Some advocates of Free Software attack the concept of intellectual property. They claim that the work of others should be made available to the world because it's the "right thing to do." Some developers buy into it in the hope of gaining exposure that could help them later in their careers and because they believe they are doing something beneficial for the world. I believe that, in the long run, both groups hold a terribly distorted view. In fact, after participating in the industry for 34 years now, I believe the Free Software movement has irreparably damaged the industry.
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Software development is an almost purely intellectual task. In that sense, it's similar to writing a book, designing a building, writing a play, composing a song or painting a picture. As with those skills, writing good software is supremely difficult. In the same way that anyone can write a short story or draw a picture, anyone can write a simple program. But modern, full-featured software is full of complexity, depth and richness that exceeds most other human endeavors.
The logic of many users and advocates of Free Software is flawed. For example, they often encourage studying the source code. In addition to benefiting from the use of the software, they also benefit from the creativity, education and programming skills of the original developers. Their employers are penalized by having to pay their staff to learn about and possibly maintain the code. While that's a potential necessity in some businesses, for most it amounts to significant added cost. The advocates distort the truth to their employers by emphasizing the fact that the software is free, while failing to acknowledge the significantly higher labor costs.
Users of Free Software also often claim that ownership of intellectual property doesn't make any sense. They say things like "how can you own an idea?" or "making a copy doesn't cost the developer anything extra" or "knowledge belongs to everyone." What they're really saying is that they want the benefits from the hard work of others, but without paying for it. They are rejecting the concept of private property at its core. If a person can't own the things they create with their own mind then what can they own? One result of this is that a lot of Free Software contains multiple patent licensing violations, which are ignored by the users as "not important."
From the developer's perspective, giving their work away for free encourages the concept that software has no real value. Rather than increasing the value of their future labor by gaining exposure in the community, the value of that future work is in fact minimized. If developers don't value their work enough to charge for it, then why should potential future employers feel compelled to pay? If all software is free, then the people who create it must not be worth very much, if anything. Competing against free software is a continual challenge. If no one is willing to pay for software, then how will companies pay the salary of those developers?
Imagine a band that gave away all of their music, then suddenly published a new recording that they wanted to charge for. They've created a market barrier for themselves. Actors have this problem, too. After being on TV for a while, their value is diminished for movies; movie-only actors can charge much more per film, as a result of audience expectations. In a similar way, software developers are denying themselves the possibility of future ownership and profits.
Let's say a developer comes up with a wonderful application that could benefit the lives of millions. They have given away all of their previous work. But now this idea is so special that they want to own it and charge people for it. How would the market respond? Rather than suddenly recognizing value in the new work, which I believe is the common self-deception, the market will instead reject the new application in favor of additional Free applications, in spite of the difference in quality or character of the new app, because they have been conditioned to expect that developer's code to be free. The developer has inadvertently shot themselves in the foot.
Personally, I use as much commercial software as I can. I do so because it's to my benefit. I am helping to support the value of my time as a developer, and I'm minimizing my support and maintenance costs by being able to call for support when I need it. Even so, I do use some free software when better alternatives aren't available (such as WordPress) – but I do so without adopting the mantra of many advocates that "all software should be free." Property rights are the cornerstone of Liberty, and must be defended at every opportunity.
Friday, 18 April 2008
Tuesday, 15 April 2008
Food Shortages
There are more and more reports in the news about food shortages. Riots have even started in some places, like Haiti. And of course, when their citizens start to feel threatened, governments feel compelled to respond. Unfortunately, that always makes things worse. What many don't understand yet is that the reason for the shortages in the first place is entirely because of government "controls" or various other forms of intervention.
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Look at Britain, for example. A while back, the government mandated that pig farmers reform the way they raise pigs to make the process more "humane". As a (totally predictable) result, raising pigs became more expensive. The farmers were unable to pass the costs along to the public, who, presumably, wanted the changes in the first place. So a lot of farmers stopped raising pigs. Their breeding herd is now about 425,000, or roughly half the size it was in 1990. Combine that with the recent run-up in grain prices, and presto! Now there's a crisis with pigs.
