Andrew has a post that includes a clever spreadsheet that illustrates the value of revenue-generating assets. A batch of New York city taxi medallions (which provide taxi drivers exclusive rights to operate in the city) were recently auctioned off, and fetched as much as $300,000. Is that a reasonable price for a medallion, he asked? How would we figure out what a taxi medallion is worth?

If you ask an economist, he’ll tell you to calculate the present value of the expected future revenue from a medallion, and compare that to the cost.

So let’s do the math. Given a medallion cost of $300,000, how much does a cabbie have to make to justify buying one? Assuming he’ll use it for 20 years, and assuming a 5 percent discount rate—the forgone return he could’ve earned on a similar investment—he’d need to earn about … $28,300 a year.

That’s not much. So how much do taxi drivers actually earn? According to the New York Times here and here, most drivers pull in about … $30,000 a year.

So it turns out those medallions aren’t so expensive after all, and a little simple economics helps us see that.

Well, not quite. This analysis assumes the opportunity cost of the taxi driver’s labor is zero– that is, if he doesn’t have a medallion, he’d be unemployed for the rest of his life. But that’s clearly not the case. New York’s a pretty expensive place, so let’s imagine (probably conservatively) that your average unskilled worker can make an average of $15,000/year over a 20-year period without a taxi medallion. The medallion is only valuable to the extent that it allows the driver to make more than he would without it. Hence, if his math (and my assumption about wages in New York) are right, the taxi driver would have to pull in $43,000/year to justify purchasing the medallion.

Clearly, taxi drivers are not making that much money. So what’s wrong with Andrew’s model, once you take my revision into account? One factor is alluded to in the New York Times article he links to: the medallion will be his property at the end of the 20 years, and so he’ll be able to sell it and recoup some of the purchase price. A good back-of-the-envelope way to take this into account is to just multiply the purchase price by your discount rate– the result is the revenue you’d need to justify the purchase over an infinite time horizon.

Another possible problem is the discount rate. It’s true that long-term, stocks offer real returns of 7% or more. But stocks don’t give a steady stream of income, which is crucial if your livelihood depends on the medallion. But if you’re looking for an investment that offers the steady income of a medallion, you’re not going to find one that gives 7% long-term returns. Perhaps 5% is more appropriate given the need to avoid volatility.

With those assumptions, the medallion would have to raise a taxi driver’s earning power by $15,000 ($300,000 * 5%) in order to justify the purchase. That means that taxi drivers’ next-best alternatives must pay less than $15,000/year to justify the purchase. That seems at least possible, although it seems like a pretty low estimate for a 20-year career given the cost of living in NYC.

Finally, it’s possible that the individuals bidding for those medallions are over-paying, and will regret their decision. The math involved is complicated enough that many bidders might not be equipped to get it right. Judging from the prices of houses around me and the amount I’m paying in rent, I have a suspicion that most of the homeowners in my neighborhood are making a similar mistake.

Will Wilkinson had the opportunity to invite someone to beta-test GMail, and was kind enough to give me the invitation. Thanks Will!

So far, I must say I’m extremely impressed. Here are the coolest things I’ve seen so far:

Brooke has a thoughtful post about the abortion rally. While I agreed with most of it, including the general conclusion that the pro-choice position is good but late-term abortions are troubling, this bothered me quite a bit:

The pro-choice lobby often makes the (valid) point that men should really have no place in the public debate on abortion. “Why are a bunch of white men telling us what we can’t do with our bodies?” the thinking goes. Our bodies, our choices. And I agree.

I heard a woman at the march say that too, to a pro-life male counterprotestor: “you can’t get pregnant! Go home!” I wondered if she wanted the pro-choice men in the march to go home too.

I have an objection to this on two levels. First, reproduction is a core human aspiration, important to men as well as women. We guys can’t bear children, and as a result we arguably have a weaker claim than women in decisions about pregnancy, but I think we’re still interested stakeholders, and at a minimum, we have a right to participate in the political debate over the issue, since it does affect our lives.

In particular, as Glen wrote a few days ago, there’s something a little troubling about the fact that women can have an abortion at any point during her pregnancy, but if she chooses to carry the child to term, the father is stuck with child support for the next 18 years. Now, I agree with Glen that changing the system so men have some kind of veto over their paternity obligations would probably be a bad idea. But I think it’s a hard enough issue that the views of men on the issue should be taken seriously.

But the idea that men have no place in the abortion debate has a more fundamental flaw: it begs the question at the heart of the debate, which is whether the fetus is a rights-bearing individual with an entitlement to be carried to term. If, as pro-lifer’s believe, an abortion is the murder of a child by the child’s mother, then maybe only men have a place in the debate, since we’re the only ones who can make even-handed judgments about the competing interests of mother and fetus.

