Slow Day

Sure, there are people who sell chocolate bars, and there are people who sell bolts, but no one can compete with our unique bolt-in-a-chocolate-bar product!

While the company faces many competitors in each of the domains it serves, we believe Company XXX doesn't have a single competitor that competes in all of the same domains. This does not diminish the quality of the competition, but does suggest to us that competitors do not enjoy the same synergies and economies of scale that Company XXX does. 

I'm reaching for my revolver.

Toll Roads

So, I'm still thinking about the whole question of net neutrality and the new rules of the road issued by the FCC (well, sorta rules -- this is still hand-wavey enough that all sides are claiming victory and defeat at the same time).  But at the same time I'm reading the FT bemoan the downfall of congestion pricing schemes for the kind of traffic that still has wheels.

Most weekdays, slow-moving traffic forms a barricade between the two halves of King's Road, the main thoroughfare through the well-heeled London district of Chelsea. For about 1km from Sloane Square, at the eastern end, taxis, buses and four-wheel-drive cars sit bumper to bumper, engines running, inching towards their destination.

Nonetheless, on Thursday 20 sq km of Chelsea and other parts of west-central London will be removed from the capital's congestion-charging zone – the area drivers must pay to enter during weekday working hours – reducing it to its original 22 sq km. Even Transport for London, the body responsible for the scheme, acknowledges this will worsen jams. Vehicle numbers are expected to rise by 15 to 20 per cent. Congestion – measured by the extra time a journey takes compared with clear road conditions – is poised to worsen by as much as 18 per cent. Emissions of harmful gases will go up sharply.

And it made me realize that there are probably a lot of people whose knee-jerk reaction would be to support congestion pricing on highways, but to simultaneously demand that anybody can drive as big a semi as they want onto the internet, and pay the same price as a Yugo.  Net neutrality gets more complicated the further you dig into it -- technically, economically, and of course politically/philosophically.  But it's hard to see a huge amount of difference between these two cases, which analogy maybe prompts us to rethink both of them.  Some form of congestion pricing may be essential to making this infrastructure function well under heavier loads.

Chief Internet Evangelist

Cynics among you will undoubtedly claim that I am merely talking my book, but I will nevertheless take this opportunity to exercise my divine right to such a time honored tradition, and pass on a straightforward comment by Google's very own Vint Cerf: Governments Shouldn't Have a Monopoly on Internet Governance.

... last week the UN Committee on Science and Technology announced that only governments would be able to sit on a working group set up to examine improvements to theIGF—one of the Internet's most important discussion forums. This move has been condemned by the Internet Governance Caucus, the Internet Society (ISOC), the International Chamber of Commerce and numerous other organizations—who have published a joint letter (PDF) and launched an online petition to mobilize opposition. Today, I have signed that petition on Google's behalf because we don't believe governments should be allowed to grant themselves a monopoly on Internet governance. 

Democracy is as democracy does, and if we let the UN take charge of it, just calling it democracy is not going to save us.

Wrong Question

Today, Daniel Henninger, Prince of Darkness (aka director of the WSJ editorial board), takes a stab at the profound.

A radical (in the best sense) 21st-century tax debate—such as over Bowles-Simpson's three stripped-down marginal rates, topping at 23%, and lower taxes on business—would challenge the conventional 100-year-old idea in the U.S. that the first purpose of a tax regime is to ensure the functioning of the state. In the hypercompetitive world we will inhabit for at least a generation, might not it be time to rewrite the textbook? To ensure American well-being, the pre-eminent purpose of a modern tax system should be to achieve the highest possible level of growth in the private economy with a competent, efficient state in a supporting role.

For a split second this argument sound superficially intelligent.  Don't we need to face up to a world where the nation state is in decline?  Where borders mean nothing to business and the only thing that holds us together is our collective commitment to the two car garage?  Don't we have global problems that need a global solution?  Isn't the logic of the "hypercompetitive" free market the final and inevitable verdict of history?  And shouldn't all these taxes at least ensure we stay ahead of the chinese?  

But after this brief and bracing moment of radicalism, we are suddenly forced to look down and discover, much like Wile E. Coyote, that there is absolutely nothing under our feet; the question was not what taxes and for, but what the state is for.  While it may not be far from the truth in actual practice, I don't think any one of you big state liberals out there (you know who you are) really argued that we pay taxes to support the state so that the state can collect taxes.  So to pretend that he's making a radical critique by suggesting that taxes actually have a purpose is not so much rhetorical as just plain idiotic.  

After these smoke and mirrors are deployed, he goes on to be just completely flat out fucking wrong.  The purpose of the state is emphatically not to maximize economic growth, so that can't be the purpose of the taxes supporting it either.  

The purpose of the state is to keep us free.  While this may require a certain base economic level -- people not getting enough to eat are shackled just as surely as if they were in chains -- that level is not the endpoint but merely the beginning of what we want out of a state.  I don't mean to imply that this base level if fixed forever at food, or is ever going to uncontroversial in practice.  I simply mean that it's philosophically very important to realize  that economic growth is not the primary thing we want out of a state, and is not at all the metric on which it should be judged.  

In fact, the state should have very little to do with economic growth.  Once it fulfills its basic function of facilitating cooperation, once it frees us to do the things we want with one another without worrying about people doing things to us we don't want, its role in the economy is over.  I suppose you could call that an "efficient supporting role", by analogy to the way an agnostic supports a Catholic, but it does seem to stretch the language.  

Whatever happened to the real libertarians I wonder.  The ones where your liberty didn't ultimately boil down to the size of your pile of gold?

The two eyes

Namely Iceland and Ireland.  

John Maudlin writes a newsletter too often to say much of anything new each time, but other than that he's all right.  If you haven't been following the bouncing ball of our little European economic experiment, you can look here for his quick recap and clunky foreshadowing (reality is just such a tawdry and obvious plot device).  I won't bother to quote any of it, because the only thing that interested me was the graph, which you can see above.  Some folks will look at this chart and say that the Irish are a bunch of stubborn idiots for not simply defaulting, and they will point to Iceland as a sort of success story by comparison.  

I dealt a bit with this logic back when I saw folks implicitly or explicitly suggesting that Greece should just default, drop out of the eurozone, and get it over with, but perhaps I can refine my point with this chart.   It's not that the chart is wrong or anything.  It's just that it leaves out one very crucial element, which is the real value of savings in the two countries.  

How much tuna and ammo does the 1,000 Krona she had in an Icelandic bank buy Bjork now?  I'm sure there are plenty of Irish who are upside down on their mortgages, just like people are here in the US.  But there really are some middle class folks who have positive net worth.  Those folks might plausibly trade some decline in real wages for the preservation of the purchasing power of their savings.  If you added this factor into your calculation, you might legitimately still reach a utilitarian conclusion that default would be better for more of the population.  But you cannot simply ignore it.  

Of course, all this is a little bit by-the-by; the actual decision making process is not going to be based on an economic calculation at all, but on a political one.

P.S.  There's a whole 'nother discussion to be had regarding whether Ireland should have saved their banks in the first place, or whether they should have only guaranteed Irish depositors and let everyone else go screw, but that gets complicated.

Deep thought of the day

Breaking left-right symmetry makes something looks a lot more strange than breaking top-bottom symmetry, for some fairly obvious reasons.

Why is there no animated mate-with-bombilla emoticon?