Where there is no market economy, the best-intentioned provisions of constitutions and laws remain a dead letter. Ludwig von Mises
Resistance to tyranny is obedience to God.
I was once asked by an advocate of citizen disarmament what I thought of 'gun control,' ... as I framed my answer, he added, 'Give me the short answer.'
'Okay,' I answered, 'if you try to take our firearms we will kill you.'
Tuesday, April 10, 2018
Intellectual Property, part 1. Theory
Can ideas be property? The (classical) liberal/libertarian position is ambiguous. Thomas Jefferson, for example, denied that intellectual property is a natural right -- it's a grant of a legal right by society, or government -- and he seemed doubtful that it's an important institution. Benjamin Franklin was a prodigious inventor, never patented anything, but noted that occasionally others took his ideas, patented them, and made monopoly profits. On the other hand, Harriet Martineau, whose income -- her livelihood -- came solely from her writing, noted that copiers and plagiarists profited from her efforts while she, the creator, received nothing.
The great economist Ludwig von Mises observed that intellectual property (IP) differs from physical property, in that an idea can be shared without reducing the availability of the idea to the creator. But if the creator of an idea can't share in the benefits generated from an idea, her/his incentive to create ideas is reduced. Hence patent and copyright protection can be warranted, if they increase beneficial innovation. In most places, such legal rights are not permanent, but last only a matter of years, giving a creator short term profits to recoup the investment.
Note that trademark, another form of IP, is different. Trademark is a certification of the source or producer of a product, important if the producer has a reputation (another ephemeral IP of sorts) or guarantee of quality. This can be a life-or-death matter. I cannot find a news link, but some years back counterfeit Johnson & Johnson surgical membranes from China made it into hospitals and were implanted in patients. Unlike authentic J&J materials, the membranes slowly decomposed into toxic chemicals, and by the time this was detected, it was too late to save the patients, who were condemned to slow, agonizing deaths.
My own position on IP is nuanced. It seems to me that trademarks are perfectly legitimate. They are simply contractual guarantees and and really not an example of IP at all. But they require that words and symbols. Rolex, for example, is a trademark that says a great deal about the watch bearing it, and a cheap Chinese copy that says "Rolex" is not the same thing. Of course, trademarks require that certain words (e.g. Kleenex, Xerox, Band-aid) and symbols be off-limits to competitors. If one could trademark a word or phrase already in common usage, that would be problematic, hence trademarks must usually be newly concocted, for the purpose at hand. (Someone tried to trademark one of Montana's mottos, "Big Sky Country," and charge royalties for use, an obvious abuse of the trademark idea. They failed.) Conclusion: trademarks are perfectly acceptable.
With respect to patents, I'm in line with Mises: what are the tradeoffs? In areas where it is likely that innovation requires substantial investment, patent protection is likely to be more important for inducing innovation. Pharmaceutical research is especially expensive, and it's certainly of high value when successful, so patent protection seems warranted. The research costs are substantially increased by government regulation, but even without that, developing new chemical formulations that work is difficult. It's hard to determine efficacy. It's hard to determine unwanted side effects. It's hard to determine whether an efficacious treatment is effective. Alternatively, new software is often not so expensive to develop, and many people are willing to undertake development, often just for the sake of doing it, e.g. R statistics environment and contributed statistical packages. (Yes, the best statistical software in the world is free. It's just ideas, and the developers willingly relinquish any property in them.) Thus patents make sense, if the benefit-cost tradeoff is made sensibly.
Copyright is similarly ambiguous. Large corporate music producers act as if downloading of music is among the most heinous crimes imaginable, while simultaneously paying performers as little as possible. That sort of rent-seeking is beside the point, though. What are the benefit-cost tradeoffs for copyright and development of new music? It's unclear to me that pop commercial music is superior to homegrown, homemade stuff. I cannot imagine what the loss in innovation would be if Lady Gaga, Miley Cyrus, the late plagiarist Michael Jackson, or George "My Sweet Lord" Harrison hadn't had copyrights to make them millions. I know far too many people who can concoct a catchy tune, or do justice to musical instrument or voice. Homegrown, live music is ubiquitous. Music can be improvised, songs made up on the spot. On the other hand, of course, there's higher, more complex, sophisticated symphonic music, which takes time and great effort to compose. Giuseppe Verdi did not receive copyrights on most of his works. But once he finally did, and consistent royalties began, his productivity plummeted. Oops. (Note: clicking the link will download a pdf from Harvard Kennedy School. The author of the linked article points out that Verdi's financial success still may have induced creative innovation by other composers; still, the evidence is that the music blossomed most in places without copyright.)
