The teacher and the CEO

Both teachers and CEO affect the performance of the work of a large number of people. A CEOs decision can make millions in difference for how a company performs. Ultimately it is about directing a large number of people towards there most productive or profitable work.

Likewise a good teacher will over the years result in several hundred people who will perform better in their jobs and careers than they would otherwise. Of course just as with the CEO we talk about very small percentage difference for each person, but which adds up when you consider the number of people.

And yet a teachers salary is minuscule in comparison to a CEO's salary. Why is that? The extra benefit they bring to society is probably similar. However a teachers students do not belong to a company which performs better or worse depending on their performance, so that the owners will see it as profitable to get the maximum performance from the teacher. The extra value a teacher brings to society suffers from the free rider problem. Just as nobody would pay you much to clean the air, because the benefits are distributed over too many people.

I is just a thought that recently occured to me. I think this is an example of a market failure but I am not sure. One might still wonder why good teachers in private schools don't make loads of money, perhaps it is an information problem.

And even if there was a way to compensate better teachers, would it really make much of difference to society apart from making more smart people chose to be teachers? It is not obvious what an optimal distribution is of teachers across all the students of a country. Should the best teachers teach the brightest students or the less able?

Peoples dislike of the top menu bar on OS X

I just stumbled across a discussion about simplification of the Nautilus file manager toolbar (used on the Gnome desktop environment on Linux).

A fellow who calls himself Aigars Mahinovs wrote this:

I know very well what Fitts law is, the problem is that it is useless in case of multiple windows (as mentioned before) or if you need to get back to the window. And it is even worse for dealing with menus, because they drop down.

It is great that I can disregard the vertical component while getting my mouse cursor to the menu. It is not great that I have to move my eye focus from one side on my large 1080p monitor to the top left corner of another 1080p monitor. It is not great that after I click on the menu, I still need to position my mouse *exactly* on the sub-menu items and the sub-sub-menu items. And then when this whole thing is done I need to travel with my mouse and focus all the way back to my original window.

It is a horrible design.

As an additional fun exercise, try working out how to implement global menu with focus-follows-mouse.

I see this kind of arguments against the Mac menu bar every once in a while, often people seem to not know very well what they are talking about. But Mahinovs seem to know quite well what he is talking about and seem to have put quite a lot of thought about it. Which makes it all the more puzzling to me. I wonder has this guy really tried to use a Mac for an extended period?

At home I use a 24 inch iMac. That should be ample space to get this terrible experience he speaks of, but I have yet to experience it. He describes mouse movement as if it involved running and you should move as short as possible to not strain yourself. But moving far distances with a mouse across the screen if you do not need much precision is very easy. That is exactly why fitt's law shows that hitting large objects on the screen is faster than hitting small objects. If there was any truth to Mr. Mahinovs assesment then buttons should be as small as possible so one would not have to move the mouse so far to get between them. But we know that it is quite the contrary, they should be large. That is quickest. It is just the need to balance screen real estate with fitt's law that don't make them huge.

Of course there are other important reasons why a top menu bar makes sense: It makes it possible to have windowless applications, and to have small windows for your apps. Frequently when using Gnome at work I need to resize a window to be able to access all the menu entries. I end up with wasting screen realestate because I need to have windows bigger than I need just to get space for the menu bar.

And finally the case of multiple windows is irrelevant as one spends most of the time accessing menu entries in one app at a time.

Review of "How Rich Countries Got Rick", part 1

I recently stumbled on a book called "How Rich Countries Got Rich ...and Why Poor Countries Stay Poor" by Erik S. Reinert a fellow Norwegian. This is a topic of great interest to me and from what I could read in the first pages it took a more historical approach to economics, rather than the mainstream mathematical one.

Background for interest
I found this interesting in context of the current financial turmoil. Neo-classical economic theory has just taken a hard blow. Greenspan has admitted that he was "wrong", in the sense that markets are not as self regulating and self-correcting as neo-classical economists often like to think.

So that is why I started reading this book with interest, only to be majorly disappointed. Well, it could get better. I have only read the first chapters, so that is why I call this part 1.

