Friday, September 12, 2003

The merits of intellectual property rights

Eugene Volokh has a great post on why intellectual property is not so different from tangible property. One key point:

The theory of intellectual property is... that giving people the right to exclude others from new works or inventions will give people an incentive to invest effort in creating and inventing. We would have less legal freedom of action -- you'll be more limited in what you can do in your own office or garage -- but we'd have more wealth, because there'll be a lot more works and inventions, albeit ones that it may cost you money to use.

What Eugene failed to mention is what makes the conferral of intellectual property rights so difficult: the credible commitment problem.

Before a concept comes into existence, the incentive created by intellectual property rights is very strong. After a concept is invented, critics are correct in saying that society would be better off if those rights were revoked. Hence the need for a credible commitment, in the form of legal protections, to assure innovators that their intellectual efforts will yield tangible rewards.

Dynamically, society is better off protecting such rights, because that helps to ensure a constant stream of innovation. However, in times of crisis, when the future is heavily discounted, it's very tempting to revoke this commitment.

UPDATE: Larry Solum responds to Volokh, and Volokh returns the favor.

posted by Dan at 03:56 PM | Comments (15) | Trackbacks (1)

Advice to new bloggers

Given my one-year anniversary, I thought I'd offer a few bits of advice on how to succeed in the blogosphere beyond what I wrote here and here:

1) Unsure about starting a blog? What do you have to lose? It takes ten minutes and zero dollars to set up a blog on Blogger. [UPDATE: Blogger just announced that they are adding most of their Blogger Pro features into their regular Blogger program, so now you get even more for nothing.] The real question is, why not start a blog? At worst, you'll run out of things to say in two weeks and delete it. Trust me, if my brother can blog, anyone can.

2) If you decide you like blogging, then switch to Moveable Type: Boy, have I been converted. I didn't know what I was missing until I made the switch. Comparing MT to any version of Blogger is like comparing any BMW to a Saturn. Yes, the latter is a fine car (I own one), but the former is much more fun. [What about Typepad?--ed. Never used it, so I can't comment. However, Tom Maguire just switched over, so it must have some virtues.]

3) Think quality over quantity. Yes, some bloggers have the ability to post in triple figures per day at a consistently high level. You, like me, are probably not one of those people. In baseball terms, you don't have to swing at every pitch -- wait for an issue or idea that's right over the plate.

4) You can still edit your text once it's posted. Blog enthusiasts repeatedly emphasize that the blogosphere's comparative advantage is the lack of editors. That's true as far as it goes, but that doesn't mean that once you've posted something it's sacrosanct. In the hour after I initially post something, I will often revise it, to clean up typos, correct my grammar, add relevant links, and bulk up my arguments with more detailed arguments or supporting facts (within reason). Yes, there are no outside editors in the blogosphere, but the best bloggers have well-honed internal editing systems -- and they use them on a regular basis.

5) Write about religion. Or better yet, Harry Potter and religion. Forget Britney Spears -- it's religious controversy that sells. Well, that plus Harry Potter; I have a healthy new respect for the legions of online Harry Potter fans that came swarming to my site after the leading Harry Potter blog, The Leaky Cauldron, linked to my post on the subject.

posted by Dan at 12:47 PM | Comments (32) | Trackbacks (16)

A belated blogiversary to myself

A year ago this week, I started this blog. If I could discover a way to travel back in time and tell myself that this blog would:

  • Attract more than 400,000 unique visits and 500,000 page views in the first year alone;

  • Lead to regular writing gigs with The New Republic and Tech Central Station.;

  • Garner press attention from the Chronicle of Higher Education, Washington Post, Rocky Mountain News,, and the Hotline;

  • Play a microscopically small role in forcing out Trent Lott as Senate Majority Leader.

  • Get e-mails from Democratic presidential candidates (no, I'm not going to name names, because I politely declined) asking me to guest blog on their sites;

  • Slowly transform my wife's attitude about this activity from "What's a blog?" to "You're spending an awful lot of time online." to "Wow, this blog thing is working out pretty well for you!";
  • Well, I'd be rich, because I'd have invented a friggin' time machine!!

    But I also wouldn't have believed me. It's been a kick-ass year.

    On to year two!!

    UPDATE: Andrew Sullivan always sends the nicest presents -- tons of hits and a great blurb!

