Tag Archives: competition

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U.S. Transhumanist Party Support for H.R. 1868, the Restoring American Privacy Act of 2017 – Post by G. Stolyarov II

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The New Renaissance HatG. Stolyarov II
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The United States Transhumanist Party and Nevada Transhumanist Party support H.R. 1868, the Restoring American Privacy Act of 2017, proposed by Rep. Jacky Rosen of Henderson, Nevada.

This bill, if enacted into law, would undo the power recently granted by S.J. Res. 34 for regional-monopoly Internet Service Providers (ISPs) to sell individuals’ private data – including browsing histories – without those individuals’ consent. For more details, read Caleb Chen’s article on Privacy News Online, “Congresswoman Rosen introduces Restoring American Privacy Act of 2017 to reverse S.J. Res. 34”.

Section I of the U.S. Transhumanist Party Platform states, “The United States Transhumanist Party strongly supports individual privacy and liberty over how to apply technology to one’s personal life. The United States Transhumanist Party holds that each individual should remain completely sovereign in the choice to disclose or not disclose personal activities, preferences, and beliefs within the public sphere. As such, the United States Transhumanist Party opposes all forms of mass surveillance and any intrusion by governmental or private institutions upon non-coercive activities that an individual has chosen to retain within his, her, or its private sphere. However, the United States Transhumanist Party also recognizes that no individuals should be protected from peaceful criticism of any matters that those individuals have chosen to disclose within the sphere of public knowledge and discourse.”

Neither governmental nor private institutions – especially private institutions with coercive monopoly powers granted to them by laws barring or limiting competition – should be permitted to deprive individuals of the choice over whether or not to disclose their personal information.

Individuals’ ownership over their own data and sovereignty over whether or not to disclose any browsing history or other history of online visitation to external entities are essential components of privacy, and we applaud Representative Rosen for her efforts to restore these concepts within United States federal law.

Become a member of the U.S. Transhumanist Party for free  by filling out the membership application form here

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Protectionism is All Around Us – Article by Daniel Gold

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Categories: Economics, Politics, Tags: , , , , , , , , , , , , , , , , , ,

The New Renaissance HatDaniel Gold
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In political speak, a protectionist is someone who is against free trade. They want to protect American businesses, and indirectly American workers, from cheap labor offered abroad.

The underlying argument is that American workers require protection from competition.The underlying argument is that American workers require, or benefit from, protection from competition.

This same argument is used to restrict many other liberties.

Crusaders against immigration lament that low wage earning immigrants steal jobs from, and drive down the wages of American born workers.

Opponents of Uber and AirBnB claim that hotel owners, and taxi drivers, need to be protected from cheap competition offered in the sharing economy.

Even advocates of the minimum wage are protectionists. They feel that workers need to be protected from other workers who would offer to sell their labor at a lower price. This was evident in the first debate over the minimum wage, when white workers felt they needed protection against cheaper, African-American labor.

The minimum wage was first implemented in the United States nationally in 1931 by the Davis-Bacon act. During the debate in the House of representatives, Rep. William Upshaw (D-Ga.) complained of the “superabundance or large aggregation of Negro labor.” Rep. Miles Allgood (D-Ala.) said, “That contractor has cheap colored labor that he transports, and he puts them in cabins, and it is labor of that sort that is in competition with white labor throughout the country.”

Opposition to immigration, trade, the sharing economy, and a wage set by the market is all the same tired argument, rebranded to hide its proven failure.

It’s Always Anti-Competitive

Protectionism fails because the harms of protectionist policies are guaranteed to exceed the benefits. Any benefits transferred to the producers are passed onto the consumer in the form of higher prices. However, because less exchange takes place at a higher price, there is a deadweight loss to the economy as a whole.

Protectionism is propped up by a political system of concentrated benefits and dispersed costs that make it difficult to defeat. Imagine you own a hotel, and a bill is sitting on your legislator’s desk to ban AirBnB.

You will make it known to your legislator, that your support for him, and the support of 100 other hotel owners like you, depends on him signing the bill. Meanwhile the hundreds of thousands of consumers who are hurt by this bill, care more about other things.

The Damage Adds Up

The individual consumer may not care much about the hurt she suffers from a more expensive hotel, but it adds up. Hundreds of thousands of goods are more expensive because of tariffs or quotas. Hundreds of services become more expensive for everyone because of occupational licensing laws.

Because of the incentives within the system, this will be one of the most difficult economic problems to fix. It requires vigilance, it requires us to call our representatives while they consider protectionist laws, it requires us to vote for non-protectionist candidates. If we do all this, we can rid ourselves of the largest drag on our economy.

danielgold
Daniel Gold

Daniel Gold is a student at Carleton College.

This article was originally published on FEE.org. Read the original article.

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Private Cities: A Path to Liberty – Article by Titus Gebel

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The New Renaissance Hat
Titus Gebel
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Given Voluntary Cooperation, Everything Is Possible

Let us analyze the market for governance: states exist, at least in part, because there is demand for them. A functioning state offers a stable framework of law and order, which enables the coexistence and interaction of a large number of people. This is so attractive that most people are willing to accept significant limitations on their personal freedom in exchange. Probably even most North Koreans would prefer staying in their country compared to living free but alone as a Robinson Crusoe on a remote island. Humans are social animals.

However, if you could offer the services of a state and also avoid its disadvantages, you would have created a better product. But after decades of political activity, I have come to the conclusion that real liberty, in the sense of voluntariness and self-determination, can’t be achieved by tinkering with existing states through the democratic process. There is simply not enough demand for these values at the moment.

However, someone could offer this as a niche product for interested parties. It might be possible for private companies to provide all of the necessary services that government normally monopolizes. I want to start such a company.

Private Cities

All that we know from the free market could be applied to what I call the “market of living together”: voluntary exchange (including the right to reject any offer), competition between products, and the resulting diversity of the product range. A “government services provider” could offer a specific model of living together within a defined territory and only the ones who like the offer settle there. Such offers have to be attractive — otherwise there will be no customers.

