Auto Added by WPeMatico

The wealth of networks, the hive mind, and the future of [mass] production

One of the more interesting books published  in the past ten years was that of a law professor called Yochai (pronounced Yohai) Benkler. His book was called “the Wealth of Networks”. Its contention was simple. The Internet is allowing for the return of a way of forming wealth that had all but disappeared from modern life: the free association of people contributing their time to a shared project.

Open-source software is an obvious example. A group of people devise an open standard; other people contribute continually via public discussion.   The economist asks why anyone would contribute free labour to a project.  It is obvious that when the costs of participation are low enough, people will freely contribute hours of labour to collective projects: for honour, for prestige (the same thing almost), for a sense of belonging to something important, even great. Among the many collective works shaping the world today are Wikipedia, Linux, Apache software, and a host of open-source codes.

CV1_TNY_11_25_13Viva.indd

The particular wealth-creating capacity of the Internet is not merely to facilitate trade and intellectual exchange, argues Benkler. Its genius is to allow for the conditions necessary for a group of volunteers to devise something complex and important: rather as if a group of amateurs could assemble a cathedral, a warship, or a car. In the conditions of production that prevailed until very recently, people lacked the tools of communication that would allow for mass participation, long-distance, specialized, and most important, voluntary association of a kind that would permit things to be done easily, without resort to the market or to the corporation.

Until now, the productive forces of society were organized either into markets, or corporations. Markets occur when people can trade safely, but markets have their own transaction costs. Corporations internalize a bunch of costs, so that you deal with another department of your corporation for services rather than go outside. The boundaries of the corporation are set by the relatively greater expense of dealing with outsiders rather than dealing with people in your corporation. In both cases, the transaction involves money, whether in the form of salaries for the insiders, or fees for the outsiders. Neither form of production runs on voluntary, unpaid association, whose emergence into significance is the change worth noting.

A case in point was raised in the National Post on Thursday in an excerpt from a book by Clive Thompson, “Smarter than you think”. The particular case was the  use of volunteers using their own computers to solve problems of protein folding. The biologists put out the problem for the public to solve, with the assistance of shared software and a scoring system. The project elicited the volunteers’  cooperation, and on the other, competition among them. The results were highly productive, and generated results that astounded the biologists. The same kind of shared use of computers occurs in the processing of possible signals from outer space, which involves a software download which then engages your computer’s idle time to analyze noise from radio telescopes for signs of intelligent life in the universe. Regardless of the possible futility of the idea, the SETI project is only possible because of the processing power of thousands of linked computers.

So far collective projects of this nature have involved the capacities of humans and computers to analyze signals and situations, write and improve software, and to invent processes. What if the next stage involved  the mass production of things? More accurately, what if the next step of collective creation involved the production of  complex objects and machines? What if the cost of producing tangible things, and not just computing, sank to the level at which a father and son shop in Bangladesh or Arkansas could produce a $100,000 gas turbine with only somewhat more effort than $300 bicycle?  What if “mass” production gave way to production at your local garage of complex spare parts that today need to be ordered from a factory or a warehouse?

Possibilities of this sort might suggest that  the era of the mass production factory might be coming to an end. More likely is that its preponderance would decline when every place with a bunch of lathes, a supply of electricity, and some skilled hands,  were enabled to create complex machinery to nanometer accuracy. If they can make Kalashnikov rifles in upcountry Pakistan with current pre-computer technologies, think what the same sorts of handy people could do with open source software driving their lathes.

That time is not far off. I am aware of an open-source software project, to be embedded on a chip, the price of which will be on the order of $30. Its purpose will be the control of complex operations of automated machine production. This is the missing link between higher-order software of the kind that runs our computers and machine tools. To a great extent, there has been no open-source software developed to control complex machine fabrication. It has all been proprietary, and as companies disappear with the regularity of mushrooms, the software they developed is not replaced, thereby idling huge and expensive machines for want of software to drive them. A friend of mine is leading a project whose purpose is to bring the most complex machine operations under the programmable control of users for a price that can be afforded, not just by McDonnell-Douglas, or General Electric, but by father-and-son shops in Arkansas, São Paulo, or Bangladesh.

The move to “print” solid objects is only an aspect of this development, and not the most important. Most useful tools will not be fabricated from injection moulding of plastics. Durable machines need to be made from metal. Here the trick is to get software controlled machinery to produce complex objects to nanometer accuracy, if necessary, and to do so as cheaply or more so than large factories.

