It’s great that so many have copies of Adam Smith’s The Wealth of Nations, but very unfortunate that so few have read it. The alleged “supply chain” problems we’re enduring right now were explained by Smith in the book’s opening pages.
Smith wrote about a pin factory, and the then remarkable truth that one man in the factory working alone could maybe – maybe – produce one pin each day. But several men working together could produce tens of thousands.
Work divided is what enables the very work specialization that drives enormous productivity. If this was true in an 18th century pin factory, imagine how vivid the truth is today. Figure that something as basic as the creation of a pencil is the consequence of global cooperation, so what kind of remarkable global symmetry leads to the creation of an airplane, car, or computer? The kind that can’t be planned is the short answer, but more realistically the only answer.
Please keep this in mind as you read media coverage of the so-called “supply-chain disruptions” resulting in “shortages” that are said to be causing “inflation.” If you want a bigger laugh, read about what President Biden wants to do in order to get “supply” back on the market with an eye on replenishing U.S. retail shelves that are increasingly bare. He’s decreed 24-hour port operations! Yes, thanks to the 46th president we now know what held the Soviets back, and ultimately destroyed the Soviet Union: their ports weren’t open long enough; thus the shortages of everything…
All of the above would be funny if it weren’t so sad. Media members, “experts,” economists, and politicians don’t even disappoint anymore. To say they do would be to flatter them.
Either they think we have inflation, shortages, or a combination of both. Wrong on all counts. Really, who was talking about supply-chain shortages or the impossibility that is demand-driven inflation in early 2020? Very few were, and that’s because the U.S. economy was largely free then. At which point politicians panicked. And in panicking, they imposed a rather draconian form of command-and-control on the U.S. economy.
Some were free to work, some weren’t, and more still were free to work and operate their businesses within strict political limits. From freedom to central planning in a very small amount of time. At which point it’s worth considering once again the simple pin factory that Smith witnessed in the 18th century versus the global cooperation that was the norm 19 months ago.
The supply lines of February 2020 were impossibly complicated structures that no politician could ever hope to design. Think billions of individuals around the world pursuing their narrow work specialization on the way to enormous global plenty. Put another way, the shelves in economically free countries were heaving with all manner of products based on economic cooperation that was staggering in scope. Brilliant as some experts claim to be, and brilliant as some politicians think they are as they look in the mirror, they could never construct the web of trillions of economic relationships that prevailed before the lockdowns. But they could destroy the web. And they did; that, or they severely impaired it.
In which case let’s please not insult reason by talking about “shortages” or “inflation” now. Let’s instead be realistic and talk about central planning. We know from the 20th century that when politicians, authoritarians or both substitute their intensely narrow knowledge for that of the marketplace that immense want for very little (and lousy) supply is the logical result. Yes it is. When we’re not economically free, bare shelves are the inevitable result.
Conversely, product and service abundance is a certain consequence yet again of the infinite actions and trillions of economic relationships entered into by billions of people. These commercial tie-ups were constructed by consenting individuals over many years and many decades only for them to be wrecked by a political class arrogantly seeking to protect us from ourselves. That’s what happens when command-and-control replaces voluntary order. The remunerative ties that bind us fray, or vanish altogether. Consenting, profitable economic activity was suddenly illegal. Yet politicians and other experts are only now wringing their hands about a lack of supply?
Really, what did they think was going to happen? While politicians couldn’t ever create or legislate billions working together around the world, they could and can surely break voluntary economic arrangements. When you have guns, handcuffs, the power to quite literally shut off power sources to the productive, not to mention the wealth produced by the productive, you have the power to impose command-and-control. And so they did, only for the “supply chains” painstakingly created in self-interested but spontaneous form over many decades to suddenly break apart. Just don’t call it inflation, or shortages.
Inflation is a devaluation of the unit of account. In our case it’s the devaluation of the dollar. And while Treasury hasn’t always done a great job as the dollar’s steward over the decades, that’s just the point. Devaluation was routine problem in the 1970s, it ceased to be in the 80s and 90s, but it reared its ugly head once again during the George W. Bush administration in the early 2000s. To say inflation is a “now” thing is to ignore that it’s more realistically been a 21st century-long thing.
