Basic concepts: Economics   no comments

Posted at 3:15 pm in Economics

“A social science what studies the choices individuals, businesses, governments and entire societies make as they cope with scarcity and the incentives that influence.” Scarcity refers to not having enough money for food, or the inability to do something that you want to do because you have to work. We all face scarcity, but we need to make choices to cope with it, for example, choosing to work over choosing a fun activity because you need the money from working to pay bills. The choices we make are influenced by incentives. It can take the form of a reward or a penalty. If skipping work has a good opportunity of getting a much better job we may be more likely to choose to skip work. This is a just a very simple example, but it also works on a larger scale. If the price of computers drops we may as a society decide to buy more and furnish all schools with good computers.

Economics is a large area is we take into consideration individuals, businesses and entire societies; therefore it is broken up into Microeconomics (individuals and business choices) and Macroeconomics (national and global economy).

One of the most common economic phrases is “supply and demand”. Demand refers to the relationship between how many people want a product and how much it costs. Supply refers to the relationship between the quantity of the product created and its price. An increase in demand would mean an increase in price and quantity supplied. An increase in supply would mean a decrease in price and increase in quantity required.

Household consumption choices are limited by income. The budget line is a way of seeing income that can be spent and how it can be spent. If prices of items you buy drop or income increases the Budget Line will change.

Indifference curves are used to show within what combinations of goods the consumer is indifferent to having. For example someone may not mind swapping a packet of cigarettes for an extra drink at the bar or even extra chocolate during the week at work.

Marginal Rate of Substitution is the rate someone will give up n of x to get n of y. If the rate is high an individual will give up a large quantity of x for a small quantity of y. This works the other way round if the rate is low, they will only give up a small quantity of x for a large quantity of y. However, we must be aware that the substitution must compliment or be a fair substitute for the item. If you are very thirsty and are offered a truck load of peanuts for one can of drink you may still decide to keep the drink!

By using these three ideas we can develop a model to predict consumer behaviour. We assume someone will pick the point that benefits them the most, so if it fits inside the budget line (indicating it is affordable) and it lies on the indifference curve (indicating it is a option someone would be happy with) and has a marginal rate of substitution that is equal to the relative price of the items desired, this gives the most affordable point and hopefully that is what someone would choose.

Elasticity is the measurement of how variables can affect each other. An example would be lowering prices to sell more.

Market power refers to the ability to influence the market. A monopoly is when a company has goods or services with no close substitute and has a barrier stopping other companies selling similar products or services. An example would be energy suppliers or the Post Office. Barriers stopping other companies could be a government contract or patent or copyright issues.

Advertising increases total cost of a product, but if the advertising increases sales the total cost of a product will fall.

Uncertainty and Risk

Uncertainty is linked to how certain you are of an event occurring. For example a farmer can never be certain crops planted will grow because they cannot be certain of the weather and other factors that could affect crop growth. Risk is a situation where more than one outcome may occur and the probability of those happening. Probability can be measured accurately or we may have to look at past experience and make a judgement called subjective probability. The cost of risk can be accessed from these probabilities. A person’s attitude towards risk can be assessed using their wealth and how much utility someone attaches to a given amount of wealth. The more wealth you have the higher the utility and the larger risks can be made.

Microeconomics

If the aim of a company is to maximise profit. They can be in any of the below modes of operation:

  • Make an economic profit (average total cost is less than the price of each product)
  • Make a normal profit (where economic profit is zero)
  • If the price is between average total cost and average variable cost the company is loss-minimising. By continuing to produce it may still recover, if it stops it will lose money.
  • If the price is below the average variable cost the company should go into shutdown. Losses are minimised by not producing more (wasting money of products that are selling at a loss).

Information and graphs summarised from:

Parkin, M., Powell, M., & Matthews, K. (2008). Economics. Essex, England: Pearson Education Limited.


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From a Psychology background I can’t help but stick this in to reflect upon. In order to utilise economics you are assuming that the consumer or the company has the aim of maximising profits and that they will always make the best rational decision. However, luck and cognitive dissonance may be more of a factor than simply “working out the numbers”. Daniel Kahneman: How cognitive illusions blind us to reason.


Written by Gemma Fitzsimmons on October 30th, 2011

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Research questions and chosen disciplines   no comments

Posted at 2:29 pm in Criminology,Sociology

Hello! Sorry for the tardiness of my first post.

