July 31, 2004 1:57 PM

Supply, Demand, and Pataki

The economic way of thinking is a pretty powerful tool. Even very basic economic principles, which can be taught in minutes, immediately yield predictions about the real world impact of government policy.

For example, once you are familiar with supply and demand curves, you can already begin making predictions about the impact of price regulation. If you artificially lower the price of a good by government edict, the demand will exceed the supply, and you will get a shortage. (Try drawing a supply and demand curve on paper with price on the horizontal axis and draw a vertical line to the left of the supply/demand intersection if you don't see this.) If, on the other hand, you artificially raise the price, you'll get an unpurchased surplus.

This pattern is consistently seen in the real world, but it is rarely understood by people watching it.

For example, in 1973, the OPEC countries decided not to sell oil to the United States because of our support of Israel. There were, however, other producers of oil, including companies extracting it inside the United States itself. If the price of oil in the United States had been entirely based on market mechanisms, we would have expected the price to shoot up until demand fell enough to cross supply. There would have been no shortages, only a dramatic price rise. Additionally, Non-OPEC producers would have had a large economic incentive to find new ways to supply oil since the they could make large profits selling it, so supply would have eventually eased.

However, the price was not unregulated. The United States had price controls on all domestically produced oil. No one remembers this — you'll be hard pressed to find more than a passing reference to it in the Wikipedia article on the crisis, for example. What happens when you have government price caps? A shortage of course. At the artificially lowered price, demand exceeds supply. The gasoline rationing that immediately resulted was completely predictable, and yet almost no one understood it. The bulk of the population had no idea that they were victims of government price control policy. People instead usually blamed the oil companies for "profiteering", as though one could make more money by refusing to sell one's product than one could by selling it.

Today we are experiencing a significant rise in the demand for energy with a simultaneous tightening of supply, but there are no gas lines this time. Why is this? Because oil prices were decontrolled long ago, so the price merely rose until supply and demand met. Eventually, as oil supplies (which are finite) start to run low, the rise in prices will eventually drive people to use other sources of energy, without any need for outside interference.

Artificial price caps are not the only type of price regulation. Set a guaranteed price floor above the market clearing price, and demand drops while supply rises. Agricultural price supports have left us with things like vast government warehouses filled with cheese no one wants, made with milk from herds of cattle that we don't need. (The irony of the government deliberately raising the price of food while issuing food stamps to the poor who can no longer pay for it is rarely mentioned, but that's not our topic today.)

The minimum wage is an example of a price floor. The ideas behind it are as simple as they are incorrect. The advocates assume that wealth is some sort of finite resource that neither grows nor falls (the "zero sum" fallacy), that employers are a privileged exploiting class that unfairly pay people less than they are "worth", and that employers could choose to pay their employees any arbitrary wage we pick, but will deliberately pay low wages because they're mean people.

Thus, we assume that by forcing employers to pay some of their employees more, we will have "costlessly" increased the well being of low wage workers. Of course, in reality there are some pretty serious costs.

First, the supply and demand rule we've just studied means that the demand for low wage labor will necessarily fall. Some of the workers will get the wage increase, but others will no longer have jobs. Employers will look at the increase in their cost of labor and try to find ways to ameliorate it. Some may find that it is cheaper to buy more automated machines than to keep as many workers. Others might forgo an expansion, and perhaps others will cut employee benefits to make up for the increased cost of wages. One way or another, though, they'll be compelled to find a way to respond to their increased costs.

You might think this is a "mean" thing for employers to do, but in fact they have no choice. You as a consumer do not voluntarily buy the more expensive choice among equivalent products when you're out shopping, so producers are under tremendous pressure to minimize costs so that they can offer lower prices in the marketplace. If a producer lowers costs more than his competitors, he gains an advantage over them, and so the competitors have to follow suit or go out of business. No employer has an infinite pool of resources to draw on. Wages are set not by "exploiting employers", but by market pressures, just like every other kind of price.

Employers cannot unilaterally set wages. If they offer wages that are too low, they will not attract qualified employees. When you've looked for work, if there were two equally interesting jobs you could pick, and one offered twice as much money, would you pick the lower paying job? Could your boss offer you *any* salary without fear that you would seek another employer that paid more?

We are all employers at times, of course. Do you pick an arbitrary fee to pay your lawyer or plumber, or are you forced into a particular fee by the marketplace? If you wanted to, could you simply pay your plumber minimum wage? Of course not. No other employer has true control over wages, either. Employees are paid well because the market clearing price for their labor is high, or are paid little if the market clearing price for their labor is low. The market for labor is driven by supply and demand like all markets.

It is possible that in some industries, demand is sufficiently inelastic that employment won't drop much after a government imposed wage increase, because customers will absorb the increase in prices. However, those customers also have only finite resources available to them. If they pay more to one supplier, they then have less money to pay to other suppliers or workers. They will either employ fewer people, or purchase fewer goods (thus causing other suppliers to employ fewer people), but either way, the change will have negative effects.

Raising the cost of labor in the economy is thus not harmless — it reduces the amount that can be done with a given amount of resources. Increasing the minimum wage, no matter how well intentioned, creates unemployment for the poor and reduces economic output.

That brings up another point, which is that the economy is not a zero sum game. There isn't a finite pool of wealth out there which some mean people have seized and which others are being unfairly kept away from. The work we do every day increases the total wealth of the world. If I go into my workshop and build a chair, the wealth of the world is larger by the value of one chair. Every day, we make more and more things, raising the total wealth of the world. The reason that 7% of the U.S. population didn't have indoor plumbing in 1970 and that only 0.6% lack it now isn't because wealth has been redistributed — it is because there is a lot more wealth to go around with every passing day.

