What Has 3D Printing Wrought?

An article in the Huffington Post by Dominique Mosbergen reports about an very clever man who managed to manufacture gun arts from 3D printing and assembled them into a usable weapon. for a country alert to recent disasters by people who handled guns maliciously and harmed fellow citizens, this development introduces a new challenge for public policy on firearms ownership and use. At the same time, there is the realization that 3D printing technology may lead to production of goods whose ownership and use remain in contention.

It may not be illegal to get blue prints and manufacture a weapon as the subject of the story did but a regulatory issue arises whether the product of that process requires registration. My hunch is that a bureaucrat will probably find good reason why it should be registered if not altogether outlawed. The fears of a criminal using a similar process to manufacture and sell large volumes of similar weapons, is perhaps overstated because the production of that weapon presupposes a high degree of knowledge and technical capability that many people save for dedicated students would have. Additionally, most of these goods are already manufactured by corporations whose processes use cutting-edge technology and who would probably wipe out a lone working competitor on cost and quality. What this state of affairs brings to the fore is that many technologies are marginally neutral in their effects and can also be applied for other purposes that portions of a society may not approve.  

Who Needs a Financial Products Agency?

It is very clear to any keen observer that financial engineering does not necessarily result in products with social value. In many cases, those who work actively to design sophisticated financial products are not always certain of their real effects on markets or other products. Staring from this realization, it is unsurprising to me that many well-intentioned people are keen to ensure that financial engineering is limited to producing products with proven social value. Gretchen Morgenson of the NYT presents that same argument and features the paper by Eric Posner and E. Glen Weyl of the University of Chicago. The two professors state that there is a distinction between the real economy and the financial services industry and this may justify regulation of the latter and not the former.

The summary of their proposal contained in this paper is that the creation of a Financial Products Agency is necessary o ensure that there is adequate testing of the social value of new products before release to the market. To my mind, the reasoning about the distinction between real markets and the financial services industry is impeccable but the proposal for creating an agency for determining social value is less convincing. Indeed, I think that it is a very bad idea that is incapable of putting to effect. My reason for this skepticism is that the determination of social value would be difficult to determine because market participants would not define it in the same way. In addition, placing a regulatory committee to determine what social value a product would have is a very nebulous endeavor that would introduce subjectivity to these decisions.   

The only way for society to ensure that socially useful products continue to thrive is to communicate to institutions that generate these solutions that they will bear the costs of any failures. It is not necessary to require clairvoyance on the part of an agency or body.   

Lessons From a New Copier

I was trying to figure out how to use the new copier in a certain corner of the office where I work when I noted that machine makers have a sense of humour. On the left hand corner of the surface of the plate is a warning stating that it is illegal to use this copier for generating photocopies of bank notes, cash, passports, certificates, securities and stamps. Having seen this, I rubbed my eyes and asked myself why this warning was necessary.

Thinking about it, it is clear to me that this item sells in various parts of the world and it may well be that in some countries, making copies of currency is forbidden. Now, the manufacturers of this machine seem to consider it their duty to warn users that making these copies would be criminal activity. I think that this manufacturer is being very kind to its customers but is merely reacting to the need to issue too many warnings in order to forestall any vexatious litigation.

To my mind, some managers considered that since the machine could be used to make forgeries, it may be in their interest to ensure that no person may claim that the machine facilitated criminal action. I am sure that this is not the way to go because people should understand that in purchasing a machine, the maker has in mind that it would be used for lawful purposes only. And that's why I was amused that a manufacturer of this machine assumes the responsibility for this warning. I would have thought that anybody who is capable of using this complicated gadget should know that copying currency may be a crime. The notice would be more accurate if its added that copying the following items with intent to use them as original is forbidden. 