My research questions are (currently):

How can we make an effective mathematical model of the web?  How can we make an effective mathematical model of social networking sites? How can we best use these models to “understand” the web and how people use the web?

These questions are rather vague and hopefully they will be refined over the next four years.

In order to make such a mathematical model we must decide what basic properties the model should have.  This argument appears circular, needing to know properties of the web in order to make a model which will inform us of properties of the web!  However, we are really investigating the (sometimes hidden) effects of these known properties and what they mean for the web.

For example we might want to model Facebook.  We could associate Facebook with a graph G by assigning people to nodes and then draw an arc between two people if they are friends.  Since it has been shown that two people with mutual friends are more likely to be friends themselves than two people with no mutual friends, one property of G is that it has an abundance of triangles.  This means that if node A is joined to node C and node B is joined to node C then it is likely that node A is joined to node B.

In practice drawing G would be virtually impossible because Facebook changes constantly as new friendships are created and destroyed and people join and leave Facebook we make a model graph M (a more convenient graph which we generate and can control).  In order to be a good model M must have an abundance of triangles.

Note that the seemingly abstract mathematical property, an abundance of triangles, comes about for a sociological reason.  What other properties should the model graph have?  To find this out it will be vital to understand how people use the web, so I have chosen to study sociology/philosophy as my first discipline.

Such mathematical models could be used to find the most efficient route from node to node (in the Facebook example from one person to another and be useful at looking at the spreading of ideas).  These models could also be used to measure the resilience of a network from attack, (i.e. how will a network cope if we knock out some nodes?) hence I have chosen criminology as my second discipline.

Written by dm1x07 on October 28th, 2011

‘Cyberchondria’? – Formulating a research question and locating literature   no comments

Posted at 2:03 pm in Psychology

The broad interest for my interdisciplinary review is the use of health websites, and their effect on the individual.

Coming from a Sociological background, my overarching interest in this particular area is on how relationships are altered between doctors and patients due to the use of online health ‘facilities’; however, I have chosen to follow a more psychological route with this piece of work – namely, the effect of health websites on the individual, and whether this leads to what has popularly been termed ‘cyberchondria’. Furthermore, I will be locating literature from health sciences that I hope will complement not only the psychological findings, but which may also tie in with the literature from sociology that I have already read.

In order to do this, I first located readings that specifically referred to health anxieties and the web, which gave a few relevant readings, and the next step will be to follow this up with looking for introductory readings for psychology.

The second subject from Health Sciences is still provisional, and currently I do not know if I am going to persist with this. Some of the literature I have read has a slant towards Media Studies and other communicative media which seem highly interesting.

So many decisions, and currently feeling overwhelmed!

Written by rn5g08 on October 25th, 2011

Strong Programmes in Sociology   no comments

Posted at 2:03 pm in Sociology

I think I might as well add what I am currently reading by David Bloor to some of my thinking on the question of subjects/disciplines and the web. This is because I may be using sociology methods or ontologies as one of my lenses for examining the question (once I settle on the question).

And, more importantly, the reading paves the way for a discussion on the social construction of technology ie. it is in contrast to the technological determinism that seems to abound in the media. (Especially the Daily Mail!) Have just got slightly side-tracked here looking at the Wikipedia entry for social constructivism, or social construction. I’m not sure I entirely agree with what’s said there, especially as I have come to social construction in the past from psychology. (This is going to turn into a giant aside, might need another post to link to here. But in essence the entry seems to be framing social construction in terms of by-products of choice, rather than natural laws,  which instantly seems to create one of the countless dichotomies that litter psychology and philosophy. Am not certain that such a dichotomy is necessary. )

