Black Google?

 Posted by on 26 August 2008 at 12:28 pm  Business, Technology
Aug 262008

Is there a need for a “Black Google”? According to this article, there is.

In a free market, specialty search engines could be entirely reasonable and appropriate if there is a demand for such a service. For instance, a search engine catering towards physicians might properly give different sorts of results than a search engine catering towards patients.

But the business model would only succeed if there were a subpopulation that had distinctive and significantly different search engine results preferences from the population at large, and the business could get them to become dominant users of their alternative search engine.

Otherwise you end up with problems like this:

Since search engines learn from what people are clicking on, RushmoreDrive had a small problem immediately after its launch: So many white members of the media were visiting the site that the results became skewed and turned up more “white” results…

The article also struck an odd note when it stated that Google’s search results “alienate the rest of the population” (i.e., the non-caucasians). It’s not clear to me that the term “alienate” is warranted.

Fraud or Ignorance?

 Posted by on 25 August 2008 at 12:58 pm  Business, Ethics
Aug 252008

Wine Spectator magazine was caught giving out its “Award of Excellence” to a non-existent Italian restaurant, which included on its featured wine list a vintage which the magazine itself once likened to “paint thinner and nail varnish”.

Writer and wine critic Robin Goldstein created this fake restaurant (complete with realistic website and all) as a test to see if the magazine would simply pocket the $250 entrance fee and give out the Award, or if they would actually do some serious investigation of the restaurant before handing out their stamp of approval. He presented his results at the recent meeting of the American Association of Wine Economists. Here’s more information on his methods.

So was the magazine acting fraudulently or in ignorance? And is it ethical for individuals or groups to use these sorts of deceptive methods to test the integrity of organizations which purport to offer a value to consumers by rating other businesses and products?

Decide for yourself after reading the article.

NoodleFoodler Letter to the Editor

 Posted by on 5 August 2008 at 11:16 am  Activism, Business
Aug 052008

The Boston Globe let me get my two-cents’ worth in on the issue of our mortgage crisis — my letter to editor on the subject was published in its Sunday, August 3 edition. Here’s the link, and the full text is reproduced below:

Let market prevail
August 3, 2008

The Boston Globe finds it “astonishing” that the Fed has to force lenders to do what they used to do out of simple self-interest – lend only to credit-worthy applicants (“An addiction to borrowing . . .,” Editorial, July 27). However, the editorial fails to examine how government regulation has perverted what is in banks’ self-interest.

Our banking industry knows that it doesn’t have to worry about the downside of lending to unqualified borrowers. Because of Fannie Mae, Freddie Mac, and the mandates of the Community Reinvestment Act, taxpayers ultimately foot the bill when borrowers can’t pay back loans.

It wasn’t always the case that banks could depend on the government using taxpayer dollars to pay for their bad decisions.

Government regulation made it in the self-interest of banks to try to sell credit to consumers without worrying about their ability to pay.

What is needed is not more regulation; we need to undo the damaging regulations that twisted lending incentives in the first place. Laws against fraud and other crimes are already available to punish dishonest practices. Government should cease economic regulation of banks, and let banks suffer the full economic consequences of the lending and investment mistakes they make.


Score one for the good guys! ;-)

Jul 222008

I just finished reading the featured article in the Summer 2008 issue of The Objective Standard, “Property Rights and the Crisis of the Electric Grid” by Raymond Niles, and I can whole-heartedly recommend it.

I had always wondered how the electrical utilities evolved into their current dysfunctional state as quasi-governmental entities, and never understood why utilities didn’t function more like private providers of essential goods (like grocery stores or airlines). Niles traces the history of the electrical utilities from the 1880′s to the present time, and shows how the current problems with the electrical industry are the result of government interference with basic property rights from the very inception.

I was particularly interested in his account of the California “deregulation” fiasco of 2000-2001. Diana and I lived in San Diego at that time, so we experienced this crisis of skyrocketing costs and rolling blackouts first-hand. However, I couldn’t make sense of the newspaper accounts at the time, which generally blamed the “free market” for the problems. (For a typical portrayal of the events, this Wikipedia entry on the “California Electricity Crisis” is a good example of the conventional wisdom).

Fortunately, Niles is able to reduce this complex topic to its essentials, using property rights as the unifying theme. As an industry analyst, he has tremendous knowledge of the history, and is able to communicate it clearly to a lay audience. And besides offering a critique of the current system, he also articulates a positive alternative vision of a free market electrical system in which property rights are genuinely respected, and the benefits it could bring to producers and consumers alike.

Because his article is the featured free article, it is available to both subscribers and non-subscribers. So read the whole thing.

