On Government and the Free Market (part 2: intellectual property law)

Spoiler: Copyrights and Patents ruin Perfect Markets, hassle software companies, bolster the plutocracy, prevent market forces from producing free digital goods and services, and make me Angry at night.  Here's why we should get rid of them:

Empirical Evidence of Plutocracy

I know that most of you didn't need this to believe, but I had to share this snippet from Ezra Klein:

I’m sure all of these theories are at least partially right. But they’re missing the big one that has the best evidence behind it: The unemployed don’t have very much money. And it’s money that gets the political system interested in your agenda:

Gilens has been collecting the results of nearly 2,000 survey questions reaching back to the 1980s, looking for evidence that when opinions change, so too does policy. And he found it — but only for the rich. “Most policy changes with majority support didn’t become law,” Hacker and Pierson write. The exception was “when they were supported by those at the top. When the opinions of the poor diverged from those of the well-off, the opinions of the poor ceased to have any apparent influence: If 90 percent of poor Americans supported a policy change, it was no more likely to happen than if 10 percent did. By contrast, when more of the well-off supported a change, it was substantially more likely to happen.”

If 15 million college-educated professionals were unemployed right now, the political system would care.

I spent a little time trying to find the original study, but I couldn't track it down. I guess you'd have to read the book, but suffice to say that I am not surprised.

Speech and Money Followup: Action-Effect distinctions lost on Supreme Court

Basically, in Arizona Free Enterprise Club's Freedome Club PAC v. Bennett the Supreme Court majority opinion makes a truly disturbing error.  They argue that the right to free speech is not one of action (you can say what you want) but rather efficacy (actions limiting the efficacy of your speech towards its goals are apparently problematic).  In other words, not by censorship, but merely by providing content-neutral funding for competing opinions, the government can be considered to be impeding free speech.  Elena Kagan hits the nail on the head in her dissenting opinion (second half of the linked opinion).  Here's her most terse description of the perceived problem.

According to the Court, the
special problem here lies in Arizona’s matching funds
mechanism, which the majority claims imposes a “sub-
stantia[l] burde[n]” on a privately funded candidate’s
speech. Ante, at 2. Sometimes, the majority suggests that
this “burden” lies in the way the mechanism “ ‘diminish[es]
the effectiveness’ ” of the privately funded candidate’s
expression by enabling his opponent to respond. Ante, at
10 (quoting Davis v. Federal Election Comm’n, 554 U. S.
724, 736 (2008)); see ante, at 21–22. At other times, the
majority indicates that the “burden” resides in the deter-
rent effect of the mechanism: The privately funded candi-
date “might not spend money” because doing so will trig-
ger matching funds. Ante, at 20. Either way, the majority
is wrong to see a substantial burden on expression.

Just a quick gloss: the worry is that the possibility that their opponents might be able to say something about their speech is what the Majority worries will discourage that speech.  And here is her most effective analysis of the error of the Majority Opinion.

Most important, and as just suggested, the very notion
that additional speech constitutes a “burden” is odd and
unsettling. Here is a simple fact: Arizona imposes nothing
remotely resembling a coercive penalty on privately
funded candidates. The State does not jail them, fine
them, or subject them to any kind of lesser disability. (So
the majority’s analogies to a fine on speech, ante, at 19, 28,
are inapposite.) The only “burden” in this case comes from
the grant of a subsidy to another person, and the opportu-
nity that subsidy allows for responsive speech. But that
means the majority cannot get out from under our subsidy
precedents. Once again: We have never, not once, under-
stood a viewpoint-neutral subsidy given to one speaker to
constitute a First Amendment burden on another. (And
that is so even when the subsidy is not open to all, as it is
here.) Yet in this case, the majority says that the prospect
of more speech—responsive speech, competitive speech,
the kind of speech that drives public debate—counts as a
constitutional injury. That concept, for all the reasons
previously given, is “wholly foreign to the First Amend-
ment.” Buckley, 424 U. S., at 49.

Money as Speech

I typically agree with most of what Ygelsias has to say, but this post really rubbed me the wrong way.  Here's the most relevant section:

My starting point is that the “money isn’t speech” mantra clearly has some real problems with it. [...]

The issue, most broadly, is that money is a big help when communicating with the public. Restricting a person’s ability to obtain money for the purpose of communicating with the public is a means of restricting that person’s ability to communicate. It is true that this means that people with more money have a disproportionate impact on the public dialogue just as they have disproportionate access to big houses and fancy dinner and quality medical care. And you don’t have to be happy about any of those facts. But they’re part of a general question of inequality and economic justice.

This seems extraordinarily perverse to me.  First of all, it turns the argument on its head.  It's patently not the case that people would be restricted from attempting to get monetary support for their communication.  Most campaign finance reform proposals allow you to do so by getting a lot of people to give you money, and they certainly don't prevent you from making money in other ways in order to fund your outreach.  They prevent DONORS from unfairly influencing the platforms of politicians by virtue of their wealth.  Furthermore, as far as restrictions on free speech go, we already have some strong ones on advertisements, which would seem to fit into the same sort of category as ads for politicians (but don't).

