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How exactly is any startup, small business owner or individual supposed to compete without strict regulation?

Well, they just provide a better product or a better price on their own. If they can't do that, then there's no need for a "small business owner or individual" to be attempting to enter that market, as Amazon must be doing a better job. If you're worried about a natural monopoly, then take a look at the two monopoly chapters in The Machinery of Freedom, and that will put your fears to rest. In short, any attempt to abuse market power will lead to Amazon being uncompetitive in the market -- which will eventually lead to its downfall. In the meantime, let's enjoy cheap products.

they should have kept it.

And by "any other monopoly does" we mean Amazon will discover it's easier to get market dominance than keep it.

If they suddenly get all scary big-pricey, they'll discover that people can buy from elsewhere -- and their suppliers will discover that selling a lot with razor-thin margins is not nearly as good as selling less with much better margins.

Other happy-ending scenarios outlined here: http://www.daviddfriedman.com/...

Well, unless they engage in violence, or get the government to do it on their behalf. The latter possibility is a credible one worth considering.

The obvious problem with anarcho-capitalism is that even is fraud is not "just", you don't really have any recourse, since there's no such thing as "illegal" in an anarchic society (who'd enforce the laws?).

This is a common misconception. The people that enforce the laws would be those that are paid to enforce the laws. I think the misconception is due to people's immediate reaction when they hear someone wants to get rid of or limit government. Anarcho-capitalists, and sometimes to a lesser extent libertarians, don't want to see an end to everything the government does, just that it should be replaced by businesses and voluntary associations that are susceptible to market forces and that can't force ("coerce") money out of people.

If you are interested in some of the general ideas of anarcho-capitalism and libertarianism along with some theoretical examples, a good intro book is _The Machinery of Freedom_.

I guess in Freem'Arkhet's ideal system (the anarchocapitalist "libertarian" utopia that I see people call for here) we'd allow the company to advertise whatever they want and the end consumer (invariably the lowest-information actor in the system) would have the responsibility to figure out what was and wasn't bullshit, but we aren't quite there yet.

Straw man. Most libertarians would agree that fraud should still be illegal. Sources:
David Freidman:
http://www.daviddfriedman.com/Academic/Anarchy_and_Eff_Law/Anarchy_and_Eff_Law.html

Wikipedia page on anarcho-capitalism:
Anarcho-capitalist libertarians believe that the only just, and/or most economically beneficial, way to acquire property is through voluntary trade, gift, or labor-based original appropriation, rather than through aggression or fraud.[12]

I don't see why private security companies or voluntary collectives couldn't do the job. David Friedman explained it pretty well.

http://www.daviddfriedman.com/Libertarian/Machinery_of_Freedom/MofF_Chapter_29.html

The game companies get their cut at the time of first sale. The selling cost of the game already includes in the price the value to the customer of the ability to resell the product. The assumption the game companies are making is that if they lock this out, they can sell more product at the current prices, but instead what will happen is that they will be have to drop their prices some amount to account for the fact that it is less valuable to the purchasers.

This is a fairly standard element of elementary economics; for instance, see this chapter of Price Theory, where virtually this exact problem is problem number 12 in chapter two of the book.

Which just goes to show that for all the supposed value of an MBA, people in business still routinely fail to apply even the simplest economics to their own worlds.

For anybody who talks about the initiation of force as if it was a simple rule that could be applied objectively, I have three words: thousand megawatt laser. Search for it, or go directly here.

but quickly reversed course. We do not need government.

Oh, and fuck you, too.

Why the hell is this flamebait? I disagree with him heartily, but it ain't flamebait. This response is better measured than any of the predecssor replies. Weird

Onto the topic, I think that everything that you've mentioned actually is addressed by economics. What you call a "seperation from a real world factor" economics calls an "externality". One of the best theories in economics on how to deal with externalities was put forth by Ronald Coase. He identified that transaction costs, not externalities, are the real culprit. And that the appropriate response is the proper assignment of property rights, at which point the market resolves the problem. He won the nobel prize for it. A really good description is here.

I've got news for you: YOUR "SCIENCE" IS FLAWED. Please try again.

On the other hand, "please try again" is exactly the correct response for physics and economics and biology and chemestry and ... It seems very likely that will be the correct response long after both of us are dead.

Or you live near their facilities, or your parents did, or you live downstream or downwind, ...

These are the classic "negative externalities", and they have nothing to do with government interference... except for being the motivation for it.