The government doesn't produce any wealth. Factories, software companies, farmers, and others are the ones producing wealth. All the government can do is make it harder for people to produce wealth or take wealth from one person and hand it to another. It can't actually make the pie larger on its own, but it can manage to drastically reduce the size of the pie by interfering. Only the people actually doing productive work can increase the size of the pie.

We see extreme cases of this in the third world. The reason people in Africa live in shacks and have to wear our cast-off clothing is not because we're mean and keep them from having all the wealth we've stolen from them. They have little wealth to steal in the first place. They are poor because their governments are run in a way that makes the creation and retention of wealth impossible. Unlike the booming Asian economies, where foreign factories are welcomed, few foreign companies "exploit" the poor of Africa, because the African governments have made running factories and businesses nearly impossible. Even indigenous entrepreneurs are regulated, shaken down and taxed into oblivion. If you want to make the poor wealthier, you have to stay out of the way of people who want to produce wealth. The more you get in the way, the poorer people will be.

So, we now turn our attention to New York State, where the legislature recently tried to raise the minimum wage to $7.15, an increase of nearly 40%. That's not a small adjustment by any means. Governor Pataki vetoed the legislation, saying that the minimum wage hike would put New York at a "distinct competitive disadvantage". This is a remarkably economically enlightened viewpoint. However, not all politicians in the state are this enlightened. Quoting the Newsday article I've just linked to:

Assembly Speaker Sheldon Silver called Pataki's veto "an outrageous slap in the face to tens of thousands of hardworking men and women in our state."

The assembly speaker appears to be basing this statement on the counter-factual belief system that I mentioned before. Repeating, this belief system claims that the economy is a "zero sum" game, that employers voluntarily choose to "exploit" people by paying them less than they are "worth", and that employers can choose to pay their employees any wage at all without impact upon them if they wish to. Therefore, these people reason, it must be the case that refusing to raise the minimum wage 40% is an attempt to continue the exploitation of the hard working men and women of New York State by evil employers, and that but for this veto thousands of people would have better lives without any negative repercussions.

As with most politicians, Silver shows a deep ignorance of how the economy actually works. This is rather ordinary. What I find unusual, and indeed praiseworthy, is that Pataki actually seems to have shown some considerable sense here, and was willing to stand up for his principles even though everyone "knows" that the minimum wage is "good".

Posted by Perry E. Metzger | Send Feedback | Permalink | Categories: Economics, Politics

July 31, 2004 1:05 AM

U.S. Budget Deficit Hits $445 Billion

The U.S. federal budget deficit is reported to have hit a record $445 Billion.

To put that in perspective, were Bill Gates' entire net worth confiscated by the feds, it would only pay for 1/10th of this year's deficit. Indeed, everything the richest man in the world has ever earned wouldn't even pay for a small fraction of our war in Iraq. The federal government now spends more than his entire asset base every week.

The federal budget continues to grow at a pace far exceeding that of the GDP. It is amazing to me that George W. Bush can still claim with a straight face to be a fiscal conservative. Then again, shame is a rare commodity among politicians.

Posted by Perry E. Metzger | Send Feedback | Permalink | Categories: Economics, Politics

July 30, 2004 11:41 PM

With God, All Things Are Possible

The BBC reports on the bizarre case of a Swedish priest who convinced his ex-nanny to kill his wife by sending her SMS messages which purported to be from "God".


"Suddenly Helge said to me: 'If God were to tell you to kill a human being, would you do it?'" Miss Svensson said.

"I thought it was a very strange question, but thought that if I really knew it was God saying it, I would have to obey. There would be no alternative," she said.

What I find interesting about this, and about the sorts of stories one hears about in books like "Under the Banner of Heaven" (disclaimer: I haven't read that book, I've just heard the author speak), is that they confirm my ancient hypothesis that once you allow yourself to be guided by "faith", to accept "truths" conveyed to you without evidence and indeed to deny evidence and rationality as a basis for understanding reality, you can be convinced to do nearly anything.

This is not to say that I believe all religious people are readily capable of murder. Rather, I claim that once you structure your life around ideas that you are not permitted to test, but which you accept as beyond testing (that is, on "faith"), you've abandoned your most important survival tool, namely reason.

Introduce a bad axiom into a mathematical formal system, you can prove anything. Similarly, if you abandon reason for "faith", you lose your only tool with which to distinguish the truth. This could leave you helpless to escape the idea that "God" demands that you kill, and from there it is a short step to shooting abortion doctors or flying planes into skyscrapers.

Some religious people will argue that "God" doesn't want you to shoot doctors or fly planes into skyscrapers, but how are we to assess whether that is true or not? We are told that we can't apply the scientific method to the question of the existence "God", let alone to the determination of the "divine" will. We are supposed to go by "faith". If you have to go by "faith", why is the "faith" of the person who kills because "God" has commanded it any less correct than the "faith" of the person who claims "God" did not command it? The answer "it just is" will get you sent to the back of the class. So will references to the "self evident" truth of any holy book you care to name.

Posted by Perry E. Metzger | Send Feedback | Permalink | Categories: Miscellanea

July 30, 2004 3:00 PM

What You Can't Say

I've discovered that Paul Graham isn't to some people's tastes, but I rather like his essays. He's got one up that I hadn't read before called What You Can't Say.


No one gets in trouble for saying that 2 + 2 is 5, or that people in Pittsburgh are ten feet tall. Such obviously false statements might be treated as jokes, or at worst as evidence of insanity, but they are not likely to make anyone mad. The statements that make people mad are the ones they worry might be believed. I suspect the statements that make people maddest are those they worry might be true.

