Using A Mallet to Smash Shiny Myths

The new, fully archived blog is now: www.cambridgeblog.org

Full of whacking metaphors?! My favorite kind of review!

Marginal Revolution takes Against Intellectual Monopoly to task. In addition to all the whacking, poster Alex Tabarrok does my other favorite kind of review; one that really engages the authors and argues nuances with them.

Against Intellectual Monopoly is a relentless, pounding, take no prisoners attack on patent and copyright law. It joins Lessig’s Free Culture and Heller’s The Gridlock Economy as an instant classic and a must-read on these issues.

Many people argue that the patent system has gone wrong in recent years, Boldrin and Levine argue that the patent system was rotten from the start. James Watt they say was a “scoundrel” who with his politically-connected partner Matthew Boulton used the patent system to crush their innovative opposition and delay the industrial revolution.

During the period of Watt’s patents, the United Kingdom added about 750 horsepower of steam engines per year. In the thirty years following Watt’s patents, additional horsepower was added at a rate of more than 4,000 per year. Moreover, the fuel efficiency of steam engines changed little during the period of Watt’s patent; however between 1810 and 1835 it is estimated to have increased by a factor of five.

Will books be published without copyright? Boldrin and Levine point out that the 9-11 Commission Report was profitably published by Norton despite being available free for download. Not to mention the fact that most of the great works of literature were published without copyright. Boldrin and Levine are top-notch theorists but AIM is widely accessible and it succeeds best with its many historical discussions and contemporary anecdotes.

Read the rest of the review on Marginal Revolution >>

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Credit Card Complaints

I have a few. I have had credit card companies fail at the most basic services. And I’m one of the lucky ones.

From a very heavily-commented editorial in today’s New York Times:

When the Federal Reserve asked for comments on its proposed rules on abusive credit card practices, an astonishing 56,000 poured in. Most were from outraged consumers. They told of interest rates skyrocketing when they paid an unrelated bill late. They complained of unwarranted late fees and pushed-up due dates. One Pennsylvania customer fumed: “I’m fed up with credit card company tricks that drive us deeper in debt.”

The author cites Ronald Mann of Columbia Law School. Mann likens the fees, interest rates, and other schemes by credit card issuers to a “sweat box.” He’s author of Cambridge’s Charging Ahead: The Growth and Regulation of Payment Card Markets. He knows a thing or two about consumer spending and the habits of credit issuers.

I’ve asked him for some comments — I’ll be back with an update if he has a chance to respond!

Update #1: Here is a link to the comments lodged with the Federal Reserve Board by consumers. Thousands and thousands of them.

Update #2: Dr. Mann’s further comments are below. He doesn’t feel that Congress’ legislation will be too effective. Here’s why:

My general perspective here is that much of the legislation Congress is considering will do little or no good. For the most part, Congress is considering bills that outlaw specific contracting practices issuers use to make it difficult for cardholders to anticipate the charges. The problem with that approach is that issuers constantly “cycle” the contractual practices they use, and outlawing the practices that were current last year has little effect on “cutting-edge” issuers who are already designing new practices that would not be covered by the statute. My strong impression continues to be that the bills would have little or no chance of passing if they had any serious prospect of actually changing the way the industry does business.

Executive Compensation

Where to begin?

Yesterday’s Wall Street Journal ran an expose on the hoops companies jump through to fund executive pensions. They do it quietly, tweak the pensions of lower-level employees (sometimes in dollars per month) and end up with a big tax shelter for thousands of dollars.

The CEO Always Goes Down with the Benjamins

The CEO Always Goes Down with the Benjamins

Little-Known Move Uses Tax Break Meant For Rank and File
By ELLEN E. SCHULTZ and THEO FRANCIS

At a time when scores of companies are freezing pensions for their workers, some are quietly converting their pension plans into resources to finance their executives’ retirement benefits and pay.

In recent years, companies from Intel Corp. to CenturyTel Inc. collectively have moved hundreds of millions of dollars of obligations for executive benefits into rank-and-file pension plans. This lets companies capture tax breaks intended for pensions of regular workers and use them to pay for executives’ supplemental benefits and compensation.

The practice has drawn scant notice. A close examination by The Wall Street Journal shows how it works and reveals that the maneuver, besides being a dubious use of tax law, risks harming regular workers. It can drain assets from pension plans and make them more likely to fail. Now, with the current bear market in stocks weakening many pension plans, this practice could put more in jeopardy. Onward to WSJ >>

There’s more.

