Porn on the iPhone? You Don't Say.

"It's a maxim of technology: Invent the newest gadget and the porn industry will find a way to cash in," writes Joel Schectman of the AP in this article about the smutty potential of the latest smart phones.

Schectman is correct, of course but I'll go him one further. Throughout human history, whenever a new medium of communication has emerged, humans have invariably rushed to use it for porn, with or without a porn industry to coordinate the effort. Hell, porn even predates gadgets.

The internet, the VCR and camcorder, the first motion picture cameras, photography - these technologies hadn't been around for five minutes before someone piped up and said, "hey, I know, let's get some shots of people screwing." And before photographic images, humans used words: Gutenberg's printing press allowed for the first mass circulation of "adult material."

Even the earliest homo sapiens, doodling on the walls of European caves, quickly realized that their ability to render visual representations of their surroundings meant that they could draw pictures of creatures bonking one another. Oh sure, scholars now refer to these earliest words and images as "erotic art." But come on, erotic art is simply the porn we like.

Steve Jobs may not like that his precious iPhone is being used as a ticket to the porn buffet, but given human history in these matters, he shouldn't be surprised.

Read more...

"This is Not Political," said the Politician

If a politician found he had cannibals among his constituents, he would promise them missionaries for dinner.

-H.L. Mencken

It's a wonder to me that anyone takes politicians seriously, particularly when those politicians get up on their moral high horse. Case in point: Over the past week, South Korean President Lee Myung-bak, a former CEO of Hyundai Engineering and Construction, has taken to scolding local conglomerates for not feeling "socially responsible" and for not understanding the "sentiments of the lower class," whatever those phrases mean. Of course, this comes from the man who earlier this year pardoned Lee Kun-hee, patriarch of the Samsung empire, who had been convicted on charges of financial hanky-panky relating to control of said empire. How this pardon affected the sentiments of the lower class is something that has yet to be explained.

Pardon me, then, if I am unmoved by President Lee's supposed concern for the little fellow. If he was truly motivated to help the lower and middle classes of society - or, indeed, South Korea as a whole - President Lee would have taken the first step toward demanding accountability from conglomerate heads by letting the conviction of Lee Kun-hee stand.

Not that President Lee, whose Grand National Party took a sound spanking in the recent elections and is now gearing up for another tight by-election this week, would stoop to political pandering. Heavens, no:

The Blue House, however, warned against the view that it was engaged in conglomerate-bashing for political purposes.

“The president’s attempt to find a model of co-prosperity between conglomerates and small companies is different from the past administration’s populist, anti-conglomerate policy,” said a senior ruling party official.

“A centrist pragmatism and working-class friendly principles have always been Lee’s philosophy,” said a senior Blue House official. “It should not be seen that Lee’s ideological coordinate has leaned to the left.”

So this is not political. The president has not leaned to the left, but rather he is merely talking like a left-wing politician. So it's just a charade, but it's not political.

Read more...

The Upside of Irrationality

In this video, the ever-interesting Dan Ariely talks about the problems of getting humans to do what is good for them in the long term even as those actions are unpleasant in the short term. How should doctors get patients to take their medication properly and on time, for instance? Or how should companies structure executive compensation packages to encourage sound long-term decisionmaking?

As Ariely points out, the climate change problem is perhaps the perfect example of the long-term vs. short-term conflict:

Can we get people to care about global warming? I think the answer is basically no. If you wanted to design a problem that people would not care about, it would basically look like global warming. It has all possible elements that get people not to care: it's long in the future; uncertain; will happen to other people first; we don't see anybody suffering; we don't see any residue of it; and anything we do individually is a drop in the bucket. These are all the elements that get people not to care, and we just put them together in global warming. So the question is, can we get people to care? Can we get people to wake up in the morning and feel urgency about the environment?

Then again, perhaps we should be relieved that more people don't feel a sense of urgency about the environment, as urgency often turns into panic and leads people embark upon expensive, ecologically harmful boondoggles.

Read more...

