Tag: signaling

Book Review: Codes of the Underworld

I recently finished Diego Gambetta’s Codes of the Underworld: How Criminals Communicate.  For those looking for a more academic take on signaling (particularly from a sociological point of view) it’s a great find.  As I previously mentioned, Gambetta uses the extreme case of cooperation amongst criminals to tease out more general dynamics of trust, signaling, and communication.  The Mafia can be considered a “hard-case” for theories of signaling trust; given the extreme incentives for criminals to lie and the lack of credibility they wield given the very fact that they are criminals, how is it that criminals manage to coordinate their actions and trust each other at all?  By understanding how trust works in this harsh environment we learn something about how to signal trustworthiness in broader, less restrictive environments.  As Gambetta notes:

Studying criminal communication problems, precisely because they are the magnified extreme versions of problems that we normally solve by means of institutions, can teach us something about how we might communicate, or even should communicate, when we find ourselves in difficult situations, when, say, we desperately want to be believed or keep our messages secret.

The book is a great example of studying deviant cases or outliers, particularly when the area of study is not well worn.  This is a valuable general methodological lesson.  We are typically taught to avoid outliers as they skew analysis.  However, they can be of great value in at least two circumstances: 1) Generating hypotheses in areas that have not been well studied and 2) Testing hypotheses in small-N research designs, where hard cases can establish potential effect and generalizability and easy cases suggest minimal plausibility.

Gambetta takes a number of criminal actions and views them through the lens of signaling.  This allows readers to see actions, in many cases, in completely new ways, highlighting the instrumental causes of behavior.  For example, Gambetta looks at how criminals solve the problem of identifying other criminals by selectively frequenting environments where non-criminals are not likely to go.  Since criminals cannot advertise their criminality, they face a coordination problem.  Frequenting these locations acts as a screening mechanism since only those that are criminals are likely willing to pay the costs to frequent these locations.  (This ignores the issue of undercover law enforcement, but Gambetta deals with that as well).  Gambetta also makes the reader look at prison in a new light.  Criminals derive a number of advantages from serving time in prison, not the least of which is providing them with a signaling mechanism for communicating their credibility to other criminals (as prison time can be verified by third parties).  Additionally, many criminal organizations will require that new members have already served time before they are allowed to join.  Moreover, Gambetta explores how incompetence can work to a criminal’s advantage, since it can signal loyalty to a boss who provides the criminals only real means of income (a topic I discussed here).

Gambetta also looks at the conspicuous use of violence within prisons.  This isn’t a new topic, as any law enforcement drama will undoubtedly portray the dilemma of a new inmate who must establish their reputation for toughness and resolve or else suffer constant assaults by other inmates.  However, Gambetta makes it interesting by embedding the acts in a signaling framework.

First, Gambetta’s hypothesis regarding the importance of non-material interests is borne out by various studies.  Among others, he cites one study of prison conflict that found:

“[n]on-material interests (self-respect, honour, fairness, loyalty, personal safety and privacy) were important in every incident.”  While only some violent conflicts occur for the immediate purpose of getting or keeping resources, all of them have to do with establishing one’s reputation or correcting wrong beliefs about it.  Even “a conflict that began over the disputed ownership of some item could quickly be interpreted by both parties as a test of who could exploit whom.”

Second, Gambetta hypothesizes that we should expect to see more fights when prisoners do not have enough of a violence track record when they first arrive in prison.  One observable implication of this is higher rates of prison violence among female prisoners and younger prisoners.  In fact, the empirical record bears this out quite nicely.  Rates of violence are inversely related to age, providing ” a plausible social rather than biological explanation” for youth violence.  Additionally, Gambetta finds that, although less violent in the outside world, “women become at least as violent and often more prone to violence than men”.  Interesting, women are less often convicted of violent offenses, suggesting that the results are not simply the result of selection effects.

Both points have implications for political science and international relations, given the growing use of signaling models to explain political behavior.  The issue of reputation in international relations is one that is still growing and Gambetta’s hypothesis about lack of “violence capital” fits right in to much of the current work in conflict studies.

Overall, Codes of the Underworld is unique and thought-provoking work.  For those with a strong interest in communication and signaling, it is a must read.

[Cross-posted at Signal/Noise]

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Friday Signaling Roundup

Here are a few quick signaling items for your perusal.  I will try to do a similar roundup each Friday if I’ve stumbled on enough items throughout the week.  Enjoy!

