Wednesday, June 30, 2010

Drugs and banks

Bloomberg:

Twenty million people in the U.S. regularly use illegal drugs, spurring street crime and wrecking families. Narcotics cost the U.S. economy $215 billion a year — enough to cover health care for 30.9 million Americans — in overburdened courts, prisons and hospitals and lost productivity, the department says.

“It’s the banks laundering money for the cartels that finances the tragedy,” says Martin Woods, director of Wachovia’s anti-money-laundering unit in London from 2006 to 2009. Woods says he quit the bank in disgust after executives ignored his documentation that drug dealers were funneling money through Wachovia’s branch network.

“If you don’t see the correlation between the money laundering by banks and the 22,000 people killed in Mexico, you’re missing the point,” Woods says.
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Monday, June 28, 2010

Ending the Monopoly of Ideas: Compulsory Licensing in Intellectual Property



The term ‘intellectual property’ seems innocuous. If property just is ‘intellectual,’ how important could it be? The truth is that intellectual property law is easily one of the most destructive forces in our economy. Nearly one-fourth of scientists responding to a survey by the American Association for the Advancement of Science, the largest general scientific body in the world, reported that patents were hampering their research.[1] In the European Union, over €60 billion are wasted every year on research and development of products that are already protected by patent law.[2] An experiment using a virtual world to simulate the effects of the US patent system found that the “participants were more likely to innovate when there was no intellectual property system at all, or when they could open-source their innovations and share them with people.”[3]

Virtually every business that holds a dominant position in its field has gotten there not simply through good business practices, but also through the advantages afforded to them by intellectual property law. In 1998, Google filed patent number 6,285,999 on the “PageRank” system, laying the foundation for them to become the dominant force in internet search.[4] Monsanto has used its patents to control 95% of the soy and 80% of the corn markets, respectively. It used this power to increase the price of each by 28% and 25%, respectively, from 2008 to 2009.[5] “Patent pools” led to monopolies that had to be broken up using antitrust laws in the airplane [6], computer, and motion picture industries.[7]

Our society has not always been like this. In 1790, the year the US Patent Office first came into being, only three patents were granted.[8] Patents had to be deemed “sufficiently useful and important” by the three-person Patent Board, comprised of the Secretary of State, the Secretary of War, and the Attorney General. By July of 1836, only ten thousand patents had been granted.[9] In 2009 alone, 167,350 utility patents, the most common type of patent, were granted. IBM was granted 4,914 of these, a 17% increase over the previous year. Microsoft was granted 2,906, a 43% increase over the previous year and a 400% increase over 2003. Fifty companies received 29% of all patents granted in 2009.[10]

Patent and copyright terms have also expanded dramatically. The original US patent term was for fourteen years, should the Patent Board approve it. The patent term is now twenty years. “Under certain circumstances, patent term extensions or adjustments may be available.”[11] The original US copyright term was for fourteen years with an option to renew the copyright for another fourteen years if the author was still alive. The current copyright term is now for the life of the author plus another seventy years. For works of corporate authorship, the copyright term is now one hundred and twenty years after creation or ninety five years after publication, whichever endpoint is earlier. This means most works will be copyrighted for over a hundred years. Trademarks, which didn’t even exist in federal statute until 1905, are in force as long as they are in use.[12]

This isn’t even to mention all the costs associated with the intellectual property bureaucracy. The US Patent Office has approximately six years of patent applications, over one million filings, waiting to be evaluated.[13] Approximately, seven out of ten patents were approved at the start of the 2000’s. Today, the number is less than half.[14] The average patent lawsuit will cost between $3 million and $10 million to litigate, and take between two to three years.[15] This amounts to a litigation cost of, at the minimum, $15.6 billion a year.[16] Merely getting a patent approved can cost $10,000 for a domestic filing and $100,000 for an international filing.[17] This amounted to a cost of $25.8 billion in 2009.[18] This isn’t even to mention that, according to Barack Obama, the paper-based tracking system of the Patent Office is woefully “outdated.”[19] As far as I know, nothing has been done to correct the situation.

Clearly, there is a problem. Our system is bogged down in waste and innovation is stifled. How do we correct it? Is the solution simply to eliminate intellectual property rights? I don’t believe so. Piracy during the 1800’s was a profound source of frustration for many authors [20] and inventors.[21] It also doesn’t make sense that people shouldn’t be rewarded for their creative work. Rewarding creators helps encourage more creation, something most people want.

The solution is to eliminate the ability of one person or entity to have the sole right to use a piece of intellectual property, while still rewarding the original creator of the intellectual property. The system that does this is compulsory licensing. In this system, every piece of intellectual property can be used in a derivative work, yet the original creator of the work is still compensated. The rate of compensation is either determined by the parties privately, or if an agreement cannot be reached, by a court.

The government sometimes uses compulsory licensing in antitrust cases, but only when it considers a firm’s dominance to be a problem.[22] Moreover, when the government does use compulsory licensing, they do not use the market to determine rates. They simply determine the licensing rate themselves. In 1953, a district court used this power to order General Electric to license its light bulb patent for “free,” a price General Electric surely was not happy with.[23] There have also been times when the government only allows a small handful of companies to license a piece of intellectual property. It is not open to the market at large.[24]

The next step to solving our intellectual property crisis is to eliminate the Patent Office and to replace it with a single repository for intellectual property that people want protection for. This idea was actually put forth by Jefferson in a 1791 bill, but unfortunately, it did not pass.[25] Without the government deciding what ideas are able to be protected, private firms spring up to search the registered intellectual property and inform individuals if they believe an idea or invention infringes upon something already registered. This eliminates long wait times, as people could presumably pay for faster searches. Plus, if a company does not perform well, it will presumably go out of business.

