Creative Destruction

You Can't Predict Who Will Change the World

America's primary export, it appears, is trial-and-error, and the innovative knowledge attained in such a way. Trial-and-error has error in it; and most top-down traditional rational and academic environments do not like the fallibility of "error" and the embarrassment of not quite knowing where they're going. The U.S. fosters entrepreneurs and creators, not exam-takers, bureaucrats or, worse, deluded economists. So the perceived weakness of the American pupil in conventional studies is where his or her very strength may lie. The American system of trial and error produces doers: Black Swan-hunting, dream-chasing entrepreneurs, with a tolerance for a certain class of risk-taking and for making plenty of small errors on the road to success or knowledge. This environment also attracts aggressive tinkering foreigners like this author.

Posted by Sameer at 11:23 AM | Permalink | Comments (0) | TrackBacks (0)

Ok, she's not just "Shockingly Ignorant." She's a mean hateful person. She pokes fun at starving people in Mongolia! People in Mongolia are starving and she's worried about making sure rich people in Canada get healthcare! (There's nothing wrong with worrying about making sure rich people in Canada get healthcare, but if someone else decides they'd rather help people in Mongolia avoid starvation, maybe you can at least not whine that they are also not worrying about making sure rich people in Canada get healthcare!)

I actually really enjoyed watching her interview on Charlie Rose, because she said so much about how Milton Friedman was evil for such and such, and I just enjoyed it because it reminded me that Milton Friedman was such a wonderful man, because of such and such. But this clip was frankly just painful. Maybe since you're a rich western woman the plight of the yak herd doesn't really matter to you, Ms. Klein, but for some people it really is a matter of life and death.

Posted by Sameer at 3:58 PM | Permalink | Comments (1) | TrackBacks (0)

that he can put the smackdown on Naomi Klein from beyond the grave.

Posted by Sameer at 3:23 PM | Permalink | Comments (0) | TrackBacks (0)

Defining Diversity Down

The above-linked article says that the UC is going to lower its admission requirement from a GPA of 3.0 to a GPA of 2.8.

They are doing this in the name of "diversity." Perhaps it would be more correctly described as anti-Asian discrimination.

For those of you not paying attention, after racial preferences were abolished by ballot initiative in 1996, the percentage of Asian students at the University of California skyrocketed, while the percentage of white, black, and hispanic students dropped. The "diversity" people lamented. Oh no, what will we do so that our schools are no longer full of high performing Asian students? We want stupid white, black, and hispanic people dammit.

Well it looks like they've found their solution. They are going to dumb down the Universities so that high performing Asian students will just not apply, while the lower-quality white, black, and hispanic students will get in. Then the race ratios at the Universities will return to acceptable values.

Of course this helps no one. The highly-performing Asian students will now have to attend private schools like Stanfurd, and they will not be able to take advantage of the lower tuition offered by the taxpayer-subsidized (using their parents' tax money of course) UC schools. The weaker white, black, and hispanic students won't benefit, because even though they are now attending a UC, it will be dumbed-down UC, so the education level will be no better than the Cal State school they would have attended before the regents decided to dumb down the UCs.

(For those of you not from California: The California university system is dual-tiered. There are various "University of California" schools, which are in the top tier, (UCLA, Berkeley, Davis, UCSF, etc.) and then there are the "Cal State" schools, which are the lower tier schools. (CSU Hayward, San Jose State, CSU Monterey Bay, etc.)

Who benefits? Well, the racist assholes who came up with this idea will benefit, because they can tell the world that they have solved the diversity problem at the UC!

I should note as a disclaimer that in the above post I make very wide and sweeping generalizations about Asian students and about white, black, and hispanic students. For those to whom it is not obvious-- these are generalizations which do not necessarily indicate that I might believe that any specific student may be smarter or dumber because of his race. Particularly because I think "race" doesn't really exist, and it is just a social construct created to screw with people and interfere with their liberty. But in order to talk about racial preferences, I have to make some concessions and use the language of the racists. Thus the statements made above.

Posted by Sameer at 7:29 AM | Permalink | Comments (0) | TrackBacks (0)

Via MR (what else) I found this photo exhibit. I've always wondered what Chinese people think of our weird toys. This doesn't answer the question, but it provides an interesting visual juxtaposition.

Posted by Sameer at 4:53 PM | Permalink | Comments (0) | TrackBacks (3)

How Yale Professors Lose Weight - November 23, 2007 - The New York Sun

The author of the book "The Undercover Economist," Tim Harford, is testing out StickK's methodology. He has paid a $1,000 so-called contract bond to the company, and has promised to donate 10% of this deposit to charity if he fails to complete 200 push-ups and 200 sit-ups every week.

