[DividesByZero]

Please elaborate on this? Good work in what sense?

Ignoring the dubious ethics of running a black market, SilkRoad is ultimately a rent-seeking enterprise making money from transactional frictions. It creates no value - hardly the sort of shining beacon of enterprise the founder(s) make it out to be.

[b6]

Well, through SR, DPR helps all parties involved be safer. For buyers, all products have ratings and reviews, and sellers have overall satisfaction statistics, and there is a forum. For sellers, there are buyer statistics.

He's a pioneer. When SR has strange technical problems, he can't just jump on IRC or Stack Overflow and ask. He has to deal with attacks against Tor no one else has experienced. I don't know of anyone else betting more heavily on the security of Tor (at least the hidden service aspect).

He's also just plain inspiring. He had a bold idea, coded it up, kept it working, by himself or with a small group, despite opposition by the worst possible adversaries. He puts his life on the line for his principles. If the world had more brave and highly capable people like him, we might not still be in the drug war.

[alexqgb]

Sorry, but you you've got the concept of "rent seeking" completely wrong.

"In public choice theory, rent-seeking is an attempt to obtain economic rent by manipulating the social or political environment in which economic activities occur, rather than by creating new wealth. One example is spending money on political lobbying in order to be given a share of wealth that has already been created."

http://en.wikipedia.org/wiki/Rent-seeking

A black market - almost by definition - is one in which the players are cut off from the channels of official lobbying or patronage that make rent-seeking a viable economic strategy.

That's not to say that a dark symbiosis can't develop between black marketeers and legitimate authorities. For instance, the police, by enforcing laws against drug trafficking, increase the risks of trafficking. This increases prices and profits alike. High profits attract a constant supply of traffickers, who also tend to be far more ruthless than the average businessman, which brings additional layers of criminality to the trade, thereby ensuring continued employment for the police - to say nothing of an unsettling expansion of their powers.

But at no point do the traffickers and the police feel a mutual need to formalize this relationship, since public opinion remains, on balance, opposed to the narcotics trade. That is to say, the police can rely on the ballot box to stay employed, stripping them of any incentive to do business (at least on an open, institutional level) with traffickers. Meanwhile, the traffickers can count on public opinion to keep police on the beat, and need not go to any further expense to keep their racket going.

Contrast all this with the retroactive extension of copyright terms which has got to be the canonical example of true rent seeking, illuminating the practice in its most naked and unproductive form.

EDIT: An more germane example is the lobbying done by pharmaceutical companies with an interest in keeping the law and public opinion in opposition to illegal substances that may have pharmacological properties. Because these substances are too well known to be patented, their legalization could lead to patent-free formulations that reduce demand for patentable substitutes that pharmaceutical companies have created, or ones they could develop in future. Blocking the legal use of one widely and cheaply available substance to create a market for a more expensive but conceivably inferior alternate is a text-book case of rent seeking.

[DividesByZero]

I'm not sure we disagree here - rent seeking indirectly by the mechanism you describe between police and drug trafficking is still rent seeking behaviour!

You don't need a formal agreement or specific legislation to establish a rent-seeking economy, nor is economic patronage necessary. A black market is not somehow separate to rent-seeking business.

[lenazegher]

I don't really understand your point. In my understanding, for silk road to be rent-seeking it would have be actively working to keep drugs illegal, thus maintaining their profits. I have seen no evidence this is the case.

I'm also unsure why you think SR "creates no value"? It creates value in the same way eBay does.

[aero142]

Morals of being a drug market aside, in what way is SilkRoad a "rent-seeking enterprise" any more than any other transaction facilitating entity? Every transaction has friction and facilitators provide the service of matching buyers and sellers. Maybe not the highest ideal of productivity but hardly deserves to be described as rent-seeking.

[DividesByZero]

You're correct, every business that profits from easing transactional friction is to a greater or lesser extent, rent seeking.

[aero142]

Well, I guess we just disagree on the definition of rent-seeking. Matching willing buyers and sellers creates value by increasing the satisfaction of both the buyer and the seller since both should be better off after the transaction. The facilitator who creates more mutually beneficial trades is increasing the wellbeing of society as a whole. From wikipedia "Rent-seeking behavior is distinguished in theory from profit-seeking behavior, in which entities seek to extract value by engaging in mutually beneficial transactions." SilkRoad is not rent seeking because they are not looking to change or increase the transaction friction and regulatory control of the drug trade for their own benefit. That is why rent-seeking is usually used to describe entities trying to create a government policy which benefits them but hinders mutual exchange of others. To define rent-seeking is such a loose way as to cover all facilitators who don't produce anything directly is to distort it's original meaning and make the word useless to describe true rent-seeking.

[DividesByZero]

Consider that it's very much in Silk Road's interest that the regulations that currently create the transactional frictions on which it makes a profit remain as they are, or perhaps become even more restrictive. It's rent seeking in the same way that smuggling illegal immigrants is rent seeking. This does not require a broadened definition of rent seeking at all.

[lenazegher]

>It's rent seeking in the same way that smuggling illegal immigrants is rent seeking.

Smuggling illegal immigrants is not rent seeking. If an illegal-immigrant-smuggling company lobbied the government to tighten immigration controls, that would be rent seeking.

[DividesByZero]

It's in the interests of the smugglers that tight immigration controls remain in place, just as it's in the interests of Silk Road that regulations on restricted substances remain in place.

They need not lobby directly for these restrictions, they have other organisations that will do that for them.

[revelation]

Who is creating the majority of friction in the drug trade? Nation states and their war on drugs.

Silk Road is using technological advancement to remove as much friction from the process as possible, but it's obviously still non-zero, just like any market in the world.

[omni]

Do you have any points to offer other than useless snark? You have multiple comments challenging your initial claim that Silk Road is rent-seeking and you have yet to offer any sort of defense of your position.

[wnight]

Unless a business in that position attempts to enforce its position, what's the problem? If he is making something easier for others he should be rewarded or he'll stop.

It's like saying a road has no value because stuff isn't created on the road, just moved.

As for ethics, you could sleep better after buying a kilo of coke on silk road than paying your taxes.

[DividesByZero]

Roads are a public good, not a business (despite what libertarian rhetoric would have you believe). All business seek to enforce their position, by the way.

[wyager]

>Roads are a public good, not a business

It's funny how I keep getting charged to drive on certain roads that provide a better service than certain other roads.

[DividesByZero]

The owners of such roads are operating rent-seeking businesses. Not in any way a contradiction.

[jacoblyles]

There were lots of private highways and roads in early US history[1]. I'm not saying it's always and everywhere a good idea, but the historical reality or private roads suggests we shouldn't dismiss them out of hand.

[1]http://en.wikipedia.org/wiki/Private_highways_in_the_United_...

[wnight]

I think you're arguing with the mirror. I said it's like [the fallacy of] thinking a road has no value ...

And I see a lot of businesses selling stuff like 3d printers who use open designs and contribute changes back to the community. Lock-in is a choice people make.