I'm sorry if I sound mean, cold, bitter and uncaring... I am, so thats how it comes out.

Tuesday, June 13, 2006

Hey I’m Back!

After a long break from Blogging (perusing other hobbies) I’m back and I’m going to try and make this blogging thing regular again. I mean sure, I know that no one reads this but still it’s cathartic for me to get some thoughts out there and it might make a nice record of what I’m thinking and where I am going.

In any case, rather crook over the long weekend decided to pluck an unread tome from my shelf and start reading. So reading through this book called “Heroic Leadership: Best Practices From A 450 Year Old Company That Changed The World” by Chris Lowney.

This guy seems pretty cool. He was a Jesuit who went on to become a MD for JP Morgan. What he does in this book is take lessons from the Jesuits and applies them to the business world to good effect.

I’m up to a section which is talking about how the Jesuits like many companies which experience fast growth were caught in the classic growth squeeze (too much work, not enough good people).

What the Jesuits did was not go out and recruit more and more but rather they made entry into the order even stricter with more intense training. Now this all sounds counter intuitive but you get the punch line that the only problem companies or organisations have is they lack great people in key positions.

With great people, all the other problems you have get solved.

It’s all as simple as that. Great people in key positions.

Wednesday, April 12, 2006

AWB: Scandal? Yes! Inevitable? Unfortunately so…

So everyone is talking about the AWB oil for food scandal. Kind of hard not to, has all those sexy things that people like to talk about, bribes, money, politicians looking like goons. Although I do find it funny that most Australians don’t really care about it.

As an aside to the main point of this, I wonder why many Australians are really pissed off about this? Could it be that they are using that strong guard of apathy or are Australians far more sophisticated in ethics and morality than I have given them credit for in the past..

For those that do care a lot about it here is some food for thought… In all governments, or any entity which holds a large amount of power scandals will happen.

Abe Lincoln (I think it was him, if I misquote sorry) once said to the effect that most people over come hardship, but if you really want to test someone give them power.

Things like bribes and other disreputable activities have to happen for any government to run optimally. We live in a world which is neither black nor white but grey. If you want to sell wheat to any developing or corrupt nation you will get your hands dirty.

There is a saying in poker, if you are never get caught bluffing you aren’t bluffing enough. They have most definitely been caught bluffing (Trying to auto push J6s for the blinds).

As for the collective arse covering that’s going on, well that’s to be expected too. How many people lie to protect their jobs? How many people strategically “don’t recall”?

I’m not saying it shouldn’t be something that is condemned but be under no illusions about honesty in general. Hmmm, me thinks there is more to this honesty thing and I will have to give it more of a ponder and tell you what I think later.

Saturday, March 04, 2006

God save the Ill Mannered Artistic Twerp

If you haven’t head recently there has been a row about playing or not playing God Save the Queen at the opening ceremony of the Commonwealth Games. Here’s a link to prove I’m not making this stuff up.

Personally I’m not too happy about this. Personally I have been trying to be a bit better mannered. It’s going ok, one of those self improvement things. So I’m trying to be better mannered and a bit more respectful. Now I see not playing God Save the Queen as absolute disrespect towards our head of state. Like it or not the Queen is our Head of State. We refer to both State and Federal Governments as the Crown. I feel that as a mark of respect to The Queen we should play her anthem.

Don’t get me wrong I’m not one for Monarchies in general. The only reason why England keeps her is because in the words of Johnny Rotten (from the Sex Pistols) “God save the Queen, because tourists are money”. We don’t get any money from these tourists so we don’t need the monarchy.

However, the reality is she is our head of state, like it or not. So let’s accept that fact of reality rather than substituting our own delusions. Oh and one more thing… to the games organizers STOP MAKING ME LOOK SO BAD IN FRONT OF THE REST OF THE WORLD.

Wednesday, March 01, 2006

IP NoT So Freely

I’m sorry this response has taken so long; I’ve been doing a few other things and thinking a few other thoughts. Well that’s the only apology I’ll give in this post, so now to business. Respective links are here, here and here to previous installments to our saga.

Perspective or Focus?

While I appreciate Not My Real Name’s view that our disagreement is about perspective I don’t entirely agree with it. Yes, I am trained as an economist and yes NMRN is a budding lawyer. While these are two different starting points to analyze things from I don’t see the disagreement as one entirely of perspective. I see it more of focus. NMRN is a budding lawyer, and in my opinion I think he’ll make a good one, so he’s “zoom lenses” is on the law and its respective letters. On the other hand I try to take a wider angle view of things (fish eye lenses). I want to see how things interact with each other, how changing one element of situation changes the results across the situation. So while we may have different perspectives, we also have different lenses attached to our respective cameras. NMRN focusing on the law and yours truly, trying desperately to see bigger game. Neither method is right nor wrong, good nor bad, each only showing it’s superiority given what you want form the analysis.