"When I signed up to do this, I thought to myself, the contract bond isn't going to matter at all; what's relevant is that I've made the psychological commitment to do these press-ups and sit-ups," he said. "I was completely wrong. There's absolutely no way I would have done these press-ups and sit-ups for the past six weeks had it not been for the commitment bond."

Shouldn't that be per day? 200 pushups per week? huh?

Posted by Sameer at 12:08 PM | Permalink | Comments (0) | TrackBacks (0)

Video Blog

Levitt: [My four year old has learned] how to take advantage of [people]. That's like everything I ever wanted for my children.

(Disclaimer: I am deliberately misquoting for comic effect. The actual video blog and comment that I quoted is actually very sweet and inspiring.)

Posted by Sameer at 11:31 AM | Permalink | Comments (0) | TrackBacks (0)

The Captain’s Journal � Operation Alljah and the Marines of 2nd Battalion, 6th Regiment

In the above-linked post Lt. Col. Mullen says a lot of good things about what is going on in Fallujah. Unfortunately however he doesn't realize that people are entering the black market for fuel because of price controls. Instead he implies the fuel problems are "their fault." Sorry, sir, the fuel problems you describe are the fault of the rocket scientists who mandated the price controls, not the Iraqis who are trying to operate in the face of them.

Lt. Col. Mullen: I cannot comment too much on the political situation in Baghdad, but the people here do not like the Iraqi Government and blame them for all the shortcomings in fuel, food and essential services. I will say also though that things are rarely as bad as the Iraqi’s make them out to be. They are prone to serious over exaggeration and always want to blame someone else. It is never their fault. For example, fuel arrives in the city, but to make extra money, the truck drivers sell it to “free enterprise” folks that then sell it curbside from plastic jugs - it is known as black market fuel where we come from. They charge much more than normal and keep the fuel from getting to the gas stations and city government in enough amounts to keep them open and operating.

Posted by Sameer at 6:49 AM | Permalink | Comments (1) | TrackBacks (0)

Well, not really. But the Republic printed my letter.

They had the good sense to add some paragraph breaks to what I had written.

Posted by Sameer at 3:11 PM | Permalink | Comments (0) | TrackBacks (0)

I wrote the following letter to the AZ Republic today upon reading this article:

Gift of kidney begins string of organ donations

Posted by Sameer at 5:59 PM | Permalink | Comments (0) | TrackBacks (0)

OK, I thought I was done blogging about the liberty dollar, but then someone, ostensibly defending the liberty dollar, pointed me to this page

Rate Formulas:

But first, many people wonder if the $20 Silver Base will be successful? Oh yes! For those who are new to the Liberty Dollar and have doubts that merchants will accept a $20 Silver Liberty when the spot price of silver is 'only' $12, let me remind you that this crazy notion was very prevalent when the Liberty Dollar was introduced with silver at 'only' $4 or $5 per ounce! Most merchants know nothing about the silver market, let alone 'spot'. Most don't even know anything about FRNs or that they are frauds. But they know that the Silver Liberty feels good and that it has intrinsic value regardless of anything else. That is usually enough.

So the liberty dollar isn't a scam in that they aren't scamming their own direct customers, but they are telling their customers to scam other people into thinking that a '20' liberty dollar is actually worth usd 20, when it is really only worth usd 12. (usd 12 when they wrote that, I guess its worth usd 13 at current silver prices.) And since as I understand if, if you're a "member" you can buy the '20' liberty dollar for a price close to spot. So you're basically telling your customers to pass off a token that they only paid 13 usd for as something worth 20 usd. Of course they're not worth 20 usd, because no one in their right mind would trade 20 usd for a '20' liberty dollar.

Of course "worth" is subjective. US dollars have no "intrinsic" value but they are worth something because you can trade them for goods and services. I guess the liberty dollar people think, "well if we can convince enough people that a '20' liberty dollar is worth usd 20, then it will be worth usd 20". Which is true. At that point you'll be sort of like the fed, in that your currency is worth more than its intrinsic value. (And you'll be rich rich rich, because you'll be making these tokens that you can sell for 20 usd at a cost of just 13 usd! It doesn't matter if you have a political opinion that the usd is worthless, because all that usd you're pulling in will still buy you an atg javelin.)

But until then, you're scamming people. And, even then, if you think the fed is a scam (which I don't), then you'll still be a scam, in your own judgement.

Posted by Sameer at 9:18 AM | Permalink | Comments (0) | TrackBacks (0)

OK, I"m convinced. In a prior post I claimed that the pre-1934 US money system wasn't very sound, because congress was authorized to revalue the dollar at will. I was googling around and I found this article:

What is a Dollar?

