Category: Web/Tech

Blogs and the private production of public goods

Blogs are a remarkable example of the private supply of public goods. The writers are highly motivated, and often highly intelligent. They produce opinion and commentary on just about everything, with remarkable speed and timeliness. Yet few of these authors are paid directly. They write either for love, or in the hope of converting their fame into profit. Well over four million blogs have been created.

Yet as we might expect, not all bloggers contribute much to the public good. To put it bluntly, many of you out there are slackers. Here are some results from a recent study:

Some highlights: about a quarter of all blogs created are abandoned after only one day. Men tend to abandon their blogs slightly faster than women do, while women are slightly more likely to create a blog in the first place. More than 90% of all blogs were created by people under 30 years old. The average active blog is updated only once every 14 days.

The summary remarks are from www.2blowhards.com.

Canadian loopholes for file-sharing?

Is it legal to download music from Canada? Maybe. Read this update on the debate. The author, Jay Currie, also offers an excellent update on file-sharing and the RIAA suits, plus some analysis, consider this:

The record companies could use the P2P networks to publicize their clubs. They could flood Kazaa with current tunes, branded with their label, with a five to ten second promo at the beginning and end of the file. If you want to download Trick Daddy you can get a clean copy with the Trickster himself shilling for his record company’s club.

Adapting to the new digital, P2P reality may be painful. But in this case it is adapt or die. There will, no doubt, be deaths. I would not want to be in the retail record store business at the moment. But the creative destruction unleashed by new technology is already creating new alternatives for artists to reach their audiences.

As Terry O’Reilly pointed out in his 2002 article on P2P “Obscurity is a far greater threat to authors and creative artists than piracy.” And, as 32 time Grammy Award nominee John Snyder suggests in his Salon article, P2P file sharing represents the greatest marketing tool the music industry has ever come upon.

My take: I agree, but let’s get ready for a music industry with far lower marketing expenditures. This will not be pleasant or convenient in every way, as middlemen are not mere parasites, and property rights are not easily disposable. Our best hope is that Internet marketing can replace costly marketing campaigns, which will become increasingly unprofitable.

Addendum: Today’s Wall Street Journal, Money and Investing section, had some interesting figures on Apple’s iTunes service. You are charged 99 cents per song. It costs about 65 cents to license the song. Credit card fees are about 25 cents a transaction (which can include several songs), minus the two or three percent. Right now the service, extrapolated across a year, would bring in only $25 million in annual revenue. When the service is extended to Windows users, this could boost revenues to the store by as much as $600 million, profit by about a tenth as much.

Forbes poll on the best blogs

Here is the link for a Forbes article, listing well-known blogs in a number of areas, including food, medicine, politics, and media. The economics selection is very small but includes some of our favorites. It is, however, about time to allow for write-in voting, or at least list more voting options. Brad DeLong, probably the most widely read economics blog, isn’t listed at all, and that isn’t the only economics blog missing from the list….

Addendum: One knowledgeable correspondent told me that the economics blog selections were done in March, before MR was started I might add, and that some blogs were ruled out for being too political, not strictly economics.

New economic policy blog from England

The Adam Smith Institute has recently started its own blog. The focus is on current events, in both Britain and around the world, the perspective is market-oriented.

Friedrich Hayek is well-know for writing an essay “Why I am Not a Conservative,” here is Madsen Pirie’s take, from ASI, entitled Why F A Hayek is a Conservative. Pirie is one of the main bloggers on the site.

Smart credit cards: markets in self-constraint

The bottom line is simple:

Researchers at the University of Pennsylvania have one-upped “smart” credit cards with embedded microchips: They’ve developed a technique that lets ordinary card users program in their own spending parameters…The technology could let employers better manage spending on corporate cards or permit parents to get teenage children emergency credit cards usable only at locations like car repair shops, hotels or pay phones.

