Firstly, the pricing models for usage throughout the industry are absolutely insane. If there was any actual competition in the marketplace then it would not stand to have these ridiculous tiered pricing systems. However, the cost of entry is so prohibitive and the providers in any given area have some sort of unspoken collusion thing going on that THERE IS NO TRUE COMPETITION.

Secondly, the model for obtaining and retaining customers should be illegal. Prohibitive pricing on hardware, deep discounts with contracts and huge cancellation fees. Proprietary hardware fuels this system. There is no competition on hardware because each provider esstentially controls the retail market. Again, NO TRUE COMPETITION in the marketplace allows what amounts to monopoly behavior. The industry incurs the dead weight loss associated with lack of competition and in practice violates the essence of anti-trust laws but (most likely through lawyers and lobbyists) keeps from exposing themselves legally. 

rant:begin/
And finally, they have annoying and invasive practices. I got a call from Verizon that I did not pick up (I do not pick up calls from unrecognized numbers). A message was left thanking me for activating a Blackberry and asking me to call back and answer some questions. I did not activate a Blackberry and was concerned that somebody made an account in my name (which is 100% unique, I am the only one with my name in the world at the moment). I called back and explained that I wanted to check if there was an active account in my name (I used to have an account with Verizon but not for the last couple years). I gave my name and state and then the rep wanted my other information. I was hesitant and asked him why they need my address and social to simply let me know if there was an active account in my name. He stated that Verizon does not give out account information without completing the security procedure of taking all your personal information. I explained that I was sure that I was the only person with this name and just wanted to make sure no sort of fraudulent activity took place in my name. He again stated that without giving more personal information he would not tell me. I asked him his name, he said Chad. I asked him his last name and he said that he will not tell me. Then I asked him for his address and social security number and hung up. Afterwards I looked up their number online, 203 514 5000, and found out that they are Verizon telemarketers that call former customers. What really bugged me was that they entice you to call back by alarming you to possible fraud. So not cool. Then they called back again!!!!!!! I asked them to take me off their list and they would not without me giving them my old phone number (which I do not remember, it was 2 years ago). The rep told me he cannot do anything about taking me off the dialer without my old account information. I pointed out that all that *should* be needed is the number that they are calling me at and them not to call that number any more. Obviously, whomever set up the system intended to make it as difficult as possible to get off the system. Anyways, I called the rep a tool and hung up. 
rant:complete/

The point is that the telecom industry in America has some severe behavioral issues and ought to be effectively reformed.

For those interested in the effects of copy right laws on culture I would highly recommend reading “Remix” by Lawrence Lessig (his blog here). 

Copy right law has had a very difficult time adjusting to remix and sampling culture in audio and visual production. Lessig makes a very good point about how sampling is treated with regard to the written word. It is perfectly acceptable to quote other people’s work as long as it is attributed and it is not used as a substitute for the original work. There is no licensing process or complex legal negotiation. You just quote. However, reproduction of parts of audio or visual works is incredibly complex. 

The (copyright) war too has an important objective. Copyright is, in my view at least, critically important to healthy culture. Properly balanced., it is essential to inspiring certain forms of creativity. Without it, we would have a much poorer culture. With it, at least properly balanced, we create the incentives to produces great new works that otherwise would not be produced.

But, like all metaphoric wars, the copyright wars are not actual conflicts of survival. Or at least, they are not conflicts of survival of a people or a society, even if they are wars of survival for certain businesses or, more accurately, business models. Thus we must keep in mind the other values or objectives that might also be affected by this war. We must make sure this war doesn’t cost more than it is worth. (Remix by Lawrence Lessig, page xvi)

He is talking about one of my favorite activities right there… Externality analysis. Yay!!! 

Lets do a fun and quick (not thorough) externality analysis of copyright laws regarding audio and visual creativity.

Positive Externalities:
It acts as an incentive for creating original work by protecting creative works from being used commercially by non-rights holders which allows for large investment in creative works. 

Negative Externalities:
Huge legal and administrative overhead.
Non-commercial use is outlawed by default.
Remix and sampling is not allowed, derivative cultural output is stymied.
The flow of culture is significantly decreased. 

If there were no copyright laws then nobody in their right mind would put up money to undertake expensive productions. Hollywood blockbusters, mega-hit albums and blue-chip video games would never get made because there would be no ability to recoup investment. 