Lee Myung-bak and His Interest Problem

Yet again, the old adage bears repeating: Beware the rising tide of good intentions.

As I wrote yesterday, South Korean President Lee Myung-bak has his undies in a bunch over the interest rates charged on loans by non-bank "capital firms," rates which can run 30-50%, depending on which day you happen to hear Chin Dong-Soo, chairman of the Korean Financial Services Commission, speak. It's an expensive price to pay for using someone else's money, to be sure, and it has prompted President Lee to label the interest rates a form of "loan sharking" and a "social injustice."

Well, as I feared might happen, Lee and Chin are now determined to go beyond political grandstanding and actually "do something" about these high interest rates. And anytime a politician gets a bug up their ass and sets out to "do something," you know you'd better bar the doors and hunker down for the coming storm of unintended consequences.

Just for fun, let's imagine for the moment that the President is motivated here by a genuine desire to help people, and not just by political calculation. With our imagination hats on, let's suppose that the government steps in and puts a cap on the amount of interest that can be charged to borrowers - nothing more than 20%, for example. What will happen to all of those borrowers who are only creditworthy at, say, 25%? Obviously, they'll either have to go without the funds or find other means to obtain the money they need. Most likely, as FSC Chairman Chin rightly observes, many of these people will turn to real loan sharks who will charge them far more than 25% for a loan, and may even take a kneecap or two if the borrower fumbles in repaying the money. Other desperate folks might turn to gambling, legal or otherwise, in the hopes of scraping together some necessary cash, or perhaps they'll hock some of their possessions at a pawnshop (somewhat less common in South Korea, but they do exist). In any event, it's not clear how anyone benefits in this situation. I only hope the government, if and when it decides to limit interest rates, will assemble and release the statistics for how many would-have-been borrowers turn to these other sources for money.

Sure, under the current system, some people take out loans that run counter to their best interests. How, though, does President Lee claim to know who these people are? These loans represent a voluntary agreement between the borrower and lender, and in taking out the loan the borrower has evidently decided that doing so is better than the next best option. No one can honestly judge what interest rate is "too high" for another person, and I fail to see how removing a choice from someone who already has a limited range of choices actually helps that person. Quite simply, in seeking to cap interest rates, President Lee is effectively saying that South Korean citizens are too stupid or childish to manage their own affairs.

I have no statistics at hand, but I suspect that if we looked into the balance sheets of these lenders, we would find that their profitability differs little from that of firms in other sectors (as is true of the much-maligned "payday loan" industry in the United States). Beyond the obvious risk of lending to folks with spotty or nonexistent credit histories, I'd bet that these creditors face high per-store and per-loan fixed costs in what is probably a fairly competitive market. Would President Lee's opinion of these lenders change if he were to learn that they have a pedestrian 3-5% rate of profit?

Another worrisome possibility, of course, is that the South Korean government will decide to make its own loans to these high-risk borrowers, thus crowding out the current stable of capital firms. Of course, this will not reduce the risks inherent in such loans, nor will it eliminate the fixed costs. Rather, such a move would merely shift the risk and costs to taxpayers, who would be on the hook for the inevitable defaults that cause capital firms to charge the current interest rates. As Frédéric Bastiat reminds us:

It is indeed a singular thing that people wish to pass laws to nullify the disagreeable consequences that the law of responsibility entails. Will they never realize that they do not eliminate these consequences but merely pass them along to other people? The result is one injustice the more and one moral the less.

President Lee and the FSC would do well to collar their moral outrage and realize that most people, most of the time, know what they're doing and do not need politicians to babysit them.

Read more...

A Matter of High Interest

Here's my latest letter to the Joong Ang Daily newspaper:

You recently reported on President Lee Myung-bak's shock and dismay at learning of the high interest rates charged by local non-bank "capital firms" in South Korea. Lee called these interest rates, which can be as high as 40-50%, a form of "loan-sharking" and "social injustice" ("Lee slams capital firms for high rates," 23 July, 2010).

