The Null Device

With the continuing rise in oil prices, some are saying that the age of cheap flights is over, as airlines raise their prices and/or collapse. Think about the implications of that for a moment: historic Eastern European town centres empty of drunken Britons, speculators unable to flog second homes on the Bulgarian Riviera to Ryanair junkies from Gillingham, people actually packing onto trains to go from, say, London to Manchester (and Britain's chronically underfunded railway infrastructure creaking under the weight of the extra patronage). As for bargain shopping in New York, forget it: if you want to see New York, your best bet may be to buy an Xbox 360 and Grand Theft Auto IV. Perhaps the end of the age of cheap travel will finally usher in the Stay-At-Home Century, when tomorrow's people will range as far from their homes as their mediæval peasant ancestors, instead communicating through broadband links.

Meanwhile, General Motors is shutting down four plants that make its Hummer SUV, which for a long time embodied the ugly side of the American Dream. This is after gasoline (that's petrol to the Europeans/Australians reading this) reached $4 a gallon (incidentally, breaking the mechanical pumps at some older gas stations, whose designers never envisioned a gallon of gasoline costing more than $3.99), and dealerships are having trouble moving the hulking behemoths. Perhaps soon we will hear an old joke about Eastern Bloc cars being repurposed?

And still in America, CNN is now running articles about whether the age of the railroads has returned. (Mostly in reference to Europe and Asia as the paragons of modernity.)

¶ oil uk usa air travel society transport economics railway [2 comments]

Good news: Britain is arguably entering the new age of the train, with more journeys having been made on the railways last year than in any year since 1946. Not so good news: Britain's railways are still barely adequate; John Major's ideologically-driven privatisation of British Railways has led to a situation where more taxpayers' money is being pumped into the railways than even in the bad old days of that Inefficient Socialist Monopoly, though fewer pounds actually making it through to improving the service (but rather going to the profits of various private enterprises at various levels and/or falling through the cracks of the various inefficiencies of the present arrangement, which in some ways looks to be cobbled together with duct tape and string). Meanwhile, passengers are paying more for their tickets than anywhere in continental Europe, whilst putting up with slower trains and often a lack of seats. Not surprisingly, most of the record-breaking rail journeys were fairly short ones, with people choosing to fly between cities (like, say, London and Manchester), in a way that they just don't do in France or Germany:

The problem is that Britain's railways are a public utility run as a profit-making enterprise, and thus a rather inefficient conduit for channelling taxpayers' funds into the coffers of private industry. It seems that there are two possible ways out of the current mess:

1. Continue regarding the railways as a public utility and undo a lot of privatisation. Either nationalise rail operators or have them provide a service to a non-profit rail company, under carefully controlled terms. All state subsidies (for keeping socially- and economically-useful though unprofitable services running) will go to the non-profit (let's call it British Rail 2.0), or:
2. Run the railways consistently as a profit-making enterprise, and restructure them to run at a profit. That would mean a new round of Beeching-style cuts, with most smaller lines being scrapped, and the service ultimately being cut down to something like American-style commuter rail, consisting largely of profitable shuttles between dormitory areas and economic centres, running mostly at commuting hours. This is the approach The Economist recommended last year.

¶ economics public transport railway thatcherism-blairism uk urban planning [no comments]

When the prices of metals rose, one started to hear of thieves electrocuting themselves on powerlines, train services being disrupted because someone nicked all the signal cables and public artworks disappearing in the middle of the night, undoubtedly destined for the scrap market. Now, in the US, the subprime crisis has caused a wave of foreclosures and evictions, and a glut of empty, mostly new houses, some of which are now worth less than their pipes and wiring. So, not surprisingly, these houses often end up being torn apart by scavengers:

"We're seeing houses sold for $100 that are distressed houses that should not be recycled," he said. Some boarded-up homes in his Slavic Village community have "No copper, only PVC" painted on the boards to stop would-be thieves.

