Quotulatiousness

May 11, 2011

How resilient is the internet?

Filed under: Economics, Media, Technology — Tags: , , , — Nicholas @ 09:57

Richard Clayton summarizes a recent study by European Network and Information Security Agency (ENISA) on the internet’s ability to cope with disruptions. Among the ways the internet is vulnerable are:

First, the Internet is vulnerable to various kinds of common mode technical failures where systems are disrupted in many places simultaneously; service could be substantially disrupted by failures of other utilities, particularly the electricity supply; a flu pandemic could cause the people on whose work it depends to stay at home, just as demand for home working by others was peaking; and finally, because of its open nature, the Internet is at risk of intentionally disruptive attacks.

Second, there are concerns about sustainability of the current business models. Internet service is cheap, and becoming rapidly cheaper, because the costs of service provision are mostly fixed costs; the marginal costs are low, so competition forces prices ever downwards. Some of the largest operators — the ‘Tier 1′ transit providers — are losing substantial amounts of money, and it is not clear how future capital investment will be financed. There is a risk that consolidation might reduce the current twenty-odd providers to a handful, at which point regulation may be needed to prevent monopoly pricing.

Third, dependability and economics interact in potentially pernicious ways. Most of the things that service providers can do to make the Internet more resilient, from having excess capacity to route filtering, benefit other providers much more than the firm that pays for them, leading to a potential ‘tragedy of the commons’. Similarly, security mechanisms that would help reduce the likelihood and the impact of malice, error and mischance are not implemented because no-one has found a way to roll them out that gives sufficiently incremental and sufficiently local benefit.

Fourth, there is remarkably little reliable information about the size and shape of the Internet infrastructure or its daily operation. This hinders any attempt to assess its resilience in general and the analysis of the true impact of incidents in particular. The opacity also hinders research and development of improved protocols, systems and practices by making it hard to know what the issues really are and harder yet to test proposed solutions.

H/T to Bruce Schneier for the link.

May 10, 2011

“The recent recession was probably the last nail in the coffin of the proposal for a common Canada-U.S. currency. “

Filed under: Cancon, Economics, USA — Tags: , , , — Nicholas @ 10:22

Stephen Gordon explains how the Canadian economy has benefitted from the independent Canadian dollar:

Let’s think about what would have happened over the past few years if a monetary union had already been in place. Instead of generating an appreciation of the Canadian dollar, the commodity boom would have drawn in larger and destabilizing flows of investment. As it was, the appreciation of the Canadian dollar tempered the flow of capital, and kept inflation under control.

When the recession hit and commodity prices fell, our floating currency gave us a 20 per cent exchange rate depreciation in the space of five months. This sort of stimulus would have been unavailable under a monetary union — as Spain is now finding out, to its great cost.

For reasons that Paul Krugman explains here, Canada has always been an interesting case study in international monetary policy. Canada’s decision to adopt a floating exchange rate in 1950 — several decades before the post-war Bretton Woods system of fixed exchange rates collapsed — was an unorthodox reaction to a situation with which we’ve become familiar: sharply fluctuating commodity prices.

May 7, 2011

Comparing mouldy old tech with bright, shiny new tech

Filed under: Books, Economics, Media, Technology — Tags: — Nicholas @ 00:19

Dark Water Muse looks at competing technology from different eras:

The tech world is all a-buzz with reviews of eReaders and tablets capable of rendering eBooks, each of these device types purported to be candidates as the preferred host for future textual content to dethrone the lowly book as the natural media form readers turn to for reading textual content. Technical reviews focus solely on the merits of individual tablets and eReaders or line them up in comparative reviews. In DWM’s opinion these reviews completely miss the whole context of what is to be critiqued.

This tablet versus eReader battleground isn’t the real competitive landscape. Tablets and eReaders aren’t merely duking it out between themselves to win the hearts of readers. DWM views tablets as equivalent to eReaders when used to access published textual content such as books and magazines. Throughout the remainder of this piece DWM will refer to tablets, and other computer hardware which support eBook formats, and eReaders as simply eReaders.

As noted earlier, eReaders aren’t merely fighting amongst themselves for market share. The eReader, collectively, is fighting to displace the printed book. Read on as DWM explores exactly how that fight is going.

