Streetwise Professor

January 25, 2012

That’s Putin’s Privilege

Filed under: Politics,Russia — The Professor @ 12:14 pm

Putin wants the upcoming election campaign to be spirited but civil:

Russian PM and presidential candidate Vladimir Putin says he wants the coming election campaign to be heated, as this will help to develop civil society, but asks the public to refrain from obscenities.

Yeah.  Leave the obscenities to him.  That’s part of his persona, and his privilege.

January 24, 2012

Lead? How ‘Bout Get Out of the Way Instead?

Filed under: Economics,Energy,Politics,Regulation — The Professor @ 4:23 pm

Obama is apparently going to make energy one of the centerpieces of his State of the Union Address (oh for the days when presidents mailed it in–literally).  If it is anything like the gas he emitted at last year’s SOTU, or anything like what is on the WH energy policy page, it will be at best irrelevant and at worst counterproductive.  CAFE is incredibly wrongheaded.  HOMESTAR is an expensive joke.  “Recovery Act Investments”?:

The Administration has invested more than $90 billion in clean energy – the largest clean energy investment in our nation’s history. These critical investments have already created or saved hundreds of thousands of jobs across the country and put the United States on a path to double renewable energy generation from 2008 levels by 2012. In fact, since 2008, more than 20,000 megawatts of new electric generating capacity from wind, solar and geothermal energy have come online, increasing installed capacity by more than 70 percent.

The idea behind investment is not the amount of money you put in, it’s the return you get out.  And these investments by Chu Capital (again, props to Paul Gregory for this felicitous phrase) are generating substantial negative returns.

So again, the Administration That Can’t Tell a Cost From A Benefit. [Also note the typical renewable dodge, focusing on “installed capacity” as opposed to energy generated.  The former number looks much more impressive than the latter: the difference between the two often makes renewables look very bad indeed.]

Renewable energy projects on Federal lands?  Another boondoggle.  And no mention about the fact that vast amounts of conventional energy sources are on public lands, and could be produced cleanly and safely–but are off limits.  And I seriously doubt we’ll hear anything about changing that tonight.

Obama is reportedly going to tout increased domestic production of natural gas.  Here he is playing the familiar role of sprinting to the front of the parade that he had nothing to do with creating, to make it look like he led it all the time.

No, neither he nor his administration nor government more broadly had much at all to do with that which has transformed the gas market, and is in the process of transforming the oil market.  The best thing he can do now is stay the hell out of the way.  The industry is doing quite fine on its own, thank you.

And that would be a good idea more broadly, with respect to energy.  Picking winners, picking technologies, picking fuels.  All things the market can do much better.  The Reagan administration’s best energy policies were to undo the insane energy policies that previous administrations and Congresses had put in place.  In that regard, Obama has a lot to work with: there are scads of insane energy policies currently in place that could use a good junking.  But since many of those are Obama administration brainstorms (or more accurately, brain cramps), that’s not going to happen.

So my bet is you will hear a lot of words about energy tonight.  Constructive action–not so much. Indeed, given past form, more counterproductive initiatives are a better bet.

January 23, 2012

A Perfect Illustration of Anti-SOPA Hysteria and Dishonesty

Filed under: Economics,Politics,Regulation — The Professor @ 10:22 pm

R passed along this video interview with Jacob Appelbaum, the would be tortured Romantic martyr for freedom on the internet. SOPA, and the recent arrest of Megaupload megaload Kim Schmitz are the focus of the interview, but there are detours into Iraq and other peripherally related subjects.

Given Appelbaum’s prominence as an advocate, and his involvement in Wikileaks–an involvement that is bringing substantial official scrutiny–his rather juvenile and hysterical remarks deserve some discussion.  Indeed, they deserve attention precisely because this juvenile and hysterical level of argument is all too common in the SOPA/PIPA debate.

A few of the lowlights:

