“Good banks, bad banks… doesn’t matter. What we need is new banks.”

Buiter’s idea to create new banks with bailout funds, seconded by Paul Romer and discussed by David Warsh is endorsed by uber-entrepreneur Marc Andreessen in this great video:

My better half, The Real Scientist, tells me that I should learn to compromise and my analysis should be conditioned on the fact that politicians will feel the need “to do something”. So getting angry about the mess they make (e.g. the disincentive to work created by the mortgage bail-out) when doing nothing would be optimal is like cursing the sun for rising in the morning. If the government feels the need to spend a ton of money fixing the banking system, investing in new banks is a good way to spend that money.

PS – No really. I’m off blogging for the rest of the week.

“We’re bored” argument for stimulus

This Lessig comment sounds like he’s wanting the fiscal stimulus because he’s bored by the old way of doing things:

If we’re lucky, we get the chance for this kind of transformation once a generation. It would be a scandal on the scale of the last 8 years to fritter it away.

New, hip things like broadband are cool. Let’s not fritter away the chance to force the whole economy to transition to these technologies.

Don’t get me wrong. I’m a total geek. I DO think broadband, smart grids, high speed railroad, online medical records, etc are cool. Its just not clear to me that these are efficiency improving technologies and even granted that, its not clear why these have to be public investments.

Larry Lessig and Will Ambrosini want these technologies therefore everyone else has to pay for them?

Where I spent my stimulus check


“But the stimulus checks haven’t been sent yet,” you say. “A stimulus package hasn’t even been passed yet,” you exclaim.

Right you are. But in expectation, my stimulus will be around $500. (90% chance a $750B deal will pass relatively soon and 75% captured by special interests leaves $500 each for the rest of “us”.)

“Alright smarty, but if you’re so ‘rational’ then why aren’t you saving all your expected stimulus in order to pay back the future taxes that will have to be raised to pay for all of this,” you respond.

Yes, given I’m forming expectations about the future, it looks a lot like I’m Ricardian. Maybe. If we’re allowed to stray from rational exceptions, though, its no holds barred. We can invent any psychology we want. Maybe my expectations are rational, i.e. expectational errors have mean zero, for cash in-flows but not for cash out-flows. Its easy to form expectations about in-flows — paychecks come in fixed intervals with some known probability— but the consumption side of my brain is next to unpredictable and so I don’t know the distribution from which my consumption draws originate.

Or maybe I expect to be poor in the future and I also expect a more progressive tax structure. Then its rational for me to spend other (future) people’s money.

Or more likely my future richer self really wants to give my poor-graduate-student self money to help smooth my consumption. He can’t do that because the right kind of long-term intertemporal consumption credit markets don’t exist. Fiscal stimulus just acts to complete the market.

“Right, so anyway, how do you like the phone.”

Thanks for asking. I’d have to say the iPhone is the best gadget I’ve played with in years. Its too early to tell but I’d say it may be the best gadget I’ve ever used.

Are EULAs inefficient?

Tim Lee says so:

It should be remembered that every contract signed is a prelude to possible state coercion if the contract is broken. Like all other kinds of coercion, the possibility of contract-related litigation creates uncertainty and other deadweight costs. In addition, the act of offering contracts imposes a deadweight cost. Every time I’m presented with a contract, I have to at least skim through it to make sure that the terms are acceptable. A society in which contract formation is extremely cheap for one party will be a society in which other people have to spend a lot of time scrutinizing the contracts they offer. Finally, contracts impose costs on the court system. A legal system that makes contracts to cheap to create will lead to too much taxpayer money being wasted on contract litigation.

In contrast, if things are structured so that each party bears roughly half the costs of contract negotiation, then each party is only going to propose a formal, written contract if he believes that the benefits of doing so will outweigh the costs to both parties. This is one of the good things about paper contract negotiations between flesh-and-blood people: If you give me a long contract to sign, you’re going to have to stand there and wait while I read the contract and decide if I want to sign it. Since standing around is a waste of your time, you’re only going to do that if you believe the transaction can’t happen without it. And you’re going to try to make the contract as short as possible so you don’t have to stand around too long.