I suppose one could argue that having more money is kind of like being photogenic or having a good prose style - useful traits that are inherently differently distributed and contribute significantly to communication efficacy.  It seems unreasonable, for instance, to say that every blogger should have to write at a 4rd grade reading level in order to even the influence playing field.  If you really believe that money and eloquence have no significant moral difference, then I guess you can buy Yglesias' argument.

But here's the thing.  As Tom Lee points out, the primary reason that money is important in speech is for purchasing network media time.  Network media time (as distinct from internet media time) is, by its nature, finite and one person's purchase necessarily crowds out another's.  This is patently not true for things like eloquence and good looks.  So, since tv time is zero-sum, restricting the ability of one person to purchase a lot of it doesn't restrict speech in general, but rather prevents a private individual from purchasing away the power of speech from the rest of the field.  From that lens (which I think is more sensible) we can see campaign finance reform as promoting, not limiting, free speech.  Also, since we're talking about media companies in particular, it might be reasonable to talk about limiting the company's speech, rather than the pundits.   In other words, we could put upper bounds on the amount of stuff they can broadcast from a single funding source, or something along those lines.  Media providers are already subject to many restrictions, so I can't think of a free speech argument against this, though I imagine implementation of such a law would suffer from serious practical and political difficulties.

Campaign Finance

I've been thinking about the problems of plutocracy for a while, and I was pleasantly surprised to discover this bill.  As far as these things go, it seems like a pretty decent start on leveling the playing field a little bit for popular candidates without corporate support.  That said, it's only a first step.  Candidates that don't opt into the program would still be funded in all the usual ways, and I suspect they'd have larger war chests too.  It also doesn't impact the third party support ads that seem to be such an important part of modern election campaigns.

If I had it my way, every candidate would be forced to campaign under the bill's provisions.  Basically, you demonstrate that you're a real candidate by getting a whole lot of small donations.  Then you have your campaign funded out of public coffers.  Everyone get's the same amount of money, give or take the difference in number of $100 donations more popular candidates could procure.  There's no need to pander to the extraordinarily wealthy or to corporate interests in order to get elected, and poor people might be able to consider running (though of course they probably wouldn't be able to on account of needing "jobs" to "support their families").  Still, it would be a step in the right direction.

The Problem With Elected Officials

So here's the thing about elected officials.  They get elected because they are Good At Getting Elected.  They don't get elected because they know something, have policy skills, or are particularly representative of the people electing them.  They get elected because they managed to convince a lot of people to vote for them.  Now, the trouble with that is it basically puts selective pressure on politicians to make them better at getting elected.  It puts absolutely no pressure on them to get better at running the country.  I mean, there might be beneficial side effects for them if they happen to implement awesome policies that greatly improve the lives of many voters, but frankly, if you tell people to think something from a position of authority they tend to believe it.  Take, for instance, beliefs about the distribution of wealth in america.  Or Obama's birthplace.  Or the level of taxation under Obama.

Basically, the moral of the story is this:  It is easy to deceive people, and you get elected by winning rhetorical battles rather than implementing policies that people like, so politicians across the board have strong motivations to deceive people rather than do anything useful.  This is going to be true in any democracy, but it seems particularly egregious here.  I feel like we need some sort of mechanism for punishing liars and showing actual facts.  The trouble is that any service doing this would almost certainly be ignored as "too partisan" by both parties.  I can't think of a way around this except through educational reform.  Education has always been the path out of tyranny.  The new tyranny is that of misinformation and rhetoric and so I guess we should be studying rhetoric and statistics.  Either that or we could all become anarchists.

Optimism is for the Rich

This is from GALLUP by way of Yglesias.  Not too terribly surprising.

The Plutocracy co-opts the Supreme Court for Bad

I've taken up reading supreme court decisions on matters I find interesting.  Here's a particularly fraught one showing how even our highest courts can make mistakes, and still have lots of right people on them.  This particular case discusses the rights of companies to restrict individuals from seeking class arbitration.  When I first saw the headline on slashdot I knew I was going to get angry about this one, and boy was I right.  The Argument:

 Some people have a dispute with AT&T.  They had to pay sales tax on ostensibly free phones, so they claimed a dispute and according to the AT&T service contracts were forced to subject themselves to third party arbitration.  However, AT&Ts contract additionally stipulates that they may not be rolled into a class arbitration.  In other words, every arbitration with AT&T must be one wronged party v. AT&T.  Clearly this is in AT&Ts favor as they can go about intimidating, avoiding, and inconveniencing the majority of claimants out of bothering to pursue arbitration.  They are assisted in this endeavor by piles of legalese, and also by the small size of each individual claim ($30 in this case).  The state of California in its wisdom wrote a law invalidating such clauses precisely because they allow a large company to defraud large numbers of people out of small amounts of money without much chance of ever getting in trouble for it.