I wonder if President Lee has paused to consider the underlying realities of this type of loan. As the article notes, the borrowers seeking such loans often have poor credit histories, and thus the higher interest rate merely reflects the added risk of lending to this person. Moreover, these loans are usually better than the alternative: as Financial Services Commission chairman Chin Dong-Soo pointed out, actual loan sharks charge much higher rates of interest and, what's more, tend to have their own unique methods of coercing repayment.

Given his apparent financial expertise, I suggest that the president lend some of his own considerable fortune to these high risk borrowers at "socially just" interest rates. Until he is willing to do this, I hope that he will spare us his moral indignation about an area from which he is far removed in both specific knowledge and general circumstance.

Sincerely,
Aaron McKenzie
Seoul

Update: The Joong Ang published this letter on 27 July, 2010.

* * *

President Lee's latest histrionics are the perfect occasion to reprint this wisdom from Jeremy Bentham:

A man is in one of these situations, suppose, in which it would be for his advantage to borrow. But his circumstances are such, that it would not be worth any body’s while to lend him, at the highest rate which it is proposed the law should allow; in short, he cannot get it at that rate. If he thought he could get it at that rate, most surely he would not give a higher: he may be trusted for that: for by the supposition he has nothing defective in his understanding. But the fact is, he cannot get it at that lower rate. At a higher rate, however, he could get it: and at that rate, though higher, it would be worth his while to get it: so he judges, who has nothing to hinder him from judging right; who has every motive and every means for forming a right judgment; who has every motive and every means for informing himself of the circumstances, upon which rectitude of judgment, in the case in question, depends. The legislator, who knows nothing, nor can know any thing, of any one of all these circumstances, who knows nothing at all about the matter, comes and says to him—"It signifies nothing; you shall not have the money: for it would be doing you a mischief to let you borrow it upon such terms."—And this out of prudence and loving-kindness!—There may be worse cruelty: but can there be greater folly?

The folly of those who persist, as is supposed, without reason, in not taking advice, has been much expatiated upon. But the folly of those who persist, without reason, in forcing their advice upon others, has been but little dwelt upon, though it is, perhaps, the more frequent, and the more flagrant of the two. It is not often that one man is a better judge for another, than that other is for himself, even in cases where the adviser will take the trouble to make himself master of as many of the materials for judging, as are within the reach of the person to be advised. But the legislator is not, can not be, in the possession of any one of these materials.—What private, can be equal to such public folly?

Read more...

The Paradox of Plenty: South Korea and Afghanistan

Fortunately, South Korea has virtually no natural resources. No oil, no uranium, no diamonds, no gold, no copper. Nothing, really. Oh sure, the Koreans once exported a fair amount of tungsten, but for all practical purposes this is a country with nothing in the ground worth extracting other than a few old gimchi pots. As a result, the South Korean people and government were forced to look elsewhere for their wealth, as were the folks in Hong Kong, Singapore, and Taiwan. In these states, governments depended for their revenue on the actual creation of wealth and thus enacted policies that encouraged productive activity.

These so-called Asian Tigers are an answer to a question put to me, only half in jest, the other day: Why is that most of the world's natural resources are concentrated in the most ramshackle, tinpot countries? Nigeria and Venezuela have all that oil. Sierra Leone is positively encrusted in diamonds. Zambia is loaded with copper. Turkmenistan and Uzbekistan are downright gassy. Given the choice, however, you probably wouldn't choose to raise your children in any one of these places, and for good reason. Turns out that, as economists and political scientists have long known, natural resource wealth is often more burden than boon, hence what is known as the "paradox of plenty" or the "natural resource curse." As Thomas Palley writes:

[The paradox of plenty] occurs because the income from these resources is often misappropriated by corrupt leaders and officials instead of being used to support growth and development. Moreover, such wealth often fuels internal grievances that cause conflict and civil war. This pattern is widely referred to as the "natural resource curse" -- natural resource wealth creates stagnation and conflict, rather than economic growth and development.