The elimination of the Patent Office may not even affect the number of intellectual property infringement law suits. Even with the Patent Office, there are still over 5,000 patent, copyright, and trademark suits every year.[26] The Patent Office also does not ensure that only “sufficiently important” creations receive protection, as was in its original mandate. Well, unless you consider “the bird diaper,” “the pat on the back apparatus,” and the “initiation apparatus,” a “harmless” way to initiate a candidate into a fraternity by shocking him with electrodes, to be “sufficiently important.”[27]

These solutions are simple, but achieving them is difficult, because they would mean the government doing less. The government, and the powerful parties who benefit from government intervention into the economy, typically do not like the government to do less. Intellectual property law has also historically been a very important tool for government-sponsored censorship, an important tool of the state. This side of intellectual property law has started raising its ugly head again in recent years. Laws and treaties such as the ACTA treaty,[28] Britain’s Digital Millennium Copyright Act,[29] and Canada’s Copyright Modernization Act [30] all threaten to bring millions people across the world under the heel of a digital dictatorship. Clearly, our intellectual property system must be reformed before any more damage is done.

A commonly cited beginning to modern intellectual property is when Fillipo Brunelleschi was granted a three year patent for a barge with hoisting gear that carried marble along Italy’s Arno river in 1421.[31] This patent was given not only for technological innovation, but also because Brunelleschi was working on one of the most important projects of the day: building the dome on the Santa Maria del Fiore. This was like the Super Bowl to the people of Florence. People would gather to watch the dome being built. Santa Maria del Fiore was “the great spiritual center of the city,” and it “served as the venue for diplomatic visits, housed important political events, and welcomed within its walls many of the cultural, spiritual and intellectual leaders of the time.”[32] It had remained without a dome for over 100 years. Thus, the granting of the first patent had a decidedly political aspect to it.

The first patent in England was given by Henry VI in 1449 to John of Utynam for a technique on manufacturing stained glass.[33] This was the start of a long tradition whereby the Crown issued monopolies to “favoured persons,” or to people willing to pay. The granting of monopolies became a key source of revenue for the Crown. Soon, monopolies covered a whole range of known goods, such as salt,[34] and the right to provide services, such as the use of inns, ale houses and gold and silver thread.[35] The Statute of Monopolies of 1623 curtailed some of these abuses by stating that the Crown could only issue letters patent (a.k.a. monopolies) to the inventors or introducers of original inventions for a fixed number of years,[36] but the system was still far from without its flaws.

The most significant monopoly granted by the Crown from an intellectual property standpoint was the one given to the Stationers Company. In 1557, the Stationers were given a monopoly over printing in all of England. The Stationers Company was not a “company” so much as a guild. There was no stock to be owned. There were only positions of power to be attained within the guild. The guild was comprised primarily of bookbinders, booksellers, and printers,[37] although text writers and lymners (or illustrators) also played a role.[38]

At the head of the Stationers Company was the master, the principal officer. Below him were the upper and under warden. The master and wardens were given plenary powers of search at any time “in any place, shop, house, chamber, or building of any printer, binder or bookseller whatever […] for any books or things printed, or to be printed, and to seize, take, hold, burn, or turn to the proper use of the foresaid community.”[39] The master and upper and lower wardens were elected from the “Court of Assistants” and held their positions for a year.

The Court of Assistants was the real seat of power. They arbitrated disputes, collected dues, and decided admittance into the Company. They were supposed to be elected from the general body of the Company, which included apprentices and yeomanry, for a limited term, but in 1557, the year the Stationers were granted their monopoly, nine of the most senior members of the Company formed a court of eighteen assistants. They took control and membership in the court became for life unless the member was formally dismissed or retired.[40]

Although censorship may not have benefited the printing industry as a whole, it was clearly a motivation for Queen Mary in issuing the Stationers a monopoly. According to Lyman Patterson, “The charter itself, however, is dominated by the idea of suppressing prohibited books, and Mary’s motive in granting it, whatever the source of the initiative involved, was to obtain an effective agency for censorship.”[41] The Stationers became a de facto police squad.

The penalties for violating censorship rules were harsh. If someone was found importing a book from overseas, they could lose all their possessions and be put in prison. No book could be printed without examination by the Privy Council. No book of scripture could be printed without examination by the King, one member of the Privy Council, or a bishop. “If a person other than an allowed printer set up or worked at any press, he was to be set in the pillory, whipped through London, and suffer any other punishment deemed proper.”[42]

Despite all this, there was still a sizeable black market for books. “Only between sixty and seventy percent of London-printed books were regularly entered in the registers, and the proportion of printed books entered fluctuated violently from year to year.”[43] Even with the threat of public whipping, imprisonment, and the taking all of one’s possessions, a black market still arose to meet a demand. Some things never change.
As a British colony, America abided by the same intellectual property laws as Britain. There was no Stationers Company, but books did have to be licensed. There also was an “informal cartel” of publishers who colluded “to keep prices artificially high.”[44]

After the revolution, America continued to follow British intellectual property law closely. America copied much of Britain’s intellectual property law verbatim, and even used the same time limits for intellectual property protection. (Luckily, Britain didn’t sue for copyright infringement.) In fact, America followed British intellectual property law so closely that a misreading of British law led America to legalize the pirating of foreign books. The original British law had forbid “the importation, vending, or selling” of books in a foreign language printed beyond the sea; it didn’t legalize piracy.[45] America’s law was a constant thorn in the side of British authors, such as Dickens, who thought they were losing a fortune in America through piracy.[46]

As time went on, intellectual property law began to grow in importance in America. From 1860 to 1890, over 500,000 patents were issued for new inventions, ten times the number in the previous seventy years.[47] By 1904, more than two hundred copyright bills had been introduced into Congress.[48] Yet even with this growth, a popular movement never gathered enough steam to move intellectual property law from its foundation. Despite some minor disturbances, intellectual property law continued to grow into the monstrosity it is today.

Like with any good story (one that is not a tragedy anyway), there have been a few glimmers of hope. The first came in the rulings of Judge Learned Hand when he defined the concept the “web of expression.” The second came when Congress amended the Copyright Act in 1909 to allow for compulsory licenses in the music industry. When these two concepts are combined, I believe they lay the groundwork for where intellectual property law needs to go.

