Sunday, October 28, 2007
Friday, October 26, 2007
A DNA test has confirmed what zoologists, hunters and aboriginal trackers in the far northern reaches of Canada have dreamed of for years: the first documented case of a grizzly-polar bear in the wild.Whoa, a Grizlar. That is pretty cool (and don't be thinking of calling it a Polzly, that's just plain silly).
Territorial officials seized the bear's body and a DNA test from Wildlife Genetics International, a lab in British Columbia, confirmed the hybrid was born of a polar bear mother and grizzly father.
Now, I am on the record as saying I do not condone interspecies sex. I don't know if that is legal up there in Canada, but it shouldn't be. Just because you are a beast, doesn't mean it isn't beastiality. And just because it happened in nature doesn't make it natural.
And don't be thinking that I am a racist because this was between a brown and a white bear. Wrong. This isn't about the color of their
The DNA results were good news for the 65-year-old hunter, who was facing a possible $909 fine and up to a year in jail for shooting a grizzly.Yeah, good news. The man shoots the one and only known wild Grizlar in all of history and we can all breath a sigh of relief that it wasn't one of the 50,000+ grizzlies.
via Seattle Times
In the first phase of the plan, Mothers Against Drunk Driving, backed by a national association of state highway officials and car manufacturers, will announce here on Monday a campaign to change drunken driving laws in 49 states to require that even first offenders install a device that tests drivers and shuts down the car if it detects alcohol.Sounds good to me.
Many states already require the devices, known as ignition interlocks, for people who have been convicted several times. Last year New Mexico became the first to make them mandatory after a first offense. With that tactic and others, the state saw an 11.3 percent drop in alcohol-related fatalities last year.
Statistics show that about 13,000 people die each year in car crashes in which a driver was legally drunk.
He also supports unobtrusive alcohol sensing in all cars. “When 40 percent of all our crashes are alcohol-involved,” he said, “I don’t think it’s going to be that difficult of a sell.”
A New Mexico company, TruTouch Technologies, is modifying a technique developed for measuring blood chemistry in diabetics and using it to measure alcohol instead. The appliance shines a light through the skin on the forearm and analyzes what bounces back.
Future devices may read alcohol content when a driver’s palm touches the steering wheel or the gear shift lever, said Jim McNally, the chief executive of TruTouch.
With 13,000 people dying annually from drunk drivers it makes me wonder why we spend so much time, money and effort on the war on drugs and the war on terrorism, when more lives could be saved if we were to just focus on decreasing drunk driving accidents.
via NY Times
The poverty figures are both less accurate and more hopeful. It sounds awful to say that 36.5m Americans are living in poverty. But “poverty” in America, as defined by the Census Bureau, does not mean destitution. A typical poor American lives in a three-bedroom house with a car, air-conditioning and two televisions. His children actually eat more meat than rich kids do. And he receives substantial benefits that the census bizarrely excludes from its calculations.I agree, I think we need some new measurements for poverty. I find it pretty silly that most of the the anti-poverty programs do nothing to reduce the official rate of poverty due to the way it is calculated. Too bad Bloomberg isn't running for president, as it would be great to put this on the national agenda.
Americans are deemed poor if their pre-tax income falls below a certain threshold—for example, $20,614 for a family of four. By this measure, the proportion of Americans who are poor is no better today than it was in the 1970s. But this is nonsense. The census ignores non-cash benefits such as government health insurance, food stamps and subsidised housing. It also ignores the earned-income tax credit, a wage subsidy for the working poor that is reckoned to be one of America's most effective anti-poverty measures. On the day the census report appeared, Michael Bloomberg, New York's mayor and a possible independent presidential candidate, called for a huge expansion of the earned-income tax credit and a serious re-think of how poverty is measured.
via The Economist
Thursday, October 25, 2007
Nobel Prize-winning economist Joseph Stiglitz suggests a replacement for GDP.
Long the standard scorecard for any national economy, GDP has become deficient as a measure of long-term economic health in our resource-driven, globalizing world.I completely agree with him that it makes no sense to look at GDP without also looking at assets. I would have thought the analogy would work better with revenue of a company than cash flow, but he has the Nobel Prize (though likely isn't a CPA) so I will go with that. GDP tells you how many goods and services are being produced each year, but they don't tell you what is happening with assets. Building tanks that get blown up or houses that stick around both have the same impact on GDP, but the later is much better for the economy.
Think about it. It's like grading a corporation based on one day's cash flow and forgetting to depreciate assets and other costs.
That's why economists looking for an alternative accounting framework to supplement the use of GDP are considering a new measure: green net national product.
The "green" means that GDP must be reduced to take into account the depletion of natural resources and the degradation of the environment - just as a company must depreciate both its tangible and intangible assets. "Net" national product (NNP) means that there has to be an adjustment for the depreciation of the country's physical assets.
It seems to me that the financial report card should also look at total assets to cover this situation. If you were to add up all of the nation's stocks, bonds, CDs, cash and real estate and then subtract off the debt, you could see how we look. Although this isn't as simple as it seems due to asset bubbles that overstate the value of stocks and real estate.
I think the idea of making it green makes sense, but it is just one of many non-standard asset classes that could be added. What about knowledge or human resource assets of people that go to college? They definitely help to produce more GDP and have the student loans to prove it. I think there are also health assets for those that are healthy and don't need to see the doctor (or the opposite that need to see a doctor more). The problem with all these non-standard assets is that they are difficult to measure objectively and put into a number that can be reported quarterly. But, ignoring them and treating their value as zero has even larger problems.
via Business 2.0 via Greg Mankiw Blog
Girls born after the Cultural Revolution are much less likely to have been spoilt, which means some employers see them as good hires. Liam Casey, the boss of PCH China Solutions, a contract-manufacturer in southern China, says he once noticed in a shopping mall that there were typically groups of seven people or groups of three. The groups of seven consisted of two sets of grandparents, parents and a boy. Those of three comprised parents and a daughter. He says he realised then that girls were valued less by society and that if he hired them and showed them loyalty, they would be more loyal in return. This is one reason, he says, that his business has much lower rates of staff turnover than his rivals' businesses do.I always say that you can be greedy or you can be sexist but you can't be both. If Chinese society chooses to undervalue the contributions of women, then smart businesses can take advantage of this for their benefit.
But even hiring women is getting harder. In Zhuhai another foreign manufacturer which hires staff from all over China says it prefers to recruit women too. The managers believe that women are generally harder-working and tend to stay longer. But schools and universities have cottoned on to this now and set quotas on the number of women that firms can recruit. The company says that for every group of women it selects, it now has to hire a share of men too.Nice. Instead of the Chinese telling the men to get their act together they choose to implement an affirmative action program for them.
via The Economist
Americans invented the Internet, but the Japanese are running away with it.Every time I read one of these articles, it makes me want to move. Besides Japan, Hong Kong is now offering 100Mbps service for $48.50 a month and Europe is now the most aggressive market for IPTV. And the US is nowhere near the top in broadband speed (and is behind France!?!) as this graph shows.
Broadband service here is eight to 30 times as fast as in the United States -- and considerably cheaper. Japan has the world's fastest Internet connections, delivering more data at a lower cost than anywhere else, recent studies show.
The speed advantage allows the Japanese to watch broadcast-quality, full-screen television over the Internet, an experience that mocks the grainy, wallet-size images Americans endure.
Ultra-high-speed applications are being rolled out for low-cost, high-definition teleconferencing, for telemedicine -- which allows urban doctors to diagnose diseases from a distance -- and for advanced telecommuting to help Japan meet its goal of doubling the number of people who work from home by 2010.
About 8.8 million Japanese homes have fiber lines -- roughly nine times the number in the United States.
Japan's lead in speed is worrisome because it will shift Internet innovation away from the United States, warns Cerf, who is widely credited with helping to invent some of the Internet's basic architecture. "Once you have very high speeds, I guarantee that people will figure out things to do with it that they haven't done before," he said.
High speed internet access will allow HD video on demand, telemedicine, telecommuting, super fast downloads of applications, music, and documents as well as future applications that have not yet been thought of.
Mr. Ferguson said the substandard American broadband infrastructure shaved as much as 1 percent off the nation’s potential productivity growth. Faster broadband services would allow telecommuters to use better videoconferencing equipment and more easily share multimedia documents, he said.Whenever I read one of these articles, I always wonder why the US is a laggard. I figure it is one of these four reasons, but I am not sure which.
1) Government policy/more competition between companies
2) Government subsidies
3) Better Telecom companies/more focused on increasing bandwidth/lower profit
4) Smaller country, cheaper to wire
According to this article, it looks like 1, 2 & 3.
"The experience of the last seven years shows that sometimes you need a strong federal regulatory framework to ensure that competition happens in a way that is constructive," said Vinton G. Cerf, a vice president at Google.I am not sure what the US needs to change to get to Japan's levels, but I think we need to look at government policy regarding competition between telecoms, possibly toss in some subsidies and put some pressure on the telecoms to get their act together and increase bandwidth for the good of the country.
The opening of Japan's copper phone lines to DSL competition launched a "virtuous cycle" of ever-increasing speed, said Cisco's Pepper. The cycle began shortly after Japanese politicians -- fretting about an Internet system that in 2000 was slower and more expensive than what existed in the United States -- decided to "unbundle" copper lines.
