The Digital Dilemma Revisited

Quote 1: The BBC News Online today –

“Jack Valenti, president of the Motion Picture Association of America, told BBC News Online earlier this year that digital piracy could become “debilitating” for the industry.

‘Digital piracy has become a real menace,’ he said. Despite the availability of pirate copies, The Matrix Reloaded has made more than $363.5m at the box office worldwide so far.“

Quote 2: Brad DeLong, Speculative Microecomomics For Tomorrow’s Economy, draft, November 14, 1999 –

“The ongoing revolution in data processing and data communications technology may well be starting to undermine those basic features of property and exchange that make the invisible hand a powerful social mechanism for organizing production and distribution. The case for the market system has always rested on three implicit pillars, three features of the way that property rights and exchange worked.

Call the first feature excludability: the ability of sellers to force consumers to become buyers, and thus to pay for whatever goods and services they use.

Call the second feature rivalry: a structure of costs in which two cannot partake as cheaply as one, in which producing enough for two million people to use will cost at least twice as many of society’s resources as producing enough for one million people to use.

Call the third transparency: the ability of individuals to see clearly what they need and what is for sale, so that they truly know just what it is that they wish to buy.

All three of these pillars fit the economy of Adam Smith’s day relatively well. …

But digital data is cheap and easy to copy. … Without the relationship between producer and consumer becomes much more akin to a gift-exchange than a purchase-and-sale relationship. The appropriate paradigm then shifts in the direction of a fund-raising drive for a National Public Radio station. When commodities are not excludable then people simply help themselves. If the user feels like it he or she may make a “pledge” to support the producer. The user sends money to the producer not because it is the only way to gain the power to utilize the product, but out of gratitude and for the sake of reciprocity.

This reciprocity-driven revenue stream may well be large enough that producers cover their costs and earn a healthy profit. Reciprocity is a basic mode of human behavior. People in the large do feel a moral obligation to tip cabdrivers and waiters. People do contribute to National Public Radio. But without excludability the belief that the market economy produces the optimal quantity of any commodity is hard to justify. Other forms of provision–public support funded by taxes that are not voluntary, for example–that had fatal disadvantages vis-a-vis the competitive market when excludability reigned may well deserve reexamination. …

[But t]he market system may well prove to be tougher than its traditional defenders have thought, and to have more subtle and powerful advantages than those that defenders of the invisible hand have usually listed.

cinema, compulsory reading, US Politics, USA

Bowling For Criticism

A Canadian article criticising Michael Moore’s film “Bowling For Columbine ” has made to the top ranks of the MIT’s blogdex today. It’s easy to see why given the linking-power of anti-Moorians on the web. But they, like most of those getting at Moore miss a rather important point:

“Bowling For Columbine” isn’t a documentary. The film is essentially a sort-of fact based cinematographic, cleverly positioned, political pamphlet. It is a well done, important film – but it is hardly a documentary in the classic sense of that term. It is well worth ciriticising that Moore continually claims it is. But that’s about it.

Moore’s main points are important even if, as the Canadian newspaper Star reports among other points,

“[a]ctor Charlton Heston, the head of the National Rifle Association, did not callously go to Denver 10 days after the shootings simply to proclaim to cheering fellow NRA members that he was going to keep his gun until it is pried ‘from my cold, dead hands.'”

This simply doesn’t matter for the film’s fundamental messages.

Moore claims that there is a much higher (physical, not economic) risk aversion in the US than in Europe which is responsible for a lot of paranoid behavior. I have to say, the highly emotionalised American discourse regarding the dangers of rogue states post 9/11 probably underscores this claim – if you want to see it that way.

Moreover, Moore claims that this higher risk aversion is a consequence of what he claims is the central social cleavage in the US – an unresolved racial conflict based on ritualised and inherited slave owner vs. slave identities. A possible conclusion, which I really cannot really say a lot about. But his claim is – here in the realm of social policy – supported by important allies, as for example this paper by Alesina, Glaeser, and Sacerdote indicates. To them, racial animosity is the principal answer to the question “Why Doesn’t the U.S. Have a European Style Welfare System?”. Charlton Heston somehow made the same point in the film – and, if I remember correctly, that section was not even cut in a particularly distorting manner.