However, the system as it is currently implemented comes with a huge price. Especially when the goods being regulated are non-rival. It is absurd. And it does no one any good to regulate in ways that we know people will not obey. (Remix, xx)

Here is a great video from American University School of Communication:

Remix and sampling culture have an incredible unrealised potential for cultural advancement. Unfortunately, there are lobbyist organizations (especially the RIAA, the AP and the MPAA) that stand in the way. Ironically, right on the RIAA website they claim to protect… the first amendment rights of artists.

Anyways, read the book. There is loads more of interesting stuff about culture and media production. Hopefully, public policy will change (through reform and simplification) to allow both commercial and amateur culture to co-exist. 

One of the biggest strains on the economy right now is negative economic friction in the form of lobbies and lawyers. Not only are huge amounts of resources being diverted to them but they also are keeping inefficient business models alive. Economic vampires suck!!!!

Shoot, I am getting back into macro econ… I can’t help myself sometimes.

Unfortunately, journalism in America has degraded into news as entertainment. On top of that, generally speaking, media companies have been resistant to adapt their model for distribution because of their lack of control regarding digital distribution.

Check out this BBC video about American cable news to illustrate my news as entertainment point:

Remember when media outlets started trying to take their product online? Many sights had users log in to view media. Others had users download a proprietary viewer. In general, there was (and still is) an effort to control content distribution. 

What happened? New media distribution models started cropping up. Like aggregators that took all the content and put it in one place making media much more accessible. Or torrents, which spread bandwidth usage amongst the user network. Or blogs, which eliminated distributional advantages based on distributional infrastructure and effectively shifted the competitive focus towards content rather than distribution. 

With the focus of competition shifting towards quality of content professional journalism is having a difficult time competing.

Why? 

Possibly it is due to the trend of sensationalism that news as entertainment promotes. Or maybe because most news outlets regurgitate press releases and are so easily manipulated by the advertising and PR industries. Possibly most journalistic outlets traded their independence for financial stability a long time ago. Or maybe the gap between an amateur and professional journalist is minuscule. 

Of course, all of these factors lead to the demise of professional journalism as we know it. Good riddance! I will not be crying at your wake.

The reason, of course, is mullah. Somewhere along the way, the journalism industry systematized a business model that focused competition on distributional infrastructure rather than content creation or integrity. 

GOOD journalism is intrinsic to a free and just society, it is something that has become a lost art. Sad but true. That is not to say that there are not many, many wonderful professional journalists. There are. 

However, as a general rule, media execs do not give much thought to good journalism. Media companies are out there to make money. In fact, they are legally obligated to maximize shareholder value. That means capturing as much market share as possible. The prevailing wisdom for decades was that the key to market share in media is distribution and promotion. 

Technology changed that. Credibility and quality content became increasingly important. Competition based on content has obviously been quite difficult for the old-school journalism industry. In addition, the journalism industries credibility has been questionable for a long time. Sycophantic articles about CEOs, poorly veiled press releases and sensationalistic editorials will do that to you. The out-moded journalism industry has been dying because they just suck at competition on a level playing field. (To suck at competition worse than the film or music industry really says something). 

So what do you do in this country if you cannot win in fair competition.

SUE!

The Associated Press has sued Google for creating a more effective mode of content distribution and vowed to control their content more tightly. Thank God the press is choosing to control and limit the flow of information because we all know how fundamental controlling access to information is to good journalism *sarcasm alert*. 

Anyways, here is an editorial from Valleywag about the AP’s action. Here is a NY Times article. Here is the AP article. And an Interview with AP Chairman, Dean Singleton, at paidcontent.org. 

And a The Australian article in which an exalted editor of the WSJ, Robert Thomson, calls internet aggregators “parasites or tech tapeworms.”
Later he argues, “It’s certainly true that readers have been socialised — wrongly I believe — that much content should be free.”
Just to be fair, the Wall Street Journal, the journalistic outlet most closely associated with Wall Street and the financial industry, is the primary check against abuses of power by the financial industry, right? 
We all know how that worked out.
This guy is a double failure as a journalist. Failed to report the truth and fails to distribute the truth.  

“If nature has made any one thing less susceptible than all others of exclusive property, it is the action of the thinking power called an idea, which an individual may exclusively possess as long as he keeps it to himself; but the moment it is divulged, it forces itself into the possession of every one, and the receiver cannot dispossess himself of it. Its peculiar character, too, is that no one possesses the less, because every other possesses the whole of it. He who receives an idea from me, receives instruction himself without lessening mine; as he who lights his taper at mine, receives light without darkening me.” -Thomas Jefferson, in a letter to Isaac McPherson. August 13, 1813.

