November 2003 Archives

Cool and yet pathetic: Hollywood Is Calling. Certainly an answer to the question: "Where are they now?"

I totally agree with

Steve Jobs has already proven he can translate his mastery of the intuitive user interface to the PC world with the successful launch of iTunes software for Windows machines. That release garnered rave reviews, even from some of the most technophilic publications around, such as Slashdot and ArsTechnica.

For an encore, Apple should release a version of iPhoto for Windows. After iTunes, it's the next most popular digital-lifestyle application on the Mac. And iPhoto is an excellent product, better in my mind than anything PC makers have offered with the single exception of Adobe's consumer package.

Apple should be in the mobile phone business too. I write this while listening to my iPod.

This short piece from the WSJ is hard to improve on and is a classic example in which many focus on the concentrated benefits (tax revenue from the rich) but ignore the diffuse costs, as eloquently describe below. Incentives matter.

Tax Reform to Die For

By EDWARD J. MCCAFFERY
November 21, 2003

I was asked recently to speak on a panel on the economics of the estate tax at an event sponsored by the Treasury Department. After a decade of writing and talking about the case against the death tax, I realized that what follows is all I had to say. For the first time in my life as a public speaker -- and with apologies to my fellow lawyers -- I failed to take up my allotted time. Here's what I said.

"It is an honor to be on this panel, and to be revisiting an issue I first raised in print almost 10 years ago.

We do not need sophisticated economics, however, to teach us that the death tax is bad. The fundamental lesson of Adam Smith, rooted in common sense, and confirmed in the laboratories of history, is that an economic system must align with ordinary moral principles to allow society to flourish. The death tax at its most basic level does not. It falls, when it falls, on the wrong people -- even for those who seek to tax the rich, on the wrong rich people. The death tax comes to the industrious, the thrifty, and the altruistic. It spares the unproductive, the spendthrift, and the selfish. There is nothing wrong, and a good deal right, with working hard and saving well and, at the end of the day, should fortune so smile, with passing on wealth to the next generation. There is ample time under a properly designed tax system to tax the heirs when and as they spend. Our current tax system taxes people when they work, when they save, when they marry, when they give, and when they die. These are wrong choices, all. We should tax people when and only when they spend. And then we can repeal the death tax, once and for all, for the simple reason that dead men don't spend. (And nor, of course, do dead women.)

Thank you."

Mr. McCaffery is professor of Law and Political Science at USC. He is the author of "Fair Not Flat: How to Make the Tax System Better and Simpler" (University of Chicago, 2002).

Some harsh but true words in the NYT about MoveOn's track record.

For all of MoveOn.org's efforts, its record is mixed: Mr. Clinton was still impeached; the Bush administration invaded Iraq; Gov. Gray Davis of California was still recalled; Republicans still pushed through the Texas redistricting. Only one in three candidates it supported in the 2000 and 2002 elections was elected.

But the real story is that now that it's taking Soros's money, it's just an end round around campaign finance reform laws. As I've noted here in the past, reform laws won't take any money out of politics, it will just push it into less transparent vehicles--having the exact opposite effect of what was ostensibly intented. In the end I say let people spend their money how they wish, so I don't have a problem with it, but those who support both campaign finance restrictions and the Soros grant will have to come to terms with their own hypocrisy. However, those from the anti-globalization circles who support Soros, a mega-globalizer, must have come to terms with their hypocrisy already.

Good stuff from Tony Nash, formerly of Herring, now at Always On, in this piece called The State Line.Excerpt:

In the end, it's not the state's role to pick winners and losers through venture investment, it's to provide an infrastructure and environment in which entrepreneurship can flourish. This is the more equitable path, given our democratic system, and one less prone to unrealistic political expectations of big, fast returns. If a state wants to grant a subsidy to technology firms to promote fast job growth, let it do so. But venture investing should be left to those with a tolerance--even an affinity--for risk.

Om Malik, former "fish" (aka Red Herring journalist) covers some of the latest goings on in the social web space in this post, GigaOm: Essays: For VCs, Blogging is the Next New Thing. From what I hear he gets most of it right--even the fact that I'm working on a start-up, but his description is a little off! And I don't think there is a cap "S" in Feedster (where's the crack Herring copy-edit team when you need them!) He forgot to mention that Ringo was just acquired by eMode and missed the enterprise plays in this space, but it's a worthy post.

The tagline for R21 is "freedom works." Here's why:

Readers of this blog wil note that I have some defined views about how we as a society can accomplish many of the ends that modern, enlightened folks tend to value. While many of these ends are very liberal (or "progressive") in nature--feed the hungry, heal the sick, educate the illiterate, peace and prosperity for all, etc.--I think the means that liberals and progressives tend to espouse have been demonstrable, abject failures and often persist only as policy today due to entrenched special interests. I also tend to believe in some more classically liberal (what is often called "conservative" today, because it conserves the liberal revolution of our founders or "libertarian"--both poor substitutes for "classic liberalism") ends--individual liberty, economic freedom, property rights, equality of opportunity and treatment, diversity of thought, limited government, freedom of assembly, etc.--that many modern liberals have demoted in importance, or in some cases abandoned all together as worthy ends.

