Archive for the ‘Economics’ Category

Subprime Judgement: The Financial Crisis and Bailout Plan

Sunday, September 21st, 2008

My paranoid thought for the day concerns the timing of this crisis, and the motives of the various players. We assume altruistic, if unwise, motives for the political agents, but before Paulson was an altruist, he was (and still is, financially?) a self-interested investment banker. One wonders if the human heart (and pocketbook) can change its allegiances so easily.

Regarding the timing of this crisis, perhaps we can consider this the ultimate political hedge. Banks must know they are better off with a pro-business (”pro-free-market” is a false sobriquet with which we can finally dispense) Republican making the bailout than a pro-consumer Democrat.

Is this conspiracy theory a paranoid fantasy?  It’s not like all the major financial players are holding private meetings, hidden away from the public, over the weekend…

Oh wait, yes they are…

Congressmembers should not be meeting with Paulson and Bernanke. The GAO should be getting unfettered access to the books of any bank that is looking for a handout. This is a strict question of numbers.

Let’s just hope Obama has the guts to stand up to this nonsense.

There are plenty more notions in this line of thought, but one is hesitant to cry ill motives alone, without further proof. Then again, given the banks’ history of hypocritical, deceptive and self-serving incompetence, perhaps the proof is plain to see. If McCain thinks that Cox should be fired, shouldn’t also every other management team on Wall Street be fired as well, before another penny of taxpayer money is given to them?

Poor in NYC? Move!

Monday, January 14th, 2008

The poor, even while employed and receiving public assistance, have a hard time making ends meet in New York City, according to this article in the New York Times.

This makes me wonder why they don’t move,.  If moving is too great an expense, shouldn’t the city help them move? Given the high cost of living in this city, wouldn’t it be wise for many families to cut their losses and try to start afresh in parts of the country where the cost of living is lower?

Such behaviour would also help those poor that decide to stay.  As the pool of low-skilled labor decreases, the market should respond by bidding up the wages of those that remain, and thereby making them less poor.

New York needs to export it’s poor, for their own good and the City’s.

Eating the Competition’s Lunch

Wednesday, September 19th, 2007

Where is the next great computer computer company?  Where once was Lotus came Microsoft, where once was AOL came Yahoo, where Yahoo was came Google.

Joel Sposky just posted a long essay on software obsolescence and transitions.  IBM’s balky introduction of a Lotus-branded version of OpenOffice called Symphonys is his starting point.  He tracks the demise of the venerable spreadsheet Lotus 1-2-3 and the subsequent rise of Microsoft’s Excel. While Lotus concentrated on coding efficiency to make their programs work well for the current generation of computers, Microsoft concentrated on adding features and just waited the six months for the computer hardware capabilities to catch up.  Joel sees a parallel in today’s browser-based market for AJAX applications, where network bandwidth and processing power still matter a lot.  Sposky sees the demise of Google’s Mail as imminent.  A smaller, more innovative company will build a software development kit (SDK) that supplants Google’s internally developed code in efficiency, and most importantly, portability and interoperability with other web-based applications.

I find Sposky’s analysis, while knowledgeable and erudite, to be misguided.  Firstly, AJAX applications like Google Mail might be very high profile, but unlike Lotus’s 1-2-3, they contribute little to Google’s bottom line.  Google serves ads , and that’s how they make their money, and they have always been open with their application programming interfaces (APIs) in this regard.  An API isn’t an SDK, but WTFDYC (what the fudge do you care), they can serve the same purpose for developers.  An API is really more important than an SDK anyway, as computing is more service-based, rather than product-based as in Lotus 1-2-3’s heyday.

Google’s true strength is not in it’s little AJAX doodads like Google Mail. It’s search algorithms are improvable with clever work by a competent team Mumbai programmers.  It’s true strength lies in it’s massive server farms, that allow it to serve the planet’s search needs, and it’s ability to store an easily accessible, frequently updated indexed database of the Internet’s content.

So until someone manages to set-up server farms to rival Google’s, with their massive parallel operations, I don’t think Google has much to worry about.   It would take billions to catch up to Google’s server farm supremacy,  which might be already rivalled by Yahoo or Amazon.  These are Google’s true competitors.  Yahoo has been trying to gain back the prominence that Google poached from it, becoming a sort of universal AOL, while Amazon has dipped its toes into search and web applications.  It’s worth noting that Microsoft’s entry into the service based world has been pretty flat.  They have the advantage of their installed base of server software to build on, but the various Unix flavors are superior to them, in numbers and quality.  Microsoft is a desktop software company.  They are also still the best on the desktop.  (Sorry folks, Apple is a boutique hardware company.)