If Galileo had said that people in Padua were ten feet tall, he would have been regarded as a harmless eccentric. Saying the earth orbited the sun was another matter. The church knew this would set people thinking.

Posted by Perry E. Metzger | Send Feedback | Permalink | Categories: Miscellanea

July 30, 2004 12:21 AM

Never Ticket a Police Official

From an article in the New York Times:

A city traffic agent who was suspended for a month without pay after she issued a ticket to a New York Police Department official was ordered back to work yesterday after three weeks, and will be paid for all but a week of the suspended period, city officials said yesterday.

Res Ipsa Loquitur.

(Thanks to Thor Simon for pointing out the article to me.)

Posted by Perry E. Metzger | Send Feedback | Permalink | Categories: Politics

July 29, 2004 2:10 PM

Francis Crick, Co-Discoverer of DNA, has Died.

Francis Crick, who co-discovered the structure of DNA with James Watson, has died. Here is the New York Times' obituary.

The Times piece has a great passage near the beginning:

The discovery of the structure of DNA resolved longstanding questions about the nature of the hereditary material and the manner in which it is copied as one generation succeeds another. The structure, almost immediately accepted, was electrifying to scientists not only because of its inherent elegance but also because it showed how biology, evolution and the nature of life itself could ultimately be explained in terms of physics and chemistry. Indeed, the desire to replace religious with rational explanations of life was a principal motivation of Dr. Crick's career.

Crick didn't just co-discover the structure of DNA — he went on to demonstrate how DNA is transcribed into proteins, and to instigate and supervise much of the foundational work of molecular biology. I think he'll be remembered for a long time.

Posted by Perry E. Metzger | Send Feedback | Permalink | Categories: Science & Technology

July 29, 2004 11:51 AM

Junk Science in New York

Today's New York Post has an article on New York City leasing out lampposts to 802.11 service providers. Normally I wouldn't bother to mention this, but it has a really stunning quote from Peter Vallone, who will be running for Mayor next year.

But all that radiation has some activists and officials concerned about the potential health implications of the antennas. "Apparently the city is willing to gamble with the health of its residents for $25 million," said Councilman Peter Vallone Jr. He is introducing legislation to require the companies to pay for radiation inspectors as part of their franchise agreements. "There is no study that has looked at the cumulative effect of these transmitters," he said.

That's got to be one of the dumbest things I've seen a politician say in... oh, sadly, hours. I wish it was unusual to see a politician spouting junk science and requesting rules to impede the construction of new infrastructure, but unfortunately it happens practically every time I look at the news.

For those not in the know, an 802.11 device puts out no more than a couple hundred milliwatts, and once you take the inverse square law into account, the capacity of such a device to transfer energy to anything nearby is pretty limited.

The city is also filled with millions of such low power emitters. If such devices were a problem, really we'd have much more serious problems than a few new pole top devices. Even banning the hundreds of thousands of existing 802.11 devices people have set up in their homes wouldn't be enough. Cell phones, cell phone towers, walkie-talkies, microwave ovens, microwave communications dishes, television and radio transmitters, etc. are everywhere, in the millions. We'd need to shut all of them down, too. That is ignoring all the televisions, radios, CD players, computers, etc., all of which emit a tiny amount of electromagnetic energy. If we got rid of all of these things, maybe then the marginal change caused by adding some pole-top 802.11 transmitters would be observable, even if it was still completely unimportant to health.

Luckily federal law keeps municipalities from preventing the construction of new cellphone base stations, but nothing protects companies from the likes of Mr. Vallone. Lets hope people laugh at him loud enough that he drops the whole thing, and soon.

Posted by Perry E. Metzger | Send Feedback | Permalink | Categories: Politics, Science & Technology

July 28, 2004 9:59 PM

Non-Risk of the Day

news.com.com.com.com is reporting that someone has realized that you can reprogram RFID tags so the scanner at the checkout thinks that you're buying something cheaper than you really are.

Of course, doing this exact same thing with printed bar codes by making up fake ones and sticking them on merchandise has been floating around for a long time. I don't see how the RFID threat is significantly different.

Posted by Perry E. Metzger | Send Feedback | Permalink | Categories: Security

July 28, 2004 9:39 PM

Neologism of the Day

Blogorrhea: excessive, obsessive and often incoherent blogging.

I wonder if I'm a victim of this devastating syndrome.

Posted by Perry E. Metzger | Send Feedback | Permalink | Categories: Miscellanea

July 28, 2004 9:03 PM

UK Academy Proposes Regulating Nanotechnology

This BBC story just in from the "strangling the infant in the crib" department.

The Royal Society and Royal Academy of Engineering in the UK are about to propose new regulations governing nanotechnology, long before any real nanotechnology has even be developed.

Best quote from the online article:

"Our main concern is that this is a new, powerful technological platform that could be disruptive," said Jim Thomas, from the campaigning ETC (Erosion, Technology and Concentration) Group.

"What does it mean for the poor, disabled, the disadvantaged - people who are usually left out of the debate?"

He stressed that nanotechnology should be developed to benefit all, and that public engagement was essential.

How the poor and disadvantaged might be helped by delaying things like lifesaving technologies and radically less expensive goods, Mr. Thomas doesn't say. Presumably the disabled might be angry about medical nanobots going in, fixing their severed spinal cords and permanently ending their blissful paraplegia.

I'm reminded yet again that the speeches the bad guys in "Atlas Shrugged" make are not parodies — they're the sorts of things real people say. It is almost enough to make me reach for a pack of ciggies with dollar signs on the filters, only I think smoking is stupid.

