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Erika Rice Scherpelz
Works at Google
Attended University of Washington
Lives in Kirkland, WA
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Erika Rice Scherpelz

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The child seems to have figured out all the elements of crawling but isn't quite sure what they are for. She'll get up on her hands and knees, even crawl a few paces, then she'll be like, "that was fun, back to scootching."

But it's near, oh so near. (Duh duh duhhhhhhhh!)
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Erika Rice Scherpelz

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The article itself is not too exciting, but I'm a big fan of keeping a journal. My husband and I do a variation of the more traditional single person journal.

For years now, we have been keeping a shared journal. Every week one of us had the journal and tries to write in it several times. At the end of the week, we trade off, read what the other has written, and start again. Each month, we read aloud that month's entries from the previous year and from five years ago.

It's a great way to both share ideas and concerns as we go along and a great way to remember the good, the bad, and the everyday. I really think that our relationship is much stronger because of our journaling. I'm such a fan of this method that journals have become a standard part of the wedding gifts we give.
Many of us associate keeping a diary with our emotionally volatile teenage years. But new research suggests that recording our run-of-the-mill, daily experiences, rather than just our highs and lows, could bring us unexpected joy. For a study published in the journal Psychological Science, ...
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Erika Rice Scherpelz

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I did not write the stories to get people through the hard places and the difficult times. I didn't write them to make readers of nonreaders. I wrote them because I was interested in the stories, because there was a maggot in my head, a small squirming idea I needed to pin to the paper and inspect, in order to find out what I thought and felt about it. I wrote them because I wanted to find out what happened next to people I had made up. I wrote them to feed my family.

So I felt almost dishonorable accepting people's thanks. I had forgotten what fiction was to me as a boy, forgotten what it was like in the library: fiction was an escape from the intolerable, a doorway into impossibly hospitable worlds where things had rules and could be understood; stories had been a way of learning about life without experiencing it, or perhaps of experiencing it as an eighteenth-century poisoner dealt with poisons, taking them in tiny doses, such that the poisoner could cope with ingesting things that would kill someone who was not inured to them. Sometimes fiction is a way of coping with the poison of the world in a way that lets us survive it.

And I remembered. I would not be the person I am without the authors who made me what I am--the special ones, the wise ones, sometimes just the ones who got there first.
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Erika Rice Scherpelz

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Technically grammatically wrong things I do because I think they're just better:
- put punctuation outside of the quote marks when the punctuation is not part of the quotation
- put spaces around m-dashes used to set off phrases
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I put punct outside the quotes as well. I figure that if I produce content for anyone who actually cares about that, then they can simply kern the text so that the punct tucks under the quotes and you can't tell which one comes first.
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Today, I’d like to talk a bit about economics. In particular, I want to look at why capitalism can both work amazingly well and fail amazingly badly, often at the same time, and is such a great factory for “best of times, worst of times” conditions. The seven-word summary is: “Free markets work, except when they don’t.”

I won’t spend too much time on the first part of the sentence, because presumably you’re familiar with the ways in which free markets can work well. Basically, if two people freely engage in a trade, by definition it makes both parties happier; if it didn’t, they wouldn’t have engaged in that trade in the first place. The more trade is possible, the more people can accumulate things that make them happy – e.g., more free time to spend with their families while getting the same amount of food. There are all sorts of mechanisms which amplify that; probably the most important is “comparative advantage,” which shows how if there are enough people around so that everyone can specialize in what they’re best at, everyone comes out ahead. (See http://en.wikipedia.org/wiki/Comparative_advantage if you want to learn more about it; Ricardo’s example is a good place to start)

However, if you’ve paid any attention at all to the world in the past few centuries, you’ve probably already got an objection to what I just said: “You think they wouldn’t have engaged in that trade if it didn’t make them happier? What if they didn’t have a choice?” And you would be perfectly right, and that part is the heart of “except when they don’t.” There are a few ways in which free markets can fail, but most of them are obscure and relatively easy to fix (e.g., limited money supply). The big one, which represents the overwhelming majority of all the problems, is coercion: the argument that a free trade makes both parties happier doesn't apply to trades which are not free.

(And note, by the way, that coercion harms free markets both locally – in that the individuals being coerced lose out, often by a lot – and globally, in that coercion is essentially a “tax” levied by one person on another. Those of you familiar with economics will recognize that whenever the price of something is pushed away from its natural equilibrium, overall value goes down. So when I talk about failures of capitalism, I mean failures that are simultaneously moral and financial failures.)

As far as I can tell, the large majority of coercion comes in three forms, which I’ll call externalization, capture, and inelasticity. These three overlap and most real situations combine them, but what they have in common is that they’re ways in which one person can force someone else to accept a trade that they would normally never take.


