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One of the "remedies" being proposed by the more militant anti-Microsoft litigants is that Microsoft be forced to market a new version of its operating system, as this story indicates.

As part of their proposed sanctions against Microsoft, the states have told Kollar-Kotelly that she should order the company to offer a stripped-down version of Windows, without any additional features such as its Internet Explorer browser.

I cannot wait to see the product planning meeting for this new operating system. You will go through a list of thousands of features, and for each one we will need a vote from all of the parties at the anti-trust suit to determine whether the feature belongs or does not belong in the new product.

Discussion Question. Assume that it is technically feasible to produce a stripped-down version of Windows. Would such a system find a ready market, or would further "remedies" be required to achieve the goals of Microsoft's opponents?

The movie industry has joined the fight to ban technology that has the potential to undermine copyright enforcement. As Dan Gillmor puts it,

If the business people who rule the entertainment industry had been as powerful 25 years ago as they are today, you'd be breaking the law if you set your videocassette recorder to tape your favorite Olympic event for later viewing. The VCR, assuming the entertainment industry would have allowed a manufacturer to sell it, would not have a fast-forward button because it would let you skip through the commercials without viewing them.

Discussion Question. Do you think that banning technologies such as personal videorecorders will help or hurt the U.S. retain its market leadership in the entertainment industry?

In a long article in Strategy+Business, authors C.K. Prahalad and Stuart L. Hart argue that corporations should pay attention to opportunities in the poorest nations. They point out that fewer than 100 million people have per-capita incomes of $20,000 or more, and only another 1.5 billion people have per-capita incomes of $1500 to $20,000.

The authors point out that there are political challenges that companies must meet.

Empowering the poor threatens the existing power structure. Local opposition can emerge very quickly...To overcome [these] problems, multi-national coporations must build a local base of political support...

Given the difficulty and complexity of constructing business models dependent on relationships with national or central governments (e.g., large infrastructure development), we envision more alliances at the local and regional level. To succeed in such alliances, MNC managers must learn to work with people who may not have the same agenda or the same educational and economic background as they do...

MNCs accustomed to Tier 1 markets think in terms of capital intensity and labor productivity. Exactly the opposite logic applies in Tier 4. Given the vast number of people at the bottom of the pyramid, the production and distribution approach must provide jobs for many...

Discussion Question. Given the nature of the challenges, are smaller companies actually better suited than large multinational enterprises to do business in poor countries?

To no one's surprise, it did not help the music industry to shut down Napster.

The music industry's attempts to replace Napster and other pirate services with legitimate music downloads have failed, according to a new report.

Maybe they should look into Lawrence Lessig's idea for a copyright commons (post 75, below).

Discussion Question. The music industry says that it is only defending the ability of musicians to get paid. Do you buy their argument?

According to this column in techcentralstation, a recent forum of the New America Foundation came to the same conclusion that I did in post 71, below, that legacy charters are an obstacle to broadband deployment.

New American Foundation Markle Fellow James Snider... advocates the creative destruction of the old copper wire phone to make way for faster fiber lines and the old line broadcasting networks to make way for new wireless technologies.

Unfortunately, both the old phone and the old broadcasting networks, he noted, are too politically well protected.

Discussion Question. Which body do you think is more likely to overcome political influence and promote a regulatory architecture for phone service and spectrum that is in the public interest: the FCC or Congress?

Lawrence Lessig thinks that copyright law is too rigid, so he plans to create a competing service, called Creative Commons (creativecommons.org, under construction), according to this story in SF Gate.

An artist might, for example, agree to give away a work as long as no one is making money on it but include a provision requiring payments on a sliding scale if it's sold...

an MP3 song or a document or any other intellectual property would contain a special machine-readable tag that specifies the exact licensing terms approved by its creator.

I am not a lawyer, but this appears to me to be an attempt to replace a generic copyright with a contractual license. Negotiating such licenses on a case-by-case basis would consume too many resources. Lessig's idea, as I understand it, is to create licenses that are generic enough to be interpreted by a computer. However, these licenses also would be flexible enough to encourage re-use of creative work, rather than constituting the barrier to re-use that current copyright law provides.

To me, this sounds like an attempt to create a private-sector alternative to compete with a government function. If it works, it could start a very interesting trend.

Discussion Question. Would these contracts be particularly difficult to enforce when the parties live in different countries?

Is the current rate of immigration good for America? Both sides of the issue are presented in this American Enterprise Institute debate. Pat Buchanan says,

Harvard economist George Borjas has found no net economic benefit from mass migration from the Third World. In his study, the added costs of schooling, health care, welfare, prisons, plus the added pressure on land, water, and power resources, exceeded the taxes that immigrants pay.

On the other hand, Ben Wattenberg says,

If America doesn’t continue to take in immigrants, it won’t continue to grow in the long run. If the Europeans and Japanese don’t start to accept more immigrants they will evaporate. Who will empty the bedpans in Italy’s retirement homes?