Perhaps we can introduce Mr. Thomas to the bureaucrats in Ghana, who are also working to help the poor. They may have ideas to trade about the public betterment.

Posted by Perry E. Metzger | Send Feedback | Permalink | Categories: Economics, Politics, Science & Technology

July 28, 2004 8:16 PM

New Paul Graham Essay: "Great Hackers"

Paul Graham has posted a new essay on his web site called "Great Hackers".

It's damn good. Even better in some ways than the old parable about programmers and bees.

If you're involved in the software industry at all, I'd recommend a read.

Paul's other essays are damn good, too. They convinced me to try programming in Lisp again, for which I'm eternally grateful.

Posted by Perry E. Metzger | Send Feedback | Permalink | Categories: Software

July 28, 2004 2:27 PM


I've been citing Wikipedia articles a lot in my recent postings.

I'd like to give the Wikipedia people a bit of a plug. They've instigated a free encyclopedia, written by... well, anyone who cares to help write it. ("Free" in this case means both the free software and free beer senses of the word.) The web site that hosts the encyclopedia is a "Wiki", a system that allows anyone who sees a problem with a page or wants to contribute to do so, immediately. There's literally a button on every part of every page named "edit".

Wikis, like all "open source" style projects, work on the stone soup model. You start with a small implementation of an idea and convince lots of people that they should help you improve it. What starts as a kettle and a rock turns into something far, far better. The public good "problem" is stood on its head. The non-rivalrous, non-excludable nature of pure information doesn't bring the "market failure" traditional economic analysis would predict, but instead becomes an advantage begging to be harnessed.

If any project shows the power of an open source community, it is Wikipedia. In a few short years, they've produced, for free, one of the best information resources I'm familiar with, and they've barely even started. If you haven't looked at Wikipedia, you should.

By coincidence Slashdot is running an interview today with Wikipedia's founder Jimmy Wales.

There's a great quote in the interview that I'd like to share:

I frequently counsel people who are getting frustrated [...] to think about someone who lives without clean drinking water, without any proper means of education, and how our work might someday help that person. It puts flamewars into some perspective, I think.

Imagine a world in which every single person on the planet is given free access to the sum of all human knowledge. That's what we're doing.

I think he's on to something. Couple

  • An internet filled with the complete sum of human knowledge
  • $10 laptop computers with cheap satelite internet access
and I think that it will no longer be possible to keep people poor and ignorant except if they want to be, no matter what their neighbors, religious leaders and governments might want.

For a fictional vision of what such technologies could bring, see The Diamond Age by Neal Stephenson.

July 28, 2004 12:30 AM

Governments and Public Goods

Every once in a while, someone mentions the Public Goods problem to me as an example of why we need governments. They mention all sorts of things as potential public goods, like, for example national defense. This entry is my overarching argument for why the "Market Failure" argument is a poor excuse for government provision of services.

If you already know what a public good is, and a bit about the theory of market failure, skip down to And now for my point.

For the rest of you who want an explanation of public goods and "market failure", and don't want to look at the Wikipedia article I list above, a Public Good is an economic good (that is, a product, service, resource, etc.) that has unusual properties that lead us to believe that a free market might underproduce it.

Specifically, it has to be:

  • non-rivalrously consumed, meaning that any number of people (within reason) can use it simultaneously without impeding each other's access. For example, whether or not someone else is in a movie theater, I can still enjoy the show. Ten people watching does not mean I only get one tenth of the viewing pleasure.
  • non-excludable, meaning that no one can keep you from enjoying the good, and thus you might not pay for it and yet you might still consume it. For example, one might consider fishing in the deep ocean non-excludable, since no one can stop someone from fishing in international waters.

Goods that possess both these features are said to have a problem, which is called "market failure". It is said that the free market will not supply as much of the good as would be truly "efficient" (in the economic sense of the word), because suppliers will not be compensated as much as the "real" demand curve for the good would imply. (See this Wikipedia article if you aren't familiar with supply and demand curves.)

Put another way, if you could exclude people from the benefits of a good, people would be forced to pay for it if they wanted it, but since they can enjoy the benefit without paying, and since one person's consumption does not impact another's, the exhibited demand curve is much lower than the "true" curve, and thus supply will be much lower than might be abstractly thought of as "efficient".

Note that you need both properties for something to be a Public Good. A movie theater has a door that locks, and is thus excludable -- I can keep you from entering if you will not pay. There is not an infinite supply of fish, and thus deep sea fishing is (at the limit) not non-rivalrous. (Fishing might exhibit a different kind of market failure popularly called "The Tragedy of the Commons", but that's a story for another day.)

An example that is often given in economics texts for a Public Good is a lighthouse. Everyone benefits from it, but since it is non-excludable why should I pay for it if someone else will? Thus we would naively expect there to be an undersupply of lighthouses. Another example given is raising honeybees — the bees help nearby farmers, but because they can't be stopped from going to any field in the vicinity, you would naively expect that beekeepers would be under-compensated for their work and thus there would be an undersupply of bee hives.

As it turns out, both of these examples are historically false. Lighthouses were historically supplied by private means, and a lively market exists in renting the use of bee hives to pollinate crops. (See the collection "The Theory of Market Failure" if you are interested in details on both these "textbook fallacies".)

As it happens, I don't believe there really are any public goods (or at least, no "market failures" important enough that we should care much about them). However, let us assume that there might be a few. It is argued that one of the functions of government is to "fix" the market failures that a pure free market might have by intervention. For example, lets say that we believed that national defense was a "public good". The government could then provide the good directly (such as by collecting taxes and running an army with them), or could use subsidies or similar mechanisms to "correct" the market failure.