Politicians Take on Banning Pyjamas In Public

One of the paradoxes about the United States is that it is a nation that is truly given to respecting individual freedom and yet one also finds petty bureaucrats who try to limit choices in ridiculous ways. An MSNBC story covers the story in Louisiana where a state official is making proposals to stop people from wearing pajama pants in public. Now, one just wonders why such a ridiculous idea should be given any consideration. Wearing pyjamas in public is unsightly but I think that it is silly to put forth legislation to ban this and then have to fund the enforcement of that law.

To my mind, several cities have attempted to ban the appearance of individuals in public but I am unsure that the numbers of people engaged in this and the cost of enforcement make it even worthy of considering. My advise is for this guy to find soem other more important issues to dedicate his regulatory creativity on. Just look the other way when one person walks past you in the street. they are suppossed to live in a free country!

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.  

Can Regulation Save Angkor Wat?

A couple of months ago, I attended a conference in the Cambodian City of Siem Reap. Naturally during the stay, I and some colleagues visited the ancient city and religious complex of Angkor Wat and was impressed not only with the scale of that cultural edifice but also with the degree of scientific knowledge that led to the construction of a building that precedes by centuries Asia's most valued structure, the Taj Mahal. 

Thereafter, I took some readings, watched a documentary speculating on the both the purpose and the religious leaders who brought the construction to its height. All this while, I wondered how to justify the inclusion of those pictures on a blog dedicated to the discussion of applied economics and public affairs.

It appears now that I need not have worried because Ben Doherty of the Guardian states that the Angkor Wat complex is threatened because of the illegal extraction of water by corporations. As it is, the land on which the complex is based is an original swampy area that enabled the planting of rice from the reverse flow of melted glaciers of the Himalayas. Rising number of tourists is creating a demand for more water whose extraction from the ground threatens the foundation of the ancient religious city.

Wearing my thinking cap, this situation illustrates once gain the fact that tourist receipts that are arguably helping to fund the conservation of the complex have the unintended consequence of leading to water extraction whose longer term effects are yet unknown. there's no clear policy response here save to estimate the amount of water extracted and charge hotels and other establishments for that extraction since the state owned corporation is unable to supply sufficient water. Regulation here is necessary and a sensible reaction because the businesses that thrive in Siem Reap rely to a large extent on the enormous tourist appeal of the Angkor Wat complex. The number of visitors is impressive but I am certain that Ben Doherty has got the population of Siem reap right because I assessed it at far more than 200,000 people.

Governments Find Blackberry Devices Too Secure

Soon after President Obama was elected, it was a matter of concern that he was reluctant to accept the surrender of his famous Blackberry phone and communication device. At the time, the concern was that the nature and extent of presidential communication required a high degree of security that would not be guaranteed by such a service. I blogged here that the Research In Motion, the corporation that manufacturers the device would take that as a challenge to assert that the degree of security for that device would make it fit for presidential communication.

Some two years later, a different set of governments have pressured the RIM into some concessions on security based on the thinking that the device provides a very tight level of security that national governments of a number of Asian countries cannot reach.  As the dated piece in the NYT states here, governments of the United Arab Emirates, Saudi Arabia and India are concerned that by guaranteeing a high level of privacy in communication, the security of states may be compromised. It seems that the device is not fit for a president but is too safe for citizens half a world away.

Images are subject to copyright and extracted from RIM website.

Motorized Bikes in China

I still maintain that the world's largest experiment in human and economic development is going on in Asia and squarely involves the Chinese and Indian people. To my mind, these two countries are placed to prove to the rest of the world that large-scale human development is possible. By no means do i think that the success of either is inevitable but China in particular has done much better.

As recorded in this post a long while back, China's main cities have faced the problem of traffic congestion and opted to ban motor bikes and motorized bicycles ostensibly because they encouraged crime. It seems that in spite of the ban, motorized bicycles are still the rage in China and that there is public preference for this mode of transportation in urban areas. To my mind, this story in the Economist magazine demonstrate how difficult it is to completely kill and industry. Chinese firms are not only exporting large sums of bicycles throughout the world but local consumption and preference for them is growing.

