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Commodifying Communism

Posted by Peter on December 15, 2004
Posted in: Book Reviews, China. Tagged: .

Book Review: Commodifying Communism : Business, Trust, and Politics in a Chinese City by David L. Wank

This book does a good job of describing typical small business activity in a city that the author lived in for a couple of years.

I have long been puzzled by the reports that China has a booming economy in spite of widespread corruption and hardly any rule of law, when those problems seem to ensure poverty elsewhere.

This book does a good deal to resolve this mystery. It suggests that Fukuyama’s claim that “there is a relatively low degree of trust in Chinese society the moment one steps outside the family circle” is misleading because the Chinese notions of family ties aren’t as rigid as in the west. Family-style trust is more like a commodity that can be readily acquired by most people who have decent reputations, via friend of a friend type connections between people. And the networks of reputation do well at ensuring the reasonableness of corrupt or arbitrary actors.

It would be nice if we could copy the good parts of these aspects of Chinese culture, but I suspect that’s as hard as copying the social capital that Fukuyama describes in his book Trust.

Here’s one isolated provocative comment to which I haven’t figured how to respond:

The premise that inequalities stemming from differential access to political capital are reprehensible, while those stemming from imbalances in access to economic capital are not, is a value judgment that elides how political power is always implicated in the structure of markets.

Innovation and Its Discontents

Posted by Peter on December 9, 2004
Posted in: Book Reviews, Economics, Politics. Tagged: , .

Book Review: Innovation and Its Discontents : How Our Broken Patent System is Endangering Innovation and Progress, and What to Do About It by Adam B. Jaffe, Josh Lerner

This book presents a clear, concise and convincing argument that subtle changes in U.S. laws starting in 1982 have broken a patent system that was working reasonably well until then. It will be more effective at convincing the average person than most other attempts have been, both because of its style and because it shows that the changes which broke the system shouldn’t have been expected to help anyone other than patent lawyers. Their analysis will be useful in helping to avoid the takeover of other agencies by special interests.

Their description of how the system should be fixed is less impressive. Their summary of proposed changes strangely fails to include undoing the change in appeals court jurisdiction which they suggest was a primary cause of the problems. Their argument in favor of patenting software, business practices, etc. is more radical than they seem to realize, as it appears to imply that patents should also be extended to mathematical theorems, yet they act as if the burden of proof should be on their critics.

It is hard to believe their proposals go far enough. One suggestion I have is that, in return for higher salaries, patent examiners should be unable to work as patent lawyers for a year or two after leaving their job. This would reduce the number of examiners who can expect to be rewarded for patents that create disputes.

Their confidence that a traditional patent system is better than no patents is unconvincing (but they do a good job of explaining why it is hard to know what the best system is). They support their position by a few examples such as Xerox, whose copier wouldn’t have been invented as it was without patent protection. But it’s much harder than they imply to determine that a copier wouldn’t have been invented some other way a few years later.

The Paper Dollar

Posted by Peter on December 3, 2004
Posted in: Economics, Investing, Politics. Tagged: .

Here’s an interesting paper (pdf) by economists Obstfeld and Rogoff on the prospects for the dollar, arguing that the differences in savings rates between countries will be important in the continuing decline in the dollar relative to other currencies. I don’t put too much faith in their attempts to forecast the size of the decline (in part because of the problems with measuring savings rates), but the basic ideas behind the paper seem sensible. It makes me wonder whether I have a big enough position in gold (the short-term outlook seems unclear, but my long-term outlook is that gold is a pretty good investment).

Report from the Foresight Conference, part 2

Posted by Peter on November 29, 2004
Posted in: Molecular Assemblers (Advanced Nanotech).

(Catching up on month-old news…)

The most important technical news from the Foresight Conference on Advanced Nanotechnology was the presentation by Christian Schafmeister, who is working on building molecules with a wide variety of shapes out of bis-amino acids. He is able to build protein-like molecules that are rigid, and whose shape is easy to predict from the sequence. If there are no hidden catches, this may be an innovation as valuable (for the purposes of creating new objects to atomic precision) as solving the protein folding problem. The biggest drawback that he mentioned was the time it takes to synthesize a medium-sized molecule (up to a week), but he says that could be automated.

I’m unsure whether there was anything important in the other talks about nanotech research. Ned Seeman mentioned something about a ribosome-like device – I suppose that might be something important and new that he has done, but he didn’t say enough about it for me to tell.

Rob Freitas made some vaguely impressive claims about the feasibility of building a diamondoid assembler using the tools available today, but he went through some critical issues such as error rates in placing individual atoms where we want them to quickly for me to evaluate the plausibility of his answers. I’ll try to read the papers he has on his web site real soon now to see if he presents those arguments more convincingly there.

Market Reaction to the Election

Posted by Peter on November 19, 2004
Posted in: Economics, Investing, U.S. Politics.

The stock market rose in reaction to Bush’s victory, which wasn’t much of a surprise. What was moderately unusual was that the dollar sank relative to many other currencies and relative to gold, and a steady sinking trend seems to be continuing. In fact, measuring the S&P 500 relative to gold, it went down the day after the election and is a tiny bit lower now than before the election. I doubt that this indicates any belief that Kerry would have been better than the typical Democrat at reducing inflation. It seems to imply that the Bush (or the Republicans in general) have abandoned the fiscal responsibility that we used to associate with Republicans.

