By Simon Grey, on January 31st, 2012
The anti-SOPA crowd argues that this is a matter of basic liberty. But it’s not. In a free society, you don’t have the freedom to steal your neighbor’s property. And that should include intellectual property. Moreover, it is the function of the state to enforce those rights. We don’t leave it up to civil litigation to protect property rights (although that is part of the solution). We give the state substantial powers to stop theft. Just as owners of tangible personal property have good cause to call for a police force and a system of criminal courts, owners of intellectual property have good cause to ask the state to stop those who would infringe on their rights.
It’s like he doesn’t understand the difference between copying and theft. If I have a book and someone copies it, they do not deprive me of the book (except for the time spent copying it). If they steal the book, I never see it again. If I write a song and someone decides to copy it, they do not deprive me of my ability to play it. On the other hand, if I have an apple and someone takes it, then they deprive me of what belongs to me. As Thomas Jefferson once said, “He who receives an idea from me receives it without lessening me, as he who lights his candle at mine receives light without darkening me. Also note that the supreme law of the land (the constitution, for MIT economics professors too stupid to familiarize themselves of the law under which they live) never refers to intellectual property in terms of theft. In fact, they refer to it primarily in terms of special monopoly privilege. Incidentally, this is why the constitution prescribes “exclusive Right” for authors and inventors for “limited times.” The founders never believed thoughts were real property, which is why they allowed these rights to expire. Thus, Mankiw’s assertion, which is nothing more than pious posturing, is verifiably false. SOPA is not a matter of preventing theft or protecting property rights. It is, like all other forms of intellectual property law, just another form of government-enforced monopoly. And like all other monopolies before it, it is just another way to reduce freedom.
By Ajay Shah, on January 19th, 2012
I was shocked by Lant Pritchett’s note on the appalling performance of India’s best two states on the international PISA assessment. Actually, I was not really shocked; I didn’t expect anything else as I’ve been listening to Lant for years now. By the same token, I agree with Jishnu Das that we really don’t know much about what works in education (other than that good teaching makes a difference) and that our bean-counting of inputs into education may be completely wrong headed. From conversations with him (also over years) I surmise that the only thing we really know about what leads to more learning is that it is correlated with how many years children stay in school. What that suggests, though, is that attention be directed towards the choice of parents and students to stay in school.
In my opinion people choose to do things if it is worth it to them. This is a common assumption for economists. While challengeable in some circumstances, does it make any sense to think that people send their children to school if they don’t think it’s worth it? If it is
compulsory: sure. With compulsion, attention of policy makers and carefully watchful observers such as Pratham should be to make sure school is worth the year of children’s attendance since people would not be able to decide for themselves. Until we see compulsory schooling enforced, though, years of education remain a family’s choice and we have to understand how and why people make that choice.
Unless we think parents are utterly clueless about the value of education and totally incapable of telling if teachers are doing anything or their children are learning anything, the effectiveness of teaching and the amount of knowledge imparted must be a major factor in their decision as to whether school is worth it. Don’t get me wrong, I’ve met dozens of educators and education officials in India who believe parents are, indeed, clueless and such decisions should be out of their hands. But they are the very people who gave us the PISA ratings and are indeed throwbacks to the License Raj where only bureaucrats were assumed to know anything. Further, with the explosion of private schools, even in rural areas, it is laughable to think that there are so many parents who value education so little. They are willing to forego free public education in order to pay for something more worthwhile.
Which brings us to accountability.
What could parents be looking at, that makes them think school is worth it? It must be based on performance: parents don’t really see
the inputs, they mostly just see their children learn. Or not learn as is the case. So how can they translate their concern for learning into actual learning? They have to be free to pick the educational context that they see is working for them or their neighbors. That’s where accountability comes in.
A provider of any good or service is likely to be most accountable when their livelihood depends upon attracting customers. If what they provide is worth it, people will take the service, and the provider can make a living. If not, parents won’t pay and teachers won’t get paid. As of now, there is no mechanism to allow families to make that choice. There is no such compulsion for teachers to provide a service worth paying for. No doubt there are many teachers (probably most) who are doing the best they can regardless of how they are paid. But with over 24% absenteeism, large numbers of teachers observed to be doing anything but teaching, and many sub-contracting their position to under-qualified replacements at a fraction of government salaries, there is substantial room for improvement.
