influence, a title that Munger credits with laying out many of the blind spots of both economics and psychology. Munger's thinking is collected in another book: Poor Charlie's Almanack: The Wit and Wisdom of Charles T. Munger.

I converted the talk to MP3 and listened to it twice today. I think I'll return to it again -- this feels like one of those mind-dumps that contains so much to pore over that it might be a work of years.

Stag Hunts: fascinating and useful game theory model for collective action problems

Cory Doctorow — Thu, 21 Feb 2013 01:45:22 +0000

Yesterday, I wrote about some Johns Hopkins students who overcame a game theory problem and got an A for the whole class. I called it a non-iterated Prisoner's Dilemma, but as Tim Harford points out, it's more of a Stag Hunt, a game theory category that I hadn't been aware of, and which has fascinating implications for lots of domains, including Internet peering:

In the stag hunt, two hunters must each decide whether to hunt the stag together or hunt rabbits alone. Half a stag is better than a brace of rabbits, but the stag will only be brought down with a combined effort. Rabbits, on the other hand, can be hunted by an individual without any trouble.
There are two rational outcomes to the stag hunt: either both hunters hunt the stag as a team, or each hunts rabbits by himself. Each would prefer to co-operate in hunting the stag, but if the other player’s motives or actions are uncertain, the rabbit hunt is a risk-free alternative.

Right on queue

(Image: [ C ] Lucas Cranach - Stag Hunt of the Elector John Frederick, a Creative Commons Attribution (2.0) image from centralasian's photostream)

Using Silk Road: game theory, economics, dope and anonymity

Cory Doctorow — Tue, 19 Feb 2013 15:39:46 +0000

Gwern's "Using Silk Road" is a riveting, fantastically detailed account of the theory and practice of Silk Road, a Tor-anonymized drugs-and-other-stuff marketplace where transactions are generally conducted with BitCoins. Gwern explains in clear language how the service solves many of the collective action problems inherent to running illicit marketplaces without exposing the buyers and sellers to legal repercussions and simultaneously minimizing ripoffs from either side. It's a tale of remix-servers, escrows, economics, and rational risk calculus -- and dope.

But as any kidnapper knows, you can communicate your demands easily enough, but how do you drop off the victim and grab the suitcase of cash without being nabbed? This has been a severe security problem forever. And bitcoins go a long way towards resolving it. So the additional security from use of Bitcoin is nontrivial. As it happened, I already had some bitcoins. (Typically, one buys bitcoins on an exchange like Mt.Gox; the era of easy profitable "mining" passed long ago.) Tor was a little more tricky, but on my Debian system, it required simply following the official install guide: apt-get install the Tor and Polipo programs, stick in the proper config file, and then install the Torbutton. Alternately, one could use the Tor browser bundle which packages up the Tor daemon, proxy, and a web browser all configured to work together; I’ve never used it but I have heard it is convenient. (I also usually set my Tor installation to be a Tor server as well - this gives me both more anonymity, speeds up my connections since the first hop/connection is unnecessary, and helps the Tor network & community by donating bandwidth.)

Using Silk Road (via O'Reilly Radar)

Logic of surveillance and problems of the enforcer class

Cory Doctorow — Mon, 18 Feb 2013 15:13:41 +0000

Ian Welsh's piece on the "logic of surveillance" makes several good points, but this one really smacked me in the face: "The enforcer class...is paid in large part by practical immunity to many laws and a license to abuse ordinary people."

Surveillance is part of the system of control. The more surveillance the more control, is the majority belief amongst the ruling elites. Automated surveillance requires fewer “watchers”, and since the watchers cannot watch all the surveillance, long term storage increases the ability to find some “crime” anyone is guilty of. When you add in recognition systems based on face, gait or other procedures, you have the theoretical ability to track a person from the moment they leave their home till they return to it. Other measures make it possible to see what people are doing in their own homes (IR heat maps, for example.) A world in which everyone is tracked all the time is very possible.
Quis custodiet ipsos custodes
This is one of the biggest problems the current elites face: they want the smallest enforcer class possible, so as to spend surplus on other things. The enforcer class is also insular, primarily concerned with itself (see Dorner) and is paid in large part by practical immunity to many laws and a license to abuse ordinary people. Not being driven primarily by justice and a desire to serve the public and with a code of honor which appears to largely center around self-protection and fraternity within the enforcer class, the enforcers reliability of the enforcers is in question: they are blunt tools and their fear for themselves makes them remarkably inefficient.

