Exxon claims it has already spent $3.5 billion cleaning up the Alaskan coastline, and the court decided 5-3 that indeed that was plenty good enough for them. Justice Alito sat the decision out because he owns stock in Exxon. Lucky Samuel Alito. The five siding with Exxon interpreted the letter of the law and said they saw no precedent for a punitive award that large. Justices Ginsberg and Stevens dissented, noting that Congress has already chosen not to impose restrictions on punitive damages in such cases.
In reversing this award, the court violated the spirit of the law if not the letter of it, and to reverse the decision now, just as ordinary Americans are watching the American standard of living plummet as fast as oil prices rise, is like kicking a body that’s already down and nearly dead.
I have to ask, why did Exxon feel the need to pursue and argue that decision for 19 years ongoing after the fact; a decision which, even in its original $2.5 billion form, was but a small fraction of the money the corporation made in any single one of those 19 years since the spill occurred? What was the point of that? To demonstrate that they had the resources to do it? To argue until they won? Were they thinking, “Wow, we aren’t hated nearly enough yet. What can we do that will make even our few remaining friends wince and hide? I know! Let’s get back that paltry Exxon Valdez money!”
What was the cost of the litigation itself? I have to wonder, what if the cost of all those corporate lawyers over all those 19 years had been put into some kind of subsidy for green energy initiatives? It’s a good thing it wasn’t, or we’d think we were living in Iceland or Sweden, and we wouldn’t want that! Sure we’d have enough heat and power to free up money for, I don’t know, healthcare or education or something, but that would be too much like socialism. Thank God we were saved from it by raw corporate greed and the reliable power of enormous amounts of money in the hands of a select few.
Because of their legal persistence, our capitalist way of life has been preserved.
A study conducted by NOAA determined that as of early 2007 about 26,000 gallons of oil remain in the contaminated sandy soil at the site of the Alaskan spill. But what’s 26,000 gallons after 19 years among friends? Certainly it’s a whole lot less than the 10.8 million gallons that covered over 11,000 square miles in 1989 the day of the spill and instantly killed between 250 and 500 thousand seabirds, 22 Orca whales, 250 bald eagles, and countless other creatures during years and years of slow, ineffective clean-up efforts that relied heavily on wildlife volunteers and local citizens who were working for hours and hours for free.
What exactly are 500 thousand seabirds and 250 bald eagles worth on the open market anyway? Can we even put a price on something like that? Maybe not. But we do know now what they are not worth.
According to the Supreme Court, they’re not worth $2.5 billion.
I just hope they don’t decide to charge the citizens who live around Prince William Sound for those 26,000 gallons of good oil still lurking in their beach soil. It does belong to Exxon after all.
The term intellectual property reflects the idea that its subject matter is the product of the mind or the intellect. It could be in the form of patents, trademarks, and copyright. The law protects intellectual property like any other form of property. It can be owned, bequeathed, sold, or bought. Unlike other forms of property, the main distinguishing feature of intellectual property is its intangibility and non-exhaustion by consumption.
Patents grant ownership rights to inventions and other technical improvements. Copyright confers ownership rights to authors, artists, and composers. Trademark establishes rights in distinctive commercial marks or symbols.
Intellectual property rights are the foundation of knowledge-based economies. It pervades all sectors of the economy and is fast becoming important for ensuring competitiveness of business enterprises.
In a free market economy, the state is concerned with improving consumer welfare by constraining the behavior of firms with market power. Intellectual property rights confer a certain degree of monopoly power on the owner of the intellectual property. Both have a common goal of enhancing consumer welfare.
From an economist’s point of view, there are two broad classes of goods:
1. Private goods which are rival in consumption.
2. Public goods which are non-rival in consumption.
Private goods can be publicly owned and public goods can be privately owned. Public goods are non-exclusive. People cannot be excluded from using them. It can be used simultaneously by many people; its use by one application does not make it harder for other people to use the same good. Private goods cannot be used simultaneously by more than one person.
The necessity to promote competition and protect intellectual property rights is embodied in the guidelines and regulations issued by the Department of Justice and the Federal Trade Commission in 1995.
Granting exclusive property rights to the creator of an idea provides an incentive to create ideas, and excluding others from using an idea enables the creator to determine the price above marginal cost and impedes their dissemination and application.
