The Silicon Valley startup as Ponzi scheme

Scientific American’s June issue included an article talking about Ponzi schemes, and how our economy is rife with them. One example they gave was the Silicon Valley startup: A simplified example illustrates how this process works—and how it can take on the attributes of a Ponzi. A start-up offers workers a low wage, less, in fact, than the dollar value of what a worker produces. Hence, with each worker, the firm generates some profit.

Going solar, part 2: Economics and hardware

Costing a solar system is complicated; there’s just no getting away from that. So I’m not going to present a detailed cost breakdown; instead, I’ll outline a few of the complexities. First of all, solar panels vary in efficiency. Higher efficiency panels generate more power per unit area, but they also cost more. So do you buy more panels, buy better panels, or aim to use less electricity? Similarly, the inverter which turns DC electricity from the panels into AC has a certain capacity and efficiency, and there are lots of companies making them to all kinds of specifications.

The terrible cost of free doughnuts

During the Second World War, the Red Cross provided free doughnuts to US troops fighting in Europe. Then they started charging 2¢ for a doughnut and coffee. 70 years later, veterans still haven’t gotten over that betrayal. NPR Planet Money explain why: basically, it comes down to the special nature of “free”, and the fact that the change altered the perceived relationship between the Red Cross and the veterans, from “friendly charity” to “money-making business”.

The future of Bitcoin

[One of a series of articles.] So far I’ve talked about Bitcoin myths and how Bitcoin is in a speculative bubble. In this article I’m going to discuss Bitcoin’s future. My view regarding the long term future of Bitcoin is fairly simple: I maintain that it doesn’t have one. And not just because there are pre-existing superior digital cash systems. No, the fact that better digital cash systems were invented in the 90s points at the fact that there are specific reasons why they haven’t taken off, and that it’s not to do with technology.

Bitcoin and quantitative easing

Update 2015-08-16: People told me I was wrong, and Bitcoin could never be forked. And then suddenly, Bitcoin was deliberately forked… Update 2017-12-01: Bitcoin was forked again, and the fork was a success (i.e. it kept value). So now, inevitably, there are half a dozen more forks planned. Original 2013 article follows: It’s frequently stated that Bitcoin is finite, that there can be exactly 21 million Bitcoins, and that’s it. Bitcoin fans like to point this out to distinguish it from normal currency, where the central bank can just print more money.

Perverse incentives

It’s commonly believed by right-wingers that US public radio has a left-wing bias. If you want to hear an example of a program that disproves the assertion, I suggest This American Life episode 490: Trends With Benefits. It has turned out to be somewhat controversial, though TAL are standing by the facts they reported, unlike with the Mike Daisey piece. As most people know, the US economy has a deficit problem.

Regarding Rush Limbaugh and contraception

Rush Limbaugh’s comments on contraception have shown that he doesn’t understand how people respond to basic economic situations. The contraceptive pill is something you have to take every day. You don’t only use it when you have sex. So if you think you might have sex once, you need to go on the pill and stay on it. This means that the cost of contraceptive pills purchased by the user is what economists call a sunk cost.

Will oil drown the Arab spring?

A recent article by Michael L. Ross talks about how oil money may yet destroy the democratic gains of the Arab Spring: Oil has not always been a barrier to democracy. Until the early 1970s, oil—producing countries were no less likely to be democratic than any other state. Ironically, this was because until that point, the so-called Seven Sisters, a handful of giant Western oil companies, dominated the global oil industry and collected most of its profits.

All Watched Over By Machines of Loving Grace (2/3)

Part 2: The Use and Abuse of Vegetational Concepts In which I continue to post my thoughts about a documentary everyone else watched six months ago. I thought during this episode that I could see a central point being made in Adam Curtis’s series. He seemed to be attacking the myth that networks are inherently self regulating and stable. I think he’s off-base painting it as a myth promoted by computer scientists or engineers, however.

The way the world works, and the god that sucks

How The World Works in The Atlantic is the best article on economic theory I’ve read in ages. Granted, I don’t exactly go out of my way to read articles on economic theory, but that’s largely because most of them exhibit the blindness cataloged in this article. Certain (mostly American) economic theories have somehow taken on the aura of absolute truth. It is drummed into us that free markets always optimize; what’s best for the individual is best for everyone; protectionism is bad.