Taxing Criminals

Stamp Duty
Want to commit a crime? Pay taxes first...

The Economist ran an interesting story about “a government-issued stamp that is expected to remain unpurchased, but which users of illegal goods must, by law, affix to substances they are not allowed to possess”. Essentially, the government is creating another layer of crime above a crime. It’s as good as saying you should not be stealing people’s money, but if you do really steal, then you’ve to pay taxes on your loot. If you avoid the taxes, you’re committing tax evasion plus theft.

Authorities seem to believe that the tax helps to further punish people who are arrested for a crime (since the inability to discover the original crime would make the taxes lame anyways) and thus serve a higher level of deterrence to the crime. I wonder if criminals would bother to discover that they would be penalized twice for a single crime.

The Marijuana Tax Act of 1937 was cited as an early conception of taxing illegal drugs. It is interesting that old bureaucracies sometimes like to make an act inconvenient rather than ban it outright. Maybe it just happens to drugs; Singapore could actually try applying extremely steep taxes on Chewing Gums rather than ban it outright.

Planned Obsolescence

Buy and throw away?

If you watched The Story of Stuff, which I introduced to this site several weeks back, it introduces several ideas that are perhaps unfamiliar to most laymen or locals for the matter. One such idea is planned obsolescence. Planned obsolescence can be defined as “the process of a product becoming obsolete and/or non-functional after a certain period or amount of use in a way that is planned or designed by the manufacturer”. In other words, when product engineers design your product, they purposely design it such that it will physically or psychologically become obsolete (i.e. useless) after a while.

This sounds like a very disturbing idea, but it makes sense to the producer of the good for the consumer to keep purchasing “updated and improved” goods from them as their old ones break down. Planned obsolescence may even be described as an art; it would take much ingenuity, in fact, to design a product such that it does not break down too obviously as a result of inferior quality but consumers still want to buy this product and its future “upgrades”.

If you wonder how planned obsolescence affects us, this article from The Daily Green is useful in highlighting some occurrences of planned obsolescence in products we use in our daily lives. So have you unintentionally succumbed to this phenomena?

Biz Connect

Social Media
Buzz Who?

Just recently, The Economist was tabulating the impacts of social networks and featured significant discussion on their impact on the business. The Big Money has a list of top 50 brand names (they call them ‘companies’) that has been doing well on Facebook as a social media vehicle for their brands. It appears that Facebook have become some sort of brand management tool that is carefully balanced with fans/consumer followings and interactions. As applications proliferate on these social networking platforms, there is a risk that all these commercial stuff are crowding out the actual social messages that are being sent over it. While

Google recently produced Buzz as I’ve highlighted previously, and The Economist thinks that it’ll hardly do much to dent the influence of Facebook and Twitter.

Blended Value

House Money
Into the Blender!

Just when people are lambasting financial institutions and entities like hedge funds, Jed Emerson who coined the concept of ‘Blended Value‘, suggests that these financial entities can play a positive social role. Fast Company had an interview with him about this in 60 seconds.

As reported on Economist Online, Jed thinks that hedge funds which focuses on fundamentals mirrors sustainably investing, meaning that they would act to move capital to places where they are used properly and for good of the society.

Trading according to rigorous fundamental research can often mirror sustainable investing, which seeks to profit by taking into account social and environmental factors, he says. Fundamental hedge funds are far more likely than other investors to try to identify a firm’s off-balance-sheet exposures, of which a growing proportion may be “environmental or social liabilities present in a market or company but not explicitly accounted for in traditional numeric valuation or mainstream investor analysis”.

He makes an important point about ‘Shorting’, which The Economist goes on to discuss. As a matter of fact, the market is kind of biased towards growth and that should be the case since the economy is usually growing but then if people are not rational enough to sell, then there has to be short-sellers who are rational enough to sell but don’t have the shares in the first place. This way, buying and selling would reflect a more fundamental value. This is of course, an ideal – prices hardly reflect any reality in moments. But at least we know that the bulls and the bears are almost right the same number of times (half of the time each; which reflects dynamism of the market). And so there’s no way we should have anything against them.

Diversity & Sophistication

Product Nodes
Just like societies...

Economics have been a subject troubled with the idea of scarcity and thinking about means of distributing resources to produce what we call ‘wealth’. Scarcity is a clear-cut notion and ‘abundance’ represents the other end of the spectrum. The problem is that we are so familiar with scarcity we cannot be quite sure what really represents abundance (infinite, in short run or long run?) and thus, we actually have a problem quantifying wealth. What constitutes richness? Money? Gold? Having the most expensive resources? Having in abundance the most useful resource? Having the most diverse resources? Having human capital?

