Category: Economics

Matters of money

Spore and DRM

One of the most talked about aspects of the computer game Spore is the digital rights management (DRM) software being used to prevent unauthorized copying. The SecureROM software restricts each copy to being installed on a maximum of 3 computers. Beyond that, you can call Electronic Arts and beg them to let you install it more times. Given that hardware upgrades can make your computer count as a ‘new’ one, this might happen to a lot of people.

As DRM software goes, this really isn’t that bad. It doesn’t run an annoying program in the background, like the awful Steam system that accompanied Half Life 2. It also lets you play the game without the DVD inserted.

Arguably, the key to this issue is the following: somebody is always going to crack the DRM and release pirated copies of the game without it online. As such, DRM does not stop unauthorized copying, but does inconvenience the people who actually shell out the money for the game. As such, DRM is both useless and unfair to legitimate customers. As the Sony DRM debacle demonstrates, it can also open massive security holes on the computers of those who run it.

P.S. I will write a full review of Spore once I finish it. My first impressions are quite positive. One major suggestion to anyone trying it: play a very aggressive species for the first four stages (basically winning by killing everyone). Then, start a new game at the space stage with a blank state species. If you bring your hyper-aggressive species out into the galaxy, you will spend all of your time manually defending each of your planets from attack. It is infinitely less frustrating to build an empire based on trade and teraforming, earn lots of badges, make alliances, buy some awesome weapons, and then start busting people up if desired.

UBC to join NCAA?

It seems the University of British Columbia is considering joining Division II of the National Collegiate Athletic Association, and is at least nominally soliciting advice from students and alumni about the decision. Personally, I have never seen varsity sports as an important part of what the universities do. For the most part, students who don’t care and don’t watch them are subsidizing athletes who contribute little to the overall university community. Sports programs also divert funding away from more valuable uses such as research, student scholarships and bursaries, and university infrastructure.

Ideally, UBC should make the ‘Varsity Sports Fee’ that gets imposed on every student an opt-in system. Then students who feel that the program is worth the approximately $200 per year cost of the program can choose to support it. By all means, attendance of athletic events can be restricted to those who pay the fee. Even so, I expect they would see a sharp contraction in their level of funding: relatively clear evidence that these programs are valued more by university administrators than by students. If the sports programs wanted to preserve their present level of funding, they would need to find willing donors, rather than exact a semi-hidden tax on those who often have far more pressing financial needs.

In any case, three consultations on the move are planned:

  • September 29, 4:00-7:00 p.m. – Liu Centre, Multi-purpose Room, 6476 North West Marine Drive
  • October 14, 6:00-9:00 p.m. – Ponderosa Centre, Arbutus Room, 2071 West Mall
  • October 15, 4:00-7:00 p.m. – Ponderosa Centre, Arbutus Room, 2071 West Mall

Those in Vancouver may wish to consider attending.

Two American cap-and-trade plans

While both John McCain and Barack Obama have endorsed a national cap-and-trade system as the centerpiece of their climate policies, the two proposals differ on several highly important grounds. The most important by far is the mechanism of permit allocation. Under the McCain system, permits to emit carbon would be granted for free to those with existing records of emissions; under the Obama system, all those wishing to emit will be required to buy permits at auction. The practical differences between the approaches are massive. Under the auction system, those who wish to pollute are made to pay. Under the free allocation system, those who have polluted in the past are granted valuable credits that they can either use to pollute or sell for cash.

As described before, consumers experience price rises in either scenario. What differs is where the windfall accrues. Under an auctioning system, it ends up in the hands of government, which can use it to fund low-carbon investments or refund it to the population as a hole (as in a cap-and-dividend system). Under a free allocation system, it simply goes into the coffers of the biggest polluters.

Even with a Democratically-controlled Congress and Senate, getting a plan based on 100% auctioning approved would be very challenging. Democrats from areas where extractive industries and automobile manufacture are economically important and politically powerful will resist policies that will be costly to dirty industries. That being said, it is arguably wiser to start with a policy position that is stronger than can probably be enacted and then compromise, rather than starting with a position that is weaker than necessary to get the job done.

Replacing the keyboard on a G4 iBook

Back in April, I managed to spill coffee on the keyboard of my 14″ iBook, disabling a number of keys. Now, I have managed to return it to functionality for less cost than anticipated.

The authorized Apple repair places in Ottawa wanted $45 just to diagnose the problem – specifically, to determine if the failure lay in the keyboard itself or the logic board it connects to. Replacing the keyboard would then cost extra for parts and labour. Replacing the logic board would be quite a significant expense, largely because the machine would have to be seriously taken apart.

