The Pin Factory Blog

I’m currently in a hotel just outside Washington, DC, en route to a couple of conferences in Dallas. Watching the news here, it’s striking how obsessed Americans seem to be with the Royal Wedding. NBC had a special on it last night, while MSNBC was broadcasting live from Trafalgar Square this mornng. I can’t help wondering if they think the whole of England is still a bit like Brideshead Revisited. Speaking of transatlantic misconceptions, I ordered the ‘English Club Sandwich’ for dinner last night. It was fantastic, and not just because it followed a day of airport and plane food. But, needless to say, I’ve never seen anything like it in England. Why can’t we make decent sandwiches? We did invent them, after all. I guess socialism must be to blame somehow.

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The Spectator is always a great read, and I’m grateful to their Easter double issue for killing a couple of hours in the air yesterday. Matthew Parris’s column, bemoaning the regulated disappearance of the incandescant lightbulb, struck a particular chord with me. Energy-saving flourescent bulbs just aren’t an adequate replacement. They cast a horrible, cold light and tend to flicker. Yet the state forces us to use them. Anyone know how I can get hold of proper light bulbs?

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On the other hand, I was astounded by an article by William von Raab arguing that the US should “get tough – really tough – with Mexico” and advocating “the same action toward the [drug] cartels in Mexico as… towards al-Qa’eda in Afghanistan”. What planet is he living on? As I wrote a while back: “Decades of bitter experience have shown that no amount of military might can win a ‘War on Drugs’. Indeed, all such interventions actually achieve is to raise the market price of these substances, and give the cartels an even greater prize to fight over. The human cost of this failure is enormous. Surely it is time to accept that the only sensible solution is to take narcotics out of the hands of gangsters, and legalize, licence and regulate their production and sale.”

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Finally, the Washington Post reports (hat-tip to the Wall Street Journal) that Liu Zhijun, until recently China’s railways minister, was fired after embezzling tens of millions of dollars and running up $271bn in debt. Journalist Charles Lane concludes, “Rather than demonstrating the advantages of centrally-planned long-term investment, as its foreign admirers sometimes suggested, China’s bullet-train experience shows what can go wrong when an unelected elite, influenced by corrupt opportunists, gives orders that all most follow”. I can’t help wondering whether we’ll be applying that lesson to China as a whole before too long.

Intellectual property rights – better thought of as intellectual monopoly rights – are an unnecessary evil. They are unnecessary because all their stated, utilitarian aims can be achieved by other means. They are an evil because granting artificial rights to non-property restricts everyone else’s property rights. They are more likely to be used to stifle the creativity, innovation, and emulation that underpins technological and cultural advance; and they concentrate wealth and power in the hands of privileged non-creators more interested in milking selected others’ efforts.

Dignifying them with the phrase “intellectual property” is a contemporary conceit to conceal crude market interference through state granted privilege with the flimsiest gossamer of respectability. The primary origins of patents lie in maintaining the state’s coffers, and of copyright in state censorship of ideas.

Property rights arise from a desire to prevent conflict over scare resources. Ideas, patterns, recipes and processes are non-scarce. Intellectual monopoly laws impose different time periods and restrictions. From time to time legislators arbitrarily decide to protect previously unprotected categories of invention. Even legislators then don’t regard them as genuine property, ownable in perpetuity by the first owner and their heirs until they chose to dispose of it.

However, many claim that, without intellectual monopoly, those with innovative and creative minds would not use those faculties, insufficiently rewarded for their creativity. This is by no means self-evident. If...

• Dickens could make money from Americans without copyright
• Musicians could feed themselves before Edison
• Plant breeding could bloom before the US Plant Variety Protection Act of 1970
• Software got written before the 1981 SCOTUS decision in Diamond vs Diehr
• Most of the 2009 Billboard Top 40 music earners made most of their income from live performances, not recordings
• Harry Potter novels sold enough in their first twenty-four hours to keep J K Rowling in style

...why do we think they need state protection now? The plain truth is that because of the grip of the small number of media giants who control the production, marketing and distribution of their favoured artists, many more undiscovered artists subsist on live gigs in local venues. And because of the modish patent trolls who have no intention of ever exploiting their patents, many innovators never even know someone else “owns” an idea until the writ arrives end up broken.

