How the gift economy pays off

Dave Pollard over at How to Save the World discusses the virtues of the gift economy. Let me snip his opening paras:

"Our society puts a value on human activities only when they can be monetized - when a transaction involving an exchange of money occurs. We tend to equate our time with money: If the 'market value' of an hour of our time exceeds the cost of hiring someone else to mow our lawn or make a present for a loved one or look after our children or our home, we conclude that it makes sense to buy those services and to work longer hours to pay for them.

"This false economy leads us to buy what we don't need, which requires us to work harder to pay for those unnecessary goods and services, leaving us even less time to look after ourselves and our own needs and forcing us, in a vicious cycle (cycle 1 in red on the chart [below]) to 'outsource' even more of the things we might be doing for ourselves....

"By contrast, the Gift Economy does not value monetized activity more highly than un-monetized activity. It suggests, on the contrary, that our time is invaluable and that therefore we should 'spend' it, as much as possible, doing things we love and things that are our personal responsibility, and only buy goods and services we cannot possibly provide for ourselves. In doing these things ourselves, we learn to do them better, more efficiently, more effectively and more economically, saving the cost of outsourcing them to a third party.

"Thanks to this cost saving, we then need to work less, which gives us more time to do the things we love, creating a virtuous cycle (cycle 2 in green on the chart [below]) instead of a vicious one."

For me, it is certainly true that the vicious circle is often tempting and the virtuous one is attractive. But how to get off the treadmill? Pollard offers only hints at answers, but the article (and those that spawned it) are good reads. Below is the diagram illustrating the idea.

Technorati : dave pollard, economics, gift economy

Posted by Allan Jenkins at 07:32pm in Economics, Society | Permalink | Comments Welcome! (1)

Australia to tax Second Life revenues

From Andrea Weckerle:

Speaking of currency, Sibley believes that within 12 months or so the lines between real currency and Linden Dollars will really blur, with, for example, debit cards being used in SL. Reuters just reported that Australia is requiring that virtual income be reported as taxable. And the U.S. Congress is looking into this as well.

Until SL gets a lot more user-friendly, I am going to be the rare visitor. But Edward Castronova's book Synthetic Worlds is an interesting look into the economics of on-line "worlds." You enthusiasts should have it on your shelves.

Posted by Allan Jenkins at 11:55pm in Books, Economics | Permalink | Comments Welcome! (1)

Google Adopts Prediction Markets

First published, in slightly different form, at the MarComBlog of Auburn University.

Last week, I wrote some about prediction markets. These are markets where hundreds, even thousands, of participants, each armed with "some" knowledge, pool their thinking to make better predictions than pollsters, better decisions than "experts".

(Note: Wikipedia's Prediction Market article is a good starting place if you want to learn more, as is James Surowiecki's The Wisdom of Crowds (search inside at Amazon).)

But what applications do prediction markets have for business and PR practitioners? The evidence is thin to date, but last week, Google announced it's using prediction markets to make better internal decisions:

At Google, we're constantly trying to find new ways to organize the world's information, including information relevant to our business. Building on the ideas of Friedrich Hayek and the Iowa Electronic Markets, a few Googlers (Doug Banks, Patri Friedman, Ilya Kirnos, Piaw Na and me, with some help from Hal Varian), set up a predictive market system inside the company.

The markets were designed to forecast product launch dates, new office openings, and many other things of strategic importance to Google. So far, more than a thousand Googlers have bid on 146 events in 43 different subject areas (no payment is required to play).

We designed the market so that the price of an event should, in theory, reflect a consensus probability that the event will occur. To determine accuracy of the market, we looked at the connection between prices of events and the frequency with which they actually occurred. If prices are correct, events priced at 10 cents should occur about 10 percent of the time. (Read more)

Google claims the prediction market is working: prices quickly reflect what's likely, and entropy declines significantly over time. Just as you would expect in a functioning market.

The next step (and Google doesn't say if they have or will take it) is to use prediction markets to make better management decisions. To do so would be a significant departure from management doctrine, which is that -- no matter how "flat" your organization -- most important decisions are made by the CEO/COO/CFO. But if markets, no matter how much the participants are laypeople, make better predictions than experts, then that's the logical next step.

Looking back on my own tenure as CEO of a 125-person agency, and as Finance Director of a 13,000 member association, I am pretty sure the "market" -- had we had them -- would have made some different decisions than I and my management colleagues made.

