Whimsley

Why Globalization Works: Notes Part 1

This is part one of some notes taken while reading Why Globalization Works by Martin Wolf, and it covers parts I and II of the book. I’m reading it because it is a well-respected book putting the case in favour of globalization, a project I am in general opposed to (at least the way globalization is usually defined).  It is a “brilliant book” (Lawrence Summers, President, Harvard University), a “devastating intellectual critique of the opponents of globalization” (Mervyn King, Governor of the Bank of England), and “a definitive analysis” (Kenneth Rogoff, Harvard University). Whether I’ll get around to part two of these notes is open to question.

                                                                                          * * *

Every academic discipline has its own way of putting itself at the centre of the world. Chemists point out that everything around us and inside us is made of chemicals. Physicists say that cosmology asks the only questions worth answering. Literary theorists say that there is nothing outside the text, and the interpreters of texts (ie themselves) are therefore the ones who bring meaning to the world. The economists’ version of this conceit is to claim that markets are responsible for all the good in the world. It is a conceit that Martin Wolf indulges in the early chapters of Why Globalization Works, and it shapes his argument in the rest of the book, so it is worth inspecting.

Wolf overreaches when setting out his claims, both in terms of what a market is and in terms of its centrality in the story of human progress.

For most of us, the market is that part of the capitalist system that involves commercial exchange. Such a definition involves two limitations. First, it defines “the market” in the sense that we usually use it, as part of capitalism: people have had markets for thousands of years, and yet when Adam Smith wrote about the wealth of nations it was not these markets that he was writing about. Second, it emphasizes that modern capitalist societies are many faceted, and some of these facets --- political democracy, the modern state, scientific research, and portions of culture, are nevertheless largely outside “the market”.

Wolf traces the origins of market-based wealth production back before the industrial revolution and the founding of capitalism, to a thousand years ago. He claims that we are living in “the millennium of the market” (p. 43) and as evidence of this points to the fact that population and economic growth started well before 1800. Yet correlation is not causation, and the existence (p 41) of commercial activity in China during the Sung dynasty (960 – 1279) does not demonstrate that markets have driven progress. Perhaps this is splitting hairs – the book is about the modern age after all – but I don’t think so. Wolf is setting the stage for an argument that an expansion of global markets is what we need, and if the stage is built on rickety foundations that argument cannot hold. There is little in his argument about “the millennium of the market” that is convincing.

The second way in which Wolf overreaches is of more immediately obvious importance. In talking about the role of the state in liberal democracies, Wolf conflates several meanings of “markets”. As I said above, to observer that we live in a capitalist society does not mean that all elements of our society are capitalist. We also live in a scientific society, a technological society, a cultural society, a welfare-state society and a hierarchical society – do these aspects of the world have a part to play too? What Wolf does in his discussion of market economies is to move back and forward between a narrow meaning of markets (capitalist exchange) and a broader meaning (the entire society of which it is a part), and the result is confusion.

This confusion is most obvious when Wolf discusses opposition to the market (pages 54 to 55). Wolf claims that “The market economy does not merely support its critics, it embraces them”. Here he is defining the market economy broadly enough to include those who oppose the actions of markets, and goes on to assert that markets breed freedom. Yet to look at the history of freedom in western Europe is to see a continual struggle to broaden franchises to include non-property owners, women, people of colour, and so on that was carried out by opponents of the property-owning classes, who would have been quite happy to keep things as they were. The growth of freedoms and rights within the workplace are also the result of countless years of cumulative struggle and pressure from workers. To simply say that “market economies” provide freedoms is insufficient, because Wolf is about to argue that we need to enlarge the scope of private industry, restrict the role of government, and (between the lines) remove bargaining levers that workers and the disenfranchised may have. The modern liberal democracy is the result of a continual pulling and pushing of many forces, of which the market is only one. Its future shape will be determined by the balance of power between all parts of society, not by the market alone. By presenting liberal democracies as “market economies”, as many economists do, Wolf underplays importance of those other forces.

