Copyright

From Beat the Press:

The big winners get to be big winners because the government is prepared to devote substantial resources to copyright enforcement. This is crucial because if everyone could freely produce and distribute the music or movies of the biggest stars, taking full advantage of innovations in technology, they would not be getting rich off of their recorded music and movies.

The internet has made copyright hugely more difficult. The government has responded by passing new laws and increasing penalties. But this was a policy choice, it was not an outcome dictated by technology. The entertainment industry and the big "winners" used their money to influence elected officials and get them to impose laws that would restrain the use of new technology. If the technology was allowed to be used unfettered by government regulation, then we would see more music and movies available to consumers at no cost.

In other words, it is government regulation that makes a winner take all economy in this case, not technology.

I think that this really is the piece of the whole puzzle that is worth discussing.  The regulation of the market place creates outcomes that are going to favor some actors over others.  It is the sad true of rules -- all rules will hurt some people and help others.  But we cannot treat the current set of rules as if they are divinely ordained or immutable -- even if current winners would enjoy that approach.

It is also the place where a Libertarian perspective seems most at odds with the marketplace.  The idea that laws need to be enacted to protect the profits of specific industries (what was once called "industrial policy") seems to be the main concern of key thinkers in the movement (consider Ayn Rand and the plot of Atlas Shrugged). 

Since the argument for copyright is about the social benefits of encouraging innovation (i.e. it is an ends based argument, not a natural rights based argument), it does seem that we should consider whether these aims are being well met in the current legal environment.  I am not an expert on this area, but it does seem that it is possible that we are too far on one side of the spectrum, where the rewards are more than are needed to incent innovation.  After all, do we really believe Walt Disney would have abandoned Mickey Mouse as unprofitable if now, 48 years after his death in 1966, the early films left copyright? 


NOTE [from Mark]:

Here are a couple of links to some previous posts that provide some background on the Mickey Mouse angle.

Alice in Lawyerland

Intellectual property and business life-cycles

Do copyright extensions drive innovation? -- Hollywood blockbuster edition

Back (momentarily) on the terrestrial superstation beat part 1 -- GetTV

While checking the TV listings a couple of weeks ago I came across an interesting but unfamiliar station showing what appeared to be a Jack Lemmon film festival. A visit to Wikipedia revealed that GetTV was a new terrestrial superstation from Sony Pictures and a quick perusal of the channel and its schedule revealed a heavy unacknowledged debt to Weigel's ThisTV and (particularly) Movies!

If you're going to steal, you from the best. As I've mentioned before, Movies! is, after TCM, probably the best channel for film buffs currently broadcasting. Technically, it's a collective effort from Weigel and Fox, but the division of labor has Fox providing the brawn (stations, money, libraries) and Weigel providing the brains (concept, programming, ad campaigns). Sony has stuck closely to the Movies! model and the result is a nice addition to the free-TV landscape.

It also provides a telling data point, especially when you take a close look at the timeline. I'll explore this in more depth in an upcoming post, but the broad outline will do for now. Six years ago, the idea of using over-the-air television to launch TBS-style superstations was not generating much interest. The only entrant was the well-respected but decidedly minor regional player, Weigel.

The first effort, ThisTV, was successful enough to convince Weigel to take its popular local format national with METV. Weigel's historic crosstown rival WGN soon followed with AntennaTV. Then came Bounce (combining elements from Weigel and BET). Then NBC/Universal's COZI. Then Weigel and Fox's previously mentioned Movies! and now, GetTV. There are a few points that need to be emphasized here:

This has a remarkably slow and steady process with increasingly large investments coming in as new information has flowed into the system;

That information is quite detailed. Since terrestrial superstations are generally broadcast in partnership with other stations, lots of parties have rich, reliable data about viewership and revenue;

As far as I know (and I've been following this story closely), all of the stations launched in this market over the past six years are still around with either their original format or a significantly upgraded one. What's more, they all appear to be making money.