And now for my point.

For the government to actually fix the so-called "market failure", it has to do two things.

First, it needs to somehow assess what the "true" demand curve is. How might it go about doing that? Is there be some amazing scientific method for figuring out the "true" demand? Unfortunately, as Von Mises and Hayek pointed out in their work on the so-called "calculation problem", there is no particularly good way to figure out appropriate supply and demand curves without resorting to market mechanisms.

In practice, then, we end up with the "calculation" being made fairly arbitrarily, as the result of policial mechanisms. Sadly, as James Buchanan demonstrated in his pioneering work on public choice economic theory, the political method is likely to base its "computation" on the interests of powerful actors in the process rather than on any sort of rational basis. Bureaucrats will have a personal interest in the expansion of their fiefdoms, and thus will always argue for increased production of a good. Firms seeking government contracts will have an enormous incentive to lobby for increased production. (Indeed, if contract worth a billion dollars in profit is in danger, why not spend $900M lobbying if it will retain your business?) Individual members of the public, however, each have only a tiny fraction of the cost of any given government program to bear, so one's personal incentive to lobby against any given program is low. On a billion dollar federal budget item, the average American can save only $3.30 by getting the program canceled — the sum hardly makes the effort worthwhile.

We therefore expect that the government will not make rational decisions about the allocation of a public good, but will instead tend to overspend on it — perhaps even vastly overspend on it.

Second, to fix the "market failure", the government must somehow actually act to supply the missing good, either directly or via government contracts. Because there is no market discipline enforcing the efficient delivery of government services, these services are often supplied in a stunningly bad manner. You can't go to the competing DMV — there is none — so you wait on line for hours to get your drivers license. Why should we expect that the efficiency with which, say, national defense or other purported "public goods" will be supplied would be any greater?

So, here is the crux of the problem with the "let the government supply the public goods" argument: there is no evidence the government can supply putative "public goods" with any greater efficiency than the market that has "failed". Indeed, one might even get less efficiency than one started with. Why, then, is government intervention any better than the "market failure" we started with?

Posted by Perry E. Metzger | Send Feedback | Permalink | Categories: Economics, Politics

July 27, 2004 2:09 PM

Denuding the Poor

One of the few economic success stories I can name in Africa is the used clothing trade. People in developed countries give vast amounts of clothing every year to charity. Most of it ends up being sold to used clothing traders, who in turn re-sell it to poor people all over Africa for pennies. African governments might do their utmost to destroy their local economies, but at least the invisible hand has usually been left free to clothe the naked.

Until now, that is.

This morning, I heard a story on the BBC World Service that seemed outlandish — they claimed that Uganda was now taxing imports of second hand clothing to "protect" the local clothing industry.

Naturally, I didn't believe anyone could be that stupid, but a quick search on Google reveals that it is true. See this article, for example, and this one. Indeed, it seems that Tanzania and other African countries are doing similar things.

I'm reminded of Frederic Bastiat's brilliant satire, The Candlemaker's Petition, except this isn't a joke — this is nightmarish reality. To protect a tiny economically inefficient local industry, these governments are driving up the cost of clothing bought by the desperately poor.

If you want to know why Africa is an economic basket case, look no further than this sort of insanity.

Posted by Perry E. Metzger | Send Feedback | Permalink | Categories: Economics, Politics

July 27, 2004 12:03 PM

News Flash: Proprietary OS Vendor Dislikes Linux!

Dan O'Dowd, the CEO of Green Hills Software (which sells proprietary operating systems, often for defense contracts) has written an article in which he argues that Linux (and by implication, all open source software) should not be used in defense contracts. He claims that open source is a major security threat to defense systems, because evil foreign agents could infiltrate the open source developer community and insert trojan horses into software later used for military purposes.

I'm a big believer in avoiding the Ad Hominem fallacy, so even though Dan O'Dowd has every reason in the world to make this up from whole cloth to protect his business, lets treat the claim seriously and address it.

It is true that evil foreign agents could try to get trojan horses into the Linux sources (as could evil domestic agents). However, they could also get jobs with companies like, say Green Hills, or other defense contractors. The latter would seem like a far more direct route to sabotage, since you get a close look at how your software will be used and thus can plan your sabotage much more effectively.

Although it is true that people working on defense contracts usually have security clearances, it is far from clear that such clearances actually prevent espionage or sabotage. I know of no studies that validate the methodology used in security clearances, and certainly the "security clearance" barrier hasn't prevented lots of folks from causing damage to U.S. interests even when they've had the clearances.

It is also the case that much of the software that goes into defense systems is produced by people with no clearances whatsoever -- I doubt that Green Hills, for example, always goes through the trouble of clearing the guys who work on their base software products if they are not going to be doing classified work.

We also have the question of the "many eyes" theory of open source security, which O'Dowd makes fun of. Many open source advocates note that since anyone who wants to can read the source code to an open source product, it is harder to conceal back doors. O'Dowd attacks this by saying that there are none the less security holes found quite regularly in Linux. What he does not mention is that there are also security holes found quite regularly in Windows and other proprietary operating systems, and that there might even be security holes in his own products. The question we are looking at here is not whether or not there are bugs -- the question is whether it is easier or harder to conceal an intentional flaw in an open source system.

Although it is true that the ability of large numbers of people to read the code is no panacea, it certainly is a help. There are comparatively few people who get to read the code in proprietary systems, such as the ones Green Hills sells, so there are fewer people in a position catch a trojan inserted by a rogue programmer.