Wolf’s portrayal of history has other lacunae. Repeatedly he defines one of the important roles of the state as providing security of property rights, so that long-term contracts can be made with assurance. Yet historically the role of the state at some crucial points in history has been to redistribute property. The enclosure movement in the early 19^th century was an example of property rules being redefined, people being expelled from what was previously thought of as their property, in order for the land-owning classes to gain more land. This is not “security of property”. The same is apparently happening in modern-day China.

Meanwhile, his view of the market portion of the economy is rose-tinted. He is casual about many market failures (pervasive asymmetric information problems are noted, but “Happily, there are solutions” – p 47). He sees innovation as a function located entirely within the private sphere: “innovation rather than price competition is the central feature of the market process” (p 51), “Innovation then does not come from outside the market. it is hard-wired into capitalism” . In considering these claims it is worth reflecting that some of the biggest innovations of recent years have come from national and international government actions taking place outside the market. The development of the Internet, surely one of the major technological innovations of the last 50 years, is one such: the networking mechanisms, the programming languages, and the web browsers on which it is built were developed largely in the labs of DARPA and the NCSA in the US, CERN in Europe, and AT&T (during the years in which it was a monopoly) in the US. The market may have helped to bring the fruits of the developments to consumers, but it did not make the big innovations. Yet such activities took place within market economies, and so Wolf attributes them to the market.

It is hardly surprising that he concludes that governments need only provide some assurances that business as usual can take place, and the entrepreneurs will innovate. Looking at the post-Soviet economies, one could also argue that if entrepreneurs are to innovate rather than to plunder the resources of their society, they must be prompted, cajoled, bribed, and funded by the state in order to do so.

One final gripe. In these early chapters Wolf lets his lack of respect for anti-globalization arguments come to the fore, and it doesn’t help his case. He dismisses the protestors as “spoiled children” (p 10). He quotes (p55) a passage from Naomi Klein’s No Logo (one that was also quoted in The Economist’s review of the book) as evidence that she indulges in “paranoid fantasies”. The quote in question starts in mid sentence, and the implied meaning is directly opposed to the actual meaning in Klein’s book, as she pointed out to The Economist when it first published the quotation. Elsewhere (p 11) he quotes a banner from a protest march “replace capitalism with something nicer” as an example of something that is not “the route to a tolerable future” --- as if a banner ever captures deep or subtle thoughts. Banners may be simple, but arguing against banners in a 400 page book is also. This is not honest argument.

In short, while setting up his argument for the remainder of the book, Martin Wolf paints a picture of the world that is undeniably broad-ranging and widely read, but which remains shallow and distorted. The positive qualities of innovation and freedom that he associates with markets are mainly qualities of modern liberal democracies as a whole, and are qualities with many diverse sources. The early chapters of his book are a statement of his point of view, and interesting as such, but they are not even handed and they are not convincing.

 

Update: Part II is now posted. 

The Evolution of Top Incomes

Yet more from Mark Thoma, who seems to collect interesting information like I collect  collecty things.  He posts a series of graphs from the latest Piketty and Saez paper on trends in incomes -- in this case particularly incomes at the very top. In short, the income share of the top 1% took a slight dip between 2000 and 2002 but it looks like a brief post-dot-com interruption in the general trend of increasing inequality starting in the 1970s.

This paper summarizes the main findings of the recent studies that have constructed top income and wealth shares series over the century for a number of countries using tax statistics. Most countries experience a dramatic drop in top income shares in the first part of the century due to a precipitous drop in large wealth holdings during the wars and depression shocks. Top income shares do not recover in the immediate post war decades. However, over the last 30 years, top income shares have increased substantially in English speaking countries but not at all in continental Europe countries or Japan. This increase is due to an unprecedented surge in top wage incomes starting in the 1970s and accelerating in the 1990s.

Oddly, the trend seems to be limited to English speaking countries. Why on earth would that be? There are some speculations both at Thoma's Economist's View and at Brad DeLong's site.

Link: Economist's View: The Evolution of Top Incomes.

Which matters more, the income of the average or the average income?

Which matters more, the income of the average citizen or the average income of citizens?

