One of the important achievements of the open government movement in recent years has been a widening of consultations. Where before the only external input came from industry interest groups and their lobbyists, today the general public in many countries is invited to give its views on a range of proposed government policies. But is this just window-dressing?

That's what Chris Taggart, co-founder of OpenCorporates and founder of the UK local government site OpenlyLocal, wondered recently when he was preparing to participate in a UK government workshop about open data:

Yesterday I received an email from a Cabinet Office civil servant in preparation for a workshop tomorrow about the Open Data in Growth Review, and in it I was asked to provide:

"an estimation of the impact of Open Data generally, or a specific data set, on UK economic growth… an estimation of the economic impact of open data on your business (perhaps in terms of increase in turnover or number of new jobs created) of Open Data or a specific data set, and where possible the UK economy as a whole"

My response:

"How many Treasury economists can I borrow to help me answer these questions? Seriously."

Because that’s the point. Like the faux Public Data Corporation consultation that refuses to allow the issue of governance to be addressed, this feels very much like a stitch-up. Who, apart from economists, or those large companies and organisations who employ economists, has the skill, tools, or ability to answer questions like that.

Taggart's rhetorical question exposes the continuing bias in apparently open consultations that ask for detailed responses: only big companies with the people or resources to apply to such questions are taken seriously, which means that the views of the general public are once more discounted.

In fact, it's worse than that, since the actual figures produced by big companies – particularly those with a vested interest in preserving outdated copyright laws, say – often turn out to have no real basis in fact, as numerous previous Techdirt stories have shown. Large organizations can just use their size to lend an air of credibility to estimates that may be little better than some back of the envelope calculation.

Recognising this fact, Taggart decided to fight fire with fire by producing his own estimates that were pretty much jotted down on the back of an envelope. He also cleverly turned the question around, calculating not the positive impact of open data – something hypothetical and hence very hard to estimate – but the observed negative impact of closed data.

His calculations are surprisingly detailed (it must have been a big envelope), and are well-worth reading. His final figure? A loss of £17,850 million – around $28 billion – a year to the UK economy:

That, back of the envelope-wise, is what closed data is costing us, the loss through creating artificial scarcity by restricting public sector data to only those pay. Like narrowing an infinitely wide crossing to a small gate just so you can charge – hey, that’s an idea, why not put a toll booth on every bridge in London, that would raise some money – you can do it, but would that really be a good idea?

And for those who say the figures are bunk, that I’ve picked them out of the air, not understood the economics, or simply made mistakes in the maths – well, you’re probably right. If you want me to do better give me those Treasury economists, and the resources to use them, or accept that you’re only getting the voice of those that do, and not innovative SMEs [small and medium enterprises], still less the Big Society [ordinary people].

Just because consultations are open doesn't mean the submissions are representative.

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The launch of Amazon's Kindle Fire at a price well below expectations has naturally focused people's attention on the e-book side of Amazon's operations, and the likely effect of the extended Kindle family on other publishers trying to go digital. But something else is happening at the other end of the publishing chain that could well disrupt the industry just as much, if not more: Amazon is becoming a major publisher in its own right.

Things began back in May 2009, when it launched AmazonEncore:

a new program whereby Amazon uses information such as customer reviews on Amazon websites to identify exceptional, overlooked books and authors that show potential for greater sales.

After this low-key start, Amazon added others imprints, including AmazonCrossing (foreign books in translation), Powered by Amazon (short books), Montlake Romance (romantic fiction), Thomas & Mercer (mysteries and thrillers) and, most recently, 47North (science fiction, fantasy and horror) - the last of these with some eye-catching authors:

47North launches with 15 books, including "The Mongoliad: Book One," the first in the ambitious, five-book, collaborative Foreworld series led by Neal Stephenson and Greg Bear. All of these books will be available to English readers in Kindle, print and audio formats at http://www.amazon.com, as well as at national and independent booksellers. 47North will publish original and previously published works, as well as out-of-print books.

Meanwhile, back in May this year, Amazon hired a publishing industry veteran to become VP, Publisher of Amazon Publishing’s New York office:

Amazon.com has taken its most aggressive step yet toward competing head-on with traditional publishers: It’s hired Larry Kirshbaum, a literary agent and the former CEO of Time Warner Publishing Group (now Hachette Book Group), to start a general trade imprint.

