Category: Law
Patents, Intellectual Property and the Rise of the Rent Seeking Society
During the summer I had the opportunity to spend a week at a16z’s crypto lab in New York City where I gave a fun talk on intellectual property including patents and copyrights, the great stagnation, the diffusion of ideas, American economic dynamism and even some discussion of AI and copyright in the Q&A. Check it out!
The best sentence I read today (so far)
“Robots can’t replace senior clerics, but they can be a trusted assistant that can help them issue a fatwa in five hours instead of 50 days,” said Mohammad Ghotbi, who heads a state-linked organisation in Qom that encourages the growth of technology businesses.
And this follow-up:
Ghotbi, who leads the Eshragh Creativity and Innovation House, affirmed the approach, arguing that the clergy should not oppose the desire of Iranians to share in global technological advances. “Today’s society favours acceleration and progress,” he said.
Here is the full FT story, via Jesper.
The Zero Sum Idea Trap
In an excellent column, John Burn-Murdoch in the FT draws out some of the implications of zero-sum thinking, based on the new NBER paper Zero-Sum Thinking and the Roots of U.S. Political Divides.
Among the most striking Harvard findings was the discovery that there is a strong relationship between the extent to which someone is a zero-sum thinker, and the economic environment they grow up in.
If someone’s formative years were spent against a backdrop of abundance, growth and upward mobility, they tend to have a more positive-sum mindset, believing it is possible to grow the pie rather than just redistribute portions of it. People who grew up in tougher economic conditions tend to be more zero-sum and sceptical of the idea that hard work brings success. These attitudes are perfectly rational.
…Every five to 10 years, the World Values Survey asks people in dozens of countries where they would place themselves on a scale from the zero-sum belief that “people can only get rich at the expense of others”, to the positive-sum view that “wealth can grow so there’s enough for everyone”.
The average response among those in high-income countries has become 20 per cent more zero-sum over the last century. Moreover, two distinct rises in the prevalence of zero-sum attitudes have coincided with two slowdowns in gross domestic product growth, one in the 1970s and another in the past two decades.
The same pattern holds within individual countries. Britons and Americans have become significantly more likely to believe that success is a matter of luck rather than effort precisely as income growth has slowed.
The problem, of course, is that zero-sum thinking can causally lead to lower growth because it leads to anti-growth policies such as tariffs, anti-immigration, NIMBY, low-trust, high taxes, redistribution, identity politics and so forth.
All of this is reminiscent of Bryan Caplan’s Idea trap model. See also my earlier posts on how distrust leads to more regulation, even when people distrust the government!
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Pharmaceutical Externalities
In my view, pharmaceuticals are undervalued and underinvested in because, despite high prices, pharmaceutical innovations earn only a fraction of the value that they create (Nordhaus finds that in general that innovations reap only a small share of the gains that they create). In 2014, for example, we got Harvoni a new treatment that offered a complete cure for hepatitis C (HCV) infection. In 2014, Harvoni cost over $1000 a pill and between $60,000 and $100,000 for a full treatment. In 2015 Medicaid spent more on Harvoni than on any other drug and there were calls for regulation and price controls. Studies showed, however, that even at that high price, Harvoni was value/cost-effective. Today, with more competition, there are equivalent versions of Harvoni available from Amazon for $12,869 (and 64 cents) which is still expensive but cheap for a cure for an often debilitating and sometimes life-threatening disease (and the price is less for a private insurance buyer or Medicare/Medicaid). In 2030, Harvoni will go generic and prices will fall much more.
Writing at their new substack, Random Acts of Medicine (based on their book of the same name which I reviewed at the WSJ), Chris Worsham and Bapu Jena point us to another side-benefit of Harvoni and similar hep-C drugs. By curing hep-C these drugs results in fewer liver transplants but that means more livers are available for transplant to other people on the waiting list.
One simple statistic suggests that indeed, treatment of HCV is freeing up donor livers for patients with other diseases: in 2022, patients with chronic HCV infection represented only 11% of liver transplants (1,029 of 9,528)—down from the 38% in 2013 when the new HCV drugs were approved.