Via Brad DeLong and Ruy Teixeira, the story of the American economy in the last five years is summarized in one page by the Economic Policy Institute.

Their headlines are:

1. Profits are up, but the wages and the incomes of average Americans are down.
2. More and more people are deeper and deeper in debt.
3. Job creation has not kept up with population growth, and the employment rate has fallen sharply.
4. Poverty is on the rise.
5. Rising health care costs are eroding families' already declining income.

An economy is a big thing, and there are a lot of stories in it, some happy and some sad. Productivity, debt, growth, uncertainty, technological advances, poverty, millionaires. Averages give only a very limited picture, and how you evaluate the overall picture depends on which stories you think are important.

Me, I think the income of average Americans is more important than the average income of Americans.

No level playing field in football's globalisation

From The Guardian, a piece on how the free market is even screwing up football/soccer, or at least some parts of it, and how FIFA may provide an example of how to make things better for poor countries.

The forces of globalisation are hindering the chances of another Derby or Nottingham Forest pipping Chelsea or Manchester United for the league title as they did in the 70s but are likely to make this summer's World Cup more competitive, according to a World Bank economist.

An in-depth study of the free market in football confirms what Premiership fans have long suspected: the influx of overseas stars has improved skill levels but at the expense of growing inequality between the elite clubs and the rest.

 

Yet national teams of poor countries have benefited from mobility of labour says an article by Branko Milanovic in the latest Review of International Political Economy. Since the national teams of rich countries cannot buy the best in the way that their clubs can, when a Didier Drogba returns home from Chelsea, the Ivory Coast team gains from his experience.

Using basic economic theory, Milanovic came up with the hypothesis that putting a good player with other good players would lead to all of them becoming even better players - or increasing returns, in the jargon of the dismal science. Given that some clubs are richer than others, he says you would expect a small group of clubs to dominate.

At club level, this is precisely what has happened. A study of the Champions League (formerly the European Cup) showed that there used to be a far better chance of an unknown or unfashionable club making it to the last eight than now. In the five years from 1958 to 1962, 30 different teams made it to the quarter finals (out of a possible maximum of 40), but between 1998 and 2002 this had fallen to 22.

A separate study of Serie A - Italy's equivalent of the Premiership - told a similar story. From the 1960s to the 1990s, there used to be three or four clubs on average from the poorer regions of the south. In 2002, for the first time since the second world war, there was not a single club from the south in Serie A.

Sepp Blatter, the president of Fifa, has condemned the greed of the modern game and, in words that could have been uttered by an anti-globalisation protester, accused Europe's top clubs of conducting themselves increasingly as "neo-colonialists" indulging in "economic rape". At the international level, Fifa has maintained limits on the inequality generated by the "leg drain", preventing rich countries from buying the national teams of poor countries. As a result, poor countries are able to capture the benefits of higher skills acquired by their players abroad when they temporarily return home to play for their national squads.

Adopting Fifa's approach to the "brain drain" of skilled workers, the paper says, might mean that the doctors, nurses, teachers and scientists who emigrate to the west should be obliged to spend one year in five back in their home country.

Milanovic says the ability of poor countries to hold on to their best players has made the World Cup more open. In the late 1970s and 1980s it was highly unusual for a newcomer to make it to the last eight of the competition but each tournament since has thrown up at least of couple of newcomers - including Cameroon, Nigeria and Turkey - who have made life difficult for fancied teams. Matches, the economist adds, are also getting tighter, suggesting some nail-biting nights for England fans this summer as the spectre of the dreaded penalty shoot-out looms.

· Globalisation and goals: does Soccer show the way? Branko Milanovic; Review of International Political Economy; www.tandf.co.uk

Learning By Drinking

An article I am working on, hoping to publish somewhere...

Once upon a time, 35 years ago to be precise, the British beer industry was dominated by five big breweries. It had been that way for a long time, and it didn’t look like changing: fifty years had passed since any new ale breweries had been founded. Sure, some people complained about the poor quality of beer, but they were probably just dreaming about a non-existent golden age and grumbling about progress. After all, if cask beers from small breweries were really better than the brand-name, large-scale production of the big brewers, why had the small breweries gone out of business? If people really wanted a different kind of beer, surely companies would be competing to provide it for them?

