“It is difficult to make predictions, especially about the future,” says a proverb often attributed to Yogi Berra. Imagine the world of freedom, or lack of it. Who could foresee the technologies that make our lives so rewarding and convenient? The same technologies have us all under the government’s giant microscope. Thankfully, the brave have turned the microscope around.
In the months since Edward Snowden revealed the nature and extent of the spying that the National Security Agency (NSA) has been perpetrating upon Americans and foreigners, some of the NSA's most troublesome behavior has not been a part of the public debate.
The problem for NSA apologist is that when guys like Snowden disclose that the government conducts comprehensive surveillance in ways that would have made 1984’s O’Brien drool, it puts the entire progressive agenda in jeopardy.
The east coast and parts of the southern U.S. were to varying degrees paralyzed by blizzards a few weeks ago. The snow as expected rendered the roads treacherous, and in anticipation of slick streets, shoppers flocked to the grocery stores in advance.The rush into grocery stores, and its aftermath, offers worthwhile lessons in economics.First up, […]
The financial world is plodding along like a drunken sailor avoiding debt collectors by keeping no cash in his wallet. It’s not the kind of calm that’s going to last or end well. But the storm will have to wait until after the Olympics.What a game! We’ve never watched ice hockey closely before. But watching […]
In times of war and national emergency, it’s sometimes necessary to sacrifice civil liberties to secure vital gains in public safety. In those cases, we may have to accept a loss of privacy or freedom rather than invite mass slaughter of Americans.The National Security Agency’s domestic phone records collection is not one of those.Never have […]
Last year was quite the year for Bitcoin. We’ve seen exponential growth in Bitcoin’s exchange rate and extensive coverage in the media. Another phenomenon we have witnessed is the proliferation of alternative cryptocurrencies, five of which we’ve provided below.What all of these cryptocurrencies have in common is that they rely on a decentralized network to […]
Image: ShutterstockBitInstant CEO Charlie Shrem, along with alleged co-conspirator Robert Faiella, was arrested by federal authorities last week for allegedly laundering more than $1 million worth of Bitcoins. This is a tiny amount compared to the largest drug-and-terrorism money laundering case ever. Yet when British bank HSBC was found guilty in 2012 of laundering billions, […]
The exercise had an awesome name, inspired by the movies: “Quantum Dawn 2.”On July 18, scads of U.S. banks, stock exchanges and government agencies took part in a digital fire drill — a practice run in the event all of Wall Street came under massive cyberattack.This isn’t the first time banks have come under an […]
The faces of the Detroit bankruptcy are the thousands of pensioners whose promised benefits are suddenly part of the restructure negotiation. When Motown filed for Chapter 9 last July, the city had $11.5 billion in unsecured liabilities. The vast majority of this was pension and health care benefits owed to retired city employees.The images of […]
The New York Times published an interminable article on health care recently. Plenty of facts — how scrupulous are these journalists! — but the article displayed absolutely no comprehension of the basics of cause and effect. I was left wondering about the whole point.The article details how the health care system rewards specialists to an […]
We’ve pointed out in the past that President Obama’s views on the surveillance state shifted completely from when he was Senator to when he was President. As Senator, he supported a bunch of reforms that are very much like the ones his panel have suggested — and which he’s about to ignore. The NY Times […]
Bitcoins are largely considered digital currency (or “crypto currency”) so you’d expect it to be treated like currency on a retail web site. But the Internal Revenue Service might not think so.
The great inventors/businessmen of the First Industrial Revolution, such as James Watt and Matthew Boulton of steam-engine fame, were not just smart but privileged. Most were either born into the ruling class or lucky enough to be apprenticed to one of the elite. For most of history since then, entrepreneurship has meant either setting up […]
Both research and production look poised for a revolution as 3-D printing applies its high-tech charms to the business of creating chemical compounds and turns the production of medicine into a DIY project.