This is the idea of a private city: a voluntary, for-profit, private enterprise that offers protection for life, liberty, and property in a given territory — better, cheaper, and freer than existing state models. Residence would depend on a predefined contractual relationship between residents and the operator. In case there is a conflict about the interpretation of the contract, there will be independent arbitration.

Private cities are not meant as a retreat for the rich. Run properly, they would develop along the lines of Hong Kong, offering opportunities to rich and poor alike. New residents who are willing to work but without means could negotiate a deferral of their payment obligations, and employers seeking a workforce could take over their contractual payment obligations.

The incentive for the operator of a private city would be profit: offering an attractive product at the right price. This would likely include public goods, such as a clean environment, police, and fire protection, as well as some infrastructure and social rules. But the operator’s main service is to ensure that the free order is not disturbed and that residents’ life and property are secure.

In practice, the operator can only guarantee this if he or she can control who is coming (prevention) and is entitled to throw out disrupters (reaction). For everything beyond this framework, there are private entrepreneurs, insurance, and civil society groups. Of course, all activity ends where the rights of others are infringed. Other than that, the proper corrective is competition and demand.

Order and Exit

Will the threat of competition bring sufficient protection to the residents? Consider this: the Principality of Monaco is a constitutional monarchy. It concedes zero political participation rights for residents without Monegasque citizenship — some 80 percent of the population, including myself. Nevertheless, there are far more applicants for residency than the small housing market of this tiny place (two square kilometers) may take.

Why is this so? Three reasons: there are no direct taxes in Monaco for individuals; it is extremely secure; and the government leaves you alone. If Monaco changed this, people would just move away to other jurisdictions. Thus, despite the prince’s formal position of great power, competition with other jurisdictions — not separation of powers, not a constitution, and not voting — ensures the residents’ freedom.

Accordingly, there is also no need for parliaments. Rather, such representative bodies are a constant danger to liberty, since special interest groups inevitably hijack and mutate them into self-service stores for the political class. Unfortunately, the rule of law does not provide adequate protection against this tendency in contemporary Western societies. If laws or constitutions are standing in the way, they will be quickly modified or interpreted in a politically convenient way.

Competition has been proven as the only effective method in human history for limitation of power. In a private city, contract and arbitration are efficient tools in favor of the residents. But ultimately, it is competition and the possibility of a speedy exit that guarantee that the operator remains a service provider and does not become a dictator.

A private city is not a utopian, constructivist idea. Instead, it is simply a known business model applied to another sector, the market of living together. In essence, the operator is a mere service provider, establishing and maintaining the framework within which the society can develop, open-ended, with no predefined goal.

The only permanent requirement in favor of freedom and self-determination is the contract with the operator. Only this contract can create mandatory obligations. For example, residents can agree on establishing a council. But even if 99 percent of the residents support the idea and voluntarily submit to the council’s decisions, this body has no right to impose their ideas on the remaining 1 percent. And this is the crucial point, which failed regularly in past and present systems: a reliable guarantee of individual liberty.

Where to Begin

In order to start this project, autonomy from existing sovereignties must be secured. It need not entail complete territorial independence, but it must include the right to regulate the city’s internal affairs. The establishment of a private city therefore requires first an agreement with an existing state. The parent state grants the operator the right to establish a private city and to set its own rules within a defined territory, ideally with access to the sea and formerly unincorporated.

Existing states can be sold on this concept when they can expect to reap benefits from it. The quasi-city states of Hong Kong, Singapore, and Monaco have a cordon of densely populated and affluent areas adjacent to their borders. These areas are part of the parent states and their residents pay taxes to the mother country. Now, if such structures are formed around a previously underdeveloped or unpopulated area, this is a gain for the parent state. Negotiating with a government to surrender partial sovereignty is certainly no easy task, but it is in my view more promising than attempts to “change the system from within.”

Private cities are much more than just a nice idea for a few people on the margins. They have the potential to subject existing states to creative destruction. If private cities are developed across the world, they will put states under considerable pressure to change their systems towards more freedom, or else they may lose subjects and revenue.

It is precisely this positive effect of competition that has been lacking in the state market to date. Not all private cities need conform to my own ideal rules. Specialized cities offering social security or catering to specific religious or ideological concerns are conceivable. Within this framework, even socialists would be free to try to prove that their system done properly really does work. But this time one thing is different: others do not have to suffer from this (or any other) social experiment. The superstructure of voluntary association allows many different systems to flourish. Given voluntary participation, everything is possible.

This simple rule has the potential to disarm and transform even a totalitarian ideology into just one product among many. I firmly believe that private cities or similar autonomous regions, such as charter cities or LEAP-zones, are inevitable. People of all social and economic groups will not forever agree to be looted, bullied, and patronized by the political class, without ever having a meaningful choice. Private cities are a peaceful, voluntary alternative that can transform our societies without revolution or violence — or even majority consensus. My guess: we will see the first private city within the next ten years. I hope to see you there.

Titus Gebel is a German entrepreneur with a PhD in law. He previously founded Deutsche Rohstoff AG, among others, and now lives with his family in Monaco.

This article was originally published by The Foundation for Economic Education and may be freely distributed, subject to a Creative Commons Attribution 4.0 International License, which requires that credit be given to the author.

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Public Education Is Superior and Must Be Protected from Competition – Article by Kevin Currie-Knight

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The New Renaissance HatKevin Currie-Knight
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Opponents of School Choice Can’t Make Up Their Minds

Defenders of public education often point to data showing public schools to be as good as or better than private alternatives. A recent book celebrating such data is The Public School Advantage: Why Public Schools Outperform Private Schools.

Public schools, according to the authors, tend to outperform private rivals on a variety of metrics. Such groups as the National Education Association teachers’ union have used this research to make a case against “privatization.” (The book’s research has been criticized in some quarters for using flawed research methods, and other data show that private schools tend to outperform public ones.)

But when school choice proposals make legislative headway and threaten public school systems, this confidence seems to evaporate. People start fulminating about how school choice programs would effectively crush the public education system.