    And let me reciprocate David Adesnik's kind words by pointing out it's his blogiversary as well. David is a blogger of the first rank.

    I should also point out that Jacob Levy's one-year blogiversary just took place as well -- he started three days before I did. Huzzah!!

    posted by Dan at 12:20 PM | Comments (14) | Trackbacks (5)

    Thursday, September 11, 2003

    California polling and California spinning

    Despite Mickey Kaus' latest Schwarzenegger scoop, it looks like the Teutonic Terminator has succeeded in phase one of his campaign -- with Peter Ueberroth's withdrawal, Schwarzenegger is now the only viable Republican challenger [What about Tom Mclintock?--ed. According to Daniel Weintraub, he's irrelevant].

    Now comes the latest poll from Knowledge Networks:

    The new poll of 528 likely and registered voters was conducted August 29th to September 8th and shows Californians favoring the recall of the Governor by 62% to 38% (with a margin of error of +/- 4.3 percentage points). Evidencing a strong split along party lines, 91% of Republicans — compared to 42% of Democrats — favor recalling the Governor.

    Among the replacement candidates, the survey found that Republican Arnold Schwarzenegger has a commanding lead over his main rival, Democratic Lieutenant Governor Cruz Bustamante, by a margin of 40% to 28%. Only 3% of Republicans indicated that they will vote for Bustamante; but 19% of Democrats said they would vote for Schwarzenegger....

    The Stanford/Knowledge Networks survey is the first to ask voters to choose from the same list of 135 candidates that they will see on election day. Previous polls have restricted voters' choices to the top candidates and have allowed respondents to select "undecided" or similar options.

    Click here for the full results. There is one jaw-dropping statistic that is not mentioned in the press release: among Hispanic voters, Bustamante only beats Schwarzenegger 40% to 37%. Since this is well within the poll's margin of error, so Bustamante and Schwarzenegger are in a statistical dead heat for the Hispanic vote. This would be consistent with the Field poll data as well.

    Many bloggers, myself included, believed that unless Schawrzenegger started getting specific on policy proposals, he'd wither on the vine. However, since Cruz Bustamante has decided to match Schwarzenegger's vagueness, that pressure has yet to kick in.

    One last point about this poll. The only reason I know about it (and apparently beat Kaus, Robert Tagorda and Daniel Weintraub to posting about it) was because someone at the White House Writers Group e-mailed the press release to me. [Does that mean the White House is getting involved?--ed. No, WHWG is a private consulting firm unaffiliated with the government. Do they have a political slant?--ed. The group was founded by Reagan-Bush speechwriters, and perusing the staff bios it's safe to say they lean to the right. By posting about this, aren't you, like, their willing slave?--ed. This is worthy of blogging because of the caliber of the people who ran the survey, and the fact that their survey method mirrors the actual voting process. That's the spin in the two media stories I found on the poll, both of which are less than two hours old]

    Two lessons to draw. The first is that the White House Writers Group is smart enough to know how to get favorable information out there -- distribute it to members of the blogosphere!! Second, the Schwarzenegger canpaign may be short on specifics, but they're long on quality consultants.

    UPDATE: Eugene Volokh got the same e-mail.

    posted by Dan at 04:04 PM | Comments (7) | Trackbacks (3)

    Two years later

    I was in Heathrow airport waiting to board a plane home when I heard about the attacks. Unlike U.S. airports, Heathrow does not have TV monitors broadcasting news every 100 yards. The only reason I found out was that I called my wife to let her know I was going to be on a different plane than I'd said. She said, "Thank God you're OK!!" and then told me what happened. By that point both of the towers had fallen and the Pentagon had been hit.

    Hearing those facts described over the phone was just bizarre. Seeing the endless replays on television in another country was equally bizarre, though the British were as kind as could be while I was marooned there.

    Until 9/11, it was safe to say that my generation had no moment of shared experience equivalent to the Kennedy assassination. I wish I could say that was still the case.

    That's all I can muster on the personal significance of 9/11 -- Jeff Jarvis and James Likeks do this better than I.

    posted by Dan at 11:16 AM | Comments (2) | Trackbacks (0)

    Wednesday, September 10, 2003

    Drezner gets results from A World Connected!!

