February 2006

In your face, journalists!

You Passed 8th Grade Math

Congratulations, you got 10/10 correct!

Here’s an article by one of my favorite economists, Mason Gaffney, on how he thinks New Orleans can be rebuilt through an appropriate level of land taxation.

Maxspeak.com 

After disaster, location remains, and location makes cities. Greater New Orleans was recently the largest port in the world, in tonnage. People, enterprise, and investment also make cities. Herein lies the greater hazard, for many American cities self-destruct without the bang of natural disasters, but with a whimper of futility, like Buffalo, Cincinnati, Detroit, Camden, or East St. Louis. New Orleans today has a kind of dynamism that those decaying cities lack. Demand for its real estate is holding up well, and rising in the unflooded areas like the Gentilly Ridge. Even in the flooded and abandoned areas there is strong demand from absentee speculators looking to hold for a free ride up the price elevator as the efforts of others bring back the neighborhoods. Yet, this kind of dynamism is worse than stasis. These absentee bottom fishers choke out other buyers aiming to commit their lives, to rebuild and reside and occupy and make neighborhoods. As “Each man kills the thing he loves”, absentee investors collectively drive away the very people who could make their dreams come true. Many of them have no plans, but are waiting for other people’s plans. “Coordinating expectations” like those comes to collective failure. New Orleans’ tax system, tragically, penalizes the builders and spares the free riders.

Gaffney’s background is in Georgist Economics, which views the taxation of land rents as the only justifiable means of taxation. Labour and capital, in this paradigm of thought, are not taxed. Let’s pretend that New Orleans was completely obliterated and abandoned and a group of real estate speculators buy up all the available land. Let’s assume they all want to see their property values increase. Those property values will only increase if people want to move back in. People will want nice houses and neighbourhoods, but the speculators don’t want to do anything about it. Those property values will not increase unless some agents of change enter the picture and make improvements on the land. The result is coordination failure because the landowners are waiting for people to make improvements on land adjacent to theirs, which boosts the value of their property.

So, Gaffney says to tax land holdings heavily, but not to tax labour and capital improvements on the land. If the value of your property is expected to rise by $20,000 per year, but property taxes rise by an equivalent amount each year, it makes no sense to hold land as an asset as there is no real return; you would be better off investing your money in bonds paying a rate marginally greater than inflation. Your best bet, then, is to put a mini mall or factory on the land in order to cover the property taxes. Now remember, labour and capital are not taxed, so if your mini mall generates $4,000,000 in revenues, your tax bill is only your $20,000 property tax. Landowners adjacent to you will see their property values and their level of taxes increase, so they too, will be driven to make improvements on the land in order to get a return.

There’s a problem with this picture, and I’ll leave it for the advanced readers out there to spot. Hint: it has to do with intertemporality.

Crossposted to: CanadianEconomist.com

If you read one article today, make it THIS one by Jason Fry of the WSJ. The crystal of insight offered into the state of blogging is that most blogs, while alive, are ‘dead’. They are dead in the sense that nearly 90% of them haven’t been updated in three months.

Blog measurement is another mess. The latest word from Dave Sifry, CEO of the blog search engine Technorati, is that there are some 28.4 million blogs and the blogosphere is doubling in size every 5.5 months. Eye-popping figures like that have been thrown around a lot recently, but folks making revolutionary claims about blogging won’t like other Technorati numbers: Less than half of those blogs are still getting posts three months after their creation, and less than 10% — just 2.7 million — are updated at least weekly. That means of Technorati’s blogs, more than 90% are either abandoned or updated too rarely to merit the name — nothing kills reader interest or visits more quickly and thoroughly than a stale blog.

Still, 2.7 million active blogs is impressive. But how should we measure their audience? Technorati does so by looking at incoming links, which is the closest thing the blog world has to an industry standard, but doesn’t tell the whole story — not with search engines and news aggregators shooting blog posts out into the general fray of the Net.

I’ve learned this first hand: When my friend Greg Prince and I started our baseball blog, Fear and Faith in Flushing, our moods used to soar and crash based on the “referrer summary” of sites that had linked to us. After a while, we noticed something odd: Our traffic kept increasing, even as our referrers held steady or decreased. Then we realized this was a good thing: Readers were coming directly to us instead of through intermediaries. Being part of a blog community is valuable, but it isn’t everything. (If you’re so inclined, read more about my blogging misadventures in this Real Time from October.)

You read it - less than 10% of all blogs are updated weekly. Blogging, it seems, is still in the “tire-kicking” phase of its development in the sense that people are giving it a try, perhaps finding it not to be what they thought and abandoning it. It seems as though the information superhighway is full of stalled or burnt-out vehicles called blogs. Perhaps that’s not the best analogy.

A better analogy might examine the blogosphere as a global conversation. And as the writers of the Cluetrain Manifesto wrote, “All markets are conversations”. But are all conversations markets? They certainly are. Marketplaces are where buyers and sellers go to exchange information about their commodities - the sellers give out information about their products to buyers who need to make a relatively informed choice among some array of alternatives.

In the global conversation market, bloggers are the sellers of information and their readers are the buyers. Believe it or not, reading or writing a blog entails a cost. Economists call this cost an ‘opportunity cost’ or the value of the next-best alternative. For example, I could be sleeping right now, but choose to blog. That implies I value blogging more than sleep at this particular moment. You, on the other hand, may be reading this at work. The cost to you or your employer is the value of the productive activities you could be engaged in. But if you hate your job, you probably value reading blogs more highly than work (though your employer doesn’t). The point is, the activity of reading this blog is the highest-valued activity (to you, specifically) relative to your available opportunities. If you are paid $20 an hour and you spend fifteen minutes reading my blog today, the cost to your employer is $5. If you are raeding this at home, the cost to you might be not getting all your chores done, or missing some TV show.