The Logic of Surveillance (via Naked Capitalism)

(Image: Surveillance, a Creative Commons Attribution Share-Alike (2.0) image from jonathanmcintosh's photostream)

Economist valentines

Maggie Koerth-Baker — Thu, 14 Feb 2013 19:10:46 +0000

Liz Fosslien offers 14 graphs explaining love from the perspective of a twitterpated economist.

Economic recovery in the US actually made 99% of Americans poorer, top 1% captured 121% of gains

Cory Doctorow — Thu, 14 Feb 2013 02:11:03 +0000

"Striking it Richer," a paper by Emmanuel Saez (an economist at UC Berkeley) looks at the way that the dividends of the slow US "economic recovery" have been distributed. Saez finds that 121% of the economic gains since 2009 have been captured by the richest 1% of Americans -- in other words, despite economic growth, the poorest 99% of Americans actually got poorer through the "recovery."

This confirms a pattern that Matt Stoller highlighted: that income inequality increased more under Obama than under Bush. And the new Saez paper also describes how it came about. In short form, income to the top 1% is significantly influenced by capital gains. Remember, the tax reporting is not clean here: rising equity and bond markets help all those private equity and hedge fund professionals, who are able to get capital gains treatment for what ought to be labor income. But the paper also stresses that the lower orders were hit hard in the aftermath of the global financial crisis than in the dot-bomb era, which also saw a big drop in capital gains. That isn’t as hard to understand. The collapse of the dot-com mania didn’t impair the real economy overmuch because it was not fueled in a meaningful way by borrowings. By contrast, the housing bubble, and more important (in terms of damage to the financial system) the much housing exposure created synthetically by CDOs that consisted entirely or mainly of credit default swaps was highly geared, hence when it collapsed, it took credit providers down with it.

Yes, Virginia, the Rich Continue to Get Richer: the Top 1% Got 121% of Income Gains Since 2009 [Yves Smith/Naked Capitalism]

I will trade you 12 sheep for 1 barrel of non-renewable hydrocarbons

Maggie Koerth-Baker — Wed, 06 Feb 2013 21:35:43 +0000

What would Settlers of Catan be like if you added oil wells to the already potent resource mix of sheep, wood, ore, brick, and grain? The Proceedings of the National Academy of Sciences finds out when reporter Ann Griswold sits in on a game of Catan: Oil Springs.

HOWTO recover your stolen car

Cory Doctorow — Fri, 01 Feb 2013 05:17:32 +0000

From an email sent to author Tyler Cowen by a reader:

Oh, and here’s a tip I hope you never need: if your car is ever stolen, your first calls should be to every cab company in the city. You offer a $50 reward to the driver who finds it AND a $50 reward to the dispatcher on duty when the car is found. The latter is to encourage dispatchers on shift to continually remind drivers of your stolen car. Of course you should call the police too but first things first. There are a lot more cabs than cops so cabbies will find it first -and they’re more frequently going in places cops typically don’t go, like apartment and motel complex parking lots, back alleys etc. Lastly, once the car is found, a swarm of cabs will descend and surround it because cabbies, like anyone else, love excitement and want to catch bad guys. Cabbies know a lot of stuff*. I found a traveling shoplifting ring in Phoenix once. Professional shoplifters always take cabs. So do strippers going to work but that’s another story.