At the moment, I don’t really have any strong urge to purchase an ebook reader. I have a few dozen books on my iPhone, and it’s able to display the text acceptably well for casual reading (those few times I have to wait and for some reason don’t have a real book with me). My big concern with ebooks is less the reader and more the content: unlike a real book, you don’t own your copy of the content, and it can (and has) been remotely removed by the licensor in more than one case already. I have very great reservations about paying money to “buy” when it turns out that I’ve just paid a license fee that can be revoked at the licensor’s discretion without warning or compensation.

May 6, 2011

CRTC: broadband decision now in government’s hands

Filed under: Cancon, Economics, Government, Technology — Tags: , , — Nicholas @ 13:16

Michael Geist sums up the CRTC’s universal service decision:

The CRTC issued its universal service decision this week, which included analysis of funding mechanisms for broadband access, broadband speed targets, and whether there should be a requirement to provide broadband access as part of any basic service objective. Consumers groups and many observers were left disappointed. The CRTC declined to establish new funding mechanisms (relying on market forces) or changes to basic service and hit on a target of 5 Mbps download speed (actual not advertised) to be universally available by the end of 2015. Critics argued this left consumers on their own and suggested that the targets were underwhelming, particularly when contrasted with other countries.

While I sympathize with the frustration over the CRTC’s decision to essentially make broadband a “watching brief,” I wonder why Canadians should expect the CRTC to lead on broadband targets and funding. Universal access to globally competitive broadband (in terms of speed, pricing, and consumer choice) is a perhaps the most important digital policy issue Canada faces and it should not be viewed through a narrow telecom regulatory lens.

May 4, 2011

Some of the troubles facing the federal Liberals

Filed under: Cancon, Economics, Politics — Tags: , — Nicholas @ 07:44

Sarah-Taïssir Bencharif lists the financial issues alone:

Whoever replaces Michael Ignatieff next week will be the Liberals’ fifth leader in five years. And he, or she, won’t be getting much of a prize. Fewer seats, less status and no keys to Stornoway.

The Liberals will also have to rebuild with less funding: fewer votes mean less public subsidy, and the NDP now receives the money allocated to the Official Opposition.

If Stephen Harper indeed eliminates public subsidies for the parties, they will be further pushed to do more with less. The Liberals will have to relearn how to talk to voters to get their money and their support.

The current system has worked well for the Liberals, allowing them to reduce their dependence on individual donations to the party. Changing that system now will be a double burden for them, as they will have to ramp up their fundraising efforts from a much-reduced base (and still facing the costs of the most recent election campaign).

May 3, 2011

Michael Geist on what the Conservative majority means for digital policies

Filed under: Cancon, Economics, Government, Liberty, Technology — Tags: , , , , , , — Nicholas @ 12:29

In short, he sees it as a mixed bag:

For example, a majority may pave the way for opening up the Canadian telecom market, which would be a welcome change. The Conservatives have focused consistently on improving Canadian competition and opening the market is the right place to start to address both Internet access (including UBB) and wireless services. The Conservatives have a chance to jump on some other issues such as following through on the digital economy strategy and ending the Election Act rules that resulted in the Twitter ban last night. They are also solidly against a number of really bad proposals — an iPod tax, new regulation of Internet video providers such as Netflix — and their majority government should put an end to those issues for the foreseeable future.

On copyright and privacy, it is more of a mixed bag.

The copyright bill is — as I described at its introduction last June — flawed but fixable. I realize that it may be reintroduced unchanged (the Wikileaks cables are not encouraging), but with the strength of a majority, there is also the strength to modify some of the provisions including the digital lock rules. Clement spoke regularly about the willingness to consider amendments and the Conservative MPs on the Bill C-32 committee were very strong. If the U.S. has exceptions for unlocking DVDs and a full fair use provision, surely Canada can too.

The Conservatives are a good news, bad news story on privacy. A fairly good privacy bill died on the order paper that will hopefully be reintroduced as it included mandatory security breach notification requirements. There will be a PIPEDA review this year and the prospect of tougher penalties for privacy violations is certainly possible. Much more troubling is the lawful access package which raises major civil liberties concerns and could be placed on the fast track.

