The World Wide Web has touched us all. It has enveloped us with its largess, mesmerized us with wonders. But like all good things there is a price to pay. The price is SPAM.
Spam is not a private good neither it is a public good, so what exactly is the spam good?
In the olden days, the word spam had one meaning. It referred to a can of meat, mixed with other ingredients. It is private good you have the option to buy or not to buy in the market place. Today when you hear SPAM, the word conjures up a most detestable image of unwanted and unsolicited e-mails, all pertaining to offer you a world of goodies if you would just let them in the door. The goodies are quite varied, from pleasure goods to not so pleasurable goods.
If you think about it you can’t help but appreciate the name SPAM. Whoever conjured up the name could not have come up with a name more fitting than Spam to describe the spammers’ activities. Any one who uses the WWW is spammed. So who are those spammers and how one may categorize the spam act?
Starting from Economics 101, students are apprised of the fact that economic activities give rise to two basic types of goods: a private good and a public good. And sometimes we have a composite good we call it a joint good. A candy bar is a private good because it possesses certain characteristics. First of all, it provides the user of exclusive right to the good, it yields benefit only to the user, it’s consumption we say gives pleasure or utility to the consumer. Note that there is no sharing of the benefit if I were to posses the candy bar and consume it. My consumption of the candy bar “excludes” all others from consuming this particular candy bar. We call this feature in defining a private good “The Exclusion Principle”. Because the consumption of the private good gives utility it commands a price. As every one knows the market price is determined by demand and supply of the good. What about the public good? Using the private good characteristics, for example the exclusion principle we define a public good as one where the Exclusion Principle does not apply. That is the use of the good by one person does not preclude its use by another. An example which is almost always used is the Defense Good say an Aircraft carrier. Defense goods are for the benefit of all. An aircraft carrier is presumably aimed at protecting us from invasion, foreign attacks and the likes. I derive utility from its provision but so does every one who lives in the country. My benefit does not exclude others from same benefits. Another feature is that the benefits or the good supply is not divisible. Because the exclusion principle does not apply and the good is not divisible, the market does not provide it. It is collectively provided by the public sector, with taxes imposed to cover the cost of provision. A joint good is a good that has two elements — Good-Good, like skin and meat from a cow, two products from one source; Good and Bad like Steel and air pollution. Here again the market set the price for this type of good when the two elements are good-good and both the market and the public sector set the prices when it is the latter. So where does SPAM fits in the private–public good space? Good question our textbooks should address. Absent that, let me use my own e-mail spam to place spam in that space.
Every day, I receive at least 500 SPAM even though our institution uses a SPAM BLOCKER. Somehow or other the spammers find ways to get around the blockade. Of this number there are usually 10 or so messages that are repeated over and over and over, with the objective are clearly to get a foot in the door by breaking down one’s resistance. I have always wondered: Who are these people? And if they have something worthwhile to sell why hide behind the veil of secrecy, most significantly perhaps why the over kill? Before I answer the last question, let me give you a sample of these spam. For two months I have been prompted to enroll in college to get a college degree. Finances are available. I am offered so many chances to win a $10,000 in scholarship money, and if I want a degree without the hassle of going to school, no problem I will be handed a degree on line. Of course I must need a car to go to school, so spammers tell me that they are committed to get me a car, no money is needed, I will never be turned down, and if I want a dream car (Hay, why not I am going to be a college graduate) no problem, I will never be turned down. Another offer that go with the car is cloth from Neiman Marcus (they hit it on target), cheap health insurance, I guess to insure my survival to get my college degree, and if I were to feel lonely or overworked they have “ring tunes”, whatever that is, and of course the too many fishes in the sea to find that one “that will take my breath away”. WOW. How can one not be impressed or grateful for such offers? I am neither impressed nor persuaded that SPAMMERS perform a service worthy of the time I spend divesting my computer from their pollution. The spam good should never occupy a spec in the private good/ public good sphere.
Economists for long have dubbed this kind of activity as the TRAGEDY OF THE COMMON. The common refers to grazing land where property rights are not assigned. Because no rights were assigned for the use of the grazing lands users behaving to maximize their income will over graze the common with adverse consequences for future uses. Had property rights been assigned, the users will ensure that the common is not over grazed. The price system will achieve then “efficient” use of the resource. Just as the overuse of the Common has been termed a tragedy, so as the over use by SPAMMERS of the World Wide Web. The tragedy here is not only a frivolous over use of a valuable resource, but also the time of internet users who are in this day and age “must” rely on this technology to carry out private good production.