Written words are different yet. There's a great difference between an unauthorized performance of "Happy Birthday to You" and publishing a bootleg copy of a novel that perhaps someone took years to write. This ambiguity explains why copyrights and patents are not natural rights, and why they might reasonably be temporary legal rights.
Next... Part 2. China, Intellectual Property, and U.S. Trade Policy
There are many things screaming for comment these days -- the insane yammering for gun control, the left's war against Trump, North Korea, Iran, Russia, Syria, China, Gaza, and other matters. I have insights, I just don't have time to do them justice. ("You really want a civil war?, fire Mueller, bomb, bomb, sanction, bomb, beats me, IDF should stay the course.") (Not sure what to do about other matters.)
There's just no way to comment on all the current events that deserve comment, and instead I'll try to return focus to issues that are more in line with economics and philosophy, as in the upcoming (above) post.
More on the sad state of the libertarian movement: immigration
A libertarian friend of mine has objected to my complaints about the sad state of the libertarian movement. He argues that what's happening is that libertarianism is expanding in acceptance, and that as more people adopt the ideas, there are necessarily a few more kooks, and I'm just picking up the kooks, the outliers. I'm skeptical. I don't know if libertarianism is expanding in acceptance, but I definitely don't think I'm simply highlighting outliers; my previous post seems to me to focus on important, high-profile libertarians. Maybe they are outliers, but if so, they in are highly influential positions.
My friend particularly took issue with my characterization of Cato's "Immigration Expert" (Cato's words), Alex Nowrasteh, and sent me a video of Nowrasteh speaking at a small midwestern college. Eventually I will watch the thing, but I've read a lot of Nowrasteh's stuff and found it quite shallow. In the stuff I've read, Nowrasteh makes empirical claims that are doubtful at best, and logical inferences that don't hold. This is a good case study of why I think too many of today's libertarian spokesmen are bad representatives of libertarianism. Here are two examples from Nowrasteh's writing.
1. During 2015 ("Syrian" refugee invasion of Europe) he argued for the U.S. taking in numbers of "Syrian" refugees similar to Germany. (That's one million or more; I use quotation marks because according to Eurostat, only a plurality of the immigrants were actually Syrian. Afghanistan, Pakistan, and Africa were all important sources.) That is, libertarian Nowrasteh proposed that the United States take in and settle one million unvetted and unvettable "Syrians."
There are so many ways in which that's a bad idea it's hard to count them. But let's look at a few.
i. Daesh and Al Qaeda both infiltrated these groups. Presumably it's bad for liberty to bring squads of Islamist terrorists into the country, right?
ii. The "Syrian" refugees were all Muslims from traditional societies. Overwhelming majorities in these societies favor things such as sharia as the basis of all law, death or other severe penalties for apostasy and blasphemy, etc. They don't accept equal rights for women, and they don't think much of gay rights either. Bring in one person who believes this nonsense and he'll likely cave in and adopt local customs and ideas. Bring in one million en masse, have them settled by lefty social workers who feed them the multiculturalist line that "assimilation is racism" and they'll demand everyone else accommodate them. That's bad for liberty, right?
iii. The "Syrian" refugees who entered Germany had lower levels of education than the average German, and it turns out that a year of Syrian education isn't equivalent to a year of German education -- it's worse. The refugees prove to be relatively unproductive and in need of substantial taxpayer support. In the United States, refugees are supported by the HHS Office of Refugee Settlement, which provides taxpayer funds for housing, education, health care, auto purchases, spending money, etc. That's bad for liberty, right? Yes, bad for the productive people paying taxes, that is, for Americans.