Method of reasoning
What I strongly dislike about the book is excessive name dropping and what in my mind amounts to cheese Hollywood "one-liners". All through the pages I have read Reinert mentions countless economists, scientists and philosophers, but without doing much more than mentioning a single sentence they said about something to backup his own ideas. Just to pull a random example:

Recognizing this in the middle of the Cold War, in 1955, Nicholas Kaldoor (1908-86) wrote that "the Marxian theory is really only a simplified version of Ricardo, clothed in a different garb"

For us to understand why Communist economic theory and neo-classical is very similar Reinert should explain concretely why by mentioning concrete examples of assumptions and predictions in both theories. Instead he pulls quotes like this full of irrelevant information for almost anything he asserts. Do we need to know that this was in the middle of the Cold War? Do we need to know when Kaldoor wrote this? Do we need to know when he lived? Name dropping a bunch of people who said single sentences that amount to back up your view on economic theory, does not assist the reader in understanding why that is so. We are just invited to believe you because apparently so many smart people seem to think what you think, but we don't need to know why apparently.

Reinerts flawed understanding of science
Reinert goes to great length to ridicule current economic theory based on abstract math. Of course this is not completely unwarranted. The mathematical models are based on assumptions which are often crude approximations to reality. Economics also suffer from the problem that unlike a lot of other science one can not conduct experiments were one can control variables properly.

But from there to completely dismiss the validity of using abstract mathematical models for economics is big step. Reinert argues that mathematical economic theories today assume each person is identical, each labour hour is equal etc and thus reach the wrong conclusions because in reality differences are considerable between humans, type of work etc.

But Reinert is completely missing the point. Nobody who do mathematical abstractions of the real world pretend that these abstractions are the same as the real world. But that does not mean that these abstractions are worthless. These abstractions are also contrary to what Reinert seems to suggest not unique to the field of economics. It applies to every science.

Reinert likes to compare todays math based economic theories with theories in physics, but physics makes the same kind of generalizations and abstractions as made in economics. In physics we also have to assume things that don't exist in the real world like perfect spheres, frictionless surfaces etc. Even in physics you can't just apply theories willy nilly without considering context. Sometimes one has to use the wave-theory for describing the behavior of light and sometimes one has to use the particle theory to describe behavior.

Abstractions and assumptions are necessary to be able to reason about particular aspect of a system. When we make economic theories, we don't need to consider human beings digestive system or hair color to make a useful theory. The key is to extract those traits which matter to economic behavior. That current theories make assumptions about economic behavior which is wrong does not make the approach of abstraction wrong. It simply indicate that we need to find better assumptions and adjust our theories.

Failure to understand the concept of comparative advantage
Reinert paints a caricature of what comparative advantage is about. In fact I am wondering whether he actually understands it at all.

He takes the example of comparing a waitress to an engineer or a country of dishwashers and shoeshiners with a country of lawyers and stock brokers. In fact he makes these comparisons repeatedly with rehashing the same point over again and over again without bringing anything new to table. The last paragraph I read about comparative advantage he is ridiculing the idea that a stone age labour hour should produce the same wages as a Silicon Valley labour hour according to Richardian trade theory.

There are a number of flaws in these comparisons and I will try to address the most obvious I can spot.

First of all comparative advantage does not imply that we will get the same wages. It simply states that wages will be better than if each one did not stick to their comparative advantage.

The principle of comparative advantage is not really that difficult. It is clearly explained at wikipedia. I am a software developer by trade. I could in theory build my own house and a builder could in theory write software. Except neither of are very good at what the other one does and would have to spend a lot of time learning the other trade and then do a shitty job at it. So rather than my taking some days of each week to build my house, it is better than I work the whole week writing software and paying a builder to make my house. He can use that money to buy my software rather than spend ages creating it himself. We are both better off even if that doesn't mean that the builder will make the same amount of money as me.

I believe the core of Reinert's misunderstanding is that he equates a way of performing a trade with the trade itself. If you specialize on washing dishes by hand of course you can never get rich. But if you specialize on simply washing dishes you could eventually automate it in some way, increase productivity and get higher returns.

Secondly Reinert takes a too static view of comparative advantage. We are of course talking about a limited time scale. Richardian theory doesn't ban you from educating your population. Even if a country focus on its comparative advantage and that happens to be say agriculture that doesn't prevent manufacturing from entering naturally. If one continuously improve productivity in the farming sector then eventually there will be a lot of unemployed people. They got to do something. We see this thing all the time. Simpler types of manufacturing moves from developed countries to developing countries thus spreading development.