You're talking about the path to the present day. I'm simply describing the present day. And in the present day the private sector is the problem.

The fact is, right now, the individuals who are right now making the decisions that are right now leading to the suppression of free speech are people who are working in the private rather than the public sector.

Corruption doesn't come "with government" or "with the private sector", it comes with power and control. And right now, the people with that power and control are not, except at the very top, the people in government.

And things like surreptitiously suppressing access to a critical website are among the results of these decisions.

To which I say, Coase.

Since I did not cite materials from "Law and Order" but from "Law's Order" written by David Friedman I am unclear if you meant to disparage it.

Friedman provides footnotes online and from appearances the whole book at http://www.daviddfriedman.com/laws_order/index.sht ml. Iceland is discussed in chapter 17.

From the descriptions provided in one of his other books, Iceland of that time does not have all the characteristics I would associate with feudalism. In particular, "The chieftain, unlike a feudal lord, had no claim over his thingman's land. The thingman was free to switch his allegiance to any chieftain willing to have him." - The Machinery of Freedom. Given the erosion of the 4th amendment and criminal cases brought against property, that makes the US seem more feudal then Iceland of that time since citizens only own property at the sufferance of the State and no longer as a Right.

Your examples are correct but you're reception of the point has failed.

In each of the examples you've mentioned, being 'carded' is one of the conditions of proceding in a consentual arrangement between two agents.

A liquor seller is vulnerable if he fails to require identification; the customer may refuse if such terms are no acceptable. A store is equally vulnerable if it fails to identify the user of a credit card, and so a customer must be willing to submit ID if he or she wishes to utilize the convenience and benefit of a credit card. A passport is a form of international identification and can only function as such if backed by other forms of ID; in this case too, being identified is required to obtain the good or service, but said good or service is voluntary.

I think you get the point now. See David D Friedman's article on Contracts in Cyberspace for a decent exposition on mechanisms depending on reputation and identification.

Also check chapter 20, The Economics of Crime, from his his book Hidden Order: The Economics of Everyday Life.

Pay particular attention to mentions of anonymity, especially when it is seen as a Good Thing (i.e. avoiding theft or fraud by not advertising residence in a particularly affluent location).

The whole idea behind the Freedom From RFID Argument is that it's an invasive means of identification that removes an important option from the agents of a supposedly free system.

Your examples are correct but you're reception of the point has failed.

In each of the examples you've mentioned, being 'carded' is one of the conditions of proceding in a consentual arrangement between two agents.

A liquor seller is vulnerable if he fails to require identification; the customer may refuse if such terms are no acceptable. A store is equally vulnerable if it fails to identify the user of a credit card, and so a customer must be willing to submit ID if he or she wishes to utilize the convenience and benefit of a credit card. A passport is a form of international identification and can only function as such if backed by other forms of ID; in this case too, being identified is required to obtain the good or service, but said good or service is voluntary.

I think you get the point now. See David D Friedman's article on Contracts in Cyberspace for a decent exposition on mechanisms depending on reputation and identification.

Also check chapter 20, The Economics of Crime, from his his book Hidden Order: The Economics of Everyday Life.

Pay particular attention to mentions of anonymity, especially when it is seen as a Good Thing (i.e. avoiding theft or fraud by not advertising residence in a particularly affluent location).

The whole idea behind the Freedom From RFID Argument is that it's an invasive means of identification that removes an important option from the agents of a supposedly free system.

The PBS site (as indicated by its own search engine) doesn't even say the word "Mises" outside of Hayek's biography, so it can hardly be considered to credibly discuss free-market schools of thought. Your assertion that the Irish had a State is sheer nonsense -- it was essentially a system of mutual protection agencies, as Rothbard discusses. Contrary to your ahistorical statement, the Irish fended off British attempts at conquest for hundreds of years. That you can say otherwise only shows you don't know what you're talking about. Ancient Iceland is also an example, and you can refer to an expert who's actually done historical work on it (David Friedman). I already linked to an article on Iceland (which cites Friedman's original piece), but here's an exchange between Friedman and others as ignorant of the history of Iceland as you. To say that the State can in any way improve upon the unhampered free market illustrates an ignorance of correct economic theory and praxeology. All State interventions cause problems (which of course leads to more interventions, to fix those problems). For example, it is impossible to have monopoly prices without a State -- for States coercively prevent entrance into a market. As DiLorenzo has illustrated, there isn't one case where monopolies have emerged absent State favoritism.