Until now, Amazon’s imprints have focused on genre fiction like mystery and romance. By hiring a high-profile industry veteran to focus on “quality books in literary and commercial fiction, business and general nonfiction”—and by releasing those books in both print and digital formats—Amazon is announcing itself as a serious competitor against the “big six” traditional trade publishing houses.

Put all these imprints together, plus Amazon's main sales sites around the world and the Kindle e-readers range, and you have a fully-integrated global publishing strategy.

It's hard to see how traditional publishers can respond. They may have impressive back catalogs, and established links with leading authors, but Amazon has the distribution network and growing success in e-book publishing. Above all, the trade publishing houses seem to lack Amazon's ambition: it looks like it doesn't just want to make money from the entire publishing chain, it wants be the entire publishing chain.

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We recently noted that the MPAA was passing around a silly infographic chock full of bogus stats, and pointed out that someone had noticed that if you took the MPAA's "losses" claim seriously, it would mean that downloaders were buying 200 more DVDs per year. The MPAA folks were apparently not happy that people called them on their misleading stats, and have come out with a statement, which it claims is about "correcting the record."

If only that were true. Instead, we get more misleading bunk from the Masters of Propaganda.

First off, the MPAA admits that perhaps (just perhaps) their original graphic may have been a little misleading, and have put out a new version that moves away from implying that they were losing $58 billion, and now merely suggests that it's the US economy that loses this much money from the combined infringement on movies, music, packaged software and video games. This is complete and utter bunk -- and the MPAA folks either know this and are lying... or they're idiots. Take your pick.

The $58 billion claim comes from a study from The Institute for Policy Innovation that has been debunked so many times over, the fact that the MPAA would even bring it up is a laugh. And it's based on a very questionable analysis of the broadly defined "copyright industry." Of course, as we've noted in the past, the definition of "the copyright industry" for such studies includes all sorts of goods and services that do not rely on copyright at all, but are force-lumped into this study. So, if we're talking about actual products that rely on copyright, you probably have to ratchet down the scale by an order of magnitude. And that's just to start. From there, you have to realize that IPI's numbers use completely bogus math.

Tim Lee did an excellent job explaining the economic and mathematical fallacies of their methodology years ago (for which IPI kindly tried to get him fired from his job). The key issue is how the IPI counts "losses."

In IPI-land, when a movie studio makes $10 selling a DVD to a Canadian, and then gives $7 to the company that manufactured the DVD and $2 to the guy who shipped it to Canada, society has benefitted by $10+$7+$2=$19. Yet some simple math shows that this is nonsense: the studio is $1 richer, the trucker is $2, and the manufacturer is $7. Shockingly enough, that adds up to $10. What each participant cares about is his profits, not his revenues.

Furthermore, in IPI and MPAA fantasy-land, dollars not spent on movies simply disappear from the economy. And yet, anyone can tell you that's simply not true. That money continues to be spent elsewhere, and plenty of studies have shown that, despite growing infringement online, the amount of money that individuals spend on entertainment continues to rise.

So why would the MPAA rely on this number, which is so obviously false? Because it doesn't care about the truth or accuracy or "correcting the record." The MPAA's job is to get Congress to pass laws that divert money from what the market wants to its legacy studios who are slow to adapt. So it will use any number it can get its hands on, no matter how ridiculous. It's just that this time it got called on it, so it had to scramble to try to make the number look even a little bit legit...

Canadian patent troll Wi-LAN has a long history as trying to tax any and all wireless innovation with patent threats. With the news that it's suing a bunch more companies -- including Apple, HTC, HP, Dell, Sierra Wireless and others, the company is merely cementing its reputation as a taxer of innovation, rather than a builder of anything useful. The company doesn't seem shy about this. As the link above notes, the company seems to brag about this "business" strategy:

What's more, Skippen said he believes "that our past investment in litigation could generate a significant return in the future. Our record revenues and earnings in the first quarter signal the beginning of that return to WiLAN and its shareholders."

It's hard to read such a comment and not feel sickened by the pure net loss on the economy and innovation from such leeches. Any company whose business model focuses on litigation is not contributing positively to society and innovation. There are times to file a lawsuit, but when that becomes central to your business model, something is broken.

The very core of a functioning capitalist system is that companies make transactions in which there's a buyer and a seller, and both sides come away from the transaction feeling better off. The buyer values the product or service more than the money paid, and the seller values the money more. That's good business. Any time you involve a lawsuit to force someone to pay, you're doing exactly the opposite of that and you're setting up a system that is not working to benefit everyone, but is actively using the force of the courts to try to force a company to "buy" something it has no interest in buying. It's not good for the economy and it's not good for innovation.