Look at e.g. China it is a developing country and even if it opened up its borders to complete free competition they would still be manufacturing things for the whole world. Why? Because it is still cheaper to manufacture in China than anywhere in the western world. Factories would move there regardless.

And yet according to the theories of Reinert, a country like China should be stuck being poor. It would only develop industry if it protected its own. But China doesn't need to protect any domestic industry. Industry moves in from abroad regardless.

Joe the plumber

John McCain pulled used the example of Joe the plumber at the last presidential candidate debate with Barack Obama, as a way to bash him for his tax policies.

Now I think Obama actually gave, quite a good answer on the whole issue so I don't see how the republicans and the media can make this into such a big deal, but regardless it does raise some important fundamental questions.

Joe (which wasn't his real name) was upset about the fact that Obama's tax policy would mean that he would have to pay more tax (than with McCains plan) when taking over the plumbing business, which he claimed would make more than 250 000 dollars a year. Of course we have the fact, which Obama pointed out, that he would be paying less tax now with Obamas plan.

Still the main question is, is it fair that you have to pay more taxes when you have worked hard and finally made it? Why should not people be allowed to enjoy the fruits of their hard labor?

Present Joe vs Future Joe
That is one way of looking at it. But I would invite the reader to try to look at it from another angle. If we assume most people will follow a Joe the plumber career it means that they will spend many years working long hours not making much money before they finally make it and make loads of money.

If one simplifies this means that people will spend most of their young years poor and they old years rich. That kind of sucks doesn't it? It is not when you are old you need the money. Joe the plumber has been needing a lot of money already to give his 13 year old kid a good upbringing. That means giving him access to good schools, and getting enough time to be home and help him with homework or all other problems of life. Simply to be there to be a good role model.

Wouldn't it be great if present day poor Joe could borrow some money from future old and rich Joe so he could spend more time with his son and give him better opportunities. Old and rich Joe has no son living at home. No mortgage to pay and no college for his son to pay, so he really doesn't need all that money.

Well turns out there is a way for future Joe to give some money to present day Joe. That way is Obamas tax plan. It doesn't make Joe pay less or more taxes through his life, but it lets present day Joe pay less taxes today, by taxing future Joe a little harder.

To me that sounds like a good trade off. Future Joe has a lot more money so he can afford to pay a bit more tax while present day Joe could really do with a tax break.

Michael Moore Hates America

Today I got down to watching Michael Wilson's documentary about Michael Moore called "Michael Moore Hates America". I don't really know what I expected.

But I was curious about it because I had heard quite a lot about how Michael Moore twists the facts before, which made me interested since I have seen Fahrenheit 9/11 and Sicko and thought both of them were quite good.

By quite good I mean I found them entertaining, interesting and that they had quite an important main message. That doesn't mean I agree with everything Michael Moore says or does. I do think he paints things a bit black and white and attempt to suggest connections were there are non. But I don't think that is a huge problem. Viewers should be able to judge for themselves based on the footage they see and make their own conclusions. As long as the footage is authentic and hasn't been tempered with or altered viewers should be able to make their own conclusions, especially when they have already been made aware that Michael Moore does employ quite creative ways of stringing together footage.

So having said that I must say that "Michael Moore Hates America" was an extremely disappointing piece of documentary. I don't think Michael Wilson is being dishonest. In fact I think he is probably more honest in his documentary making than Michael Moore is. He really does seem to be a good guy that wants to do the right thing, etc.

So why do I think it is such a disappointing piece of documentary? First of all the documentary is just really boring. It has no entertainment value. Often it just feels like a bunch of talking head blabbering away without ever getting to the point. At least Moore's movies are to the point and entertaining. Secondly it is surprising how little it has to show for. At the end I was thinking "This is all they got?" I was sure there would be lot more factual errors by Moore that they would report on. The documentary made me almost think that Moore was a lot more truthful in his documentaries than I had given him credit for.

Liberties with the truth Michael Moore style
While my impression was that Wilsons tries to be more honest than Moore, it doesn't mean he is. Someone else should probably take their time and look through his documentary for factual mistakes more thoroughly the way others have with Moore documentaries. But it was quite obvious for me early on that Wilson employed a lot of the same tactics in his documentary as Moore does. I think that is a bit hypocrite when one makes such a big point out of how bad it is that Moore does it.

