Dec 102013
 

In many ways, a US resident could see the 19th Century as the New York Century with its transcontinental railroad terminals and Ellis Island, the 20th Century as the California Century with Hollywood and Silicon Valley, and the 21st Century as the South Florida Century with its transcultural population and strategic location.

Consider:

Miami is closer to dozens of foreign capitals than it is to Washington DC, geographically and metaphorically. No other region of the USA is as tightly woven into the fabric of the integrated global economy. Even the Home Depot stores in South Florida have export departments!

Only five major languages are spoken natively in the Western Hemisphere—English, Spanish, Portuguese, French, and Haitian/Antillean Creole—all of which are spoken wildely in Miami, often in the same sentence.

South Florida has no majority ethnicity or majority native language.

Metropolitan Miami is the seventh largest metropolitan area in the United States, and the fourth largest urbanized area in the USA, behind Los Angeles, New York, and Chicago.

Florida has no personal state income tax.

Miami is home to NAP of the Americas, one of the largest Internet landing points in the world, and it is one of the top five best-interconnected cities in the world, ahead of San Francisco, Chicago, and Washington DC.

For passengers, cargo, and money, South Florida is one of the world’s premier logistics hubs.

Miami’s financial district is home to the offices of more than 100 international banks.

The second-largest tourist attraction in the state of Florida, after Disney World, is Sawgrass Mills: a shopping mall west of Ft. Lauderdale that attracts shoppers from Latin America, the Caribbean, and Europe.

Of all the port complexes in the USA, only Miami/Ft.Lauderdale is a net exporter in terms of value. South Florida imports goods for local consumption, for both residents and the millions of tourists who pass through every year, and exports cars, machine parts, electronics, tools, and other high-value-added goods and services. All other ports in the USA are net importers.

Port Everglades in Ft. Lauderdale is home of the second-largest free trade zone in the USA and the largest exporter.

Port Everglades and Port of Miami vie annually for the top two positions as the world’s first- and second-busiest cruise ports.

Miami is home to EarlyShares, the equity crowdfunding portal, and it has a very active Bitcoin user base. Bitcoin startups in South Florida include Bitcoin Intel, Bitcountant, Coingig, and Conscious Trader. Companies based in South Florida that are embracing Bitcoin include SoftTouch and Tiger Direct.

Bitcoin’s highest and best use is in small-scale international trade. South Florida firms tend to be small and medium-size enterprises (SMEs). For every Silicon Valley / Wall Street Ten-Bagger with 10 million customers and countless broken hearts strewn about its feet, one will find 10 thousand South Florida SMEs with 1,000 customers each. This environment is ideal for Bitcoin entrepreneurs.

Added to this, Miami is at the interface of a region with more than a half-billion individuals in Latin America and the Caribbean who do not have easy access to capital markets, credit, or efficient banking services, and of the eight-million-pound gorilla of capital markets in the USA.

Already, Wall Street bankers have begun relocating in such large numbers that the Palm Beach County government has an office with full-time staff dedicated to helping them find neighborhoods with good schools. If Bitcoin and crowdfunding entrepreneurs follow them, South Florida could become the ‘Silicon Valley / Wall Street’ of transnational entrepreneurship.

Invest accordingly.

Prof. Evans

Mar 192013
 

Approximately once per decade, the market experiences a Gold Rush, a once-in-a-lifetime opportunity that, once missed, is gone forever.

Examples include the introduction of competitive long-distance telephone service in the USA in the 1980s and mobile telephones after that; two- and three-letter domain names in the late 1990s; privatization in newly democratized countries; etc.

Bitcoin appears to be such a Gold Rush, especially now that it has received the regulatory green light in the USA.

A user of virtual currency is not an MSB under FinCEN’s regulations and therefore is not subject to MSB registration, reporting, and recordkeeping regulations. However, an administrator or exchanger is an MSB under FinCEN’s regulations, specifically, a money transmitter, unless a limitation to or exemption from the definition applies to the person. An administrator or exchanger is not a provider or seller of prepaid access, or a dealer in foreign exchange, under FinCEN’s regulations.”
Guidance: Application of FinCEN’s Regulations to Persons Administering, Exchanging, or Using Virtual Currencies
Financial Crimes Enforcement Network (FinCEN), 18 March 2013

Invest accordingly.