It claims, pretty convincingly, that when the constitution authorized congress to set the value of a dollar, it meant in the sense that it also authorized congress to define what an ounce and a second are. These are relatively arbitrary measures, but still based on common usage.

At the time, the silver spanish milled dollar was in common use, so people regarded that as the dollar. It didn't have a very well-defined qty of silver in it though, so they went around, came up with a reasonable average, and used that as the "standard" for the dollar.

Now still, from plain reading, it says, congress can set these things. So they could change it. Yes, but changing the value of the dollar would have been tantamount to changing the weight of an ounce! The weight of an ounce probably has changed over the years, as we moved from the imperial standards to the metric standards, but by an amount that is negligible.

I guess the founders thought it was inconceivable the the government would do something so crazy as to redefine a basic measurement. haha. silly founders.

Posted by Sameer at 10:41 AM | Permalink | Comments (0) | TrackBacks (0)

So the whole situation with the liberty dollar has been clarified for me, and I now understand that it's not a scam, just really lame.

Here is the story:

The liberty dollar people, before november 2005 issued 10 liberty dollar certificates, it would say on it "This warehouse receipt for One (1) Troy Ounce of .999 Fine Silver" Thus you could turn in your silver cert for an ounce of silver. Or, you could get from then a $10 silver "round" (they don't use the term coin for legal reasons) which contained in it one ounce of silver.

After november 2005, the liberty dollar people started issuing $20 silver certificates. These silver certificates also entitled the bearer to one ounce of silver. They also issued $20 "rounds" containing one ounce of silver.

Now, if you are a normal, rational person, you would think that two 10 liberty dollar silver certificates would be equivalent to one 20 liberty dollar silver certificate. You know, 10 + 10 = 20. Not that hard, right? That's what I figured, which is why I thought that in November 2005 they had just devalued their currency by 50%. Well, you'd be wrong.

Your old 10 liberty dollar certificates could still be redeemed for an ounce of silver, and the 10 liberty dollar rounds (of course-- conservation of mass applies in monetary economics just as much as it applies in physics) still had an ounce of silver in them.

Since the liberty dollar people continue to honor the 10 liberty dollar silver certificate, you can give them your 10 liberty dollar certificate, turn it in, and get an ounce of silver. Just like with the 20 dollar silver certificate. Or if you want to think in terms of physical metal, note that the 10 liberty dollar round has the same amount of silver in it as the 20 liberty dollar round.

So if I have two 10 liberty dollar rounds, how much money do I have? 20 liberty dollars? Well, no, because the 20 liberty dollar round has half as much silver in it as two 10 liberty dollar rounds. Do I then have forty liberty dollars? Well, I suppose, because I can exchange them for two twenty liberty dollar rounds. So is 10 + 10 = 40?

Suppose I went to the store and I had a 20 liberty dollar. I wanted to buy something, which would cost me 20 liberty dollars if I wanted to buy two. But I only want one. The seller only wants to sell me one. (In a normal world, we'd say that one item cost 10 dollars. But we can't, because liberty dollars are so screwed up.) What do we do? Well I could give him my 20, and he could give me back a 10. But the ten is worth the same as a 20. So, maybe he should give me a 5? But if the 10 isn't worth half as much as a 20, how do I know that the 5 is worth half as much as a 10? What if the five is worth 1/4 as much as a 10? (5 is 1/4 of 20, so it makes sense that a 5 should be worth 1/4 of a 20. But then if a 10 is worth the same as a 20, then the 5 is worth 1/4 of the ten!)

The solution to this conundrum, of course, is to just say well let's realize that since two of the item I want costs 20 liberty dollars (or 10!), which is equivalent to one ounce of silver, buying one item will cost me half an ounce of silver. I give the merchant my 20 (or 10!) and he takes his hacksaw, cuts it in half, keeps half, and gives me the other half. Problem solved.

Why, oh why, did they set up such a crazy system?

So basically the number stamped on a liberty dollar round or certificate is just decorative? It has no bearing to the real world?

Well, no, not exactly. They set this crazy system up because they thought that there should be a "fake peg" between the liberty dollar and the us dollar. Before November 2005, the us dollar price of silver was under $7.50/ounce. So they figured, well, we'll stamp "10" on each of these one ounce rounds, so people can think they are worth ten us dollars. That will make life easier. People can buy stuff and not have to do exchange rate conversions in their head.
After November 2005, the us dollar price of silver went above $7.50, so they said, well, let's stamp "20" on our one ounce rounds from now on. That way we can try to convince people that they are each worth about 20 us dollars.