Specifically he tries to discredit Canada as being any safer than the US, stating that Canada has twice the crime rate of the US. While this is in fact true, it is misleading the viewer by not giving any further specification. From wikipedia and by following its references we can read that the US that robbery rate is 65% higher, homicide rate is more than 3 times as high, more than twice as many aggravated assaults per capita etc. In short for any serious crime the US is far above Canada. Canada has overall more crime than the US because there are more of things like bike thefts, shop lifting and more theft of Trucks etc. Really, I don't think bike thefts make Canada a more unsafe place than the US;-)

Secondly all the Americans he interviews in the movie are your stereotypical hard-working american, while the few Canadians you see are stereotypical teenage dope-heads (not that I claim they are drug users, they just look like it). They got piercing, long hair and what they said can essentially be distilled to: "Dude, America is so stupid. We are like some much better in Canada".

Thirdly Wilson doesn't seem to try to make in balance in his movie by interviewing people of different political stripes on their opinion of Moore or analysis of his movies. They all seem to be well known far-right conservatives. Now Moore might do the same with liberals, but wasn't Wilson supposed to be more honest and truthful than Moore was?

Some general observations on the show a positive side of America part
Apparently one of Wilson's other stated goal in the movie was to show a more positive side of America and American values. To a non-american it didn't really do that. Quite the contrary. There were sentences like: "People are downtown enjoying all the freedoms this country gives them". Which prompt me to wonder, what freedoms? The freedom to go to a bowling alley and get pissed drunk in a bar afterwards? No, seriously as one of the worlds oldest democracies the freedoms Americans should in that case be enjoying are freedoms given to you in a democracy, like the right to vote, the right to write and say anything you want etc. That is not stuff you go downtown and enjoy on a saturday night. Suggesting that is just meaningless hot air.

Most other sentences proclaimed by one guy after the other seemed to be along the lines of: "America is the best country in the world, and it offers more opportunities and freedoms than any other country in the world. It is the best place to live. You can do anything. You can become anything etc".

I do think America is a great country and I think it is good to be proud of your own country, but somehow I have the feeling that 95% of all those people proclaiming these things in the movie have never set their foot in another country, aside from perhaps Mexico and Canada. And judging from my own impression from traveling around the American heartland, they haven't read or learned much about other countries to be able to make such bombastic claims about America and other countries.

Hence the impression that the movie does not give a positive image of the US, but rather a view of a country made up of people you are quite ignorant.

Michael Moore movies on the other hand give a much more positive image of the US, because it shows people who are aware of Americas flaws and want to fix them and make it a better country. If anything Moore movies make the American system look bad. But they certainly don't make regular Americans look bad. Quite the contrary.

The lack of innovation in large companies

From following news in the tech industry and my own experiences working in the corporate world it has occurred to me how useless in fact a lot of large companies are. Both in software and medical industry real innovation seldom seem to happen within the companies. Instead it happens in small companies and these get bought by the big companies who make the inventions widely distributed and used.

In many ways it reminds me of the relationship between the Romans and the Greeks. A lot of what we consider as Roman inventions were in fact greek. If the Roman empire was the big multinational, the greeks were the small upstart company with all the good ideas, however they lacked sales channels, production facilities etc. When greek inventions got adopted by the Romans they got spread to the whole world (or what was the whole world then rather). Roman sense for organizing, standardizing etc made sure that inventions got put to efficient and widespread usage.

I worked for a small upstart company once competing against a huge multinational company. With a handful of software developers we managed to do what the behemoth with its army of thousands of programmers proved unable to do despite endless attempts. In the end lack of infrastructure for sales channels put limits on growth despite the spectacular progress we experienced, so in the end my upstart company decided to get bought up by the multinational. And then things suddenly snowballed. The product really gained ground when the big corporate machine with its huge sales channels and large network of people knowing each other the the board rooms were able to push the product to each other.

From reading the tech news I realize that this is just the common way things happen. Apple got their iPod software from a small software company. Their iPhone touch interface they got from another small tech firm they bought. Microsoft got MS Office from another company. Even DOS, the foundation of Microsoft's dominance, was bought from another hacker by Bill Gates. Visual Basic was bought from yet another company, and so I believe their ubiquitious COM technology was as well. The list goes on and on. Likewise the new drugs that big pharma "invents" almost exclusively comes from universities or small biotech companies.

