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Arguing in My Spare Time, January, 2001 -

Title DateStarts WithEnds With
Halberstam's Law01-02

recessionary tendencies can usually be effectively treated with cheap, over-the-counter medication: cut interest rates a couple of percentage points, provide plenty of liquidity, and call me in the morning.

-- Paul Krugman, "We're not Japan," N.Y. Times, Dec. 27, 2000

Krugman and his cohorts believe that it will be easy for the United States to avoid a severe economic slump. They are telling us not to worry about flying into turbulence, because Captain Greenspan is in the cockpit and in control. I just hope that Bush's economic team does not wind up like Chuck Nolan, drenched and sputtering, clinging to a raft for dear life.
Paradox of Profits01-15

The executives of Yahoo! appear to be dusting off their copies of "Information Rules." Their challenge, as Shapiro and Varian could have warned them, is to come up with strategies for charging for content that can be distributed at essentially zero marginal cost.

This model of corporate behavior creates the paradox of profits. If that model is valid, then we may see that the harder companies try individually to increase profits, the weaker will be the economy and the lower will be profits as a whole.
The Real Meaning of the Internet Economy01-23

The February 2001 issue of FastCompany contains an interview with Marc Andreessen. The magazine asked the former Netscape founder what he believes to be true about the Internet economy, given that the deflation of the bubble has exposed a number of fallacies.

However, the economic meaning of the Internet is not that it provides a mechanism for creating instant cube farms. I believe that the economic meaning of the Internet is that it allows some of us to leave cube farms for smaller companies.
The Sour Spot02-05

Last year, the Palm-thingy industry sold 3.5 million personal information managers, handheld devices, digital organizers, or whatever they are calling them nowadays. I am not impressed. The adoption pattern is slow and the demographic base is narrow.

Laptops will stay. People want the ability to take work and/or entertainment with them on a plane, and that means having a lot of local storage and processing power. But the Palm-thingys, with neither reliable local storage nor outstanding communication functions, will go.
A Fad Ap-peers02-16

Not only am I without a Palm Pilot. I never used Napster.

The conditions that are necessary to enable P2P to achieve its potential also will be sufficient to make it obsolete.
The Club Vs. the Silo02-26

The Americans will always do the right thing. . .after they've exhausted all the alternatives.

--Winston Churchill

Online content providers are trapped in the offline metaphor of a magazine, which is a separate silo funded by a combination of subscriptions and advertising. When they have exhausted the alternatives associated with the silo model, perhaps they will come around to the idea of a club.
Blinder, Murphy, and Hubbard03-03Alan Blinder, in his classic book, "Hard Heads, Soft Hearts," coined the phrase "Murphy's Law of Economic Policy." The gist of this law is that politicians embrace tenuous and controversial economic hypotheses while ignoring well-established propositions about which there is consensus within the economics profession. I would hate to think that the effects of the Blinder-Murphy law are so strong that in order to be appointed to an economic policy position one has to assert something as ridiculous as suggesting that the Clinton tax increase discouraged entrepreneurship by a significant amount. I think I'd sooner become an Amway distributor.
Krugman and the Great Blowfish03-06Paul Krugman, whose New York Times column makes him the de facto spokesman for the economics profession, is terribly worked up about President Bush's tax cut. It is as though the tax cut is Moby Dick, and Krugman is Captain Ahab. I would like to see someone who speaks consistently for the economics profession, even though on occasion this may embarrass the Democratic Party. Krugman is going about it the other way around.
Invest Wisely03-12One of the more striking ads on this year's Super Bowl was from E*Trade. It was disingenuous on many levels. I cannot promise that this strategy will prove to be optimal. However, it is a strategy that would be comfortable for most economists. Even though it is not very comfortable for E*Trade.
Woodheads03-14...rationality is an assumption I make about other people. I know myself well enough to allow for the consequences of my own irrationality. But for the vast mass of my fellow humans, about whom I know very little, rationality is the best predictive assumption available.

--David Friedman, Hidden Order: The Economics of Everyday Life, p. 5

All of us are woodheads in some aspects of our economic lives. However, with the possible exception of the stock market, my tendency is to view woodhead behavior as having relatively uninteresting consequences overall.
Cruel Paternalism03-22Suppose that a private corporation invests resources in projects that address a critical social problem. Which is the appropriate public policy toward that corporation?

  • (a) benign neglect
  • (b) confiscation of the corporation's assets
  • For a compassionate libertarian, it warms the heart to see companies earning profits from investments in things like energy production and research on AIDS therapy. Cruel paternalists find such profits appalling. If cruel paternalists get their way, they will control the allocation of energy and AIDS drugs. Too bad there will not be anything to allocate.
    Data Deposit Boxes03-27This is the first of three essays that speculate on Microsoft's Internet strategy, aka its ".Net initiative." Unlike other analyses, which are based on Microsoft's announcements, I take the approach of asking, "If I were Microsoft, what would be my strategy?" Therefore, I predict that Microsoft will try to foster the use of data deposit boxes. My guess is that they will have better luck getting consumers to adopt the concept if Microsoft works in co-operation with banks.
    Willie Sutton and the Leaky Buckets04-11Beginning with President Roosevelt's New Deal, our government gave middle-income citizens a stake in policies that help the poor. You would create a broad-based program, such as social security, that would collect most of its taxes and pay most of its benefits to middle-income taxpayers, with some spillover benefits to low-income citizens. Today, the case for this type of social contract is not very compelling. The possibility of a new social contract provides some perspective on the debate over tax cuts. President Bush's opponents are arguing that smaller government and smaller taxes necessarily will be worse for the poor. However, it is not clear that this must be the case. Taxing the rich to fund expanded middle-class programs under the old social contract may be less progressive than allowing them to use their money to engage in "venture philanthropy" under a new social contract.
    Brick and Mortarboards04-17Recently, I toured two institutions of higher learning. In both cases, what struck me was the outlandishness of the physical plant. The auditoriums, student lounges, dining areas, and fitness facilities exceeded those of large luxury hotels. The office space would have accomodated a corporation several times the size of the faculty. As students and faculty increase their external interactions, administrators may become uneasy. They might experience the ongoing changes as a loss of control. As their institutions become more fluid, they may yearn for something solid and concrete. Like more buildings.
    Bandwidth Utopia05-18Fewer Phones, Dumber Terminals, Smarter Attention Sentries "shopping alerts" and "stock market alerts" are never going to be billion-dollar industries.
    Arithmetic in a Whine05-27In 1970, a few years before the Arab oil embargo and subsequent energy shortage (and about five years before Zevon's song appeared), the price of gasoline was 36 cents a gallon. the only rational economic perspective on the increase in gasoline prices over the past year is to treat it as a minimal-to-non event. If this is what passes for a crisis, then people really are desperate for an excuse to whine.
    Explaining Markets to Californians06-05Californians seem to have difficulty grasping the concept of a market when it comes to energy. I thought it might be useful to explain it in terms of something they understand. This fairy tale should help. By taking the economist's suggestions, Texas eliminated blackouts and kept its state budget in balance. Everyone lived happily ever after. Just like in the movies.
    A Meditation on Innovation 06-20Innovation seems to be the most important force in the economy today. This may not have been true in the past. Even if innovation has always been important, this probably is more obvious today than was the case earlier in history. However, ultimately, the rate of innovation cannot continue to increase unless the processes for filtering, adopting, and discarding technologies can be improved significantly. Thus, although economic growth can continue, it is unlikely to accelerate exponentially, as it apparently has until now.