We don’t suddenly have an inflation problem. To say we do is the equivalent of saying that the Soviets had inflation because all the goods worth getting were both difficult to find, and incredibly expensive if they could be found. In our case we’ve had a lockdown problem care of nail-biting politicians that suffocated commercial cooperation around the world. And with work divided less than it used to be care of government force, productivity is naturally lower than it used to be.
Please consider modern productivity in terms of Smith’s pin factory example yet again, and ask what it would do to supply. The only thing is supply shortfalls are not evidence of inflation. A rise in one price due to lack of supply implies a fall in other prices. Yes, we have a central planning problem. Were he around today, Adam Smith could diagnose this in seconds.
I’m the editor of RealClearMarkets, and a senior economic adviser to Applied Finance Advisors. I’m also the author of five books. The most recent released in March is When Politicians Panicked: The New
In 2013, James Evans, a University of Chicago sociologist and computational scientist, launched a study to see if science forged a bridge across the political divide. Did conservatives and liberals at least agree on biology and physics and economics? Short answer: No. “We found more polarization than we expected,” Evans told me recently.
People were even more polarized over science than sports teams. At the outset, Evans said, “I was hoping to find that science was like a Switzerland. When we have problems, we can appeal to science as a neutral arbiter to produce a solution, or pathway to a solution. That wasn’t the case at all.”
Evans started his study on Amazon. You know the heading that says, “Customers who bought this item also bought”? Evans and his colleagues analyzed the top 100 items in this list for two “seed” books: Barack Obama’s Dreams from My Father and Mitt Romney’s No Apology. They repeated this process for each book in the top-100 list until they ran out of new titles.
“The resulting ‘snowball sample,’ ” Evans and company wrote in their 2017 Nature Human Behaviour paper, “contained virtually all books in the largest strongly connected component in Amazon’s directed co-purchase network,” or 1,303,504 unique titles.
After performing a co-purchase network analysis—the sort used to study co-citation and co-author networks—on this dataset, the scholars concluded that political ideology guided people to science books. With some curious results. Liberal readers preferred basic science (physics, astronomy, zoology), while conservatives went for applied and commercial science (criminology, medicine, geophysics).
“It seems like conservatives are happy to draw on science associated with economic growth—that’s what they want from science,” Evans said. “Science is more like Star Trek for liberals: traveling through worlds, searching for new meanings, searching for yourself.” Science turned out to be “a huge example of confirmation bias,” Evans said. “You expect something to be true, you want it to be true, you read books that affirm and confirm those truths.”
The thing most disturbing to me is the onslaught of claims about fake information and fake news.
Looking at the polarized results, Evans had an idea. What would happen if you put together a group of diverse people to produce information? What would the results look like? Evans knew just the place to conduct the experiment: Wikipedia. Evans and Misha Teplitskiy, a postdoctoral fellow at the Laboratory for Innovation Science at Harvard, and colleagues, studied 205,000 Wikipedia topics and their associated “talk pages,” where anybody can observe the debates and conversations that go on behind the scenes.
The scholars judged the quality of the articles on Wikipedia’s own assessments. “It’s based on internal quality criteria that is essentially: What do we want a good encyclopedia article to be? We want it to be readable, comprehensive, pitched at the right level, well-sourced, linked to other stuff,” Teplitskiy explained.
In their Nature Human Behaviourpaper, “The Wisdom of Polarized Crowds,” Evans and Teplitskiy concluded that polarization doesn’t poison the wells of information. On the contrary, they showed politically diverse editor teams on Wikipedia put out better entries—articles with higher accuracy or completeness—than uniformly liberal or conservative or moderate teams. It’s a surprising result and so I caught up with Evans and Teplitskiy to offer their interpretations.
What does Wikipedia tell us about diversity?
James Evans: People talk about the importance of diversity. It’s not diversity in general; it’s diversity in specific. If you have these different ideologies, it’s associated with different filters on the world, different intakes of information, and so when it comes to constructing reference knowledge on an encyclopedic web page that’s supposed to thoroughly characterize an area, you do a much better job because you have a lot more information that’s attended to by this ideologically diverse group.