    Yesterday, Jacob Levy posted the following:

    I'm proud to note that of the 30 finalists in the Institute for Humane Studies' "A World Connected" globalization essay contest, six are from the University of Chicago. I know one of them by face and name, but haven't ever (IIRC) taught or talked at length with any of them. As far as I can tell no other institution has more than one finalist.

    I am happy to claim partial credit for this bonanza of U of C finalists -- three of the six students were also in my spring class, Globalization and Its Discontents.

    At the last minute -- at the suggestion of a student -- I changed the first assignment to mirror the essay contest question.

    In seeing who among my students made the cut, I'm pleased to note the following:

  • The students who made the cut received A grades for their papers. Always ood to see a high degree of intercoder reliability.

  • The Institute for Humane Studies sponsors A World Connected, and a quick perusal of the site makes it clear that it's quite pro-globalization. However, I know for a fact that at least one of my students that made the top 30 wrote an (excellent) essay that was critical of economic globalization. So kudos to the panel of judges for their analytical rigor and intellectual honesty.

  • Should any of my students win any money, I certainly won't expect a big kickback [He was kidding!!--ed. Right... that's what I was doing.]
  • posted by Dan at 04:29 PM | Comments (1) | Trackbacks (1)

    Conan O'Brien's 10th anniversary

    This weekend NBC will air the 10th anniversary celebration of Late Night with Conan O'Brien. In those ten years, I've gone from someone who would watch the show on occasion to someone who desperately needs to be asleep by the time he's on.

    That said, he's still a funny guy. For those fellow readers who need their sleep, go read Conan's commencement speech to the Havard Class of 2000 -- it's pretty damn funny. Here's part of his closing:

    So, that's what I wish for all of you: the bad as well as the good. Fall down, make a mess, break something occasionally. And remember that the story is never over. If it's all right, I'd like to read a little something from just this year: "Somehow, Conan O'Brien has transformed himself into the brightest star in the Late Night firmament. His comedy is the gold standard and Conan himself is not only the quickest and most inventive wit of his generation, but quite possible the greatest host ever."

    Ladies and Gentlemen, Class of 2000, I wrote that this morning, as proof that, when all else fails, there's always delusion.

    Read the whole thing.

    posted by Dan at 12:03 PM | Comments (4) | Trackbacks (2)

    Harry Potter and the Threat of Lashkar-e-Taiba

    The title to this post is not the name of J.K. Rowling's sixth book in the Harry Potter series -- though it's not bad.

    Lashkar-e-Taiba is an Islamic fundamentalist group based in Pakistan responsible for multiple terrorist attacks against India over the past ten years. Technically, Lashkar-e-Taiba was banned by the Pakistani government following the 9/11 attacks, so the group is now called Jama'at ud-Da'wa Pakistan. Only the name has been changed, however.

    What does this have to do with Harry Potter?'s trusted South Asia expert alertly informed him of the cover of the August 2003 issue of Zerb-e-Taiba (roughly translated, clash/clang/strike), Lashkar-e-Taiba's flagship publication.

    Now, if you look at the upper-left hand corner of the cover, you'll see an image of a Harry Potter book. Why? Apparently, the magazine has an article arguing that the Harry Potter series is really part of a missionary plot to spread Christianity to the Islamic parts of the world (sorry, no translation).

    The irony is extremely rich, since a slice of Christian fundamentalists -- particularly some (but not all) individuals affiliated with Focus on the Family -- have been arguing for the past five years that Harry Potter must be the work of the devil because it promotes worship of the occult. Think I'm exaggerating? Click here. For a rebuttal, click here.

    Now, while some in the blogosphere are less than enamored with the Harry Potter series, even these curmudgeons would allow that the series has caused a lot of children to become more voracious readers, which is all to the good. Saying that Harry Potter influences religious preferences would be like saying Frasier -- or Woody Allen, for that matter -- encourages people to enter psychoanalysis.