There -- three good reasons for opposing bringing in one million unvetted Muslim refugees. Terrorists would infiltrate, this would be one million people who oppose libertarianism and Western liberalism, and they'd require substantial subsidy from taxpayers.
2. Nowrasteh is one of the people who have made and promoted the "bathtub argument" fallacy (one is 1000 times more likely to die falling in bathtub than from terrorism, so concerns about terrorism from unvetted refugees are overblown). I might be mistaken, but I think he's even something of a pioneer in this line of foolishness. It's hard to imagine a more ridiculous argument, or more inept use of statistical reasoning. Again, just a few reasons:
i. Bathtubs are not plotting to raise their death count. Terrorists are.
ii. Death counts from terrorism would be much higher, except that we spend billions and take all sorts of interdiction measures.
iii. Each of us can effectively controls our exposure to bathtub risk. If one is worried, non-slip mats, safety rails, and even avoiding bathtubs are within one's power. But if the government listens to Nowrasteh and opens the borders to anyone, no questions asked, or if the government settles a large number of irritable foreigners next to us, what are we to do?
iv. The fallacy confuses physical phenomena, mere physical causality, with teleology. Terrorism is purposeful. Any human being understands the difference between accidentally bashing your head in, and having someone bashing your head in for you. Nowrasteh apparently doesn't... that is, when other people are involved, of course. He's doing analysis that might be suitable for a "society" of homo economici, or robots, but not for human beings.
v. Along these lines, death toll isn't even the right measure for effects of terror. Terrorism is a political tool; it is designed to shape political behavior, and death toll is besides the point. It's designed to scare survivors and change their behavior, and it works. No MSM outlet will print the Danish cartoons. Charlie Hebdo stopped printing Mohammed cartoons. Bathtub accidents don't change our institutions or threaten our freedom. Terrorism does.
vi. There's a second reason death toll isn't the right measure. Successful terrorism destroys Trade Centers, shuts down subway systems, closes tunnels, knocks out electrical grids, and even unsuccessful terrorism can shut down transport systems. Bathtub accidents don't.
Bathtubs don't kill people, but terrorists do, Alex.
OK, but I agree, any single person such as Nowrasteh, is beside the point. It's the overall pattern I'm seeing that disturbs me. It disturbs me when I hear libertarians dismiss people who disagree with the open borders line as nativists or racists or statists or just ignorant folks who ought to worry more more about bathtubs... that bothers me. To me, it means libertarians have lost interest in dealing with real world problems, at least in any genuinely reasonable way.
Here's another example - Dr. Chandran Kukathas (LSE political scientist, department head, libertarian, who occasionally works w Cato, IHS, etc.) wrote a piece reposted by FEE arguing that immigration control logically implies setting up internal controls to monitor and control everyone in a country, citizen and non-citizen alike, and compared it to South Africa during apartheid. (I previously discussed this here.)
OK. I just wanted to think about how we might stop Hezbollah assassins or Daesh bombing teams from entering the country. Suddenly I'm told that therefore, logically I'm promoting 24/7 monitoring of every citizen, internal passports and checkpoints, etc. And the only alternative is completely open borders? There's no middle ground?
If I am skeptical of bringing in one million "Syrian" refugees, that's equivalent to sending a boatload of Jewish refugees back to death camps in Nazi Germany? (So said David Bier, at the time with the Niskanen Center, but subsequently hired by Cato as an "expert," as their site puts it.)
One can respond that Kukathas or Nowrasteh & Bier are outliers (Nowrasteh & Bier are the two people Cato lists as their immigration experts). Fine. I'm willing to accept that argument, although they seem pretty high profile for outliers, but let's grant that. So then who are the reasonable middle ground libertarians on this? It's not a rhetorical question. I've asked my friend, and I'll see how he responds.
That's just one issue, but it's a good example of why recent libertarians have often bothered me, and why I doubt they really care about liberty.
I intermittently read writing by Justin Raimondo. The last time I read anything of his I agreed with was well over twenty years ago. But he's largely hit the nail on the head with his recent piece in Chronicles, Lost Near the Beltway. I think many of his details aren't quite right -- Rothbard, Ron Paul, and the Rockwellites have their own problems, and Russia really is a very bad player (Putin imagines Russia at war with us, whether we do or not) -- but Raimondo is certainly onto the rot that's infested the minds of modern libertarians.