Editors working on a social issues page said, “We have to admit that the position that was echoed at the end of the argument was much stronger and balanced.” Did they begrudgingly come to that? They did, and that’s the key. If they too easily updated their opinion, then they wouldn’t have been motivated to find counter-factual and counter-data arguments that fuel that conversation.
We found that more diversity is associated with longer conversations. If they were immediately willing to give up on these things, then it wouldn’t have produced the sustained competition that ended up generating the balance that they, themselves, came to appreciate.
Which pages on Wikipedia benefit most from political diversity?
Evans: Political pages. The second most are social issues pages, which have a substantial political content. Even science pages benefit because sciences resonate with different political ideologies. And there’s no question that the science articles that benefited the most were the science articles that are associated with political polarization.
I would be surprised if we didn’t see that across the science pages associated with the environment, which include climate change, but likely a lot of other things, including biodiversity. Those are kinds of science articles that benefited the most from political polarization because they’re the ones, unsurprisingly, for which diverse political perspectives end up offering really different filtered information.
Misha Teplitskiy: Psychologists and organizational scholars call this “task relevance.” It’s the idea that diversity in ideas should help only for tasks for which diversity is relevant. You expect ideological diversity to be most relevant for politics, less so for social issues, and less so for science. The surprising feature there is that it’s at all relevant to science, but generally we expect it to matter less and less the farther you get away from task relevance.
The evidence for our contribution to climate change is unimpeachable. So might a Wikipedia entry that encouraged diverse opinions not produce a high quality result? Would that run counter to your study, to the importance of diversity?
Evans: You’re saying there are some things where diversity can just generate noise. In general, one could imagine this, and there’s a wonderful book called Merchants of Doubt which explores precisely this issue, that companies in a number of areas increased the amount of apparent diversity in a decreasingly diverse consensus about, for example, smoking’s influence on lung cancer.
That’s certainly taking place in the world. But for some reason, and this is a tribute to some of the standards in the context of Wikipedia, people discipline each other and are effectively disciplined by higher-level editors. There’s also a whole host of different perspectives that people might take with respect to global warming.
Even though there might be general agreement that human activity is increasing greenhouse gases and higher temperatures, it could be one assumption has you thinking there are human solutions to human problems, and another one has you thinking of the importance of human stewardship over the earth. So different perspectives aren’t just generating artificial conflict in these contexts.
At the same time, our experience is for broad topics. There are few places where there’s enormous amounts of certainty in the sciences. My guess is in places where there is strong certainty, we’re not going to see a big effect from political diversity. Political diversity is not a magical substance. If the distribution of political perspectives aren’t correlated with useful information about the topic at hand, then you’re not going to see a benefit. You’re going to see noise. You might even see a detriment.
What do you think about fake news?
Evans: The thing most disturbing to me is the onslaught of claims about fake information and fake news. In some sense, all information is fake. All of it has a purpose, an angle. But the fact that now it’s just so easy to claim that it’s fake without any particular support for that claim, and it’s popular to do so, means it’s easier to discount alternative information than ever before.
Angles are useful. They motivate people to look in a certain place, to search out information that you probably wouldn’t have searched out if you weren’t motivated by the possession of a belief. Angles end up having a lot of value, unless you discount them all. It begins with Trump arguing that everything’s fake news and then people arguing that Trump’s producing fake news all the time.
There’s this cloud of fakery out there, and, of course, it’s exacerbated by the proliferation of bots and other things generating noise. I see that in mass media news in the same way I see it online. It’s a new level. It’s like we’ve just discovered that there’s bias in the system and so everything is biased, categorically, and we can agree or disagree with it at will.
I hope that we can begin to persuade people to really value the importance of bias, that bias is critical to how we view things, that there isn’t an unbiased position.
Why are the highest quality articles overseen or written by an ideologically diverse group of people?