On Tuesday, we questioned John Sununu and Harold Ford Jr.'s assertion that Netflix was somehow getting a "free ride" on the internet these days, by asking if they'd be willing to swap broadband bills with the company for the rest of the year. On Wednesday we upped the ante, by offering to give each man $500 if they'd pay Netflix's broadband bill for the final quarter of the year. $500 would come from Derek Kerton who suggested it, and another $500 would come from us at Techdirt. Since then, a few more people have contacted me and offered (anonymously) to put up another $1,500 between them. So we're now up to $2,500 total (or $1,250 each) if John Sununu and Harold Ford Jr. agree to pay Netflix's broadband bills for the months of October, November and December. Or, you know, they could admit that their op-ed was misleading claptrap. Of course, their failure to accept this "free" money sorta makes that statement for them.

I'm constantly amazed at the general cluelessness of the video gaming industry on basic economics concerning the concept of the first sale doctrine and the ability to resell a product. More than pretty much any other industry, the video game industry is vehemently against the idea of reselling used games. They've claimed that it defrauds the industry, that it hurts consumers (say what, now?) and that it "cheats developers." All of this is ridiculous and economically ignorant.

The latest to jump into the fray, as pointed out by Copysense, is some industry consultant who basically calls used games sales by Gamestop a version of money laundering:

It is time to for Gamestop to fess up and acknowledge their real business. Relative margins reveal Gamestop's actual business to be the collection and resale of used games. New game and accessory sales revenue may equal or exceed the used game revenue, but they do not come close to matching the profit. The stock of used games is financed by the very publishers who are being harmed by the market. They put up the risk capital to make and market the game and put the unit on the shelf. Publishers receive a one time, per unit fee for putting the game into the Gamestop system and are required to pay marketing development funds to Gamestop to have posters and other promotions in store. But Gamestop does not pay for the games, customers do. Gamestop only provides credit until the games are sold. The consumers' payment covers Gamestop's initial outlay, plus a profit. Because Gamestop pays on terms, the consumers' money is in the bank before Gamestop ever makes a payment on the new game units. If the consumers do not sufficiently cover the expense, Gamestop will call on the publishers for price adjustments and protection. While this business shows a profit with no downside risk, the entire retail side is merely a highly cost effective way of funding the used game inventory. To ensure return of the games, consumers who buy a games are bombarded with offers to turn them back in for credit. Each turned in game builds the used inventory, at no cost to Gamestop. When sold, the only person receiving the benefit, is Gamestop. When I put it this way . . . . I don't want to say it sounds like laundering, but . . . . . They take a game unit a publisher should get paid for, run it though a consumer, and turn into a game unit they can sell over, and over, and over, and over without compensation to the publisher.

Of course, all of this is based on faulty economic theory. They all seem to ignore the fact that a healthy resale market increases primary market sales, by making the primary sale more valuable. It's a pretty simple equation. If I can buy a $60 game, knowing that I can sell it back later, that reduces the risk and the real "cost" to me. That increases sales. Separately, a strong resale market has other secondary benefits, such as hooking people on series of video games, so that they're more interested in buying the "new" (full price) versions.

But, overall, what these gaming industry execs and consultants are whining about is that they just don't like a free market where they can't artificially inflate the market price of games even higher. The used market acts as a check on the primary market to keep it realistic. And, as a result of a more efficient market, you actually have a bigger market. Those who assume that demand is totally inelastic think this is bad, but they don't recognize that game buyers have choices, and one of those choices is not to buy games that are too expensive. It's not fraud and it's certainly not money laundering. It's called keeping a market healthy.

So we just wrote about a truly ridiculous opinion piece by two ex-politicians, John Sununu and Harold Ford Jr., claiming that Netflix somehow didn't pay for its bandwidth. They complained about the supposed "free ride" that Netflix was getting. As one of our commenters pointed out, this is sort of like the "free ride" that Ford Motor Company gets from the highway system.

But Derek Kerton may have had the best idea of all, noting that Sununu and Ford will almost certainly ignore our request that they swap their broadband bills with Netflix. Derek suggests we up the ante, and offer to actually give Sununu and Ford some money if they agree to pay Netflix's broadband bills for the rest of 2011. He's putting up $500 and we at Techdirt will match his offer and put up another $500. So, that's $1,000 for Sununu and Ford Jr. if they're willing to pay Netflix's braodband bill. Hell, we'll give them some time to think it over, and say they only have to pay for the last quarter of the year. If they'll pay Netflix's broadband bills for October, November and December, we'll give them $1,000 ($500 each). Some others in the comments have also offered to chip in as well, so perhaps we can raise the ante a bit more.