  • Around :17 in the video, he claims that SOPA is a censorship regime like Syria or China.  Uhm, no, actually.  None of the content of the web that Syrian or Chinese censors wish to stamp out–notably, political speech–is covered by SOPA.  SOPA is clearly aimed at commercial sites that sell copyrighted material.  Such dishonesty, and the attempt to conscript truly oppressed individuals in his cause, is a clear giveaway that he cannot make an argument against SOPA on its (de)merits, but must instead invent and grotesquely exaggerate flaws in order to prevail on emotion and ignorance.  If you have to lie and inflame emotions to make your case, you probably have no case.
  • At 1:07 Appelbaum bemoans the arrest of Schmitz: a “guy who [was] arrested for running a website where other people upload files.”  Mr. Appelbaum, legal expert, finds such actions “supersketchy” [warning!: technical legal jargon] and un-American.  News for Mr. Appelbaum.  There is a component of American copyright law called contributory infringement, whereby an individual facilitates infringement by another.  This is, in essence, aiding and abetting.  This is no different than fencing stolen property.  As to the possibility that Megaupload was used to share some files legitimately, that is not a defense, any more than an art dealer who fences stolen paintings is not able to skate because he also engages in legitimate sales.  Apparently, these established features of the law are “supersketchy” too.
  • Insofar as contributory infringement is concerned, US courts have demonstrated some ability to distinguish between different technologies.  This is what did in Napster, but the Supreme Court found in favor of Sony when it was accused of contributory infringement in the Betamax case.  Too many SOPA hysterics fail to realize that courts will–will–weigh in on these issues, and enforcement of the law.  Appelbaum, and too many others, overlook this basic fact.  Do they really think that all the courts in the US, up to the Supreme Court, would meekly permit the most lurid scenarios that they posit to occur?
  • At 1:33 or so, he begins a juvenile discussion of copyright.  The gravamen of his argument is that the property owner is not deprived of property by copying.  This is, in a sense true.  The fundamental conundrum of intellectual property is that the marginal cost of reproduction is close to zero, and that intellectual property is non-rivalrous.  Two people can consume a song: only one can use a car at a time.  People have understood this for donkey years (since the work of Plant in the 1950s).  But people have also understood that there is a fundamental tension between static efficiency–which is impeded by copyright–and dynamic efficiency–which it can advance.  If copying is not restricted, and the price of a work (e.g., a song or a movie) is driven to zero as a result, there is no incentive to create the good in the first place, especially if the fixed cost of production is high (as is often the case, especially with a movie).  This is a knotty economic problem that is found in many settings–including the subject of my PhD thesis, ocean shipping.  This always leads to difficult legal and policy choices.  There is no easy way to determine the set of rights that optimally balances the static costs of copyright (too little of existing creations are consumed) against the dynamic benefits (more creations exist).  This is why copyright law–and IP law generally–is so much more contentious and controversial than law involving conventional, rivalrous property.  So have the debate over the messy ways to achieve balance.  Don’t be juvenile and just assume the tension away by focusing only on the static inefficiencies of copyright.  That’s just what Appelbaum–and many SOPA opponents–do.
  • At 2:20 he claims that Schmitz was arrested without reasonable process.  Really?  The Feds got a warrant, and presumably went through the normal process.  If they committed procedural violations, Mr. Schmitz will have every opportunity to make that case.  And if he does, he walks.  Appelbaum actually asks, rhetorically, “why not give him [Schmitz] a day in court?”  Does Appelbaum really believe that Schmitz is not going to get a day in court?  Really?  Arrest is the beginning of the process.  There are many legal battles yet to fight, and Herr Schmitz will have the legal counsel he needs to fight them.  Jeez: has Appelbaum never watched Law and Order? You know, the show where the first part shows how the cops develop a case and arrest people, and where the second part shows how the courts judge people who the cops arrested?  It’s not that freaking complicated.
  • At about 3:14 Appelbaum says that the arrest was unjustified because SOPA was intended to give the government powers to enforce IP law overseas, the implication being that since SOPA has not passed, the government exceeded its authority in arresting Schmitz.  Can anyone actually be this stupid?  Well, yes, actually: anyone who actually believes this crap.
  • SOPA is really just a new mechanism for enforcing existing rights, not an assertion or creation of new rights.  Under existing law, it is possible to go after people who infringe copyright even if they are overseas: that’s what USDOJ did in New Zealand.  The point is, that is very expensive and difficult, especially if the authorities in the countries where the pirates operate are not cooperative.  That is, if Schmitz had operated in Russia or China, he would have been at much less risk from arrest by US authorities than he did by operating in New Zealand.   What SOPA does is provide an alternative way to enforce copyright against infringers in uncooperative jurisdictions.

    Appelbaum and others–notably Google–suggest that the mechanism is novel and outrageous, in that it utilizes third parties (search engines, payment systems) to help enforce copyrights.  It is neither novel nor outrageous.  In the words of Posner and Landes (in The Economic Structure of Intellectual Property Law) it is beneficial to have “a legal mechanism for placing the ultimate liability” for preventing the violation of a copyright on the party that can do so most cheaply.  That’s not always the infringer: it can be the provider of a service complementary to the infringement.  Would Appelbaum–or you–prefer to have copyright enforced by Feds breaking down doors, or by Paypal cutting off a pirate?  Which is more intrusive, and more subject to abuse, and more costly in the event of a mistake?   This is exactly the logic behind the doctrine of contributory infringement, a recognized part of current law, and applies to SOPA.  It is a way of reducing the costs of enforcing copyright.

    This points out one of the issues that is often confused.  Many people object to SOPA because they really object to copyright law, as it exists.  If that’s true, don’t focus on the mechanism of enforcing the copyright law: focus on copyright law itself.  Again, it is an economically difficult issue, and people of good will can differ on this.  Battles are inevitable.  But fight the battles over the relevant issues of how best to delineate copyrights, rather on than on the issue of how to enforce rights as they exist.  That addresses the issue at the root.