As Siva Vaidhyanathan writes, “No jurist or legal scholar has had a greater effect on the business and content of American culture than Judge Learned Hand. For most of his career, Hand served on the US Second Circuit Court of Appeals in New York City. A student of William James and George Santayana at Harvard, Hand was passionate about matters of freedom, creativity, and intellectual progress. […] Hand played a part in most of the major copyright decisions of the day.”[49]

Hand thought that the plot of a story itself could not be copyrighted, but that the “value added” to it could. Hand’s central point was that when judging the extent of infringement between works that tell similar stories, one must distill the “very web of the author’s dramatic expression.” This “web” he defines as “the sequence of the confluents of all these means (plot, character, means of revelation, setting, themes), bound together in an inseparable unity.”[50]

Hand broke down the whole down to its parts to help see what was original and what was not. This is exactly what needs to be done in all intellectual property cases. As Mark Twain said, “As if there was much of anything in any human utterance, oral or written except plagiarism. […] [S]ubstantially all ideas are second-hand, consciously and unconsciously drawn from a million outside sources.”[51] We all are dependent upon past ideas for present ones. The question is how much. Hand’s framework helps guide us for making those decisions.

It’s been shown that Steamboat Mickey, the first Mickey Mouse film, relied heavily on Steamboat Bill, Jr., a film by Buster Keaton, who was enormously popular at the time.[52] Did Walt Disney rely exclusively on Keaton’s material? No. Should we barred from seeing Walt Disney’s film because he relied on Keaton’s material? No. But we could have been. That is the situation we are currently in. We are in an “all or nothing” scenario: a judgment of guilty means a work that is “too” derivative and cannot be seen or profited from. A judgment of not guilty means it can. We need to move to a system where both the original creator and “second user” are compensated according to what they each contribute to a derivative work.

The second glimmer of hope was Congress’s amendment to the Copyright Act in 1909 to allow for compulsory licenses in the music industry. This was strictly to allow greater freedom of expression in the music industry. As Lawrence Lessig writes, “Congress was quite explicit about its reasons for granting this right. Its fear was the monopoly power of rights holders, and that that power would stifle follow-on creativity.”[53] It has worked. The music industry allows far greater rights to “second comers” than any other artistic field.

If a person wants to create a derivative work from a book, he or she must get permission from the original author. The original author may allow for derivative works to be created, but may require the “second comer” to sign over any profits, as is the case with the Star Wars franchise.[54] The only problem with the compulsory licensing in the music industry is that is that Congress determines the rate instead of letting individuals try to determine it first.[55] The author of a song may want to license a song to a celebrity at a lower rate, because the author might feel the celebrity may make them more money in the long run than the typical recording artist. The original author simply does not have the freedom to do that.

Why should compulsory licensing be good for the music industry and not good for every other field? Clearly, it shouldn’t. All genres of art and all scientific creations would benefit from compulsory licensing. An active “second user” culture can also lead to an even greater appreciation of the original product. In Japan, there is something called doujinshi, which is “second user” manga. There are over 33,000 “circles” of doujinshi creators across Japan. Two times a year more than 450,000 Japanese gather to exchange and sell doujinshi. According to Lessig, “[I]n the view of many, it is precisely because [doujinshi] exists that Japanese manga flourishes.”[56]

Some people may see a problem with compulsory licensing. They may ask, “If a person is able to use intellectual property at will, what is to keep that person from modifying an original creation just a slight bit and selling at a severely reduced price, thereby undercutting the competition?”

There is a solution to this. The “second user” is able to change the price only in accordance with how much they contributed to the derivative product. Let’s say either the originator and “second user” agree, or a judge decides, that a “second user” contributed 10% to the derivative product. Let’s say the “second user” contributed a new drum track to a song. If the original song was being sold for $5, then the “second user” would have the right to sell the derivative version for anywhere between $5 plus or minus 10% (i.e. $4.50 to $5.50.) 90% of the revenue generated from the derivative product would still have to go to whoever owned the rights to the original product.

Another objection someone may bring up is, “What if it is not in a company’s interest to release a piece of technology? Like let’s say something crazy happened, like Chevron owned the patent on the battery for the electric car.[57] What is to keep them from pricing a product so high it effectively removes the product from market?”

The government may be forced to have them re-price it. This can be done within limits. In the scenario painted, the intellectual property owner is pricing their product so high that if they decrease the price, they would actually make more. Because at a lower price, the owner would sell a higher quantity. The government could mandate the owner lower the price until the point when he or she stopped making more money through increased quantity sold. That is point is where the company is making the maximum amount of profit for that product.

I do not see a better scenario than this. We are being forced to either allow the domination of society by one individual, or the domination of the right to price this product by society. The rights of society must be respected too. This is not historically unprecedented. Before the ratification of the US Constitution, five of the original thirteen states, Connecticut, South Carolina, North Carolina, Georgia, and New York, all contained intellectual property-related price-control provisions in their state constitutions.[58] If the original party loses money by lowering the price, the party who initiated the suit could be liable for the losses.

Once this price is set, individuals or companies could license the intellectual property in its entirety. This would allow for competition based on production quality and customer service. If a company is able to charge more for an product based on superior brand recognition and/or customer service, that company should be able to keep whatever they earn beyond the price set by the original company.

I believe these provisions eliminate the need for time limits on copyright and patent protection. Time limits seem to be built upon the belief that intellectual property law causes prices to be higher and for there to be less competition than there should be. My suggestions, however, eliminate these concerns. Why, after all, after a certain point should a publishing house profit from an author’s work rather than the author’s estate, or to whomever the author ascribed the rights of his or her work?

We need to change to a compulsory licensing system and eliminate the Patent Office. Current intellectual property law and bureaucracy leaves us as peasants, looking up at the one dome being built in the city. Intellectual property law that has been reformed under the guidelines I have outlined will unleash the creativity of human spirit, and help fill the skyline with as many domes as we desire.