Beyond this simple figure, a new working paper by economists Kevin Callison, Michael Darden, and Keith Teltser has taken a new, rigorous look at data from 2014 to 2019 to understand how these new drugs for HCV have impacted liver transplants after their first 5 years of broad use. There were a number of encouraging findings:
- Waiting lists for liver transplants were being occupied by fewer HCV-positive patients and more HCV-negative patients; this shift can be explained by an estimated 45% reduction in the addition of new HCV-positive patients to waiting lists
- Patients on the waiting list were healthier, likely because waiting times for livers have decreased with less demand from HCV-positive patients
- Compared to what would have been expected without the introduction of new HCV treatments, the researchers estimated a 39% decrease in transplants to HCV-positive patients coupled with a 36% increase in transplants to HCV-negative patients.
- Over the five year period, researchers estimated 5,682 livers were transplanted to HCV-negative patients as a result of the new HCV drugs, corresponding to an economic value of $7.5 billion.
These kinds of external benefits from pharmaceuticals are often undercounted and they are one reason why I think the pharmaceutical price controls in the Inflation Reduction Act are a very bad idea.
The British ban on bully dogs
That is the topic of my latest Bloomberg column, here is one excerpt:
The decision offers some important lessons about regulation. First, sometimes an outright ban is better than charging owners or users a fee, or what economists call Pigou taxes. Under some economic theories, bans should be exceedingly rare. Instead, the government should charge a high fee for the right to own or use something. In this case, people who really want to keep their XL bully dogs will just pay more for a license.
XL bully dogs are different. They are symbols of fear and aggression, and their muscular body and fierce countenance reflects this, as does their very name. They are especially popular with criminal gangs.
There is value in getting rid of the symbol altogether. An outright ban of XL bully dogs probably makes people feel more safe than a high tax that makes the dogs rare but not illegal. That extra feeling of security might be partly irrational, but it still matters for how people process their daily stress.
A ban is also easier to enforce than a tax. If the dogs are banned, it is difficult to take one around in public without being spotted. Tax evasion, in contrast, is quite common, and tax laws can be difficult to enforce. The British government may be unwilling to throw people in jail for their unwillingness to pay their XL bully dog tax. Nor is it easy for the government to determine which are the responsible owners of XL bully dogs and which are irresponsible.
The question, then, is how to value owner demand for XL bully dogs.
To put my own cards on the table: I am frankly suspicious of anyone who wants to own a bully dog. Limiting preferences for such dogs now would help limit the spread of the XL bully dog itself, which has been in the UK only since about 2014 or 2015. Over time the dogs could become more established with more clubs of dog owners, more specialized trainers, and in general more support services. By banning the dogs now, the government might stop a wider preference for such dogs from developing. A ban would also help limit long-term frustration if, as I suspect, the decision is reached that XL bully dogs cannot be allowed to spread without limit.
The low or black market capitalization of many bully dog owners is another reason why strict liability here may not work so well.
As a side note, I don’t think the United States should follow the same policy, as I note later in the piece. One argument (which I did not get to) is that the more guns you have (for better or worse), the less you have to worry about your dog policies.
Think about it.
I thank Sam Bowman for the initial pointer to this issue.
EU May Ban Payments for Milk, Sperm and Blood
BrusselsSignal: The European Parliament has approved a draft regulation banning payments for breast milk, sperm, blood and other “substances of human origin” (SoHO).
Billed as an attempt to increase safety across the bloc, the ban allegedly aims to ensure that those who are financially disadvantaged within the bloc are not subject to undue pressure to donate their cells and bodily fluids.
Hmmm. Why not ban the sale of labor to protect financially disadvantaged labor donors from undue pressure? Indeed, why not require that dangerous jobs like mining pay low wages so we can be sure that no one is induced to do these jobs by financial pressure?