Mr. O'Dowd also misses one of the most important aspects of security -- he fails to discuss the economic tradeoffs (if any) being made in a given security decision. He mentions only the possible problems of using an open source operating system, but he ignores the price associated with not using one. Against the weak claim of decreased security, we have to balance the loss of functionality and increased cost that using a proprietary operating system might cause. Developers do not select open source software at random. They adopt it because it gives them better functionality and has a lower cost.

Indeed, the cost savings and productivity benefits of open source systems might easily make it possible to devote more effort to security in a design, and the improved tools available can make security far easier to implement. Open source operating system users take features like packet filters, MMU based memory protection for multiple processes, logging facilities, etc., for granted, but these features not available in many conventional embedded operating systems. Even the ones that do have any particular feature rarely provide the breadth of functionality of the open source systems.

Lastly, let me note that Mr. O'Dowd appears to be inventing the threat he describes. I doubt he has any actual evidence of evil foreign agents trying to subvert defense products by sneaking trojan horses into the Linux source base. If he does have such evidence, he did not mention it.

Overall, I think his argument against open source is pretty weak. I don't think defense agencies should give it much heed.

Posted by Perry E. Metzger | Send Feedback | Permalink | Categories: Open Source, Security

July 26, 2004 11:47 PM

Potemkin Security at the DNC

Another interesting find at Cryptome: according to this set of web pages, security at the Democratic National Convention turns out to be quite unprofessional in places.

I was a bit skeptical, but a friend of mine who is a ham radio operator in Boston confirms the radio frequencies posted are unencrypted and are indeed being used as stated, and the photographs of unprotected facilities speak for themselves. The descriptions in the report are a bit breathless, but they appear to be essentially plausible.

It seems that Potemkin Security is everywhere -- even at a national political convention. We're willing to shut down all the highways in Boston, but no one will even think to properly install fencing or to encrypt security communications.

Posted by Perry E. Metzger | Send Feedback | Permalink | Categories: Politics, Security

July 26, 2004 10:14 PM

Calendar of US Casualties in Iraq

Cryptome has published an extraordinary calendar of every U.S soldier killed to date in Iraq.

Posted by Perry E. Metzger | Send Feedback | Permalink | Categories: Politics

July 26, 2004 10:06 PM

Run a fan site, go to jail.

I've always thought that running a fan site for a television program is a strange pass-time. You spend lots of energy promoting and advertising someone else's product for free, and no one from the company is ever likely to even thank you for for it.

However, there is a difference between ingratitude and filing charges for criminal copyright violation, which is what the MPAA has done to a guy running a Stargate SG1 fan site.

I wonder if anyone told the folks at the MPAA that trying to jail your customers is bad for business?

Of course, the MPAA has a history of taking stupid positions.

[Originally seen on bOINGbOING and via Adam Fields]

ADDENDUM: It appears that the story is in fact months old. You can find a government press release on it here. I have no information on what may have transpired since then.

Posted by Perry E. Metzger | Send Feedback | Permalink | Categories: Intellectual Property

July 26, 2004 9:09 PM

"Improved" Currency

From the meme of the day department:

Rob Mitchell has noted to me that those of us who object to the phrase "In God We Trust" on US paper money have an easy form of protest available to us.

Simply black out the offensive words with a felt tip pen. You'll be taking direct action to make the currency better, and every bill you alter and spend will circulate your opinion of 31 USC 5114(b) far and wide.

This idea seems to have been re-invented several times. Google finds a number of web sites advocating it, such as this one, for example.

I'm sure I'll get mail claiming that marking your bills in this manner is a crime of some sort, but it appears that, arguably, given the intent and result of the action, it is does not meet the definition of defacing the currency in the U.S. code. Apparently adding an advertisement to the currency is illegal, so I would stick to merely inking out the offending phrase rather than adding any words of one's own, even though the statute seems to be discussing commercial advertising. Also, merely inking out the phrase makes it less likely the bill could be argued to be "unfit to be reissued" given that banks put ink marks on bills all the time.

(Rob argues that just inking out the offending phrase is a more powerful statement anyway, and I tend to agree with him.)

Regardless, the activity is probably protected by the first amendment, and as a practical matter, the odds of anything happening to you are likely nil.

Posted by Perry E. Metzger | Send Feedback | Permalink | Categories: Politics

July 26, 2004 11:36 AM

Statistics and Aliens

Several blogs have pointed out a claim from Seth Shostak at the SETI Institute that, given the Drake Equation and Moore's Law, we should expect to discover radio signals from another civilization within 20 years or so.

This seems like a good opportunity for me to mention that I think Drake Equation is flawed. It calculates the number of technological civilizations we should expect to find in our galaxy by multiplying a few estimated quantities and probabilities. Unfortunately, it makes the assumption that these figures are statistically independent. I see no reason to make that assumption, so I think the Drake Equation is incorrect.

If the Drake Equation's input values are statistically independent, the development of one technological civilization would have no impact on the development of other technological civilizations. That seems unreasonable to me.

I think it's likely that any technological civilization will build Von Neumann Machines, i.e. self replicating devices, that explore and colonize the universe around them in every possible direction. Very likely these constructs will travel at a large fraction of the speed of light. Our own civilization is extremely young, and yet it should be able to create such things within the next century.

I thus think it is likely that any species capable of technological civilization starts expanding out at near the speed of light within tens of thousands of years of evolving. We've been around for something less than 1/100,000th of the life of the universe, which is a blink of of an eye on cosmic time scales. You would therefore expect that if another civilization is in your light cone, it should already have traveled to where you are. (This is a variation of the Fermi Paradox.)

