Monthly Archives: October 2008


Here’s an interesting article in Democracy Magazine (put out by the Roosevelt Institute, a US-based student think-tank) that discusses possible applications of the network effect in the world of public policy. [For a quick background on some of this stuff, see my earlier post titled “the Power of Networks: a Primer.”]

In a representative democracy, we entrust elected and appointed officials to make informed decisions on our behalf. Of course, the system is imperfect and other than the occasional “town-hall” meeting, opportunities for real public consultation are few and far between.

Thus, applying the collaborative power of networks to public policy is an intriguing prospect. At its essence, the Internet’s strengths lie in its ability to decrease information asymmetries and connect disparate people together by giving them a platform to collaborate. Thus, the Internet and public policy are intuitive bedfellows- technology can strengthen public institutions, by lowering the cost of access to both specialized knowledge and public opinion. The article describes a great example of this type of project:

On June 15, 2007, the USPTO [United States Patent Office- a public institution] launched an experiment, the “Peer-to-Patent: Community Patent Review,” which could become a model for precisely this sort of collaborative governance. The program solicits public participation in the patent examination process via the Web. This system (the design and implementation of which I direct in cooperation with the USPTO) allows the public to research and upload publications–known in patent law as “prior art”–that will inform the patent examiner about the novelty and obviousness of the invention and enable her to decide whether it deserves a patent. This is truly revolutionary: In the 200 years since Thomas Jefferson founded the patent office, there has been no direct communication between the patent examiner and the public.

How can patent officers be expected to judge the merit of applications on topics that they know nothing about? This project allows patent officers access to the public’s wealth of specialized information. Results show significant progress in reducing the back-log in patent offices.

I think there is exciting potential for these types of projects to improve public institutions. What better way to strengthen our democracy, than by applying the very democratizer of information itself.


The Obama show

I caught the Obama “infomercial” last night and I have to say it’s not a stretch to say he looked eminently presidential (perhaps a bit presumptuous, give he hasn’t been elected yet). Slick production values and cheesy music aside, what stuck out for me was how the commercial illuminated Obama’s priorities.

One of the families featured in the 30 minute ad was a retired elderly couple, uninsured and struggling to pay their medical bills. The husband was not only forced to go back to work (a Walmart greeter at 72 years of age) but they also took a loan out on their house to pay to cover the cost of medication. The segment was a stinging critique of the broken American health care system. At the end of the vignette, Obama came on and said something along the lines of: “we have to take a longer view on issues such as health care and the environment” and then proceeded to passionately discuss his energy plan. What a non-sequitur. Discussion of health care reforms was left to the end of the infomercial.

Obama speaks with a lot more vigour when talking about “reducing US dependence on Middle Eastern oil” than he does on health care reform. [Note: the US actually gets most of its oil from Venezuela, so reducing the Middle Eastern supply is almost moot].

I think this gives us an interesting glimpse into Obama’s priorities. Not to say that environmental issues aren’t important, but I would think that health care, a complex problem with a far more human face , would be higher up on Obama’s radar screen.

Picking up the pieces: Republican Party in 2012

With the election just days away, an Obama win inches closer and closer to realization (I really wanted to use the term “forgone conclusion,” but I don’t want to jinx it). Disgruntled Republican party members are pointing their fingers every which way, trying to exculpate themselves from McCain’s dubiously run campaign. At a panel on the American election last Saturday, New York Review of Book’s editor Michael Tomasky articulated what I’m sure many of you have noticed over the last week or so: there has been an inundation of negative media stories involving “unnamed sources” within the Republican party. This obvious in-fighting has produced some good entertainment including this McCain-Palin puppet show. In contrast, Obama’s campaign team has remained remarkably disciplined and united- with no palpable cracks in his facade.

One of the most terrifying stories has Palin attempting to salvage her reputation in order to make a run for 2012. If she is the future of the Republican party, they don’t seem to want to move very far from the present. The NYT article has her attending daily “policy-for-dummies” tutorials in an attempt to bone-up on the issues, so she can show she has “substance.” This is all fairly laughable. Is the Republican Party so devoid of real prospects that her “folksy charm” is worth keeping around? Are they forgetting that her unpopularity is one of the prime reasons they are going to lose this campaign?