  • At around 4:19 Appelbaum argues that SOPA represents the normalization of the surveillance and censorship state.  He asks, in a tired trope, “who are the real terrorists?”, and drags the Iraq War into the discussion.  More overstretch, and more dishonest and emotionally manipulative exploitation of human tragedy to advance a position on a completely unrelated issue–and a demonstration that much of the opposition to SOPA and copyright is inextricably mixed with an implacable hatred for the US.    The truly disgusting part of this discussion is that the creator of Tor advocates people use it and other techniques to escape surveillance–without acknowledging that Tor is also used by hackers to surveil, invade privacy, destroy lives through “doxing”, and steal.  An honest individual would recognize that his creation can be used for good and evil: like Nobel, say, who was tormented by the use of his invention of dynamite to kill.  But Appelbaum is hardly so honest, or self-reflective.  He refuses to acknowledge the very sharp double edge of the sword he has created, and the malign purposes to which it has been put.  He presents himself as a crusader for right, protecting the innocent against the predation of the state, but denies responsibility for the harm that occurs when non-state actors–his hacker buddies and fanboys (emphasis on “boys”)–prey on innocent people.

This interview is a perfect distillation of anti-SOPA hysteria and dishonesty.  There is room for legitimate debate on copyright, and the proper extent of copyright coverage.  This Appelbaum, and other opponents of SOPA, too often fail to do.  Instead they appeal to emotion, make wild analogies, engage in hysteria, and make demonstrably risible assertions about the law.  The ultimate irony is that by opposing SOPA, they are likely to increase reliance on coercive enforcement of copyrights (like the raid on Megaupload), and to induce the socially wasteful expenditure of resources to protect IP via technical means.  If copyright exists, and those copyrights are valuable, holders have an incentive to enforce those rights, and they will do so–and you may not like the way they do it.  If you have a problem with copyright law, as it exists, there is plenty of room to make legitimate argument.  Do that, and spare us the “who is the real terrorist?” crap.

Note: Catherine Fitzgerald has been on to Appelbaum for a while.  Here are a  couple of her posts that are definitely worth a read.  She refers to him as “an open-source cultist and thuggish heckler of critics on Twitter. He’s also a liar, claiming that US soldiers deliberately killed children in Iraq when they could not have possibly known that there were children in a vehicle of a driver who stopped to help wounded, armed persons whom were shot at by the US soldiers from a helicopter. The entire incident — tendentiously released by WikiLeaks — had enough problematic features to it and a need for investigation and more caution without tarting it up and lying about it. That they can and do lie and do so shamelessly taints everything about WikiLeaks.”

Oh, and Mr. X and others who have advanced the theory that Catherine Fitzpatrick Fitzgerald=LaRussophobe, you should note that Fitzpatrick Fitzgerald is a strong supporter of SOPA, but LR has written numerous tweets in opposition, and has advocated signing the Google anti-SOPA petition.  This could be a masterly act of misdirection, but I’ll defer to Occam’s razor.

January 19, 2012

Speaking of S***, Putin Loses His

Filed under: Politics,Russia — The Professor @ 11:35 am

Vladimir Putin apparently cannot abide the thought that there is even one media outlet in Russia, no matter how marginal, that does not slavishly obey his dictates, and does not engage in only hagiographic coverage:

The attack may signal that the prime minister, all but certain to return as president after a vote March despite streets protests against his 12-year rule, has grown impatient with media criticism and could move to curb opposition outlets.

“I see that you are upset with me. I see it in your face. Why? I am not getting upset with you when you are pouring shit all over me from dawn to dusk,” Putin told Ekho Moskvy’s Alexei Venediktov, meeting media at his residence in Moscow’s suburbs.  [Another translation reported that Putin’s scatological word was “diarrhea.”]

Some commenters on SWP (Putinophiles, mainly) have ridiculed Ekho Moskvy as an irrelevance.  It probably is: so then why did Putin throw this public tantrum?

Putin also slammed the station for its coverage of US missile defense plans:

Putin said he had heard a radio show about U.S. missile defence plans while on holiday in the Black Sea resort town of Sochi that was “serving the interests of another countries at the expense of the Russian Federation”.

“I was lying in bed thinking: ‘This is not information. It is serving the interests of one country at the expense of another,” Putin told the audience of about 30 editors of Russian-based media outlets, in a typically earthy speech.

So again with the conspiracy theories.  No mention of Phobos-Grunt and HAARP, apparently, but the campaign is young yet.

This is not the portrait of a serenely confident Leader of the Nation.  Anything but.  Instead, this outburst is evocative of a man who is angry and stressed.

This is no doubt a result of the protests, although not because there is a substantial risk of him losing the election.  No, as I pointed out in the immediate aftermath of the Duma election, it is because the demolition of the carefully crafted myth of Putin the Universally Popular undermines his position within the elite.  This raises the prospect of considerable fighting under the carpet–fights that will damage Putin, and perhaps wound him mortally.

Robert Amsterdam recently wrote a very good post along these lines:

Are the protesters significant? Those who assess their influence by numbers or demographic percentages miss the point, a mistake made again and again over the past century of revolutionary upheavals. While the protesters may not constitute the arithmetical majority, they are setting the framework of the national political discourse, while by the hour Putin has been losing his ability to determine the national political agenda. He of course is perfectly aware of this precipitous change of his relative political standing.

