Over at Convergences I consider the writings of Polk Wagner, beginning thus:

Polk Wagner has written some worthwhile papers on law and technology. I heartily recommend those that support points on which we agree, such as T he Perfect Storm: Intellectual Property and Public Values, 73 Fordham L. Rev. 1107. 2005. This paper notes how the de facto balance between copyright and fair use has shifted over the years, and that in key respects copyright has lost, not gained, ground, and also noting that fair use is far from being the only key conceptual or practical limit on copyright. But his paper “On Software Regulation,” is a bit muddled.  It may not be Professor Wagner’s fault, for the article was written following up on the “code is law” meme, which is at bottom a rather unhelpful observation. If “code is law” then so is everything else—the laws of physics, architecture, road design, engineering, biology, the laws of physics, religion, education, insect swarming patterns, families, and so on. All of these things affect human behavior and shape and regularize society. My complaint with “code is law” is not that is not true, in a sense—but that it is very unhelpful in understanding any real problem. Many institutions and systems affect human behavior, but they do so in different ways. It is understanding the differences that will be the key to resolving any serious human problems. Consistent with this, Professor Wagner begins by noting that “code is law” tells us nothing about how code and law relate. But he restates the view that software code constitutes regulation. Software “regulates” in the sense that it makes human conduct more regular and affects the public. But is it really much like “regulation” enacted through a legal process by Congress or the FCC, or even like law described by courts? Certainly not. But the paper’s description of the differences is oddly incomplete.

For the remainder, visit Convergences here.

Over at “Convergences,” I write on the origins of the idea of a “public option” for health insurance. In part, I note:

At a superficial level, the “public option” for health care is both appealing and puzzling. From a competition policy standpoint, the entry into the market of a subsidized competitor offering a wide array of benefits certainly might put downward pressure on prices as well as easing humanitarian concerns about access. Equally obvious, though, are objections. What mechanism of accountability would exist to ensure that this subsidized entity is well run? It cannot be allowed to go bankrupt; nor is it likely that unhappy customers would have much leeway in suing it. How would it avoid driving private insurers out of the market for low-end service entirely? How much of a subsidy would it get, and how is this to be funded? Since the party and administration that sponsored this proposal are associated with the intelligentsia, however, people hoping to improve the health care system probably felt entitled to trust that these questions had good answers. Somewhere, someone deep in the bowels of the brain trust had considered these issues. Curious about this, I found myself reading one of the more serious works to address the public option, a paper by Randall D. Cebul, James B. Rebitzer, Lowell J. Taylor and Mark E. Votruba entitled, “Unhealthy Insurance Markets: Search Frictions and the Cost and Quality of Health Insurance,” identified as NBER Working Paper No. 14455, from October 2008.

Read my whole piece, here.

Over at Convergences I ponder a version of Mark Lemley’s argument to the effect that confusing patents tied up in administrative disputes are in effect the same as no patents. I write:

I recently read “Patenting Nanotechnology” by law prof Mark Lemley. Excitement about (and fear of) nanotechnology seems to be waning rather than waxing. The article nonetheless includes a curiously paradoxical line of argument about intellectual property that I think is worth setting out in detail. Presently there is some concern that there are already too many overlapping nanotechnology patents, and/or too many nanotechnology patents that cover basic research concepts as opposed to actual useful products. A number of observers have warned that these patents could interfere with ongoing nanotechnology research. This is a familiar theme over the past couple decades of patent scholarship. Of course, patents (with all their warts) were around during the nineteenth and twentieth centuries, too, when a lot of important advances were made in technology. All kinds of things from sewing machines to radios were developed, and it all worked out okay in spite of much patent nonsense being involved. Now, here is where Mark comes up with a twist on the familiar arguments. To help make his paper about nanotechnology more interesting, he seems to want to build up the case that nanotechnology is different from earlier technologies, so that the patent system might cause problems for nano that they did not cause for earlier technologies. So he goes through each earlier technology in some detail, and argues that in each case, in effect, for each of these key earlier technologies, patent protection was in effect non-existent. In the case of sewing machines, for example, the patents were tied up in litigation; in the case of radio, WWI intervened and the patents were taken over by the government. Therefore, he argues, nanotechnology will be the first important technology that is in effect actually protected by patents. He goes on to conclude that there is no reason to worry about this yet. This conclusion seems sensible enough. So… what?

With his argument that previous key technologies were in effect devoid of patent protection as a practical measure, even though they were patented, well, he’s created a mythical monster, the worm who eats his own tail. I don’t think he fully realizes this, so I will play with the idea a little bit.

For the results of my exploration, kindly visit Convergences.

On October 1 I attended a panel discussion on the use of technology to restrict the illegal transfer of copyright-protected content online. The panel talked about a new French law requiring ISPs to block users who had “three strikes” against them for illegal transfers, recent developments in watermarking and fingerprinting, and the future of fair use.

I blog further at Convergences and also supply sketches for your amusement. For it is important that you be amused.

The deadline for filing amicus briefs in support of the Federal Circuit’s attempt to trim back business method patents in Bilski passed on October 2. Many briefs have been filed, and much fuss has been made in the tech community, for business method patents are linked to the problem of software patents. Many software patents, such as Amazon’s 1-click order patent, are for business methods.

If the courts ultimately trim back business method patents, will this take some of the pressure off both tech and the patent system? Not as much as many in the tech community or the patent community would hope, for reasons I examine below. Patent reform is now being driven by business constituencies, and these constituencies are not good at all at working on big picture institutional problems. There, in short, is a not-seeing-forest-for trees problem.

Business method patents as such involve processes related to market research, loans, billing, underwriting, and so on.  Software patents are just that, patents on software–perhaps software built into hardware, perhaps stand-alone software intended to run on any computer. In a nutshell, problems have arisen with these patents. Such patents are hard to define. There are many of them, perhaps too many. Large producer firms become a target of patent owners, some of whom seem to buy up patents mainly to litigate them.

Some caveats: These problems are not unique to software or business methods; they also arise with biotech, nanotech, bioinformatics, and so on. The problem is one of degree, not of kind. And no one has shown conclusively that business method or software patents are harmful on balance; several studies of software patents suggest that the good and bad balances out, or that software patents are a weak positive.  Nevertheless, there are problems, and solutions are being sought.

Many solutions look, as does Bilkski, to subject matter limits and to sectoral reforms–getting rid of software or business method patents, or tailoring the law just for them. Another type of solution is more general, affecting the patent system as a whole, like changes to the presumption of patent validity.

Sectoral and subject matter reforms can get traction inside the Beltway. This approach promises gain with no pain; if software and business method patents just go away, pharma and biotech are unscathed, and might not bother to oppose the changes.

Note, though, that getting rid of business method patents (the best line of argument is probably that these are ultimately, like a piece of music or a book, playing to a human and not to a machine audience) does not necessarily get rid of software patents. Software’s main purpose is to make a machine do something involving electricity and optics and such; whatever the literary qualities of source code it makes little sense to distinguish it from object code (nor would doing so get programmers off the hook if all they did was produce source code… they would simply face liablity for contributory patent infringement as opposed to liability for direct infringement, on the same principle that the maker of a drug that turns into a patented product in the patient’s stomach faces liability for contributory infringement).

Furthermore, any sectoral approaches leave biotech, nanotech, and technologies beyond out in the cold, which makes no sense from a policy standpoint. It also might tend to be obsolete rather quickly, like the chip mask laws. Sectoral differences can come and go. For the moment, pharma clearly needs patents because it has big up-front research costs and must recoup those. But this might change… if medicines were tailor-made for individual DNA, for example, expensive clinical trials would look quite different and might become nearly obsolete. Software could change, biotech could change, nanotech could change, finance could change.

More generally, finding sensible rules to limit patentable subject matter is likely to be an uphill battle.  Most economic studies find that the patent system as a whole is a positive for both developed and, generally, for developing countries, though for some sectors (software) a more weak positive than others. So one doesn’t necessarily want to default it to “off” for new technology. A law intended to cover new technology by its nature cannot always describe exactly what that technology should or should not look like in advance.  A sectoral approach is doomed to make rules by hindsight, a particularly unsatisfactory outlook for forward-looking innovation. The law needs to be general… and a general law is likely to catch a lot of borderline stuff.