I don't mean to say that these big companies aren't useful and don't serve a purpose. They obviously do. However I think they greatly exaggerate their own importance. Now that wouldn't matter much it if it was just about bragging. However they use this constantly in favor of giving themselves fat rewards for their "innovation" and whine about the need for protection of their intellectual property, usually in the sense of never expiring patents and the likes. Without it they say they can't protect they investment in research and development. And without that no innovation and society would suffer. Only problem is, they are not the ones inventing anything. It is the small companies which do, the ones who typically can't afford to protect patents in courts or file a patent to begin with. So what this really ends up being about is how to basically buy monopoly rights so you can milk the customer for what he or she is worth as long as possible.

But this isn't really unique to tech industry. It is the same with the content creation industry. The big record companies get copyright to songs they never wrote. They are not the creative geniuses, and yet they are the ones which by far get the biggest benefits. But they got all the leverage. Without them an artist cant distribute his or her music to people or let it be known.

Hopefully the world will change when technology like the internet will allow artists to spread their music and sell it without having a big corporation behind you. When you can sell from iTunes you don't need big companies with CD manufacturing facilities and CD distribution networks to reach the consumers.

Big corporations reap the benefits not because they are innovative but because our current technological limitations, favor them. When products and ideas can more easily be spread and realized they will be made superfluous.

Corporate Greed

I used to be outraged at peoples complaints about CEO pay in Norway. Nobody ever seemed to complain about the huge salaries which fotball players get payed, despite the fact that running a company in my view is a much more important business than kicking a leather ball around on the field. CEOs do a very important job and should be rewarded for it.

However something has been bothering me for a long time: the feeling that something still isn't quite right. The CEO pay might not after all reflect market value, and it might not work as incentive in the right way. Looking at numbers for how CEO pay is increasing much higher than pay for all other professions and it does this in time without comparable increases in corporate performance. Add to that the fact that a lot of CEOs make a lot of money even when they screw up.

I think a lot of us who are believers in the free market easily get apologetic about this. Economic text books tells us that valuing things at market value is the most efficient way to allocate resource and make the economy grow. So if the market says CEOs need to make 10 million dollars that must be the best for the economy? Never mind the fact that we feel very uneasy about this fact. I think what really made me rethink the idea was reading about the insane salaries of CEOs in the US. They are so beyond anything I imagined that they start to look like some sort of caricature of the free market.

Most influential for my change of views is probably reading books like Freakonomics, The Undercover economist and about the prisoners dilemma from game theory. It shows clearly how market sometimes fail spectacularly and that often we forget that money is not the only thing with which we can buy goods or services. Social standing, reputation, positive feedback also factor in on our evaluation. The high regard and fame one would get for say curing cancer would to many be worth much more than a given amount of money.

In the case of CEOs I believe that is an example of market failure. Adam Smith the father of modern capitalism even pointed out 250 years ago how companies were best run when there was few owners and the owners were engaged in the operations of the company. He observed that the bigger the companies got the less people care about performing well because ones own performance matter less and less to the overall result of the company. And when the leader (CEO) of the company isn't even owning part of, he or she will have less at stake to make it perform.

So one has tried to alleviate this by giving stock options. Only problem is that since CEO don't get to stick around for very long time, they never get in the habit of doing things which are particularly good for the company in the long run. It ends up being all about short term profits. Whatever will make the stock go up while you are still in the CEO chair.

That is one problem, but perhaps the most serious one is related to the prisoners dilemma. Just as the prisoners end up choosing a strategy which is bad for both of them, the arms race between companies in giving their CEOs higher salaries aren't really helping society or the companies, but they have no way to end the race, because they can't simply agree among themselves to not pay more.

Obviously CEOs need a better compensation than a lot of other workers. Otherwise companies wouldn't get talented people to run companies. They would go do something else. Maybe even something that pays less, if it is less stressful. However the problem is that American CEO salaries are now so high that even if you cut the salaries to one tenth, being a CEO would still be more desirable from an economic point of view than anything else. So one wouldn't loose any bright heads to other professions. Likewise as long as the relative difference remained, big companies wouldn't lose heads to smaller companies because there would still be more to earn at big companies.