So what is Putin’s strategy? Again, his most important steps have been largely ignored by the Western media. Although he has attempted to restore his position with the appointments of loyalists, the previous political configuration may be unattainable.

Big business has already lost faith in the ability of Putin to protect its positions abroad, as exemplified by the recent troubles of Severstal in the USA. On the other hand, internally, Putin has been unwilling or unable to stem the tide of corruption that has become the principle political issue for both the protesters and big Russian businesses, making close allies out of them.

In short, economic elites in Russia now perceive Putin as a significant strategic liability, and would be happy with most of the alternatives.

Thus, Putin moved to recruit the two constituencies for which the all-pervasive corruption is not a priority issue – namely, siloviki and siloviki-related nationalists.

In other words, what happens on the streets is important not because there will be a popular uprising or democratic repudiation of the government, but because of how it affects the dynamics in the back rooms, where the real action occurs.

As I noted long ago, Putinism is brittle.  It depends on maintaining an equilibrium between jostling factions.  Putin’s perceived popularity has been crucial in allowing Putin to play the role of maintaining the equilibrium, demoting those who get too big for their britches, and promoting the more biddable.  The fading of the aura of popular adulation–and indeed, its replacement with widespread ridicule–undercuts seriously his ability to play that role.

There are no doubt many within the elite with lean and hungry looks, who might be tempted to exploit this slippage.  And Putin no doubt knows that better than anyone.   This goes a long way to explain why he lost it in public, and apparently cannot tolerate anything but public obeisance.  He senses things are slipping out of control, and wants to reassert his grip.

Methinks it is too late, however.  Once the curtain has been pulled back, it is impossible for the Wizard to awe the masses.  Indeed, even the attempt invites more ridicule.  Which means that as much as Putin touts the importance of stability, and his pivotal role in securing it, there is likely little political stability in Russia’s future–in large part because Putin is going to win, but try to govern from a weakened political position.

January 18, 2012

The Administration That Makes the Broken Window Fallacy the Foundation of Its Energy Policy

Filed under: Economics,Energy,Politics,Regulation — The Professor @ 11:21 pm

So Obama has rejected–at least for now, for heaven forfend he make a firm decision–the Keystone XL Pipeline.  He claims that the rejection was not on the merits, but due to the fact that the Republicans had given him too little time–a mere 60 days–to determine whether the pipeline was in the national interest.  This after 3 plus years of the pipeline application began wending its way through the labyrinthine pipeline of the Federal approval process. So it’s not like this just landed on his desk with no prior analysis.  It’s more like: get on with it, Mr. Vote Present.

This from the guy who on every other day berates the same Republicans for foot-dragging obstructionism.  The guy who says he is going to do something every day to create jobs even if Congress doesn’t go along because it is just too slow.

I guess Obama is just President Goldilocks.  This is toooo fast.  This is toooo slow.  But he hasn’t found just right yet.

And the guy who is supposedly sooooo smart that he is bored because his mind is racing ahead of everyone (just ask Valerie Jarrett!) apparently needs a little extra time on this exam.

Please.  This was just another political dodge, wrapped up in a whinging excuse about being hustled along by meanie Republicans.

The administration’s cavils about the pipeline are economically inane:

The truth is that just two of the Administration’s programs – the DOE Loan Guarantee Program and the EPA’s Mercury and Air Toxics Standards – will create more than 10 times the amount of jobs generated by the Keystone XL pipeline, which will only generate a few thousand temporary jobs. In terms of reducing America’s dependence on oil, the Administration’s fuel economy standards alone will save more than twice the amount of oil the Keystone pipeline would deliver.

That is just moronic.  As I’ve noted before, these people cannot tell a cost from a benefit.  It doesn’t get any dumber than that.

Keystone will likely create economic value, as indicated by the fact that private capital is willing to invest.  In contrast, the DOE loan guarantee program–“Chu Capital,” as my colleague Paul Gregory calls it–exists because the green elephants it funds cannot attract private capital: a very strong indication that they do not generate value, and in fact destroy it.  Hell, these companies cannot survive even with lavish subsidies.

The EPA programs–what to say?  These will impose huge costs.  Huge.  The people employed to implement the program are just part of the cost.  The distortions in the power market–less efficient generation, lower reliability–represent a far larger cost: indeed, those employed are expending effort to create distortions, so costs are incurred to incur more costs–who could object to that?  All in exchange for a risibly small health benefit.  This is carbon-tax-by-stealth.  The EPA’s cost-benefit analysis is arguably the worst in the federal government–which is saying something.

This administration would apparently believe that hiring ten times as many people who would be employed on Keystone to blow up oil wells and power plants would count as a huge boost to employment, and would be a far better policy than approving Keystone.* Something to brag about on the WH website.

I better shut up.  They might take that seriously.  I wouldn’t put it past them.

Is there not one economist of rank in this administration with enough self-respect to call bullshit?  After all, such economic stupidity reflects very badly on them, especially inasmuch as their silence connotes assent.