April 29, 2011

Stephen Gordon: Layton needs to avoid disruptive monetary policies

Filed under: Cancon, Economics, Politics — Tags: , , , , — Nicholas @ 13:20

It’s almost as if nobody bothered to read what the NDP had in their platform until last week . . . and paying even less attention to what Jack Layton said on the campaign trail. They’re paying attention now:

In my recent post on the prospects of a possible NDP government, I came to the conclusion that not very much would change; their platform had none of the transformational elements that had been a feature of so many NDP campaigns in the past.

But if recent reports are correct, and if Jack Layton seriously thinks that it would be a good idea for a Prime Minister to instruct the Bank of Canada to keep interest rates low, then this benign assessment no longer holds. Such an intervention would be a serious mistake that would seriously endanger the recovery, and could generate another spiral of higher inflation and higher interest rates.

The first thing that would happen after such an order is that Governor Mark Carney would have no choice but to resign. This would be a serious shock to the financial system, and unless his successor could extract a promise that no further orders would be forthcoming, the Bank of Canada’s credibility would simply disappear.

You remember all those smug, self-congratulatory pieces about how well Canada had weathered the recession and how well positioned the country was to take advantage of economic growth? Perhaps this is the imp of the perverse coming back for a revision of all that hearty back-patting.

April 28, 2011

Kevin Milligan: Corporations are not really people

Filed under: Cancon, Economics, Law, Politics — Tags: , , , — Nicholas @ 12:02

The notion that corporations are “legal persons” is useful for legal purposes, but terribly misleading when politicians are trying to formulate tax policies:

Pretending that corporations are people leads to tax policies with perverse consequences; some can even produce the opposite of what the policy is intended to do.

[. . .]

Some people want to tax corporations heavily because the corporations are ‘rich.’ But, if corporations are not people, they can’t be rich. The owners or employees of the corporation can be rich, but not an artificial legal entity. As my Economy Lab colleague Stephen Gordon wrote, “Claiming that ‘wealthy corporations’ pay [corporate taxes] makes about as much sense as claiming that ‘rich buildings’ pay property taxes.”

This is not an obscure debate. The owners of corporations do not all wear top hats and monocles like the fellow from the Monopoly game. In reality, Bay Street IPO-mongers quake in fear of two large stockholders. One is the Ontario Teachers Pension Plan. The other is the Canada Pension Plan Investment Board. These two pension plans are the largest holders of corporate equity in Canada, and their stakeholders are broadly middle income. Tax policy that hurts the dividends of Canadian corporations has a direct impact on the vast Canadian middle that hold pensions through these two, and similar, pension entities. Of course, many high-income Canadians also own corporate equities. But, if we desire to change the tax burden on high income individuals, though, it is best to do so directly through the personal income tax rather than taxing things high income people may or may not own.

April 25, 2011

Grameen Bank cleared of “irregularities”, but Yunus will not be re-instated

Filed under: Asia, Economics, Law, Liberty — Tags: , , , , — Nicholas @ 11:06

The Bangladeshi government has completed their investigation into financial irregularities at microfinance specialist Grameen Bank, but the founder, Muhammad Yunus, will not be brought back:

Yunus, 70, was dismissed by a central bank order — upheld by the high court and supreme court — on the grounds that he had overstayed in his position and refused requests to quit.

Yunus, winner of the 2006 Nobel peace prize, set up Grameen, which means village in Bengali, and had been the bank’s managing director since 2000.

Lauded at home and abroad by politicians and financiers as the “banker to the poor”, he has been under attack by the government since late last year, after a Norwegian documentary alleged the bank was dodging taxes.

Yunus denied any wrongdoing and a Norwegian government investigation later also cleared him of any malpractice.

Rational debate on tax policy MIA in this election

Filed under: Cancon, Economics, Politics — Tags: , , — Nicholas @ 10:33

Stephen Gordon wishes there was a way to disentangle sensible tax policy discussions from politics:

The Conservatives implemented two major tax cuts in the past five years: the two-point reduction in the GST, and the three-point reduction in the corporate income tax (CIT) rate. The GST cut was almost certainly a mistake, but no opposition party has challenged this decision in the election campaign.

