Virtual Reality: The Death of Our Economic System?

By Bhagwad Jal Park, on September 16th, 2008

I’m going to pull a leaf right out of The Matrix here. Well, perhaps a few leaves from David Hume as well. This article is going to deal with the ultimate goal of virtual worlds. We have already taken the first stumbling steps towards it with sites like Second Life and Google’s Lively. The idea is to envelop ourselves in a virtual computer world where there are counterparts for everything that we have in the real world.

The sites mentioned above are only the first steps, and they are already tremendously addictive. There are games that are shared online by tens of thousands of players, called massively multiplayer online role playing games (MMORPG) where people are so involved in their online worlds that they frequently forget about their real world.

Let’s take this to the extreme. A time will come when technology will enable us to plunge headlong into the virtual world literally. We will be able to forget what is happening around us and experience the virtual world as if it were the real one. Like The Matrix, some probe will be pushed into us, and we will be able to live in worlds of our own creation.

Just imagine being able to be in a world where you are God. Artificial intelligence that will pass the Turing Test will already be so advanced that you will be able to have a family in the virtual world and raise them in the same way the real world allows you to. If you have any fantasies, then this is the place for you. You could indulge in whatever you want without any thought of repercussions; you can have the perfect body and could have an entire harem of beauties at your beck and call.

Image Credit: signalstationVirtual Reality

Indeed, who will want to come out of this perfect world? It will be the ultimate addiction. Humans will be quite content to live inside them, keeping their real world bodies alive by being fed by tubes on the outside. I’m not being facetious. I’m dead serious. That’s what will happen if everything is unimpeded.

Real world relationships will dwindle and then become almost extinct. Who wants an imperfect or unsatisfying relationship when you can have the best, most handsome or beautiful and sweetest spouse (or many spouses!) in your own world where you are God?

The economic system as we know it will collapse utterly. People will not want anything else other than the ability to spend time online in their worlds. It will be available as a utility bill like the Internet. People will spend all their money buying online time (with a little for being fed by drip), and manufacture of all goods and services will drop to zero. Housing is perhaps the only industry that will remain, but not as we know it. All that will be needed will be dormitories where our bodies can lie, and thousands of such bodies can fit into one house.

Of course, any company that controls online access will flourish, and the industry will be responsible for 95% of the economy, if not more. It’s a scary thought, but one that we currently find repulsive only because we haven’t gotten accustomed to it. Once in that situation, it will be the most natural thing in the world.

The question now remains as to what work will people do to earn their money to buy online time. If the demand for all products is zero, then what possible work will be left? Perhaps online time will then be a free service, which no one can possibly gain by earning money.

I’m sorry if all this sounds a bit Orweilian. But this is where I see the future heading, and what can be done to stop it?



6 comments   Citizen Economists   , ,  

Vaccination Against HIV May Now Be Possible

By R. C. Anderson, on September 16th, 2008

Virtually the worst diagnosis a patient can hear is: “You have HIV.” The amount of global suffering from this disease is inconceivable, made worse by the knowledge that drugs will only slow the disease, not arrest it or clear it from the patient’s body. Because of the heinous nature of HIV and subsequently, AIDS, the U.S. has poured millions into research as well as help for those facing it overseas.

In 2003, President Bush began PEPFAR, or the President’s Emergency Plan for AIDS Relief. With this program, Bush initially funded HIV drugs to 50,000 people in Africa. As of 2008, the humanitarian budget and aid has expanded to include just over 1.7 million people. This helped a large number of people but at a cost of $15 billion. Bush wants to increase this funding by 100% to $30 billion. In June, the Senate debated a bill that would increase the funding beyond this to $50 billion. The House of Representatives passed the bill in April. Bush and the supporters of increased aid hope that the extra funding will allow three to five million people infected with HIV, malaria and tuberculosis to acquire treatment. Four times this many would be taught disease prevention in hopes of stemming the tide of HIV victims before they become infected. According to Dr. Premlata Shankar, a scientist developing a type of HIV vaccine, 33 million people are infected with HIV worldwide, all of whom could potentially benefit from such a vaccine.

Developing an HIV Vaccine

In the August 22 issue of Cell, Dr. Priti Kumar describes a new way in which HIV could be prevented from replicating in its victims. Viruses like HIV work by entering a host cell, taking over the cell machinery to make the proteins necessary to replicate itself and then bursting the cell open (lysis), releasing the new viral particles to infect other cells. In the case of HIV, the virus enters T-cells, replicates and then destroys the T-cells upon lysis of the cell. The reason this is so problematic is that the T-cell is the foundation upon which the immune system is based. If the T-cells are destroyed and the cell count drops, the immune system is handicapped and unable to fight off other secondary infections, such as pneumonia or the common cold.