  • How to Signal That You Are Marrying for Love? It’s tougher than you might think.  Some suggest using a pre-nuptial agreement to signal one’s love and affection instead of their love of money.  If one is truly marrying for love and not money they should have no problem signing a pre-nup if they are the less-wealthy of the pair.  However, the pre-nup may act as a signal from the wealthier of the two parties that they have reason to believe that the marriage will not last.  Therefore, pre-nups are likely only an optimal signal when they are suggested at first by the least wealthy member of the couple. (via Cheap Talk)
  • Tyler Cowen asks the questions “Which ingredient most signals a quality dish?”:  I can’t think of one off the top of my head.  Scallions is noted in the post, and that’s a pretty good one.  I’d think that ingredients that are financially costly and/or time consuming to prepare would also signal quality.  So, higher quality cuts of meat or dishes that are slow roasted or smoked, etc.  A friend of mine once remarked, “Ah, Bean salad.  If you’ve got bean salad then you know there is going to be great desert.”  He was using the quality of an earlier dish to predict the quality of a later one.  (via Marginal Revolution)
  • Can Cheap Talk Deter (PDF)? Potentially in an entry-deterrence situation, according to a draft paper by Dustin Tingley and Barbara Walter.  Tingley and Walter find that in an experimental setting, contra the expectations of their formal model, when participants were able to make a verbal threat to the first potential market entrant it decreased the instances of conflict from 83% (where communication wasn’t allowed) to 38%.  This is interesting, since the verbal threats by the defender where by definition costless (since they wouldn’t not face the challenger again and additional challengers would not know if they followed through on the threat)–meaning, they shouldn’t have revealed any additional information to the challenger.  My first thought is that in an experimental setting subjects might be revealing information through their body language or micro-expressions (which can’t be captured by a formal model) and that these signals conveyed additional information to the challenger.  But defenders where only allowed to communicate their threats to challengers through email.  The authors offer some potential reasons for the discrepant results, such as the unexpected success of early round costless threats actually signals that the defender is a savvy player and understands the game (i.e. fighting early in early rounds to deter future entrants makes sense, and therefore they are likely to follow through on the threat since future entrants will see that they fought).

[Cross-posted at Signal/Noise]

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The Individual Utility of Incompetence

There are many reasons why organizations (government, businesses, etc) grow dysfunctional and stagnant.  One major reason lies with the promotion and retention of less capable workers.  There have been a number of studies that explored this dynamic (for example, The Peter Principle, which theorizes that people are promoted as long as they are competent, which means at some point they reach a position of incompetence).  In general, though, the promotion and retention of incompetent workers would seem to run counter to the rational interests of the larger organization.  So why does this behavior persist?  Why are less competent workers able to retain their positions and, in some cases, obtain promotions?

One potential reason is that it is their very incompetence that is valued.  Incompetence acts as a credible, costly signal that they can be trusted by superiors looking to accumulate a power base.

Sociologist Diego Gambetta is a pioneer in the study of signaling.  In his 2007 book Codes of the Underworld: How Criminals Communicate, Gambetta uses the extreme case of cooperation amongst criminals to tease out more general dynamics of trust, signaling, and communication.  The Mafia can be considered a “hard-case” for theories of signaling trust; given the extreme incentives for criminals to lie and the lack of credibility they wield given the very fact that they are criminals, how is it that criminals manage to coordinate their actions and trust each other at all?  By understanding how trust works in this harsh environment we learn something about how to signal trustworthiness in broader, less restrictive environments.

Gambetta theorizes that one way that a criminal can signal their trustworthiness to another is through their own incompetence:

The mobsters’ henchman, so often caricaturised in fiction as an énergumène, epitomizes the extreme case of this class. If he were too clever he would be a menace to the boss. Idiocy implies a kind of trustworthiness.  […] One way of convincing others that one’s best chance of making money lies in behaving as an ‘honourable thief’, is by showing that one lacks better alternatives.  […] Incompetence is one way of telling people “You can count on me for even if I wanted to I would not be able to cheat.”

Through this mechanism, lower-level criminals can signal their trustworthiness to their bosses, since they are essentially dependent on their bosses for their economic gains given their lack of independent skill and intelligence.  This pervasive logic means that criminal organizations are likely to employ mostly incompetent criminals and that leaders will likely surround themselves with less competent lieutenants over time.