* Not to mention that it is completely illogical to imply that these things are mutually exclusive.

January 17, 2012

All Lathered Up About SOPA

Filed under: Uncategorized — The Professor @ 10:19 pm

The internet has been ablaze in recent weeks with dire warnings about The End of the Internet As We Know It due to the seemingly imminent passage of SOPA–the Stop Online Piracy Act.  The threat was so severe that Jimmy Wales, the pretentious, pompous, self-satisfied git who is also the founder of Wikipedia, is shutting down Wikipedia for a day–tomorrow, 18 January, 2012–in protest.  (Sorry all you high schoolers with term papers due on Thursday–I guess you’re SOL.)  This move is being followed by other sites outraged at the legislation.  But not Google–even though it is the main force behind the opposition to SOPA: more on this below.

The stated intent of SOPA is to deal with a real problem: the flagrant theft and sale of intellectual property by large, commercial operations, primarily in Russia and China.  It should also be noted that especially in Russia these enterprises are in a tight nexus with even more unsavory–disgusting, actually–web-based operations, including large-scale hacking-for-profit and child pornography.

SOPA gives the government and the owners of intellectual property the right to obtain injunctions against websites posting and selling stolen content.  It also empowers the USDOJ to obtain court orders requiring US-based ISPs, advertisers, and payment services to cease dealing with infringers.

I have much experience with intellectual property law (as an expert in some large patent litigations), and have read a good deal of the economic literature on the subject (with the Posner-Landes book being a great source).   As a result, I am aware of the difficulties and limitations of IP law.  It is a very difficult task to trade-off between providing protections that reward creators, but which are not overly broad and therefore limit potential for combining or expanding on existing creations to develop new ones.  I also understand that there is a lot of rent seeking involved in IP and IP litigation.  The system is not perfect, by any means.

But the targets of SOPA are definitely malign, and damage legitimate creators: this is not a borderline call.  They currently operate largely outside the reach of the law.  Legislation and enforcement that curtail their activities would be an unmitigated gain.

The question is whether SOPA’s reach would be limited to such obvious, large-scale crooks, or would also ensnare individuals or small websites that inadvertently post copyrighted material.  This is the gravamen of the opposition to SOPA.

Much of this opposition is, to be blunt, hysterical and overwrought.  The opponents argue that SOPA represents the descent of the dark night of fascism over the internet.

I am deeply suspicious of state regulation and intervention, but the over the top screeds of the opponents make me suspicious.  Exaggeration and volume are often used to cover up a lack of substance.  And that appears to be the case here.

So I thought it would be worthwhile to examine SOPA more soberly, using some economics.

The most important aspect of the legislation is that it would reverse the burden of proof.  Presently, a copyright holder has the burden to prove somebody infringed before enjoining the infringer’s operations.  Under SOPA, the government or a copyright holder could go to court asking for an injunction, and the alleged infringer would have the burden to prove it did not infringe.

In most US legal actions, the moving party has the burden, so SOPA is somewhat unusual in that it reverses that.  Is that exception to the rule justified?

The burden of proof is important because information is limited, and any judicial procedure is subject to error: burden wouldn’t matter if information were costless and judges infallible.  But it does matter when errors are possible: burden affects the likelihood of errors, and the type of errors, in a legal proceeding.

In this context, there are two kinds of mistakes: (1) a false positive, where a legit website that does not infringe is cut off by ISPs, payment services, etc., and (2) a false negative, where a large-scale thief is allowed to continue to operate.

Putting the burden on the moving party (the copyright holder) presumes that the costs of false negatives are lower than the costs of false positives.  This makes sense in criminal cases, for instance.  The state’s interest in a conviction is the deterrent effect, which is likely to be small for any given case.  The individual defendant’s interest is his or her freedom or perhaps life.  Here the asymmetry between the cost of errors makes it efficient to err on the side of letting the guilty go free.  The benefit to the state of letting a single criminal go free is small, but the cost to an innocent person from incarceration or death is large.

But that asymmetry does not hold in all instances.  It is quite likely untrue in this instance.  Sometimes the asymmetry cuts the other way.  A large-scale infringer can impose huge losses on legitimate copyright holders.  Indeed, these losses are likely far larger than the profits of legitimate website operators: in a competitive industry (the legal resale sale of copyrighted material) these profits are close to zero, and customers are typically not harmed when one site is shut down because there are alternative legitimate sources of content.  Thus, the presumption in favor of letting the potential infringer walk does not necessarily hold.  Indeed, the asymmetry in this instance suggests that it is efficient to shift the burden because the losses from false negatives are larger than the losses from false positives.

Moreover, the burden should depend on the cost of producing information.  The system should impose a greater burden on the party with the lower cost of providing information that would allow the trier-of-fact to make a correct judgment.

A legitimate commercial site that is paying the copyright holder should have no problem proving that.  Show records of payments received for content sold, and records of payments made to copyright holders.  All kinds of businesses do that every day.  End of story.  At worst, SOPA imposes a burden to keep good records and be punctilious about paying royalties.  Which is kind of the point.

