TV is a mess. It is hard to navigate to what you want to watch without having to deal with a mess of technology and diverse business plans rooted in crappy copyright laws. Everyone knows it and for ages we have waited for someone to cut through it and fix it.

Apple has had ambitions on this for years and has offered a few contributions. First, it put TV and movies on iTunes so you could watch a computer connected to a TV. Second, it put TV and movies on iPads and let you play them on a TV. Third, it developed Apple TV — a glorified iPod — to do the same thing. Each has helped but each suffers from the overall flaws in the system. Read more »

Apple introduced a new social network yesterday — Ping. Ping basically allows you to share your iTunes music, video and other interests with you friends. On paper, it is a great idea as it integrates an existing social network into an existing payment and shopping network. This provides a route to monetisation that has eluded many others. Do this for apps and books as well and this might be significant. As I have written before, sharing your electronic tastes is a gap waiting to be filled. Read more »

I wrote an Op Ed for the AFR a few weeks back that has sparked some debate. Rather than attempting to debate by e-mail, I reproduce the Op Ed below and hope that the debate can continue through this blog.Our newspapers are in a fight to the death. One enemy is well known – the news aggregators like Google News. But the other enemy has slipped under the radar – the public broadcasters like the ABC.

News aggregators upset the newspapers because they lower consumer search costs and reduce barriers to entry.

Want to know the days top stories? Go to your aggregator’s page on the internet and you get the headlines from a vast array of alternative sources. Don’t want to pay? Of the hundreds of stories on any topic, a few will be behind pay-walls. But these are easy to avoid as there are a myriad of substitutes that you can click on instead. Read more »

Tim Harford looks at signaling by criminals. In the process, comes this remark:

Other signals seem perverse. Gambetta describes a convention in Italian academia for some established professors to celebrate the poor quality of their published work. This, he says, is a credible signal that they cannot jump ship for somewhere like Harvard – so will remain in Italian academia as powerful patrons.

That does seem perverse. It also seems a self-serving excuse for low productivity in a low incentive environment. Surely, the way to signal a commitment not to become a Harvard professor but to otherwise want to contribute to society is to publish exclusively in the popular press. Read more »

Thinking of a career in politics or public life? Then have I got the opportunity for you. The most economically-qualified person to ever hold elected office in Australia is looking for staff (advertisement and details over the fold). This has got to be the horse to back for a long-term investment in political leadership and you have a great chance to get in early. I’m sure, for the right candidate, the pay is well below market opportunity but think of the signal you’ll be sending by accepting that pay.

Also, mentioning that you read the ad on this blog will surely not go astray.

Andrew Leigh

Potential Member for Fraser

ELECTORATE OFFICERS

Applications are invited for several electorate officer positions, based in Canberra. This advertisement anticipates the formal declaration of the election result, which is expected to occur within the next week. Read more »

A little mental arithmetic on Saturday night left me wondering why Tasmania has 5 federal seats in the lower house.  There are 150 seats in the lower house, as we all now know.  The Australian Bureau of Statistics site trumpets Australia’s population as 22.4 million.  So there should be about one seat per 150,000 people.  Tasmania’s population was 505,000 at the end of 2009.  Therefore Tasmania has less than 3.4 quotas, and since quotas are, quite rationally, rounded to the nearest integer, Tasmania should have 3 seats in the lower house. Read more »

I have to admit, and I stress that all parties involved are ones I believe to be beyond reproach and, indeed, for that reason, I think the Governor-General will step aside. I don’t know anything about constitutional law but when the father of your grandchild is in Parliament and you have to decide who governs that’s a conflict of interest. I don’t think anyone thinks that being without a Governor-General right now would be good but that may well be the outcome.

This exposes a key flaw in our current system. It is not simply that we have a Constitutional Monarchy but that the monarchy part is determined by the incumbent executive party. If the Governor-General were elected, this isn’t an issue because the people electing her would be the ones holding responsibility for any personal conflicts and their relevance. Read more »

With all of the discussion about media reporting in the election, I wanted to reflect upon a positive experience I had this week in the US that demonstrated what reporting could be. Read more »

Labor came out today with an addition to their parental leave policy:

The Gillard Labor Government’s Paid Paternity Leave will be government-funded, and will provide eligible working fathers and other partners with two weeks pay at the national minimum wage – currently $570 a week.

