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Now that's dumb

The US government is going to try to outspend heroin addicts for opium. I'm awfully cynical about government, but this still ranks among the stupidest things I've ever heard. As the Drug Policy Alliance says:

"The so-called 'carrot and stick' approach has failed in every country it has been tried in, including our own," said Bill Piper, director of national affairs for the Drug Policy Alliance. "As long as there is a demand for drugs, there will be a supply to meet it. Drug prohibition makes plants more valuable than gold."

A recent report from the State Department's Office of the Inspector General on counternarcotics programs in Afghanistan contained a pessimistic analysis of existing strategies. The report confirmed that eradication goals "were not realistic," and said that "the assessment team found no realistic possibility of outspending economic incentives in the narcotics industry."


Late night thoughts on the economics of parenting

My 1.5yr old son is very cute with his dancing, spinning around, singing, laughing, clapping, and high-fiving. Good thing too, since he's been doing it until 11:30PM most nights this summer.

I expected my kid would be short, smart, and hyperactive. Somehow I didn't realize he'd be a flirtatious, fun-loving night owl too. Ah well, I can attest to it being a fun package (for oneself, one's peers, and hopefully one's parents). But it's a bit tough on us. I feel guilty saying that, given how much childcare we have, but it is striking how much mellower and easy to entertain a lot of other people's kids are.

In some wacky theoretical sense, I used to believe that educated people have an erroneous instinct for quality over quantity in child production/rearing (ObKnockedUpQuote "Watch you, he wants to rear your child!"). That is, many people obsess about pouring resources into their kids, when they'd be happier (and the world richer) if they had more kids instead. But now that I'm going through the brutality of parenting, and psyching myself up to be happy with quality because I don't think I am up for much quantity, I'm not sure I buy that.

Maybe it's a question of utility curves: putting a little extra effort into existing kids doesn't hurt your quality of life much, even if it's over many years, whereas having new ones makes life really suck for awhile. Or discount rates: the cost of putting extra effort into parenting over 18 years is mostly in the misty future, while the cost of pregnancy and caring for a newborn loom large in the next couple years. (This is subtly different from Bryan Caplan's argument, which focuses on people over-discounting the benefits, rather than the costs).


This is why I don't read Marginal Revolution

Tyler on Robin on Tyler on Robin:

In some ways I think of the whole book as an (attempted) rebuttal to Robin. Robin is the rational constructivist, the logical atomist, the reductionist, and the extreme Darwinian. The Inner Economist is trying to reconcile (modified) economic reasoning and a (modified) version of common sense morality.

But...for the secularist reductionism beckons and seduces. Imagine an intellectual war with Darwin, Fourier, Comte, early Carnap, David Friedman and millenarian Christian eschatology on one side (that's my mental image of how Robin maps into the history of ideas), with bits from Henry Sidgwick, Hayek, Quine, and William James on the other side, yet within the framework of modern microeconomics and with ongoing references to the blogosphere. I am (implicitly) defending gradualism, pluralism, the partial irreduciblity of individual choice, the primacy of civilization, and yes also a certain degree of social artifice.

(see also Robin on Tyler on Robin)

Their exchange in the comments is both amusing and telling as well. As Robin says at one point in the thread: "So the main thing we disagree on, is that I want to be clear on what we disagree on, while you find the labels "reductionist" versus "pluralist" to be plenty precise?"

I stopped reading Marginal Revolution because something about Tyler's writing and ideas just didn't mesh with my interests and view of the world. His libertarianism is not my libertarianism, his cultural interests are not my cultural interests. I couldn't really put my finger on it, but Tyler has hit on at least part of it above. There may someday come a time when the camp with my dad, Darwin, and Robin in it is not my camp, but at this point it's no contest.

Perhaps this means that I should read Tyler's book as part of a search for contrary viewpoints, to avoid confirmation bias. But my strategy, at least so far, is to seek disconfirming ideas from thinkers with whom I share a philosophical common ground. This does limit the range of ideas I am exposed to, but it also greatly increases the likelihood that I will be receptive to these ideas, since they tend to be phrased in "my language" and have demonstrably appealed to people like me. When I read people too different from myself, I find it neither pleasant nor educational - mostly it just results in my writing critical blog posts.

Fortunately, people like me have quite a range of ideas.


