Category Archives: Crony capitalism

Blind Lines

Last week a Los Angeles jury awarded the estate of Marvin Gaye a $7.3 million verdict against songwriters Robin Thicke and Pharell Williams for their 2013 chart topping hit “Blurred Lines.”  The plaintiffs claimed that “Blurred Lines” copied several key elements of Gaye’s 1977 song “Got to Give It Up.”  There are many parts that contribute to what we call music: melody, harmony, key, time, rhythm, note patterns, chords, instrumentation, lyrics, and so on. The degree of similarity or dissimilarity of any one of these components is not an objectively measurable property. One’s judgment of similarity is a subjective assessment that depends on our unique set of experiences and preferences. For some a song’s rhythm may be the most striking characteristic, whereas others may find the key or melody to be more noteworthy (bah-bump). To underscore this point one need only to do a cursory Internet search on this topic to witness the broad range of opinions: some say it was a blatant “rip-off” whereas others assert only a superficial similarity (the cowbell). So if the degree of similarity in such a case can be so dependent upon a mere cross section of opinion, how can it be said “justice has been done”? Try this case 10 more times and you’ll get a random array of “thumbs up/thumbs down” decisions. Using the result of one coin toss is hardly just.

But the arbitrariness of the outcome, insofar as it rests solely upon the subjective opinion of 12 jurors, is not a failure of the judicial system itself or of the jurors. Jurors in such a case are tasked with the intellectual equivalent of deciding if that now infamous Internet dress is gold and white or black and blue. The failure is in the legislative system. Ambiguity and arbitrariness in law breads ambiguity and arbitrariness in outcomes. Copyright (and by extension all intellectual property law) is nothing if not arbitrary and that fact betrays the invalidity of IP laws in their specious claims to be protecting “property.” Laws protecting actual property (that is scarce, rivalrous physical goods) do not have expiration dates. The title to your house or car doesn’t simply expire after some set time period; but not so for copyright (or patents, etc.). In fact the fingerprints of crony-capitalism are all over the recent extensions of the copyright term (life of author + 50 years in 1976 and then extended to life of author + 70 years in 1998).  Every time some particularly lucrative piece of copyright material would otherwise fall into the public domain (yes Disney, I’m looking at you) there is mysteriously a push in Congress to extend the copyright term just a bit further out.

Surprisingly there are still some areas of human creativity that are not protected by copyright and yet, despite pro-IP arguments to the contrary, innovation and creativity have flourished. Yes, the utilitarian argument for IP laws is superficially plausible – unfortunately the empirical data indicates IP laws inhibit innovation whereas a lack of them fosters innovation. For example, food recipes are not copyrighted (can you imagine the state of affairs if McDonalds had copyrighted the hamburger and fries – it would be a CRIMINAL offense for any other firm to make such a meal). Clothing design/fashion is not covered by copyright. Designs are copied, altered, and tweaked into a dizzying array of choices. Fashion trends twist and turn and change so quickly as each firm tries to distinguish themselves and stay one step ahead of the competition. Imagine that, people can still actually be creative without the “protection” of a state granted monopoly.

Human creative efforts invariably must draw on the work of those who have come before. If one objects to truth of this statement, then they would see no downside in not educating their children, destroying all books and technology, and depositing babies in the forest so that each new generation must start from scratch. Since such a scenario is obviously absurd then we can agree that it’s not “copying” that is “bad” but rather “too much” copying that is bad. Ok, so where shall we draw this arbitrary line in the sand between “just right” and “too much”?

Let’s erase that line and allow the full flourishing of human creativity in all arenas. Where is the harm in that? If the “copy” is more successful than the original what has the original lost? What has been stolen? The right to limit the choices of others to your inferior product? If your business model necessitates the deployment of armed goons of the state to influence the peaceful behavior of others, then it’s time to rethink your business model.

Medicaid Expansion: Compassion or Trojan Horse?

Georgia is one of 19 states currently not expanding Medicaid under the auspices of Obamacare. This, contends proponents of expansion, is leading to needless deaths and poor health outcomes for many poorer Georgia residents due to the ongoing closure of rural Georgia hospitals. As with any political issue reduced to sound bites, this is a gross over simplification. Although it is true that monies received under a Medicaid expansion would indirectly alleviate some of the financial burden faced by these hospitals, it would not solve the problem nor would it address the proximate cause of these hospital’s failures.