The decline of the dollar seems to be overwhelming the Chinese attempts to prop up the dollar to the extent that it is stable relative to the yuan. It seems strange that government officials think they can manage a gradual and widely anticipated change in the exchange rate. If interest rates on dollar-denominated holdings was higher than yuan-denominated holdings, people might expect the two to be equally good investments. But dollar interest rates seem to be a good deal lower, which makes it obvious to anyone who believes the official hints that yuan holdings are a better investment. And there are reports that China has bought increasing amounts of dollars from people who realize this. This suggests to me that a sudden collapse in the dollar relative to the yuan is not too far off when the Chinese government realizes a slow decline is expensive.

Charity Angels

Posted by Peter on November 18, 2004
Posted in: Economics. Tagged: .

Marginal Revolution summarizes an idea of Robin Hanson about how to overcome the problem of poor information regarding who is worthy of what charity (which I agree is a serious problem).

Unfortunately, I doubt it will work, because it suffers from very similar information problems as direct charity does. It requires donors to have good information about what a prototypical worthy recipient looks like (but having this information seems like a large part of the problem we are trying to solve), or else be able to hire someone who has better information about that than the donor (but Robin provides some strong reasons to doubt that is possible in his more recent paper He Who Pays The Piper Must Know The Tune).

I can imagine (but am unconvinced) that donors can describe the appropriate criteria for worthiness, and that the main information problem is distinguishing honest claims of meeting those criteria from dishonest claims. But the charity angels scheme rewards people for failing to distinguish honest claims, which makes me doubt that the giving that this scheme would encourage has much to do with truly worthy causes.

The “Tell Off A Jerk” variant on this theme seems closer to a workable idea, but it risks producing flame wars where people polarize into groups each of which uses charitable donations to encourage retaliation for the other group’s rude attempts at deterring jerkdom.

Book Review: Rare Earth by Peter Ward, Donald Brownlee

Posted by Peter on November 17, 2004
Posted in: Book Reviews, Fermi Paradox. Tagged: , , , , .

Rare Earth : Why Complex Life Is Uncommon in the Universe provides some fairly strong (and not well known) arguments that animal life on earth has been very lucky, and that planetary surfaces are typically much more hostile to multicellular life than our experience leads us to expect.

The most convincing parts of the book deal with geological and astronomical phenomena that suggest that earth-like conditions are unstable, and that it would have been normal for animal life to have been wiped out by disasters such as asteroids, extreme temperatures, supernovae, etc.

The parts of the book that deal with biology and evolution are disappointing. The “enigma” of the Cambrian explosion seems to have been explained by Andrew Parker (see his book In the Blink of an Eye) in a way that undercuts Rare Earth’s use of it (dramatic changes of this nature seem very likely when eyes first evolve). This theory was apparently first published in a technical journal in 1998 (i.e. before Rare Earth).

They often assume that intelligence could only develop as it has in humans, even suggesting that it couldn’t evolve in the ocean, which is rather odd given how close the octopus is to qualifying. But the various arguments in the book are independent enough that the weak parts don’t have much affect on the rest of the arguments.

I was surprised that they never mentioned the Fermi Paradox, which I consider to be the strongest single argument for their position. Apparently they don’t give it much thought because they don’t expect technological growth to produce effects that encompass more than our planet and are visible at galactic distances.

Their concern over biodiversity seems rather misplaced. I can understand why people who overestimate mother nature’s benevolence think that preserving the status quo is a safe strategy for humanity, but it seems to me that anyone sharing Rare Earth’s belief that nature could wipe us out any time now should tend to prefer a strategy of putting more of our effort into creating technology that will allow us to survive natural disasters.

I am disappointed that they rarely attempt to quantify the range of probabilities they would consider reasonable for the risks they discuss.

Stephen Webb has written a book on roughly the same subject called Where is Everybody? that is more carefully argued, but less entertaining, than Rare Earth.

Accelerating Change Conference

Posted by Peter on November 11, 2004
Posted in: Freedom, Investing, Virtual Worlds. Tagged: , .

The 2004 Accelerating Change Conference focused much more on current changes than last year’s attempts at providing long-term visions led me to expect.

The one topic that excited me was a virtual world called Second Life. While it might sound superficially like just a virtual Burning Man, the designers are serious enough about their nationbuilding to encourage commerce, both within the system and via currency exchanges such as The Gaming Open Market with other worlds. Their VP of Product Development Cory Ondrejka described Hernando de Soto’s book The Mystery of Capital as "must reading". They have been careful to insure that people have few incentives to take disputes arising in the virtual world to meatspace courts. For instance, they once banned a vandal from the game who owned a fair amount of land; they auctioned off the land and sent him a check for most of the proceeds – $1600.

Some of their customers are doing well enough in the virtual world that the company that runs Second Life has trouble offering them a salary good enough to compete with what they’re making in virtual life.

They don’t seem as concerned about the highly deflationary effects of their monetary policy as I expect they ought to be. Why will people buy their land (the sale of which seems to be their main source of income) if they can earn a safe and sure return by just holding the local currency?

The responsiveness of the company to citizen complaints (e.g. simplifying and later abolishing taxes in response to tax revolts) is fairly strong evidence that a non-monopolistic dictator is better than a democracy with monopoly power.

Tradesports compared to the pollsters

Posted by Peter on November 3, 2004
Posted in: Idea Futures, Investing, U.S. Politics. Tagged: , .

Once again, I feel somewhat humbled for underestimating the accuracy of presidential election markets. At least I was cautious enough to mainly bet against Bush winning states where he appeared to be behind, and against him winning 400 electoral votes, which made up for what I lost betting that Kerry would win the election and popular vote.

Assuming the preliminary results are accurately indicating the final results, Tradesports did quite well at predicting the elections (except for a few hours on Tuesday afternoon when it mistakenly reacted to exit polls). It’s Monday evening prices correctly indicated which presidential candidate would win each state. And it did a good job of indicating which states were closest (saying Iowa and Ohio were the least certain).

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