Bibliography:

1. Stephen Hansen, Amanda Brewster, Jana Asher, Michael Kisielewski, The Effects of Patenting in the AAAS Scientific Community, American Association for the Advancement of Science, 2006

2. Matrixware, Patent Wars, 2006.

3. Sherry Main, “Study finds patents may discourage innovation,” Physorg.com, July 27, 2009.

4. Henry Fountain, “Google’s Internet Techniques Inspire Studies of Food Webs,” New York Times, September 4th, 2009.

5. Christopher Leonard, “Monsanto Squeezes Out Seed Business Competition,” AP, December 13th, 2009.

6. Michele Boldrin and David K. Levine, Against Intellectual Monopoly, (Cambridge University Press, 2008), p. 86.

7. Siva Vaidhyanathan, Copyrights and Copywrongs: The Rise of Intellectual Property and How It Threatens Creativity, (New York University Press, 2001), p. 88.

8. Bedini, “Man of Science,” Thomas Jefferson: A Reference Biography, (Scribner’s Sons, 1986), p. 269.

9. Randy Alfred, “May 5, 1809: Hats Off to First U.S. Woman Patent-Holder,” Wired, May 5th, 2009

10. Tom Kivett, “American Companies Capture Less than Majority of 2009 U.S. Patent Pool,” IFI Patent Intelligence press release, January 12th, 2010.

11. “General Information Concerning Patents,” United States Patent and Trademark Office, January, 2005.

12. Lanham Trademark Act 15, USC, §§1147-27.

13. John Shmid and Ben Poston, “Patent backlog clogs recovery,” Milwaukee Wisconsin Journal Sentinel, August 15th, 2009.

14. Ibid.

15. Sylvia Hsieh, “More patent cases are being taken on contingency fee basis,” Lawyers USA, August 14, 2006.

16. Dan Horn, “Patent Litigation Lucrative, on Rise,” Cincinnati.com, July 26, 2009. This puts the total number of patent infringement lawsuits at 2600. 2600 * $3M = $7.8B. Since this is the cost for each side, the total cost is $15.6B. This does not even account for litigation costs in copyright, trademark, and trade secret cases. For instance, the Recording Industry of America filed 5,460 lawsuits in 2004 alone (“RIAA v. the People: Five Years Later,” Electronic Frontier Foundation, September, 2008.), meaning the total cost of litigation could be much higher.

17. “How much does a patent cost?”, Inventionstatistics.com.

18. Tom Kivett, “American Companies Capture Less than Majority of 2009 U.S. Patent Pool,” IFI Patent Intelligence press release, January 12th, 2010. This states that US corporations received 49% of all utility patents issued, meaning foreign corporations received 51%. The total number of patent applications for 2009 was 457, 966. 457,966 * .49 * $10,000 = $2.2B. 457,966 * .51 * $100,000 = $23.6B. $2.2B + $23.6B = $25.8B. Again, this doesn’t account for copyright, trademark, or business secret. As a side note, the total patent numbers come from private sources and have not come from the US Patent and Trademark Office since 2006, because they found that “too many people were focusing on patent quantity and not patent quality.” (Timothy Pricket Morgan, “Big Blue Tops US Patent Grubber List,” The Register, January 19, 2009.) Isn’t that nice of them?

19. Barack Obama, “Forum on Modernizing Government,” White House, January 14, 2010.

20. Vaidhyanathan, p. 54.

21. Adrian Johns, Piracy. The Intellectual Property Wars from Gutenberg to Gates, (University of Chicago Press, 2009), p. 254.

22. Makan Delrahim, “Forcing Firms to Share the Sandbox: Compulsory Licensing of Intellectual Property Rights and Antitrust,” Department of Justice, May 2004. (Don’t you love the infantilizing of intellectual property holders by the Justice Department?)

23. Ibid.

24. “Ohio Steel Company Agrees to License Patents in Order to Resolve Justice Department’s Antitrust Concerns,” Department of Justice press release, August 26, 1999. This is true fascism. The government is concerned with picking winners and losers, not with simply allowing the licensing to be open to the whole market.

25. Dumas Malone, Jefferson, (Little, Brown & Co., 1948-81. 6 vols.), vol. 2, p. 285.

26. Zusha Elinson, “Surprises Found in Data on IP Suits,” Law.com, December 10, 2008.

27. Stephan Kinsella, “Against Intellectual Property,” Journal of Libertarian Studies 15, no. 2, (Spring 2001).

28. Nate Anderson, “Secret ACTA Treaty Can’t Be Shown to Public, Just 42 Lawyers,” Arstechnica.com, October 15, 2009.

29. Charles Arthur, “Internet Provider Defies Internet Bill,” The Guardian, April 8, 2010.

30. Don Martin, “Conservatives to Unveil National Securities Watchdog: Sources,” National Post, May 19, 2010.

31. Christine MacLeod, Inventing the Industrial Revolution: The English Patent System, 1660-1800, (Cambridge University Press, 2002),

32. Maricia Tacconi, Cathedral and Civic Ritual in Late Medieval and Renaissance Florence, (Cambridge University Press, 2006), p. 2.

33. Vivek Tawari, “Which Was the First Patent Ever to Be Granted?,” Times of India, August 7, 2004.

34. “History of Patent Law,” Wikipedia.

35. “Monopolies and Corruption: The 1621 Parliament,” Earlystewartlibels.net.

36. Brad Sherman and Lionel Bently, The Making of Modern Intellectual Property Law: The British Experience, 1760 – 1911, (Cambridge University Press, 1999), p. 207.

37. Lyman Ray Patterson, Copyright in Historical Perspective, (Vanderbilt University Press, 1968), p. 35.

38. Ibid., p. 29.

39. Ibid., p. 29.

40. Ibid., p. 33.

41. Ibid., p. 29.

42. Ibid., p. 124.

43. Ibid., p. 63.

44. Vaidhyanathan, p. 38.

45. Patterson, p. 199.

46. Vaidhyanathan, p. 51.

47. “Second Industrial Revolution,” Wikipedia.com.

