## 16 March 2007

### Ripped off Again

My collection of toys was augmented last month by this device:

Notice the puzzle displayed in the image:

8 4 . . . . 6 . .
. 2 . . 6 8 3 . 4
3 . . . 1 . 9 . 8
. . . . . . . . 3
2 8 5 7 9 . . . .
1 . . . 2 6 . 9 7
. . 8 . . 5 . 4 .
5 9 . 2 . . . 8 6
. 7 2 6 . 9 . 3 .

Unlike a proper sudoku, the grid does not have a unique solution. Any of the following three filled grids are possible:

Solution 1
8 4 1 9 3 7 6 5 2
7 2 9 5 6 8 3 1 4
3 5 6 4 1 2 9 7 8
9 6 7 1 5 4 8 2 3
2 8 5 7 9 3 4 6 1
1 3 4 8 2 6 5 9 7
6 1 8 3 7 5 2 4 9
5 9 3 2 4 1 7 8 6
4 7 2 6 8 9 1 3 5

Solution 2
8 4 1 9 3 7 6 5 2
9 2 7 5 6 8 3 1 4
3 5 6 4 1 2 9 7 8
7 6 9 1 5 4 8 2 3
2 8 5 7 9 3 4 6 1
1 3 4 8 2 6 5 9 7
6 1 8 3 7 5 2 4 9
5 9 3 2 4 1 7 8 6
4 7 2 6 8 9 1 3 5

Solution 3
8 4 9 5 3 7 6 1 2
7 2 1 9 6 8 3 5 4
3 5 6 4 1 2 9 7 8
9 6 7 1 5 4 8 2 3
2 8 5 7 9 3 4 6 1
1 3 4 8 2 6 5 9 7
6 1 8 3 7 5 2 4 9
5 9 3 2 4 1 7 8 6
4 7 2 6 8 9 1 3 5

My experience with the device has exposed more errors of this kind. On "Medium" difficulty, I got the following grid:

4 3 . . 1 8 . . .
5 . . . . . . . 1
. 9 1 . . . . 6 4
. . 3 . . . 7 . 6
9 . . . 6 . . . .
6 . 5 . . . . 9 .
. . . . 7 6 . . 9
. 6 . . 5 . . . 7
. . . 8 . . . . .

I will not enumerate here the 13748 solutions my trusty xemacs mode found for that grid. The only one the machine accepts as correct is number 10310.

Does anybody have Carol Vorderman's email address?

Since I installed Rockbox on my M5 there's no need to use it anyway, but it's really my public duty to complain.

## 15 March 2007

Private Equity, blah blah blah, capitalism, blah, tendency to monopoly, blah blah.

"Splitting into two distinct companies could dramatically increase Cadbury's value - perhaps by £3.4bin

"It may also become easier to manage after suffering a spate of problems"

This is happening under the threat of a takeover by a private investor.

The force driving companies to get bigger is Parkinson's Law. The force tearing them apart when they get unmanagably large is the market.

The size of a company that matters for organisation is not the annual turnover, it is the number of decision-makers.

## 08 March 2007

### All Thatcher's fault

Watching the much-anticipated C4 film "The Great Global Warming Swindle".
The science is OK - I was worried they would over-egg the pudding and drag in some of the siller arguments (the Monckton stuff, e.g.) It's more cautious than that - nothing I have seen so far can be trivially dismissed.
The only really startling claim (1/2 hour still to go) is that Baroness Thatcher kicked the whole panic off in the 1980s in an attempt to undermine the NUM. According to Nigel Lawson, she wanted nuclear power to reduce dependence on coal and oil, saw the early suggestions that anthropogenic CO2 might cause warning, and set up a large Royal Society research project to go and back it up, leading directly to the IPCC etc.
I've never heard that storyline put forward before, and I can hardly wait to see if it stands up to scrutiny. Just imagine telling all the anti-capitalists that they're just left-over pawns of their most hated enemy.

The programme seems to be winding up with whacking some easy targets - the idea that malaria would spread because of warming is plain silly, and I have never actually heard it before. Apparently the IPCC reports have put it forward, so it is perhaps worth taking on.