For just $2 a month, upstart broadband companies were allowed to rent bandwidth on an NTT copper wire connected to a Japanese home. Low rent allowed them to charge low prices to consumers -- as little as $22 a month for a DSL connection faster than almost all U.S. broadband services.
Masayoshi Son, head of a company called Softbank, offered broadband that was much cheaper and more than six times as fast as NTT's. He added marketing razzmatazz to the mix, dispatching young people to street corners to give away modems that would connect users to a service called Yahoo BB. (The U.S.-based Yahoo owns about a third of it.) The company's share of DSL business in Japan has exploded in the past five years, from zero to 37 percent. As competition grew, the monthly cost of broadband across Japan fell by about half, as broadband speed jumped 33-fold, according to a recent study.
With the help of government subsidies and tax breaks, NTT launched a nationwide build-out of fiber-optic lines to homes, making the lower-capacity copper wires obsolete.
Indeed, the stock price of Nippon Telegraph and Telephone, which has two-thirds of the fiber-to-the-home market, has sunk because of concerns about heavy investments and the deep discounts it has showered on customers. Other carriers have gotten out of the business entirely, even though it is supported by government tax breaks and other incentives.
And analysts note that the Bush administration has largely stood on the sidelines rather than provide financial incentives to promote fiber services.
via Washington Post and NY Times
Wednesday, October 24, 2007
A while back there was a debate over whether Bush was the Churchill of the 21st century. Of course, the liberal media was having none of it.
I was reminded of that when I read this passage in The Prize:
The British needed a monarch for Iraq, another new state, this one to be formed out of three former provinces of the Turkish empire. Political stability in the area was required not only by the prospect for oil, but also for the defense of the Persian Gulf and for the new imperial air route from Britain to India, Singapore, and Australia. The British did not want to rule the region directly; that would cost too much. Rather what Churchill, then the head of the Colonial Office, wanted was an Arab government, with a constitutional monarch, that would be "supported" by Britain under League of Nations mandate. It would be cheaper. So Churchill crowned King of Iraq in Baghdad in August 1921. Faisal's brother Abdullah-originally destined for the Iraqi throne-was instead installed as king "of the vacant lot which the British christened the Amirate of Transjordan."Is Bush Churchillian? Lets see.
Faisal's task was enormous; he had not inherited a well-defined nation, but rather a collection of diverse groups - Shia Aras and Sunni Arabs, Jews and Kurds and Yazidis - a territory with a few important cities, most of the countryside under the control of local sheiks, and with little common political or cultural history, but with a rising Arab nationalism. The minority Sunni Arabs held political power, while the Shia Arabs were by far the most numerous. To complicate things further, the Jews were the largest single group among inhabitants of Baghdad, followed by Arabs and Turks. To this religious and ethnic mosaic, Britain sought to import constitutionalism and a responsible parliament. Faisal depended upon Britain to support his new kingdom, but his position would be gravely impaired if he were seen as being too beholden to London. The British government had to cope not only with Arab nationalism in Iraq but also with the oil men, who were clamoring for some word on the status of the Iraqi concession. Britain was all for oil development, hoping that the potential oil revenues would help finance the new Iraqi government and further reduce its own financial burdens.
- Attempts to import constitutionalism and a responsible parliament on a collection of diverse ethnic groups:
- Believes that oil revenues would support the new government and pay for reconstruction:
- Creates a government that is dependent on a foreign power but can't be seen as being too beholden:
- Has a need for political stability for access to oil, but no desire to rule directly:
In fact this whole situation sounds frighteningly similar to what is happening today. Well except for the part about Jews being the largest ethic group of Baghdad. Fortunately for the Jews they left a long time ago.
According to the NY Times the answer is yes.
This intriguing — if unsettling — finding is part of a larger story: there appears to be a growing happiness gap between men and women.I find this research interesting for while feminists focus on the wage gap between men and women, I am more interested in whether there is a happiness and life satisfaction gap between the sexes.
Two new research papers, using very different methods, have both come to this conclusion. Betsey Stevenson and Justin Wolfers, economists at the University of Pennsylvania (and a couple), have looked at the traditional happiness data, in which people are simply asked how satisfied they are with their overall lives. In the early 1970s, women reported being slightly happier than men. Today, the two have switched places.
Mr. Krueger, analyzing time-use studies over the last four decades, has found an even starker pattern. Since the 1960s, men have gradually cut back on activities they find unpleasant. They now work less and relax more.
Over the same span, women have replaced housework with paid work — and, as a result, are spending almost as much time doing things they don’t enjoy as in the past. Forty years ago, a typical woman spent about 23 hours a week in an activity considered unpleasant, or 40 more minutes than a typical man. Today, with men working less, the gap is 90 minutes.
I was just about to post this conclusion when I figured I better do my due diligence and see what other blogs had to say on this. And in this case, I found the Language Log to have a fine and contradictory analysis of this article.
I agree with this blogger that when you look at the underlying data (click on the graphs for a larger version), it looks like men and womens' happiness are fairly similar and that there is a lot of noise in the data (and surprisingly the data shows there are actually more very happy women than men in the US currently). While I can see how the trend line shows decreasing female life satisfaction vs. men, I think that you add another 5-10 years of data and that trend will be completely gone. And when it does, that will allow for another research report to be published showing how womens' happiness is increasing compared to men. :)
This is another example of where I wish the media would spend more time looking at the actual data and trying to question is accuracy rather then spending time analyzing the results and trying to come up with explanations for it. As documented on Language Lab this article has become a Rorschach inkblot test for internet commenters, where everyone rushes to come up with explanations for women's supposed decrease in happiness, but the explanations tell more about the commenter world view than they do about the results. And I am pretty sure that if the article claimed the opposite result that women were getting happier compared to men that people would be able to come up with explanations for that just as easily.
As America shifts from an industrial to a knowledge economy, digital goods and content become more important. Consumers want access to as many digital goods as possible. For this to occur, there must be incentives for people to create them.
Digital goods are items that can be replicated many times without requiring additional effort or modification, such as software or .mp3 music files. They are produced by digital goods creators such as software engineers, musicians, writers, actors, and scientists. These goods are non-rivalrous meaning that one person consuming them doesn't stop another from doing the same. One can have their cake and eat it too (or one can listen to their music files and share them too). Digital goods require a large initial investment to create, but then little or nothing to replicate millions of times.
While markets works well in creating the societal optimal amount of goods and services, they don't work well with digital goods as the underlying economics are different. With goods and services the socially optimal price and quantity occurs where the supply curve intersects with the demand curve. This occurs when the cost to produce another widget is equal to the price price someone is willing to pay (where marginal cost is equal to marginal benefit). But with digital goods the marginal cost of production is 0 as it costs nothing to make additional copies. This leads to a price of zero allowing anyone who wants the digital good to have access to it. But, at a price of 0 there is no incentive for people to create digital goods. Hence, the key problem with digital goods is that they are underproduced.
One way to handle this market inefficiency is to use intellectual property (IP) rights: copyright, patents, and trademarks. This gives the creator the exclusive right (for a limited time) to sell the good. This short term monopoly allows the author to be compensated for the effort they put in. It allows digital goods to be treated like rivalrous goods and to be sold in markets.
Bypassing the IP and using the digital content without compensating the creator is known as piracy. It can occur by end users who access the content without paying or by bootleggers who sell the content for their own benefit without compensating the creator.
There are also other way of incentivizing digital goods creators that do not require IP. Digital goods can be created and given away free as a form of advertising to sell other goods and services. Digital goods creators can be supported by the government or donations allowing them to give the goods away for free. Digital goods can also be created by volunteers motivated by something other than money.
There are 8 different models for compensating digital content creators:
1) sell the digital good directly (iTunes), 2) sell a subscription to an unlimited use library (Netflix), 3) tie it to a physical good (books), 4) advertising (TV), 5) sell an associated service (music concerts), 6) donation (shareware), 7) government funding (science research), 8) volunteer (blogs)
For each one lets look at how the model works, the types of goods it produces, who pays, who can access the digital goods, and what piracy look like.
1) Charge for Digital Goods Directly
Examples: iTunes, Amazon e-Documents, goods in Second Life
In this model, consumers directly purchase a single instance of a digital good: a song, a digital book, a version of software, or a piece of clothing in a digital world. Because there is no physical good associated with this, the customer is really purchasing access to the digital good (or license) which could expire after a given amount of time. The content creator is paid from these revenues.
Because of the price, access is limited. Instead of everyone who wants it having access, only those who are willing to pay the price will get it. All those who would like to have it, but not enough to pay the price lose out in this system.
Music is at the forefront of using this model as $2 billion worth of music was sold online or through mobile phones in 2006. Digital worlds are starting to generate real revenue selling virtual goods as seen by the $25 million a month spent on goods in Second Life.
Piracy by end users is common in this model. File sharing allows music, movies and software to be transferred between end users without compensating the creator. In Second Life, Copybot, allows users to copy clothing and other goods for free without compensating the creator.
Piracy by bootleggers can be seen in AllOfMp3, which sells .mp3 music files, but does not compensate the creators of that music.
To stop these forms of piracy, IP copyright laws are used. They are augmented with digital rights management (DRM) which restricts how the content can be used. DRM typically has the side effect of making it harder for people to use the digital content in legal but non-standard ways.