Ron Paul @ Google

Ron Paul is speaking at Google right now. The video will be up on YouTube soon I'm sure. Here's the question I asked him:

"As a libertarian, I love your ideals, and I am excited about seeing them aired in national debate, and about the response it has gotten. But as a realist, I look at the betting markets at InTrade and I see your nomination chances in the single-digits. It seems like your greatest impact might be to help move the Republicans away from the current neoconservative insanity and towards a more classically conservative direction. Is that something you are working on, or think will happen?"

He said that his goal is to get as many votes as possible, and what happens happens, which I don't think is a good answer, because I believe that efforts should be directed where they will do the most good, and so it matters what those votes are going to accomplish. But he then gave what I think is an excellent answer, which is that he doesn't think much of politicians, or parties, or their importance in change. What he thinks matters is the opinions that people hold, especially young people, and he has been surprised and encouraged by the degree of response of young people to his campaign. So whether or not he wins, if he is helping young people learn about freedom, that will have an impact.

Update:  Video here.


Best econ paper title ever

In one of Tim Harford's columns I learned about the paper An-arrgh-chy: The Law and Economics of Pirate Organization:

This paper investigates the internal governance institutions of violent criminal enterprise by examining the law, economics, and organization of pirates. To sectively organize their banditry, pirates required mechanisms to prevent internal predation, minimize crew conflict, and maximize piratical profit. I argue that pirates devised two institutions for this purpose. First, I analyze the system of piratical checks and balances that crews used to constrain captain predation. Second, I examine how pirates used democratic constitutions to minimize contact and create piratical law and order. Remarkably, pirates adopted both of these institutions before the United States or England. Pirate governance created sufficient order and cooperation to make pirates one of the most sophisticated and successful criminal organizations in history.


False arguments against economist's views

I've been listening to this great podcast with Bryan Caplan about his new book The Myth of the Rational Voter: Why Democracies Choose Bad Policies (interview with co-blogger Trent McBride here). Just heard a great bit where they talked about how economists and random people have consistently different views on economic questions. But does this mean that economists are right? Well, in most sciences, we presume that the expert is more likely to be correct than the layperson. Why would this be false for economists?

There are two standard explanations: 1) Economists are rich white men, and their self-interest leads them to beliefs which favor rich white men. 2) Economists are libertarians/conservatives, and so they tend to believe the conservative party line.

Both of these are testable, and both are false. When you control for age, gender, income, education, etc., you account for only 18% of the economist / layperson belief gap. And when you control for political party, the gap gets slightly bigger - because the average economist is a moderate Democrat. It's understandable that one might not realize this since the internet is full of proselytizing libertarians, but it turns out to be the case.

Which doesn't prove that economists are right, of course, but does at least buttress the case.

BTW, Will Wilkinson had an interesting bit about one of the biases Caplan identifies - the pessimism bias. Compared to regular people, economists (and libertarians) are much more likely to think that things have gotten better and are getting better. This leads to some of the regulatory differences - if you don't think there is a problem, then you also won't think government needs to provide a solution.

Anyway, the interesting part is this as a partial explanation for why libertarians tend to be skeptical of global warming. We're so used to hearing bogus alarmism that we automatically disbelieve any claim of a crisis paired with an explanation of why government needs to fix it. Of course, sometimes there really is a wolf, and libertarians should make sure not to take their learned skepticism too far.


Update on Lott, Guns, and Cats

David Friedman has posted the details of his claim that Lott is using an erroneous version of a gun control anecdote. Also see the discussion over at EconLog. Some commenters at EconLog claim that Allerca has shipped cats, I am investigating.

Here is a news story on Allerca's problems and the reputation of its founder:

Allerca was evicted in February from its San Diego headquarters – which was also Brodie's residence – in the downtown 777 Sixth Avenue Lofts complex for nonpayment of rent, according to court records. In addition, Allerca, Brodie and other Brodie-affiliated companies have accumulated tens of thousands of
dollars in bad debt in recent years.

...

This is not the first time that Allerca founder Brodie has been involved in companies that propose to do things on a grand scale. At various times, the entrepreneur has promoted companies that proposed to create the world's most powerful computer processor, as well as a national Wi-Fi network.

Some of Brodie's companies seem to appear suddenly and fade quickly, and in some cases leave behind unhappy clients, unpaid employees, debts, lawsuits, court judgments and liens, according to court records, former Brodie associates and media accounts.