Also true for Epidemiology

From the ever interesting Andrew Gelman:

Don’t model the probability of win, model the expected score differential. Yeah, I know, I know, what you really want to know is who wins. But the most efficient way to get there is to model the score differential and then map that back to win probabilities. The exact same issue comes up in election modeling: it makes sense to predict vote differential and then map that to Pr(win), rather than predicting Pr(win) directly. This is most obvious in very close games (or elections) or blowouts; in either of these settings the win/loss outcome provides essentially zero information. But it’s true more generally that there’s a lot of information in the score (or vote) differential that’s thrown away if you just look at win/loss.

This is the same principle in a lot of medical problems.  There is often a tendency to define diseases based on continuous distributions as binary outcomes.  Consider:

• High blood pressure = hypertension
• High cholesterol (especially LDL) and/or low cholesterol (HDL) = dyslipidemia
• High blood glucose = diabetes

Now, there are case where the true value is obscured by treatment.  That can be a reason to dichotomize, especially if the effect of the drugs is variable.  However, even in such cases there are options that can be used to estimate the untreated values of the continuous parameter. 

But I think that you will see much better prediction if you first model change in the parameter (e.g. blood pressure) and then convert that to the binary disease state (e.g. hypertension) then if you just develop a logistic model for prob(hypertension). 

Light posting

The last major push of traveling season is upon me and I know Mark is in the later stages of a pretty cool project.  So we might be updating a tad less than usual. 

The Outlier by the Bay

[Homonym alert -- I dictated this to my smart phone then edited it late in the evening.]

There's an energetic debate going on over at Andrew Gelman's site regarding Richard Florida's theories of the creative class. I can understand the urge to rise to Florida's defense. After all, there's great appeal to the idea that the kind of smart, innovative people who tend to drive economic growth are attracted to diverse, tolerant, livable cities with vibrant cultures. To  some extent, I believe it myself, but I find myself having the same problems with Florida I have with the rest of the urban utopianists: first that they have a tendency to take interesting but somewhat limited findings and draw impossibly sweeping conclusions and TED-ready narratives; and that these narratives often mesh badly with the facts on the ground. I've already discussed the latter (in probably overly harsh but still heartfelt language). Here are some thoughts on the second.

Part of my problem with a lot of urban research is that there just aren't enough major cities out there to make a really good sample, particularly when you have data this confounded and so many unusual if not unique aspects with each area. For some cities, with New York and San Francisco being very close to the top of the list, these unique aspects make it difficult to generalize findings and policy suggestions.

When I look at Richard Florida's research, at least in the form that made it to the Washington Monthly article, the role of San Francisco strikes me as especially problematic.

What is by many standards the most Bohemian and gay-friendly area in America is also arguably the country's center of technological innovation. Even if there were no relationship in the rest of the country, that single point would create a statistically significant correlation. That would not be so troubling if we had a clear causal relationship or a common origin. Unfortunately, the main driver of the tech boom, if you had to limit yourself to just one factor, would have to be Stanford University, while the culture of San Francisco does not appear to have been particularly influenced by that school, particularly when compared to Berkeley. In other words, had Stanford chosen to establish his college in Bakersfield, we might still have had Haight-Ashbury but we almost certainly would not have had Silicon Valley.

What's more, when we start looking at this narrative on a city by city basis, we often fail to see what we would expect. For example, if you were growing up in a relatively repressive area of the Southeast and you were looking for a Bohemian, gay-friendly metropolitan area with a vibrant arts scene, the first name on your list would probably be New Orleans followed by, roughly in this order, Atlanta, Savannah, and Memphis. Neither Cary. North Carolina nor Huntsville, Alabama would have made your top 10.

