Anomaly UK

Lock-in

Doc Searls talks about the familiar obsession of technology companies (in this case social-networking providers) for business models with lock-in, and strategies that “kill other companies”

Why do they do this? It’s not because it’s the only way to make money. Plenty of companies make money by supplying open, competitive markets in which consumers can easily choose one supplier over another.

But those companies don’t make vast amounts of money – at least, not unless they are in vast markets. To make huge amounts of money without being the size of Mittal Steel or something, you have to have some degree of immunity from competition. This can come from network effects, patents, state regulation, or some combination.

I can’t back this up right now, but I think that most of the private-sector business in the world – most of the salaries, most of the profits – come from socially useful work. But most of the biggest profits come from businesses which have found some way of locking out competition.

The kind of logic here is that behind every great fortune there is a great crime – if you define crime loosely enough to include practices that limit the choices of consumers. (And if you allow one or two exceptions, which are worth looking at in another post). It does not follow that behind every modest fortune there is a modest crime.

This has a huge effect on perception. When you look at the market from outside, the most visible practitioners are the most successful, who are largely those who have managed to extract some form of monopoly rent. And the size of those rents are so large that they do represent significant costs to society. But theyare the exception rather than the rule – the bulk of economic activity takes place in competitive markets by businesses without market power.

It was also one of the factors behind the original internet bubble. Investors were valuing business that used the internet, but were in fact normal businesses, by comparing them with the companies that made internet infrastructure, and therefore had lock-in because of network effects. Amazon is a large and profitable business, but it has little or no lock-in. Cisco, Sun, Intel collect monopoly rents resulting from the network effects of their installed bases. Therefore Amazon’s operating profit is 5% of revenue, while Microsoft’s is 35%

For the UK, statistics show 60% of business (by no. of employees or by turnover) is carried out by businesses with less than 500 employees – just some vague background to show that it’s plausible that I’m talking about the real world.

Buying large-scale insurance

I made a shocking admission in a comment at Samizdata – that there was something important that I thought might be difficult for the market to provide.

The issue was agriculture. Globally, agriculture is heavily state-dominated, and in the short term (at least until recently), the most profitable way to run agriculture was not to have any, but to buy in food from abroad, subsidised by foreign taxpayers.

If Britain had followed that policy for the last couple of decades, we would now be in even more trouble responding to the sudden increases in global food prices. (Assuming that land which has not been farmed recently can’t quickly be brought into production – which is a question I am not able to answer).

Now in theory there would be a market opportunity, insuring against food shortages by maintaining – even at a loss – the capability to ramp up food production quickly, so as to be able to profit from shortages.

What I said was that this kind of large-scale investment, which is likely to show negative return but has a compensating possibility of a large profit, would have to be handled through the financial markets. As they have been functioning relatively poorly recently, the investments might not have happened.

(This is still in my fantasy Britain where the EU was not already subsidising farming to survive).

Thinking about it some more, there are various ways in which this kind of investment could be made.

The most obvious is to fund the losses by selling out-of-the-money commodity call options. If food prices do not rise, the options expire unexercised; if the prices do rise, you’re in.

If that can’t be made profitable, it means that the options are too cheap.
I would have thought there were plenty of buyers of such options – people who wanted insurance against expensive food. Supermarkets would be a prime potential buyer.

But here we see the real problem. Farmers are politically popular (how else would they get all that help?). Supermarkets are politically unpopular – there is always political activity seeking to restrict them. They are simultaneously accused of driving down wholesale prices, driving up retail prices, and squeezing out competition.

Insuring against food shortages costs money in normal years. If these costs are transferred from politically popular farmers to politically unpopular supermarkets, the chance of getting government help correspondingly declines. Therefore the mere tendency of government to involve itself in the industry acts to rule out the most effective market solutions before they even start.

MPs' Discipline

The fiction which gives legitimacy to our government is that the process of having elections every five years disciplines MPs to act in the general interest. Whatever comes out of Parliament is the “result of the democratic process”.