So, as a part of our reading around the philosophy of science, we looked at a number of thinkers like Lakatos, Feyerabrand, Kuhn and Popper. We also looked quickly at Bloor. In defining a strong programme in the sociology of knowledge, (sorry, am referring to what he says he’s doing, not the title of the article which is the same), he says that rather than trying to define what knowledge is, independently of how people construct it, ‘knowledge for the sociologist is whatever people take to be knowledge.’ He also, rather magnificently, says that, ‘The cause of the hesitation to bring science within the scope of a thorough-going sociological scrutiny is lack of nerve and will.’ He then acknowledges this to be a psychological explanation, although depending on perspective, I think there can be failures of nerve and will that run through entire societies – in which case the treatment of what must apparently then be epistemological deficits cannot be (or at least, should not be?) purely bounded by psychological explanations. My thinking this also points to, I imagine, the fact that I think he’s correct but should perhaps be less apologetic in his approach. The paragraph that instantly caught my eye was the one that began, ‘how is knowledge transmitted, how stable is it, what processes go into its creation and maintenance, how is it organised and categorised into different disciplines or spheres?’ This, for me, was yet another ‘Oh Wow’ moment, as this description first, really mirrors what I wrote above on how knowledge is treated on the web, and second, is actually very similar to the way we talk about curating or maintaining web-pages. (And once I get more advanced, hopefully, how I might start looking at hypermedia, about which I know very little, but I can now see, after today’s lecture, is something I NEED to know about very urgently.) For Bloor’s sentence on knowledge above, it’s entirely meaningful to add ‘on the web’ to everything he says – instantly casting the web as something that is very strongly to do with knowledge, a cognitive extension.

So, I now have some words from sociology (although alluding to or perhaps also sitting within philosophy of science)  that fit quite snugly around my set of questions to be refined.

Bloor sets out four conditions that make for a strong framework, which are: causality, impartiality (surely a little question-begging?) symmetricality, and reflexivity. I don’t necessarily think systems of knowledge have to be reflexive: by definition if not everything is founded in inductive, scientific, detached knowledge, then the things being described or observed don’t really need to bootstrap themselves up via the same cantilevered mechanism. (He does discuss this, as I will.) However, I love the idea of the same types of cause explaining both true and false beliefs. Again, I would hedge my bets about causation since almost everything physics seems to tell us is that our notions of cause and therefore of explanation are local, but I think that a lot of what we see and understand in the world is most elegantly alluded to by what we don’t see, what we misunderstand, the ways in which we are wrong about things, the shadows left by a lack of light and the ways in which our explanations break down.

Written by me1g11 on October 25th, 2011

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Self and business in social networks   no comments

Posted at 2:03 pm in Economics,Psychology,Sociology

I was considering the two topics – social networks and consciousness from the perspective of Psychology and Marketing. But as I found later the more appropriate fields would be Sociology and Social Marketing.

After the class on Wednesday, one nice colleague boroughed me the book Social Psychology by Brehm, Kassin, Fein with the suggestion that I could also look into Sociology. As I was reading through this book and thinking about the topics, I came across the The Self-Concept which is just another term for self-consciousness. We can describe self-consciousness by looking at the main methods through it is achieved:

  1. introspection = looking inward at one’s thoughts and feelings
  2. perceptions of our own behavior = analyzing your own behaviour you can find out how you react in certain situations
  3. influences of other people = identifying yourself through comparison with others
  4. cultural perspectives – depending on the origin of the individual he might be an individualist (its values are independence, autonomy, self-reliance) or a collectivist (its values are interdependence, cooperation and social harmony)

So point 3. states that self-consciousness is influenced by others. In the Royal Society presentation called Understanding social and information networks given by Professor Jon Kleinberg: http://royalsociety.tv/rsPlayer.aspx?presentationid=499 the speaker shows the probability of joining a group based on the number of friends already joined:

The web is now a social phenomenon, it isn’t just a place to access and share information, it is a world of its own where people interact, live and change. This is an unprecedented phenomenon in human history.

And as the world changes, the way of doing business also shifts from the traditional marketing techniques to a more valuable, customized approach. A suitable quote from Socialnomics by Erik Qualman would be the following:

Marketer’s Philosophy Yesterday

  • It’s all about the sex and sizzle of the message and brand imagery
  • It’s all about the message; good marketers can sell anything
  • We know what is right for the customer – we are doing the customer a service because they really don’t know what they want

Marketer’s Philosophy Today

  • It’s important to listen and respond to customer needs
  • It’s all about the product; it’s necessary to in constant communication with all the other departments
  • We never know what is exactly right for the customer; that is why we are constantly asking and making adjustments

The topics that I touched in this post (and will in the next ones) were the self-concept and how it relates to the social-self, new ways of doing marketing taking into account this new type of individual. Until the next post, I will

  • have a look into Sociology to understand the driving forces of social networks
  • read more from the book Socialnomics because it describes how social media transforms the way we live and do business (this is actually the book subtitle)
  • look into more social marketing books to find out the methods of doing business in this brave new world

Written by ad4g11 on October 25th, 2011

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The Pit and the Pendulum of extended and over-elaborate metaphor   no comments

Posted at 2:03 pm in Economics,Psychology,Sociology

Mors ubi dira fuit vita salusque patent.