Further, if we are going to get more students (and, hence, teachers) into classrooms, the dedicated teachers may be the ones who are already on the job. People induced to enter the profession may not be as dedicated and, hence, need some other way to hold them accountable than internally felt professional ethics.I am an educator (of sorts) but have no opinion about what the bottleneck in children’s learning really is. Jishnu says the most successful headmasters all say different things (after good teachers – but then, don’t we judge the goodness of teachers by whether their students actually learn? It’s an output based judgment, too.) I know little of pedagogical theory. But I know just as little about the inner workings of most complex things I use — computers and the Internet, water systems, bicycles. I can tell when they work and when they don’t, though. Similarly, I know that my sons learned to read and
write, become responsible citizens and to develop and exercise critical intellectual capacities (sometimes way too critical for my
taste) even though I have no idea how they learned them. I did know that their teachers were in school almost every day and doing things that sounded like teaching to me. I did not have to be an expert on pedagogy to hold the schools completely accountable for my children’s education.
I was also fortunate enough to be able to take (or threaten to take) them out of government schools if I thought otherwise. Funding
for government schools (in the U.S.) follows enrollment, if not so directly and obviously as for private schools. So my threats about
shifting my children out of government school directly mattered to their teachers.
There is no reason why Indian parents can’t do the same. They, on average, may not have my education but after talking to hundreds of families in rural areas, tribal villages, urban slums and SC hamlets, I hear no less concern for their children’s future than I have for
mine and no less ability to tell if a teacher appears to be doing his job. They may be more capable than me since they are more likely to see the teachers themselves — I needed to ask my children.
In many rich countries, the issue of vouchers to pay for schools is emotionally charged. Historically, free compulsory public education was a result of fights between church and State (even in Japan where `church’ doesn’t quite fit — but religion and State does). Children were already attending school in high percentages and there was a fight for their hearts and minds. In rich countries currently, suggestions to provide vouchers instead of State-run schools re-kindle this old antagonism against religious instruction.
India never had this fight nor this evolution of public provision. Our view of schooling here in India was imposed based on the final result of universal free education seen in rich countries without the history from which that final result evolved.
India needn’t go through the phase of fighting over who gets to teach students who are already highly motivated to learn and have seen learning take place. If India wants to see all children educated, she can certainly pay for the cost of education (in fact, the job can be done for much less per student is presently spent) so that families don’t have to. But the government doesn’t have to provide it directly (though government schools should be free to compete for this money if it can). The fight is the State against society (families), not against the church.
What the State can do is make as much information known to parents as possible. What should children know after how many years of school?
How do you know if your child is keeping up? How do you know what you’re paying for is worth it? As of now, this information is
certainly not given to parents. Maybe State run schools don’t want parents to know (and, unfortunately, most Indian parents will not know about PISA). And as of now, there is nothing parents (particularly poor parents) can do about it anyway.
By Simon Grey, on December 6th, 2011
Street vending has been a path out of poverty for Americans. And like other such paths (say, driving a taxi), this one is increasingly difficult to navigate. Why? Because entrenched interests don’t like competition. So they lobby their powerful friends to erect high hurdles to upstarts. It’s an old story.
Now, growing local governments are crushing street vendors.
The city of Atlanta, for example, has turned all street vending over to a monopoly contractor. In feudalist fashion, all existing vendors were told they must work for the monopoly or not vend at all.
…
Institute lawyer Elizabeth Foley says the regulations make “it virtually impossible to be an effective street vendor. You can’t be within 300 feet of any place that sells the same or similar merchandise. That’s absolutely ridiculous for the government to use its power to enact a law like that. … These people are just trying to make an honest living, and the city is making it impossible to do so.”
…
Raul Martinez, the mayor when the law passed, defended the rule.
“You don’t want to have everybody in the middle of the streets competing for space on the sidewalk without some sort of regulations. In the city of Hialeah, we’re not overregulating anybody.”
He says one purpose of the law is simple fairness: Street vendors don’t pay property taxes. Brick-and-mortar stores must.
No one likes paying taxes, and so everyone tries to either avoid the misery or spread it around. One common justification for paying taxes, then, is fairness: Why should I pay taxes when my competitor doesn’t?