Once a good has been discovered, the cost of producing a non-rival good is zero. The marginal cost of such good is zero. When prices are equated to marginal costs, resources are allocated efficiently. Efficiency is lost if the price of a non-rival good is above zero. If the price cannot be more than zero, there can be no motivation for development. By acquiring an intellectual property right in a non-rival good, it is possible to make it excludable and prevent it’s use by others.
To give people an incentive to produce socially desirable new innovations, the law allows the creators of a non-rival good to appropriate the returns of their innovation for themselves alone through intellectual property rights. But since intellectual property rights make a non-rival good excludable, it constitutes an inefficiency – the price of the good will be above the marginal cost of producing the good. Conferring ownership of intellectual property rights is tantamount to conferring a monopoly.
Unlimited protection of intellectual property gives rise to two problems:
1. Discouraging dissemination of inventions and ideas, i.e. under-utilization.
2. Encouraging a race among inventors, i.e. over investment in research and development.
As such economists have to adjudicate as to the desirability of using intellectual property rights as a spur to innovation and as an instigator of monopolistic inefficiency.
When Eastern European countries joined the EU in 2004 and 2007, concerns were raised about a possible flood of migration to the UK, a country already experiencing record immigration levels. According to some media reports, not only would the British labor market be overrun by low-skilled East European workers but the widening of the EU boundaries would also result in a surge of illegal migrants who would easily slip in through countries with weaker immigration controls. It was argued that these developments would have adverse impacts on the British economy since the East European immigrants would accept low-paid work, reducing wage costs and increasing unemployment levels among native workers and thus suppressing prices and economic growth.
Many other EU countries decided to protect their labor forces from East European migration by exercising the right to impose a seven-year ban on working for the new EU citizens. Great Britain allowed most new EU nationals to take up employment in the UK immediately, subject to registration with the government. In the face of rising public concerns about immigration, it did, however, impose temporary restrictions on the numbers of Romanian and Bulgarian nationals allowed to work in the UK after these two countries were admitted to the EU in January 2007.
What is known about the impacts of East European migration on the British economy to date? Any findings will have considerable significance for the debate about immigration and the economy, which has long occupied the minds of academics and policymakers on both sides of the Atlantic.
Crying Flood
First, actual levels of East European migration to Great Britain have been much lower than some observers had feared. Data from the British Government’s Worker Registration Scheme indicate that around 800,000 East European migrants joined the British labor force between May 2004 and the end of December 2007; by 2008 it was being reported that applications for employment had dropped to their lowest levels since 2005. Moreover, the available data suggests that up to half of all East European migrants have returned home after a period of working in the UK.
Synthesizing the findings of a range of studies, a House of Lords report published in April reported that immigration results in clear “winners and losers in economic terms.” The winners in this economic contest include the immigrants who land jobs as well as the employers who are able to fill their vacancies at relatively low wage rates, while the losers include those directly competing for low-skilled or low-paid jobs, including many immigrants already in the country as well as young entrants to the labor market. For the economy as a whole, the House of Lords report concluded, immigration may not be beneficial due to its suppressing effects on labor costs and thus on the price of goods and services.
However, academic research for the British Government published more recently in June, The Impact of Migration from the New EU Member States on Native Workers, claims to provide data showing that East European migration has had no adverse impact on unemployment or wage levels among the existing British population and has increased annual levels of economic growth by 0.15% per capita.
The Extremities of the Population
Globally, researchers have not been able to reach a consensus about whether immigration in general has a positive or negative impact on a country’s economy – some argue that the costs and benefits cancel each other out so the overall effect is in any case minimal. The lack of conclusive findings may be explained by the results of a UK study, Migration: an economic and social analysis, which concluded that immigrant characteristics are more polarized than those of the general population, often including extremes of wealth and poverty, concentrations of high-skilled and low-skilled workers and of employed and unemployed (or economically inactive) people.
The overall impact on a country’s economy will clearly depend, therefore, on the profile of its immigrant population as well as prevailing labor market conditions and the need for particular types of workers. Moreover, the social effects of immigration and their indirect economic impacts must also be included in the equation: the UK Border Agency recently reported that in the majority of English regions, recent migration has resulted in pressures on housing and education and in crime problems.
See Also
Blanchflower, D., Salaheen, J. & Shadforth, C. (2007). The impact of the recent migration from Eastern Europe on the UK economy. Discussion Papers 17. Monetary Policy Committee Unit, Bank of England.
Glover, S. Gott, C., Loizillon, A., Portes, J., Price, R., Spencer, S., Srinivasan. V. & Willis, C. (2001). Migration: an economic and social analysis. RDS Occasional Paper No 67. London: The Home Office.