If you want to use a law, understand a law or get around one, ask a lawyer. If you want to change a law and have an understanding of the effects of that change better ask an economist (a new Beckeresc, game theorist type economist).


Respective Disagreements with what NMRN said


Ok it's best if I deal with this in numbered point.
1) My objective is not economic growth per se; my objective is the progression of the human race. Economic growth is the bed rock on which all our great accomplishments as primates have been founded. Without some degree of economic wealth we would still be banging rocks together and howling at the moon. More on this to come.

2) So lawyers, when thinking about the law don’t think it necessary to look and try to understand the effects of changes in law? In my opinion anyone who has a hand in writing new or amending old laws should have done some study in game theory / mechanism design. I have another name for these two things; I call it structured common sense. If you don’t have the tools to analyze and understand the effects of changes have as a whole YOU HAVE NO BUSINESSS MAKING LAWS! If you do not have access to these tools of analysis your combination of power and ignorance makes you a liability to everyone. Starting out with good intentions will not instantly get you a pass on this blog.

3) Quote “It allows infringment of those rights, but that is not theft. It is best illustrated by those video piracy ads, which say 'Piracy is stealing'. That, unfortunately, is complete rubbish. Piracy is a copyright infringement and subject to economic damages, not a criminal offence as is made out by the media. Small differences, but important. I am the first to admit I am not one to talk about loose use of language and I have been critisised before. However, it is important to see what my perspective is.” While this is an important legal distinction to make perhaps too fine a hair to split in a 30 second ad. Also, while being a legal distinction in my eyes it’s still taking something that not yours, call it what you like.

4) NMRN stands by his assertion that sick people would never have purchased a medicine that made them well at any price. I stand by my assertion that this is a question of PRICE. If anyone has an illness I can assure you that they are in the market for a cure. The question is totally one of price. Would they have purchased if the treatment cost them $10, $1 or 10cents? I think to assume or assert otherwise is defining people as ignorant or stupid rather than poor.

5) NMRN fops off my use of terms like perfect price discrimination but perfect price discrimination is the answer to ALL of the problems here. If drug companies who own the IP could some how ensure that the persons who need the drug, and only those people, were administered the drug and they paid a price just above cost then there would be no issues. However this is not the case the Brazilian government wants to force a license at as yet at an unknown price and manufacture the drug themselves. Given that Brazilian government is ranked at 59 of 146 governments for transparency I can see that anyone having their IP rights forced away form them would not to too crazy of the about the idea.


6) Quote “My further point in response to Dash's post is that, whilst I understand the link between growth and IP protection, there is little examination of the proper balance point.” This is absolutely incorrect. There are extensive theoretical economic models which talk about the optimal length of a patent. Even though I haven’t access to empirical material on this I would assume it exists (econometricians seem to test every bit of theory economists come out with. It’s the stuff PhD’s are made of). Also I don’t quite understand what you mean by “proper” balance point. This would be definitely be a question of opinion, if you buy medicines the

7) Now there is limited protection of IP, it comes in the form of time. If I own a turnip, I have rights to that turnip for that turnips existence. However if I take out a patent on some something I developed how long does that patent last? I don’t have perpetual rights over this do I? That’s the ONLY way you can relax property rights since time is such an objective measure (although Einstein told us otherwise… had to make a joke, sorry).

8) Quote “As another side issue, you are right in terms of FDI going elsewhere when countries don't provide proper legal protection and sound legal institutions. It is interesting that nowadays, least developed countries tend to negotiate at the WTO as a big block, probably for that exact reason.” I doubt it is for this exact reason it’s so they have a group of votes when making treaty decisions. On a practical level this situation is a classical prisoner’s dilemma where there is a much higher incentive for a country to break away from the group. Think about it, if developing countries say as a group “We will enforce IP the way we want”, companies lose out. However this won’t happen. What will happen is that one of these countries will say to the companies “We will enforce IP to protect any investment you make in our country”. So what happens then is you may have several countries in this block defect because they have a whole bunch of FDI poured upon them and their cheap labour pool. The irony is the bigger the block, the bigger the rewards for defecting. Mmmmmm game theory.


Ok that’s my main parries and counters to your intellectual thrusts.

Growth is a path not a destination

Although you do not deliberately represent me as such it feels like I’m being interpreted as someone whose focus is solely on economic growth for its own sake. While I am focused on economic growth I don’t see it as an end but rather as the beginning of a great many things.

We have been discussing basically the trade off between enforcement of IP vs. access to cheap advanced medicine. That to me seems like what this all boils down to. I see IP as essential for not only growth but perhaps the next step in the progression of our society.