48. Patterson, p. 213.

49. Vaidhyanathan, p. 105.

50. Ibid, p. 109.

51. Albert Bigelow Paine, ed., Mark Twain’s Letters, (Harper & Brothers, 1917), p. 731.

52. Lawrence Lessig, “Examining the Remix,” Ted.com, April, 2010.

53. Lawrence Lessig, Free Culture: How Big Media Uses Technology and the Law to Lock Down Culture and Control Creativity, (Penguin, 2004), p. 57.

54. Lawrence Lessig, “Examining the Remix,” Ted.com, April, 2010.

55. Lawrence Lessig, Free Culture: How Big Media Uses Technology and the Law to Lock Down Culture and Control Creativity, (Penguin, 2004), p. 57.

56. Ibid., p. 26.

57. I like irony.

58. Patterson, p. 189.


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Sunday, June 27, 2010

Stossel on more guns, less crime




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On how and why did the Soviet Union end

There's a ton of information here, too much to quote in one post. I think the article is a must read for anyone who's curious about what price controls and central planning can do to an economy. Here's one tidbit.

Mises:

The anti-alcohol campaign began right away. Party bosses sternly announced that they didn't want any "drunks" in their country. Their enforcers began a concerted effort to discover anyone with the smell of alcohol on their breath and haul them into the police station. When the police stations became overcrowded, it became routine practice to drive thousands of people about fifteen miles out of town and drop them in the cold and dark. Nearly every night, you could see armies of so-called drunks walking miles back to town in the middle of winter.

Over 90 percent of liquor stores were closed. The Party bosses did not anticipate what happened next: sugar, flour, aftershave, and window cleaner immediately disappeared from the shelves. Using these products, the production of moonshine increased by about 300 percent in one year.

The predictable result was a heavy loss of life. From 13,000 to 25,000 people died from drinking poisonous homemade alcohol. Many more died standing in lines for five hours to get the little bit of official liquor that was left. Meanwhile, Gorbachev and loyal Party bureaucrats — who said the dead deserved their fate — would get expensive liquor from the West delivered to their homes and offices. Many families would spend up to 75 percent of their official income on alcohol. But with Gorbachev's campaign, every other household began moonshining.

Revenues from alcohol sales (taxed up to 6,000 percent) were a major source of funding for the central government, generating enough to fund the entire medical budget. The campaign ended when the government realized it was costing too much. The government's budget began to lose 25–30 billion rubles per year. Moreover, Gorbachev learned what previous regimes had understood: it is easier to govern people who are drunk because they withstand humiliation and abuse better. When people are sober they begin to care about politics and are not nearly as passive. So Gorbachev did an about-face and ordered a massive increase in alcohol production. And he had the government make it available to be sold everywhere, even toyshops and bakeries.

The anti-alcohol campaign did irreparable damage to the economy. With state revenues having been severely curtailed, an economic chain reaction set in that hurt every sector. The central bank began to print money, leaving too much money chasing too few goods. Consumers used to get enough to survive from state stores, but new disposable income saved from not buying alcohol was spent on goods. The end result was massive shortages. And to correct for the deficit, services were drastically cut, even while Gorbachev restricted private alternatives.
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Saturday, June 26, 2010

Is BP the best to handle the clean-up/stopping of the leak?

See here. There are tons of posts on Washington's Blog about this. There are just too many hyperlinks to post it here.

Here are my thoughts on the situation: I think that the government should be stepping in and stopping this. My guess is that BP is trying to make sure they'll be able to use this well again rather than stopping it. That's not in the best interest of the people who are affected by the oil spill. The government, after keeping BP liable for the full costs of clean-up and income lost to the spill (which probably won't happen due to the $75M liability cap), could even pay BP for lost income if the well becomes inoperable, or for the costs of making it operational again. There's nothing that says anyone has to be unfair about this. Simply keep BP accountable for what they owe, and if the government's actions cost BP to lose money, then fine, they can be compensated. But right now BP is not doing a good job at solving this problem, as the link will show. I believe that's because their interest (getting the well able to be used again) is against the interest of the general public ("Please don't make me drink and breathe oil and chemical disperants.")

Just to give you a quick idea of how bad BP has been, even in the past, they've averaged one oil spill a day for the past 20 years.

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Thursday, June 24, 2010

George Selgin on free banking




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The AMA and the death of George Washington

I don't know about the things this guy says about cancer at the end, but from what I know the thing about the war between the allopaths and the homeopaths is true.




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Tuesday, June 22, 2010

6 month investigation results in 6 arrests of strippers for 'indecent exposure'

Take your time, boys.

Charlotte Observer:

Authorities have arrested six women and were looking for 10 more Thursday night in an investigation of indecent exposure at Charlotte strip clubs, Alcohol Beverage Control officials say.

All 16 topless dancers are charged with violating a state law that, while allowing topless dancing, prohibits dancers at the adult clubs from performing naked.

"They know that they're not allowed to expose themselves and they did," said Michael Crowley of Mecklenburg's ABC commission. "You're not allowed to remove your bottom."

The recent arrests follow a six-month undercover investigation into eight adult-entertainment clubs, including the city's two Leather & Lace clubs, Uptown Cabaret on Morehead Street, and the Gentlemen's Club on Woodlawn Road, just off Interstate 77. Most of the clubs involved are operated by M.A.L. entertainment, a company owned by Charlotte businessman David "Slim" Baucom.
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All the facts you need to argue against government growth and tax hikes

Bloomberg:

In a study of 44 large fiscal adjustments in 24 advanced economies since 1975, Broadbent and Daly discovered that reducing expenditures by 1 percentage point a year boosted average annual growth by 0.6 percentage point. Raising the ratio of taxes to GDP by the same margin cut growth by an average 0.9 percentage point.
Pretty simple, huh?


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More Commerce Clause bull

So, not only do they misuse it to justify everything, but they can't even use it correctly when a case comes up.




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Thomas Woods on Greenspan




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Monday, June 21, 2010

Gridlock

Wired:

[P]lanners haven’t had much success at unsnarling gridlock. A study by the Texas Transportation Institute found that in 2007, metropolitan-area drivers in the US spent an average of 36 hours stuck in traffic—up from 14 hours in 1982.
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My thoughts on regulation

What we need is "more, smarter regulation."