### Intimacy II

Further to my thoughts this morning on the separation of public and intimate relationships, it occured to me that I missed some interesting connections.
I wrote that we need emotional commitment where we can't achieve commitment via public enforcement (contracts) because the considerations required can't be specified precisely enough (perhaps because flexibility is itself a key consideration). Possibly more important is the fact we can't enforce publicly (using the law) something that is supposed to happen in private, without witnesses. This came up before when I defended old-fashioned courtship patterns as a way of avoiding the unpleasantness that can result from being alone without witnesses with an untrusted partner.
The concept that keeps coming up is the cost or difficulty of enforcing any arrangement. Whether I am talking about intimate relationships, the basis of property, the structure of government, law and order, or the business models of entertainment products, it keeps coming up as the decisive factor. Either I have a bee in my bonnet about it, or it is being generally overlooked: treated as a minor implementation detail to be worked out later. Or both, I suppose.

Another stray thought on drawing a boundary around the intimate is Linus Torvalds' famous quote: Software is like sex -- it's better when it's free. Taking the idea altogether too seriously, what might there be about the writing of software that makes it more suitable to being motivated by emotional commitment rather than public bargain?
It might just be the undefinability of the requirements. A piece of software isn't much to look at, it's very difficult to assess its value in advance. Even if you can determine that it functions correctly, that's not a complete assessment -- quality of software is notoriously difficult to define. If you have the freedom to take what you need from software, that is perhaps more valuable than a predefined functional specification.

Listened to last week's EconTalk, with Viviana Zelizer talking about the divide between the initimate and the commercial.
It struck me as a huge exercise in missing the point. Not once were the key words mentioned. They are trust and commitment.
Contracts are all very well when it is possible to specify precisely what each party expects to get out of a relationship. However, if I have expectations which I can't practically define and enumerate, then I can't put them in a contract.
However, it is frequently advantageous to be able to make binding commitments. How do we do that in cases where we can't use contract enforcement to make the commitments binding?
Fortunately, there is a mechanism built into us. Humans can form emotional bonds with other humans. If parties to a relationship can see that the other parties have emotionally bonded to them, then they can have confidence that their needs in the relationship will be met, without recourse to contract lawyers and bailiffs.
It is possible to fake an emotional bond. The central question of much human interaction is whether, and how strongly, such bonds have genuinely formed. The literature on this subject is vast, and includes a large portion of all fiction ever written. We are continually on watch to check that the bonds others have to us are still strong.
This is the reason for what Zelizer calls the "Hostile Worlds" of the intimate and the commercial -- the deliberate and socially expected attempt to separate, as far as is practical, intimate relationships from commercial relationships. If those who we believe are with us for emotional reasons are actually with us for commercial reasons, we can no longer rely on their emotional bond to enforce their commitments beyond what we can achieve in the courts.
This is by no means an original line of reasoning: I'm sure I've come across it in books by Diamond, Dawkins, Matt Ridley as well as writings by economists. The issue of signalling an emotional commitment came up at length in an earlier EconTalk podcast on religion, so I'm disappointed that Zelizer ignored the question, and that Russ Roberts didn't bring it up. It defines the boundary of the intimate and the commercial (because it is the answer to "why do we care") If we expect consideration from a party to a relationship beyond what we are able to define and enforce publically, then we must rely on intimacy - emotional bonds - which themselves require a certain amount of care and maintenance.

Update: more thoughts on the question

## 07 March 2007

### Property

There have been various attempts to derive private property rights absolutely from some kind of first principles. I have not been impressed by them. It's not that arguments like this are obviously wrong, it's just that equally persuasive arguments could be made for almost any basic political position, including many that I want no part of.

No, I am prepared to accept that the law that you can't take my stuff the moment I turn my back on it is just another government regulation, not fundamentally different from the many that I howl against.

Given that property is not fundamentally a different kind of thing, why do I support it over the other ways that a society can organise its resources?

The root is that property is, relatively, very cheap and easy to enforce, compared to other possible rights. It is practical for me to take most of the responsibility for enforcing my private property rights myself, by keeping hold of my property and keeping an eye on it, leaving relatively little for the public sector to do. It is also relatively easy to work out whether I own something, compared to trying to determine, for instance, whether I most need it, or whether I most deserve it, or whether I can make the most productive use of it, all of which could be seen as "better" criteria for whether I should control it. Private property enables us to co-operate, not perfectly, but quite effectively, with a minimum of administrative cost.

With that as the basis of my support for private property, this quote by Lawrence Lessig has incredible power:
...the government has designed [the copyright system] so that there's no simple way to know who owns what, the very essence of a property system.

### When to leave Iraq

Some of the violence in Iraq is caused by the presence of occupying troops there.
Some of it is caused by rival factions within Iraq.

If the Iraqi government can get to the stage where it is able to control the country and hold it together with just its own forces, the whole regime-change process will have been, by some measures, a success.