19th century libertarians ranked Intellectual Monopoly as state created privilege that impoverishes the majority. We should heed them: they are still destructive, unnecessary, statist and evil.

Further reading:

Stephan Kinsella’s “Against Intellectual Property” at the Mises Institute (and an audiobook version of it by me)

Stephan’s thinktank, the “Centre for the Study of Innovative Freedom” (C4SIF)

“Against Intellectual Monopoly” by Michele Boldrin and David Levine and the supporting website “Against Monopoly: Defending the Right to Innovate”

…and if you are minded to do a bit more study on Intellectual Property from a libertarian perspective, though Stephan Kinsella’s Mises Academy course “Rethinking Intellectual Property: History, Theory and Economics” is coming to the end of its current run, you might keep an eye out for it running again.

April 26th is "World Intellectual Property Day". Jock Coats blogs at OxFr33.

Free speech is one of the few liberal totems that has been adopted across the political spectrum, but sadly only nominally. The current debate around “super-injunctions” – gagging orders that prevent the press from even reporting the injunction, let alone the person involved – highlights this. (For anybody wondering who has taken these out, a quick Twitter search should be helpful.)

The right to privacy is usually invoked to justify this gagging of speech, but what does this right actually constitute? The logic of the injunction-backers implies that the right to privacy should mean that we may not say true things about people if it will embarrass them. Well, ok – I’ll be sure to remember that next time someone reminds me of any silly things I’ve done while tipsy. Or maybe it means you can’t say it to an audience of a certain size – so soft talkers might be OK, whereas loud talkers are in trouble. Or maybe it’s just famous and/or rich people that have this right. I don’t fully understand the logic, possibly because there isn’t any.

Talk of a right to privacy is like the right to be loved in the UN’s Convention on the Rights of the Child. Both are noble sentiments, but meaningless without a description of how they’re enforced in the law. Under a libertarian system, people derive protections of their privacy from private property. For example, nobody should be able to find out what I get up to in my bedroom without my permission, but if I did the same thing in a public park, I wouldn’t be entitled to the same protections. The crime would be in bugging my room (or whatever journalists and governments do to spy on people), not in embarrassing me by reporting something I’ve done.

The same goes for the right to free speech. If I’m in your house and I start saying things you don’t like, you should have every right to eject me at any time – to do so would not be a violation of my rights, because it’s your property. I only have a right to speech on my property or that of a consenting party (in a newspaper, for instance).

So, back to super-injunctions. A gagging order is, simply, the use or threat of violence to shut people up from saying embarrassing things. To add insult to injury, this is only available to people with a lot of money. The state is a mercenary, after all. 

It would be nice if footballers’ affairs weren’t reported on, absolutely. But using state violence to shut people up isn’t how we should achieve that. No, we should not have a right to spy on people’s private property, but nor should people have a right to avoid embarrassment or hurt feelings. 

It's David Hume's 300th birthday today. Perhaps some lucky people are sharing a party with him somewhere – because Hume always tops the lists of characters from history that everyone would like to dine with. Adam Smith wrote of him 'as approaching as nearly to the idea of a perfectly wise and virtuous man as perhaps the nature of human frailty will permit'.

Not that Hume would have any truck with the notion of an afterlife. He was, in a time steeped in religion and tense with religious disputes, the leading skeptic of his age. His philosophy was empiricism, following the evidence of our senses and trying to understand the workings of the world through that evidence, the only access we have to it. Any number of mystical or metaphysical explanations could be concocted, he thought, including religion; but that got us no nearer to an understanding of reality or of our own nature.

There was hardly any subject in philosophy, politics or even economics that Hume did not write on, and write on with a directness and common sense that cuts through any sophistry. Milton Friedman said of Hume's essay Of Money that it could be read today with pleasure and profit and that it contained 'few if any errors of commission'. This man really could turn his mind to any subject.

In an age where academic status seems to hinge on making everything look complicated, how much we need today the commonsense philosophy of David Hume.