What's this mean for PR practitioners? Probably little, now, since prediction markets are only now slipping in to management's minds. But if I were doing PR for Microsoft's MSN Virtual  Earth, I would be concerned about this graph, for example. Taken from the Yahoo Research Buzz Game, a prediction market, it shows how poorly the "buzz" around MSN Virtual Earth (red dots, bottom graph) has been compared to GoogleEarth (blue dots). And how the "market" views the two properties (top graph). (Note, the green lines denote NASA's product).

I've had only a few clients where a prediction market could have been deployed effectively (it takes a fairly good-sized pool, I believe), but I've no doubt the market would have made some of our marketing decisions easier and faster.

Posted by Allan Jenkins at 09:53pm in Advertising, Communication, Corporate Management, Economics, Prediction Markets, Public Relations, Smart Communities, Social Tools, Society, Technology | Permalink | Comments Welcome! (0) | TrackBack (0)

Yeah, we got eggs in Denmark. And Ireland's Starting to Look Like America

A couple of years ago, I was with an American tourist in a Danish supermarket. He was gape-jawed for a while, then turned to me: "No wonder you don't miss home. You've got all the same stuff here!"

Since we were standing in the egg & dairy section, and had just passed through the produce section, I have to say I was at a loss for words. I know he wasn't, on a purely objective level, surprised we have eggs, milk, cheese, and celery here in Europe but... somewhere, deep down, he was surprised and disappointed.

So I was delighted with Don Boudreaux's post at Cafe Hayek, where he gently but firmly castigates an American who laments that Ireland is starting to "look like America":

Dear Mr. Ebnet:

You are "saddened" that Ireland is becoming economically prosperous. No, that’s not quite right (or fair of me): You are "saddened" because Ireland is losing its "identity" as its people cooperate ever more closely with more and more peoples from around the world in a process that improves their standards of living.

The sight of "foreign manufacturing plants" in Ireland burdens you with "oppressive melancholy." You regret that Gaelic is fading today everywhere as a spoken language, save in the western coast of Ireland – the part that remains poorest and that hasn’t yet been much affected by globalization.

It's not uncommon: the US tourist comes to "quainte olde Europe" for the first time and expects to see Heidi-in-pigtails tending cows in the Swiss Alps, or meet garrulous and sage farmers in a Yorkshire pub, or experience Danny Kaye singing "Wonderful, wonderful Copenhagen!" while all the fishwives clap flounder in unison. You'd think CNN would have taken care of these illusions, but no.

So my fellow American goes home, disillusioned, disenchanted, grumbling, "I thought Europe would be different."

Why the grumbling? Couldn't tell you. Boudreaux seems to think it might spring from the American expecting no let on his own material wealth while hoping others hadn't cottoned on to the good life. I think it's simpler than that: ignorance of other cultures combined with a genuine desire to see a romantic alternative to McMansions and the "Motor Mile" out on the by-pass.

Doesn't work that way. Never has. Fact is, most of the time, so much more boring than fiction.

ADDENDUM: the "most of the time" in the line just above was a throwaway. I didn't realize London was being attacked just before I wrote it. Too often, when fact is more interesting than fiction, it's because common murderers had, on that day, more imagination than writers.

My own family is coming to Denmark next week, passing through London. They aren't naive; they've been here before: they don't go slack-jawed in the supermarket (Shit! Y'all got apples, too!). But, somehow, I would like to be able to show them it is different here. Not so paranoid. Not so angry.

But that will be a damned hard row to hoe... and maybe the wrong row to hoe... after today.

London has endured far worse days than today. And Londoners are as gritty and bitter and as optimistic as New Yorkers, Washingtonians and the people of Madrid. London, like New York and Madrid, will shrug these murders off and go on.

Copenhagen and Rome are, according to Danish media, next on the list. Well, Copenhagen and Rome have endured far worse than terrorists can throw at them, too. Just like New York, Madrid, and London.

Posted by Allan Jenkins at 12:36pm in Denmark, Economics, Expatriate Life, Travel | Permalink | Comments Welcome! (8) | TrackBack (0)

B.L. Ochman Argues Full Posts in RSS Feeds Don't Make Sense; I Beg to Differ

While my back was turned at Reboot, B. L. Ochman, bless her heart, came up with five reasons she doesn't like full posts in RSS feeds.

She titles the post "Why Full Posts in RSS Feeders (sic) Don't Make Sense"

Most of you, if you are professional communicators (and, if you are not, this is how we think), will be asking "Whoa... makes sense for whom? Who's reading the communication? What's their take?"

