Microsoft Complains of Antitrust Violations by Google

It is worthy of repetition that while I am a libertarian, I maintain that regulatory policy is sensible in the area of competition because it is demonstrably possible that a firm could depress welfare through anti-competitive behaviour. At the same time, I am aware that as George Stigler argued, the market is such a tough and dynamic place that most anti trust policy achieves very little that is positive. more importantly, it is clear that calculating corporations may incite or instigate anti-trust investigations against a competitor to defeat with a view to using government muscle to ensure that a competitor is restrained in legitimate market activity.

And perhaps one firm in the modern times that faced a multiple of claims that its behavior as a dominant firm was distorting markets outcomes was none other than Microsoft. indeed some people have made the claim, unconvincing in my view, that the very rise of Google was made possible due to the temporary distraction that Microsoft faced over a decade since its tribulations with competition authorities commenced. so the irony of this came to me starkly when I learned from this piece by Mark Sweeney in the Guardian that Microsoft is suing Google for violation of competition rules.

I have not had a chance to review any official documents in order to make some comments but I still think that as stated in that piece, this is very interesting. And yet, it is clear, with the benefit of hindsight, that it was predictable.I would like to see what the "pattern of actions" that Microsoft has identified constitute violations by Google.      

The Evolution of the Chameleon

A few hours ago, I was seated at a garden restaurant when I noticed a slow moving creature that was perfectly camouflaged against a brownish tree trunk. My stream of thoughts led me to try and trace its slow movement, where one limb moves tentatively forward and then followed by another as it rolled down that tree trunk. Putting on my quasi-scientific thinking cap, I mused, "So this creature is supposed to be perfectly adapted to its environment?"

This question continued to turn in my mind as I tried to figure out what is the evolutionary advantage of moving so slowly in an area with shrubs. It is perfectly understandable that the ability to change color is useful for evading predators and insect prey by being undetectable. On the other hand, once it is detected, its tentative steps condemn it to very easy seizure by a bird or other animal that may feed on it. A straight answer may be that the tentative movements are part of its survival because it is compensated for by a very long, sticky and quick tongue that allows it to capture insects while it is yet undetected.

I am not sure how all this evolutionary advantages fit together for this ugly but amazing creature. I think that there is no perfect answer because it appears that often in the quest to justify the valid scientific process of evolution, we first detect the facts and thereafter adopt a narrative with an evolutionary rationale.

Picture Available at: www.ilovechameleons.com        

Quoting Brian Micklethwait

" Governments are good at destroying stuff but tend to be shambolic at any kind of creativity. The more creative they try to be, the more destructive they end up being. People do creative, not governments". Brian Micklethwait at Samizdata.

Is Japan's Low Crime Rate About Culture?

Japanese people have had to cope not only with the serious effects of the earthquake which occurred a week ago but also with the adversity that it has generated through the severely damaged nuclear power plants. Besides the fortitude that the Japanese have shown is the impressive level of order that has been maintained amidst the grave conditions. Many have attributed this to the cultural predisposition that emphasizes fairness and a deep sense of duty.  

It is difficult to fail to notice the difference between the reaction to this disaster and those that have occurred in the last few years. Christopher Beam of Slate Magazine muses that perhaps the cultural component of this composure under stress is overstated. He states that the phenomenon that we see is supported by incentives that encourage honesty while punishing misdemeanor quite severely. As an example, it states that Japan has a well developed finders fee which is paid out for recovery of an item that is stolen and this is further reinforced by the fact that severe negative incentives apply for captured thieves. This makes every situation one of balancing small positive incentives to the possibility of severe punishment.

Separate from these incentives are a large police force that is both competent and well trained. one sees how this force in turn reinforces the incentive scheme by raising the probability of capture for a thief. On the part of informal law enforcement by criminal organizations, one sees how they may have an interest in enforcing order in the areas of their operations. Notwithstanding my suspicion that these groups can perform a positive role, the article state that some are ensuring an orderly period and also contributing to the relief efforts. Fair enough, but only if the competent police force could just start investigating and prosecuting these gangs. 

Players Union Vs NFL Team Owners

While I make the time to understand most sports events and the character of the franchises, I understood very little about the economics of the National Football League until I listened to this podcast from Freakonomics. I do not only recommend it for enlightening me but for the depth that it revealed about the financial structure of the firms and what the real bone of contention is between the players through their union and the owners of the teams. For instance, while I am aware that incomes among professional athletes tend to be very unequal, i was still surprised that the average career for NFL athletes is less than four years. For all the high incomes, it is clear that the average athlete faces great odds against living purely from that income.

Having listened to that podcast, it became immediately clear to me that the player's union had far more sensible views about the sharing of revenues than the owners. For one, it is clear that the NFL should have no pretense to being a market because it like other leagues, is a cartel and a collusive arrangement. Once team owners have gained entry, they tend to have little skin in the game and usually sit back and are assured of revenue and profits.

James Surowiecki, writing in the New Yorker Magazine has given the dispute an analysis fit for illustrating the behaviour of cartels and the distortions that result from their market power. Immediately evident is the fact that there is less competition for revenues because teams are in a symbiotic relationship in which they rise or sink together. In my view, that's what makes the negotiations critical for the teams because owners know that having decided on the formula, they need to do little less. As the article lucidly explains, the structure under which players and owners transact business does not deserve to be called a market. I am not particularly fond of unions but they have my support on this matter though it is unlikely that their negotiation strategy will try and get the industry to be more in tune with real markets.