The better approaches to reform therefore are big picture changes that look at how to improve the system as a whole. These include adding more courts to hear patent appeals (so the Federal Circuit has someone to talk to); increasing the use of fee shifting in the patent system (or the legal system more generally) so that defendants are more willing to litigate strong cases; and rolling back the presumption of patent validity. But companies for which the patent system is a positive now are opposed to any change.

The better, more general, approach is therefore doomed, for the present, to take a back seat to fussing over whether or not an idea is too abstract to be useful; exactly what a patentable “process” is; whether source code should be treated like object code; whether code running in a machine is different from code merely being transmitted, and other arcane inquries, the results of which are unlikely to prove durable.

Having no dog in this fight, I can only watch it all unfold, and reserve the right to change my mind about any of these after reading the next 100 studies.

Further Reading:

“Patents and Innovation: Friends or Foes,” by Francois Leveque and Yann Meniere.

“Defining Software Patents – A Research Field Guide,” by Anne Layne-Farrar.

Josh Lerner and Feng Zhu, “What is the Impact of Software Patent Shifts?:  Evidence from Lotus v. Borland.”

Martin Campbell-Kelly, “Not All Bad: A Historical Perspective on Software Patents,” Michigan Telecommunications and Technology Law Review, Vol. 11.

Iain Cockburn, Megan MacGarvie, “Entry, Exit and Patenting in the Software Industry.”

Anne Layne-Farrar and others, “Do Companies that Patent More Today Have Higher Revenues Tomorrow?”

I ponder Canadian health care and directions for U.S. reform on the Convergence Law Institute Blog here.

The Obama administration has been greeted with enthusiasm by scientists who see the potential for “research-based policy.” Reason, not ideology, will govern. The New Scientist, among other zines, headlines “Let Science Rule: the Rational Way to Run Societies.” (May 28, p. 40-43) This is part of a larger theme: Behavioral economics is taking off.

One commonly offered example of policy fixes that are crying out for a research-based approach is sex education. Abstinence-only sex education programs are well-taxpayer–funded at the federal, state, and international level. And they don’t work, either for HIV prevention or pregnancy prevention. What advocates of abstinence perhaps forgot is that the social context in which abstinence was preached with some success to upper-middle-class Victorian young ladies (not the young men, even the Victorians had more sense than that) were perpetually accompanied by adult chaperones. (The result was horrendous… the innocent young ladies would ultimately be infected with venereal diseases by their husbands, and they and their babies would suffer and often die without ever being told what was wrong or how it could have been prevented–bringing us to an important chapter in U.S. free speech history, as the “birth controllers” and other advocates like Katharine Hepburn’s mother fought for an end to the silence). Done. Criminal law also could reap substantial benefits from a research-based approach. I have written elsewhere about the problems of ignoring deterrence research in copyright.

But it gets harder. The key problem: There is research, and then there is research. Much of it is done by advocates or just people who are careless with their assumptions. Some of these people might not even be aware of the extent to which they are advocates.

Examples: One is the EU FLOSS Report, which I was reading the other day. Some interesting data, but the authors are so busy making the case for open source they neglect key questions. Such as, just for example, how do you measure the contribution to GDP of volunteer labor? Can one simultaneously express concern (as the FLOSS report does) about the EU’s low levels of investment in software, and delight that open source reduces the amount that firms must spend in software research or on software? If one wishes to make the cheery prediction that increasing the take-up of open source software within Europe will close their innovation gap with the United States, shouldn’t one consider that perhaps the United States might simultaneously increase it’s take-up rate if it appears to be a good idea? Just why does the United States seem to be more innovative than Europe anyway?

And so on. On the problem of result-oriented studies, New Scientist quotes Laurence Moore of Cardiff University in the United Kingdom: “They’re almost designed to show that the idea is a good idea … Rigorous evaluations are perceived as threatening rather than supportive of better policy.”

Sound studies that run contrary to popular ideas are often simply ignored. Abstinence policy is one example. But the problem is not confined to conservatives. Another example is Head Start. This is the classic 1960’s early childhood research-based triumph. Except the only study showing lasting results from Head Start was an study designed by the originator of the program. Later studies continue to cite the original study, and to cite studies citing the original study, and so on. The results showing long term gains have never been replicated. This problem, too, is recognized: “Assessing social policies using randomised controlled trials did start to take off in the US from the 1960s to 1980s. But the practice has declined, partly because policy makers became disenchanted when the trials did not endorse their brainwaves, according to Sheila Bird, a statistician at the Medical Research Council Biostatistics Unit in Cambridge, UK.”

This raises the question of why politicians and many other policymakers stick with such determination to their agendas even in the face of contrary evidence. Another way of asking the same thing: What is ideology and what does it do for us? I offer some thoughts. Are people just dumb? Is it ego? People must “save face” and are unwilling to back down from a position once taken publicly?

Some of our willingness to go with general principles is a good thing. A vast amount of human experience gets summed up and expressed in the form of ideology. The United States Constitution is an ideological document. Yet it is also based on human experience with hundreds of years of monarchy, condensed into few words. One does not, and ought not, lightly set such things aside. Example: There is a not-well-enough-known Supreme Court case, Buchanan v. Worley. At issue was the constitutionality of racial segregation laws. The supporters of the laws were filed many research reports from highly progressive social scientists, purporting to prove that segregation was good for people. Quite rightly, the Supreme Court dismissed the research and favored the principle of equality in the eyes of the law. Segregation statutes were unconstitutional. Without the Court’s willingness to declare them so, the United States could have developed a full-blown apartheid system along the lines of South Africa.

Certainly it would be good to scrutinize the human experiences that go into our ideologies and rules of thumb carefully. But this cannot always be done. I do not wish to be a gulag guinea pig.

Also, there are general, as well as particular lessons to be drawn from research-based policy. One general lesson appears to be that many bright ideas fail. The excellent book Seeing Like A State elaborates on this theme. But there is another. Why is it the need for research-based policy so pressing and not, say, just for example, research-based ideas for small business or how to cook a good hard-boiled egg? Why is the need usually in the public sector, not the private sector? When research is needed in the private sector, such as medicine—why is it taken up readily, egos set aside, while the public sector has been so stubborn?

This is not merely an accident. In the private sector, failure often has natural and severe consequence for those who support or act on a bad idea. In government, failure often has no consequences except embarrassment for those who act on or support a bad idea. Research will continue to be ignored without accountability. Which brings us back to ideology; a gentle rule of thumb favoring action through the private sector, not the public sector, may be more research-based than some would like to think after all.

My original post is here at convergence law.com.

At George Mason University a while back, I was treated to a preview of some economic research; this time, a paper studying whether or not consumers read the fine print. “Does Anyone Read the Fine Print? A Test of the Informed Minority Hypothesis Using Clickstream Data.”  Authored by Yannis Bakos, Florencia Marotta-Wurgler, and David Trossen. The conclusion: in online software sales, no one does. Barely anyone. Less than one percent.

Well, of course not. Do you? (I skim them, personally, but most of that is me wearing my legal scholar curiousity hat, not me as a consumer. I read contracts with moving companies rather more carefully, as a consumer. Otherwise, not really.)

But what does it all mean? According to the authors “the result casts doubt on the validity of the informed minority argument in a market where it has been invoked by both theorists and court; it also raises questions about the likely effectiveness of policies mandating increased contract disclosure to alleviate market failures.”

Actually, the study doesn’t quite do either of these things convincingly. For starters, the data set is too limited. It’s software sales only. And of those, only a small subset of software sales, since purchases through sites where you MUST scan down and click on the EULA were excluded–that is, most mass-market software. However. let us set aside this as a quibble, for now. I know I don’t read online or offline contracts or policies very often … or in very great detail. Most people seem to share this trait. So there is something here, although the data might not capture it very well. Let us go back to basics.

