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Economic Infrastructure

There are several sectors that constitute economic infrastructure. Some are real infrastructure like roads, the electric grid, but others are not typically seen as infrastructure. The housing market, for example, is not typically seen as infrastructure, but it is part of the economic infrastructure—a necessity to building economic prosperity.

Other examples of economic infrastructure are healthcare, education, and media. In order to build economy, people need health, they need a knowledge base, and they need to filter new information through that knowledge base to keep it healthy and current.

The importance of economic infrastructure is two-fold. First, it provides the same support role that traditional infrastructure provides: it girds the other social and economic activities of a society. It allows commerce to operate efficiently and with routine expectations that fade into the background of life, letting those engaged in other activities focus on their local problems and challenges. Second, just like traditional infrastructure, it creates a base of economic activity to itself. This base activity furnishes a minimum and continuous economy that can cushion the dynamic economy that sits atop it. Even when downturns occur, children continue to go to school, medical practices continue to operate, and housing is still needed for all inhabitants.

Those that argue, for example, for Medicaid expansion in the states, are arguing for improvements to the economic infrastructure. As with traditional infrastructure, more developed societies should expect and require advanced economic infrastructure. A modern society could not function without a network of paved roads, nor should it attempt to function without schools, universal healthcare, and other robust forms of economic infrastructure.

Even the Internet, while built of physical infrastructure, also includes volumes of economic infrastructure in the forms of protocols and software, much of it open source, which allows for interoperability that supports massive economies.

In seeking to shore up traditional infrastructure, it is important to do the same with these institutional, economic structures that are as important to the modern economy.

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Economic Problems

We see it on education. On healthcare. On climate. On recreational drugs. On abortion. On practically every issue our nations face.

Our debate isn’t really about any issue, per se. It’s all come down to the economic structures we use to do work.

Take education. We know how to teach people things, more or less. While there are challenges, the fundamental question of education is one of funding. The conservatives want to have McSchools pop up across the land, where you go in and order a number six with cheese and you learn how to do algebra (with cheese). The liberals want to continue to have school lunch: you go to school and the meal is the meal.

In both scenarios, the mechanism of learning is basically the same: read, hear, watch, then practice. The idea that we need to undercut the fabric of education, that this has to be a debate rather than an experiment, is silly, but for scarcity of time and money.

The same is true on healthcare. There’s nobody saying we need to trepan patients’ skulls to let the demons out. The medical science is advancing as it is, more or less on schedule. The argument is over how much money should be made, and how should it be allocated. The courts are currently blocking the march to private-single-payer with their rulings on anti-trust actions by the DOJ.

And climate, where the oil companies aren’t arguing that global warming isn’t real (not really), that the disasters aren’t coming, but that we should pay for it by enduring its effects, rather than mitigating it. Or, as some Republicans now push for a carbon tax over regulation, maybe there can be a market structure.

Reduced to this high-level view, our problems are fundamentally about who profits and how much, a frank discussion that is sorely needed but that is continually obfuscated by pretending it’s about healthcare or abortion.

We should not be fanatical about which side of the imaginary public-private line a service like education or healthcare resides on. But, more importantly, the people should demand high-quality and low-cost with protections and rights retained wherever the service lives. That includes representation, due process, fiduciary duties, and the like.

The politicians need to stop having fake arguments about issues and start having the real argument about the monetary structures of society.

In unrelated news, 1.5% of the current presidential term is already over. Just remember, every fortnight is 1% more of the term gone.

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Thoughts on Steam Trade Holds (Escrow)

Valve’s Steam service is set to roll out an escrow on non-two-factor-authorized trades. They are calling this a “Trade Hold.”

Alice wants Bob’s hat and Bob wants Alice’s key. They agree to trade.

Alice has Steam Guard Mobile Authenticator (SGMA), Bob does not. After the trade, they wait three days to get their items.

At this point, it’s unknown whether Alice could know at the point of trade whether she was risking the trade hold. It seems likely she will, and thus she could avoid it.

Problems with the system include:

  1. People without Android or iOS devices being unable to use SGMA.
  2. Automated trades via bots being unable to deal with escrow without major changes.
  3. People feeling that, generally, they are being disadvantaged due to a minority of users who fall for scams or install malware.

Valve has a scam/malware problem masquerading as a customer service problem. They have looked at improving customer service, but correctly realize that will not really solve the problem. They do need better customer service, but they also need to do more to address the problem of fraudulent trading. The escrow is supposed to be a pressure valve, to relieve some stress by limiting the damage that fraud traders can mete out.

Education of users is important, but simultaneously unrealistic short of Valve creating a trading simulator game that people want to play and it teaching them the hard-learned lessons of what to avoid. Users that would be helped by education either already educate themselves or will be a minority. Forcing education (e.g., through testing prior to granting trade privileges) would deter users from trading altogether.

Previously, Valve has used e-mail confirmations. This failed for hijacked accounts, because the users would simply have their e-mail accounts compromised in the hijacking. SGMA differs in that the likelihood of also compromising a mobile device is much lower.

If machine learning is mature enough, Valve may be able to leverage it to identify fraudulent trading patterns in a bulk of cases, in a manner similar to the credit card industry. It isn’t clear if it is up to this task, nor is it clear how easily Valve could implement such a filter. It seems reasonable to expect that will be a large part of their eventual strategy in fraud prevention.

