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Hoarding and Price Gouging

Economists have reasonable arguments against laws that prohibit hoarding and price gouging. But often they get carried away and take those arguments so far that they’re arguing that nobody could ever be a jerk for doing those things — that, say, a store owner who raises the price of flashlights after a hurricane is always doing the right thing.

The basic argument is that if he keeps flashlights at the normal price they’ll quickly sell out, whereas at a higher price they’ll last longer and the people who will buy them will be the people who need them the most. It’s a reasonable argument, but it’s missing a key piece: it doesn’t tell the store owner how much to raise the price.

If he raises it too much, the flashlights will all go unsold, and he won’t be doing anyone a favor — not even himself. He’ll just be being so much of a greedy jerk that it’s self-defeating. At a somewhat lower price, he’ll be the sort of greedy jerk who makes a lot of money: he’ll have lots of flashlights left over, but on the ones that did sell he’ll have made a killing. At an even lower price, he’ll sell them all and only run out just before his next resupplies come in. This might be thought of as optimal, but that is of course in the eye of the beholder. And hitting that “optimum”, or pretty much any other “optimum” that might be preferred, would demand not only knowing when exactly more flashlights will come in (which is not always known after a hurricane), but also on the vagaries of local opinion — not only on how many people need flashlights, but on how scared they are and thus how willing to pay higher prices.

If the store owner keeps the normal flashlight price, he might sell them all to someone who then re-sells them at a higher price. (A law against price-gouging might not even prohibit this: price gouging is commonly defined as raising prices, and someone who was not selling flashlights in the first place has not raised his prices, since he didn’t previously have prices.) If more flashlights will arrive soon, this actually might be the way for the store owner to make the most money: sell the current stock of flashlights to the profiteer, let him hang onto them in anticipation of higher prices later, and then sell more flashlights to everyone else, leaving the profiteer out of luck.

There are of course other possible strategies a store owner might take, such as letting each customer buy one flashlight at the normal price but asking for more money for subsequent flashlights, “so that there are flashlights left for others”. That’s the solid core of the argument against laws that ban price-gouging: they impose a fixed rule on a situation where really the best thing to do is a difficult judgement call. What those laws demand is the right call when there is plentiful supply, but that might not be the case.

The situation for hoarding is similar, although laws against hoarding tend to be a feature of truly tyrannical regimes, rather than (as with price gouging laws) something even relatively free societies do. One reads, for instance, that in the Ukraine famine of the 1930s, people who weren’t visibly starving were “suspected of hoarding”. But as evil as the people who engineered that famine were, it nevertheless is possible to be a jerk by hoarding: when something is scarce, buy up a large amount of it, more than you’ll ever need, and then just sit on your hoard until after the scarcity is over.

The non-jerk way of hoarding is to buy when supplies are plentiful and cheap, and then share with others when they are scarce. This can even be profitable. But it requires more than average foresight: the above ‘jerk’ may be trying to be a non-jerk, and just thinking the scarcity will get much worse, until he is eventually forced to admit that plenty has really returned again and that he has not only worsened the scarcity for others but also lost his own money.

As with price gouging, though, there are intermediate scenarios in which the hoarder may make a lot of money while still being a jerk. And as with price gouging, choosing the best thing to do can be a difficult decision. In a way it can be pleasant to have the government take the decision away from you, but the consequences of having the decision made in a thoughtless, predetermined manner are likely to be not at all pleasant.


From slavery to COBOL

Recently Yale University renamed one of their “residential colleges” (dorms): it had previously been named after John C. Calhoun, and now is named after Admiral Grace Hopper. The administration explained that although they don’t intend to go around renaming everything to satisfy every politically correct complainer, this was a particularly egregious case: the original naming after Calhoun had been not because of any strong link to Yale, but to honor Calhoun’s career as a politician, notably his advocacy of slavery as a “positive good” and of white supremacy. The college had featured a stained glass window depicting happy slaves on a plantation, recently smashed in protest. The original naming was done in 1931, long after Calhoun’s death, long after the Civil War, and at a time when white supremacy was, in the terms of today’s social networks, “strongly trending”.