Taxis and the shortest route home (from my email) (via Kottke)

Three more Merchant Princes books due

Cory Doctorow — Wed, 30 Jan 2013 17:39:08 +0000

Here's a bit of good news: Charlie Stross has sold another trilogy in his fantastic Merchant Princes series, a highly original take on heroic fantasy, with the DHS and real-world economics thrown in for spice. "

The Parable of the Ox: podcast explains the disastrous separation of financial markets from the real economy

Cory Doctorow — Thu, 24 Jan 2013 01:03:32 +0000

An excellent recent episode of the BBC Radio 4 math/current affairs show "More or Less" dramatized "The Parable of the Ox," a short article by John Kay originally published in the Financial Times (~~paywalled, alas, or I'd link to it~~ available from Kay's site). Fans of James Surowiecki's Wisdom of the Crowds will know the first part of this story -- wherein the average of several guesses about the weight of an ox was more accurate than the guesses of any of the experts in the crowd. What this podcast and the article adds is a coda about how the use of "guesses" (or stock trades) as a way of weighing the ox quickly departed from guesses about the weight of the ox (or the value of a firm) and turned into guesses about other peoples' guesses about other peoples' guesses -- a financialized system that soon has no connection to the real economy or the real ox. And it ends, predictably enough, when the ox dies.

The Parable of the Ox [More or Less]

MP3

The parable of the ox [John Kay]

Great economics/storytelling podcast

Cory Doctorow — Fri, 18 Jan 2013 23:40:39 +0000

Tim Harford (Undercover Economist, guest blogger, statistical superhero) has a new show on BBC Radio 4, called Pop Up Economics: well-told tales about the dismal science. The inaugural episode (MP3) is a beautiful parable about innovation and invention.

North Dakota natural gas fields can be seen from space

Maggie Koerth-Baker — Thu, 17 Jan 2013 20:28:42 +0000

NPR's Robert Krulwich circled this bright spot on a night-time satellite image of the United States. As Krulwich points out, this cluster of lights is new — it wasn't there in 2005. And it's not a city.

Instead, that bright spot is a shining reminder of the natural gas boom. What you're seeing are the lights from drilling rigs and flares burning gas.

Why data-caps SUCK

Cory Doctorow — Tue, 15 Jan 2013 07:17:06 +0000

Brian sez, "I made an animated presentation about broadband and mobile data caps - specifically, how they discourage innovation, how the excuses used to justify data caps don't hold water, and the real reasons that ISPs and mobile providers are moving towards caps."

This is really good stuff. It might need an edit for time, but if you've got 11 minutes, this is what you should spend 'em on.

Why Data Caps Suck: The Animated Examination (Thanks, Brian!)

How Internet copyright laws let Big Content get away with paying less to artists

Cory Doctorow — Mon, 14 Jan 2013 21:00:21 +0000

I've written an essay on how copyright enforcement laws let entertainment companies get away with paying less to artists for the O'Reilly Tools of Change blog. The ToC folks asked to to contribute something related to the keynote I'll be doing at their annual conference in NYC next month, as part of my tour for Homeland, the sequel to Little Brother.

In other words, by asking governments to ascribe liability to these “intermediaries” (services that sit between creators and audiences), the entertainment industry is demanding that the Internet be scaled back to something that’ll fit in cable TV’s bathtub. Something where only people with a lot of capital and clout can speak and be heard. Something where big entertainment companies can use their money and power as a wall to stop anyone from challenging their pride of place.
When a big star goes into a record-company negotiations, she isn’t limited to saying, “Sorry, that deal’s not good enough, I’ll see what I can get across the street at your competitor.” Now she can say, “That’s not good enough, I can do better on my own, like Trent Reznor did.” Or, “That’s not good enough, I can hook up with a new kind of music business,” like Madonna did. But only if the intermediary liability is small enough to allow all these different kinds of companies to clamor for artists’ attention and products.
When a successful beginner like Amanda Hocking or EL James comes before a big publisher who wants to take her from indie to pro, the worst deal they can offer her has to be better than the best deal she could get for herself, or from one of the new startups.
Put it another way: There’s never been a time when tight controls over distribution were good for artists: fewer labels always means worse deals for musicians; fewer studios always means worse deals for filmmakers, actors, and other film professionals; fewer publishers always means worse deals for authors.