If competition from private education would doom public schools, then how confident can the public system’s proponents really be about the schools they’re defending? And if public education really is superior to private alternatives, why worry that people would prefer private schools if given a choice?

Spotting the Monopoly
Imagine that I am a spokesperson for the dominant car dealership in your area, and you’ve been hearing good things about a rival dealership. Not to worry, I convince you: our cars outperform theirs on a variety of metrics.

Now, imagine that that rival car company is about ready to open up a dealership down the street, and you hear me petition to the legislature not to allow it: “Permitting this other dealership to move in will surely spell the death of our company. Once people are allowed another option, it is only a matter of time before our profits dwindle to the point where we can’t sustain our business.”

“Wait,” you say, “I thought you just told me how confident you were in the superiority of your cars. Surely, if you are that confident, you wouldn’t be so worried about competition!”

You’d be right. And this situation is basically the one we are in regarding American public schools. Proponents point to data showing that, on several metrics, public schools fare no worse and sometimes better than private schools. Yet, when local governments entertain school choice programs, the public system’s defenders suggest that competition will spell the death of public schooling.

Either you’re confident that your product is the best choice or you’re not.

The Sky Is Falling!
Indiana, for instance, is entertaining two bills (House Bill 1311 and Senate Bill 397) that would allow students in the state to use money that would have been spent on their public education to receive private educational services. The Indiana State Teacher’s Association website declares that this change would “be a major blow to public schools.”

We see a similar lack of confidence in reactions to Arizona’s recent attempt to open up a very targeted voucher program to all students by 2018. “This is the end of public education in Arizona,” laments state senator Steve Farley.

Perhaps the fear mongering is just about rallying the troops. Maybe public school defenders know their product is superior but want to motivate their base with “the sky is falling” rhetoric.

But notice that such declarations about the “end of public school” share school choice advocates’ basic assumption: given the option, consumers will leave the public schools to the point where public schools need to be concerned for their financial viability.

Superior or Not — Which Is It?
Let’s go back to the example of the fictional car dealership. When shopping for a car, you certainly care what the research says on the cars you’re looking at. But would you be content if the car dealer told you, “You don’t need to look into that other car manufacturer. I assure you, lots of studies show that our cars are better than theirs on a variety of metrics”?

My guess is that you’d keep the claim in mind but look at the other dealer’s cars anyway. Yes, you want the best car, but you also want the flexibility to decide which car is best for you.

When you then hear the car manufacturer’s lobbyists worrying to the legislature that allowing competitors into your area would surely spell the death of their employer’s company, it seems like cause for concern. The most plausible explanation — which the car manufacturer would never admit — is that they really are worried that consumers would prefer the competitors if given a choice.

When a car dealership, a school system or anyone else believes that competition will destroy their business, you can assume they aren’t confident about what they’re selling and wonder if their product or service is inferior.

Public school proponents can’t have it both ways. Under school choice programs like the ones Indiana and Arizona are considering, public schools will compete for funding with private educational services. Students who choose public schools will send their “tuition” money to their chosen public school. Therefore, the only way these choice programs could kill public schooling is if families en masse choose, and continue to choose, to direct public dollars away from the government’s school system and into private schools.

And if that’s what parents prefer for their children, then why shouldn’t they have that choice?

Kevin Currie-Knight teaches in East Carolina University’s Department of Special Education, Foundations, and Research. His website is KevinCK.net. He is a member of the FEE Faculty Network.

This article was originally published by The Foundation for Economic Education and may be freely distributed, subject to a Creative Commons Attribution 4.0 International License, which requires that credit be given to the author.

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Capitalism Promotes Equality – Article by Barry Brownstein

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The New Renaissance HatBarry Brownstein
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Equality in Consumption Is Now the Norm

Highway traffic began to slow outside of Boston as we made our way to the airport. My wife was driving, so I took out my $100 Android phone and opened Google Maps. Google Traffic instantly showed me, in real time, the best route to avoid delays and estimated the number of minutes we’d save by altering our route. Thanks to Google, there was no threat of missing our flight.

It was not too long ago that we relied on traffic reporters in helicopters, and their advice was often useless by the time we heard their updates.

Have you wondered how Google Traffic does it? The answer is crowdsourcing. If you are among the two-thirds of American adults who own a smartphone, and if the GPS locator on your phone is enabled, you are generating real-time traffic information. Google Traffic measures how fast cars are moving compared to normal speeds and generates location-specific reports.

Rich or poor, most of the drivers on the highway that day had access to the same miraculous traffic report and the same opportunity to make better driving decisions. This is just one example of how the marketplace generates equality in consumption.

The cars we drive are another indicator of consumption equality. We were driving an inexpensive Subaru Outback. There are more expensive, comfortable, and bigger cars on the market, but the Insurance Institute for Highway Safety says that there are none safer than the Outback.

Would a rich individual, on this same drive to the airport, have any noticeable advantages over me? He or she could hire a driver and use the drive time for something more productive, but even that advantage will dwindle as driverless cars become the norm.

In his Wall Street Journal commentary “The Rise of Consumption Equality,” former hedge fund manager Andy Kessler writes:

Just about every product or service that makes our lives better requires a mass market or it’s not economic to bother offering. Those who invent and produce for the mass market get rich. And the more these innovators better the rest of our lives, the richer they get but the less they can differentiate themselves from the masses whose wants they serve.

“What does Google founder Larry Page have that you don’t have?” Kessler asks pointedly.

Page’s income is unimaginably larger than most of ours. But in terms of consumption, the differences are negligible — which is remarkable, given how much Page and Google have improved our lives.

All-time football great Tom Brady earns roughly $10 million a year. His diet made the news recently. Does Brady enjoy health advantages not available to Americans with a fraction of his income? Brady hires a cook. Our family doesn’t do that, but we eat much like Brady — organic vegetables, fruits, whole grains, beans, and fish make up the bulk of our diet. From May to October, a local organic farmer provides an abundance of vegetables that are picked fresh for us based on an order we place the day before. In the summertime, our produce may be fresher than Brady’s. Compared to any of us, what real dietary advantage does Tom Brady’s income afford him? It is his commitment to a healthy lifestyle, not his income, that makes the difference.