Shifting gears from the unpalatable to the possibly tolerable, Bobby Jindal, one of VP candidates McCain rejected, could become a big player in the next go around. The newly elected Governor of Louisiana is young (36), charismatic, Indian-American (but also Christian), smart (Rhodes Scholar) and has a burgeoning reputation as a bipartisan change-maker. Sound familiar? The New Republic calls him the Republican Obama. It seems a bit early for conclusions like that, but this one might be interesting to follow. Here’s a clip of him on Hard Ball, so you can judge for yourself:

Things I love…

A quick post about things that I wanted to share… loosely related to technology.

1. Urtak: The recent presidential election has made the inadequacies of modern polling all too apparent. The art of polling has been revealed to be less scientific (and prescient) than I ever imagined. Enter Urtak, a new experiment in democratic polling, started by a couple of gents that went to my high school. It’s a neat little project, but also very addictive. “The polls may not be representative, but they’re 100% authentic!” (Please mention my name when you sign up!)

2. Googletext: Those of you who know me, know that I love Google. Here’s another reason for me to love it even more. Use it to look-up phone numbers, find that sushi place around the corner or resolve a bet that you made with your friend in the car.

3. The Kindle. I want one. But I think I’ll wait for Version 2.0. (Note: only available in the US).

Does the free market corrode moral character?

The recent collapse of the credit markets has everyone and their mothers denouncing the greed and corruption of Wall Street. The public fury is palatable and often justifiable: public money is being used to bailout firms that willingly took on risk, without adequately considering the consequences of doing so. More radical critics have used the market collapse as an opportunity to denounce the entire free-market system. In light of these events, the question of this online debate sponsored by the John Templeton Foundation becomes even more topical:does the free market corrode moral character? The debate surveys a sprinkling of different academics, politicians and public figures.

The essays provide a cogent and entertaining mix of different analysis- philosophical, economical, historical and ethical frameworks are used to shed light on the debate. The two authors who resonate with me are economist Tyler Cowan and US Senator Rick Santorum.

The results are: No: 5, It depends: 5 Yes: 3

I would tend to put myself in the “no” camp although I suppose it would depend on one’s definition of “moral character”. Although I could never weigh-in as eloquently as any of these participants, I will leave a few notes (I’m going to use my rudimentary knowledge of economics to form some arguments).

1. Markets might value moral characteristics: Utility maximization (i.e. the ideal scenario) in a free-market society occurs when each individual acts in his own self-interest. Some might immediately equate “self-interest” with greed, selfishness and morally corrupt behavior. I would argue that this is not the case- acting in one’s own self-interest should not automatically imply moral corruption. In fact, acting in one’s interest may not preclude acts of generousity or altruism. After all, each individual has a different set of preferences- so, I might get a certain amount of satisfaction from being perceived as “moral” or “generous” forcing me to include these factors in my calculations of how to act. In other words, a free-market system may also place value on “moral” characteristics. In addition, free markets tend to encourage a host of positive human qualities such as innovation and entrepreneurship.

2. Markets without morality cannot exist. Connected to the previous point, there seems to be some evidence that not only do free markets place value on “moral characteristics,” markets will collapse without them (e.g. the current state of the financial system). Free markets cannot survive without the implicit trust that a buyer or seller will fulfill his respective duties. Widespread corruption cannot be sustained in a free market society- as illustrated by the unsuccessful attempts of transitional economies such as China or Russia to create market infrastructure. A corrupt environment leads to high indirect costs, which in turn create a high risk premium, discouraging investment for a particular economy. Also, since we are discussing transitional economies, another question comes to mind: what are the alternatives to the free-market system? Clearly, communism has not produced morally-perfect results.

3. Post hoc, ergo propter hoc: This is not to say that free-market economies are devoid of morally corrupt behaviour. Greed, envy and vanity are just some of the unfortunate consequences caused by a free-market system (not to mention other indirect results such as environmental degradation and income inequality). However, I would argue that these are human flaws- perhaps exacerbated by the economic system but not borne of them. Thus, this morally corrupt behaviour might be concurrent with the free market system, but is not caused by it.

