Monday, November 24, 2008

Stupid Economic Punditry-

Last night (11/23/2008) Fox News was on in the background. The anchor asked Jonathan Hoenig a question concerning taxes and the economy. My ears perked up and I went over to listen. Johnathan responded that that those who earn less than $XXX should not get a tax break as that would promote consumerism, which is what got us into this financial mess. OK so far.

He then went on to say that those who earn more than $XXX should get a tax break as an incentive to create jobs. At this point my jaw dropped in surprise. Economically, there is no difference.

If you give the "poor" a tax break they have money to go out an buy stuff. The "rich" seeing this demand for products hire more people to produce more.

If you give the "rich" a tax break to create more jobs, they hire the "poor" and begin to manufacture more. The "poor" now have more money to buy stuff. So we are back to the consumerism that created the economic meltdown.

Giving tax incentives, especially to the "rich" also ignores a couple economic principals. First, we are supposed to be a capitalistic system. The simplistic mantra of many of our economic pundits is "keep the government out of the private economy". Tax incentives means that the government is involved in the economy. If the mantra of "keep the government out" means anything, then no tax incentives. Furthermore, why would the "rich" need an incentive? If they see an opportunity, as an entrepreneur, they take the risk of investing. Isn't that what capitalism is about?

Paying taxes is not a "black hole". When individuals pay taxes the taxes are used to fund programs for the benefit of society, such as roads. If taxes are reduced then funding for many programs funded by tax dollars decreases. I'll end the tax issue here, otherwise this post will become too long.

Many economic pundits claim that the "rich" need tax incentives to "create" jobs. My viewpoint is that this is backwards. Jobs are created when the consumer has unmet demand for a product and the "rich" seeing that demand hire more workers. After all why would a "rich" person hire someone to produce something if there is no known demand for that product? Capitalism is not a welfare system. The argument that tax incentives are needed distorts the economy and simply becomes "corporate welfare".

Saturday, November 22, 2008

Kudos to the Washington Post

Rob Pegoraro writes in the Washington Post: "Apple's DRM Breaks MacBook Movie-Download Viewing" Rob exposes the flaws of DRM to his readers. Specifically that DRM adds no value to the consumer and, in fact, deprives the consumer of his/her ability to use their legally bought products.

The Post has been one of the better papers when it comes to holistically reporting on a product. Too many papers, including computer magazines, only seem to regurgitate a corporate press release touting all the new bells and whistles of a product conviently ignoring the downside issues. The consumer needs to be fully informed. Thanks Rob!
Updated 11/25/2008: Here is an article from the Electronic Frontier Foundation "Apple Downgrades Macbook Video with DRM". Fred Von Lohmann also wrote "When you buy DRMd content, the vendor can snatch your investment from you at anytime."

The Great Net Neutrality Debate

The internet has become an indispensable tool for most of us. Our ability to use the internet depends on the transmission of data packets. How those data packets are transmitted through the internet cloud has become a matter of controversy. Here is a sampling from The Technological Liberation Front. Here is a sampling from TechDirt and here. The controversy revolves around the issue of whether the transmission of data packets should or should not be regulated by the government.

Sounds simple, but it is far from simple. Those who advocate that net neutrality should not be subject to government regulation assert that it is a private network and not subject to government oversight. Furthermore, the argument is made that if an internet service provider (ISP) attempts to break net neutrality concepts that the ISP will punished by the market and would be forced go back to a net neutrality operating concept. Given our free-market orientation this appears to be exactly what we would want.

Unfortunately, the utopian free-market concept of net neutrality crashes in the face of reality. The private market simply can not be trusted to implement a neutral internet from the consumers perspective.

First, those who vehemently argue against government regulation speak of all the problems that government regulation of the internet may create. The problem is that those who do not want regulation refuse with equal vehemence to offer the public any guarantees that they would operate under the principle of network neutrality. They state that if a network neutrality concern surfaces, the market will magically punish the abuser thereby restoring the operation of network neutrality.

This theoretical self-correction sounds reasonable but it breaks down in the face of reality. The average person does not have the equipment and technical expertise to monitor the internet. Companies, if discovered, can easily say "OOPS, sorry about that" and then try another abusive tactic. So if the ISP are unwilling to stand-up and offer the public reasonable guarantees of network neutrality, why should we trust them. "The check is in the mail."

Second, the argument is made that the ISPs would have little incentive to interfere with the movement of packets on the internet. This is bunk.