At the level of theory, consumers do not read contracts because it makes little sense for them to do so. Harm rarely results from not reading. It is “Rational ignorance.” But why does harm result so rarely? To explain this, along comes the “informed minority” theory. A few consumers do read, it was argued. For the theory to work, though, the minority of consumers needs to be enough to discipline sellers. Since the number might turn out to be very, very small in practice… do we toss the theory? And… more importantly, do we need more a more careful, watchful regulatory eye on consumers online and offline as a consequence, as some might suggest? From this data to theory and thence to policy is a much, much more giant step than first appears.

Because the bottom line remains. Every day there are billions and billions of transactions offline and online. Hardly anyone is reading the fine print. As Tom Hazlett astutely pointed out at the event, offline, there is often nothing to read. Do you write a contract when you sit down to eat in a restaurant? No. Many exchanges involve such implied contracts. Many others implicate statute law, which no one reads in their capacity as consumers. And yet more involve actual contracts which no one reads, or the meaning of which is not clearly comprehensible even to those who do read closely. And yet, overall, remarkable benefits come from this array of exchanges. And … the probability of actual harm linked to not reading the fine print? Tiny. From one standpoint, the “problem” is a non-problem.

But it is a fascinating puzzle nonetheless. If our ignorance of the content of these contracts is rational, why is it so? The habit of non-reading clearly present an opportunity for contract drafters to put all sorts of surprising nonsense in the contracts… Why is it not there?

Some think it is there. The fine print might include an arbitration clause, for example. Is this a mean trick to play on consumers, something that if one knew it was there one would go to another seller? Probably not. Studies suggest that arbitration awards tends to favor consumers slightly. Sellers put them in to avoid litigation costs (a benefit to consumers as well), not to harm consumers. What other devious stuff is in the fine print? Limitations on consequential damages? These are the damages of the sort that follow from “for want of a nail, a horseshoe was lost, for want of a shoe a horse was lost, for want of a horse… ” and so on. Well, if there were no limits on consequential damages, many products quite likely would not be offered, or not for long, or they would cost far more. This isn’t a good example of fine print harming consumers, either. Privacy policies? Again, real harm is rare and there are benefits to consumers from information sharing, as well (unless you are a theorist who values privacy in itself… but this seems to beg the question).

Some mechanism does discipline sellers. There is a potent force shaping these transactions. After all, sellers don’t stick the price of the product or other key information in the fine print (If prices were in the fine print, I bet people would read it then, so long as they knew it was there; if not, customers would vanish, perplexed, since no one would expect something really important like price to be in the fine print, and would be unlikely to look for it there unprompted). In the vast majority of cases, only stuff that really, really almost always does not matter gets in there, and it is pretty benign. There is a very, very low probability of mischief from this stuff. But Why? Why? Why? We hate mysteries.

Perhaps a partial answer is rooted in legal, rather than pure economic, thinking. Think of the contract or license not as one aspect of the whole product, like the color, but as something that has been bundled with the actual good (software, a restaurant meal, a lawnmower). Why is it there? People are looking to reduce risk. What if this happens? What if that happens? What if there is a dispute… What if? Both buyers and sellers want low risk and predictability. Consider again markets with no written contracts at all. Why are restaurant processes and customs for service and pricing and menus and service so much alike? The comfort of certainty for both sides. When there is a written contract, that force remains powerful. Contracts are shaped by hundreds of years of legal precedent. Writing one of these is a very conservative undertaking. If there is something weird in there, it presents an unknown element. What will a court do? We don’t know. And this would be bad. The instrument would no longer serve its basic function as guide to what is going to happen. Demand for certainty is so strong, and the market for contracts so responsive to this demand, that we can get away, most of the time, without reading. (Again, though, the mystery… why, why, why… how does signaling work here?).

One of the strangest ideas to have taken hold of the legal mind in the last century is the idea that contracts of adhesion are bad, because consumers do not get to negotiate the individual terms. Who the heck wants to do that? It would make every purchase an endless research process. Do consumers do better when they negotiate with, say, used car salesmen? No? Then why would we want to negotiate with software salesmen? Shoe salesmen? And so on.

Disclaimer. The fine print: This is yet another half-baked theory. Enjoy.

My original blog is here

Scott Gottlieb reports in the WSJ online on provisions in the fiscal stimulus package now before the House that would restrict the drugs doctors could prescribe based on cost effectiveness. This entails top-down assessments not only of how good the drugs are, but what an additional year of a person’s life is worth. Rather ironic, in an environment where some argue in favor of a government controlled health care system because health care is a “right.” His article also points the way to a better solution–let private companies that study the effectiveness of treatments publicize the results.

I have not looked at the details of this plan, but it seems to me that especially if it does not leave patients the option of paying out of pocket for alternative treatments, it is ripe for consitutional challenges, under Griswold that protects rights to use contraceptives, for example. It will be interesting if restrictions on speech, prohibiting doctors from telling patients that alternative treatments are available that they are not permitted to prescribe, eventually accompany the the attempt to restrict prescriptions.

Geese are flying overhead. Leaves are orange. The election is over. A historic moment. And I will be optimistic, and hope that although the economics of the moment seems to be a return to things past… to the 1930s, it will turn out to be otherwise, for a good bit is known now that was not known then, whatever one’s ideology.

This column offering thoughts from Europe anticipates a wave of hostility to free markets. Well, that would perhaps not be that much of a change. I will venture far out on a doctrinal limb here, why not, and venture to ask where the free marketers went wrong? [Wait, you mean that they did something wrong? Can that be possible? Surely not]. (There is a good bit that went wrong, of course, that is not the fault of markets or their advocates… the fact that markets are not perfect, problems with rent-seeking, the fondness of the press for dwelling on the negative, and so on). But there have been consistent problems with our presentation, which I diagnose as follows:

-Use of nineteenth century models and rhetoric, and too much movement jargon, much of which is pointlessly disparaging and negative.

-Failure to empathize with people’s real concerns, such as concern about the environment or income disparity. There is the perennial addiction of wonks to Reason-and our awkwardness with emotion that leads us to dismiss it as irrelevant. Makes it look like we don’t care–a false impression, but a real factor none-the-less.

-Specializing in the defense of unpopular causes, whether it is free speech, the super-rich, or the large company of the day. Advocates tend to focus on these causes in the hope of getting attention as contrarians-but as a result the image of advocates for the market becomes identified with unpopular interests, and our energy gets expended in short run battles.

The solution? Well, I’ll save that for another day.

Meanwhile, how about this for a thought? In recognition of the nation’s leaning to the left, I’ll make a concession. Have some social programs. Have all the social programs you want. But there is one thing that I will insist on. Just one thing.

Y’all will have to be ruthlessly honest about how well the programs actually work. About the unintended consequences. About the rules that pile up costs with no benefits. About the forces and factors that lead institutions like public schools or regulatory agencies to fail.

If you can just manage a genuine curiousity about whether the plans that you dream up to help people will actually work, then we’ve got a deal. I promise that if the programs don’t work, we can try something else. Institutional re-design. Heck, maybe even a market.

But I don’t think anyone’s going to go for it.

Peter Ferrara, offering us a taste of the dismal science for the American Spectator in reviewing a recent book’s economic predictions for an Obama Presidency (but what about civil liberties?). Hey, maybe they’ll send out more economic stimulus checks! We used ours this year to pay down a tax bill. It’s like the circle of life. (Other references to the Lion King will be swiftly and severely dealt with).

Arnold Kling on the Sergey Brin effect and inequality:

Income inequality in the United States consists of two gaps. The first gap is an upper-lower gap, between those with a college education and those without. The second is an upper-upper gap, between those with high incomes and those with extraordinarily high incomes. The upper-lower gap reflects changes in the structure of the economy. New technologies place a premium on cognitive ability. Harvard University economists Claudia Goldin and Lawrence Katz have dubbed this “skill-biased technological change.” In today’s economy, more value added comes from knowledge work, and relatively less comes from unskilled labor.

Kling goes on to discuss policy options that might address inequality, such as tax and immigration reform options.