In 1998, Brodie promoted Integra Information Technology, a Toronto company that recruited non-computer-literate people in England to pay 15,000 pounds, or about $25,000 at that time, to take a three-week Lotus Notes training course by promising them highly paid contracting work.

The price tag included flights to Integra's training center in Toronto, accommodations, software and vouchers for the cost of taking the Lotus exams on the clients' return to England. At the time, the cost of similar Lotus training, which typically required months to complete, was only about 2,000 pounds, or around $3,300, in the United Kingdom.

The British magazine Computer Weekly took a skeptical look at Integra in September 1998, detailing in an article the plight of former Integra clients and the company's dubious marketing practices.

Those former clients said that Brodie, who described himself as Integra's business development manager, promised that the course would provide them with full Notes training and that the company would help find them work.

Computer Weekly, which interviewed Integra clients and information technology experts, concluded that the eality was far different, with “ex-course members struggling to complete their Notes certification on their own, left to fend for themselves in the job market, and grappling with huge debts for the exorbitant course fees.”

The rest of the article contains other examples of the dishonesty and scamminess of Allerca's founder's other ventures.

John Lott makes some good points in the EconLog comments defening his use of this example: "The paragraph that I had on the Allerca cats was based on two news stories that came out when was writing the book last fall (Meghan Daum, "$4k Cat Is Nothing to Sneeze At," Los Angeles Times, October 7, 2006, and “Hypoallergenic Cats for Sale,” ABC News, October 6, 2006. The point was a simple one that simply giving a producer a patent isn't always enough to ensure that the producer can earn the profits necessary to encourage innovation. I used the cat example because it was very current. There were of course other examples that could have been used. I have no idea who is correct on this point and I appreciate Patri bringing it to my attention (if indirectly)."

It is certainly true that as a hypothetical example, this is a fine one to illustrate a point, and that mainstream media were taken in by the story as well. But I believe strongly that people should check their facts before claiming in print to be telling true stories, and a single google search would have revealed the controversy over Allerca. I made that Google search awhile back because something about Allerca - like that they'd had a website for years and never produced a tangible product, despite it being something that lots of people would buy if it existed - smelled funny to me.

So while I agree that it is a minor error, it still seems like one which points away from recommending his book. It seems to indicate either that Lott/his editor do not believe in double-checking his facts, or that they did not detect the scent of snake oil from Allerca. Either of these reduces the book's reliability as a source, and thus the benefit from reading it. Admittedly, it is a small factor, but I think it is a real one. After all, one reason to read a book is to learn in an efficient mannter by saving time because you can assume that the author has done the fact-checking already.

On a more positive note, let me echo David's sentiments in rejoicing that we live in an age where such discussions can include responses by those involved as well as links to sources, so that readers can review the material and decide for themselves exactly how to adjust their reputational evaluations.


Who Watches The Watchers? And Who Kills The Killers?

Randall posted about this terrible case, When Killer Cops Walk:

On November 6, 2006, U.S. Marine Derek J. Hale, back from Iraq on a combat-related discharge, sat peacefully on a friend's porch in Wilmington, Del. in the late afternoon. He was in town to participate in the Toys for Tots program and was house-sitting for the friend. He had no criminal record, but he had recently joined a motorcycle club that, unbeknown to him, was being investigated for drug dealing. Without any warrant for his arrest or to search him, a team of at least eight undercover state police officers approached him from their unmarked SUV, commanded his friend's ex-wife and her two kids to keep back, and tasered him seven times without provocation. As Hale writhed on the ground, vomiting and convulsing from the tasing, police Lieutenant William Browne closed in and shot him, point blank, three times in the chest.

Like Webb, Browne claimed self-defense. But Hale was no threat to anyone when he was killed. He didn't resist arrest. He had no weapon. He had no chance. Again, had an Iraqi insurgent killed him, even in far more ambiguous circumstances, most Americans would have assumed he was in the right and his killer in the wrong. But when an American police officer shoots him in an act of cold-blooded murder, there's nothing to see here, please move along. The Delaware attorney general cleared Browne of criminal charges; he's back on duty, and just last week the Wilmington Police Department announced that he had not even violated police procedure or policy.