(via Boing Boing, Reuters) ¶ crime economics usa recession [no comments]

Faced with the choice of a mobile phone plan to buy, Charlie Stross did the math and determined that the more "expensive" ones are often, in terms of total cost of ownership, cheaper:

The first obvious conclusion I reached is that if you look at the total cost of ownership (TCO) of a phone, including both the phone cost and the monthly tariff cost multiplied by the term of the contract, there's surprisingly little elasticity in the bottom line until you get into the eye-wateringly high usage tariffs. The TCO for a sample phone on 18 month contract varied by only £102 between the Talk 75 and Talk 500 tariffs (75 included minutes and 100 included texts per month, versus 500 minutes and 1000 texts per month). The same pattern held on 12 month contracts, with a £60 spread. Which is, frankly, ridiculous, because you get so few minutes and texts on Talk 75 that the actual cost per minute is nine times higher, and the cost per text is eight time higher than on Talk 500.

What I had discovered looked weirdly like a classic bathtub curve — only plotting price against contract time, rather than the more familiar failure rate against time. It's a familiar curve: airline seat price allocations often follow the same distribution. At one end of the curve, you've got the chancers who want a flashy phone but no commitment to use it. Typically they'll sign up for a short, cheap contract with an expensive phone. Fashion victims, in other words. The cellcos are set up to recognize and fleece them, however. At the other side of the curve you've got the gabby heavy users, and they're going to throw money at you whatever you do, so you might as well take it. In between, you've got a highly price sensitive market, which you want to encourage to use their phones more (and graduate into being heavy users), so you dangle some promising discounts in front of them, weighted towards the heavier tariffs.

(Airline seats for long-haul flights: if someone books a flight six months ahead of departure, it is a Big Deal to them, so they value it, so you can price it high. If they book at two day's notice to go to Aunt Irma's Funeral in New Zealand, it's a coercion purchase, so you can price it high. In-between, there's a trough where people have time to pick and choose which carrier to use ... so seat prices are at their lowest in the period 8-12 weeks before departure. It's the same bathtub-shaped curve.)

Though is the bathtub curve the whole story for air fares? As flying a jumbo jet from one airport to another has a rather large fixed cost, it would make sense for the airlines to make an effort to fill as many seats as they can, whilst taking as much per ticket as the market will bear. I imagine they may have worked out a way of, at the last minute, selling off the remaining empty seats to whoever will pay for them without disincentivising other passengers from, in future, paying as much as they would otherwise be willing to, perhaps by making last-minute discounts inconvenient or cumbersome to obtain.

Anyway, while we're on the subject of mobile phones: here is a piece on how unwanted mobile phones are recycled. (Some are sold to people further down the new-shiny-toy chain; ancient, obsolete bricks often end up in countries where their network technology is still in use; some are refurbished or used for parts in countries with lower labour costs (and lower gadget-buying power), and those at the end of their useful life can end up melted down for their precious metals (of which there is a lot). If they're lucky; if not, they may end up leaching toxins into the water table somewhere in Africa.

It’s hard to track ReCellular’s or Collective Good’s phones. But Jack Qiu, a professor at the Chinese University of Hong Kong who has studied the movement of used computers and phones in China, describes one route phones take. In Kowloon, in Hong Kong, Pakistanis and other immigrants (often asylum seekers) import phones from Europe by the shipping container. These are fixed or cannibalized for parts in stalls at a local market. In the past, Nigerians and other African exporters swept in to buy tens of thousands of phones at a time, particularly so-called “14-day phones” — those that have been returned under warranty and used little. But recently, Qiu says, the markets for these phones have become saturated in African cities. So the Nigerians, needing to take their business to poorer African villages, have been leaving Hong Kong for Chinese cities like Guangzhou, where they can purchase cheaper, more heavily used phones from the larger refurbishing companies there. Many Nigerians have learned Mandarin in order to do business in Guangzhou, Qiu says, and the city now has an African-style coffee shop.

cellphones are not easily abandoned — and, when they are, someone somewhere is still likely to see some value in them. Jim Puckett, the coordinator of the Basel Action Network, a nongovernmental watchdog group that focuses on e-waste, visited Nigeria in 2005. He describes, at one Lagos electronics bazaar, repairmen sitting on dirt floors under shelves of scavenged parts, jury-rigging phones back together, over and over again, until the things are absolutely dead.