The significance of Ann and Alan Keen counting ten thousand a year of what is basically an investment as an expense, and getting it signed off as such, is not in the cost itself – the hundred million a year or so that MPs take for themselves is a small part of their impact – it is that this conclusively disproves the legitimacy theory.

If, as the theory holds, MPs are constrained to act in the public interest, then everything they officially do must be in the public interest. Pocketing an extra ten grand a year, effectively in cash, is not in the public interest. Therefore the MPs are not so constrained. Q.E.D.

As a corollary, there is no reason to believe that anything else they do is in the public interest either.

via Devil’s Kitchen

The FLDS

Further to my previous piece, obviously the issue of polygamy came up in the context of the raid on the FLDS community in Texas.

It’s difficult to judge who’s right or wrong when the facts are still unclear, but various difficult questions are raised. One of them was polygamy itself – based on my reasoning earlier, I would say that there’s no need to ban polygamy itself, but its existence raises a particular question of whether women in the community are being denied their right to leave their husbands.

Again, based on what I’ve already written, my attention would go first to the “first wives”, because it’s their behaviour which is the most anomalous relative to the wider society. Have any of them tried to go to court to get a divorce and an income or a share of assets, and what has been the result? Presumably they are taught that divorce is wrong, which is fine, provided they are not actually restrained if they change their mind.

Public attention has been centred on the younger women who become second “wives”. The accusation is that some of them are under legal age. This has not been substantiated, and it emerges that some of the “underage mothers” that were taken from the compound were in their twenties. If it turns out that underage girls are having sex with “husbands”, then crimes are obviously being committed. There is then a wider question of who else is guilty, beyond the men themselves. The difference between a marriage which is not legally recognised on one and and an affair on the other is that a marriage is publicly recognised. If the rest of the community has been knowingly participating in ceremonies where underage women are entering into marriages, then it would seem to me that they are complicit in the crime. In any case, I understand that Texas has laws specifically against marriage ceremonies involving minors, which strikes me as a sensible way of clarifying that question. There could be tricky questions around what is or is not a marriage ceremony, but I think they can be resolved – if the participants in the ceremony know that the couple is going to live together immediately, then it is a marriage ceremony. In the FLDS, that question is not likely to be controversial anyway.

My position so far is that if married women are being prevented from leaving or suing for divorce outside the FLDS community, or if underage women are being openly1 taken into sexual relationships, then crimes are being committed which need to be prosecuted. The next question is: what steps can justifiably be taken to investigate these factual questions? This is to my mind the most difficult questions. On the one hand, the Texas authorities seem to have undertaken very drastic action on the basis of very little evidence, which itself has turned out to be fake (the phone call). On the other hand, if the sort of crimes I have discussed are taking place, then how will they ever be exposed without barging in and questioning many members of the community privately? There may be room for disagreement about what was going on in Eldorado, but what about Khyra Ishaq who starved to death in Birmingham? What about Josef Fritzl with his daughter imprisoned in his basement? These cannot be prevented without being prepared to poke into people’s privacy to a certain degree without very much evidence. I am attracted to the idea that every man’s home is his castle, but can we really allow them to contain dungeons2?

They had the phone call (presumably they reasonably believed it to be genuine to start with), they had what could be called a prejudice, but in the light of the above I think a reasonable prejudice, that a closed, polygamous group is likely to be up to no good; I think they had sufficient ground for some kind of investigation, and in the circumstances any investigation would necessarily be very intrusive. It looks a bit as if the steps they took were excessive, but I’m willing to wait and see as the facts really come out.

There are even more issues over the status of adults in the community: the first is whether they have been “brainwashed” or “conditioned” in such a way that they are not free to leave even if they are not physically prevented from doing so. I don’t think the law can recognise that. There is no government in the world that I would trust to overrule what a mentally competent adult says she wants.