If you're a reader, and you think B. L. is arguing your case when she prompts for truncated feeds... think again. She's thinking entirely after her own interests. Not your  interests, dear reader:.

1. She notes you can't add comments to a post on a feed reader; only if you visit the site.

Exactly... but the reader won't comment unless he (and I'm being generic here) reads the full post. So.. by giving a truncated post, you're taking your chances. You'd better hope you are compelling.

I suppose if you were a bestselling writer who had the gift of inserting a little "gem" in the lower half of your posts, you would be entitled to ask for click-through. But.... not here.
Takeaway: Don't make your audience work for your content!

2. Feed-aggregators don't allow graphics or design elements to show up.

That could be a problem for bloggers whose photographs or art are integral to the blog. And I would love to hear from them. But, B.L. your graphics are a) icons of the reports you want to sell, and b) (if I remember) some photos of some hawks or something that live on your building. You might want to show those things (and I am all for it) but you text has to argue for me to click through for that.
Takeaway: Substance, not style

3. It's ridiculous to write long posts into RSS, which is meant to speed up reading. And bloggers should write less.

Aggregation means "bringing together" not "giving you a USA Today 50-State News Bite".
Takeaway: USA Today is popular. The Economist is influential. One publishes sweet little snippets. The other doesn't.

4. Hey, I need to make a living. So I'm keeping my content free with advertising.

Not if I have to click through to see your content or, in other words, spend time getting at it. Does my time have no value?

Readers and listeners always pay a price for content. Ask for a hour of radio or TV, and you will get it, if you pay the price of watching commercials or (here in Europe) paying a license fee. Ask for the content in a newspaper and you will pay $1 for 120 pages of newpaper, of which perhaps 3 or 4 full pages actually interest you. About 90 pages will be advertising.

And you are saying "That's me, too". No offense, but it's a stretch. It's a stretch for A-list bloggers. I've listened and talked to a number of them this weekend and... I don't see a market for AdSense and "buy my updated report" sites.

Takeaway: MSM publishing is already about razor-close margins. If you want to jump in that space, be my guest. Just don't bitch about MSM anymore.

5. The blogs with the best content are the ones we'll still be reading years from now.

That's right!.
Takeaway: Even if your rhetoric and logic classes are at 8AM, don't sleep in.

I'm happy to consider short feeds when I hear one argument against for them that makes rational, economic sense. So far, I've not heard anything close to one.

Posted by Allan Jenkins at 03:29am in Blogging, Blogging for Benjamins, Economics | Permalink | Comments Welcome! (6) | TrackBack (5)

How Word Choice Frames Your (False) Memories

Two people watch the same video clip of a traffic accident. One is asked how fast the cars were going when they contacted one another. The other is asked how fast the cars were going when they smashed one another.

How much will the answers differ? And how will word choice affect how the viewers will remember accident details two weeks later?

Economist Bryan Caplan, discussing Aldert Vrij's book Detecting Lies and Deceit, notes:

"A central assumption of much of my research is that people can choose their own beliefs. There are many possible mechanisms, but Vrij's discussion suggests yet another. If you want to believe something, just describe the relevant event to yourself using appropriately loaded language. Your memory does the rest.

"Conversely, if you want to prevent your desires from affecting your beliefs, use measured language to describe it to yourself. Otherwise, you're burying a time capsule of deception for yourself to dig up at a later date."

Copywriters have known this for years.

By the way, the contacted group answered 31 mph, while the smashed group answered 41 mph. Moreover, 32% of the smashed group remembered seeing broken glass at the accident site two weeks later. There was none.

From the EconLog blog.

Posted by Allan Jenkins at 07:37am in Economics, Writing & Grammar | Permalink | Comments Welcome! (0) | TrackBack (0)

Becker-Posner See No Need for Blogger Ethics Codes, but Argue for Sales-Tax on E-Commerce

Desirable Roasted Coffee's Code of Blogging Ethics is voluntary (and applies to this site only). I wrote it partly in response to Nick Denton's call for a formal blog ethics committee (seconded by Jason Calacanis), a call that I considered and consider naive and unworkable.

This week on the Becker-Posner Blog, US Circuit Judge Richard Posner and Nobel-prize winning economist Gary Becker argue that exempting bloggers from formal and voluntary ethics rules makes sound economic sense.

Posner notes:

"...the argument is that since the mainstream media have adopted ethical standards concerning such matters as reliance on anonymous sources and retraction of errors (with electronic media such as television stations subject to formal regulation), so should bloggers.