Adding to the preference for bikes is the fact that they are perceived to contribute less to pollution in comparison to automobiles. The moral of the story is that controlling congestion requires a far more complex cost-benefit calculation than was envisaged.

iPads Welcome in Israel Now

I stated in this blog post that Israel's government impounded iPads from visitors and its citizens one month ago.To me, that was a totally puzzling thing considering that Israel is the Middle east's most technologically driven country. An article from the Jerusalem Post confirms that the government has reversed that policy and while I do not believe the initial reason behind that temporary ban, I still think that it has made the right decision now. True to my thinking that this is a country whose citizens welcome technology, the story confirms that it prides itself in being slightly ahead of other countries who are also launching the product.

Bring No iPad Here

If someone asked a question about which state would try to impede the use of the iPad by its citizens, I would not think that Israel would be it. And yet this story in the Washington Post reports that the Middle East's most astute government in economic policy has just done that. I do not fully accept Israel's policies in the political field but its economics and approach to technology is something that I have lauded here before. And that is why I find the reason given for refusing to allow entry of the iPad into the country completely puzzling for its wrongheadedness. What's really happening?  

Banning Poker in Russia

One would think that of all things that governments realize today, it is the lesson that a multitude of rules does not  guarantee improvements in welfare. But bureaucrats have this tendency to ascribe the possibility of armageddon to any activity that some people are drawn to. True to its statist history, the government of Russia has announced a ban on playing poker for cash. This was accomplished by the de-listing of poker as a sport and therefore cannot be played for money.

Besides the annoyance that this creates in people who play poker with their friends for small wager, just what does this new rule accomplish? To my mind, the response form those who wish to circumvent the rule would probably be to keep records away from the playing tables. However, this rule is completely silly because these bureaucrats in Russia seem to be unaware of Partygaming and other online gaming corporations. But pragmatism is not a forte of most bureaucrats and in spite of the certainty that enforcement will fail, they would rather try.

Toyoda Goes to DC

In my thinking, there is a definite problem in having a congressional panel put to task Toyota Corporation's leadership on account of the alleged failures in the electronic acceleration control system. The main reason is because a number of US automakers that are now protected and subsidized by the state are direct competitors to this firm. That aside, legislators are representatives of people and are bound to want to ask questions when the public seems to be concerned and where loss of life is attributed to these failures.

Lisa Twaronite of MarketWatch reports that Mr. Toyoda's contrition was very well read by the equity markets and this resulted in the share price outperforming the market for that day. I see this as a good signal to corporations that it does help to adopt an attitude that is not combative.

Looking at the numbers quoted in the article, I am trying to figure out how many accidents really took place because 8 million cars are recalled when the reported fatalities were 38. A fuller picture would be required to make a definite conclusion but I think the safety standards in the safety systems are quite decent noting that those cars log in millions of kilometres.

Keep the Pyjamas At Home

Together with the general interest in the great development achievements of the People's Republic of China, I have maintained an interest in the odd and freedom-inhibiting regulatory provisions that countries maintain. Some of these blog posts such as this, have commented on the ingenuity of China's local bosses in designing laws and provisions with interesting outcomes. I have just stumbled upon another story which confirms that city officials in Shanghai have started a campaign to dissuade Chinese citizens from wearing their pyjamas in public.

This is interesting to me for two reasons. First, my libertarian instincts lead me to ask so what if a person chooses to wear pyjamas on the side walks. Indeed, they would probably look quite odd though it is possible that they may start a fad which is helpful for a major manufacturer and exporter of textiles. As a second point, this is worrisome because while there is no law yet, it suggest that some bureaucrats are obsessed with creating impressions to foreigners and are less mindful of the implications for individual choices.