The second is similar: Growing up in a community where dissenting will mean losing contact with everyone the dissenter has ever known itself makes it questionable whether members are really free to leave. Again, I would be reluctant to trust a government to go against an adult’s stated wishes “for her own good”, but that is not to deny the problem. Other ex-members can provide support – if the public wishes to make it easier for members to leave, probably the best method is to assist those groups. Googling around produces, for example, this Ex-Mormon Support Group. Presumably there are others.

Notes:
1 Obviously if minors are secretly having sex, that’s illegal too, but it’s harder to do anything about, and in any case minors are having sex all the time. What’s distinctive here is the allegation that the whole community is aware of minors being “married”.
2 Note I’m not actually opposed to dungeons per se, that was just a poetic way of saying people shouldn’t have sufficient privacy to be able to secretly imprison people.

Polygamy

Ann Althouse raises the polygamy question.

She and her commenters cover the usual issues; polygamy tends to happen when some men are much richer / more powerful than most men, and it causes friction because of the men left without women. Polygamy is not ruled out by scripture, but by Western Christian tradition. Whether or not polygamy is legal is not a big deal, provided a man can live with a woman and have children without officially marrying her.

What is missed is the real link between polygamy and societies which deny rights to women.

Look at it this way. As we know, it is possible to take a second “wife” without legally marrying her, have children by her, leave property to the children by will, etc. Why don’t I do that?

I might have trouble attracting a second “wife”, but I fancy I might manage it. It’s worth trying, anyway. What’s to stop me?

The answer is so overwhelmingly obvious it’s surprising it seems to be missed. Were I to enter into any such arrangement, my No. 1 wife would be gone in about thirty seconds.

For polygamy to actually work, there has to be some way to force wives to tolerate the introduction of new wives. If a wife can get a divorce, and a share of property, either for no cause or for the cause of the addition of a second “wife” (whether by legal polygamous marriage or in the form of “adultery”), then polygamy, legal or not, is going to be very damned rare.

Attention seems to be wrongly attached to the new wives. As commenters at Althouse said, there would be nothing strange in a billionaire or a sports star being able to attract a second or third wife. But it would be very unlikely that they could do that and hold on to their first one.

That’s why polygamy generally doesn’t happen in societies where women have rights.

Mob Violence

The BBC has quite a lot of good video of the visit to Manchester on Wednesday of a large number of Glaswegians.

The normal question to ask about these scenes is, of course, “how do we prevent it”. But maybe there are more important questions. Mostly, how bad actually was it?

OK, so a lot of damage was done, and quite a few people got hurt. But a lot of people had a lot of fun, too, both visiting Scotsmen and the Greater Manchester Police. (Watch this video and tell me the police didn’t have fun). I’ve had a lot of fun watching the video. It’s noteworthy that the BBC are showing quite a lot of video that was obviously shot by the rioters.

The entertainment is probably quite good value per pound spent on repairing the damage. Just think how many good riots we could afford for the cost of the far less entertaining 2012 Olympics.

But the entertainment value is incidental too. I think the important point is that the threat of mob violence is an important part of the balance of power. It’s the same point as I made earlier today: where do rights come from? This is where they come from.

Now, if I were picking rights worth establishing, the right to have major football matches shown free on working large public screens near the ground wouldn’t be high on my list. As a direct political action, this week’s riot cannot be counted a great benefit. But we have mostly forgotten about the power of the mob, and I think there’s an indirect benefit in having a little reminder, every couple of years, that a few thousand inebriated young men with a grudge, together in one place on a warm evening, constitute a force seriously to be reckoned with. And if nobody gets too seriously hurt, then we get the reminder cheap.

On Rights

In the past, I’ve argued against the concept of “rights” as basis for reasoning about policy.

I’m about to do a 180° on this. I think I’ve finally understood what rights are.

The currently popular idea is that rights are automatically attached to every human. The UN Universal Declaration of Human Rights is, I suppose, the most relevant statement of this idea, though the US Declaration of Independence makes the same fundamental claim.

The obvious – and fatal – problem with this theory is that it is useless. What does it mean to say that somebody has the right to life, if they have a terminal disease? What does it mean to say someone has a right to protection against unemployment (article 23) if nobody can afford to employ him?

