A fifteen-minute interview by Lew Rockwell: Podcast #32; MP3 file (8.2MB). As Lew's site describes it, "Stephan Kinsella podcast on phony rights vs. real ones." We discussed mainly the moral, libertarian, propertarian, and state-related aspects of patent and copyright, and why there has been confusion about IP among libertarians.

More detailed discussion of these issues can be found on my libertarian publications page; see also my monograph Against Intellectual Property; and my speech and presentation, The Intellectual Property Quagmire, or, The Perils of Libertarian Creationism.

First a link to the Economist's Voice on the bailout plan. (Link deleted because the articles are not accessible without a subscription.) Then this:

From: Minister of the Treasury Paulson Subject: REQUEST FOR URGENT CONFIDENTIAL BUSINESS RELATIONSHIP

Dear American:

I need to ask you to support an urgent secret business relationship with a transfer of funds of great magnitude.

I am Ministry of the Treasury of the Republic of America. My country has had crisis that has caused need for large transfer of funds of 700 billion dollars US. If you would assist me in this transfer, it would be most profitable to you.

I am working with Mr. Phil Gramm, lobbyist for UBS, who will be my replacement as Ministry of the Treasury in January. As a Senator, you may know him as the leader of the American banking deregulation movement in the 1990s. This transactin is 100% safe.

This is a matter of great urgency. We need blank check. We need funds as quickly as possible. We cannot directly transfer funds in the names of our close friends because we are constantly under surveillance. My family lawyer advised me that I should look for reliable and trustworthy person who will act as a next of kin so funds can be transferred.

Please reply with all of your bank account, IRA and college fund account numbers and those of your children and grandchildren to wallstreetbailout@treasury.gov so that we may transfer your commission for this transaction. After I receive confirmation of transfer, I will respond with detailed information about safeguards that will be used to protect the funds.

Yours Faithfully Minister of Treasury Paulson

Here is the proposed bill. Read it. It says simply that the Treasury secretary is given a 700 billion dollar credit line and told to go out and play the mortgage backed security market, appointing whoever he chooses, and buying and selling without any oversight, concurrent or retroactive. Can I imagine a better prescription for political corruption? I'm not imaginative enough. I'm imaginative enough to think that however good the intentions of the (politically appointed) Secretary might be, the people who do the buying and selling will feel sympathetic to their friends and will want to do what they think the boss man would "want them to do" towards his friends. Some will not give in to the temptation. Others will. And on the other side those who receive lesser bailouts will think that it is unfair and driven by politics - regardless of whether or not it is.

Even the financial markets being bailed out currently seem skeptical of the totally unfocused nature of the plan.

Bear in mind also: with this kind of stake it is easy to make money and it is also easy to crush firms. The AIG bailout may have already done that. AIG stock lost over 100 billion with the Federal bailout. Best estimates of current housing market losses falling in the financial sector is on the order of 2-300 billion. That doesn't account for future losses, but it also measure peak to current time, and not all houses were purchased at the peak. As far as I can tell the AIG mortgage exposure was in insuring mortgage backed securities, so they don't seem to have been leveraged beyond their exposure to the fall in housing prices. That means unless they are responsible for about half the losses in housing, there has been a wealth transfer from AIG shareholders to the Federal government.

Naked Capitalism

Diamond and Kashyap who know a great deal about these markets.

The Corner isn't as a rule very good on economic issues, but this is a thoughtful post.

Mankiw has good links and coverage

Marginal Revolution has some good posts and links

If there is a thoughtful consensus it is: this is a power-grab by Treasury with down the road consequences we'll live to regret. I haven't read anyone, including those in favor of some sort of bailout, who argue that we need something this extreme.

Even if we accept that a massive bailout is needed, it seems easy enough to add minimal protections:

1. give them less money and let them ask for more later if they need it; they can't possibly spend it all at once anyway

2. make them write rules subject to congressional approval for how they are going to spend the money

Insofar as time is an issue, requests for more money or approval of regulations can be made fast-track (like trade agreements) in which Congress agrees in advance to an up-or-down vote.

The fact that there is nothing like this in the proposed regulation seems to me very revealing. Moreover, Congress would probably like nothing better than to wash their hands of the mess so if things go wrong they can blame somebody else, and so they can't be accused of fiddling while Rome burns.

IP is one form of government enforced monopoly. A great deal of government regulation of the private sector serves the same purpose. (Medical licensing boards? Hairdresser licenses?) Try entering into the investment banking business and see how far you get...A nice post discusses the story - pretty well understood among economists - of how regulations that emerged during the "progressive" era supposedly to protect consumers and average people served instead the interests of large would-be monopolists.