The natural resource curse is vividly illustrated in Angola, where an International Monetary Fund fiscal audit has been unable to account for hundreds of millions of dollars of oil revenues. In Nigeria, Cameroon and the Republic of the Congo, oil wealth has failed to generate development, and has instead generated deep-seated corruption that retards growth. Sudan is marked by strife over oil. And in Aceh, Indonesia, regional separatism has been fanned by secrecy about oil payments and public misunderstanding about their scale. 

How might history have been different if, in the 1950s and 1960s, the likes of Rhee Syngman and Park Chung-hee had found themselves in control of vast oil or mineral reserves? Thankfully, they didn't. 

Sadly, then, I find it hard to cheer the recent news that as much as $1 trillion in untapped mineral wealth might lie beneath the soil of Afghanistan. Sure, we're all happy for anything that might improve the material condition of that luckless country, but history doesn't suggest that a windfall of natural resource money will be much of a blessing. Just ask the people who live in the purple countries in the map above, many of which rely on natural resources for their livelihoods. 

Writing yesterday in the International Herald-Tribune, Paul Collier of Oxford University expressed similar concerns about Afghanistan's recent mineral discoveries:

To build trust, the Afghan government must be open about any deals it makes with foreign companies. It has already shown it has room for improvement in this regard: the country’s first extraction deal, for copper, was won by the Chinese in murky circumstances — the minister of mines was accused of taking a $30 million bribe. But now Kabul has signed on to the Extractive Industries Transparency Initiative, a set of disclosure standards created seven years ago by an international organization of governments, civil society and business. 

Again, though, using history as a guide, I wouldn't place any bets on the Afghan government  finally getting its act together now that mineral wealth has entered the equation. The countries that both have a wealth of natural resources and are liberal, free market democracies (such as Canada, Britain, Norway, and the United States) tend to be those that had good governance in place before their resources became, well, resources (Botswana, with its diamonds, is a notable exception to this rule).

If anything, I worry that Afghanistan's mineral wealth might only make matters worse for the Afghan people. 

Read more...

China Factors in U.S.-South Korean Relations

From Stratfor:

One of South Korea's more intriguing foreign policy tasks in the coming years will be to decide how it balances its relationships with the United States and China. In the grand sweep of history, China has arguably had the greatest influence of any country over South Korean culture and politics. The Korean War, however, brought the United States into the picture and for the first fifty years or so after the war, most South Koreans had little doubt about where their interests lay. This alliance with the United States, of course, continues to this day, and the strength of it is visibly illustrated by the 28,500 US soldiers currently stationed in South Korea.

Yet, as China becomes a more prominent player in the international arena, South Korea will find itself torn in two directions. On the economic front, for instance, while the US remains the world's largest economy, China is now South Korea's largest trading partner. How will South Korea juggle competing demands in the event of an economic dispute between the US and China? Furthermore, as the video notes, South Korea has to be increasingly concerned with how its military alliance - and specifically the joint exercises -  with the US will be perceived on the other side of the Yellow Sea.

Fortunately, South Korea is no longer the penniless runt of Asia, having become an increasingly prominent actor on the world stage in recent years. The rise of China, and the opportunities this has created for South Korea, may give the country leverage in its dealings with both China and the US. I'll be curious to see how South Korea plays whatever cards it may have.

Read more...

The Myth of the Early Adopter Nation

For a country that prides itself on being one of the most wired nations on earth, and being full of "early adopters," South Korea sure can be slow at adopting the latest in trendy tech items when those gadgets come from overseas companies. Fortunately, the brief hiccup surrounding the Korea Communications Commission's approval for the Apple iPad was resolved quickly, but as this article notes the entrance of the iPhone 3G  into Korea was delayed for so long that it became known as "next month's phone." 

Now, the iPhone 4G has been left off of Apple's list of countries set to receive the iPhone as of 30 July. Depending on who you ask, the problem is either that the KCC hasn't approved the latest iteration of Apple's smartphone, or that Korea Telecom never submitted a petition for its approval. Either way, this tech savvy country isn't looking so savvy at the moment.

Korea, you did well to get yourself wired up. Now, how you doin' on the wireless front?

Read more...