Economics, Law, Politics

Why Nations Fail

why_nations_fail_coverWhy Nations Fail: The Origins of Power, Prosperity, and Poverty by Daron Acemoglu and James A. Robinson

I recently finished  Why Nations Fail, a very interesting look at the factors behind economic success or failure of nations. According to the author, the deciding factor is a country’s institutions, such as its legal system, system of government, and so on.

In short, institutions which are extractive (are designed to extract economic resources from the majority) lead to policies which maximise extraction, and hinder the majority to benefit economically, which lessens economic growth. These policies may include monopolies, slavery, nepotism, and so on.

On the other hand, institutions which are inclusive (let a majority take part in the economy and political decision-making), let the majority benefit economically, which leads to better economic growth overall.

The author supports his case with a large number of historical case studies, in particular, similar countries whose economies have diverged because of which political faction won and which social institutions they created.

Economics, Literature

Customer is king

When flat-screen TV:s started to appear, they were much better than old cathode-ray tube TVs. You’d think customers would be happy with a TV which was more convenient, had better picture and took less space than the old ones, but no, soon those overblown, ignorant bastards started demanding even more. They wanted flat-screen TV:s with more functions, like built-in media players. They wanted even better and bigger pictures. They wanted them cheaper!

And the customers got what they wanted. Why? Because producers could make even better and cheaper TVs, thanks to technological progress, and if they didn’t sell their customers better and cheaper TVs, their competitors would. And instead of giving the producers a break, those selfish customers chose to buy the best and cheapest TVs they could find.

The same thing is happening to books. Lots of people think e-books are more convenient than print books, and STILL those ignorant, selfish bastards want e-books to be cheaper and without the hassle of DRM, just because they can be, with no regard to the writer/publisher’s ability to support themselves.

And the worst thing is, they’ll get what they want. If a writer/publisher doesn’t offer the best and cheapest product they can to the customer, someone else will. The customer doesn’t just compare your e-book to your paper book; they also compare your e-book to someone else’s e-book, and if you’re not already one of their favourite authors, they’re likely to let price and convenience affect their choice.

Customer is king. As a writer/publisher, you’re just a humble servant.

Economics, Politics

A proposal to replace software copyright

Two of the most commonly stated purposes of commercial copyright are:
  1. Being beneficial to society as a whole by providing an incentive for the production of copyrighted goods, and
  2. Giving creators of copyrighted goods fair compensation for their work
It has been questioned if copyright law really satisfies these two purposes, and if society is perhaps better off without copyright, or with a significantly shortened term of duration. In the case of computer software, the case against copyright is especially strong, since a huge amount of software is already produced without direct compensation to the authors, so called Free and Open Source Software (FOSS).

In this post I’ll make a proposal which attempts to capture the best aspects of FOSS, increase competition in the software industry, and still provide for those businesses that feel they need software copyright in order to make a profit:

Traditional copyright on software is abolished, but the author of software is granted an exclusive right to copy and distribute it for three years, provided they make its source code available to the public.

Under this system, an author who sells software to the mass market would be strongly encouraged to release their source code, or they would have no protection against copying and unauthorised use.
The authors would have three years to recoup their R&D efforts, but once the three years were up, anyone could modify their software, add their own features and start competing in the same market segment.
This would lower the barrier of entry to the market, and give software companies a strong incentive to continue to innovate once they’ve reached a dominant position.

On the other hand, authors who don’t sell their software to the mass market, would not be forced to reveal their source code, since they could rely on contracts and non-disclosure agreements instead of copyright to prevent unauthorised copying and use. The system would be self-regulating in the sense that the authors would themselves decide if the legal protection was important enough for them to release their source code.

The software industry as a whole would benefit from being able to take advantage of the work of competitors (positive externalities), while retaining the financial incentive to produce and sell software.

But there would also be advantages that are due to the peculiarities of the software industry. Proprietary software often creates lock-in effects, that is, prevents its users to switch to competing software and retain interoperatbility with their other software and computer systems. The interoperability problems would be alleviated if competitors could base their own software on the three-year-old source code of the market leaders.

Perhaps the most important feature of the proposal is its simplicity. There would be no need to register software or its source code, no need to use force against software authors, and no need to go to court to mandate the release of source code. The only burden placed on the courts would be to decide if the source code had been properly released to the public before ruling in favour of an author claiming infringement.