Evans: More collective insight is generated when you draw people who have non-random and minimally overlapping sets of information or knowledge exposures and you put them in a forum that’s well-regulated by a set of norms, which can be appealed to and are, in fact, appealed to. I was really struck by the fact that people often experience this. When they experience balanced debates on these sites, they really described the process as painful and beleaguered but the outcome as satisfying.
Teplitskiy: Ideologically diverse teams end up debating more. These people are carrying different bits of knowledge. When they bring it together, they’re spending more effort to aggregate it into good content. Even aside from increased effort, we’re also finding that the kinds of debates they have are a bit more focused. They zero in on a smaller set of issues and really hash out those issues that are presumably most problematic.
They end up having more conflict and rely on policies more for regulating what we call their “task conflict,” or conflict that’s oriented around creating content, and they also have a lower relational conflict—they gang up on each other less and harass each other less on a personal level compared to more unbalanced teams. Those that are more balanced have a lower harassment prevalence.
What happens when editor teams are politically unbalanced, or overwhelmingly left- or right-wing?
Evans: When you have a single person going in and describing a set of pages as, “They look like Russian propaganda,” those people don’t recognize that they are entering a system of 30 or 40 people who have constructed this page in conversation, and they are coming in and really just trashing that characterization.
Almost invariably, they just got beaten up, labeled as trolls, sent out of the community on a rod with tar and feathers. The homogenous group has a sense of, “We’ve built the social contract and then this person is coming in from the outside.” We found empirically, in our study, that there was a lot more toxic language when you have these imbalances.
Teplitskiy: Our data is suggestive. You would prefer diverse teams that are in a moderate position. Shifting in either direction away from the middle or the moderate position as a team is negatively associated with quality.
Are there some key lessons that groups that produce or evaluate ideas can take from your Wikipedia study?
Teplitskiy: One lesson that our work raises is around branding or creating a culture and letting people know about it, and letting it be the mechanics of how you organize a platform. One interesting thing about Wikipedia is it’s got a very strong culture. If you want to play in the sandbox, you should be ready to back up your claims, cite your sources, cite sources that are reasonable, listen to others.
That clearly discourages some people from joining, people who are not willing to play by reasonable rules. They do more filtering up front on who can play, not in a heavy handed way, but more by signaling their culture strongly, and people who don’t like it don’t stick around.
Compared to the science-book study, the Wikipedia paper sure seems to hold out hope for consensus.
Evans: Yes, and I hope that we can begin to persuade people, with this kind of paper, to really value the importance of bias, that bias is critical to how we view things, that there isn’t an unbiased position. Only when we begin to demonstrate the value of bias can we battle the cloud that bias is bad. Everything’s biased, so we have to reach into our core values and use those to guide our way through this world. There’s a strong scientific value behind bias, so our hope is to begin a conversation about the value of polarized crowds.
What can scientists learn from your results?
Evans: My hope is that not just scientists, but people with opinions and political stakes in general, can seriously consider the fact that people who don’t share their political viewpoints have something valuable to say—and even if they don’t have something valuable to say about a particular political topic, that their different experience and perspective has likely given them access to other kinds of information that will be valuable and new to you.
That’s the key to unlocking the potential of polarization: to allow people to constructively contribute to knowledge projects and other projects together. If you know enough about Wikipedia to open up the talk page, which anybody can do but almost nobody does, you’ll see extensive discussions going on. You’ll see people carefully, painstakingly employing diverse perspectives that are perceived by experts as being systematically better. It just produces more robust knowledge because there’s less ideological filtering going on.
Aronson, Elliot (2010). Social Psychology. Upper Saddle River, NJ: Prentice Hall. pp. 273.
Myers, D.G.; H. Lamm (1975). “The polarizing effect of group discussion”. American Scientist. 63 (3): 297–303. Bibcode:1975AmSci..63..297M. PMID1147368.
Isenberg, D.J. (1986). “Group Polarization: A Critical Review and Meta-Analysis”. Journal of Personality and Social Psychology. 50 (6): 1141–1151. doi:10.1037/0022-3514.50.6.1141.
Bray, R. M.; A. M. Noble (1978). “Authoritarianism and decisions of mock juries: Evidence of jury bias and group polarization”. Journal of Personality and Social Psychology. 36 (12): 1424–1430. doi:10.1037/0022-3514.36.12.1424.