Consider what is going on now: mass participation in improving software, which enables us to solve puzzles and problems, such as protein-folding, that could not be solved without mass participation. Next, inject into this picture of innovation and distributed participation the ability of very small workshops to produce useful tools and parts to the most exacting specifications, all across the world. This means that material objects might be subject to the kinds of criticism and orderly improvement, as well as the surprising innovation, that characterizes open source software, and scientific experiments conducted by computer-mediated mass participation.

Wealth creation has largely been conducted through corporations and markets, rather than by means of honour- and prestige- based cooperation. The promise of cheap, open-source software for the control of machines is  twofold: the same kind of innovation that has occurred in software can occur in the production of things and, moreover,  the participation in complex production is democratized to every place it the world with a stable supply of electricity, a few lathes, and a few pairs of hands. It raises the possibility that the driving force of open-source software will transform the productive powers of formerly backward parts of the globe, from Arkansas to rural Russia. As for the advanced portions of the world, maybe Speedy Muffler will get most of its parts for your car from workshops down the street, rather than from hundreds of miles away.

Your local machine shop may become the source of important technical innovation, just as it was at the beginning of the Industrial Revolution.

More signs of hope

It has been reported that David Cameron, the British Prime Minister, has told his ministers to get rid of the “green crap”, all the subsidies, levies, taxes and other encroachments on the taxpayer’s pockets, which are driving up household energy bills – as they are designed to do – by large amounts.

 

UK energy bills

I am waiting for Tim Hudak or the next premier of Ontario to speak as bluntly.

Leftist war-for-oil canard

Leftist are always fond coming up with hare-brained theories which are then amplified by the MSM and then further propagated by useful idiots amongst us. One of the oldest is “war-for-oil”, which is used to explain every military action in the middle east in context of access to oil. Perhaps leftist should consider this fact.

Last month the world witnessed a paradigm shift: China surpassed the United States as the world’s largest consumer of foreign oil, importing 6.3 million barrels per day compared to the United States’ 6.24 million. This trend is likely to continue and this gap is likely to grow, according to the EIA’s October short-term energy outlook. Wood Mackenzie, a leading global energy consultancy, echoed this prediction, estimating Chinese oil imports will rise to 9.2 million barrels per day (70% of total demand) by 2020.

Yes, all China had to do for that oil was to pay for it. An astonishing concept indeed, that further underscores Left’s limited understanding of economics.

Matt Ridley on why climate change is good for us

Matt Ridley, author of the Rational Optimist, writes in the Spectator why climate change and CO2 in particular are good for us.

 

The increase in average carbon dioxide levels over the past century, from 0.03 per cent to 0.04 per cent of the air, has had a measurable impact on plant growth rates. It is responsible for a startling change in the amount of greenery on the planet. As Dr Ranga Myneni of Boston University has documented, using three decades of satellite data, 31 per cent of the global vegetated area of the planet has become greener and just 3 per cent has become less green. This translates into a 14 per cent increase in productivity of ecosystems and has been observed in all vegetation types.

 

More fact-based assertions are in the article.

Circle of socialism almost complete in Washington

With the presidency in the hands of a great phony who thinks that “…this debt ceiling — I just want to remind people in case you haven’t been keeping up — raising the debt ceiling, which has been done over a hundred times, does not increase our debt; it does not somehow promote profligacy” and Senate on similar track, it is the turn of Federal Reserve Bank to adopt a similar outlook.

Now that Lawrence Summers’ nomination has been derailed by a small number of Democrat, who thought he was too laissez-faire during the 90s and because of his Harvard speech that commented on lack of women in sciences, Janet Yellen is the one most likely to be nominated. What does this liberal, who was a professor at Univ of California, Berkeley think of the future course of Fed policy? This in her own words.

“Will capitalist economies operate at full employment in the absence of routine intervention? Certainly not,” she said.

Thanks for making that clear Janet. Now please tell us about the keen insights that you will bring to this job. Yellen shared the following with the Financial Crisis Inquiry Commission in 2010, regarding the 2008 financial crisis.

“For my own part,” Ms. Yellen said, “I did not see and did not appreciate what the risks were with securitization, the credit ratings agencies, the shadow banking system, the S.I.V.’s — I didn’t see any of that coming until it happened.” Her startled interviewers noted that almost none of the officials who testified had offered a similar acknowledgment of an almost universal failure.

Well, at least she is honest about it. US is in great hands indeed.

US credit agency learns the Chicago-way

The US business community is learning not to mess with “da boss”.

Standard & Poor’s on Tuesday blasted a $5 billion fraud lawsuit by the U.S. government as retaliation for its 2011 decision to strip the country of its AAA credit rating.