That is, perhaps, a legitimate question, but it is irrelevant nonetheless because fairness does not exist. For starters, no two people can even agree on what constitutes fairness. And even if they could, ensuring fairness requires more data than anyone possesses or could hope of possessing.
Taking the case at hand, it seems obvious that it is unfair for street vendors to not pay taxes. But should their tax bill be comparable to brick-and-mortar stores? The answer isn’t straightforward because one must consider how much less of a burden street vendors are to the local government relative to brick-and-mortar stores. One must also compare the relative advantages of each venue—a street vendor does not offer the same product as a restaurant, even if the menu offerings are identical. Trying to determine a fair tax rate in light of the considerations is simply impossible.
As such, it is simply best for the government to surrender the battle on fairness and simply say that the government needs X amount of dollars in revenue and that policy Y is the easiest way to attain this. The continual bickering over fairness simply increases systemic costs, damages the economy, kills people’s job prospects, increases political rancor, and does absolutely nothing to improve the system in the long run. Therefore, the government would be better off implementing one simple tax and living within its means, and stop concerning itself with fairness.
By Simon Grey, on November 11th, 2011
As I mentioned before, I’m currently enrolled in a microeconomics course that makes use of Mankiw’s textbook. I haven’t read much of the book, save for the assigned homework questions and his chapter on oligopolies. He begins with a discussion of monopolies, and asserts that Microsoft is an example of a market monopoly. This claim struck me as quite hilarious for two reasons.
First, Mankiw uses a very narrow definition of market to prove his point. Instead of placing Microsoft in a software market, he claims that Microsoft has a natural market monopoly on Microsoft software, since one can only acquire Microsoft software through Microsoft.*
What Mankiw should say, in order to be precise, is that one can only legally acquire Microsoft software from Microsoft. But this would undermine his point, because what enables Microsoft’s monopoly power is not the natural mechanisms of the market but rather the government, via intellectual property laws. Therefore, Mankiw’s narrow definition fails because it Microsoft’s monopoly power is the result of governmental favoritism and is not a natural market monopoly.
The second thing that makes Mankiw’s claim laughable is that he ignores the broader market of software. There are plenty of alternatives to Microsoft software. Mac, Linux, and Unix are all alternatives to Windows; OpenOffice is an alternative to Microsoft Office; Wii and PS3 consoles and games are alternatives to the Xbox console and games; etc. Mankiw, if he were being honest, would say that Microsoft cannot force anyone to buy any of their software, and is therefore not a monopoly in the sense of being able to make prices.
Of course, if Mankiw were concerned with honesty, he would have to say that Microsoft, though not a true monopoly, does have a limited form of monopoly power via government regulation. Saying this would be heretical to mainstream economics because the natural conclusion of this assertion is that improving market function would require less government, not more, and we can’t have that.
* Of course, this latter claim is patently false as one can easily acquire Microsoft software on a variety of torrent sites.
By The Gold Report, on September 28th, 2011
 As exciting as the critical metals sector is becoming, Gold Stock Trades’ Jeb Handwerger warns that the public is being bombarded with misleading information, even at the highest levels of commerce and policy. In this exclusive article for The Critical Metals Report, Jeb gives his take on Molycorp’s recent presentation to Congress, and outlines key points investors and policymakers alike should use to inform their decisions.
This week, Molycorp Minerals (MCP:NYSE) went to bat before the House Foreign Affairs Committee, represented by CEO Mark Smith. What was needed was a confident batter presenting an urgent case for national survival. But instead of a strong slugger, all we got was a little leaguer. Opportunities were missed and runners were left stranded. The industry sent a very conflicted Mr. Smith to Washington.
First of all, Mr. Smith never questioned the categorization of the metal class, namely that heavy rare earths (HREEs) are lumped in with the more common, garden-variety light earths (LREEs). Not once were the members of the committee informed of the importance of the highly critical dysprosium and terbium minerals, or the serious consequences China’s supply monopoly poses for American industry. Meanwhile, Alaska-based miner Ucore Rare Metals Inc. (UCU:TSX.V; UURAF:OTCQX) is sitting on a mountain of dysprosium and terbium in North America’s backyard.
