A view of the second amendment: Militias
As ratified by the states, the second amendment is as follows: “A well regulated militia being necessary to the security of a free state, the right of the people to keep and bear arms shall not be infringed.”
So where is the “well regulated militia?” Clearly, militias are not encouraged in the present environment. You could say that militias are crowded out by police. But police forces are few relative to the population. If order were to break down, say, due to an EMP attack, the police and national guard could be stripped of transportation and communications. Protection would have to come from a much more numerous and more widely spread out force, a militia. This is a point that is missing from the prepper shows on TV. It is impossible to go it alone in such a circumstance.
What could the framers have had in mind? Their society was one with a frontier. There were dangers on the frontier that could not reasonably be addressed by a police force. But a militia would be just the answer.
The bottom line is that it follows that if there might be an occasion in which a militia is useful, then the population must be armed to some extent. While the Supreme Court has determined that the right of people to bear arms is justified by the use of arms in self protection alone, the language regarding a militia could still be relevant. It seems reasonable that when the police are not readily available to protect individuals or groups, then individuals or groups may protect themselves with arms.
Do people buy guns because they imagine joining a militia at some point? Probably not very many. Primarily, people buy guns to shoot them at ranges, for personal defense, for hunting, and/or for collections/investment. Of course, many gun owners have them for more than one of these purposes or have some guns for one purpose and some for another. But again, very few actually contemplate joining a militia and using guns in the context of militia activities. On the other hand, it would be impossible to form future militias without rather extensive private gun ownership. The reason is that militias will probably only exist if the public sector is substantially disabled so that police forces cease to function. Private gun ownership is necessary under these conditions because the public sector could not be counted on to distribute guns and ammunition from governmental caches.
Interest rate increase
The media is abuzz with the news of an interest rate increase. Why are rates rising and what are the primary effects of rising rates? Rates are not rising because of some new Fed policy. To the contrary, rates are rising in spite of relatively constant (and peculiar) Fed policy. Rates are rising because the rate of return in the economy is rising. A recovery is finally underway. By the way, the first true indicator of this was the recent improvement in the housing market. This is quite typical of recoveries from recessions . . . the housing market responds first.
The primary effect of a rise in interest rates is that the value of most bonds or stocks that act like bonds (like utilities that pay constant dividends) will decline. The finance term that relates to this effect is “duration.” Duration refers to the sensitivity of asset value to a change in interest rates. Positive duration is when an increase in rates causes a decrease in values. The larger the duration, the larger the decline in value with a given increase in rates. Bonds with longer terms will have larger duration.
bitcoin
Is bitcoin a reasonable alternative money?
The first problem is that bitcoin appears to be created by useless work. Solving a mathematical puzzle is what earns new bitcoins.
The second problem is that the quantity of bitcoin is limited to a fixed amount. This suggests that ultimately there will be deflation in bitcoin. In other words, bitcoin will be worth more and more through time. If investors in bitcoin realize this, the spot bitcoin price will jump upward to reflect a rate of appreciation that is roughly the market rate of interest . . . but not the rate in bitcoin. What do you think the bitcoin interest rate will be? Will there be a bitcoin credit market?
Organ Transplant Shortage
Why is there a shortage of organs available for transplant? The answer is very simple. There is a shortage because the public sector controls the market so as to produce a wholesale price of zero. For those who hate markets, the big bugaboo is that they think that only the rich will be able to afford organs if there is a functioning market for organs. There are two answers for this critique. First, if there are a great many more organs available, the equilibrium price might be quite affordable. Second, there is the issue of what constitutes “rich;” it could be that the market would provide credits for donors that could be given to organ recipients. Thus, the new “rich” in this context might be those whose family, or church, or union, or some other association has made donations to the clearinghouse. We need a palpable incentive to get well people to donate organs as well as to get them to sign donation cards that would permit harvesting of their organs in the event of a fatal accident or illness. The incentive could be transferable credits that could be sold, given away, or inherited.
One has to realize that the wholesale price must be well below the retail price of organs. This requirement exists because those who harvest the organs, categorize them, and ship them, must be compensated for their work and for the facilities in which they work. Also, those who do the transplantation must similarly be compensated. Nevertheless, if there were vastly more organs available and transplanted, scale economies would drive down these costs.
With an abundance of organs for transplant, the entire business changes. First, organs would not be allocated to only the very, very sick. This would improve the chances of success tremendously. Second, the larger number of transplants would improve the skills of the transplant teams also improving the chances of success. Third, we may learn more quickly about avoiding rejection without taking drugs with huge side effects . . . drugs that suppress the immune system.
Money in the Zombie Apocalypse, .22 LRs
What will serve as money in the Zombie Apocalypse? Will it really be gold and silver? Perhaps it will, but it is more likely to be gold and silver coins than bullion bars. Why? Because it is more difficult to verify the quality of bars than coinage. In addition, the units must be fairly small. But what about other stuff? Well, what makes for a good “natural” or non-governmental money. First, it should probably be something or somethings that are more-or-less durable, more-or-less scarce, and perhaps even useful. We all know about cigarettes serving as money in prison camps. So maybe cigarettes would be a good money. But smokers will generally have to quit early on, so it is not clear that cigarettes will really work over the long haul.