“I’m a firm believer in the people. If given the truth, they can meet any national crisis. The great point is to bring them the real facts.” -Abraham Lincoln

“Freedom and democracy depend upon individuals who refuse to give up the belief that the free flow of information has made freedom and human dignity possible.” -Bill Kovach, Founding Chairman- Committee of Concerned Journalists. September 13, 2006.

Sorry about quote dropping. It is usually not my style. However, sometimes I must defer to those who can articulate with an eloquence that surpasses my own.

In conclusion, the practice of maximizing shareholder profit through legal injunctions that limit the flow of information is in direct opposition to the true spirit of journalism, which is simply, proliferation of truth.

Normally, you would renew directly through the county for, in this case, $30. This Ficticious Business Name Renewal Center sends out a notice ahead of time and charges extra to file something that can be filed directly just as easily. The letter they send you has no mention that they are simply a filing service (with a 333% premium!)

Check out the scan to see the letter. It looks quite official and is very easy to mistake for the real thing.

Other than publicizing a specific shady business practice, I would like to touch on the effects of misleading and shady business practices on economics as a whole. The driving force of the economy, quite simply, is labor, capital and innovation. All those factors are finite. When labor, capital or innovation are used to produce goods and services that have little or no utility returns there is an aggregate loss of macro output. Resources are going to pursuits that add little or nothing to society. When you break down economic activity to the most basic root level you will find that this is exactly why the US economy is suffering: LOTS OF PEOPLE WHO ARE MAKING LOTS OF MONEY ARE NOT PRODUCING ANYTHING SOCIALLY BENEFICIAL WHILE MOST PEOPLE WHOSE PRODUCTION HAS SOCIAL BENEFIT ARE NOT RECEIVING RETURNS COMMENSURATE TO THEIR OUTPUT. This is due to the parameters (mostly policy) of business practice. There is more motivation to cheat than to compete. Sustained economic prosperity for our country will depend on sustainable business practices (meaning market forces in which social benefit produced and compensation are more highly correlated.)

The current Catholic Pope recently visited Africa and reiterated that the Catholic church is anti-condoms. CNN article here.

The Catholic church is absolutely ridiculous with some of their policies. This hyper-ideological garbage is a very sad state of affairs and incredibly irresponsible.

Happy Saint Patrick’s Day!

and always practice safe sex.

Oh wait that already happened over 200 years ago when American socialists passed the Coinage Act of 1792. I am being facetious with the socialist part of course. America is obviously not socialist for standardized currency. The network effect is the economic phenomena that justifies standard currency. Before 1792 Americans used foreign currency or many different types of bank notes. This increased transaction costs, a form of negative economic friction. (did u know that when u google search “economic friction” I am the #2 result? go me)

Besides the network effect there are other reasons to nationalize certain markets. One would be economies of scale. Also, a non-functional market. In most cases, the best result for all involved is attained through market freedom. Usually, market freedom leads to a competitive markets which is the ideal distribution mechanism for goods and services. However, there are many cases in which market freedom does not result in a competitive market. This can lead to huge social loses. The best technique for dealing with this situation is to engineer parameters regarding market functionality that will lead to the formation of a competitive market. In many cases that is not a feasible course of action and nationalization is a viable alternative. However, nationalization in most cases leads to politicians managing resources and, since politicians are generally highly educated incompetents, it should be avoided at all costs. 

What inspired me to write this is the rhetoric I have been seening around the net and on those retarded cable news programs that are always on at the gym I go to. There is serious dumbing down and propagandizing going on regarding socialism and nationalizing. 

If you look back on my blog you will see that I was (and am) against a financial industry bail out. You will also see that I am against the incredibly prevalent propaganda that labels everything in ideological terms. That is some Red Scare non-sense. Ironically, I am writing propaganda that is ideologically opposed to ideological propaganda. Ew! That is some PoMo hipster shizzle, no me gusta. I need a vacation from the world. 

I posted an argument for developing better information infrastructure a couple months back. Broadband Stimulus Package. 

Basically, I argue that having effective and accessible information infrastructure will stimulate economic activity on the aggregate and individual level by greatly increasing the rate of flow regarding information for a relatively small capital outlay. I am sure the cable and telephone companies hate the idea because it would break up their oligopoly on data distribution but tons of new markets will be created and the end effect will net significantly positive.