Liability vs. leverage

Interview with Suicide Girls about Homeland, the sequel to Little Brother

Cory Doctorow — Thu, 10 Jan 2013 22:53:01 +0000

My next novel, Homeland (the sequel to Little Brother) is out in a few weeks, and I recently sat down with Nicole Powers from Suicide Girls for an interview about the book and the issues it raises, especially the student-debt bubble:

When it was just rich people going, it wasn’t about just getting a better job, because you were already rich, you already had the entré into the better job. You could already do unfunded apprenticeships and your parents’ friends were the people offering you the unfunded apprenticeships. You had a good five ways within the system. But now it’s a market transaction, and once it’s a market transaction we start applying cost benefit analysis to it. We start saying, well if the university degree earns you so many pounds, then it makes sense to start talking about you paying so many pounds. And if the objective here is to take people whose lifetime income expectancy was so many pounds, and make it a little bit higher –– which is what we call social mobility –– then why shouldn’t that be a virtuous cycle and they pay back into it. That way the university can expand the number of students they take on and all the rest of it, right?
The problem with that is that it’s become a Ponzi scheme, especially in America. We haven’t quite gotten there here. But in America, you have this crazy thing where it is somewhat true and it’s also universally received as true, that you can’t get a good job without a university degree. It’s also the case that universities, including many state colleges –– that are actually owned by the public –– can act as loan originators, which is to say they lend you the money but where those loans are then backed by the federal government. They can lend you any amount of money because there’s no risk to them because the government will take the loan off their hands. Those loans are then further secured by the federal government when they float them as bonds. So you have this weird perverse incentive where the universities, the more they charge the more they get –– which is a bit weird right? Because in real market economies, the more you charge the more you get up to a point, and then people start going, wait a second, that’s not worth it anymore, and they stop paying in. But if I tell you that you can’t get a job unless you get a degree, and then I tell you that no matter how much the degree costs I can get you a loan for that much, all of a sudden you start getting takers for those crazy propositions and that starts to look like a bubble, like a pyramid scheme.

Cory Doctorow: Homeland

Positive externalities thrive online

Cory Doctorow — Wed, 09 Jan 2013 02:05:16 +0000

My latest Guardian column is about positive externalities, the value that bystanders get from the stuff you're already doing:

That's the crux of this irrational fear of positive externalities: "If something I do has value, I deserve a cut." It's one thing to say that someone who hires you to do a job, or purchases your product, should pay you money. But positive externalities are the waste-product of something we were already going to do. They're things that you have thrown away, that you have thrown off, that you have generated in the process of enjoying yourself and living your life.
The mania to internalise your positive externalities is the essence of cutting off your nose to spite your face. I walk down the street whistling a jaunty tune because I'm in a good mood — but stop as soon as I see someone smiling and enjoying the music. I keep my porchlight on to read by on a warm night, but if I catch you using the light to read your map, I switch it off, because those are my photons — I paid for 'em!
Worse still: the infectious idea of internalising externalities turns its victims into grasping, would-be rentiers. You translate a document because you need it in two languages. I come along and use those translations to teach a computer something about context. You tell me I owe you a slice of all the revenue my software generates. That's just crazy. It's like saying that someone who figures out how to recycle the rubbish you set out at the kerb should give you a piece of their earnings. Harvesting positive externalities involves collecting billions of minute shreds of residual value – snippets of discarded string –and balling them up into something big and useful.
If every shred needs to be accounted for and paid for, then the harvest won't happen. Paying for every link you make, or every link you count, or every document you analyse is a losing game. Forget payment: the process of figuring out who to pay and how much is owed would totally swamp the expected return from whatever it is you're planning on making out of all those unloved scraps.