An argument can be put in defense of spammers. Not unlike other private goods sellers spammers advertise their wares. True enough. But there is a vast difference between the two. There is a market established prices for using airways, posters and flyers to advertise private good wares. Merchants have to include advertising cost in the price of the good. As such the level of advertising will be affected by the effectiveness of the claim and the added cost. Sellers cannot ignore the effect of selling costs on the total cost as well as on the demand for their product. Moreover, advertisers do not hide behind a veil of secrecy. They want the buyer to know who they are, and hence the targeted individual exercises his market power by refusing to frequent a merchant whose products and or advertisements are unsatisfactorily. With spam, one has but one option — to invest one’s scarce resource to rid one’s space of spam.
Economists are the first to acknowledge that any activity, no matter how distasteful, can find a buyer or a user. Since spam activity utilizes a scare resource, the time of the spammer, it suggests that the rate of return to spam activities must be positive for spammers. As we have no data on this rate of return, the fact that it continues to persist suggests that it is positive. Hence it cannot be ignored. As yet we have no data on the spam output, or on the rate of return on this activity. Most of all we have no information on the private and social costs of spam. Hopefully, my small effort will induce others to take up the challenge.
Thursday, April 26, 2007
Monday, April 9, 2007
David Stockman May No Longer Be Alone
“There can be no proper motive for hurting our neighbour, there can be no incitement to do evil to another which mankind will go along with except just indignation for evil which that other has done to us”.
Adam Smith: The Moral Sentiments (1854, p. 119).
The Washington Post (March 26, 2007) had two eye catching headlines: “Reagan Budget Head Stockman is charged with Fraud”, and “Soldier of a Revolution: Stockman was the Face of the Reaganomics”. How the mighty has fallen.
These two articles brought back to me my assessments of Stockman’s budget policy during the early days of the Reagan administration where he was serving as the head of the Management and Budget. Back in the 1980’s and early 1990’s I wrote OP pieces published in the Worcester Telegram and Gazette. My articles focused exclusively on economic policies and most often on the federal budget policy.
When the Reagan Administration came into office, the landscape for making economic policy changed shape — from Keynesian economics to Reaganomics. The architect of this new religion was said to be David Stockman, although a great deal of the underlying philosophy belonged to others.
Having spent quite a bit of time in Washington D.C. writing about federal budget policies, I needed to learn about the new religion. This knowledge was quickly acquired during the deliberation on the first Reagan budget submitted to Congress. On February 2nd, 1982, I wrote a piece for the WT&G titled: “A little Knowledge is a Dangerous Thing”. I wrote then that David Stockman would do well to remember that. It might keep him out of trouble. Little that I knew then how apt this statement would turns out to be. My comment related to his economic policy, a field in which he had no formal training. Had he had that perhaps… I also wrote in the article that Stockman problem stems from his presumption that he knew how the world works. Stockman assumed that the world is like an “unassembled” toy and one only needs to know how to read the blueprints to assemble the parts. Unfortunately for Stockman he either failed to correctly read the blueprint or that the world is a bit more complex than a disassembled toy.
He ran into trouble applying his religion to the budget program – that cutting tax (supply side economics) would increase revenues, and eliminate the deficit over the short hall. Cutting taxes raise revenues by changing incentives. A rise in investment and a higher growth rate ultimately would raise revenues and change the deficit path. Unfortunately, the time framework is usually much longer than the political life of an administration.
Stockman as reported by the Post is accused of defrauding investors and banks during his stewardship of Collins & Aikman, a large Southfield, Michigan auto parts maker that gone into bankruptcy in 2005. According to the Post, Manhattan attorney Michael Garcia that “Stockman and a team of hand picked executives entered into secret agreements with suppliers, created false documents to fool auditors… “Stockman pleaded “not guilty” to the charges”. I hope he is not guilty. The country has had more than it’s share of high profile officials and corporate executives pursuing not only policies of self enrichments at the expense of the public but also of grandiose schemes of corruption that had soiled the nation’s image.
