If you have a fax machine or E-mail inbox, you've probably seen these:

MICRO-CAP ALERT!!!! FLY-BY-NIGHT TECHNOLOGIES SET TO EXPLODE! Fly-By-Night (OTC:BB FLYB) is about to QUADRUPLE in price as investors discover this hidden gem!

And so forth....

This is the classic "pump-and-dump" stock fraud, where the fraudsters quietly load up on the stock in advance, then promote the crap out of it, hoping to drive the price higher to make a quick profit. The company itself may have nothing to do with the promoters, but just happens to be a convenient target.

If there's one part of government which is overripe for explosive remodeling, it must be the tax system.

There's a problem, though. Reform is hard. Real reform--the kind which comes from starting over from a blank sheet of paper--is often politically impossible. Any overhaul creates both winners and losers, and the losers usually fight much harder against change than the winners fight for it.

How about a couple of other tax changes to promote the welfare of the country

In my prior article, I outlined the difficulties in trying to pass any real reform of our tax system, and proposed a couple of obvious fixes to current problems (which don't have a snowball's chance of passing).

Now, as long as I'm dreaming about remaking the tax code, I'd like to offer a more radical vision of a simpler, fairer income tax system which doesn't have a snowball's chance of even being considered:

The Household Profit Tax

The yield curve has proven a reasonably reliable predictor of future recessions. But what’s not clear is whether the yield curve causes future recessions, or is an effect of underlying conditions that will create a recession.

An article in today's Wall Street Journal (sorry, paid subscription required) brings to mind the simmering issue of venture fund disclosure. Venture capitalists have always had the freedom to operate in nearly total secrecy, and have sometimes provided their investors with mind-boggling returns (though nobody knows what VCs return overall, thanks to said secrecy).

The past few years, there has been an effort by some to pry the lid off the VC community, largely through open records laws which cover public institutions (university endowments, pension funds, etc.) which invest in VC funds. This basically pits the VC's desire to invest in secret against the public's right to know how public investments are managed.

The problems with our current copyright and patent systems have been well documented. In many ways, they boil down to three problems: (1) It is too easy to get a copyright or a patent relative to the level of legal protection it provides; (2) There is no incentive for the owner of the copyright or patent to place commercially worthless rights in the public domain--thus littering the intellectual property landscape with protected stuff which the owner has no interest in selling; and (3) The time of the protection is far longer than reasonable (with some exceptions for things like drug patents, where the FDA approval process can chew up much of the patent life).

Back in the bad old days, bandits armed with six-shooters would rob stagecoaches at gunpoint to get their money and valuables. This was a reasonably effective way to earn a living, since law enforcement was nonexistent and the stages often carried a reasonable amount of loot. Of course, the bad guys couldn't mix with polite company, but that never bothered them much.

We've come a long way since then. Now, bandits armed with lawyers and obscure intellectual property extort small online businesses for "licensing fees" under the threat of crushingly expensive lawsuits. This is a reasonable way to get money, since the burden is on the defendant to have the patent or copyright claim invalidated, and small businesses are unlikely to have the resources to fight back. Of course, the bad guys won't ever be mistaken for true innovators, but that doesn't seem to bother them much.

Micropayment schemes have been around since the beginning of the graphical web browser. I remember in 1994 or 1995 listening to a presentation at NCSA (home of Mosaic, the original browser) about an early idea for micropayments. At the time, I was impressed by all the thought which had gone into ensuring cryptographic anonymity, fraud protection, and so forth, but I wasn't really clear as to why someone would want to buy a newspaper one article at a time. The ensuing years have recorded the failure of one micropayment system after another, each more elegant than the last.

The problem with the American tax system is not that we pay too much taxes: by the standards of developed nations, we don't. The problem is that we pay too many taxes. Here, for example, is a probably incomplete list of the taxes my as-yet unprofitable startup pays:

Remember: if you're fighting a war, there's two ways to lose. The enemy can destroy you (not likely from a bunch of extremists half a planet away), or the enemy can make you commit suicide. Our response since 9/11 has often been more driven by irrational fear and paranoia, rather than a considered response to a known threat. That way lies madness.

Pop quiz: What's the difference between an economics professor and the rest of us?

Answer: When an economics professor gets screwed out of $650 by an airline , his reaction is that "United is perfectly rational to want fewer children in its business class."

Insider trading--the illegal selling and/or buying of stock based on inside information--has been at the center of many Wall Street scandals over the years. What's really wrong with this practice? It isn't that insiders trade stock, but that they have access to information which most people don't have, and that the information gives them an unfair advantage. Rather than simply banning trading on inside information, why not legalize it, and use insider trading to improve the flow of information to the market?

One way to look at economic systems is that they are the mechanisms through which a group of people allocate scarce resources. The growth and size of an economy is limited by its most scarce resources, and (at least in a free-market economy) mechanisms evolve to try to use relatively plentiful resources instead of scarce ones. So what is the limiting resource in our economy today, that resource which keeps our economy from growing faster? The answer will come as a surprise to anyone who has been unemployed lately, but our economy is limited by the relative scarcity of people.

There's a tradeoff between speed and price when buying or selling stock. In the U.S., our markets favor trading quickly rather than getting the best price for investors....and I don't think a lot of small investors understand this. Should market orders be banned?

There was an article in the Wall Street Journal today about the SEC examining how the stock markets work and whether it is better for investors to get the best possible price when they trade stock, or to get their trades done quickly.

About time!