Of course one couldn't just slash their salaries by fiat or by setting maximum ceilings on income etc. I am not a socialist so I don't believe in force. No, the main problem the way I see it is simply the culture of greed. Greed has become accepted, almost saluted. Many might point out that among average Joe this isn't always the case, but the problem is that the CEOs and the corporate fat-cats themselves, see it as admirable. They all think they deserve it. They think their contribution to the company is so great that they need to be rewarded with tens of millions of dollars. As long as they believe this, the problem can not easily be fixed.

Not until they realize that this is pure greed and selfishness can one see any change. So in my belief what is needed is a change of values and ideals. And that is not something which can easily happen. It can certainly not happen by government passing a new law. What we need is a great leader or person to step forward and change public opinion. To make greed and flaunting your wealth embarrassing again.

I am sure many die hard Libertarians will denounce all of this either jealousness, or say that the CEOs really deserve what they get due to the extra value they bring to the company. Of course this is all rubbish, in more ways than I can count. First of all a lot of people high up in the system get there from going to the right school, not for being bright but because their parents had a lot of money. Companies higher these people not because they are bright but because of the connections they get at ivy league universities. Companies value those connections. And thus the system perpetuate itself. A lot of potentially bright people who could have been great CEOs never make it because they didn't belong to the right social circle.

Secondly the contributions of a CEO pales in comparison to the result a company gets from a a bright engineer or scientist coming up with a bright idea. Yet, even if inventors typically contribute the most to both the companies and the countries economy as a whole, their reward is often miniscule. In fact it is surprising that people become scientists and researchers at all because it makes next to no economic sense at all. Yet they do. If people can put endless hours each day into the pursuit of curing cancer, without being paid millions of dollars, why shouldn't a CEO?

It all comes down to bargain power. Scientists are not typically trained in the game of economics and they have less bargain power than a CEO, because their work has less short term impact on the company's economic performance.

I am not asking for CEO salaries to scientists and engineers, but merely pointing out that people who are equally hard working, equally intelligent and over the long run has equal influence on the economic performance of a company still manage to be motivated to do a good job, with a much lower salary. Perhaps because because people do in fact also value rewards which are not measured in pure monetary terms?

Proving existance: God vs Dawkins

Some time ago I read an article called Does Richard Dawkins Exist?. It was quite intelligently written, as a way of making fun of Richard Dawkins or any other atheists rebuttal of the existence of God.

What strikes me however is that it is like every other argument by religious favoring the existence of God. It is the same flawed argument they have been using ever since the days of Darwin. The arguments are always the same, except they get update with new shiny wrapping every so often and presented as a new killer argument.

Basically this parody is trying to appeal to our common sense. The reader is invited to believe that only an idiot would be this skeptical about the existence of Dawkins. It is self evident that he exists. From this the reader is tricked to draw the conclusion, that likewise only a fool would doubt the existence of God. Just look around you at the wonders in nature and it should be self evident that he exists. The fact that dispel this kind of argument in "God Delusion" the very book the essay writer makes fun of is a bit ironic.

The key, which Dawkins explains at length is that the argument is based on the flawed assumption that the existence or non-existence of anything we don't have solid evidence for or against is always the same.

It is true that we can't know for 100% sure that Dawkins exists. In fact we can't know anything 100% sure. But that doesn't mean that everything is equally probable. Some things are more likely than others. Evidence always weight more towards one conclusion than another.

In a murder trial we might have technical evidence like the blood of the suspect at the crime scene, the gun is found to have been registered on the suspect, he doesn't have an alibi for that night etc. Sure the cynic can say that we don't have 100% proof that he did it because we weren't there and saw him do it. But as evidence piles up, it becomes very likely that he did it. At one point it becomes so probable that we simply conclude "He did it" and put him behind bars.

Likewise I can't know for sure that Dawkins exist, put if I was a lawyer in a trial, trying to prove his existence I would have quite a lot of evidence to support me. I could show books which he wrote. I could show footage of him speaking. I could make calls and get witnesses which can attest to the fact that they have seen him etc.