It is not hard to see this same logic play out in businesses, schools, and government.  If organizations are set up in such a way where the accumulation of loyalists is incentivized instead of performance, we should expect to see a greater number of incompetent employees relative to competent ones.  Additionally, we should see more incompetent employees advance as their “sponsor” advances.

[Cross-posted at Signal/Noise]
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Applied Signaling: Pajamas and 3-year olds

Every night, about 15 minutes or so after we’ve put my 3-year old daughter to bed, we inevitably hear a knock at the door.  She’s typically knocking because she needs to go the bathroom.  She’s also knocking because she wants to scope out what we are doing, find out if she is missing anything.  One thing that bothers her is if me or my wife leaves the house after she goes to bed.  In order to go to sleep she needs some kind of guarantee that we aren’t leaving and are getting read to go to bed just like her.  It appears she’s found one–whether me or my wife have gotten changed into our pajamas.

If we come to her door in our pajamas–or at least different clothes (e.g. sweatpants, etc) than when she last saw us–she takes it as a signal that we are in for the night.  If we were going out or not going to bed soon we would still be in our regular clothes that we wore earlier.  If we haven’t changed, she probes–“why aren’t you in your jammies?”  This let’s us know that she suspects we aren’t in for the night.  It also means that she will likely spend a fair amount of time looking out her window to see if our cars stay in the driveway before she will settle in and go to sleep.  Now, putting on pajamas isn’t that costly of signal–there is nothing stopping us from putting them on and then changing back into regular clothes to leave the house or host guests.  (However, in all honestly this isn’t likely to happen.)

The lesson here is that a) the idea of seeking out signals is intuitive for people and we start at a very early age, and b) rather than fight with our daughter about going to bed we might be better served just changing into our pajamas out the outset to demonstrate to her that we aren’t leaving the house, no one is coming over, and we are also getting ready for bed.  She may not believe our words, but she seems to believe the signal that she’s identified.  Leveraging that signal can lead to better communication and the outcome that we want.

[Cross-posted at Signal/Noise]

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When promises are credible signals

[Cross-posted at Signal/Noise]

While there are all sorts of actions people can take to signal that they are trustworthy, sometimes simply making a promise can get the job done. When two parties will be dealing with each other for an indeterminate amount of time it is advantageous to both if they are viewed as trustworthy. Lying would mean being punished in the future by the other party. In this way, talk isn’t simply cheap–it’s a credible signal.

Case in point, the potential reconciliation of the Health Care Reform bill:

Now, it’s true that the Obama administration achieves its policy goals once the House passes the Senate bill, and doesn’t need a follow-up reconciliation bill except insofar as it’s necessary to guarantee House passage. But the reconciliation bill is going to consist of a lot of popular provisions that Democrats will be eager to vote for — canceling the Cornhusker Kickback, boosting middle-class tax credits, delaying the excise tax and instead raising taxes on the rich.

Moreover, the House is only going to pass the Senate bill first if it gets ironclad assurance on the reconciliation bill from the administration and the Senate. Why would Obama and the Senate nakedly double cross the House? It would mean never being able to pass a piece of legislation again. The reputations of the double-crossers would be destroyed, both inside Washington and, to a lesser extent, nationally. No remotely rational politician, no matter how evil, would do something like that.

What makes (or, would make) this a credible signal of trustworthiness by Senate Democrats?

  1. Shadow of the future: It isn’t known ahead of time when House and Senate Democrats will need to stop cooperating on various measures, therefore both have a strong incentive to keep their word. Now, it is true that come November one or both chambers could come under Republican control, but that doesn’t negate the need for the parties to cooperate across the House and Senate. To some degree, it may actually increase it;
  2. Explicit/Public commitment: By explicitly promising to use reconciliation to enact changes sought by House Democrats, the Senate Democrats would be placing their reputations for trustworthiness on the line. While the shadow of the future certainly creates incentives for them to cooperate regardless of what they may say, explicit declarations make it very difficult for them to rationalize or explain away any non-compliance after the fact. What would be better is if every Senator (or, at least, the 51 needed to pass the measure) publicly declared their intention before the House votes. A blanket promise from only the leadership isn’t as valuable. Sure, the leadership would strengthen their own incentive to ensure a majority supports the measure, but that leaves open the possibility that individual Senators whose constituents are against reconciliation could back out–especially since the majority leader may not even be around come November;
  3. Ability to verify actions: There will be no way to hide whether Senate Democrats follow through on their promise to the House. Reconciliation will require each Senator to publicly declare their support or opposition to the measure. Making it easy to verify if someone follows through on a promise ensures that their incentive to lie is reduced, since they know they’ll be caught and punished in the future. Ambiguity is the enemy of verbal signaling.