Rather bizarrely, Florida discusses both the Research Triangle and and New Orleans in his WM article, apparently without seeing the disconnect with his theories.:

Stuck in old paradigms of economic development, cities like Buffalo, New Orleans, and Louisville struggled in the 1980s and 1990s to become the next "Silicon Somewhere" by building generic high-tech office parks or subsidizing professional sports teams. Yet they lost members of the creative class, and their economic dynamism, to places like Austin, Boston, Washington, D.C. and Seattle---places more tolerant, diverse, and open to creativity.

There are lots of reasons for leaving New Orleans for Austin, but tolerance, diversity and openness to creativity aren't among them.

Even stranger are Florida's comments about the Research Triangle:

Kotkin finds that the lack of lifestyle amenities is causing significant problems in attracting top creative people to places like the North Carolina Research Triangle. He quotes a major real estate developer as saying, "Ask anyone where downtown is and nobody can tell you. There's not much of a sense of place here. . . .The people I am selling space to are screaming about cultural issues." The Research Triangle lacks the hip urban lifestyle found in places like San Francisco, Seattle, New York, and Chicago, laments a University of North Carolina researcher: "In Raleigh-Durham, we can always visit the hog farms."

Remember, Florida said "Places that succeed in attracting and retaining creative class people prosper; those that fail don't," so is this spot withering away? Not so much:

Anchored by leading technology firms, government and world-class universities and medical centers, the area's economy has performed exceptionally well. Significant increases in employment, earnings, personal income and retail sales are projected over the next 15 years.

The region's growing high-technology community includes such companies as IBM, SAS Institute, Cisco Systems, NetApp, Red Hat, EMC Corporation and Credit Suisse First Boston. In addition to high-tech, the region is consistently ranked in the top three in the U.S. with concentration in life science companies. Some of these companies include GlaxoSmithKline, Biogen Idec, BASF, Merck & Co., Novo Nordisk, Novozymes, and Wyeth. Research Triangle Park and North Carolina State University's Centennial Campus in Raleigh support innovation through R&D and technology transfer among the region's companies and research universities (including Duke University and The University of North Carolina at Chapel Hill).

This is not to say that there is not some truth to Florida's narrative or validity to many if not most of his insights. It does appear, however, that the magnitude of the effects he proposes are far less than he suggested and that the absolute claims he is fond of making are often riddled with exceptions.

Weekend blogging --Hard boiled (foreign edition)

A couple more from the Criterion Collection for your cinematic to-do list (free for the next nine days).




 Akira Kurosawa's High and Low:





This next one is not as well known but it sounds interesting:
Ascenseur pour l'échafaud is a 1958 French film directed by Louis Malle. It was released as Elevator to the Gallows in the USA (aka Frantic) and as Lift to the Scaffold in the UK. It stars Jeanne Moreau and Maurice Ronet as criminal lovers whose perfect crime begins to unravel when Ronet is trapped in an elevator. The film is often associated by critics with the film noir style. According to recent studies, it also introduces very peculiar narrative and editing techniques so that it can be considered a very important experience at the base of the Nouvelle Vague and the so-called New Modern Cinema.

Context is everything

There has been some vigorous discussions about the Congressional Budget Office's claims that increasing the minimum wage would cost jobs.  But there really are two things to keep in mind. 

One, noted by Jon Chait, is that we don't seem to be worried about job losses in other contexts:

And yet the Congressional Budget Office, now brimming with conservative credibility, has spent the last five years issuing report after report assailing the Republican position. Republicans weeping for the half-million or so jobs that would be destroyed by a higher minimum wage would be shocked to learn that, according to the CBO, they have destroyed 200,000 jobs by blocking the extension of emergency unemployment benefits (which lift the incomes of destitute workers, creating higher demand). Likewise, the budget sequestration they have embraced as their cherished second-term Obama trophy has destroyed 900,000 jobs.