No government ever seems to ask "who will pay for this?" or "what will the effects be?" Unfortunately, even if they did ask such questions, their answers would usually be wrong. The economy is just too hard to predict. That's one reason why free markets are the only viable long-term answer. In the case of pigs, if people wanted farmers to treat pigs more humanely, they could have boycotted farmers who didn't, and expressed their willingness to pay a higher price for better animal conditions (analogous to organic produce). The market would have communicated the message. No shortages would have developed.
Now the same kind of thing is happening with other foods. The government says "if you grow corn for biofuel, we'll give you a subsidy." After all, biofuels will help reduce our dependency on oil, and that's a good thing, right? So farmers replaced wheat with corn. Now there's a wheat shortage. Oh, and it turns out that corn-derived ethanol isn't an economically viable substitute for oil after all. So now we're screwed three ways: not enough wheat, ethanol that takes more energy to produce than it delivers, and more government debt / inflation. Again, this just wouldn't have happened in a free market.
What about food aid to developing countries? Those people are hungry, and they deserve our help, right? We're richer than they are, and we can afford it, so it has to be a good thing, right? Wrong. Food aid actually does MUCH more harm than good. For one thing, the money never goes to the people who it would really help the most. Let's say the money is used to buy food on the open market and deliver it to poor, downtrodden communities. First, the extra demand for food drives prices higher for everyone else, so the people who aren't receiving aid suffer as a result. Second, how can a local farmer compete with free food? When continued over a long period, farmers are driven out of business. As Jim Rogers explains in his book Adventure Capitalist, there used to be a lot of farmers in Ethiopia. It has rich, fertile land. Lots of free food over the years has driven the farmers out of business – there are probably few people there now who even remember how to farm. So now if there's a global food shortage, where the food programs are no longer able to afford to buy food in the open market, guess who suffers? The people in those countries you thought you were helping will starve, because they've become dependent and can no longer support themselves. Yeah, food "aid" – another collectivist crime against humanity.
So what's the cure for food shortages? Stop subsidies. Stop interventions. Abolish tariffs and other restrictions on free trade. Repeal or minimize government restrictions on farmers (like legislating how pigs are treated). Let the free market work!
[[MORE]]
Look at Britain, for example. A while back, the government mandated that pig farmers reform the way they raise pigs to make the process more "humane". As a (totally predictable) result, raising pigs became more expensive. The farmers were unable to pass the costs along to the public, who, presumably, wanted the changes in the first place. So a lot of farmers stopped raising pigs. Their breeding herd is now about 425,000, or roughly half the size it was in 1990. Combine that with the recent run-up in grain prices, and presto! Now there's a crisis with pigs.
No government ever seems to ask "who will pay for this?" or "what will the effects be?" Unfortunately, even if they did ask such questions, their answers would usually be wrong. The economy is just too hard to predict. That's one reason why free markets are the only viable long-term answer. In the case of pigs, if people wanted farmers to treat pigs more humanely, they could have boycotted farmers who didn't, and expressed their willingness to pay a higher price for better animal conditions (analogous to organic produce). The market would have communicated the message. No shortages would have developed.
Now the same kind of thing is happening with other foods. The government says "if you grow corn for biofuel, we'll give you a subsidy." After all, biofuels will help reduce our dependency on oil, and that's a good thing, right? So farmers replaced wheat with corn. Now there's a wheat shortage. Oh, and it turns out that corn-derived ethanol isn't an economically viable substitute for oil after all. So now we're screwed three ways: not enough wheat, ethanol that takes more energy to produce than it delivers, and more government debt / inflation. Again, this just wouldn't have happened in a free market.