But then a strange thing happened. As many people know, some of these grumblers got together to form the Campaign for Real Ale (CAMRA). CAMRA held local beer festivals, published an annual Good Beer Guide, and local CAMRA groups published newsletters that helped to keep information as well as ale flowing. And they didn’t stop there: CAMRA campaigned for less restrictive pub licensing laws and selling practices, against takeovers of smaller breweries, and against deceptive advertising. CAMRA tries all kinds of tactics: “Lively and sometimes controversial campaigns are mounted at local level, with backup from headquarters. MPs, councillors, trade unions, licensees and workers might be involved. Tactics we have used include petitions, threatened boycotts, publicity stunts, marches, laying wreaths outside closed breweries and so forth.”

CAMRA now boasts a membership of 75,000. Three hundred new breweries operate in the UK. The Good Beer Guide claims that “In spite of the best efforts of the global brewers who dominate British brewing, there is greater choice today than at any time since the … early 1970s.” CAMRA has changed the British beer landscape. It turns out that there was a demand for a different beer after all.

*  * *

Why write about a thirty-year old British beer-drinkers organization? Because CAMRA’s success has a lot to tell us about the world we inhabit as consumers. It shines a light on one of the basic questions about our society: does a free market economy really give us what we want? Many areas of our consuming lives are dominated by a few big companies and their heavily advertised brands, just like the market for beer in Britain in 1970. And just like CAMRA, we can ask the question, does their success mean that we really like them?

Another way of asking this question is “who is in charge when it comes to brands?” There are two common answers. Here in the red corner representing the anti-corporate constituency is Naomi Klein, who argued five years ago in No Logo that brands provide a front for “corporate rule” and that we are being pushed around by “Brand bullies”. And over here in the blue corner representing the free-market enthusiasts is The Economist, which claims that “Brands do not rule consumers; consumers rule brands… When we like a brand we manifest our loyalty in cash. If we don’t like it, we walk away. Customers are in charge.”

CAMRA showed that there is a third possibility. Enterprising landlords always had the right to set up “free houses” which could sell beer from any brewer. So although the big breweries made it easier to drink their beer than that of their smaller competitors, it is difficult to argue that beer drinkers were being bullied. On the other hand CAMRA’s success proves that the market was not giving people what they wanted: for many years, the British beer industry really did provide low-quality, albeit predictable, fare and got away with it.

Some free-market enthusiasts would argue that CAMRA is simply the market at work, facilitating the sharing of information needed for the market to work properly. But are activist, volunteer groups setting out to discredit big companies (and with a Trotskyist ex-leader of the Socialist Workers’ Party playing a leading role) needed for markets to work well? If so, we are a far cry from the way that the invisible hand and consumer sovereignty is supposed to work.

So consumers were not being bullied, but they were still trapped by the big breweries. In principle they were in charge, but in order to be in charge you have to have a way to issue orders. Until CAMRA came along something was stopping British beer drinkers from demanding better beer and was keeping them in a bad-beer trap. But what?

The answer matters because although the CAMRA story is interesting—at least, I think it is—it would be interesting only in an anecdotal, “isn’t that odd” kind of way if it was only an exception to the rule. But there are good reasons to believe that the forces at work among British beer drinkers are working in a lot of other areas of our consuming lives. The CAMRA story is a tale of conflict between marketing-driven brand-name companies and smaller suppliers who have to rely on word of mouth for their success. It shows that the success of brands may not be a good thing, and it shows that individual choice and the market may not be enough to get us out of the various traps we find ourselves in.