    Why do these books cause such heart palpitations among religious fundamentalists of all stripes? Wading into some hazardous waters -- let me add here that most devout people do not fall into the trap I'm about to describe -- here's my theory:

    If there's anything that scares religious orthodoxy, it's decentralized enthusiasm for something new. What devotees of Lashkar-e-Taiba or James Dobson share is an unquenched desire for order. Now, anyone who thinks of themselves as religious recognize this impulse, and one should never underestimate the power of faith to provide comfort in times of uncertainty. However, fundamentalist groups have an exaggerated fear of uncertainty, and any phenomenon beyond their control represents a threat to their world. Harry Potter may be harmless, but the books are beyond their control. They inject new and unwanted ideas into the heads of young children. God forbid that Muslim girls should read about a strong female character like Hermione Granger, or that young Christian children read stories that suggest not all authority figues are omniscient or pure of heart.

    Worse than any of these specifics, of course, is the central strength of the Harry Potter series -- the sheer inventiveness of Rowling's imagination. Reading the books teaches children that fantasies are fun, that it's a worthwhile endeavor to explore one's own imagination. This is the first step down the road towards independent thought -- the bane of all religious extremists.

    Turning back to Pakistan, the good news is that most Pakistanis are either ignoring or decrying this attack on Harry Potter. In fact, if this press release is any guide, Pakistani readers are far more upset about the Hollywood bastardization of Harry Potter and the Goblet of Fire. So maybe my pessimism about the state of that country is exaggerated.

    UPDATE: As Patrick Belton points out, it's not only religious fundamentalists that have a problem with magic.

    posted by Dan at 10:03 AM | Comments (50) | Trackbacks (1)

    David Brooks starts his NYT gig

    David Brooks' inaugural New York Times op-ed column confirms for me that he'll be a good fit for that page.

    Brooks' essay starts off with a spot-on critique of the administration:

    The Bush administration has the most infuriating way of changing its mind. The leading Bushies almost never admit serious mistakes. They never acknowledge that they are listening to their critics. They never even admit they are shifting course. They don these facial expressions suggesting calm omniscience while down below their legs are doing the fox trot in six different directions.

    Sunday night's presidential speech was a perfect example. The policy ideas Bush sketched out represent such a striking series of policy shifts they amount to a virtual relaunching of the efforts to rebuild Iraq. Yet the president unveiled them as if they were stately extensions of the policies that commenced on Sept. 11, 2001.

    At this point in the essay, loyal Times readers are nodding their heads, basking in the warm glow of Bushwacking.

    However, by the end of the piece, Brooks is in a different place than the start would have suggested:

    Still, as Bush makes these pivots, I'm reminded of the way Ronald Reagan made his amazing policy shifts at the end of the cold war, some of which outraged liberals (Reykjavik) and some of which outraged conservatives (the arms control treaties with Mikhail Gorbachev). Presidents tend to be ruthless opportunists, no matter how ideological they appear. Even as he announced his strategy on Sunday night, Bush left open the possibility that he might be compelled to shift again and send in more U.S. troops if circumstances warrant.

    The essential news is that Bush will do whatever it takes to prevail, and senior members of his administration are capable of looking honestly at their mistakes. You will just never be able to get any of them to admit publicly they've ever made any.

    So, even while deftly skewering the administration's PR on its policy, Brooks manages to point out Bush's virtues.

    Is he right? I hope so -- even if it renders two of my previous posts --here and here -- wrong.


    UPDATE: &c. has more on the Brooks essay (link via Josh Cherniss, who's more skeptical about Brooks than I)

    posted by Dan at 12:30 AM | Comments (2) | Trackbacks (0)

    Tuesday, September 9, 2003

    Links for the day

    Will Saletan and Andrew Sullivan are having a debate on Bush's Sunday speech and whether Operation Iraqi Freedom is integral to the war on terror. As loyal readers are aware, I'm mostly on Saletan's side here, but not completely.

    Tacitus has a post on South Korea's quasi-delusional behavior vis-à-vis North Korea -- something I wrote about here (link via InstaPundit).

    The Chicago Tribune has a good front-pager on U.S. efforts to build a modern highway between Kabul and Kandahar. According to the story, the effort has already reduced the travelling time between the two cities from two days to ten hours. When it's finished, the time will be shaved to six hours.