Here are a few examples from my own "libertoonist chamber of horrors."
Gary Johnson, "Libertarian" Party presidential candidate, identified leftists David Souter and Merrick Garland as ideal SCOTUS justices, flipped out when someone asked him about illegal aliens and insisted on the socialist's PC euphemism "undocumented workers," opposed cutting taxpayer subsidies to Planned Parenthood and opposed abolishing EPA, agreed that governments should forcibly close businesses of bakers who refuse to decorate cakes with themes that celebrate homosexuality, declared Hillary Clinton a good public servant, condemned freedom of religion and called it a "black box," blamed Allepo on U.S. interventionism (once he figured out Allepo wasn't a government agency). I guess it's understandable that he promoted drug use.
William Weld, his VP running mate, promoted Hillary Clinton for president, called semi-automatic firearms "WMDs" and expressed horror that we mere civilians have access to them, and called for expanded federal power to control Western lands including private lands.
The Niskanen Institute, a pseudo-libertarian "think" tank, has attacked Heartland Institute for expressing doubt about climate models. Climate models have systematically failed to predict (as the Niskanen "defense" admitted) and are the weakest part of the argument for anthropogenic climate change.
David Bier, also of the Niskanen Institute, attacked Americans for our "bigotry" and argued we should emulate Angela Merkel's policy of taking in one million unvetted "Syrian" refugees, at a cost to taxpayers of ten billion euros in the first year. His essays on this subject were reposted by FEE, and Bier was subsequently hired by Cato as an "immigration expert."
Alex Nowrasteh, another Cato "immigration expert," regularly claimed that to not import "Syrians" at taxpayer expense was equivalent to turning away oats bearing Jews escaping Nazi Germany. Nowrasteh endorsed unlimited immigration by Muslims, who he claimed are less prone to terrorism than the average person.
Cato writers also have endorsed a guaranteed national income, as well as criminalizing all firearms transfers that don't have the permission of the federal government and that provide the government a set of records.
Not to be outdone, FEE's chief editor, Jeffrey Tucker, endorsed a deep state coup against President Trump.
Earlier FEE ran a point-counterpoint debate in which their own "expert," Cathy Reisenwitz, argued that libertarians should devote less time to worrying about individual rights and more to figuring out how to combat "white privilege." She later lamented libertarians don't rush to embrace the Marxists of Black Lies Matter. (Although the Bier brothers did.)
In another online debate, Reason chief editor Katherine Mangu-Ward and libertarian and economist Steven Horwitz argued (covered here) that there's nothing more to ethics than basic libertarian respect for others' rights...which are, of course, undefined. (Does this respect for others' rights mean we have to bake gay cakes, Steve?)
Who needs these people? We already have the New Left. And at least the New Left doesn't poison the discussion by claiming that all this crap promotes something other that totalitarianism.
What would we call someone who opposed leftists on the Supreme Court, said bakers can decorate cakes as they damn please, said people should own guns, that EPA should be abolished, opposed taxpayer funds for Planned Parenthood and for importing and settling immigrants, favored shutting down the shadow government-deep state, and thought that ethical behavior entails all sorts of things beyond simply refraining from initiating violence. I'd call them a real libertarian.
You are advocates of violence, and you should stop -- pull back from the brink to which you are heading. You're "demanding" that I, and millions of people like me, surrender our rights and our property, because of your stupid ideas and your hatred of us. I guess we're to assume the government will take care of us -- the way the FBI did when warned about the recent Florida high school murderer, or the Boston bombers, or the Fort Hood murderer... or the way the the Broward Country sheriff did? (45 calls on the killer, including felony complaints). And we're to trust you and the rest of the left and the government that if you could disarm us, you'd proceed to respect the remainder of our rights? Well, we don't.
Stripping people of their abilities to defend against criminals and tyrannical government will not lead to less violence, but more. The venom and hate you spew against those of us who disagree with you shows what's in your soul. It's violent. You ought to be looking at yourselves, asking what you've become and asking if you really want to declare war on your fellow citizens. No one would win a civil war, but you'd not come in first.