Why trying to charge for everything will kill online creativity

Robots are taking your job and mine: deal with it

Cory Doctorow — Tue, 01 Jan 2013 16:11:07 +0000

Two striking articles on the roboticization of the workforce: first is Kevin Kelly in Wired, with "Better Than Human", an optimistic and practical-minded look at the way that robots change the jobs landscape, with some advice on how to survive the automation of your gig:

Now let’s consider quadrant C, the new jobs created by automation—including the jobs that we did not know we wanted done. This is the greatest genius of the robot takeover: With the assistance of robots and computerized intelligence, we already can do things we never imagined doing 150 years ago. We can remove a tumor in our gut through our navel, make a talking-picture video of our wedding, drive a cart on Mars, print a pattern on fabric that a friend mailed to us through the air. We are doing, and are sometimes paid for doing, a million new activities that would have dazzled and shocked the farmers of 1850. These new accomplishments are not merely chores that were difficult before. Rather they are dreams that are created chiefly by the capabilities of the machines that can do them. They are jobs the machines make up.
Before we invented automobiles, air-conditioning, flatscreen video displays, and animated cartoons, no one living in ancient Rome wished they could watch cartoons while riding to Athens in climate-controlled comfort. Two hundred years ago not a single citizen of Shanghai would have told you that they would buy a tiny slab that allowed them to talk to faraway friends before they would buy indoor plumbing. Crafty AIs embedded in first-person-shooter games have given millions of teenage boys the urge, the need, to become professional game designers—a dream that no boy in Victorian times ever had. In a very real way our inventions assign us our jobs. Each successful bit of automation generates new occupations—occupations we would not have fantasized about without the prompting of the automation.
To reiterate, the bulk of new tasks created by automation are tasks only other automation can handle. Now that we have search engines like Google, we set the servant upon a thousand new errands. Google, can you tell me where my phone is? Google, can you match the people suffering depression with the doctors selling pills? Google, can you predict when the next viral epidemic will erupt? Technology is indiscriminate this way, piling up possibilities and options for both humans and machines.
It is a safe bet that the highest-earning professions in the year 2050 will depend on automations and machines that have not been invented yet. That is, we can’t see these jobs from here, because we can’t yet see the machines and technologies that will make them possible. Robots create jobs that we did not even know we wanted done.

Kelly is one of the great technological optimists of our era, and always makes a good case for the net benefit of technology. I really admire What Technology Wants, his 2010 book, not least because it sets out a program for deciding how to integrate technology with your life, and, more importantly, how and why to refuse to adopt some technologies (Kelly frames as being a "technology gourmet," someone who knows what she wants from technology and seeks it out; versus being a "technology glutton," who pigs out on whatever technology is on offer).

Now, contrast that robot-human co-existence manifesto with Why Workers Are Losing the War Against Machines, an excerpt from Race Against the Machine: How the Digital Revolution is Accelerating Innovation, Driving Productivity, and Irreversibly Transforming Employment and the Economy , a new book by Erik Brynjolfsson and Andrew McAfee that's being serialized in The Atlantic:

Skill-biased technical change has also been important in the past. For most of the 19th century, about 25% of all agriculture labor threshed grain. That job was automated in the 1860s. The 20th century was marked by an accelerating mechanization not only of agriculture but also of factory work. Echoing the first Nobel Prize winner in economics, Jan Tinbergen, Harvard economists Claudia Goldin and Larry Katz described the resulting SBTC as a "race between education and technology." Ever-greater investments in education, dramatically increasing the average educational level of the American workforce, helped prevent inequality from soaring as technology automated more and more unskilled work. While education is certainly not synonymous with skill, it is one of the most easily measurable correlates of skill, so this pattern suggests that demand for upskilling has increased faster than its supply.
Studies by this book's co-author Erik Brynjolfsson along with Timothy Bresnahan, Lorin Hitt, and Shinku Yang found that a key aspect of SBTC was not just the skills of those working with computers, but more importantly the broader changes in work organization that were made possible by information technology. The most productive firms reinvented and reorganized decision rights, incentives systems, information flows, hiring systems, and other aspects of organizational capital to get the most from the technology. This, in turn, required radically different and, generally, higher skill levels in the workforce. It was not so much that those directly working with computers had to be more skilled, but rather that whole production processes, and even industries, were reengineered to exploit powerful new information technologies. What's more, each dollar of computer hardware was often the catalyst for more than $10 of investment in complementary organizational capital. The intangible organizational assets are typically much harder to change, but they are also much more important to the success of the organization.