Instead of taking it into a shop, I bought a replacement keyboard on eBay for about $30. Had it been a logic board issue, I would have diagnosed it myself for a lesser cost, which could have been further reduced by re-selling the replacement keyboard. As it happens, the new keyboard works fine. The process of installing it is pretty straightforward:

  1. Shut down computer. Remove power cord and battery.
  2. Lift plastic tabs at the top of the keyboard so it can swing upward towards you. Lay the partially removed keyboard flat across the area with the touchpad.
  3. Ground yourself by touching something metal, to prevent static shock to the components.
  4. If present, remove the AirPort card by gently pulling it towards the screen. Gently remove the plug connecting it to the motherboard.
  5. Use a tiny screwdriver to remove the four tiny screws holding down the aluminum plate under the space where an AirPort card goes.
  6. Lift off that plate.
  7. Pull the keyboard connector out of the motherboard. In my experience, it takes a moderate amount of force to make it disconnect.
  8. Position the new keyboard where the old one was, lying keys-down on the trackpad area.
  9. Plug the new keyboard into the logic board, as before.
  10. Replace the aluminum plate. Replace the four screws.
  11. If present, replace the AirPort card by plugging the connector into it, then clicking it back where it was previously.
  12. Place the keyboard back in its normal position, allowing the tabs to click it into place.

I am always suspicious that stuff I buy on eBay is counterfeit. This keyboard certainly looks identical to the old one. I am less sure about the sounds and feeling of the keys, but that may just be because I had grown used to how an old keyboard feels, followed by the feeling of Apple’s nice new aluminum external keyboards.

The replacement keyboard is definitely squeakier than would be ideal (particularly in terms of the spacebar). Hopefully, it will mellow with use.

True North American free trade

Amazon.com is superior to Amazon.ca in several ways. Firstly, it has a much broader selection. Secondly, it has some special features, like the Amazon Prime subscription that gives you unlimited shipping for $79 a year. The process of ordering things from Amazon.com, having them sent to places in the US, and then having them relayed to me has left me wondering what the effect of a true North American Free Trade Agreement would be.

In the simplest form, it would work like this:

  • Anyone in Canada, the United States, and Mexico can purchase anything sold by any company in any of the three countries.
  • The item can be shipped directly to them, and they will not be charged any customs fees, duties, or other border-related charges.
  • Some simple system is sorted out for sales taxes. It could be (a) you pay the tax of your local jurisdiction, which may send part of the revenue to the sending jurisdiction (b) you pay the tax of the sending jurisdiction or (c) you don’t pay sales tax.

Such an arrangement would obviously be beneficial for consumers. They would be able to buy from whatever physical or web-based store offered them the best arrangement. It’s less clear what the effect on businesses would be. Those that benefit from having consumers who are more likely to buy from a firm in their own country would get hurt, at least temporarily. Those that would be more attractive to outside consumers in the absence of duty fees would likewise benefit in the near-term. In the near term, this alternative approach should produce net economic benefits. While some actors would lose the benefits of a captive market (like drink sellers at concerts), the larger market would be more efficient overall.

In the longer term, there would be effects on firm consolidation, tax revenues, currency values, and macroeconomic conditions. Both from the perspective of what would benefit readers personally and from the perspective of what would be best for society overall, would readers prefer (a) for the current system to continue (b) having the current system replaced with one akin to the one above or (c) getting rid of North American free trade entirely?

Buying, but not using, carbon credits

One attractive element of a cap-and-trade system for reducing greenhouse gas emissions is that it would permit entities other than firms to buy credits, which they could then choose not to actually use. For example, a cap-and-trade system might mandate that emissions in 2020 return to 1990 levels and require that all credits be auctioned, rather than issued for free to past polluters. In Canada, that would mean selling 596 million tonnes worth of emission permits.

Firms wishing to emit greenhouse gasses would then need to buy permits for whatever quantity they choose to emit. Given the cap on the total number of permits to be sold, the price of permits will rise to the point where a sufficient number of emissions are cut. Because of the economic incentive produced to cut out whichever emissions within the economy would be cheapest to eliminate, the overall cost of compliance is minimized.

If, however, groups exist that feel that cuts deeper than 1990 levels by 2020 are required, they could buy permits on the same market. In so doing, they would reduce the supply available and increase the price of those remaining. This would induce firms to eliminate emissions where the cost per tonne is between what the price of permits would be without this independent action and what the price has become along with it.

