October 2009

In the last issue of The New Republic, Lawrence Lessig published the unfortunately titled article “Against Transparency.” In it he criticizes what he calls the “naked transparency movement.”* The article has drawn several responses, with Ellen Miller and Michael Klein’s being the best and most direct. I’d like to offer a libertarian perspective.

Lessig’s thesis is that the revolution in government transparency that modern information technology makes possible is a double-edged sword because what it uncovers is simply the general corruptibility of government–and he speaks of Congress in particular. Tools like MAPLight.org show that there is a strong correlation between campaign contributions and legislative votes. Some of these may indeed be corrupt bargains, and some may not. But the fact is that “the contributions are corrupting the reputation of Congress, because they raise the question of whether the member acted to track good sense or campaign dollars.”

Because citizens are prone to rational ignorance (although Lessig insists on relabeling the concept “lack of attention-span”), they will not investigate individual votes or other actions very deeply, and they will unfairly ascribe a certain susceptibility to influence to all in Congress. As a result, the naked transparency movement won’t inspire reform, but instead “will simply push any faith in our political system over the cliff.” Lessig writes:

At this time the judgment that Washington is all about money is so wide and so deep that among all the possible reasons to explain something puzzling, money is the first, and most likely the last, explanation that will be given. It sets the default against which anything different must fight. And this default, this unexamined assumption of causality, will only be reinforced by the naked transparency movement and its correlations. What we believe will be confirmed, again and again.

His solution? “A system of publicly funded elections would make it impossible to suggest that the reason some member of Congress voted the way he voted was because of money.” Take the money out of politics, Lessig argues, and you also take away the cynicism that forestalls change.

Lessig’s solution reminds me of airline regulation in the 60s and 70s. Prices where set by government, so airlines were forced to compete on other margins. First came the elaborate meals, then the in-flight bar lounges and later piano bars, and then “the musicians, magicians, wine-tasters, and Playboy bunnies.”

Continue reading →

Die-hard Halloween fans can find a hearse-load of ghoulish party supplies on the Internet, from Freddie Krueger window silhouettes to a severed arm that hangs from a car trunk. You could even order a casket; maybe use it as a beer cooler. 

One casket hawker on eBay named morbid611 boasted, “Will make a great Halloween prop and even keep it around the house and have fun with it when you have company over [!]  When your neighbors have their cardboard caskets or home made bulky looking box caskets they won’t be able to compare to your real casket.” (Emphasis added. In case you’re curious, the winning bid was $285.)

Unfortunately, in my home state of Virginia, it’s questionable whether I can order one via the Internet. That’s because Virginia is one of  a handful of states that prohibit anyone other than licensed funeral directors from selling caskets. I’m not sure how strictly this prohibition is enforced, though. Some online casket sellers claim they will ship anywhere, but Costco’s casket supplier won’t ship to Virginia.

The evidence is mixed on whether these restrictions increase overall funeral prices. In a 2008 study published in the Journal of Law & Economics, Judith Chevalier and Fiona Scott Morton found that funeral directors who face competition from independent casket retailers simply lower their casket prices and increase their prices for other services by about the same amount.  But the funeral directors’ casket prices still don’t match online prices.  The authors calculate that a simple funeral with a wooden casket would cost about $360 less if the customer purchased the casket online.

Dan Sutter, in an article published in the Journal of Law, Economics, and Policy in 2007, reached similarly mixed conclusions. He found that casket sales restrictions do not affect average receipts per death in the funeral industry (one measure of funeral prices). However, three states that had their casket sales restrictions invalidated by federal courts saw receipts per death fall more rapidly between 1997 and 2002 than states where these regulations remained in effect. In a 2005 study published in the Journal of Private Enterprise, Sutter found that Oklahoma funeral homes charged an average of 68 percent more than an Oklahoma-based Internet retailer charged for the same caskets.

It’s clear that consumers could save money by buying caskets online. Since not many consumers do, researchers have not found that the online competition has reduced funeral directors’ overall revenues in states where this competition is legal.

But this may change over time. Personally, I plan to haunt my family mercilessly if they end up drinking cheap booze at my wake because they overpaid for my casket!