(via Boing Boing Gadgets) ¶ mobile phones economics charlie stross recycling environment tech [no comments]

The world appears to be experiencing a subway building boom, with cities across the world building new underground urban railways, to alleviate traffic congestion or merely as a status symbol. Cities across the Middle East such as Dubai are investing in subways (in Dubai's case with both gender-segregated carriages and VIP carriages), provincial cities across Europe are putting them in, and even seemingly unlikely places such as Santo Domingo (of the Dominican Republic) and Mallorca (in the Balearic Islands) are putting them in. And, of course, China and India are going wild on subway building. Though, apparently, the United States is over subways:

Sure, Los Angeles and New York are adding modest extensions to their systems. And Phoenix is considering a subway. But Chicago's system is nearing collapse--still with no long-term consensus about how to save it. Cincinnati is fighting over what to do with deteriorating tunnels built in the 1920s, but abandoned for expressways. And subways aren't even a controversy in most American cities because they're a political nonstarter. Bonds, which need to float costs approaching $1 billion a mile, are simply off the table. And federal funds have slowed to a trickle. Besides, libertarians believe subways distort a city's natrual growth and gentrification. You need only look at what cars and expressways do to a city's "natural" growth and gentrification to give subways a second look. Yes, they're expensive. And they're usually worth it.

(via Wired News) ¶ public transport subway economics urban planning [1 comment]

Phrase of the day: "white lobster": cocaine dumped by traffickers and washed up on beaches, bringing fortunes for the villagers and fishermen who find it.

It also sounds like a good song title, in a 1970s-revivalist sort of vein.

¶ drugs cocaine crime economics white lobster song titles [no comments]

The Graun has a piece on Don Tapscott's recently released book Wikinomics, and the theory that computer-aided networking may soon make large corporations redundant:

Ronald Coase had noticed something odd about capitalism. The received wisdom, among western economists, was that individuals should compete in a free market: planned economies, such as Stalin's, were doomed. But in that case, why did huge companies exist, with centralised operations and planning? The Ford Motor Company was hailed as a paragon of American business, but wasn't the Soviet Union just an attempt to run a country like a big company? If capitalist theory was correct, why didn't Americans, or British people, just do business with each other as individual buyers and sellers in the open market, instead of organising themselves into firms?

The answer - which won Coase a Nobel prize - is that making things requires collaboration, and finding and linking up all the people who need to collaborate costs money. Companies emerge when it becomes cheaper to gather people, tools and material under one roof, rather than to go out looking for the best deal every time you need a few hours' labour, or a part for a car. But the internet, Tapscott argues, is radically lowering the cost of collaborating. Companies - certainly big companies - are losing their raison d'etre. Individuals, and tiny companies, can collaborate without corporate behemoths to organise them. Considering how many of us spend our weekdays working for big companies, and then spend our weekends giving our money to them, this is a far-reaching thought.

If anything, it is tempting to suggest that Tapscott is too kind to large companies. (His multimillion-dollar research was, after all, funded by a consortium of them.) Wikinomics is a book for existing corporations who want to learn how to survive: he suggests, for example, turning consumers into "prosumers", with an active role in product design, as with Lego Mindstorms, a range of construction toys with robotic bricks, aimed at adults. And he's scathing about record labels and others who don't see that the internet is a platform on which they can build new, profitable products, rather than something to be fought with lawsuits. But in the very long term, there's no particular reason why large corporations should survive at all. If Ronald Coase's 1937 insight remains valid, we could yet see the day when big companies such as Google begin to look rather prehistoric -because they are still, after all, big companies.

¶ economics society internet [no comments]

An economist at Yale is experimenting with training monkeys to use currency, with some success:

The essential idea was to give a monkey a dollar and see what it did with it. The currency Chen settled on was a silver disc, one inch in diameter, with a hole in the middle -- ''kind of like Chinese money,'' he says. It took several months of rudimentary repetition to teach the monkeys that these tokens were valuable as a means of exchange for a treat and would be similarly valuable the next day. Having gained that understanding, a capuchin would then be presented with 12 tokens on a tray and have to decide how many to surrender for, say, Jell-O cubes versus grapes. This first step allowed each capuchin to reveal its preferences and to grasp the concept of budgeting.