The fears that small-time, perhaps inadvertent, infringers will be targeted are overblown.  The benefit to cracking down on such an infringer are small, and the cost of obtaining an injunction are probably not that much higher than would be involved in going after a big-time Russian or Chinese pirate site, meaning that copyright holders have a strong incentive to concentrate their efforts on the big infringers, and let the small fry swim away.  And even if economics don’t make it unattractive for a content owner to pursue a small-time infringer, the clear legislative intent to attack large-scale commercial infringement by major foreign operators will constrain judges.  It would likely take some time for the precedents to be established, but eventually it is likely that SOPA enforcement would have very few false positive errors.

But that is likely all academic–figuratively, not literally, in the sense that the previous analysis was academic.  Obama has hinted that he opposes SOPA.  The White House blog had a post over the weekend stating that the administration opposes legislation that “reduces freedom of expression” or harms “the dynamic, innovative global Internet.”  This is widely interpreted as a White House whistle calling off the SOPA dogs.   Although it has broad support in Congress, its passage is now problematic.  (Note the typical Obamaesque voting present slipperiness here.  As with the Keystone XL Pipeline, he doesn’t have the political or moral courage to kill something he doesn’t like forthrightly and honestly, instead strangling it stealthily while attempting to leave no fingerprints behind.)

And why oh why did he do that?  One can imagine the angst this caused him, for this issue pits Obama’s and the Democrat’s biggest money constituents against one another: big media (“Hollywood”) on the one hand, and Silicon Valley, on the other: SoCal vs. NoCal.  And by Silicon Valley/NoCal, I mean primarily Google.  This is a Dem Donor Civil War.

Google has been fiercely opposed to SOPA.  No surprise there.  Lowering the price of content raises the demand for the services of those who connect users to content.  Google is the most important presence in the connecting business.  Google need not engage in piracy directly to profit from it.  Moreover, Google bridles at incurring costs to enforce the property rights of others.  Hence its fervent opposition.

And hence Obama’s opposition to SOPA.  As the net neutrality debate demonstrates, when Google says “jump,” Obama responds: “how high?”

And like its support for net neutrality, Google’s strident opposition to SOPA illustrates that its true credo is definitely not “don’t be evil.”  Instead, it is: “what is mine is mine, and so is what is yours.”  Google defends its asserted intellectual property quite aggressively, thank you: see its record in patent litigation, and its wars against search engine optimizers.  But it shows no such respect for the property of content owners (in the case of SOPA) or the owners of networks, cable companies, etc. (Net Neutrality).  It benefits when content is pirated, increasing the derived demand for it as an entity that connects content with users.  It benefits when the terms on which the owners of the networks–another element in the chain connecting content with users–can provide their services are limited (as is the case with net neutrality, which is effectively a form of price control that transfers the property of network owners to network users, and suppliers of services complementary to these networks.)

So before you fall for the histrionics over SOPA and the End of the Internet As We Know It, consider the possibility–the likelihood, actually–that you are being played by a company with the most Orwellian credo ever.  Do you want to be a chump for Google, which would be pretty ironic given the heavy anti-corporate rhetoric of many of the SOPA boxers?  Fall for the histrionics surrounding SOPA, and you will be.

Russia, Chutzpah is Thy Name

Filed under: Economics,Energy,Military,Politics,Russia — The Professor @ 11:20 am

Russia claims that the United States is stoking unrest in the Middle East, and in Iran in particular–in order to make drilling for shale oil economically viable (h/t Renee).  Seriously:

The US is deliberately aggravating the situation around the Iranian nuclear program. According to Russian experts, the conflict’s escalation will help the US to make the production of “difficult” hydrocarbons such as shale oil and gas cost efficient. The multibillion program on the development of shale gas production approved in the US authorities can be implemented only in conditions of high oil prices.  And if Iran in response to Washington’s recent actions blocks the Strait of Hormuz this problem will be resolved by itself, analysts note.

. . . .

“Over the last decades the US has been actively developing shale gas production. Then the US companies started to develop shale oil production.  In the US it is almost a nationwide project implying creation of more than 1 million of working places. Shale oil and gas production implies almost permanent drilling of new wells because after one year a well is no longer operational. It is very expensive and to make this project cost efficient oil should cost not less than $100 per barrel. In reality the US needs Iran to close the Strait of Hormuz through which shipments of Middle Eastern oil and gas are carried out. This would lead to a great deficit.”

. . . .

Experts point at one more aspect of using the Iranian factor for the benefits of the shale oil project. Until recently the US ecologists have been pointing at catastrophic consequences the mass development of shale deposits may lead to. The wells are located deep underground in porous fields.  In order to prevent their disintegration the oil producers pump in mixture of water and chemical substances there, a professor Alexei Yablokov says:

“The production of shale gas may provoke earthquakes. Another problem is contamination of ground waters, which may spread quite far. There have been constant disputes in America whether to allow such production in the state of New York and states.”*

Talk about an inversion of the truth.  As a large consumer of energy, and a net importer, the US does not benefit as a whole from higher oil prices–even though there are some that do.   Like the 400,000 people in North Dakota.  Thus, contrary to the assertion, it is risible to argue that the US would stoke conflict with Iran to benefit . . . North Dakota.