(Hat tip Cheap Talk)

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Dictators, Torture Conventions, and Signaling

Charli linked to a great round-up of theories circulating that propose to answer the rather interesting question of why countries that sign the Convention Against Torture seem to have a greater likelihood of committing torture.

One working paper in particular , by James Hollyer and Peter Rosendorff of NYU, has caused quite a stir. They propose that dictators use the signing of such a treaty as a costly signal to domestic opposition groups that they fully intend to continue torturing those that oppose their regime. How does this work?

We argue that authoritarian states ratify human rights treaties explicitly because they do not intend to comply. And it is important to those signatories that all observers understand that they have no intention of complying at the time of accession. The logic, while counterintuitive, is straightforward: an elite facing threats from a domestic opposition can mitigate these threats by engaging in torture. If there is any additional cost to the elite of signing and then being found to torture, the act of signing the agreement signals to the opposition the strength of the elite’s commitment to remaining in power. Accession is a signal to the opposition of the very high value the elite places on holding onto power and its willingness to use torture if necessary. On observing the government’s accession, the opposition – now better informed about the value the elite places on holding power – will rationally reduce its anti-regime activities. The government continues to torture, but will torture less. On the other hand a regime that doesn’t sign shows itself to be vulnerable to the added costs associated with the use of torture. Thus, the opposition will increase e orts to remove the regime on seeing that the government does not sign.

It’s an intriguing theory, and the authors do a good job of linking their claims to empirical evidence. However, I am skeptical regarding their proposed mechanisms and whether they actually obtain:

1) If it is well known that the conversion rate, if you will, for bringing accused torturers to justice in connection with the CAT is quite low, then why would a domestic audience see this as a credible signal? Any dictator could sign the treaty regardless of whether their type was of a moderate or an extreme–if the signal could easily be sent by either type it can’t differentiate. Additionally, the more credible signal is one that actually demonstrates the will and, more importantly, the capability of the sender. In this case, if a dictator’s real aim and desire is to signal that they will do whatever it takes to stay in power why not just make an example of revolutionaries, rebels, etc? Show that you have the will and capability to do whatever it takes to stay in power (thinking here of Barbara Walter’s work on why some states negotiate with separatist groups and others choose violent repression).

2) Given that, I am more inclined to see it as a low-cost, public relations move to placate domestic and international critics. By signing the CAT a dictator can point to his/her efforts to play by the same rules as other governments and to treat their citizens humanly. The next time they are getting reamed out at some summit or UN meeting they can say “yes, but, we did sign the CAT”. They don’t really need to send a credible signal with the move, just create a useful tool in their public relations arsenal.

3) Additionally, violent, repressive dictators are less likely to fall from power. Therefore, they are less likely to be placed in a position where they could be prosecuted for their actions under the CAT. Combine this fact with the potential usefulness of signing the CAT from a public relations standpoint and you have another potential explanation aside from signaling. Moreover, it would also explain why ‘moderate’ or ‘competitive’ dictatorships are less likely to sign the CAT–precisely because their are more vulnerable to losing power and could therefore be brought to justice under the CAT. Given that the public relations gains are modest compared to the potential costs of actually being prosecuted, moderate dictators would be less likely to sign.

Just my initial thoughts. In general, the data is quite intriguing as is Hollyer and Rosendorff’s theory–certainly a puzzle well worth exploring.

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Reputational Rhetoric: When does it work?

Over at FP.com, Stephen Walt provides a review of an interesting new book:

[M]y colleague Matthew Baum and his co-author, Tim Groeling of UCLA, have recently published an excellent book entitled War Stories: The Causes and Consequences of Public Views on War (Princeton University Press). Drawing on a wide array of empirical evidence (including opinion surveys, media content, and foreign policy decisions), they argue that the interaction between elites, media, and public opinion is a three-way process in which each group’s behavior is essentially strategic. Politicians try to use media to advance their aims; the media picks stories in order to maximize audience (or in some cases, to advance an ideological agenda), and therefore tend to favor stories that are novel or surprising (like when a prominent senator criticizes a president from his own party). Similarly, the public does not just consume the news passively; readers and viewers use various cues to gauge the credibility of different sources.