The answer matters because faith in markets is now so widespread. It is commonplace to hear that if people are eating at McDonald’s while independent restaurants go out of business, or if people are watching American sitcom re-runs while Canadian productions can’t find funding, then—like it or not—this is a reflection of what consumers want. If we liked Canadian-made TV shows we’d watch them without any help from the CRTC. If we really cared about healthy downtowns, we wouldn’t be shopping at Wal-Mart. The argument is used as a verbal cudgel to beat those who argue for government intervention or who protest the global spread of brand-name companies and cultural homogeneity. Even Paul Krugman—New York Times columnist, fierce George Bush critic, and every US liberal’s favourite economist—argues that because “no one forces you to eat at McDonald’s”, anti-globalization activists are hoping that “individuals be prevented from getting what they want”.

* * *

To better understand the CAMRA story we turn to economist George Akerlof. Just before CAMRA was founded he had an insight that explains why markets often fail. Akerlof’s big idea is called “the market for lemons”—lemons as in bad quality cars, not as in the fruit—and it has had a huge impact on economics, winning him the Nobel Prize in 2002. Unlike some other big ideas it has not made the jump into the realm of public discussion. It is time it did so, because it has a lot to say about many of today’s most topical issues, including the conflict between the big brands and smaller vendors.

Akerlof observed that, in many exchanges, buyers cannot tell the quality of what they buy before they buy it, while sellers know the quality of what they are selling. The used car market was his example; when you buy a used car direct from its owner it is hard to tell if it is in good shape or whether the brakes are just about to fail. On the other hand, sellers know how well they have maintained their cars and have a better idea of whether there is anything dodgy under the hood.

In situations like this, where one side knows more than the other, there is a problem of trust. Buyers of used cars must ask themselves the question “if he (or she) wants to sell that car, do I really want to buy it?”

The logic goes like this.

• Buyers will only pay a premium price if they are confident that they will get what they are paying for. If they can’t identify or verify quality then they will not offer top dollar because they know they might be buying a lemon instead (they can’t tell the difference). They don’t trust the seller.
• As buyers will not offer a high price, sellers of good quality used cars will tend to hold on to their vehicles rather than selling them at an unwarranted discount. They are driven out of the market.
• Realizing that sellers with good quality used cars will hold on to them, buyers will further lower the price they are prepared to offer. This drives the sellers of the second-best cars out of the market.
• The spiral continues and the market unravels until the only cars that can be sold are those for which the quality is certain: lemons.

The morals of the story are that markets where trust cannot be established are much less active than they would otherwise be—they are “thin”—and that it is particularly difficult to buy and sell high quality goods when their quality is not easily verified. Even when buyers would be happy to spend money for good quality merchandise, and even when sellers could make some money by providing it, the “lemons problem” means that many potentially beneficial exchanges fail to take place. There is no magic in the market that guarantees success for producers of good things unless they can establish a level of trust in what they are supplying.

But there is more to the lemons problem than this.

In many markets where trust is difficult to establish, there are “nearby” markets where it is less of a problem. The quality of a new car is more easily verifiable than that of a used car, because the seller can offer guarantees, and legally is held to account more than the private seller of a used car. Faced with a choice between a predictable new car and a second hand car that may be a lemon, the good choice is to go with the predictable.

It is not quite so simple, of course, as Akerlof knew very well. The market for lemons is both less than and more than the truth. On one hand, few goods are of completely unknown quality ahead of time: sellers can offer guarantees, and buyers can tease out information in many different ways. Plenty of used cars, even good quality ones, do get bought and sold. But on the other hand, the forces Akerlof identified are present to some extent in almost every market transaction. In fact, many aspects of consumer society are taken up with trying to get around this basic problem of establishing trustworthiness. Establishing trust is not impossible, but it is costly.

* * *

Hidden in the market for lemons is an explanation of why British beer could stay as low-quality for years, and of how CAMRA could give independent producers a chance to sell their products.

The competition between the big breweries and the independents in the UK was really a battle between two ways of establishing trustworthiness and reputation. Brands rely on direct communication to the consumer through large-scale marketing campaigns and an obvious uniformity, while the independents have to rely instead on word of mouth among an educated customer base to build their reputation.

Once the big breweries had tightened their hold on the market, small breweries were faced with an information Catch-22. They lacked a base of well-informed consumers to establish their reputation, and consumers lacked good quality products to be informed about. Consumers were not bullied, but they were trapped. In a market dominated by brands, individual consumer choices were not enough to re-establish a market for independent producers.