Noting that the samples of pyjamas worn by the two men in the picture accompanying that story are quite decent, I still contend that a drive to impose behaviour on individuals just because the country is hosting an international event betrays a bureaucracy that is filled with busy bodies. Given Shanghai's place in the continuing economic development miracle achieved by China, one would think that bureaucrats in that city understand the opportunity costs of raising a campaign to stop people going about the sidewalks in clothes of their choice. With tongue in cheek, would one face the same scrutiny if the choice of pyjamas was from this Piero Galante store?

Bank Secrecy and Public Good

Swiss banking has acquired an enviable reputation for efficiency and solidity in keeping assets safe for individuals with large incomes and assets. Indeed, one of its main selling points has been the bankable value of Swiss bank secrecy as a recognized character of most of those banks. I have been at a loss about the virtual arm twisting that has led Swiss banks to accept the release of details of a number of account holders who may have evaded taxes in the US and European countries.

Lacking the clarity and certainty that has been expressed by various liberty-loving and libertarian bloggers on the one side and state agents arguing for the right to find and punish banks that collaborate with tax evaders, I have eschewed a contribution to that discussion on this blog or elsewhere. However, reading what I think is a mildly tilted but passable opinion by Holman Jenkins Jr. of the Wall Street Journal here, I consider that I could venture with my views too.

To begin with, businesses of every kind should design and retain the liberty to emphasize features that would give them an advantage over others based in different countries or nations. For that reason alone, there is nothing completely objectionable about Swiss banking institutions stressing the secrecy as a sacrosanct feature in their service to clients. As Holman Jenkins Jr. states, this specific feature was developed by the Swiss legislature entirely for defensible purposes aimed at preventing the confiscation of private property by the government of Nazi Germany. To his admission too, the author states that the feature was neutral and allowed both some Nazis and the Jewish families to shield their property from confiscation.

Later however, the deployment of bank secrecy as a business feature has given Swiss banks a bad name and this was bound to boomerang badly sooner than later. To start with, many African and Latin American despots and killers are known and suspected of holding comparatively large fortunes in Swiss banks. Often after the demise of these despots, Swiss banks have hidden behind this secrecy feature to prevent national governments from claiming property that was stolen from national treasuries, all in the name of absolute bank secrecy laws. This has been a frustrating state of affairs for many residents of developing nations and has made a useful instrument highly suspect and the banks largely despised.

So while I am loath to concede to government wide regulation and forced participation in a disclosure scheme, I think that the banks could have preempted this loss of public confidence by refining the secrecy laws to allow fewer despots and thieves from escaping with large sums of cash. To my mind, a person who relocates his assets across countries to evade taxes is, strictly speaking, breaking the law but cannot compare to outright killers and thieves whose money has been parked in Swiss banks for decades. Unlike Holman Jenkins Jr., I am less inclined to accept that the the problem was that the banks deployed Swiss banking too widely, but agree that it indeed was cheapened by making outright killers keep dollars that they obviously did not earn and that were stolen from national treasuries. Swiss banking has a valuable attribute but it made itself cheap by keeping assets for killers and outright thieves.

The Vanishing Envelopes of China

Looking at Chinese progress throughout the last two decades, it looks as if it has a very competent government and public service generally. Now, this story in the NYT is one that reminds about the ridiculous things that happen in that otherwise impressive economic growth story. It chronicles the life of Xue Longlong and the loss of his certificates due to what officialdom describes as misplacement and which increasingly looks like something really corrupt. As the story states, it appears that the ability to validate academic qualifications rests entirely with public sector workers and that records throughout a student's career are kept in a single file kept throughout one's life. The risk associated with these seem to escape the bureaucracy or perhaps some in its understand that once all the records are in one place, then it is easier to purvey them corruptly.