I have not read the book yet, but it certainly sounds interesting. I do wonder to what extent it may shed light on an idea I kicked around for my dissertation: the effectiveness of reputational rhetoric.

Reputational rhetoric can be defined as the strategic deployment by state leaders of rhetoric that implies a threat to the state’s reputation for resolve if a) the state backs down from a challenge or threat, or b) a state alters course in an existing conflict. The purpose of this rhetoric is to manufacture or maintain public opinion that is favorable to the leader’s preferred foreign policy. There has been quite a bit written in the literature about reputation and whether it matters, but mostly from the perspective of whether adversaries take a state’s reputation for resolve into account when determining how to react to threats or whether to challenge the status quo. What seemed to me to be missing in the literature is an examination of the extent to which the deployment of such logic and arguments by leaders is effective at swaying public opinion.

Leaders across time and space have often deployed reputational rhetoric in an attempt to rally the public. It wouldn’t take us long to find examples uttered by US Presidents from Eisenhower to Johnson to Reagan to Clinton to Bush. Sometimes this rhetoric is met with skepticism and disdain from the public, other times it is embraced–often during the same conflict. Furthermore, the use of this rhetoric is not bound by party or era. Understanding when such rhetoric is successful would seem to me rather important from an academic, policy, and political perspective.

So what might explain the success or failure of such rhetoric? I have a few notions (these have by no means been rigorously developed, just initial thoughts):

  1. Media: it may be that the degree to which the media is unified in its characterization of a conflict will help determine whether reputational rhetoric succeeds or fails.
  2. Filters: rather than looking at the media as a whole, it may be that the public relies on certain outlets or individuals as filters for the various opinions that exist around a policy. If those filters begin to adopt the same reputational rhetoric as state leaders it could sway the public.
  3. “Never Again”: reputational rhetoric may be more effective following a defeat or attack, as the impulse to regain a reputation for resolve and deter further attacks may be strong. Think about a gambler who loses a number of hands in a row and, rather than cut his losses, continues to place bets to recover what was his previously. Framing of the conflict as avoiding a potential loss or regaining that which was previously held may trigger greater support (prospect theory may tell us something about why, psychologically, this would be the case).
  4. Stage of a conflict: it may also be that reputational rhetoric works best during the early stages of a conflict when it appears there is much to lose unless action is taken and where victory seems probable. However, as the conflict drags on and victory seems less likely, the public may become more focused on preventing further losses (in terms of blood, treasure, and possibly even the state’s reputation for capabilities–i.e., the state can actually achieve military victory vs the state is simply willing to use force).

As I said, these are off the cuff thoughts. I would be curious what others have to say. Obviously, Patrick could comment on the potential power of reputational rhetoric as a rhetorical commonplace, particularly in the United States. Additionally, Jon has published on the interplay of political leaders, citizens, and the media when it comes to making the case for war.

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The Complexities of Signaling

Adam Elkus from Rethinking Security tweets about a recent critique of the current US strategy of strategic communication in the Muslim world. The critique was penned by non other than Admiral Mike Mullen, the current Chairman of the Joint Chiefs of Staff. Mullen’s contention is that efforts by the US to counter propaganda from Islamic militants is doomed to fail unless more attention is paid to the outcomes of US policies on the ground:

“To put it simply, we need to worry a lot less about how to communicate our actions and much more about what our actions communicate,” Admiral Mullen wrote in the critique, an essay to be published Friday by Joint Force Quarterly, an official military journal.

“I would argue that most strategic communication problems are not communication problems at all,” he wrote. “They are policy and execution problems. Each time we fail to live up to our values or don’t follow up on a promise, we look more and more like the arrogant Americans the enemy claims we are.”

Mullen’s critique is a great opportunity to discuss the importance and difficulties of signaling.

The quote above reflects general problems with signaling–the practice of conveying information about oneself to another party that in turn either reinforces or alters the image that party has of the sender. Signaling is not simply a topic for security studies, but has wide-ranging applications in economics, business, marketing, and social relations in general.