2) Unlimited Access Subscription (library)
examples: Rhapsody, Netflix, Wall Street Journal Online, HBO
In this model the consumer pays a subscription fee to get unlimited access to a library of digital goods. The consumer just pays a monthly fee and then can listen to any and as many songs, movies or articles that they wish that are in the library. There is no additional fee for accessing content. The digital content creators are compensated from the subscription fees.
Charging for digital goods directly (#1) had the problem that people who wanted access to a digital good but not enough to pay the price couldn't. With this model, if there is an article that you are not sure you will find interesting, or a song that you are not sure if you will like, you can try it out without additional cost.
The problem with this model is that if you don't access much content, it is not worth the money. Also, each library has a limited amount of content. Rhapsody doesn't have rights to all music out there so you still might need other ways to access music. The cable company has different tiers of service which give you access to different channels. If you would only watch a particular channel once a month, it would not be worth paying for access to it, but this is unfortunate as there would be no additional cost to the cable provider for allowing you access. A trend toward larger libraries (for example a single subscription that allowed access to all online newspapers) would cut down on this problem.
Netflix has over 6 million subscribers and revenues of $1 billion a year. The Wall Street Journal has close to 1 million online subscribers paying $100 a year. HBO has 28.7 million subscribers and profits of $1 billion a year.
Piracy by end users takes the form of illegal access. This could be sharing a username and password to an online service, republishing an article for free access on the internet, or using a descrambler cable box. Piracy by bootleggers would occur if there was a subscription service that didn't pay the content creators (think of a Netflix in China that had all pirated DVDs). IP laws are needed to prevent these forms of piracy.
3) Tie it to a Physical Good
Examples: books, CDs, DVDs, video games, medical drugs
In this model the digital content is tied to a physical good which is then sold. The content creators are compensated from the sale of the physical good. Because it is a physical good, it is rivalrous and therefore easier to control and sell.
The amount of value that is in the physical vs. the digital portion of the good varies, and some goods couldn't exist without their physical version. For goods such as CDs, DVDs and video games the value is all in the digital part. For goods such as books and magazines, there are digital alternatives, but much of the value is in the physical. For goods such as food, clothing, medical drugs and cars, the vast majority of the value is in the physical (the digital part of these goods being the recipe, the style, the drug design and the engineering, respectively).
For some goods, giving the digital version away for free allows for more copies of the physical version to be sold (the digital version acting as advertising). For example, one could sell books and at the same time allow a .pdf version of the book to be available for download free.
"Free sells books," affirmed Dan Weiss of Barnes & Noble's study guides, SparkNotes. "Everything that's in print is free online," he said, and over half his site's traffic comes from Google search.Some musicians give .mp3 files away for free and charge for CDs. In fact researchers in Canada have shown that the piracy actually boosts CD sales, with one additional P2P download per month increasing music purchasing by 0.44 CDs per year.
IP is not available to the fashion or restaurant industries. Food and clothing sales support the designers and chefs as they create new styles and recipes. It is legal for a chef or designer to "steal" the work of their competitors. These industries are full of innovation, but it is not clear if lack of IP is a hindrance or a boon to those designing new clothes and new recipes.
End user piracy depends on how much of the good's value is digital. For goods that have a digital format that contains most of the value, such as music and software, the digital portion can be ripped from the physical one and then traded via file sharing.
Besides ripping it is also possible to make illegal copies of the physical goods themselves, such as copying a CD. One way to combat this is to add a levy to all blank media like CD and iPods that can be used to copy digital goods like the Canadians do. The proceeds from the levy are split among songwriters, performers, and record production companies. Even if Canadians are obtaining their music through file sharing and copying, the artists still get compensated.
As more of the value of a good is in the physical rather than digital, the less likely end user piracy is. With magazines and books, for example, it is often times more expensive to make photocopies of books or magazines then it is to just buy another one.
Second hand sale of these goods, such as used books on Amazon, could also be thought of as a form of piracy in that they do not compensate the content creator. On the other hand the argument could be made that people will buy more hardcover books if they know there is a resale market for them (allowing them to just ebay rent the book). Used CD seller LaLa deals with this issue by donating 20% of revenue to music foundations. Similarly loaning CDs or books to friends, could be thought of as piracy to the extent it lessens how much you buy.
Piracy by bootleggers of physical goods is rampant. Music CDs, movie DVDs, and books can all be purchased from bootleggers at lower prices which do not compensate the goods creator. Unpurchased software is often loaded on new computers.
Even in goods where most of the value is physical, bootlegging takes place in the form of stealing trade secrets and patent theft. Drugs under patent can be produced without compensating the drug discoverer. New engineering on cars can be stolen and added to a competitor's version. IP laws are needed to stop these forms of bootlegging.
Examples: Google, NBC, commercial radio, Boing Boing
In this model, companies pay for access to eyeballs in order to sell their product. Part of this revenue funds the digital content creation. The content is available to everyone and the consumer does not have to pay for it, with the exception of their time to view the advertising.
Advertising is a major funder of content, supporting TV, newspapers, magazine, radio and many websites. But, this model is limited by the amount of money that advertisers are willing to pay. Currently there is a $177 billion domestic ad budget, and a $550 billion global market. This includes $46.6 billion in print advertising, $54 billion in TV advertising, and $16.4 billion in online advertising. Even video games are getting into the action with $76 million in advertising. An economy can only spend a certain percentage on advertising, which limits how much content can be funded with this method ($177 is 1.4% of the $12 trillion US economy). But, this is much more than the $10 billion video game market, $12 billion music industry, $25 billion book publishing industry.
Because it is free, the content is accessible to everyone and there is no reason for end users to pirate it. But, as money is only generated when people view the advertisements, not watching the ads (perhaps with the help of Tivo) could be thought of as a form of piracy. If enough people did this it would ruin the model.
To ensure that those receiving the advertising (NBC) support those who make the content (The Office), IP is needed to stop bootleggers. Otherwise, anyone could display the content (or copy it) and make advertising money off it and not compensate the creators.
5) Sell An Accompanying Service
Examples: concerts, book lectures, consulting, teaching
In this model you give the digital good away for free (the music, the software, or the written material) and charge for a corresponding service. The digital goods work as advertising for the services you can provide, and creating them gives you expertise. Purchases of the service support the creation of the digital good.
For example, with software you can allow everyone to download it for free but charge for customization, consulting and support as seen with Red Hat Linux. With music you can give your songs away for free but charge for a concert as demonstrated by Prince. Concerts generated $3.1 billion in revenue in 2005 and $9 billion worldwide. With written material you can allow free downloads but charge for lectures. With science you can give your research away for free but charge for teaching.
Because the content is given away for free, anyone who wants the digital good can have them, it doesn't require IP and piracy is impossible. The downside of this model is that since the creator gets paid for the service and not the digital good, the amount of time the creator can spend developing them is limited.
Examples: shareware, blogs, WWF reports
In this model, the content creator is supported by donations from individuals, foundations or corporations. This model allows everyone free access to the content. It therefore does not require IP and piracy is impossible. The downside to this model is that the number of people who choose to donate might be small and therefore not be able to support many content creators.
American's donated $260 billion in 2005. While non-profits spend much of this money on goods and services, part of it goes to create digital goods such as report by the WWF on the Living Planet Report.
Shareware is another example of donation funded content creation. It is similar to charging for the digital goods directly (#1), but people decide how much to give. Those that have more money or derive more benefit can give more, while those with less money or don't really use the software much can use it for free.
Ongoing blogs and magazines, can also fund themselves by donations. In this case it is similar to the subscription(#2) and service (#5) models, but people decide how much to give rather than having a fixed price. The funding allows for the ongoing creation of content.
7) Government Funding
Examples: Science research, libraries, BBC, C-Span
This is similar to the donation model(#6), but money put into the system is based on taxes. The government pays for the content to be created which is then made freely available to all citizens. In this model, IP is not needed. The amount of funding and the number of digital content creators is determined by the political process. Piracy take the form of those who avoid paying the tax.
Donations have a free rider problem, where everyone benefits regardless of who pays. Government can solve this problem by imposing a tax. A tax makes sense if a majority of people would be willing to pay but only if others are forced to do so as well. On the other hand, a blanket tax will charge even those who don't use the digital goods.
One example of this model is science research. The federal government spent $25 billion on academic R&D funding in '03. This funded science research which was then available to other scientists and citizens. Well, except that most academic journals end up charging for access, but hopefully that will change with open source journals such as Public Library of Science.
Public libraries are another way the government helps to fund content creators. $1.1 billion was spent on public library collections in the US in 2003. The money spent purchasing books, CDs and DVDs supports those content creators.
The BBC collects a £10 monthly license fee on every TV in order to fund the BBC and allow for 8 TV channels free of adverts (that's English for commercials) and independent of advertisers, shareholders or political interests. The content from the BBC is then available for all to use in non-commercial ways as they see fit with the BBC Creative Archive. Piracy here takes the form of those who don't pay for the TVs they have.
There is currently an idea in the EU to tax broadband Internet and mobile phones around €4/month and allow consumers to download and consume all the music they want without DRM.