Prof. Evans

Nov 152012
 

3 November 2012, Clayton Christensen, whose earlier works I have found inspirational and illuminating, published an article in the New York Times—”A Capitalist’s Dilemma, Whoever Wins on Tuesday“—that starts with a reasonable premise, and veers hopelessly off course.

To Wit: “Whatever happens on Election Day, Americans will keep asking the same question: When will this economy get better?”

Fair enough. That is a very reasonable question, and it is a very reasonable expectation that Americans will keep asking it.

So far, so good.

Then, we get this:

“The Fed has been injecting more and more capital into the economy…”

<facepalm>

The Fed has been pumping more and more money into the economy. The value of money is measured by the ratio of units in circulation to the value of stuff. If the number of units in circulation increases faster than the quantity, value, or both of stuff, then prices rise.

Capital is the long-term means of production: drill presses, trucks, robots, etc.. The Fed doesn’t have any of that, and Fed governors are not in a position to command others to make such things available.

The Fed lends money to the US Treasury, buys toxic assets from commercial banks, and regulates banks. It isn’t a hardware store.

Now, if one is sitting on a lot of money that one can convert into capital assets, then one might adopt the financier’s habit of referring to that money as capital, but one should avoid conflating fiat inflation with the means of production.

“And yet cash hoards in the billions are sitting unused on the pristine balance sheets of Fortune 500 corporations.”

Firms are supposed to keep pools of cash as a kind of self-insurance policy against slow economic times. We call this ‘working capital’. When the future is even scarier than normal, the prudent thing to do is to hold more cash. The ‘Fiscal Cliff’, Pres. Obama’s political rhetoric expressing open disdain for those who are wealthier than he, the unknowable effects of Obamacare, the ongoing transition away from a capital/labor economy toward a service/knowledge economy, and the specter of another decade of ‘Bush’s war’ are enough to render all expectations of the future little more than random bets and wild guesses.

And, no one gets fired for playing it safe. So, until things settle down, executives play it safe.

“Billions in capital is also sitting inert and uninvested at private equity funds.”

Does Prof. Christensen believe that fund managers have piles of big, canvas sacks with dollar signs on them, filled with cash… like Scrooge McDuck or the dapper little fellow from the Monopoly™ game?!?

The money is invested somewhere, most likely US Treasury debt, because the US Treasury has a reputation of always paying its debts… even if it has to print more money to do so. In these highly uncertain times, the safest bet is the safest bet.

“Empowering innovations create jobs, because they require more and more people who can build, distribute, sell[,] and service these products.”

Sadly… no, no, no, and no.

Build: Factories are increasingly automated, and when meat-that-talks is needed, one hires labor where it is cheap; i.e. Latin America, Southeast Asia, and increasingly Sub-Saharan Africa.

Distribute: DHL, FedEx, UPS, already have that pretty well covered.

Sell: Amazon.com.

Service: What is that? Throw it away and buy a new one.

“[T]he Toyota Prius hybrid is a marvelous product.”

Except that [o]nly 35 percent of hybrid car owners bought a hybrid again when they purchased a new vehicle in 2011.

“‘[E]fficiency’ innovations… almost always reduce the net number of jobs…”

This one is spot-on. It is unfortunate that Christensen did not make it the centerpiece of his analysis.

“The economic machine is out of balance and losing its horsepower. But why?”

Peter Drucker answered this question in Post-Capitalist Society, which was written nearly twenty years ago, and reads today like a play-by-play account of what happened in the 1990s and 2000s.

[Reread the sentence above, click on the link, and buy the book. You can thank me later.]

Also, the total value of goods manufactured in the USA continues to exceed the value of goods manufactured in China.

The scorpion’s sting is in the tail. Toward the end of the article, Christensen states, “We can use capital with abandon now, because it’s abundant and cheap. But we can no longer waste education, subsidizing it in fields that offer few jobs.”