What about .22 cartridges? Here is a test. Try to go out today and buy .22 cartridges. Oh, you can’t do it? Out of stock? Suppose you absolutely luck out and the store just happened to get a delivery just before you arrive. You’ll find three things. First, the price will be nearly double what it was half a year ago. Second, you will be limited as to the quantity you can buy. Third, the lines to buy .22 cartridges will start forming as soon as the word gets out. This is a classical shortage. How can this exist? Is the market regulated? How is this done? We know that government agencies are buying huge quantities of ammo, but what possible use would they have with .22 cartridges? We could ask this same question about all the other calibers federal government agencies are buying, but that might be another question. Why are ordinary citizens hoarding .22 cartridges?
What are .22 cartridges?
A .22 cartridge is a combination of a bullet and shell. The shell is a metallic container for the powder and the chemical that sets the powder off when it is struck. The .22 cartridge is a rimfire cartridge and not a centerfire cartridge. This means that the firing pin hits the end of the shell off center. Rimfire cartridges tend to be smaller, and the .22 cartridge is very small indeed. There are three shell lengths for .22 cartridges: shorts, longs, and long rifles (or LR). It is the the .22 LR that is the most sought after. What are .22 cartridges good for? Well, targets and small game such as squirrel. What are .22 cartridges used for? Target shooting mostly but sometimes they are used for things they are not particularly good for. For example, they can be used for larger game when hunting out of season. The idea is to make less noise. This is not to be encouraged . . . not just because this sort of hunting is illegal but also because it can be cruel.
Will .22 cartridges be the money for the zombie apocalypse?
William R. Forstchen in One Second After, 2009 suggests that .22 cartridges will indeed be the money for the zombie apocalypse. Perhaps he is right. The cartridges come in small denominations, are durable, scarce, and sought after.
Apple Bites Man
The talking heads are all abuzz about Apple. It seems that Apple has not been paying its fair share of taxes . . . or so they say. Just what is the fair share tax on a corporation? I had thought that everybody who is anybody had already heard that corporate taxes are double taxes. For the owners of corporate shares, their income gets taxed once at the corporate level and again at the individual level. So effective tax rates are much higher than they appear. My feeling is that there should not be any corporate PROFIT tax at all. This does not mean that there should be no corporate tax at all. Instead, it would be reasonable to impose a small tax on corporate gross income as a user fee for the privilege of limited liability protection. Of course, this would suggest that LLCs should also face the LL tax. Oh, maybe there should also be a user charge to cover the government costs of regulating public markets. One might assume that this would be levied on stock valuation. Of course, the regulation charge would not apply to LLCs.
The idea that Apple Corporation should be demonized for holding funds in international tax havens when it has legitimate international business dealings is simply preposterous. If you want Apple to move those funds to the USA and spend them here, then get rid of the conventional corporate tax. Some might say that Apple should “return” the funds to the USA, but those funds were generated outside the USA. The word “return” just doesn’t apply.
Let’s substitute the limited liability tax and possibly the public markets user charge as well. The cost of compliance would fall. The playing field would be leveled. The economy would prosper.
In Defense of Prepping, Life and Data
I’m not writing about the wearing of shirts with little alligators sewn on them. Come on now, we’ve all seen the Prepper shows on TV where people seem worried about asteroid strikes, super volcanoes or some other unlikely disaster. What I am in favor of is preparing for likely disasters that might reasonably have serious consequences. If you live on Tornado Alley, then it is useful to prepare for tornadoes. If you live on an active fault line, prepare for earthquakes for goodness sake. If you live on a relevant coastline, then prepare for hurricanes. If you live in some parts of the upper midwest, prepare for flooding.
The deadly tornado in Oklahoma has prompted this post. How do you prepare for a tornado? Well, warnings have gotten real good. Get a radio that warns of this sort of thing with a special signal, and keep it on during tornado season. Mostly what you need to do is to prepare a shelter. Shelters are easy and cheap to create. One can use large precast concrete culverts or used steel shipping containers. For best effect, bury the shelter. How about burying it under the patio you have wanted to create? Finally, use the shelter when warned of tornadoes.
Each of the likely disasters one might face has a short list of preparations or “preps” that a reasonable person might utilize. Some of these include moving. For example, if you are worried about hurricanes, then moving just a bit inland can often provide a substantial amount of protection. If you hear that floods are likely, then move your vehicles and animals to high ground. If you are in the area of wildfires, clear your immediate area of combustibles and develop a water source from which water can be pumped on your buildings. If your life is threatened by staying, then get up and move yourself. Create a bug-out bag and take it with you, but move.