Examples: Linux, Wikipedia, Flickr, Blogs, YouTube (user generated content)
This isn't really a funding method as no one is getting paid (or you could think of it as the creator paying himself to make the digital good). Instead the digital content creators do so for non-monetary reasons such as status, enjoyment or experience. These content creators must have jobs elsewhere in order to support them. That job could have something to do with the content they create (see model #5) or it could be completely different.
There were 19.9 billion hours volunteered in 1998. If every American spent 1 hour a day creating content, that would work out to 110 billion hours a year which is only a little less that 1/2 of the approximately 250 billion hours of paid work performed by the US workforce a year. As I wrote in the Hybrid Economy, volunteers can make up a substantial portion of content creators.
Digital content created by volunteers is accessible by everyone and does not require IP.
The main problem with this model is that volunteers must have another way to support themselves and can only work on the digital goods creation part time. If they are really good, society would be better off if they were working on it full time.
Pirated content such as .mp3 file sharing could be thought of as a type of unintentional volunteering. The user gets to listen to the music, but the creator doesn't get compensated. The RIAA estimates they "donate" music worth $4.2 billion a year. An interesting idea would be to change the tax code to allow them to write this off as donations.
There are 8 funding models for digital goods creation:
1) sell the digital good directly, 2) sell a subscription to an unlimited use library, 3) tie it to a physical good, 4) advertising, 5) sell an associated service, 6) donation, 7) government funding, 8) volunteer.
It is also possible to combine models. For example, cable TV uses both subscription and advertising. PBS is funded via donations and government funding.
Content creators can use any one or possibly all of these methods to fund their work. Musicians, for example, can be compensated using all 8 models: iTunes, Rhapsody, CDs, advertising based radio, concerts, donation based .mp3s, EU music tax, and free .mp3s. Different content creators might choose different models based on how they like to work and whether they are trying to maximize the amount of money that they make of the number of viewers of their content. Of course, not all models might be available based on the type of digital good and the IP laws regarding them.
Funding models are also likely to change as technology changes. Software used to be distributed by floppy disks and the physical model made sense. Now with the internet more models can be used such as subscription, volunteer, direct digital good sale and advertising. TV went from an advertising only model to a subscription model with cable, and radio is making the same progression with satellite radio. Newspapers need to change their model with viewers going online, but what exactly that model will be is not yet clear.
Philosophical outlooks could also determine which model is used. When it comes to developing new medicines, the NIH could do the drug discovery (funded via taxpayers) and then have the drugs sold as generics at the price of production or drug companies could fund the drug discovery and then sell the drugs at higher prices to customers (selling a physical product using IP laws). While both models have their pros and cons, academic scientists might prefer the government funded solution, while business men might prefer using IP for philosophical reasons.
As a society we need to balance the right of creators to be compensated with the right of end users to access digital content. This means looking at IP laws to make sure they are strong enough to encourage creation but not too strong to limit access. It also means taking a look at each industry and seeing if other models might allow for more content to be created.
I will leave you with some questions I was unable to answer. If anyone has any thoughts on these, please leave a comment.
1) How much money is spent, how much content is generated and how many creators are supported by each of the 8 models?
2) Under what scenario is each model the best choice?
3) How do you measure the output? Does GDP capture it, or do digital goods require a different way to measure as the often are priced at zero? If Rhapsody's library goes form 50,000 songs to 500,000 songs, how do you value the greater access to consumers?
4) How do you determine the socially optimum number of full time content creators?
Monday, October 22, 2007
In case you are looking to become an urban ninja but were worried that the all black look wouldn't really work as camouflage in a city, you are now in luck.
Deftly, Ms. Tsukioka, a 29-year-old experimental fashion designer, lifted a flap on her skirt to reveal a large sheet of cloth printed in bright red with a soft drink logo partly visible. By holding the sheet open and stepping to the side of the road, she showed how a woman walking alone could elude pursuers — by disguising herself as a vending machine.God I love the Japanese.
Don't miss the entire slideshow of disguises.
Update: Don't miss the video.
Leading experts in organic solar cells say the field is being damaged by questionable reports.
Manufacture and transport of export goods accounts for about 25% of China’s CO2 emissions.
$5 Million prize for achievement in African leadership given to Mozambican.
Dell's Green Computing Competition
Sunday, October 21, 2007
While foreign aid works in some situations, it has two huge problems. First, there is never enough money to go around. The second problem is that the money that does get distributed doesn’t always reach the people who need it.I like this idea. But, politically it seems like a tough sell. Tax breaks for setting up factories in other countries? Good luck with that one.
A solution to both problems would be to give tax credits to American companies that invest in qualified developing countries. A similar program that focuses on domestic poverty has been a resounding success. In 2000, Congress created a program giving businesses that invest in poor communities within the United States a tax credit equal to 39 percent of the cost of the investment. The theory was that poverty and joblessness in poor communities could be ended only by developing local businesses, not by an aid check. Seven years later, so many businesses want to invest in poor areas that only a quarter of the companies that applied for tax credits in 2006 received them.
Using the domestic program as a template, Congress should provide a 39-cent tax credit for every dollar of American investment in developing countries. If Company X were to build a $100 million factory in Madagascar, its tax bill would be reduced by $39 million. The lost tax revenue would be offset by reducing direct foreign aid by the same amount.
Moshe Alamaro, of the Massachusetts Institute of Technology (MIT), told The Sunday Telegraph of his plans to "paint" the tops of hurricanes black by scattering carbon particles – either soot or black particles from the manufacture of tyres – from aircraft flying above the storms. The particles would absorb heat from the sun, leading to changes in the airflows within the storm. Satellites could also heat the cloud tops by beaming microwaves from space.The ability to steer hurricanes or weaken them would greatly reduce the damage that hurricanes cause. Of course steering a hurricane from a major city to another area has its own issues.
"If they're done in the right place at the right time they can affect the strength of the hurricane," Mr Alamaro said.
The theory has so far been tested only in computer simulation by Mr Alamaro's colleague, Ross Hoffman. Mr Alamaro said: "With small changes to this side or that side of the hurricane we can nudge it and change its track. We're starting with computer simulations, then will hopefully experiment on a small weather system."
Last month scientists at the Hebrew University of Jerusalem announced that they had simulated the effect of sowing clouds with microscopic dust to cool the hurricane's base, also weakening it. The dust would attract water but would form droplets too small to fall as rain. Instead, they would rise and evaporate, cooling hot air at the hurricane base.
In findings presented at a conference in Trieste, Italy, the team led by Daniel Rosenfeld demonstrated that dust dropped into the lower part of Hurricane Katrina would have reduced wind speeds and diverted its course.
But the hurricane modifiers are fighting more than the weather. Lawyers warn that diverting a hurricane from one city to save life and property could result in multi-billion dollar lawsuits from towns that bear the brunt instead. Hurricane Katrina caused about $41 billion in damage to New Orleans.It seems like a no brainer that is a good idea to steer a hurricane away from a major city, but the questions of who should have the power to do it and what rules should there be regarding it are not as easy to answer.
Anyone who reads the fine site Book of Joe knows that the man behind the blogging empire is religiously devoted to working out while writing, and prides himself on having integrated a treadmill into his workspace. Well manufacturer Steelcase thinks that this trend has grown beyond one individual multitasking in his underwear, and is poised to introduce a nicely-designed product called the Walkstation which seems more at home in a CEO's office than your messy living room.I like it. I think better while walking than sitting, so I wouldn't mind using one of these. But the $6,500 price tag is a bit steep.
Wednesday, October 17, 2007
Patrick Awuah left a comfortable life in Seattle to return to Ghana and co-found, against the odds, a liberal arts college. Why? Because he believes that Ghana's failures in leadership -- and he gives several mind-boggling examples -- stem from a university system that fails to train real leaders.This was a very inspirational speech. I highly recommend watching it.
And don't miss out on the other 149 talks TED has to offer.
A new Pentagon study lays out the roadmap for a multibillion-dollar push to the final frontier of energy: a satellite system that collects gigawatts’ worth of solar power and beams it down to Earth.Cool.
Step-by-step explanation of how it works:
* A network of satellites would be constructed in space with arrays of lightweight mirrors extending for several miles (kilometers) on each side.Darn, only 1/6 as intense as noon sunlight. There goes my Bond villain idea of using it as a death ray.
* Those mirrors would focus sunlight on solar cells, generating electrical power. The electricity would be converted into microwaves suitable for transmitting through Earth's atmosphere, at frequencies of 2.45 or 5.8 GHz.
* The microwaves would be directed down to antenna arrays on Earth, as a beam of radiation about one-sixth as intense as noon sunlight. The antennas would convert the radiation back into electricity for distribution via conventional grids.
The real question is how the economics of such an endeavor would work and if this would be a better option than land based photovoltaics. I am skeptical, but it might work when you see the value to the military:
Those factors still don't make space solar power attractive for commercial users, but a better case could be made for the Defense Department. The U.S. military pays a premium for its power in the battlefield, when you consider the cost of shipping oil out of the Middle East, refining it, then shipping the fuel back to the combat zone and burning it in electrical generators, Miller said. All that brings the current power price tag to $1 or more per killowatt-hour, compared with 5 to 10 cents on the domestic market, the report says.Could you imagine them using this in Afghanistan? They would be surrounded by people who still use livestock as a form of transportation, and here they would be fueling up their base and gadgets with solar power from a satellite in space.
via MSNBC via Engadget
Besides global warming, burning fossil fuels also cause CO2 levels in the ocean to become higher which causes them to be more acidic. This rising ocean acidity has a negative effect on the ability of corals to build their calcium carbonate skeletons. So much so that it could cause coral reefs to waste away.