So here we go. According to Sununu and Ford Jr., this is "free money" that we're offering them. Will they take it? Will they agree to pay for Netflix and its very cheap "free rider" broadband bill? I'm not holding my breath.

Not this again. I thought that we were well past lobbyists publishing op-ed pieces in which they flat out lied about how broadband pricing works. Almost exactly five years ago, we called out (then) telecom lobbyist Mike McCurry (a former Clinton press secretary) for his bizarre and ridiculous claim that Google got its bandwidth for free. We asked, if that was the case, if McCurry would agree to pay Google's bandwidth bill. McCurry never responded, though the astroturf group he ran at the time was clearly reading, since they took other comments of mine totally out of context at a later date.

It looks like we're in for a repeat with some other ex-DC folks-turned-sell-out lobbyists. This time, it's former Senator John Sununu and former Rep. Harold Ford Jr., shilling for "Broadband for America," claiming that Netflix gets its bandwidth for free. There are so many things wrong with this particular op-ed piece, which is so dishonest that the Mercury News should publish a full retraction and apology. But, for now I'll just make the same deal that I offered to McCurry five years ago:

If John Sununu and Harold Ford Jr. really believe that Netflix is getting a "free ride" with its bandwidth and this is somehow socially irresponsible and unfair, will they agree to pay Netflix's broadband bills for the rest of this year?

Perhaps they can trade bandwidth bills with Netflix. I'm sure if they're willing to pay Netflix's bandwidth bill, Netflix would have no problem paying for their home DSL lines. Hell, maybe Netflix will even cover their mobile broadband accounts as well.

As for the rest of the op-ed, it's pretty funny. While they play up how Netflix "saves" $0.40 in postage by not having to use the mail, they ignore the fact that in order to stream movies, Netflix has to pay ridiculously high licenses. With disc rentals, it could buy one disc and rent it out many times. Not so with streaming licenses. It needs to pay a ton for those.

Then there's this bit of economic cluelessness:

Netflix argues that the marginal cost to the network providers of streaming a half-hour TV show to a residential customer is "one penny." This ignores the hundreds of billions of dollars in sunken network investments needed to create that one-penny marginal cost efficiency at the customer's end.

Um, yes, it does. And as most any economics professor will tell you, you're supposed to ignore the sunk costs in understanding how a market prices things competitively. Telling the market to do the opposite is the very definition of an anti-market, anti-efficient solution.

Consumers tend to pay more when they consume more goods and services, and pay less when they consume less.

And, contrary to the claims in the article, Netflix pays more when its users consume more. Again, will Sununu and Ford pay Netflix's bandwidth bill?

The reality is that Netflix and similar services want a free ride on the networks built with more than $250 billion in design, engineering, manufacturing, construction and maintenance -- a system that now provides broadband services to 95 percent of American households.

Hey, you know what? I spent a lot of money building Techdirt. All of you now owe me money. Apparently that's how Sununu and Ford view market functions. If one party spends a lot of money on something, everyone else is just required to pay. Of course, back here in the real world, that's not how things work. Various broadband companies (with massive taxpayer subsidies, by the way) built out broadband networks because they knew it would be profitable to do so. They made their bet and made their deal. Now they're trying to change the deal by pretending that someone's not paying. They're lying. What they really want is for service providers to pay twice for the same bandwidth. Netflix is already paying for its bandwidth. Consumers already pay for their bandwidth. Sununu and Ford (and really, the telcos they represent) are really trying to get Netflix to pay again, pretending that they should pay for the bandwidth that consumers already paid for, even though Netflix is already paying for that bandwidth. This is about trying to double charge.

If broadband providers are so hard up for cash, then just let them raise rates. Nothing is stopping them from doing that. But that's not what this is really about. This is about trying to force Netflix to double-pay for consumers' bandwidth as well.

So, once again, John Sununu and Harold Ford Jr.: since you insist that Netflix is getting a free ride, will you pay Netflix's bills for the rest of the year? Or will you pull a Mike McCurry and simply ignore this simple challenge and go on pretending that Netflix doesn't pay?