“Bowling For Columbine” is not a scientific elaboration. It is an opinionated, scary, but also entertaining film that expressed some of the fundamental anxieties a non-negligeable part of Americans seems to have with regard to the society they live in as well as an attempt to explain some of the fears the rest of the world recently developed with respect to the former land of unlimited opportunities. And – being cleverly marketed by a director who increasingly presented himself as the bearer of truth in a time when people readily swallowed everything that would “verify” their gut felt opposition to the Texan way of life – the film was turned into a huge commercial success.

Again. It is an important film. It is film whose message deserves to be taken seriously. It is a non-fiction film. But is hardly a documentary in the classic sense. Moore deserves criticism for telling the world it is, but again – that’s about it.

almost a diary, compulsory reading, Fußball, photoblogging, Sport

Sometimes Football Is More.

On Sunday, the definition of “tragedy” was rewritten. Mainz 05, the local football team lost the race for the third promotion spot to Germany’s premier league, Bundesliga, by a single goal, and a single second, to local rival Eintracht Frankfurt. Both teams had scored 59 points in 33 games. Befor the last, and decisive, game, they were separated only by goal difference: Eintracht Frankfurt’s was one goal better.

The race was too close to call. At half-time, Frankfurt led 3:1 and Mainz led 2:0 against their respective opponents. Nothing had changed. But then Mainz scored twice while Frankfurt got two goals. Frankfurt would have to score four goals now – or three, should Mainz get one. A rather improbable scenario 80 minutes into the games.

Nonetheless, this is what happened. After Mainz got the 4:1 Frankfurt scored three goals in seven minutes, the 6:3 literally in the last second of the game’s extension leaving Mainz’ players and supporters (like myself) in a numbed state somewhere between disbelief and denial.

It was heart-breaking to see so many people burst into tears – again. Pretty much the same thing happened about a year ago in Berlin. It just was not fair.

But life often isn’t – despite our Hollywood inspired tendency to believe in happy ends. In life, we have to fight the obstacles without guaranteed success. But if we’re lucky, we have someone who fights with us. And I suppose the team of Mainz 05 is lucky.

They will never walk alone.

compulsory reading, Economics, German Politics, Germany

Zeitenwende. End Of An Era.

It took some time and more of their money to make Germans understand.

It took more than ten years of subsidizing consumption and unemployment in a previously bankrupt former communist economy and virtual non-growth to make us see that it is not only necessary to think about the problematic long-term consequences of the current incentive structure in the German version of the continental model of the Welfare State but to actually change them.

It was no joke when, earlier this year, two people working in a zoo, who were fired for grilling the animals they should feed, successfully sued their former employer for a golden handshake. An extreme case, of course, but one indicating rather lucidly what’s keeping Germany from growing (possibly apart from too high interest rates, but that’s another story – albeit a connected one).

For ages, Germany’s consensus democracy was unable to get reforms going because, well, there was no consensus to speak of – whichever party was in opposition made a bet that it would pay off to block government reforms as far as possible because the electorate would not believe change was necessary. Sure, such a perception is partly a consequence of failed leadership. But only to a small part. Because they were right – the electorate did not want to see.

Then Schroeder won the 1998 election, largely because of the implicit promise that he would become the German Blair – that he could transform the German Social Democrats into some sort of NewLabour without the need for a Thatcher or a “Winter of Discontent”. But when he had just won his first power struggle and made the loony left’s star propagandist Oskar Lafontaine quit the finance ministry in March 1999, he realized that the internet bubble induced growth (weak, in Germany, but real economic growth nonetheless) would allow him to put off fundamental reforms and to mend relations with the loony left with even more rigid labour market reforms.

Unfortunately, after the bubble burst, it was too late for reforms that would have paid off for the government in last year’s election. A fiscal expansion was impossible and, moreover, unwise given strained public budgets. So Schroeder had to play the hand he was dealt – rectal rapprochement to the trade-unions, exploiting the flood-disaster in East-Germany, and betting on the public’s opposition to the American stance on Iraq.

