Gresham’s Second Law

The inventor of the Web writes to its 2bn users.

Sir Tim Berners-Lee, who with Robert Cailliau created the World-Wide Web 28 years ago with the specification for HTML, has published an open letter to the Web’s 2 billion users today.

The text is here, in English, French, Spanish, Portuguese and Arabic. He invites everybody to share it, so I’ll save you the fatigue of clicking on the link to reproduce it below the jump. Some quick comments from me to get you going.

Internet users by country, 2011

1. Berners-Lee is one of the few people who can speak with real authority on this stuff. If he says we have big problems, it’s a safe prior that we do. If he says they can be fixed, there is a very good chance they can.

2. The approach is too narrow. I rely here on another authority, Mike O’Hare of this blog. He has written about the crisis in society created by the arrival of transmission and reproduction of information at near-zero marginal cost, leading to the implosion of subscriber revenues for journalism and the dramatic thinning out of newsroom staff.

Let’s give this insight a catchy name: Gresham’s Second Law.

Robert Gresham was an English financier of the Elizabethan era, who has given his name to the first genuine economic law: that is, a generalisation based on solid observation, explained by a robust theory. (He had eminent predecessors including Copernicus so the attribution is a little unfair.) The Law reads:

Bad money drives out good.

That is, with a bullion specie currency, when the king debases it by reducing the bullion content of the coins, the price of the metal rises in nominal terms, and anyone who can get hold of the old, fatter coins can make a quick doubloon by melting them down. So the good old coins disappear.

Gresham’s-nth-granddaughter’s Second Law, which I have just invented, is similar:

Bad information drives out good.

The cost of production of good information – science, literature, accurate reporting – is high. The cost of production of lies, bullshit, smears, pornography, and rumours is negligible. On the consumption side, bad information is designed to appeal to our lower human nature (Kahneman’s System 1). Good information is often difficult, unwelcome or both, and requires the support of the lazy System 2. So the good information always has a struggle to be heard.

Now consider a technical innovation that lowers the cost of reproduction or transmission of information: say from hand copying to print, or print to the Internet. In the print era, Adolf Hitler had to struggle to get his message across. He had to find a printer for Mein Kampf (the title was accurate). He had to build a united movement from the hard-right flotsam floating round Munich, through endless face-to-face meetings in beer halls. Even in favourable conditions, it took him a decade before he could mount a credible challenge to gain power. Contrast Donald Trump. Starting from nowhere politically in 2015, he won an election in a much larger country with little more infrastructure than a Twitter account and support from the Breitbart website.

The contrast can be explained in terms of  Gresham’s Second Law. The drop in transmission costs removes an obstacle to the dissemination of bad information, and releases its advantage in lower costs of production. So the problem has got worse.

3. Berners-Lee is right that we need to brake bad information. His example of political advertising linking to fake news is just one abuse. Americans in particular need to rethink free speech absolutism. Citizens United represented to many of us a reductio ad absurdum. As legal persons, corporations are slaves, with inferior, not equal rights to the humans they serve. Should corporate bodies – with access to much bigger megaphones than individuals – be held to a higher standard of care in their public speech? Companies that mislead their stockholders face severe sanctions, and deception in advertising is limited to suggestio falsi and suppressio veri, outright lies being banned. I don’t see why the privilege of corporate political and cultural speech should not face analogous restrictions.

4. We also have to think positively: how can the good information be paid for? The answer for science has been socialism leavened by philanthropy. Literature and music seem to be doing all right in the market system, though that’s just a non-expert impression. A sufficient number of customers for music seem prepared to pay one or two dollars for a song rather than pirate everything, a convention that relies more on an honesty-box ethic than on sanctions. The immediate crisis is in reporting. It’s good news that Sir Tim’s team will be looking at micropayments. They should be looking at socialism too. It’s already how we pay for education and health.