Then Chen introduced price shocks and wealth shocks. If, for instance, the price of Jell-O fell (two cubes instead of one per token), would the capuchin buy more Jell-O and fewer grapes? The capuchins responded rationally to tests like this -- that is, they responded the way most readers of The Times would respond. In economist-speak, the capuchins adhered to the rules of utility maximization and price theory: when the price of something falls, people tend to buy more of it.

During the chaos in the monkey cage, Chen saw something out of the corner of his eye that he would later try to play down but in his heart of hearts he knew to be true. What he witnessed was probably the first observed exchange of money for sex in the history of monkeykind. (Further proof that the monkeys truly understood money: the monkey who was paid for sex immediately traded the token in for a grape.)

(via jwz) ¶ monkeys economics animals nature vs. nurture [no comments]

A professor of psychiatry in Dublin suggests that Reaganite/Thatcherite "economic rationalist" ideology may have originated in Asperger's Syndrome, a mild form of autism. The claim is based on a diagnosis of Sir Keith Joseph, a pioneer of the radical free-market ideology that strongly influenced Margaret Thatcher:

"His ideas have influenced politics for 20 years. Monetarism has some of the characteristics of Asperger's in its insensitivity and its harshness - that is my point, the man and what he does in life are one. It is important to know this because these people control the destiny of the nation," Professor Fitzgerald said.

People with Asperger's are mostly of normal intelligence but have narrow, intense or obsessive interests. They suffer social impairment and have difficulty making friends and forming and keeping relationships. They lack the ability to understand the subtext of social situations, and make remarks that cause offence or behave in ways that breach the rules of acceptability. They have to learn social skills intellectually rather than intuitively.

¶ affluenza economic rationalism thatcherism-blairism asperger's syndrome monetarism society economics politics [1 comment]

According to the latest Worldwide Cost of Living Survey, Tokyo is still the world's most expensive city; in second place is Oslo; Reykjavík is at #4, London is down from #6 to #8, and New York has slipped to #35 (behind Wellington, New Zealand). The cheapest city surveyed was Tehran.

¶ tokyo japan society economics [no comments]

I have been thinking about the homebrew-console-games-vs.-manufacturer-DRM issue recently.

New consoles with new capabilities come out, often containing powerful CPUs and graphics chips, and hackers and hobbyists want to have a go at writing code for them and getting them to do things other than consume titles. The manufacturers, of course, design the units so as to prevent unauthorised code running on them, primarily to protect their business model. The video-game console business model typically involves selling the consoles cheaply (often at a loss) and collecting a cut of the price of each game sold. Of course, for this to work, console makers have to strictly control what code will run on their machines, and ensure that they get a cut of every item released for them.

It's a stiflingly regressive reality, though it appears to be stable and is unlikely to go away any time soon. The alternative model (open game machines, sold at above-cost price, with anyone able to develop code for them) has been tried and failed; witness the Tapwave Zodiac PalmOS-based game machine, for example. Customers are more likely to buy cheap consoles and more expensive games for them later, in instalments, than to buy a more expensive console with cheaper software. Of course, this makes game consoles somewhat stagnant platforms (compared to, say, PCs or handhelds), though the game market seems to be able to cope with this well enough for it to be the best current business model for that kind of business.

(This ignores mobile phone J2ME games, which anyone can write and run on any compliant mobile phone without the manufacturer's blessing. Mobile phones are heavily subsidised as well, though they are subsidised by phone companies who make the money back in network usage; besides which, J2ME is a fairly weak gaming platform (for one, the low-power CPUs used in mobile phones often mean sluggish response times for navigating the internal menus, let alone games). Perhaps this will change in future.)