But it did make me wonder, how did coral exist millions of years ago when CO2 levels were much higher? And here is my answer:
Jaroslaw Stolarski and his colleagues found that ancient corals were able to alter the way they built their aragonite skeletons to adjust to their increasingly acidic surroundings - opening the door to the possibility that modern corals could do the same under similar conditions.Interesting. Now we just need to toss these corals in the Biosphere, pump in the additional CO2 and see if they can replicate the behavior.
The fossilized corals they studied - belonging to the genus Coelosmilia, which were commonly found during the Cretaceous period - had calcite skeletons, a form of calcium carbonate less susceptible to the corrosive effects of a lower pH (as opposed to aragonite). "We now have many different arguments to prove that these corals were actually made originally out of calcite—and not just aragonite that was transformed after the coral died and become fossilized ... There was great biological variability among the corals, and some of them adjusted perfectly to the prevailing geochemical situation," said Stolarski.
If calcite skeletons were more effective at dealing with an increasingly acidic ocean, why were there still so many aragonite skeletons? According to Stephen Cairns, a research zoologist at the Smithsonian's National Museum of Natural History, it may be because corals evolved the ability to switch their skeletons from one form to the other: "This study has opened the door to the possibility that coral skeletons can potentially change back and forth from aragonite to calcite."
Tuesday, October 16, 2007
Popular Mechanics just held its yearly Breakthrough Conference, and one of the winners was the Wind Belt, an invention we've not seen before. The Wind Belt is a new approach to wind energy production and an innovative approach that could radically change the cost curve downwards, especially within the developing world and in off-grid environments.
Shawn built a kind of bridge out of taut kite fabric. The fabric vibrates in the wind, and a magnet, attached to the fabric, creates electricity at one end of the device. He says that, in a 10 mph wind, the generator is up to 30 times more efficient than the best rotary turbines.
These are some impressive claims. That much more efficient? But, at what cost? Well, ridiculously cheap. Just some fabric, a magnet and some copper coils does it. Frayne guesses that, for the developing world, the Windbelt could cost as little as a few dollars. It's cleaner, cheaper, and easier to fix than any other method of generating power. That is, as long as the wind keeps blowing.
Pretty sweet. I think there are going to be a lot of applications for this technology. The video gives a good demonstration as to how it works.
Monday, October 15, 2007
The Economist takes a look at Carbon Labeling and some of its issues.
But calculating the carbon footprint of a product is far from easy. Unlike the fat or sugar content, it cannot be measured directly. For a start, how far back up the supply chain do you go? Academic “life-cycle analyses” go into painstaking detail, factoring in the emissions associated with building factories in which food is produced, for example. But doing this for thousands of products would be a mammoth undertaking. The trick, says Mr Murray, is to find the right trade-off between rigour and a methodology that works across thousands of items. The Carbon Trust's approach is to include carbon dioxide produced in the manufacturing but not, say, that from employees commuting to work.I think that is true that it will be a massive undertaking, but once you have collected values for many of the underlying inputs to products, then calculating for a new product will not be that difficult.
How far down the supply chain do you go? The Carbon Trust's labels aim to show the carbon emissions associated with making something, packaging it, getting it to the store and disposing of it. Because bags of crisps delivered to far-flung shops will have travelled farther from the factory, the auditors use an average figure for transport emissions. Similarly, national averages feed into calculations of whether a product or its packaging are recycled, incinerated or put into landfill.Interesting points on boiling potatoes and shampoo.
The labels do not count the energy needed for refrigeration, lighting and heating in shops. Nor do they include the emissions that come from using a product. The carbon footprint of boiled potatoes, for example, is dominated by the emissions associated with cooking them. Whether you put a lid on the pan can make more of a difference than how they were farmed, or whether they were produced locally or not. Similarly, the emissions of shampoo depend on how long you spend in the shower, how hot the water is and the quality of your boiler. Such things cannot be captured in a carbon label, so they are not included, says Mr Murray.
I think that adding carbon labels is a good thing to do, as emissions caused by our personal use of gasoline, natural gas and electricity only account for around 1/3 of our total emissions. The other 2/3 are embedded in the products that we purchase. Currently there is no way for educated consumers to figure out where that 2/3 comes from. If you add labels, then you could figure it out for yourself, and be able to shift your consumption to "low-carbon" products.
I also think that the improving the labels will be an evolutionary process. The first ones released will probably not be all that accurate, but hopefully in ten years time they will be pretty good.
via The Economist
Seems like every time you look at the paper you read about another coal mining accident in China. My favorite story lately was the two brothers who tunneled out of a collapsed mine and were forced to eat coal and drink urine during the nearly six-day ordeal. (As far as I know you can't digest coal, so my theory is that the coal allowed them to drink their urine, by neutralizing the toxins in it.)
Official statistics suggest that since the Communist party took control in 1949, 250,000 people have died in China's mines; this year alone more than 2,000 have perished.Good to see that the number of coal mining deaths is going down, but that still pales in comparison to those killed by coal air pollution.
As such firms grow at the expense of shadier operators, the human toll is falling dramatically: in the 1950s an average of 70,000 people died each year in coal mines, compared with 40,000 in the 1980s, 10,000 in the 1990s and roughly 6,000 since 2000, says Mr Tu.
The World Health Organization found that China suffered more deaths from water-related pollutants and fewer from bad air, but agreed with the World Bank that the total death toll had reached 750,000 a year. In comparison, 4,700 people died last year in China’s notoriously unsafe mines, and 89,000 people were killed in road accidents, the highest number of automobile-related deaths in the world. The Ministry of Health estimates that cigarette smoking takes a million Chinese lives each year.While trapped miners might get all of the media attention, the pollution caused by coal kills 100 times more people. Greater safety in the mines is important, but more lives can be saved by focusing on reducing pollution from burning coal.
An internal, unpublicized report by the Chinese Academy of Environmental Planning in 2003 estimated that 300,000 people die each year from ambient air pollution, mostly of heart disease and lung cancer. An additional 110,000 deaths could be attributed to indoor air pollution caused by poorly ventilated coal and wood stoves or toxic fumes from shoddy construction materials, said a person involved in that study.
via NY Times and The Economist
Two really insightful and entertaining talks by Hans Rosling on poverty and development in countries. The first shows off the tool Gapminder for looking at UN development statistics. The second has additional insights on poverty. And if you make it to the end of the second, there is an something that you just won't believe.
I love this quote:
I have a neighbor who knows 200 types of wine. He knows everything. He knows the name of the grape, the temperature, and everything. I only know two types of wine: red and white. But my neighbor only knows two types of countries: industrialized and developing and I know 200.And I find his comparison of Sweden in its past with developing countries in 2007 to be quite perceptive. What is Sierra Leone like today? Well in terms of GDP and infant mortality it is similar to Sweden in 1830.
1830 Great-great Grandmother - Sierra Leone
1863 Great Grandmother - Mozambique
1891 Grandmother - Ghana
1923 Mother - Egypt
1948 Hans - Mexico
1974 Daughter - Chile
2004 Granddaughter - Singapore
Sunday, October 14, 2007
Nearly 1.9m people were arrested in America for drug offences in 2006—over three times the number detained in 1980. Around one in eight arrests is now drug related. But what they achieve in the “war on drugs” is unclear, according to a report by The Sentencing Project, an advocacy group. Fewer people take drugs: 14% of people reported using them monthly in 1979, but only 8% in 2005. But arrests are increasingly for more trivial crimes: in 2006 only 17.5% of arrests were made for the sale or manufacture of drugs, whereas some 39% were for the possession of marijuana.via The Economist
Manage your energy, not your time.
Greenpeace urges kangaroo consumption to fight global warming.
Pot growers account for 6% of British Columbia's power consumption.
On average 90 percent of women worldwide will have had an abortion before the age of 45.
Greenpeace tracks whales online.
Saturday, October 13, 2007
A small study links the type of bacteria living in people's digestive system to a desire for chocolate. Everyone has a vast community of microbes in their guts. But people who crave daily chocolate show signs of having different colonies of bacteria than people who are immune to chocolate's allure.Interesting. I wonder what the pharmacological impact of the differing bacteria is. Glad to see there is lots of interest in gut bacteria research these days.
Kochhar compared the blood and urine of those 11 men, who he jokingly called "weird" for their indifference to chocolate, to 11 similar men who ate chocolate daily. They were all healthy, not obese, and were fed the same food for five days.
The researchers examined the byproducts of metabolism in their blood and urine and found that a dozen substances were significantly different between the two groups. For example, the amino acid glycine was higher in chocolate lovers, while taurine (an active ingredient in energy drinks) was higher in people who didn't eat chocolate. Also chocolate lovers had lower levels of the bad cholesterol, LDL.
The levels of several of the specific substances that were different in the two groups are known to be linked to different types of bacteria, Kochhar said.
Genetics pioneer J. Craig Venter is preparing to sequence the genomes of as many as 50 people -- possibly including millionaires who pay for the privilege -- by the end of 2008. Within a decade, he hopes the number of sequenced genomes will reach 10,000.50 by the end of '08, why that is great!
