Thursday, October 26, 2006

Guide to Stealing an Election

In case we haven't harped on this enough, from Arstechnica (via /.), comes a guide to using electronic voting machines to steal an election:
What I'll show you instead is a road map to the brave new world of electronic election manipulation, with just enough nuts-and-bolts detail to help you understand why things work the way they do.

Along the way, I'll also show you just how many different hands touch these electronic voting machines before and after a vote is cast, and I'll lay out just how vulnerable a DRE-based elections system is to what e-voting researchers have dubbed "wholesale fraud," i.e., the ability of an individual or a very small group to steal an entire election by making subtle changes in the right places.

Follow the link above to the full article.

Six Word Stories

In the tradition of Ernest Hemingway ("For sale: baby shoes, never worn."), Wired magazine searched out current authors to write their own six word stories. Some are less than interesting, others are quite good. None have the power of Hemingway's story, and several of them rely on well-known stories to provide important context for the six-word stories... those are more sequels than stories of their own.

My favorites:

Gown removed carelessly. Head, less so.
- Joss Whedon

Longed for him. Got him. Shit.
- Margaret Atwood

Batman Sues Batsignal: Demands Trademark Royalties.
- Cory Doctorow [note: and you thought this wasn't an IP post...]

Steve ignores editor's word limit and
- Steven Meretzky

Leia: "Baby's yours." Luke: "Bad news…"
- Steven Meretzky

(H/T: Language Log)

Wednesday, October 25, 2006

Best Show on TV

The season 6 trailer for 24 came out last night. In case you weren't watching, here it is:

Tuesday, October 24, 2006

Captain Copyright's Day Job

It seems that just like Superman, Captain Copyright has a day job at a newspaper. While Clark Kent worked at the Daily Planet, it seems that Captain Copyright's alter ego (who presumably looks just like Clark Kent) works at the North Country Gazette.

From the front page of the paper's website:
In accordance with Fair Use of Copyright: WE FORBID ANY REPRODUCTION in part or in whole of The North Country Gazette.
I particularly like the capitalization. Remember Captain Copyright's claim:
You are not permitted to copy or cut from any page or its HTML source code to the Windows™ clipboard (or equivalent on other platforms) onto any other website.
This, of course, is profusely ridiculous. As the Volokh Conspiracy points out, there's no way you can just state that Fair Use doesn't apply; that's the whole point of Fair Use.

FYI, just so I can reproduce some things from the Gazette, the North Country Gazette serves "New York State and beyond," providing "news, commentary, (and) investigative reports."

Friday, October 20, 2006

Economics of Casual Fridays

It's casual Friday in the office today and, for whatever reason, I found myself wondering why we have casual Fridays instead of, say, casual Mondays. The obvious answer is that it's a way to start the weekend early, by letting everyone dress like it's Saturday. The other question is: "why do we have casual Fridays at all?" I think we'd all guess that it's a way of giving employees a little boost, and wikipedia agrees:
Casual Friday began in the late 1950s originally as an attempt to raise worker morale in the new white-collar office environment.
(Wikipedia also mentions the clothing industry pushing for it to shift clothing demand from formal, European clothes to cheap clothes made in Asia.) Anyway, let's assume that the goal is to increase worker happiness. Let's also assume that there is a (small?) productivity cost to casual dress. If we don't assume this, then employers are just cruel since casual dress makes workers happy. If there's no cost to that, then your boss really is a jerk.

We generally assume that utility is concave (increasing at a decreasing rate, or u'>0, u''<0). To determine why casual Fridays should be on Fridays, we need to assume something about a production function. Let's say that the relevant input affected by all this is effort, or effort-adjusted labor hours (call it L). So the idea is that casual dress reduces the "formality" of the office and everyone goofs off a little more. Would we all agree that the production function would be increasing in effort-adjusted hours, but at a decreasing rate (so that FL>0 and FLL<0)? (A standard production function has that relationship with unadjusted labor hours.)

Now, if we assume that Friday is no different from any other day, then it doesn't matter what day you make casual dress day. But Friday isn't like any other day, is it? It's a day when people tend to goof off a little more, anyway. We daydream about the weekend, sneak out early to head a start on travel, etc. So, it's probably a safe assumption that LFRIDAY is lower than Li, where i is any other work day. Given that (and our assumptions on the concavity of the production function), adding casual dress day to Friday suggests that you are reducing effort-adjusted labor hours on the one day of the week in which it has the largest possible negative marginal impact.