Indeed, the Machiavellian hand of China’s mining industry was not merely overlooked, but praised. Mark Smith’s presentation before the Congressional Committee read like an apologia for the nation’s draconian quotas. Not once in his presentation did he make reference to American sources of these valuable minerals. Instead, Molycorp was hailed as king of the REE hill, as if there were no other viable rare earth entities. It became an obvious case of not-too-skilled investor relations.
In every missed opportunity there exists a valuable learning experience. What else was omitted that would have made for a stronger presentation?
- Where does Molycorp get its heavy rare earths? Smith claimed Molycorp possesses a complete suite of rare earths at their Mountain Pass property. Assays have shown that this mountain possesses predominately light rare earths with little or no heavies.
- Why does Molycorp venture to far-away Estonia to process U.S. ore when it can be done more efficiently and economically on American soil? A new industry could be created here offering jobs to build a new, native industry.
- What was the significance of the aborted deal between Hitachi and Molycorp? The Japanese claim that Molycorp did not possess sufficient heavy rare earths to satisfy Japanese industrial needs. Smith glossed over the strategic importance of heavy rare earths right here in the United States.
- Why was no mention made of the Critical Minerals Act that has been languishing on congressional desks for many months? Encouraging Federal Government to support this act might have served to fast-track vital legislation. What could be more pertinent than weaning the U.S. from its dependency on China?
- Chinese policy makers have stated that the nation needs strategic rare earths for its own markets and that there are simply not enough of these resources to go around. They’ve even said they would welcome American firms to develop the sector on Chinese soil. Why not explore this opportunity to assist our Chinese colleagues, thereby furthering a more harmonious relationship?
Let’s hope that a more voluble and reasoned representative will inspire Congress at the next opportunity. Sadly, only four committee members were present at the hearing. Perhaps such North American players as Ucore, Rare Element Resources Ltd. (RES:TSX; REE:NYSE.A) and Great Western Minerals Group Ltd. (GWG:TSX.V; GWMGF:OTCQX) can send a slugger up to bat to advance our indigenous rare earth industry.
It’s not just Congress who could use some enlightenment on this oft-misunderstood market; even major investment firms demonstrate limited understanding of the rare earth sector. J.P. Morgan recently downgraded Molycorp’s rating, slanting its sector thesis by forecasting declining prices. Nowhere did they differentiate between the heavies and the lights. Dysprosium and terbium prices have not gone much lower. Investors fear that Molycorp and Lynas Corp. (LYC:ASX) will flood the rare earth supply when they come online, but this is not the reality.
Right now, LREE-heavy Lynas and Molycorp are half a loaf. All these two giants have to do is look to our recommendation list to find suitable heavy rare earth additions to complete the catalogue, or else they open themselves up to evisceration by bankers who may be playing both sides of the field.
Finally, is it not passing strange that JP Morgan chose to issue this negative pronouncement on the eve of Bernanke’s two-day conclave in Washington? Keep in mind that J.P. Morgan is being sued by individual silver investors who allege the bank “amassed an unfairly large position in silver futures and then used its position to drive down prices of silver and increase its own profits.” (Wall Street Journal) This lawsuit may indeed throw into question good-old J.P.’s credibility as an impartial observer. Do not forget that our rare earth stocks have an incredibly large short-interest position. This is not the time to flee the battlefields in this vital sector.
Gold Stock Trades Editor Jeb Handwerger is a highly sought-after stock analyst who is syndicated internationally and known throughout the financial industry for his accurate and timely analysis of the equities markets—particularly the precious metals sector. You can read his daily bulletin for timely updates on the rare earth sector by clicking here.
By Simon Grey, on September 21st, 2011
President Obama today signed into law the Leahy-Smith America Invents Act (H.R. 1249) a bipartisan, bicameral bill that updates our patent system to encourage innovation, job creation and economic growth. Both Houses of Congress overwhelmingly supported the proposal, which was sponsored by House Judiciary Committee Chairman Lamar Smith (R-Texas). The House of Representatives passed H.R. 1249 by a vote of 304-117 earlier this year. The Senate passed the bill by a vote of 89-9. Senator Patrick Leahy (D-Vermont) partnered with Chairman Smith on the legislation. Congressman Smith led the House efforts on patent reform for more than six years.