So, to expand the first blog post a little: what I think is nagging at me is this sense of a range of ‘objects,’ of pieces of ‘knowledge-meat’, or ‘currency’, that are consumed or traded within their own disciplines. Sometimes these objects of knowledge have the same names in other subjects, but they mean different things. And across disciplines the means of making them edible, civilized, tradable can be hugely different. Traditionally these bits of ontologies, of data (they are sometimes data) are going to somehow be examined, discussed, prodded, perhaps measured: quantified or qualified in some sense. In the past this might have been described on paper. These days, some of us (perhaps not that many, globally) have the web as a means of mediating discovery and knowledge acquisition. There are many things that can be done with knowledge on the web: it can be hidden, it can be spread, it can be created, it can be pushed around. If tiny bits of data somehow fit with the tiny little pieces of the structure of the web, then one might suppose that a sort of true picture emerges. However, again, something that has nagged at me is how so much of our thinking is analogical, or metaphorical. So that true pictures are actually very hard to locate using reductionist mapping – see Wicked Problems, for example.

What I think might be part of one of the questions I want to pursue, is to do with how the web might change the analogies that are implicit or embedded within disciplines. Sometimes the process of collaboration can bring out these assumptions. Sometimes, collaboration is hugely impeded by them.

For example, one of our widely used assumptions or analogies that fascinates me, is that which describes electricity. Electricity has long been portrayed as a commodity. Walter Patterson (a physicist by trade) has written at length on this subject, in a book called, ‘Keeping the Lights On.’ The traditional picture of electricity is of something that ‘flows’ like water, and can be cut off, traded, conserved, or wasted. Entire forests have been destroyed in the pursuit of the subject of electricity and our consumption of it. Generations of schoolchildren have suffered sleepless nights, worrying (somewhat misguidedly) about global warming’s fatal pendulum hanging over the Polar Bear every time they put their heating on (along with the location of the calorie  – another rather elusive and misleading concept.)

Patterson says, “How many times have you heard or read some energy specialist refer to ‘energy production’ or ‘energy consumption’? These people are supposed to be experts. Surely they ought to know one unbreakable law, the First Law of Thermodynamics, the law of conservation of energy. No one produces energy. No one consumes energy. The amount of energy in the whole universe remains the same.”

He then goes on to describes a host of assumptions that arise incorrectly out of our making electricity a commodity to be traded, the most simple being that arising from the regulators who are allegedly looking for the best deal for the household market – a low unit price does not equal a low bill – the holy grail for the ‘consumers.’ To me, having worked with the UK’s largest energy company and, in particular, with their hard and soft data, it’s clear on a fairly elementary level that describing our relationship with electricity like this is going to cause anxiety for the ‘consumer’. It describes a selfish market. It’s all about measuring how much we use, and not the quality of our relationship with it. Too much = red, not very much = green. It’s almost a little bit childish. Imagine designing an app to somehow map our relationship with energy. It would have reds and greens, wouldn’t it?  It would be about ‘a lot’ (scolding) or ‘a little’ (caressing tone of voice- well done.) It would be great to break from this model and look at different ways of being technical about how we are with energy.

Even as I’m doing my preliminary, slightly distracted, coffee-table pre-reading, this strikes a chord with me. A book I picked up a couple  of weeks ago, written by Stephen Landsburg is called, ‘The Armchair Economist.’ (In the manner of many inhabitants of armchairs he keeps disappearing just when I want him. I’m also wondering if The Spy in the Coffee Machine can see him from the kitchen, and if so, whether they should talk. Never mind.)

The first chapter of this book starts boldly with, “Most of economics can be measured in four words: ‘People respond to incentives.’ The rest is commentary.” He then goes on to describe, or perhaps, hypothesise, how making cars more safe kills more people, as people drive more safely in more dangerous cars. Landsburg continues by saying that economics begins with the assumption that all human behaviour is rational. I’m presuming that part of the rest of the book is to decry this notion triumphantly. It is very fashionable nowadays (and seems to cause great joy for the evolutionary psychologists) to show how entirely irrational we are; however I can’t help feeling that there is sometimes a confusion in the literature between say a system of perception, or of governance that overcorrects, and the net result that that has for the movement and/or survival of its owner. (I know, feeling something isn’t really academic: it’s another question to explore.)