This nationwide network of rural hospitals was established in the 1940s by the federal government. For the most part they were quite successful with few closures, that is, until the first year of Obamacare regulations came on line – 2010. Obamacare then began to smother these community hospitals with shortsighted regulations that do nothing to limit costs. These regulations included penalties for patient re-admittance if done too soon after initial release, mandates to establish electronic medical records, as well as cuts in Medicare reimbursements to hospitals.  While one hand of Obamacare beats these hospitals with a stick (regulation), the other hand offers a Band-Aid (Medicaid expansion); truly a case of governmental cognitive dissonance.

Medicaid expansion is but one part of the Obamacare-Trojan horse that will slowly stamp out the last vestige of market health care. The “Medicaid Hole” was deliberately inserted into Obamacare. This “hole” leaves some people with no coverage unless the states go along with the Federal definition of Medicaid eligibility (the states can set their own standards now). This is the second Gruber-esque ploy within Obamacare directed at enticing “voluntary” state compliance. It follows the standard Mafia extortion-pattern of an “offer you can’t refuse” by threatening harm to a third party. The first instance of this was the state exchanges: “set up state exchanges or else your citizens won’t qualify for federal subsidies.” Now it is “expand Medicaid or your citizens will suffer for lack of health care.” The individual is but a pawn in their game. If that were not so then why didn’t they simply create federal exchanges and grant everyone subsidies?

The second part of this Trojan horse is that Obamacare sets a substantial tax on “Cadillac” health care plans. The threshold for a Cadillac plan is the ONLY financial figure in Obamacare that is NOT indexed to inflation (let that sink in for a minute). Once a state expands Medicaid they must follow the federal eligibility requirements. The end game is a masterful pincer action; Medicaid eligibility will be eased upward by the feds while the Cadillac cap will in effect be eased downward (as a result of healthcare inflation). “Affordable” plans will disappear and thus people will have no choice but to jump over to Medicaid. End result: single payer healthcare (Medicaid) without a shot being fired.

Now before anyone argues that we need single payer to fix this “free market” mess remember that we have never had a free market based health care system in this country – there has always, at some level, been government intrusion into the market.* These intrusions distorted natural incentives and created unintended consequences. The “solution” to these unintended consequences then is always more government intrusions. Wash, rinse, and repeat.

To find a real solution to government interventions we must “undo” – not “do”. If proponents of Medicaid expansion in Georgia are serious about helping the poor and uninsured then they should propose the total repeal of all “Certificate of Need” laws (O.C.G.A. 31-6) in this state that require both state approval and the approval of any potential competitors for not only any new health care facility, but even the expansion of an existing one. CON laws have nothing to do with maintaining a certain standard of care. They are entirely a crony-capitalist measure, like taxi medallions, meant to limit competition among providers of a particular service. These laws do nothing but scare off potential investors and add years onto the process of opening a new hospital. The best thing to help the uninsured would be low prices brought about through competition. Subsidies to the uninsured in a CON environment are nothing but an indirect subsidy to high cost providers.


*Sky high income tax rates during World War II fostered the creation of tax free health insurance through ones employer. That, coupled with the creation of Medicare in the 1960s soon led to rapidly increasing health costs in the 1970s which Congress tried to stem with the HMO Act of 1973  and this country’s first dalliance with “managed-care” – that is the insertion of a third party between the doctor and patient who would pay for all care but also inject their opinion on the necessity of care. As costs continued to spiral upwards (due to the artificial disconnect between the customer (the patient) and the vendor (the doctor), Congress introduced layer upon layer of additional regulations trying to keep costs down. That was about as successful as throwing more blankets on a leaking waterbed to stop the leak. Like whack-a-mole, as soon as they plugged one hole a new one appeared, normally as a direct, unintended consequence of the “fix” for the last hole. And that story is how we now got to Obamacare – the latest fix in a long line of fixes.


Not Neutrality, Part 3

Last week’s article on Net Neutrality focused primarily on what not to do. Net Neutrality shares an ideological pedigree with every other government backed “solution” intended to solve the problem fostered by government itself. The solution to the (mostly) unfounded fears of Net Neutrality advocates is more competition, not more government one-size-fits-all programs. The only way to get more competition is to reign in government’s ability to restrict it.