Programmable credit cards could let cardholders limit expenditures, for instance, to $100 a day or to spending only on certain days or at certain establishments, Gunter said. The programmable card’s added layer of security could also help cut fraudulent online use of credit cards, which has grown into a significant problem for consumers and industry. The same technology could be used in cell phones that use a smart card, Gunter said, to provide owners with ways to regulate the use of the phone by others.

For the full account click here.

One man’s vice…

Here is a new blog devoted to the economics of public policy for the vices, namely the regulation of drugs, gambling, and prostitution, see vicesquad.blogspot.com. I am reading a bit in here, but overall the perspective rings sympathetic toward various methods of legalization or decriminalization. Click here if you wish to read about the attempt of Los Angeles to ban lap dancing.

Here is the blogmeister’s self-description: “My name is Jim Leitzel and I am an economist and co-chair of the public policy concentration in the undergraduate college at the University of Chicago. For the past five years I have taught a course on vice policy, and I have recently started to write a secondary text for the class.”

Thanks for Peter Boettke for the pointer.

Is love predictable?

The advent of Internet dating has led rapidly to a search for better matching results, as detailed by a recent story. After all, reductionists may wonder just how many dimensions the problem can have. Consider the following:

[Researchers] decided to employ computer technology to find a few “simple, logical rules” that make up, well, the recipe for love. For help on the technical side, they turned to Michael Georgeff, director of the Australian Artificial Intelligence Institute. During his work on a NASA project at Stanford Research Institute, Georgeff had developed a methodology to teach Space Shuttle Discovery computers how to anticipate unexpected problems. Working with Thompson and Hutchinson, he applied the same principles to the design of dating software, employing many of the statistical methods common to social science research. “Say you score a 3 on the introvert scale, and a 6 on touchy-feely. Will you tend to like somebody who’s practical?” Using Georgeff’s software, Thompson and Hutchinson then developed an online quiz. Match.com, the highly popular online dating site, began using weAttract.com’s software this year to give users a rough sense of what proportion of the dating population might be attracted to their particular array of personality traits.

The new algorithms are designed to measure not only initial attraction, but also how well the would-be couple can live in harmony. Ten thousand people a day are signing up for eharmony.com, which also tries to do some simple lie-detecting. According to some accounts 30 percent of on-line daters are in fact married, and often lying about that fact.

Meredith Hanrahan, at Matchmaker.com, invokes a market metaphor:

If you want to buy a car, you get a lot of information before you even test-drive,” she says. “There hasn’t been a way to do that with relationships.”

Perhaps one web-dating entrepreneur put it best:

“Everyone is high maintenance. The trick is finding the precise sort of maintenance you need.”

The Eric Rasmusen controversy

Eric Rasmusen of Indiana University has long been well-known as an excellent microeconomist. I taught from his Games and Information for many years, I still have his article “Stock Banks and Mutual Banks” on my Industrial Organization reading list.

Lately Rasmusen has been the center of much controversy. Usually I like to summarize the links I use, however briefly. But in this case I am not sure how to explain events without offending anybody, I know Rasmusen a bit plus I have numerous gay friends. So just read here on the episode. Here is Rasmusen’s frequently interesting blog. Here are Rasmusen’s views on religion. Thanks to Eugene Volokh for the Chicago Tribune link.

Never miss a day of the revolution!

You can now see all the posts from a specific day by clicking on that day in the calendar. Also, did you know that an easy way to see all the posts in a category is to click on the category link at the bottom of each post? The opening page of Marginal Revolution contains the last 7 days of posts. Google search and links to monthly and weekly archives are available in the left hand column.

Elephants all the way down

I just learned that there is a blog concerned solely with news about blogging, www.blogroots.com.

Of course that is just the beginning. Blogdex tracks popular links, see also Daypop.com. Technorati tells you who is linking to the URL of your choice. Blogstreet.com lists the most influential and widely-read blogs. Number one is Scripting News, Instapundit is number three, the rankings are based on the metric of how often a blog is blogrolled by others. If you weight blogrolling by the influence of who is blogrolling, Instapundit is number one and Andrew Sullivan is number two.