What was needed, and what CAMRA provided, was collective action. A group of people who, by banding together, managed to give the market enough of a kick to propel it from one kind of outcome, dominated by brands and low customer information, to another in which better-informed drinkers could make better-informed decisions. CAMRA solved the lemons problem faced by independent breweries.

* * *

Malcolm Gladwell’s hugely successful book The Tipping Point explains how word of mouth works. Gladwell takes his readers to meet a set of “connectors, mavens, and salesmen”. These are people who, because of a gregarious nature, or an inclination to collect information, or a natural persuasive ability, carry information about good and bad products to the rest of us and spark what Gladwell calls “word-of-mouth epidemics”. But powerful as these connectors are, and engaging as Gladwell’s book is, we cannot always trust that individuals will provide the information needed to sustain good products. Word-of-mouth information about a beer, or about a restaurant, or about a new book, requires a certain density of people who know about it to transmit the information to the rest of us, and even though Gladwell shows that a surprisingly small number of people can manage to be a conduit for a lot of information, a critical mass is still needed to reach the “tipping point”. In any particular market left to the vagaries of individual choices there is no guarantee that it will ever be reached.

The market for lemons means that brands can drive out word-of-mouth products as long as they are “good enough” to make the search for reliable information too costly. If a branded product can get a foothold in the market, it takes some customers out of the market for word-of-mouth goods. By doing so, it increases the cost of word-of-mouth information for all consumers and so makes the lemons problem a little worse. The effect is a spiral, with each turn cutting into the word-of-mouth culture that maintains independent producers and adding to the market share of brand-name companies.

In some cases, word of mouth can keep an independent market healthy, but in other cases brands drive word-of-mouth goods to the periphery, where only the most enthusiastic will even hear about them, or even eliminate them all together. The predictability of brand-name goods can literally dumb down the market, even if we continue to make good individual choices. Despite what The Economist says, a victory for brands does not prove a real “preference” by individual consumers. It may simply show that the brand is no so bad that it is worth the effort of finding out about alternatives.

Despite its recent woes, McDonald’s is a brand archetype. McDonald’s restaurants scream predictability, from the identikit restaurant design to the employees’ uniforms and scripted dialogue (“would you like fries with that?”) to the production-line cooking techniques to the global marketing efforts. A tourist in a new city may never have heard of any of the local restaurants, and may not know their quality, but certainly does know what the food will be like at McDonald’s. It may not be great, but it is “good enough”. Food in some tourist areas is notoriously bad because the repeat business needed to establish a reputation for quality is just not there. Restaurants that provide good value cannot find a market for the food they sell. Such areas are prime territory for the guaranteed predictability of the franchise.

Ron Galloway, director of the new film Why Wal-Mart Works & Why That Makes Some People Crazy, claims that "138 million people vote with their feet to go to Wal-Mart. And Americans are pretty smart. And I think Wal-Mart, if Wal-Mart were really doing something genuinely wrong, the American people would be able to figure it out and not go." But it has nothing to do with how smart we are as individuals. Instead, it is simply that in the face of the economies of scale and large-scale marketing, maintaining knowledge about alternatives becomes increasingly difficult.

Once you see how the market for lemons works, less obvious examples are all around. Networking is often a vital step in getting a good job. The ability of “old boys clubs” and networks based on common universities and schools has sustained many an insider group, and outsiders (women, racial minorities) who do not have access to these networks can be excluded, even when the people doing the hiring have no intention to discriminate. It simply makes good sense to choose the known over the unknown. The market for lemons is an argument in favour of affirmative action: even the most well-intentioned hiring procedure that is based on information about the individual can leave us with well-connected but only “good enough” people in good jobs, while potentially excellent candidates without good connections can be left in the cold.

Getting credit to start a company is another area where contacts are important. Investors and banks look for real evidence that a loan can be repaid, and personal recommendations or contacts provide an invaluable source of such evidence. Those from the wrong side of the track looking for a loan to start a company may have to look long and hard, no matter how good their ideas are.