In 1900, Americans spent approximately 50 percent of their household income on food and clothing; today, we spend closer to 20 percent. Today, fresh produce from all over the world, not even available to a king a century ago, awaits common consumers when they enter the supermarket.

In 1900, only 25 percent of households had running water; fewer still had flush toilets. It would be decades before such wonders as electricity, automobiles, and indoor plumbing were ubiquitous. The faucets in the famed Hearst Castle in California may have been gold plated, but was the water any better than what the average household received? The water running in my home comes from an artesian well over 400 feet deep. More evidence of consumption equality: my water is every bit as good, if not better, than a billionaire’s in a big city penthouse.

Wealth is not a good predictor of a rich life. Psychology professor Sonja Lyubomirsky found that only 10 percent of the variance in Americans’ happiness is due to income and other circumstances. “Happiness more than anything,” she writes in her book The How of Happiness, ”is a state-of-mind, a way of perceiving and approaching ourselves and the world in which we reside.”

And what of the elements of emotional intelligence that make life richer? In the book Big Magic, best-selling author Elizabeth Gilbert observes:

If money were the only thing people needed to live rich creative lives, then the mega-rich would be the most imaginative, generative, and original thinkers among us, and they simply are not. The essential ingredients for creativity remain exactly the same for everybody: courage, enchantment, permission, persistence, trust — and those elements are universally accessible. Which does not mean that creative living is always easy; it merely means that creative living is always possible.

The same universally accessible elements are essential ingredients for entrepreneurship. Entrepreneurs persist, driven by their vision and by the equality of opportunity that capitalism affords. The entrepreneur’s choice to be persistent and courageous is the not-so-secret engine that drives success.

The essential consumption goods we couldn’t even imagine a hundred years ago are almost universally available in the United States today. The marketplace, aided by many creative, pioneering entrepreneurs and every person who strives to put in a good day’s work, is generating consumption equality.

Barry Brownstein is professor emeritus of economics and leadership at the University of Baltimore. He is the author of The Inner-Work of Leadership. He blogs at BarryBrownstein.com, Giving up Control, and America’s Highest Purpose.

This article was published by The Foundation for Economic Education and may be freely distributed, subject to a Creative Commons Attribution 4.0 International License, which requires that credit be given to the author.

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Why Trump and Sanders See Losers Everywhere – Article by Steven Horwitz

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The New Renaissance HatSteven Horwitz
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Competition and the Zero-Sum Fallacy

Donald Trump, Bernie Sanders, many political actors, too many intellectuals, and much of the general public share a false and destructive belief about the nature of exchange: that economic activity is something akin to a battle or a full-fledged war in which the goal is for one group to “defeat” another. We see this mentality across the political spectrum.

Zero-Sum Losers

Think of the ways Trump and others on the political right talk about international trade. The basic framework is to see other countries as enemies in competition with us. The goal of trade policy is somehow to “beat” them, because if they are “winning” by selling us a lot of stuff, we must be losing. The result is mistaken policies such as Trump’s proposed 45 percent tariff on Chinese imports.

We see the same us-and-them thinking on the left, where progressives perceive a persistent battle between capital and labor, each trying to defeat the other. For leftists, capital is always the winner and labor is always the loser — unless the government intervenes. The appropriate policy response, from this perspective, is either to limit capital’s gains or, if you’re a bit more radical, to help labor vanquish capital once and for all. One of the related beliefs on the left is that the wealth of capital comes at the expense of labor. That is, capital’s gains come from labor’s losses.

Both arguments share the underlying belief that the winners’ gains must come at the losers’ expense. Economic activity, and specifically wealth creation, is at best seen as what economists would call a “zero-sum game.”

In zero-sum games, the winners’ gains do, in fact, come at the losers’ expense. Think of a poker game where each person buys $100 worth of chips. If there are five players, there is $500 to be apportioned out. If the game ends with me having $250, then the remaining $250 will be split among the other four players. My gain of $150 comes from others’ losses. Playing the game creates winners and losers because it simply reallocates fixed wealth around the group.

Positive-Sum Winners

Market economies, however, are not zero-sum games. Consider the profits of entrepreneurs like Steve Jobs or Bill Gates or Mark Zuckerberg or any of thousands of lesser-known inventors who have become fabulously wealthy by providing us with products and services that we value. Their gains are not our losses. To the contrary: markets are what we call positive-sum games. Entrepreneurs make huge profits, but they can only do so by providing us with products and services we value more than what we give up to obtain them.

Every time you get something yummy from a food truck, for example, you demonstrate the mutual benefit of trade: the truck owner gets your money and you get something delicious to eat. You both gave up something you valued less than the thing you acquired. Trade is made of win.

So when people complain that the United States is “losing to China,” presumably because we have a trade deficit with them, they are falling for the zero-sum fallacy. A trade deficit simply means that we are buying more of their goods and services than they are of ours. This doesn’t mean “they” are winning. First, there’s no “they.” The winners are individual Chinese sellers and the people they employ on one side, and individual US consumers on the other. Portraying trade as a contest between countries is deceptive: trade is always among specific individuals and groups.

Second, both sides are winning. Chinese sellers get US dollars and US consumers get products they like at low prices, which frees up income to buy other goods and services, creating jobs in other sectors of the US economy. Those US dollars, it is worth noting, make their way back to the US as Chinese firms invest in US assets, funding everything from private-sector construction to a small part of our government debt. The dollars we spend on Chinese goods do not just disappear; they come back as investments in US capital goods.

It would be more accurate to see what’s happening here as Chinese sellers arriving at the US border with boatloads of cheap goods for us to buy. Under what logic are we made worse off by the “gift” of lower priced goods?

Misunderstanding “Competition”

I suspect that much of the zero-sum thinking we see with trade is based on a misplaced application of the idea of “competition.” Competition in the market does share a number of features with the sorts of competition that people are more familiar with: sports, games, and war.