The other issue is that costs are being talked about in the absence of benefits:

As economic policies go, that's not bad. In the real world, there's no such thing as a policy that has benefits with zero costs. There are always compromises. In this case, in return for the small job losses, 16 million workers would get a direct wage increase; another 8 million would get an indirect wage increase; and nearly a million workers would be lifted out of poverty. That's about as good as it gets. 

The argument against the extensions of unemployment benefits is the cost to the deficit (or the need to increase taxes).   It is not a good plan to consider both costs and benefits for the policies that you do like, and not to consider benefits for the policies that you do like. On point is:

There is no policy I can think of that generates only benefits without any costs, and policy makers always have to weigh the two sides. In the case of the minimum wage, on the benefits side of ledger, the budget office shows that 16.5 million low-wage workers would directly get a much-needed pay increase at no cost to the federal budget.

Finally, the magic trump card of "innovation" can be considered.  The argument against increasing taxes is that it might reduce innovation by high performers.  Robert Downey Jr might make fewer movies, for example, as he might value his leisure time more.  I am not convinced by this argument, but at least there is some theory that links these two things (high taxes and innovation) together. 

However, with minimum wage you have the opposite problem.  Low wages are known to stifle innovation.  It is well accepted that one of the problems with slavery (in Rome, as a common example) was that the cheap labor made the returns on labor saving innovations small.  So making labor cost more could have the expected costs and benefits plus drive innovation.  And there is no tax increase to be considered. 

Now does this mean that this policy is a "no-brainer"?  No.  But it does mean that there really has to be a much deeper engagement with the pros and cons of such an argument. 

Chip and Pin

Kevin Drum:

Americans are already accustomed to using PINs, and would have no more trouble managing multiple PINs than Danes and Italians do. And while using one PIN for ten cards might not exactly be best practice, it's certainly better than no PIN at all. How could it possibly increase fraud? Signature cards can be used with nothing more than a scrawl.

And then we get to the last paragraph. If cards have PINs, banks and card issuers will have to spend a bit of money helping people change their PINs. 

And that seems to be what we're left with. Merchants are willing to make the switch. Consumers would get used to the switch pretty quickly. But card issuers don't want to bother because it might increase their customer support costs a bit during the transition.

 So clearly we are in a situation where there is not a really open market.  The quote from Capital One in another Kevin Drum post makes this even more clear: the banks are blaming retailers not wanting to adopt this system.  But I look at major events like the recent Target hacking and figure that secure payment systems would have huge market value.  Or the actual statements from retailers wanting the more advanced system and, again, ponder why this is so hard to arrange.  So why can't one specific bank just pioneer the new system (well tested in Canada and Europe) as a market advantage?

Well, the unified payment systems would seem to me to be the issue.  But that is an issue of infrastructure as we go to a post-cash world.  If fraud mostly affects merchants, the incentives for banks is to offload costs. 

Why can't we get to an equilibrium where everyone is better off? 

French inefficiency

So I had always presumed we make a painful choice between efficiency and social support.  That the United States has an efficient and dynamic economy because we make the hard decisions to leave workers with a lower support network so that companies can be more agile. 

But then I read about the French:

• Having better medical care
• Having faster broadband for less money
• Less expensive and faster infrastructure

And they do this with early retirement, unions, and a dense network of government regulations.  I don't want to make the mistaken attribution that they are perfect -- that would be clearly untrue.  But I want to think a bit more clearly about precisely where our advantages lie.  Because these were the areas that I thought might be the most likely candidates for the US to dominate, given low levels of  regulation and flexible labor. 

"The Wolf of Sesame Street"

I'm not sure whether this David Sirota exposé is a pension story (which is Joseph's beat) or a media story (which is more my territory). Either way it's something you ought to check out.

On December 18th, the Public Broadcasting Service’s flagship station WNET issued a press release announcing the launch of a new two-year news series entitled “The Pension Peril.” The series, promoting cuts to public employee pensions, is airing on hundreds of PBS outlets all over the nation. It has been presented as objective news on  major PBS programs including the PBS News Hour.