More prosaically, the European Union falls short of producing all the blood plasma it needs to meet its demand for life-saving medicine. Consequently, the European Union depends on imports—primarily from compensated donors in the United States—to address its plasma deficit. Should the proposed EU legislation be enacted, the deficit is likely to get worse because Germany, Austria, Hungary, and the Czech Republic, currently permit financial compensation. Indeed the U.S. and these EU countries together account for 90% of the global plasma supply. A ban on paid donations within the EU will thus decrease the quantity of plasma supplied from Germany, Austria, Hungary, and the Czech Republic and force the EU to rely even more on imports from the US.
The US is also the world’s biggest exporter of human sperm because US sperm donors can be compensated and remain anonymous (depending on the state). US donors are also carefully screened for quality, in part due to US regulations and in part due to market demand for information about the donors. Denmark is also a major exporter of sperm, in part because it, too, allows financial incentives to donors. Reduced donations from Denmark will make the European Union increasingly dependent on U.S. sperm supplies. Indeed, after Canada banned paid sperm donors in 2004, the supply of Canadian donors plummeted to just 35 (!) and US sperm exports to Canada increased. Unintended consequences, eh?
Creating EU wide standards for testing of blood, sperm and breast milk to allow greater flows across borders is a good idea. Shortages of baby formula in the US, for example, led to a valuable increase in breast milk donations and sales but it would probably be better if more breast milk donations went through a qualified milk bank rather than through Facebook (and the same is also true for sperm banks and sperm donations). But there is no call for banning paid donation.
Paying donors of blood, sperm and breast milk is an ethical way to increase the quantity supplied and it can be done while ensuring that the donations are high-quality and safe.
Does an AI Pause make sense?
Should we lobby governments to impose a moratorium on AI research? Since we don’t enforce pauses on most new technologies, I hope the reader will grant that the burden of proof is on those who advocate for such a moratorium. We should only advocate for such heavy-handed government action if it’s clear that the benefits of doing so would significantly outweigh the costs.[1] In this essay, I’ll argue an AI pause would increase the risk of catastrophically bad outcomes, in at least three different ways:
- Reducing the quality of AI alignment research by forcing researchers to exclusively test ideas on models like GPT-4 or weaker.
- Increasing the chance of a “fast takeoff” in which one or a handful of AIs rapidly and discontinuously become more capable, concentrating immense power in their hands.
- Pushing capabilities research underground, and to countries with looser regulations and safety requirements.
That is from Nora Belrose, here is much more. Via N.
Regulation is the Friend of the Incumbent!
A fantastic talk from VC Bill Gurley. A great primer on public choice and regulation.
IFOs
While strolling in the garden one day…a priest said to him, ‘Father Joseph, oh, how beautiful God has made heaven!’ Then Joseph, as if he had been called to heaven, gave a loud shriek, leapt off the ground, flew through the air, and knelt down atop an olive tree, and—as witnesses declared in his beatification inquest—that branch on which he rested waved as if a bird were perched upon it, and he remained up there about half an hour” (Paolo Agelli, Vita del Beato Giuseppe di Copertino, 1753).
What kind of nonsense is this? Who is this liar quoted above? Human beings can’t fly or kneel on slender tree limbs like little birds. So, how is it that in the sixteenth and seventeenth centuries—the very era that gave birth to aggressive skepticism and empirical science—countless people swore that they had witnessed such events? And how is it that some of these sworn testimonies are legal records, archived alongside lawsuits and murder trials, from all sorts of people, not just illiterate peasants but also elites at the apex of the social, intellectual, and political hierarchy?
…Levitation is one of the best of all entry points into the history of the impossible, principally because it is an event for which we have an overabundance of testimonies, not just in Western Christianity but throughout all of world history.
Carlos Eire argues in CommonWeal that these events should be taken seriously. Eire is cagey about what he means by take seriously but I agree that we can say something about the form such visions take and when and why they rise and fall in frequency. Eire notes, for example, that reporting of such events changed significantly with the Protestant Reformation.