Riiight.

All Gov.:

1978. That’s when the Food and Drug Administration (FDA) first began developing regulations for sunscreen products—and still has not implemented anything in 32 years.

Manufacturers have been able for decades to promote their sun-block lotions without proving they’re “waterproof,” “broad-based” or “lasts all day.” More importantly, because no federal standards exist, consumers have no way of knowing if the SPF level of a product means anything and if they are really getting the protection that numbers such as “50” imply.

Public health and consumer groups have objected to some SPF claims of sunscreen manufacturers. The Environmental Working Group examined 500 products on the market and came away recommending only 39.

The FDA came close to issuing regulations in 1999, but officials backed off after the Cosmetic, Toiletry and Fragrance Association objected to certain rules. FDA officials said they pulled the regulations because the proposal only addressed products offering protection against UVB radiation—which causes sunburns—and not UVA radiation, which leads to premature aging of the skin. But both types of ultraviolet radiation can lead to skin cancer.
If anything this seems to be a 'pro-regulation' article to me: "Do it better. Do it smarter." Let me just explain my views on regulation.

Regulation, "keeping things regular," having some outside eyes come in for quality control, is a good thing. Government monopoly on this quality control is not.

Whenever the government says, "Only the government can do this," you eliminate the possibility of competition. That means if the regulatory agency does something wrong, you're going to have a very difficult time getting rid of it. If anything goes wrong, in all likelihood, more money just will be thrown at the offending agency to make it "better." As research on education shows, the amount of spent on something does not necessarily correlate with results.

The people who should be in charge of "regulation" should be people who have something at stake, people who can make money from success or lose money (or the company itself) from failure. In all likelihood, insurance companies would take the place of the regulatory body in the ideal society. They benefit if things are safe, and could possibly go out of business if things are not safe.

Why is this not the case now? In the case of BP, we've limited their liability, so an insurance policy really isn't necessary for them. I'm not an expert on how else we limit corporate liability, but I think tort law limits it quite a bit. Rothbard has argued against limited liability for torts. Limiting liability for torts transfers risk from the company to the rest of society. It, therefore, lessens the incentive of a corporation to get insurance, which would decrease its oversight and increase the risk to the rest of society.

Can something possibly go wrong by using insurance agencies to perform this function? Yes, but things have already gone wrong. The FDA allows ineffective cancer drugs to stay on the market for years, and says they have no intention of changing. The EPA's and Department of Energy's program "EnergyStar" was/is a complete fraud. The Minerals Management Service is the Animal House of regulatory agencies.

Our regulatory system is already in complete chaos. The most fundamental benefit removing liability caps and letting insurers become "regulators" is that if an insurer does a bad job, they can go out of business. This means that, in all likelihood, the cream will rise to the top, and we will get good "regulators." If a company that was once good gets sloppy, they can go out of business. This is not an option that we have with the current regulatory state. We have one option, and we'd just better cross our fingers and hope that it's good.

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Sunday, June 20, 2010

North Korea looks to allow private markets to keep people from starving

Washington Post (h/t Cryptogon):

Bowing to reality, the North Korean government has lifted all restrictions on private markets — a last-resort option for a leadership desperate to prevent its people from starving.

In recent weeks, according to North Korea observers and defector groups with sources in the country, Kim Jong Il’s government admitted its inability to solve the current food shortage and encouraged its people to rely on private markets for the purchase of goods. Though the policy reversal will not alter daily patterns — North Koreans have depended on such markets for more than 15 years — the latest order from Pyongyang abandons a key pillar of a central, planned economy.

With November’s currency revaluation, Kim wiped out his citizens’ personal savings and struck a blow against the private food distribution system sustaining his country. The latest policy switch, though, stands as an acknowledgment that the currency move was a failure and that only capitalist-style trading can prevent widespread famine.

“The North Korean government has tried all possible ways [for a planned economy] and failed, and it now has to resort to the last option,” said Koh Yu-hwan, professor of North Korean studies at Dongguk University in Seoul. “There’s been lots of back and forth in what the government has been willing to tolerate, and I cannot rule out the possibility of them trying to bring back restrictions on the markets. But it is hard for the government to reverse it now.”
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Saturday, June 19, 2010

Graphs and numbers to scare you

Lew Rockwell:









[...]The working middle class sunk deeper into despair as their wages continued a two decade long stagnation. Real hourly earnings were the same in 2005 as they were in 1984, and 10% below the level of 1972.



[...]The ratio of CEO’s pay to the average worker’s pay leaped from 30 to 1 in 1980 to 250 to 1 by 2005.





The personal savings rate was 12% in the early 1980s and declined to negative 1% by 2005.

[...]Credit cards didn’t even exist until 1968. Until the 1990s mortgage lenders followed the 28/36 rule. Your mortgage payment, including taxes and insurance, couldn’t exceed 28% of your monthly gross income. All of your debt payments couldn’t exceed 36% of your monthly gross income. Homebuyers rarely put down less than 10% of the home’s value. Home equity loans were virtually non-existent. The subprime loan market for homes and automobiles was miniscule. In the early 1980s auto loans averaged 45 months and buyers put 12% down on the purchase. By the mid 2000s auto loans averaged 64 months with only 5% down on the purchase. By 1999, 40% of all cars on the highway were leased.

[...]Subprime mortgages surged from 5% of all mortgages [in 1999]to 30% by 2008, as issuing the mortgage became detached from the risk of the mortgage. The issuer of the loan had no risk, since the mortgages were immediately bundled and sold off to investors (suckers).

[...]Total US credit market debt increased from 275% of GDP in 2000 to 365% of GDP in 2009.

[...]Consumer debt has increased from $1.5 trillion in 2000 to $2.4 trillion today.

[...]There are 7 million less Americans employed today than there were in 2007.