When our cops are shooting and killing our troops, perhaps we should wonder about giving either group unquestioned faith. When different rules apply to police officers than to everyone else, what exists is a police state. The seeds of totalitarianism are planted when the state's agents have a different moral code than the rest of us.

(a more detailed article from LRC)

I am sympathetic to the criticisms expressed in the comments to my revenge Livejournal post linking to this EconLog post defending revenge: that revenge tends to attract hotheads and create fueds, and ceding violence to the state is a win because it is dispassionate and the feud ends tehre. But for certain types of crimes - namely, those perpetrated by agents of the state - the state is notoriously and consistently lax at punishment. To give up completely on redressing those frequent wrongs seems like more than a small step in the direction of a police state, a two-tiered society of wolves with badges and sheep who they both protect and abuse, depending on circumstance.

Now, I'm not going to just naively make a slippery-slope argument and say that because of this, vigilante justice against the state is always wonderful because otherwise we're totally screwed and will end up in a totalitarian dystopia. I acknowledge that there are substantial advantages to police rather than vigilante justice, and so even with some amount of abuse, it can still be a good system. Yet surely it is also true that with less abuse, it would be an even better system, that cases like this demonstrate how little incentive against abuse there is, and thus that it is worth thinking about how such excesses can be checked.

Let's consider one solution for this case: a group of Derek's Marine buddies get together and assassinate Browne. It is not clear to me that any of the objections raised apply to such a case. There is detailed court evidence which can be used to ascertain what happened, and thus no need to worry about kangaroo courts or hotheads asking without evidence. It might start a cop vs. Marine feud - but seems more likely to just make cops be a bit more careful about who they murder. And because it is specifically focusing on an area (prosecuting cops) where the state has abdicated its duties, would it really threaten the good system we currently have?

Maybe we haven't gotten to that point yet. Maybe more killing won't help. I dunno. All I know is that it makes my blood boil when people get away with murder, not because they didn't get caught, not because the evidence was unclear, but because they have a badge. And while it may be "vigilante" justice, I have a tough time believing that private action to redress such terrible wrongs would really make the world a worse place. Shouldn't those who dispense death be the most worried about receiving it, lest they dispense it too freely?


Enemies of the truth

I bashed Michael Moore on my personal blog recently for being a lying propagandist. One person defended him for being a liberal antidote to conservative lying propagandists, and I replied that what we needed was more truth and not counterbalancing lies. I detest Moore even when I agree with some of his ideas (the Iraq war is bullshit, health care in the US is screwed up), because of his disregard for the truth. To me, honesty is more important than what your political views happen to be. Which is a good segue to bashing John Lott.

Lott is a good example of how someone can get wrapped up in a set of political ideas to the exclusion of the truth, which I consider a bad thing even when I agree with those ideas. Now, we've all heard about the Mary Rosh incident, but there is more:

Exhibit A: While I haven't read Lott's latest book Freedomnomics, Bryan Caplan's review mentioned the first highlight as "In order to forestall the creation of a secondary market by customers who buy the cats [$3950 + $900 shipping] and then breed them themselves, Allerca simply neuters all the cats it sells." Now, as someone who is terribly allergic to cats, yet has many friends who love them, I have kept tabs on Allerca, and as it turns out, they have never actually shipped any cats, and as far as anyone can tell at this point, their product is vaporware. (See Wikipedia, or Google for [Allerca vaporware]). Citing the economic theories of a vaporware producer w.r.t. their product does not exactly suggest careful scholarship.

Exhibit B: David Friedman tells me that John Lott likes to use, in speeches, a particular stirring story about a horrible crime that would have been averted had there not been gun locks on a family's guns. David investigated that story, and found that while the crime had happened, the part about the gun locks was bogus. He passed his findings on to Lott - who continued to use the story in future speeches.

So, much as I love freedom, I'm staying well away from Freedomnomics. And as for the Lott-Levitt fued, while Steve Levitt may not be a libertarian, at least he's an honest guy. As far as I'm concerned, that means he's on the right side.

I have enough confidence in my ideals that I believe more truth and more honesty will only help them - no matter what political alignment it comes from.  And if more truth makes my ideals look worse - well, so much for those ideals.


Consumers paying for features?