All are what F.A. Hayek called “discovery procedures.” We play games as a way to discover which individual or team is best. There’s no way to know who the best hockey team is without the discovery process of the Stanley Cup playoffs. We can’t know the answer just by looking at statistics, as every major upset in sports history demonstrates. In markets, we discover who is producing the best product at the best price by letting sellers and buyers compete. One might say the same about war.

Despite these similarities, however, there’s a critical difference: athletic competition and war are zero-sum and negative-sum games, respectively. In sports, one team wins and the other loses, or there’s a tie. Both of those outcomes are zero-sum. War destroys human and physical capital, and even when one country “wins,” everyone is worse off, making it negative-sum.

Market competition, by contrast, is positive-sum. When sellers compete with other sellers to keep prices low, it’s true that some sellers will win and others will lose, but in that process, all of the buyers win, too, not to mention the other people who will receive more income because the buyers who are paying less for the original product can now buy their products. Wealth is not redistributed, as in a poker game, and there is not an offsetting loser for each winner, as in sports. Instead, additional wealth is created. That makes it a positive-sum game.

Seeing the Bigger Picture

CEOs are used to seeing this process from the narrow perspective of their firms, which often do lose in competition with other firms, leading them to believe the same principles apply between countries, or for the economy as a whole. This may explain why Donald Trump thinks he can “defeat” China in the same way he might outcompete another firm. It also explains why Sanders can believe that we are in a competition to preserve jobs. By focusing on the growth in manufacturing jobs in China, Sanders sees trade as “stealing” US jobs rather than being part of the larger competitive process responsible for the overall growth in US jobs and wealth.

Yes, markets share much with other forms of competition, but the key difference is the one that matters. Markets are positive-sum games, and they are not about one country, one group, or one class defeating another. Competition and trade are the way we produce cooperation and mutual benefit. Failing to understand this important difference easily opens the door to demagogues on both the right and the left.

Steven Horwitz is the Charles A. Dana Professor of Economics at St. Lawrence University and the author of Hayek’s Modern Family: Classical Liberalism and the Evolution of Social Institutions. He is a member of the FEE Faculty Network.

This article was published by The Foundation for Economic Education and may be freely distributed, subject to a Creative Commons Attribution 4.0 International License, which requires that credit be given to the author.

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The Hoverboard’s Patent Problem – Article by Jeffrey A. Tucker

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The New Renaissance HatJeffrey A. Tucker
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Who has the right to make a “hoverboard”?

Shane Chen of Portland, Oregon, owns the patent to one of the hottest holiday gifts this season. It is a kind of hoverboard, a small item that keeps its user upright using infrared sensors, gyroscopes, and motors. You have probably seen them all over your city. You might even have been approached by a street seller.

The authorized version — licensed by Chen himself — is being made and distributed by Razor USA. Prices started at $1,000 and up, but competition from cheap knockoffs, selling for as low as $200, has brought the price for the authorized version to $600. Still, there are places online where you can get them for $200. If experience in new products in a guide to the future, in a year, they will be available for less than $100.

And truly, these knockoffs are everywhere. Small entrepreneurs are importing them from small manufacturers by the thousands and selling them on the streets. They are making and selling so fast that quality control has been… lax. There are anecdotal reports of explosions and sudden acceleration (parodies on this Saturday night live skit). Amazon has refused to sell many brands.

The patent has proven difficult to enforce. Razor is spending up to $1 million per week to sue unauthorized manufactures. It’s a reminder: it’s never enough just own the government-granted monopoly rights to produce something. It always costs money to enforce it. You have to investigate. You have to litigate. You have to win. And by the time that day comes, you might have lost vast market share.

If the product is popular enough, the task is essentially hopeless. The resources and time expended on patent enforcement might instead of gone to innovation and marketing toward actually making profits. Enforcing a monopoly isn’t necessarily the same as making money. Indeed, it is the opposite.

The Case of Eli Whitney
The hoverboard saga brings to mind the history of one of the 19th-century’s most famous inventions: the cotton gin. The holder of the patent was Eli Whitney. A year after his graduation from Yale, he designed and constructed an improvement in the cotton gin — a technology that had existed since the ancient world. He obtained the patent on a single feature, a brush-like extension that improved the way the seeds were extracted from the cotton.

According to Boldrin and Levine, Eli and his partner Phineas Miller has dreams of getting rich with a monopoly pricing scheme. They would install their machines throughout the South and ask a royalty of two fifths, payable in ginned cotton. This prospect seriously annoyed farmers throughout the region, understandably.

So it became a common practice for farmers to reverse engineer the innovation — not a difficult thing to do. Rather than lease the Whitney machine, they would just make their own. Does this violate anyone’s rights? Of course not. A design of a contraption is made scarce and “owned” only by legislation. To forcibly prevent farmers from making their own machines is actually an invasion of their rights.

Still, with the prospect of riches dancing in his head, Eli and Phineas set out to sue every farmer who reverse engineered their design. “Whitney and Miller spent a lot of time and money trying to enforce their patent on the cotton gin, but with little success,” write Boldrin and Levine. “Between 1794 and 1807 they went around the South bringing to court everyone in sight, yet received little compensation for their strenuous efforts.”

Meanwhile, the gin led to vast increases in productivity. The cotton industry boomed. But the holders of the patent became ever poorer.

Fortunately, the story ends well. Whitney learned that suing people is less profitable than actually marketing products. His next project was to invent a machine that created interchangeable parts for muskets. Having learned his lesson, he did not seek a patent for his innovation. He just got busy right away and began selling. (His main customer, as it turns out, became the US Army.)

He finally did strike it big. As Boldrin and Levine summarize the lesson: “It was not as a monopolist of the cotton gin, but rather as the competitive manufacturer of muskets that Whitney finally became rich.”

Will Shane Chen Learn the Lesson?
The hoverboard, like the cotton gin, is in enormous demand. All the government power is the world will not prevent hundreds of manufacturers from making them, driving the price down and down until everyone can afford one. That one million per week that Razor is spending on trying to stop copycats is probably better spent on marketing and innovation — actually selling stuff rather than trying to prevent others from selling stuff.