One can attempt to avoid this problem by restricting rights to “Negative rights”. On this system, one cannot have, as a right, anything that requires another person to actively provide anything; one can only have the right not to be prevented from some given course of action. This is less obviously silly, but not, I think, really different. Two people cannot usefully have the right to eat the same apple.

It can go as far as defining rights simply as restrictions on government, but that is not useful, for what is government but a bunch of men with guns? Restricting the government does no good if some other bunch of thugs commit the same crimes.

So much for inherent rights. There is another view, which is that rights are not inherent, but are given by government. There is no problem with rights which are awarded by government, it is just one way of expressing the government’s law. On the other hand, since the essence of government is that the strong enslave the weak, there is no particular significance to the laws insofar as they restrict government, they are just the way a government chooses to behave until it chooses differently.

Rejecting both inherent and government-awarded rights as useful concepts, then, I have rejected rights. I now see that there is a third category of rights, which is a useful basis for thinking about law and about government.

Rights are neither inherent, nor given. Rights are taken.

The early arguments based on rights appealed neither to God nor to charter as the basis of the rights. If anything, they appealed to tradition. How does tradition justify their claims, if it only pushes into the past whatever is supposed to be the origin of the rights. The answer is that the argument is saying, that for some long period of time, when the alleged rights have been infringed, the people have acted to regain them. A right is not something you are born with, or something you are given. It is something you are prepared to fight for. More pertinently, it is something a group of people are prepared to fight for. If you establish a track record of consistently fighting for some right, then the most absolute of governments will nonetheless find it advisable to make a point of respecting it.

I worked this out once before, in the case of the right to freedom of religion, but I saw that at the time as a special case, whereas I now claim that is an instance of the general principle of what rights are.

I’ve been doing this for three and a half years, and some of the first things I posted I’d written up to a year previously. I want to recap over the major propositions that define what a newcomer would find.

Global Politics

I think the arguments used to advocate the Iraq War were legitimate, but that the costs of the war, both to the OIF alliance and to everybody else, outweighed the benefits and it was therefore a mistake. There were people who correctly anticipated this, but I wasn’t one of them; I was a “don’t know”.

The major competing political forces in the world are the EU’s corporatist totalitarianism and the USA’s residual individualism. No other world power or ideology – including Russia, China and radical Islamism – comes close to challenging either of them.

Many foreign countries are crap places to live, but I don’t think there is any strategy for improving them by military action that will have overall beneficial results, although it might get lucky now and again. I think it is more beneficial to respect the sovereignty of other countries’ governments, even where they are very nasty.

Democracy

Democracy necessarily entails class divisions. Either democracy is working within a ruling class and is kept “straight” by the need to efficiently resist revolt by the disenfranchised class, or else the important division is between politicians and non-politicians.

Most people would be better off in a society with minimal government as advocated by the libertarian movement. However, this is against the interests of politicians, and therefore is not achievable, under democracy or under any other political system. A wider understanding of the situation would result in marginal improvement, however.

For those not being directly promised bribes by one candidate or another, the amount of predictable improvement in policy by electing one candidate rather than another is often outweighed by the difference in entertainment value between the candidates, as estimated using the market prices of entertainment. Democratic politics can therefore be seen as a small section of the (huge) entertainment industry. That is not to say that government is insignificant, just that the changes that can be made to government by democratic politics are.

Climate

The Climate Change debate is about politics, not science. The question is whether the small chance that disastrous change will happen but can be averted by a concerted global programme of austerity justifies the costs of such a programme. The dangers are exaggerated by those who support austerity or transnational government or both. The dangers are minimised by those who support prosperity or small-scale government or both. The latter group includes me, but I try to avoid dishonesty.