Lord, C. G.; Ross, L.; Lepper, M. R. (1979). “Biased assimilation and attitude polarization: The effects of prior theories on subsequently considered evidence”. Journal of Personality and Social Psychology. 37 (11): 2098–2109. doi:10.1037/0022-3514.37.11.2098.
Taber, Charles S.; Lodge, Milton (July 2006). “Motivated Skepticism in the Evaluation of Political Beliefs”. American Journal of Political Science. 50 (3): 755–769. doi:10.1111/j.1540-5907.2006.00214.x.
Brauer, Mark J.; Judd, Charles Mosley; Gliner, M D (1995). “The effects of repeated expressions on attitude polarization during group discussions”. Journal of Personality and Social Psychology. 68 (6): 1014–1029. doi:10.1037/0022-3514.68.6.1014. PMID7608855.
Moscovici, S.; W. Doise; R. Dulong (1972). “Studies in group decision: II. Differences of positions, differences of opinion, and group polarization”. European Journal of Social Psychology. 2 (4): 385–399. doi:10.1002/ejsp.2420020404.
Stoner, J.A. (1961). “A comparison of individual and group decision involving risk”. Unpublished Master’s Thesis, Massachusetts Institute of Technology.
Forsyth, D.R. (2010) Group Dynamics
Moscovici, S.; M. Zavalloni (1969). “The group as a polarizer of attitudes”. Journal of Personality and Social Psychology. 12 (2): 125–135. doi:10.1037/h0027568.
Van Swol, Lyn M. (2009). “Extreme members and group polarization”. Social Influence. 4 (3): 185–199. doi:10.1080/15534510802584368.
Vinokur, A.; Burnstein, E. (1974). “Effects of partially shared persuasive arguments on group induced shifts: A group problem-solving approach”. Journal of Personality and Social Psychology. 29 (3): 305–315. doi:10.1037/h0036010.
Hinsz, V.B.; Davis, J.H. (1984). “Persuasive Arguments Theory, Group Polarization, and Choice Shifts”. Personality and Social Psychology Bulletin. 10 (2): 260–268. doi:10.1177/0146167284102012. S2CID145085635.
Hogg, M.A.; Turner, J.C.; Davidson, B. (1990). “Polarized norms and social frames of reference: A test of the self-categorization theory of group polarization”. Basic and Applied Social Psychology. 11: 77–100. doi:10.1207/s15324834basp1101_6.
McGarty, Craig; John C. Turner, Michael A., Barbara David; et al. (March 1992). “Group polarization as conformity to the prototypical group member”. British Journal of Social Psychology. 31: 1–19. doi:10.1111/j.2044-8309.1992.tb00952.x.
Feilitzen, C. (2009). Influences of mediated violence: a brief research summary. International clearninghouse on children, youth and media. ISBN978-91-89471-81-8.
Bastug, Mehmet F.; Douai, Aziz; Akca, Davut (2020-07-02). “Exploring the “Demand Side” of Online Radicalization: Evidence from the Canadian Context”. Studies in Conflict & Terrorism. 43 (7): 616–637. doi:10.1080/1057610X.2018.1494409. ISSN1057-610X. S2CID115806907.
Sia, C. L; Tan, B; Wei, K. K. (2002). “Group Polarization and Computer-Mediated Communication: Effects of Communication Cues, Social Presence, and Anonymity”. Information Systems Research. 13: 70–90. doi:10.1287/isre.13.1.70.92.
Taylor, J.; MacDonald, J. (2002). “The effects of asynchronous computer-mediated group interaction of group processes”. Social Science Review. 20 (3): 260–274. doi:10.1177/089443930202000304. S2CID220160579.
Iyengar, Shanto; Westwood, Sean (2014). “Fear and Loathing Across Party Lines: New Evidence on Group Polarization”. American Journal of Political Science. 59 (3): 690–707. doi:10.1111/ajps.12152.