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Friday, June 18, 2010

Hazlitt on Bretton Woods

Mises:

Two days later, still before the conference opened, Hazlitt nailed it and explained precisely why Bretton Woods could not last. Under the plan, the creditor nations — meaning the United States and Britain — would pledge themselves to buy the currency of net debtor nations in order to keep the currency value at parity. Even if other countries devalued their currencies, the United States would be on the hook for buying it to maintain the fixed paper-to-gold ratio. This is precisely what led to the undoing of the entire system from 1969 to 1971. This, my friends, is prophetic.

Hazlitt was not just speaking for a sector of opinion here. So far as he could tell, and so far as anyone has been able to discern since these days, Hazlitt was completely alone in speaking these truths. No one else joined him, at least not in the United States
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Thursday, June 17, 2010

Growth of government

Daily Caller:

While the Democrats are awful, Republicans under George Bush were also a fiscal disappointment. Federal outlays (spending) grew from $1.86 trillion in 2001 to $3.5 trillion in 2009. As bad as the GOP President and Democrat Congress were in the late 2000s, Obama is making Bush look like a piker. His deficit spending alone will equal the entire 2001 budget outlays of about $1.8 trillion. Yes, our budget deficit is now equal to the entire spending of our government ten years ago.
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Ron Paul for President?

Yes.

Public Policy Polling:

Ron Paul is the most popular out of the whole group with independents. They see him favorably by a 35/25 margin. The only other White House hopeful on positive ground with them is Romney at a +2 spread and they're very negative on the rest: -5 for Huckabee, -16 for Gingrich and Palin, and -17 for Obama. All five of the possible GOP contenders lead Obama with independents, but Paul does so by the widest margin at 46-28.
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Reason tries not to argue with people who should know better



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Monday, June 14, 2010

Judge Andrew Napolitano

Check it, ya'll.



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Sunday, June 13, 2010

CO2 emissions at lowest point in 15 years

Carpe Diem:



Amazingly, the U.S. generated fewer energy-related CO2 emissions in 2009 than in 1996, even though we produced almost 38 percent more output last year, our population has increased by almost 38 million, and our traffic volume was 22 percent higher last year than in 1996.

The EIA estimates that only about one-third of the drop in CO2 emissions in 2009 was because of the economic slowdown and the reduction in real output, and the large majority of the decline resulted from the increasing energy efficiency of the economy and the ongoing reduction in the carbon intensity of our energy usage. Therefore, even without a recession in the first half of the year, there would have been almost a five percent reduction in CO2 emissions in 2009, which still would have been one of the largest annual declines on record.

Our expanding output of domestic natural gas from shale rock, with its 45 percent lower carbon content than coal, has played a major role in reducing the carbon intensity of our overall energy supply, and helped bring down emissions last year to a 14-year low. Now that the U.S. has overtaken Russia as the world’s largest natural gas producer and our domestic production keeps setting new record highs, the significant improvements in carbon intensity and reduced emissions from using more natural gas should continue into the future.
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Thursday, June 10, 2010

Crime vs. incarceration rates

Reason:



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Mercantalism and forced labor

Mises (Rothbard):

Many 20th-century historians have lauded the mercantilists for their proto-Keynesian concern for "full employment," thus showing allegedly surprising modern tendencies. It should be stressed, however, that the mercantilist concern for full employment was scarcely humanitarian. On the contrary, their desire was to stamp out idleness, and to force the idle, the vagrant, and the "sturdy beggars" to work. In short, for the mercantilists, "full employment" frankly implied its logical corollary: forced labor. Thus, in 1545, the "sturdy beggars" of Paris were forced to work for long hours, and two years later, "to take away all opportunity for idleness from the healthy," all women able but unwilling to work were whipped and driven out of Paris, while all men in the same category were sent to the galleys as slave labor.

The class basis of this mercantilist horror of idleness should be instantly noted. The nobility and the clergy, for example, were scarcely concerned with their own idleness; it was only that of the lower classes that must be ended by any means necessary. The same is true of the privileged merchants of the third estate. The thinly veiled excuse was the necessity of increasing "the productivity of the nation," but these classes constituted the ruling elite, and such forced ending of idleness, whether on public works or in private production, was a boon to the rulers. It not only increased production for the latter's benefit; it also lowered wage rates by adding to the supply of labor by coercion.

Thus, at the meeting of the states general, the parliamentary body of France, in 1576, all three estates united in their call for forced labor. The clergy urged that "no idle person … be allowed or tolerated." The third estate wanted "sturdy beggars" to be put to work, whipped or exiled. The nobles urged that "sturdy beggars and idlers" be forced to work and whipped if they refused to comply.
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Obama should kick his own ass?

Yes please.



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Wednesday, June 9, 2010

Liberals don't know jack about economics; it's a fact

Carpe Diem:

From today's WSJ: "Are You Smarter Than a Fifth Grader? Liberals and Democrats do badly on questions of basic economics."

The questions were:

1) Restrictions on housing development make housing less affordable (unenlightened answer: disagree).

2) Mandatory licensing of professional services increases the prices of those services (unenlightened answer: disagree).

3) Overall, the standard of living is higher today than it was 30 years ago (unenlightened answer: disagree).

4) Rent control leads to housing shortages (unenlightened answer: disagree).

5) A company with the largest market share is a monopoly (unenlightened answer: agree).

6) Third World workers working for American companies overseas are being exploited (unenlightened answer: agree).

7) Free trade leads to unemployment (unenlightened answer: agree).

8) Minimum wage laws raise unemployment (unenlightened answer: disagree).

How did the six ideological groups do overall? From best to worst, average number of incorrect responses (out of 8):

Very conservative: 1.30 out of 8
Libertarian: 1.38
Conservative: 1.67
Moderate: 3.67
Liberal: 4.69
Progressive/very liberal: 5.26
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Monday, June 7, 2010

"What about the fire department?"

I haven't even read the whole report, but I'm just excited to finally find this thing. I think I saw it a while ago, and haven't been able to find it since, all the while listening to smug 'progressives' (only with the smartest among them does the conversation conversation even gets this far) say "What about the fire department?"

Well, here's 42 pages on it.

Reason:

About 90 percent of all fire departments in the United States are composed either entirely or mostly of volunteers. These departments protect 42 percent of the population."
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LA zoning insanity

It took over 2 years for this to get to city council.