Inequality is one of the most fundamental and divisive political issues around, the root of considerable discontent. It offends many persons’ sense of fairness. Much inequality of fortune stems from luck–where one is born, for example. Growing inequality might be heralded as a forerunner of an H.G. Wells Time Machine world where humanity is divided into two classes that eventually become two species. It might come about as a result of exploitation, in which one group becomes wealthy at the expense of another. This clearly happens in the case of slavery; according to Marxist theory, of course, exploitation is the rule rather than the exception.

The free-market answer to these points is simple enough. Inequality in a market economy should not matter. In a market in which everyone has equal rights, trade makes everyone better off (Marx being wrong on his theory of value). Some have a larger piece of the pie than others, but the pie keeps growing, and there is more for everyone. Inequality might grow, but as the rich grow richer, the poor also grow richer. This argument is nicely made by Cox and Alm in Myths of Rich and Poor. Earlier, Hayek notes that yes, markets reward results, not merit, but from the standpoint of a population, it is results that matter–we want houses that don’t fall down in a strong wind, even if the architect who designs them is lucky rather than good. Furthermore, luck is not entirely beyond one’s control.

Building on this set of argument, it is common for libertarians to set aside concerns about income inequality as a result of “envy.” Whatever it is, it seems to be nearly universal; I recall (and am too lazy to hunt down and link to) a study a few years back showing that populations report higher levels of happiness in countries with less inequality. (There must be a limit to this at some point, one would expect, surely a population comprised almost entirely of people some of whom are starving, where others are merely malnourished, would not be particularly jolly).

Game theorist Axelrod seems to have tracked down the root of the problem. In his various tournaments, he sometimes set up games in which he asked participants not to be envious, that is, not to think of themselves as doing badly even when their opponent in a given game was doing better. He found that people would do it anyway. He hypothesizes that people want to know how well they are doing as compared to some standard, and in the absence of any other standard, are irresistably drawn to compare their results to those of others.

So are we stuck with dealing with inequality as a “problem,” making policy choices that move pieces of pie from the rich to the poor, even though this might mean that overall the pie grows more slowly–or not at all–or even that it shrinks? Hopefully not the latter. Must we adopt a religious outlook, in which wanting is set aside in pursuit of enlightenment, that is, zen, or perhaps a dose of Calvinism, in which all is predestined, or all serves some grand being’s larger plan? I find this stretches my own credulity too far. So teach economic history, and hope for the best.

Along these lines, maybe it was better for capitalism when there were more grim socialist examples around.

I remark briefly on the commentary “how smart is Palin,” noting her mispronunciation of “verbiage” and “pundit.” I’d suggest that observers be wary of assessing qualifications based on this kind of thing. Example: one very well-educated person I know, whose IQ is high enough to qualify enough for Mensa, mispronounces several words because he was socially isolated for his formative years and formed the habit of saying them before he had the chance to hear others pronounce them correctly. I don’t mean he was shut in a closet, which wouldn’t be relevant as Palin clearly hasn’t been, but just that he lived in a rural area where most of his peers were relatively uneducated.

In any case, it is curious that the anxious analysis of Palin, stemming from the fact that she is relatively unknown, seems to turn on characteristics of social class rather than on information about her decision-making as an executive. What significant choices about things like taxes, education policy, resources, and so on was she faced with as governor? What did she do in those situations? Why? What were the alternatives? Many voters probably do elect candidates based on how someone talks or looks, but mightn’t it be nice for a change for the talking classes to assess a candidate on policy? Would she make a better political candidate if some professor had had a couple months to drill her on vocabulary and delivery, like the hapless flower seller Eliza whats-her-name?

A second curiousity is the very common assumption that IQ is relevant to the ability to be a decent President. I’ll have to explain what I mean by this at some length, as I’m aware this is heresy of sorts for intelligentsia. There seems to be some sort of hankering after rule by some of Plato’s philosopher-kings, natural or otherwise.

I have met a good many intelligent, educated people who would make spectacularly bad Presidents. An alarming number of them in fact make quite bad whatever it is that they are supposed to be, professors, for example, or parents. Some have marked neuroses–they are paranoid, dishonest, depressive, addicted, passive-aggressive, and so on. A good number are too immature or insecure to admit or identify other’s strong points as complements to their own weaknesses, or admit their own errors. Others can’t shut up to listen to someone else talk for two minutes together, and if they do happen to fall silent are busy thinking up what they are going to say next, rather than actually taking in new information. Then there are others who lack the moral courage to actually follow a line of reasoning or argument, if it would mean the disapproval of their peers or, worse, their students. Others are so accustomed to being praised for the cleverness and quickness of their reasoning that they do not stop to check the facts upon which that reasoning is based. A significant number are hide-bound-incapable of exercising their judgment to make an exception to a general rule, even when that means disaster.

Scholars whose work makes a real contribution (Bob Summers of Cornell is one example known to me; Richard Epstein is another) are as a general rule smart, but cleverness is not the most marked characteristic of their personalities. One characteristic is boundless curiousity that drives them to question their own views as well as others in order to get to the bottom of things, not minding that they might discover themselves to be wrong; their views as a result may shift over the course of a lifetime. Ego and impressing others is less important to them than knowing the answer. Another characteristic is an appetite for facts–historical, scientific, economic, and so on. Another is a sort of in-grained disinterest in attacking straw men–their response to a poorly worded challenge is not to take the opportunity to mock the challenger, it would be to rephrase the challenge cogently, giving the challenger the benefit of the doubt, and then to respond to that. I could go on, but I won’t. The point is just that even in an area where intelligence supposedly matters so much, academics, it isn’t everything and indeed all too often turns out to be not much of anything, with the brilliant head of this or that class whipping off an article or two, or dozens, that are frankly unreadable and that twenty years from now will be entirely forgotten.

Leadership, likewise, seems linked to qualities other than intelligence. One is confidence and maturity. Another is the ability to attract, tolerate, and mediate among advisors of differing opinions–including some dissenters and eccentrics. Being surrounded by yes-men or opportunists, consistently placing loyalty above ability, is a disaster for a leader. This has, however, little to do with intelligence. Personal charisma does play a role, associated with the ability of a leader to empathize with individuals or to appear to–a noted Bill Clinton trait. So does being good judge of character. So does guts.

Last but not least, it strikes me that the apparently endless analysis of Palin’s more superficial characteristics is likely to miss the mark because it misses an obvious clue. Palin’s political trajectory is rather out of the ordinary. There is, therefore, quite possibly some striking quality that she possesses that helps to explain this–one candidate quality being raw moral courage. For that matter, analysis of Barack Obama and his similarly unusual trajectory might benefit from a similar examination; what has he got that people want? I am skeptical that at the end of day intelligence matters to followers as much as other marks of character.

http://penny-arcade.com/comic/2008/9/26/

Speaking of snakes, I am just returned from a camping trip along the Appalachian trail in the Michaux Forest, quite out of wireless reception range. Several days’ heavy rain had washed the forest clean, left the moss glowing green and the mushrooms, salamanders, crayfish, and frogs quite content. There one combats the same problems confronted by earlier settlers–mice (and the snakes they attract), staying dry and tolerably warm, the production of decent meals, and keeping small children from wandering off into the woods. Why do some people enjoy briefly returning to this world? Despite being one of those people, I can’t say. Now I am back and my day is easy and comfortable (comparatively), with time to spare contemplating the meta-structures of finance, property, and capital. Let’s all hope these structures are not nearly as fragile as our confidence in them, which, judging from the tone of remarks at last week’s ITIF conference on innovation, has fallen quite low.

In particular, the dominant concern seemed to be involve U.S. competitiveness in the face of developments in India and China, low growth in jobs and real wages, and so on. One commentator described the last ten years of liberalized trade as an experiment in moving jobs overseas in the hope that consumers would reap considerable benefits, which he seemed to think had not come about. While every event needs a little pessimism, this particular low mood seemed to have spread to nearly everyone. (Intellectuals seem to be as susceptible to mass psychology effects as anyone else, if anything perhaps more so, because they live in their heads). I would not have been surprised if the attendees had spontaneously all broken into tears (oh, all right, I would have been).