Copyright exists to correct a market failure: that the creation of new valuable information benefits anyone who obtains a copy, but the costs are concentrated on the creator. Like all interventions to correct market failures, there are dangers, including capture of the regulatory structure by concentrated producer interests, which has clearly been demonstrated by retroactive extension of copyright terms. Also, as with other such interventions, it is not obvious that the market cannot find its own solutions to internalise the externality, nor is it obvious that the costs of regulation and the deadweight losses do not outweigh the benefits of the correction. Getting rid of copyright might be an overall benefit, although it would be dangerous. The evidence is overwhelming that reducing the scope of copyright would be beneficial, and that regulation aimed at suppressing technologies that are used to evade copyright enforcement is very harmful.

Free Software is cool. The overhead of protecting copyright in software is very damaging to the efficiency of the software production process and to the quality of the product.

his post will remain as a kind of “index” to the blog, and I’ll update it if my positions change.

Entertainment and Policy

Boris Johnson’s win is consistent with my theory that politics is a branch of the entertainment industry. Boris won because people liked him on TV, not because they had any confidence he’d do a good job. In fact, it simply doesn’t matter whether he does a good job or not.

Whatever the budget of the GLA, the actual amount of cash he can shift from one activity to another over the next four years is probably on the order of only a few millions. He can change a few buses, approve a few “don’t knife each other, there’s good chaps” posters, approve or deny one or two large buildings.

On the other hand, he will be on television a lot, and get a lot more attention, because now he’s (drum roll) In Government. And if you treat each of his appearances as a light entertainment programme, value it as equivalent to an equally entertaining non-political celebrity appearance, and multiply up the number of such appearances over the four years, his entertainment value to the voters easily outweighs whatever costs might be imposed on the voters if he is a Bad Mayor in a policy sense.

And in fact the predictable cost of Boris vs Ken is near enough zero. Who knows, Boris might even be better. While the predictable difference in entertainment value is huge – not only is Boris more entertaining than Ken on a level playing field, but more importantly the Ken show has run for eight years and we’ve seen all the best bits.

My point is that (a) Boris has been elected because he’s funny and people are bored of Ken, and (b) This is, with apologies to Bryan Caplan, rational voting.

And of course, it is nothing new: Ken was elected in 2000 for just the same good reason.

BBC drops UKIP from election results

Update – they’ve corrected the omission now. I did notify them of the error directly as well as ranting here.

The London Elects website shows results by first preference votes for 10 candidates. The BBC website shows 9 candidates: Gerald Batten, who came 7th for UKIP with 22,422 votes is missing. The Left List, English Democrat and Independent that polled fewer votes are shown in 7th, 8th and 9th.

It’s rather reminiscent of the US Republican primaries, where Ron Paul was routinely omitted from media publications of results, even while lower-polling rivals like Giuliani were included.

The BNP had to be covered, because they were discussed before the election and people would be looking to see what they got, but the fact that UKIP on zero publicity had outpolled the hard left was a fact that could be safely kept from public view.

London mayor election results (BBC)

Boris Johnson (Tory): 1,043,761

Ken Livingstone (Lab): 893,877

Brian Paddick (Lib Dem): 236,685

Sian Berry, (Green): 77,374

Richard Barnbrook (BNP): 69,710

Alan Craig, (Christian Choice): 39,249

Lindsey German (Left List): 16,796

Matt O’Connor, (Eng Democrats): 10,695

Winston McKenzie (Ind): 5,389

London mayor election results (London Elects)

Results by candidate for 2008

Candidate name	Party	1st choice votes	1st choice %	2nd choice %
Boris Johnson	Conservative Party	1,043,761	42.48%	0.00%
Ken Livingstone	The Labour Party	893,877	36.38%	0.00%
Brian Paddick	Liberal Democrats	236,685	9.63%	0.00%
Siân Berry	Green Party	77,374	3.15%	0.00%
Richard Barnbrook	British National Party	69,710	2.84%	0.00%
Alan Craig	Christian Peoples Alliance and Christian Party	39,249	1.60%	0.00%
Gerard Batten	UK Independence Party	22,422	0.91%	0.00%
Lindsey German	Left List	16,796	0.68%	0.00%
Matt O’Connor	English Democrats	10,695	0.44%	0.00%
Winston McKenzie	Independent	5,389	0.22%	0.00%