So, if there are other folks out there that we could hear, they should be where we are already. However, if they were here already, we probably wouldn't be. Intelligent life has a way of drastically interfering with its environment. We've seen this phenomenon on Earth, where we've spread over the entire planet in a miniscule time. It isn't likely that other intelligent technologically capable species are going to arise on Earth so long as we're here.

Thus, we hear no one because if we weren't the first out the starting gate in our light cone, we wouldn't be here in the first place.

Does this mean I think SETI is a waste of time? Far from it. Among other things, I have a mediocre record as a pundit, so I could be wrong, and it would be a great mistake not to find out if there is other intelligent life out there. However, I will not be shocked if we hear nothing.

By the way, we may hear nothing even if there are other technological civilizations out there. There is an assumption that with sufficiently sensitive equipment, we should be able to pick up the internal communications of other civilizations. Our own television and radio broadcasts are, after all, likely to be detectable many light years away. However, this will not continue.

Information theory tells us that more densely packed a signal is, the more it resembles random noise. We're getting better and better at using bandwidth, so pretty soon I'd expect everything we send to be pretty indistinguishable from random. This has already started to happen. We're also starting to adopt spread spectrum radio technology very widely, and that, too, has the effect of making your broadcasts look like random noise. Lastly, in order to maximize the available bandwidth, we'll start more and more narrowly focusing our communications using phased arrays and other active antenna technologies, so most of our communications may be inaudible outside of teeny chunks of space.

Although the specifics of how we communicate by radio in the future will change, the fact that new technologies will produce signals more and more like random noise and harder and harder to hear at a distance is likely permanent. It is a response to fundamental laws about information theory and radio communications. I assume that if there is anyone out there, they will be subject to the same fundamental laws, so their communications will follow the same trend.

Posted by Perry E. Metzger | Send Feedback | Permalink | Categories: Science & Technology

July 26, 2004 9:50 AM

Prison+Parole Population Hits 6.9 Million

Another New York Times story (sorry, registration required and the link will doubtless expire soon) notes that the number of Americans currently in prison or on parole has reached a new high of 6.9 million. That's 3.2% of the population.

Posted by Perry E. Metzger | Send Feedback | Permalink | Categories: Politics

July 26, 2004 9:45 AM

Are AK-47s Pirated Goods?

The New York Times has a front page story (sorry, registration required to read it, and it probably won't be accessible in a few days anyway) about how the Russians are upset about the "pirating" of the AK-47 worldwide. They assert that the numerous clones of the famous rifle made in factories around the world are illegal because Russian intellectual property is being used without any licenses.

On the face of it, this claim is completely ridiculous. The rifle was designed over 50 years ago, so any patents that might be claimed have long since expired. There might be a claim on the name "AK-47" itself, as a trademark, but the usual rules on trademark say "police it or lose it", and the mark has been in use as a generic term for the design of this particular rifle for so long without anyone being sued that I doubt any court would now enforce a claim for such a mark.

Posted by Perry E. Metzger | Send Feedback | Permalink | Categories: Intellectual Property

July 26, 2004 8:56 AM

The Price

A few days ago, the number of US military deaths in Iraq crossed the 900 mark. As of yesterday, the Department of Defense had confirmed 903 military personnel killed. (Which soldier was number 900 exactly is unclear. The DoD web site doesn't give out enough information on the ordering of the deaths.) In addition, the current count for deaths among allied "coalition" troops is 117. There are therefore now over 1000 direct deaths among allied military personnel.

There have also been numerous deaths among civilian contractors, for which it is impossible to get a direct count. However, this site lists the names of 116, though there are surely far more.

At least 5,000-6,000 Iraqi military were killed during the course of the war itself, and something like another 12,000 civilians have been killed (though that is a number based on news reports and may be low.)

We are therefore now at something like seven times the number of people killed on 9/11, and this is just in Iraq.

We've also spent something like $125 billion dollars, and we're planning on spending something like $100 billion more. (Sources for a more accurate figure would be appreciated).

Posted by Perry E. Metzger | Send Feedback | Permalink | Categories: Politics

July 25, 2004 7:12 PM

Kronos Quartet plays Sigur Ros

What do you get when the Kronos Quartet decides to cover "Flugufrelsarinn" by Sigur Ros?

You can find out here.

Posted by Perry E. Metzger | Send Feedback | Permalink | Categories: Music

July 25, 2004 3:27 PM

Transport Insecurity

I generally think that trying to stop people from bringing pocket knives onto airplanes isn't very useful. It is an example of what I like to call "Potemkin Security" (or what Bruce Schneier calls "Security Theater"). It provides the feeling that something is being done even if it doesn't actually accomplish much, and thus gives people the ability to say "see, we're doing something about security!"

I mention this today because a friend of mine just told me that they had accidently flown out of LaGuardia Airport a few days ago with a Leatherman in their bag, and hadn't realized it until someone caught it when they tried to board their flight back to New York today. I hear stories like this all the time, and there are even some known incidents of people accidently bringing firearms onto aircraft without anyone stopping them. (I suspect those might happen routinely but for the fact that there are very few people who forget that they are carrying a gun and then try to board an airplane.)

I suppose it shouldn't be surprising that the TSA doesn't even do the wrong job very well. It seems like a fine example of what happens when people demand that the government "do something" about a problem, without contemplating too seriously what the right "something" might be.

Posted by Perry E. Metzger | Send Feedback | Permalink | Categories: Politics, Security

July 25, 2004 2:43 PM

Election Betting

I just noticed (because of a link on Marginal Revolution) that there is an Irish based company called TradeSports that runs an unusual betting operation.

Instead of keeping their own book, TradeSports sets up futures style contracts with cash settlement that pay off based on the outcome of a future event. (I'm reminded of Idea Futures, except for the most part they're doing pretty ordinary sports bets.)