…Protestants of all stripes also rejected the proposition that God had continued to perform miracles beyond the first century, a doctrine that came to be known as “the cessation of miracles” or “the cessation of the charismata.” The miracles mentioned in the Bible had really occurred, they argued, but such marvels became unnecessary after the birth of the early Church and would never happen again. Consequently, all of those miraculous supernatural phenomena associated with holiness throughout the Middle Ages, including levitation, could not be the work of God. But by designating these phenomena “false”—that is, not attributable to God—Protestants did not declare them impossible. As most Protestant Reformers and their later disciples saw it, ecstatic seizures, levitations, luminous irradiance, and all such phenomena did in fact occur, but they were all diabolical in origin.
…Given the religious, social, political, and intellectual turmoil caused by the advent of Protestantism and its great paradigm shift, it is not at all surprising that miracles became a marker of difference between Catholics and Protestants, as well as a flash point of discord and a polemical weapon.
That’s right but the author would have done better to refer to the work of my GMU colleagues. GMU (oddly?) is a leading center of experts on witch trials. See most notably Leeson and Russ and Johnson and Koyama.
People don’t report seeing flying people the way they used to. Is that because people have become more rational or because the socially acceptable form of vision has changed?
Should child influencers have stronger rights to the income they generate?
That is the topic of my latest Bloomberg column. You can think of this as a government regulation issue, but alternatively you could frame it as the government enforcing individual property rights that currently are absent. Here is one excerpt:
More and more children, by which I mean minors below legal working age, are producing content as online influencers. A lot of Instagram or YouTube or TikTok accounts feature such children, and they can be cute, endearing or (depending on your mood) annoying — as well as profitable. By one estimate, the most successful children working in this area — called “kidfluencers” — can generate more than $20 million a year in revenue…
Legally, these children have no claim to the income their sites generate. Thankfully, many parents are loving and generous. But not all. There is no data on how social media earnings are distributed within the family, but the long history of child movie and TV stars indicates that many receive little or nothing.
But change is afoot, and this is mostly a good thing:
Enter the state of Illinois, where a recently passed law gives successful child social media stars a right to some percentage of the earnings they generate, to be held in a trust in their name until they turn 18. Such legislation has precedent. In the early days of Hollywood, California passed the Coogan Law, which gives child actors a right to a certain percentage of earnings, which employers have to place in trust accounts. New York has passed similar legislation.
The social media case is tougher to enforce, because often the parents themselves are the de facto employer and there is no contract specifying terms. And how is the relative contribution of the child to the family income to be assessed? (Time spent onscreen? Cuteness? What if the social media presence leads to a book contract or podcast?) Nonetheless, the law sends a clear signal that the children do have some rights to the generated income, and grown children can sue their parents if the money is not passed along.
Note however that: “It is neither practical nor desirable for the state to insert itself into family decision-making on a regular basis.” So we should expect only limited gains from such legislation. Furthermore, unlike with child stars in the movies and on TV, there is no real paper trail of contracts and transactions. On the upside, those superior property rights for “kidfluencer” income might get some kids to want to work more, rather than less.
Not everyone will like that outcome of course.
I thank Anecdotal, and also A., for pointers on this issue.
U.S.A. fact of the day
After the Supreme Court struck down Roe v. Wade last year, it looked like the number of abortions would soon plummet across the country. But new estimates suggest that has not happened. The number of legal abortions has held steady, if not increased, nationwide since 2020, our colleagues Amy Schoenfeld Walker and Allison McCann reported today.
How is that possible? New data from the Guttmacher Institute, a nonprofit specializing in reproductive health, implies that more people are traveling across state lines or using telemedicine to get abortions, including through the use of abortion pills. The increase in use of those options has offset the decrease in abortions resulting from new state bans, Amy and Allison found.
Here is more from The New York Times.