The McGraw Hill Financial unit was the only major credit rating agency to take away the United States’ top rating and the only one sued by the Department of Justice for allegedly misleading banks and credit unions about the credibility of its ratings before the 2008 financial crisis.

In a filing with the U.S. District Court in Santa Ana, Calif., S&P said the lawsuit attempts to punish it for exercising its First Amendment free speech rights under the U.S. Constitution but also seeks “excessive fines” in violation of the Eighth Amendment.

It said the government’s “impermissibly selective, punitive and meritless” lawsuit was brought “in retaliation for defendants’ exercise of their free speech rights with respect to the creditworthiness of the United States of America.”

What is the real US credit rating if it was unaffected by political pressure?

Perhaps shockingly, most of these estimators come up with a score of around 650 (with a range of 625 to 720). That is basically in the middle of the range, and consistent with the recent rating on U.S. debt of A+ by China’s Dagong Global, the only non-U.S. credit rating agency that seems to draw much interest or credibility. By comparison, countries like Norway, Switzerland and Singapore score an AAA from Dagong, and the United States is largely on par with Japan, France and Britain in Dagong’s scoring.

Dagong is dismissed by the sycophant AP as a “little-known Chinese ratings agency” even though it is regarding as a notable non-US credit rating agency. Additionally the “U.S. Securities and Exchange Commission has refused to recognize Dagong’s ratings because of the commission’s inability to supervise the Beijing-based agency”, read exercise political control, which is puzzling because in 2010 “Chinese credit rating agency Dagong Global Credit Rating … said it might delay its American credit rating market entry plans, after the US government rebuffed its application earlier this year.” Credit is the lifeblood of the economy and credit agency are the designated gatekeepers, so US has vested interest in ensuring control over them.

As an aside, if you are lending money, who would you rely on to ascertain the credit worthiness of the borrower – your credit rating agency or the borrower’s credit rating agency?

Economic fruits of liberalism

In this blog Dalwhinnie posted the following about America.

America is in one of its low points… It is important to remember the America that was, has been, and will be again.

Before adopting a  Panglossian view of America, it is important to answer the question, what happened to Detroit and what is happening to California? First Detroit.

Last year Obama spoke of Detroit as follows.

President Obama on Saturday painted a strong contrast between his record on the auto bailout with that of his presidential rival Mitt Romney, touting his own refusal to “let Detroit go bankrupt.”

In his pre-taped weekly address Mr. Obama, referencing a 2008 op-ed in which Romney argued against bailing out the auto industry (entitled “Let Detroit Go Bankrupt”), outlined his administration’s efforts to save the industry upon being elected.

And today, on a day which the US stock market hit all-time highs because things are going so well, we heard this.

The city of Detroit filed the largest municipal bankruptcy case in U.S. history Thursday afternoon, culminating a decades-long slide that transformed the nation’s iconic industrial town into a model of urban decline crippled by population loss, a dwindling tax base and financial problems.

The 16-page petition was filed in U.S. Bankruptcy Court in Detroit.

Heckuva job Obama! Some people blame the problems in Detroit to decline of the auto industry, unions, white migration and black politics. How could a city, that was at the center of an area that produced 45% of the world manufacturing output after WW2 go bust? Those excuses are reasonable but what about California? Its problems are summarized by Hanson.

California’s multidimensional decline—fiscal, commercial, social, and political—sometimes seems endless. The state’s fiscal problems were especially evident this past May, when Governor Jerry Brown announced an “unexpected” $16 billion annual budget shortfall… According to a study published by a public policy group at Stanford University, California’s various retirement systems have amassed $500 billion in unfunded liabilities…

Not just in its finances but almost wherever you look, the state’s vital signs are dipping. The average unemployment rate hovers above 10 percent. In the reading and math tests administered by the National Assessment of Educational Progress, California students rank near the bottom of the country, though their teachers earn far more than the average American teacher does. California’s penal system is the largest in the United States, with more than 165,000 inmates…

Meanwhile, business surveys perennially rank California among the most hostile states to private enterprise, largely because of overregulation, stifling coastal zoning laws, inflated housing costs, and high tax rates. Environmental extremism has cost the state dearly: oil production has plunged 45 percent over the last 25 years, even though California’s Monterey Shale formation has an estimated 15.4 billion barrels of recoverable oil, according to the U.S. Energy Information Administration…

Worst of all is that neither the legislature nor the governor has offered a serious plan to address any of these problems…

Here is a state that is at the center of a technology boom led by firms like Apple and Google as well as countless others. This technology boom, led by computer firms and associated technology, is clearly one of the most important events in economic history. Several hundred years hence, this period will be still be viewed as pivotal to human progress, yet a state at the center of it all struggles. The introduction of personal computer in the 80s and internet in the 90s, are just recent events in the past yet America seems to have expended all the benefits accrued from this development.