The news about Venter's genome convinced about 200 people to volunteer to take part in the Venter Institute's genome-testing project. It's not clear if any of them will actually participate, because the institute wants its subjects to represent a range of gender, ethnicity and common diseases.They were looking for volunteers? How come nobody told me about that?
Some scientists predict personal genome testing may become generally available within five years, but Venter's group still expects tests to cost $300,000 each, said spokeswoman Heather Kowalski.$300,000? I thought the price was $1 million at least. If they can really do it for that price range it has come down a lot more then I knew.
And, it seems, the institute is also interested in financial support from some of those who take part. That's where the millionaires come in, raising the touchy issue of pay-for-play. According to Levy, it's possible that the institute may develop a ratio of participants who pay to take part to those who don't, in order to guarantee that everyone not everyone has to shell out money to take part.I don't understand why the pay-for-play issue is touchy. Rich people always get access to new technologies first and they pay for the privilege. Their early purchases at inflated prices support the research and development that brings the price down to a level that everyone can afford a few years later. This has been going on as long as technology has been around. For example, JP Morgan was the first person to have incandescent bulbs in his home. I call it trickle down technology, and I don't see anything wrong with it.
Friday, October 12, 2007
The aim of Western economics is to maximize "standard of living" by the amount of annual consumption, with more being better.This quote comes from Small is Beautiful (the current values for the US would be 25% of world's resources and less than 5% of population).
The aim of Buddhist economics is to maximize well-being while minimizing consumption.
An industrial system which uses 40% of the world's primary resources to supply less than 6% of the world's population could be called efficient only if it obtained strikingly successful results in terms of human happiness, well-being, culture, peace and harmony.
What are the implications of the Buddhist economics philosophy? What exactly is well-being and how do you measure it? What are the benefits of reducing natural resource usage? How does it change one's behavior as a consumer, as a worker and as an investor?
Lets take a closer look at these questions.
What is well-being and how do you measure it?
Adapted from Beyond Money:
- Having a good life: a life that is enjoyable, meaningful, engaging, and fulfilling.
- Having material well being: food, clothing, shelter, and medicine.
- Having good health and a long life.
- Having a good education and the opportunity to always be learning.
- Having safety and stability at both the personal and larger community level.
- Having good mental health: positive emotions, happiness, trust, optimism, and contentment.
- Live in a democratic and stable society that provides material resources to meet needs.
- Have supportive friends and family.
- Have rewarding and engaging work and an adequate income.
- Be reasonably healthy and have treatment available in case of mental problems.
- Have important goals related to one’s values.
- Have a philosophy or religion that provides guidance, purpose, and meaning to one’s life.
Mahbub ul Haq, Pakistani economist who pioneered the annual Human Development Index explains the difference between income and development as such:
The basic purpose of development is to enlarge people’s choices. In principle, these choices can be infinite and can change over time. People often value achievements that do not show up at all, or not immediately, in income or growth figures: greater access to knowledge, better nutrition and health services, more secure livelihoods, security against crime and physical violence, satisfying leisure hours, political and cultural freedoms and sense of participation in community activities. The objective of development is to create an enabling environment for people to enjoy long, healthy and creative lives.To measure well-being, what kind of attributes should we be collecting statistics on?
On the individual level, examples include: health, education, material well-being and quality of work. Additionally from a mental perspective: positive and negative emotions, depression, engagement, purpose and meaning, optimism and trust, and the broad construct of life satisfaction.
On the societal level examples include: life expectancy, literacy rate, unemployment rate, homelessness rate, crime rate, suicide rate, marriage and divorce rates, bankruptcy rates, community vitality, citizen engagement, environmental quality, land set aside for nature, amount of natural resources used, and stability of government.
There are many examples of statistics measuring different aspects of well-being. In the US, Redefining Progress calculates the Genuine Progress Indicator (GPI) which distinguishes worthwhile growth from uneconomic growth by subtracting the negatives out of GDP such as resource depletion, crime and family breakdown. Ed Diener and Martin Seligman are creating a national well-being index looking at positive and negative emotions, engagement, purpose and meaning, optimism and trust, and the broad construct of life satisfaction. The Calvert-Henderson Quality of Life Indicators look at education, employment, energy, environment, health, human rights, income, infrastructure, national security, public safety, re-creation and shelter.
Many other countries have their own metrics. Bhutan has a Gross National Happiness statistic. The EU monitors psychological well-being with the Eurobarometer. All regions of New Zealand submit regular reports on their environmental, social, cultural and economic wellbeing. Canada is working on an Index of Well-being. The UK's conservative party suggests scrapping Gross Domestic Product (GDP) as a measure of the nation’s success in favor of a model that measures people’s happiness drawn up up by Friends of the Earth.
There are also some statistics collected comparing well-being between nations. The UN developed the Human Development Index (HDI) ranking countries by life expectancy, literacy and GDP. The World Value Survey has assessed happiness and life satisfaction in about 70 nations. The OECD is working toward metrics on well-being and societal progress. WWF has graphed HDI with ecological footprints as a way of looking at both development and resource usage.
While well-being is easy to describe, it is difficult to measure. But good measurement is necessary to determine how countries are doing. While GDP and GDP per capita are easy to measure, they are an inexact proxy for well-being. Current well-being measurements are still a work in progress and are steadily being improved. While they might not be as accurate as one would wish, as Keynes said "It is better to be roughly right than precisely wrong".
Why minimize natural resource use?
Buddhist economics attempts to minimize consumption (natural resources). There are four main reasons to minimize natural resource consumption.
First, using less leaves more for others. Reducing our consumption of natural resources ultimately allows the the size of the human population on Earth to be larger and more people experiencing a quality life is a good thing. By not using natural resources, you allow them to be used by someone else. As can be seen in a standard supply/demand diagram, lowered demand reduces the price for everyone. Those with the least will be able to afford more.
Second, natural resource usage leads to pollution and environmental damage. Fossil fuel usage leads to greenhouse gas emissions which lead to global warming. Fertilizer and pesticide runoff from agriculture pollutes rivers. Mining removes entire mountains and pollutes surrounding rivers with runoff and toxic chemicals. Limiting natural resource usage reduces these environmental damages.
Third, it allows more room for nature. Less land for farming, less land for tree harvesting, and smaller cities means more land for wilderness. Many species are being driven to extinction by human encroachment. Increases in agricultural land in Brazil are causing the Amazon rainforest to be cut down. And as stated above natural resource usage means leads to pollution which is also not good for wild animals.
Forth, natural resource extraction often leads to corruption and violence. While you would think discovering natural resources in a poor country would lead to economic development, in fact the opposite is likely to occur, a phenomenon known as the natural resource curse. One variety is the oil curse which has afflicted many countries including Azerbaijan, Angola, Chad, Russia, and Iraq. Blood diamonds are used to support wars in Africa. Forests in Burma are cut down to support the military dictatorship. While these problems do not typically afflict first world countries, using fewer of these natural resources decreases demand, lowering the global price and giving less money to the offending regimes (and making it easier to boycott goods from them completely).
How should one consume?
While Western economics aims is to maximize consumption, Buddhist economics aims to maximize well-being from our consumption while minimizing the natural resources they took to produce.
Buddhist economics is about maximizing the well-being return on natural resources of every purchase. The first way to do this is to add more meaning to each of your purchases. Items given as gifts often have additional sentimental value. No additional natural resources are need, but it adds to your well-being.
The second way is to decrease your natural resource usage while maintaining your well-being. This is done by minimizing the Material Intensity Per Service Unit of your purchases. It means shifting your purchases to products and entire segments of the economy that use fewer resources, purchasing more services and less goods, and substituting virtual goods for real items. Examples include: substituting video conferencing for air travel, vacationing closer to home, purchasing a fuel efficient car, and eating more vegan food and less meat.
Buddhist economics is a philosophy of better not more. Instead of trying to eat the most you can without getting fat, you want to eat the least you can while still thoroughly enjoying your meals and maintaining your health. In the US so much food is consumed that it has a negative impact on health. Well-being in the US could be improved if Americans shifted their consumption to a lower quantity of higher quality foods.
Rather than purchasing inexpensive items that would need to be replaced many times, you want to spend extra for higher quality goods that last longer. You also want to make your purchases last as long as possible and then, if feasible, find a new home for them when you no longer use them. Another way to get the most out of natural resources is to rent goods or share a purchase with multiple people, such as with car sharing or eBay renting.
Buddhist economics is about substituting human ingenuity for natural resources: cars that get higher gas mileage, houses that are designed to use less energy to heat, or computers that need less electricity to run. It is about paying more for items that use less natural resources (like hybrid cars and CFL light bulbs), or use renewable resources in place of non-renewable resources (like green electricity that comes from the wind rather than coal).
It is a philosophy of voluntary simplicity. Instead of trying to buy the largest house you can afford, it is about trying to find the smallest house you can live in and still be completely satisfied. Fight Club summed it up best: the things you own end up owning you. Owning more means spending more time cleaning, maintaining and fixing things. Instead of enjoying our things they become a source of work and headaches. Streamline what you own to just what gives you the most happiness and well-being.
