I heard a concept today that could potentially revolutionize my whole standpoint on government regulation on various things. The premise is that outright banning of a particular activity, i.e., polluting or drinking, often results in externalities more negative than the banned activity, and sometimes just doesn’t work at all: much more preferable to this is to allow it, but under such conditions that its negative consequences are at least negated by the associated disincentives.

The example given was one of poaching. In Kenya, a law was passed outlawing the killing of wild animals. This meant that the wild animals would compete with livestock for water and grazing land, so the livestock owners fenced off grazing land and water holes. In the end, more endangered animals died after the prohibition than before, but because of starvation/thirst rather than hunting.

Likewise in several places, a system has been instituted so that rather than outright banning polluting industries, industries must remove a certain percentage of pollutants greater than they put out. This way companies either don’t pollute, or if they do, the environment and economy are both better off than they were before. Old grungy cars jump in value because these companies are taking them off the road in order to reduce emissions, and everyone wins in the end.

So the question is, how extensible is this concept? Would it make Prohibition Part II feasible? How about cigarettes? Cocaine? I think it could definitely replace dietary prohibitions like New York’s banning of trans-fats, and for power mandates like EnergyStar and California’s ban of incandescent lightbulbs. In fact, the more I think about things that are banned for whatever reason, the more I see that this concept could work for nearly anything except addictive substances: the psychological drive would overcome rational consideration of disincentive and just drive the user into poverty.

What do you think? Are there consequences that I haven’t thought of, or is this really and truly a great legal framework?

China for centuries has been using a tactic called Panda Diplomacy to endear themselves to whichever country they feel the need to. Basically, they loan out pandas (since Chinese law forbids actually giving away pandas to foreigners) for foreign zoos as an act of goodwill. Even the US has received pandas under this policy - President Nixon got two of them. It’s certainly a nice gesture in most cases, but recently it’s been used for more devious purposes. In 2005, after decades of disputes with Taiwan as to whether they were independent or Chinese property, China offered Taiwan two pandas - not under a loan, but as a free gift. This seemed like a very magnanimous move on China’s part, and was even very popular among the Taiwanese public, but implicit in the deal was a concession by the Taiwanese government that Taiwan was in fact a Chinese property, since the pandas were not on loan. Despite the popularity of the gesture, Taiwan’s government did refuse the pandas in the end, thus preserving their dignity as an independent state.

Likewise, Microsoft has just struck a deal with a longtime enemy, Novell, makers of SUSE Linux. On the surface, it seems like an equally magnanimous deal: Microsoft gives Novell hundreds of millions of dollars for SUSE licenses, agrees to support customers running SUSE, and promises protection for patent infringement.

Microsoft and China are both great at putting on these benevolent façades, but just as China had no interest in endearing themselves to Taiwan, Microsoft has no interest in promoting SUSE. This is not a peace: Implicit in the MS-Novell deal is the concession that SUSE, and Linux on a broader scale, does indeed infringe on Microsoft’s patents. Think of the “I’m Thinkin’ Arbys” commercials, except instead of the Arbys logo, there’s a giant blinking sign that says “ULTERIOR MOTIVE!!” floating above Steve Ballmer’s head. In this case, it’s not even speculation as to Microsoft’s intent: Ballmer is notoriously loose-lipped. “only a customer who has Suse Linux actually has paid properly for the use of intellectual property from Microsoft”. Like China’s (arguably false) position that it owns Taiwan, Microsoft is of the (arguably false) position that Linux infringes on its intellectual property.

Taiwan was smart enough to resist the smooth talking, but Novell bit the bait hook line and sinker. This is a terrible precedent for free and open software as a whole - and thankfully companies like RedHat and Samba are openly condemning the deal - but now that Microsoft has seduced a key player in the open source community into submission, their legal bludgeon could carry far more weight in future battles.

As great as the economizing potential of the internet is, we must be careful not to put our stock (literally and figuratively) in unsustainable or doomed business models. The “dotcom bust” of the late 90s was a mild economic crash caused by entrepreneurs getting excited by the potential of this new medium of the internet - excited enough to put billions of dollars into hundreds of ambitious companies like WebVan, an online grocery shopping site, and boo.com, a fashion retail site with a 3D avatar (from PCWorld’s The 25 Worst Websites), which promptly went bankrupt without sustainable business models.

If history teaches us anything, it’s that people don’t learn from history. Whereas the first dotcom bust was limited in scope because it burst before it could build itself high enough to do any serious economic damage, the internet at large seems to be headed for another, exponentially more massive economic bust barely a decade after the first, for exactly the same reasons.

The company that pioneered this business model has become immensely popular in recent years, and has skyrocketed in stock value from an initial $85 just over 2 years ago to $401 as of this moment (CNN Money). It has pioneered amazing innovation in areas such as webmail, sattelite photos and maps, and most obviously, websearch, all from a single income source. The company? Google, and their income solely from advertising.

Now Google is an amazing company, but it exhibits remarkable similarities in many ways to doctoms of the late 90s. For example:

• Vastly inflated stock prices due to investor excitement over an income method
• Extravagant spending: The Googleplex campus is equipped with a fleet of Segways, an army of masseuses, all-you can eat snacks nearly everywhere, and free meals provided by the former chef of the Grateful Dead, who has since left Google (CNN)
• Gigantic investments with no revenue potential: Google has bought the companies Keyhole (Google Earth) and Sketchup (a 3D modeling program), and has developed programs like Picassa and Google Desktop - none of which bring in any revenue

Now I’m as much a fan of Google as the next person, but their revenue model as an advertising producer, which is also being employed in more or less the same manner by companies like Yahoo, cannot last for much longer.