In 1798 Coleridge wrote, “water, water, everywhere, [but not a] drop to drink”. By 2100 this may become “water, water, everywhere, but not a fish to eat”. Carbon dioxide (CO2), a greenhouse gas, may be doing more than warming our atmosphere, it may be acidifying our oceans. According to Dr. Richard Feely, an Oceanographer with the National Oceanic and Atmospheric Administration (NOAA), 525 billion tons of CO2 has been absorbed by the ocean over the last 200 years with 22 million tons being absorbed daily. This gas is converted to carbonic acid and has resulted in a 30% increase in ocean acidity since the early 1900s. Dr. Ken Caldeira of the Carnegie Institute of Washington stated in a written testimony to the Committee on Science and Technology that 65 million years ago the oceans acidified and not only did almost all marine life with shells disappear, but coral reefs dissolved and weren’t seen again for two million years. Although the impact of ocean acidification has become a concern for scientists and legislators alike, much research to this point has been conducted only in fish tanks and on a small scale. In a July 3, 2008 publication of Nature, Dr. Jason Hall-Spencer presented the first large-scale study of an oceanic ecosystem to provide disturbing proof of what could happen to marine life if the acidity of the ocean continues to rise.
Many things are acidic, such as battery acid and orange juice. The ocean, however, is supposed to be slightly basic at pH 8.2, similar to baking soda. However, the pH has dropped to 8.1 and is estimated to drop to 7.7 by the year 2100. Hall-Spencer has shown that this could be detrimental to the marine ecosystem. By surveying oceanic areas where volcanic vents were either present or absent, he and his colleagues drew comparisons involving the marine life present in each area. These vents released millions of liters of CO2 gas each day, acidifying the surrounding water. In areas of normal pH, marine life which depended on calcified shells thrived. When the pH dropped to 7.8, the number of marine species was reduced by 30%. In more acidic conditions around 7.4, the shells of various shellfish were eaten away, pitted and fragile. Many scientists worry that as the ocean acidifies, aquatic creatures will become unable to make shells. Another pressing concern is the preservation of coral reefs. In acidic conditions, the population of Corallinaceae, an alga important in protecting reefs, dropped by 60%. This left the reef vulnerable to harmful algae and dissolution due to the acidity of the water.
While the fate of a snail or coral reef may not initially trigger concern, the future consequences of ocean acidity on all marine life and the global economy might. In May 2008, NOAA released a “State of the Science” fact sheet. It stated that not only is the U.S. the third largest seafood consumer globally, but patrons spend $60 billion per year on fish and shellfish. Furthermore, coastal and marine fishing supports 70,000 jobs and produces revenue of $30 billion each year. This industry is dependent on the stability of coral reefs. Reefs are the lynchpin for many fisheries since half of them use reefs for the life cycles of their fish. Fish stocks are currently estimated at over $250 million. The marine plankton and small snails which serve as a food source for many fish such as salmon, mackerel and cod would be reduced, along with the coral, as acidity increased. This could reduce the amount of food available and restructure the food web altogether. In the end, if the coral fails, so too does a large portion of the lucrative fishing industry.
Coral does not, however, only support marine life and fishing. It also supports tourism. NOAA estimated that the economic losses from coral reef degradation in the Caribbean will be $350-780 million per year by 2015. Trying to protect the reefs will entail another $3-4 billion each year. The Florida Keys generates $1.2 billion per annum in coral reef tourism while Hawaii collects $360 million every year. These numbers do not even consider the amount of money saved in real estate damage that is averted due to the protection coral reefs provide from storms and tsunami. On June 5, 2008, a hearing was held by the Committee on Science and Technology in the U.S. House of Representatives to listen to testimony regarding ocean acidification and its consequences. As stated by the chairman, Nick Lampson, “H.R. 4174 was introduced by…Congressman Tom Allen…to coordinate and expand…efforts…to expand our knowledge of ocean acidification. Through more comprehensive monitoring and research we can begin to address the impacts of these changes on our fisheries and…ecosystems.” In his written testimony to the committee, Feeley wrote that the ocean is estimated to be more acidic in 2100 than in the last 20 million years. The Intergovernmental Panel on Climate Change (IPCC) has calculated the CO2 concentration could be so high in 2100 as to begin dissolving the coral reefs faster than they can grow. If the predictions for 2100 are correct, the growth rate of coral reefs could be reduced by 85% when compared to today’s rate. They are already growing 15% slower than they did at the beginning of the 1900s when ocean acidity was at a proper level according to data in NOAAs “State of the Science” fact sheet.