In the “Solider of a Revolution” piece, the writer bemoans the charge: “It’s a shame that a guy who made such a great contribution as a member of Congress and the Reagan Administration has this thing happening to him”. Pardonez moi! The plight of David Stockman falls squarely in his lap. One’s action or lack of action has consequences that cannot simply be laid at the feet of others.
The Stockman story is one of many that smell of corruption. By itself it does not warrant too much of a notice except of course from lawyers and prosecutors. What ought to be of note is the implications of this and similar acts on the nation’s standing. We in the US are quick to point out corruption in many developing countries particularly in Africa. Indeed the International Monetary Fund and The World Bank have devoted a great deal of efforts and resources to make countries recipient of their loans and aid comply with requirements of “Good Governance” in general and the reduction in corruption in particular. Beginning in the 1980’s this mandate took center stage in official documents not only of said agencies but also in US aid policies. This concern gave rise to compilation of corruption indicators. Indicators of worldwide corruption have been reported by Business International (currently named Economic Intelligence Unit), Transparency International and International Country Risk guide (ICRG). These groups publish corruption indices computed from measures such as bribes, red tape, accountability, rules of law and the like. Every country is given a score based on the value of the indices. From ICRG data over the period 1984-2003, one is able to trace the development of corrupt practices in over 100 countries. Based on the calculated scores, countries are grouped into three categories: High corruption (0.0-4.5), Middle corruption (5.0-6.9), and Low corruption (7.00-10.0). Of interest here is a comparison over time between countries. Between the years 1984-2003, there have been “minuses” and “pluses”. A minus suggest a worsening of corruption, a plus an improvement.
Let us look at the US viz a viz regimes that one associates with corrupt practices. It is disheartening to discover that over a 20 years period corruption has gotten worse. More countries have had a negative change (became more corrupt), than countries with a positive change. Out of a total of 101 countries, 67 countries had negative change (mean change of -0.0257), 12 countries with no change and 22 countries with positive change (Mean change of 0.596).
As I have mentioned earlier the presumption is that developing countries, especially those in Africa are riddled with corruption. To some extent this is true, but that is only half of the story. Almost all of the improvements in the corruption scores were recorded for the African countries. Examples are Mali, Congo DR, Uganda, Kenya, Liberia, Ghana, Zambia and the Ivory Coast. The US, which was ranked in the middle group, fell in the negative change group with a change of (-0.221), a change greater than those experienced by some African countries like Tanzania (-0.163), Senegal (-0.125), and Egypt (-0.063). Zimbabwe ranked at the top in terms of increased level of corruption with a score change of -0.745 followed by South Africa with a change of -0.524. For more on corruption scores and analyses of change in the corruption levels see (H.Seldady (2007), “Does Corruption Persist?”, paper presented at the Public Choice Societies meeting in Amsterdam, March 29-April 3).
The numbers reported in the Seldady’s paper paint a picture not very complimentary about the developed world. It is not only that the US score has worsened but so did scores of others like the UK and Canada. The findings bring to mind an old adage: “charity begins at home”. In this context the saying should be changed to “cleaning house should begin with one’s home”.
Adam Smith: The Moral Sentiments (1854, p. 119).
The Washington Post (March 26, 2007) had two eye catching headlines: “Reagan Budget Head Stockman is charged with Fraud”, and “Soldier of a Revolution: Stockman was the Face of the Reaganomics”. How the mighty has fallen.
These two articles brought back to me my assessments of Stockman’s budget policy during the early days of the Reagan administration where he was serving as the head of the Management and Budget. Back in the 1980’s and early 1990’s I wrote OP pieces published in the Worcester Telegram and Gazette. My articles focused exclusively on economic policies and most often on the federal budget policy.
When the Reagan Administration came into office, the landscape for making economic policy changed shape — from Keynesian economics to Reaganomics. The architect of this new religion was said to be David Stockman, although a great deal of the underlying philosophy belonged to others.
Having spent quite a bit of time in Washington D.C. writing about federal budget policies, I needed to learn about the new religion. This knowledge was quickly acquired during the deliberation on the first Reagan budget submitted to Congress. On February 2nd, 1982, I wrote a piece for the WT&G titled: “A little Knowledge is a Dangerous Thing”. I wrote then that David Stockman would do well to remember that. It might keep him out of trouble. Little that I knew then how apt this statement would turns out to be. My comment related to his economic policy, a field in which he had no formal training. Had he had that perhaps… I also wrote in the article that Stockman problem stems from his presumption that he knew how the world works. Stockman assumed that the world is like an “unassembled” toy and one only needs to know how to read the blueprints to assemble the parts. Unfortunately for Stockman he either failed to correctly read the blueprint or that the world is a bit more complex than a disassembled toy.