What does not seem likely is Valve Customer Service becoming a peudo-law-enforcement agency. Investigating claims of fraud and trying to uncover the realities of events after the fact is just not in the cards for a video game services company. They will undoubtedly continue to seek to prevent the fraud.

It seems reasonable to say nobody wants to wait three days for a trade to go through, including Valve who will have to keep track of the trades. But Valve also does not want to have the volume of scammed items and problems sustain their current rates or grow. So they have to keep trying stuff, even if the community feels burdened.

Some minority of users may circumvent the protections of SGMA via emulators and desktop applications implementing the HMAC technology that SGMA uses. It’s a risk, and there doesn’t seem to be a easy way to avoid it, but that user count will likely stay small, sustaining the general integrity of SGMA/trade holds.

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Exernalities and Products

Externalities are costs in a market not borne by the consumers of the products or services. Pollution is the common example. Waste management (be it unused excess or things like packaging) is another. Anti-competitive practices are a third. In general, they are marked by market distortion.

For example, take waste management rather than some system where corporations have to directly account for product waste. Call a company LeafRing Inc. They manufacture decorative jewelry for you to put on your trees’ leaves. Each piece is sold for $1 and comes in a throw-away wrapper.

Let’s say that suddenly LeafRing had to pay for the waste, all those wrappers, plus damaged LeafRings, plus ones that people quit using. That might raise their unit price to $2, but people will only pay $1. They can’t sell LeafRings, so they go bust.

Instead, we have the externality system, where the true cost is still $2, but LeafRing only cares about the first dollar. The other dollar is up to the whole system (which, it isn’t, due to the way certain government and business funding actually works) to bear.

Basically, the system is designed such that a product that might otherwise be unviable can exist by everyone else paying for certain costs.

Now, that’s not to say society isn’t better off for having LeafRing. Nor to say it is. It’s a tradeoff people can disagree about. And they might choose to call it an effective subsidy instead of an externality.

The problem comes when, in response to externalities, people expect the solution to be free or profit-making.

Take public transportation, for example. The semi-private automobile system is too expensive or otherwise exclusive for some people, and so they need alternative transportation. But enough people get past the velvet rope that public transport is underutilized (a form of de facto segregation, though not entirely along racial lines). The fact that some people are not able to use the dominant transportation is an externality caused by high prices of cars and fuel, plus the demands placed upon operators.

Public transport is effectively the cost of the system we have, but critics often pretend that it should pay for itself. They want a free lunch: cars not having to account for the costs they impose on society, plus the therapy coming at no cost. Indeed, there are car drivers who look at a bus and think they’re paying for transportation twice: once for the car, and once when they pay taxes that support the busline.

In fact, the latter is just paying the hidden costs in the former. And the fact that’s not made clear, that politicians and media portray costs of externalities as though they’re facts of life, rather than as a problem of market distortion, only distorts the political system further.

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The Valve Mod Marketplace Fiasco ARG

So I’d written a piece that painted the paid mod controversy as a new alternate-reality game by Valve. But since the whole thing is on hiatus, I guess it won’t work.

What can be said, instead?

I think Valve is right about the inevitability of paid mods and having a more fluid system for moving works online from free to paid. They just didn’t have a very successful rollout. Part of that was the 75% rake between Valve (30%) and Bethesda (45%), leaving the mod maker with the smallest share (25%). Sure, the money spends for a mod maker that would otherwise get none, but it rubs the buyer the wrong way.

There’s a lesson in that. If other semi-predatory industries like the music industry had a more prominent display of how little the artists get out of your $15 album purchase, it could shake things up a lot. And that goes for other industries like farming, clothing manufacturing, and so on. If people know that workers are getting screwed, they’ll at least make a stink. If they can just ignore it, because it’s not in their face, they’ll tend to ignore it.

There were issues with misappropriation of others’ mods. Valve will have a hard time working out a perfect model for derivatives and dependencies on the legal side of the issue. But they can at least push for better technological integration of mod dependencies in games.

And Valve is right to glimpse a future where games themselves might be seen as a greater-than-the-sum-of-their-parts assemblage of mods. Something like a patchwork quilt that you play on a computer. That future will come to pass in time. It won’t be exclusive, other non-mod-based games will exist. But it will live alongside those games, both feeding off them and feeding into them.

In the meantime, it appears that the factions I’d described in the hypothetical ARG seem to be here to stay. We will probably see mods that will license themselves only for use with free mods, for example. While others will say they’re happy to be used by paid mods.

But paid mods do give modders an incentive to work and a mechanism to buy work from others to make their own mods better. If you’re doing free mods exclusively, you might want to get some better textures or models, but have to take what’s free. If you sell the mod, however, you can afford to hire professionals to augment your abilities (e.g., if you’re writing code, you can pay other professionals can do the art) make that mod a bit better for customers.

The other thing this whole incident reminds us of is that we will undoubtedly see other monetizations come forward. You might earn gametime or rewards in future games by helping new players out (as a guide would through a dangerous environment in the real world), for example. Or you might earn real money for doing so, as some already do by streaming their gameplay.

The nature of gaming is so digital that it provides a key ground to try things that might not fly in other industries, and although Valve didn’t get it right the first time, I hope they keep working on it.