(On a personal note, I had the pleasure of meeting Ray Niles at the OCON 2008 conference a few weeks ago, and found him to be a thorougly intelligent, articulate, and pleasant dinner companion.)

"Common Carrier" Craziness

 Posted by on 17 July 2008 at 11:38 pm  Business, Politics
Jul 172008

The common law doctrine of “common carrier” would be funny if it weren’t so stupid. In effect, the common carrier doctrine operates by designating a service as indispensible, and then destroying that service.

A New York Times article discusses the doctrine in the context of the debate over the advisability of “net neutrality,” which is “the idea that Internet access providers like Comcast should not be allowed to favor some uses of their networks over others.”

[The chairman of a net neutrality advocacy group] said the issues at stake go back to the common-law concept of a common carrier, which defined certain businesses — from blacksmiths to ferries — as so essential to commerce that their owners could not discriminate against any paying customer.

The ‘Lectric Law Library fleshes out what it means to “not discriminate,” in the classic application of the doctrine to a transportation provider:

1. To carry passengers whenever they offer themselves and are ready to pay for their transportation. They have no more right to refuse a passenger, if they have sufficient room and accommodation, than an innkeeper has to refuse a guest.

What’s funny is that no-one seems to follow this policy to its logical conclusion. Let’s say a common carrier does routinely refuse to provide service to certain individuals or a class of individuals. If the carrier is profit-seeking, the refusal to provide service will rest on the profitability of that refusal, or else some other carrier will enter the business to provide service to the denied individuals. Under the common carrier doctrine, such “discriminating” carriers would have to be punished, in proportion with the severity and persistency of their discrimination. Eventually, one or all of the following three things will occur: 1) common carriers will cease to be profitable as a result of increasing fines, and go out of business, 2) punishment of carriers will escalate to forcibly shutting noncompliant carriers down, or 3) no-one will undertake common carrier trades. Either way, the doctrine must have the effect of eliminating the businesses designated as common carriers.

If all of the above is true, then why, you may ask, do we still have common carriers? It is because we have a mixed economy. In a free economy, all property is privately owned, including all businesses. In a mixed economy such as ours, internet service providers such as Comcast can do business only if they are first licensed by the government. Once licensed, they enjoy a near-monopoly, with the ability through incumbency and lobbying to prevent other potential providers from entering the field.

So, we now we have the following perversion of incentives: a government policy of violating property rights (the common carrier doctrine) becomes a weapon by which those whose rights are violated (like Comcast) keep competitors out of the field by force. That is, the system is set up so that it is possible to make money by giving up your rights, so long as you thereby gain the power to violate the rights of others.

Ironically, this policy is supposedly designed to protect consumers. But it is consumers who lose in the end. Licensed common carriers have little incentive to provide good service at a good price, because consumers have no choice but to deal with them. So under common carrier policies, consumers must either 1) purchase overpriced and inferior services, or 2) face the complete unavailability of those services.
There’s a way to describe a policy like this. It’s called “stupid.”

Actually, there’s a better way to describe the common carrier doctrine. Wrong.

Southwest Airlines Secrets of Success

 Posted by on 15 July 2008 at 12:44 pm  Business
Jul 152008

I like Southwest Airlines quite a bit, so I was interested to see this article describing their plans for expansion at a time that other airlines are reeling from rising fuel costs:

Its competitors among the network carriers — American, United, Delta, Continental, Northwest and US Airways — are shrinking passenger capacity by more than 10 percent and grounding hundreds of aircraft starting in the fall. Southwest will add a handful of daily flights. It will take delivery of another dozen aircraft next year and still plans to grow by 2 to 3 percent.

How can Southwest pull off this move? Read the full article, “Southwest Airlines’ Seven Secrets for Success“, to learn more.

A Moral Example of Salami Slicing

 Posted by on 26 June 2008 at 11:47 pm  Business, Cool, Ethics
Jun 262008

Remember that technique which showed up in the plots of movies like Superman III, Hackers, and Office Space, where someone would change bank software to take fractions of cents from transactions like interest payments and funnel them all into one account? Nobody misses a fraction of a cent — but given enough transactions over time, the sum can really add up! That’s what they call “Salami Slicing.”

Of course it is stealing in cases like that, but the same idea of accumulating vast numbers of tiny values that are hardly noticeable could legitimately pay off, too.

Consider this fact about driving your vehicle: left turns often require waiting for oncoming traffic to clear, taking a little more time and gas on average than right turns do. Now, this doesn’t make all that much of a difference to most of us (just like the above fraction of a cent we may or may not get in interest from the bank) — but if you have a fleet of 90,000 big brown trucks that follow the routes you schedule for them each day to deliver packages, then adjusting your software to minimize left turns could really add up!