How could that be? How could a state that epitomized rugged individualism a mere 50-years ago, go from that to what it is today where liberals control all levers of government and Republicans don’t need to bother showing up because Democrats have super-majority with which to force legislation through.

The only thing they have in common is the brand of economic, social and cultural policies that are practised. Things are no different at the federal level which is led by a guy who in 2010 said “I mean, I do think at a certain point you’ve made enough money.” That really shouldn’t come as a surprise because we learned in 2008 that life as you know it in America was over.

Barack Obama will require you to work. He is going to demand that you shed your cynicism. That you put down your divisions. That you come out of your isolation, that you move out of your comfort zones. That you push yourselves to be better. And that you engage. Barack will never allow you to go back to your lives as usual, uninvolved, uninformed.

When Jimmy Carter says that “America has no functioning democracy” and we hear former Supreme Court Justice David Souter state that the “pervasive civic ignorance” in the U.S. could bring dictatorship you know that America has changed fundamentally and any predictions of its future must take that into account. If things are like this during this economic up cycle what will happen during the next down cycle? Who will be left holding the shit can?

Politics, economics, finance and Obama’s future

So far Obama has led a charmed life, seemingly impervious to scandals around him. As the economy has climbed out of the 2008 financial crisis, the old adage of politics being driven by a warm bed and cold beer has held true. If the economy was to unravel Obama will be in trouble, especially because the media will not provide him with cover. Financial volatility leads to economic volatility, which leads to political instability as W found out. What is happening on the economic and financial front?

June 4, 2013 on barrelstrength.com : Bracing for economic volatility

The economic volatility is downstream from financial volatility and the latter process might have started during the last week of May. The extent of government intervention in the markets, via Quantitative Easing (QE), is unprecedented and therefore the ramifications will have a lot of unknowns.

June 20, 2012Analysis: Anxiety grows as stock market learns to walk on its own

The stock market has been put on notice by the Federal Reserve: from here on in, you’re on your own.

Stock markets worldwide have fallen sharply since comments on Wednesday by Fed Chairman Ben Bernanke laying out the U.S. central bank’s plans to pull back on its $85 billion in monthly asset purchases. U.S. stocks endured their worst two-day selloff since November 2011, and the Dow Jones industrials fell 354 points on Thursday.

 

June 21, 2012

Bracing for economic volatility

The economic volatility is downstream from financial volatility and the latter process might have started during the last week of May. The extent of government intervention in the markets, via Quantitative Easing (QE), is unprecedented and therefore the ramifications will have a lot of unknowns.

What I think gets lost in the discussion about the cost/benefit of QE, and more importantly, how long it has gone on, is the fact that there are billions of potentially very volatile long duration low coupons on the balance sheets of investment portfolios.  Bond math dictates that for a given duration, the lower the coupon, the more volatile the price.  A 2% 10-year is much more price-sensitive than a 4% 10-year.  Due to the nature of these low, long duration coupons, the adjustment process is likely to be very chaotic, making last week look like a game of tiddlywinks.  This is bound to have a profound impact on portfolios and on sentiment….

The dark side of QE is the idea that no one really knows where the natural rate of interest really is, and finding that equilibrium is going to be a very uncomfortable adjustment process.  Regardless to what extent you believe the Fed has influenced interest rates, the fact is we still don’t know where the curve should trade absent QE.

Iraq and war-for-oil argument

Hopefully this will put an end to the oft repeated leftist canard that the Iraq war was for oil.

Since the American-led invasion of 2003, Iraq has become one of the world’s top oil producers, and China is now its biggest customer.

China already buys nearly half the oil that Iraq produces, nearly 1.5 million barrels a day, and is angling for an even bigger share, bidding for a stake now owned by Exxon Mobil in one of Iraq’s largest oil fields.

“The Chinese are the biggest beneficiary of this post-Saddam oil boom in Iraq,” said Denise Natali, a Middle East expert at the National Defense University in Washington. “They need energy, and they want to get into the market.”

Why do leftist keep repeating the remark that one must go to war to secure oil? Perhaps they do not understand fundamental economics. In case of the oil market there is a very willing seller, the Arab countries don’t have much else to trade and need the money, and willing buyers. To purchase the oil, one simply has to pay for it and outbid the other buyers, which is what the Chinese are doing.