The thing is, the concept of IP was and is essential in the development of our society. All of a sudden ideas became excludable (an economic term) allowing them to take on marketable value. This means that you can concentrate resources on finding the answer to a given question, like “How do we cure aids” or “how do we cure cancer”. By allowing the answer to have value, you can devote time, effort and money to the question.

All of this had led us to a state of vast economic wealth. This wealth has allowed us to further invest in both answer questions and developing ourselves enough to ask better questions and get better answers through education.

Economic growth has been the soil out of which these many great things have come to be. Economic growth is not an end but a beginning, one great perpetual beginning. Think about it, the very drugs we are talking about would not have happened without both wealth and protection of the idea. I remember a great piece of wisdom “YOU DO NOT KICK OUT THE LADDER THAT GOT YOU WHERE YOU ARE, PARTICUARLY WHILE YOU ARE STANDING ON IT!”

Quote "Does the greatest economic growth come in the profit flowing to the IP holder due to high drug prices, or the production created when sick people are made well by drugs which have been manufactured contrary to patent rights?"I don't know the answer, but I sure as hell would like to find out.

If you would really like to find out, we can figure this one out together if you like. Doing a quick bit of thinking I have an idea of the methodology used to answer such a question. I don’t have the numbers but I had an idea of what numbers we need.

So if you want we can try and work this out together, just let me know because I already have several ideas on how to work this out. So if you really want to know tell me and we can get to work on thunking this one out.

Tuesday, February 21, 2006

IP, Growth, Strategy or: You say fail to enforce proeprty rights I say theft!

Well this post is going to take a while… It’s in response to a little too and fro between yours truly and Not My Real Name. Link is here have a look if you like or just sit back and marvel at my 1st class thinking crammed into 3rd class writing.

Firstly a caveat: This is not condemning the morality of any decision made by someone. I figure if you do something seen as immoral, like theft, so long as you accept the consequences of it and are ok with it… it’s moral.

Ok so I have a few (many) issues of what NMRN has said. Firstly his first point of it not being theft because the owner of the right is not deprived of anything.

Let me demonstrate with a hypothetical situation. If I break into someone’s car while they sleep, hotwire it (no damage, cause I’m a good thief) drive it 10km’s to buy a pack of smokes and leave $10.00 in the glove box all before they wake up am I guilty of theft?

I haven’t deprived the owner of anything. If anything they are ahead on the transaction since the ATO km rate is $.65 per km. Am I guilty of theft? I believe I am. It is because I have infringed on the rights of the owner of the car. It is their right to say if I can or cannot use the car regardless of if they are or aren’t damaged by its use. Drug companies do potentially LOSE from people stealing their IP but we’ll get to that in a bit.

Not my real names point that the beneficiary of the theft wouldn’t have bought the item in question any way is… well wrong. Why would someone steal something they did not receive a benefit from it? Are Brazilians by nature kleptomaniacs? Deriving utility from theft? I don’t think so, that racist not to mention plain old silly.

The issue here is not if they would have purchased at all but AT WHAT PRICE they would have purchased. At what price would they not steal it? At what price would begin to steal? This is a very weak rationalization for flogging intellectual property (I have heard it before) but like I said if you’re ok with it it’s moral. If it’s theft it’s theft, don’t try and rationalize it and call it something else. Spades are spades.

See the thing is with a good which is high in fixed costs (drugs in particular) it is in the best interests of the drug company to sell to everyone in the market. Ideally they want what is called, first degree or perfect price discrimination. So why aren’t they doing it with third world countries? Because a key criterion of price discrimination is non-transferability. That is if they sell a course of drugs to a Brazilian for $1.50 (at just above cost), which usually sells for say $1000 in the US, that gives a very big incentive for drugs to be smuggled to the US at a profit to the Brazilians. If this happened the drug companies would lose a great deal. So much so that I would say a lot of R&D is forgone because of it. This means less new drugs etc.

This leads me to the issue of IP rights, development and growth. NMRN question whether or not there was a link between IP rights and growth and apologized for his ignorance in advance, apology accepted.

The work of Douglas C North outlined the importance of IP rights in the history of economic growth; one of his contentions was that it was a key reason for the industrial revolution.

This was the kick start to economic growth in the world and came about for a strong part due to the creation of value in ideas and design through patents etc. IP is extremely important for the development of ANY economy. Intellectual Property rights are so important that they are even named in the US constitution (I heard that some place could be wrong).

However that’s not to say that there was a perpetual right, most patents are limited in time, to allow the original creator enough monopoly time to recoup their original investment. It’s a question of dynamic efficiency not static.