On the other hand, every opposition party has promised to increase the CIT — the tax that is most harmful to economic growth. What is going on?

I see two answers to that question, and both are based on the presumption — possibly well-founded — that voters do not understand the concept of tax incidence. If you don’t understand how corporate taxes are passed onto workers, then the idea of taxing ‘wealthy corporations’ has a certain appeal: “I’m not a wealthy corporation, so it’s no skin off my nose.”

But of course, it is. So the only question is whether or not the opposition parties campaigning on increasing corporate tax rates understand who actually pays the CIT. If they do not understand that higher CIT rates reduce wages, then their competence as a government-in-waiting leaves something to be desired. If they do understand, then they are being less than honest about what the effects of their proposals will be.

The most efficient tax is broad-based and as close to non-distorting as possible. That is also the most hated form: the Goods and Services Tax. The Tory cut in the GST was terrible economics, but great politics. There, in a nutshell, is why stupid tax policies are the only ones on offer in the election campaign — because sensible policies require people to actually face up to the costs of the government they want. People much prefer the illusion that “someone else” is paying for the goodies.

April 21, 2011

Why the headline inflation rate may not force the Bank of Canada to increase interest rates

Filed under: Cancon, Economics — Tags: , — Nicholas @ 08:00

Stephen Gordon explains why the spike of certain prices may not trigger interest rate hikes from the Bank of Canada:

The increase in the headline March CPI inflation rate is due to increases in a relatively small number of goods, and is best seen as a change in relative prices that will have only a transitory increase in the CPI. There are two ways that headline CPI can return to target. The first is that consumers adjust their spending patterns and substitute away from the goods whose prices have risen; the resulting fall in demand will bring prices back down. If this doesn’t happen, prices of other goods can fall — or at least rise more slowly — so that the rate of inflation of the broader index falls back to target.

The Bank of Canada is preoccupied with inflation, not fluctuations in relative prices, so the current increase in the CPI will only be a problem if firms and workers start using 3 per cent as a benchmark for increases in wages and the prices of other goods.

Even though the target is the headline CPI inflation rate, it is the Bank’s opinion that the core CPI inflation rate is a better predictor for future inflation. The components of core CPI are generally those whose prices are set infrequently and whose increases reflect expectations for future inflation as well as market conditions. If expected inflation starts to rise, it will be more visible in the core rate than in the headline number.

April 19, 2011

This is why the delays at the US border are so important to Canadians

Filed under: Cancon, Economics, USA — Tags: , , — Nicholas @ 10:11

Stephen Gordon says that the additional costs to the Canadian economy for slower border crossings rival (or possibly even exceed) the savings due to NAFTA:

It is difficult to overstate the importance of Canada-U.S. trade flows: roughly one-quarter of what Canada produces is exported to the United States, and the volume of imports from the U.S. is only slightly smaller.

The increased border security in the wake of the Sept. 11 attacks may be only a minor irritant in the context of a single border crossing, but a small cost multiplied by a large number of crossings can still end up being a very big number. Even a small perturbation in trade flows of this magnitude can have a significant effect on the Canadian economy.

A recent study by Trien Nguyen of the University of Waterloo and Randy Wigle of Wilfrid Laurier University and published in the March 2011 issue of Canadian Public Policy provides some estimates for the economic costs of border crossing delays. These costs can be startlingly large, especially in the auto sector. Parts and subassemblies of cars produced in North America crisscross the border several times during production, so custom rules and border delays can add an extra $800 to the cost of production. In contrast, cars imported from overseas only have to pass through customs once.

Things that keep on rising in price … like healthcare costs

Filed under: Cancon, Economics, Government, Health — Tags: , , , — Nicholas @ 00:06

Kevin Libin points out that Michael Ignatieff may have been even more accurate than he himself realized:

The politicians are finally talking about it, but if you listened to what Mr. Ignatieff said during last week’s English-language debate, you might have found yourself feeling a bit depressed. Perhaps because the Liberal leader effectively argued that if Canadians wanted to keep getting decent medical treatment, they were going to have to learn to live without lots of other things.