No one knows where the ‘jobs’ of the future will be. Social engineering always fails. In the 1960s, it was plastics; in the 1980s, software development; in the 1990s, Dot.Com… No one knows what it will be next decade.

“[T]he [capital gains tax] rate should be reduced the longer the investment is held — so that, for example, tax rates on investments held for five years might be zero — and rates on investments held for eight years might be negative.”

It might have made sense a century ago, when technology changed slowly, to make it costly to change plans quickly in response to new information, but Christensen’s advice in a highly dynamic—even chaotic—integrated global economy would create an incentive to keep sub-optimal plans running beyond their use-by dates.

“Federal tax receipts from capital gains comprise only a tiny percentage of all United States tax revenue.”

This suffers from two fatal flaws. 1) The universe does not end at the US border. 2) If capital gains represent a trivial portion of the federal budget, then eliminate the cost of collecting and enforcing them and call for their repeal. Leave the money in the owners’ hands, rather than seize it at gunpoint, if it is hardly worth collecting.

“It’s true that some of the richest Americans have been making money with money — investing in efficiency innovations rather than investing to create jobs. They are doing what their professors taught them to do, but times have changed.”

Indeed, times have changed, but that does not mean that this time is different, as Christensen seems to assume. We are in the latter stages of a transition as profound as the 18th Century Industrial Revolution, from a capital/labor division—in which semi-literate proletarians drive industrial machines—to a knowledge/service division, in which skilled workers are the ‘capital’ and are not interchangeable.

However, the wealthy will invest where they expect the greatest opportunities are, as has been the case since the Renaissance a half millennium ago. When princes, presidents, and parliamentarians create uncertainty, the wealthy will hunker down and wait until circumstances stabilize.

Christensen started with the premise that the president and the Fed do not have the power to fix things, and then concluded that the IRS does have such power.

This conclusion is counterintuitive. An alternative would be for presidents, princes, and parliamentarians to enforce transparency, and otherwise to mind their knitting, rather than concern themselves with affairs that are beyond their abilities.

Invest accordingly.

Prof. Evans

Nov 042012
 

We examine the effect of securities laws on stock market development in 49 countries. We find little evidence that public enforcement benefits stock markets, but strong evidence that laws mandating disclosure and facilitating private enforcement through liability rules benefit stock markets.”
(La Porta, Lopez-de-Silanes & Shleifer 2006)

In general—and vastly oversimplified—regulatory regimes fall into three categories: Authoritarianism, Anarchism, and Transparency.

The term authoritarianism here refers to what one might think of as over-regulation, as when entrepreneurs in a particular country must seek permission—perhaps even an act of parliament or specific permission from the ruling junta—before being allowed to register a new firm.

The term anarchism here refers to a de facto, even if not a de jure lack of government oversight, where regulations either do not exist or exist but are not enforced.

The term transparency here refers to a regime, in which individuals are more or less free to do as they want, but must make public disclosures of actions or decisions of material importance.

Markets that could be described as ‘authoritarian’ tend not to attract much capital from investors outside those jurisdictions, and investors within those jurisdiction—particularly those who are not politically connected—often tend to prefer to invest abroad. This is in large measure, because they are highly constrained in how they can respond to new information, changing supply conditions for inputs, and evolving demand conditions among consumers.

For example, if one were required to declare the precise nature of one’s enterprise as a condition of registration and permission to operate, and one were forbidden to deviate in the future from this stated purpose in response to changing expectations, regulatory inflexibility might create an incentive for one to take one’s business to a jurisdiction less plagued by bureaucratic micro-management.

At the other extreme, ‘anarchic’ markets tend not attract much capital from outside those jurisdictions, and investors within those jurisdictions—particularly those who are not politically connected—often tend to prefer to invest abroad. This is in large measure, because they have little recourse to dispassionate enforcement institutions, like unbiased judges, neutral regulators, and incorrupt police.