I skimmed over your rubbish, and will respond as briefly as possible.

What you call "law" is nothing more than meaningless declarations on a piece of paper. Simply because a group of men get together and write something down on a piece of paper doesn't mean it has any legitimacy. Mafia bosses could also get together and write a "constitution". Also, the Constitution doesn't protect us, because it is precisely the same State that is supposed to be limited by the Constitution that interprets it. Again, I suggest you read Hoppe's book on Democracy, monarchy, and the natural order.

The assertion that no ancient State lasted as long as the US can only come from gross historical ignorance. Among some prominent examples, I'd point to Egypt, Rome, and Greece. Also, you should note that there's a strong argument that the US was a different government after the Civil War, as opposed to before it. Oh yea, and there are Stateless societies that have lasted at least as long, if not much longer, than the US: Ancient Iceland (295 years) and Ancient Ireland (almost 1000 years). See Property Rights in Celtic Irish Law and PRIVATE CREATION AND ENFORCEMENT OF LAW: A HISTORICAL CASE.

The corruption of the Constitution has nothing to do with the fact that some people can become much more wealthy than others. It is a predictable result of such a governmental system, where it is in the interests of all those in the government to expand it's power, including the courts that are supposed to interpret the Constitution. The theoretical "last line of defense" of the Constitution would be citizens bearing arms, but the US government has largely nullified that.

You do not seem to understand monopoly. Whenever there is a monopoly -- that is, the criminalization of competition in a certain area -- the quality of service declines while the price of service increases. This is just as true of justice, protection, and police as of anything else. Now, these things can easily be provided for absence of States. Free-market competitition provides them, namely in the form of insurance protection agencies, which allows even those not extremely rich to be able to afford it. Also, as in Ancient Iceland, the possibility to sell the right to extract restitution/retrbituion from a criminal allows even the poorest to obtain justice.

Since States never have been legitimate from the start -- but merely one person's coercsion over another -- talking about "their property" misses the boat. For an exposition of how a libertartian society would work, see For a New Liberty. For an exposition of the fallacies of the kinds of arguments your making about protection and how the State can best provide it, see Myth of National Defense. You have not refuted any of my arguments.

Physicist-turned-economist David D. Friedman mentioned that he sends his children to a Sudbury School. You might find the concept interesting: it's an entirely de-institutionalized, student led form of schooling. Being a high school senior now, I wish I had had the opportunity to go to a place like that.

"The basic problem with any sort of anarchy in practice is that there is no protection against non-state coercion."

Again, anarcho-capitalists disagree.

Very briefly, an old, popular economic idea was that an economy would fall apart without some central power to control it. That turns out to be false; a market not only works, it works much better than a command economy. This has been a surprise to some of the smartest people, and not everyone is convinced; nevertheless, I would argue it's true. Similarly, it is common even among the most serious political thinkers to think that without a state to create and enforce law, the legal system would fall apart. But is that true? If we consider creation and enforcement of law as services, then we can ask, why shouldn't these services be provided on the market?

I don't want to get into a debate, so I'll refer you to the works of David Friedman, specifically his popularizing book The Machinery of Freedom, where he outlines a proposal for non-state creation and enforcement of law (i.e., non-state protection against coercion). Here is one chapter where he describes the idea.

"Did Adam Smith ever talk of trees or clean water? No he did not. It simply did not occur to him that we might one day run out of either substance." On what basis do you say that? As far as I can tell (I've dabbled in Smith, have not read even 3/4 of Wealth of Nations, though, so perhaps he says this), Smith does not confine his views on scarcity to precious metals or anything else.

Let's say that G.W decided that trees cause pollution and ordered all forests logged. The market would be flooded with wood and the price of wood would drop down to nothing. At that point a capitalism would say "the price of wood keeps decreasing so that must mean there are more trees in the world, in fact I predict that in 6 months there will be infinate amount of trees in the world"."

(Who's G.W.?)

The above scenario, while I know you meant it as a cartoon rather than a serious possibility, better describes the attitude toward labor under Chinese socialism ("there will always be more") than it does the attitude of any capitalist I've met.

You say that "[C]apitalism has no way of measuring sustainibility until it's too late." Compared to what? There are lots of Czechs suffering from chemicals dumped into mines who might have liked M. Friedman's right to sue polluters under their former regime. (I like David D. Friedman better ;)) Besides which, imperfect as they are, market-centric systems cannot afford to ignore future supplies of whatever they're dealing in, from oil to 30lb bond printer paper.