    Oh, and everyone at OxBlog seems to have stopped moving around and started posting again. Always worth a read.

    posted by Dan at 11:39 AM | Comments (4) | Trackbacks (0)

    The media and asymmetrical warfare

    Glenn Reynolds has a post and links to the media's role in asymmetrical warfare -- namely, how a necesary condition for a victory by guerillas over syanding armies is that the media interprets tactical losses as strategic victories:

    In Somalia, the Somalis took over 30 casualties for every American killed or wounded. That was done through the use of superior American training, firepower (on the ground, and in helicopters overhead) and situational awareness (helicopters and more radios.) The battle in Mogadishu is only considered an American defeat because the American government considered 18 dead G.I.’s a defeat, even if over 500 Somali fighters died as well. At the time, the Somalis considered themselves defeated, and feared the return of the Army Rangers the next day to finish off the Somali militia that was terrorizing Mogadishu. The media declared the battle an American defeat, and that’s how it became known. Asymmetric warfare includes having the media in your corner, for that can easily turn a military defeat into a media victory.

    That makes Donald Rumsfeld's comments yesterday about media criticism a bit more understandable:

    Defense Secretary Donald Rumsfeld said Monday that terrorists may be gaining encouragement by some Americans' criticism of the Bush administration's actions in Iraq.

    "We know for a fact ... that terrorists studied Somalia and they studied instances where the United States was dealt a blow and tucked in and persuaded themselves they could, in fact, cause us to acquiesce in whatever it is they wanted us to do," Rumsfeld told reporters as he flew back to Washington after a four-day tour of Iraq and Afghanistan.

    Even if Rumsfeld has a point, he's overreaching -- it's not the place of the Secretary of Defense to insinuate that the media is providing aid and comfort to the enemy.

    posted by Dan at 11:37 AM | Comments (16) | Trackbacks (0)

    The state of play in world trade

    My latest Tech Central Station column is up -- it's on the increased prominence of developing countries in the latest round of world trade talks, and what this means for the United States. There are lots of links, too. Go check it out.

    And after that, go check out the Cato Institute's online globalization debate. It's between Cato and the Institute for Humane studies on the "pro" side, and the Nation and The America Prospect on the "anti" side. There's also also an ongoing email debate for the course of the WTO talks between Johan Norberg and Bob Kuttner.

    posted by Dan at 10:13 AM | Comments (1) | Trackbacks (0)

    Monday, September 8, 2003

    Gregg Easterbrook has been absorbed

    Less than a week after I praised Gregg Easterbrook's Tuesday Morning Quarterback column on, he goes and sets up a proper blog hosted by The New Republic.

    Go check it out -- he's asking for name suggestions. Be warned: there will probably be few postings on cheerbabes.

    Who will be the next big thinker to become one with the Blogosphere? Post your guesses below.

    UPDATE: I realize I didn't provide my own guess. Well, after seeing this picture of Easterbrook posing with the Philadelphia Eagles cheerleaders from last night's football game...


    There can be only one name -- Philly Cheesesteak.

    posted by Dan at 04:46 PM | Comments (6) | Trackbacks (0)

    Too bad

    Warren Zevon is dead. He was much loved in the blogosphere. Myself, I will always be grateful to him for composing this song.

    posted by Dan at 03:43 PM | Comments (2) | Trackbacks (0)

    Some minor housekeeping

    A few minor changes:

    1) For the eight of you that care, I've finally downloaded some pictures of the boy and the beagle. You can access all of them here.

    2) It's come to my attention that after a while, accessing my TNR Online essays on TNR's web site requires a subscription. Now, while subscribing to The New Republic is an excellent decision and should be encouraged, this is a bit unfair. So, I've posted all of them on the website -- which means the links to the right will take you there.

    3) I've updated the book recommendations page to include a section on intellectual history [Boy, you really now how hip up the site!!--ed. Oh, shut up].

    posted by Dan at 03:37 PM | Comments (1) | Trackbacks (0)

    Sunday, September 7, 2003

    The substance of style in cable news

    Given all the brouhaha over the past year about the relative merits of Fox News vs. CNN, I made sure to tape Virginia Postrel's appearance on Tony Snow's Fox News Live Weekend so I could compare it to her CNN appearance. Comparing and contrasting the two were highly revealing.

    Why? Because the Fox segment was just flat-out better on the aesthetics. Postrel was in Fox's DC studio. Virginia looked much better in this appearance, probably because she wasn't trying to sound pithy while suffocating in a remote studio the size broom closet. Furthermore, in contrast to the CNN teasers, the Fox teasers seemed more on point with the thesis of The Substance of Style.