For example, if one were subject to routine breach of contract, expropriation of property, or threat of violence, regulatory apathy might create an incentive for one to take one’s business to a jurisdiction less plagued by uncertainty.

Between these two extremes are ‘transparent’ markets, which one tends to find in English-speaking countries and non-English-speaking countries where the legal systems have been based on or even borrowed from England or the USA (and possibly the commercial code from Germany). In these countries, one has a relatively free hand to organize one’s affairs as one sees fit and to change plans as needed.

For example, in Australia, Canada, the UK, the USA, etc., one can incorporate, regardless of one’s standing in the community, family membership, political affiliation, or even criminal background. One does not need to declare the specific purpose of one’s firm—the boilerplate ‘purpose’ being “to engage in any lawful activity”—seek sponsorship or permission to incorporate, or submit to a background check. One submits articles of incorporation, pays a fee, and stays current with one’s filing requirements.

The executives of privately held firms must communicate all decisions and actions that have a material impact on the firm to their shareholders, or risk civil or even criminal complaint. The executives of publicly traded firms must file public disclosures for seemingly trivial matters, or risk regulatory penalties.

Jurisdictions where transparency is the order of the day tend to attract both domestic and global investment, have efficient and liquid markets, and recover from crises robustly.

The optimal level of regulation lies somewhere between authoritarianism and anarchism, in which executives are free to form expectations, make plans, take action, and to modify their plans in light of new information—including rumor, superstition, and noise—changing supply conditions for inputs, and evolving demand conditions among consumers.

Invest accordingly.

Prof. Evans

_____
La Porta, Rafael, Florencio Lopez-de-Silanes, and Andrei Shleifer, 2006. “What Works In Securities Laws?” Journal of Finance 61(1), 1-32.

[possibly available at: http://works.bepress.com/cgi/viewcontent.cgi?article=1000&context=florencio_lopez_de_silanes]

[2003 Working Paper available at: http://www.nber.org/papers/w9882]

Dec 072011
 

Röpke on Imperium & Dominium

In addition to advocating the Social Market Economy, for which he is most famous, Wilhelm Röpke (1899-1966) distinguished between two types of colonialism that are of immense relevance to understanding the world today, as we transition from multiple capital/labor national economies to an integrated knowledge/service global economy.

Röpke referred to these as Imperium and Dominium. [warning: PDF] Imperium refers to political sovereignty, and it is projected at the point of a gun. Dominium refers to economic sovereignty, and it is projected at the point of a pen used to sign a contract.

Röpke recognized that both Imperium and Dominium are forms of domination, and that Imperium is by far the more violent of the two. In other words, if one were going to be dominated by a foreign power, one would be better off if that power were Nike and not the CIA. Still, one would be dominated, and one might be expected to chafe at that.

Historically, Imperium has been more potent than Dominium, e.g. the Roman, Ottoman, Spanish, British, etc. Empires. It was not until the 20th Century and the birth of the multinational corporation that Dominium began to emerge as a potent political force. As borders become increasingly meaningless today, corporate Dominium is supplanting government Imperium as the predominant means for projecting influence and power worldwide.

While agents of the US military drop bombs, executives of Chinese firms are buying controlling interests in the Panama Canal, Freeport (Bahamas), and other Western Hemisphere commercial infrastructure. In the long run, US taxpayers will tire of paying for adventures in nation building on their behalf, while one expects that the demand for global transportation will continue for the foreseeable future.

(And, make no mistake of it, the Americans might be flat-footed and incompetent imperialists, but they are master dominialists!)

As we have seen in the Middle East in 2011, when enough individuals realize that the real power is in transnational commerce, and that politicians and regulators govern at the pleasure of the people, their relationships with their rulers can change radically.

Colonialism

This is not to say that that future will be all roses, ice cream, and singing unicorns. Quite the contrary, colonialism and other forms of domination will persist, but in different forms from before.

One of the distinguishing characteristics of a colony is that it is a jurisdiction that exports raw materials and imports finished goods from the jurisdiction to which the raw materials were exported.