Brynjolfsson and McAfee are more economist-jargon heavy than Kelly, and more downbeat, and they're also pointing out something obvious, which is that there are losers in technological revolution. See, e.g., Bruce Sterling's end of the year roundup:

Come 2013, I think it's time for people in and around the "music industry" to stop blaming themselves, and thinking their situation is somehow special. Whatever happens to musicians will eventually happen to everybody.
Nobody was or is really much better at "digital transition" than musicians were and are. If you're superb at digitalization, that's no great solution either. You just have to auto-disrupt and re-invent yourself over and over and over again.
It's pretty awful to be a musician and have no possibility of health insurance (as Jaron Lanier keeps pointing out), but you could have been a Nokia engineer. You'd have been blindsided even harder and faster, and you wouldn't even have had the girls and the weed.

Which is to say that even though technology makes us more "productive" and puts more goods into more peoples' hands, that the transition isn't bloodless, it isn't fair, and it isn't always very nice.

But here's the thing that neither of these articles -- or even Bruce's acid observations -- touches on: once technology creates abundance, what possibilities exist for distributing the fruits of that abundance such that the benefits are more evenly felt? We've been talking about an increase in productivity producing an increase in leisure for a long time, but instead, the "winner take all" world of Brynjolfsson and McAfee often seems to produce a "winner" class that works itself into an early grave by running 100-hour work weeks at astounding payscales, and a much larger "loser" class that works itself into an early grave by working 100-hour weeks in shitty, marginal, grey-economy jobs, trying to stitch together something like an income.

In America, anyone who proposes an increase in overall quality of life through public schools, health programs, libraries, or even Internet access, is immediately branded a socialist and dismissed out of hand.

On the other hand, the Internet-age's sweetest dividend is the creative possibilities: the chance to sit in your little grass shack or organic farm or urban crackerbox and use the tubes to carry on debate; to contribute to software and Wikipedia; to crowdsource capital for your creativity; to find makers who have solved 90% of the problem that's nagging you and who will help you solve the remaining ten percent; to access a library of human creativity and knowledge without parallel; to have your art and creativity accessible to all, and to find the mutants who're wired the same as you and jam with them.

That world of de-marketized, non-market, non-commodity and/or gift economy living is something that seems tantalizingly within our grasp today, and it feels like automation holds the key to so much of it. But is it just the latest version of the dream of a leisure society? Or can we Craigslist and Kickstarter and Freecycle and Etsy and Thingiverse and Open Source Hardware and Wikipedia and Creative Commons our way to a world where the means of information is owned by no one and yet tended by all?

(via O'Reilly Radar)

Why entertainment industry release windows drive piracy that we all have to pay for

Cory Doctorow — Thu, 20 Dec 2012 14:34:43 +0000

My latest Guardian column, "Why the entertainment industry's release strategy creates piracy," looks at the weird entertainment industry practice of defending their right not to sell us the things we want to buy, and the rather more odious practice of asking the public to foot the bill for this strategy:

In a real marketplace, the ability of entertainment companies to stagger their releases would be curtailed by the willingness of customers to put profits ahead of their own desire to watch TV or movies when the rest of the world is talking about them on Twitter and Facebook – and not six months later, timed to coincide with a bank holiday. However, by equating watching TV at "the wrong time" with theft, the entertainment companies have been pretty successful in convincing politicians that the public should foot the bill for this decision through costly market interventions, up to and including a branch of the City of London police charged with finding copyright infringers.
Which brings us back to the empirical evidence on lawful alternatives and piracy rates. The fact that people eschew the black market when there is a legitimate alternative tells you that they're not thieves looking to steal. Rather, like the notional customer who sneaks in her own fizzy drinks rather than paying for the cinema's insane markups, they are potential customers whose purchases have been forfeited by a business that has violated rule number one: offer a product that people want to buy at the price they're willing to pay.

