An interesting year for Detroit

2007 will be an interesting year for the "big three" U.S. auto companies, and thus for Michigan. In 2006 and the first few months of this year:

• GM fought off an attempted take over by Nissan, but only because they are the strongest of the three and improving
• Ford finally fired it's useless namesake CEO
• Daimler has given up on Chrysler and walked away from its $35 billion investment, even paying an extra half-billion to be rid of it!
  

Also, in 2006, all three companies had large lay-off programs.

The essential problem of the U.S. automobile industry has been the evasion of reality in the past. Unionization is primarily responsible for the problems. Of course, management has been less than stellar, but management's major mistakes of the past have been to go along with union demands -- taking the easy (and short-term) way out.

When the Japanese auto companies came to the U.S. they ought to have been moving some large parts of their operations into the Detroit area, for the same reason software companies locate in Silicon Valley. They also ought to have been buying up some U.S. auto-firms. This was politically impossible for a single reason: unions. Those who live in the Detroit area would have seen Union halls with "no foreign cars" signs in their parking lots. Well, the chickens have come home to roost!

While the U.S. auto industry is at rock bottom, all is not lost. They could go under, but there is also a large likelihood that 2007 will be the turning point. The most important change is that auto-workers, down to the rank and file, now understand that evasion cannot go on much longer.... and 2007 is the year when the new union contract is negotiated.

One big liability weighing on the U.S. auto companies is their retiree health-care costs. They're huge, but that's not the worst of it: they're also unpredictable and growing as the cost of health care continues to outpace others costs in the U.S. So, 2007 may be the year that the U.S. auto industry finally fixes this problem. The most likely solution is actually very simple in its elegance: let the union run the system.

Imagine how tempting it is to a union boss to say he gets to run a multi-billion health-care fund. In a sense, the workers would be lambs being delivered to their union bosses, but their trust in the union system is what got them here in the first place, so I would cheer for this approach. The automakers will set up a health-care fund that caps their liability, and the union will run it. This has been tried at Goodyear.

If the 2007 union contract can cap the health-care liabilities, and also close loss-making plants and cut superfluous labor, the automakers may have seen bottom. This would have been too much to expect even 5 years ago, but the mood among workers appears ready for it now.

So, I'm optimistic that it's up from here, and that in 2010, Michigan will no longer be near the bottom of the states in economic metrics.

Arizona tries to protect monopoly power of Appraisers

A while ago, I mentioned Zillow.com, an interesting web-site that gathers public-record data on house prices and displays them in a very convenient Google-maps format. Enter an address and it shows a map, at a scale where you can see houses, each labelled with a price. The price label is an estimate, apparently based on the publicly-available actual sales prices of nearby homes. At least for my neighborhood, the prices appear to be pretty good estimates.

All sounds good so far? Well, turns out the government does not think so. The government of the people's state of Arizona wants to protect it's citizens from Zillow -- believe it or not. They say:

The Arizona Board of Appraisal issued two cease-and-desist letters to the company that operates the popular real estate Web site Zillow, saying it needs an appraiser license to offer its "zestimates" in Arizona.

"It is the board's feeling that (Zillow) is providing an appraisal," Deborah Pearson, the board's executive director, said Friday.

HT: Freakonomics Blog

Laws about virtual reality

I don't play any role-playing games, but I find it disconcerting that people are starting to treat games like they're "real".

Taxation of in-game transactions: The first example of this is the discussion about taxation in games. If someone builds something in a game which he then sells for real money, I can understand that being treated as income. However, there are some people who're discussing real-world taxation of exchanges that happen completely within games, without any real-world trade.

Here's their argument (not being a gamer, my example will have to be abstract): suppose I build something inside a game that has value in the real world -- I could sell it, even if I actually don't. Let's say another person also builds something inside a game. Now, we exchange what each has created. A taxman could say I've exchanged something that has "real world" value for something else of "real world" value, therefore I've entered into a barter transaction, no different from a programmer writing software and giving it to a baker in exchange for a year's worth of chocolate cakes (yummy)!

Barters are taxable (if they're reported). If two people each have things that have $100 market values and exchange it, it is treated as Person A selling the item for $100 and buying Person B's item for $100. Thus, each ends up with $100 of taxable income, even though no money changed hands. (Of course barter transactions go under the radar and "market value" can be stretched, but that's not the point here.)

The blogger I linked to above argues against taxing "in game" trades, but her reasons are very poor. She argues against the...

...regressive nature of the tax because players who put in the most time and the east money would owe the most tax, although players who put in the most time 40-80 hours a week or more) tend not to be employed full-time (e.g., students). layers with higher incomes tend to be those putting in less time; they tend to spend money in the "real market" in lieu of hours of "grinding" to level up.

A very poor argument.

Crime inside games: Now, for a different example: crime in online games. Since a game is programmed, whoever programmed it makes the rules. For instance, one might have a game where players "kill" other players. Now, what if someone has a game that does not allow "killing", but some hacker figures out how to do so anyway. Should the law get involved? I'd say, that depends on the specifics. However, even if the law is involved, it might be a civil case, or it might be some type of computer-crime or property-crime, not murder!

However, a recent news-story says that someone playing "Second Life" in Belgium complained to the police, because she was raped inside the game. While the game allows avatars to "have sex" if the players allow it, it appears that some hackers figured out how to make their avatars "have sex" with another player's avatar regardless of the other player's instructions. However, some people discussing this (links in news-story above) seem to have a hard time thinking of it in terms of a computer crime -- the moving of bits and bytes, and seem to confuse it with the real-life equivalent, even though they don't quite equate the two. Supposedly the police got involved, but they may simply be treating it as a computer-crime/property-crime.

I wonder what Objectivist gamers think about all this.