For example, historically, British weavers imported cotton and silk from India and exported finished cloth and apparel to India. In this way, the weavers were able to acquire raw materials at commodity prices and sell their output at significantly higher monopoly (one producer) or oligopoly (a small number of producers) prices.

Independence from British weavers was such an issue for Gandhi that he wove his own cloth as a sign of protest, and the spinning wheel became such an important symbol of Indian independence that it adorns the national flag of India.

Over the past century, the economic center of gravity has shifted away from agriculture to manufacturing to knowledge, and the nature of colonialism has changed.

Today, China, India, and Russia export large numbers of students and entrepreneurs — the raw materials of a knowledge economy — to North America and Western Europe, where they conduct research and produce commercial goods that find their way into textbooks, software, and other information goods that are then exported back to their homelands.

From this perspective, one can argue that colonialism never went away; it just changed industries. The raw material today is not fiber, grain, or rubber, but human capital.

As Röpke pointed out, today’s colonialism is not based on the imperialism of the past, which was imposed at the point of a gun in the employ of an East India Company; it is based on ‘dominialism’, which originates in commercial transactions.

While such distinctions have merit, and they appeal to academics and public intellectuals, from the perspective of the student in Shanghai, Bangalore, or Lahore… or São Paulo, or St. Petersburg, or Kiev, or La Paz, or pretty much anywhere outside of the G7 countries, such distinctions might ring hollow. Technically, it is true that one chooses to engage in transactions, but when those transactions relate to food, shelter, clothing, textbooks, and entertainment, the balance of economic power is tilted toward the supplier of the finished goods and away from the individual consumer.

Fading Power

The seat of global power is shifting from parliaments to boardrooms as corporations supplant governments, and today’s colonial masters of the people of the middle-income countries of the world are not France, the UK, or the USA, but Microsoft, Sony, and Wiley & Sons.

Whether this is ‘good’ or ‘bad’ or ‘right’ or ‘wrong’ is irrelevant. The fact is that the individuals in the middle-income countries outnumber the individuals in the G7 countries nearly 10:1, and they bear the brunt of Dominium. There was a time in India, when the British Empire seemed impervious… till Gandhi came along.

Today, Microsoft, Sony, and Wiley & Sons might seem impervious, but they enjoy their monopoly positions only so long as the people in the Middle Income countries do not realize that nothing stops them from being home to BookBoon, Khan Academy, or any of a multitude of other information services that requires effectively no capital investment.

As there is a cost for every benefit, and there’s no such thing as a free lunch, there is a benefit lurking with every cost, and chaos equals opportunity. The real game is not political but commercial. Currently, is being played in Silicon Valley, Manhattan, Mexico City, Miami, Shanghai, Singapore, and Bangalore.

Nothing stops it from being played in Accra, Addis Ababa, Dhaka, Kingston, Jakarta, Lahore, Montevideo, Tegucigalpa, or anywhere else.

Invest accordingly.

Prof. Evans

Oct 232011
 

An interesting pattern emerges, when we line up market structure from economics and finance with theories of developmental psychology and pedagogy, as in the table below. For more details than I describe here, click on the links at the head of each column to see the Wikipedia articles on these topics.

Admittedly, the alignment undoubtedly is not as precise as implied below, but the exercise is fruitful, at least in broad brushstrokes. The point here is to seek insights that might lead to testable hypotheses, rather than to present established conclusions concerning a detailed theory of society.

Brief Introduction of Each Column

Starting at the bottom, Maslow argued that the primary motive of all individuals is survival; where this is not assured, nothing else will occupy an individual’s mind. Once survival is assured, the individual will focus on safety. Only after survival and safety are fulfilled, can individuals focus on social needs. When survival, safety, and social needs are fulfilled, the individual can focus on self-esteem, which is a fundamental topic in itself, especially among those who grow up in dangerous or abusive environments. Finally, once all of these needs have been fulfilled, the individual can focus on self-actualization — ‘realizing one’s full potential’ or ‘going beyond oneself’ — which might manifest itself in the creation of works of art, volunteering, or any other activity that one feels compelled to do for its own sake