When discussing the liberalization of our drug policy it is common to hear many concede that in regards to some drugs, cannabis in particular, the UK should move towards a more permissive policy. However, many people are more reluctant to advocate an equally permissive policy for drugs like crystal meth (methamphetamine). This reluctance is ill-founded, as when one examines the history of crystal meth it becomes evident that it is a creation of the drug war, as moonshine was a creation of alcohol prohibition during the prohibition years in the United States. Controlling it will simply lead to an even stronger drug being developed.

There can be no doubt that crystal meth is an extremely unpleasant drug. Crystal meth is highly addictive and one of the most dangerous of the illegal drugs to quit and has a high relapse rate. Users develop extensive neurological and physiological damage; one of the most debilitating and damaging of these effects is what is known as ‘meth mouth’ which results in the deterioration of the gum and teeth loss.

Despite its reputation and prevalence today, methamphetamine has been around since the nineteenth century in medicine and is still used in some medications today. But its use as a recreational drug is a relatively modern phenomenon. Why then, when there are less dangerous drugs with similar effects, is crystal meth even on the drugs market? The answer is that crystal meth is a creation of the drug war.

In Mark Thorton of the Ludwig Von Mises Institute's article, What Explains Crystal Meth?, he says:

…crystal meth is a cheap date; it has been referred to as the poor man’s cocaine. Cocaine and meth are both stimulants, so it is reasonable to assume that they appeal to the same subset of drug users. During cocaine’s heyday, meth was nearly extinct on the illegal market.’

However, during the drug war this changed as it became cheaper and safer for those who traded in cocaine to switch to a cheaper product. And so was born the drug we know today as crystal meth.

This is a pattern in other prohibitions. The prohibition of a substance does not eliminate demand, it only changes the nature of the market. During the prohibition of alcohol in the United States moonshine became a substitute for previously legal alcohol. Although having the same desired effect of alcohol before prohibition moonshine contained higher levels of toxins and was regarded as more dangerous previously available alcohol. Like many government policies, the prohibition of illegal drugs is motivated by good intentions. However, the unintended consequences have been disastrous with more potent and dangerous drugs entering the market.

The government should move towards a policy that allows for the free trade of substances that are currently prohibited – however brutal those substances are to their users. Such a policy, which moves towards total legalisation, would be effective in reducing crime and breaking the monopoly criminals have on the drugs trade, and reduce the tendency toward ever-stronger substances. A more realistic policy decision would be to move towards a system of decriminalisation as currently used in Portugal. A more liberal policy would allow for a safer environment for those who use the drugs, remove many stigmas currently attached to drug use, and make it easier for addicts to seek treatment.

It is a good rule of thumb that whenever the Archbishop of Canterbury makes a political statement, the exact opposite is true. Last week, Mr Williams proposed a updated version of the medieval 'Royal Touch', whereby the monarch's touch alone could allegedly heal sufferers of scrofula.

In a 21st Century update, Rowan Williams has suggested a law which would compel “all cabinet members and leaders of political parties, editors of national papers and the 100 most successful financiers in the UK, [to] spend a couple of hours every year serving dinners in a primary school on a council estate... or cleaning bathrooms in a residential home.”

The principle behind the idea is not a bad one. Society as a whole would benefit from greater levels of personal charity, be it on a personal or organised level: David Cameron's vision of a 'Big Society' in action. But this should not be limited to those at the top of society, unless we want to relegate ourselves back to our Feudal past.

What his suggestion reveals, however, is a far more worrying trend: that of the state being the first port of call for any perceived problem. Is it really Westminster's business to legislate for our morality? Charitable actions enforced by law are no longer charitable nor moral: giving a child a lollipop whilst you're compelled to do so by the force of the judiciary doesn't make you a better person.

The state already appropriates a huge proportion of our incomes – how much is there left to be charitable with? It then proceeds to squander vast amounts of this in the name of various malleable buzz words: 'equality', 'empowerment'. Empirical evidences shows that it is those richest and most successful in society who often provide most to those less fortunate, with Bill Gates being the greatest ambassador of this. How much more does Rowan Williams expect these people to give? I would wager that in states such as the USSR, levels of private charity were negligible.