Walker, Thomas G.; Main, Eleanor C. (December 1973). “Choice shifts and extreme behavior: Judicial review in the federal courts”. The Journal of Social Psychology. 2. 91 (2): 215–221. doi:10.1080/00224545.1973.9923044.
Kunovich, Robert; Deitelbaum, Catherine (2004). “Ethnic Conflict, Group Polarization, and Gender Attitudes in Croatia”. Journal of Marriage and Family. 66 (5): 1089–1107. doi:10.1111/j.0022-2445.2004.00080.x. Myers, DG (2007). Exploring Social Psychology: Fourth Edition. McGraw Hill.
Restaurant patrons who’ve grown accustomed during the pandemic to whipping out their phones to access menus using QR codes should understand the implications for their personal data, say privacy and cyber-security experts.
That’s especially important given some restaurant owners are finding electronic menus efficient and cost effective, and that they may hold onto the practice even after COVID-19 is more contained.
It’s not the QR code itself that collects customer data, said Dustin Moores, a privacy lawyer with nNovation LLP in Ottawa.
“What the QR code does is it sort of acts as a web link to a web page. So when you scan a QR code on your phone, in all likelihood it is going to send you to either the restaurant’s website, or to the website of a service provider that’s being used by the restaurant,” he told Cost of Living producer Jennifer Keene.
“What’s happening is we’re replacing a very sort of innocuous object, a restaurant menu, with a website that comes with all the sort of tracking technologies that you see in modern e-commerce today.”
A marketing device
Bringing up an online menu on your phone doesn’t mean you’re handing data such as your birth date and banking details to bad actors on the internet.
The more immediate implication is that it gives your local pub, or the platform they use, new knowledge of your behaviours and preferences that it can use to better sell to you.
“If you’re a returning customer to to one of these restaurants that use the QR code technology, they might be able to say, ‘Hey, we know that Jennifer ordered the Caesar salad last time; let’s put it at the top of our menu this time because we know that she likes it,'” said Moores.
The restaurant could also use the information it has gathered to upsell customers, such as suggesting the customer add chicken to that salad, he said. Ot it could try to influence your choices by offering a discount on the dish you enjoyed last time.
Moore said it’s also likely that the QR code will take you to a website that uses third-party cookies that can be used to track your web browsing habits. “Let’s say it was a Hungarian restaurant that you visited. Well then other Hungarian restaurants in the area might start advertising to you all of a sudden,” he said.
An issue of consent
Moore said his biggest legal concern about the spike in use of QR code-enabled menus is consent.
“I think what might get lost on a lot of restaurant owners is that, like every other business in Canada, they’re subject to our privacy laws,” he said. “Whenever a business collects, uses or shares personal information in the course of commercial activities, they need to have people’s consent to do that.”
Cyber-security expert Yuan Stevens, policy lead for technology, cyber-security and democracy at Ryerson University’s Leadership Lab, said the security concerns related to QR codes remain “fairly hypothetical.”
“I have not yet found any cases in Canada of QR codes being used for stealing data or violating your privacy,” she said. “But I also think it is useful to keep in mind what concerns we should be aware of as technology becomes ubiquitous.”
Someone who wants to direct you to a malicious website could “fast track” that process using a QR code, said Stevens. “Phishing and scams are already happening. And QR codes would just be another conduit to that.”
She said some restaurants are using QR codes to gather contact tracing information as well as for menus.
With the drive to reduce contact with surfaces and each other, QR codes have increased in popularity during the pandemic, said Stevens, particularly in China, where their use increased six per cent between 2019 and 2020.
QR-code enabled vaccination verification systems are now in place in Manitoba and New Brunswick, and will be in Ontario as of Oct. 22.
Jenny Burthwright, owner of Jane Bond BBQ in Calgary, said her business introduced QR code menus in the fall of 2020 when they’d been “ripping through” paper menus while trying to keep COVID-safe.She plans to keep the higher-tech system in place post-pandemic.
“There’s a very obvious cost savings to it,” she said. “With the rising costs of everything, we considered that, and also environmentally just wanted to move away from that paper.