Mullen is correct that words alone will not matter much–they basically amount to cheap talk since there is little to no cost associated with uttering them. The problem is exacerbated by an actor making declarations of one kind while taking actions that can be seen as inconsistent with those declarations. Since talk is cheap, audiences will look to the actions of actors to see what they reveal about their true intentions, character, and/or interests. However, matching words to deeds in this way is difficult for any number of reasons. Keren Yarhi and I are actually in the process of writing an article on the difficulty and challenges of choosing an optimal signaling strategy. Here are two that come to mind after reading the Admiral’s comments:

  1. Multiple Audiences: signaling is hard enough, but the degree of difficulty is compounded when you consider that there are always multiple audiences receiving the signals you send. Sometimes these audiences have different expectations of your performance which can complicate how you choose to act. There are strategies for dealing with this situation (e.g. using back-channels or multivocal signals), but these strategies are far from optimal.
  2. Audience Perception: even if the right conditions exist for actors to select their preferred signaling strategy they still may not be able to effectively communicate their desired message. Why? Because whatever signals they send still need to be interpreted by the audience. Contra what Admiral Mullen asserts in his critique, actions do not always speak for themselves. In fact, they rarely ever do.

Consistency in messaging is crucial in any campaign, particularly when you are working against history as well as competitive interlocutors which may have the ear of your audience. However, it is easier said then done and even when it can be achieved it may not be enough to truly convince your audience that what you say is true.

Updated: Stephen Walt weighs in with his favorable reaction to Admiral Mullen’s piece. Walt acknowledges the problems of ‘cheap talk’, but largely assumes (or implies) that actions will speak for themselves.

[Cross-posted at bill | petti]

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Piracy as a Signal of Value?

[Cross posted at bill | petti)

Christopher Penn crafts an interesting piece arguing that piracy (i.e. copyright infringement) is, among other things, a market signal:

Piracy indicates that something is sufficiently valuable enough that it’s worth stealing. It’s worth making an illegal copy and spreading without compensating the creator.

Do you want the most accurate, unbiased, unmanipulated measure of how popular and valuable something is? Go hit up a site like The Pirate Bay or Demonoid or any of the other file sharing services and see if someone is stealing it.

Now, I think this is an interesting observation, as well as a logical one. It seems intuitive that someone must value a product in order to go to the trouble of illegally copying and distributing it. This act takes time as well as incurs particular risks if one is caught. Similarly, for someone to illegally download a product they too incur some level of risk and therefore must believe the product to be worth the risk they are taking on. However, I would have to disagree with Christopher that using file sharing services as an index for how valuable something is constitutes the optimal way to measure value.

In most cases (and I stress most, leaving room for a few exceptions), the market price of a product can indicate three things: level of demand, level of supply, and/or price of inputs for that product. When price rises either demand has increased, supply has decreased, or the cost of inputs has increased. If consumers keep consuming the product at the higher price it indicates that they place a higher marginal utility on that product (fancy way of saying they value or like it more). If consumers are not willing to pay the higher cost the market will correct itself–as demand drops, supply increases, etc.–leading to a lower price for the product.

With piracy, we lose the power of the price signal. ‘Producers’ in this scenario essentially have no production costs, as it is incredibly easy to produce and distribute pirated products electronically. They also have no concerns for inventory, since ‘digital shelf space’ is infinite. Additionally, consumers bear no immediate costs for consuming the product. That is the whole point of illegal file sharing–one does not have to pay for what one consumes. Without any kind of feedback besides pure demand, it is hard to gauge how valuable something is since consumers are not being asked to sacrifice anything of value for the product.

However, there is one possible bit of cost that we could incorporate–risk. Copyright infringement is illegal (well, most places) and, if caught, one could face stiff fines and penalties for either ‘producing’ or ‘consuming’ illegal content. We woul need to incorporate a measure of risk that takes into account the severity of the possible penalties and multiply that times the likelihood that one would be caught and that the harshest penalty would be applied. Say, for example, R=P x L where R equals the total risk assumed, P equals penalties, and L equals the likelihood of being penalized. This measure could denote the actual ‘price’ that people are willing to pay to either distribute and consume specific illegal products.