Nonetheless, that does not change the fact that hardware such as the PSP and Nintendo DS is tantalisingly attractive to tinkerers. When it was discovered recently that certain early Japanese PSPs could be made to execute code off a Memory Stick, a hacker community cropped up, with games, demos, utilities and ports of old console emulators popping up like mushrooms after a rain; the more recent firmware has closed off this hole, and anyone running a recent game on an old PSP will find themselves upgraded against their will.

What if, instead of locking out the hacker culture, game companies worked with it, whilst still preserving their business model? Imagine, for example, a device sold by the console manufacturer which costs about the difference between the retail and cost price of a game machine and enables it to run homebrew code. It could be a disc, a hardware dongle, or even a special cable. Unlike homebrew hacks (such as the Nintendo DS passthrough cartridge), it requires no soldering and no fabrication of circuit boards, allowing those who don't have a fetish for that sort of thing to get involved. Perhaps it comes with development tools and documentation (the GNU toolchain would be a start), or even membership of a community web site, where users can share their code. From time to time, publishers could release compilations of the best such titles, perhaps in a magazine format, doing the necessary licensing to make the releases run on standard machines.

Sony once tried something like this with their PlayStation 1; they called it "Net Yaroze", and apparently it wasn't a stellar success. I wonder whether it could be done better.

Of course, if the console makers don't throw a bone to hobbyists, makers of third-party extensions (of various levels of legality) just might; and these would be less concerned with protecting the makers' profit margins.

¶ videogames economics drm open-source architectures of control business homebrew [5 comments]

This book looks potentially quite interesting:

It was Mr. Levitt who nailed a bunch of Chicago public-school teachers for artificially inflating their students' standardized test scores. I'm dying to tell you exactly how he did it, but I don't want to spoil any surprises. His account of the affair in "Freakonomics" reads like a detective novel.

The evidence is right there in front of you: Mr. Levitt actually reproduces all the answer sheets from two Chicago classrooms and challenges you to spot the cheater. Then he shows you how it's done. He points to suspicious patterns that you almost surely overlooked. Suspicious, yes, but not conclusive--maybe there is some legitimate explanation. Except that Mr. Levitt slowly piles pattern on pattern, ruling out one explanation after another until only the most insidious one remains. The resulting tour de force is so convincing that it eventually cost 12 Chicago schoolteachers their jobs.

Then it's on to another question, and another and another. Were lynchings, as their malevolent perpetrators hoped, an effective way to keep Southern blacks "in their place"? Do real-estate agents really represent their clients' interests? Why do so many drug dealers live with their mothers? Which parenting strategies work and which don't? Does a good first name contribute to success in life?

Back in 1999, Mr. Levitt was trying to figure out why crime rates had fallen so dramatically in the previous decade. He was struck by the fact that crime began falling nationwide just 18 years after the Supreme Court effectively legalized abortion. He was struck harder by the fact that in five states crime began falling three years earlier than it did everywhere else. These were exactly the five states that had legalized abortion three years before Roe v. Wade.

(via fmh) ¶ books freakonomics economics [no comments]

A new study from US Federal Reserve economists has shown that countries with widespread beliefs in Hell and damnation are less corrupt and more prosperous. The report, of course, casts a very flattering light on the US, with its marriage of fire-and-brimstone Christianity and free-market liberalism like a shining beacon to all. Common sense psychology, or more of the Bush administration's neo-Lysenkoist ideological pseudoscience? (via bOING bOING)

¶ hell religion economics usa propaganda [no comments]

Good news for anyone who wants someone rubbed out: contract killings are now affordable, undoubtedly due to the in-built efficiencies of a vigorously competitive market, and now the services of a hitman can be yours (or, indeed, your psychopathic ex's) for as little as A$380. Most hits are relationship-motivated, ordered either by people wishing to murder their cheating partners, eliminate an inconvenient spouse who's lost that loving feeling in order to pursue a new relationship, or prevent an ex-partner from seeing anybody else or getting custody of children. (via the Darwin list)

¶ crime murder economics business [1 comment]

US dollar has gains in value against the Euro and Australian peso. The Bush economic miracle shines through, and liberals scurry away looking for something else to snivel about. Or maybe not.