The overriding problem is structural. The world we live in is the result of decades of misguided policies and government induced market distortions. Like some perverse game of pick up sticks, this state backed structure retains its form no matter how many pieces are removed, impervious to all “reform.” The state has wrought a Gordian knot so intractable the only solution is to cut it.

At the ground floor of this structure are local municipalities that grant utility providers exclusive monopoly privileges in exchange for the fig leaf of “oversight”. If an outside Internet Service Provider (ISP) wishes to enter that market they have no choice but to negotiate either with the municipality itself or its pet public utility for access to “public” infrastructure such as utility poles or underground conduit. The fees charged for such access can double the cost of the entire project, turning an economically viable endeavor into one that is hopelessly unprofitable and results in the ISP throwing up their hands in disgust and walking away. This encourages either no service or monopoly service. Just as a sperm cell induces a protective response in the egg it fertilizes, so too does the first ISP in a region use the powers of its municipal host to keep out all would be competitors. For example, they may negotiate a contract that requires the municipality or public utility charge any future competitors much higher rates for access or a guarantee of exclusive access, thus effectively securing their monopoly position. In at least 20 states so far some ISPs have pushed for legislation that blocks municipalities from competing as ISPs themselves. Such legislation is typically cloaked in the rhetoric of “saving jobs” to pass the sniff test of public opinion. Not that “municipalizing” an industry is ever a good idea, but to the extent that it is possible for this to occur without the use of any taxes, subsidies or eminent domain, there is theoretically no ethical issue with such competition. Although I would seriously question whether such tax-free competition is possible, the easiest way to test that is to remove the power of taxation and eminent domain, not create a rat’s nest of exceptions and restrictions.

To ultimately solve these issues we need fewer, not more laws. We need fewer grants of monopoly privilege for both private and “public” interests. Municipalities should have no rights to grant charters or licenses to any business. This removes the whole notion of “public” utilities. With that antiquated framework swept away, we would witness competition between electric, gas, water, sewage, phone, and Internet providers solve an array of problems that are intractable under the current “public” system. For example, restrictions in Georgia on the generation of solar power, water rationing during drought, and poor and expensive phone service, are all easily solved in a competitive environment. For Internet access one solution could be totally free access but the consumer pays the content provider directly. Or a consumer pays their ISP but there exists an explicit contract where the ISP guarantees maximum speed to all content. Or a million other approaches that neither you nor I can predict. We must dispense with the “should” attitude of “it should work this way or that way.” “Should” implies the necessity of an enforcer to make that “should” a reality. “Could” is more appropriate. It acknowledges the uncertainty of anyone being prescient enough to know what is best. To paraphrase Yoda, “No should! Could or could not, there is no should.”

Competition permits the creative power of millions to come to bear on solving problems. They pursue it in hopes of “winning” the best-solution-lottery that will yield happy paying customers. Municipal monopolies maintain a legacy status quo system by restricting all allowed approaches to just one. If one is knowingly ingesting poison the solution is to not also simultaneously ingest an antidote; the solution is to stop ingesting the poison.

Not Neutrality, Part 2

The moniker “net neutrality” is perhaps one of the most masterful strokes of political propaganda, right up there with “ethnic cleansing” and “quantitative easing” when measured for overall obfuscation. When asked their opinion, many are hesitant to take a stand, as they retreat behind a wall of an honest lack of knowledge on the subject. For the most part this is due to a perceived requirement that one must possess a deep technical understanding of how the internet works in order to have an informed opinion. Unfortunately this plays right into the hands of its proponents; “it’s complicated, trust us, we know what is best”. In fact this complexity tactic comes directly from the pundit’s playbook; witness the recent condescending Jonathan Gruber revelations (“Lack of transparency is a huge political advantage.”) In fact, the essence of net neutrality is not at all complicated; it is just good ol’ fashioned crony capitalism in 21st century garb.