Restaurants are also finding it easier and faster to update an online menu than a printed one, said Olivier Bourbeau, a vice-president of Restaurants Canada, the industry association representing food-service employers.
Being able to quickly add or remove a menu item, or update the price of the dish, is particularly useful given the complexities of running a food-service business during this crisis, including rising food costs and supply-chain problems that delay delivery of ingredients.
Those advantages will likely mean many restaurants will keep the QR-code system in place, Bourbeau said.
Protective measures
To mediate the risks associated with leaving a digital trail every time you order a brisket sandwich or a poke bowl, there are some precautions consumers can take, according to cyber-security expert Stevens.
The same principles that you’d apply to avoiding phishing and other online scams generally also apply to using QR codes, she said.
“Be careful of offers that seem too good to be true. Don’t give sensitive information over email or phone to untrusted sources. Be careful what you click on.”
Treat a QR code with the same care as an email attachment, and keep your eyes peeled for printed QR codes that look like they’ve been duplicated — one stuck on top of another, said Stevens.
It’s worth taking the time to check with your host or server to make sure the QR code you’re about to use is legit, she said.
“You want to be really careful that the QR code you’re scanning is actually the restaurant’s, otherwise you could be misled. And that’s when you’d be scammed.
The Commonwealth Bank of Australia (CBA) announced that transactions between Eftpos and international schemes like Mastercard and Visa would be automated using the least-cost routing method (LCR), making it one of the first major banks to commit to automatically routing transactions for small business merchants.
“CBA will centrally route transactions in the most cost-effective and competitive way, so businesses don’t have to spend their valuable time managing their routing options, CBA said in a statement.
“CBA will also take the hassle out of payments by automatically routing transactions between eftpos and international schemes for eligible small business customers.”
Treasurer Josh Frydenberg pressed the Reserve Bank of Australia earlier in September to lower expenses for small businesses by requiring commercial banks to provide cheaper debit card solutions to consumers making tap-and-go payments in stores. Frydenberg wrote to the Payments System Board, urging it to require major and medium-sized financial institutions to issue dual-network debit cards.
Debit card costs for Mastercard/Visa are on average 0.5 per cent, compared to 0.3 per cent for eftpos. According to official statistics, small businesses suffer greater fees on average.
Commenting on the significance of LCR for newsagents and lottery agents, Australian Lottery and Newsagents Association (ALNA) CEO Ben Kearney said: “The substantially growing costs of accepting payments for newsagents and lottery agents is one of their top daily concerns.
“They do not have the same level of control over commercial levers in different parts of their business as some other retailers. They are characterised by modest margins on volume products with fixed pricing.”
As an example, the cost of acceptance of card payments for lottery tickets – one of ALNA members’ largest categories – can be as much as 9% of their total commission for the sale of these products.
“The most important mechanism for doing this recently, when customers increasingly want to use contactless payments, has been LCR.
“This generally increases the number of debit transactions that occur, saving hundreds of dollars a month for many of our members,” Kearney continued.
Meanwhile, the government has said that it aims to implement least cost routing for tap-and-go debit transactions so that commercial merchants can avoid paying higher fees by using the relatively cheaper domestic eftpos system instead of the services of US card giants Visa and Mastercard.
According to James Fowle, CBA’s Executive General Manager, Everyday Business Banking, the announcement follows feedback from its merchant customers on Least Cost Routing (LCR) in recent months
“The overwhelming feedback from our small business customers is that they want simple competitive pricing without the hassle. They want the benefit from least cost routing without having to manage the routing themselves,” Mr Fowle said.
“Our new flat rates are designed to offer that by removing complex pricing structures and managing the routing of transactions for them. We’ll automatically and centrally route transactions in the most cost-effective and competitive way, saving businesses a lot of time and money.”
Lower rates
In addition to automating transaction routing, the bank said that all in-store card transactions will be charged a flat rate of 1.1 per cent, and all online payment transactions will be charged a flat rate of 1.5 per cent, irrespective of interchange rate or card type.
“To lower the cost of doing business, CBA will be offering 1.1 per cent for all in-store card transactions, and 1.5 per cent for online transactions, regardless of the interchange rate or the type of card (debit, credit or Amex),” CBA said.