I got an iPhone yesterday, and by now I have of course exhaustedly catalogued it's pros and cons. I'm sure Apple will fix some of the cons in software, but the situation makes me wonder whether there are better incentive systems than just selling more units to promote software improvements. I'm thinking something like a site where people post ideas, and bid on them. If Apple implements an idea, it gets paid all the bids. So the site would serve both to collect and rank ideas, and to let consumers pay to have those ideas implemented.

There are two problems with just counting on the desire to ship more units:

1) It's a coarse signal - Apple has to count on market research to determine what features people want, because "We sold X more units this month" doesn't tell that. The market would be much more detailed.

2) Their incentives are entirely focused on the marginal consumer. I guess there is some incentive to please the fans who help generate the hype so they'll generate more. But aside from that, Apple's incentive is to shift more marginal consumers, not to increase the utility of the device to people like me who already find it well worth the $600 price tag.

Note that even if the total bid on the site is higher than the cost of the improvement, it may be worthwhile because of the other benefits (like selling more units). Among other things, the site serves as an un-spoofable ranking system for how much people want new features.  There's a public good problem, sure, but Apple can just upweight the monetary amounts accordingly.

(For those who are curious - the screen is huge and gorgeous, while the device is slim, and most of the time it's a joy to use the multitouch interface...but there are some annoying UI quirks like no search of contacts or songs, that ought to be easy to fix.)


Cory Doctorow on Copyright and the Information Age

Cory Doctorow talks fast enough that I am not multi-tasking, except for typing up some of it. This is unusual for a talk!

Boing Boing and Wired reach audiences about the same size. Boing Boing costs $2500/mo in bandwidth. I'm sure Wired costs orders of magnitude more to print and distribute. Cory characterizes the US as having an autoimmune disorder w.r.t. the internet - US legislation attacking the countries lifeblood. The cause is partly the phrase "The Information Age", which likens the internet economy to the old manufacturing age, but with Information as the product, rather than Manufactured Goods. This is a mistake of forecasting the future to be more like the present than it actually is. He does some great mocking of the ability of future forecasting: "We didn't predict Yelp, we didn't predict askaninja, we didn't predict Google".

So we assumed that like companies in the past sold stuff, companies in the future would sell information. We passed legislation that lowered trade barriers for physical goods but requiring trading partners to sign onto our IP laws. To protect the Snow Crash "Music, Movies, and Microcode" segments of our economy, which we thought would make up the balance of trade. Suddenly we have these lawmakers demanding "justice" for the recording industry, which they had previously damned as an endless sewer of filth.

Cory does not believe that there is enough money in selling information to make up for the loss of manufacturing exports. So we should stop trying, and stop hurting ourselves. None of the crap we are doing with the DMCA serves its ostensible purpose of copyright, namely promoting diversity. Doing things like suing Danger Mouse for the Gray Album is saying "This art does not have the right to exist." And that's kinda creepy. An EMI exec responded to him at a previous talk by pointing out that EMI then signed Danger Mouse to make more music.

"So what?" says Cory. This is a move back to a patronage system where you have to have permission from

"Making bits harder to copy is like making water that is less wet", says Bruce Schneier. The future is clearly going to be a place where it is going to be easier and easier copy. That is obvious. DRM does not work. If you deliver to the attacker the cipher, the ciphertext, and the key (pause, everyone laughs), you cannot stop them from cracking the cipher, no matter how smart your engineers.

It's like the Victorian prohibition against masturbation. It's like Lysenkoism, where you deny the obvious physical realities of where wheat will grow. The result is not wheat - it is famine. Then you get the incredible irony of the Dmitry Skylarov case, which resulted in Russia warning its academic community that the United States has become a country where certain kinds of math are illegal, and they should be careful about traveling there or presenting their work.

We are constructing a society where the law and physical reality are getting farther and farther apart. "Consensus hallucination". If the world is going to thrive, we need to embrace the real information age - a world where communication transforms every business, eliminates some of them, and brings huge efficiencies to the rest. He disses Google for doing DRM on Google Video. If publisher require DRM - it isn't the right time to be in video. It is against the customer-focus of the company, he believes, because no customers want DRM. So please don't bring this to YouTube, he asks.

Questions: I asked "Do you see a connection between the impossibility of stopping people from copying bits, and the futility of trying, and the impossibility of stopping them from growing small plants and using them in various ways?"