¶ economics [5 comments]

Also via bOING bOING, a table of software license fees in terms of earning power, for various countries. Did you know that it takes the average Burundian more than five and a half years to earn enough to buy a copy of Windows XP and MS Office, whereas it takes the average Luxembourgian less than a week, and the average American slightly longer than that?

¶ economics software [3 comments]

Rocknerd's Ben Butler connects the SCO/Linux lawsuit to the recording industry's woes. What links SCO and the RIAA, you see, is that both have seen their markets become commodified, eroding their business models, which depended on them being able to name their own prices and terms.

The process goes something like this: you sell widgets. You are the only company selling widgets. Some other companies enter the widget market. They undercut your price. But yours are the original, superior widgets, so you charge a premium for them. More competitors enter the market. The price drops more. Suddenly widgets are cheap. Your brand value is eroded - people figure out that all the widgets are substantially the same and besides, even if your widgets are better made than everyone else's, it no longer matters - they're cheap enough to throw out and replace when they break.

¶ commodification linux riaa the recording industry economics [no comments]

Science has discovered techniques for manufacturing high-quality diamonds, potentially indistinguishable from mined gems. De Beers are, as you can imagine, running scared. However, this disruptive technology promises to do more than wiping out the diamond industry as we know it; for example, cheap, manufactured diamond would be an ideal substrate for ever-faster microprocessors, being able to withstand extremes of temperature better than silicon can. (via Slashdot)

¶ diamonds economics de beers tech [no comments]

Some in the music industry estimate that 4 out of every 5 albums are produced using ProTools, often eschewing the expense of a traditional studio. (Not entirely, I'm sure, at least where vocals and acoustic instruments come into the equation.) This has lowered the barrier to entry into recorded music significantly, and consequently artists no longer need six-figure advances, or indeed major-label backing, to cut a record. Which is probably one reason why the major labels are running scared and pushing for end-to-end DRM (not so much to stop MP3 swapping as to kill off independent distribution channels and protect their dying oligopoly). (via Slashdot)

¶ music protools audio economics the recording industry [2 comments]

An interesting WIRED article about E-Gold, an anonymous, gold-based online payment system which can be used to buy everything from EFF memberships to ammunition to cheap books and flag-burning kits (not to mention shares in pyramid schemes and online gambling). It has a related denomination called the E-Dinar, based on an Islamic gold standard defined in the Koran, and for all the anarcho-libertarian kudos it gets, it owes its existence to a radical Islamic sufi sect sworn to the cause of eliminating the evil of paper currency and destroying capitalism:

E-dinar's British COO, Yahya Cattanach, and his family share a communal condo with Castiñeira in the comfortable Jumeirah district of Dubai. The company's Spanish president, Umar Ibrahim Vadillo, is also the president of the Islamic Mint. And finally, uniting all three men - as well as e-dinar's Swiss CEO, Malaysian CFO, and German CTO - is one crucial biographical datum: All are high-placed members of the Murabitun movement, a modern, Western offshoot of Sufi Islam and possibly the only religious sect in history whose defining article of faith is a financial theory.

A global gold-backed Islamic currency may not be so far-fetched. Malaysian prime minister Mahathir Mohammad (best known for berating Australia for its racist commitment to pluralism and intolerance of "Asian values" and such, and denouncing currency trading as a Jewish plot to destroy the economies of Muslim nations) has proposed a global "Islamic trading block" based around the gold-backed "Islamic dinar", which would instantly make E-Gold the currency of a big chunk of the world.

Meanwhile, the Anti-Defamation League, the pressure group best known for releasing a list of "hate symbols" including the "peace" and "anarchy" symbols and the Wiccan five-pointed star, has warned that E-Gold is a terrorist tool; then again, aren't open 802.11 access points and MP3 sharing networks also a terrorist tool? Is anything not a terrorist tool these days? (via vigilant.tv)

¶ e-gold e-currency economics paranoia fringe islam sufi mahathir mohamad terrorism the long siege [3 comments]

A good overview of the economics of the recording industry, and why most artists end up skint (especially if they don't have writing credit). (via Slashdot)

¶ the recording industry economics scams business [no comments]