* * * * * *

(Letter over the jump) Continue reading “Gresham’s Second Law”

Balkin’s Three (revised) Laws of Robotics

Balkin updates Asimov.

The eminent Yale scholar of, and blogger on, constitutional law Jack Balkin has published a very nice article updating Issac Asimov’s famous Three Laws of Robotics.

robot

It’s a rich short essay, not a treatise; an opening shot in a new debate, not the last word. Read it and comment please.

A few takes of mine. Continue reading “Balkin’s Three (revised) Laws of Robotics”

Network Architecture, Social Media, and Social Justice: Some Preliminary Thoughts

Since the election, I’ve seen a lot of writing about the ways in which social media can help explain our contemporary political divide, from the rise of fake news on Facebook to the belated ban of racists on Twitter (sorry, I don’t use the politically correct term “alt-right”, and, by the way, how ironic is it to be PC about that group, of all people) to the existence of news bubbles (as foretold by Eli Parisier). I worry, though, that too much of this conversation focuses on policy fixes, and not enough looks at the deeper issues: how these systems and networks are designed from the ground up. We seem to be talking about how to fix Facebook, but not about whether Facebook is ultimately able to be fixed.

Facebook is private property and its rules of discourse are governed by proprietary algorithms designed with revenue-maximization–not social benefit–in mind. Any social benefits–and there are many–are incidental. So even though it acts as a de facto town square, it’s really a town mall. And that makes the ground rules–and our ability to change them–different. The same is true of all other platforms, not just Facebook. What I want to explore is how particular architectures embed certain kinds of expectations about people and their needs, and the ways in which these structures facilitate certain activities and circumscribe others.  Ultimately, is there a way for us to consider society as we build out new platforms, particularly when it comes to social media, where people are both the producers of value and its consumers? Put another way, how is it possible that, after the rise of literary theory, we are not thinking more deeply about a system where private corporations control the ways in which language is produced, distributed, and consumed? Surely that is affecting its content–and its potential.

If Walter Benjamin were alive, I imagine he would talk about the ways in which the cyber flaneur is constrained. We live in intentional online communities. There is little juxtaposition or happenstance. We go online, typically, with a search in mind–and even though we use a “browser” to get there, we are motivated to get to our destination. Searching and browsing are fundamentally different. Alternatively, we are on Facebook, which is less directional. We are looking for stuff to see, but we are only doing this from known entities, not ones we happen to encounter, and this stuff to see is typically disconnected from our corporeal selves that eat, live, work, play, and travel through real spaces, through different neighborhoods whose inhabitants have different perspectives. Even our offline movements are increasingly point-to-point, designed with minimal travel times in mind, through the aid of navigation apps.

How you feel about this depends on what your goals are (and where you are in the system). The mid-20th century drive to build highways through American city centers made a certain kind of sense: it allowed for speedy transfer of surburbanites to their work in the urban core. As long as this was the goal, highways were the answer, and the governmental subsidies that embedded these policy choices made sense. But highways through cities, of course, also destroy urban neighborhoods, make mixed-use development more difficult, and create sprawl and its attendant social isolation. You can either read the Power Broker or have grown up in suburban Atlanta to understand that. So if your goal is vibrant city life, highways–and subsidies–don’t make sense. I fear that we are currently building highways and gated communities in cyberspace without thinking about their potential side effects. We are only concerned with efficiency, not sustainability. Continue reading “Network Architecture, Social Media, and Social Justice: Some Preliminary Thoughts”

Developing new drugs

All over the world, new pharmaceuticals are developed more or less the same way. Governments and foundations spend money on fundamental research on diseases, but once a specific molecule has been identified – and sometimes long before that – the focus shifts to the private sector.

A pharmaceutical company puts its own money first into animal trials, then into human safety studies, then into small-scale efficacy trials, and finally into the big, expensive “Phase III” trials required to obtain approval from FDA or its equivalents elsewhere. About 80-90% of the time, the compound turns out to be a loser.

