As perhaps the earliest opponent of “net neutrality” regulation, it feels good to know I’m no longer “evil.”
Net Neutrality forever! Wait, never mind…
When you’ve written as much as I have about the weird Web topic known as “network neutrality,” this is big news indeed.
The celebrated openness of the Internet — network providers are not supposed to give preferential treatment to any traffic — is quietly losing powerful defenders.
Google Inc. has approached major cable and phone companies that carry Internet traffic with a proposal to create a fast lane for its own content, according to documents reviewed by The Wall Street Journal. Google has traditionally been one of the loudest advocates of equal network access for all content providers.
What some innocuously call “equal network access,” others call meddlesome regulation. Net neutrality could potentially provide a platform for Congress and the FCC to micromanage everything on the Net, from wires and switches to applications and services to the bits and bytes themselves. It is a potentially monstrous threat to dynamic innovation on the fast-growing Net, where experimentation still reigns.
But now Google, a newly powerful force in Washington and Obamaland, may be reversing course 180-degrees. The regulatory threat level may have just dropped from orange to yellow.
Update: Richard Bennett expertly comments here.
The Blago Revolt
Rich Karlgaard with a modest proposal: Pay politicians more!
Give these takers the chance to become rich legally.
Here is how. Let’s put every elected federal official and appointee and bureaucrat on a stock option plan. The value of these options would be tied to the health and wealth of America. Half the options would vest over two years so as to spur politicians to make immediate changes. The other half would vest over 20 years, so politicians could build a framework for enduring success and be rewarded for it.
The options would gain or lose value based on these criteria:
1. Noninflationary GDP growth
2. Job growth
3. Vitality of the small-business sector
4. Wealth growth of American households in all four socioeconomic quadrants
5. Educational achievements of American K-12 kids versus the world
6. Health and longevity of Americans
7. Prevention of military or terrorist attack
8. Reduction of the national debt
As Rich himself says, this proposal might not be exactly the way to go, or even close, but he gets at a very real and big problem in our representative democracy, one that modern public choice theorists like James Buchanan described. And which those older public choice theorists like Madison and Hamilton wrestled with as well as anyone ever has. They put a system in place that survived and mostly prospered for more than 200 years. But it does seem we need some big tweaks or even more fundamental changes to secure, once again, the blessings of liberty.
Bailouts kill productivity
The always excellent Matthew Slaughter with a new study on productivity and innovation:
So how has U.S. productivity grown recently? Unfortunately, very slowly. After averaging 2.7% productivity growth from 1995 through 2002, annual growth of productivity in the nonfarming business sector has slowed dramatically — to just 1.7% in 2005, 1.0% in 2006, and 1.4% in 2007. At this new average rate of under 1.4%, it would take nearly 52 years for average U.S. living standards to double — versus just 26 years at the earlier average. Signs of this slowdown are apparent, particularly in the waning competitiveness of U.S. sectors like automobiles, financial services and information technology.
Report from a far-away capital
David Brooks at his best:
zeros have lost their meanings. The amount of consideration once devoted to a proposal costing $3 billion is now devoted to a proposal costing $300 billion. Americans have entered the age of budgetary infinity. . . .
Your humble ambassador has heard analysts casually tick off the elements of the Obama plan: enact the largest infrastructure project in 50 years, initiate the broadest tax cut in history, reorganize 14 percent of the American economy, replace the carbon-based economy with a renewable-energy economy, restructure the auto industry, perhaps even rescue the Detroit Lions.
Technology: 2008 vs. 1992
See my comparison of the state of technology in 2008 versus 1992, when the last Democratic presidential transition took place.
Today, an average consumer can buy a terabyte hard drive (1 million megabytes), on which she might store her family photos, videos and other digital documents for as little as $109.99. In 1992, a terabyte drive, if such a thing had existed, would have cost $5 million.
Go to Forbes.com for the full article: “How Techno-creativity Will Save Us.”
Quote of the Day
“Rarely has there been such a case in which the sin is perfectly represented by the physical presence of the sinner. I had never seen him until the news this week, and there he was, a lipless, dull-featured, wig-wearing moron with a foul-mouthed harridan of a wife.”
— Peggy Noonan, commenting on the instantly infamous governor of Illinois, Blago.
