How Much Is Music Worth?

Pitchfork has a great article on the consumer prices of music over the last century. Some interesting bits:

Setting aside the particular format, then, albums gross less than half as much, on average, as they once did, and singles bring in roughly one-fifth of their past glories. For comparison, remember that overall revenues in constant dollars are roughly one-third what they were at the U.S. industry’s millennial peak. Units have shifted, all right: into insignificance…

One more quick point about the data: Adjusting revenues for inflation can also shed light on individual formats, such as the growing vinyl niche. Vinyl albums (including EPs), at $23.86 per unit in 2014, certainly are expensive compared with CDs, which averaged $12.87, or download albums, which averaged $9.79, especially considering the alternative of free, on-demand streams. That’s up from only an inflation-adjusted $15.45 per vinyl album in 1999, compared with $19.23 for CDs. Still, vinyl is actually cheaper than it was in 1977, its biggest year-ever by units shipped and by inflation-adjusted revenue, when the average unit cost $24.81 accounting for inflation. In 2015, even when recorded music’s expensive, it’s cheap.

Why It’s Important That The Internet Created Technopopulism

After finishing ITIF’s new report on technopopulism, I couldn’t help but think, isn’t this missing a couple of pages, about, you know, the Internet?

While there is much to like about the report, the missing piece, the missing message, as McLuhan famously quipped, is the medium.

Here is the basic gist of the report. In the old days, tech policy was decided by educated wonks who knew the finer points of policy and could  make reasoned arguments. Better outcomes and more nuanced policy proliferated. In the last few years, the debate has been morphed by good ol’ American populism. The new image of technology policy is one of individuals protesting in favor of network neutrality outside Chairman Wheeler’s house. To Rob Atkinson and his co-authors, the new discourse is long on cliches and short on analysis, much to the detriment of consumers.

Yes. I agree to a certain extent, but there’s more to the story.

It is nearly trite to say that the Internet has dramatically changed and continues to change how an individual relates to others and knowledge. Yet hardly a word is mentioned about this important change in this report.

The gatekeeper function of the media has been democratized with the Internet, creating new, expansive spaces to discuss any number of topics. And if there is one thing to unite people on the Internet interested in policy, it would naturally be Internet policy.

While Rob et al might lament the old days where there was balanced and thoughtful discussion, it was only possible because the high barriers to entry limited the number of people that could have possibly been involved in the conversation. Enforcing norms without formal institutional structures could be achieved when the absolute numbers were smaller due to the these constraints. Moreover, to be part of that group required a job that was dedicated to its study, such as an economist, a lawyer, or an analyst at the think tank. Of course, to get that kind of job required formal education that signaled interest and continued dedication to the topic area, which also helped to enforce a set of norms.

Once the conversation expanded via the Internet, the norms and the institutional requirements dramatically changed, leading to the world that the authors detail. Of course, there is still a core of educated discussants, but that has been supplemented by broader ethical and policy conversations over Twitter, discussion boards, Reddit, comment sections and countless other places. But let’s remember, this doesn’t mean the concerns are being translated onto the political stage. Even network neutrality, with its millions of FCC comments, is still largely unknown. Indeed, even after the President’s speech on the topic last November, 54 percent of those polled, including majorities of Republicans and Democrats, said they haven’t heard of the concept.

Indeed, what the report cites as instances of technopopulism is just a small fraction of the entire conversation. What is included are the issues that have, for one reason or another, garnered attention. For the most part, other important issues face far less outsider scrutiny. Take for example, the House Energy & Commerce efforts to update the Communications Act. Arguably, this new Act would be far more important than network neutrality, since it would determine how tech is governed. And yet, even the most commented upon subject, video law, only received 220 responses. Apart from network neutrality, FCC dockets are fairly technical and aren’t often commented upon.

All things considered, I still think we are toiling in relative obscurity. For now.

Whence Shall Innovation Come? A Rejoinder to Jacobin’s Red Innovation

This month’s Jacobin Magazine tackles the subject of technology, and in it, one article titled “Red Innovation” was an interesting read, but it displays the countless pitfalls of thinkers who are not trained in economics but proffer on capitalism. Here is one section:

It’s no surprise that Apple’s tremendously successful line of products — iPads, iPhones, and iPods — incorporate twelve key innovations. All twelve (central processing units, dynamic random-access memory, hard-drive disks, liquid-crystal displays, batteries, digital single processing, the Internet, the HTTP and HTML languages, cellular networks, GPS system, and voice-user AI programs) were developed by publicly funded research and development projects.