Apparently, the rocket scientist who came up with this thought that people were too stupid to understand what an exchange rate is, so we'll stamp some arbitrary number on our rounds to let people think that the liberty dollar is pegged to the us dollar. Of course it would be really stupid for someone to trade 20 us dollars for a 20 liberty dollar round, because the usd price of one ounce of silver is about 13 usd.

In writing this up, I have realized that there is a scam here, just one that's completely different than the one I thought existed in the first place. Yesterday I thought the scam was that the liberty dollar actually represents real silver. Today, I have realized that the liberty dollar does actually represent real silver, but the scam is that the liberty dollar is pegged to the us dollar.

It's sort of a "bad scam," though. Because if you're concerned about usd inflation, then you don't want the currency you use to be pegged to the usd. But the liberty dollar people are trying to make people think that it is.

Weird stuff.

Posted by Sameer at 1:55 PM | Permalink | Comments (0) | TrackBacks (4)

My recent post about Liberty Dollars led some people to email saying that liberty dollars wasn't a scam. The email primarily apologized for their high seignorage rate, which I don't have a problem with. I thought about this a bit, and I think I've realized why gold bugs don't think liberty dollars is a scam. It's because liberty dollars is no more a scam than the constitutional gold standard.

Now for the record, let me emphasize that I am a complete supporter of monetary competition and competitive currencies backed by hard assets. I am all for sound money and eliminating further the power of government to inflate the currency at will. (I say "eliminate further" because today, with an independent central bank, the government's power to inflate the currency at will is already quite limited.)

However, the monetary system described in the constitution, the traditional gold standard, is by no means a "sound money" regime. The first evidence of this is found when you look at a traditional gold certificate:

See what it says there, "FIFTY DOLLARS IN GOLD COIN PAYABLE TO THE BEARER ON DEMAND."

It doesn't say, "one troy ounce of gold, payable to the bearer on demand."

So you could say, well, this is just seignorage. A fifty dollar gold coin has less than fifty dollars worth of gold bullion in it, because the mint needs to pay for the cost of minting, etc. That would be all well and good until you read the line in the constitution, Article I, Section 8:

"To coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures; " (emphasis added)

So that basically gives congress unlimited power to devalue the currency at will. If one day you could turn in your 50 dollar gold certificate for gold coin containing an ounce of gold, congress could pass a law so that the next day that same 50 dollar gold certificate will be worth gold coin containing only half an ounce of gold. The same exact thing the liberty dollar people did on November 24, 2005.

In fact, this means that our current fiat money system has more protection against inflation than the gold standard. Under the gold standard, congress had no real incentive to maintain the currency's value. If they wanted to spend like drunken sailors, they could easily just devalue the currency. Congress likes to spend. That's their goal in life, so they have no incentive to maintain the price level. The fed, on the other hand, is independent of congress, and, being run by private bankers with a stake in the economy, people who really couldn't care less how much congress has to spend, the fed has a greater incentive to maintain stable prices and not inflate the currency needlessly.

The constitution in fact mandates fixed foreign exchange rates as well (i.e. set by congress, rather than the market). I believe in the rule of law, so the fact that we aren't abiding by the constitution's dictates in this regard is problematic. The solution, however, is not to follow the constitution, but to amend it.

UPDATE: Patrick Chkoreff points me to this article he wrote detailing FDR's devaluation of the currency in 1934. He claims it was unconstitutional, and I agree, because FDR was president (article ii), not Congress (article i). If congress had devalued the currency, that, I suspect, would have been constitutional.

UPDATE II: The case which confirmed that congress has the power to devalue the currency is known as "Nortz v. United States." One can read a NY Times article summarizing the decision here. The question of authority between the president and congress, however, is interesting. The case doesn't claim that the president has the authority to devalue the currency, but congress did legally authorize the president (through the sec. of the treasury) to require all persons to surrender their gold. Apparently congress didn't authorize the devaluation described in Chkoreff's article, but since congress did authorize the gold surrender, the plaintiff's claim was moot -- even if he were entitled to gold at the prior rate, he would have had to give it up anyway.

Posted by Sameer at 7:18 AM | Permalink | Comments (0) | TrackBacks (0)

UPDATE II: So it turns out that I was mistaken, and the liberty dollar is not a scam. Lame, yes. Scam, no. more here.

I friend recently forwarded to me this article Ron Paul Gains New Currency, which prompted me to check out these Liberty Dollar people.

I may be mistaken, but it appears to be a complete and utter scam.