Today, of course, one thing that is “strongly trending” is advocacy of women in technology. But skepticism as to such trends should not stop one from honoring people who truly deserve it. And for all I know Hopper does: I have not made any real examination of her career, but the occasional things I have heard of her have been positive. Still, the particular grounds called out by the Yale administration for naming the college after her are problematic. They seem to center around her efforts in advocating “word-based computer languages”, of which COBOL is the prime example, and one which she was instrumental in.

COBOL today is almost as dead as slavery was in 1931; and just as the namers in 1931 seem not to have asked the descendants of slaves to weigh in on Calhoun, programmers seem not to have been asked what we think of COBOL. Personally, I never had to suffer through COBOL (it was before my time), but suffering was the word. For one thing, the language was quite verbose. A dominant language today is C++; the name of that language is not only its name but a statement you can write in it. The corresponding statement in COBOL is “ADD 1 TO COBOL GIVING COBOL”. Now, admittedly nonprogrammers likely will be able to guess what the latter statement means, whereas with the former statement you just have to know. But programmers do know, and we object to having to write mountains of text to convey what to us has become simple. To force us to do so isn’t humane, it is inhumane: it denies us one of the main human powers, that of learning and developing skills.

So while Yale has changed the name of the college, it is still named in honor of a failed effort to crush the human spirit.

(A Russian translation of this article, by Timur Kadirov, is here).


Crypto and the Second Amendment

In the Crypto Wars, arguments have occasionally been made that there is a constitutional right to cryptography. Most recently, Apple made that argument in trying to fend off the FBI’s request to help break into an encrypted phone. It went roughly as follows: writing code is an expressive act, freedom of expression is protected by the First Amendment, and so they can’t be forced to express themselves in ways they don’t want.

I don’t think this argument would have fared well in the courts. Corporations (and individuals) are regularly forced to express themselves in ways they don’t want. Enviromental regulations force them to write MSDSs (among many other things). Tax regulations force them to fill out tax forms, and the ways they do so can be, uh, highly creative. Being forced to express themselves in such ways doesn’t prevent them from making whatever arguments they want in public.

But there is an amendment in the Bill of Rights that really is a good match: the Second. The Second Amendment is about private possession of weapons of war; crypto has eminently been a weapon of war. It is about preserving the ability to resist tyranny; and if the government were to have the power to snoop on every communication in a modern computerized society, it would enable a level of tyranny so oppressive as to make every tyranny in history seem mild in comparison. It is also about self-defense against criminals; and there too the fit is good — not just because cryptography is essential for protecting such things as online banking transactions (though it is); it also ties in to personal self-defense, as might be performed with a firearm. To assassinate someone, a key piece of information is where they will be in the future; a good defense against assassination is to vary one’s schedule in an unpredictable manner. If you can read a person’s communications, you can predict where they will be; and if you can predict where they will be, you can put a bomb there or send a gunman there. If they will be wearing a bulletproof vest or bringing a bodyguard, you can get that piece of information too from their communications, and choose your weapons so as to pierce that vest and your team so as to outnumber any bodyguards.

To return to Apple’s argument, firearms design can be quite an expressive act too. The designs of John Moses Browning are said to have a distinctive character, and are revered by many; one of his designs, the M2 heavy machine gun, recently completed its hundredth year in active duty with the US Army. But people would think a gunsmith was out of his mind if he proclaimed that he had a First Amendment right to make whatever firearm he wanted, and would tell him: no, whatever rights you do or don’t have in that regard come from the next Amendment in the list.

To say that the Second Amendment covers crypto is admittedly a completely novel interpretation of it; but much is said about the need to interpret the Constitution in accordance with the needs of modern society, and this is a lot more natural than many of the reinterpretations that have been foisted on us under that argument. Technological change means that cryptography isn’t, as it was in the era of the Founding Fathers, just something done by hand; now it’s weaponized, so weapons freedoms apply. The First Amendment protects discussions of weapons; the Second Amendment protects actually fielding them.

This is not to imply that all the present rules for firearms would apply without change to crypto, or that they’re even really the right rules for firearms. It’s too easy to use crypto without knowing it, and too much of modern society depends on doing so, for there to be much sense in, say, prohibiting it for convicted felons. It’s also a lot easier to download a program than to make or buy a firearm, which weighs strongly in favor of having the laws looser: a law that’s too easy to flout is best not made at all. Also, there are many sillinesses in weapons law, and it would not do to duplicate all those for crypto. But making use of the Second Amendment would still be better than not making use of it.


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