Absent the government regulation, how can innovators make money? They have the first-mover advantage. This is what provides a period of high profitability before others get in on the act. This is the competitive market at work, inspiring everyone to serve the customer ever more faithfully through lower prices and better products.

Another factor that gives advantage to the innovators is trust. Even now, you can go to the drug store and see name-brand products living alongside store-branded products. Both make money. Both appeal to certain market segments. One producer’s gain does not necessarily come at the expense of other producers, unless the government intervenes.

It is common wisdom to say that the patent system is broken. But what is broken about it? It’s not that the system is abused. It is that it is used at all. Industrial monopolies achieved through government grants of special privileges create waste — and the ongoing lawsuits concerning the hoverboard are a case in point.

Whether it is ginning cotton or zipping around on city sidewalks, a true innovative society encourages as much production and innovation as possible, in service of the masses who love the newest and coolest thing.

Jeffrey Tucker is Director of Digital Development at FEE, CLO of the startup Liberty.me, and editor at Laissez Faire Books. Author of five books, he speaks at FEE summer seminars and other events. His latest book is Bit by Bit: How P2P Is Freeing the World.  Follow on Twitter and Like on Facebook. 

This article was published by The Foundation for Economic Education and may be freely distributed, subject to a Creative Commons Attribution United States License, which requires that credit be given to the author.

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Artisanopolis – Seasteading City Concept by Gabriel Scheare, Luke Crowley, Lourdes Crowley, and Patrick White

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The New Renaissance HatGabriel Scheare, Luke Crowley, Lourdes Crowley, and Patrick White
August 8, 2015
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Artisanopolis, created by Gabriel Scheare, Luke & Lourdes Crowley, and Patrick White of Roark 3D and Fortgalt as a gift to The Seasteading Institute, in conjunction with the Institute’s Architectural Design Contest.

Description by The Seasteading Institute: Based on the foundational vision of The Seasteading Institute and DeltaSync, these works of art constitute an attempt at communicating the essence of what the infrastructure of sea-based civilization might look like in the near future. In this age of limited governance options, we intend to suggest an alternative model that allows new communities to form beyond the limiting jurisdictions of existing nation states in order to promote freedom and competition in the marketplace.

Each floating platform can be towed via tugboat from location to location and they can interlock to form sprawling formations over the water’s surface. Ballasts are used to adjust the depth at which the platforms sit in the water and coupling latches lock them together to form larger, cohesive footprints for convenience and stability. Modeled after those found at the seaport of Brighton, England, a large modular wavebreaker surrounds the city to shelter it from rough waters and wind while energy is supplied by renewable means like photovoltaic panel arrays and wave-driven turbines. Aquaponics greenhouse domes provide locally grown food, seawater is desalinated on site to provide drinking water, organic waste is removed via tankers to an off-site composting location, and inorganic waste is recycled. With so much focus on efficiency and sustainability, The Floating City Project promises to serve as a viable template upon which other seasteading projects can be modeled in the future.

All design contest images on this page are under the Creative Commons Attribution License. It means that you are allowed to redistribute and modify images but that you must attribute the original designer when doing so.

Note: Left-click on the images to see them in higher resolution.

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The Pathway to Faster Cures – When It Comes to Life-Saving Drugs, We Need More Than Modest Reform – Article by Bartley J. Madden

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The New Renaissance Hat
Bartley J. Madden
May 26, 2015
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Rob Donahue used to ride horses. He was a modern-day cowboy until he was stricken with amyotrophic lateral sclerosis (ALS). Now his muscles are weak. He can’t ride horses anymore. And his condition is worsening quickly. ALS will degenerate Donahue’s neurons and nervous system, and he will probably die in less than five years.

Another ALS sufferer, Nick Grillo, is trying to change all that. He’s put together a petition on Change.org to urge the FDA to fast-track approval of a new drug, GM-604, that would help people like Donahue and others like him.

“People can’t wait five, ten, 15 years for the clinical trial process,” said Grillo. “Things need to happen much quicker.”

But ALS is just one illness, and GM-604 is just one medicine. There are thousands of Americans suffering — many with terminal illnesses — while waiting on the FDA approval process.

Paradigm change

A paradigm change is essential because FDA culture has led to a situation where it costs an average of $1.5 billion and 12 or more years of clinical testing to bring a new drug to market. Medical innovation cannot thrive when only very large firms can afford to research and develop new drugs.

Another problem is that the FDA’s first goal is not to maximize innovation, but to minimize the chances that an FDA-approved drug leads to unanticipated adverse side effects and negative publicity. In particular, the FDA’s efficacy testing requirements have resulted in an ever-increasing load of money and time on drug developers. We can’t count on FDA bureaucrats to fix the broken system they created.

Even Congress, whose cottage industry is to regulate, admits that the current FDA system is a roadblock to fast-paced innovation. Congress’s own 21st Century Cures Initiative has led to many good ideas for delivering medical treatments, but even if successful, these ideas would bring only incremental improvements.

Americans deserve a bold plan to achieve genuine large-scale change enabling us to live longer, healthier, and more productive lives. And most importantly, we need a mechanism for allowing patients to exercise choice consistent with their own preferences for risk.

Congressional hearings: the missing seat at the table

The missing seat at the table is for someone who represents freedom — that is, the right of patients, advised by their doctors, to make informed decisions as to the use of not-yet-FDA-approved drugs.

Freedom in response to suffering and subjugation is a powerful rallying call. The Women’s Right to Vote constitutional amendment in 1920 and the Civil Rights Act of 1964 were not about incremental improvements; each was a paradigm change that brought forth a different and better future.

Absent from the congressional hearings over health care, however, has been a freedom agenda, specifically one designed to eliminate the FDA’s monopoly on access to new drugs.

Venture capitalists, where have you gone?

We hear very little about those who suffer and die because they were not able to access drugs stuck in the FDA’s testing pipeline, or about drugs that were never brought to market because FDA procedures made the development costs too high. There is an invisible graveyard filled with people who have died because of drug lag and drug loss.