Reason:

This purportedly carbon-neutral building, in Venice, California, is three and a half feet too tall, according to Los Angeles zoning restrictions. Removing the solar panels would knock it down 18 inches, but that might not be enough for the City Council. The architect says, "To fix it would cost more than it cost to erect it in the first place."
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NJ Governor Chris Christie on the teachers' union







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Sunday, June 6, 2010

Stigler center papers

Mises.org is always a great first resource, but this seems to be pretty interesting too.

Here.

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Copyright and patent videos

I absolutely don't agree with every conclusion reached here, but I think there's a lot of good information.










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Private city




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Saturday, June 5, 2010

To hack or not to hack?

Lew Rockwell:

NPR is always wheeling out disgusting “legendary journalist” Daniel Schorr to propagandize for the state. He has been heralded for his alleged courage in attacking Nixon, Bush, and other Republicans. But he’s only a partisan, and a boring, creepy one at that. Today, he was asked about the anti-free trade siege of Gaza, which—in the tradition of US sanctions—blocks such WMD as coriander seeds, fishing nets, gardening and dairy equipment, candy, and children’s toys, and the violent protectionist attack on the aid boats. The heroic Schorr said he did not want to get in the middle of that controversy, and so would have no comment. He did say it was wrong to criticize “our president” over the oil leak. Then he was asked about the news that Obama now has personal death squads in 73 countries, far more than Bush. Well, he said, laughing indulgently, every president wants to be be able to apply “direct action” [commit murders]. He’s targeting terrorists!, said the civil libertarian Schorr. But, he was asked, Obama campaigned against Bush—and still criticizes Bush—for doing less of this sort of thing than he now does. Get over it, said the progressive Schorr. They’re terrorists.
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How a state monopoly on liquor can raise prices over 1000%

Star News Online:

The state's ABC Commission sets prices on liquor uniformly throughout the state, as governed by state statute. And on every delivered case of spirituous liquor approved for sale, there is an 80.8 percent markup from the distiller's price, in addition to other charges.

The distiller's base price for a case of 12 bottles of Aristocrat Vodka, for example, is $5.79 – just less than 50 cents a bottle.

Then a federal excise tax, distiller's freight charges and bailment charges for the warehouse storage are added, and that case's price goes up to $32.91.

Then the local ABC board tacks on a 39 percent markup that's used to generate profit, bringing that price to $45.74, and then state taxes, additional markups and another bailment surcharge bring the case to a total of $61.92. With bottle charges added and an 8 percent sales tax added, that's $5.67 per bottle purchased at the ABC store.

Bars and restaurants with mixed beverage licenses pay an additional $3.75 mixed beverage tax per bottle, but they do not pay sales tax since sales taxes are generated when drinks are sold at the establishments.

So, purchase a mixed drink made with Aristocrat Vodka and you might pay $5 per drink – just less than the price of Aristocrat Vodka by the bottle.

All that money generated – more than $30.7 million in the past fiscal year for New Hanover County – has to go somewhere.

On the sale of the bottle of Aristocrat Vodka, 38 percent of what the buyer pays goes to the state in the form of sales and excise taxes, said Agnes Stevens, spokeswoman for the ABC Commission.

Herring said the ABC system does not receive state appropriations because revenues from liquor sales pay for its operation. Local ABC boards use 39 percent of a sale of a bottle of liquor to pay their operating costs, and the remainder of the purchase price, minus the 38 percent given to the state, covers the distiller's price, federal excise tax and administrative costs for the state commission and warehouse.

From sales to businesses with mixed beverage permits, the state gets 30 percent, local boards get 39 percent and the state and local boards split an additional mixed beverage tax. Boards with many mixed beverage permit accounts tend to be more profitable than others, Stevens said.

Funds dispersed in fiscal year 2008-09 to state agencies by the New Hanover County ABC board include $7.9 million in state taxes, $1.6 million to New Hanover County and $808,084 to the city of Wilmington.

[...]But some officials want to take a closer look at the government's liquor operation after the StarNews revealed the New Hanover County ABC father-son administration team of Billy and Bradley Williams earns nearly $350,000 together in annual salaries.

Gov. Beverly Perdue said last week all options were on the table for reforming the ABC system, including privatization. North Carolina is one of 19 states that operate the sale of hard liquor.
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Fully privatized town?

Pittsburgh Live:

Atlanta's wealthiest suburb is a company town.

Three Fortune 500 firms call this home. City Hall is in a private office park. And a giant Colorado corporation agreed four years ago to groom the ball fields, fill potholes, control traffic lights, sweep streets, enforce building codes and run all public services, except fire and police.

"Years ago, this road would flood when it rained because the county didn't clean out the drains," said Arthur Thompson, 70, gesturing to the concrete lane in front of his home of 30 years. "It doesn't happen anymore. They actually come out and clear them now."

Sandy Springs is the first U.S. city to outsource most of its public services to a private company.

Officials say promising results for the city of 85,000 could offer lessons to officials in Pennsylvania seeking public-private partnerships that aim to merge the bottom-line efficiency of private enterprise with the accountability of public officeholders.

"We're about the same size as Roswell (Ga.) up the road, population-wise, and we have about 100 fewer employees, so we think our model is a lot more efficient," said Mayor Eva Galambos, a Republican who fought 30 years to incorporate Sandy Springs and secede from surrounding Fulton County.

She and other like-minded residents in 2005 voted overwhelmingly to approve incorporating the city.

"We had a county government that just ignored us," she said. "We weren't getting any services."

CH2M Hill of Colorado employs Sandy Springs' 115 city workers, but not its 140 police officers and 97 firefighters.

Revenue from the city's affluent tax base focused, in part, on repaving 81 miles of streets, building 5,000 feet of sidewalks and adding a 25-acre, $15 million park to the town that had 12 parks.

There are other benefits.

If an employee performs poorly, the company can fire or transfer the person without going through union arbitration. Pension and health care costs fall on the employer, not the city.
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