All of which is apropos of the current financial bailout. I am naturally skeptical about government intervention in the market. It is a fact that some of the current crisis has been caused by government intervention in mortgage markets through implicit guarantees for the big GSE's. What sort of policy is it to create a private entity, give them implicit guarantees, then turn them loose to drive their competition out of business, and fatten their own purses? I am doubtful that in the absence of government intervention the banking sector would collapse, although there would be some short-term pain while it restructured itself. And while I'm happy that the stock-holders in insolvent financial institutions aren't being rescued, I don't see why the bond-holders should get off scott free. Still an argument can be made that the government needs to fix what it broke.

The current planned bailouts, however, seem to be government at its worst. The people who get bailed out are those who have the monopoly power. A few small fry are left to go bankrupt, while the really big ones get government guarantees. They also get fewer competitors, and the promise of regulation to keep competitors out in the future. The large players that are bailed out also are the ones that face the greatest moral hazard: they have the ability and the incentive to structure portfolios that promise high returns in exchange for a small probability of failure exactly when the government can be counted on to bail them out.

The obvious question is: given that the problem is inability of individual mortgage holders to pay their mortgages or sell into a falling housing market - why not bail them out? If tax money is going to be spent to mitigate private losses, why not mitigate the private losses of the small-fry? Individual mortgage holders have debt structures that are quite transparent. Nor do they have the ability to structure portfolios that promise great returns in exchange for a small probability of failure so great it demands government intervention. So of all the people involved the individual mortgage holders seem to face the least moral hazard.

Why not start, in fact, by reverting the current bankruptcy law to its state before the prior reform? The change in the bankruptcy law - to make it easier for creditors to collect after bankrutpcy - seems to have been a give away to lenders plain and simple. That is, it was a massive change in the structure of existing debt. It seems to be the lender equivalent of retroactive copyright extension. One can imagine a combination of a change in the bankruptcy law to strengthen the negotiating hand of individual mortgage holders, combined with a requirement for government assumption of bad mortgage debt that the bad loans be renegotiated with borrowers.

Sadly, nothing like this will happen, and the real message is clear: When the politically connected buddies of high government officials are threatened, the government steps in and bails them out. It's enough to make a right-wing economist become a left-winger, or perhaps just an anarcho-capitalist.

Insightful and interesting comments by Cory Doctorow (and surprisingly sound, given that Doctorow unfortunately favors socialized medicine (see this Free Talk Live interview):

Why do you give away your books? Giving away ebooks gives me artistic, moral and commercial satisfaction. The commercial question is the one that comes up most often: how can you give away free ebooks and still make money?

For me for pretty much every writer the big problem isn't piracy, it's obscurity (thanks to Tim O'Reilly for this great aphorism). Of all the people who failed to buy this book today, the majority did so because they never heard of it, not because someone gave them a free copy. Mega-hit best-sellers in science fiction sell half a million copies in a world where 175,000 attend the San Diego Comic Con alone, you've got to figure that most of the people who "like science fiction" (and related geeky stuff like comics, games, Linux, and so on) just don't really buy books. I'm more interested in getting more of that wider audience into the tent than making sure that everyone who's in the tent bought a ticket to be there.

Ebooks are verbs, not nouns. You copy them, it's in their nature. And many of those copies have a destination, a person they're intended for, a hand-wrought transfer from one person to another, embodying a personal recommendation between two people who trust each other enough to share bits. That's the kind of thing that authors (should) dream of, the proverbial sealing of the deal. By making my books available for free pass-along, I make it easy for people who love them to help other people love them.

What's more, I don't see ebooks as substitute for paper books for most people. It's not that the screens aren't good enough, either: if you're anything like me, you already spend every hour you can get in front of the screen, reading text. But the more computer-literate you are, the less likely you are to be reading long-form works on those screens that's because computer-literate people do more things with their computers. We run IM and email and we use the browser in a million diverse ways. We have games running in the background, and endless opportunities to tinker with our music libraries. The more you do with your computer, the more likely it is that you'll be interrupted after five to seven minutes to do something else. That makes the computer extremely poorly suited to reading long-form works off of, unless you have the iron self-discipline of a monk.

The good news (for writers) is that this means that ebooks on computers are more likely to be an enticement to buy the printed book (which is, after all, cheap, easily had, and easy to use) than a substitute for it. You can probably read just enough of the book off the screen to realize you want to be reading it on paper.

So ebooks sell print books. Every writer I've heard of who's tried giving away ebooks to promote paper books has come back to do it again. That's the commercial case for doing free ebooks.