The first hint that it was a scam was when I read this page:

EXCHANGE:

Ultimately, it is in our best interest to have direct convertibility between the American Liberty Dollar (ALD) and the US dollar (USD) as close to par as possible. Unfortunately, the difference between the world's only physical, value backed currency and the world's largest fiat currency is as large as the difference between right and wrong. But as the ALD grows up and the USD falls, the two currencies will cross on the chart and the scales of time will become a bellwether of our success.

On January 2, 2007, "Convertibility" commences between the ALD back into the USD on a very very limited basis. The model outlined below is to start small, test the supply and demand in these troubled waters, and grow the amount of the "Convertibility" as a measure of our success until the currencies cross on the above mentioned chart.

So these liberty dollars, which are theoretically backed by actual silver, can't be exchanged for US dollars? Why not? If they were actually backed by real silver, then if someone wanted to exchange their liberty dollars for US dollars, the liberty dollar issuer need only sell some of the silver that is backing the liberty dollar in order to come up with the US dollars to exchange for the liberty dollar.

The only reason I could come up with for restricting exchange would be if the liberty dollar was not truly backed by silver, and they actually didn't hold enough silver to sell for US dollars when people asked to convert their liberty dollars to us dollars.

Then I discovered this thing they call MoveUp, which appears to be another word for "devaluation".

Apparently, on Thursday, November 24, 2005, they devalued their currency by 50%. Their web page claims that they just doubled the value of the money, but only someone who knows nothing about monetary economics would fall for that. On November 23, 2005, 10 liberty dollars was "worth" (assuming that it was actually convertible, something I am unconvinced of) 1 troy ounce of silver. On November 25, 2005, you would need 20 liberty dollars to buy a troy ounce of silver. Thus the 10 liberty dollars you held on the 23rd, which you could have theoretically traded in for an ounce of silver, would be worth only half as much on the 25th, because you could at that point only trade it in for half an ounce.

They then go into this long explanation of moving averages and the us dollar spot price of silver, all of which seems like a bunch of verbiage meant to confuse and misdirect people away from the simple fact that they devalued their currency.

Ron Paul really needs to tell them that he isn't willing to let his likeness be used to promote their scam. Otherwise he may well get tarred with the same brush.

UPDATE I: It's been pointed out to me by customers of Liberty Dollar, that they are quite good about redeeming Liberty Dollars for actual silver, and that they have the silver and it is well-audited, etc. Good to know. Strike that from the list of red flags which make me question the legitimacy of the operation.

Posted by Sameer at 4:35 PM | Permalink | Comments (7) | TrackBacks (0)

It's no secret that our tax code is needlessly complex. But sometimes even I'm surprised at how needlessly complex it is.

I was recently asking my accountant about mortgage interest deductions, and how they are limited by AGI. She replied, ". . .certain itemized deductions (mortgage interest included) are reduced by two-thirds of 3% of the amount by which your adjusted gross income exceeds $156,400"

That was odd. 2/3 of 3%? What does that mean? Sounds like 2% to me. Why didn't she just say 2%? Perhaps I misunderstood what she wrote. So I asked her, "Isn't 2/3 of 3% just 2%?"

The reply? "Yes. . .that was the language in the tax code."

Great.

Posted by Sameer at 10:48 AM | Permalink | Comments (0) | TrackBacks (0)

Oddly I had a conversation about this topic in a taxicab today. If you are altruistic, it is easy to precommit. Hire someone to give money to India, and require them to pull away the money from the Indians if you don't lose those pounds on your overweight frame. What should we conclude from the fact that no one seems to do this?

(No link, the blog is secret!)

This seems a great way to "fix" the whole "charity marathon" thing. You can actually give people a much better motivation to run the marathon if you set goals. Say you pay $1000 to run the marathon, and if you complete it within 3:30, the charity gets the full amount. If you finish within 4:00, then the charity gets $500. Or if you don't finish at all, the charity gets nothing. (The money not paid out to the charity goes to "benefit" the promoters of the event.)

This way, suppose you are raising money from friends or whatever to run the marathon. You are then under a serious obligation to perform well and not slack in your training. Otherwise your friends money will then go to "waste".

In the traditional "charity marathon", you can raise money from friends to sponsor you, but it doesn't matter if you finish or not, the charity will still get the money. The traditional charity marathon provides no improvement over your friends giving money directly to charity and you paying to run a non-charity marathon. The traditional charity marathon, as has been described before, is really just a way to get your altruistric friends to subsidize your running habit.

This new charity marathon is also a way to get your altruistic friends to subsidize your running habit, but at least they also know that by taking part they are helping motivate you to get fit as well. Thus potentially eliminating the deadweight loss associated with the traditional charity marathon.