We’ve seen that most of the rich, developed world appears to be the same, with the similar institutions, rule of law and informal market rules; most of them produce certain complex niche products while importing a variety of inputs as well as many other consumer products. On the other hand, developing economies appears more diverse. This shows that the end state of riches can probably be attained through different pathways. The Economists’ latest Economic Focus discuss how recent research shows that sophistication in the economy signals at the potential of an economy.

The Product Space map that the researchers came up with shows that an economy producing at a more centrally located product zone where it is easy to diversify into many other products would fare better than one in an isolated region. However, the isolated products often yield greater profits because they are probably rarer and so competition amongst economies leads to evolutionary forces pushing certain economies into these corners of product space possibly at the expense of potential. In any case, versatility is treasured and flexibility in production will aid economic growth.

A unique way of conservation

How do you take me out of the equation?

The Green.view column in The Economist has plenty of environmental-themed articles that provoke deeper thought about what we know about the environment and our assumptions about the environment. In their latest article, they present an effective but controversial method of biodiversity conservation: to remove humans “from the equation”.

The conventional thing to do is to “fence off large areas of parkland” to create nature reserves that, without much disturbance of man, would perhaps help protect the biodiversity inside it. This would be quite inhumane of course, considering that original residents of the reserve would have to be “booted out”. Hence conservationists “try to manage nature with humans in situ”, i.e. conserve without having to remove humans from the equation.

However, “involuntary parks” seem to be the most effective in conserving biodiversity. Where humans have vacated or have not trampled upon, wildlife flourishes, for instance in many parts of Papua New Guinea. Places that have seen conflict have also unintentionally become nature reserves, for instance in the demilitarised zone (DMZ) between North & South Korea. So in this case, would peace between the North & the South lead to the disappearance of this nature reserve and all its “residents”? Sounds perverted, that war might be necessary to protect and conserve the lifes of lesser beings (animals and plants) while human lives are lost.

In another example, Somali pirates off the coast of Somalia and Kenya have led to “a profusion of fish” in the waters as commercial trawlers are scared away from the region. And this has benefitted the local Kenyan fishermen who fish for a living, as this article from The Scotsman testifies. Given that the state of the world’s fisheries and fish population are not looking good, to allow fish populations to recover from the state of being overfished would certainly be beneficial for its conservation even if biodiversity might not have expanded.

The article concludes that it is “depopulation” that makes the difference between conservation / protection and extinction. Sadly but truly, humans may sometimes have to remove themselves from the equation if nature and the environment is to recover and thrive. Would this be possible? Would this be humane? Would this be fair? I suspect this method of conservation would probably never be broached seriously.

Automated Eyes

I stumbled upon Tineye, a ‘reverse image search engine’. It basically allows you to upload an image and then perform a search for pictures that are similar to the image. This is the beginning of answering a question my friend have posted me a couple of years back when he asked if the Internet can help us find out the name of a person from a photo of him/her. Alternatively, if you have a picture of a place, you might want to upload the image to search for where exactly it is. Alas, Tineye is not yet capable of all that, to quote from the Wiki article:

A user uploads an image to the Web application search engine or provides a URL for an image (or for a page containing the image). The search engine will look up other usage of the image in the internet including their time of appearance and including modified images based upon that image. Tineye does not recognise objects or persons in an image, it recognises the entire image, and some altered versions of that image. This includes differently sized versions of the image.

The search engine is provided by Idée, Inc., a Canadian firm that also produces other image-matching technology products, like PixID. A demonstration of the power of this product is shown in this video that follows:

It purportedly helps client tracks usage of their photographs or images online and print publications to manage image license and also to ‘uncover unauthorized image usage’, and it kind of reminds me how it makes patent trolls’ job easier, reflecting a worsened state of gridlock. In other words, while the software may help to raise the opportunity for transactions and thus contribute value to creators, it might potentially discourage mashups in the area of graphic designs. Of course, it has a potential for good as well; scanning through a film can help the production crew find out whether they have obtained permission for all the images or clips used and would thus know what to filter out if they are unable to identify the owners.

The potential of such technology always works both ways and eventually it will be up to Economics to resolve the issues.

Game Theory & Politics

Well, it's a game...

Christopher Beam on framed the Senate (or any democratic deliberative body) as “the world’s greatest collective-action problem“. In a way, it is. Debating on issues and surfacing potential problems stakeholders might face and arguing on the different consequences on different parties is one thing about parliaments and national assemblies but then decision-making is another.

In democracies, debates and discussions are known to hold up decision-making and the same is reflected in bureaucratic bodies where power is shared across several individuals. This dispersion of power calls for coordination to get anything done and thus allow game theoretical analysis to dissect the dynamics involved in any of those coordination outcomes (ie the final decision).