One example: the existence and robustness of futures markets (and all markets have some element of future prices built in, even those that aren't specifically called futures markets, but that's another point!) tend to nullify this example, though: since we know where wood comes from (trees), the price of wood (I predict) would rise with the risk level of a diminishing future supply, until and unless substitutes were found for enough uses for wood that the magnitude of change a wood-supply crisis could cause was considerably shrunk.

What are futures markets if not a mechanism for measuring (better said, perhaps, "predicting") sustainability?

timothy

You usually have a lot more liability if a) you're selling the product and b) marketing the product as having specific qualities.

For you to have liability requires responsibility. In the case of a product, that would require a sale of that product or a license to use it. If there is no signed contract and you received nothing for it, it is going to be incredibly hard to prove that you have any liability because you not only did nothing to accept the liability, you never even had the opportunity to say to the user that the product wasn't suitable for his purpose. That doesn't mean that it isn't possible to interpret the GPL as a contract between a programmer and an unknown customer. For more detail on this thorny issue, I suggest Chapter 12 of David Friedman's book Law's Order.

Prof. David D. Friedman explains at some length in Chapter 19: The Political Marketplace of his book Price Theory: An Intermediate Text the harm that is done by tariffs. The problem is that the benefit is very concentrated, while the cost is spread throughout the rest of the economy. In this case, it is even tougher because Micron is making the argument that their request is in response to subsidies favoring their competitor. I'm sure that most Slashdot readers can follow Friedman's math if they have the patience for it. But for those who can't or don't, he makes his argument in words as well as equations.

While this tariff would benefit Micron, it would cost lots of other companies money. What I would prefer to see is for the US to push the threat of a tariff. Let South Korea take their case to the WTO. Send in a team of vicious attack lawyers who will readily agree that both the tariff and the South Korean subsidy are wrong. Let's see Micron and Hynix compete head-to-head without tariffs or subsidies.

Their subsidy is at least as harmful to their economy as a tariff would be to ours. Simply put, we have the option of avoiding the tariff by not buying the goods. The citizens of South Korea pay for the subsidy regardless of their own individual choices, and at least in the short run, regardless of whether the chips even get sold.

Prof. David D. Friedman explains at some length in Chapter 19: The Political Marketplace of his book Price Theory: An Intermediate Text the harm that is done by tariffs. The problem is that the benefit is very concentrated, while the cost is spread throughout the rest of the economy. In this case, it is even tougher because Micron is making the argument that their request is in response to subsidies favoring their competitor. I'm sure that most Slashdot readers can follow Friedman's math if they have the patience for it. But for those who can't or don't, he makes his argument in words as well as equations.

While this tariff would benefit Micron, it would cost lots of other companies money. What I would prefer to see is for the US to push the threat of a tariff. Let South Korea take their case to the WTO. Send in a team of vicious attack lawyers who will readily agree that both the tariff and the South Korean subsidy are wrong. Let's see Micron and Hynix compete head-to-head without tariffs or subsidies.

Their subsidy is at least as harmful to their economy as a tariff would be to ours. Simply put, we have the option of avoiding the tariff by not buying the goods. The citizens of South Korea pay for the subsidy regardless of their own individual choices, and at least in the short run, regardless of whether the chips even get sold.

Prof. David D. Friedman explains at some length in Chapter 19: The Political Marketplace of his book Price Theory: An Intermediate Text the harm that is done by tariffs. The problem is that the benefit is very concentrated, while the cost is spread throughout the rest of the economy. In this case, it is even tougher because Micron is making the argument that their request is in response to subsidies favoring their competitor. I'm sure that most Slashdot readers can follow Friedman's math if they have the patience for it. But for those who can't or don't, he makes his argument in words as well as equations.

While this tariff would benefit Micron, it would cost lots of other companies money. What I would prefer to see is for the US to push the threat of a tariff. Let South Korea take their case to the WTO. Send in a team of vicious attack lawyers who will readily agree that both the tariff and the South Korean subsidy are wrong. Let's see Micron and Hynix compete head-to-head without tariffs or subsidies.

Their subsidy is at least as harmful to their economy as a tariff would be to ours. Simply put, we have the option of avoiding the tariff by not buying the goods. The citizens of South Korea pay for the subsidy regardless of their own individual choices, and at least in the short run, regardless of whether the chips even get sold.