Having narrowly won last year’s election, Schroeder knew that he would have to deliver on his 1998 promise, even thought the economic climate was far worse than it was back then. And even if though delivering would probably lead to the most serious conflict the SPD ever had with trade unions which, for no obvious reason given the steady decline in their membership, still claim to be speaking for “ordinary Germans” when it comes to “social justice”. The readjustment of the social security system, as well as the “intellectual” separation of the Social Democrats from the unions – developments that will undoubtedly be beneficial to both the SPD and Germany as a whole – will be a lot harder now than they would have been back in 1994, under Kohl, or in 1998.

The difference is that now, for the first time, a growing majority of Germans seems to be willing to give up something for a risky future benefit – or put differently, a lot more people are scared by what they think could happen to them, their children, and this country, if the social security system is not dealt with right now. Let’s hope it remains this way for sometime. The tough reforms are still out there in the think-tanks waiting to be pasted into bills.

Of course, the loony left is barking and whining about its loss of discourse hegemony on “social justice”. But don’t we all know that dogs that bark don’t bite?

If only because they have lost their teeth.

compulsory reading

Political Correctness, ad 1920.

In light of the spiral of violence that has once again engulfed the peoples living in Israel, the West Bank, and the Gaza Strip, Spiegel Online has published a feature containing articles covering the main stages of the conflict in the course of the last fifty-five years.

Of course, for well known reasons, they could not go further back to cover the – non religious – roots of the conflict. So I checked the online archives of “The Atlantic” and found some interesting articles dating from a time when the Osman rule of the area ended, and Britain and France divided the area among themselves (with a league of nations cover…), a few years after the famous “Balfour declaration” calling for a Jewish homeland in the British mandate area, when there was no Palestinian nationalism to speak of and when the clans previously ruling the area were only too happy to sell largely uninhabitable land to Jewish settlers with the dream of living in Zion.

The dynamics of the eternal conflict to be were quite different at the time. So was political correctness – I suppose – as the following quote from a 1920 article from “The Atlantic” demonstrates –

“Any practical experiment toward the attainment of a contented Jewish people would be welcome. At present, large communities of Jews never live in perfect amity with Gentile neighbors; and it would be instructive to see whether, in a self-contained Jewish state, they could live in amity with one another. It would also give them a chance to show whether they possess the attributes of a ruling people — a question to which the answer is, at present, largely uncertain.”

compulsory reading, German Politics, Iraq, US Politics

Inabilty? Or Willful Wreckage?

So Colin Powell and the German chancellor tried to look forward, not to explain, and not to complain. And what does Geroge W. do? He behaves like a spoilt kid trying to get even by chatting for fifteen minutes with Roland Koch, the premier of the German state of Hessen, a leading figure of Germany’s main opposition party, the Christian Democratic Union (CDU).

No one would have believed the White House affirmations that the meeting happened “accidentally”, that Bush “just walked in” after a scheduled talk between Dick Cheney and Koch anyway, but in an interview with ZDF television’s afternoon programme “Mittagsmagazin”, Koch was pretty much unable not to smirk when the interviewer suggested that a German state premier hardly gets fifteen “accidental” minutes with the US president. GWB’s childish behavior is good news only for those in the US administration who want to strain transatlantic relations even further, and for Koch, who is said to have ambitions to become the next chancellor-candidate for the CDU instead of the current leader Angela Merkel. It is bad news for everyone else.

Was it inability, or willful wreckage? While some people might be tempted to give Bush the credit of inability, the Involvement of Cheney makes it a lot harder to come to this conclusion. So the chancellor is probably quite right to take this as a serious personal attack that he is unlikely to forgive soon. And he, as the German population, will certainly remember that the CDU has chosen to become a pawn in a game originating in the White House.

But Schröder is not the only who has been embarrassed by the latest Bushism. For Colin Powell and the US state department the Bush-Koch meeting conveys an even more serious message – it confirms again and very visibly to everyone abroad who is actually in control of US foreign policy – that Foggy Bottom doesn’t matter and that Powell’s role has apparently been reduced to that of chief messenger. I wonder how long he will go along.

The Cato Institute’s Doug Bandow wrote in October last year with respect to the transatlantic rift that

“… the [US] administration wants doormats, not allies.”

Today, Bush powerfully confirmed this. And while Schröder has repeatedly stated in the last few weeks that Germany does not wish to be forced to have to choose between its most important allies, the US and France, it looks like the American President is indeed waiting for an answer.

