Gneezy and Rustichini (2000) examine the effect of imposing a fine on
parents who arrive late to pick up their children from Israeli daycare
centers. They find that parents actually arrive significantly later once this
fine is in place. When what was formerly a fuzzy unwritten social contract is
rewritten with an exact punishment, they suggest that parents feel free to
break the rules and pay the exact fine (where before they were unsure about
the potential consequences of their lateness).
Lawrence Lessig argues that most of the people who watch The Social
Network will miss the really important point in the story of the rise of
Facebook: that is, no innovation of its kind would have been possible without
the Internet, which is not bogged down by monopolies or excessive regulation
(yet?).
“Bitcoin is Flawed, But It Will Still Take Over the World” covers
some of the most recent controversy concerning the booming cryptocurrency. It
is still disputed whether the inevitable deflation of Bitcoin (the total
circulation is limited by design) will doom the
currency. A free rider problem will also
emerge when this limit is reached: those who currently “mine” Bitcoin are
actually in effect working to validate real digital transactions. When there
is no more coin to be mined, the incentive to continue supporting the network
in this way drops significantly. There is by design a mechanism by which
spenders can pay transaction fees to miners so that their exchanges are
verified efficiently, but it is not certain that this will be a stable or
sufficient incentive alone. The author ignores the possibility of the problem
in suggesting: “They may run them just to keep the Bitcoin system going,
knowing that the system will reward them in other ways.”
More on Bitcoin:
“As China Looms, the U.S. Ponders Ways Not to Destroy Bitcoin.” Robert
McMillan of Wired Enterprise claims that current U.S. regulations are stifling
an industry with great potential. He suggests that as the involvement of the
Chinese with the currency skyrckets, a significant part of the Congressional
support for Bitcoin is fueled by a worry of a China-dominated digital
currency.
In the early 20th century, William James’ “The Ph.D. Octopus” pointed
to a dangerous and popular trend of overdependence on credentials within
academia. I can’t say the problem has improved — it’s survived, rather, and
spread into industry as well!