With current technologies, according to an interview given by Shankar to Nature, “a combination of retroviral therapies allow patients to control the infection, [but] the virus is not eradicated…rather [it] persists…in the cells.” What Kumar and his associates present is a way to shut down the virus all together and do it directly in the human host, which others have been unable to accomplish. Kumar’s technique uses small interfering RNAs (siRNA) to arrest the virus.

Going back to biology class, genes are made of DNA. DNA is turned into RNA, which is turned into proteins. Proteins do the majority of work in any organism. By using siRNAs, the RNA is bound up and unable to make proteins. If the virus cannot make proteins, it cannot replicate, cannot take over other cells and cannot harm its victim. These siRNAs are small, yet they throw a huge wrench into the viral life cycle, arresting it.

Shankar speculates that if people can be injected with these siRNAs and become infected with HIV at a later date, the siRNA would prevent the HIV from establishing itself and causing disease. This would allow large populations to be vaccinated, in a way, against a currently incurable virus. Something like this still has extensive testing to complete, and Shankar believes more toxicology studies, at the very least, need to be done in larger animals before considering human trials.

Far-Reaching Implications

The application of technology such as this has far-reaching implications. siRNAs need not only be used for HIV; they could be used for almost any disease. As long as the disease of interest has RNA, it could be halted with siRNAs, given enough time, money and research. Every day it seems as if new genes are being found that are specifically expressed during diseases such as Alzheimer’s and cancer. If the highly specific RNAs made from these genes could be shut down, it is feasible that the disease itself could be disabled, allowing the patient to live a long, healthy life. If this occurs with HIV, then it may be possible to see the saving of billions of U.S. dollars normally spent on HIV drugs, which only manage such diseases rather than cure them.



Leave a comment   Healthcare   , , ,  

Fannie Mae and Freddie Mac Now Under Federal Control

By G.L.C., on September 16th, 2008

It has finally happened: the federal takeover of Fannie Mae and Freddie Mac, which together own or guarantee almost half of the $12 trillion home mortgage debt. The takeover came after inspectors poring over the books of the two companies concluded that the accounting methods used by Freddie Mac had overstated the capital cushion of the company. The methods used to bolster the capital cushion have caused serious concerns among regulators. Freddie Mac’s portfolio has many securities backed by subprime loans, but the company has not written down the value of these loans to reflect the current market price. The two companies have also inflated their financial positions by relying on deferred tax assets – Fannie Mae’s worth increased by $36 billion and Freddie Mac’s by $28 billion. Without tax deferred assets, the value of both companies would fall below the regulatory requirements.

The takeover is being seen as necessary to help stabilize the mortgage industry in the short term. But it does not answer the all-important question of how best to finance home mortgages in the United States.

The lender’s retention of credit risk and maturity matched finding are two key characteristics of safe, efficient, fixed rate mortgage lending. In the mortgage market, these two characteristics are missing to a great extent. Lenders have used the securitization process to pass the risk to others. The transaction cost of securitization is high, particularly if the mortgages are refinanced at a lower interest rate. Maturity mismatching has been prevailing at most lenders, including Fannie Mae and Freddie Mac, since the early 1980s.

One answer to the question is to introduce covered bond financing for mortgages. These bonds are on balance sheet borrowings and secured by mortgages owned by the issuer of the bonds. The lender can safely hold on its balance sheet the fixed rate mortgage it has made.

Covered bonds are new to the United States. Only two lenders – Bank of America and Washington Mutual – issue them. But in Europe, they have been issued for over two centuries. Today there are approximately $3 trillion of these outstanding in Europe. Since these bonds are on balance sheet borrowings, it acts as an incentive for good lending decisions: the lender would be stuck with lending errors.

The authorities are now taking steps making covered bonds more popular. The United States Treasury has already issued a set of best practices for issuing covered bonds. New Jersey Rep. Scott Garrett introduced a legislation for providing statutory protection for investors of covered bonds similar to the protection enjoyed by investors of covered bonds in Europe.

Covered bonds have the potential to fund a significant portion of the $10 trillion outstanding in home mortgages today. With covered bonds, the lenders need not sell their fixed rate mortgages into a secondary mortgage market. Instead, they can safely keep their mortgages.

The federal takeover of Fannie Mae and Freddie Mac has only demonstrated that the present mortgage infrastructure is inefficient and extremely risky. The introduction of covered bonds in such a scenario is a welcome step in the right direction.



4 comments   Financial Markets   , , , , , , ,