I can't answer the question of whether all the tech jobs are headed overseas with complete certainty. I suspect they aren't because there are things that require hands on work. Someone here suggested becoming a plumber because that can't be shipped overseas.

Nonetheless, there's a concept in economics called "comparative advantage". David Friedman explains it at considerable length in his book Price Theory: An Intermediate Text. The relevant chapter can be found here. I'll give a shorter summary.

Assume there are two people. Let's call them Joe and Asok. Joe's labor to make a car costs $1000. His labor to assemble a PC and load all the software is $100. Asok can build the car for $250 and set up the PC for $75. Asok does both jobs cheaper. It doesn't matter whether he's cheaper because his labor is less expensive per hour or because he works faster. He'll end up with the car manufacturing and Joe will be supporting the PCs, because neither of them can do both at the same time. Think of the price of PCs in cars or cars in PCs.

During a recession, when there is more labor than businesses demand, both jobs can get done where the labor is cheapest. When demand for labor rises again, the jobs that get done in various places will depend on comparative advantage.

There are differences in cost, quality, availability, skills and numerous other factors. All of those will help determine which industries and products each country, or even region, enjoys a comparative advantage in.

Actually it isn't hard to find economics texts that are suitable for the layman.

I have to disagree, albeit on the weak grounds that absence of evidence is evidence of absence. I have done a lot of searching, and the best (contemporary) literature I can come up with is David D. Friedman. I would be much obliged if you can give me some leads to follow up on. Strange as it sounds, I would be overjoyed if you proved me wrong. It just doesn't seem that likely.

I'm afraid you went off the deep end with the rest of your post.

As I am entitled to my opinion, you are entitled to your poor grammar.

Not all economists like government intervention. Try reading Hayek ("The Road to Serfdom" would be a good place to start).

"The Road to Serfdom" was published in 1944, and I'm relatively certain that Hayek is now deceased. I thank you for the lead, but if you remember, my original complaint was with the relationship between contemporary economists and the public. That qualifier, contemporary, may not be omitted.

I ran across Plucker about six months ago. Loaded the software on my Palm M100 and my main (Linux-based) machine at home. Now, any time I run across a neat article on Slashdot, if I don't have time to read it now, I create a quick script which "plucks" it and I put it on my Palm. At that point, I can read it whenever I like.

Current contents: Contracts in Cyberspace and the VCR-faq. I was trying to fix a VCR which didn't want to play EP tapes and was always having problems with the tracking. I didn't have to bring the VCR to my computer, and I didn't have to kill any trees.

That aside, I use the daylights out of the Calendar function; medical and dental appointments for myself, my wife and my kids, when certain bills are due, when I'm expecting such-and-such check or refund, etc. It makes it a lot easier to follow-up on something when you can put it in the calendar, with a note, and have it trigger an alarm a month or more down the road.

The Memopad gets used a lot, as well. If I'm talking to the insurance agent about my vehicles, I have the VIN numbers at my fingertips, as well as the license plate numbers. I keep a file with all my passwords for the various online places where I have accounts. I also have birthdates and SSN's for my wife and kids (I'm notoriously bad at remembering dates; having an alarm go off a week prior to a birthdate or the anniversary helps).

If we're planning a roadtrip (to visit family members elsewhere), I can put together a list (in the To-Do list) of everything which needs to go, and check them off when it comes time to leave. This also comes in handy when going to the grocery store. My wife will be telling me hours beforehand, "oh, and we need this and this and this," and I can mark them all down and check them off when I pick them up.

If you have a Palm, and you haven't gotten your hands on BrainForest, you need to look at it. I tend to think in "outline fashion," and this program help tremendously. Excellent for keeping notes which are more structured and organized than you might keep with MemoPad (and you aren't as limited in the size of your file, either).

Finally, get your hands on TextPlus. It takes a little getting used to, but once you do, it definitely improves your data input speed, even in graffiti. I just wish there was a way to use it in Windows and Linux; this kind of program could actually make a pen-based system an realistic replacement for a keyboard.

I swear by my Palm. I wish I had one with more RAM (M100 = 2 MB, not expandable or upgradeable in the firmware category). I used to have a IIIx, which had more RAM and upgradability; I miss it. Also, my M100 has a problem with NOT retaining its data when the batteries come out, so I have to sync mine regularly, then restore the whole thing after I replace the batteries (rechargeable NiMH batteries). In spite of that rather large pain in the neck, I still love my Palm. I'd be a completely unorganized mess without it. I hated carrying a paper-based planner; my Palm fits in my pocket, so size really isn't an issue.