Now, onto the artistic case. It's the twenty-first century. Copying stuff is never, ever going to get any harder than it is today (or if it does, it'll be because civilization has collapsed, at which point we'll have other problems). Hard drives aren't going to get bulkier, more expensive, or less capacious. Networks won't get slower or harder to access. If you're not making art with the intention of having it copied, you're not really making art for the twenty-first century. There's something charming about making work you don't want to be copied, in the same way that it's nice to go to a Pioneer Village and see the olde-timey blacksmith shoeing a horse at his traditional forge. But it's hardly, you know, contemporary. I'm a science fiction writer. It's my job to write about the future (on a good day) or at least the present. Art that's not supposed to be copied is from the past.

Finally, let's look at the moral case. Copying stuff is natural. It's how we learn (copying our parents and the people around us). My first story, written when I was six, was an excited re-telling of Star Wars, which I'd just seen in the theater. Now that the Internet the world's most efficient copying machine is pretty much everywhere, our copying instinct is just going to play out more and more. There's no way I can stop my readers, and if I tried, I'd be a hypocrite: when I was 17, I was making mix-tapes, photocopying stories, and generally copying in every way I could imagine. If the Internet had been around then, I'd have been using it to copy as much as I possibly could.

There's no way to stop it, and the people who try end up doing more harm than piracy ever did. The record industry's ridiculous holy war against file-sharers (more than 20,000 music fans sued and counting!) exemplifies the absurdity of trying to get the food-coloring out of the swimming pool. If the choice is between allowing copying or being a frothing bully lashing out at anything he can reach, I choose the former.

Great post on TechDirt:

IP Attorneys Increasingly Getting Their Own Patents And Suing

from the joining-in-the-party dept

A year ago, the story of patent attorney Scott Harris started making headlines. While being an IP attorney at a prestigious law firm, on the side, Harris had been getting his own patents, and then using a shell organization to sue companies for infringing. Some of the companies sued were represented by the firm that Harris worked for. Talk about a conflict of interest, right? Well, reporter Joe Mullin has discovered that these sorts of things are increasingly common. Various IP attorneys involved in patent hoarding lawsuits are seeing how lucrative it can be to just get a patent and sue -- and so they're eagerly jumping into the game themselves. Mullin dug up a bunch of cases of IP lawyers getting their own patents, and then suing over those patents, outside of their day job. Not surprisingly, many of the patents seem highly questionable (a patent on a car entertainment system that has a radio in front with DVD video in back.)

However, the bigger question is the conflict of interest. First, with lawyers getting their own patents, there are always going to be questions about whether any of the patents are really the work of clients rather than the lawyer themselves. In fact, in the case of the car entertainment system above, one of the companies that's been sued over the patent points out that "two diagrams and several columns of text" appear to be directly plagiarized from another company's patents -- who just so happened to be a client of law firm the lawyer worked for. Oops.

The second potential conflict of interest is, as with Harris, about suing companies that are represented by the law firm the lawyer in question works for. In some cases, the lawyers dance around this. For example, in one of the cases Mullin discusses, the lawyer sued three of the four companies who own CareerBuilder. The lawyer did not sue the fourth owner, the Tribune Company. Why? While there's no official explanation, it's not hard to figure it out. The Tribune Company is a client of the law firm the guy works for. The other three owners are not. So, basically, the Tribune Company got lucky that the guy with the patent just happens to work for a law firm it uses. Perhaps the law firm sees this as a way of "locking in" clients: leave us, and one of our lawyers will sue you for patent infringement.

Either way, the article is a pretty depressing look at the state of patent law and patent lawyers these days.

JOHN ELIGON describes the close of the Harry Potter case link here. Author Rowling won. Eligon quotes the judge's ruling, "Plaintiffs have shown that the lexicon copies a sufficient quantity of the Harry Potter series to support a finding of substantial similarity between the Lexicon and Rowling's novels." The ruling blocks publication of a Harry Potter Lexicon written by Steven Jan Vander Ark. For details, see Ligons piece.

The judge apparently admits to being an ardent Potter fan. One would have to see the Lexicon text to judge whether "fair use" was violated.

Here's the disturbing story.

On the Sept. 3, 2008 show of Free Talk Live, the excellent libertarian radio program, there was an interesting discussion with a caller who is an author and has changed his mind about IP--he realized that by giving online versions of his book away on Amazon, he can sell more copies of it.

The recorded show is here; the IP discussion starts at the beginning, with the first caller, and lasts for a few minutes.

In other news, Google's new Chrome browser "is based on the open-source WebKit architecture, and Google claims that its code will be open source, so it's unlikely that the company is trying to corner the market on browser functionality, since innovations are eminently copyable." I.e., Google's not trying to lock Chrome's code down with copyright. It's not afraid of competition.