However, neither the WNET press release nor the broadcasted segments explicitly disclosed who is financing the series. Pando has exclusively confirmed that “The Pension Peril” is secretly funded by former Enron trader John Arnold, a billionaire political powerbroker who is actively trying to shape the very pension policy that the series claims to be dispassionately covering.

In recent years, Arnold has been using massive contributions to politicians, Super PACs, ballot initiative efforts, think tanks and local front groups to finance a nationwide political campaign aimed at slashing public employees’ retirement benefits. His foundation which backs his efforts employs top Republican political operatives, including the former chief of staff to GOP House Majority Leader Dick Armey (TX). According to its own promotional materials, the Arnold Foundation is pushing lawmakers in states across the country “to stop promising a (retirement) benefit” to public employees.

Despite Arnold’s pension-slashing activism and his foundation’s ties to partisan politics, Leila Walsh, a spokesperson for the Laura and John Arnold Foundation (LJAF), told Pando that PBS officials were not hesitant to work with them, even though PBS’s own very clear rules prohibit such blatant conflicts. (note: the term “PBS officials” refers interchangeably to both PBS officials and officials from PBS flagship affiliate WNET who were acting on behalf of the entire PBS system).

To the contrary, the Arnold Foundation spokesperson tells Pando that it was PBS officials who first initiated contact with Arnold in the Spring of 2013. She says those officials actively solicited Arnold to finance the broadcaster’s proposal for a new pension-focused series. According to the spokesperson, they solicited Arnold’s support based specifically on their knowledge of his push to slash pension benefits for public employees.

The foundation’s spokesperson said PBS executives approached Arnold “with the proposal for the series, having become aware of LJAF’s interest” in shaping public pension policy, and moving that policy toward cutting retirement benefits for public workers.

According to newly posted disclosures about its 2013 grantmaking, the Laura and John Arnold Foundation responded to PBS’s tailored proposal by donating a whopping $3.5 million to WNET, the PBS flagship station that is coordinating the “Pension Peril” series for distribution across the country. The $3.5 million, which is earmarked for “educat(ing) the public about public employees’ retirement benefits,” is one of the foundation’s largest single disclosed expenditures. WNET spokesperson Kellie Specter confirmed to Pando that the huge sum makes Arnold the “anchor/lead funder of the initiative.” A single note buried on PBS’s website – but not repeated in such explicit terms on PBS airwaves – confirms that the money is directly financing the “Pension Peril” series.

Much more of this if you follow the link.

Felix and pensions

I wish I could write as clearly as Felix Salmon:

Isn’t it better to just keep all your money for yourself, and make sure to save enough that you can live well in retirement?

This is a pretty libertarian, every-man-for-himself view of retirement: it makes few concessions to the idea that there’s a societal obligation to the elderly, or that groups can achieve more together than they can individually. At heart, it’s a view which benefits people like John Arnold, who pay a lot of taxes, at the expense of the poorest members of society, who might take out more than they put in. And, of course, it’s a view which benefits successful investors, like John Arnold, over schmucks who have no idea how to best invest their paltry 401(k) funds.

In reality, big pooled pension funds are much more efficient — and generate much higher returns — than anything an individual is likely to be able to manage. And in the specific realm of public finance, the case for group-funded defined-benefit schemes is even stronger. That’s because public servants — police officers, elementary school teachers, you name it — tend to have much longer tenure at their jobs than, say, hot-shot fund managers. They are also willing to work for relatively low salaries precisely because they know that their pension benefits are good: that they don’t need to worry about how they’re going to make ends meet in retirement. That peace of mind is hugely valuable, and rarely factors in to the calculations of the pension opponents, who seem to think that worrying about your individual retirement investments is a good thing.

I think that this point cannot be emphasized enough  -- the shift to defined contribution pensions is not a social neutral decision.  It's also worth noting that the wage depressing effects of security (noted as early as Adam Smith's day in the 1700's) can generate a lot of social benefit.  It's not that abuses do not occur -- we are a big country.  But there is a case to be made for efficiency . . .