In some sense, this is a trade-off; deliberation this way that involves the coordination game ensures that the outcome cannot be entirely fair though it might provide an illusion of it. In the first place, reality includes a spectrum or even several dimension of opinions and no system can be designed to capture and aggregate this complexity. The authors of Thinking Strategically mentions this in one of the chapters on elections. As a result, we are left with the political game that is manipulating the legislative structure although everyone hates to admit it. In some sense, Singapore’s structure might churn out better results in terms of efficiency and do ‘the right thing’. The idea then, is to move the game away from the ballot box in the first place, to somewhere further and higher.

Putting a price on nature

60 cents for the droplet...

For something that combines thoroughly both concepts of economics and the environment. A question that occasionally pops up when we ask about how we can internalise the external costs and benefits of nature, how we can monetise and valuate what is deemed free or priceless and how can we account for environmental protection and conservation in our equations of governance and environmental management.

The trigger for these questions came about when I read The Economist’s Green.view column online and saw an article about “price fixing”: not so much price fixing in terms of what we learn in Economics about monopolistic behaviour, but about how we can fix a pricetag on nature.

There’s plenty of debate with regard to putting a price on nature, as witnessed from the tremendous number of articles that can be found on this issue. The plausibility of this recommendation, with a detailed discussion on how it can work, has been discussed on Earthbeat on Australia’s Radio National, while in very recent history there has been a flurry of writings from Planet Green, The New York Times and BBC News. LiveScience has a more concrete and specific suggestion: a “market-driven approach to habitat preservation”.

Anyway, let me just try to summarise and highlight some of the pros and cons of putting a pricetag on nature. You should read the articles above for much more detailed discussions however.

Why would / should we put a price on nature?

1. Solve misallocation of resources: what we learn in economics in terms of the external costs of, say, water pollution on marine biodiversity, would thus be accounted for when firms do cost-benefit analysis because there’s a explicit price tag attached to it (The Economist uses a slightly different line of argument, I’m just phrasing what I understand in my own words)

2. Allows for developing and some especially-impoverished but nature-rich countries to tap into the money-spinning potential for the natural resources and at the same time enable economic development

3. On the Earthbeat link, it quotes a paper written in the Nature journal 4 years earlier on the value of “ecosystem services”, valued at US$33tr. Compared to the GDP of Earth at US$18tr, it seems like there is plenty of value in these “ecosystem services” waiting to be tapped, of which these services could be invaluable to humans (for example, clean air)

Why cant / shouldnt we put a price on nature?

1. Insult to the concept of the beauty of nature or reducing everything intangible in the environment to a dollar value or ignoring the greater benefits that ecosystems and nature provides. Like the sense of serenity and peace when one walks in a park: that cannot exactly be quantified in a monetary sense, and that may not be reflected even if a pricetag were to be placed on the park

2. How do we put a value to animals that might be of little utility but of much value to conservation and beauty? The article in The Economist compares the panda, which “humans are fond of”, with the dung bettle, which “provide the greatest utility”. How then do you price the two vis-a-vis each other?

The articles themselves cover much more details and examples. Again, this is some more food for thought for those who have always found themselves fighting a moral battle in their minds between economic development and environmental conservation.

Carving up the USA?

Equal Frags

I stumbled upon this creative but mad article that proposes cutting up the United States of America into 50 states of equal population size. The aim of this exercise is to equalise “congressional overrepresentation” from small states and rural areas. This would be quite important today considering that Congress representation is such that each state, regardless of population size, gets the same number of votes, which makes the small, rural states wield extra power. This extra power can come in handy to block bills unfavourable to them, as witnessed in the process to pass the cap-and-trade bill where small rural states, expected to be severely disadvantaged due to their agricultural economy, have used their votes to block the passing of the bill or try squeeze some concessions and caveats in return for votes. Neil Freeman discusses some advantages and disadvantages on his website.

Erasing the current borders of the USA is not a new idea. From as early as 1975, people have proposed the notion of carving up the USA into 38 states based on cultural and physical aspects of the territory. Professor C Etzel Pearcy realigned the boundaries based on newer and evolved concepts such as population density, urban sprawl and transport routes. Not quite how one normally decides a boundary (usually based on physical relief: rivers or mountain ranges for example), but still worth considering for the better of jurisdiction and administration. But of course, such measures are really controversial: will the people in power today want to yield their power to someone else, or have their powers curtailed? I am quite sure not.

And I am reminded of closer to home, when electoral boundaries are redrawn every now and then to accomodate for changing population sizes, according to the government.

Some entertaining ideas for you to think about this Lunar New Year.