OnePeople buy when there’s blood in the streets

My name is Kyle MacDonald and I am making a series of up-trades for bigger or better things up to my goal of a house.

I started with one red paperclip on July 12th, 2005.

You can read stories about each trade.

He's up to a snowmobile.

[One Red Paperclip via digg]

Business owners do not normally work for money either. They work for
the enjoyment of their competitive skill, in the context of a life
where competing skillfully makes sense. The money they earn supports
this way of life. The same is true of their businesses. One might
think that they view their businesses as nothing more than machines to
produce profits, since they do closely monitor their accounts to keep
tabs on those profits.

But this way of thinking replaces the point of the machine's activity
with a diagnostic test of how well it is performing. Normally, one
senses whether one is performing skillfully. A basketball player does
not need to count baskets to know whether the team as a whole is in
flow. Saying that the point of business is to produce profit is like
saying that the whole point of playing basketball is to make as many
baskets as possible. One could make many more baskets by having no
opponent.

The game and styles of playing the game are what matter because they
produce identities people care about. Likewise, a business develops an
identity by providing a product or a service to people. To do that it
needs capital, and it needs to make a profit, but no more than it
needs to have competent employees or customers or any other thing that
enables production to take place. None of this is the goal of the
activity.

Disclosing New Worlds: Entrepreneurship, Democratic Action and the Cultivation of Solidarity by Charles Spinosa, Fernando Flores & Hubert Dreyfus (MIT Press 1997)

One of the few ways you could (most cynically) justify our invation of Iraq was that America drives the world's economy... America therefore need a steady energy supply... Let's not be afraid to act when our interests "intersect" with our "principles".. and take that precious oil out of the hands of that, that, that madman.

But that hasn't worked either. (And please don't reply saying that the only reason this is so is because of the temporary lack of security: that's the point of the post, silly.)

LONDON (AFP) - World oil prices raced to new record high levels close to 50 dollars a barrel as unrest in Nigeria and Saudi Arabia alarmed traders already anxious about low oil inventories.

In New York the price of light sweet crude for November delivery climbed to an all-time high point of 49.74 dollars per barrel in electronic trading, the highest level since oil began trading on the New York market in 1983.

The contract smashed through the previous record peak of 49.40 dollars seen on August 20. Prices rose 67 cents to 49.55 dollars a barrel in opening deals.

The EFF directs us to an article by John Phillip Sousa, warning against the evils of recorded music. The argument is eerily familiar:

"I foresee a marked deterioration in American music and musical taste, an interruption in the musical development of the country, and a host of other injuries to music in its artistic manifestations, by virtue -- or rather by vice -- of the multiplication of the various music-reproducing machines."

"[F]or the life of me I am puzzled to know why the powerful corporations controlling these playing and talking machines are so totally blind to the moral and ethical questions involved. Could anything be more blamable, as a matter of principle, than to take an artist's composition, reproduce it a thousandfold on their machines, and deny him all participation in the large financial returns...?"

A quick reminder that even your favorite economic indicator is more likely to be a statistically convenient fiction than an accurate index:

From LAT, 29 December 2003:

The nation's official jobless rate is 5.9%, a relatively benign level by historical standards. But economists say that figure paints only a partial

Reuters has a fascinating account of North Korean forced labour in Russia. The North Korean government ships labor teams, a holdover from the Soviet era, to Vladivostok where they live in dormitories and work for Russians under the strict supervision of plainclothes DPRK police. North Korea's compelled to turn out their labor force to gain hard currency. The North Korean labor force is all over it: officials in the DPRK are being bribed for spots on the teams. The piece doesn't mention it, but there would certainly be consequences to allowing these labor teams to see how a capitalist system works -- even if it's Russia.

Today's NYT has an editorial by Todd G. Buchholz, a former economic advisor to the White House. He has the first well-reasoned critique of PAM and the "terrorist futures" market we've read thus far. Unlike the other analysis in these past two days, this is grounded in some solid thinking.

In short: the market is a fine idea, but won't work because it must be "deep and liquid," meaning that there must be a high transaction volume and many participants. There are also problems with the frequency of terrorist attacks: they're so rare, that the market would have difficulty speculating on them. There are also unpleasant side-effects: if the payouts are too large, there's incentive to fix the market. In his words, "market manipulation can show up not as a forged buy order but as a bullet."