He said "Definitely! There is a strong connection with the War on Some Drugs. That war doesn't help users, it doesn't help junkies. This is all part of a bigger thing where we criminalize behavior that everyone engages in. It's poisonous - corrupting to all of society."

Someone asked a very sharp question, asking whether Cory's problem is with the existence of copyright law, or simply how it gets used by these big media companies, and what the solution is. Cory agrees that a lot of the problem is how it gets used in this media conglomerates, but he thinks that many of the laws (ie against sampling) are part of the problem. One suggestion he has is to make the rights to authorize derivative works inalienable to the author, so that rights are widely distributed rather than concentrated in the hands of a few companies. He also suggests increasing the bifurcation of law into different forms for culture and commerce, which allows a lot more freedom for individuals to play with bits than for companies to sell them. "I don't think it's unreasonable for a movie studio to have to pay another movie studio to use their character, I do think it is unreasonable for them to sue you for painting that character on your nursery wall."

Another good question: Is there a parallel between "bits get easier to copy, and you can't stop that", and "privacy gets easier to violate, and you can't stop that"? I think so, and he gave the answer that privacy is a much thornier problem, and he isn't lecturing about it because the answers are much less clear.

I expect the talk will be up on Google Video within the next week.


Open Source Terrorism and the Decline of the Nation State

I recently discovered Brave New War by John Robb:

War in the twenty-first century will be very different from what we've come to expect. Terrorism and guerrilla warfare are rapidly evolving to allow nonstate networks to challenge the structure and order of nation-states. It is a change on par with the rise of the Internet and China, and will dramatically change how you and your kids will view security.

In Brave New War, the counterterrorism expert John Robb reveals how the same technology that has enabled globalization also allows terrorists and criminals to join forces against larger adversaries with relative ease and to carry out small, inexpensive actions—like sabotaging an oil pipeline—that will generate a huge return. He shows how taking steps to combat the shutdown of the world's oil, high-tech, and financial markets could cost us the thing we've come to value the most—worldwide economic and cultural integration—and the crucial steps we must take now to safeguard our systems and ourselves against this new method of warfare.

This seems like a reasonable projection. And his solution, which is to increase decentralization to reduce the number of major attack points, also seems quite reasonable. Decentralization will be expensive - there is a reason we build giant, vulnerable facilities - but it does seem like a good counter-strategy.

His Global Guerrillas blog is very interesting as well - it's sort of the wikipedia/open-source/memetics/long-tail/Web 2.0 viewpoint applied to global insurgencies, drug gangs, etc. For example, he explicitly applies The Cathedral and The Bazaar to terrorism. And a recent post was fascinating from the viewpoint of David Friedman's hope that eventually the state will just wither away, or the Snow Crash model of the state just becoming slowly obsolete:

JOURNAL: Private CIAs

A strong sign that the nation-state is in decay is the frequency we see announcements of companies that are replicating some of the most sensitive government services. The most recent mover is Walmart, which is in the process of putting together its own intelligence arm (it's being built by a former CIA/FBI officer Kenneth Senser). For those unable to afford their own global intelligence unit, Blackwater's Cofer Black is building one called Total Intelligence Solutions.


Market is internally consistent

MSFT pays $6B for AQNT, which had a market cap of about $3B. The result? MSFT's market cap is down by about $3B.

The market is consistent - although it may or may not turn out to be right.


Governmental Innovation and The Wisdom of Crowds

I've been reading James Surowiecki's The Wisdom of Crowds, and I think it must be really good, because I've already encountered a section supporting my political ideas :). Discussing the early automobile industry, he writes:

In the first decade of the twentieth century, there were literally hundreds of companies trying to make automobiles. And because there was no firm definition of what a car should look like, or what kind of engine it should have, those companies offered a bewildering variety of vehicles, including the aforementioned steamers and battery-powered cars...At one point, a third of all cars on the road in the US were electric-powered. Similarly, steam-powered engines were seen by many as the most logical way to propel a vehicle, since steam obviously worked so well in propelling trains and boats...As the decade wore on, though, the contenders began to fade...By the time of WWI, there were still more than a hundred automakers in America. But more than four hundred car companies had gone out of business or been acquired.

