Tim Harford on Originality of Ideas

"Most original ideas turn out either to be not original after all, or original for the very good reason that they are useless. And when an original idea does work, the returns can be too high to be sensibly measured." Tim Harford in Adapt. p. 83.

How the Middle Class Takes Shocks

Searching the name Simon Kuper in the Amazon page will show that he writes very insightful books on the use of economics thinking in the analysis of soccer. He is also a contributor to the Financial Times and has a very informative piece here on the vulnerability of middle classes world over. It is pertinent because the whole world is presently riveted to the remote possibility of US debt default and the less remote one of Greek default and the subsequent contagion throughout interconnected financial markets.

The piece is perceptive and insightful in taking the focus to individuals and households and therefore, considering the micro-level effects and how these impose suffering on account of shocks to the income of individuals. Arguing that those who fall through the "trapdoor" tend to lose faith in the values that support capitalism and suddenly become vulnerable to support conspiracy theories and belligerent leadership, he seems to accept that a sudden economic shock has effects that go beyond the economy.

A response to this thesis requires proper consideration but I think that the government of Greece needs to make tough decisions today because the earlier decisions have been poor and have built up into a far larger problem requiring more sober policies.  And as that happens, I hope that the narrative that develops is not a distorted one rather than one that faces the tough facts as they are. Some Greek people lived far beyond their means and relied too heavily on public subvention.  Still, I am impressed with the thesis about how some people's political opinions evolves with the changes in their economic circumstances.   

Is Netflix the Panacea for Piracy?

This time, the blog takes a break from the concluded deal between the players union on the one side and the team owners on the other. Farhad Manjoo educates me with his articles on technology and business but I think that the latest piece on Slate is just plain wrong. The gist of his argument is that because of the ease of use of the Netflix subscription service, the piracy of digital entertainment in the form of movies may soon die down. he is obviously mistaken for a number of reasons.

I think that Farhad contradicts himself when he mentions early on that Netflix envisages a decline in the growth of subscribers on account of an upwards adjustment of subscription rates. One would think that he would then extend this argument further by stating that why are the subscribers unwilling to take up the service. My incomplete answer is that many of them know that with a certain level of difficulty, they would still be able to get alternatives or even similar movies through various channels including piracy. Secondly, I suspect that  a large proportion of the individuals who download unauthorized versions of entertainment are based in countries in which the streaming service is not available and are thereby unaffected by the availability of streaming services in the US. A third reason is that Farhad makes the big assumption that individuals think of unauthorized content and streamed content as alternatives and therefore consume one to the exclusion of the other.

To my mind, there is no reason to think that the pirates will be held back just because there is an expanded list of movies on Netflix. tThe solution instead is for the owners of these works to understand that while the material is rolled out by geography, the pirates think of the entertainment world as very integrated one. 

NFL Vs Players Union III

In this last blog post, I suggested that the owners of teams somehow used strong arm tactics to scrape away two percentage points from the players and that the real cost of this concessions would be borne by future players. In fairness, the owners also conceded to putting aside some money to ensure that retired players will receive some payments. However, I am surprised that the general assessment seems to be that this deal was fair.

Alex Marvez of Fox Sports covers the emotional session during which the agreement was declared to the public and concludes that there appears to be no ill-will between the sides. tThis may well be but as stated, i I think that the NFL is not only a cartel that hinders competition between franchises by sharing revenues and thereby dividing the market but that owners are aware of the very short careers of a majority of players and exploited it to the maximum. Looking at what has been declared of the collective bargaining agreement, i I am not sure that there was a commercially compelling reason for players to agree to the salary cap and cede 2% points in the overall revenue.  In light of the brinkmanship and tough negotiation, I see no reason to revise my view that players ceded much more and are the weaker side. I hope that further facts and analysis shows me otherwise for I wish to be better educated on the economics of the NFL teams. My best wishes for the next decade.

NFL vs Players Union II

I blogged here a while ago about select details about the financial structure of the NFL and the impending dispute with the players union. For some reason, I understood it that there would be brinkmanship on either side before an acceptable settlement comes up before the next season commences. Jeremy Singer-Vine goes through what is the preliminary proposal presented by the owners proposing that players would be entitled to 46-48% share of revenues as opposed to the even split that characterized the last agreement.

To my mind, the players seem to have ceded quite some ground with that 2-4% spread because I see nothing that shows that the economics of the NFL has changed substantially. Indeed, while this proposal is not concluded yet, reflects the vulnerability of players to the factors that the first blog post revealed. That players have a perishable lifespan in the game allows the team owners to wield substantial economic power. In addition, the existing players have merely preserved their pay by pushing the cuts to younger layers who will face the pay ceilings and salary caps.