The Ruling:

The 5 justices that made this ridiculous ruling seem to have based it on the idea that California's law goes against the FAA.  Their ruling is in the first link of this post.  It says that the FAA allows state laws to supersede it only if they are consistent with the intent of the bill (which is to put arbitration agreements on the same footing as all other contracts).  They basically say that since California's law specifically targets arbitration agreements it is contrary to the intent of the FAA and therefore it is not upheld.  They are all wrong.

The 4 justices who dissented in this one have it exactly right in my view.  They are in the second half of the first link of this post.  Basically they say: If you have to hire a lawyer to file a claim, or even spend a lot of time and effort or have any sort of expertise, and the amount of money in question is small, then no one will ever file claim, and the bad company will get away with its bad practices forever.  This is obvious.  They also point out a delicious and hilarious number of flaws in the majority opinion.  This rather undermines their final words: With respect, I dissent.

American Plutocracy

Basically, our laws and political structure give hilariously large amounts of power and protection to the wealthy.  This seems like a problem, because the vast majority of people aren't, you know, wealthy, and also because the wealthy already have a lot going for them without getting any help or special treatment.  I talked about this with respect to our tax code last post, but it applies in all sorts of venues.  Let's talk about them now:

1. Taxes - been here before but it's worth saying again.  The rich have an enormous advantage when it comes to taking advantage of tax exemptions.  Corporations (which are getting more and more like extremely wealthy people every court decision) are the most egregious example of this, with many "American" companies paying virtually no taxes as a result of complex accounting structures and multinational presences. All this made possible by complex tax codes and armies of lawyers and accountants.

2. Civil and Criminal cases - Legal fees make basically everything about the courtroom experience farcically favorable to the wealthy.  This is most awful in civil suits, where discrepancies in wealth lead to major corporations being able to bully people into settling cases that, given equal means, would assuredly go to court.  Recent examples: the GeoHotz fiasco, or any RIAA suit.  It's also pretty bad in criminal courts, where rich people have a great deal more access to effective legal council (there are public defenders, even really good ones, but that's a mixed bag), and can much more easily avoid the painful side effects of criminal suits because they can afford bail.  It's awful just how much time innocent poor people spend in prison waiting for their trial merely because they can't afford bail.  Likewise, rich people suffer significantly less from tickets and other fines and penalties, so they have much less incentive to obey laws whose violation results in such penalties.  All of this is before we even consider things like cronyism or bribery which are at least theoretically illegal.

3. Political Influence - I just recently was reading about a dinner party fundraiser hosted by the Obama campaign.  Tickets were going for 35,800 dollars.  For that price you got to eat and hobnob with the President of the United States, with only 60 other people around.  While I'm sure Obama has a fairly well established set of political views, it certainly can't hurt the agendas of the dinner guests to have a chance to chat with him.  If you consider the fact that all of the fund raising dinners, charity drives, and donation things that occur in the upper echelon of politics are attended more or less exclusively by people able to drop 35K on a dinner party then you can probably pretty quickly recognize why politicians might favor the agendas of the very wealthy.  It's almost an accident at this point, the very wealthy are the only people they're really hanging out and chatting with; how could they be expected to favor anyone else?  It get's a lot less accidental when you look at things like corporate giving and campaign donations and the like.  Money buys you media time, which gives you a disproportionately large voice in the public arena.  All of this rather handily explains items 1 and 2 in this list.  Turns out of wealth gives you a bigger voice in the making of laws, the laws will grow in favor of you.  I bet we are all surprised by this.

Taxes - how they should be (Part 2 Simple)

Complexity is the friend of the wealthy.  This causes problems all over our country, but I'm going to focus only on tax law right now.

Complexity problem 1: Wealthy people can afford lawyers and accountants, who exist entirely so that money can be made off of the complexity of our laws.  Unsurprisingly, this means that the well off are more likely to receive tax deductions &c.  They report and record their income and expenditures more carefully and they have access to experts who can maneuver the many loopholes and edge cases in our current system.

This is compounded by problem number 2: As some of you may have noticed from this income and expenditure spreadsheet, education trends with income.  That means that if you're not making a whole lot of money, it's likely that you don't have a whole lot of education or training in order to deal with the complexities of tax law, which means you probably wont be able to do as good a job as a highly trained professional expert tax payer like an accountant.  Surprise!

I'm not the first person to have noticed this, as you can see from Obama's recent budget speech, but I hope this expresses the issues succinctly.  Basically, I think tax payments should be a simple function of your income.  We should be adjusting the level of taxation to what we expected to make on average at each income level once deductions were applied, and we should leave social policy implementation out of our revenue stream.  This would have a whole pile of interesting side benefits like:

1. Taxes would be hilariously easy to calculate for people with regular salaries, which means the government could just send you a bill rather than forcing you to wade through a pile of inconvenient forms.  I'd love that.

2. Human beings might understand the tax code.

3. Politicians wouldn't be able to sneak in weird policy ideas under the guise of tax breaks.

4. Our revenue stream would be highly predictable on account of no variance being introduced by lawyers

5. We would put huge numbers of accountants out of jobs (Hurray!)