It hasn’t been the dynamics of the market so much as active state intervention that has fueled technological change.

And yet, if Apple had not developed those products for the masses then they would simply be nice ideas in the pages of some fraying journal. Production is one side of the market of which research is a part; markets also include consumption, interestingly enough. Between the two lies the transaction, including all of the costs of conducting the transaction. These, as the economist Kenneth Arrow laid out, are the costs of running the economic system. More than production, the panoply of transaction costs determine the structure of firms and the economic structure of a society.

As I see it, this is the world that the author envisions:

Da Vinci’s flying machines were both technically dazzling and fueled by state intervention via the Medici family. But it took a couple of bicycle manufacturers, who had experience in materials and engineering to actually create the first flying machine. And the Wright Brothers too were not the most successful at commercializing the technology. For all of the distrust of commercial society by this strain of the left, at core, commercialization is the democratization of production.

As I explained before, Alfred North Whitehead was probably right about the state of science in Europe in 1500: the total accumulated knowledge was less than Archimedes knew in 212 BC. But as far as applied technology is concerned, the same could not be said. By 1500, Europe had advanced further than known before through small scale commercial means. Although they might not have been more enlightened, they were incomparably better at producing and consuming the goods and services that determine material living standards.

In part, a rise in the productivity of human capital in that time period resulted in new, more efficient modes of production. It is wonder that the author, for all of his mentions of capital, doesn’t have a firm grasp on the important idea of human capital as evidenced by this statement:

At the same time, enterprises in poorer regions, lacking access to high-level R&D, find themselves trapped in a vicious cycle. Their present inability to make significant innovations that would enable them to compete successfully in world markets undercuts their future prospects. Only a handful of countries — such as South Korea and Taiwan — have ever been able to move forward from this starting disadvantage.

What is ever more startling is that the author fails to recognize that North Korea was far more advanced than the South before the war. And, of course, that handful of countries is only a handful if you don’t consider most of Africa or Asia. Nor does it explain why Russia is doing so poorly in spite of all of the state sponsored research in the past. But going down that very sordid literature wouldn’t work especially well with his political outlook. So, I won’t.  

The Political Principal-Agent Problem

This headline came across my Twitter feed today: “As Fairfax grows more diverse, candidates for office mostly don’t.” Immediately I thought of the principal-agent problem. Here is one bit:

“I do think the Republican Party is not doing minority engagement to the fullest extent possible if it’s not eventually nominating candidates that don’t look like me, a white male,” Whitbeck said. “We really need to have an open enough party where we’re nominating people from all communities.”

This actually leads to some interesting questions. Does the inclusion of legislative agents that are more ethnically representative of principals ensure more representative outcomes? In other words, does the Republican Party need to incorporate more diversity in their legislative pool to ensure a broadening of the issues? Or do they need to merely need to seek out and recognize diverse groups when they seek election? There is actually very little data on this topic, but one paper seems to support the general relationship:

Using school district-level data, the paper finds statistically robust evidence that the political representation of minority groups is associated with a more equitable allocation of state aid to school districts. In states in which African Americans gained fairer representation, high minority enrollment school districts saw a greater increase in their state funding as compared to minority districts in states where minorities remained underrepresented. The results are robust to controls for the effect of mandated school-finance reforms, as well as other political and demographic factors. Thus, racial composition of legislatures does matter, not just in a symbolic sense, but also for policy outcomes that reflect diverse interests of society.

 

Jefferson’s Contractual Society

When Jefferson said “The earth belongs to the living,” he was railing against the popular Burkean revision of Locke’s contractual society.

The quote comes from a letter to Madison and makes sense only in the broader debate between Burke and Paine:

The question Whether one generation of men has a right to bind another, seems never to have been started either on this or our side of the water. Yet it is a question of such consequences as not only to merit decision, but place also, among the fundamental principles of every government.

 

Some Stats on the NYPD Work Stoppage

In reaction to what NYPD’s Police Benevolent Association chief Patrick Lynch calls a “hostile anti-police environment in the city,” officers are simply refusing to arrest or ticket people for minor offenses, leading to an overall arrest dropoff of nearly 66 percent.