"Nevertheless I think this “exemption” of blogging from the ethical standards applicable to the mainstream media makes good economic sense because of economic and technological differences between those media and the 'blogosphere'."

I paraphrase his reasons:

1. The large number of blogs, the speed of transmission, and the fact that most serious bloggers are highly specialized mean that the blogosphere pools information quickly and completely.
2. The rapid and complete pooling of information quickly marginalizes bloggers whose lack of ethics affects the public interest.
3. The self-correcting nature of the blogosphere is far more efficient than the fact-checking procedures of mainstream media (MSM).
4. The ire and finger-pointing raised by egregiously incorrect or unethical blogging is far more public and instant than the retractions printed by MSM days after an error.

In short, no "cost" is borne by society by the lack of a common code of blogging ethics.

Posner does argue, though, that the law banning sales-tax imposts on e-commerce distorts the market and imposes a externality on society. Becker agrees on both counts.

The posts are the sort of 2000+ word full-feeds that may drive you to distraction if you are in a fast-food frame of mind. But if you want some mind-candy to noodle over this weekend, I highly recommend Posner's post and Becker's reply.

What do you all think? Do we need a blogging code of ethics? Do we want sales-tax on e-commerce?

Link: The Becker-Posner Blog: Blogging, Spam, and the Taxation of Internet Transactions—Posner.

Posted by Allan Jenkins at 06:35pm in Citizen Journalism, Economics, Ethics, Journalism, Law, Online Media | Permalink | Comments Welcome! (0) | TrackBack (0)

Is Good Design Good for Your Share Price?

Hans Henrik has found and posted a fascinating paper on the relationship between good aesthetic product design and share performance. That a causal relationship exists between the two is not proven, but it's hard to imagine there is no relationship.

Link: public(MIND): What effect does design have on stock market performance?.

Posted by Allan Jenkins at 07:38pm in Economics | Permalink | Comments Welcome! (1) | TrackBack (2)

Most Generous Nation? No...

When the Bush Administration pledged a paltry $15 million (later grudgingly upped to $35 million), I thought I would not be alone in thinking it tightfisted.

In correspondence to friends, acquaintances, and a couple US mailing lists, I said so (coincidentally, at about the same time of Egelund's statement), and said that I, here in Europe, had not heard any compelling arguments about why the contribution should be so small (on a per capita basis or a percentage of GNP). After all, the upcoming Inauguration budget is $40 million.

The response was so surprisingly, and vehemently against government aid to disaster relief -- that even $35 million was too much -- that I realized just how out of touch I am with Red-State values (I come from the South, so I know a lot of Red-Staters).

The howling fell into four main groupings:

1. The US wasn't affected by this; anyway, we had our own disasters (hurricanes) in 2004.

2. The "UN will waste it".

3. We can't divert funds from the War on Terror.

4. The US Government doesn't have to give foreign aid, because Americans have the heart to give through charity. In other countries, people aren't naturally charitable, and so must be taxed so their countries can give foreign aid.

Holders of deep beliefs are rarely swayed by facts or numbers, so I am afraid I converted no Red-Staters into advocates for greater foreign aid or disaster relief.

But some facts and myths simply deserve to be more widely-known.

Thus:

The US wasn't affected by this; anyway, we had our own disasters (hurricanes) in 2004.

Myth:  4000-5000 Americans are still missing as of this writing. Many, one must hope, will be found. But since many who were in the tsunami are already back home argues that the number of American dead and missing will be high. To say that America isn't affected simply means you don't know anyone who travels in Asia.

Fact: the US was struck by four hurricanes this year. But $13 billion was set aside for disaster relief. Yes, I agree that Florida is closer to home than Sri Lanka. But not 867 times closer.

"The UN will just waste the money"

Myth: While the UN is a favorite bête-noire of the Red-Staters, no aid money or disaster relief need be channeled through the UN.

We can't divert funds from the War on Terror

Myth: With over $120 billion already allocated to the Iraqi Adventure, no disaster aid contribution is likely to doom the effort. Anyway, the funds don't come out of the Defense Department budget.

The US Government doesn't have to give foreign aid, because Americans have the heart to give through charity. In other countries, people aren't naturally charitable, and so must be taxed so their countries can give foreign aid.

Myth: Americans do give to a lot of charities: $3 billion a year, according to this article.But that amounts to just 0.03 of Gross National Income. In comparison, the US government gives $15 billion, or 0.15% of GNI. Even if no other citizen in any other rich country gave a single dime, the US at the back of the pack of generosity.