The FDA’s deadly over-caution is why venture capitalists shy away from investing in biopharmaceutical startup firms. Venture capitalists are willing to take big risks on ideas that may fail. But failure due to regulatory risk is just too big a hurdle to overcome. Capital providers have other opportunities, even if those opportunities don’t involve cures for disease.

High costs and slow innovation are the hallmark of a monopoly. And, as medical science continues its rapid pace of innovation, the cost of lost opportunities for better health will increase even faster. The solution is to introduce consumer choice and competition.

Free to choose medicine

Three self-reinforcing principles are needed to bring rapid innovation to the biopharmaceutical marketplace.

First, we need a free-to-choose track that operates independently of the FDA and runs alongside the conventional FDA clinical testing track — a competitive alternative. After a new drug has successfully passed safety trials and shows initial effectiveness in early clinical trials, a drug developer could request that the drug be available for sale. Such an arrangement would allow for new drugs to be available up to seven years earlier than waiting for a final FDA approval decision.

Second, free-to-choose treatment results, including patients’ genetic data, would be posted on an open-access database. Patients and their physicians would be able to make informed decisions about the use of approved drugs versus not-yet-approved drugs. The resulting treasure trove of observational data would reveal, in real time on the Internet, which subsets of patients do extremely well or poorly using a particular new drug. This broad population of users — in contrast to the tight similarity of clinical trial patients — would better inform the biopharmaceutical industry, yielding better R&D decisions and faster innovation.

Third, some drug developers would want to provide free-to-choose drugs in order to quickly demonstrate that their drugs were effective, thereby enhancing the ability to raise needed capital. For patients who need insurance reimbursement and for developers seeking formal FDA recognition of their drugs’ safety and effectiveness, another kind of incentive is needed. That is, FDA observational approval would be based on treatment results reflected in observational data posted on the open-access Internet database.

In the foreword to my 2012 book, Free to Choose Medicine: Better Drugs Sooner at Lower Cost, Nobel Laureate economist Vernon Smith wrote, “These three design components for patient/doctor control of medical treatment are both innovative and soundly based. With this conceptual blueprint, legislation could be crafted to promote both expanded consumer choice and the discipline of choice to the long-term benefit of society.”

Opposition

FDA proponents would bolster the fear that “unsafe” drugs could flood the marketplace. But the FDA cannot define what is “safe.” Only patients with their unique health conditions, treatment profiles, and preferences for taking risk can define what is safe for them. That is what freedom is all about: individual choice. Keep in mind that the likely large number of free-to-choose patients with widely varying health conditions would yield uniquely useful safety data superior to safety readouts from clinical trial data.

The free-to-choose medicine plan is voluntary and would not disturb those who want to use only approved drugs. A reasonable implementation schedule would first allow the new system to be used by patients fighting a life-threatening illness, as they are the ones most in need of access to the latest drug advancements.

Biopharmaceutical firms likely to oppose such a plan would include larger firms who consider their expertise in dealing with the FDA bureaucracy as an especially valued competitive advantage over their smaller competitors. We should expect support from firms with a high level of scientific skill, but limited skill and resources in dealing with FDA bureaucracy. Nevertheless, even those firms initially opposed should question their current business models, which produce sky-high prescription drug prices and the very real chance that government at some future point will impose price controls. Why not set into motion an alternative that can lead to radically lower development and approval costs with concomitant lower prescription drug prices while maintaining industry profitability levels?

Trial lawyer organizations will be expected to contribute mightily to defeat any freedom-based legislation. They do not want Americans legally taking personal responsibility by way of voluntary contracts, even if there are life-saving benefits to be had.

Patients are the ultimate beneficiaries of competition, and they are a powerful force for those who want a fundamental restructuring of the FDA. Right-to-try state laws are designed to allow those dealing with life-threatening illnesses access to not-yet-approved drugs. These laws’ enormous popularity indicates that a well-run campaign could generate similar support at the federal level for free-to-choose medicine.

Freedom should be part of the national debate on 21st century medical legislation. For that to happen, we need to give freedom lovers and chronic sufferers a seat at the table.

Every American should have the right to make informed decisions that can improve health or save lives. Freedom is not something to fear; it is the best route forward to a more innovative, efficient, and humane medical system.

Bartley J. Madden is a founder of Tomorrow’s Cures Today.  His website is www.LearningWhatWorks.com.
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This article was originally published by The Foundation for Economic Education.

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Decentralization: Why Dumb Networks Are Better – Article by Andreas Antonopoulos

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Categories: Economics, Technology, Tags: , , , , , , , , , , , , , ,

The New Renaissance Hat
Andreas Antonopoulos
March 8, 2015
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“Every device employed to bolster individual freedom must have as its chief purpose the impairment of the absoluteness of power.” — Eric Hoffer

In computer and communications networks, decentralization leads to faster innovation, greater openness, and lower cost. Decentralization creates the conditions for competition and diversity in the services the network provides.

But how can you tell if a network is decentralized, and what makes it more likely to be decentralized? Network “intelligence” is the characteristic that differentiates centralized from decentralized networks — but in a way that is surprising and counterintuitive.

Some networks are “smart.” They offer sophisticated services that can be delivered to very simple end-user devices on the “edge” of the network. Other networks are “dumb” — they offer only a very basic service and require that the end-user devices are intelligent. What’s smart about dumb networks is that they push innovation to the edge, giving end-users control over the pace and direction of innovation. Simplicity at the center allows for complexity at the edge, which fosters the vast decentralization of services.

Surprisingly, then, “dumb” networks are the smart choice for innovation and freedom.

The telephone network used to be a smart network supporting dumb devices (telephones). All the intelligence in the telephone network and all the services were contained in the phone company’s switching buildings. The telephone on the consumer’s kitchen table was little more than a speaker and a microphone. Even the most advanced touch-tone telephones were still pretty simple devices, depending entirely on the network services they could “request” through beeping the right tones.