Kohlberg‘s focus was on morality. He argued that how an individual decides ‘right’ from ‘wrong’ starts at a primitive level and becomes more sophisticated as one matures. At the lowest level, the test is pain vs pleasure; if it hurts, it is wrong, and if it feels good, it is good. In time, this develops into egoism, in which the orientation is toward oneself to the exclusion of all others, often associated with young toddlers and their tantrums. As one develops — and corresponding to Maslow’s Social stage — one’s moral orientation becomes outward; first as ‘be nice’, and later as a law & order adherence to the rules. For a minority of the population, contradictions and other failings of the status quo lead to an moral orientation based on questioning authority and reconciling inconsistencies. Finally, some very few adopt a universal ethic, which manifests itself as a single principle that guides the individual’s sense of right and wrong. For some, this ethic might be non-aggression; for others, the superiority of one’s tribe; etc.

An individual can move up or down either hierarchy, but will tend to be grounded in a specific one at any particular time. Individuals generally can imagine the next developmental level up, but not beyond. Those operating at a very primitive level, for example, will be unable to distinguish a universal ethic from egoism. This, also, is not to say that a universal ethic will be viewed by others as ‘good’, as when one who has embraced non-aggression evaluates the morality of a tribalist who believes in the collective ‘superiority’ of his or her people.

Bloom‘s Taxonomy deals with pedagogy and the appropriate method of education. With very young children and those who are new to a subject, the first step is identification, which essentially is being able to point a thing when named. The next step is definition, which is when the learner is able to explain what something is without naming it. Next is application, which is using a tool, concept, or anything else in a prescribed fashion. Higher-order learning begins with analysis, which is breaking complex puzzles, concepts, or objects into simpler constituent units. There is some debate concerning the order of the last two steps: evaluation, which is judging a thing based on some standard, and synthesis, which is constructing something new from existing components, whether it is a structure, a work of art, story, etc.

Market structure is the relationship between the number of buyers and the number of sellers in a market. Here, we focus on the number of sellers and assume that the number of potential buyers is very large. The most restrictive market structure is the command economy, in which a central authority rations goods and services, and secondary trading is generally difficult if not forbidden outright. Next is monopoly, in which only one supplier exists. One of the hallmarks of monopoly markets is price discrimination which occurs when two buyers pay different prices for the same good or service; in any other market structure, buyers can shop among sellers and buy from the one with the lowest price. A market with a small number of sellers, each of whom represents a significant portion of the overall market is called an oligopoly. Oligopolies are distinguished by ‘interdependence’, in which a sale made by one oligopolist is a sale lost by each of the others; oligopolists often have very large advertising budgets. A market with imperfect competition has a large number of sellers — each of whom might have some amount of monopoly power based, most commonly, on geography — none of whom represents a significant fraction of the total market. Most of the sellers that each of us deals with in the real world are imperfect competitors, who might be able to price discriminate through coupons, early bird specials, happy hours, etc., but who do not have the market power of an electric, sewage, or water utility. A commodity market is one in which the good or service sold by one seller is economically identical to the others’. This includes things like wheat, gold, and financial assets that are sold on formal exchanges. At the furthest extreme are public goods*, which exist in such abundance that one’s consumption does not diminish anyone else’s ability to consume them, and one is unable to meter their consumption or stop others from consuming them. Common examples are breathable air at sea level, seawater, and anything else that one can consume in unlimited quantities for free.


Market Structure and Developmental Psychology
Maslow’s
Hierarchy
Kohlberg’s
Stages
Bloom’s
Taxonomy
Market
Structure
Self-Actualization Universal Ethic Synthesis Public Good
Self-Esteem “Question Authority” Evaluation Commodity
Social Law & Order Analysis Imperfect Competition
“Be Nice” Application Oligopoly
Safety Egoism Definition Monopoly
Survival Pain/Pleasure Identification Command


The Table Row-by-Row.

In general — and bearing in mind that the real world is much subtler than implied here — life in a command economy is brutish and mean. Individuals in such a society likely have little time for reflection on higher ideals, and instead focus their attention on survival and avoiding punishment.