I think if we look at it this way we would find that the value of these goods (in most cases) is far less than Christopher thinks they are, as the probability of being caught is quite low for most participants in this type of economy. If that is the case, the rate of piracy would not necessarily indicate that consumers value the product more, but actually that they value it less since R would likely be less than the market price ($). I think there is a philosophical dimension to piracy that Christopher does not incorporate into his theory (more on this below).

Christopher makes another point with regards to marketing:

Unlike commercial markets where marketers spend time, energy, and money to get you to buy things, no commercial marketer actively goes out and tells people to steal their products and not pay them. That’s completely irrational.

Give away for non-monetary currency, sure, through inbound links or reputation, through legitimate venues like your web site or iTunes, but no one wants to confer any level of legitimacy on pirate markets. Thus, when you see something in a pirate market that is actively being traded (meaning someone right now is seeding or leeching, uploading or downloading), it’s a good indicator to me that there’s value being exchanged, even if the creator isn’t getting compensated.

This is true in most cases, except that whether you pay for a product or not you have still been exposed to the barrage of marketing activities that promote the product.

Finally, piracy as a signal runs into problems due to the philosophical/psychological dimensions to the practice. Peter emailed me to discuss the post and lays out some of the basic logic that I was alluding to above regarding philosophical/psychological factors to piracy:

On piracy–there is also a social/normative component, in that people want to identify as Pirates because Pirates are cool.

Sometimes you’ll have folks who want something but don’t want to pay, and there’s an economic signal there. But, you will also have an identification element at work–I’m a Pirate, i don’t pay for anything (even if the cost is negligible), mainly for the self image of romantic hero bucking the system, rebeling against the Man. Pirates are, after all, cool. They even have a major political party in Europe that won seats in the EU parliament.

I agree with Peter, and this fact further complicates using piracy as a signal of value. Furthermore, we know from experimental work that simply making something free can alter how the item is perceived and, consequently, consumed.

[BTW, Peter and Patrick are supervising some really sharp undergrads who are doing some independent Piracy research this summer, and this identification element becomes a strong running theme for them, as the modern notion of piracy contains a romantic and heroic element to it. They have a great blog on the project: https://roguishcommonwealth.blogspot.com]

Overall I think the idea is very interesting and we likely can extract some additional measure of value from file sharing sites. But piracy is just one input among many that we could use to devise a more complete index for value.

(via chrisbrogan)

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Balancing: A Reply to Tobias Harris

Tobias Harris over at Observing Japan, weighs in on the discussion regarding Japanese balancing (or lack thereof). Harris’ post is an excellent addition to the discussion and includes some excellent points that require me to clarify my original post. And away we go…

1) Tobias is correct that given the current and likely current state of the DPRK they are not exactly a Gilpin-esque revisionist power. However, I don’t think that a state must have asperations and likely capabilities to match to be considered a revisionist state in general. A state that clearly is unhappy with the current political order (whether it be regional or global) and shows intent to press for revisions to the status-quo can be considered revisionist. No one thinks that Iran is capable of challenging the US for global dominance or seriously affecting the current global order, but they certainly can rock the boat regionally which can make them revisionist in many states’ view. My larger point was that the DPRK is more likely in the short term to be the focus of any reactive balancing by Japan–given that they are a more immediate security threat.

2) I think we are in agreement that China is certainly the long-term focus of any balancing, whether that be internal or external. My larger point was that it isn’t likely to serve as a catalyst for change in Japan’s currently policy short term.

3) On Japan’s desire to strengthen it’s alliance with the US: I actually agree. Some of their behavior, even that which may require changes to the status-quo of their own security policy, can be explained by their need to signal to the US that they are a reliable partner in the alliance. To do so requires not only a shift in material capabilities, but also a shift in political capabilities–meaning, a greater willingness domestically to allow for these types of military operations. A dashing young scholar has explored this dynamic with regards to Germany after the Cold War. I am not as well versed in the domestic and foreign policies of Japan as Tobias seems to be, but from what I’ve seen I think a similar case can be made, particularly looking at the evolution of Japan’s willingness and ability to project power in coordination with UN or US-led campaigns.

4) Finally, I should have been more explicit in terms of hedging my post. I wrote that the idea had merit. I don’t have enough knowledge of Japan to say for sure that this is the case, only that it was plausible and that I thought there was a compelling logic to it. Needless to say I will certainly be keeping a closer eye on it to see if the effects and behavior I posit eventually come to pass.

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