The current parental leave plan applies to fathers too but let’s face, if it can’t be shared, at least initially, it is the mother claiming that benefit. Read more »

There is some discussion at the moment that the Australian government might move to require mobile application games to be classified according to content. This is a move that is consistent with requirements on other computer games and, on the face of it, if classification is policy there it would seem that it should be policy for mobile games. (Note to commentators: it may well be that classification of games is silly but I’m not looking to discuss that here.)

What I want to discuss is the implementation of this. Here is what the concern is: Read more »

In the NYT, Tyler Cowen argues the case against free parking. It is a simple and compelling point. The way it is put in the NYT piece has created confusion (for example, see Arnold Kling).

If developers were allowed to face directly the high land costs of providing so much parking, the number of spaces would be a result of a careful economic calculation rather than a matter of satisfying a legal requirement. Parking would be scarcer, and more likely to have a price — or a higher one than it does now — and people would be more careful about when and where they drove. Read more »

I thought it was time to pick up a theme on the National Broadband Network that has been going around for sometime; the lack of a clear cost-benefit analysis.

First, it is never going to happen. Put simply, the political rationale for the NBN is a combination of two things. First, that a big push on broadband was not going to happen without a big push from Government given the virtual monopoly held by Telstra and the ineffectiveness of regulation to manage that. Second, there is the Yes Prime Minister Trident/Hollowmen/GFC Big Ticket/Shiny things rationale that is wonderfully captured by this piece in The Onion. You only want a comprehensive cost-benefit analysis if it is going to change your decision. The political rationale is so strong that that is not going to happen and so there is no point to attempts at quantification. Read more »

Higher education has not been a feature of the current election campaign. That is a problem.

There is a huge and unsustainable cross-subsidy in higher education in Australia. The subsidy is from international students to domestic students. In areas such as business, an international student can be paying three or four times as much as the university receives for a domestic student. Same seat, same lecture, vastly different price.

This cross subsidy has enabled successive governments to ignore their funding obligations to Australian universities. Australian students in undergraduate courses in business, arts or law simply do not pay the average cost of their education. As capacity constraints come into play – as they do in many business courses – Australian students do not even pay the marginal cost of their place. Read more »

I have an opinion piece in today’s Age comparing the Coalition plan and the NBN.

The Broadband Premise: Both sides have it wrong

Joshua Gans, The Age, 12th August 2010

THE Coalition’s broadband policy, as is the nature of these things, is short on details and detailed justification. But the basic elements are there.

The Coalition will not build the national broadband network (NBN), leaving it instead to the market. It will give it a kick along by building a duplicate backbone network that is open access. The idea is that it will provide competition at that point, allowing other providers to connect it to consumers. That part will cost $2.75 billion. The Coalition recognises that this will leave gaps so, for those, they intend to throw money at the problem: $3.45 billion in fact. Read more »

There are two alternative policies for broadband internet in Australia.

1. use government money to build the NBN using fibre to the home; or
2. restructure Telstra and leave it to the market.

The government’s policy is the first of these. The coalition’s policy is neither. And that is the coalition’s problem.

To simply invest in some fibre backbone and fill some gaps in rural and regional Australia achieves almost nothing. But this seems to be the coalition’s broadband policy. Telstra will still own the copper for ADSL, the main cable network used by Foxtel and the biggest and best 3G mobile network. This means that the ACCC will have to keep regulating Telstra and the problems of the past 20 years of telecommunications will not be addressed. Read more »

That is how I would class the Coalition’s broadband policy if they had the guts to say what it actually was. The policy is basically: we will not be building the NBN and instead will spend $6 billion on plugging the usual gaps via some other means. They are claiming to provide something cost effective and still give people what they want. It is unlikely that is the case because the regulatory issues with Telstra will still remain and, in any case, the Coalition is in no rush.

The sad thing is that they had the opportunity to sell the policy legitimately and according to their values. Here is what they could say: “Broadband is a private good. Many people want fast video downloads and the like and the well-to-do are able to pay for them. Labor is offering no choice, you must pay for such downloads whether you want them or not. Instead, the Coalition wants to let the market supply these things but will also make sure that in outlying areas, the market has some help.” It is a clear and simple message and one that Australian’s have a right to hear. Read more »

There are two aerial photographs of the Sydney CBD in the AFR today that (quite unintentionally) bring out the problem with developing the Western harbourside of the CBD.  The photos are on pages 47 and 50 of Thursday’s AFR.  The first looks north from a height of about 600 metres above Sydney University.  It shows the harbour bridge and the massive road that comes South from the harbour bridge which is called the Western distributor.  The second looks South along the Western shoreline of the Sydney CBD, which was until recently a working port.