Photo: If you want peace, learn to use these and keep them ready.
Tariffs are a terrible idea. It's clear that Chinese government policies pose problems that need addressing -- the Chinese government steals all sorts of data, including patents and proprietary trade information, personal data (including biometric markers and security clearances). They also require firms doing business in China to reveal proprietary technological information, which they promptly steal. All of this does call for sharp, harsh, intelligent responses.
Steel and aluminum tariffs are a blunt and non-targeted response. They don't directly attack the problem, nor the culprits responsible. Tariffs become a stupid response when applied broadly, to other countries, and especially when levied at non-offender South Korea. South Korea is an American ally. At a time when we need allies in the Pacific, tariffs on South Korea not only make us poorer and make our friends weaker, they threaten us by strengthening our enemy, Rocket Man -- that fat, short homicidal dope with a ridiculous haircut and nuclear weapons. Tariffs on South Korean steel are a dumb idea, even from the standpoint of anti-free-traders so foolish as to believe that low prices are a problem for us.
Fortunately, the threatened tariffs against South Korea have been temporarily suspended. But the suspension is temporary, and imposition of the draconian tariffs depends upon the outcome of the upcoming talks. "We" at Unforeseen Contingencies would like to point out to President Trump and the USTR that tariffs on South Korean steel will hurt America. They will raise costs for Americans who use steel (they far outnumber the few American steel users who might gain, and might not), they will jeopardize the trade surplusthat American service providers and American farmers and ranchers have with South Korea, over steel? Do you really want to jeopardize $6.9 billion in American ag exports over $3.4 billion of South Korean steel imports? Do really want to weaken South Korea and reduce South Koreans' willingness to cooperate with Americans in opposing homicidal Rocket Man, all in the the name of 16th century economic theory?
Mr. Trump --DO NOT RAISE TARIFFS ON SOUTH KOREA, and stop with the mercantilist nonsense. Make America great again. Free trade and a robust, aggressive defense, please.
"We" at Unforeseen Contingencies always strive to be on the cutting edge, and what could be cutting-edgier than celebrating "Israel-Apartheid Week," a carnival of hatred against Israel and Israelis? Israel-Apartheid Week (IAW) is a pro-BDS movement that promotes eliminating Israel. IAW rejects the 1948 borders, and even the idea of a Jewish homeland; they are explicit about this. (See the second and fourth paragraphs.) (But caution: their website is set so that you cannot click back to this one.)
To celebrate, let's share the concerns of Micah Lakin Avni, who just spoke before the UNHCR (United Nations High Commissioner for Refugees). Avni's father, Richard Avni, was a school principal who taught both Jewish and Arab children. He was an American who immigrated to Israel. As a young man in the U.S., he had been active in the civil rights movement, and after moving to Israel he promoted rights of Palestinians. In 2015, Palestinian terrorists stabbed and shot him to death, because he was, after all, Jewish.
His son recently spoke to the UNHCR concerning the Palestinian Authority's (PA) longstanding practice of paying bounties -- permanent incomes, in fact -- to families of those who murdered his father and similar terrorists. As he put it, "What if I paid to butcher your fathers?"
Great question. UNHCR had no answer. Those who pronounce Israel an apartheid state, or even who see moral equivalence between Israel and the exterminationists of the PA and Hamas, need this shoved in their faces. They are on the side of murder. Israel is not an apartheid state. Israelis who are Arabs, Blacks, Muslims, Christians, and Druse all have equal rights. The "apartheid" claim is disinformation, designed to demonize a country that is a thorn in the New Left's side, for some reason.
OTOH, what "apartheid" literally means is "separateness." In that sense, perhaps Israel might be well-advised to separate itself entirely from the PA territory, Gaza, and Syria? Put up impenetrable walls, backed by minefields and missile defense systems and anti-tunnel defenses, and blast anyone who dares try venture across? That would at least isolate the Palestinians from the supposedly pernicious effects of contact with Jews; would that help, in the eyes of the BDS/IAW movement? I'm guessing not. PA territories and Gaza would die on their own; they need Israel to survive.