    Does Fox's rightward tilt explain this? Not likely -- in fact, during the segment Tony Snow seemed to imply that libertarians were geeks with little social life.

    Part of it may have been due to the fact that Tony Snow is higher on the news food chain than the nondescript morning anchor that interviewed Virginia on CNN. Part of it also is that I simply loathe the dearth of hard news content on morning shows, and the CNN interviewer made no effort to go beyond the discussion of toilet brushes.

    In contrast, Snow made a concerted effort to link Virginia's take on aesthetics to larger trends like cultural globalization and political thought, which I find more interesting.

    Still, having unconsciously abstained from watching cable news since the Iraq war, it was interesting to see the differences. Part of the reason Fox is doing better than CNN is that their sense of style is more focused. But part of it is also due to the symbiosis between their style and the substance.

    UPDATE: Chris Lawrence also provides a first-hand account.

    posted by Dan at 05:45 PM | Trackbacks (1)

    The art of criticism

    One of the amusing aspects of being a professor is watching the evolution of graduate students.

    During their first two years -- immersed in coursework -- they become excellent critics. As they sharpen their analytical skills, the students excel at exposing the flaws of every article or book put in front of them. By the end of their coursework, they are thoroughly unimpressed with the cutting edge of the literature.

    Of course, that's usually the point at which they have to start drafting their own work. At which point they discover that the enterprise of developing original ideas is a wee bit trickier than it appears to the critical eye. And suddenly, the stuff that they had savaged six months earlier doesn't look so bad.

    The good students, after getting the wind knocked out of them, develop the proper equipoise between respect for the good but imperfect work that's out there and disdain for the hackwork that, to be blunt, pervades most of the social sciences.

    Clive James reminded me of all this in his amusing essay in the Sunday New York Times op-ed page on the merits of snarky literary reviews. His conclusion:

    When you say a man writes badly, you are trying to hurt him. When you say it in words better than his, you have succeeded. It would be better to admit this fact, and admit that all adverse reviews are snarks to some degree, than to indulge the sentimental wish that malice might be debarred from the literary world. The literary world is where it belongs. When Dr. Johnson longed for his enemy to publish a book, it was because he wasn't allowed to hit him with an ax. Civilization tames human passions, but it can't eliminate them. Hunt the snark and you will find it everywhere.

    Indeed. What James is saying about fiction applies with equal force to nonfiction.

    [Er, isn't it contradictory to praise an essay that praises the art of not praising bad writers?--ed. Not if the essay is well-written. I'd be happy to savage bad editors, though. Never mind!!--ed.]

    posted by Dan at 10:50 AM | Comments (1) | Trackbacks (5)

    Who benefits from outsourcing? Who could benefit from outsourcing?

    The Washington Post had an article two days ago on why this employment decline is different from all others. The answer is that many of the jobs that have disappeared aren't coming back. The reason? Outsourcing:

    Most past recessions have been followed by a rapid recovery of jobs, as companies that laid off workers during the downturn brought them back when business picked up. But a growing body of evidence suggests that this recession and recovery are different. Large industrial companies with such cyclical employment policies account for just 21 percent of the workforce, down from 49 percent in the early 1980s, according to the Fed study.

    Now, even as the economy has slowly expanded over the past 20 months, businesses have stepped up automation, sent jobs overseas and produced more while employing fewer people.

    Mickey Kaus -- who links to the story -- gives one spin on this phenomenon:

    This is a continuation of a long term trend, with one new wrinkle. This time white collar jobs "brain" jobs are going overseas (e.g. to India) along with blue-collar jobs.

    And that's Mickey's optimistic interpretation of events!!

    Sounds bleak. Until you read these couple of grafs in the WaPo story:

    A new study by the McKinsey Global Institute, the think tank of the consulting firm McKinsey & Co., suggests why [outsourced jobs won't return]. When a firm ships a $60-an-hour software job to a $6-an-hour code writer in India, the most obvious benefit goes to the Indian. But, the McKinsey study reports, the U.S. economy receives at least two-thirds of the benefit from offshore outsourcing, compared with the third gained by the lower-wage countries receiving the jobs.

    American firms and consumers enjoy reduced costs. Larger profits can be reinvested in more innovative businesses at home. New and expanding subcontractors abroad create new markets for U.S. products. And, at least theoretically, displaced U.S. workers will find new jobs in more dynamic industries.