Posted by Sameer at 2:58 PM | Permalink | Comments (4) | TrackBacks (0)

Oddly I had a conversation about this topic in a taxicab today. If you are altruistic, it is easy to precommit. Hire someone to give money to India, and require them to pull away the money from the Indians if you don't lose those pounds on your overweight frame. What should we conclude from the fact that no one seems to do this?

(No link, the blog is secret!)

This seems a great way to "fix" the whole "charity marathon" thing. You can actually give people a much better motivation to run the marathon if you set goals. Say you pay $1000 to run the marathon, and if you complete it within 3:30, the charity gets the full amount. If you finish within 4:00, then the charity gets $500. Or if you don't finish at all, the charity gets nothing. (The money not paid out to the charity goes to "benefit" the promoters of the event.)

This way, suppose you are raising money from friends or whatever to run the marathon. You are then under a serious obligation to perform well and not slack in your training. Otherwise your friends money will then go to "waste".

In the traditional "charity marathon", you can raise money from friends to sponsor you, but it doesn't matter if you finish or not, the charity will still get the money. The traditional charity marathon provides no improvement over your friends giving money directly to charity and you paying to run a non-charity marathon. The traditional charity marathon, as has been described before, is really just a way to get your altruistric friends to subsidize your running habit.

This new charity marathon is also a way to get your altruistic friends to subsidize your running habit, but at least they also know that by taking part they are helping motivate you to get fit as well. Thus potentially eliminating the deadweight loss associated with the traditional charity marathon.

Posted by Sameer at 2:58 PM | Permalink | Comments (4) | TrackBacks (0)

Will Tyler Cowen's Secret Blog surpass Marginal Revolution In the blog pantheon? The suspense is killing me. Meanwhile, if you too want to get access to Tyler's secret blog, you have to buy his new book.

Posted by Sameer at 6:50 AM | Permalink | Comments (0) | TrackBacks (0)

Don Surber � Blog Archive � Is the Internet killing the economy?

As is often discussed at Cafe Hayek people often fall prey to this economic fallacy. Seeing only what is visible, vs what is not. Don Surber thinks that the economy is hurt by the fact that so much stuff on the Internet is free. His evidence for this is:

• the decline of revenue to newspapers
• eBay realizing they don't have to pay google for traffic
• the porn industry being undercut by amateurs

He commits a common fallacy, described in Bastiat's famous essay, What is Seen and What Is Not Seen.

Surber focuses only on the losses generated by these changes in the economy. The newspapers are declining, and they are making less money. That money isn't really moving to new competitors to newspapers, because the newspapers are losing out to basically free providers of the same stuff. Similarly, ebay realized that they don't have to pay google for traffic, because google is sending it to them for free anyway. Similarly, porn consumers have realized that they don't have to pay porn stars to undress and have sex on camera for them, because amateurs will do it for free.

Thus he complains that the Internet is killing the economy.

While it may be true that this results in a net loss of revenue to these various companies, that is only because normal economics indicators such as GDP do not measure all that is unseen. For example the economic benefit that ebay provides, reducing transaction costs and increasing people's ability to buy goods and services efficiently. The fact that they are now spending less money on ads at google puts more money in every user of ebay's pocket, at the end of the day.

This is very similar (conversely) to the situation where you have work that used to be done within the family, such as housework, is now often contracted out. It looks like a huge increase in measured GDP, because housework that was done by the stay at home wife is now being done by hired help. But the measured increase is larger than the actual increase, because the productive value of the housework was not being measured when it wasn't associated with a financial transaction.

Posted by Sameer at 6:08 PM | Permalink | Comments (0) | TrackBacks (0)

More on e-gold here.

Jackson points to a December 2005 court case where he says the Secret Service deceived Federal Magistrate Judge John Facciola by presenting erroneous testimony in order to obtain search and seizure warrants authorizing the government to seize U.S. bank accounts of Gold & Silver Reserve Inc. Jackson's online statement even includes a link to an e-mail that appears to indicate that he had made plans in December 2004 to visit the Secret Service in Washington, D.C., in order to brief them on how E-Gold operates. These plans, he says, were eventually cancelled by senior Secret Service management, although it's not clear based on Jackson's telling of the story why this was done.

In defense of the money laundering charges, Jackson notes that his company's OmniPay online exchange service "has for years followed stringent customer identification procedures and an absolute policy of only accepting money payments by bank wire." Further, since E-Gold doesn't accept money payments from "anyone in any form and has never owned a single dollar, yen, euro or any other brand of legacy money," it can "scarcely be construed" as a money launderer. E-Gold is a closed system, the only way to obtain e-gold is by receiving a transfer from someone who already has some, and the company maintains a permanent record of all transfers.