Simultaneously, it's likely that all that Friday day-dreaming, goofing off, and cutting out earlier means that workers already have higher levels of utility on Friday than on other work days. Thus, the boost that workers get from casual dress is "wasted" on a Friday, since marginal utility is lowest on Fridays. That is, it's likely that Friday is the worst possible day for casual dress day. Rather, casual dress day should be on the day of the week that has the highest level of effort (so that that marginal impact of slacking off is minimized) and the lowest level of worker happiness (so that the marginal utility of wearing jeans is maximized). Likely, these two things go hand-in-hand. And, very likely, they are not on Fridays. So maybe we should all have casual Mondays, rather than casual Fridays. (Or casual Wednesdays, or whatever day you think fits the criteria discussed.)

So, why do we have casual Fridays? One easy answer is coordination. Someone started it on Fridays, and so everyone coordinates on that day, even if it's less than optimal. (This is still a bad answer, because it begs the question of why it started on Fridays.) Another possibility is that I'm wrong and that things don't work the way I layed them out. Maybe casual dress enters the production function differently, or maybe there's no relationship between Fridays and slacking off, who knows? Or maybe, and this is what I'd choose if forced to choose something, there is a complementarity between Fridays and casual dress and that it's not the case that the marginal utility of jeans is lower on Fridays. Maybe being able to wear jeans on the day you sneak off early for the weekend is a huge utility boost, much more than you'd get on a Monday or Wednesday. If that's the case, casual Fridays may well be optimal, even if the productivity loss is greater on Fridays than on other days.

Thursday, October 19, 2006

Timely News

The New York Times today reports that:
Advertising sales continues to sag at major newspaper publishers, judging by the quarterly results reported today by The New York Times Company and the Tribune Company, owner of the Los Angeles Times, Chicago Tribune and Newsday.
Given today's discussion on the effects on online newspapers, this is not surprising.

Interesting New NBER Working Papers on IP

  1. Entry, Exit and Patenting in the Software Industry (Iain M. Cockburn, Megan J. MacGarvie)
  2. We examine the effects of software patents on entry and exit in 27 narrowly-defined classes of software products, using a dataset with comprehensive coverage of both mature public firms and small privately held firms between 1994 and 2004. Reflecting the complex economics underlying the relationship between patent protection, entry costs and industry structure, we find that patents have a mixture of effects on entry and exit. Controlling for firm and market characteristics, firms are less likely to enter product classes in which there are more software patents. However, all else equal, firms that hold software patents are more likely to enter these markets. The net effect on entry of increasing the number of software patents is difficult to measure precisely: estimates of the effect of an across-the-board 10% increase in patent holdings on the number of entrants into the average market in this sample range from -5% to +3.5%, with quite large standard errors. Evidence on exit and survival is consistent with these findings - holding patents appears to enhance the survival prospects of firms after entering a market.
  3. Intellectual Property and Marketing ( Darius Lakdawalla, Tomas Philipson, Y. Richard Wang)
  4. Patent protection spurs innovation by raising the rewards for research, but it usually results in less desirable allocations after the innovation has been discovered. In effect, patents reward inventors with inefficient monopoly power. However, previous analysis of intellectual property has focused only on the costs patents impose by restricting price-competition. We analyze the potentially important but overlooked role played by competition on dimensions other than price. Compared to a patent monopoly, competitive firms may engage in inefficient levels of non-price competition—such as marketing—when these activities confer benefits on competitors. Patent monopolies may thus price less efficiently, but market more efficiently than competitive firms. We measure the empirical importance of this issue, using patent-expiration data for the US pharmaceutical industry from 1990 to 2003. Contrary to what is predicted by price competition alone, we find that patent expirations actually have a negative effect on output for the first year after expiration. This results from the reduction in marketing effort, which offsets the reduction in price. The short-run decline in output costs consumers at least $400,000 per month, for each drug. In the long-run, however, expirations do raise output, but the value of expiration to consumers is about 15% lower than would be predicted by a model that considers price-competition alone, without marketing effort. The non-standard effects introduced by non-price competition alter the analysis of patents’ welfare effects.

Online Newspapers: Superstar's Long Tails

In a paper that has been around for a few years, but recently came out in NBER working paper form (and also forthcoming in the AER), Matt Gentzkow argues that online newspapers and print newspapers are strong substitutes. In fact, using data from the DC metropolitan area, Matt finds that online newspaper availability reduces print newspaper profits by $5.5 million per year.

So, what's the solution? Well, perhaps you could charge for online news. Matt argues that this would not work because (a) the optimal price is very small and (b) there are transaction costs, both "real" and perceived, that would make the low "optimal" price not worth it.