Or how about the market for movies? We have heard a lot about the increased availability of online review sites and other ways of finding information at your fingertips. Such developments are real, but let’s not forget the other side of the story. New technology also allows producers to “open wide” in many theatres simultaneously following a barrage of publicity, so making word of mouth information more difficult to get. This provides a way of promoting a brand-based predictability. The inclusion of bankable stars and the production of sequels are other ways of emphasizing the reliability of the product and cutting into the influence of word of mouth.

Any market where there are “acquired tastes” is vulnerable to being dumbed down by brands. The phrase “acquired tastes” suggests fine wines and smelly cheeses, but CAMRA shows that the phrase applies just as much to cheaper products. Groups of enthusiasts help to keep such areas alive, and play a fundamental role in maintaining variety. At the high end, gourmet groups may manage to maintain a flow of information so that independent producers (“boutique” products) can still find a niche without being as militant as CAMRA. At the other end of the market, it is unlikely at this stage that a real market for locally-produced soft drinks can be re-established: the cheapness of the mass-produced product means that any independent variant must be substantially better to make it worth searching out.

Seen in this light, collective action among consumers becomes all the more important. And brand-name companies are aware of this. As the success of consumer campaigns such as those against Nike and Nestlé have shown, people do take information into account when they make their decisions, as long as that information is available. But it requires collective action to make this information available to individual consumers, and to make it part of how we decide what to buy and what not to buy.

If we continue to trust more and more areas of society to the supposed power of individual consumer choice, there is no guarantee that we will end up in a good place. The success of brand-name companies is no evidence of popularity. There continues to be a need for people to band together. Such efforts can have an effect, as CAMRA has done, and make us collectively smarter.

DVD Dilemma

There is an interesting dynamic to the  battle over the next-generation of DVDs. In one corner there is Microsoft, Toshiba, Intel and some others supporting the HD-DVD format. In the other is Sony and most of the Hollywood studios, supporting Blu-ray.

It is clearly in the interests of all the companies to agree on one standard.

"The damage the industry does to itself by not choosing a format is enormous," said Brad Anderson, vice chairman and chief executive officer of Best Buy, one of the largest U.S. consumer electronics and appliances retail chains. "Two incompatible formats is as much a nightmare as you can make for consumers," he added.

And yet they can't.

"There's no question that a format war is not a good idea but I don't see what we can do about it except push on and convince everybody that a revolutionary high-definition disc (Blu-ray) is better than an evolutionary high-definition disc (HD-DVD)," [a Sony spokesperson] said during a news conference at the Consumer Electronics Show in Las Vegas.

Ted Schadler of Forrester Research says that for whoever wins it is a pyrrhic victory "Eventually they both lose." The two sides are stuck in a prisoner's dilemma, where giving way is the worst outcome, so they may end up with a merely kind-of-bad outcome instead.

Usually this is the kind of thing that is good for customers, because competition among companies, after all, is a good thing. But in this case it is not so clear that competition is a good thing, because the other side of the story is one of increasing returns. There is a lot to be gained for consumers in having a single standard. We'd rather all keyboards use QWERTY than have a superflous choice of keyboard layouts, and the same goes for DVD formats. Who wants to buy both HD-DVD and Blu-ray to play high-definition movies and next-generation games? In the absence of a clear standard, it is quite possible that consumers will just stay away in droves.

That could be very bad for the DVD-makers because, as Bill Gates said in an interview with the Daily Princetonian college newspaper last year "this is the last physical format there will ever be. Everything's going to be streamed directly or on a hard disk."

So what is good for consumers here? Probably an agree-upon standard and competition of other features based on that standard. In the format area at least, competition is not a good thing, but it is not clear that Microsoft, Sony and the rest can find a way out of their dilemma.

Link: Fight between Blu-ray, HD-DVD bad for everyone | InfoWorld | News | 2006-01-09 | By Dan Nystedt and Martyn Williams, IDG News Service.

Link: Guardian Unlimited Technology | Technology | Two tribes go to war.