What about food aid to developing countries? Those people are hungry, and they deserve our help, right? We're richer than they are, and we can afford it, so it has to be a good thing, right? Wrong. Food aid actually does MUCH more harm than good. For one thing, the money never goes to the people who it would really help the most. Let's say the money is used to buy food on the open market and deliver it to poor, downtrodden communities. First, the extra demand for food drives prices higher for everyone else, so the people who aren't receiving aid suffer as a result. Second, how can a local farmer compete with free food? When continued over a long period, farmers are driven out of business. As Jim Rogers explains in his book Adventure Capitalist, there used to be a lot of farmers in Ethiopia. It has rich, fertile land. Lots of free food over the years has driven the farmers out of business – there are probably few people there now who even remember how to farm. So now if there's a global food shortage, where the food programs are no longer able to afford to buy food in the open market, guess who suffers? The people in those countries you thought you were helping will starve, because they've become dependent and can no longer support themselves. Yeah, food "aid" – another collectivist crime against humanity.
So what's the cure for food shortages? Stop subsidies. Stop interventions. Abolish tariffs and other restrictions on free trade. Repeal or minimize government restrictions on farmers (like legislating how pigs are treated). Let the free market work!
Friday, 11 April 2008
Producer vs. Consumer Jobs
The Bureau of Labor Statistics' in the US recently published numbers for how many people are employed in various areas of the economy can break this down slightly differently than how they do it, according to producers (those who are creating things of value) and those who are either consumers or whose jobs directly depend on the producers (accountants, lawyers, etc). Using their numbers:
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Producers
13,643,000 Manufacturing
3,010,000 Information (it might be a stretch to include all of these jobs...)
751,000 Mining and logging
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17,404,000
Consumers
22,387,000 Government
13,682,000 Leisure and hospitality
21,467,000 Wholesale and retail
18,036,000 Professional and business services
18,699,000 Education and health
8,228,000 Financial
4,532,000 Transportation
7,338,000 Construction
5,516,000 Other services
------------------
119,885,000
Total workers = 137,289,000
Which means that the ENTIRE ECONOMY is being carried by only about 13% of the total population (or about 1 out of every 8 people).
Just to be totally clear: if those producer jobs were to go away, the rest of the economy would collapse, even under the best of economic conditions.
Imagine an economy with just a handful of people: a farmer, an accountant, a store clerk and a government worker. The farmer is the only one producing anything. If the farmer goes away, what's left to sell at the store? With no sales, who needs an accountant? With nothing left to tax, there's no way to pay the government worker. The ripple effect is catastrophic -- and importing more stuff from overseas than we sell there just compounds the problem.
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Producers
13,643,000 Manufacturing
3,010,000 Information (it might be a stretch to include all of these jobs...)
751,000 Mining and logging
------------------
17,404,000
Consumers
22,387,000 Government
13,682,000 Leisure and hospitality
21,467,000 Wholesale and retail
18,036,000 Professional and business services
18,699,000 Education and health
8,228,000 Financial
4,532,000 Transportation
7,338,000 Construction
5,516,000 Other services
------------------
119,885,000
Total workers = 137,289,000
Which means that the ENTIRE ECONOMY is being carried by only about 13% of the total population (or about 1 out of every 8 people).
Just to be totally clear: if those producer jobs were to go away, the rest of the economy would collapse, even under the best of economic conditions.
Imagine an economy with just a handful of people: a farmer, an accountant, a store clerk and a government worker. The farmer is the only one producing anything. If the farmer goes away, what's left to sell at the store? With no sales, who needs an accountant? With nothing left to tax, there's no way to pay the government worker. The ripple effect is catastrophic -- and importing more stuff from overseas than we sell there just compounds the problem.
Wednesday, 9 April 2008
What did I learn in school?
I went to public school in the US for K through 12, and then to a public university (UC Santa Barbara). I skipped a few years and finally graduated with a BA in Math in 1978, just after I turned 19, so I spent about 14 years in the public school system.
What did I learn in school?
1. How to take tests
2. How to memorize and regurgitate
3. How to conform and get along
[[MORE]]4. How to not conform and not get caught
5. Teachers often know less than their students
6. Real education happens with your peers, not in the classroom
7. Most people are jerks
The most valuable lesson:
Society doesn't care about truth, honesty or the ability to think critically. What's important are rules, conformity and political correctness.
The purpose of American schools is not to teach reasoning skills, or how to get and hold a job, or anything along those lines. The schools are there as babysitters so both parents can work, and to teach the values of the state and obedience to the state.