So, now I have economics and markets intruding a little into my original speculation about how the concepts or metaphors embedded in disciplines might be creating pictures that aren’t entirely correct. It’s certainly the case that while markets have their own language, they also trade in the languages used by the disciplines that come together to create the products or objects on sale. And now, for some of us, the sorts of things that can be traded, over the net for example, are elusive objects, which it might be worth while trying to pin down a little further. I’m worrying that some of this sounds as though I’m just talking semantics. I do intend to explore this further and show how it’s not just trivial misunderstandings, but deep ones that maybe re-cast our notion of the world to some extent.

As far as a methodology goes, my approach to research is often about contingency. Particularly interdisciplinary research. I don’t believe that using a wholly empirical, top-down filtering method is always going to work, as this assumes that there is an explicit pool of knowledge out there to be refined. My very subject matter says that this might not be the case. So, although I intend to use the traditional method, and my next step is to get my text books on economics and psychology/ sociology, and to read and annotate findings from them, I will  also read a lot of not-quite academic, coffee-table stuff that gives me a feel for whether I would be happy to say, sit and have lunch with the people who are writing. And, more immediately, I’m suffering from a nagging sense of not having figured out what the correct referencing procedure for blogging is. I’m used to using hyperlinks and checking they’re still live every now and then. Suspect I might need proper references.

I also haven’t yet drawn out my reasons for an interest in psychology, but, quickly, this is because I think that in the pursuit of truth (which should arise somewhere when looking at how subjects are affected by the web), it is is probably going to be interesting to look at what drives people to co-operate and trust each other when working together within specific subject areas that use specific ontologies that might or might not be affected by the emergence of the WWW.

I am now releasing these thoughts into the wild, where they can roam about in a  sort of purgatory of waiting for approval.

Written by me1g11 on October 25th, 2011

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What is the web doing to our minds?   no comments

Posted at 2:03 pm in Uncategorized

My exploration stems from the question as to how the web is changing human cognition: The way we think, they way we understand, the way we learn and reason. This is primarily resulting from a very enjoyable reading of ‘The Shallows’ by Nicholas Carr, which has sparked many debates, both internally with myself and with others, sometimes beocming quite heated. It is indeed a controversial topic, with very interesting arguments being raised from numerous different perspectives.

The questions are not just the if or the how in a psychological or physical sense but also a philosophial consideration of the greater impact and entering the terriroties of cognitive extension and the web. Is this a dangerous notion or a good one and should we encourage it or discourage it? If we are truly outsourcing not just our memories but our thoughts and indeed, our thinking processes themselves, where does this leave us in ten years time? This of course leads back to the psychological concerns of what is actually happening internally within ourselves, are certain facilities for thought being replaced by others? What have we given up when we pick up a SatNav system or an iPhone to help guide us rather than a map and a compass (particularly relevant after having spent a weekend doing Duke of Edinburgh learning to navigate without such technology!) or when we let Facebook decide what it thinks is important for us and intersting to us so we don’t have to?

To begin this journey of explanation, I shall thus be diving deeper into the realms of both psychology and philosophy to explore the question – what is the web doing to our minds?

Written by Oliver on October 25th, 2011

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The Gameification of Warfare   no comments

Posted at 2:03 pm in Uncategorized

POST ONE;

Having missed the lecture it appears I am behind on my blogging. Also never having blogged before this is a new concept to me, but I shall give it my best shot!

After much deliberation and thought I decided to go along the lines of thinking that if I am going to be researching a new topic perhaps I should choose something that has always been of interest to me, but as of yet I have not had a chance to study.

On this bases, my chosen research area will be the gameification of warfare. I hope to expand on this further in later blogs.

The two topics that I have chosen will be War Studies and Physiology.

Linking these two subjects will pose an interesting challenge after doing some brief research in Physiology I believe the following schools of thought will be of particular interest to me area of research;

BEHAVIOURISM


COGNITIVISM

And perhaps;

Neuro psychology


READING LIST – Psychology


Breedlove, S.M., Watson, N.V., Rosenzweight, M.R., (2010) Biological Psychology: An Introduction to Behavioural, Cognitive, and Clinical Neuroscience, Sinauer Associates.

This book is a comprehensive survey of the bases of behaviour that is authoritative and up-to-date. It offers a very broad perspective – encompassing lucid descriptions of behaviour, evolutionary history, development, proximate mechanisms and applications.