What the state should be doing is removing, not imposing more legislation. Many of the poorest in society, who are most in need of charity, are in such a position because of an infantilising state which by keeping thousands of people on unnecessary benefits has reduced them to a position of powerlessness.

By removing legislation, freeing individuals and creating the environment for greater prosperity, levels of charity would sky rocket. Until I see Rowan Williams finally dismount his high horse and make a grab for the Toilet Duck, I will continue to ignore him.

What we should do about monopolies is one of those economic questions that rather starts the catfights. It's possible to point out that monopolies can be (note, can be!) detrimental to the consumer. It's also possible to point out that at least some monopolies get their start, even keep their position, because they're better for the consumer than any of the alternatives.

These arguments have been going on for well over a century. Both sides can use Standard Oil as their example: yes, it did indeed "play" very agressively, deliberately trying to put competitors out of business. It also lowered the cost of kerosene (the major product in those early days) faster than possibly anyone else could have done through its integration of refining technology and transport systems.

Another sort of monopoly, the "trust", or the cooperative oligopoly, can have similar effects. But here the problem is that it is always in the interest of one member to defect, as long as all the others don't. So such conspiratorial monopolies are always unstable. A third type, the "Mafia" monopoly, where you don't defect or you die, that's rather a different matter: but we can put it to one side in a discussion of the legal world, given that the "die" bit is already, or at least causing death to prevent defection, illegal.

Which brings us to the technological monopoly, something that has much exercised minds recently, with especial reference to Microsoft. That just about everyone uses Windows and or Office on their desktop, isn't this detrimental to us all, this monoculture? Certainly we think we can see evidence of rents being piled up in Redmond: on the other hand, perhaps it is the very ubiquity of the Wondows standard that has made computing so cheap for us all, at such benefit to us all?

So do we need to do anything about this technological monopoly? There are intriguing signs that actually, perhaps we don't. For technological monopolies aren't stable either. Have a look here at which operating systems are winning out in the smartphone market. It's Google's Android, by a country mile. Windows is picking up a few scraps here and there but that's all.

Ah, but that's phones, not computers, isn't it? Well, yes, but smartphones are the new disruptive technology, as this photo shows.

And it becomes less insane than you’d think to suggest that Microsoft is in the process of experiencing the fastest and deepest collapse of market share in history, wars and catastrophes aside.

For we're rapidly getting to the point that a smartphone is all the computing power that most of us will need almost all the time. Stick it in a docking station with a keyboard and a screen and certainly one would do everything that I ever do with a computer. The next generation but one or two almost certainly everything you ever do with one too.

Technological monopolies aren't stable because technology isn't stable. So perhaps we don't need to do anything about such technological monopolies? After all, how did the Buggy Whip Trust end up?

As with a child wondering why the world is so odd, I find myself unable to work out what public sector unions are for.

No, I understand what unions in general are for: they are the banding together of the workers to make sure that the employers do not oppress them. Such freedom of association is just as important in a free society as freedom of speech (although whether unions should enjoy legal immunity from certain consequences of their actions is another matter entirely).

But government is the wise and benevolent looking out for all of us isn't it? At least, among those who purport to support public sector unions it does seem to be. That's why they tell us that ever more of our lives must be determined by government. Yet more regulation , nudging, prodding, of us to do the right thing. As determined by the politicians, those wise, benevolent and disinterested beings who determine what the regulation, nudging and prodding will be.

But if government, politicians, are indeed those wise and benevolent beings, then why should those who are employed by them need protecting from them? And if those who work for government need protection, shouldn't those of us subject to government also be protected? Be allowed, for example, to refuse to perform under the contract we've signed (that "social contract" thing?) as union members are able to without fear of retaliation? To withdraw our labour from the government's remit in protest at their worsening of our conditions? For us general citizenry that would be a tax strike of course, one that should have the same protections as unions members withdrawing their labour.

I can see one or other part being an honestly held view: government are people we need protection from thus public sector unions are necessary. But a necessary corollarly to that is that government is dangerous, we all need protection, and we certainly shouldn't be campaigning for it to have ever more power over our lives.

Or that government is lovely and cuddly and we should all welcome its correction of our mistaken ways: in which case there is no need for public sector unions.