There are a lot of interesting weekly roundups on the ‘Net. A search on “this week in” using Google reveals these weekly segments (among the top 50 results) on:

pictures

science

education

the history of chemistry

the Poconos

blackness

evolution

virology

amateur radio

Palestine

My colleagues at ACT aim to join the Poconos and Palestine by adding “antitrust” to the list! Per the ACT blog:

Today, we’re kicking off a new feature on the blog, a weekly round up of the tech industry’s various antitrust cases and “potential” antitrust concerns. While last week’s antitrust news was dominated by competition concerns outside the technology industry (health insurers and the BCS), there were a few notable stories coming out of the world tech competition.

It goes on to list antitrust discussion around Amazon, IBM, Google, Microsoft, and Oracle/Sun. Given the hard line talk from Christine Varney, head of DOJ’s antitrust division, this could be an ACTive weekly blog.

A recent article by Lisa Carley in the New York Wine Examiner reports that Amazon is suspending plans that would have allowed wine producers to sell direct to consumers.  The culprit? State regulations:

One of the main reasons why this program has been put on hold is the complexity of wine-shipping laws within the United States, and that fact that the major wholesalers spend millions of dollars on the state level to keep it difficult for the consumer to have access to wine they want at good prices.

About 35 states permit some form of direct shipment to consumers, but laws vary greatly. In Virginia, consumers can order wine from any winery or retailer licensed in any state, as long as the seller registers with the state of Virginia and collects taxes. In Maryland, direct shipment of wine to consumers is still a felony. Montana limits the total amount of wine any consumer can order to 12 cases per year, which means most wineries won’t ship there because an individual winery has no way of knowing how much wine the consumer has ordered from other sellers. I’m not making this stuff up; check the Wine Institute’s compendium of state laws.

In several studies, Alan Wiseman and I found that consumers can enjoy significant savings on higher-priced wines if they order online.  (The savings disappear for wines priced under $20 per bottle because of shipping costs.) The Internet also gives consumers access to wines that they might not find by simply walking into a store.   

It would be a shame to see Amazon’s idea die. Currently, a winery or retailer that wants to ship directly to consumers has to figure out and comply with each state’s laws. It makes a lot of sense that a single retail sales portal could consolidate and continuously update this information, then set up a system that lets any seller market its wine direct to consumers in states where that’s legal, in compliance with all state laws.

Just a reminder about this week’s event on the 50th anniversary of Ronald Coase’s seminal article, “The Federal Communications Commission.”  As Jerry noted here before, Coase’s critique of the political allocation of radio spectrum, and his arguments for achieving efficient allocation by allowing the government to sell rights to the spectrum, has had a profound effect on the course of communications policy. This event will explore the impact of Coase’s ideas and the legacy of his article and life’s work on communications and media policy.

This event will take place on Thursday morning at 9:00 in Hazel Hall, Room 121 (ground floor) at the George Mason University School of Law in Arlington.  The event is being co-hosted by The Mercatus Center at George Mason University and The Progress & Freedom Foundation and Jerry Brito and I will be co-moderating the session.

Opening remarks will be given by Commissioner Robert M. McDowell of the Federal Communications Commission and his remarks will be followed by a panel discussion that includes:

  • Prof. Thomas W. Hazlett, George Mason University School of Law
  • Dr. Jeffrey A. Eisenach, Empiris LLC & George Mason University School of Law
  • Dr. Evan Kwerel, Federal Communications Commission
  • John Williams, Federal Communications Commission

We hope you can make it!  Please RSVP here.


CNET reports that Amazon has halted plans to sell wine online. The reason:  too many inconsistent state laws. Per the article:

Since the Supreme Court ruled in May 2005 that states must grant the same shipping rights to out-of-state and in-state wineries, winery-to-consumer shipping has become legal in 35 states, according to wine advocacy group Free the Grapes. But state laws governing direct wine shipping vary greatly, creating an onerous task in managing compliance.

Amazon has become a great marketplace for countless products–it’s a shame to see wine makers shut out from this market due to regulatory barriers to e-commerce.

The imagination of the open source community never ceases to amaze me.  But these days the sheer number of people using open source solutions makes the previous statement akin to saying “people never to cease to amaze me,” which they don’t.  However, with thousands of a developers adapting open platforms to problem I never knew existed, I should get used to the constant stream of innovations.

WordPress has become an especially vibrant community that often throws total curve balls my way when I’m looking at lists of plugins, which I all-to-frequently do. Today, I discovered two particular gems worth sharing.