In this day and age, data can be some of our most valuable stuff. Move it. You should not keep your data backups near your computer. Instead, your backups should be sent to a data center far away . . . and preferably to a region that is not faced with threats from natural disasters. There are such places. For example, consider the Upper Peninsula of Michigan. No hurricanes or tornadoes or earthquakes. Very little flooding and only modestly high winds. Much of the electrical generation capacity is hydro. Huge access to fresh water. You get the idea: evaluate places in terms of their likelihood for experiencing disaster.
Be safe.
Abstract vs. Concrete, Computers and Patents
When are inventions that are implemented via computer patentable? An answer is that when the inventions are not simply abstract and when the machine, the computer, is specialized in some sense. The case I am referring to is CLS Bank v. Alice Corp. How should judges think about the terms ABSTRACT and a specialized MACHINE? The reader might also be interested in the recent point-counterpoint discussion in The Wall Street Journal (May 13, 2013, p. R2).
ABSTRACT v. CONCRETE
First, let’s examine the term ABSTRACT. It means a simplification that is the essence of something. So it might be a mathematical equation. If something is ABSTRACT, it does not contain all the features that reflect reality. So an abstract model is not reality, it is an imperfect reflection of reality. An abstract idea is not itself a useful product, although it may form the core of a useful product . . . one for which a market exists or may reasonably exist in the future.
Let’s use the term CONCRETE to mean the opposite of ABSTRACT. So a concrete idea is one which is or could reasonably be useful. It is an idea that is fully fleshed out for its intended purpose. It is not a stripped-down simplification or essence of an idea.
Let’s say that a patentable invention must be CONCRETE.
MACHINE
Is a computer a machine that can be used to make a business process patentable? How do you make a computer into a specialized machine? When is it unreasonable to argue that computations that can be done on the computer cannot be done by hand, by pencil and paper?
I can only hope that we will lose the luddite gene that makes computers appear to some judges to be undifferentiated. Instead, computers are specialized machines that can make business processes patentable. What causes computers to become specialized? The answer is software. Software is the jig, the gizmo, or the widget of the information age.
If you break down software into its most elemental computation, a person can do the computation by hand. However, in many cases a person cannot do the sum total of the computations in a time that could be considered reasonable. Often, computer programs do computations in seconds that would have taken years or lifetimes before the age of computers. So speed has increased to such an extent that what we do is, in fact, different qualitatively and quantitatively than what we used to do.
What is the Point?
Why do we want business process software to be patentable? Why to we believe that it is necessary to view programmed computers as specialized machines in the modern age?
Primarily, we want business process software to be patentable, because it reduces the use of trade secrets. As a result, it eliminates reverse engineering and industrial espionage which are extremely inefficient activities. In addition, it promotes further development along similar lines by making the process completely transparent.
There are other reasons we might want patents in this arena. The traditional argument is that there are high costs associated with developing software and non-trivial business processes. Investments in these inventions are encouraged by providing a period of years in which competition is diminished. Competition is not eliminated; it is just diminished. It is expected that creative people will find ways to work around the patent and provide increasingly close substitutes as time passes. This is part of the genius of the patent system. It creates a structure in which people search for new solutions in markets that might not have existed without the initial patent. That is, a patent creates relatively well-defined lines, the scope of the patented invention, beyond which innovations are acceptable.
Computers are, of course, useless without software. So software is the sine qua non for computer usefulness. Continuing along this theme, useful computer/software applications are numerous and potentially diverse. In the same way, a steam engine is useless unless it is connected to something else. For example, a steam engine may drive a train, a car, or an electrical generator. Each of these applications and more deserve patents . . . in their proper time contexts.
I have purposely not addressed a number of issues such as novelty and obviousness in this post. However, I have covered these issues in previous posts. Briefly, most of the critiques of software patents relate to trivial software or obvious software. Of course, there is no excuse for patents of this nature: one click shopping, etc. On the other hand, novel and profound inventions that will have lives of many years deserve patents. For example, suppose one could really invent a way to insure against capital risk in housing or default risk in mortgages, now that would deserve a patent. One of the great errors in patent history is the lack of a patent for Rex Schrader’s combinatorial auction system which was later copied by the famous spectrum auctions.
Feldstein on Fed Policy
Martin Feldstein has written that Fed policy is a dead end. Ordinarily, when you reach a dead end, you just turn around. I’m not convinced that Bernanke actually has a reasonable exit strategy.
Internet Sales Tax
Dick Morris is leading the charge against the internet sales tax, writing “With 11,000 separate tax jurisdictions and rates in the US, taxing sales online is a huge burden on net firms.” First, the internet sales tax is not in my self interest. Nevertheless, I feel compelled to refute this assertion from Dick Morris. What the internet does best is to deal will complexities like the number of jurisdictions and tax rates. If there is an internet tax that works by taxing transactions at their destinations (that is, the location of the buyer), then services will arise to keep track of the various taxing authorities, collect, and distribute the tax. The cost of such a service should be tiny. On the other hand, why not tax these transactions at their origins (that is, the location of the seller) rather than at their destinations? Then each seller would only have one location to deal with. I like this approach, because it would put the screws to high tax states and localities which cannot attract internet sellers. In contrast, taxing the destinations encourages the high tax places.