ITIF’s policy proposals for the next administration suffered somewhat from being embedded in this glum context. Nonetheless, there are some good ideas there. In order of merit, the best ideas include:

1. Letting foreign grad students in the sciences and tech fields get green cards.

2. Let companies expense IT investments in the first year.

3. Significantly expand the R&D tax credit (overall tax reform and reductions would be preferable, but that isn’t happening, so this is a third best).

4. Establish a federal office of Information CIO. Not, I hope, to inform what goes on in the private sector, but to follow it, on the off chance that systems and records might be kept so that we might begin to understand how leviathan actually works (or doesn’t work), or even do something about improving it.

Next come ideas that I would count as worth pondering further, with the caveat that one might do more than good:

5. Reform the Patent System. What a can of worms that is…

6. Implement an Innovation-based National Trade Policy. ITIF seems to be supporting more aggressive WTO actions against nations that do not do such a good job of IP enforcement, for example. I think attention to this policy issue makes sense, but until the U.S. winds down agricultural subsidies and pressures Europe to do the same, we had better be wary of starting a more punitive trend. Better to focus on coming up with blueprints for better low-cost enforcement, carrots rather than sticks. Our own enforcement methods are rather archaic, at that.

And a few ideas that are not so good. However much I have benefited from Rob Atkinson’s sense over the years, I am skeptical that we should:

7. Create a national innovation foundation.

OR

8. Implement a national broadband policy by a) adding broadband to universal service coverage (even if reverse auctions are established) b) funding joint federal-state initiatives or c) initiate educational programs on how to use broadband. The idea of making more spectrum available, though, is good sense. (See, for example, a recent paper of mine at http://www.ipi.org/, “Should the U.S. Favor a Free Nationwide Wireless Network Provider.”

Overall, one ought not denigrate the contribution that innovation has made to the economy. But micro-tinkering with federal policy in support of innvation in the technical sense is less likely to yield real growth than a) figuring out how to address problems with the federal budget without increases in taxes b) looking to innovate public institutions so that they do not cause more problems than they solve c) avoiding disastrous commitments to entitlements and d) seeing the opportunity and promise in the growth of India and China (as speaker Kathleen Wallman alone pointed out). Otherwise we go the way of Europe, which has all the national plans, policies, and foundation conceivable, and where they are holding conferences at which speakers ponder why their own innovation is lagging behind that of the United States. Yes, tax rates do matter. And it is not, and never will be, a good thing for the United States to try to return to policies that leave more hungry children in Calcutta.

I reviewed the Veoh case for DRMWatch recently:

The user-generated video site Veoh achieved a victory in court on August 27th when California District Judge Howard Lloyd ruled that it was entitled to the protection of the DMCA’s safe harbor provisions. Veoh was accused of copyright infringement by IO Group, a maker of adult films…

Like eBay v. Tiffany, another case in which one might trumpet a tech-side win… the tech gets at least some protection from liability. But only in a context in which the tech is already taking substantial steps to help the plaintiff trademark/copyright owner with their enforcement problem, steps that would have been hard to conceive of a decade ago, and that many would have grandly declared to be too ambitious and too invasive for online services to attempt. Prediction: the case law is now much more mature, but the business side is just getting started. More and fancier filtering to come.

It’s funny and scary how many of our grand ideas about justice, rights, freedom, fairness and property come down to what we can become accustomed too.  Bad, in the sense that one can easily lose the customary baselines against which freedom is measured in a generation or so. Good, in the sense that one is not limited to identify freedom with just one historic mythical Golden Age; a free society has somewhat more leeway.

I’m fond of paradoxes these days. Tedious things. Almost as annoying to other people, I am sure, as those characters (you know who you are) who make puns all the time.

My recent comments on a developers experiment in combatting software piracy, posted here.

And an absolutely brilliant adventure in free speech marital event planning, here (OT).

Recently for DRMWatch I commented on the Court of Appeals ruling that Cablevision’s remote digital video recorder service did not directly violated copyright. The Court, however, did raise the possibility of indirect liability.

One possibility–perhaps the most sensible outcome–to avoid further litigation, Cablevision will negotiate a license allowing the new service–and content will offer a reasonable price, because their victory on indirect liability grounds is not by any means assured. Indirect liability depends on their being direct liability, and this takes us back into the realm of the Supreme Court’s decision in Sony-in which the Court ruled that time-shifting was a fair use. This is probably not territory that content is all that anxious to revisit, although Sony does leave them some wiggle room. (There is also a problem in the law… some theories of liability depend on whether the performance is “public” or “private,” and this distinction, while useful enough at a time when the only means to serve a mass market was to serve everybody at the same time from the same copy (a concert played in a crowded theatre, for example), is no longer particularly coherent). At the other end of the possibility range is the stupid outcome. There are no further negotiations; content sues, doesn’t have their heart in proving direct liability, and loses. Every manner of remote copying facility for everything springs into being, undermining not only content production but also Cablevision’s service, licensed or otherwise. And then there is more compulsory licensing, which no one likes. Unlikely? Yes, but stupid enough to be real!

Another recent case worth note is eBay v. Tiffany. Another widely trumpeted victory for the Internet in which the result is not quite so one-sided as a bare recitation of the holding suggests.

Enjoy.

Read Recently: The Marriage of Elizabeth Barrett Browning and Robert Browning. A remarkable and very non-technological story.

Also: Most of John Dupre’s book Human Nature and the Limits of Science. This turns out to be a critique of two models of human nature, one derived from evolutionary biology and evolutionary psychology, and the other derived from economics. Dupre favors a view of human nature more closely linked to culture, acknowledging the value of diversity. This is a topic well worth writing about; unfortunately, this particular book would have benefited from a vigorous pre-publication critique. Reading it is a lot like having a very frustrating dinner conversation with Dupre, in which interesting arguments are stumbled over, explained only partly, and then abandoned.

The first question that occurred to me is to wonder why and whether a critique of these two theories of human nature–one based (however loosely) on evolutionary theory, the other based on economics–belong in the same book. Well, thinking about it, there is an explanation of sort: Both theories enjoy a fairly significant academic following; both appeal to “science;” and for Dupre, arguably, both theories have political or policy implications. In his mind, these policy implications are conservative; and one suspects ultimately that is what lead him to lump the theories together in one book–he dislikes what he sees as the policy implications of both.

But at least at the beginning, the theories he targets are dissimilar enough that he critiques them separately. Evolutionary psychology first. This theory is a sort of psychological companion to evolutionary biology. It postulates many aspects of human nature that continue to affect our lives today evolved in the Stone Age.

Dupre starts with a critique of reductionism. This is familiar ground to those who have read much philosophy of Mind or Science: Paul and Patty Churchland; mind/body dualism; set theory and its limits. Is what the word “donkey” really means just the set of all actual donkeys? How does one know what gets into the set? Must the word “unicorn” then refer to the set of all actual unicorns? And intensional states (belief, thinking, and so on). Dupre doesn’t go over all of this ground, though; he only needs to make the point that there are more options than reductionism and mind/body dualism. Fine.

Except that unless evolutionary psychology is a reductionist argument–that is, that its proponents want it to be a complete theory of human behavior at the individual level–the case for or against reductionism seems to me to be beside the point. And evolutionary psychology as I am familiar with it is not trying to be all that complete. Dupre needed to come up with a few examples of the more ambitious evolutionary psychologists to give what he does any weight.

His next argument against evolutionary psychology is that it is largely an empty suit. The response of the evolutionary psychologist to any observed behavior is to propose an evolutionary explanation that affects our mental capabilities to this day. Men and women court one another for evolutionary reasons; so some evolutionary psychologists have also proposed an evolutionary explanation for rape. Less controversially, parents tend to favor their own offspring; men tend to be more violent than women, and so on. But this theory doesn’t really explain actual individual instances of the behavior in the present or deviations from it; nor does it have any predictive power. When it gets down to it, one needs to know a good bit more about cultural factors; institutions, the immediate environment, and so on. He also notes that the theory leaves much unexplained–homosexuality being his choice of example (though how he knows that there is no evolutionary explanation for homosexuality a priori, I cannot imagine; there may very well be one, especially as it is common to many species).