There are lots of issues– slavery, domestic violence, rape shield laws, euthanasia, capital punishment– where one side or the other claims to speak on behalf of innocent victims who might be unable to defend themselves. To say that only slave-owners should have a say in the slavery issue, or that only accused rapists should have a say in rape shield laws misses the whole point of the debate.

At root, this is a kind of ad hominum argument. Men who make good arguments should have a place in the abortion debate. Men who make stupid arguments should not. The same true of women. The fact that women are more affected means that their interests should be taken more seriously when weighing competing claims, but that does not mean that arguments made by women should a priori have more weight than arguments made by men.

And in any event, pro-choicers seem to be under the illusion that the abortion issue divides the genders. That’s just not so. As gallup says:

An aggregate of abortion surveys from 2001-2003 finds no statistical difference in the percentage of men and women identifying with the pro-choice and pro-life labels. Overall, 47% of men and 48% of women call themselves “pro-choice,” while 45% of men and 43% of women call themselves “pro-life.”

Peoples’ opinion on abortion tends to be a function of age, marital status, and religiousity more than gender. Older, married, and more religious women are more likely to be pro-life than younger, single, and non-religious women. Same is true of men. Telling men to go home isn’t just disrespectful to men, but it’s not going to do pro-choicers’ cause much good anyway.

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3 Billion dollars in 2007 and gaming was worth over 5 billion dollars in 2007 (source Netsize Guide 2008).

I’m appalled that a smart liberal like Matthew Yglesias thinks a draft could be a good idea. Ezra Klein has a long discussion of the issue on his blog. My basic objection to a draft is simply that it’s involuntary servitude. Involuntary servitude is wrong, period. It’s especially abhorrent when the service lasts for more than a year and involves killing other human beings. I just don’t see how any liberal can be comfortable with giving the state that kind of power over its citizens.

Let me tackle a few of the most common pro-draft arguments:
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Via Amy, I found this warning that the GOP was pushing new FEC rules that threatened to gag non-profits.

The Republican National Committee is pressing the Federal Election Commission (“FEC”) to issue new rules that would shut down groups that dare to communicate with the public in any way critical of President Bush or members of Congress. Incredibly, the FEC has just issued — for public comment — proposed rules that would do just that. Any kind of non-profit — conservative, progressive, labor, religious, secular, social service, charitable, educational, civic participation, issue-oriented, large, and small — could be affected by these rules.

This, presumably, is based on changes to campaign finance law under McCain-Feingold. Guess what MoveOn had to say about McCain-Feingold before it became law? Here’s a press release from 2001:

MoveOn.org delivered more than 15,000 email messages from constituents to Congress in support of the McCain-Feingold campaign finance reform bill today. The group launched the effort on Monday, March 19th, asking its members to sign and pass along a petition which says: “We believe Congress must: Immediately enact the McCain-Feingold bill banning Soft Money.”

Now, maybe I just imagined it, but I distinctly remember that around the same time, scores of crazy right-wingers like myself argued against McCain-Feingold on the grounds that it could be abused to silence criticism of public officials. Once you give politicians the power to regulate political speech, we argued, there’s no guarantee that that power won’t be abused. Then, less than a year ago, I could have sworn that we crazy right-wingers were arguing that the Supreme Court should strike McCain-Feingold down on the grounds that they were a threat to free speech.

Unfortunately, we lost: McCain-Feingold passed, and was upheld as constitutional by the Supreme Court. Now it’s the law of the land, and (surprise!) it’s being ruthlessly exploited by the party in power. MoveOn is right on the mark when they say this is a serious threat to free speech.

Moreover, I’ll concede that the GOP is probably twisting McCain-Feingold in ways its authors didn’t intend. But seriously, is MoveOn and the rest of the left really so myopic that it never occurred to them that this sort of thing could happen? Did they assume that the FEC would always be run by Democrats or public-spirited civil servants? Or did they imagine that regulations magically work precisely as their authors intended, without the need for human intervention?

While I share their alarm at this threat to free speech and hope that the FEC turns down these rules, I can’t help but be a little smug at all the left-wingers who are gradually waking up to the implications of giving a Republican government power over their political speech. Until MoveOn and its ilk realizes the error of their ways and supports a repeal of McCain-Feingold, they’re not going to get a lot of sympathy from me if the FEC harasses them.