If you think I'm exaggerating, just look at modern history books as an example: horribly distorted and full of outright lies. It's a joke.
Uneducated minds are then more susceptible to propaganda from the mass media and religion. Throw in some new-age stuff about how feelings can be used to discover things about the world around us, and you end up with a society that's so confused it becomes self-destructive -- and government schools are at the root of it.
What did I learn in school?
1. How to take tests
2. How to memorize and regurgitate
3. How to conform and get along
[[MORE]]4. How to not conform and not get caught
5. Teachers often know less than their students
6. Real education happens with your peers, not in the classroom
7. Most people are jerks
The most valuable lesson:
Society doesn't care about truth, honesty or the ability to think critically. What's important are rules, conformity and political correctness.
The purpose of American schools is not to teach reasoning skills, or how to get and hold a job, or anything along those lines. The schools are there as babysitters so both parents can work, and to teach the values of the state and obedience to the state.
If you think I'm exaggerating, just look at modern history books as an example: horribly distorted and full of outright lies. It's a joke.
Uneducated minds are then more susceptible to propaganda from the mass media and religion. Throw in some new-age stuff about how feelings can be used to discover things about the world around us, and you end up with a society that's so confused it becomes self-destructive -- and government schools are at the root of it.
Tuesday, 11 March 2008
Interest rate manipulation
The problem with central banks like the Fed is that they distort the markets by setting interest rates at artificial levels. That sends incorrect signals to investors and businesses. For example, low interest rates cause business valuations to rise, so stocks go up. Or apparently cheap money might allow a business to justify a loan or an expansion that wouldn't be possible if rates were higher. That's the boom phase. What happens next is that when the economy gets "overheated" (high inflation), the central banks raise rates. Things then start to unwind: company valuations drop, new loans are no longer affordable, etc. That's the contraction (recession) phase.
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On a gold standard with full-reserve banking, interest rates are always set at free-market levels -- so businesses and individuals are receiving correct, undistorted information about the economy. Rates also tend to be more consistent. Longer-term planning becomes possible; 99 yr loans again become feasible, for example. The business cycle also goes away: no more booms and busts, because the assumptions underlying investments and other spending don't suddenly turn out to be untrue.
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On a gold standard with full-reserve banking, interest rates are always set at free-market levels -- so businesses and individuals are receiving correct, undistorted information about the economy. Rates also tend to be more consistent. Longer-term planning becomes possible; 99 yr loans again become feasible, for example. The business cycle also goes away: no more booms and busts, because the assumptions underlying investments and other spending don't suddenly turn out to be untrue.
Friday, 29 February 2008
Bush Economic Doublespeak
In the article below, President Bush uses a lot of doublespeak, which I've attempted to translate here:
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- "the country is not recession-bound" --> "the country is already in a recession"
- "concern about slowing economic growth" --> "concern that the election won't go the way I want and the next president might not carry on my policies"
- "rejected for now any additional stimulus efforts" --> "planning to hand out more cash right before the election"
- "We acted robustly" --> "we didn't know what else to do"
- "We'll see the effects of this pro-growth package" --> "everyone likes more money, so this has to help"
- "Why don't we let stimulus package 1, which seemed like a good idea at the time, have a chance to kick in?" --> "We have to number the cash hand-out programs now, because there will eventually be so many that you won't know which one we're talking about otherwise"
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- "I don't think we're headed to recession." --> "We've changed the definition of a recession so that they only happen when the Democrats are in office"
- "But no question, we're in a slowdown." --> "you ain't seen nothin' yet!"
- "So we're still for a strong dollar." --> "a strong dollar means that there are a whole lot of them, right? I read that on the Internet somewhere, so it has to be true, right?"
- "We'll make it through this period just like we made it through other periods of uncertainty during my presidency" --> "yet another unmitigated disaster"
WASHINGTON - President Bush said Thursday the country is not recession-bound and, despite expressing concern about slowing economic growth, rejected for now any additional stimulus efforts. "We acted robustly," he said.