Law-Abiding Immigrants
The subtitle is The Incarceration Gap Between Immigrants and the U.S.-Born, 1850–2020, and the authors are Ran Abramitzky, Leah Boustan, Elisa Jácome, Santiago Pérez, and Juan David Torres. Here is the to-the-point abstract:
Combining full-count Census data with Census/ACS samples, the researchers provide the first nationally representative long-run series (1870–2020) of incarceration rates for immigrants and the U.S.-born. As a group, immigrants had lower incarceration rates than the US-born for the last 150 years. Moreover, relative to the U.S.-born, immigrants’ incarceration rates have declined since 1960: Immigrants today are 60% less likely to be incarcerated (30% relative to U.S.-born whites). This relative decline occurred among immigrants from all regions and cannot be explained by changes in immigrants’ observable characteristics or immigration policy. Instead, the decline likely reflects immigrants’ resilience to economic shocks.
Here is the full paper, via Anecdotal.
Why do immigrants oppose immigration?
This question does not receive enough discussion, but there is a new paper of note, by Aflatun Kaeser and Massimiliano Tani:
…successful immigrants in the United States (i.e., those who are in the top quintile of the socioeconomic classification), who may benefit the most from being perceived as unrelated to unskilled undocumented immigrants, have negative views about immigration, especially with respect to its contribution to unemployment, crime, and the risk of a terrorist attack. This effect does not arise in the case of countries that apply stricter controls than the United States on immigration, like Australia, Canada, and New Zealand, or do not attract as large a number of undocumented immigrants. We interpret these results as evidence that immigrants’ attitudes toward other immigrants respond to the lack of a selective immigration policy: namely, if successful immigrants run the risk of being perceived as related to undocumented or uncontrolled immigration, they respond by embracing an immigrants’ anti-immigration view.
Via the excellent Kevin Lewis.
Proudhon: To be Governed
To be GOVERNED is to be watched, inspected, spied upon, directed, law-driven, numbered, regulated, enrolled, indoctrinated, preached at, controlled, checked, estimated, valued, censured, commanded, by creatures who have neither the right nor the wisdom nor the virtue to do so. To be GOVERNED is to be at every operation, at every transaction noted, registered, counted, taxed, stamped, measured, numbered, assessed, licensed, authorized, admonished, prevented, forbidden, reformed, corrected, punished. It is, under pretext of public utility, and in the name of the general interest, to be place under contribution, drilled, fleeced, exploited, monopolized, extorted from, squeezed, hoaxed, robbed; then, at the slightest resistance, the first word of complaint, to be repressed, fined, vilified, harassed, hunted down, abused, clubbed, disarmed, bound, choked, imprisoned, judged, condemned, shot, deported, sacrificed, sold, betrayed; and to crown all, mocked, ridiculed, derided, outraged, dishonored. That is government; that is its justice; that is its morality.
Pierre-Joseph Proudhon, “General Idea of the Revolution in the Nineteenth Century,” first published in French 1851; translated by John Beverly Robinson (1923), pp. 293-294.
Hat tip: Robert Higgs.
Italy fact of the day
Before becoming Italian prime minister, Giorgia Meloni was one of the most strident voices on migration in the European Union. As an opposition politician, she warned darkly of efforts to substitute native Italians with ethnic minorities and promised to put in place a naval blockade to stop migrants crossing the Mediterranean.
During her time in office, she has taken a markedly different tack — presiding over a sharp spike in irregular arrivals and introducing legislation that could see as many as 1.5 million new migrants arrive through legal channels.
Do note this:
Meloni is presiding over a country that is economically stagnant and in demographic decline. Over the last decade, Italy has shrunk by some 1.5 million people (more than the population of Milan). In 39 of its 107 provinces, there are more retirees than workers. ..
Meloni’s legal migration decree estimates Italy needs 833,000 new migrants over the next three years to fill in the gap in its labor force. It opens the door to 452,000 workers over the same period to fill seasonal jobs in sectors like agriculture and tourism as well as long-term positions like plumbers, electricians, care workers and mechanics…
Given Italy’s rules on family reunification, which allow residents to bring in relatives, “it’s easy to predict that over something like 10 years, these figures will triple,” bringing in about 1.5 million migrants, said Maurizio Ambrosini, a professor of sociology and an expert on migration at Milan’s university.
The median voter surfaces yet again? Here is the full account, via Andrew McLoughlin.