Opinions differ as to how likely that is. I am going to assume for the purposes of this discussion that there is a realistic chance it will happen.

If this stage is to be reached, there will come a point where the dangers of staying outweigh the dangers of leaving. I think it would be very optimistic to think that the country will be completely stabilised and pacified while a substantial US and British military presence remains.
Because there is a deep-seated tendency to overestimate risks which are completely outside one's own control, compared to risks over which one has some control, when that point is reached, it will look as if it is still a long way off.

That is, at the optimal time to leave, it will look far too early. The risks caused by leaving will appear greater than the risks caused by staying.

The time might even have come already. I think there is a considerable risk that, if the Iraqi government were left to try to manage on its own now, it would fail. But there is a risk it will fail anyway. The question is which risk is greater, after correcting for our own biases.

I do not pretend to have sufficient knowledge of the situation on the ground to answer whether the time has come. But, just playing with the basic principles, I am fairly sure that when the time comes, it will not be at all obvious.

### Clean energy subsidies

There has been some discussion on econblogs, originating, I think, with this Economist blog piece, attacking the idea of carbon offsets and particularly of subsidising clean energy as a way of reducing pollution from traditional energy sources.

The first pro-subsidy argument is that subsidising clean energy will cause clean energy to be substituted for dirty energy, which is good.

The reply, in the Economist piece, and also Arnold Kling's recent TCS article, is that a subsidy to clean energy is a subsidy to energy, and will increase overall consumption of energy, possibly producing more total pollution than would otherwise have been the case. Pigouvian taxes on dirty energy can be justified, but not subsidies.

In a comment on a Kling EconLog entry on the subject, I put forward a second pro-subsidy argument:

The purpose of subsidising clean energy is not simply to displace dirty energy in the immediate sense -- that is undoubtedly done better by taxing the dirty energy.

New technologies require a lot of development investment to bring to market. Once they are being successfully produced and sold in the market, experience and competition often produce rapid improvements, particularly in efficiency. The subsidy to clean energy use should not be seen so much as encouraging a certain quantity of clean energy to be produced, but more as a subsidy to the of clean energy technologies, to bring them more quickly to the stage where they can be rapidly and profitably developed.

The intervention in the market is then not aimed at correcting the direct negative externality of pollution, but at the positive externality of improving technological knowledge.

I believe that this is what the proponents of subsidised clean energy have in mind.

I brought the argument up not because I agree with it, but because I don't like to see important points being missed.

Note that because the point of the subsidy is to encourage industry to invest in the relevant technologies, the effects if it works correctly -- increasing the profits of businesses in the relevant sectors -- would end up looking an awful lot like pork, which is the major criticism. The profits might not be rents, but fair reward for valuable additions to the knowledge of clean energy technology.

There are, nonetheless, a number of problems with the argument.

First, there are other mechanisms which are intended to address this very general market failure (that is, the positive externality of R&D). Most relevant in this case are patents and direct state-funded or state-subsidised research. The existence of these alternatives do not automatically invalidate the use of energy subsidies -- one would have to show that it is a less effective approach. Both government research and patents are far from perfect, and should not be presumed to be the best solutions.

As an example, subsidising the research, rather than the energy, reduces the incentive on the producer to actually improve efficiency. If the subsidy directly targets the energy use, then there is competition between firms producing the subsidised energy, whereas if the subsidy is on a particular research project, it is a pure rent.

More significantly, there is no guarantee that the subsidies will go to the most promising technologies. I don't believe that making ethanol from corn will ever be a useful contribution to the energy industry, no matter how much more efficient the process becomes. It will be carried on only for as long as it is actively subsidised, and is pure deadweight loss. But as long as it is subsidised, it might be profitable for producers and consumers. Solar panels, on the other hand, while not really worthwhile at the moment, might well, if pushed into the market by subsidy, and improved in efficiency once there, develop to the point where they are a major portion of energy production at a genuinely low cost.

Since the policy is currently directed far more to biofuels than to solar energy, I think it is not working.

That's not to say it can't work. There are many other points that can be made pro and con. I am, as always, sceptical that any interventionist policy will be effective in the long run, but the argument has too much merit to be ignored or dismissed out of hand.

### Films and tax

Film industry facing 'tax crisis'

Production in the UK "will fall dramatically" because new tax laws are scaring off investors.

Apparently, there is a very strong relationship between the levels of taxation on the film industry, and the amount of investment that the industry receives.

I wonder if the normal tax regime "dramatically" discourages investment and production in industries other than film, as well.

I believe it does.

What policy implications would the great and good of the film industry draw from this?