Money Map
See Slate’s interactive guide to the bailout(s) (plural) (ad infinitum). Total committed so far: $5.596 trillion.
Talent, merit, luck, obsessive hard work, all-the-above?
Ross Douthat discusses Malcolm Gladwell’s latest book Outliers.
This means that while meritocratic success tends to be inherited, in an important sense — because the whole culture of obsessive hyper-achievement is just that, a culture that some Americans are raised in and steeped in and some aren’t — everybody doesn’t inherit the same level of success. Getting into the right kind of schools because you have the right kind of parents is generally a necessary condition for ascending the meritocratic ladder, but it isn’t a sufficient one; it tends to create a floor for failure, but it doesn’t guarantee a ceiling for achievement.
“Not just worse…a lot worse”
That, it seems, is the economic prognosis of the Obama financial team, looking ahead at a total global “demand collapse” and the total failure of fragile states like Pakistan.
the sense I get from them is that they are very worried that the economy will get a lot worse before it gets better. Not just worse… a lot worse. As in — double digit unemployment without the wiggle factors. Huge declines in aggregate demand. Significant, persistent deficits. That’s one reason why the Obama administration seems to be open to listening to every economist with an idea and is stocking the staff with the leading lights of the field. . . .
Where the discussion isn’t going, at least in public, (or the PR level), is the possibility that the first foreign policy crisis the administration will face will be the complete economic collapse of a large, unstable nation. To be sure, Pakistan is nearly broke, and U.S. policy makers seem to be aware of that; but a worldwide demand crisis could lead to social unrest in countries like Indonesia and Malaysia, Singapore, the Ukraine, Japan, Turkey or Egypt (which is facing an internal political crisis of epic proportions already). The U.S. won’t have the resources to, say, engineer the rescue of the peso again, or intervene in Asia as in 1997.
Team Obama may believe this. And they may be right. But it probably doesn’t hurt their cause to make people think they believe this. If things do get much worse, they can say they anticipated it. If things improve, they can take credit for a heroic and historic rescue. (See, “Committee to Save the World.” ca. 1999.)
To a number of smart people, all this seems like too much “depression lust.”
Quote of the Day
“We’ve found that decentralized decision-making, in which millions of independent economic actors make judgments using their own money, results in the wisest allocation of scarce resources across our complex society. And we’ve found the market to be more reliable in heeding price signals and meting out discipline to failing enterprises than government could ever be.”
— Chris Cox, SEC chairman, December 11, 2008, attempting some much needed self-regulation of the public sector.
Web Wars
A new report says we’re not prepared for the cyberwars to come and need a White House office to address emerging threats.
“Panhandlers!”
My old college roommate Jared Polis, soon to be a Democratic Congressman from Colorado, pens a terrific op-ed in today’s Wall Street Journal offering a unique non-bail-out solution to the automobile meltdown.
By waiving the future capital-gains tax on all investments in the automobile industry, we enhance the projected return models and therefore the likely occurrence of a privately funded “bailout.” There are turnaround firms and funds, and they are experts at what needs to be done. Tax exemption for gains would certainly get their attention. It also wouldn’t cost taxpayers anything because it only forgoes future government revenues that wouldn’t exist absent this incentive.
Hayek’s the answer, as usual
Richard Epstein advocates the same type of radical decentralization of education that I proposed in my last Wall Street Journal article.
no one knows how to develop standards for education that match the precise ones in place for today’s industrial products. . . .
At root, educational success depends upon the distinctive interaction between a responsive student and a dedicated teacher. . . .
The more sensible approach, therefore, is to follow economist Friedrich Hayek’s lead: Push hard toward decentralization, so that different groups can take their crack at developing integrated K-12 educational programs that might work, precisely because they are fueled by competitive forces. Let’s remove the fetters that local governments impose on charter schools. Let’s expand the use of vouchers, without onerous government conditions. Let’s encourage the formation of bottom-up education programs that build off a strong home-schooled base.
Quote of the Day
“What we ended up with is a failure of government, which we have erroneously termed a failure of capitalism.”
— Harvey Golub, December 9, 2008
Danger Zone
We are in a new, if entirely predictable, danger zone. The State of Illinois and City of Chicago are now ceasing business with Bank of America because BofA declined to extend credit to Republic Windows and Doors, a plant where workers are now engaged in a sit-in.