Much-needed reforms to our patent system are long overdue. The last major patent reform was nearly 60 years ago. The House patent reform bill implements a first-inventor-to-file standard for patent approval, creates a post-grant review system to weed out bad patents, and helps the Patent and Trademark Office (PTO) address the backlog of patent applications. This bill is supported by local companies as well as many national organizations and businesses.
I’m not sure what to think of this.
On the one hand, this streamlines the patent system, which I begrudgingly support. The first-to-file standard makes resolving multiple claims dead simple: Who got to the patent office first. And weeding out bad patents is also good, especially in light of the standards (distinct, non-obvious, etc.).However, this legislation could very well increase the occurrences of patent-trolling. This would actually discourage invention and innovation in the long run because inventors would more than likely seek to avoid paying royalties to produce their own inventions, so they would have to create modifications to their own product in order to sell them. I imagine this effect would be more prominent among large corporations than among individual inventors because corporations tend to be more susceptible to industrial/commercial espionage.
At the end of the day, though, the simplest and most effective reform is to simply abolish the patent system altogether.There’s little evidence that the costs of the patent system outweigh the benefits thereof.
By Simon Grey, on August 10th, 2011
Consumers are watching as many – if not more – films than ever for less money and time than ever, for a third of the cost. The money that had been spent on (now unneeded) overheads can go on other things. Be sure to avoid the broken window fallacy – the saved money will go into other productive things that people want. As Blockbuster falls, something else people want will rise. And, at the margin, lower costs mean that there should be more movies made per dollar spent.
I think this pattern might hold elsewhere, too. Since getting a Kindle e-reader in June, I’ve read more books than I did in the entire year up to that point.
Although costs aren’t falling yet – it’s a proprietary Amazon device, and they’re keeping the costs high while subsidising the cost of the device itself – the shift to e-readers means that authors will eventually be able to bypass publishers and significantly increase their profit-per-purchase. Like the rise of Netflix, this will probably mean less money spent on overheads and more spent on actual content.
Recall that those who defend copyright laws on utilitarian grounds argue essentially that the purpose of granting creators a temporary monopoly license is to ensure that people have an incentive to create. This being the case, one reasonable proposal to be offered to the utilitarian sect of copyright defenders is to decrease creators’ state-granted monopoly powers as technological innovation increases.*
Technological growth reduces publication and distribution costs for creators, enabling them to not only sell directly, but to increase their profit margins while decreasing prices. As such, monopoly protections are less necessary (if not altogether unnecessary) in the face of technological growth because technology makes it easier for creators to turn a profit, which, it should be remembered, is the whole point of having copyright laws in the first place. Thus, if creators can make a profit without doing much to protect their product, then it seems obvious to conclude that copyright is largely unnecessary, and certainly does not draconian enforcement.
Note: Software is a nebulous entity that is somewhere between copyrightable and patentable in terms of classification. As such, it is not covered under this proposal because it would drive this proposal. If it absolutely must be given IP status, it should be considered its own entity with longer terms than patents but shorter terms than copyright. Furthermore, it should also have the novelty prerequisite of patents. Given the complexity of this subject, though, this discussion is best reserved for another post.
By Simon Grey, on May 20th, 2011
I’ve often criticized IP from both philosophical and utilitarian grounds, but I haven’t often addressed some of the specific benefits that would come from abolishing IP. Anyhow, here’s a story that offers a glimpse of a future without IP: As companies compete to digitize the textbook market, there is one approach that shakes the traditional publishing business model: open source textbooks, whose proponents believe online educational tomes should be free.
Many universities, including MIT and Carnegie Mellon, post course lectures online for free use. A New York Times article last year explained some of the barriers to applying the same approach to textbooks.
For one thing, the textbook authors must agree to have them distributed online without charging royalties — something that may work well in the software world, where engineers often work on projects while keeping a day job, but typically avoided by writers who put their sweat equity into one book at a time. Also, books for K-12 classrooms must meet state standards, and most states don’t have procedures in place for approving open source textbooks.
Open source textbooks are a step in the right direction. If you follow the link, you will see that there are serious savings offered by the open source book model. If IP were abolished, these effects would be even greater, for students could buy cheap bootlegs or “pirate” digital copies for free which, as anyone currently in college knows, would offer extremely serious savings.