Posted by Sameer at 10:55 AM | Permalink | Comments (0) | TrackBacks (0)

This press release from e-gold is reprinted here in full, as it is too important to excerpt.

e-gold® Founder Denies Criminal Charges
April 30, 2007 Melbourne, FL

On April 24, 2007, a Federal Grand Jury handed down an indictment charging e-gold Ltd., Gold & Silver Reserve, Inc., and the Directors of both companies with money laundering, operating an unlicensed money transmitter business, and conspiracies to commit both offenses.

Dr. Douglas Jackson, Chairman and Founder of e-gold, speaking on behalf of his fellow Directors and both companies vigorously denies the charges, taking particular exception to the allegations that either company ever turned a blind eye to payments for child pornography or for the sale of stolen identity and credit card information.

Continue reading "e-gold® Founder Denies Criminal Charges" »

Posted by Sameer at 1:42 PM | Permalink | Comments (0) | TrackBacks (0)

Two Brevard County men accused of catering to criminals moving money - Orlando Sentinel : State News Two Brevard County men accused of catering to criminals moving money - Orlando Sentinel : State News

A four-count indictment handed up Tuesday and made public today charged E-Gold Ltd., Gold & Silver Reserve Inc. and owners Dr. Douglas L. Jackson, of Satellite Beach; Reid A. Jackson, of Melbourne; and Barry K. Downey, of Woodbine, Maryland. Each was charged with conspiring to lauder monetary instruments; conspriracy to operate an unlicensed money transmitting business; operating an unlicensed money transmitting business; and transmitting money without a license in Washington, D.C.

Ack. While I never thought (as I mentioned before) e-gold was really serious competition to normal dollar-denominated internet payment systems like paypal, I had no idea that the feds thought it was a money laundering scheme! These articles about e-gold are all very damning, yet I am struck by the fact that they are all basically just reprinted press releases. There is no statement from e-gold's attorneys. I only met the e-gold guys a few times at the Financial Cryptography conferences, and while I might say they were a bit crazy like all gold standard types and cypherpunks are (not necessarily in a bad way) I couldn't imagine them actually actively engaged in any sort of money laundering. This is really overblown as far as I am concerned. I hope they are vindicated.

Posted by Sameer at 8:14 PM | Permalink | Comments (0) | TrackBacks (0)

While I've always known that water in Phoenix was underpriced, I never knew how drastically underpriced until I read this:

Continue reading "the strangest thing I've read in a while" »

Posted by Sameer at 1:33 PM | Permalink | Comments (2) | TrackBacks (0)

Unfortunately, Warren was never able to consummate the [Long Term Capital Management] deal. He had been invited by Bill Gates to vacation in Alaska when the crisis broke and it was hard to negotiate such a deal on a cell phone... “Bill Gates cost me about $3 billion,” he shrugged.

(via MR, via Newmark's Door)

Posted by Sameer at 6:41 AM | Permalink | Comments (0) | TrackBacks (0)

Amazon.com: Prophet of Innovation: Joseph Schumpeter and Creative Destruction: Books: Thomas K. McCraw

Tyler Cowen:

Prophet of Innovation: Joseph Schumpeter and Creative Destruction, by Thomas K. McCraw. It is beautifully written, suspenseful throughout, full of love and intrigue, a story of European migration, also a history of Harvard economics, reassesses Schumpeter's thought, and is as good a biography of an economist as has ever been written. I do not make the latter claim lightly.

Obviously, an obligatory post due to the name of this blog, but I am going to check it out as well. That's quite a recommendation from Prof. Cowen.

Posted by Sameer at 10:54 AM | Permalink | Comments (0) | TrackBacks (1)

It appears that my prof. at Cal has made the list, along with his wife, who seems to have joined the faculty after I left.

Posted by Sameer at 8:29 AM | Permalink | Comments (0) | TrackBacks (0)

test post

Posted by Sameer at 3:03 PM | Permalink | Comments (0) | TrackBacks (0)

I never knew Friedman, but his passing has quite saddened me today.

"Freedom is not the natural state of mankind. It is a rare and wonderful achievement."
-- Milton Friedman 1912-2006

Posted by Sameer at 8:11 PM | Permalink | Comments (0) | TrackBacks (0)

Posted by Sameer at 2:49 PM | Permalink | Comments (0) | TrackBacks (0)

About Milton Friedman

An American hero is gone from this earth. May his legacy live on.