He also asserts that the market is, in fact, unnecessary. The existing financial markets already incorporate PAM-like analysis: South African instability, for instance, is reflected in the trading price of the rand. It seems that a more sophisticated analysis of the markets already in place would yield similar results, without the attendant problems.

His final point is the most important: that DARPA, which collaborated with the Economist Intelligence Unit on PAM, is doing its job. It was chartered to come up with groundbreaking ideas exactly like these. In the past, DARPA has given us revolutionary technologies -- not the least of which is the Internet. We should be encouraging this, and it's important that yesterday's Congressional rebuke doesn't stifle its initiative.

Admiral Poindexter's Office of Information Awareness is at it again. Fresh from the sound drubbing they received in Congress for their Orwellian information-collection program, they have a new tool they think will help predict terrorist events. Rather than collecting more information, which the intelligence agencies are already drowning in, this program intends to improve the analysis of that information -- which is where the agencies have been failing.

The tool is the Policy Analysis Market. It's a joint venture between the venerable Economist Intelligence Unit and the Defense Advanced Research Projects Agency (DARPA). This should be familiar to anyone who's played the Hollywood Stock Exchange. It is a futures market for events in the Middle East. Traders place bets on when certain events occur, collecting money when they're right and losing money when they fail. The idea is that markets can be excellent indicators for future events -- each analyst's individual opinion is aggregated with the others, creating a consensus which is represented by the price.

The OIA wants to harness the analytic power of this market by opening a seperate market for terrorism futures, alongside the markets for stability and military posture in Syria, Iran, and elsewhere.

"Spending taxpayer dollars to create terrorism betting parlors is as wasteful as it is repugnant," say Senators Byron Dorgan (D-North Dakota) and Ron Wyden (D-Oregon). What's more, they feel that the market would actually influence the terrorists themselves -- if they know when the market thinks the next attack will be, they will obviously try to beat the oddsmakers.

They have a fair point, in that individual actors can more easily subvert the predictions of a theoretical market than any single person could influence the price of gold. Their revulsion at the premise of the market itself, though, is short-sighted. The market would provide a valuable service, in the form of relatively accurate predictions. They are not revolted by the other markets, like the date of the overthrow of the Jordanian monarchy, and it is foolish to say that a terrorism futures market is qualitatively different.

Other comments from the Senators belie the other forces at work: "They still didn

Wired New York, via No Data Source, has a running discussion on rent controls in New York. Briefly: New York's rent controls are distorting the market. Single widows hold on to three bedroom apartments, causing artificial shortages. Apartments allowed to float must subsidize the rent-controlled units, creating exhorbitant rents. The example of Cambridge, Massachusetts is held up as an example of the healing power of the marketplace. An MIT study cited in almost every piece concludes that after deregulation, housing investment increased 20%.

The Cambridge model is presumably the best-case scenario. New York would lift all controls at once, and allow the market to sort itself out. Investment in new housing would increase 20%, with a commensurate increase in available units, driving down the price of apartments. Retired widowers would no longer knock around in three bedroom apartments. Everyone has presumably won: the construction industry is happy with the new investment, landlords now have the flexibility to respond to market pressures, and tenants benefit from new, cheaper apartments.

Floating the 1 million rent-controlled units would certainly eliminate distortions in the market, but is this really what we want? Markets are excellent for delivering the best price-point to the widest possible audience, but terrible at instituting social policy.

There are other forces at work, however, which complicate the rosy scenario. At the heart of this deregulation-induced revitalization is the increase in supply. This means more people. Many more people, which is exactly what New York doesn't need.

This assumes, of course, that the 20% increase in housing investment is devoted to new construction, which is unlikely. It is far more likely, that new investment would be devoted to upgrades. New construction is messy and complicated. It is far easier and more lucurative to add hardwood floors, bay windows, and dishwashers to dilapidated apartments, and charge a higher rent for a tidy and newly unregulated profit. This does nothing to relieve the housing shortage, which is the presumed goal of deregulation.

Lo and behold, this is exactly what the MIT study claims will happen: deregulation creates better apartments, but does not increase their availability. Better, more expensive apartments come at the cost of driving out lower-income tenants, creating homogenously affluent neighborhoods.

Deregulation, it seems, works nicely for the construction industry and landlords, but works to the detriment of lower-income tenants. Under the current system, these tenants are subsidized by more affluent residents and an unpleasant market inefficiency. Faced with a choice between this, and a Manhattan reserved for old- and new-money New York Brahmins, we would gladly accept the former.