In a smart network like that, there is no room for innovation at the edge. Sure, you can make a phone look like a cheeseburger or a banana, but you can’t change the services it offers. The services depend entirely on the central switches owned by the phone company. Centralized innovation means slow innovation. It also means innovation directed by the goals of a single company. As a result, anything that doesn’t seem to fit the vision of the company that owns the network is rejected or even actively fought.

In fact, until 1968, AT&T restricted the devices allowed on the network to a handful of approved devices. In 1968, in a landmark decision, the FCC ruled in favor of the Carterfone, an acoustic coupler device for connecting two-way radios to telephones, opening the door for any consumer device that didn’t “cause harm to the system.”

That ruling paved the way for the answering machine, the fax machine, and the modem. But even with the ability to connect smarter devices to the edge, it wasn’t until the modem that innovation really accelerated. The modem represented a complete inversion of the architecture: all the intelligence was moved to the edge, and the phone network was used only as an underlying “dumb” network to carry the data.

Did the telecommunications companies welcome this development? Of course not! They fought it for nearly a decade, using regulation, lobbying, and legal threats against the new competition. In some countries, modem calls across international lines were automatically disconnected to prevent competition in the lucrative long-distance market. In the end, the Internet won. Now, almost the entire phone network runs as an app on top of the Internet.

The Internet is a dumb network, which is its defining and most valuable feature. The Internet’s protocol (transmission control protocol/Internet protocol, or TCP/IP) doesn’t offer “services.” It doesn’t make decisions about content. It doesn’t distinguish between photos and text, video and audio. It doesn’t have a list of approved applications. It doesn’t even distinguish between client and server, user and host, or individual versus corporation. Every IP address is an equal peer.

TCP/IP acts as an efficient pipeline, moving data from one point to another. Over time, it has had some minor adjustments to offer some differentiated “quality of service” capabilities, but other than that, it remains, for the most part, a dumb data pipeline. Almost all the intelligence is on the edge — all the services, all the applications are created on the edge-devices. Creating a new application does not involve changing the network. The Web, voice, video, and social media were all created as applications on the edge without any need to modify the Internet protocol.

So the dumb network becomes a platform for independent innovation, without permission, at the edge. The result is an incredible range of innovations, carried out at an even more incredible pace. People interested in even the tiniest of niche applications can create them on the edge. Applications that only have two participants only need two devices to support them, and they can run on the Internet. Contrast that to the telephone network where a new “service,” like caller ID, had to be built and deployed on every company switch, incurring maintenance cost for every subscriber. So only the most popular, profitable, and widely used services got deployed.

The financial services industry is built on top of many highly specialized and service-specific networks. Most of these are layered atop the Internet, but they are architected as closed, centralized, and “smart” networks with limited intelligence on the edge.

Take, for example, the Society for Worldwide Interbank Financial Telecommunication (SWIFT), the international wire transfer network. The consortium behind SWIFT has built a closed network of member banks that offers specific services: secure messages, mostly payment orders. Only banks can be members, and the network services are highly centralized.

The SWIFT network is just one of dozens of single-purpose, tightly controlled, and closed networks offered to financial services companies such as banks, brokerage firms, and exchanges. All these networks mediate the services by interposing the service provider between the “users,” and they allow minimal innovation or differentiation at the edge — that is, they are smart networks serving mostly dumb devices.

Bitcoin is the Internet of money. It offers a basic dumb network that connects peers from anywhere in the world. The bitcoin network itself does not define any financial services or applications. It doesn’t require membership registration or identification. It doesn’t control the types of devices or applications that can live on its edge. Bitcoin offers one service: securely time-stamped scripted transactions. Everything else is built on the edge-devices as an application. Bitcoin allows any application to be developed independently, without permission, on the edge of the network. A developer can create a new application using the transactional service as a platform and deploy it on any device. Even niche applications with few users — applications never envisioned by the bitcoin protocol creator — can be built and deployed.

Almost any network architecture can be inverted. You can build a closed network on top of an open network or vice versa, although it is easier to centralize than to decentralize. The modem inverted the phone network, giving us the Internet. The banks have built closed network systems on top of the decentralized Internet. Now bitcoin provides an open network platform for financial services on top of the open and decentralized Internet. The financial services built on top of bitcoin are themselves open because they are not “services” delivered by the network; they are “apps” running on top of the network. This arrangement opens a market for applications, putting the end user in a position of power to choose the right application without restrictions.

What happens when an industry transitions from using one or more “smart” and centralized networks to using a common, decentralized, open, and dumb network? A tsunami of innovation that was pent up for decades is suddenly released. All the applications that could never get permission in the closed network can now be developed and deployed without permission. At first, this change involves reinventing the previously centralized services with new and open decentralized alternatives. We saw that with the Internet, as traditional telecommunications services were reinvented with email, instant messaging, and video calls.

This first wave is also characterized by disintermediation — the removal of entire layers of intermediaries who are no longer necessary. With the Internet, this meant replacing brokers, classified ads publishers, real estate agents, car salespeople, and many others with search engines and online direct markets. In the financial industry, bitcoin will create a similar wave of disintermediation by making clearinghouses, exchanges, and wire transfer services obsolete. The big difference is that some of these disintermediated layers are multibillion dollar industries that are no longer needed.

Beyond the first wave of innovation, which simply replaces existing services, is another wave that begins to build the applications that were impossible with the previous centralized network. The second wave doesn’t just create applications that compare to existing services; it spawns new industries on the basis of applications that were previously too expensive or too difficult to scale. By eliminating friction in payments, bitcoin doesn’t just make better payments; it introduces market mechanisms and price discovery to economic activities that were too small or inefficient under the previous cost structure.

We used to think “smart” networks would deliver the most value, but making the network “dumb” enabled a massive wave of innovation. Intelligence at the edge brings choice, freedom, and experimentation without permission. In networks, “dumb” is better.

Andreas M. Antonopoulos is a technologist and serial entrepreneur who advises companies on the use of technology and decentralized digital currencies such as bitcoin.

This article was originally published by The Foundation for Economic Education.

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