Putatively complicated subjects are often best understood through metaphor. In this case we cast the large content carriers (Netflix, Amazon, Apple, Google) as manufacturers. The manufacturers need to ship their product to distributors. The ISP’s (Comcast, AT&T, Verizon) are the shipping carriers. Currently it is entirely uncontroversial that shipping carriers charge more to ship large things quickly than they do to ship small things slowly. So if we rename “net neutrality” as “shipping neutrality” things come into focus. Under “shipping neutrality” the large manufacturers want the government to force the shipping carriers to charge everyone the exact same amount regardless of size, weight, or speed. In fact, they want the shippers to ship everything at “next day air” speeds but charge first class letter rates. Net neutrality is nothing more than two parties disagreeing over pricing for a service. The cronyism comes in to play when one side demands the government take their side and implement a price ceiling. Of course such naked rent seeking would never fly politically, so it is camouflaged under the guise of protecting freedom, equality and baby kittens. Who could be against baby kittens?

But, as with all types of economic protectionism (tariffs, subsidies and other price controls) it is the consumer that is ultimately harmed. To discern this harm we must extend the metaphor a bit further. If the shipping carriers could not recoup their costs from the shipper then they would have no choice but to collect it from the recipient (postage due surcharge). Nothing is free and someone must pay.

We should be striving to make the internet more, not less, like a package shipping network. For example, if our neighbor receives a large delivery and we receive a small one, we do not subsidize his shipment through a “monthly shipment access fee”. If we receive no shipments in a particular month, we pay nothing. With free competition we would likely see a similar situation with internet access develop: no monthly charges, pay for only the amount and speed you demand as you actually consume it.

Today with internet access we pay the same amount month after month regardless of the extent to which we utilize that service. Although some may pay a bit more for faster service, the fact remains that light users subsidize heavy users. Under net neutrality this subsidization ‘inequality’ would only become more extreme. Heavy Netflix users will cause ISP’s to increase access rates for all consumers because they are legally prohibited from collecting anything extra from Netflix or basing consumer’s charges on their usage patterns; all in the name of ‘fairness’ of course. Would it not be a better outcome if through competition ISP’s charged Netflix more to ensure priority for their content and Netflix in turned passed that cost onto their customers alone? Internet access for everyone else would get cheaper and faster as ISP’s plow that ‘Netflix’ profit into bigger and faster pipes.

An even worse outcome of net neutrality would be if ISP’s were prohibited from raising anyone’s rates. This would result in a fixed price but ever slowing speeds as the network became more congested. At which point the voters would cry out “to do something” and we would then see a new “internet delivery tax” collected by the government and doled out to ISP’s that promised to wag their tails and do their master’s bidding (such as identifying all users on their network, tracking “suspicious” behavior and shutting down websites deemed by the government to be “politically incorrect”.)

So net neutrality supporters, be careful what you wish for, you just might get the world Edward Snowden feared.

Where’s the harm?

If you’re anything like me you’ve likely always had a strange sense when buying a car that something wasn’t quite right, a sort of tingly spidey-sense that that you were the punch line to an inside joke. New car dealerships are a fraternity unto themselves. But unlike college fraternities, they work hard to keep newcomers from joining their ranks. The Internet has done much to reveal what the exclusive walls of membership formerly protected. It is not just information that has been freed, but also new modes of doing business. But last week we learned the lengths that these old school fraternities will go to in order to fight change and retain the power structure of their very unique cartel (cartel – get it?). The Georgia Auto Dealers Association filed a complaint last week  with the Georgia Department of Revenue claiming that Tesla Motors (a manufacturer of high performance, all electric cars) should be barred from selling any of their vehicles in Georgia because Tesla apparently violated some byzantine state statute that limited manufacturer owned auto outlets from selling more than 150 cars in a year. Tesla sold 173. Yes, I know, what monsters. Off with their heads.

Whether or not Tesla actually sold more than 150 is immaterial. The fact that such a law exists brings into shocking relief the ends to which automobile dealers in the state of Georgia (and indeed many other states, Georgia is sadly not alone) will go to in order to protect their own financial self-interests. Of course protectionist fervor is not how the dealers spin this. They claim they are only trying to protect the public (what selfless servants they are). Without independent dealers, manufacturers would be able to set strict non-negotiable prices, ignore warranties, and otherwise cause the marketplace to collapse into a top-down manufacturer driven oligopoly (according to a bit of NADA propaganda). So clearly in order to protect competition we must limit competition.