As the NFL stands today, the order of benefits is with owners, the players and with fans coming last. My view is that this should be turned by 180 degrees.

Regulation of Market for Lion Hunting

In the last blog post, I posited that the conservation of big cats such as lions will most likely fail unless the movements fighting against extinction adopt some market and prices mechanisms as instruments of conservation. Indeed I made a bold bet with myself that given the choice between moral exhortation and a modest market based alternative, I would choose the latter. Dr. Luke Hunter, who works at Panthera, an organization committed to the worldwide conservation of big cats, addresses the market and price question in the piece in the monthly magazine of the organization. His main attack is against the Endangered Species Act which will forbid Us hunters from collecting trophies of lions. 

It is certainly not the first but is obviously a brave effort at sticking his neck out by stating that hunting of lions may is "unpalatable but necessary" for ensuring their survival. His view is quite pragmatic and seeks to confront the simplistic view that the only option is for the human person to stop being evil lions live. In detail, he states that since hunters are prepared to pay as much as US$ 125,000 to take lion parts as a trophy and this demand could be exploited minimally to raise funds for conservation of the species in general. 

The intelligence of this view is demonstrated in his admission that the ideas that inform determination of numbers to be harvested through hunting is based on shoddy science and may be all guess work. his response is that the use of a market based scheme should apply conservative quotas together with extraction based on the age of the animal would be a giant leap forward. Going further he argues that this scheme, well regulated would confirm that hunting will not necessarily harm numbers and growth of the species. He concludes: "Whatever one's personal feeling, hunting should be regarded as yet another tool in the arsenal of options we must consider to conserve the lion". 

Individual lions facing high powered rifles may not agree but surely that's one step forward in incorporate a form of prices and markets in the options for species conservation.  

Saving Lions Demands A Brave Solution

As expected, it states that demand for the fur, claws and head of the lion are creating a reduction in the population of male lions. Suzanne Goldenberg of the Guardian writes about the danger that the killing of one lion exposes its pride to due to the instinctive eradication of younger members of a colonized pride. The story makes the argument that US based collectors of animal trophies are driving down these numbers by creating demand which is satisfied by illegal poaching in addition to farmers who kill lions in order to expand their farming acreage.

In all, institutions that call for conservation make a strong case regarding the dynamics that affect the number of endangered species such a lions. Nobody would be oppose the need for conservation where the number of lions in the wild have crashed to 40,000 or less,  from 200,000 in a century. However, as I have stated here about the conservation of tigers, it is clear that the curve will go further towards extinction if the conservation approach remains wedded to moral exhortation and reliance on governments that cannot enforce the obligations being placed upon them.

If saving the King of the Jungle is agreed upon, then lessons must be drawn from a fair critique of the model of conservation being pursued. It is anathema to many conservationists, but the incorporation of a market mechanism is inevitable. With 40,000 lions out there, it would help to provide property rights in a creative way to ranch owners or other people to secure a portion of the animals and breed them in the wild. This approach could allow for comparison with the existing conservation model over a ten year time horizon to see what the results are. I would place my bet on the property rights model.
 

Record Price for Comic Book

It is a fact well known that if one was to find the correct price for any good, then a well-designed auction would reveal its price. And this principle has worked again with good effect as reported here that a copy of the 15th edition of Spiderman comics was sold for US$ 1.1 million. That is surely an impressive amount of money and the collector has been rewarded for keeping the comic published in 1962 in good and marketable condition.

Leaving aside those who argue whether a comic book should ever cost that much, my partiality towards markets leads me to ask what are the applicable principles recognizable to a student of economics. To begin with, I am less convinced that the price has been entirely determined by the fact that this is a piece of antique. To me, the proper way to look at it is that its age notwithstanding, this is a classic situation where the price offered was about the scarcity of the item as opposed to the age alone. So the correct principle that a teacher of economics should ask students to take note of is that scarcity operates to determine prices.

My business idea is to consider preparing a catalogue of equally scarce and valuable objects that high income citizens of a prosperous may purchase. Wish me luck!

Adam Smith On Rank

"This disposition to admire, and almost to worship, the rich and the powerful, and to despise, or, at least to neglect persons of poor and mean condition, though both necessary to establish and to maintain the distinction of ranks and the order of society, is, at the same time, the great and most universal cause of the corruption of our moral sentiments. " The Theory of Moral Sentiments. (Kindle Loc. 999)

Publishers Have Hangups About E-books

It has become clear to me by day that publishers are unable to think clearly about the economics of e-books because they are caught up i comparing it directly with its printed versions. Patrick Kingsley of the Guardian cites  an instance in which one of the largest publishers has insisted that e-books made available to libraries would have to be replaced after being lent out 26 times. The reason given is that print editions have often been replaced after that number.

Now, one does not have to be partial to e-books or particularly like Amazon to see that this is an unbelievably preposterous argument. To start with, e-books are e-books and therefore not printed books and so to try and market them or calculate profitability based on that which is being replaced is laughable. What is clear here is that this publishing house has not made time to think carefully about how e-books will alter their marketing posture and have tried to graft the lives of e-books o that which they know; print versions. And as the story states, two librarians have already proved that the number 26 was arbitrarily determined and is therefore unjustifiable.

I must sympathize with an industry whose leading paradigm is changing rapidly and whose future is uncertain. Still, this is no reason to maintain such woolly thinking by holding on to the familiar. E-books are now going to reduce margins but they have the advantage that they are easily reproducible. A more reasonable approach to how libraries lend out e-books requires rethinking but should not be based on such a poor premise and hangups with paper versions of publications.