Now we turn our attention to how this decision will affect Brazil. Personally I think it’s a really bad idea, as it focuses on short term symptoms of much deeper problems.

Lets say if Brazil were to facilitate the theft of IP (i.e. not enforce the property right) what are the consequences of this? Well they get access to cheap drugs and so their population is healthy... for a time until the next thing comes along.

But two other things happen. Firstly they then have a brand new export which is the smuggling of knock-off drugs (which will use the same people and channels as normal illicit drugs). Secondly a whole bunch of foreign direct investment goes else where.

See if you fail to enforce IP rights other companies who are looking to invest through the creation of manufacturing and the like will go to another developing economy which has the same pool of cheap labour but better legal institutions.

This hurts Brazil two ways, firstly in the forgone income which the FDI would have generated but also in stunting of technology transfer. This was the idea demonstrated in David Romer’s model of long run economic growth. This is where long term growth is attributed in no small part to how much R&D and technology transfer occurs in an economy.

So in the long run this is a really bad idea for Brazil. The only time when they should consider this (strategically) is if their discount rate is really really high. This may well be the case right now, but I’m unsure. If they decide to facilitate the theft of IP, it will be an affect that is felt for many decades. Even if they restore IP rights this may well be seen as an incredible temporary measure which will not encourage business to invest in Brazil.

Now as for the US et all not living up to their WTO obligations in paying subsides… well I would have thought it was obvious why they don’t do it. if they cut the subsidies they would pay the ultimate price for a government…losing office.

From a strategic point of view if I were negotiating in terms of trade policies I would only raise the issue of agricultural subsides so as they can trade it off the table. That is get something else for it because I know I will never be able to pressure the US into totally dropping agricultural subsides.

Now the US is by no means the worst offender in farm subsides, the French are much worse. Then again French farmers are not so much in the agricultural business as they are in the tourism industry.

Finally, NMRN’s last comment that companies “in theory” have WTO obligations. I don’t agree with this. The company’s legal obligations are to the countries they are incorporated and operate in not to a super-national organisation. “In theories” aside, those who are obligated to the WTO are signatories, not those who operate under their laws. While the laws in which they operate may change they operate under the US’ laws not the WTO’s. Remember if the US decides to not comply with WTO obligations US companies are not required to change.

Well that’s enough for me. I’ve got work to do. May have more to say on this depending on the comments received. Other than that…. Have a good day.


Thursday, February 16, 2006

Abort Yourself Rich and Get Confident Stupid!

Well unless you were living under some kind of rock (igneous or sedimentary) you would have heard that The Hon. Danna Vale has come out and said some… interesting (said with a bit of a smirk) statements regarding abortion and Australia becoming an Islamic nation. Well Ms. Vale has received a whole bunch of flack for this and deservedly so. But no one has really attacked in an analytical manner on the merits of what she has said. The response has been to call her Xenophobic, Racist, Stupid etc. but not to question the substance of what she has said.

As disappointed as I am with the words that Ms. Vale has uttered I am just as disappointed in the widespread response which has been emotional and thin. This is fine if you want to play to the crowd (hey I do that sometimes) but the fact is no one learns nor is enriched by it. Lesson for today my young Padawan’s, no one learns anything if you point fingers and call someone a racist.

So let us start right here. Let us challenge Ms. Vale on the substance (as misguided as it is) of her opinions of abortion. Are we aborting ourselves out of existence? Maybe, but as Ms. Vandstone has said we have a large intake of immigrants from many nations (a major majority are non Muslim), that aside I’m not sure if we want a high birth rate.

If we follow the most basic of long term economic growth models or even some of the augmented Solow models one of the fundamental facts is a low birth rate actually increases GDP per capita in the long run. So abortion, lowering the birth rate actually helps to make us richer.

Now if we go deeper into economic literature we come across the work of Mr. Steven Levitt. Mr. Levitt wrote an awesome book called Freakonomics and one of his chapters basically said that access to abortion actually reduces the future crime rate.

The idea is that abortion reduces the number of children born into adverse circumstances, the ones who are more prone to crime. Now some of Mr. Levitt’s data has come under fire. Personally I think it still holds up as does the reasoning behind such a theory.

So Ms Vale, Islamic as we may be at least we’ll be rich and I won’t have my stuff flogged by some never-should-have-been punk criminal.

Wednesday, February 08, 2006

Conflict of Religions in one simple metaphor

Religion is not about opposing ideals or anything like that. All religions are pretty much the same at their base level.

Religion is like the square at the center of town. Christians are approaching from the South, Jews from the East, and Muslims from the North. They are all approaching the same destination but just coming at it from different starting points.

Now sure, a few of these religious types get caught down the back alleys and one way streets they are still looking for the center of town. Just… no map or compass.