Posted by Sameer at 2:08 PM | Permalink | Comments (0) | TrackBacks (0)

Brad DeLong's Semi-Daily Journal: The Meaning of CPI Bias

Brad DeLong quotes Dean Baker claiming that the new goods bias applies only to rich people:

Most of the drop in snow blowers' prices took place before the middle class began to buy them. This drop provided a gain to those who already were buying snow blowers, but it provided zero gain to those who found them too expensive to be worth their money....

'zero gain'? So if I couldn't afford to buy a snowblower yesterday, and had to shovel my driveway by hand, whereas now I -can- afford to buy a snowblower, and I don't have to shovel my driveway by hand, I haven't gained anything?

Posted by Sameer at 8:26 AM | Permalink | Comments (0) | TrackBacks (0)

Drivers give helmeted cyclists less room - Yahoo! News

(via, MR, of course.)

So I am now riding bike to/from class here in Arizona, and there is no helmet law. But I am so used to wearing a helmet, that I get scared while riding on the street without one. I ride around campus without my helmet though. Which led me to lose my helmet yesterday, so I had to ride home and to class today (I bought a helmet while on campus) without one, which was hair-raising.

Yet now I read this article. Hrm. Of course it makes some amount of sense given the Tullock effect, but the Tullock effect really applies more directly to the driver's own safety. Ie a driver is at no greater risk from a cyclist if that cyclist is helmeted, it is the cyclist that is at greater risk. Yet motorists seem to take greater care of cyclists that are unhelmeted. However, given that here in Arizona most commuter cyclists are unhelmeted. So the unhelmeted cyclist is not 'special' and therefore the motorist might not notice and then may not give greater amounts of space.

However, when there is no bike lane, I make a point to drive close to the center of the main travel lane, to prevent cars from passing and sideswiping me. I feel that is safer, although it may not be, because I am angering many people in control of multi-thousand-pound vehicles. But I pay taxes too! I have as much right to use the road as they do. Dammit.

Posted by Sameer at 5:13 PM | Permalink | Comments (0) | TrackBacks (0)

This weekend is my mother's birthday, and my sister tasked me with buying the gift. She tells me that I've gotten really good at buying gifts, which surprised me, because I've always thought I am pretty bad at it. But then when I thought about it further, most people in my family don't really seem to know how to give a gift, so even though I might not be good at it, at least I know what the goal should be. Three cheers for low standards.

Now in situations where the gift-receiver has substantially less financial means than the giver, it makes sense that the giver might just give the recipient a check or a gift certificate, or something mundane, that they would buy anyway, because the recipient actually couldn't afford it. But in the case where the financial means among the parties is relatively equal, then there's really no point, and the standard economics story about why gifts create a deadweight loss applies. (I.e. if someone buys me something I wouldn't just go out and buy myself, then I'm not buying it because its value to me is less than its price. Therefore someone is buying something at price X, giving it to me, who values it at Y < X, for a deadweight loss of X-Y. And of course giving cash is the most economically efficient thing to do in this case, because then the recipient can use that cash to buy the marginal item that is most valued but wasn't able to purchase with his previous resources. [I.e. if someone gives a gift valued at X, priced Y (X > Y), but another item with value Z > X (at the same price Y) exists, then giving the gift rather than a cash of Y is effectively a deadweight loss of Z-X)

However, the "proper" way to give gifts, in my opinion, again looking to economics, is to signal that you know the receiver well and care about them to the degree of being able to find a gift item that they would buy themselves, but won't, not because X < Y, but because maybe they don't know about it, haven't heard of it, they don't have the time to go get it, it has some personal component, etc. Of course, finding such items is really hard, which is why I agonize over buying gifts and think that I'm not a very good gift-giver. I'm sure that of people who use this strategy to buy gifts, I rank at the low end of the scale, but if you include people who think that a good gift is just something that is expensive, then I probably rank much higher.

Of course that doesn't help me find something for my mother's birthday. ack!

Posted by Sameer at 4:59 PM | Permalink | Comments (0) | TrackBacks (0)

So I am myself a good example of the horror of marginal tax rates. Given the previously mentioned job offer, if that was my only income, my average federal taxes on that income would be about 21%. However, due to the horror that is increasing marginal tax rates, the average federal taxes on that income, for me, taxed at the top marginal rate, is nearly double that: 35%! Of course the impact on the 2nd Lt. salary is more severe. Average tax rate for a 2nd Lt., if that's his only income, is 13.5%. But for me, of course, the taxes would be more than double that: again, 35%! So even though this job offer has a marginally higher salary than I was making at age nineteen, after taxes, it comes out to a good deal less than I was making back then.

Talk about a disincentive to work. And these numbers don't even take into account fica, medicare, state taxes, etc.

Posted by Sameer at 4:56 PM | Permalink | Comments (0) | TrackBacks (0)