In a society dominated by monopoly, the focus is on personal benefit to the exclusion of virtually all else. Corruption is a common feature in a society that has one provider for each category of goods and services, and innovation and entrepreneurship are essentially unknown — except, perhaps in the oligopolistic or imperfectly competitive underground economy — and daily life is highly bureaucratized.

A society dominated by imperfect competition — “a nation of shopkeepers” as Karl Marx sneeringly described 19th Century England — is organized along the principles of ‘getting along’, ‘not rocking the boat’, and ‘observing established customs’. Perhaps, regulations exist to ensure that the peace is kept. At a personal level, social needs are the primary focus, along with ‘knowing one’s place’. Marginal improvements in techniques are tolerated, so long as they are not disruptive.

A society dominated by commodification — ‘McCulture’, if you will — will be one in which individuals’ social needs are fulfilled in general, and the quest for self-esteem is the primary focus. Rules are broken, norms are evaluated, old ways are cast aside by each new generation. Seen from the outside, such a culture might look superficial, made of plastic, and chaotic, but it operates by its own internal logic of creative destruction and disruptive innovation.

Finally, a society dominated by public goods is a society in which individuals seek self-actualization through the synthesis of what has never existed before, based on some universal ethic. For those locked into the habits of thought of lower stages of development, a public goods society is indistinguishable from a command or monopoly society (i.e., ‘communism’). But, whereas command and monopoly societies suffer from chronic shortage, public goods societies have so must stuff that they just give it away.

The Way Ahead

The wealthy parts of the world today are dominated by commodification, self-esteem, and social change. However, a small but growing subculture of open source, free culture, and ubiquitous charity already has had an impact on modern life. The move is away from command and monopoly in the form of patent and copyright. Granted, those with a vested interest in the status quo will not go quietly, but go they will.

This is not a ‘good’ thing or a ‘bad’ thing, as all value is subjective. It simply is. Some will love the change, others will hate the change, and the great majority will just roll with the tide.

We are in the latter stages of an epochal transition from the capital/labor dichotomy to the knowledge/service dichotomy in an increasingly integrated global community, where borders are largely meaningless, anything that can be encoded as information — whether software, music, texts, videos, title, or even money — flows freely, and emerging institutions are supplanting traditional forms of social coordination.

Invest accordingly.

Prof. Evans


*Note: The term ‘public good’ should not be confused with ‘government-provided good’. If the ability of an individual to consume a good or service is reduced by others’ consumption, or if it is possible to restrict access, then it is a private good, regardless of whether it is provided by government or no direct fee is charged for it. Thus, ‘public schools’, ‘public beaches’, ‘public roads’, etc. are government-provided private goods.

Oct 152011
 


Bureaucratics – Images by Jan Banning

Those of us who live in relatively well run places can forget that corruption is a very important factor throughout most of the world.

Dutch historian and documentary photographer Jan Banning has published a 50-photograph exhibition that is “a comparative photographic study of the culture, rituals and symbols of state civil administrations and its servants in eight countries on five continents,” called Bureaucratics.

The images are a stark reminder of what awaits entrepreneurs: underpaid individuals with the power to expedite or impede progress. It is easy to vilify corrupt officials, but they are only responding to incentives and pursuing available options for which the expected benefit exceeds the expected cost, including opportunity cost. These are some of their faces.

It might be the case that borders are increasingly meaningless in our increasingly integrated global community, but bureaucrazy follows its own rules.

Invest accordingly.

Prof. Evans

Sep 292011
 

The Telegraph, a newspaper, has a story steeped in irony.

Germany and America were on a collision course on Tuesday night over the handling of Europe’s debt crisis after Berlin savaged plans to boost the EU rescue fund as a “stupid idea” and told the White House to sort out its own mess before giving gratuitous advice to others.

The long and the short of it is that the German Finance Minister is rejecting the policy of activist inflation that the heads of the US central bank and of the Treasury Department favor.

If anyone knows that you cannot inflate your way out of an economic crisis, it should be a German.

Invest accordingly.

Prof. Evans