Externalization, also known as “negative externalities,” is when I can make everyone else pay my costs. The most common forms which don't overlap heavily with capture (the next item) are when I can take my costs from a poorly-policed commons (e.g., dump waste into an air supply that nobody is monitoring), or when I can spread the costs out so widely that every individual's cost of recovery would exceed the damages to them. (Playing games with individuals less able to individually recover is part of capture and inelasticity)

Capture is the classic positive-feedback problem of any system of human power: you can use your power to get more of it. Pure capture (as opposed to inelasticity) happens when there are central methods of regulation or other power-amplifying systems which you bring under your control via bribery, coercion, etc., and suddenly rather than regulating you they amplify you. That can be anything from regulation of pollution of commons to having the police keep Those People "under control" for you. 

Inelasticity is the result of the fact that the value of money isn't linear. If you have $100,000, then $1 means a lot less to you than if you have $10,000. In particular, people's needs up to a certain wealth level are dominated by constant overheads such as food and housing; so long as your total resource access is of the same scale as those overheads, your financial life is dominated by the severe consequences of falling below any one threshold. Once you're far from those overheads, the value of resources becomes far more linear. Often, a good way to measure this is in terms of "being one <event> away from disaster;" if the event is as small as a flat tire, versus if it's as big as inoperable cancer, it's a huge difference in life.

If two people are about to engage in a deal, and one of them is near-threshold while the other isn't, the one who isn't has huge negotiating leverage. For example, you can give someone a shitty job like mining coal that they would never accept if they had some option other than starvation. 

(Economists will note that in “inelasticity,” I’ve abused a term which actually represents something very natural, which is that the price of some goods isn’t very sensitive to supply or demand. The problem I’m describing here is really the problem of extreme inelasticity: specifically, when a person’s net resources are low enough that the costs of white-pill [“you need this in order to live,” nearly infinitely inelastic] goods become a dominant part of their financial calculus. Better terms for any of these would be welcome.)


There are methods to deal with all of these problems, and they work to varying extents.

The way you solve the first kind of externality is to not have poorly-policed commons. That doesn't necessarily mean enclosure, i.e. giving ownership of those commons to private individuals: in fact, enclosure is extremely susceptible to capture effects, as we saw with the original enclosures in 18th-century England. Methods like cap-and-trade, or simply either (a) requiring people to pay their own damned cleanup costs or (b) being up-front about the fact that we’ve decided to pay those costs as a community in exchange for the net benefits of whatever it is those people do, can be quite effective.

The second kind of externality, where people spread costs around widely – e.g., stealing $5 from every household in a city – can be solved by mechanisms like class-action suits, central regulators and law enforcement. In each case, the idea is to create some kind of entity (be it an ad-hoc collective of individuals or a dedicated set of professionals) which is strong enough, and incented properly, to pursue recovery whenever someone tries to steal from the community. 

There’s a hybrid kind of externality which also uses inelasticity: if you steal from the poor, they’re less likely to have the resources to go after you. This is based on the fact that recovery of any sort tends to have fixed overhead costs, e.g. the time, money, and knowledge required to sue someone. When people’s total spare budget of any of these is tiny because of their basic cost of survival – e.g., when someone is working hourly and can’t afford the time to engage in a lawsuit – it becomes a lot easier to steal with impunity. This is just a nastier variation of the second kind of externality, and is often best solved with a swift kick to a tender area of the anatomy.

You can solve inelasticity by reducing the overhead costs to zero. There are many different overhead costs -- food, shelter, transport, child care, etc., etc. -- and each can be analyzed separately and each creates value in its reduction. One way to reduce those is to literally reduce the cost of the items; e.g., the real cost of clothing has plummeted over the past few centuries, and now lacking clothing is only a major factor for people near the absolute bottom of the resource curve, where clothing is really being used as a substitute for shelter. Another way is to reduce need for the items, e.g. by having housing close enough to work and so on that people don't need lots of transport. A third way is to socialize the costs of these items, e.g. by having functional public transit or health care. That doesn't reduce their intrinsic costs, but it eliminates the inelasticity effect on individuals by averaging their cost over the entire population.

Capture is harder to solve. The best solution proposed so far has been democracy, but as we're well aware, that's more like "the worst solution except for all the other ones that have been proposed." There are some fields in which it can be solved by things like direct competition among regulators, but that has strange failure modes: consider, e.g., the competition among bond rating agencies which was supposed to ensure that bond ratings were meaningful. Unfortunately, all three of them were funded by bond sellers, not buyers, and so had the same incentives; a lot of the mortgage crisis was a consequence of that. (Specifically, that the various CDO's being traded had been AAA-rated based on completely nonsensical models, which any rater that had an incentive to actually think through would have known)


Importantly, though, I think that the first part of that original sentence about free trade is at least as important as the second: capitalism works well when coercion is brought under control. Communism was a recipe for making everybody miserable – and ultimately proved even more vulnerable to capture than capitalism. Feudalism and so on are even worse. Even more significantly, capitalism works better by its own metrics when coercion is eliminated: in fact, economists tend to model these things as a kind of tax on the system.