He also explains how the best innovations from this wide variety were eventually taken up by the winners, and goes on to generalize:

The story of the early days of the US auto industry is not an unusual one. In fact, if you look at the histories of most new industries in America, from the railroads to television to personal computers to, most recently, the Internet, you'll see a similar pattern. In all these cases, the early days of the business are characterized by a profusion of alternatives, many of them dramatically different from each other in design and technology. As time passes, the market winnows out the winners and losers, effectively choosing which technologies will flourish and which will disappear. Most of the companies fail, going bankrupt or getting acquired by other firms. At the end of the day, a few players are left standing and control most of the market.

Why do things this way? Isn't it inefficient to have so much failure? Surowiecki explains that this process is a response to a situation when you not only have to choose between many possibilities, but you don't even know what the possibilities are! Now you can't just choose, you have to first explore to determine your choices, which requires diversity and experimentation. He says:

One key to this approach is a system that encourages, and funds, speculative ideas even though they have only slim possibilities of success. Even more important, though, is diversity, not in a sociological sense, but rather in a conceptual and cognitive sense. You want diversity among the entrepreneurs who are coming up with the ideas, so you end up with meaningful differences among those ideas rather than minor variations on the same concept.

Because of the high barrier to entry in the governing industry, such an explosion of innovative and diverse firms has passed us by. Without experimentation, how can we find more effective means of organizing and governing societies? And because the cost of switching countries is so high, the current large firms don't even do much innovation to compete with each other. (And what competition there is is to attract businesses, not people, since businesses are more mobile). As a result, the field is moribund, slow-moving, and inefficient, with business models ("Monarchy", "Democracy") lasting for hundreds of years - the diametric opposite of a thriving industry. This is especially bad because government is currently the largest industry. Furthermore, one of its most important aspects, generating laws, is a knowledge industry of the type which has been revolutionized by modern communications - at least, in the private sector - so there is reason to think the technology could be improved.

Dynamic geography and market anarchy both offer the potential to dynamize the industry by knocking the entry barrier down to size. Dynamic geography is what you get in places like the ocean where you can build a new country one floating house at a time. Market anarchy is a system where each function of government is performed by many competitive, private firms. In these systems, a new competitor doesn't have to win an election, a revolution, or a war to enter the market, just have a new and appealing product - just like the industries Surowiecki describes.

It is important to note that these new and appealing products should not be restricted merely to libertarian systems. A competitive market can serve many niches - including ones that you never would have predicted in advance. Which is a good thing - we want to see the product of diverse viewpoints about what makes a good, just society and how to get it. The lack of governmental innovation doesn't just hurt libertarians - it hurts everyone.

Now, its not clear that either of these systems will ever become reality - they are clearly speculative ideas. But slim though the possibilities are, the potential payoff is gigantic. If either of them comes into being, government will finally have its Cambrian explosion, a dot-gov boom of experimentation and exploration, and the world will be a different and better place. Seems worth shooting for - which is why I'm back to trying to finish my seasteading book.


Active Insurance

I've been thinking about a potential business idea for seasteads (although it would work elsewhere as well) which my friend Daniel called "Active Insurance". It came out of daydreaming about what I'd want to do with lots of money if I made it.

One answer is "buy healthcare which gives me a long and happy life", which made me wonder how someone with lots of money would turn money into health. If you have enough money, just buying healthcare won't soak up enough. What I would really want to do is to sponsor medical research into the things which were going to kill me.

So imagine an organization you could join, and give whatever amount of money you want to devote to your health problems. The organization starts out with a full risk assessment to figure out what causes are most likely to kill you. The organization then allocates your money to its research funds in proportion to their risk. So each medical problem is funded in proportion to the sum of risk it contributes to the membership pool weighted by the contributions of the at-risk members. (Even better would be to add an estimate of the difficulty of addressing a given problem, and thus the benefit of marginal dollars).

The larger a fund and the more obscure the health problem, the more likely the organization would start an in-house effort. For smaller funds and more common problems, it would instead give research grants, donations, and venture capital to other organizations. Any breakthroughs or products would be first available to members, then either sold to other medical companies (to increase funds available for solving more problems) or given away, depending on the cost structure, demand structure, and goals of the membership.

I suppose that a truly efficient regular insurer would render such a system less useful. The insurer would have incentive to research medical breakthroughs that would reduce their costs by more than the cost of the research. But they don't have the sliding cost structure, where people are willing to pay more because they know the money is going directly towards figuring out how to extend their life, solve their problems. And in practice, while they fund some such research, they don't fund much.