Conclusion: So, I’ll admit free markets might include some corruption of moral character depending on the individual. However, I would argue that the market system does not necessarily corrupt, nor does it corrupt absolutely.

In Defense of the Deficit

In the last few weeks, the dreaded “d” word (deficit) has reared its ugly head in a variety of news stories. The Ontario economy, ravaged by its flagging manufacturing sector looks to be about $500M in the red. With the turmoil in the financial sector, the overall Canadian economy appears headed towards recession, which could also spell budget shortfalls for the federal government. The public perception on deficits is decidedly negative- most think they should be avoided at all costs (see this common opinion into today’s G&M). In the last election, this perception led all major parties to run on the promise of a balanced budget. Near the end of the campaign, Stephen Harper even commented outright that his party would not run a deficit. This kind of talk is dangerous.

Running a deficit in times of recession is not an unreasonable policy.  During a recession, both businesses and individuals make and spend less money, leading to shrinkage in the economy and smaller tax collections by the government. The ability to spend money is one of the few fiscal policy tools that a government has to fill the spending gap caused by the recession. Thus, in order to spur economic activity, we need our governments to spend money (on infrastructure, on health care, on education, etc)- not cut spending just to balance the books. Harper needs to rethink this ill-conceived campaign promise to balance the budget, which could worsen the state of our economy. If he insists on pandering to public opinion, he should look first at getting rid of his “targeted tax breaks” (read: bribes) before cutting spending- for more on this, see Jeffrey Simpson’s column. However, he should avoid raising taxes or interest rates to try to make up the short fall- both would further discourage investment in the economy.

(On another note, I’d argue that large government surpluses aren’t actually a good policy. Surpluses are usually the result of strategic “budget padding”- when the budget overemphasizes expenses and underestimates revenue sources. In this scenario the government should either lower taxes or spend the money on something useful.)

Bottom line: Deficits are not bad. In fact, in times of recession, they may be necessary.

The Power of Networks: a Brief Primer

Over the summer, I developed a strong interest in examining the impact of technology on our society. The Internet is a particularly poignant example of one such transformative technology. Even to the least tech savvy, its benefits are enormous. Among other things, the Internet gives us unlimited access to information (Google), allows us to communicate over great distances with minimal effort (email) and even provides us with channels to express our many opinions (blogs).

In the Wealth of Networks (full review to come), Benkler explains the internet’s transformative power using economics terms. He asserts that the Internet has empowered individuals by facilitating collaboration and creating a powerful “networked information economy.” Essentially, the magic of the Internet lies in its ability to connect disparate individuals- a collective can create something much larger than any individual could. By providing a medium for collaboration, information technology essentially increases the value of an individual’s output. This is the power of networks.

The net is littered with countless examples of this phenomenon. Wikipedia, an online encyclopedia run by volunteers, has turned its traditional counterparts (e.g. Encyclopedia Britannica) into expensive paper weights. Linux, an open-source operating system designed by programmers in their spare time, is a legitimate alternative to Microsoft’s corporate behemoth, Windows. Obama’s wildly successful presidential fund raising campaign relies on millions of dollars of individual donations rather than corporate or public funding. Political blogs and hundreds of independent online media sources are challenging and revolutionizing traditional journalistic mediums.

In my opinion, the most exciting applications of these ideas are still to come. The ability to harness the power of networks has yet to be fully explored (or exploited) by the private or public sectors. The world of public policy, in particular, is long overdue for some innovation. The Internet is probably one of the best champions of democracy- having essentially democratized the market for information… more on this later

One more thing before I end this post: new developments in the regulatory environment for the Internet (particularly intellectual property law) may threaten the network information economy. These laws restrict the flow of information, which is critical for any network to survive.  The “open everything” movement is the brainchild of proponents of the the freedom of information and its ability to create power innovation. Look no further for a worthy cause…

Interested in reading more? Try:

1) Benkler’s book available for free here. Lawrence Lessig is another authority on the topic worth checking out.

2) Economics of Sharing, Economist, Feb. 3rd 2005. (Short and sweet)

3) James Surowiecki’s Wisdom of Crowds (Explains why a crowd might actually be better than an “expert.”)