On the consumer end, people are becoming less and less tolerant of advertising. No matter how targeted ads may become, most people simply ignore anything that looks like an ad - and the particularly savvy users may block them completely. Programs like PithHelmet for Safari and Adblock for Firefox are becoming increasingly popular as people get increasingly sick of online advertisement. Advertising is unpredictable enough to obfuscate any earnings that may come from it indirectly (for example, did a user visit this site because of an ad, or for another reason?), but eventually advertisers will realize that the cost of advertising isn’t made up for by increased revenue.

In addition to decreased revenue from placing advertisements, there’s an increasing market for clickfraud, increasing advertiser costs with zero increased revenue. According to the article, it’s a booming business despite efforts to squash it, and advertisers are signing off en masse because of it.

Whether this happens all at once or gradually, it’s practically inevitable that it will happen. Google can’t last forever on an advertising supported revenue model, and whether its fortunes crash or crumble, the impact will not be small. Thousands of sites are supported solely by advertising money paid out by Google, Yahoo, and other advertising providers, and in many cases make a good bit of money off it. Advertising money from displaying ads is becoming more popular as a business model for immensely popular sites like Facebook and Youtube, and most of the internet makes money in some way or another from ads. Even this site displays Google ads for some quick money (though it’s hardly dependent on them; I’ve made all of $9 so far). Sites like these dependent on ad revenue will go down with Google and the other ad providers that pay them, leaving a scarred internet and a broken economy.

The word ‘Communist’ is weighed down by many negative connotations. Soviets, Lenin, Stalin, Trotsky - all these people started with an impossible socioeconomic ideal, and through the methods of dictatorship and oppression that we commonly associate with ‘Communism’ today forced it upon an unwilling populace. But the ideal of Communism is hardly restricted to political and economic factors, nor is it synonymous at all with the connotations commonly attached to it.

It has been said that a Communist ecosystem can only exist when one of two conditions are met:

• Human nature is perfect (or nearly so)
• There exist infinite (or more than can be consumed) resources.

The first requirement, though feasible on small scales (mostly with religious motivation - Acts 2:44-46, or medieval monasteries), will obviously never be accomplished on any whole society. There is a critical mass of people that once a commune reaches that number, then people will begin to leech off it, eventually leading to its downfall. Human nature is inherently selfish - people want something in return for their work at the very minimum, and prefer in nearly every case to get more out of a system than they put in - the tragedy of the commons. And without the altruism of a most often religious nature, even the smaller communes could not exist.

It is also obvious that one can never draw out infinite (or even nearly so) physical resources on any plane from the Earth, or even simply more than can be consumed. However, there is one plane in which the amount of resources available has the capacity to outpace theoretical consumption: the internet.

The internet is certainly not the perfect example of the Communist ideal, but there are several important elements thereof in its structure. First of all, it has nearly infinite capacity for contribution and consumption. It costs nothing past the price of the electricity used to duplicate a piece of data, nothing past the time spent to create and contribute to the system, and nothing past the bandwidth to consume from the internet. Now bandwidth is certainly a big cost for high-traffic sites, hosts, and service providers, but given the contracts given by the government to upgrade the internet backbones, it would seem to be less of a problem than the telecoms are making it.

Secondly, it’s decentralized, and by corollary, redundant. Any good Communist system is necessarily divided up into smaller “communes” so as to prevent leechers from bringing down the system from within, and also to protect it from attack from without: if one part goes down, the rest doesn’t. The internet was designed with this in mind - if any of the main DNS servers were to be caught a nuclear attack, the others would seamlessly take over and the internet would still be there serving out news and updates.

Third, it’s all-inclusive. With the internet progressing as it is, and with all the web technologies available now, the Web 2.0 revolution - the democratization of information - was all but inevitable. People now on sites like Newsvine, Blogger, or Technorati can bring their own content to the wide world of the internet for free - a sizable threat to major media companies, but they seem to be coping. The problem for this comes when we take away Net Neutrality: suddenly, big media is back at an advantage. Popular sites like Youtube would instantly go under - they’re barely paying the bandwidth bills as it is; they certainly couldn’t handle an extra cost like that. And given the bandwidth they use, it certainly wouldn’t be a cheap extra cost. The telecoms’ “free ride” argument is bogus: Bandwidth costs add up substantially for high-traffic sites, making the operation of any moderately successful site an expensive endeavor. But like any good Capitalist, their interest is in maximizing their own profit by any legal method - even if that entails changing what is “legal”. So rather than raising prices for the consumer (bad PR, after all), they’re going to screw them indirectly by passing the cost to every website that wants fast access to the end user, the costs of which will be passed on to the consumer in a more diffuse manner, but will inevitably be far greater than the cost of a direct price hike.

Abolishing net neutrality can be described as Soviet in more ways than one. Before the Russian revolution and the ensuing civil war in 1917, the Soviets - especially the Bolsheviks - were quite idealistic in their brand of Communism. But after the war, their idealism turned to stony pragmatism: in order to achieve the abolition of private property, they forced it on the peasantry by means of an omnipresent central state government. In achieving an aspect of their ideal, they destroyed the core. Likewise the telecoms, from the ashes of their glory days of Blue Sky Research, are trying to achieve one plane of a noble goal (more bandwidth resources - presumably, the money they raise from the producer end of the internet will go to upgrading the internet backbone) by destroying the soul of the internet - the essence that made it successful in the first place.