I highly doubt he will like it.

compulsory reading, Political Theory, US Politics

Veto Players On The Move.

Democracy is a tricky thing. That is true not only for the Middle East, where the current US government claims to be implementing it. That is apparently also true for the current US president’s home state of Texas, where the Parliamentary opposition, more than 50 Democratic politicians, has turned into extra-Parliamentarian opposition by fleeing the state before a crucial vote this week, thereby have bringing the state’s political system to a halt but also creating the profound impression that something is seriously rotten in the state of Texas.

What happened – and what is not going to happen. According to the BBC online –

“The lawmakers left the city of Austin just before a scheduled debate on a controversial rezoning plan for voting districts, which Democrats say will unfairly tip the balance in the state in the Republicans favour. They arrived in Oklahoma, but when Texas sent state troopers to ask them to return, they refused to come back. The Democratic boycott means that the Texas House of Representatives does not have the minimum of 100 members needed for a vote to be held.”

Ah, good old gerrymandering.

As old as the American Democracy, and probably a neglected factor in the last, problematic, presidential election in the US. But it’s tough to say something about the electoral consequences of current or redefined state-constituencies without detailed knowledge of the demographic composition and clear evidence whether these group characteristics actually are a proxy for electoral results. In cases where demographic composition is a politically correct term for ethnic or class voting, gerrymandering can have severe consequences, as, say, the creation of Northern Ireland amply demonstrates. But as cross-voting increases, the consequences vary a lot more, and politicians suffer from an illusion of control when trying to design their constituencies. Again, it’s hard to speculate about the consequences without a detailed analysis.

However, if, as the BBC explains,

[t]he Republicans had gained control of the Texas House in November for the first time since just after the US Civil War in the 1860s.”

It seems quite understandable to me that they are trying to change that long-time history of losing by rezoning electoral districts to their benefit. Likewise, taking job-security from Democratic deputies is not likely to make them happy.

While their trip to Oklahoma increases the impression of the US being a Banana Republic in terms of democratic procedures, it is actually a smart move to do so – and just another proof of the unintended consequences of designing institutions. I am pretty sure that collective absence from the state by the minority faction was not something those drafting the Texas House Rules were ever even contemplating. But by taking advantage of that omission, the minority faction has indeed become a veto player, something their presence in the Parliament would not have allowed.

So when the Republican leader in the US House of Representatives, Tom DeLay, states that

“Representatives are elected and paid for by the people with the expectation that they show up to work do the people’s business and have the courage to cast tough votes, I have never turned tail and run and shirked my responsibility”

His anger seems to have blurred his political instincts, for by taking that leave, the Representatives are actually living up to their responsibility. If the Parliamentary rules de facto accord the minority faction a veto right, they would be negligent not to exercise it if necessary.

Whatever the eventual outcome in this redistricting battle, redrafting the Parliamentary rules will likely be up next. So, who knows, maybe this procedural quarrel turns out to become a travel industry stimulus package…

compulsory reading, media, US Politics

Paul Krugman Agrees With Me

that increased scrutiny of media control issues is one of the major policy lessons of the Iraq war [see my recent post]. In addition, his current NYTimes column, “The China Syndrome“, adds an interesting analysis of corporate regulative bargaining with governments. Whatever your opinion regarding the “biased BBC” – or for that matter, biased German tv – discussion, there is only one possible stand concerning the biased “Fox News” debate. And that alone is quite telling in my book.

The issue is of utmost general importance, but today’s Krugman column has been triggered by yesterday’s presentation by Michael Powell, chairman of the Federal Communications Commission of a US bill to relax regulations on media ownership –

“… that will further reduce the diversity of news available to most people…”.

So if Krugman is indeed right in his assessment that

“[w]e don’t have censorship in [the USA]; it’s still possible to find different points of view. But we do have a system in which the major media companies have strong incentives to present the news in a way that pleases the party in power, and no incentive not to.”

Well, if Krugman is right here, and if it weren’t for the Internet, I guess Gleichschaltung could become a concept more and more people might not just identify with partisan news reporting in the Third Reich.