“This comes down to a moment of choice,” Mr. Ignatieff intoned. Canadians could either vote for personal income tax breaks, planned corporate income tax cuts, new equipment for the Canadian Forces, all promised by the Conservatives, or, he said, “you can support health care.”

To be accurate, he used language that was far more politically loaded (“multi-million dollar expenditure on prisons … big gifts to upper-middle class Canadians”), but his message was the same: affording public health care means sacrificing other possible priorities.

There’s certainly much to suggest he’s got a point.

If our healthcare costs keep rising, unbounded by any kind of cost control, it will either consume the economy, or cause its collapse. And, of course, the large number of soon-to-retire Baby Boomers are about to need much higher health spending as the natural aging process starts taking its inevitable toll. Fun times ahead, folks.

Already, nine out of 10 provinces spend the majority of their own source revenues (which excludes federal transfers) on health care, according to the Fraser Institute’s report “Canada’s Medicare Bubble.” Only Alberta is just barely under 50%; Nova Scotia spends 88%.

With all the good will in the world, the government can’t keep increasing their healthcare spending . . . they’re almost out of money already.

April 18, 2011

The real secret weapon of the “China economic miracle”

Filed under: China, Economics, Government — Tags: , , , , — Nicholas @ 10:35

Chriss W. Street thinks the Chinese banks are about to suffer a crisis moment:

It is ironic that China is demanding greater control of the World Bank and International Monetary Fund, just as the nation’s banking system is about to be devastated by the white hot flames of inflation.
From a distance, China’s economy seems to be the poster child of sustainable growth. Recent government reports show the economy expanding by 9.7%, retail sales up a blistering 17.4%, foreign reserves at $3 trillion, and inflation only 5.4%. But these statistics mask a dark side; Chinese communist authorities have been artificially holding down fierce inflationary pressures by subsidizing consumer prices.

[. . .]

The less known and far more important secret-weapon of the “China Economic Miracle” is the absolute control of the banking industry by China’s four largest state-owned banks (“SOB”); Industrial and Commercial Bank, Agricultural Bank, People’s Bank of China and Construction. Since the government does not provide adequate social welfare programs and restricts its citizen’s investment options to bank accounts, about 40% of Chinese household income is deposited in SOBs each month. The SOBs then leverage the deposits by ten times and loan 75% of this massive amount of cash at extremely low interest rates to state-owned-enterprises (“SOE”). The other 25% of lending is allocated to real estate development.

China is no stranger to bankers making risky loans to communist party officials and their crony real estate developers. During the Asian Financial Crisis of the mid-1990s, it is estimated that 40% of all SOB loans were non-performing and most were written off. The Chinese paid for the SOB losses with a 76% devaluation of their currency that crushed the people’s buying-power by 76%. From 1997 to 2004 Chinese frivolous lending was somewhat restrained, but since 2003 the bureaucrats have mandated a massive expansion of lending. In comparison to the U.S. and Europe where bank lending is flat, SOBs have been expanding loans by 25% annually.

H/T to Jon for the link.

Toronto area gas station boycott

Filed under: Cancon, Economics — Tags: , , — Nicholas @ 10:01

Chris Greaves (who doesn’t even own a car) looks at the possibility of using weekly boycott targets in an attempt to force oil companies to lower the retail price of gasoline in Toronto:

Consider therefore a web site for the GTA which announced as the next boycott period approached that the new target was “Shell”.

Those drivers who subscribe to the mass-boycott idea would avoid buying gas at Shell and, being evangelical, would tell their friends and colleagues that “Shell” was the target this period.

The question is “Who picks the target?” and the answer is simple: torontogasprices already announces the highest and lowest price for gas in the GTA. Score +1 against that company with the highest gas price at a random time each day. Then pick the company with the highest score. Over a short period, the company with the highest prices would float to the top of the list and be ready for a boycott.

In order to avoid any hint of collusion and legal attack, the web site would be hosted as a private web site, a blog perhaps, with the views expressed being solely those of the individual. There can be no legal complaint against an individual blogging and/or tweeting a disarmingly simple statement “This week I am boycotting Shell”.

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