    If you go to McKinsey Global Institute's (MGI) summary of its own report, you run into this startling graf:

    Of the $1.45 - $1.47 of value MGI estimates is created globally from every dollar spend a domestic company chooses to divert abroad, the U.S. captures $1.12 - $1.14 while the receiving country captures on average 33 cents. In other words, the U.S. captures 78 percent of the total value.

    Click here to download the actual report (you'll have to register). It's not blind to the unemployment question. In fact, the report makes an intriguing proposal to cushion the blow:

    [B]ecause the perceived risk of unemployment is higher than the actuarial risk, and because the pain of employment is greater than the economic cost of it, the situation lends itself well to highly targeted insurance products. Specifically, as part of a severance package, and for a small percent of the savings from offshoring, companies could purchase insurance for their displaced workers that would cover their loss in wages for the time a worker is unemployed. To avoid the "moral hazard of such insurance... the insurance program could cover occupational groups and not individuals, covering only the median period taken by an occupational group to be reemployed.

    This proposal would convert the static gains from outsourcing into a Pareto-improving move -- i.e., someone can be made better off without anyone being made worse off. Not eveyone understands this concept, but it's an important one in making policy decisions.

    Dynamically, the gains from outsourcing will benefit all Americans. There will be a lag between the increase in the corporate rate of return, the concomitant increase in investment, and an uptick in the domestic economy.

    But it will happen.

    posted by Dan at 09:36 AM | Comments (19) | Trackbacks (8)

    What do you do with a country like Pakistan?

    In anticipation of President Bush's progress report on Iraq and the war on terror tonight, here's a conundrum to consider:

    Weak states are the incubator of terrorists. Pakistan is a weak, dusfunctional state that lacks a coherent sense of national identity. Its leader may be perceived as both strong and pro-Western, but that's only in comparison to the rest of the Pakistani elite, for whom the sectarian comes before the national.

    The outcome from a weak Pakistani government is a perfect haven for Taliban remnants to harrass U.S. forces in Afghanistan. Ahmed Rashid makes this point in an article for YaleGlobal. Some highlights:

    The war on terror has done little to address the issue of Pashtun desire for political autonomy. The Taliban's dramatic offensive in Afghanistan during the past few weeks has been fuelled by recruits, arms, money, and logistical support from Pakistan's two provinces of North West Frontier (NWFP) and Baluchistan, where Pashtun tribesmen and Islamic parties are sympathetic to the Taliban. Pakistan's Pashtuns find common ethnic and political cause with the Taliban, who are also largely Pashtun. Pashtuns on both sides of the border are bitterly opposed to the presence of US forces in Pakistan and Afghanistan.

    The sense of Pashtun brotherhood is even stronger in Pakistan's seven Federal Administered Tribal Agencies (FATA), which run north to south forming a 1,200-kilometer wedge between Afghanistan and the settled areas of NWFP. FATA are nominally under the control of Pakistan, but the tribes have been semi-autonomous since the British Raj. They have always carried arms and sold arms to everyone in the region, from Tamil Tigers and Kashmiri militants to the Taliban. These days the bazaars in FATA are filled with Taliban – both Afghan and Pakistani – looking to stock up before going into Afghanistan. ''The Taliban are clean, honest, believe in Islam, and will rout the Americans,'' says Shakirullah, a Mohmand shopkeeper. ''Anyone fighting the Americans is our friend,'' he adds.

    The Mohmands are just one of dozens of major tribes that straddle the border, but their views are similar to most tribal Pashtuns. Isolated from mainstream Pakistan and the media, misinformation is rampant. After dozens of interviews it is apparent that most Mohmands refuse to accept that Al' Qaeda carried out the attacks of September 11, believing instead that they were perpetrated by ''the CIA and Jews.'' Most Mohmands also believe that the Americans and, in particular, President George Bush, hate the Pashtuns.

    Read the whole article. To be fair to the U.S. and Pakistani governments, they're not blind to the problem. They have taken actions to try and reverse the flow of arms and men across the border.

    But as the article also makes clear, they haven't done enough.

    [Thanks to alert reader A.A. for the tip.]

    posted by Dan at 09:02 AM | Comments (2) | Trackbacks (0)