Witnesses could be cross examined. I could check that they described Dawkins in the same way. I could find records at the university he went to saying there was a certain mister Dawkins who got examined there. All this combined with the fact that we know biology professors exist already. It does not take a huge leap of faith to believe a particular one by the name Dawkins exist.

God on the other hand is completely different. While the creationists could present so called evidence like nature in supporting their case, there would alternative explanations which are just as good. Combined with the fact that none of us see beings like god on a regular basis. It is more likely that a man like Dawkins exist because we already know for a fact that men exists. We met them many times before. We might even have met biology professors. However nobody has ever seen or met anything remotely similar to God, and that makes God that much more improbable.

Gambling, prostitution and drugs

As a follow up to the previous post I want to highlight some other aspects of illegal activities not related to property ownership. As Hernando De Soto clearly explains in his book "The mystery of Capital", when the common peoples understanding of the law diverges too far from the official law, the official law stops being followed and stops having any meaning. The result is what corresponds closely to gangster rule. Since people are illegally settled and run illegal businesses they can't depend on the police for protection against thieves, swindlers, land disputes etc. Gangsters will take the role of police in providing protection and settling disputes. For the authorities fighting the gangsters became impossible because they are part of a whole world that is illegal. The people in the world are not going to help the authorities in fighting the gangsters because the authorities represent a threat to the common people. To the authorities their property and businesses are illegal so of two evils they will chose the gangsters.

This is hardly an ideal world and the common people would love nothing more than to be part of the official law if they could. Whenever they are brought into the official law, the gangsters lose their power because the police is allowed to operate normally again.

To me these observations about the problems of the third world also show a clear parallel to why we in the west have so much problems with drugs, gambling, prostitution etc. Just like with property laws in the third world, which are based on an idealized reality that doesn't exists and take no considerations to the peoples law, our laws on drugs, prostitution and gambling are also based on high ideals which have nothing to do with the real world. As probation showed in the 1930s USA, when you make laws which a significant part of the population don't believe in and don't want to follow you open up for gangster rule and crime. Gangsters and crime will always fill the vacuum left when the official law leaves. When the bars and drinkers don't get what they need from the authorities they will turn to the gangsters. The response from the authorities is always condemnation, blaming the people for lack of moral, criminals, aiding gangsters etc. The faint belief is always that strong moral campaigns, and stricter punishment will make people finally turn around and behave as the authorities want them to.

This is what I think is the problem with drugs and prostitution. A significant number of people will always want to do drugs. The legal system has to realize this and make laws that reflect that reality. This doesn't meant that I think everything should be legal. Surely because someone thinks it is okay to kill people doesn't mean that it should be legal. Even gangsters have rules, and don't allow you to kill anybody. The bosses at the top should sanction it and there should be a good reason. There will always be deviants. The law is not supposed to cater for any deviation, then there wouldn't be any point in having a law. But when something is sufficiently common and accepted it should be worked into the official law in some way.

Soft drug usage e.g. is so common that making it illegal serves no purpose anymore to make it completely illegal. Instead it should be brought into the official law and regulated. Take e.g. the dutch policy on soft drugs. It doesn't allow you to freely use and sell drugs wherever you want. Rather it provides a law that is close enough to reality that it get accepted by the majority of users. In Holland most soft drug users chose to be within the official law.

Prostitution has much of the same problem in my view. There has always been men paying for sex and women selling it. Laws should reflect that reality. When they don't it leads to a lot of crime. Gangsters make profit from prostitution. Prostitutes are subject to abuse and violence. It is not much different from a shop owner operating illegally. He or she will be subject to abuse and violence from gangsters or customers but can never report it to the authorities because he/she is already illegal and would risk losing his or her business if contacting the authorities.

Trafficking victims suffer the same faith. Because they are illegally in the country they will not contact authorities despite abuse. Had they been there legally they would never have been in that situation.

Again Holland dealt with part of this problem through extensive legalization and regulation of prostitution. But people don't always realize the benefits. They point to the fact that the number of prostitutes have indeed not declined. Or e.g. the example of sweden were buying sex was made illegal it was pointed to the fact that street prostitution had gone down as proof of success. However that is much like saying more severe punishment against squatters have led to fewer squatters. The question is, are the people who would have been squatters under milder regimes or the ones that are squatters under the new regime any better off? Probably not.