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I’m growing increasingly annoyed by GMail critics. Consider this gem:

“Consent can only be given by a Gmail account holder,” [Privacy International] said. “Those who send e-mail to a Gmail customer will have no opportunity to consent to having their e-mail read for keywords.”

Now, keep in mind that “having their email read” means that a computer–an inanimate object–will examine the sender’s email and use that to choose ads to display to the recipient of the email. No other human being on the planet will get to see the email, or even what ads were chosen for that email. There’s no plausible sense in which this is an invasion of the sender’s privacy, unless one believes that computers are themselves sentient beings. The objection seems to me to be not just wrong, but obviously nuts if you understand how the system works.

Professional advocacy organizations like Privacy International should know better. Maybe they do know better and are continuing to make disingenuous arguments because they want to shut down GMail for other reasons. Maybe they’re just clueless.

Either way, these sorts of arguments are disturbingly common. Think of the cookie hysteria a few years back, or the general suspicion of corporate data-collection I posted about yesterday. When you press such people for details, they can’t really explain what the danger is. For the most part, that’s due to honest ignorance–people aren’t sure what could go wrong, but they want to be on the safe side. But that means that the people actually building the technology have to spend an unreasonable amount of time explaining to those in the political arena why the delusional rantings of critics are unfounded. And sometimes, they have to scale back their innovative idea to avoid legislative intervention.

In that sense, the furor over new “privacy invading” technologies like cookies or GMail is analogous to Leon Kass’s famous wisdom of repugnance in the bioethics realm: if it seems creepy, that’s reason enough to ban it. Never mind that no plausible harms have been identified, or that the potential benefits are immense. Rational analysis is unnecessary, because the creepiness is itself a reason for a ban, whether a plausible harm can be shown or not.

This coin has two sides, unfortunately. While “problems” like cookies and GMail generate heated debate, genuine threats to innovation like the DMCA and software patents receive almost no attention from non-geeks. Unfortunately, vague fears about evil corporations reading your email make much better bumper stickers.

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I’m on a Lawrence Lessig kick, and at the moment I’m reading Code I might have thoughts on the book as a whole when I finish it, but I was struck by how unpersuasive his chapter about the dangers of private-sector information-gathering was.

Here’s the issue: technology has made it feasibly for private actors to collect reams of trivial data about those with whom they do business. Stores, credit card companies, e-commerce sites, and others can and do keep detailed records of transactions. Stores video-tape their stores, and soon reliable face-recognition software may allow them to scan that video data to create a detailed record of which customers come into their stores when. Many web sites already keep detailed records of users’ browsing habits.

So is that a bad thing? Lessig’s answer is yes, but his reasoning is surprisingly unpersuasive. He gives two reasons such monitoring should concern us. The first is preserving “the benefit of ignorance.” He quotes Peter Lewis of the New York Times:

Surveillance cameras followed the attractive young blond woman through the lobby of the midtown Manhattan hotel, kept a glassy eye on her as she rode the elevator up to the 23rd floor and peered discreetly down the hall as she knocked at the door to my room. I have not seen the videotapes, but I can imagine the digital readout superimposed on the scenes, noting the exact time of the encounter. That would come in handy if someone were to question later why this woman, who is not my wife, was visiting my hotel room during a recent business trip. The cameras later saw us heading off to dinner and to the theater–a middle-aged, married man from Texas with his arm around a pretty East Village woman young enough to be his daughter.

As a matter of fact, she was my daughter.

This is a clever story, but it begs a lot of questions. Who would be viewing these tapes and why would they confront Lewis about them? Hotel employees might view the tapes, but surely illicit encounters happen frequently at hotels, and no hotel employee would question a customer on who visited him in his room. And it seems extremely unlikely that a hotel would willingly share such data with third parties. They certainly would not make it available to the general public, because the customer backlash against such a decision would be intense, and the hotel wouldn’t profit from doing so.

This point is a general one. It would certainly be embarrassing if porn magazines and strip clubs made their customer lists generally available, but those that did so would create such an intense backlash that they’d lose business for years. Similarly for bookstores who published lists of their customers’ purchases. No government regulation is needed to prevent private businesses from committing suicide by betraying their customers’ trust.

On the other hand, there’s plenty of data that’s simply innocuous. I don’t really care if some central database somewhere has a record of how many bananas I’ve purchased in the last 10 years. Even if the nation’s grocery stores pooled their information to create a nationwide grocery-snooping ring, they’d still only know about a small part of my life I don’t have any interest in hiding. If I did care to keep such information private, it’s not that hard to do– I can pay with cash and refuse to use a loyalty card.