The question is what can we do about it? While many, such as Caldeira, believe the “only way to really save the oceans is to greatly decrease carbon dioxide omissions soon.”, H.R. 4174 proposes to give $25 million over three years and $30 million every following year towards research of acidification and how to reverse it. Dr. Joan Kleypas of the National Center for Atmospheric Research, however, stated in her written testimony that $50-55 million each year is the “minimum if scientists are to provide useful information regarding how oceans are responding to acidification and how we should change our…policies.” While this initially sounds stunning, Caldeira noted in his written testimony that, “It’s impossible to say what the oceans are worth to us, but it has to be…tens of billions of dollars per year. [The] research investment [is] starting at several millions of dollars per year…that’s a ratio of about ten thousand to one. That’s like having a $20,000 car and…spending only two bucks to find out what’s going wrong. We shouldn’t be surprised when it breaks down [on] the highway.”
There’s only so much many companies can do to reduce pollution. A steel smelter can scrub all it wants, and it’s still going to produce pollution. There’s no way around it. Pollution is an inevitable byproduct for many industries.
In order to look better on paper, companies offset their pollution by supporting carbon reduction elsewhere, purchasing credits from carbon reducers to offset their own carbon production.
In many cases, in order for the polluter to keep polluting at the same rate it always has, it buys credits from some random farmer who keeps doing the same thing he’s always done. So there’s been no real change in the level of overall carbon output.
In the future, however, carbon credits may rise in price to the point that farmers and others have an incentive to reduce carbon emissions further in order to sell more credits. Also, regulation may force carbon reducers to prove they’ve done something to earn the right to sell credits.
Believe it or not, there is actually an active futures market for these credits, and it’s blowing up. By mid April, trading volume on the Chicago Climate Exchange had already surpassed total trading volume for all of 2007! Since the beginning of the year, the contract price has risen from under $2.50 to nearly $7.50 then fell back to a current price* of $$3.90. It’s a hot but volatile market.
Besides trading in the futures markets, there are several ways one may be able to get in on this market. Chicago Climate Exchange is owned by Climate Exchange PLC (CLE) which trades on the London exchange. A couple of relatively new ETFs (exchange traded funds) are available as well: PowerShares WilderHill Progressive Energy Portfolio (PUW) and PowerShares Cleantech Portfolio (PZD). And XShares Advisers has an agreement with Chicago Climate Exchange to develop other ETFs.
Infotopia: How Many Minds Produce Knowledge. By Cass R. Sunstein. Oxford University Press, USA, 2008. 304 pages. $15.95.
If you’re interested in how organizations and societies process knowledge or how what one individual knows diffuses through a larger social matrix, read Cass Sunstein’s Infotopia. It’s not perfect, but it does a fine job of analyzing a range of possibilities for aggregating individual knowledge—and it’s fun.
That Sunstein’s perspective is largely positive is indicated through the title; “infotopia” resonates with “utopia,” and there’s more of a trace of the hope that through collective understanding, we might shape a perfect society. There’s also a nice play on words here. “Utopia” can mean either “eu-topos,” the good place, or “ou-topos,” a place that does not exist, and so allows for ambiguity and hypotheticals. Well, Sunstein describes an ideal society whose place is in information and which is accessed via information and constructed upon information. To learn and discourse is to become a citizen of Infotopia.
Sunstein’s core problem is this: how do we aggregate dispersed knowledge? Or how do we as a group come to know what distinct individuals know? Sunstein follows two interweaving strands of analysis. One examines how groups actually do aggregate information known by individuals; the other strand examines how groups should do so. He pursues both analytical paths through discussing several areas of communal knowledge processing.
He starts with a, yes, utopian vision of what might happen if information aggregation worked everywhere as promised, then moves into discussions of numerous failures. From there, Sunstein spends a chapter each on major approaches to aggregation: statistical combinations, deliberation, markets and via the Internet. Examples are given in each case—often first hand and/or amusing examples—and general principles are derived from them. A historical and theoretical frame is given in each case though the natures of these frames vary widely. For example, when discussing deliberation, which has a long history in both practice and philosophy, Sunstein necessarily skips from high point to high point in this complex account, touching on Aristotle, Rawls, Habermas, etc. By contrast, when discussing electronic methods of aggregation, there’s comparatively little theory and considerable discussion of practice.