If you really want to talk about obsolesence, talk about the aforementioned AOL.  The stupid company bought into its own public relations baloney and thought they were more than a bunch of convenient phone numbers with modems at the end.  But they didn’t own the phone lines that kept the whole thing together.  Once  the phone and cable companies, got their act together they ate AOL’s lunch.  The service part of what AOL provided was provided for free, and with better quality, by Yahoo.  Then Yahoo, bought their own hype and thought that they were the destination rather than a waypoint and so Google, doing a better job of indexing, ate Yahoo’s  lunch.  The Internet is all about connectiong little people like me together.  When company’s think they are more important than the little people they connect, then they fail, as the little people go to the new companies that let them be themselves.

Cue the munchkins.

The Rich Are Different Than You and Me — They Have More Money

Tuesday, August 21st, 2007

It is worth saying something about the social position of beggars, for when one has consorted with them, and found that they are ordinary human beings, one cannot help being struck by the curious attitude that society takes towards them. People seem to feel that there is some essential difference between beggars and ordinary “working” men. They are a race apart–outcasts, like criminals and prostitutes. Working men “work,” beggars do not “work”; they are parasites, worthless in their very nature. It is taken for granted that a beggar does not “earn” his living, as a bricklayer or a literary critic “earns” his. He is a mere social excrescence, tolerated because we live in a humane age, but essentially despicable.

Yet if one looks closely one sees that there is no essential difference between a beggar’s livelihood and that of numberless respectable people. Beggars do not work, it is said; but, then, what is work? A navvy works by swinging a pick. An accountant works by adding up figures. A beggar works by standing out of doors in all weathers and getting varicose veins, chronic bronchitis, etc. It is a trade like any other; quite useless, of course–but, then, many reputable trades are quite useless. And as a social type a beggar compares well with scores of others. He is honest compared with the sellers of most patent medicines, high-minded compared with a Sunday newspaper proprietor, amiable compared with a hire-purchase tout–in short, a parasite, but a fairly harmless parasite. He seldom extracts more than a bare living from the community, and, what should justify him according to our ethical ideas, he pays for it over and over in suffering. I do not think there is anything about a beggar that sets him in a different class from other people, or gives most modern men the right to despise him.

Then the question arises, Why are beggars despised? –for they are despised, universally. I believe it is for the simple reason that they fail to earn a decent living. In practice nobody cares whether work is useful or useless, productive or parasitic; the sole thing demanded is that it shall be profitable. In all the modem talk about energy, efficiency, social service and the rest of it, what meaning is there except “Get money, get it legally, and get a lot of it”? Money has become the grand test of virtue. By this test beggars fail, and for this they are despised. If one could earn even ten pounds a week at begging, it would become a respectable profession immediately. A beggar, looked at realistically, is simply a businessman, getting his living, like other businessmen, in the way that comes to hand. He has not, more than most modern people, sold his honor; he has merely made the mistake of choosing a trade at which it is impossible to grow rich.

– George Orwell, Down and Out in Paris and London (1933), end of Chapter XXXI

China, India, and the Rest of the World

Tuesday, June 26th, 2007

I’ve been doing some population studies, and in trying to get the big picture, I have made a little chart on world population trends by country (source:, which you can take a gander at below: (more…)

Good Games and the Law of Diminishing Returns

Monday, June 11th, 2007

I got turned on to a very good web game called “Castle Wars“. The game is a computerized version Mille Bornes, but with castles and catapults. It is a lot of fun, and uses the fundamental economic principle of diminishing returns to great effect.


The Paradox of Expected Disaster

Thursday, June 7th, 2007

The old joke about buying insurance is that you hope it is wasted money. The wise man prepares for disaster, but is relieved to avert it. Yet the wise man is also human, and therefore prone to the the irrationalities essential to the human mind. When faced with uncertainty, man is relieved to find his preparations necessary, and disappointed when his prescience is faulty and the disaster never comes and his efforts are wasted. This is the Paradox of Expected Disaster.