However, before I go further there are times when an ISP has legitimate technical reasons for managing packet flows on the internet. My comments pertain to when an ISP interferes with packet flows for ulterior reasons unrelated to technical issues.

Richard Bennett commented that: "In general, arguments that service providers can't do this or that as a practical matter are founded on sand. Advances in technology make many things practical tomorrow that are utterly impossible today, and we can more or less expect that to happen." This observation is reflected in reality. (Please note that Richard Bennett would, more than likely not agree with my statements below.)
  • In the ideal situation where the ISP is just providing the "pipe" there is no economic incentive to filter. However, when telecoms (as one example) are part of the network flow, there are significant economic incentives to filter. Sues AT&T For Blocked Phone Calls.
  • Then there is the corporate intimidation tactic: Movie Studios Sue Australian ISP For Not Waving Magic Wand And Defeating Piracy
  • We are now living in a world where special interest groups are demanding that laws be passed to force ISPs to break network neutrality concepts.
    RIAA Gets Tennessee Law To Force Universities To Filter Networks For Copyrighted Content
  • As a follow-up to the special interest groups gaining favorable legislation is the concern that private companies are now obtaining governmental police powers. This would essentially allow private companies to censor the internet at their whim. This is not an idle concern. Harvard Law Professor Charles R. Nesson, stated "This is an unconstitutional delegation by Congress of executive prosecutorial powers to private hands," says Nesson. "That a private organization is allowed to take a huge chunk of government power and impose its will upon millions of people is, frankly, disconcerting,"
  • This may seem outlandish, but then we are in a free market economic system, so it may be possible for the likes of the RIAA or the MPAA to pay the ISPs to spy on internet traffic for the purpose of uncovering the theft of so-called intellectual property. Essentially, private enterprise (in the name of protecting their so-called property rights) believes that they would have the right to read your private "mail" (packet) without your permission.
Those who oppose network neutrality regulation make lofty utopian assertions that the invisible hand of the free market will protect the concept of a neutral internet. The reality is that there are a lot of issues that would frustrate the operation of a neutral internet if they are not resolved. Those opposed to network neutrality are unwilling to make guarantees that if they were in a position of power that they would operate the internet in a neutral manner. If they are unwilling to step up to the plate and take responsibility, the consumer is free to seek regulation that will protect their ability to surf the internet in a fair neutral manner. After all, it is the consumer who pays the ISPs to provide this service.

Thursday, November 6, 2008

Obama Backpedaling ??????

Well it only took the New York Times one day to run a post-election article: "Obama Aides Tamp Down Expectations". The Times is blatantly for Obama so the question naturally arises was this article a legitimate news story OR was it a planted story by the Obama camp to lay a foundation for a future media blitz to diminish the promises made during the campaign.

One story, by itself does, not prove that this story was planted. Nevertheless politicians are not noted for being up-front when it comes to campaign promises. Once elected, campaign promises become a political liability. A political savvy person would never acknowledge that they purposely made promises that they had no intention of keeping just to get elected. Instead they would initiate, post election, a media campaign that would "document" the complexities of the "problem" and that after careful "consideration" would require a revision of the campaign promises to reflect "reality". The movie Wag the Dog (Wikipedia) comes to mind as a humerus example of how this manipulative process works to shape public opinion. Clearly it is to the benefit of the Obama camp to recharacterize campaign promises as hopeful goals rather than as real concrete commitments.

Is this story a tentative initiation of a future media campaign to diminish Obama's campaign promises? I don't know. Only time will tell.
Updated 11/9/2008: The Washington Post ran an article "Can He Do It?" The Post writes: "During the long election campaign, Sen. Barack Obama promised many things to many taxpayers, investors and homeowners. When he first announced some of his proposals, the economy and the federal budget looked vastly different." (Emphasis added). "What probably has to give is swift action on the myriad tax cuts that candidate Obama laid out on the stump, analysts said. " ... "William Gale, director of economic studies at the Brookings Institution. "Remember, the plans were created at a time when we weren't in this situation. Something has to give. Significant flexibility is required." " (Empahis added)

There is no doubt that priorities have to change in the face of a worsening economy. Neverless, like the New York Times article; is this article a legitimate exploration of the difficulties to be faced in implementing the campaign promisess or is it a forunner of the pro-Obama media to initiate a crusade to diminish Obama's campaign promises?