However, benefit to the system as a whole doesn't translate to benefit as individuals. In particular, if you're making a lot of money off (say) inelasticity, by having a large pool of desperate and subservient workers, then even though the aggregate wealth of society would go up a lot if they weren't so desperate, your own wealth (especially your effective wealth, divided by the cost of converting it to goods) would go down. That creates one hell of an incentive for capture, in forms ranging from direct regulatory capture by bribes, to funding astroturf organizations, to creating entire media and social panics, all the way out to creating social institutions – e.g., feudalism or slavery.

So while solving externalization and inelasticity are extremely important, capture is often the key to the whole deal.

Fortunately, it isn't always the key to the deal: sometimes, for example, someone figures out a way to knock the price of some key good down through the floor so quickly that existing groups can't figure out how to capture it in time. The expansion of Europeans through North America was an interesting example of that case (where the price of land became cheap because anyone could just kill people and take it -- or, once the cost of killing people got socialized into an army, just take it); their expansion through South America much less so, because there expansion was effectively captured as an industry by entrenched nobles. The rise of new technologies is a somewhat less bloodthirsty example: e.g., when companies like FedEx cratered the price of small-scale many-to-many shipping logistics, thousands of new businesses suddenly emerged.

Technology, wisely applied, can knock the pillars of inelasticity out from under people. That creates a sudden chance to rapidly equalize wealth distributions, which in turn has a strong negative effect on capture. The question of whether you can maintain that negative effect after the initial pulse, or whether wealth will inevitably end up re-aggregating through a combination of capture and externalization even in a zero-inelasticity world, is one of the major hard questions we're likely to face in the next few decades.

But it’s one of my major interests, and it’s why I spend my time working on technologies which I think can alter the basic cost calculus of the world, by making something previously necessary and expensive (be it knowledge, or communication, or data storage) nearly free.


Illustrative cartoon by Ape Lad (http://goo.gl/QI13CH), CC-NC-ND. Thanks as well to +Xenophrenia​​​ for the initial conversation which sparked this post, and for many other such arguments about the nature of capitalism.
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Ugh. Getting to Seattle from the Eastside today is terrible.
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Entertaining and full of wisdom. This is one of those books that demonstrate why I don't read a lot of fiction ~~ when I find something I like, I have a hard time putting it d...
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If you get the chance to read it, I'd be interested to know what you think of the Night Watch series, by Sergei Lukyaneko.
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I like it!
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I thought it was a jet-pack.
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When my husband and I were building our house, we were asked regularly if the butterfly roof would have problems in the snow. I just realized that no one worries about office buildings or apartment complexes for the amount of snow we get in the Northwest. Odd.
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Walking through the neighborhood on a gorgeous spring day.
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Mini bundt cake from Nothing Bundt Cakes in Mill Creek. It's pretty much a cupcake, but small, and therefore not dry. It's what you wish the treats from cupcake places were. 
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It's called "Nothing Bundt Cake"
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450 people
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1,528 people
Larry Liu's profile photo
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Education
  • University of Washington
  • Harvey Mudd College
  • Marysville-Pilchuck High School
  • Marysville Junior High School
  • Marysville Middle School
  • Marshall Elementary
  • Fairmont Elementary
  • Joy of Learning Montessori Preschool
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Erika Rice
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Nerd, crafter, software engineer.
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    Software Engineer, present
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Kirkland, WA
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Marysville, WA - Claremont,CA - Seattle, WA
Great venue for a baby shower! The cupcakes are a bit sweeter than I like, but still very tasty.
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I've been visiting Dr. Kim for years. His office takes great care in finding high quality hygienists who make you feel that the cleaning experience is as pleasant as having your teeth cleaned can be. Dr. Kim lets you know about cosmetic dental options, but he doesn't push them, and he's very clear about when he's making recommendations for medical reasons vs suggestions for aesthetic reasons.
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My favorite hot chocolate in Seattle, plus a great selection of chocolates and truffles.
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reviewed 10 months ago
The molten chocolate cakes are delicious, but so are the other desserts.
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reviewed 10 months ago
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I've been seeing Cassie at Vain for years, and I've always been happy with the service. The vibe of the salon is contemporary without being pretentious.
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I've been going to Earthly Rituals for years, and I love the personalized experience Patti gives me. Not only do I get her full attention, but she knows my skin well enough to make sure my facial is always customized to what I need that day.
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Very nice, great location for my needs.
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