TextImage and Censortive, two plugins compatible with the most current versions of WordPress, are ingenious little bits of programming for skirting around the “Great Firewall” and any other attempts to censor the Net.  The two plugins work by turning some or all of the text of a blog post into .PNG images of those words—making them readable by humans, but not by machines set to filter out web pages featuring forbidden words like “Falun Gong” and “Dalai Lama.”

While TextImage will image-ify your whole post—the fail-safe way around the censors—Censortive allows users to create a list of likely-to-be-censored terms which will then be replaced with images of those words. This means that text is still search-able, but words considered off-limits by big brother won’t set off any flags at your local office of the cultural ministry. Simply Brilliant!

Recent history has shown us that regimes in Egypt, Iran, and Australia can’t control content for long, thanks to quick and easy workarounds like these.  It’s a shame that they keep trying.

Some people have labored under the impression that “net neutrality” regulation was about the government stepping in to ensure that large corporations would not control the Internet. Now that the issue is truly joined, it is clear (as exhibited in this Wall Street Journal story) that the debate is about one set of corporate interests battling another set of corporate interests about the Internet, each seeking to protect or strengthen its business model. The FCC is surfing the debate pursuing a greater role for itself, meaning more budget and power.

Tim Lee’s paper, The Durable Internet, dispells the idea that owners of Internet infrastructure can actually control the Internet. The better approach to “net neutrality” is to let Internet users decide what they want from their ISPs and to let ISPs and content companies do unmediated battle with one another to create and capture the greatest value from the Internet ecosystem. If the FCC were to reduce its power by freeing up more wireless spectrum—either selling it as property or dedicating it to commons treatment—competition to provide Internet service would strengthen consumers’ hands.

These are notions I have tried to get across in some recent television interviews, which you’ll find after the jump. Continue reading →

On Friday, the Federal Communications Commission (FCC) released a new Notice of Inquiry entitled, “Empowering Parents and Protecting Children in an Evolving Media Landscape” (MB Docket No. 09-194).  The purpose of this investigation is to:

seek information on the extent to which children are using electronic media today, the benefits and risks these technologies bring for children, and the ways in which parents, teachers, and children can help reap the benefits while minimizing the risks. (p. 2)… Our goal with this NOI is to gather data and recommend-ations from experts, industry, and parents that will enable us to identify actions that all stakeholders can take to enable parents and children to navigate this promising electronic media landscape safely and successfully. (p. 3)

This Notice builds on the FCC’s August 31st Report to Congress (“Implementation of the Child Safe Viewing Act; Examination of Parental Control Technologies for Video or Audio Programming”) that was required pursuant to the “Child Safe Viewing Act of 2007,” which Congress passed last year and President Bush signed last December. The goal of that bill and the FCC’s proceeding (MB Docket No. 09-26) was to study “advanced blocking technologies” that “may be appropriate across a wide variety of distribution platforms, including wired, wireless, and Internet platforms.” [I filed 150+ pages worth of comments in that proceeding, and here’s my analysis of why the bill and the FCC’s proceedings are worth monitoring. In previous posts here, I also listed all the major filings and reply comments that were submitted to the FCC in the matter.]

While the FCC’s new Notice outlines several positive impacts that media use may have for children, it then goes on to itemize a variety of concerns about media exposure: Continue reading →

Joe Tighe, an IT Infrastructure Consultant, has an interesting essay up over at Circle ID.  He takes a hard look at Rep. Ed Markey’s proposed “Internet Freedom Preservation Act of 2009″ and makes an argument that many of us here have made ad nauseum — regulation involves trade-offs and unintended consequences:

One of the main problems with the proposed legislation is the lack of recognition of costs to provide internet services. Some applications, such as video are bandwidth hogs and require significantly greater network infrastructure and associated costs to deliver when compared to the network infrastructure costs to deliver email access. Under the proposed legislation, services providers would have to charge the low bandwidth users (casual browsers and email readers) more to offset the higher costs of the video users. One result of the proposed legislation would be less consumer choice and a hidden “bandwidth hog tax”. Today, most service providers offer tiered products and pricing to consumers and businesses to account for the additional costs to deliver bandwidth intensive applications. You pay more if you use more under the tiered pricing model. These are not “discriminatory” practices. Rather, tiered pricing and application prioritization are sound business models delivering reliable, profitable product choices and unburdened internet ecommerce. Consumers and businesses currently have choices. The proposed legislation takes away choice and increases costs to consumers and businesses.

Quite right.  Read the whole essay here.