The latest cost-benefit analysis of various Australian broadband proposals is out. It’s part of a report from an inquiry chaired by former Victorian Treasury head Mike Vertigan.
And it says in essence that Australia’s expected growth in demand for bandwidth is big enough to make the NBN viable, but small enough to make the government’s alternative look better.
I would have expected to hear the report’s authors out there defending it, but Mike Vertigan has never been keen to put himself forward in the public debate. So today much of the media I saw has been dominated by critics, and they’ve mostly been saying that a useful cost-benefit analysis is impossible, so we should just build the NBN. Paul Budde was making the claim this morning on ABC Radio, and lesser-known experts such as Sydney Uni’s Kai Riemer have been saying the same thing.
This claim – that we can’t usefully analyse the NBN’s costs and benefits – is hooey.
We can’t do a precise cost-benefit analysis, given how much Internet use is likely to change over the next decade or two. And whatever analysis we do should be up-front about how much guesswork is involved. But cost-benefit analyses are not just helpful; they’re also inevitable. Indeed, everyone who says “we should just build it” actually is doing a cost-benefit analysis. Typically they’re just doing a really sloppy cost-benefit analysis in their head, and setting their median estimate of the benefits at, approximately, Unimaginably Huge.
And Unimaginably Huge is almost certainly an overstatement.
“We can’t begin to imagine what people could do with upload speeds on an industrial scale,” Riemer told News Limited.
But of course we can begin to imagine that. Here’s how. Continue reading
Chris Anderson managed to get an article, and then a book of the article (a pet peeve of mine, but we’ll move on) out of the idea that ‘free’ is a big deal. Better than a low low price, free avoids ‘mental transactions costs’ and is all round a Big New Thing. One thing that I don’t think he mentioned is that the ‘free’ of the internet revives to practical relevance an old insight from textbook economics which was theoretically clear but always of less use than some economists appreciated because of the practical difficulties of implementing it. (Sound familiar?)
There’s always been a ‘textbook’ case for governments to help subsidise from general revenue their own or even other service providers’ fixed costs to make marginal cost pricing (as supported by Economics 101) financially viable. But the incentive perversities and institutional complexities of doing so were usually formidable. If you issue subsidies for fixed costs, how will you get those fixed costs met at lowest cost? How will you prevent various tricks to maximise fixed costs to further lower marginal costs? How do you even define fixed costs in contradistinction to marginal costs – there can be difficulties making the distinction in practice.
Web 2.0 platforms will often provide a much cleaner opportunity to trial these ideas. Take, for example, the Australian firm CultureAmp, which successfully sells browser based employee engagement software to large and small firms whilst also offering a cut down free version. Government could negotiate with CultureAmp and its competitors to fund one of them to supply a full suite of web-based services within a certain jurisdiction for free. (It might make more sense to do this for businesses within a certain size also as larger businesses may well require customisation). Continue reading
In case anyone’s interested I did an interview on ‘my trip’ overseas recently which if you fancy a bit of light and slightly educational entertainment is here.
Anyway, the main burden of my remarks is that we’re losing ground within the leaders group on eGov and Government 2.0 (which I see as somewhat different things). The UK have been stepping up the pace and are now way ahead of us on the digital agenda including the PIMS agenda – personal information management services - which we’ve barely begun to work on.
This year every student studying at MIT will be given their own bitcoin wallet and $100 in bitcoin. Sounds like a fantastic way to kick off an ecosystem to build the internet of money!
We’re not distinguishing ourselves in this area. The UK has had three PMs pushing the digital agenda – Blair, Brown and Cameron. The US has had Silicon Valley pushing things along and Obama driving things with all sorts of highly talented people brought into the administration.
Us? Not so much, from either party.
Amazing that this is such a big deal, that we can administer morphine but not medical marijuana to alleviate pain. The paper is here.
While at least a dozen state legislatures in the United States have
recently considered bills to allow the consumption of marijuana for
medicinal purposes, the federal government is intensifying its
efforts to close medical marijuana dispensaries. Federal officials
contend that the legalization of medical marijuana encourages
teenagers to use marijuana and have targeted dispensaries operating
within 1,000 feet of schools, parks and playgrounds. Using data from
the national and state Youth Risk Behavior Surveys, the National
Longitudinal Survey of Youth 1997 and the Treatment Episode Data Set,
we estimate the relationship between medical marijuana laws and
marijuana use. Our results are not consistent with the hypothesis
that legalization leads to increased use of marijuana by teenagers.
by D. Mark Anderson, Benjamin Hansen, Daniel I. Rees – #20332 (CH HE LE)
In case anyone’s interested, I did an interview on “My Trip” which can be downloaded from this link.
Employee Satisfaction, Labor Market Flexibility, and Stock Returns Around The World
by Alex Edmans, Lucius Li, Chendi Zhang – #20300 (CF LE LS)
We study the relationship between employee satisfaction and abnormal stock returns around the world, using lists of the “Best Companies to Work For” in 14 countries. We show that employee satisfaction is associated with positive abnormal returns in countries with high labor market flexibility, such as the U.S. and U.K., but not in countries with low labor market flexibility, such as Germany. These results are consistent with high employee satisfaction being a valuable tool for recruitment, retention, and motivation in flexible labor markets, where firms face fewer constraints on hiring and firing. In contrast, in regulated labor markets, legislation already provides minimum standards for worker welfare and so additional expenditure may exhibit diminishing returns. The results have implications for the differential profitability of socially responsible investing (“SRI”) strategies around the world. In particular, they emphasize the importance of taking institutional features into account when forming such strategies.