Public giving is a public policy decision, ultimately decided by collective public. Personal giving is a personal choice. So if it is the will of Americans to give less, given the country's wealth, through public or private choice, so be it. But, really people, let's stop kidding ourselves that we are the most generous nation on earth.

Update: In the last few days, the Bush Administration either came to or was shamed into its senses. So the disaster relief was put up into the hundreds of millions. Still cheap, but getting there.

I've been wondering how they would justify it to the Red-Staters... who thought $35 million was more than enough. The answer lies in the War on Terror.

Say what you will about Karl Rove, he knows PR.

Posted by Allan Jenkins at 06:01pm in Economics, Politics, Tsunami | Permalink | Comments Welcome! (0) | TrackBack (2)

Long Tail Blog (Updated)

In October's Wired, Chris Anderson published "The Long Tail", an insightful article describing why on-line distribution turns the Law of Scarcity upside down and makes previously obscure works -- music, movies, literature -- widely available.

   

"Hit-driven economics is a creation of an age without enough room to carry everything for everybody. Not enough shelf space for all the CDs, DVDs, and games produced. Not enough screens to show all the available movies. Not enough channels to broadcast all the TV programs, not enough radio waves to play all the music created, and not enough hours in the day to squeeze everything out through either of those sets of slots.

   

"This is the world of scarcity. Now, with online distribution and retail, we are entering a world of abundance. And the differences are profound."

Now Anderson is blogging the Long Tail idea as he writes a book about it. The posts so far aren't particularly insightful, but I think its a blog worth watching.

Via Virginia Postrel

Update (December 22, 2005): Stephen Pierzchala, who writes the Lost Below the 49th blog argues that Anderson's thinking is hardly original.:

"The whole reason that the Internet retail channel was touted in the first place was for just the reason that Chris Anderson has "discovered" in the Long Tail: all-the-time access to everything in market niche X. So why is the blogosphere heralding this as a new discovery?"

Good point: Anderson isn't original. I commented at Stephen's blog, but thought I would reprint it here.:

   

"It's not new, and you'll note that Virginia mentioned that she had covered the concept in Forbes ASAP in 1999. Kevin Kelly's New Rules for the New Economy (1998) touched it, as did Frances Cairncross in the Death of Distance ('96, if memory serves).

    

"What's not new but relevant about Anderson's article is

    

"a) it's coming after the dot-bust. Rightly or wrongly, much of the "net punditry" slate was wiped clean in 2000-2001. A lot of relevant stuff written them was tossed in the trash heap with all the worthless stock options.

    

"b) In 1998-2000, little history could guide us. We only knew how going digital "should" affect intellectual property. Now we know a lot more, and Anderson did a pretty good job of pulling that together. It's not original, but it's important because many more managers are ready to think about the message.

    

"c) Yeah, he "invented" a term for it. A pithy one that people are latching onto. As a communicator, I can say that is only good. Again... not original, but right place and right time."

Posted by Allan Jenkins at 10:44am in Economics, Online Media, Society | Permalink | Comments Welcome! (0) | TrackBack (0)

Blogging Just Went to a Higher Plane

Blogging took a leap upwards last week. If these two intellectual heavyweights can make their collaborative blog work, then MSM pundits can give up scoffing at the blogosphere.

I'm talking about The Becker-Posner Blog, a partnership between Economics Nobel Prize winner Gary Becker and US Appeals Circuit Court Judge Richard Posner.

Both are prolific writers, often irritating, and often really irritating. But always erudite.

I can't gush enough, so go read their opening salvo on economic and legal aspects of preventive war.

Posted by Allan Jenkins at 09:27am in Bloggers, Economics, Ethics, Law, Writing I Enjoy | Permalink | Comments Welcome! (0) | TrackBack (0)

Economists give thumbs-down to W

I didn't get my Economist (the world's best newspaper, by far, if only for the droll captions) this week, but Sean Aday at the Gadfly did.

He points to and discusses an Economist poll of economists, asking them to rate Bush economic policies. If you are an American out of work or without health insurance (or both), you knew this already, but the marks are almost uniformly bad for W.

Morever, the 56 economists agree that Kerry would be far better for the US economy. Go figure: 56 economists polled by a right-of-center financial newspaper prefer the guy that W calls a "tax and spender".

The raw numbers make good reading, too.

Posted by Allan Jenkins at 06:36pm in Current Affairs, Economics, Politics | Permalink | Comments Welcome! (0) | TrackBack (0)