The first shows the bridge and its southern exit road in a harsh but revealing light.  The bridge is an unappealing and massive  industrial structure; no more attractive than the now abandoned container wharfs on the western edge of the CBD,  and the road cuts off the city completely from its western shoreline. Read more »

A bit of interesting commentary today on the population debate. First, on The Drum, Chris Berg who points out the struggles the Greens are having on their immigration policy:

Let’s be clear. If you are a refugee fleeing persecution, then a Green government will embrace you. But if you are fleeing something as banal and commonplace as poverty, economic hardship, low wages, a lack of opportunity or jobs, or if you’re just looking for a better life for you and your family – then the door to Australia is closed.

Actually, the contradiction arises because the Greens are moving away from their core issue. They should be arguing the population position solely on environmental grounds which generally means being neutral on movements of people and dead against ‘natural’ expansions in the population. That means having a Small World population policy and not having any specific views on the size of Australia. Read more »

My colleague Sven Feldmann presented a talk today on Game Theory in Action. The city council where he lives has been using a very common approach for matching children to kindergartens. The Boston Approach (see here for details) involves asking for a preference ranking and making several rounds of offers. This approach is fraught with problems including: inefficient matching, an incentive for parents to misrepresent their preferences, and “justified envy“, whereby a student prefers a school S that she was not admitted to, despite having a higher priority than another student who was in fact admitted to school S. Read more »

Imagine the following. You are in an industry where technological change has made your main products redundant. Your revenues have crashed. It is far from obvious that you can re-engineer your business to survive. What do you do?

1. Ask antitrust authorities to allow you to collude?
2. Try to change the law to undermine your competitors?
3. Both of the above?

The clear answer for newspapers in the US is “both of the above”. And the FTC appears to be listening.

Earlier this year the FTC released a discussion paper “Potential policy recommendations to support the reinvention of journalism“. Two recommendations are ‘statutory limits to fairuse’ and ‘collaborative actions and antitrust exemptions’. Put simply: Read more »

Australia Radio National recently did a radio program on e-books at the Brisbane Writers Festival. Of the 4 panelists, only one actually owned an electronic book reader. A number of benefits were cited of e-books, including convenience of purchase, lower book prices (especially compared to the prices of printed books in Australia), and better access from rural locations. However, the overall the impression was that printed books and traditional bookstores will continue to exist for some time. One of the panelists stated that printed books will still constitute 70% of the market within a decade. Another panelist felt that bookshops would continue to exist because they are a nexus of social activity. Read more »

Early this month a number of Chinese provinces raised their minimum wage by one-third, and the Director of  the Wages and Labour Institute at China’s  Ministry of Human Resources and Social Security has suggested that it ought to be possible to double wages within 5 years. Normally economists would be worried about the employment effects of such a large increase in legislated wages, but in China there is reason to believe that these wage increases will have a positive effect on the economy. As with any economy, the key to growing wages without having employment fall is rising productivity. In China this productivity needs to be underpinned by rising human capital, and the physical capital to support growth. In both areas there is no reason to believe that reason trends won’t continue to support strong labour productivity growth. The other factor supporting strong wages growth is the fact that the wage share of income has steadily declined in recent years, from 53% of GDP in 1999 to below 40% today. By comparison this share is 57% in the US and 51% in Japan (so who’s  the communist here!). Read more »

It is hard to watch the current ‘population’ debate in Australia, be overseas and not think about that question. Let me put it more specifically, if I am nationalistic towards Australia, should I consider remaining overseas and not returning? In particular, what is the logical answer to that question if I am to believe the general arguments put forward seemingly by both major political parties — albiet one more starkly stated than the other.

To begin answering this question let me state a few axioms from which to base logical consequences. First, I’ll assume the goal is the welfare — happiness, economic prosperity, etc — of all current resident Australians in some sort of aggregate — the nationalistic assumption. Second, I’ll assume that I am not allowed to base my decision on my own economic circumstance and also on the ‘economic contribution’ I might make to Australia in the future — this is the no-economic discrimination assumption that I see politicians as making. Those two should do it. Read more »

Take a look at this week’s Forbes.

