Book Review: "Radical Markets" by Eric A. Posner & E. Glen Weyl

I've recently read the book "Radical Markets" by Eric A. Posner & E. Glen Weyl. I should disclose that I came to know of this book upon attending a talk and Q&A session on campus by the latter author about this book, and that I was able to ask a question during that time (though as I point out later, I didn't find the answer to be so satisfactory). In any case, the topic intrigued me. This book is essentially a vision for a radical reformation of society, starting in the West but ultimately spreading through the world, such that concentrations of power are systematically broken and a level playing field is quickly approached. The two key novel contributions of this work are the notion of a common ownership self-assessed tax (COST), which aims to revolutionize notions of ownership by abolishing property rights extending to perpetuity and replacing them with auctions for goods & capital, and quadratic voting (QV), which aims to replace the principle of one-person-one-vote with voting credits such that individuals can vote on issues or candidates (for or against) in proportion to their perceived importance while being prevented from unduly swinging elections. There are also other issues discussed, such as immigration, institutional investment, and the value of digital data, all in the context of concentrations of power. It is worth pointing out that though there are many arguments that extend to Canada, the UK, other European countries, Japan, Singapore, Australia, and New Zealand, most of the arguments are made in the context of the US.

I will leave a detailed critique after the jump, and summarize my thoughts here. I found the ideas presented in the book rather intriguing and certainly novel. However, the main flaw of the book in my view is that the authors too often like to present their ideas at a very broad conceptual (macroscopic) level while simultaneously presenting examples justifying these concepts at a very granular (microscopic) level. The missing elements are the granular implementations of their broad concepts as well as the implications of the granular examples interacting on a larger scale; as a result, particularly for the introduction of the COST ideas, the claims must be taken essentially on faith, as the authors are quite glib about the importance of implementation details to the overall path of society if their ideas were to be followed. Given this, there are many reasons to remain skeptical about these ideas. This is also evident in the writing style too, in that my need to reread parts of certain chapters multiple times, while in part because these ideas are certainly not trivial, was mostly because of these sorts of logical leaps to conclusions that were not obvious, and many times, these conclusions remained non-obvious even after multiple reads through; the writing is otherwise engaging and fun to read, but I could tell that the authors were at many points getting swept up in their own ideas at the expense of clarity for readers. Overall, I recommend this book because the ideas are intriguing and I do want to see these ideas fleshed out better, but I would not recommend this book in the sense of wanting to preach these ideas myself. Follow the jump to see more detailed discussion about this book.

Book Review: "Narconomics" by Tom Wainwright

I've recently read the book Narconomics by Tom Wainwright. It's an exposition into the economics of Latin American drug cartels, looking at them as businesses rather than mysterious criminal entities. In particular, it considers the competition versus monopolistic/monopsonistic behavior on the demand- & supply-sides, issues of global operations and outsourcing, diversification in products, cartel hierarchies versus franchising, public relations versus employee incompetence, and so on. Of course, as the drugs discussed in this book are illegal for the most part, there are other issues of dealing with the police and the government, whether through hiding, bribery, or warfare, and with enforcing things like non-compete agreements and franchise territories through violent means in the absence of legal recognition (where a court system could otherwise peacefully mediate such disputes). The aim of this book is to step back from the emotionally charged rhetoric of the "war on drugs" by seeing them in terms similar to legitimate businesses, and in doing so defeat the scourges of the illegal drug trade in the long-run through economically-minded legislation rather than ineffective brute force.

The book is not too long, quite accessible, well-written, and engaging to anyone with a high school-level understanding of microeconomics and an interest in issues surrounding illegal drugs. There are a few issues I have with the book though. One is that while the focus is clearly on Latin America, I would have liked to see at least some parallel discussion about the flow of drugs from Central/South Asia (particularly Afghanistan) to Europe and the economics therein, as that is mentioned a few times without further details. Another is that the last numbered chapter discusses legalization exclusively in the context of marijuana/cannabis, even though there is a discussion about the much narrower margin between safe and fatal doses for other drugs (especially heroin) compared to cannabis, which then raises questions about whether the legalization of marijuana is really meant to be a model for legalization/regulation of other currently illegal harder drugs; the epilogue addresses this point adequately with more nuance, but the structure of the final chapter still seems subpar for that reason. Finally, my biggest issue regards the discussions of how the operations of drug cartels in Latin America are influenced by how they can compete with the governmental "monopoly" on force due to unresponsive, complicit, corrupt, or ineffectual governments, and how cartels can compete with other economic opportunities through wages, protection, and other benefits. In particular, my concern is that the book acknowledges how legalization of drugs often economically incentivizes supply-side consolidation (as being outlawed necessarily limits how large drug operations can grow before attracting government attention), but in conjunction with other trends like offshoring of drug production too, it isn't clear how people in poorer Central American countries will further benefit; while the reduction in violence that would almost surely accompany restricted legalization of drugs is certainly a laudable goal, it is unclear whether the resulting economic opportunities, given the continuing poor governance and paucity of other good economic opportunities there, will really work to better the lives of those people, or whether the situation will devolve into large drug companies bullying small countries as in the banana republics of several decades ago (as discussed in the book) or tobacco or fast food companies doing the same to such countries today. In light of that, while the suggestions made in the book for improving outcomes of drug policy do seem like they would certainly help to some extent, I can't help but feel that the title of the epilogue, that economists make the best police officers, smacks of hubris. Apart from those issues, I'd recommend this to anyone interested in the subject.

Stuff in Between Monopoly and Competition

It has been a while since I've ranted about an economics article, but there was one by Peter Thiel (cofounder of PayPal and Palantir) in the Wall Street Journal that caught my eye, so it is the subject of this post. In it, he argues that monopolies are not always the bad entities that people make them out to be. In particular, he argues that Google's dominance in the search market has allowed it to expand to other markets such as advertising, robotics, and phones, and in all of those it is far from a dominant market player. He also argues that firms in perfectly competitive markets are too caught up with staying afloat to be able to innovate in any meaningful way, so real innovation can only come from firms with dominant market positions (such that they have money to gamble on such an innovation). Follow the jump to see my reaction to this.

Microsoft is Now a Legal Monopoly in Germany

As it seems, the German government is setting up a hotline for (Windows) computer users' malware issues.
This. Is. Bad.
In a continent (the EU) that is wary of monopolies and has taking strict measures against Microsoft to reduce their monopoly status (e.g. make a "browser ballot" in a Windows installation to allow users to choose their preferred browser(s) (and the order must be random (i.e. IE cannot be the top choice each time))), this is a huge, terrible reversal.
Many posts talking about this describe this as just a subsidy for Microsoft to produce shoddy code and not improve upon it (as the government will cover that cost, essentially).
That's not the biggest problem.
Let me be clear: the German government is basically legalizing Microsoft's monopoly.
Now there will be almost no incentive to get products other than those of Microsoft, as the government will always help the users and Microsoft will reap the (larger) profits (and no longer bear the burden of fixing code).
Why, oh Germany, why?
If you happen to live in Germany, tell your elected officials to repeal this bill.
Microsoft has for the longest time been a de facto monopoly, but never in my memory have I heard of this sort of official government support for Microsoft's monopoly. This basically flies in the face of everything free-market.
Please, stop the madness.