In the minority of cases in which the drug actually gets approved, the average time-lag between starting work and getting it on the market is most of a decade. Since the pharma business is risky, the cost of capital is high. That’s the justification Big Pharma offers for the price-gouging that patent protection allows: if the payoff isn’t there, the R&D won’t get done.

If you’re going to risk millions of dollars that costs you 10% per year on a longshot, the payoff if it hits needs to be very large. So pharmaceutical companies focus on “blockbuster” drugs: those with potential revenues of more than $1B/yr. That means drugs that (1) have to be taken frequently – ideally, every day for a lifetime – and (2) deal with the diseases of people with good health insurance.

None of this makes anything but a twisted sort of sense. It leads to not enough new drugs and to excessive drug pricing. In particular, it leads to the absurd situation where there’s an obvious social need to develop a drug but no economic mechanism for doing so. Today’s big example is a Zika vaccine, but the same is true of antibiotics and of innovative pain-relief formulations (e.g., pain-appropriate dosages of buprenorphine, opiate-and-antagonist combinations) with less addiction risk.

There are lots of proposals for fixing the whole system: my personal favorite is to at least partially replace patent protection with large cash prizes as the incentive for bringing new drugs through the approval process. (Since the U.S. federal government winds up bearing much of the cost of pharmaceuticals anyway – through Medicare and Medicaid, through VA health, through health coverage for its own military and non-military employees and their dependents, and finally through the tax deduction for employee health benefits – it could write some very big checks and still come out ahead, if the result was marginal-cost pricing for the drugs themselves.)

But in the meantime, there’s something much simpler. If drug development were financed at Treasury rates rather than at the pharmaceutical-company cost of capital, lots of socially important projects that aren’t financially attractive now would become attractive. That could be done by creating a publicly-owned pharma R&D firm to get socially needed drugs through the FDA process and license the resulting patents to generic drug manufacturers, or by lending the money at concessionary rates to current phama outfits to develop drugs serving identified needs and then sell them at controlled prices.

Of course the details matter – the details always matter – but in this case almost any set of details would leave us much better off than we are now.

Footnote

There’s a broader issue here: Right now, the whole world is eager to lend money to the U.S. Treasury, and as a result we can now borrow money for 30-year terms at 2.2% nominal. If our political system can just get out of its fixation on deficits and debt, we ought to be borrowing some of that money and investing it in things with good long-term returns: not just drug development, but R&D more generally (especially, I would say, basic science), infrastructure, and education.

One side effect would be to boost final demand, kicking the economy out of the slow growth that has been so marked since the beginning of the Great Recession.  There’s not much wrong with this country that ten years of tight labor markets couldn’t cure.

Solar airplanes

The Solar Impulse stopped in our neighborhood this week and is off to continue its trip around the world.  It was stuck here for five days because it was too windy for this absurd, delicate, folly to fly safely, but things have calmed down and it’s ready to resume its 30 mph odyssey. I think the whole thing is silly, though as long as people are willing to fund it as a lark or can make money from sponsorships, it’s harmless. Nothing about solar power (or aviation) is being learned from the project that could not be inferred from engineering and economic calculations. The critical constraint on such a thing, of course, is the refusal of the sun to shed more than about the power consumption of a toaster on a square yard of any surface, so to carry a pilot and his lunch, and the batteries that keep it under way (and therefore aloft) at night, the aircraft has to be (i) enormous and (ii) exquisitely delicate, pushing the limits of material science.

It is also impractically at risk from  turbulence, eddies even in steady flows that can apply forces in opposite directions to different parts of the plane.  This turbulence is probably the reason very large, necessarily delicate, lighter-than-air rigid craft like the Shenandoah, Macon and Akron failed. I predict that if the Solar Impulse 2 voyage fails, it will be loss of the aircraft in unexpected weather, possibly clear air turbulence and not even a violent storm.