It seems that no country is immune to the sting of financial opinions. As we saw recently, S&P's decision to strip an "A" off their rating for the U.S. debt resulted in President Obama's dismissal of the rating ("We're still AAA."), Michael Moore's call for something a bit more drastic ("show some guts and arrest the CEO of Standards and Poors") and, finally, the Senate Banking Committee's decision to explore its options, including a possible hearing involving S&P ("We won't arrest them. We'll just take them downtown to answer a few questions.")

Being unable to graciously accept financial criticism isn't just an American problem, however. As several European nations continue their slide into bankruptcy, their respective governments have stepped up to do the only thing that makes sense: ban short sales on government-backed bank shares (following on a similar plan to ban negative ratings). It's yet another case of governments attempting to suppress expression it doesn't like (i.e., "We think failure is the most likely option.") through legislation. And as Matt Levine of Dealbreaker explains, there's a whole lot of unintended consequences to banning "sad thoughts about banks:"

This is hard to believe because all European banks are obviously well capitalized and any suggestion to the contrary is just rumor and speculation. But! Sometimes things go wrong. Sometimes banks need to raise money. When equity investors are staying away from them, sometimes they do this by selling convertible bonds...

The short sale bans are mostly for just 15 days, but repeatedly changing the rules in the financial markets will have effects well beyond the brief share-price gains. If you're a convertible arbitrage investor, it's now pretty clear that you should never buy convertibles issued by a European bank, because you may not be able to hedge when you need to. Which can't be good for the banks' future capital raising needs.

Oddly enough, the protectionist legislation meant to protect the banks from "evil" speculation will also work against their ability to raise funds in the future, which extends the damage from "just right now" to "an indefinitely longer period."

Then there's this bit of extremely broad terminology coming from Spain's entry into the "the only correct position is a positive position" ban-happy sweepstakes:

This preventive ban affects any trade on equities or indices, including cash equities transactions, derivatives in regulated markets or OTC derivatives, that has an effect of creating a net short position or increase a previous one, even if on an intraday basis. A net short position means any position resulting in a positive economic exposure to falls in the price of the stock.

In much simpler words: investors are not allowed to profit when stock prices dip. This also means that investors can't mix in a few shorts with the rest of their investments to insulate themselves against price drops. Or rather, that they can do that, but only if the end result of the investments is that they lose money when stock prices fall. Spain, it would seem, is only going to allow bullish investments despite the realities of the market, and it will be watching this on a day-to-day basis, if the language above is to be believed. Adios, bear market day traders!

France ties things down even further in its extensive AMF document:

3 - Is an investor allowed to create a net short position in one of the securities concerned by using derivatives?
No, investors are not allowed to use derivatives to create a net short position; they may only use derivatives to hedge, create or extend a net long position.

France is also savvy to other devious, speculative moves as well:

6 - Are trades in index derivatives allowed where the basket of securities includes one or more of the securities concerned?
a) Investors exposed to the equity market are allowed to hedge their general market risk by trading in index derivatives. In this context, the AMF accepts the marginal net short positions in the securities concerned that may result from that trading in index derivatives.
b) Trading in index derivatives for any other purpose than hedging general market risk is not allowed unless the resulting net short positions in the securities concerned are offset by long positions.

Again, this overly broad ban against speculators who have the audacity to express their lack of confidence in a financial system via their market activity will also steamroll "legitimate" investors who are just looking to "not lose money," as Levine points out:

We wonder how you would test whether a net short position in an index derivative is for the purposes of "hedging general market risk" or for the purposes of "profiting on spreading false rumors" (or other non-legitimate purposes, like hedging specific market risk). Presumably anyone shorting European indexes does so because they don't want to lose money when the market goes down. Even speculators.

Oh, and one more thing: these bans are still in effect if you're a citizen of these short-sale-banning countries, no matter which country you actually reside and/or do business in:

The Decision applies to any natural or legal person, French or foreign, regardless of whether trading takes place in France or in another country, or on a regulated market or not.

All of this ridiculous legislation is due to various governments suddenly developing very thin skin when investors insult them tangentially with their financial decisions and opinions. There's nothing to be gained by banning short sales and plenty of unintended consequences to unleash into an already-disrupted marketplace. Levine sums up their attitude this way:

You take shorting of bank shares as a personal affront, and your goal is not to have functioning markets but just to prove that you’re tough.

While I'm sure most governments would love all of their citizens to believe that their respective nations will overcome all odds and rise to greatness once again, in the meantime, investors are still going to bet on what is likely, rather than just wrapping themselves in the flag and throwing their money into whatever the legislative body deems to be proper, patriotic investments.