While I agree with aspects of this critique, I don’t think that it is as devastating as he hopes. His point that theory can be an empty suit unless there is a way to test and prove or disprove its hypotheses is well taken. But my expectations of a general theory of human behavior don’t lead me to expect that it will have much predictive power in individual cases or complete predictive power; we are too complex. I expect that most evolutionary psychologists would readily concede that. And it doesn’t seem to me that the cultural explanations have more predictive power as a general matter, either. Each theory has its own sphere in which it has more or less. An evolutionary psychologist would note that most violence against children is perpretrated by stepfathers against stepchildren. The trend is likely to continue into the future. In the United States, spaghetti is usually eaten with a fork. This trend is also likely to continue in the future. Evolutionary factors contribute perhaps more to the former than to the latter; cultural factors more to the latter than to the former. Neither one has much to say about individual cases or deviations from the pattern. Of course not… these are general theories. The general theory of epidemiology has much to say about how quickly a certain flu might spread through the population, but much less power to predict the outcome of individual instances of exposure.

Ultimately, Dupre’s concern is that evolutionary psychology could be used as a pseudo-scientific basis for policy. Unfortunately, he doesn’t have an actual example of anyone doing this. Furthermore how it could have that tendency given that he thinks it is an empty suit is a little difficult to see. And the example he constructs as a hypothetical, that people who think of rape as an evolutionary strategy are likely to respond to it as if it were more justifiable, strikes me as unlikely. Acknowledging that our sinuses evolved with the drains located where they ought to be if we were an animal that walked on all fours doesn’t mean that one is more likely to view sinusitis as a good thing.

He next proposes explanations for human behavior more based on culture–and points out that culture evolves much more quickly than genetic material. Again, though, I don’t suppose there is much more in what he says that an evolutionary psychologist would disagree with. (Furthermore I am 80% without looking it up that he is getting the science wrong. The reason he gives for evolutionary theorists’ focus on the Stone Age is that genes evolve very slowly… but as I understand it the Stone Age comes into focus because it was the last period of time in which the population was low enough for significant genetic evolution to take place; in very large populations, mutations for good or ill just get swamped. It doesn’t have much to do with genes evolving slowly or quickly.)

Last but not least throughout he seems to want to distinguish evolutionary psychology (as a bad theory) from evolutionary biology (a good theory); but I am not so sure that is all that easily done, even for non-reductionists. Some stuff (organs) pretty clearly belong to biology; but what about pain? mating behavior? etc. The bottom line is that he does not touch the underlying draw of evolutionary psychology–that sense that there is something about human beings that remains as a defining factor over time–despite outlying examples and cultural veneers and remarkable diversity. But he is quite right that the theory lacks anything remotely resembling rigor.

And then he comes to economic theories of human nature. 1) He’s gotten hold of theories of perfect competition, and thinks that that is all very well and good, but as soon as one gets to the real economy, then of course it all goes to hell. He seems concludes from this that if markets are not perfect, they are no good at all and it is back to square one on policy… which does not in fact follow. First mistake. 2) Then he notes that the premise that people act rationally in their self-interest won’t do as a theory of human nature; if one takes this to mean that a person is likely to do what seems to him to be the best option at the time he does it, the theory is largely empty. So he assumes that postulating rationally self-interested behavior must go along with some kind of theory about the things that people are likely to want to do and value. Mistake number two. In fact, the theory of rational self-interest does not incorporate any such additional input about values or preferences. It is perfectly happy being empty… each individual’s well-being is then defined by his own set of preferences chosen by him, not by someone else. It isn’t a theory of human nature at all. It isn’t supposed to be. It is an uncontroversial premise used to learn other things about human behavior.

He has one nice observation in there. He notes that economists are likely to spin out long mathemetical proofs of things based on assumptions about people that are hopelessly simplistic–that all firms sell exactly the same product, that all people have the same information, that there are only two firms in the market, etc. etc. and then propose policy based on these unreal models. This is indeed a fair point. One might add that this nonsense occurs just as often in support of left-liberal projects as conservative ones.

Bottom line: we have another critique of the supposed foundations of “conservatism” by someone well qualified to undertake it, but not overly familiar with it; and evidently not on reasonably good terms with a single exponent of the theories that he critiques, such that he could do a reality check of his loose impressions of the theories. I wonder if there is an evolutionary explanation, or a cultural one?

TCS Daily on June 18 ran an essay by me on regulatory policy. I excerpt thus:

In a sense, both models – market and regulatory — are flawed. But there is a difference. For every theory contending that markets fail, there is usually an answering argument that they tend to self-correct. Once, economic theory worried that markets would fail to fund “public goods” like lighthouses—until more careful economics revealed markets doing exactly that. More theory pointed to the evils of monopoly. But in reality a monopolist reaping substantial profits is a big target, with every entrepreneur looking for a substitute good or service. Many of the markets’ self-correcting mechanisms are simple Darwinism. Poor investors and badly run businesses lose (their own) money until they go under. Technology and other factors that bring change keep even established firms on their toes. In contrast, self-correction is not a common response to regulatory failures. There is no good explanation for how an agency or a system of rules can be designed to systematically succeed or self-correct.

On June 10 at the National Press Club, the Federalist Society for Law and Public Policy organized a forum on technology policy in the Presidential campaigns, featuring former FCC Chair Reed Hundt, tech advisor to Senator Barrack Obama and former FCC Chair Michael Powell, advisor to Senator John McCain. One sees in U.S. elections such a fascination with the personal qualities of the candidates that one would think that the President ran the executive branch single-handed. But, of course, he doesn’t, and the teams matter. A relatively inexerperienced candidate might make up for this by having a knack for identifying astute advisors–or find his platform hijacked by a careerist with his own agenda.

Reed Hundt opened with an attack on Sen. McCain, including such details as McCain’s vote against the e-rate, the provision of the 1996 Telecom Act that funded Internet service to schools and libraries. This sally might have given him greater leverage had the room not been filled with tech-savvy types aware of the program’s difficulties–and the failure of the computerized classroom to produce any educational miracles. Then he offered an outline of an Obama administration’s tech policy.

-A promise to have the government “nimbly” spend $150 billion on technology (citing the fall of the U.S. from 4th place to 15th in broadband–a gloomy statistic that disappears when one checks actual broadband speed as opposed to advertised speed).

-tax credits for green energy.

-move the national to getting 25% of its energy from green sources such as solar.

-blocking further mergers until policies supporting localism and diversity are strengthened.

Powell immediately dove into substance with his courteous and learned style, emphasizing Sen. McCain’s experience and his ability to have observed what was working and what was not in regulation, culminating in a preference for creating a climate hospitable to entrepreneurship. He emphasized that the U.S. continues to lead the world in innovation and the creation of wealth. His outline of McCain’s policies featured:

-A commitment to maintaining access to capital and investment, including attention to tax rates and capital gains. (Here Powell noted the consequences of high corporate tax rates included driving capital overseas, such that U.S. labor would end up bearing the cost–U.S. corporate taxes already being the highest in the world).

-Immigration policy, including reform of the H1-B visa program to improve availability of qualified tech workers.

-Light regulation-particularly on the issue of net neutrality, where Powell emphasized the difficulty in defining discrimination against bits and the odds of getting policy wrong in the absence of any concrete dispute.

At one time, Senator McCain had been interested in cable a la carte pricing and forced unbundling of cable channels, but he seems to left that behind for a tack more consistent with his overall policy of light regulation and attention to continued investment.

During question period, however, some of Hundt’s spontaneous utterances raised the eyebrows of even jaded observers such as myself. For example, he noted Senator Obama’s excitement about current plans to build cities in China that measure and plan for efficient energy use… A nifty idea, but in the United States there are already any number of cities, pretty well built up. We are to rebuild them? Maybe this needs to be thought through a little more.