To my mind, this suggests a simple lesson that should be clear to any bureaucracy. Highly centralized systems may appear effective in getting people to do big building projects but it is not necessary to keep the record of millions of students in one place and in a single institution. I am at a loss when I consider China's population and imagine that any one person's records can only be verified through a single office. This is a failure of centralization taken too far because academic qualifications should be verifiable from the institutions that offered the courses. In which case, there would be a distributed network of offices bearing different records that could be used to build a composite picture. To my mind, there's good reason for the rise of a number businesses that would reliably verify academic qualifications.

The most surprising bit is that the China's private sector continues to rely upon the public officers to confirm individual capability when it ought to be clear to them that these are corrupt. The best way out is for them to show less respect for the brown manila envelope an ask Mr. Xue Longlong's University to verify his academic qualification. To continue to insist on the production of that Brown envelope allows the corrupt market to thrive.

Amazon and Remote Deletion

Farhad Manjoo of Slate Magazine covers here the recent deletion of certain book titles from the Kindle by Amazon without prior consultation with the owners of the gadgets. To my mind, this shows an exceptionally broad remit that Amazon retains for itself regarding a gadget that it sells expensively and which I have written exuberantly on this blog. While Amazon has explained that the deletion of the books from the Kindle gadgets was occasioned by the fact that digital titles had been mistakenly published and may have been in breach of intellectual property rights, I am truly amazed at this degree of brazenness.

As a person who is seriously considering the purchase of the Kindle 2, I am taken aback by the enormous power that Amazon not only had but which it has unilaterally wielded against its own customers. This reminds me of the behaviour of firms that tried to impose unrealistic Digital Rights Management systems on purchasers of CDs. The bigger question in my mind though is on who really owns the Kindle devices and the digital books that are read on them. As the article under reference states, the service contract suggests that Amazon interprets this as its property.

Well, Amazon is entirely entitled to its interpretation but I think that when I eventually purchase a Kindle 2, I will continue to fully assume and claim property rights to the titles that I have paid for just as I am convinced of my ownership of the number of books that I have bought from the Amazon store. Nobody should sneak into my library and take away titles from my shelf just because the titles were mistakenly sold to me. I would fully appreciate a note perhaps reminding me that the title was sold to me erroneously and that I should consider adherence to the law by returning it for a full refund. That's just sound etiquette and one that Amazon should consider before acting with stealth like it did. This is the first regulatory issue regarding the rights of Kindle users.

Banks and Compensation

I have argued on this blog before that the financial crisis was caused primarily by regulators who slept on the job in addition to the idea that government will not let some banks to fail. I am less convinced that the remuneration that firms choose to pay their employees should concern anyone other than shareholders. In the last week, there has been confirmation that Goldman Sachs and JP Morgan, both investment banks, are back to high profitability and are prepared to pay bonuses and perks that are no different from the behavior that their critics loath.

I have little sympathy for the argument that such high pay is harmful to the financial system because it does increase the propensity for reckless risk taking. To my mind, the reason for high profitability in an industry is because of a unique ability or insufficient competition. That both JP Morgan and Goldman Sachs are making profits that are considered too high should lead to proper diagnosis of the problem. First, that many financial services firms and investment banks needed cash from government means that their managers are certainly not as bright as they believe. Secondly, it is possible that the distribution of profits favours a few firms in that industry and this to me makes more sense.

As Graham Bowley of the NYT states here, the recent crisis nearly decimated a large number of firms and that has allowed JP Morgan and Goldman Sachs to become the preeminent bakers for the moment. It is not clear that they will maintain this position but the fact that the crisis has led to a new industry with new opportunities exploited by the two shows that the markets are working decently. That these firms were propped up with public funds does not bother me much now because they have paid back. More competition is always better and regulatory policy should concentrate on this side of the business.

However, the possibility of a new crisis that devastates the market and leads to a widespread economic crisis still exists. So while governments are unhappy with the new bonus plans, I have little respect for this view. All they need to state categorically is that there will be no future bailouts irrespective of the cause and leave investment banks to their devices. Reigning in poorly designed incentive schemes in banks is the work of shareholders.