John Chambers, CEO of Cisco Systems, released a blog article with similar recommendations supported by altogether different reasoning. Check it here at GigaOm. His company does make networking hardware so he has a lot to gain personally from public investment in broadband infrastructure. However, it is still a good idea. I have absolutely nothing to gain monetarily from the proposal and I am all for it. I also recommend investment in a public wireless data network.

However, the biggest argument against broadband besides supporting the telecom’s stranglehold on the market for data distribution is, of course, the possibility of the convergence of broadband, materials, robotic and artificial intelligence technologies to create the ultimate threat to humanity and hasten judgement day. Personally, I am willing to take the risk and just suck up to the machines if they end up taking over. 

So, uh, an Xbox live user was banned for disclaiming her w4w sexuality in her profile. JIC u r from outer space, Xbox live is an online gaming community that integrates users of the Microsoft Xbox 360 video game console and w4w is craigslist speak for gay females. 

Here are some articles:
Gaming Blog Kotaku- here.
Tech Blog ARS- here.
Consumer Blog, Consumerist- here. 

Firstly, being gay and out is still not socially acceptable (it should be but it is not), even in California (see Prop 8.) It should be, but there are still way too many people with head in their ass syndrome. 

Secondly, sexuality should not be discussed in mainstream video gaming communities. Way too many kids play video games and there are way too many (one is too many) child predators. Sexuality has nothing to do with gaming so just STFU and play bee-otch.

Anyways, this story is indicative of where we are at as far as social progressiveness is concerned. Although (in my HUMBLE opinion) there is ABSOLUTELY nothing wrong with ANY sexual preference (amongst consenting adults, of course), and although this is 2009, our society still acts towards gays like pre-MLK towards race. Some insecure douche complained that girly had her sexual preference in her profile and dumbass MicroSoft banned her. Like I said, they made a socially acceptable decision but still backwards. And, seriously, MS? Funk MS.

The point is: fuck all the haters!

Talk to your kids about sexuality and sexual preference. Stop living like bigots. And grow some F-ing balls.

Yes we are at a point of social development in which sexuality is an unacceptable topic to breach. 

But that is no excuse.

I subscribe to quite a few econ blogs and, recently, multiple economists with advanced degrees and university tenure posted about this article from the magazine Wired. Basically, the article talks about how most investment professionals trusted this BS stat function made up by some quant because they did not understand the mathematics behind it or else they did and knew there was money to be made anyways. The major point is that the investment industry relies on a blend of stats and hype which is a recipe for disaster. My point is that no matter how much credibility or money somebody in the investment industry has, they are pretty much just a greedy, hack who contributes nothing to society.

Ironically, the field of economics is in the exact same state. This is not some minor little instance of irony. This is THE full blown ironic twist like Wolfgang Puck’s scrapple and grits or saving the environment with corn based ethanol. 

Economists base their own arguments on statistical models. Statistical models are great for determining correlation within a closed system with given metrics. However, correlation in real world open systems based on statistical models is BS. 

Here is why:

1. Behavioral unknown. Often statisticians account for this with margin of error. However, as more variables are added to the model, the margin of error goes up exponentially. In real world situations the behavioral element makes most economic modeling meaningless. Behavioral trends are exactly that, trends. They are time and place specific. 
2. Parameters. Have you ever done a project using multiple regression analysis? I have. Quite a few, in fact. No matter how big the sample set and accurate the data there are still parameters that the modeling is based on. The parameters always have an arbitrary element. For a model to work there must be givens. Unfortunately, these givens (aka assumption parameters) are subject to change. A model is only really useful in the particular instance it is created from.
3. Hedonic valuation. This technique is used to indirectly quantify something that is abstract. Economists love quantifying stuff because then they can write up a statistical analysis paper that backs up their favored theories.

Anyways, the point is that there are lots of economists with tons of popular credibility and tenure that are full of shit. There are even economists who write academic text books or win Nobel prizes who are hacks. In fact, the discipline, as a generalization, is pretty off base regarding approach. In fact, that is why I majored in it. My father is a PhD Physicist who worked for Intel for the majority of his career and my grandfather a PhD Aeronautical Engineer (rocket scientist) who worked Nasa for the majority of his career. I have an exceptional comprehension of the mathematical (I had better be a math person, you see how I write, lulz) and was starting down the path towards a physics major when I got enthralled with Economics. I switched majors because I noticed that there is something fundamentally wrong with the discipline. I thought that the entire basis of the study of economics is flawed. I wanted to understand economics at a root level and see what the problem is and what I can do to fix it. 