Another possibility would be not to have an on-line edition, and make everyone pay for the paper copies. This is flawed because, obviously, a lack of an online edition is a competitive disadvantage. If the Washington Post abandoned its online edition, it would likely not gain those $5.5 million in profits back; instead, it's likely that those online readers would stay online, but read other papers. Online news is a prisoner's dilemma for newspapers. They might get that $5.5 million back if they all abandoned online news, but that's not going to happen.

So, what's the end result of this? I think it's likely that what has happened is that online news has created a newspaper "superstar" effect. People still read the Boston Globe or the SF Chronicle for local news, but the reader share of the major, national and international, newspapers is skyrocketing. I, for example, read the Boston Globe for its local sports coverage (I do it for free online, of course), but get my national and international news from the NY Times. Newspapers like the Times, the Wall St. Journal, and maybe some others will be able to turn a profit online, but other, more local papers, will be forced to specialize as local news sources. I think we'll end up seeing both Rosen's superstar effect and Chris Anderson's Long Tail, with a news market much more clearly split into regional and national/international segments.

Wednesday, October 11, 2006

$20.5 Billion per Year!!!

That's what movie piracy costs the U.S. economy, along with 140,000 jobs and over $800 million in tax revenue, according to a new study released by the Institute for Policy Innovation (and paid for, in part, by NBC/Universal and the MPAA). The number is reached at by taking a figure of $6 billion in lost sales of legal DVDs and online films that comes from an earlier report by a consulting firm called L.E.K., and then applying multipliers used by the Bureau of Economic Analysis. Story here.

This is a pre-emptive post, because I haven't yet read either the L.E.K. report or the new report. Here's my guess at the problems:
  1. Generally, the reports issued/commissioned by producers count every illegal copy as a lost legal copy. This is outright crazy and totally ignores the price difference between a legally purchased DVD and a digital file downloaded from the web. I don't have the data that would allow me to calculate the right elasticity, but I think we can all agree its not zero. So, likely, the $6 billion figure is grossly overstated. If I find the report, I'll check back.
  2. Why the hell is it appropriate to apply macroeconomic multiplier to that $6 billion figure to calculate a ripple effect on the economy? There's only a ripple effect if that $6 billion is not spent on legal DVD and is instead but under mattress or buried in the backyard. If the money is not spent on DVDs, but is instead spent on TVs, or hamburgers, or put in a savings account and loaned to someone to build a house, or anything like that at all, then those $6 billion in revenues/incomes are not lost, they are just redistributed. It's possible that the $6 billion causes lost jobs in the movie industry, but they would just be made up by creating jobs in the TV manufacturing, hamburger, or housing sectors. [The Electronic Frontier Foundation makes this point in the WP article.]
Here's the reports:
I hope to read them soon and provide a better critique.

Friday, October 06, 2006

Trudeau Strikes Again

Really, it is a little over-the-top that MIT's buildings all have numbers rather than name....

Thursday, October 05, 2006

Microsoft's Newest Piracy Plans

Microsoft has annouced much stricter controls to combat piracy of its soon-to-be-released operating system, Vista:

Microsoft, the world’s largest software maker, said Wednesday that people running a version of Windows Vista that it thought was pirated would initially be denied access to some Vista features. That includes Windows Aero, an improved graphics technology.

If a legitimate copy is not purchased within 30 days, the system will curtail functionality much further by restricting users to just the Web browser for an hour at a time, said Thomas Lindeman, Microsoft senior product manager.

Without having the data to support it, I'm going to go out on a limb and suggest that more Microsoft software is pirated than software from any other company. OK, here's a little bit of data. According to Microsoft, 60 million installed copies of Windows XP are pirated. That's a lot, and even given the fact that some (most?) of the owners of those copies would not have bought an official copy, that's a lot of money left on the table, even for Microsoft. So, you can understand why they may want to fight piracy. But....

There's another issue here. If those 60 million were forced to pay for Windows, it's true that some would and that that would generate lots of additional profits for Microsoft. The problem with this, though, is what do the other do? If they can't use pirated Windows, and can't/don't want to pay for an official version, I'm guessing that most would turn to another OS. And if Linux (or pirated versions of Macintosh OS running on Intel) could grab a fair # of those converts, it could be a significant boost to their OS.