The lesson: When two unions engage in discussion with each other, it is future workers that pay the cost. This may be worth bearing in mind in the season of sports and impending political lockouts.        

Sales Tax: Amazon Has A Point

Farhad Manjoo often does a fantastic job at the Slate Magazine in explaining the confluence between technology and business, but in seeing technology as business. His latest piece addresses his view on taxation by different US states on the taxation of goods sold by Amazon. As usual, the coverage of the issues is comprehensive.I am less sanguine about the conclusion that Amazon is reluctant to collect taxes on behalf of states because it has no incentive to do so. 

It is obviously true that Amazon is aware that a tax levy on goods that it sells would cause a reduction of quantities purchased. However, the view that Amazon is capable of putting up a system that would track and keep data on taxes due to each state enable the is only half true because keeping this clearing house is not without cost. In essence, I am reluctant to blame Amazon for the fact that states impose taxes that not only reduce trade but also impose tracking costs on businesses.With that in mind, it may be that the states that impose taxes externalize the problem of maintaining records while picking their revenue. I think Amazon is right to state its concerns about that. 

Rybka Plagiarized Code

My recent reading of the book from which this profound quote was extracted led me to wonder about the pressure and interesting life of top chess players and how they incorporate machine learning in their games. bearing in mind that Gary Kasparov, the world's highest ranked player lost to a computer a while back, it occurred to me that computer games would be the next platform for learning for elite players.

That's why more i was quite enamored with this occurrence where it was discovered that the Chess champion among computers known as Rybka, was disqualified for unauthorized use of code from other programmers. The hilarious title of the story aside, it is an illustration that the programmer of the four time champion learned from other open source codes and used it to enhance the performance of Rybka. Come to think of it, any champion could borrow Alekhine's defense or Capablanca's openings without being accused of plagiarism but once the play is in machine language, then different rules apply.        

The Age of Benevolent Dictators

A few months ago, I found myself in a discussion with an acquaintance who had visited the Libyan city of Tripoli in the last year. It is to be recalled that at the time, Egypt was in political turmoil due to unrelenting pressure by the citizens for resignation by the president and the leadership. As is common, there were various ideas about how far the series of protests would go throughout the nations of the Middle East and the north of Africa. The discussion started with arguments about what the trajectory of protests would take and which country would next be under pressure. My interlocutor stated firmly that Libya's government would have no reason at all for worry because of the better quality of life that it accorded its citizens. In his view, many people would willingly trade off political freedom for economic prosperity and that was it. While I do not recall exactly the words uttered, the libertarian bone in me was  disturbed by the assertion that benevolent dictators are going to be more safe and better for development outcomes.

Today, I got a copy of this piece by the Centre for International Private Enterprise (CIPE) that places a dispassionate argument dispelling the myth of the stability and prosperity of states under the rule of "benevolent dictators". Admitting that there are a number of seemingly prosperous states that have had authoritarian governments, the article makes the important point that this is no reason to conclude that democracy should be secondary to strong economies. And yet, the clear evidence that democratic systems have endured into prosperous economies does not seem to correlate with preference for the former. At the same time, it is clear that democratic systems may be difficult to work under but these governments are more likely to be interested in achievements that go beyond keeping the chairman and his comrades in power.  

For all its conciseness and clarity, this article is unlikely to convince everyone that democratic freedom is also most stable avenue towards economic prosperity. One need not only look at Intrade's main board on the chances of Gaddafi's survival to understand that this quest for benevolent dictatorships is ill-informed. We now know that among the governments in the neighbourhood of the Middle east, it is the Libyan government that has the toughest choices ahead of it now. It is also less likely that the regime will survive intact as there are some irreversible changes already afoot.

Is Tiger Beyond His Best?

A couple of weeks ago, Rory McIlroy won the US Open Golf Tournament for 2011 with an impressive and dominant display that started the comparisons to Tiger woods. Clearly, the winner deserved the glory and provides proof he is one of the top players and not just a rising star. And that brings me to the consideration about the prospects of Tiger Woods in the game.

I stated a while back in this post that Tiger Woods will be back after his tribulations and that he will still be among the players to beat. With more than a year gone since that assertion I think that I would still wager a considerable sum on his return. Tiger's injuries notwithstanding, my confidence in his ability comes from the fact that he plays a sport in which the physical diminution of skills does not occur as quickly and the range in ages of the top players is among the widest in professional sports today. Secondly, the skills that are required to perform in golf are built over time and may be improved over a longer stretch and this gives Tiger a significant advantage.

For that reason, articles such as this about Tiger being invincible probably overstate Tiger's supposed decline, if any and fail to mention the fact that PGA Rankings released last month should be read cautiously. For instance, while the ranking system places Tiger as seventeenth, it is clear to me that this is largely explained by the fact that he has played the least among all players ranked above him. Tiger will be back.