What these manufacturers fail to realize is that were these fascist, depression-era laws repealed it would not result in the overnight demise of the independent dealers. Rather it would mean dealers would have to compete with manufacturer outlets on price, service, or quality. Likewise the manufacturers would have to compete in precisely the same manner. At the end of the day the manufacturers don’t really care how their cars are sold, they just want them sold. If independent dealers can offer a manufacturer the ability to sell its cars more efficiently than that manufacturer can sell them (dealerships are a large capital investment after all), then they’re going to choose the cheaper, and thus more profitable route.

In short, the dealers are afraid of competition. And I don’t necessarily blame them. Who wouldn’t love to have one’s ability to earn a living protected by state sanctioned violence? Who wouldn’t love a system that created an artificially high barrier to market entry in order to keep out newcomers with new ideas that might otherwise eat into your 1940’s business model. But cartels, syndicates and state protected oligopolies are not consistent with the principals of liberty; namely that unless I’m using violence or the threat of violence to influence your actions, then you have no right to interfere in my actions irrespective of whether or not you believe it may “harm” you in the future. All competition “harms” another (whether it be economic, social or sport). But the “harm” of competition has a beneficial silver lining. It compels one to work harder, to do better and thus benefit the consumer and themselves in the long run. But if possible “harm” to someone becomes the litmus test for state intervention then I dare say we all belong in jail.

Not Neutrality

“Net neutrality” certainly sounds appealing, doesn’t it? Who could possibly be against “neutrality” given its ability to evoke an emotional tie to equality, fairness, impartiality and egalitarianism? Only someone who is sufficiently ethically consistent that they will aver the use of aggression in all situations, rather than merely when popular opinion provides a safe harbor for that stance. Neutrality is not neutral when imposed at the barrel of a gun. Proponents of net neutrality seek not neutrality, but rather protectionism. For example, applying the principle of net neutrality one could legitimately argue that the state should restrict the ability of some companies to spend more money on marketing or R&D than their competitors. If they were allowed the freedom to spend as desired this might promote a competitive disadvantage leading to a market no longer consisting of “neutral” players. Competition bad, neutrality good.

Net neutrality has been in the news this past week due to a not-so-secret-secret vote by the FCC concerning some proposed Internet traffic rules. Proponents of net neutrality want the FCC to reclassify the Internet as a Title II medium (telecommunication service) from its current Title I designation (information service). This would transform the Internet (in the US) for all practical purposes into a public utility. Now consider the reputation that public utilities have for innovation, choice, and service and the whole notion of net neutrality should make you shudder. Free or low cost phone service over the Internet? Well you can say goodbye to that if the FCC is ever allowed to micromanage the net. Be grateful Congress did not allow the FCC to regulate cable; had they done so we’d still be stuck with three channels and rabbit ears.

Net neutrality, like all appeals for regulation, is about fear i.e. fear of hypotheticals. It is a solution in search of a problem. Indeed anti-trust legislation is based upon a similar principal. It seeks to destroy that which has never existed (a market monopoly) before it can do that which it has never done (raise prices). If one proposes dragon slaying as a solution, chances are they will be motivated to uncover dragons where none exist. Net neutrality is likewise the latest in a long line of state sponsored dragon quests. Net neutrality proponents have an irrational fear that dragons (big companies) will take over the forest (dominate the Internet) and thereby incinerate the little guy. The problem with this of course is that these dragons don’t exist. The Internet has been very much non-neutral since day one and none of their fears have come to pass. Under this benign regulatory neglect we have witnessed not oligopolization but rather innovation, growth, competition and more, not less, access for the “little guy” (Twitter, YouTube, Facebook, etc). Their fears of the Internet turning into a virtual walled garden are not supported by 20 years of unregulated growth.

Companies like Netflix, Hulu or Apple pay big money to ensure the pipes carrying their content remain full. Why? Because we, the paying customers, demand it (anything to avoid the dreaded “buffering, buffering” message)! The network providers in turn use those big bucks to build out infrastructure to ensure content delivery occurs as promised. But if net neutrality proponents have their way, such premium payments would be disallowed, because everyone’s content must be treated “equally”. How again exactly does that help us, the customer?