More on the animosity of the education reform movement toward professional teachers

Following up on Joseph's post on Jonathan Chait and the education reform movement and on the ensuing discussion..

I've talked before about the inevitable tension between profession teachers (particularly highly competent and experienced teachers) and movement reformers like Chait.

First, because, pedagogically, the system has a reactionary bias, made worse by the fact that the most effective teachers, the ones you would want in your corner, are also the ones who are most reluctant to trade their methods in for something new and unproven.

I'm afraid, though, I've only discussed the point tangentially and I may have left readers with the idea that this was some sort of a hypothetical particle, that theory predicts reformers might occasionally want to get rid of teachers, not because they were incompetent but because they were reluctant to adopt untested methods (some of which can strike outsiders as a bit flaky).

Not only does this sort of thing happen, but, as pointed out in this Boston Globe story (via the invaluable Edushyster), it sometimes constitutes recognized policy.

But in most cases, the teachers at Dever and Holland should be of high quality. Principals of those schools were granted enormous flexibility to hand-pick their staffs under a 2010 state law that aims to rapidly overhaul failing schools. That hiring flexibility enables principals to get rid of any teacher, including those who perform well but disagree with the turnaround methods.

Free markets: a continuing story

Capitalism in action:

The NYT has a fascinating piece about threats that Tennessee Republicans are making against Volkswagen if they recognize a union formed by its workers . . . This is an interesting view coming from people who usually claim to be supporters of a free market and to believe that the government should not interfere in the running of a business.

Once again, this goes to the whole question of whether market outcomes are somehow moral.  Given that government is willing to provide pressure to distort the market based on ideology, there cannot be a clean economic meritocracy.  Which is fine -- I think mixed markets have some real benefits from an optimization point of view.

But we should all just note that "we should distort markets because, in the long run, unions in our state will do more harm than good" isn't really all that different in form than the whole idea of government regulation for health, safety, or equality (i.e. minimum wage laws). 

Points to Ponder

I don't always like the perspectives of this blogger, but this is a very good point in any world in which we are worrying about the knock-on effects of things like corporate taxes:

In the "debate" about welfare benefits, there's one point which is underweighted but so obvious that I'm embarrassed to mention it - that some form of welfare is beneficial not just to its recipients, but to capitalists.

Rightists like to point out - correctly - that the burden of taxes doesn't necessarily fall upon those who nominally pay it: corporation tax, for example, is paid by workers and not just capitalists.

But just as there's tax incidence, so there is benefit incidence; the benefits of benefits don't flow merely to their nominal recipients.

Housing benefit, for example, helps to sustain high rents and so could well be renamed landlords benefit.

Thinking about things in this sort of interlinked way makes it hard for me to understand why welfare programs are seem so negatively.  After all, they still create opportunities and it is not like the levels of pay-out make it actively fun to be employed. 

Feynman beautifully summarizes the problem with 'rigor' in primary and secondary math textbooks

From the previously mentioned essay by Richard P. Feynman, this does a perfect job boiling down the reaction that teachers with math backgrounds so often have to the books they're told to teach from.

It was a pretty big job, and I worked all the time at it down in the basement. My wife says that during this period it was like living over a volcano. It would be quiet for a while, but then all of a sudden, "BLLLLLOOOOOOWWWWW!!!!" -- there would be a big explosion from the "volcano" below. 

The reason was that the books were so lousy. They were false. They were hurried. They would try to be rigorous, but they would use examples (like automobiles in the street for "sets") which were almost OK, but in which there were always some subtleties. The definitions weren't accurate. Everything was a little bit ambiguous -- they weren't smart enough to understand what was meant by "rigor." They were faking it. They were teaching something they didn't understand, and which was, in fact, useless, at that time, for the child.