Buddhist economics is about maximizing well-being through smart consumption. Many aspects of happiness and well-being are counterintuitive and we need to adjust our purchases accordingly. One example is that people tend to adapt to improvements in goods and no longer get additional happiness from them, but they don't take this into account during purchasing. While an HD TV at first is breathtaking, after enough views the quality of the picture will be taken for granted. In the Happiness Hypothesis, Jonathan Haidt says that we will adapt to power, status, freedom, health, and sunshine but not to (street) noise, commuting, lack of control, shame, or relationships (interpersonal conflict). Spending more of our money on purchases we don't adapt to will increase well-being. Variety is the natural enemy of adaption, and adding it to our purchases increases our enjoyment.
Considerable evidence suggests that if we use an increase in our incomes, as many of us do, simply to buy bigger houses and more expensive cars, then we do not end up any happier than before. But if we use an increase in our incomes to buy more of certain inconspicuous goods–such as freedom from a long commute or a stressful job–then the evidence paints a very different picture. The less we spend on conspicuous consumption goods, the better we can afford to alleviate congestion; and the more time we can devote to family and friends, to exercise, sleep, travel, and other restorative activities.The more we can substitute inconspicuous goods for conspicuous ones, the more well-being we will get out of our purchases.
In order to minimize your natural resource usage, you need to be able to track it. It would be great if there was a Quicken like piece of software which could track the natural resource expenditures of all of your purchases. Every time you used your credit card, information on what you purchased and what natural resources it required would be recorded and later download into the Quicken like software. Ideally, it would measure many different types of natural resources: land usage, water, metals, minerals, energy, CO2 emissions and pollution. With this knowledge you could then try and adjust your purchases to lower natural resource consumption each year while maintaining your well-being.
Having so many different types of natural resources makes it difficult to determine how best to minimize your usage. One solution is to aggregate them into a single score using a weighing mechanism such as Ecoindicator '99.
Another way to aggregate the natural resource consumption is the Ecological Footprint measurement. It looks at the amount of land needed to provide the resources required to manufacture the good and to absorb its wastes. Hopefully in the future grocery stores will have environmental rewards cards that track the footprints of all your food purchases. It would be even more useful if it split the footprint into energy and land usage components as acres and gallon scores. The footprint concept is good but currently there are some methodology issues with how it handles energy use and increased productivity of land meed to be addressed for its results to be accurate.
Buddhist economics is concerned about the well-being of future generations and therefore supports sustainability. It seeks to eliminate the non-sustainable use of resources such as fossil fuels, clear cutting of forests, depleting aquifers, soil loss due to farming, and over harvesting of fish stocks. It seeks to maximize use of recycled goods to minimize the need for additional mining or harvesting of forests. It even seeks to minimize sustainable use of natural resources as this allows others to substitute their non-sustainable resource usage for a sustainable one.
Buddhist economics takes into account the well-being of others as well as yourself and supports good jobs for workers. You want your purchases to make the largest positive impact on the workers, possibly by supporting higher wages for workers or possibly by supporting workers in poor countries where additional money would go farther. As consumers we should try and support products that generate good jobs and likewise avoid products that lead to bad jobs.
Buddhist economics is about taking the entire backstory into account instead of just purchasing based on price and quality. What kind of jobs did my purchase support? What impact on the environment did it have? If you get a good deal but it comes at the expense of workers or the environment, then it is not a good deal.
Improved labeling helps us to better see the backstory. There are more and more examples of environmental and social labeling appearing every day. The Fair Tracing Project is developing a digital tag that would tell the backstory behind the food you eat, and the Dole Organic Farm label allows you to view the farm the banana was raised on and certifications of that farm. Green Office has a "green screen" which rates products based on the amount of recycled content they contain, their biodegradability, their chemical content, and third party verification of products and companies. JVC Manufacturing's label shows energy usage, CO2 emissions, water usage, air and water pollution, chemicals used and waste created. Carbon labeling by Carbon Trust and Tesco calculate the CO2 impact of items like potato chips. Timberland has a "Our Footprint" label, Home Depot has an Eco Label and Wal-Mart is adding an environmental sustainability scorecard to electronics. The Hekhsher Tsedek label ensures workers of kosher foods are treated fairly and Fair Trade sets standards for international labor and environmentalism.
Hopefully in the future, customers will be able to use their cellphones to access this information about products they are purchasing like they do in Japan.
In conclusion, consumption in Buddhist economics is about maximizing the well-being return on natural resources, substituting human ingenuity for natural resources, maximizing well-being through smart consumption, taking the entire backstory into account, and supporting good jobs for workers. It is a philosophy exemplified by the concepts of better not more, voluntary simplicity, and sustainability.
How about work?
From Small is Beautiful:
To strive for leisure as an alternative to work would be considered a complete misunderstanding of one of the basic truths of human existence, namely that work and leisure are complementary parts of the same living process and cannot be separated without destroying the joy of work and bliss of leisure.While GDP goes up the more you work, at a certain point individuals would get greater well-being from more leisure than from additional income. Overwork leads to stress and illness, decreasing well being as this research finds:
Whereas the goal of Western Economics is to minimize and hopefully eliminate all work, Buddhist economics sees that having a good job is a necessary component of well being, and as a goal to create good jobs for everyone.
Despite the weak relationship between income and global life satisfaction or experienced happiness, many people are highly motivated to increase their income," the study said. "In some cases, this focusing illusion may lead to a misallocation of time, from accepting lengthy commutes (which are among the worst moments of the day) to sacrificing time spent socializing (which are among the best moments of the day).And while not having a job might sound ideal, it has negative impacts on well-being as well. From Reality Check:
But unemployment brings just as many health problems and hidden costs as overwork. The unemployed suffer higher rates of physical and mental illness than those with jobs.
Attributes of good jobs:
- Meaningful to worker
- Opportunity for using skills and creativity
- Variety of tasks
- Respect and status
- Interpersonal contact
- Opportunity for personal control
- Limited stress and safe
- Good pay and benefits
Po Bronson writes in What Should I Do With My Life that:
We still cling to the idea that work should not only be challenging and meaningful -- but also invigorating and entertaining. But really, work should be like life: sometimes fun, sometimes moving, often frustrating, and defined by meaningful events. Those who have found their place don't talk about how exciting and challenging and stimulating their work is. Their language invokes a different troika: meaningful, significant, fulfilling. And they rarely ever talk about work without weaving in their personal history.Instead of striving for jobs with the highest pay, we should strive for those that give us the greatest increase in well-being, opportunity to display our talents and allow us the greatest potential to improve the world.
Being selective as to where you work can have an impact on companies as well. Jeffrey Sachs says that businesses can't recruit top talent anymore unless they are doing corporate philanthropy. The first thing many candidates ask is what the company is doing in Africa. These recruits want to work at a place that is meaningful, a place that is making contributions to do good in the world. For corporations then philanthropy and doing good make business sense in order to attract top talent.
The term "good job" is too often defined solely by its salary. Boring, repetitive manufacturing jobs are considered good because they pay well and have good benefits. But, while they capture the last bullet point for attributes of a good job they often miss all the others. These jobs frequently pay well to compensate for the fact that the others are lacking. Jobs should be redesigned to meet all the bullet points and ones that can't make it should be eliminated. Boring repetitive work should be outsourced to computers and machines, and the interesting and challenging part should be left for humans.
As a society (and as consumers) we should try to give everyone the opportunity to work and make jobs as good as possible. While all jobs can't pay well, they can meet the other conditions of being a good job. If a job is made better but not more productive, this isn't captured by traditional economic metrics, but it is still a good thing. We want an economy that allows as many people as possible to follow their dreams and get paid to do it full time. GDP might not be affected, but well-being would be increased if more people can pursue professions they are passionate about.
What about investing?
Western economic investing allocates capital to maximize return on investment while Buddhist economics takes additional social and environmental issues into account.
If you are following Buddhist economics principles, your self-worth is not based on the size of your bank account and you are attempting to minimizing your consumption. Therefore, while you will still need to invest for retirement, for financial security, and for large purchases, your overall need for wealth will not be that great (then again, you might take a job that pays less, so you will have less to invest in the first place). You will likely have more money then you will consume yourself and the extra money will be given away. Accordingly, you are not solely focused on maximizing returns and are able to take other social and environmental issues into account when investing. Just like you are willing to spend more for socially/environmentally conscious products, you are also willing to accept a lower return on investment for companies that handle more than their fair share of social and environmental issues.
Buddhist economics investing is about long term, non-zero-sum game investing. Short term investing, such as day trading, is more gambling than investing as one person has to lose money for another to gain. From a societal standpoint this is a waste of time, as all the effort of the investors goes into trying to outsmart their competitors rather than creating new wealth. Since you are concerned not just about maximizing your own wealth but also about societal well-being, you want to avoid short term zero-sum game investing.
Universal investing is one form of long term investing where you invest as broadly as possible in the world economy. A universal investor therefore aligns himself with what is best for the entire world economy over the long run.
Investing can also be an alternative to donating money to non-profits. It is more effective to invest in a company that is less profitable because it is stopping problems from ever occurring than to donate to an NPO to help fix the problems that were created.
For example, suppose there are two companies, one which would give you a slightly higher return (say 10%) but have higher environmental costs (for example, coal companies with air pollution) and another which has a slightly lower return (say 8%) but fewer environmental costs (solar power). You can think of the 2% lower rate of return as a donation. But, this "donation" is likely to have much greater impact than donating to a charity, for it is stopping the environmental and health issues of coal, such as asthma and respiratory diseases, from ever happening rather than donating to an NPO to provide medicine to fix the problems it caused.