If the public demands faster internet and prioritized content then the only means to achieve this is through the same process that has brought the internet to the state it is in today: an unregulated free market where individuals, not internet czars at the FCC, choose what services they want by voting with their dollars.

Farming Fascism

The inherently self-contradictory justification for the state is that it reserves to itself the right to engage in those actions that its very existence is predicated on proscribing. The state is a paradoxical philosopher’s stone; believed by the masses to create only good, it in fact transmutes all that it touches into its polar opposite. Evil, when implemented by the state, is declared as good (war, taxation, kidnapping, torture) while virtue, when implemented by the state, becomes harmful (charity, regulation, education). These virtuous activities become but mere shadows of what they could be absent monopolistic state intervention.

In Georgia we have our own special brand of state distorted virtue: the Vidalia® onion cartel. The state government has decided that these beautiful, delicious, sweet onions grown in and around Vidalia, Georgia are too valuable to the economic health of the People’s Republic of Georgia to allow the people who actually grow them to control how they are marketed and sold. And so came forth the Vidalia Onion Act of 1986. Yes, our legislators pass laws about onions. It was only a few weeks ago that the state of Georgia fined a farmer who had the impudence to ship his crop of Vidalia® onions to market prior to the April 21 date set forth by the state agriculture commissioner.  Unseasonably warm weather has moved up and extended the growing season (thank you global warming!) Apparently Mother Nature forgot to read O.C.G.A 40-7-8.17 and thus produced ripe onion in open defiance of the law. Sadly, the state of Georgia is not alone in these sort of legal strictures on farming. Florida has its oranges, Idaho its potatoes and California its wines, raisins and avocados. Wait, avocados? Yes, California stipulates all avocados grown in the state must contain at least 8% fat. Or else.

Now there is certainly nothing wrong with farmers coming together and mutually agreeing on a set of standards for their produce if they feel that setting such quality standards will bring about mutual benefits. However, just because some farmers wish to do so does not mean that all farmers should be forced to do so. But when the state steps in, that is exactly what happens. Only the state has the monopoly power of the guns to force compliance. Once again, if your business model is predicated on the use of guns in order to achieve success then there is something wrong with your business model. Regrettably, the appeal of ready access to the legal deployment of weapons to further ones ends is the siren song of protectionism. That sweet sound calls to us until we collide against the rock-hewn walls of the cage we willingly built. Too much metaphor? Ok, people champion competition when they are buying but oppose competition when selling. So while that tidbit of self-defeating equilibrium sinks in, consider this: the most common method of limiting competition is turning to the state and requesting aid beneath its great wing of protectionist measures. Once state protections are in place then new entrants to the market are excluded. This reduces supply and so raises prices; great for the sellers, not so great for the buyers. The appeal of bully-based price protection for sellers is why nearly every law on the books has some sort of protectionist origin (licensing, certification, regulation, registration, etc). The fear of failure and the desire to put your competitors out of business is too much for most to resist. It is not until you yourself become the competitor do you see the error of your ways (or if you’re a hypocrite you refuse to see the error and simply demand even more special exceptions, i.e. protection from your own protectionism).

If we hand over all of our rights to someone with a gun (the state) we should not be surprised when they refuse to hand them back – even when we ask nicely. When the putatively legal owners are no longer calling the shots and must bend to the will of the de facto owner (the state) or suffer the consequences then there is only one word that by definition describes this situation: fascism.

Unicorns Attack Free TV

Ever heard of a company called Aereo? Yeah, didn’t think so. Up until last week I had never heard of it either, but this little company may be forging the way toward increased competition, lower prices, and more consumer choice in the oligopolistic televised media industry. That is assuming of course the nine kings and queens of the royal court (aka the US Supreme Court) consider the interests of 300 million consumers when they reflect upon the merits of a case as old as the republic itself: who shall receive the court’s tip of the hat, the protectionist rent-seekers or the upstart innovator?