According to one estimate, right now Windows XP accounts for 85% of all installed OSs. The same article cited above says that those 60 million copies that failed the Windows Genuine Advantage test were out of 300 million that were checked in total. Combine these two numbers, and that means that 20% of Windows XP's 85% share could be up for grabs. Imagine the potential change in the industry if, rather than shell out $300 for Windows Vista, 50% of that 20% switched to Mac, or Linux. That would be 8.5% of the total OS market. If someone got a hold of that (right now, Mac is about 4-5% share, Linux is about 0.5%), it would be a huge shock to the OS market. I'm not saying that Microsoft should be afraid (probably most people would just hold onto their "illegal" version of XP and not upgrade), but it's something to think about.

Now, Microsoft would still be the dominant force in OS, even if this happened. But in a market where network externalities are this important, the value of allowing pirated copies to be used by those unwilling to pay for a legit copy should not be underestimated, even by Microsoft.

14.147 in room E52.341

Doonesbury today takes a friendly jab at MIT:

Monday, October 02, 2006

More on Electronic Voting

Continuing Bryce's campaign against electronic voting, courtesy of Slashdot, we have a Washington Post story on questions that still exist surrounding Brasil's use of electronic voting machines. Here's a couple of choice quotes:
Some Brazilians are lobbying the tribunal to switch from Windows CE to an open-source operating system for the voting machines, since Microsoft Corp., citing trade secrecy, won't allow independent audits to make sure malicious programmers haven't inserted commands to "flip" votes from one candidate to another.
Further, Brasil also does not use a "paper trail" which would allow users to see that their vote was processed correctly and would allow allow for a paper recount of electronic tallies when fraud is suspected.
Paper receipts that appeared behind glass - so voters could confirm their choices but not walk off with the evidence - were tried on 23,300 machines in 2002, with plans to install them nationwide two years later. But the machines' maker was resolutely opposed to this system, and the tribunal decided to rely instead on "ballot box bulletins."

These bulletins - printouts of each machine's overall votes, made after the polls close - serve as a backup record of the tallies transmitted electronically over a secure network. But they can't show whether a programming flaw or malicious hack deleted or changed votes inside the machine before the printout was made, computer scientists say.
I find it amazingly strange that Diebold (which makes the Brasilian machines) would be "resolutely opposed" to paper voting receipts. I really can not think of a reason for the manufacturer to be oppposed to it, other than the increaesd cost. However, I'm sure that they could pass this cost on to the governments that are purchasing the machines, especially if the feature was requested. So they would probably make even more money per machine if they added this feature.
And Diebold has said that voters should trust its equipment, more than any paper record, to deliver fraud-free elections.
Why should we just trust them? I'm not saying that Diebold has any reason to tip elections themselves (maybe they do, maybe they don't), but why in the world should we just "trust" election results that can never be verified? The incentive for someone to cheat is just so high that it seems perfectly rational to do whatever you can to increase the cost of cheating. Part of increasing the cost of voting fraud is to make it as difficult as possible to cheat, within reasonable budget constraints. Since I can't believe that the cost of adding paper trails which can be used to random paper checks against electronic voting totals would be very expensive, this seems like a great way to help fight cheating. Diebold, for some reason, disagrees, continuing to ask voters to "trust" them. That seems dangerous and very, very wierd to me. I, of course, am not the only one with this concern:
"The problem is not that elections have been rigged necessarily _ it's that you can't say for sure that they weren't, because rigging is possible on these systems," said Dr. Avi Rubin, who directs the Information Security Institute at Johns Hopkins University in Baltimore. "Given the choice of picking a system where wholesale rigging is easy, versus one where it's impossible, why has Brazil gone with the system where it's easy?"
Indeed, and why are we moving in the same direction? Excuse me, why are we moving in the direction of even less-secure voting machines? Brasil does perform audits on the voting software before the elections, and hours before the election start, randomly chosen machines are tested that they process votes correctly. That's not all though:

Each step of the count also is monitored onsite by representatives of the political parties, the Brazilian Bar Association and the federal prosecutor's office, Fontoura said. And the entire election process is overseen by the tribunal _ an independent, nonpartisan agency legally empowered to combat fraud as it happens and overturn elections if necessary.

That's far different from the U.S., where private voting software companies refuse to allow independent audits, elections are managed by partisan politicians with inherent conflicts of interest, federal courts are reluctant to intervene in state-run elections and the federal agencies involved have little power to investigate, let alone resolve disputes.

Someone please give me a good reason why the manufacturer telling me "trust us" should be good enough. Even more, tell me why the manufacturer rejects additional security features that would allow it to earn more profit on each machine it sells to the government. I don't get this one.