Likewise swedish prostitutes are likely not any better off, even if there are fewer of them. And in the case of Holland, and important fact is that even if there are not any fewer prostitutes in Holland, their lives are considerably better. They enjoy strong legal protection, they have police looking after them. Video cameras surveying the red light districts, alarm buttons to push if a customer is violent etc. All adding up the the fact that surveys have found, that dutch prostitutes are quite happy with their work. Now that is of course a very politically incorrect thing to say. It as if I feel guilty for saying it. But that is just the facts. But for some reason it seems like our society has defined prostitution as infinity misery in itself so that there is no gradation of it. It is all bad, so the only measurable improvement in the situation is merely how many there are of them.

It is just like with drug usage. We don't care about the horrible lives that junkies live. All that matters is how may of them there are. If we can reduce to number by 50% through draconian laws and punishment, then we deem it a success. Even if it means that the ones left get their live worsened several times over. In fact one of the problems, prostitution is in many ways caused by our failure to tackle the other problem. Of course there will always be prostitution, but the problem is exacerbated by the fact that many drug addicts can't find enough money for their habit without resorting to prostitution. Had drug usage been legal the prices of drugs would have been so low that prostitution would have been unnecessary.

Why capitalism fails in the third world

Imagine a world were it is impossible to get a bank loan. You need a house to live in, but you can't afford one without getting a loan. No problem you think. I will just rent. But then imagine there is nowhere to rent in the area where you work and live. To a westerner this sounds like quite a hypothetical and unrealistic situation.

However this is in fact the situation facing most of the people living in the poor world. Getting back to the scenario, what you would probably do is to build some temporary living quarters on a piece of land. Except to further complicate the issue, you are not able to purchase any land to build on. Actually you can but it will take you 14 years to get legally. Obviously you need shelter now and can't wait that long. So you put up something at a location illegally.

From these simple principles it becomes apparent that you will run in to a whole host of problems. You probably can't put up a tent or something downtown or in the yard of someone in the suburbs. That would make you run into trouble with the authorities and local people living there. So you will go out of town and make a home out of the materials you can afford to buy cash right now.

I think what becomes pretty clear for any reader by now is that you will be living in quite a poor and shitty situation. You will end up living in a shanty without any proper road connection, sewage system, water, electricity etc. All this while you have a regular job making a good wage. This actually give a good description of the problems that face the majority of people in the poor world. It is not poor peoples lack of wealth that is the major problem. As in our example, you are not living in shitty conditions because you are poor, but because you don't have access to simple things like a bank loan.

Why this is the case is described in fascinating detail by Hernando De Soto, a Peruvian economist in "The Mystery of Capital". The book explains why capitalism works in the west but has failed everywhere else. His great discovery was that poor people actually has a tremendous amount of wealth but they are not capable of utilizing it. The reason why they can't get simple things like a bank loan is because they don't have official papers showing that they are owning the property they live on. Without security banks don't give loans. The poor can't get these papers either or obtain legal papers for any property.

To a westerner this might seem like a mystery. But the fact is that in many developing countries up to 70% of the population occupy their land illegally. The problem is that the law is written with complete disregard for reality. Complying with the official law is so difficult that people opt out. What De Soto found was that registering property, businesses, making property transactions official etc, had to go through dozens of government institutions and so much red tape that years could pass by. In many countries more than 10 years. This effectively rendered the official law useless for most people which instead have to live outside of the law, instead following their own made up laws.

I am not going to retell the whole book, but the main point was human laws are not that different from natural laws. Scientists don't make the natural laws they discover them and codify them. The provide elaborate descriptions of how the work. In the same way real laws are not made by legal experts but rather "discovered" and codified. Anywhere in the world the common people already have their own laws and customs governing their interaction. In the poor countries people have made up their own titles for land, their own way of solving property disputes etc. All the legal experts need to do is discover those laws and codify them. Laws made from the top without consideration to the peoples own understanding of the law will never be accepted.

This might sound like some exotic problem only related to the third world. However a couple of 100 years ago the western world faced exactly the same problems. America in the 1800s was a country basically filled with illegal squatters, just like third world countries today. Most people lived outside the official law, but that didn't mean they didn't have laws. They were just not official. The feat that the US and other western countries pulled off was to realize that the law of the people had to be codified and adopted in the official legal system. Countries that did this prospered and countries which failed to do so became failed states.