Loaning can have a greater impact than giving. You can only give your money away once, but if you loan it out instead it comes back and then you can loan it out another time (and on and on) greatly increasing its leverage. One way is through microfinance where you loan to someone in the 3rd world who wouldn't have access to capital otherwise. Created by Grameen bank, microfinance is now prevalent and anyone with $25 and internet access can be a banker to the poor via kiva.org. Because a small amount of money has a larger impact to someone in the 3rd world than in the 1st, microfinance's impact on well-being is greater than a similar amount invested in the first world.
Investing in 4th sector companies, those that are run for-profit but with a nonprofit mission, can have a greater impact than donating to a non-profit. They are more sustainable than non-profits as they fund themselves through their business and are not dependent on fundraising to cover their expenses. For example, the Greyston Bakery employs those recently released from jail and gives them the opportunity to gain job skills and increases their employability. If an NPO attempted to teach the job skills instead, it would cost money to run, requiring donations, and the opportunities of the workers wouldn't match that of being on a real job.
Buddhist economics is about getting companies to think long term. This really is no different from Western economics as the best companies (such as Google) and investors (Warren Buffet) think long term, but not all companies do. Managers at many firms are focused on short term goals to the detriment of the longer term. Long term focused companies are ethical, honest and act legally as to not do so will severely damage companies in the long term. One take on corporate social responsibility (CSR) is just to get a company to think in its enlightened long-term self interest.
You also want companies to internalize the externalities. An externality is a positive or negative impact on anyone not party to a given economic transaction, in this case a social or environmental impact that goes beyond the company and the consumer.
Examples of negative externalities include: pollution, clearcutting forests, exploiting workers, and greenhouse gas emissions. Examples of positive externalities include: hiring workers that are otherwise unemployable, creating knowledge through R&D (that isn't covered by patents), improving safety for workers, and providing access to credit to those that otherwise wouldn't get it.
While a smart, long term focused company can internalize many externalities without additional costs, at some point there is a trade off between externalities and profitability. The costs can be absorbed by consumers in the form of higher prices, workers in the form of lower salaries, or investors in the from of lower returns. As seen above, it is cheaper from society's standpoint for a company to handle the externalities itself rather than having citizens pay more in taxes or donations to fix the problem later. Therefore you want to support companies that internalize their externalities even if this leads to a lower rate of return.
To see which companies are handling their externalities, Buddhist economics is about supporting corporate transparency and greater environmental and social reporting. Instead of just reporting about the bottom line, you want companies reporting about the triple bottom line: "People, Planet, Profit". The additional information allows you to value them on more than just profits.
Many corporations are already doing this as shown by the 2271 CSR, Sustainability, and Environment reports released in 2006 as tracked by Corporate Register. In order that these reports can be compared with each other, the Global Reporting Initiative specifies a set of reporting guidelines.
Making this information available allows non-profits and financial institutions to compare companies. For example, Climate Counts ranks companies based on carbon reporting and actions being taken, Greenpeace has a Green Electronics Guide that ranks leading mobile and PC manufacturers on their global policies and practice on eliminating harmful chemicals and on taking responsibility for their products once they are discarded by consumers and Goldman Sachs, the Wall Street investment bank, has a four-member research team that assesses the environmental, social and management performance of companies in the same way that more traditional colleagues analyze financial performance.
You can get companies to think long term, internalize the externalities and support transparency by rewarding companies that do this with higher valuations and by putting pressure on companies that don't to move in the right direction.
Instead of basing the value of a company on just its earnings you want to add in additional social and environmental externalities. If a company is making $2 a share but has positive social and environmental externalities that equate to an additional $2 a share, then you want to value this company as if it was earning $4 a share. Taking these positive externalities into account will cause the company's stock to go up and have a higher P/E ratio. This increased price gives an incentive to managers of competing companies to change their behavior so they too will get the premium put on their stock.
The increased price also means more capital is allocated these companies and it signals others to invest in similar companies or to create new companies like them. For example, because cleantech companies are currently being given high valuations, venture capitalists have more incentive to fund cleantech companies. Between 2005 and 2006, investments in the clean-tech sector jumped from $623 million to $1.5 billion.
Alone you might not have much impact on a stock price, but by banding together with like minded investors, you can make a big difference. One such way is investing through socially responsible investing (SRI) mutual funds which aim to maximize both financial return and social good. Today, $2.3 trillion, nearly one out of every ten dollars under professional investment management in the United States, is involved in SRI.
While it is possible to raise a stock price to reflect the positive externalities a company brings, it is not possible to do the opposite and lower the stock price of a company that has negative externalities as long as some investors value companies only on earnings. To nudge bad companies in the right direction you need other techniques.
Ownership can be used to influence companies:
"Responsible investing requires responsible ownership," said Amy Domini, Founder and a Managing Principal of Domini Social Investments. "By filing shareholder proposals on social and environmental issues, and through constructive dialog with companies, we are helping to make corporations more accountable to their stockholders, employees, communities and the environment."Another possibility would be to take a company private. A SRI private equity firm could be created that looks to purchase social and environmental laggards in hopes of reforming them. For example, a coal company that uses inefficient and polluting power plants could be bought out completely. The plants could then be replaced with more efficient IGCC versions which also remove 90-95% of mercury, and greater than 99% of sulfur dioxide (SO2). The CO2 could be captured and sequestered. Looking strictly at the bottom line this sort of purchase might not make sense, but if investors are motivated by improving the environment as much as making money and see the transaction as part donation, part investment, then it does.
While it might seem counter-intuitive to invest in "bad" companies, they have more potential for change, as the "low hanging fruit" that other companies have already picked are still available. It is easier to make a positive impact for the environment by working with Wal-Mart than it would be with Whole Foods, since Whole Foods has already implemented many of the changes and Wal-Mart is a larger company so the impact would be greater.
Some ethical investors use screens to avoid investing in certain companies that produce products that society would be better without such as alcohol, tobacco and weapons. But, not investing in these companies does nothing to reduce demand for their products or make them go away. If ethical investors shun these companies they would be owned solely by people looking to maximize profits regardless of externalities who see no reason to change.
Instead, while people are still purchasing these products, you want to use your influence as an owner to make sure those companies are producing them in the most responsible way possible. As long as people are still smoking, you want tobacco companies to do their best to stop underage smoking, make cigarettes that are as easy as possible to quit and attempt to create electric toxin free cigarettes. You want alcohol companies that don't target teenagers with their advertisements.
Another way you can change these companies is to change their definition of their business. For example, getting oil or coal companies to think of themselves as energy companies, where the energy could be generated in a more environmentally friendly way.
To summarize, Buddhist economics investing is about long term investing and using investing as an alternative to donating. It is about trying to get companies to think long term, internalize externalities and practice transparency by supporting good companies and nudging bad ones in the right direction.
While Western economics attempts to maximize standard of living, Buddhist economics attempts to maximize well-being. Whereas Western economics is agnostic toward natural resource use Buddhist economics attempts to minimize it. The key reasons for decreasing resource use are: leaving more for others, reducing pollution and environmental damage, leaving more room for nature and reducing corruption and violence. The point of the economy is more than just maximizing output or productivity, it is to create meaningful jobs that create the goods and services that allow us to maximize well-being.
As individuals, Buddhist economics changes the way we consume, work and invest. Consuming is about maximizing well-being while minimizing natural resources usage. Working is about finding the job that gives us the most well-being, the best opportunity to display your talents and the greatest potential to improve the world. Investing is about long term investing and using investing as an alternative to donating.
Some people like to blame society's problems on corporations. If only corporations cared about more than just maximizing profits then many of the worlds problems wouldn't exist. If we could just get corporations to change, the thinking goes, then these problems would be solved. But, the way a corporation acts is determined by the values of its customers, workers and investors. If a company's customers are just looking for the lowest price, its workers just looking to maximize their salary and its investors just trying to maximize their return, then you will find a company that is not concerned about greater social and environmental issues. If you forced that company to make changes but their customers weren't willing to pay more, they would just go to a competitor, the company would flounder and no real change will have taken place. Likewise, a company whose customers, workers and investors take greater social and environmental issues into account will be able to focus on more than just the bottom line. Therefore to enact change, instead of targeting the managers of a corporation, the key is getting its consumers, workers and investors to change.
As a society, Buddhist economics changes the way we measure success. Instead of using GDP as the measure of progress, you use statistics on the well-being of society. It has been reported that:
In the early stages of a climb out of poverty, for a household or a country, incomes and contentment grow in lockstep. But various studies show that beyond certain thresholds, roughly as annual per capita income passes $10,000 or $20,000, happiness does not keep up.Once an economy gets to a certain level, mental impacts of well-being are much more important than the ability to obtain more stuff. At this level certain policies, such as reduced work hours or greater environmental regulation, that reduce GDP might actually raise well-being. At the societal level, natural resource use can be discouraged by taxes on resources such as taxes on carbon and mineral extraction.
The Buddhist economics philosophy works well within a democratic capitalist system. Individuals have the freedom to choose how they consume, work and invest. They are able to vote for the politicians that would best follow its principles. They are free to lobby and convince their fellow citizens to follow these principals as well.