Most of the information that web sites gather about you is in the “innocuous” category. I just don’t see what harm a web site can do if it knows what recent google searches you’ve made, or what books you’ve purchased on Amazon. I wouldn’t want that information to be available to the world at large, but it’s hard to see why Google and Amazon would ever release such information to the general public. They might share that information with a selected group of other business, but they’d also be fairly careful not to let non-employees have access, and they’d likely implement internal controls to prevent unauthorized snooping by employees.

I’m not sure what to think of Lessig’s other objection. He’s afraid private data collection will lead to social balkanization, as marketers become experts at pitching products to peoples’ existing tastes and class prejudices. That seems neither plausible or alarming to me. He gives the example of airlines giving frequent-flyer customers first dibs on food on flights, and talks about data collection making it possible to recreate “systems of status” that were destroyed by mass consumer culture in the last century, but I simply don’t see it. Not that this couldn’t happen, or even that it wouldn’t be a bad thing, but changing privacy rules doesn’t seem like it would have much impact on that process one way or the other.

Which leaves me wondering if there’s any reason to be more than mildly worried about such things. I think it’s a good general operating principle to assume that any information you reveal about yourself could be stored, indexed, and shared. If privacy is truly important, it’s not that hard to preserve anonymity: use a public internet terminal, buy books with cash, register for sites with a throw-away email address. The rest of the time, it’s just a fact of life that those you do business with have information about you. It’s not clear to me how that’s a bad thing.

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I’m amused by Subservient Chicken, Burger King’s take-off on the cam girl, which they’re using to hawk their new chicken sandwich.

Before reading my thoughts on it, go try it! Seriously, it’s cool. The chicken actually responds to your commands, in real time. Go check it out
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iPods outsold Macs last quarter, propelling Apple to a healthy tripling of profits over the year-ago quarter. Macs have been the mainstay of Apple’s product line since the late 1980s.

A big contributor to the increased profitability was the sale of 400,000 units of Apple’s iLife software. It’s a suite of “digital lifestyle” software that was originally developed as a loss-leader to sell hardware, so they can plausibly treat the $20 million in revenue as pure profit.

For the first time, Apple can plausibly claim that it’s not just a computer company, but a diversified software and consumer electronics company. I have to admit I was an iPod skeptic when the product was first introduced. It was a cute product, I thought, but more a gimmick to sell Macs than a genuine revolution. But since I’ve started seeing little white earpieces in the ears of everyone I meet, it’s become obvious I was wrong.

Was Virginia Postrel watching the same presidential press conference I was? “In the Q&A,” she says, “Bush was much more expansive, articulate, and comfortable than he’s often been in the past.”

Andrew Sullivan agrees: “I found the president clear, forceful, impassioned, determined, real. This was not an average performance. I found it Bush at his best. He needs to do it more.”

Gene Healy, on the other hand, had precisely the opposite reaction. “Why don’t they just put him in a tutu and have him respond to reporters’ questions in the form of an interpretive dance?” he asks. “It wouldn’t be any more awkward and he wouldn’t be any more out of his element.”

Julian Sanchez agrees with Gene: “It seemed like each question was followed by about 20 seconds of something that might be construed as a response in a vague, Rorschach test kind of way, then a couple minutes of some sort of random decoupage of old talking points on a variety of dubiously relevant topics.”

You can see a sampling of more wildly disparate reactions over at Hit and Run.

Virginia, Andrew, Gene, and Julian are all very smart and insightful people, yet they had diametrically opposite impressions of the same event. The obvious difference is that Virginia and Andrew are hawks, while Gene and Julian are doves. I would have loved to watch the press conference with a smart hawk, because I’m really puzzled by their reactions. Certainly the fact that I disagree with what Bush says makes me more disposed to doubt his speaking ability, honesty, and sincerity. But I didn’t think this was a close call. Even compensating for my reflexive antagonism toward the president when he talks about the war, I still think it was obvioulsy a mediocre speech, followed by an embarrassingly evasive and incoherent Q&A session.

I don’t understand how any intelligent observer, no matter how hawkish, can come away from that press conference without acknowledging–at a minimum–that he failed to answer most of the questions and was generally out of his element. If I were in the hawk camp, I might have said “well, news conferences aren’t the president’s strong suit. Fortunately he’s a much better commander in chief behind the scenes than in front of the cameras, and we’ve got articulate hawks like Rummy to make the case for the war.” That’s an argument I can at least understand, even if I don’t agree with it. But pretending that it wasn’t a subpar performance, when it obviously was, is bizarre.

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The next blogorama has been announced. Thursday at 7 PM at the Rendezvous Lounge. Be there or be [].