Mark Steyn is stupid

I'd just like to say that Mark Steyn's article The war on terror is the real women's issue in Maclean's is the worst piece of crap I've read in a long time. I think every single line has something wrong with it - a gratuitous insult, a twisted argument, a non sequitur, or just something plain stupid.

I guess it's one way to get attention, but it is adolescent through and through.

Thanks to This Mag for raising my blood pressure.

Stalkerazzi

Russell Smith in The Globe and Mail writes about California's new law in California puts lens rangers on notice. Here's what the new law says

The statute forbids two types of invasion of private space: one literal, one virtual. It makes it an offence to take pictures or sound recordings of anyone "engaging in a personal or familial activity and the physical invasion occurs in a manner that is offensive to a reasonable person," and it also forbids doing so to a person "engaging in a personal or familial activity under circumstances in which the plaintiff had a reasonable expectation of privacy, through the use of a visual or auditory enhancing device, regardless of whether there is a physical trespass."

In other words, not only is standing in the subject's way or pushing your camera into her car window unacceptable, but so is using a zoom lens 50 metres away from her bedroom.

Smith notes that "U.S. public reaction to the law is overwhelmingly positive" and is sympathetic himself. But he has reservations...

And yet, and yet . . . the people who are thrilled to see their icons protected from the scum are exactly the same people who gobble up the tabloids. They must be; the numbers don't lie. The only way a magazine can offer $400,000 (U.S.) for the first photo of Madonna's baby is to have millions of eager readers.

Those readers -- that type of reader -- seem to form the bulk of the American population right now. It's the same population that elects Hollywood celebrities to positions in government, the same population that has grown to know or think it knows Lindsay Lohan through her pictures in magazines, and feels sympathy for her when she is assaulted or threatened or humiliated.

It's a bit like being an animal-lover and eating chicken: We're not opposed to consuming the final product, we just don't want to know how it's produced.

Smith is right, but it reads like he thinks there is a contradiction here and there is none (see previous post for another example). There are two separate choices - one is whether to read the Enquirer (given that it is available) and the other is whether to approve of its methods. Given most people can only actually act on one of the choices -- whether to read the Enquirer -- it is hardly surprising that the market reflects that preference but not the other.  That's why the whole idea that the market responds to our preferences is a half-truth at best -- it can only respond to a few of those preferences: those that can be expressed by an exchange of money.

Not that I read the tabloids of course. I've just heard about them, that's all.

FootBinding: Search for the Three Inch Golden Lotus

So the other day LS was watching FootBinding: Search for the Three Inch Golden Lotus.  Part of the show was about whether footbinding was really oppressive, given that the choice to bind was usually made by mother, who had herself been bound.  In particular, "Columbia University Professor Dorothy Ko mounts her show Every Step a Lotus and contends that footbinding was not the tragedy modern thinkers make it out to be"

In Dorothy Ko's book of the show "she contends that footbinding was a reasonable course of action for a woman who lived in a Confucian culture that placed the highest moral value on domesticity, motherhood, and handwork."

There is no contradiction between reasonable courses of action and tragedy. It is quite possible for people to make choices and still be oppressed: what matters is the system of incentives. In this case, the origin of the exploitation is in the value given to bound feet (by a patriarchal culture), not in any coercion to bind: once the right incentives are set, coercion is no longer needed. Given that a woman with bound feet would have a better chance at a stable or prosperous future than one without, it made sense for women to choose to bind their daughters' feet. The cost to the decision was high (and higher, of course, for those of lower status who had no others to do work for them, and for whom the binding process started later, if at all), but not as high as the cost of failing to secure a good marriage.

This idea -- that there can be no exploitation as long as people are given choices -- is present today in a lot of free-market arguments. Why not give children the opportunity to work in sweatshops? It gives them a chance to be better off than they would otherwise be. Or, as Gary Becker argued recently, why not let people sell their internal organs for transplants?

Footbinding is a compellingn example of how oppression is perfectly compatible with individual choice (albeit made by mothers, but with their daughters' best interests at heart).