Even to argue that government changes party at times and thus sometimes we need the protections of unions doesn't help: for government changes party at times and clearly, at the same time as we need the union protections we all need the protections. Even, as I think is probably true, when the unions don't need their protections the rest of us do and vice versa.

So the existence of and support for public sector unions seems to be an argument in favour of a minarchist state. For if those who work for government need protection from it then we don't want government to do very much so that we all need protection from it similarly.

There is of course a way out of this for those who support both expansive government and public setor unions. That yes, government is lovely and cuddly but that the unions are not there to protect union members. Rather, they are there to extort ever more from government for those members. Which may even actually be true but it's not an argument that I'd want to have to try and defend in public.

I'm at the Mont Pelerin Society meeting in Buenos Aires, where I have been learning about the issues facing the future of freedom in South America. One interesting case is that of Chile, whose military government of the 1980s, perhaps surprisingly, introduced a series of free-market liberal reforms. One of these was to change Chile's hopeless chain-letter pension system – that is, one like ours – into a system based on personal savings accounts.

Overall, the system has been a fantastic success. It gave people choice in how they saved, and incentives to do so. Personal savings in Chile are up from just a few hundred million dollars to tens of trillions of dollars today.

But no system is perfect. Self-employed people were not required to join the system, so many such people saved nothing or little. Young workers often did not bother to contribute, reckoning that retirement was a long way off. Low-paid, temporary workers had patchy saving records. The government guaranteed a minimum pension for those who contributed long-term – which, like the pension credit in the UK, gave many workers no incentive to save much at all. Some retired people drew down their pension benefits too rapidly, and ran out of money.

In 2008, Chile introduced a number of reforms to try to get round these problems. There were new supplements for people with little or nothing saved in their accounts. Wealthier people, and some self-employed persons, are now obliged to participate. Younger workers were given subsidy incentives to join. New rules were introduced to make sure that pensioners did not exhaust their accounts before they died. And there were new requirements on people to buy survivors' and disability insurance.

Will this work? My worry is that two-thirds of all pensioners will now receive some government pension support – which must reduce the incentive to save. Public benefits will comprise half the retirement income of the poorest households. The new survivors' and disability insurance will impose a new financial burden on families, which will eat into their savings. The public benefits will cost a noticeable fraction of the government budget – and paying for them will impose an effective tax, and quite a hefty one, on private pensions.

Chile's pension system was a commonsense breakthrough that many other countries have copied. As a pioneering system, it is not surprising that it threw up some problems to solve. But the solutions, I believe, should have been more in the direction of extending market principles rather than extending government interventions. It will be interesting to see what happens – and it will provide a lesson for us all.

A Sequence of Lines Traced by Five Hundred Individuals from clement valla on Vimeo.

This is an interesting example of why planning, at least centralised planning, has such difficulty in working. If the video doesn't appear here, you can see it here. 500 individuals were asked to trace over a line. But each person got to see only the tracing made by hte person before. So the 100th only saw the 99th, the 300 th the 299 th etc. As you can see, by the end there's almost no connection at all to the original idea of a straight line.

All rather reminiscent of the game of Chinese Whispers ("Telephone" to Americans) where the order "send reinforcements, we're going to advance" becomes, after transmission through a number of phone/radio operators, becomes (allegedly) "send three and fourpence, we're going to a dance".

The analogy to the centralised planning of the economy is obvious. By the time the word has moved from the Prime Minister's sofa, to The Treasury, through the civil service, through the layers of management, of rule making and target setting, to those who actually do things, what was originally said has been lost. This could be how we get outreach diversity advisors for example. The original request "Who can advise me on how to reach out to the diverse people's of the nation" from that Number 10 sofa becomes an employment programme for the dimmer outputs of sociologist factories.

And the lesson is similarly obvious. The things that need to be done should be decided by those close to what needs to be done: localism in short. That this might lead to different things being done in different places should not scare us. After all, what needs to be done might vary from place to place and even if it doesn't, the result will still be better than the doing of what no one wants to be done as a result of the instructions being garbled as above.

Telling everyone what to do from the centre just doesn't work for what is being said never turns out to be what is being heard.