Moreover, as a large exporter that is dependent on high oil prices to fund the government and generate the rents that its governing elites siphon off, Russia, and those who rule it, definitely have an interest in high oil prices.  Russia is the main beneficiary of unrest in the Middle East.  I pointed this out years ago, as have many others.  It clearly has an interest in fomenting conflict, and its actions in the Middle East are clearly consistent with this interest.  Indeed, its actions vis a vis Iran–including its support for Iran’s nuclear program, and its running diplomatic interference for IRI (especially at the UN)–make perfect sense from this perspective.

Russia has every incentive to keep the pot boiling in the Straits of Hormuz–but not to the point of boiling over.  That’s a very dangerous game to play.

American options in Iran are limited, and there are many risks involved.  There are many conflicting goals.  But one thing I can say categorically is that fomenting tension to keep the price of oil high is not one of them.  That is adverse to American interests.  (I also consider it ironic that with respect to Libya and Iraq, Russia and other anti-American voices–including some American ones–claimed that our policy was driven by the desire to get our hands on cheap oil.  So which is it?)

No, fomenting tension to keep up oil prices is Russia’s job.  It benefits economically from this.  It also benefits from having the US tied up in another conflict–or potential conflict.

But as with the farcical assertions regarding Phobos-Grunt (see the immediately preceding post), this type of agitprop is an indication of what we can expect out of the next Putin administration.  Not even Obama will be able to claim with a straight face that the Reset is only resting.  It will be dead, dead, dead.  Well, it is already, but its demise will be undeniable.

*To illustrate the article’s tenuous grip on reality, it states: “In New York and Texas the authorities finally banned shale hydrocarbons production.”  That’s news in Texas.  And in NY too, for the fracking ban was lifted–though very tough restrictions remain in place.

Doubling Down on Paranoia

Filed under: Military,Politics,Russia — The Professor @ 10:30 am

Rather than letting the bizarre claim that the Phobos-Grunt Mars probe was brought down by dark foreign forces fade into obscurity, the Russians are doubling down:

A powerful electromagnetic emission from a U.S. radar in the Pacific could have caused the malfunctioning of the Russian Phobos-Grunt probe, the Kommersant daily said on Tuesday.

A Russian government investigation commission is considering several causes of the failure, including a short circuit or “external impact,” the paper said citing an unnamed source in the Russian space industry.

“Experts do not dismiss the possibility that the probe could have accidentally come under the impact of emissions [from a U.S. radar stationed on the Marshall Islands], whose megawatt impulse triggered the malfunctioning of on-board electronics,” the source said.

And they are going to test this possibility using a model:

The investigators said that they would stage an experiment where a model Phobos will be subjected to radiation similar to that from U.S. radars.

“The results of the experiment will allow us to prove or dismiss the possibility of the radars’ impact,” said Commission head Yury Koptev, the former head of the Russian space agency, Roscosmos.

Give me a break.  Radiation would most likely impact the craft’s electrical and computer systems.  Just how, exactly, could a toy reproduce these systems from the full-sized probe?  Or the shielding that the actual probe’s electrical and computer systems had?

And this isn’t Russophobia. Russian scientists are snickering–publicly–at the hypothesis:

The theory that Russia’s Mars mission failed due to a U.S. radar is extremely “exotic,” Russian scientists said on Tuesday.

Phobos-Grunt, Russia’s most ambitious planetary mission in decades, was launched on November 9 but it was lost due to a propulsion failure and fell back to Earth on Sunday.

The crash could have been caused by a powerful electromagnetic emission from a U.S. radar in the Pacific Ocean, the Kommersant daily reported earlier on Tuesday citing an unnamed source in the Russian space industry. The source stressed that it was more likely an accident rather than an act of sabotage.

“Consider the power of the impact. I don’t think the Americans have radars capable of ensuring such power at such an altitude [about 200 kilometers],” said Alexander Zakharov of the Russian Academy of Sciences Space Research Institute, where the Phobos equipment and research program were developed.

He suggested the theory was just a blind to cover up some people’s mistakes.

“I simply think that is disingenuous. It is convenient to find the cause of the failure on the outside,” he said, adding that “external impact hypotheses” were “far-fetched.”

“The spacecraft itself should be examined first. There are problems there,” he said.

That would be a great idea . . . except they don’t know exactly where it went down.  They say: “[Phobos-Grunt] ‘had ceased its existence in a section covering ‘the southern part of the Pacific Ocean, South America and the Atlantic Ocean.’”  Glad they narrowed that down.

Some more:

His view was echoed by Viktor Savorsky, a researcher at the Russian Academy of Sciences Institute of Radio Technology and Electronics.

“The electronic equipment [of spacecraft] is usually protected very well against radiation and sheltered against external fields,” he said.