Why the entertainment industry's release strategy creates piracy

Makers: economic manifesto

Cory Doctorow — Wed, 05 Dec 2012 16:11:12 +0000

Some months ago, Chris Anderson wrote to me to let me know that he was working on a book called Makers, and given that I'd written a well-known novel on similar themes with the same title, did I mind? Of course I didn't -- for one thing, having already published many stories with the same title as famous stories that came before them, I was hardly in a position to object! But more importantly, I was interested in Anderson's take on the subject.

I've thoroughly enjoyed Anderson's two earlier works on economics in the Internet age (The Long Tail and Free). Anderson -- formerly a tech editor for The Economist -- has got a very good grasp of economics and business; but as the long-time editor-in-chief at Wired, he wasn't afraid of visionary pronouncements about technology either. He's also got a background as an indie rocker, and has a good grasp of the rewards and challenges of a life in the arts. Though I've disagreed pretty vociferously with some of the things he's had to say in the past, his work has provoked more nods from me than head-shakes, and when I've disagreed with him, it's been for chewy, substantive reasons that were worth exploring.

I've just finished a copy of (Anderson's) Makers -- having come to the book a bit late due to my own book-tour for Pirate Cinema -- and it delivered on all the promise of Anderson's earlier work, and then blew past them. Simply put, Makers is a thrilling manifesto, a call to arms to quit your day job, pick up your tools, and change the future of manufacturing and business forever. It's a recipe for a heady cocktail of open business; free software; low-cost, global coordination; and community cooperation that Anderson credibly suggests will forever change the world.

Anderson's Makers is a tour through all the different ways that manufacturing in quantities of 1-10,000 units has been transformed, and how this changes the very nature of entrepreneurship and creativity. Using diverse example from modern times -- and comparing them with manufacturing stories from the past century -- Anderson shows how 3D printing, laser-cutting, Internet-based custom fabrication, free and open development models, and crowdfunding have made it possible to make something, make it better, sell it, make it better still through co-development with customers, scale up and up, and serve your needs and the needs of your community.

He doesn't gloss over the challenges of this sort of thing, but he does show how a world where hardware is (nearly) as cheap to prototype and share as software means that the traditional gatekeepers to creativity -- established manufacturing giants, retail titans, and massive distributors -- are losing their stranglehold on the market. This means that you can do something that makes your life better, you can turn it into a business, and others can turn it into a business, too.

Because this is Anderson, this is firmly a business book, and that's probably a good thing. Anderson's bottom-line practicality is likely to lend the idea of making a certain boardroom credibility that other, wider-eyed literature on the movement lacks. That said, this, more than any of Anderson's books, acknowledges the role that passion, love, community spirit and personal satisfaction play in the world of innovation. I was a little disappointed that Free glossed over the ethical and personal reasons that people worked on free and open systems, but in this volume Anderson's much more in touch with his indie-rock history than in previous outings, and it's a very welcome addition.

For all that, there's still a wide streak of makerish practicality here, and the chapters are only a few steps away from being full-blown HOWTOs for doing it yourself (or, more importantly, doing it with everyone else who cares about the same stuff as you). And Anderson certainly practices as he preaches: not long after the book's publication, he quit his job at Wired to run his DIY Drone business full-time.

This is really Anderson at his finest: a blend of economic big-picture stuff and nitty-gritty, hands-dirty making. I can see it being a perfect kick in the bum for any number of frustrated makers struggling in a crappy economy and wondering where to take their lives.