Google the Revolution!

By popular demand we have added a search box to the left sidebar. Should, for example, you want to find all posts by your favorite Revolutionary, just search for Tabarrok! Now that we are getting lots of hits and a fair number of links, Google has a pretty good archive of MR. But you can help by putting a link to www.MarginalRevolution.com on your homepage – this will further draw the attention of the great Google spider! Thanks. You can, of course, also find content by category and date in the Archives.

Advice for budding bloggers

Here is more on how blogs succeed, or fail, from Daniel Drezner. Focus on your audience, he says, rather than obsessing on getting links from the popular mega-blogs, such as Instapundit. Don’t neglect the link from Electric Venom, she says the world of blogging is a bit like high school, it has its bullies, people who go through friends like laundry, and so on. Her conclusion: don’t do it if you don’t enjoy it. John Scalzi tells us that the future belongs to the amateur blogger (N.B.: he is paid), and that the mega-bloggers have to focus on boring topics, such as Howard Dean.

Arguments against micropayments

Why not use web technology to charge people very small bits for downloading songs, or reading blogs for that matter? An earlier note of mine discussed mental transactions costs — having to ponder the small charge each time — as a potential problem. An excellent post by Daniel Davies provides further, and better, ammunition against the micropayments idea. His key point: at some point micropayments have to clear through real financial institutions and the real shuffling of paper. Right now we don’t have the technology to do this more cheaply than credit card companies do, and they don’t find very small transactions to be worth their while.

Addendum: Here is a good response in defense of the practicality of micropayments.

The Demise of Crypto Anarchy

Crypto anarchists and cyber-libertarians promised a new world of privacy and liberty built on the foundations of the internet and public key cryptography. As David Friedman memorably put it public key cryptograpy allows “anonymity with reputation” thus it becomes possible in theory to evade the taxman while still maintaining a public presence.

All of this now looks somewhat naive. Consider, for example, how internet gambling has been quashed. First, the credit card companies caved into government pressure and refused to process gambling related transactions. Initially, gamblers shrugged this off and routed their transactions through PayPal but a U.S District Attorney accused PayPal of violating the USA Patriot Act and to avoid charges PayPal was forced to pony up 10 million dollars. (Why am I not surprised that a law intended to go after terrorists has been used to most affect against peaceful gamblers?). Entrepreneurs have taken their online gambling sites to places where it is legal like Antigua and Costa Rica but don’t try coming home again. When Jay Cohen, founder of the World Sport Exchange, did that he was tried, convicted and jailed in a Federal prison.

The cyber-anarchists and libertarians were correct about the technology – public key cryptography can do what they say it can do – so where did the argument go wrong? In part, the cyber anarchists forgot that most of the value of cyberspace comes from its overlap with real space. I don’t blog anonymously because I want to be rewarded for my blogging with something that I can use to buy a car (ok, maybe a toaster is more realistic). Even if privacy is perfect in cyberspace the many margins of overlap with real space leave plenty of room for authority to insert its hooks especially when authority itself is technologically adept. Moreover, as Richard Posner has noted, the demand for privacy is more often than not a demand for control over the public presentation of self and cryptography does nothing to help and may even impede that demand.

The cyber-anarchist world works in a thought-experiment when everyone demands privacy and as a result the technology for getting privacy is built into all of our communications structures and used as a matter of routine. But that’s a description of an equilibrium and not a description of how to get there from here. At present, most people are not that bothered with privacy and so do not, for example, encrypt their email. As a result, privacy is not convenient even for those who want it. Indeed, someone who encrypts their email or phone conversations is probably calling more attention to themselves than they otherwise would.

The cyber anarchists may yet be proven right but today David Brin’s forecast of a Transparent Society in which no one has privacy, including authority, is looking far more realistic. Need I mention this as proof of Brin’s thesis?