Rhetoric aside, there is widespread agreement about some important facts, which can be found in this February 6 brief from the Census Bureau. For example,

• from 1990 to 2000 the U.S. population increased by 13 percent compared with 2.5 percent for other more-developed countries combined.
• In 2000, a majority of children under the age of five lived in less-developed countries.
• Between 2000 and 2025, the population of the less-developed countries is expected to increase by 35 percent, the population of the U.S. is expected to increase by 23 percent, and the population of the remaining more-developed countries is expected to remain flat.
• By 2025, the elderly population in the United States will have increased by nearly 80 percent, with only a 15 percent increase in working-age adults. (Folks, this is the social security crisis, and as I have pointed out, no politician's lock-box or financial gimmick is going to change it.)

Discussion Question. The quote from Buchanan implies that we can value immigrants according to whether or not the taxes they pay cover the government services they require. Even if you accept this approach, is it not likely to overstate the negatives of immigration, because as time passes the immigrants and their families are likely to pay more taxes and require fewer social services?

With the U.S. Treasury Secretary and a leading Senator talking about growing up without indoor plumbing, and with the Davos World Economic Forum wringing its hands over uneven economic progress, I decided it was time to look up some analysis of the causes of differences in economic growth around the world. Authors Richard Roll and John Talbott attempted to use "event studies" to sort out the causal relationship between political freedom and economic prosperity. They reported,

When countries undertake a democratic change such as deposing a dictator, they enjoy a dramatic spurt in economic growth, which persists for at least two decades. In contrast, an anti-democratic event is followed by a reduction in growth.

Discussion Question. Is China an exception to the rule that political freedom is required for economic growth?

Reading this report by Morgan Stanley's Steve Roach on the World Economic Forum (known as "Davos" but this year held in New York), it now seems that the strongest anti-globalization protest took place inside the conference.

The verdict, in my mind, went very much against...the survival of globalization in its current form...

the next strain of globalization seems likely to be accompanied by more governmental intrusion for America than was the case in the 1980s and 1990s.

Reading the entire commentary, what I hear the Davos folks saying is,

1. America's relatively free-wheeling capitalism has been successful.
2. Europe and Japan are hamstrung by government intervention and resistance to change.
3. The underdeveloped world is even more resistant to change and failing even worse.
4. Therefore, what we need is a compromise. Other countries need to be more flexible, and U.S. needs to be more regulated.

I can follow the argument all the way up to the fourth point, but there I'm lost.

Discussion Question. If flexibility and dynamism are the keys to economic growth, how would it help the world for the U.S. to become less flexible and dynamic?

David Isenberg and Dave Weinberger wrote a manifesto called The Paradox of the Best Network. They suggest that private markets will not provide the best communications network. They say that the best communications network is a "stupid" network, meaning one that is not designed optimally for any particular application, such as voice or television. Like the Internet, the network moves packets of information, and leaves it to the devices on the edge of the network to interpret the packets.

Arguably, building the best network is a Public Good. It will boost the economy, open global markets, and make us better informed citizens, customers and business people. So, perhaps we should let the government do it. Perhaps we should insist that the government do it.

But governments tend to make mistakes. Big governments tend to make big, costly, persistent mistakes. We do not want government to lock us into particular technologies or certain ways of doing things, no matter if they seem to be the most promising technologies and methods today.

...we are stuck between the Scylla of big government and the Charybdis of free market dynamics. We need to find wise ways to proceed. If we don’t, telephone company lobbyists will write the next chapters of the communications story.

In my view, Isenberg and Weinberger have made a case that the best network would be good for the public. However, they have not made the case that the best communication network is a public good, in the economic sense of the term. In economics, a public good is a good which can be enjoyed by people who do not pay for it. As a result, the tendency will be for that good to be under-supplied.

Charging people for Internet connectivity is not a problem. Andrew Odlyzko pointed out in Content is not King that people in fact pay more for connectivity than for content. I do not buy the public good argument.

I am more sympathetic to the argument that the government has granted monopoly franchises unwisely. Local phone companies are monopolies. Cable companies are monopolies. Spectrum is parceled out to monopolies. Each of these monopolies was chartered to provide a specific service. The monopoly charters run directly counter to the ideal of the stupid network.

The challenge for government is how to undo the past granting of monopoly charters.

• Do you tell the monopolies that they are now free to offer pure connectivity? So far, the government seems to say "yes" to telephone and cable companies but "no" to most spectrum owners, particularly broadcasters. Would changing the charters provide sufficient market stimulus to get the current monopolies to head toward the most efficient solution for providing pure connectivity?
• Instead, do you confiscate the assets of the monopolies, such as the phone companies' wires and the broadcasters' spectrum licenses, and make these assets available to any company that wants to use them for pure connectivity? If you confiscate assets, how much compensation, if any, do you offer existing owners?

In my view, the "public good" argument is misleading. The policy issue is what to do about the legacy of monopoly charters that were granted for specific services.

Discussion Question. It also is argued that connecting certain classes of people to the Internet (rural residents, or poor people) is a public good. Is this valid, given the economic definition of public goods?