To provide a further cash injection in the lead up to Christmas, CBA will automatically waive three months of merchant fees for small businesses that have been hardest hit by the latest COVID lockdowns. This equates to more than $7 million dollars back into the pockets of merchant customers.
“From next week, we’ll be letting more than 50,000 customers know we are automatically waiving their standard merchant fees for three months from September through to November.
This translates into approximately $7 million back into their pockets leading up to Christmas,” said Mr Fowle.
Additionally, CBA said that an additional $3 million has been returned to retailers who have been facing financial difficulties since the outbreak began. Customers who are having financial difficulties can contact CBA for a refund on a variety of applicable fees for a period of up to 90 days.
Tokenized stocks, or digital assets pegged to the price of company shares, are no longer available for purchase on Binance.com. Offerings had included Tesla, Apple, and Coinbase shares, which Binance claims were fully backed through shares held by its partner, German-based investment firm CM-Equity AG.
Support for stock tokens was first made available on Binance.com in April, 2021, which was enabled through a partnership with Digital Assets AG, a firm focused on issuing tokenized financial products.
“Today, we are announcing that we will be winding down support for stock tokens on Binance.com to shift our commercial focus to other product offerings,” the announcement reads.
Although the exact reason for the about-face is unclear, Binance’s reversal on tokenized stocks comes as financial regulators around the world are putting pressure on the firm. Officials in Germany, Thailand, Japan, Canada, and the United Kingdom have all issued warnings about the exchange over recent months, the firm has been dropped by the payments processor Clear Junction, and certain banking relationships in Europe and around the world are coming into question.
More broadly, it raises doubts about Binance’s hyper growth strategy of rapidly launching new products around the world such as debit cards and derivatives products.
Users currently holding stock tokens have 90 days to sell their shares. Clients in the European Economic Area and Switzerland have the option to transfer their holdings to a new digital asset platform from CM-Equity AG. After October 14, 2021 they will not be able to manually sell or close their positions on the Binance site.
Binance will list MicroStrategy, Microsoft and Apple, providing Binance users with exposure via the tokenization of equities. The tokens are expected to be denominated in the exchange’s stablecoin, BUSD.
The move means Binance users will be able to qualify for economic returns on the underlying shares, which will include potential dividends. The tokens also allow Binance customers to purchase as little as one-hundredth of a regular stock using BUSD.
Binance’s stock tokens are tokenized equities that can be traded on traditional stock exchanges. Each tokenized stock represents one ordinary share of the stock and is backed by a depository portfolio of underlying securities held by CM-Equity AG, Germany, according to the post.
Two stock tokens have begun trading on Binance including electric vehicle maker Tesla and cryptocurrency exchange Coinbase. Those listings are already ruffling the feathers of regulators who say the exchange has not acquired the necessary license to begin marketing equities to the public.
Cryptocurrency exchange Binance is allowing its users to buy fractions of companies’ shares with a new tokenized stock trading service, starting with Tesla.
The crypto exchange announced Monday the launch of Binance Stock Tokens, zero-commission digital tokens that qualify holders for returns including dividends.
As of 1:35 p.m. UTC (9:35 a.m. ET) April 12, users will be able to buy fractions of actual Tesla shares, which trade at $677 a share at the time of writing.
Users will be able to purchase as little as one-hundredth of a Tesla share, with prices settled in Binance USD (BUSD).
The exchange’s native crypto Binance Coin (BNB) has surged more than 25% in the last 24 hours, reaching an all-time high of $637.44. It is priced at $590.51 at press time. It’s not immediately clear what is driving the price of the coin.
It’s not the first tokenized stock play in crypto land: Terra Labs’ Mirror Protocol went live in December.
But where Mirror uses synthetic stocks (or tokenized representations of actual equities), the Binance product is “backed by a depository portfolio of underlying securities” managed by an investment firm in Germany.
It’s great that so many have copies of Adam Smith’s The Wealth of Nations, but very unfortunate that so few have read it. The alleged “supply chain” problems we’re enduring right now were explained by Smith in the book’s opening pages.