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“Dark Knight” Lasts 38 Hours Before Pirated

David K. Levine on keeping your monopoly just long enough to benefit from it — but not so long as to be, well, a monopoly. Further, Dark Knight did it without government intervention!

An interesting story in the LA Times about the movie “Dark Knight.” They went to great lengths to make sure that bootleg DVDs wouldn’t hit the streets for the first two days after the movie was released:

Avast!

Avast!

Warner created a “chain of custody” to track who had access to the film at any moment. It varied the shipping and delivery methods, staggering the delivery of film reels, so the entire movie wouldn’t arrive at multiplexes in one shipment, in order to reduce risk of an entire copy being lost or stolen. It conducted spot checks of hundreds of theaters domestically and abroad, to ensure that illegal camcording wasn’t taking place. It even handed out night-vision goggles to exhibitors in Australia, where the film opened two days before its U.S. launch, to scan the audience for the telltale infrared signal of a camcorder.

Warner Bros. executives said the extra vigilance paid off, helping to prevent camcorded copies of the reported $180-million film from reaching Internet file-sharing sites for about 38 hours. Although that doesn’t sound like much progress, it was enough time to keep bootleg DVDs off the streets as the film racked up a record-breaking $158.4 million on opening weekend. The movie has now taken in more than $300 million.

The success of an anti-piracy campaign is measured in the number of hours it buys before the digital dam breaks.

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Why Trade is Broken, and How to Fix It

Patterson and Afilalo were never that optimistic about Doha.

They are international law and trade experts at Rutgers, who feel that the WTO procedure is based on an economic situation (beginning at Bretton Woods) that just doesn’t exist anymore — big western powers and all those other economies.

How to fix things? Make a trade council based on economic incentives.

Dennis Patterson

While the collapse of the Doha talks will not spell disaster for World Trade, it will contribute to the growing voices of protectionism heard both in the United States and abroad. Given the failure to reach consensus, it seems natural to ask if the cause is specific to the issues under discussion or whether the problem lies deeper. The immediate cause of the failure of the talks appears to have been an intractable dispute over protection for farmers in developing countries. America insisted on minimal protection: India and China wanted a “special safeguard mechanism” that would allow developing nations to raise tariffs in the interest of protecting domestic agriculture.

One of the problems with the current global trading order is that it is limited by the negotiation structure of the WTO. Each side to a given debate advances a position and then an effort is made to move the participants to consensus with each side giving ground as they are cajoled by bureaucrats to cooperate in the service of an abstract ideal. It would be far better – and likely more successful – if the participants could motivate their interlocutors to reach consensus by offering concrete incentives.

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University Endowments

What can’t they buy?

Did your university have a climbing wall, hot tubs, or en-suite bathrooms?

Mine sure didn’t. And I didn’t miss ’em. Then again, it didn’t have a massive endowment either. Maybe because they built a giant sports complex that I didn’t use. I’m sure that exercise equipment is the surest way to attract top-notch students… or not. So do we have a bunch of picky, bratty kids, or parents with massive expectations as they prepare to shell out years of savings? From the NY Times:

BEREA, Ky. — Berea College, founded 150 years ago to educate freed slaves and “poor white mountaineers,” accepts only applicants from low-income families, and it charges no tuition.

“You can literally come to Berea with nothing but what you can carry, and graduate debt free,” said Joseph P. Bagnoli Jr., the associate provost for enrollment management. “We call it the best education money can’t buy.”

Actually, what buys that education is Berea’s $1.1 billion endowment, which puts the college among the nation’s wealthiest. But unlike most well-endowed colleges, Berea has no football team, coed dorms, hot tubs or climbing walls. Instead, it has a no-frills budget, with food from the college farm, handmade furniture from the college crafts workshops, and 10-hour-a-week campus jobs for every student.

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YES.

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Amusing but sad.

Is anyone else floored by this?

At Ford, End of a Big-Vehicle Era Takes a Toll (NY Times)

Ford and GM are losing lots of money and generally making a mess of things, because they focused so much on pickup trucks and SUVs, which are both fairly worthless right now.

And all along, their foreign competitors, (even Ford in Europe!) produced small cars and flourished. How could they not know that the day was coming?

“These write-downs are another result of the tremendous movement in the marketplace away from trucks and S.U.V.’s,” Ford’s chief executive, Alan R. Mulally, said in an interview.

This isn’t new. It looks like they’ll have to take a pretty big beating before they’ll get up and innovate something.