He ran into trouble applying his religion to the budget program – that cutting tax (supply side economics) would increase revenues, and eliminate the deficit over the short hall. Cutting taxes raise revenues by changing incentives. A rise in investment and a higher growth rate ultimately would raise revenues and change the deficit path. Unfortunately, the time framework is usually much longer than the political life of an administration.
Stockman as reported by the Post is accused of defrauding investors and banks during his stewardship of Collins & Aikman, a large Southfield, Michigan auto parts maker that gone into bankruptcy in 2005. According to the Post, Manhattan attorney Michael Garcia that “Stockman and a team of hand picked executives entered into secret agreements with suppliers, created false documents to fool auditors… “Stockman pleaded “not guilty” to the charges”. I hope he is not guilty. The country has had more than it’s share of high profile officials and corporate executives pursuing not only policies of self enrichments at the expense of the public but also of grandiose schemes of corruption that had soiled the nation’s image.
In the “Solider of a Revolution” piece, the writer bemoans the charge: “It’s a shame that a guy who made such a great contribution as a member of Congress and the Reagan Administration has this thing happening to him”. Pardonez moi! The plight of David Stockman falls squarely in his lap. One’s action or lack of action has consequences that cannot simply be laid at the feet of others.
The Stockman story is one of many that smell of corruption. By itself it does not warrant too much of a notice except of course from lawyers and prosecutors. What ought to be of note is the implications of this and similar acts on the nation’s standing. We in the US are quick to point out corruption in many developing countries particularly in Africa. Indeed the International Monetary Fund and The World Bank have devoted a great deal of efforts and resources to make countries recipient of their loans and aid comply with requirements of “Good Governance” in general and the reduction in corruption in particular. Beginning in the 1980’s this mandate took center stage in official documents not only of said agencies but also in US aid policies. This concern gave rise to compilation of corruption indicators. Indicators of worldwide corruption have been reported by Business International (currently named Economic Intelligence Unit), Transparency International and International Country Risk guide (ICRG). These groups publish corruption indices computed from measures such as bribes, red tape, accountability, rules of law and the like. Every country is given a score based on the value of the indices. From ICRG data over the period 1984-2003, one is able to trace the development of corrupt practices in over 100 countries. Based on the calculated scores, countries are grouped into three categories: High corruption (0.0-4.5), Middle corruption (5.0-6.9), and Low corruption (7.00-10.0). Of interest here is a comparison over time between countries. Between the years 1984-2003, there have been “minuses” and “pluses”. A minus suggest a worsening of corruption, a plus an improvement.
Let us look at the US viz a viz regimes that one associates with corrupt practices. It is disheartening to discover that over a 20 years period corruption has gotten worse. More countries have had a negative change (became more corrupt), than countries with a positive change. Out of a total of 101 countries, 67 countries had negative change (mean change of -0.0257), 12 countries with no change and 22 countries with positive change (Mean change of 0.596).
As I have mentioned earlier the presumption is that developing countries, especially those in Africa are riddled with corruption. To some extent this is true, but that is only half of the story. Almost all of the improvements in the corruption scores were recorded for the African countries. Examples are Mali, Congo DR, Uganda, Kenya, Liberia, Ghana, Zambia and the Ivory Coast. The US, which was ranked in the middle group, fell in the negative change group with a change of (-0.221), a change greater than those experienced by some African countries like Tanzania (-0.163), Senegal (-0.125), and Egypt (-0.063). Zimbabwe ranked at the top in terms of increased level of corruption with a score change of -0.745 followed by South Africa with a change of -0.524. For more on corruption scores and analyses of change in the corruption levels see (H.Seldady (2007), “Does Corruption Persist?”, paper presented at the Public Choice Societies meeting in Amsterdam, March 29-April 3).
The numbers reported in the Seldady’s paper paint a picture not very complimentary about the developed world. It is not only that the US score has worsened but so did scores of others like the UK and Canada. The findings bring to mind an old adage: “charity begins at home”. In this context the saying should be changed to “cleaning house should begin with one’s home”.
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