Last year, according to Heather Robinson, a U.P.S. spokeswoman, the software helped the company shave 28.5 million miles off its delivery routes, which has resulted in savings of roughly three million gallons of gas…

That’s some serious scratch, especially with the price of gas today! I love it — kudos to the brain at UPS who saw and brilliantly exploited this little fact.

[HT: Jason]

Jun 182008

I just love to learn about how people are using their brains and turning important problems inside out to slam-dunk in some novel way.

Try this on for size: they have produced genetically-modified organisms that “feed on agricultural waste such as woodchips or wheat straw [...and] excrete crude oil.” Isn’t that outrageously cool? So much for the “finite supply of fossil fuels.”

Oh, and the guys pulling this off have a nice angle aimed at those who are out to destroy industrial civilization:

What is most remarkable about what they are doing is that instead of trying to reengineer the global economy — as is required, for example, for the use of hydrogen fuel – they are trying to make a product that is interchangeable with oil. The company claims that this “Oil 2.0″ will not only be renewable but also carbon negative — meaning that the carbon it emits will be less than that sucked from the atmosphere by the raw materials from which it is made.

So if they go big with this, we get to enjoy the resulting cognitive dissonance in the guys who consider the invention of the internal combustion engine the low point of human history. Sweet.


Activists are now using corporate shareholder votes to push an agenda favoring “universal” health care. According to the May 27, 2008 New York Times, these activists are attempting get corporate boards to make explicit statements of principle supporting “universal health care” as a goal for all society (as opposed to simply asking that it be an employee benefit for that specific company). These activists include a mixture of religious and labor groups:

Employers frequently complain about the cost of health benefits for employees and retirees. The shareholder proposal would not require companies to provide health benefits for employees, but asks top corporate executives to view the issue in a broader context, as a question of social policy.

“We are doing what we can as shareholders,” said the Rev. Michael H. Crosby, a 68-year-old Capuchin priest who has had discussions with nine companies on behalf of 20 Roman Catholic orders this year. “We come out of a religious tradition, but we are not engaged in a messianic enterprise. We are one voice among many seeking equitable access to health care for all.”

Despite the fact that many have argued that these sorts of statements have no place in shareholder debates, the Securities and Exchange Commission has ruled that these resolutions must be included on the ballot.

I thought there were two noteworthy points:

First, the convergence of interests between religious activists and causes favored by the secular left previously described in this earlier New York Times article from October 28, 2007 is accelerating.

Second, the trend towards inappropriate shareholder activism is also accelerating. Yaron Brook discussed this issue in more detail in his excellent course, “The Corporation” given at the 2007 OCON Conference.

As Dr. Brook notes in a related article:

…What motivates these activists is not the wellbeing–i.e., the wealth–of fellow shareholders, but an anti-profit, anti-capitalist social agenda. It is they who call for corporate “social responsibility”–the idea that executives and shareholders should sacrifice money-making for the sake of sundry “stakeholders.” This is incompatible with the purpose of business and with the responsibility of corporate leaders to maximize shareholder wealth.

…But far from fighting government controls, shareholder “activists” fight to hand control over American corporations to government–or to organizations controlled indirectly by politicians, such as public pension plans. Indeed, this is already beginning, prompting many businesses to flee to the relative safety of private ownership–i.e., being owned and run by professionals–so that they can continue to maximize their wealth.

These activists are using the leverage and power of productive men and women running corporations to force them to advocate for government policies that will strangle the ability of such individuals to keep producing. I don’t think we’ll be seeing the last of this particular tactic.

It also means that whenever issues like this arise, pro-capitalism stockholders of corporations should make sure that their voices are also heard when it comes time for a shareholder vote.

Repealing Blue Laws

 Posted by on 1 June 2008 at 7:10 am  Business, Religion
Jun 012008

What happens when various “blue laws” (i.e., laws restricting commercial retail activity on Sundays) are repealed? According to this study:

Repealing America’s blue laws not only decreased church attendance, donations and spending, but it also led to a rise in alcohol and drug use among people who had been religious…

The economists used data from the General Social Survey on religious attendance and from the Consumer Expenditure Survey to show a very strong reduction in religious attendance and a decline in religious contributions once the blue laws were repealed. They found no change in other charitable activity, [MIT economist Jonathan] Gruber notes.

Interestingly enough, the former church-goers also went out and did more things on Saturday nights.

Here’s the article abstract: “The Church versus the Mall: What Happens When Religion Faces Increased Secular Competition?

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