I’m not so sure about this. EULA’s impose a cost on customers, but they’re willing to pay those costs so I’m not sure why these would be dead weight losses. I agree that if I read every contract offered me, that would entail high costs, but I don’t read every contract offered me. There’s a risk that if I don’t read the contract I’ll be signing away my life, but clearly if I buy the software I’m willing to bare this risk.

I agree legal costs are dead weight losses but its an empirical question as to how much cost EULA’s impose on our court system. I’m guessing not very many of these contracts are contested in courts so the cost is really low.

Standards of fairness may argue against EULA’s (e.g. both contracting parties should bare equal contracting related costs), but the efficiency based argument against them doesn’t work for me.

As a complete aside: what’s so bad about leasing software vs buying it? This is the same question I have for folks that go nuts over copy-protection in games. So what if those schemes result in psuedo-ownership of games? If the game isn’t fun enough to lease, then don’t lease it.


To establish my Nerd God street cred, here’s some links:

  • Atheist chat: Hitchens is on fire, Dawkins comes off assholish (surprise!) and dogmatic (ironic!), Dennett more pragmatic but a bit senile and I don’t know who the other dude is. Its worth two hours of your time.
  • ARIMA ain’t a Caribbean island: The best introduction I’ve seen to the Box-Jenkins method for fitting time-series data.
  • Social innovation: Udell, the best writer on technology in these parts, says g ain’t new inventions, its some people mastering the technologies and then teaching their learned techniques to the masses.
  • Happy Birthday Perl!

adding structure to social networks OR open-sourcing Web 2.0 OR checking to see if my brother reads my blog

Brad Fitzpatrick has thoughts on the social graph:

What I mean by “social graph” is a the global mapping of everybody and how they’re related… Currently if you’re a new site that needs the social graph (e.g. dopplr.com) to provide one fun & useful feature (e.g. where are your friends traveling and when?), then you face a much bigger problem then just implementing your main feature. You also have to have usernames, passwords (or hopefully you use OpenID instead), a way to invite friends, add/remove friends, and the list goes on. So generally you have to ask for email addresses too, requiring you to send out address verification emails, etc. Then lost username/password emails. etc, etc. If I had to declare the problem statement succinctly, it’d be: People are getting sick of registering and re-declaring their friends on every site., but also: Developing “Social Applications” is too much work.

Facebook’s answer seems to be that the world should just all be Facebook apps… [but a] centralized “owner” of the social graph is bad for the Internet.

He then goes on to describe the, somewhat technical, goals of a more open social graph.

For more fun social networking neologisms, here’s Jon Udell (my must-read tech writer) with examples of lifebits which the social graph would help stitch together:

Today we can, and often do, put serious effort into these acts of personal publishing [i.e blogs]. But the infrastructure to which we commit our words, sounds, and images doesn’t take our effort seriously. There’s no guarantee that anyone will be able to access an item at the published address in a year, never mind ten or a hundred. And there’s no guarantee that the effects of these acts of personal publishing — the reactions they provoke, the influences that flow from them, the reputations they create for us — can be measured.

In the hosted lifebits scenario such guarantees will exist, because we’ll pay for the service that makes them. At the core of that service is an archive that provides price-tiered levels of assurance that your stuff will be stable over time, that access will be granted in exactly the ways you specify, and that you can monitor that access.

Today when I [write emails], I transmit a message from my email system to yours. If I want to maintain a coherent archive of my email, there are all sorts of challenges. Over time I use a succession of personal and business email systems. And at any given point I use several different ones concurrently, to separate personal from business correspondence. I know a few people who have kept their email archives intact over time, but for most those archives are scattered across a variety of local and (nowadays) cloud-based repositories.

In the hosted lifebits scenario, an email message can be a kissing cousin to a blog posting or a comment. I write it, commit it to my archive at a stable URL, notify you of its existence at that URL, and optionally transmit a copy of the message. That last step is optional because this model decouples two aspects of email that have always been inseparable: notification and transmission.

Its a bit funny to me that Jon — a guy all about loose coupling and decentralization — is advocating a hosted service and Brad — a designer of a proprietary social network site, i.e. a closed network — is advocating a distributed system. Nevertheless, that Jon and Brad are talking about these things makes me think these things are getting close to reality and soon. ((BTW, Kevin take good notes. There will be an exam.)) ((Yes, I have footnotes on my blog now.))