Hundt focussed relentlessly on McCain’s attitude to mergers. Powell noted that blocking mergers is not really the function of the legislative branch. As Hundt refused to turn his attention from the matter and went on and on about mergers and consolidation, one was left with the impression that he thought we were living in an age of monopoly, pre-Fox, pre-C-SPAN, pre-200 channels, pre-BBC, pre-wireless, pre-blogosphere. This negativity about the overall direction of the Information Age was a little surreal. Even if mergers were a dominant feature of today’s diversified landscape, mergers are, after all, one way among many that firms grow; by and large, growth is not bad, and consolidation has brought considerable benefits for consumers. Nationwide consolidation in the wireless business, for example, created efficiencies that lead to significant drops in prices.

But the discussion quickly became even stranger. An audience member asked Hundt to provide an example of an issue on which he felt that the media had acted as a bottleneck and kept information from reaching the American public. Hundt explained that he believed that the Bush administration and the media had acted in concert and “coordinated” coverage to deceive the American people about the need for war in Iraq. Net neutrality, he explained, was necessary to keep information channels open. This view of government as guarantor of free speech, given he has just depicted the government as a villain determined to distort speech, is a little odd. Indeed, the history of the Fairness doctrine suggests that regulation to maintain “objectivity” (similar to “neutrality”) is more likely to be used by government to harass media outlets critical of government policies than to keep any channels open (as media history buffs will recall the Kennedy and Nixon administrations used the Fairness Doctrine). The view of the media as in league with the Bush administration is even more eccentric. One can imagine sales-hungry editors independently urging coverage to slant one way or another, but “coordination” is a stretch in the absence of fairly specific evidence.

Last but not least came an enthusiastic Reed’s reference to Schumpeterian competition, by which he seemed to mean … competition between networks ginned up and managed by regulation. In other words… *not* Schumpeterian competition. Ah.

This will be an interesting campaign, however it shakes out.

I have in past years learned a great deal from reading John Calfee’s book “Fear of Persuasion,” on the consumer benefits of advertising. Now he is writing on drug development in “The Indispensable Industry,”

http://www.american.com/archive/2008/may-june-magazine-contents/the-indispensable-industry

He considers, one after another, various proposals to fund drug development using public funds, prizes, or other plans. He writes:

There are two problems with government and nonprofit R&D as a substitute for the traditional for-profit industry. One lies in what the nonprofit sector has not tried to do; the other lies in what it has tried to do. 

We have to remember that no laws, regulations, or traditions have prevented the public research system from inventing the drugs we need if it was really capable of doing that and no one else was. In principle, publicly funded drug research can run all the way from basic research through clinical trials to FDA approval and, if the believers in this approach are correct, it can be conducted at reasonable costs including the inevitable losses from drilling dry holes. 

But let’s look at the record. If we really had a reliably productive government-nonprofit drug development system, we should have seen its fruits by now. Those fruits would have arrived in such areas as the testing of off-patent drugs with great potential and the creation of new drugs where profit incentives are inherently weak because of inadequate intellectual property laws. We should have seen, for example, clinical demonstrations of aspirin for heart disease and cancer much faster than actually occurred…

The piece is well worth reading in its entirety.

From an interesting collection of economists, including L. Vernon Smith and Cass Sunstein, a paper calling for changes to facilitate the growth of prediction markets.

Another paper on happiness research and cost-benefit analysis. “Opportunity cost, Opportunity Cost!” shrieks Ludwig von Lachman from beyong the grave.

Here is a more questionable contribution from the more mainstream Herbert Hovenkamp. ., “ Innovation and the Domain of Competition Policy ” “ U Iowa Legal Studies Research Paper No. 08-07  . The paper advocates the more expansive use of antitrust law in intellectual property disputes, on the grounds that IP law has been tainted by rent-seeking, and that antitrust law has not. Granted, that the antitrust statutes have not been much revised. So the lobbying action is at the DOJ, the FTC, and pretty much everywhere else rather than in the halls of Congress. And yet more action in the offices of the countless economic consultancies that have sprung up, spouting reams of game theoretic nonsense in the pursuit of fat expert witness fees. And the antitrust bar. Dr. Hovenkamp has been fortunate to remain oblivious to it all. See George Bittlingmayer at  http://papers.ssrn.com/sol3/papers.cfm?abstract_id=344040.

Another curiousity is this paper by Dr. Richard Gilbert, proposing that “innovation” as such also be subject to antitrust scrutiny when the distribution of market power is interesting. Talk about subjecting ordinary business conduct to a chilling and error-prone regulatory regime. I read it through wondering if it was a clever reductio ad absurdum of the whole enterprise, but in the end when there was no punch line delivered I concluded sadly that the author was serious.  Gilbert, Richard, “Holding Innovation to an Antitrust Standard,” 3 Competition Policy 47 (2007).    http://papers.ssrn.com/sol3/papers.cfm?abstract_id=987322

From Independent Women’s Forum, “Despite praise of a Constitution that protects the rights of Afghan Women, Afghan women continue to suffer abuse from men and society in general.  Halima Karzai, Associate Director of International Policy for the Independent Women’s Forum, has written a powerful piece on the continuing problem of oppression and violence against Afghan women before and after the Taliban.”

Such reports are disturbing at so many levels, one hardly knows where to begin. First there is the comparative lack of attention to this issue by the public, the press, and in the political sphere; this appalling abuse has become background noise to which we are almost accustomed. Second there is the puzzle of how such practices begin and spread and are so hard to root out. One would think that the abuses would be instantly recognizable as morally unthinkable. One would think that they run so counter to ordinary primate biology, in which males and females have somewhat different roles and scuffle but nonetheless remain part of a whole cooperative group, that there would be some natural resistance to them. One would think that local observers would recognize the value of a more inclusive society in which their children would be more quickly lifted out of poverty in an economy enriched by the education and intellectual capital of the whole population. As in apartheid South Africa, exclusion is not only wrong, but it denies the economy entrepreneurs, managers, technologists, teachers, and other seeds of growth. 

Something here has gone sadly wrong. It rather puts concerns about the exact scope of the rights of makers of mashups in a new perspective.

Larry Magid in the San Jose Mercury News on the limits of the age verification proposals being discussed to protect kids online. A quote:

Some attorneys general want to see the electronic equivalent of showing an ID at the door. . . But Sentinel Chief Executive John Cardillo told me age- and identity-verification schemes typically rely on credit reports and other data that is accessible for most adults but generally not available for people under 17. One could, in theory, access school, birth or Social Security records, but for a variety of good reasons, these databases are off-limits to private entities. . . . [E]even if age verification is possible, I still question whether it’s desirable. I worry about some teens – including victims and youths questioning their sexual identity – being harmed because they’re denied access to online support services that could help them or even save their lives.

Arguments concerning age verification and showing harm from restricting minors’ access to the Internet were made in challenging provisions of the Communications Decency Act restricting “indecency” online back in 1997/1998. At the time, age verification was judged impracticable, and the Supreme Court’s ruling upholding free speech rights online in some part rested on this conclusion. If age verification proposals now move forward, the issue might be revisited again.

Free speech rights are some of the healthier provisions of the Bill of Rights protection. But the area of minors continues to be troublesome. The challenges to the “indecency” laws are made on behalf of members of an adult audience; they are in effect restricted to child-safe material even though the law only is intended to protect kids.  Almost everyone seems to accept without question the premise that such challenges may not be brought on behalf of the children themselves.  The lack of attention to this point seems to stem, first, from observation that of course children do not have rights to free speech as against their parents or other private caretakers. I tell The Grub to hush, he must hush, or I will give his racetrack a time-out. But this power of parents and their delegates is a common law matter. It ought to have nothing to do with the resolution of the constitutional question, regarding the free speech rights of kids as against the government.

One now contends with a second argument: It is common sense that children (differently for different ages) must have different rights than adults, they are not all at the same stage of development and so on and so on. Again, the same objection. One is not dealing with the common law of contracts here. This has to do with constitutional rights. The constitution says “Congress may make no law….”  It is a restriction on the power of government. It gives government no special powers with respect to minors. If in fact Congress has such powers, where does it get them? If it can get them somewhere else, what is the limit?