Matt Taibbi explains:

If you’re wondering exactly what that means, the Post is reporting that the protesting police have decided to make arrests “only when they have to.” (Let that sink in for a moment. Seriously, take 10 or 15 seconds).

It’s incredibly ironic that the police have chosen to abandon quality-of-life actions like public urination tickets and open-container violations, because it’s precisely these types of interactions that are at the heart of the Broken Windows polices that so infuriate residents of so-called “hot spot” neighborhoods.

In an alternate universe where this pseudo-strike wasn’t the latest sortie in a standard-issue right-versus left political showdown, one could imagine this protest as a progressive or even a libertarian strike, in which police refused to work as backdoor tax-collectors and/or implement Minority Report-style pre-emptive policing policies, which is what a lot of these Broken Windows-type arrests amount to.

But that’s not what’s going on here. As far as I can tell, there’s nothing enlightened about this slowdown, although I’m sure there are thousands of cops who are more than happy to get a break from Broken Windows policing.

Resources on Digital Trade & The Transatlantic Trade and Investment Partnership

I have been trying to educate myself on digital goods, digital trade, and the Transatlantic Trade and Investment Partnership (TTIP). Here are some resources from that research:

  • “Digital Trade in the U.S. and Global Economies” by United States International Trade Commission (Part 1, Part 2)
  • “Digital Drag: Ranking 125 Nations by Taxes and Tariffs on ICT Goods and Services” by Ben Miller and Rob Atkinson at ITIF  (source)
  • “The Importance of the Internet and Transatlantic Data Flows for U.S. and EU Trade and Investment” by Joshua P. Meltzer at Brookings (source)
  • “At a Minimum, Transatlantic Trade Negotiations Should Ditch Investor-State Provisions” by Daniel Ikenson at Cato (source)
  • “The Transatlantic Trade and Investment Partnership: A Roadmap for Success” by Daniel Ikenson at Cato (source)
  • “A Compromise to Advance the Trade Agenda: Purge Negotiations of Investor-State Dispute Settlement” by Daniel Ikenson at Cato (source)
  • “The Obama Administration’s Trade Agenda Is Crumbling” by Daniel R. Pearson at Cato  (source)
  • “EU-US Trade Negotiations Continue Shutting out the Public—When Will They Learn?” by  Jeremy Malcolm and Maira Sutton at EFF (source)

 

Healthcare.gov & the Scalability Problem

Scalability problems plague the creation of large web sites. This is especially poignant, given the Healthcare.gov web site fiasco:

Large systems, too complex for individual comprehension, must be subdivided into smaller tasks coordinated between groups. In fact, a large portion of software engineering is devoted to the documentation, notification, and management review needed to coordinate large projects.

Thus, it is not uncommon for large IT projects like this to have overrun costs or fail:

One study shows that 34 percent of projects are unqualified successes, 15 percent are complete failures which were abandoned before completion, and the remaining 51 percent, like healthcare.gov, fall somewhere in between.

Forget About Too Little Information or Too Much Information, Think About Search Costs

Poking around Cory Doctrow’s Tumblr site today, I came across a Neil Gaiman quote:

For most of the human race, pretty much all of the lifespan of the human race, information was currency. Information was like gold. It was rare, it was hard to find, it was expensive. You could get your information, but you had to know where to go, you had to know what you were looking at, you had to know how to find your information. It was hard. And librarians were the key players in the battle for information, because they could go and get and bring back this golden nugget for you, the thing that you needed.

Over the last decade, which is less than a blink of an eye in the history of the human race, it’s all changed. And we’ve gone from a world in which there is too little information, in which information is scarce, to a world in which there is too much information, and most of it is untrue or irrelevant.

From too little information to too much information in just a few short years? Presumably then, at some point there was a Goldilocks era when we had exactly the right amount of information. So, when exactly was that, 1998 or thereabouts? Gaiman’s rhetorical use of too much and too little information hardly makes sense when considered in finer detail.

True, there is more information today than ever. Almost 90% of all data in the world today has been created in the last two years alone. And yes, there is a lot to experience, yet, there is a serious dearth of useful information, as there always has been. Useful information, information that push forward a project or make a difference in saving lives is costly. For individuals, it means pushing yourself further on the learning curve. For firms, it means the adoption of new management practices. Concerns about too much or too little information are orthogonal to a more important line of questioning: what are the costs in searching for the answer.