Conservatism and science

One of the most regrettable things about contemporary conservatism – aside from forgetting Edmund Burke’s notion of humanity as stewards of the natural world – is the unwillingness to acknowledge basic scientific realities. Sometimes, this is because of ideological conflicts; acknowledging the immense danger posed by climate change basically means admitting that government regulation is required. Sometimes, it is because of religious beliefs at odds with the basic knowledge we now have about the universe. It is simply embarrassing that there are still people in developed countries who do not understand evolution, or who believe the Earth to be a few thousand years old.

Also regrettably, it seems that the recent surprise Republican vice presidential choice Sarah Palin is among those who profess doubt about the existence of biological evolution. She is of the ‘teach the controversy’ school of thought, in which schoolchildren should supposedly be presented with multiple theories and charged with choosing for themselves. Thankfully, this approach provides rich opportunities for satire. One site sells ‘Teach the Controversy’ shirts showing Atlantis, the devil burying dinosaur bones, aliens building the Egyptian pyramids, and so forth. Most famously, the whole Flying Spaghetti Monster phenomenon began as a mocking response to this approach:

I think we can all agree that it is important for students to hear multiple viewpoints so they can choose for themselves the theory that makes the most sense to them. I am concerned, however, that students will only hear one theory of Intelligent Design.

Let us remember that there are multiple theories of Intelligent Design. I and many others around the world are of the strong belief that the universe was created by a Flying Spaghetti Monster. It was He who created all that we see and all that we feel. We feel strongly that the overwhelming scientific evidence pointing towards evolutionary processes is nothing but a coincidence, put in place by Him.

Being tolerant of people with religious beliefs does not mean treating those beliefs with special deference, or refraining from mocking the more absurd ones among them. Indeed, it is only through the vigorous consideration of the relative merits and explanatory capabilities of different viewpoints that we can further refine our understanding of the world. The sad thing is that there are some people who never get a fair shot at it because those in power choose to give them a deeply inadequate initiation into the teaching of science.

Climate action withdrawn

The Government of British Columbia has suddenly decided to retract my Climate Action Dividend (discussed here before). Previously, they had decided to issue them to anyone who filed a provincial tax return in 2006 or 2007. Now, they are being retracted from everyone who was not a resident of BC as of December 31st, 2007. This strikes me as rather poor planning on their part. The administrative costs of re-collecting the money will form a deadweight loss, and the government will henceforth have less credibility when issuing credits of this kind.

I suppose I will need to pack up and return my compact fluorescent bulbs, returning the inefficient incandescent ones to the sockets, remove the weather stripping from my doors and windows, switch back to my old and inefficient hot water system, swap out my low-flow showerhead, partially deflate the tires on my vehicle, and rip out my new crawl space insulation… Actually, I probably directed the money towards paying down student loans.

This can be dubbed the “Oh, wait. You are probably not going to vote in the next BC election, are you?” retraction.

A supercomputer on every desk

One product of globalization and technological advance is the amplification of the ‘pygmy and giant’ phenomenon. On measures like wealth or fame, the world is probably more unequal than ever before. There are faces that would probably be recognized by a significant majority of those alive on Earth – probably a situation that has only existed for a few decades at most.

At the same time, technology is sometimes a great equalizer. For instance, the world wide web lets virtually anyone with literacy and moderate wealth speak to a worldwide audience. The range of capabilities is also narrowing in other areas. For example, Wal-Mart supposedly has about 583 terabytes of sales and inventory data stored at its headquarters. That sounds impressive until I remember the 1 terabyte drive sitting on my desk. It cost about three days worth of after-tax pay and serves the major purpose of protecting my data from the failure of the disk in my main computer. At a moderate personal expense, I have 0.17% of Wal-Mart’s storage capacity.

The amount of computing power you can get per dollar (or per watt of electricity), continues to increase dramatically. For the price of a sports car, you can build yourself a supercomputer. It is interesting to speculate upon what the democratization of computing power will lead to. Will it just mean increasingly realistic games and ever-more-bloated word processors, or will some genuinely game-changing applications emerge? The fact that someone can host a webpage like this for under $40 a year suggests the potential importance of this confluence in technology, economics, and innovation.

European Emission Trading Scheme primer

This document – produced by the World Wildlife Fund – provides a good concise overview of the Emissions Trading Scheme being used to reduce greenhouse gas emissions in the European Union.

In addition to outlining the basic design of the system, the document describes some of the errors of implementation that have occurred. The biggest of those were probably the over-allocation of permits and their free distribution, as opposed to auctioning. Together, these sharply reduced the effectiveness of the system during its first phase of operations. Hopefully, lessons learned during this period will help to make future emission trading schemes work more efficiently and equitably.