Imagine if one made the “children can’t possibly have the same rights as adults” with respect to other provisions of the Bill of Rights. The anti-establishment clause for example. Government may not establish a religion for adults, but if we read exceptions into the Bill of Rights for children, evidently it can establish such a religion for children? That is nonsense. Similarly the right against self-incrimination. It is not okay for the police to torture adults, but if we are to read exceptions in the Bill of Rights against children, evidently it is okay for the the police to torture children? More nonsense. May Congress take the property of children without compensation? Subject them to cruel and unusual punishments? It seems to me that if the answer to any of these questions is “no,” then it must be “no” to all of them (including, to the outrage of many, to the right to bear arms and the right to trial by jury). Congress has no more powers over kids than it has over adults. May the next free speech challenge to age verification will be brought on behalf of the kids themselves.

Much hemming and hawing and lawyering will follow. I know, I know.

This analysis from IPA in Australia suggests not.

http://www.ipa.org.au/publications/publisting_detail.asp?pubid=822

This analysis draws on two recent studies of fair trade to conclude that is it just not what it is cracked up to be. One example of the studies findings:

from the US-based Transfair, fair trade advocates conceded that fair trade producers provided lower grade coffee for sale through the fair trade system. Fair trade producers sell their best coffee on the free market when it commands a higher speciality price than fair trade. Producers then keep their lower-grade quality through the fair trade system where they receive a guaranteed price. They do this because there is an oversupply of fair trade coffee and an undersupply of buyers for fair trade coffee.

The IPA analysis concludes, that “new studies demonstrate that the evidence supporting fair trade’s contribution to development for the world’s poor is dubious, at best. The studies also show that fair trade creates a number of problems for fair trade and non-fair trade producers.”

An incident at my son’s preschool yesterday serves as a good example of a problem I have sometimes pondered relating to IP–that is the extent to which substantive rules are adapted and sometimes distorted in response to difficulties or limitations on the enforcement end. An example, the tendency to boost the penalties for IP related offenses in an effort to compensate for low enforcement rates.

There is substantial room for disagreement on whether and when this kind of substantive adaptation is legitimate. One might think, at first, that one should never do that… consider the following example, though: Under the law of the Icelandic Commonwealth, the penalties for killing someone were much greater if one did not report the killing to one of the next three households one passed. A nice way to solve an evidentiary problem, and what is wrong with it, really, if otherwise disputes about killings would go on forever in the face of endless doubts about who was responsible?

Now, to preschool. The preschool classroom is well populated and while the little horrors are closely supervised they aren’t watched every minute. So any altercation that is not witnessed in full by a teacher can be resolved “correctly” only on the assumption that three and four-year-olds can be persuaded to talk about something other than princesses, guns, tadpoles, or dinosaurs. This is next to impossible. Yesterday the Grub was one of three small boys called to a conference at the “Peace Table” to settle down and talk over their differences. What happened? No one knows. The Grub told me gravely that he hit E, and when asked why, said it was because E. hit him. E. is a sensible chap a full year older and unlikely to hit absent provocation (unlike budding sociopath K.), provocation that The Grub is capable of supplying, but no testimony on this point was forthcoming. This morning The Grub told his father, in response to skilled cross-examination, that he had pushed E., still with the same grave honest face. What actually happened? How was the third little boy A. involved? A. is a scamp, so probably he was involved somehow, but this cannot be admissible. Pushing further only lead to bubbles being blown into milk. So the substantive rules we are left with as a result of such situations are mere pretty phrases, such as “play nicely with your friends.” This won’t do, and how The Grub is to learn that it is okay to defend himself but not attack in this context I do not know. So far, therefore, the main things he seems to have learned in preschool are 1) how to make a fist 2) how to use his sharp little elbows to keep his place in a crowd 3) what a transformer is. Luckily we have a few years left. If I were having another child, I would just let them scuffle away and trust that he would learn not to hit because it leads to being hit back, with some adaptations to avoid a doves/hawks problem. Just an experiment, to see how that one would turn out.

A link to “The poor stand to lose from Anti-Patent Crusades,” by Franklin Cudjoe, out April 30, 2008, with a free-market think tank in Ghana.

http://en.afrik.com/article13423.html

A selection: Patents are actually a critical part of the solution. They protect the financial incentives that drive pharmaceutical companies to create innovative medications in the first place. It takes an average of US$800 million and 10-15 years to bring a new drug to the market. Patents ensure that pharmaceutical companies can recoup that enormous investment. If countries start breaking patents, though, firms lose out on sales. And they’re less able to finance the development of new cures. That’s a blow to the public health efforts of all countries, rich and poor. Ghana’s health Minister told me that he fails to see how people could hold antagonistic positions against pharmaceutical companies, because in his own words “if drugs are being made, then people must be sick somewhere-it is not for charity”.

An interesting analysis of Apple and competing distributor and network business models appears on “Going Private.” Agree or disagree? Agree with about half.  

One point that I thought worth noting; the allegedly pernicious influence of MBAs laden with theory. This runs counter to the classic free-market (Austrian-school-influenced) model of the entrepreneur taking advantage of local knowledge and designing from the bottom up. But the latter could be, in the long run, a better description only of the more successful contenders, the ones whose actions are rewarded. At the starting line, a more motley crew will be assembled, and markets will not necessarily bring them  to account immediately or in an obvious way for mediocrity. But they will do so eventually. By comparison, regulators may never bear any consequences for poor decisions at all.

I’ve been rereading Lady Chatterley’s Lover lately, and also reviewing some of the literature about it. The central theme of this book, the rootedness of mankind in his physical body and in “animal” pursuits, is still very fresh today and well worth thinking about (but one notices this only if one is not distracted, as I was when much younger, with looking for the naughty bits, which are a) not very naught b) include not-so-bad descriptions of female orgasms… how does DHL DO that?)(there is a consensus among critics that Clifford’s paralysis is a flaw in the book that makes Lady Chatterley’s departure “vulgar;” I cautiously disagree–that is, if it does make if vulgar, that is part of the point). And I’d not realized before that the book set such important free speech precedents. The litigation surrounding the publication of the book in England and in the United States marked a significant shift by the judiciary of the lower courts towards considering the actual community of readers in conceiving of “community standards.”

If one considers recent history, one might get the impression that the movement of tolerance for offensive speech was steadily growing greater. That is, if one considers only the nineteenth and twentieth centuries, it looks as though tolerance grows continuously, perhaps due in part towards a market mechanism. Producers and publishers continually push the bounds of the scandalous outwards, hoping to gain attention for their works. The public becomes continuously more jaded. If this process continues indefinitely and courts actually pay attention to community standards, this means that the content of what could be considered “obscene” or otherwise offensive steadily shrinks.

Whether this perspective can be maintained, though, depends very much on what period of history one chooses to start with. Starting in the nineteenth century with the Victorians biases the outcome considerably. This was a world in which young wives were permitted to die of veneral disease contracted from their husbands without anyone ever explaining to them how it could be prevented, or even what was wrong with them. Naturally taking this as a starting point of comparison, the category of what is taboo to speak of is likely to seem to shrink, it could hardly grow much larger.

Starting with the ancient Greeks, though, who were forever painting artistic images of couples frolicking about in various positions on their lamps and other household goods, what is taboo seems sometimes to shrink, and sometimes to grow, within certain parameters. One starts to wonder if certain visceral responses to sexual content are not only learned or cultural, but to some extent hardwired, which would be natural for mammals, which we are, after all (back to Lawrence’s thesis).  If this is true, does this justify censorship, or make it inevitable? I think not. That we may react to certain imagery as mammals does not dictate that we must react as censors, by empowering the government to control those things. The risks of delegating that sort of control are too great.

But it does explain, in part, why the battle for free speech is so difficult.

[update: Thinking about this issue further, I realized my discussion of the free speech rights of children could be misinterpreted to cast me as an advocate for eight-year-olds reading some really appalling stuff. No, no, that’s not the point!  (Don’t forget, the parents are still in charge). There is a larger issue, whether the government has more expansive powers to control the speech or religion of children than it does of adults, and an interesting question of constitutional interpretation… how some things that people just seem to assume about reading the constitution turn out to be problematic…]