Makers: The New Industrial Revolution

Photo: Shutterstock

Translating plutocrat economic campaign-speak into plain English

Cory Doctorow — Wed, 05 Dec 2012 16:04:16 +0000

The Campaign to Fix the Debt is a coalition of hyper-rich CEOs and bankers that's been formed to campaign for social safety net cuts, seizing the "fiscal cliff" moment as a chance to change the public debate and protect tax breaks to the richest 1% while slashing services upon which the rest of the country relies. Alternet's Lynn Parramore provides a handy crib-sheet for translating the Campaign's manifesto to plain English:

1. “Fix” means cut: When they say “fix” Social Security, they mean cut Social Security. Fixers want to convince the public that a well-managed, hugely popular program that does not add to the deficit (it’s self-funded) is somehow in crisis and requires intervention in the form of various cutting schemes. They seek this because many of the rich do not want to pay taxes for Social Security, and financiers want very much to move toward privitization of retirement accounts so they can collect fees on such accounts.
2. “Reform” means rob. When the say “reform” the tax code, they mean “make taxes even lower for the rich.” The wealthy do not pay their fair share of taxes in the United States, which is a major reason there is a large deficit in the first place. When the very wealthy pay lower tax rates than ordinary working people, the result is an increasing redistribution of income upward that puts the U.S. in the top 30 percent in income inequality out of 140 nations, according to the Central Intelligence Agency. We’re a shameful #42. Income inequality is not only unfair, it’s dangerous and makes society unstable.
3.“Bipartisan” means all of the rich. Fix the Debt is a pro-business ideological movement pretending to be a bipartisan group of concerned citizens. But the group is really just a coalition for the greedy, unpatriotic rich. There are plenty of financiers and other 1 percenters in the Democratic Party, and some of them have decided to join forces with their GOP counterparts to work toward a goal that means a great deal to all of them: Making the rich even richer.

The Obscenely Rich Men Bent on Shredding the Safety Net

Future Perfect: an optimistic look at the future of networked politics

Cory Doctorow — Wed, 21 Nov 2012 14:22:48 +0000

I've read and enjoyed innumerable Steven Johnson books; he's one of those great science writers who can gather together disparate phenomena from the technological world and tease out of them a coherent story about what's happening to the world right under our noses.

His latest, Future Perfect: The Case For Progress In A Networked Age, is no exception. Johnson proposes that people who believe in the Internet are not techno-utopians, but rather "peer progressives" -- people who believe that progress is possible when peers work together through non-hierarchical, networked systems.

Johnson lays out the case for peer progressivism as being neither of the right nor the left. It shares some of the right's beliefs in markets -- the idea that the distributed intelligence of lots of people produces better outcomes than centralized decision-making. But it shares some of the left's belief in collective, state-driven spending -- the idea that systems like the Internet don't get produced by advantage-seeking commercial firms (which want to make walled gardens), but rather by governments trying to attain some public-interest goals.

Using this lens of public-spirited, state-sponsored development to create market-driven, individual-centered systems, Johnson lays out his case, showing how the Internet has enabled radical shifts in city management, political campaigning, newsgathering, arts funding, and entrepreneurship. Each of these chapters is well-drawn, and Johnson's careful to label his uncertainties when he has them, rather than trying to shoehorn the facts to fit his thesis.

I was particularly struck by the chapter on news-publishing, in which Johnson suggests that the Internet has demonstrated a capacity to produce fine-grained, intelligent, well-thought-through coverage of various subjects. He suggests that tech news -- the most mature news-subject on the net -- is a template for future subjects. The early days of the Web were particularly hard on tech publications, which struggled to remain relevant with monthly publications in the age of up-to-the-minute Internet coverage, and to continue to pay the bills as online new sources expanded the advertising inventory by orders of magnitude. But over time, a kind of stability emerged, an ecosystem of news coverage that beggars anything of the pre-Internet age. Johnson suggests that the net isn't inherently great at covering tech, but that it was just the first of many news niches the net will cover, and that in time, it will be a model for overall networked newsgathering (he also mentions studies showing that newspaper readers are more likely to inhabit an echo chamber of bias-confirming news than online news junkies).

This is a refreshing, optimistic, level-headed read, and the idea of "peer progressive" is a good one, with the potential to get people thinking outside the Dem/GOP, left/right boxes.

Future Perfect: The Case For Progress In A Networked Age