In this 21st century replay of Gibbons v. Ogden, Aereo plays the role of the audacious entrepreneur challenging the state chartered monopolies (played here by NBC, ABC, & CBS). In Gibbons v. Ogden it was about who had the right to navigate the river-waves, now it concerns tapping the air-waves and surfing the web. Aereo is providing a service to consumers who prefer to watch their local TV stations over the more convenient medium of web-attached devices (thereby foregoing the hassle of dealing with antennas and converter boxes). Consumers are in essence renting antenna time from Aereo and having this content directed to their device. You’d think the big three media companies would be pleased – Aereo is expanding their viewership! But alas that is not the case. Because Aereo is redirecting these free over-the-air transmissions they have not been paying a tribute to the big three for the content. This stands in stark contrast to the hefty sums forked over each year by cable and satellite providers (and which are naturally passed on to the consumer). If Aereo is permitted to exist it might set a precedent that would allow an unwinding of the decades old law that made an arbitrary distinction between “public” vs. “private” broadcast (which is why cable companies must pay rebroadcast fees but we are free to record and time-shift content while enduring scary FBI warnings on our DVDs.).

The justification used against Aereo is that they are violating the copyright of the big three – rebroadcast without consent. This would be fine if copyright were an actual real form of property – the only problem is, it is not. Copyright, patent, & trademark are all artificial creatures of the state; they are the unicorns of rights. They are a state grant of monopoly privilege. Utilitarian opinions built upon notions of “encouraging” certain types of behavior by such monopolistic grants are as wrong-headed as any “ends justify the means” arguments. Whereas IP cannot exist absent state enforcement, true property rights, not being an invention of the state, can. The recognition of rights in property is the only alternative to violence when settling a conflict over the control of scarce and rivalrous material. Two parties resolving such a dispute do not necessarily rely on a state. Enforcement of IP, however, is impossible without state violence.

Ideas, assemblages of words or sounds, are neither scarce nor rivalrous; therefore, it is nonsensical to claim property rights in them (akin to claiming such a right in one’s name). A state enforced fiat decree to the contrary is no more legitimate than the decree that a man may be property. Indeed, man as property fails on the rivalrous test; rivalrous goods can be conveyed, a man’s soul cannot. If someone copies your creative work and that upsets you, beat them at their own game by copying the manner in which they are employing it. That’s how competition in a free market works, no state necessary. If your business model necessitates men with guns then there is something wrong with your business model.

Now, given that even the supposed champion-of-the-little-guy-mr-progressive-democrat-Obama has come down on the side of the big media conglomerates, my feeling is that Aereo will likely lose this case. There is just too much money at stake, and in the crony-capitalist cesspool that is Washington DC, “we the people” have allowed the growth of a dystopian system that enables moneyed interests (warfare, welfare, and cronyisms) to rule us all.

Who is the customer?

Outsourcing, public-private partnership – this is the Trojan horse of the political entrepreneur that will fool the political class every time into believing salvation from inefficient government lies within. For those familiar with how markets are actually supposed to function, the irony is clear: only harm shall spring forth.

One of the more insidious “partnerships” is that of the outsourced private prison and probation services. The Georgia legislature has recently passed HB 837 which has expanded the authority of private probation companies while simultaneously decreasing public oversight of their operations. In Georgia, if one is convicted of a misdemeanor  (anything from shoplifting to traffic citations) and cannot pay the assessed fine in full, then one is turned over to a private probation company (basically a glorified collection agency) which then collects the fine, along with their monthly fee of course. Under the new law, if fines are unpaid then those convicted may be thrown in jail or electronically monitored all the while accruing greater fines. The original probation period may be “tolled” or extended indefinitely until the fine is paid in full. Inability to pay will land one in prison. Essentially Georgia has reestablished debtor prisons. Herein lies a perverse incentive; inability to pay translates into larger fines. The public courts and the private companies then share in this growing revenue stream. Ironically they make more money off of those with the least ability to pay.

“But criminals must make restitution, surely you’re not suggesting that just because someone is “poor” they should not be compelled to answer for their crime?” No, I’m not suggesting that at all (although I do seriously question whether traffic violations rise to the level of “crime”). To understand why outsourcing leads to distorted incentives, ask yourself, who is the customer? Is it the state, or is it the lawbreaker? In fact, it is the lawbreaker. The state intercedes and poses as the customer, which diverts the stream of responsibility. The probation company is not answerable to the real customer, so they have no incentive to serve them.