Some business lobby groups are apparently opposed to Julia Gillard’s plan to reduce immigation rates, and hence population growth. It is argued that reducing population growth rates would reduce economic growth. Unfortunately this is far from clear cut. The workhorse model of economic growth, the neoclassical growth model, suggests that rising population growth reduces steady state living standards, and has no effect on per-capita economic growth.  The simple and intuitive reason for this is that higher population growth increases investment required to keep the capital stock growing, which becomes more difficult the faster is population growth. If Tony Abbott cuts infrastructure spending and increases population growth we have pretty much a recipe for reduced living standards, according to the standard model. More recent work on economic growth, both empirical and theoretical,  has come to conflicting conclusions about the relationship between population and growth. Some of  Michael Kremer’s work suggests that larger populations increase innovation and economic growth. Read more »

A few weeks ago two of my friends (on the same day in fact) shared some lengthy stories that, while not about economics, are worth the read. Here is Shane Greenstein on his trials with bacteria and here is Chris Joye on his trials with international espionage.

This article by David Uren has got some international attention. It is about Per Capita and its potential influence on our new Prime Minister. The particular bit of interest is the idea of “market design.”

The idea of “market design” is a key theme for Per Capita. Governments have always had a role in setting the rules of conduct for markets through trade practices. Per Capita argues that with due government guidance, markets can perform a powerful role in delivering human services, such as the jobs network. Read more »

With the election campaign now on, it will be interesting to see the policies of the major parties on banking, particularly bank regulation. Just because China saved Australia from the worst effects of the GFC does not mean that our system is all fine and dandy. We have learnt some lessons about banking from the GFC and we need to see how the parties are going to deal with these lessons.

I have touched on these lessons before.

Lesson 1: The Government WILL underwrite financial institutions – whether it wants to or not. This is the big lesson. The federal government currently implicitly insures the banking system. It is politically impossible for the government to do anything else.  This lesson is the starting point for thinking about bank regulation. Read more »

Australia, Brazil and India completely dominate the export of iron ore in seaborne trade.  In a market of about 750 million tonnes, Australia have about 40% of market share each and India has about 13%.  You might think that these countries would cooperate to capture the surplus from rising iron ore prices and volumes.

India has an export tax or 15%.  Brazil was considering an export tax earlier this year, but as far as I know they have not imposed one yet.  Instead of the failed RSPT, why didn’t the Rudd Government just impose an export tax and at the same time collude with Brazil and India to have them impose a similar tax.  And then increase or decrease export taxes in unison to achieve the optimal extraction of rents from the market.

On current expansion plans Australia will be exporting about 700 million tonnes of iron ore by 2018.  The spot price of iron is about $100 per tonne (having fallen from $180 earlier this year) and the average total cost of extraction is about $35 per tonne.  A $20 per tonne tax would raise over $10 billion per year of extra taxes. Read more »

All through the twitter coverage of Steve Jobs’ press conference, I wondered what would have happened if this issue had emerged with the media as it was in 2000 or 1990. Users may have noticed the antenna issue. Random ones may have brought the issue to the attention of media outlets but it would have taken more than 22 days for it to have become a story. In that time, Apple could have adjusted the problem and also, given away free cases — not as an apology as they have now — but as a promotion. The marketing issue would never have emerged.

But that didn’t happen. Thanks to the Internet, the problem flared up in 22 minutes (I’m being poetic here). It was too quick for the company to react with a counter-strategy by stealth while that issue simmered in the media for all that time. Had Apple done what they had done to react today — namely, a fix of the algorithm and free cases — without anything else, their reputation would be damaged. The Internet changed what they had to do. Read more »

If there is one thing I know attracts a great deal of interest on this blog is when I feel its time for another urinal post. As I know from my popular economics book — the only one in existence to include a full chapter on toileting — no issue commands more interest than ones in this area. Read more »

Once indication of when a company has ‘made it’ is when they start to be the target of antitrust attention. A couple of years ago, Google entered that club and now Apple looks set to follow. Read more »

Last year David Weston and I wrote a teaching case on how in 2000, NTP sued Research in Motion (makers of the popular BlackBerry device) for infringing its patents that cover the wireless delivery of email (free download from WIPO). Well, NTP is at it again, and has just sued a number of firms including Apple, Google, LG, Motorola, HTC and Microsoft that make smartphones. The Washington Post has a brief description of the patents. The earlier case ended with a $600+ million settlement, but that large amount was partly the result of (a) RIM being found to willfully infringed NTP’s patents and  attempted to deceive the court when presenting evidence of “prior art” in 2002, and (b) as the case escalated, RIM faced the very real threat of having its US operations closed down in 2005. Read more »