In all cases, however, the discussions of contemporary understanding of these methods of information aggregation were both intriguing and exciting. In particular, Sunstein’s discussion of the myriad ways prediction markets can be applied—and the fact that they outperform experts in many areas—was worthy of serious consideration. That a single mechanism is used for predicting events as diverse as presidential elections and internal product launches is intriguing. I found myself wanting to harness prediction markets for new areas in the arts or even in social and personal arenas. Likewise, the possibilities inherent in what Sunstein called “collaborative filtering”—finding parallels between books purchased or movies watched, as Amazon and Netflix do—have clearly just begun to be tapped. Such associational thinking could be used to multiply potential for product innovation or even to craft narratives within an art form.
Sunstein is clearly both committed to the potential inherent in collective understanding and excited by the revolution he sees unfolding in cyberspace or in prediction markets. However, he’s not blindly carried away by these processes. The chapter on deliberation is titled “The Surprising Failure of Deliberating Groups,” and the following chapter is called simply “Four Big Problems.” The gaffes, gaps and biases described there are deeply daunting and almost universally human. Other related failings are detailed in the discussion of the blogosphere, with the result being a book that works hard to be balanced.
While I trust Sunstein’s intent, I do not always trust his success rate. One of the potential failings he describes in deliberation is what he calls a “reputational cascade” in which people agree on a specific answer or point because they are part of a group and want to retain their social standing in it and essentially smother their objections or contradictory knowledge. Sunstein also describes the sort of cascade that follows a successful political movement and how blind people are to how they’re being carried along by the crowd. To a certain degree, I think that’s happening here. Sunstein sees so much rich potential in these emerging practices that even when he’s trying to see the objections, he fails to do so fully. What effect does Wikipedia have on creativity or does Google have on memory? What happens to older forms of collective knowledge transfer such as tradition? I would have loved to see more on areas like these as well as sharper distinctions about just what knowledge is.
However, those objections and desires don’t take anything away from Infotopia, which should start you speculating on what might be and reflecting on how the groups you belong to make decisions.
At the UN summit in Rome, which ended June 5, the UN’s Food and Agriculture Organization (FOA) appealed to governments to step up to the plate and provide at least $20 billion per year to help feed the world’s hungry.
On the agenda (at least for U.S. Agricultural Secretary Ed Schafer) was promoting the use of genetically modified (GM) foods, but the concept left a bad taste in some people’s mouths.
Europe has been the main holdout to using GM foods. France, who is Europe’s number one producer of agriculture, passed a bill by a single vote to allow GM crops if and when the EU accepts them. Some European farmers are willing to give GM crops a try, as they are seeing the tangible (financial) rewards of GM crops.
Some of the poorest countries who are most in need of food have rejected the use of GM foods as a way to ease the burden of hunger – which angers countries like the U.S. who commonly use GM crops to produce processed foods, oils, and corn syrup.
So why are people so against using a technology that could help end world hunger by producing crops that are drought-resistant, insect and disease resistant, and that yields higher levels of nutrients?
The answer is simple: people are afraid. GM foods have only been in existence for a few years. Although (thus far) there have been no reports of adverse effects, scientists are unable to say with any certainty that there will never be any ill effects from consuming foods produced from GM crops.
The American Medical Association states: “Worldwide, many people are eating GM foods with no overt adverse effects on human health reported in the peer-reviewed scientific literature and according to regulatory agencies.” In their adopted policy as of 2000, the AMA recognizes “the many potential benefits offered by genetically modified crops and foods, does not support a moratorium on planting genetically modified crops, and encourages ongoing research developments in food biotechnology.”
However, they once thought Thalidomide was the answer to the nauseated pregnant woman’s prayer.
of living plummet as fast as oil prices rise, is like kicking a body that’s already down and nearly dead.
What was the cost of the litigation itself? I have to wonder, what if the cost of all those corporate lawyers over all those 19 years had been put into some kind of subsidy for green energy initiatives? It’s a good thing it wasn’t, or we’d think we were living in Iceland or Sweden, and we wouldn’t want that! Sure we’d have enough heat and power to free up money for, I don’t know, healthcare or education or something, but that would be too much like socialism. Thank God we were saved from it by raw corporate greed and the reliable power of enormous amounts of money in the hands of a select few.
According to the Supreme Court, they’re not worth $2.5 billion.
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