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In particular, loan car calculator wants to impact loud loan car calculator usage as well as calls regarding sensitive matters.

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The ninth circuit has ruled that cable is a “telecommunication service,” not an “information service.” The upshot is that cable will now be subject to the whims of state and local regulators, who can now force them to “share” their lines with competitors.

The problem with this notion of forced “competition” is that in practice, the competition you get is almost entirely artificial. Imagine if I ran a monopoly grocery store, and in order to increase competition, my state grocery regulator decreed that I must engage in “infrastructure sharing” with any company that wanted to compete with me. In particular, anyone who wanted to become my competitor had a right to purchase my produce at government-mandated bulk prices, and then set up a vegetable stand in my parking lot to sell the produce to customers who visit my store.

This is admittedly a contrived example, and it doesn’t perfectly track the telecommunications case, but it shares several crucial attributes. First, the mandated price is crucial for determining what efffect “managed competition” will have on the industry. If it’s set too high, there won’t be enough of a margin for my competitors to turn a profit, and so there will be few competitors and they’ll go out of business quickly. On the other hand, if the mandated price is set too low, I end up actually subsidizing my competition, and no matter how efficient I make my operations, my competitors can undercut my prices and make a tidy profit at my expense. That’s unfair to me, and is likely to drive me out of business in the long run.

There’s a narrow band in between, where it’s possible to compete with me but I can still recoup my costs. But even if regulators find that “sweet spot,” it’s not clear what’s accomplished by this “competition.” Since we’re both selling essentially the same product at essentially the same price, there’s very little room for innovation or improvement on either of our parts– you’re selling whatever I produce at the price the government decides, while I know that you’ll get access to any improvements I make to the product, so I have little incentive to innovate. Consumers, it seems, would be better off if the regulator simply mandated the price at which I sell that produce to consumers, and save the overhead of phony competitors.

Forced sharing of broadband is actually worse than that, however, because unlike produce at a grocery store, the costs of producing broadband services is largely in sunk capital. Such capital is extremely difficult to price correctly, and if it’s priced too low for them to make a profit, incumbents will simply stop making new infrastructure investments. On the other hand, because it’s so hard to measure marginal costs, it’s easy for the Bells to exaggerate the real costs, and they have every reason to do so. As a result, regulators are more or less shooting in the dark when they try to set prices.

Moreover, once this sort of mandated “competition” is the norm, the dominant mode of “competition” becomes regulatory gamesmanship. We saw this in the late 90s with the battles between the Bells and competitive DSL providers. The Bells won, largely by dragging their feet on giving the competitors access to their infrastructure and ignoring the FCC’s limp-wristed attempts to reprimand them. Whether the FCC should have been more aggressive is debatable, but the point is that the Bells won because they had superior lobbying muscle and legal clout, not because they provided better service to their customers. That would have been equally true if the Bells had lost the regulatory battles and been forced to open up their lines–both sides would continue fighting tooth and nail for more favorable prices and access rules. Because the terms of agreement between the Bells and their competitors are mandated by the FCC, there would never have been a genuinely competitive market. Instead, the inevitable result of forced competition is a zero-sum battle to the death, in which competitors’ gains are the Bells’ loss.

Genuine competition, on the other hand, involves firms with independent supply chains and production facilities. If Coke finds a way to shave a few pennies off of its production process, it knows it will reap the benefits at Pepsi’s expense. If Pepsi discovers a better soda formula, it doesn’t have to let Coke sell the improved formula as well. The result is genuine inprovements in both product quality and efficiency, not simply zero-sum transfers between “competing” firms. Fortunately, almost everyone in today’s telecom market has competitors. Cable companies compete with broadcast TV and satellite for television viewers. The Bells compete with cell phones and (recently) cable companies in the phone market. Dial-up ISPs, cable, and DSL providers all offer internet access. Almost everybody has someone competiting with them.

For reasons I don’t understand, supporters of forced competition scoff at these rivalries, concluding, I suppose, that having only 2 or 3 firms in a market is insufficiently competitive. But the important point is that these are genuinely competitive firms, not vegetable stands in the baby bells’ parking lot. They have their own infrastructure investments, their own supply chains, and their own customer bases. They don’t need the protection of regulators to stay in business, nor are they dependent on their competitors for their existence. That means that in the long run, the competition between cable and DSL will be far more robust and innovative than any “competition” that the FCC might try to mandate within the cable or DSL markets. Unfortunately, the DC court decision makes it likely that cable companies like Comcast and Time Warner will spend the next few years focused on lobbying regulators for favorable access rules rather than rolling out innovative new services.