But not to worry!  Dmitri Rogozin is on the case!  (And what a case load he has!)

“I’m taking personal control of the investigation into the reasons for the Phobos-Grunt accident,” Russia’s former ambassador to NATO and recently appointed Deputy Prime Minister Dmitry Rogozin wrote on his Twitter account.

Rogozin said he expected the Russian space agency Roscosmos to name the “anti-heroes” responsible for the latest in a series of space failures.

I don’t like to throw around “neo-Soviet”, but that last remark about “anti-heroes” surely warrants it.  The implication is that the disaster was intentional.  He might as well have said Roscomsmos should identify the “foreign saboteurs or domestic wreckers responsible for the disaster.”

Speaking of Rogozin, upon parting his NATO ambassadorship, he planted two poplar trees–“topol” in Russian.  Topol, of course, is also the name of Russia’s primary ICBM.  Just to make sure that people knew this was not an accident, he called one of the trees “Topol-M”: that being the name of Russia’s road mobile version of the missile.

Rogozin’s prominence in the Russian government tells you a lot.  And one thing it tells you is that there’s going to be a reset when Putin reassumes the presidency, but nothing like what Obama has dreamed of.

January 13, 2012

The Negotiations Aren’t Dead. They’re Only Resting.

Filed under: Economics,Financial Crisis II — The Professor @ 3:36 pm

Negotiations between Greece and its private creditors are–and I quote– “paused for reflection on the benefits of a voluntary approach.”  Are they on time out?  Meditating?

Hardly auspicious.  No wonder yields on 1 year Greek debt hit 400 percent/year today.  That’s not basis points, that’s percentage points.  Invest 20 Euros today, you are promised to get back 100 Euros in a year.  Good luck with that.

The Hardware Ain’t So Hot Either

Filed under: Military,Politics,Russia — The Professor @ 3:29 pm

The Russian “aircraft carrier”–and crucially, its trusty tugboat–reached Syria, where the flotilla received a warm welcome from the besieged Assad regime.  Pavel Felgenhauer’s description makes it plain that scare quotes I routinely use in reference to the Kuznetsov are more than warranted:

The Kuznetsov is a 60,000 ton ship that may carry an air wing of up to 50, including some 26 jets and 24 helicopters. On its present voyage the Kuznetsov’s majestic flight deck is almost empty – only eight Su-33 fighters and two Ka-27S helicopters for search and rescue missions, if any Su-33s are lost (Interfax, November 30). Not only is the present Kuznetsov air wing minuscule, it entirely lacks anti-submarine Ka-27 PLO helicopters and even more importantly – Ka-27RLD (Ka-31) early warning flying radars. Without any long-range radar capability, the Kuznetsov is not a combat ship, but a sitting duck – a large, uncomfortable and rusty tourist ship. The Su-33 fighters are not produced any more, so the Kuznetsov is now carrying the last flight worthy Su-33s and they will soon be mothballed after the carrier returns to port within two weeks.

The Kuznetsov’s main steam turbine engine has been breaking down constantly during the ship’s service, which began in 1992. The Kuznetsov has been a largely immobile and useless ship with three major shipyard repair periods lasting over six years since 1996. The sea salvage tug Nikolai Chiker is shadowing the Kuznetsov during its present tour to tow the hapless carrier back home if the main engine breaks down again. After completing its last voyage the Kuznetsov will be disarmed and go to the Severodvinsk shipyard for a major refitting that is officially planned to last until 2017 or end later – if ever (NVO, April 22, 2011). Su-33 production has been terminated, so the Kuznetsov must be refitted to carry MiG-29K fighter jets being developed for India. The Kuznetsov’s main anti-ship weapon, the supersonic Granit cruise missile, is also out of production and must be replaced. The main engine must be replaced – the carrier will be virtually gutted to the bare hull and rebuilt from scratch. When it ever sails again, al-Assad will be long forgotten history.

Meaning that the Kuznetsov’s little tugboat that could, the Nikolai Chiker, is arguably the most important vessel in the Russian fleet.

I doubt that the refit mentioned in the above quotewill go any better than the overhaul of another Russian “carrier”, the Gorshkov.  It was sold to the Indians, but the overhaul in a Russian yard went billions (dollars, not rubles rupees) over budget, and years over schedule.

Speaking of refits with hazy timelines, some news is leaking out about the fate of the Yekaterinburg, with emphasis on the “leaking.”  Whereas Rogozin had initially said the vessel would be repaired in a year, even he is now pushing that date into 2014, and other estimates say 2016 .   That’s because the damage was far more severe than Rogozin let on.  The sonar system is a total loss, and the torpedo section heavily damaged.  These both give lie to the initial claims that damage was limited to the rubber coating on the hull.  Neither is surprising given the pictures that came out last week.

The boat must be towed to a shipyard in Severodvinsk, and that can’t happen until the ice clears–and that big hole in the side of the boat is patched up  This will likely be May at the earliest.

I’ve frequently argued that the software in the Russian military is in deplorable shape.  The hardware isn’t that great either, especially afloat.

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