The take-over of much of the U.S. financial industry — with health care and maybe energy next — could lead to endless mischief of this sort and much worse.
A friend writes to say: “fascism has come to America.” Alarmist, or prophetic?
“Complete Bunkum”
Bill Frezza with a hilarious send-up of the “science” of macroeconomics.
I confess that the only Hayek book I made it through without my eyes glazing over was “The Fatal Conceit.” It’s a slim volume written later in life, apparently after Hayek discovered humbleness, an unusual discovery for an economist. His thesis is simple – “I don’t care how smart you are, you can’t keep track of all this s**t.”
Don’t fear Murdoch’s genius
Wall Street Journal alum Tunku Varadarajan with an incisive and amusing look at Rupert Murdoch and his proprietorship of the Journal so far.
this writer believes we are wimps to be scared by Murdoch; compared with Northcliffe and Beaverbrook and Hearst, he’s a pussycat. Murdoch phobia shows what a soft, homogenized, emasculated world we live in. Murdoch phobia is also the result of the press obsessing about (and inflating) its own importance. There are many other people, such as Robert Rubin and Jeffrey Sachs, who are more dangerous than the man who bought The Wall Street Journal — and who, in doing so, saved The Wall Street Journal from itself.
Straw Men Can’t Swim
The venerable Economist magazine has made a hash of my research on the growth of the Internet, which examines the rich media technologies now flooding onto the Web and projects Internet traffic over the coming decade. This “exaflood” of new applications and services represents a bounty of new entertainment, education, and business applications that can drive productivity and economic growth across all our industries and the world economy.
But somehow, The Economist was convinced that my research represents some “gloomy prophesy,” that I am “doom-mongering” about an Internet “overload” that could “crash” the Internet. Where does The Economist find any evidence for these silly charges?
In a series of reports, articles (here and here), and presentations around the globe — and in a long, detailed, nuanced, very pleasant interview with The Economist, in which I thought the reporter grasped the key points — I have consistently said the exaflood is an opportunity, an embarrassment of riches.
I’ve also said it will take a lot of investment in networks (both wired and wireless), data centers, and other cloud infrastructure to both drive and accommodate this exaflood. Some have questioned this rather mundane statement, but for the life of me I can’t figure out why they deny building this amazingly powerful global Internet might cost a good bit of money.
One critic of mine has said he thinks we might need to spend $5-10 billion on new Net infrastructure over the next five years. What? We already spend some $70 billion a year on all communications infrastructure in the U.S. with an ever greater portion of that going toward what we might consider the Net. Google invests more than $3 billion a year in its cloud infrastructure, Verizon is building a $25-billion fiber-to-the-home network, and AT&T is investing another $10 billion, just for starters. Over the last 10 years, the cable TV companies invested some $120 billion. And Microsoft just yesterday said its new cloud computing infrastructure will consist of 20 new “super data centers,” at $1 billion a piece.
I’m glad The Economist quoted my line that “today’s networks are not remotely prepared to handle this exaflood.” Which is absolutely, unambiguously, uncontroversially true. Can you get all the HD video you want over your broadband connection today? Do all your remote applications work as fast as you’d like? Is your mobile phone and Wi-Fi access as widespread and flawless as you’d like? Do videos or applications always work instantly, without ever a hint of buffer or delay? Are today’s metro switches prepared for a jump from voice-over-IP to widespread high-resolution video conferencing? No, not even close.
But as we add capacity and robustness to many of these access networks, usage and traffic will surge, and the bottlenecks will shift to other parts of the Net. Core, edge, metro, access, data center — the architecture of the Net is ever-changing, with technologies and upgrades and investment happening in different spots at varying pace. This is not a debate about whether the Internet will “crash.” It’s a discussion about how the Net will evolve and grow, about what its capabilities and architecture will be, and about how much it will cost and how we will govern it, but mostly about how much it will yield in new innovation and economic growth.
The Economist and the myriad bloggers, who everyday try to kill some phantom catastrophe theory I do not recognize, are engaging in the old and very tedious practice of setting up digital straw men, which they then heroically strike down with a bold punch of the delete button. Ignoring the real issues and the real debate doesn’t take much effort, nor much thought.
