Internet changes everything

Born sometime between 2008 and 2009, when more things became connected to the Internet than people, the Internet of Things has the potential to close the poverty gap, improve distribution of the world’s resources, and help us understand our planet so we can be more proactive and less reactive.

In 2010, there were 12.5 billion devices connected to the Internet. Looking to the future, Cisco IBSG predicts there will be 25 billion devices connected to the Internet by 2015, and 50 billion by 2020. But how will having lots of things connected to the Internet change everything?

The answer lies in how humans learn. People process data and turn it into information that can be used in our daily lives. From the results, we gain knowledge and, ultimately, wisdom. With literally billions of sensors connected to the Internet, our ability to gather massive amounts of data has never been greater. With the right filtering and analytics, people across all disciplines will turn this data into new knowledge and wisdom that will change our lives for the better.

Already, advances such as Cisco’s Planetary Skin and HP’s central nervous system for the earth are under way that will let us sense what the planet is doing in real time. This will allow us to be more proactive in our response to climate change and save lives by being more prepared for natural disasters. Another possibility is the placement of sensors at critical points across the country’s infrastructure, such as bridges and tunnels, that alert workers of problems long before tragic accidents occur.

Although the promise of the Internet of Things is great, several barriers threaten to slow its development. These roadblocks include the transition to IPv6, establishing a common set of standards, and developing energy sources for the millions, even billions, of minute sensors.

Even so, I’m optimistic. As businesses, governments, standards bodies, and academia work together to solve these challenges, the Internet of Things will continue to progress and change the world as we know it today. How quickly we get there is up to us.

Orphanages

EVEN on a sunny day Sarata Noua is a gloomy place. From 1969 until it closed in 2012 this orphanage in rural Moldova housed up to 152 children at a time. Young people aged between seven and 22 slept ten to a room, sharing a weekly shower in a dark bathroom. Though murals of tropical lakes brighten the walls, it still feels much like a workhouse.

Around the world about 2m children are thought to live in institutions like this. The true figure may be bigger. Some, as in Moldova, are left over from Soviet times, when governments took responsibility for children born with disabilities (occasionally against their families’ wishes). Indian orphanages often cater to unwanted girls, many of whom leave only when they marry. In China around 800 state-run “social-welfare institutions” house abandoned children or those with mild disabilities. Charities in Africa run institutions for those whose families have died in genocides or from HIV/AIDs. But one cheerful fact unites these dreary places—big children’s homes are falling out of fashion.

In Romania, once notorious for its decrepit orphanages, the number of children living in institutions has dropped from more than 32,000 in 2004 to about 9,000 last year. In Moldova the total fell by 62% between 2007 and 2012, to 4,393. In Rwanda the number of orphanages has declined from over 400 five years ago to only 33 in 2012 and the government has promised to close them all by 2014. Georgia had 41 institutions ten years ago; now it has three.

Slower-moving countries are starting to catch up. India’s government is looking at alternatives, says Shireen Miller of Save the Children, a charity. International pressure is rising. In December the American government pledged to help children worldwide stay within families or family-like care.

Reform is essential, for three reasons. First, big institutions are poisonous. John Williamson of the Better Care Network, a charity, and Aaron Greenberg of the UN argue that for every three months that a child stays in an institution he or she loses one month of development. Since 2000 American academics have kept track of 136 children from orphanages in Romania. They have found that the IQ levels of children who remain in big care homes are lower than those put in foster care. Both groups had lower scores than those who were not institutionalised at all.

Even fairly modern institutions often continue controversial practices. The Chisinau Municipal Institution for Babies in the capital of Moldova is currently home to 44 children. It is clean, light and bustling with nurses. Yet when a child arrives he or she is placed in an “isolator”—a double-glazed glass booth containing one or two cots. Some with disabilities have been isolated for nearly a year. A nurse says this helps the children adjust to their new home. Others think it stunts development.

Second, orphanages can prevent children living with what family they have. Most institutionalised children are not truly alone—up to 90% have living parents, says Georgette Mulheir of Lumos, a British campaign group. In Sri Lanka almost all children in care have one or both parents living, reckons Save the Children. In Rwanda over a third of children in institutions are in regular contact with relatives, says Hope and Homes for Children, a British charity. These places are a way of dealing with poverty, says Silvia Lupan, a child-protection officer for UNICEF in Moldova.

Third, institutions are costly. They need staff to cook, clean and corral the children, and cash to warm and maintain big buildings. Studies from the World Bank and Save the Children say institutions cost between six and ten times as much as supporting a child within a family. Sarata Noua cost $300,000 per year to run, says Liliana Rotaru of CCF Moldova, a charity that helped close it down. Foster parents, by contrast, earn about $1,000 a year.

No More STUDENT LOANS!!!

Last Friday, the President signed into law the student loan “compromise,” promising it would help rein in college costs.

The bill pegs interest rates on federal student loans to Washington’s cost of borrowing (the Treasury rate) plus 2.05 percent and caps interest rates at 8.25 percent. Congress says that this bill will cover 18 million loans, totaling about $106 billion this fall, and reduce the deficit by $715 million over the next decade. But Congress’s promises do not account for the $500 billion in student loans that are currently not being repaid and the one-eighth of students defaulting on their loans.

What will the unpaid loans and student defaults do to Congress’s promise? Likely force Congress to break it—at the expense of taxpayers.

The details are in the accounting practices. The Congressional Budget Office (CBO) has used two different accounting measures to evaluate the cost of the student loan compromise: the Federal Credit Reform Act (FCRA) and fair-value accounting (FVA). Currently, the CBO evaluates student loan costs under FCRA accounting practices, which require that the cost of federal student loans be estimated on “market rates,” but this accounting method does not account for the risk that some students receiving loans will not pay back the government as expected. This is especially problematic when about $180 billion of the $1 trillion in student debt is in default or forbearance.

FVA, on the other hand, accounts for the risk of default, reflecting the full cost of student loans and other federal credit programs. It is the standard accounting method for academic economists.

In June, the CBO released cost estimates using FCRA and FVA for federal student loans. Under FCRA practices, a loan deal using the Treasury rate plus 3 percent—not that different from the new deal passed by Congress—would yield savings of $37 billion this year and $184 billion from 2013 to 2023. However, under FVA, the student loan program will yield $6 billion in savings in 2013 and will cost taxpayers $95 billion from 2013 to 2023. That’s a major difference for taxpayers.

Because FVA practices account for market risk, it is likely that this calculation measure would recognize the 1/8 of students defaulting and the $500 billion that is not being repaid, and factor that risk into the interest rates—providing a more honest account of the program’s costs.

Americans today owe more on student debt than they do on their credit cards or auto loans. Over the past 20 years, college enrollment has increased from 13.8 million to 21 million. In 2011, the average borrower who graduated from a private university left with $28,000 in debt; public college graduates didn’t fare much better, leaving with roughly $22,000 in IOUs.

Continuing to expand higher education subsidies through subsidized federal student loans and grants does nothing to put pressure on colleges to lower costs. In fact, access to easy money does the opposite, enabling universities to raise prices, knowing students can return to the federal trough for more financing. Although Congress will sleep easy now on the student loan interest rate issue, they should not delude themselves into believing they’ve done anything to fundamentally reduce the cost of college.