"We'll see the effects of this pro-growth package," Bush told reporters at a White House news conference, acknowledging that some lawmakers already are talking about a second stimulus package. "Why don't we let stimulus package 1, which seemed like a good idea at the time, have a chance to kick in?"
Bush's view of the economy was decidedly rosier than that of many economists, who say the country is nearing recession territory or may already be there. "I'm concerned about the economy," he said. "I don't think we're headed to recession. But no question, we're in a slowdown."
The centerpiece of government efforts to brace the wobbly economy is a package Congress passed and Bush signed last month. It will rush rebates ranging from $300 to $1,200 to millions of people and give tax incentives to businesses.
On one issue particularly worrisome to American consumers, there are indications that paying $4 for a gallon of gasoline is not out of the question once the summer driving season arrives. Asked about that, Bush said "That's interesting. I hadn't heard that. ... I know it's high now."
Bush: 'We’re in a slowdown'
Feb. 28: President Bush says, "I don’t think we’re headed to recession. But no question, we’re in a slowdown,” at a news conference at the White House.
Bush also telegraphed optimism about the U.S. dollar, which has been declining in value.
"I believe that our economy has got the fundamentals in place for us to ... grow and continue growing, more robustly hopefully than we're growing now," he said. "So we're still for a strong dollar."
Bush also used his news conference to press Congress to give telecommunications companies legal immunity for helping the government eavesdrop after the Sept. 11 terrorist attacks.
Bush criticized the Democratic presidential candidates over their attempts to disassociate themselves from the North American Free Trade Agreement, a free-trade pact between the U.S., Canada and Mexico. Bush said the deal is contributing to more and better-paying jobs for Americans.
Following his news conference, Bush traveled to the Labor Department to meet with his economic advisers.
Afterward, he expressed confidence in the nation's ability to weather the economic downturn.
"We'll make it through this period just like we made it through other periods of uncertainty during my presidency," Bush said.
Thursday, 28 February 2008
Path to Hyperinflation
I was reading the Wikipedia article on Hyperinflation, and noticed that they have a list of the ways that governments have historically hidden the true rate of inflation, which helps pave the road to eventual hyperinflation. In case you were wondering what might lay ahead:
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1. Outright lying as to official statistics such as money supply, inflation or reserves.
Current government statistics are awash in lies. Everything from unemployment statistics to the CPI and the GDP are badly distorted. See http://www.shadowstats.com/ for details.
2. Suppression of publication of money supply statistics, or inflation indices.
The M3 money supply stats are no longer published by the Fed.
3. Price and wage controls.
This hasn't happened recently. However, inflation was only around 4% when Nixon tried it back in the early 1970's. Inflation is now about three times that level, when calculated in the same way as it was back then.
4. Forced savings schemes, designed to suck up excess liquidity. These savings schemes may be described as pension schemes, emergency funds, war funds, or similar.
This sounds like Obama's "automatic workplace pensions".
5. Adjusting the components of the Consumer Price Index, to remove those items whose prices are rising the fastest.
Food and energy are not included in the CPI. They also make "hedonic" adjustments to remove other items from the index whose prices are rising fast, resulting in further distortions.
[[MORE]]
1. Outright lying as to official statistics such as money supply, inflation or reserves.
Current government statistics are awash in lies. Everything from unemployment statistics to the CPI and the GDP are badly distorted. See http://www.shadowstats.com/ for details.
2. Suppression of publication of money supply statistics, or inflation indices.
The M3 money supply stats are no longer published by the Fed.
3. Price and wage controls.
This hasn't happened recently. However, inflation was only around 4% when Nixon tried it back in the early 1970's. Inflation is now about three times that level, when calculated in the same way as it was back then.
4. Forced savings schemes, designed to suck up excess liquidity. These savings schemes may be described as pension schemes, emergency funds, war funds, or similar.
This sounds like Obama's "automatic workplace pensions".
5. Adjusting the components of the Consumer Price Index, to remove those items whose prices are rising the fastest.
Food and energy are not included in the CPI. They also make "hedonic" adjustments to remove other items from the index whose prices are rising fast, resulting in further distortions.
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