This is the cause of my political affiliations, not the effect. That is, my ideas govern my political choices, not the other way around. Thus I have to pick a candidate and party that will in all likelihood be imperfect. There is no doubt that the political class is a deeply flawed one. Special interests corrupt nearly all aspects of politics, left and right, and politicians are usually in the business of selling favors (which is one of the reasons I advocate limited government--less to sell.) I think it is a near impossibility to answer the question "which is worse?" The political literature is rife with examples of this every day, and often it depends on ones perspective. Left wing journals and books decry the corruptness of the right and the reverse is true. I won't defend politicians.

On the whole I believe classical liberals (typified best perhaps by Milton Friedman) get it right while modern liberals (Paul Krugman?? Al Gore?) get it wrong. I am not a fan of modern social conservatives, though I have to admit to aligning somewhat well with the neo cons on foreign policy issues. Boiled down my view is this: freedom works. It is not only a moral imperative, it is an effective strategy for improving the human condition. It is no coincidence that the US is among the freest and most prosperous nations. Usually attacks on freedom are done by folks who neglect or refuse to consider things in whole systems. Milton Friedman put it well: there is no such thing as a free lunch. And yet we often make policy decisions as if there were and ignore when diffuse costs exceed the concentrated benefits. Concentrated benefits are easy to see, feel, taste, and touch--and lobby for--whereas diffuse costs have few representatives. Actually, I think this is partly why we have an obesity problem in this country--instant gratification. We like the immediate benefits of eating and discount the diffuse costs getting fatter. This is a generalization, of course. But I think that this perspective can be applied to: social welfare programs, environmental laws, wage laws, subsidies, targeted tax incentives/breaks, tariffs, licensure, tort litigation, and on and on. We don't care if the cure is worse than the disease, SOMETHING must be done. Some like to suggest it takes faith to believe in markets--I believe the opposite is true. After countless, repeated failures of the welfare state, and the dysfuntion of its iconic programs--social security, state run education, medicare, welfare, etc.--compared with the prosperity of free, open, and self-organizing systems, I think it takes faith to believe in socialism, as many do in practise, if not in name. "Do nothing" may not be a palitable course of action for our elected officials, but the truth is often that it is the best one--freedom works, while their remedies often don't.

GeorgeWBush.com :: Political Perspective - Part III - A Year Out

"California deserves a Senator who realizes the need for creating jobs by advocating for small businesses and fighting against tax increases.” So says Rosario Marin, running for the CA senate seat in 2004 against Barbara Boxer.

A clear example of how regulation and taxation--often encouraged by special interests looking for barriers to competition--can stand in the way of innovation, and hence growth and prosperity in general in this column on FT.com by Tom Hazlett. Worth reading in whole, but here are some excerpts:

The problem for regulators is that local telephone rates today include a bloated package of regulation-induced charges. Such taxes (hidden and explicit) are generally doled out in subsidies for below-cost rural services and cheap residential connections for low-income households, and to fund such "public interest" goals as information technology for schools. The costs associated with padding users' bills - particularly in long-distance charges and business services - are ignored. The perverse outcomes embedded in this system are legion, exemplified by the poor urban-dweller who pays artificially high long-distance bills to underwrite subsidised local phone service to a CEO's Aspen ski chalet. This system constitutes what is universally known as "good politics."

Unregulated competitors wreak havoc on this jumble by injecting a dose of economic rationality. The entrants target customers paying prices fattened by regulation. Vonage's phone service, which lays atop a cable modem or DSL connection, offers home users unlimited local and domestic long-distance calling for about $35 a month. With a similar bill for broadband service, residential customers pay about a $75 monthly tab. That is far above what most households pay for phone services, but for users paying high long-distance charges - i.e. those funding the subsidies - it can be a bargain. Customers held hostage to regulation-by-taxation (as Richard Posner famously described the regulatory temptation to block competitive entry, directing the profits generated to fund popular projects) are making a break. State regulators, vigilant in protecting cross-subsidies, want to block this exodus by subjecting the new technologies to the old rules.

The states do have a legal point. Using if it looks like a duck logic, the function of VoIP is analogous to plain old telephone service. It makes little sense to subject close substitutes to distinct rules. VoIP carriers respond that their technology is completely different - but this points to re-crafting the old rules for new situations, not abandoning them altogether.

The superior argument for waiving regulatory rules for the new technology is that such regulations are barriers to entry. By eliminating taxes and regulations, we encourage the emergence of competitive services and networks. This properly focuses attention on the damage such rules inflict on investment and innovation undertaken by all providers - new entrants as well as more established, non-VoIP providers. Such damage includes under-investment in serving high-cost rural areas through efficient alternatives such as terrestrial wireless or satellite. Instead, the argument over regulatory lines becomes legalistic and arcane.