When the government grants a certain business a regional territory, franchise, subsidy, or, protection, competition is legally prevented by threat of force.

Violators of the government's will are arrested at gun point [...] When the government allows companies to merge into huge monopolies, they are only laying the foundations for socialism -- and that's the last thing we ever want in America.

What you are describing is termed Fascism, not socialism. You might profit by learning a bit more about political science.

Without free markets and cutthroat competition, our economy will become stagnant and weak and eventually fall apart due to corruption and incompetence, like in the former Soviet Union and soon to be in socialist western Europe.

I think a little less Usenet and a little more Friedman and Hayek would allow you to make the case you want to make a bit more clearly.

-j

Look at it this way: If you really want to be married to this woman, you value marrying her, and ought in principle to be willing to pay for the privilege. But, you want her to be committed to and value the relationship also, and if you pay her to get engaged or to marry you, you have no way of knowing she didn't just get engaged so she could "take the money and run."

So what do you do? You buy something really expensive that has no utility or intrinsic value, you give it to her (to prove you aren't going to resell it), and she can't "take the money and run" since diamonds are hard to resell and there is social pressure against reselling them anyway.

Basically, you are "burning money" to prove you value the marriage you are about to enter into. You do this to convince her you are serious, she needs to know you are serious since marrying someone who isn't serious is potentially costly in all sort of ways (emotionally, financially, time-wise, etc.).

True, there are only a few countries in which diamonds are used for engagements, but I bet most of the other societies have similar committment devices that also amount to "money-burning."

For more on this, see the book, Hidden Order: The Economics of Everyday Life by David D. Friedman (yes, son of the famous economist Milton Friedman). The book is available here and here with a table of contents, etc., here.

Look at it this way: If you really want to be married to this woman, you value marrying her, and ought in principle to be willing to pay for the privilege. But, you want her to be committed to and value the relationship also, and if you pay her to get engaged or to marry you, you have no way of knowing she didn't just get engaged so she could "take the money and run."

So what do you do? You buy something really expensive that has no utility or intrinsic value, you give it to her (to prove you aren't going to resell it), and she can't "take the money and run" since diamonds are hard to resell and there is social pressure against reselling them anyway.

Basically, you are "burning money" to prove you value the marriage you are about to enter into. You do this to convince her you are serious, she needs to know you are serious since marrying someone who isn't serious is potentially costly in all sort of ways (emotionally, financially, time-wise, etc.).

True, there are only a few countries in which diamonds are used for engagements, but I bet most of the other societies have similar committment devices that also amount to "money-burning."

For more on this, see the book, Hidden Order: The Economics of Everyday Life by David D. Friedman (yes, son of the famous economist Milton Friedman). The book is available here and here with a table of contents, etc., here.

Premarital sex was not invented in the 1960s, and has in fact been around ever since just before the first marriage. Of course, back in the good old days, a good girl would never have sex before wedlock. However, some were willing to bend the rules once they were engaged. So, men quickly discovered that you could ask a woman to marry you, have sex with her, and then break off the engagement.

Up until 1935, this was considered an actionable tort in 47 of the 48 states. A woman who was deceived in this way could sue for the value of her lost virginity and subsequent difficulty in acquiring a husband. State legislatures passed laws against these suits in the 1930s and 1940s.

So, after this ability was removed, women needed a new way to ensure that a man proposing marriage really meant it. It became social custom that a man asking for marriage would post a performance bond equivalent to about twice his monthly salary. This bond would be forfeitable upon his breaking off of the engagement, but returnable if she broke off the engagement. This 'bond' was implemented as a diamond ring, because it was an easy way to, er, 'crystalize' two months of his salary in an easy-to-handle package.

In essence, the engagement ring is a private reimplementation of a canceled government policy.

PayPal's big problem is that they aren't staffed for the exception rate of a financial institution. In banking, less than 1% of transactions are exceptions, but exception handling consumes about 25% of bank resources.

Now that PayPal has moved away from being a peer to peer service (consumer-level PayPal accounts can only send money, not receive it), they're probably going to be regulated like a credit card issuer. In fact, it's not clear what PayPal's role is now that they basically have consumer accounts and merchant accounts. That's basically competing with banks that handle credit card merchant accounts, and the banks do a better job of that.