Seems like the “Land Of The Free” could need some more brave publicists these days when even a Larry Flynt is wasting his time chasing an obscure skin-flick allegedly featuring Barbara Bush (the daughter – not the mother…).

compulsory reading, USA

A Big Place…

America is indeed. The country formerly known as the “Land Of The Free” may no longer be regarded as such by the majority of the world’s thinking inhabitants, but there is anecdotal evidence that Mars and Venus may have not yet actually decided to put the Atlantic between them as they still seem to believe the Rocky Mountains provide a sufficiently high geological divide.

In the South, AP reports,

“[t]he Alabama House voted against a bill [last] Tuesday that would have removed a ban on sexual devices, such as vibrators, from the state’s obscenity law. The ban on sexual devices was added at the last minute when the obscenity law passed the Legislature in 1998.”

Even though

“[a] federal district judge in Birmingham has twice ruled that the ban is unconstitutional…”

and therefore unenforceable. So maybe I am entirely misreading the poll. Maybe, what the lawmakers actually wanted was to leave in place an unenforceable obscenity law because they like obscenity. That, of course, would falsify the entire theory about the continental divide, as a Reuters story from the North, Northern California to be precise, can hardly be misinterpreted:

“More than 100 men and women have gathered in famously liberal San Francisco [last] weekend for what organisers said was the city’s second annual public “Masturbate-a-Thon”. Organisers said they have taken the event “from the sheets to the streets”, offering volunteers — 18 years or older — the opportunity to overcome their inhibitions in “a safe environment” and raise money for charity.”

What I like even better than the $25,000 these events have raised for charity in the course of the last five years is the pseudo-academic interpretation of the event –

“‘[t]his is an effort to counter centuries of censure, to make masturbation more fun and to make it more accessible,'” said Thomas W. Laqueur, a professor of history at the University of California at Berkeley and author of the recent “Solitary Sex: A Cultural History of Masturbation…”

I honestly wonder if Mr Laqueur participated or once again proved the old quip right that those who do don’t teach, and those who teach, well… don’t do.

compulsory reading, Economics, intellectual property rights, music industry

They’ll get the pricing wrong.

For at least five years. If you search my blog you will find that I have repeatedly said that all attempts to sell musical downloads will suffer from problematic price policy. Apple’s new itunes download service is no exception. True, it is probably closer than anything previously seen to actually enhancing the user experience with digital music. According to wired news,

“… opening day downloads equaled the number of songs legally downloaded over a six-month period last year.”

But it is nonetheless bereft with a pricing dilemma. A dollar a tune is not always a justifiable price, even though NY Times columnist David Pogue is ridiculing criticism of this pricing policy.

In fact, for most downloads it is clearly too much, even though things are cheaper when an entire Album is downloaded – for 10 dollars. While a tenner a disk makes downloading for some albums cheaper than your local record store, it is, on the other hand, probably a prohibitive price for DRM protected material, and, moreover, a price justifiable only due to the channel conflict with the non-digital distribution universe, which still makes it necessary to spend millions on marketing songs to people who are not interested in them anyway. It is a price only justified if the advantages of the internet, especially in the realm of marketing to a smaller, but more appropriate audience, are not exploited.

Thus, a dollar a buck can just be the beginning. People will continue to negotiate this price by using KaZaa and Grokster. Record companies will continue to try to scare unwitting conservative politicians about “the end of property” as well as send cease-and-desist letters to people sharing songs.

The big unknown variable is the political one. Will politicians be willing to understand the conventional definitions of property are just not appropriate in the digital age? Or will they allow the record industry to gain a windfall from perpetuating the economic structures of previous times for an unknown amount of time? I firmly believe that eventually, the social and economic institutions will adjust to a new reality.

But again, it is a matter of pricing. This time, a matter of the price that our information societies will be willing to pay for patrolling people’s hard drives and digitally fingreprinting their lives. Maybe US Sen. Santorum’s intervention telling homosexuals that they do not have a right to privacy came at the right time. I don’t know. But it is more important now than ever to tell people that digital privacy is an important issue. Something, many people were concerned about when it wasn’t a real issue yet, back in the 1980s.

Now that it is one, people don’t seem to realise that the same mechanism that allows to reduce the prices of individual songs could be the reason for the end of civil liberties as we know it. [ author off to pay to see a film in a real movie theatre…]

almost a diary

Tobias Schwarz's thoughts, opinions, and ideas of the moment

Archiv der Kategorie: compulsory reading