In Anathem, by Neal Stephenson, there are tons of really cool intellectual concepts; it is a great work of fiction. The one that pertains to my point is the book. The book is used as punishment for the academic monks who break the rules. Basically, the book is either exhaustively pointless busy work, like memorizing pi to a thousand places, or flawed conceptual work, like learning material that 98% true with just enough wrong with it to infuriate the student. The driving concept of the book is that exhaustive busy work or slightly flawed theoretics is equivalent to intellectual torture. I hope you get where I am going with this.

Economics uses flawed theory and exhaustively pointless proofing. The flaws take place at the individual level, so are compounded by several orders of magnitude when applied at the aggregate level. In the end, decisions that effect everybody are made based on pseudo-mathematical concepts that are misunderstood or misrepresented. The end result grossly detracts from humanity. However, since it comes from people that write textbooks or win Nobel prizes everybody just shuts up and goes with it. Just like the investment industry and the Gaussian Copula Function. 

Ironically, these same hacks are posting about the flaws in the investment industry and linking to are article that condemns the industry for using pseudo-math and partaking in follow the leader. 

Hello? 

Earth to economists?

This is some Alanis Morissette shit.

Update:

Here is a white paper that talks about the point that I am trying to make in this post about the study of Economics being significantly flawed. Unsurprisingly, the paper is a helluva lot more articulate (though a bit pompously verbose) than my clumsy words.

 The Financial Crisis and the Systematic Failure of Academic Economists

There are a ton of good points about the failures within the Economics discipline. However, I must disagree with the bits about needing a deeper basis in empiricism regarding modeling. It is naive to even begin to allude that Economics can be based on empirics. The empirical process calls for controlling variables, which is impossible in open systems with infinite variables. Yes, IMPOSSIBLE. Economics cannot be approached empirically in any manner that is meaningful. Open systems with infinite variables require the technique that I refer to as open system analysis.

Not to get too deep into pedantic minutiae, lol, but this is not a recession, it is an Economic depression by definition.

It has been building up for a while. Nothing really changed last November or so besides the d-bag politico/ investor crowd calling a spade a spade. The fundamentals were exactly the same one day to the next. Our nation employed millions of people doing useless bureaucratic tasks and transferring paper gains back and forth. That did not change suddenly last November when politicians, the media and investors finally agreed that the economy is going to stall out. It has been on that path for at least a decade. We have been paying more and more for less and less. Healthcare, education, administration, energy, infrastructure have all gone up in price and down in actual output for years and years. But since national income is a function of price and does not disaggregate useless behavior from useful behavior, our economy still continued to grow on paper.

If a man is paid to dig a ditch, then fill it in and dig it again that raises GDP by 3* the amount of just digging a ditch. 

In Naked Economics, University of Chicago economist Charles Wheelan writes:

The French policy (of lowering the maximum work week to “conserve” jobs and fight unemployment) is based on the fallacy that there are a fixed number of jobs in the economy, which must therefore be rationed. It’s utter nonsense. The American economy has created millions of new jobs over the last decade- all without the government trying to divvy up work hours. (p. xvii)

I am going to stick my neck out for a second and talk about the members of the prevailing schools of economic thought for second. To both the Chicago school and Austrian school; both neo-Keynesian and Laissez-faire neo-classicals: STFU n00bz. This message also goes out to Dems and Republicans; capitalists and socialists. Just STFU. I have covered this sort of ideological polarization in prior posts. If you belong to any “school” of thought then go read my older posts and then go jump in a lake if you still cannot form independent thoughts. No offense or anything but if you cannot form independent thought then you really ought to do society a favor and F-0ff.

Anyways, my point is that the Laissez-faire invisible hand model is garbage; so is the socialist, command economy model. Economic policy is a mechanism for allocation. Optimal economic policy maximizes efficiency and equitability. In some cases it requires market functionality and in some cases direct allocation mechanisms. Determination of the optimal methodology for allocation requires the arcane art of *gasp* thinking. I know, shocking. Who does that anyway? Soooooo passe.

Sorry about the frustration and sarcasm and all that. Sometimes you just need to blog a proper diatribe cuz you get so fed up with the rhetoricians.

In summary, remember: Economics for efficient and equitable allocation = optimal good.