“Tea. Earl Grey. Hot.”When Capt. Jean-Luc Picard wants a steaming beverage in his ready room aboard the starship Enterprise, he just utters those words. The ship’s “replicator” then assembles the necessary atoms — including those for the cup — and produces it, ready for the drinking. Picard thinks nothing of it — it’s hardly more […]
The market has selected different things as money throughout history. Some of these items have served as money in isolated places for specific periods of time — for instance, cigarettes in prisoner-of-war camps. Cigarettes continue to be a currency in prisons if allowed, but if not, according to Wikipedia, “postage stamps have become a more […]
[Ed. Note: This article originally published on Jan. 24, 2013]Stocks up. Gold down. Bitcoin… waaay up.The S&P 500 busted through the 1,500 mark this morning. Stocks haven’t been this expensive since 2007… right before they got a whole lot cheaper… for a whole lot longer. Gold, meanwhile, dipped a tad. This, despite central bankers of […]
Before the housing market collapsed and the government pumped billions into the economy to save it, there was a programmer named Satoshi Nakamoto. And without much fanfare, he created an idea that’s in the process of changing the world. His idea was Bitcoin.Some background information is in order before I go any further.Think back to […]
Americans are still trying to get a handle on the full extent of the government’s domestic spying activities, including the recent revelation that the National Security Agency (NSA) has been collecting and storing the email address books of ordinary Americans using online messaging services. Many users of such services are looking to tech executives for […]
The online Internet exchanges created by the Affordable Care Act are up and running.OK, they’re up. Uhh, OK, some of them are sort of up.It has been almost a week since last Tuesday’s initial launch, and there have been more than a few problems.Website crashes, excessive response times and other problems have plagued the exchanges. […]
A growing consensus of IT experts, outside and inside the government, have figured out a principal reason why the website for Obamacare’s federally sponsored insurance exchange is crashing. Healthcare.gov forces you to create an account and enter detailed personal information before you can start shopping.This, in turn, creates a massive traffic bottleneck, as the government […]
As much as I love technology, part of me hates being so dependent on a live wall plug wherever I go. You find yourself trapped in some setting without accessible wall plugs and your phone is dying. You charge from you laptop, but that is dying too. You take recourse to your tablet, but that […]
U.S. and British intelligence agencies have successfully cracked much of the online encryption relied upon by hundreds of millions of people to protect the privacy of their personal data, online transactions and emails, according to top-secret documents revealed by former contractor Edward Snowden.The files show that the National Security Agency and its UK counterpart GCHQ […]
Today, like most days, I fired up my computer.I read freely available information on the latest developments in technology that would, in the not too distant past, have required a drive to a library to flip through journals too numerous for me to afford. I read the latest national and global news without having to […]
On a Sunday afternoon swim, a 6-year-old boy was bugging me in a sweet sort of way. He rode up and down the handrail on the stairs in the shallow end of the pool where I was trying to sit in peace. He was laughing and talking, but I couldn’t understand a word through the […]
I’ve just completed a heavy schedule of talks at the Agora Financial Investment Symposium in Vancouver. All my talks centered on information economics, Web startups, and the productivity of the Internet and its meaning. As usual, I learned as much from the attendees as (I hope) they learned from my talks. The research I did […]
Get this: The federal bureaucrat who last month started the litigation against Apple and book publishers for e-book pricing is the same person who, back in the stone age, represented Netscape in its lawsuit against Microsoft.
Recall that Microsoft was trying to give away its Internet Explorer to computer users for free. Netscape went nuts and got the government to clobber Microsoft for being so nice to consumers. It put the company through litigation hell and even demanded that Microsoft change its operating system code to untie it from IE.
The person’s name is Sharis Pozen, and she is acting head of the Justice Department’s antitrust division and a political appointee of the Obama administration. She claims that she is threatening state violence against Apple and publishers for pricing collusion — and that it’s her job to protect consumers.
Interesting. She began her career trying to protect the rights of an old-line company to rip off consumers. To her, a price of zero was unfair competition. She was sure that a browser should be a paid product. The progress of history flattens that argument. Today, dozens of companies beg you to download their browser for free. Browser use is all over the place, sort of like a free market. There is no Microsoft monopoly, contrary to the overheated predictions.