Now you may be scratching your head trying to figure out why the lawbreaker should be the customer. Allow me to explain. Assuming that an actual rights violation has occurred (e.g. petty theft), then there is a victim and a perpetrator. The conflict is between those two parties and no one else. It can then be resolved by use of an arbitration (court) proceeding to uncover fault. Assuming the thief is at fault, he has an obligation to make all parties whole (the entity that apprehended him, the court that adjudicated the facts, and of course the victim). To simplify things we’ll assume the insurance carrier of the victim has made all parties whole. Now the insurance carrier has a rightful claim against the thief. It seeks to be made whole. Stated differently, the thief has a debt obligation to that insurance carrier. If the thief cannot pay immediately, then those two parties can come to a mutual agreement as to how that debt will be discharged. They are not constrained by any “laws” – they may agree to whatever they wish. There are many options, but one option could be a voluntary arrangement with a private “prison” (if you can call it that) that would discharge the debt to the insurance carrier in exchange for a certain amount of labor. The thief would have many of these private prisons to choose from and he is under no obligation to choose this path at all – therefore such private prisons would compete for such a labor source, enticing their customers with favorable terms. Indeed, conditions would most assuredly be far more favorable than in any public or private prison system today. After all, if they don’t please their customers (the voluntary “prisoners”) then they won’t be in business for long.

Public-private partnerships will always be corrupted by perverse incentives if the company providing the service is not directly accountable to the customer.

Life, Liberty and Oligopoly for All!

Life, liberty and the pursuit of happiness: the protection of these rights is the bedrock upon which any legitimate government is founded (if such an oxymoron is possible). However, apparently somewhere along the way “oligopoly” was added to the list of inalienable rights. To wit, the latest example of such protectionist behavior was filed in the Georgia House of Representatives on February 5. A bill (HB907) was introduced that would expand the onerous taxicab and limousine regulations in order that they encompass the activities of internet based ridesharing services such as Uber and Lyft. For those unfamiliar with these services, they use a smartphone app based system to connect people that need transportation with those willing to provide it. Like the Internet it is peer-to-peer interaction with the host company merely maintaining the communication backend. It is a lean and efficient system that translates lower operational overhead into lower consumer costs. All drivers undergo a background check and vehicle inspection before they can sign up. To weed out both undesirable drivers as well as passengers these services employ a self-regulating Ebay-style reputation/feedback system.

These services are faster, often cheaper and can quickly respond to increases in demand, so it should come as no surprise that they’ve been having an impact on the bottom line of the traditional taxi services – many of which still don’t even accept credit cards in the cab. Taxi companies don’t like competition. So what do they do? Do they turn to government and ask “Why don’t you remove all your burdensome regulations so we too can operate more efficiently and at lower costs?” No. Instead they demand that if they must drag a 100-lb boulder everywhere they go, then so too must everyone else. In reality they never would ask for regulations to be repealed. Many had a hand in crafting them. These regulations artificially suppress the supply of service (oligopoly) so as to maintain elevated prices. As an industry, taxis operate nationwide under a byzantine set of rules that permit the local government (and often competitors as well) to determine, in their sole discretion, the precise perfect quantity of taxis needed in their jurisdiction. Once that is determined, taxi owners are allowed to purchase from the government that quintessential symbol of their “public necessity” role – the taxi medallion. The medallion is nothing more than a glorified business license, albeit an artificially limited license. To imagine how limiting the quantity of licenses issued for a service might affect prices paid by the consumer, imagine if, say, another occupation that is also bizarrely licensed by the state – barbers – (really? we really need government to ensure we get a good haircut?) were restricted to just one barber per town. Sure that one barber earns more, but everyone else loses. In the same way, the taxis that already have their medallion stand to benefit by using government to artificially limit who can participate in the taxi market.

When discussing this bill in public the taxi companies are not foolish enough to divulge it’s all about protecting their oligopolistic profits; no, they claim, (as do all politicians looking for an excuse to control our lives), it is about “public safety.” Yes, because clearly when someone is paying you for a lift you lose all ability to competently operate an automobile. Cars function completely differently when a paying passenger is in them as opposed to a non-paying passenger. Yes, how stupid of me to not realize this fact.

It’s a good thing we have government, otherwise how else would we be protected from the evils of innovative businesses attempting to compete with ossified fascist oligopolies.