In addition to sports, they're running a number of contracts on future economic statistics, elections and other such things.

(One hopes that perhaps someday they'll do Idea Futures. There are places like the Foresight Exchange that do idea futures, but so far as I know none use real money.)

One reason I mention them is because they're running a set of contracts on the current U.S. presidential election, much like the Iowa Electronic Markets, except they're not a small scale academic experiment.

Currently, it appears that the people on TradeSports collectively believe George Bush's reelection is a 50/50 shot, which is pretty much the same prediction that the IEM and the Foresight Exchange.

Posted by Perry E. Metzger | Send Feedback | Permalink | Categories: Economics, Politics

July 25, 2004 1:12 PM

Shocking News: Government Agency is Ineffective!

An article in information week reveals the shocking fact that the Department of Homeland Security's efforts to fight "cybercrime" are "plagued by problems". One good quote:
"Despite the progress made, DHS faces significant challenges in developing and implementing a program to protect our national cyber-infrastructure," Ervin's report said.

Of course, one asks what they legitimately could do to "protect our national cyber-infrastructure". Those of us who are actually involved in computer security are working pretty hard to come up with solutions to things like denial of service attacks, viruses, and other issues. There isn't terribly much they could be doing other than law enforcement, and they don't seem to ever do any of that. People are, for practical purposes, never prosecuted for computer break-ins. (There are prosecutions, but they constitute a microscopic fraction of the number of incidents.)

One of the things I find bizarre about the whole thing is that the government is under the delusion that it is, in fact, involved. They spend money and have departments with appropriate names and such, but so far as I can tell none of it has any connection to reality. (I'm not including the folks at places like NSA who actually do computer security for their organizations every day. I mean the various "information security task force" types.)

So, there are folks in Washington who must go in to the office every day and think they are involved with keeping our networks secure, when in fact nothing they do has any impact on the problem at all. This kind of thing appears to be a common feature of large bureaucracies. I've been struggling to come up with a pithy word or metaphor for it without much success. The only thing that pops into mind for me today is the Aztec priesthood. Those where the folks who thought that if they didn't cut out someone's heart every day, the sun would stop rising.

It is sort of the inverse of a "Cargo Cult". Instead of your actions bringing about no results even though you think you're doing everything right, the results you want keep happening even though your actions have nothing to do with it at all, and you are convinced you are the cause.

This brings up a couple of questions.

  • Is there a good word or phrase for this sort of thing? That is, is there a good word for "people who think they're doing something but who are in fact completely uninvolved?" There are excellent phrases for similar concepts -- "Potemkin Village", "Cargo Cult", etc., -- but none of them quite capture the idea precisely.
  • Is it actually for the best that these folks are kept busy thinking they're involved when they aren't, so that they don't cause damage by actually becoming involved? It doesn't seem as though we can prevent the government from wanting to "do something" about computer security, so maybe keeping them occupied with reports, studies and "coordinating activities" is, in fact, a good thing.

Addendum: A friend writes to me and says: The best comment I've heard about DHS is "They can't even piss through an open window."

Posted by Perry E. Metzger | Send Feedback | Permalink | Categories: Politics, Security

July 24, 2004 6:03 PM

Magnetic Resonance Force Microscopy

In the future, when we design molecular machines, it will be helpful to be able to see the arrangement of the atoms in the individual molecules we are working with. Until now, that's been rather difficult. Currently, to determine the three dimensional structure of, say, a protein, we have to resort to fairly crude and time consuming methods like X-ray crystallography. However, things may be changing.

When I was a kid, they told us things in science classes like "no one will ever seen an atom because they are too small". Then, of course, in 1981, some smart folks invented Scanning Tunneling Microscopy ("STM") and suddenly people could take pictures of atoms. Soon we had Atomic Force Microscopy ("AFM") too.

Neither STM nor AFM are capable of doing things like showing us the detailed structure of a macromolecule like a protein, but now another variation on the theme has been invented, Magnetic Resonance Force Microscopy. It is a cross between Magnetic Resonance Imaging and scanning microscopes like the STM.

The first devices seem to be capable of detecting spin flips in individual electrons, and upping the sensitivity by a few orders of magnitude seems straightforward. This could be a major breakthrough. We may soon be able to directly image macromolecules. The impact of that capability on chemistry, biology and molecular nanotechnology would be huge.

Posted by Perry E. Metzger | Send Feedback | Permalink | Categories: Science & Technology

July 24, 2004 5:14 PM

Welcome to Diminished Capacity

Welcome to "Diminished Capacity", the brand new home for my extended fits of blathering.

I've kept saying I was going to set up a blog for a long time, but I never actually got in a large enough supply of "round tuits" before now.

More to the point, I've finally found a blogging program that does things roughly the way I like. (Actually, it doesn't quite do what I want, so I'll probably rewrite it when it becomes irritating enough to me. That's a different story, though.)

My intent is to republish all the rants I currently post to various other places here, and to use this as a home base for new ones. Usenet is dead, and mailing lists are pretty limited in scope. Blogs seem to be taking over the role of providing places for people to express themselves. I'm hoping this is a better medium for archiving my thoughts.

Will I write regularly for this thing? Maybe, maybe not. I suppose it depends on how it feels. We'll see how it goes.

You will note that the blog doesn't contain a "comments" mechanism. Part of that is because I wanted to start with a blogging system that produced purely static content. Part is that I also prefer to decide on what goes up on this site. If you want to say something about things I've posted, send me email.

Posted by Perry E. Metzger | Send Feedback | Permalink | Categories: Miscellanea