Our "Israeli Apartheid Week" celebration seems to be petering out. The problem is that Israel, a Jewish state, is a country of freedom, and the Palestinian alternatives, PA and Hamas, are regimes of murderous thugs, and Israeli Apartheid Week is a disgusting farce. But Unforeseen Contingencies remains cutting edge, for what could be more cutting edge than cutting down the left's cutting edge?
When my brothers and I were quite young, we heard that rhubarb leaves are poisonous. We had rhubarb growing in our back yard, so on more than one occasion (usually when friends were over) we would each take a bite out of a rhubarb leaf to test whether it really would poison us. Apparently this is well below the dose required for toxicity, and none of us noticed any effects. (Perhaps some readers are now saying "Aha, that explains him!")
President Trump is engaging in a very interesting economic experiment. It's sometimes said one cannot conduct economic experiments on a nationwide or worldwide level, but of course it is academic economists saying this about themselves, not about the president. We are about to witness a grand experiment. Tariffs are poison, and Trump is about to prescribe a big dose. OK, alleged to be poison, by us oddballs called economists. Let's see who's right.
I've not yet read the details of the tariffs, other than that steel and aluminum will be particularly targeted, but apparently retaliations are already being considered elsewhere. An economic experiment is about to get underway, and the results will be instructive.
I will make some predictions. The overall prediction -- the main experiment -- is that trade war will inflict real economic harm on America and Americans. Some specifics:
1. There will be a series of tit-for-tat responses, in which tariffs will increase and trade war intensifies. This isn't a forgone conclusion, and I think it's the weakest of my predictions. Conceivably targeted nations could drop some of the trade restrictions and practices that Trump claims justify his tariffs. I don't expect this, but it is certainly possible that trade war won't ensue, that the threat of U.S. tariffs will cause trade partners to increase their openness American exports.
As Adam Smith put it in Wealth of Nations, "To judge whether such retaliations are likely to produce such an effect, does not, perhaps, belong so much to the science of a legislator, whose deliberations ought to be governed by general principles which are always the same, as to the skill of that insidious and crafty animal, vulgarly called a statesman or politician, whose councils are directed by the momentary fluctuations of affairs." Trump claims expertise at the art of the deal; we'll see how insidious and crafty an animal we really have in Mr. Trump.
2. This will cause consumer prices to rise substantially in the United States, especially for lower end consumer goods, e.g. the sorts of things one buys at Walmart. I'm reminded that Robert Reich lamented that low consumer prices at Walmart meant a lower standard of living for the bottom half. I think that showed Reich to be an utter ignoramous, but now we'll have a test of his claim.
3. I expect capital inflows into the U.S. to plummet. Somehow Trump supposes that foreign investment into the United States is good, and trade deficits bad. Apparently Trump, his pseudo-economic advisor Peter Navarro, and all the other people who think this could make sense are unaware that there is no way to have net foreign investment in a country unless it runs a trade deficit. The simplest balance of payments accounting shows this. It's not a theory, it's basic accounting.
4. If net foreign capital inflow declines, I expect interest rates in the U.S. to rise. The national debt is already growing out of control; when the federal government must refinance its burgeoning debt at higher interest rates, this growth will accelerate. Trump is playing with fire. The debt problem is about to get much worse.
There are really three predictions here for economic harm in the United States: higher prices and lower living standards, lower investment and hence future productivity, and an acceleration of the national debt and risk of sovereign debt crisis. I can make other observations of a more political nature. Given DPRK's behavior, this seems an especially dumb time to hit South Korea with damaging tariffs. Trade war has the potential to undo the economic gain from tax cuts and deregulation that was undercutting the chances of the Democrats to take over Congress. (Memo to Trump: The dems are your enemies. They will impeach you and destroy you if they ever get the chance.) And I'm skeptical this tariff policy is really driven by "unfair" foreign practices. I think it is pure mercantilist rent-seeking by the U.S. steel industry.
This is not a good situation; it's a terrible one. But enemies of economics -- our enemies on both the left and the right -- have been yammering for far too long about how free trade is just dogma, that protectionism creates jobs and prosperity, that economists know nothing. Oh yeah? Well I say (and 95% of economists say) that protectionism is poison. So on with it, let's have a little empirical testing.