Given that history, one might suppose she would retire from public life and maybe go into flower arranging or something. Instead, she is still at it. Last year, she denied a proposed merger between T-Mobile and AT&T that would have improved your cell service. This year, she says that a deal between publishers and Apple is harming consumers, so she has to act.
Government had absolutely nothing to do with inventing the e-book. It didn’t invent the e-reader, either. The Nook, Kindle, iPad, and all the others were purely the products of private enterprise. So too the distribution system that makes millions of titles instantly downloadable with a quick click, storing your downloads in the cloud. The whole apparatus has given new life to the book itself, and represents a bigger shift in publishing than even the printing press.
But we are supposed to believe that Sharis Pozen knows exactly what the prices of e-books should be. She knows how the contractual relations between publishers and distributors are supposed to work. She knows when there’s competition and collusion. She knows how to protect the consumer against high prices because, of course, we stupid consumers are all sitting here completely clueless about whether $9 or $14 is too much to pay. We’d just mindlessly let go of our money, scammed by private enterprise, were it not for Sharis Pozen looking after our interests.
There is no arrogance in this world to compare with the government bureaucrats’.
There is no way that any mortal can know in advance how e-book pricing should work. For years, people tried to create a profitable market in selling PDF downloads. Some firms succeeded, but only in a limited way by selling to large institutions, and even then, the product add-ons had to be pretty impressive: fancy searches, large collections, citation help, and more. This model never penetrated the retail sector.
Why? It’s hard to say for sure, but in hindsight, one might speculate that the PDF format just isn’t very consumer friendly. It is fine for many purposes, and miraculous by any historical standard. But in the end, it was not commodifiable on a mass scale.
Then came the e-book. It had an HTML structure that allowed fonts to be increased and decreased. It allowed instant search. Navigation was a snap. It mimicked the page turn of a physical book. It was lightweight. For all these reasons, and probably some reasons that I haven’t thought of, the e-book became commodifiable. I never would have believed it, but there it is.
I know that I’m hooked myself.
But how does pricing work? A conventional government model would examine costs and presume that prices are marked up along a preset path. This model has a superficial, if fallacious, plausibility with physical goods, but it is wholly irrelevant to digital goods. With digital goods, in which the marginal unit cost of each additional item is effectively zero, the price is, very obviously, nothing but a point of agreement between buyer and seller, having nothing to do with costs of production.
So it’s anyone’s guess what the final price of an e-book ought to be. The market dictates this. At first, publishers were selling on a wholesale model and letting the distributors determine the prices. As the distributors do with physical books, they were pushing prices lower and lower, and the publishers started to complain.
That’s when Apple shifted to an agency model of pricing. The publisher sets any price and the distributor takes 30 percent. That way everyone can make a profit. This also allowed smaller publishers to get involved. Even a sole proprietor can get involved and push out e-books to the world.
So what’s the problem? Apple and Amazon have made it part of their contractual relationships with those using their services that they do not want to be undersold by another company. And why? Of course they want the business, but more tellingly, they are trying to incentivize producers to bring down prices in the interest of making deals.
This is standard procedure in Web pricing. If you are using a service, the service wants to be able to offer the best deal available. Actually, Amazon and others have been doing this for many years. The service user can accept or reject the deal.
Here’s the thing. If this is not the right model, it will hurt the service it delivers. Others can compete. Authors and publishers can establish their own systems. Markets work these things out for themselves. In this case, it appears that Amazon is the only complaining party: it does not want Apple to gain a foothold.
The e-book market is brand-new, for goodness sake. It is going to go through many changes before it is settled — and actually, here’s to hoping it never settles! Ceaseless change in economics and life is a good thing.
But bureaucrats don’t see it that way. They want to freeze everything in place and make all things conform to their model. And if Sharis Pozen had her way, we would all be paying Netscape for the opportunity to surf the Web. So much for caring about the consumer.