Crisp, R.J., Turner, R.N., (2010) Essential Social Psychology, 2nd Edition, Sage Publications, London.

Essential Social Psychology gives an accessible and thorough grounding in the key concepts, the fundamentals and the essentials of social psychology, while providing a lively introduction to the major theoretical debates, new approaches, and findings in the discipline.

Eynsenck, M.W., Keane M.T., (2010) Cognitive Psychology: A Student’s Handbook, 6th Edition, Psychology Press.

Traditional approaches are combined with the cutting-edge cognitive neuroscience approach to create a comprehensive, coherent and totally up-to-date overview of all the main fields in cognitive psychology. The major topics covered include perception, attention, memory, concepts, language, problem solving, and reasoning, as well as some applied topics such as everyday memory.

Goodwin, J.C.,  (2011)  A History of Modern Psychology, 4th Edition J. Wiley and Sons

This book explores the modern history of psychology including the fundamental bases of psychology and psychology’s advancements in the 20th century. Contains substantial information including ideas and concepts, history on the applied areas of psychology; philosophical antecedents and physiological antecedents  and history in the 20th century.

Gross, R. (2010) Psychology: The Science of Mind and Behaviour, 6th Edition, Hodder Education.

All the major domains of psychology are covered in detail across 50 chapters . A final section on issues and debates casts a critical eye on the research process, explores the nature of psychology as an evolving science, and provides an understanding some of the ethical issues faced by psychologists.

Slater, A. and Bremmer, G. (2011) An Introduction to Developmental Psychology (BPS Textbooks in Psychology) 2nd Edition, J. Wiley and Son

In the first section of the book, developmental theory and methodology is discussed with special emphasis on the complex nurture–nature transactions shaping the child’s development. In a closing section educational and clinical implications of developmental research are presented. The book covers both European and American contributions to developmental science. Anecdotes about children, graphs of empirical results, pictures of experimental apparatus, and a set of discussion points at the end of each chapter facilitate the understanding of developmental achievements.

Written by Katie on October 25th, 2011

Investigating intellectual property on the web through Economics and Law.   no comments

Posted at 2:03 pm in Economics,Law,Uncategorized

The web has changed the way we consume content, and I want to investigate this change through the disciplines of Economics and Law. There are several related questions I hope to address.

How has the law evolved (or not) in response to the shift from print to web-based media? How and why has consumer behaviour changed with regards to content on the web? How do the two relate to each other? Is the current intellectual property regime in inevitable conflict with the economic decisions of content consumers?

I’m going to start by reading some textbooks. So far (with thanks to Alison), I have begun to leaf through Information Technology Law, by Andrew Murray (in particular, Part III: “Digital Content and Intellectual Property Rights”). I imagine that after attempting to read the whole IT law textbook I’ll end up having to get some more basic understanding of the law from additional sources. I’m also hoping to get in contact with some people who Alison recommended, namely:

  • Professor Steve Saxby (head of IT law research in Southampton)
  • Laura German (2nd year Phd Web Science, from a Law background)
  • Dr Roksana Moore (who gives lectures on IT law this term)

As for economics, I’m going to read the straightforwardly titled Economics, by Paul Samuelson and William Nordhaus (apparently a classic introductory textbook). I also have Modern Industrial Organization, Dennis W. Carlton, Jeffrey M. Perloff, in particular, Chapter 16: “Patents and Technological Change”, again thanks to Alison.

Finally, because my interest is in consumer behaviour and economic decision-making with regards to the consumption of digital content, I would also like to look at ‘behavioural economics’. An Introduction to Behavioral Economics, by Nick Wilkinson and Matthias Klaes, will hopefully give me the relevant background. I also hope to get in contact with Professor David Gill from Southampton’s Economics department, who specialises in behavioural economics.

Written by rb5g11 on October 25th, 2011

Researching Distributed Currencies   no comments

Posted at 2:03 pm in Criminology,Economics

Researching Distributed Currencies.

Over the course of my time here studying Web Science, I would like to do some in depth research into distributed currencies. A distributed currency is a form of money with no centralized processor or controlling authority. At the moment there are only a handful of distributed currencies in existence, and the majority of them stem from Bitcoin. Bitcoin is a “totally” anonymous and distributed online currency. It’s similar to PayPal in that you can use it to buy things online and send/receive currency quickly and conveniently.