Basically, publishers and authors would not be able to artificially restrict supply; their monopoly would effectively be ended. Competing publishers could copy the text and produce it cheaply, forcing the original publisher to either update the books every quarter/semester/trimester or drive down the price of their own books to be competitive. Of course, it’s a hassle for professors to change books every quarter, so students would, more likely than not, be able to get their books on the cheap. Therefore, those currently in college should support the abolition of IP as it will help them save money.
By Simon Grey, on April 14th, 2011
Students who attend Chicago’s Little Village Academy public school get nothing but nutritional tough love during their lunch period each day. The students can either eat the cafeteria food–or go hungry. Only students with allergies are allowed to bring a homemade lunch to school, the Chicago Tribune reports.
“Nutrition wise, it is better for the children to eat at the school,” principal Elsa Carmona told the paper of the years-old policy. “It’s about … the excellent quality food that they are able to serve (in the lunchroom). It’s milk versus a Coke.”
But students said they would rather bring their own lunch to school in the time-honored tradition of the brown paper bag. “They’re afraid that we’ll all bring in greasy food instead of healthy food and it won’t be as good as what they give us at school,” student Yesenia Gutierrez told the paper. “It’s really lame.”
Having eaten my share of school lunches, I can say with a high degree of certainty that there is no way that any lunch students bring from home is worse than the garbage schools pass off as food. Yes, it’s possible that parents send highly processed junk food with their children. But how is that different than the highly processed non-food that schools serve?
There is plenty of junk food available at every grocery store, so parents can still make sure that their children eat plenty of non-nutritious garbage at lunch, if they so desire. Of course, going this route is more economical than buying a school lunch, for it provides children with the same empty calories, just at lower prices. That’s probably why home lunches were banned: the school’s food supplier wanted a monopoly in order to make more money.
Of course, it’s entirely possible that some parents actually sent nutritious lunches with their children. If that’s the case, the school is actively working to destroy kids’ health.
And so we see how the government works: it creates a lose-lose situation for parents, for now parents must subject their children to higher-priced, less-nutritious lunches. All in order to ensure that someone can make a little extra money. Ain’t it grand?
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By Thersites, on January 7th, 2010
In tomorrow’s episode of John Stossel’s new show on Fox Business, he will address the question, “Who is Wesley Mouch?” in speaking to the parallels between Atlas Shrugged and contemporary America. As one might expect, in my view it seems as if almost all businessmen (given their predilection towards using government to destroy markets to their own advantage) in one way or another embody the qualities of Wesley Mouch.
One exception who will be on Stossel’s program is John Allison, an executive at BB&T Bank, who staunchly opposed TARP, has repeatedly refused to use the law to plunder the property of others and as one might guess is an ardent Austrian-school libertarian. In a scene reminiscent of the smoke-filled rooms of Atlas Shrugged, Allison divulged at an NYU lecture this past fall that the Feds threatened to go in and audit any bank that wouldn’t take government funds, forcing healthy banks to comply so as to cover for the fact that the government was only propping up a select few sick ones (at the expense of the solvent I might add).
In response to Stossel’s call in the aforehyperlinked column for suggestions for a follow-up show on “crony capitalism,” I posted:
John,
If you want to talk about crony capitalism, it may pay to have Burton Fulsom who wrote “The Myth of the Robber Barons” on the program. I think the key is to delineate between political entrepreneurs and market entrepreneurs, something which he does astutely in that book.
Political entrepreneurs seek to use government decrees to profit, largely by cartelization, monopoly advantages and other barriers to entry, while market entrepreneurs generally seek to win profits in the market by merit – by producing the best product at the cheapest price.
More generally, the Mouch problem lies in the fact that while initially businessmen extol the virtues of little regulation, low barriers to entry and minimal governmental interference generally, once they become successful, out of self-interest they support any and all legislation that will cement their position in the market. They support all of those things anathema to the free market that they had used to their advantage in the first place.
This is akin to the economic plight of America as a whole. While up until the early 20th century (though some libertarians will argue that it was really only up until the time of Lincoln), America functioned under a largely laissez-faire economy, with the wealth and progress generated by this economy, we forgot about the virtues that led to our success and rewarded those tending towards failure. We created a welfare state from the riches of a relatively free state, throwing under the bus the very principles that elevated to us to our position as a great nation.
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