As in any market, the seller exchanges a commodity for currency. The seller values that currency not for its intrinsic value (paper is worthless!), but for what the currency can in turn be exchanged for. Bloggers are much like the sellers of information in the sense that they produce content. The currency of the blogosphere is attention. Why is attention the currency of the blogosphere? Well, in order for something to be ‘money’ it must perform three functions: 1) A unit of account, 2) a store of value and 3) a means of exchange.

Think about an excellent blog post in recent memory. This post’s value will be measured in terms of the links it has received from other blogs (which affects its ranking in google), by the comments it receives as well as by the number of direct hits the post gets. Some bloggers choose to turn their comments off, which blurs their status as being a ‘blog’, but the point is, highly valued blog posts get plenty of attention. The problem, however, is settling on a univerally agreed upon measurement of value. Absolute traffic levels might seem like the way to go, but bots patrol the web 24/7, so unless your traffic counter is set up to exlude them, the value of your particular blog or blog post could be highly over valued. Comments might be a decent measurement of a blog’s impact due to the controversy or level of discourse it generates, but trackback and comment spam account for a certain portion of comments and so again, this measurement over-values the information.

My Dad recently told me something: nothing happens until somebody sells something. Well, in the blogosphere, nothing happens until somebody pays attention. You could have the best blog in the world, but unless somebody links to it, comments on it or visits it, your blog receives no market value. It may have intrinsic value, however. The information provided on your blog may be invaluable in the sense that it documents current events for future reference, but market value is only realized once an exhange has taken place.

Economics is really about how people allocate limited goods in a world of potentially unlimited wants. Attention economics, then, is about how we allocate attention in a world of possibly unlimited demands. If you think about it, somebody’s always trying to get your attention. Just driving down the street will illustrate this. Traffic signs are trying to get your attention to warn you about construction. Stores have signs near the road advertising sales. People with nice cars have their steros turned up. And, depending on what area of town you are in, there’s the prostitutes.

Life is just one big bid for attention. Newborns demand it of their parents, and their development is contingent on receiving enough of it. People dress in order to get it. Workers, seeking to advance their careers, try to obtain it from their bosses. Bloggers try to get it through generating cool content for others to read. Celebrities are rumored to engage in fake marriages if it will get the attention of the media. Most, though not all people, derive a sense of self-worth from the amount of attention they are able to obtain from others.

The blogosphere is a global conversation market where sellers of information (bloggers) exchange this commodity for currency (attention), paid by the buyers (blog readers). The amount of attention paid by blog readers varies, however. I might get a few hundred hits to this post via google searches for ‘the economics of blogging’, but 90% of those hits might last for mere seconds as potential readers assess this information and find it might not be what they are looking for. This is why hits are not the best measurement of value in the blogosphere. If I looked to my traffic logs and found that most readers spent five minutes reading this post, and maybe even posted a comment or linked to it on their own blog, I might conclude they actually paid me some attention.

What this implies about the blogosphere, then, is that a possible unit of value in the blogosphere is a composite of comments (filtered for spam), hits (filtered for bots), links and an ‘appropriate’ amount of time required to read a post. For example, if you left your computer for five hours and had this post on the screen, my traffic logs would indicate this. I would know you spent five hours here, but you may have just left the browser window open in an attempt to return to it later. I guess attention is a difficult thing to measure.

One would not necessarily conclude that money is the only unit of value in the blogosphere. Some bloggers might have high traffic levels, lots of discussion and they may get plenty of outside links to their posts. But what if they choose not to have revenue-generating ads on their blogs? They’re still generating something of value to people, but they aren’t converting their attention into money through ads. Ah, but perhaps they don’t know how to put ads on their blogs, or they just don’t have a lot of confidence in their content.

They may just have a different optimization path than the usual blogger. I would venture to guess that if you looked at a blog that was obviously garnering plenty of attention on a consistent basis and offered incremental amounts of money on a per-click or per-hit basis, eventually any blogger would cave and allow ads on their site. They might be concerned about being able to choose the look of their ads or the ability of advertisers to influence content, but every blogger has a financial breaking point; who wouldn’t want to blog for a living?

Sphere: Related Content

In protest of South Dakota passing a bill banning abortion, one blogger has decided to publish a how-to manual as a form of protest.

Hey, it is what it is.

And while I know, women of South Dakota, that you never asked for this, now is the time to learn how it is done. There is no reason you should be beholden to doctors — especially in a state where doctors have been refusing to perform them, forcing the state’s only abortion clinic to fly doctors in from elsewhere.

No textbooks or guides existed at that time to help them, and the equipment was hard to find. This is no longer true. For under $2000, any person with the inclination to learn could create a fully functioning abortion setup allowing for both vacuum aspiration and dilation/curettage abortions. If you are careful and diligent, and have a good grasp of a woman’s anatomy you will not put anyone’s health or life in danger, even if you have not seen one of these procedures performed.

h/t:Kottke

Been wonderin’ what my buddy Don Hill has been up to? I really gotta hang out with this guy more often.

He has a sweet download available to the public.  Check it out. 

Just to switch things up for the weekend, I’ve fired off a new template. Don’t worry, the older, uglier version will be back. I’ll probably throw in a theme switcher to let you pick the one you like.

For those of you who are looking for pictures of the Syncrude Crane Accident, you can find them HERE

Way rad.

http://mchammer.blogspot.com/ 

Check out The Pencil Clock, a clock written in pencil.

h/t: pencilrevolution