PayPal is the opposite of a distributed currency, it’s centralized. PayPal handle all the processing of transactions, and they are also the authority for all transactions and for this service they charge a small fee on each transaction (varying from 2% – 8% of a transaction + a fixed 20p.) If PayPal doesn’t like a transaction, it will slow it, stop it or outright take your money away (googling PayPal took my money returns over 6million results.)

A distributed currency is not centralized. The transaction processing is handled by anybody who chooses to use the currency which normally involves running some client software. Because it’s running on anybodies computer, the currency must be designed in a secure way that doesn’t allow individual clients to tamper with or reverse transactions. The implications of this are a totally unregulated currency where nobody can decide what is right or wrong.

The pro’s of this are that people can make transactions for anything they want, without the worry of their account being frozen or their transaction being blocked or slowed or outright refused by a regulatory authority like PayPal. There is no single point of failure (or corruption.) Also, there is no mandatory fee’s to use these currencies or make transactions. The open distributed nature utilizes the internet in the way it was intended. It could be argued that centralized services governed by one authority undermine the entire point of have the internet (a distributed network) in the first place.

Bitcoin is totally anonymous also. If you want to receive money, you give someone a wallet address. You can have as many wallet addresses as you want which has the end result of it being impossible to link transactions to people. However, combine anonymity, money, and no regulation or authority and sure enough, you get criminals.

Bitcoin received a lot of publicity after the launch of a website called silkroad which was described as “the Amazon marketplace of drugs” which allowed users to by all sorts of illegal items including drugs and weapons – all paid for by the anonymous distributed currency Bitcoin. As well as Silk Road for weapons and drugs, there have also been suggestions that Bitcoin is used to trade in other illicit things such as hiring bot nets, hitmen, slaves, prostitutes and more.

Because there are supposedly a large amount of criminals using Bitcoin, there is a lot of fraud. Browsing Bitcoin forums and it’s not hard to find posts of people frustrated at being scammed out of several hundred Bitcoins (the current conversion is 1btc = $3) because there is no regulatory authority to reverse fraudulent transactions.

However, that’s not to say everyone that uses Bitcoin is a criminal or that every transaction is related to an illegal item. The idea of totally free online transactions should appeal to anybody that sells online, as it could result in lower product prices for the end user.

Over the course of my research, 1 of the many aspects of distributed currencies I would like to look into is ways of making a distributed economy that is less risky to use (e.g. reducing fraud and scams, it maybe that this means reducing anonymity) but maintaining the benefits of free transactions and no single point of failure/corruption.

My 2 subjects of research

My background is in computing science, I think it would be useful for me to also have a better understanding of economics and and criminology for the aspect of research above. Why?:

Economics: wikipedia described economics as “the social science that analyses the production, distribution, and consumption of goods and services.” I believe a deeper understanding of this and the methods associated with economics would allow me to conduct more informed, appropriate and educated research and to account for and explain the necessity of currency, trade and economies. Specifically I would like to look into online/cyber economics as it’s important to understand the differences (if any) between how people trade online vs. in the real world and how to cater towards these differences and incorporate them into my future research.

Reading Material
I’m not sure yet, I’ve been looking for economics books relating to the web and internet but have been unsuccessful in finding any so far. If anyone has any suggestions, please don’t hesitate to put them forward!

Criminology: wikipedia describes criminology as “the scientific study of the nature extent, causes and control of criminal behaviour in both the individual and in society.” In order to protect something against crime and fraud, I believe it’s important to first understand why people commit crime and fraud in the first place. Specifically I would like to look into cyber criminology to try and get an idea of the research methods used to access and understand such a dark corner of the web. I’d like to learn if and how researchers in this area get full, truthful and honest answers from an area that is inherently full of people willing to mislead.

Reading Material
Not 100% sure on this one yet, but here’s a few ideas:

Cyber Criminology: Exploring Internet Crimes and Criminal Behaviour (2011)

http://www.crcpress.com/product/isbn/9781439829493

“Approaching the topic from a social science perspective, the book explores methods for determining the causes of computer crime.”

Cyber Forensics and Cyber Crime: An Introduction (2008)

http://www.amazon.com/Computer-Forensics-Cyber-Crime-Introduction/dp/0132447495/

“It includes and exhaustive discussion of legal and social issues, fully defines computer crime…provides a comprehensive analysis of current case law, constitutional challenges and government legislation”

Written by djh2g11 on October 25th, 2011

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