Mike Huckabee on Fox News Sunday, 1/27/08

January 31, 2008 at 4:35 am (2008 Presidential Candidates)
Tags: , , , ,

Huckabee said some things that I agreed with in his interview with Chris Wallace on Fox News Sunday (1/27/08).

One the issue of the economy he was asked by Chris Wallace about Romney’s claim that he would be best suited to navigate the country through an economic downturn, which Huckabee has disputed.

He started talking about his extensive executive experience as Lt. Governor and Governor of Arkansas.  But what impressed me was his point about how the other Republican candidates at the Dearborn Michigan debate had said the economy was okay, but that is because they are at the top of the economic pyramid.  He talked about how if you talked to the average worker, they felt that things aren’t too good and have felt that way for awhile.  He also said that recessions were trickle up from the lower income classes to the investor class.  You can see that from 2:20 to 3:15 of this you tube clip.

The other part that I liked is that he went big tent on faith or lack of faith.  Granted it was related to a very pro-life opening, but he talked about Catholics and even people of no faith.  That is very different than Romney’s position that freedom requires religion.  This can be seen from 4:50 to 5:10 on the clip.

Now as much as I like these to aspects of his interview, I can’t see myself ever voting for him.  But I did want to point out  some of his encouraging language.

-Josh

Leave a Comment

The Sounds of Cinema Festival by the Minnesota Orchestra

January 31, 2008 at 3:01 am (MN Orchestra, Music)
Tags: , , ,

Over the past few weeks the Minnesota Orchestra has had four different programs of orchestral music from cinema. I attended two of them.

I have always loved movie scores. It probably started with Fantasia which was basically animation to classical music. But I grew to love the music in many movies like the Mission, Last Temptation of Christ, Batman (score not soundtrack), and so many more. So when I heard about the festival, I had to go to some of them.

The first was the full silent movie City Lights by Charlie Chaplin. I am not sure I have ever seen any of his works other than short clips. This movie was quite magical. The score was very fun. The best part was watching the musicians turn to watch the movie when they had long breaks for their instrument.

The second concert was selected music from movie scores. The theme from Out of Africa was so very enjoyable. It is just great music. Philip Glass’ minimalist suite from The Hours was great and only Nyman’s music in Gattaca is better of minimalist scores. They placed the finale perfectly, because it would have been horrible any place else in the program. The finale was very energetic music from Pirates of the Caribbean.

Overall it was great to hear music from movie scores with a live orchestra.

-Josh

Leave a Comment

Sophie Milman at the Dakota

January 31, 2008 at 2:15 am (Music)
Tags: , ,

This is a bit of a late review. I saw Sophie Milman perform at the Dakota on January 22. It was a really nice concert, I only wished it was longer than hour and 25 minutes. She performed songs from both of her albums, her debut Sophie Milman and 2nd album Make Someone Happy. I really liked the Russian song Ochi Chernye.

The concert opened with her band playing without her vocals. There was a mid set break for her as well. She put in a nice plug for her band’s own album, as well as her albums.

I did stop by after the show to chat with her briefly, I was not alone. She is currently a Commerce student at the University of Toronto, which is where I studied and received my degree. I did get manage to get this picture of us.

Sophie Milman and Josh

So check out her music.

-Josh

Leave a Comment

Flawed argument in letter to the Strib

January 26, 2008 at 2:49 pm (Economic policy)
Tags: , , ,

On Friday I read a letter to the editor in the Star Tribune (Strib). Here it is in its entirety.

MPLS-HINCKLEY-DULUTH RAIL
Utah, etc., shouldn’t buy

The proposed high-speed rail line that would haul businesspeople, tourists and gamblers between Minneapolis, Hinckley and Duluth sounds like quite a deal for Minnesota.

A $363 million investment would generate $2 billion in development, according to a study reported on in the Jan. 23 Star Tribune. And, the federal government would pay 70 to 80 percent of the tab. No wonder both Democratic and Republican members of Minnesota’s congressional delegation are lining up to support the project.

But wait a minute. Isn’t the federal government running a deficit? Maybe the politicians can explain to me why the good taxpayers of Iowa, Wisconsin and 47 other states should pay 70 to 80 percent of the costs of a rail line that would benefit primarily Minnesota.

J.H. FONKERT, ST. PAUL

Now I haven’t read the article this letter writer is commenting on, and I don’t need to counter JH’s argument.

JH is basically saying that because the Feds are going to fund 70-80% of the cost of this rail line that it is wrong. That other state’s shouldn’t have to foot the bill because it benefits Minnesota.

Maybe the author thinks that such a great return on investment should warrant the state to put up the full funds. Now that case could be made, but wasn’t explicitly stated.

Now on to countering the argument, the Tax Foundation (with praise from John Kennedy, Milton Friedman, John Snow, and Dick Armey it is definitely non-partisan) has done an analysis looking at federal tax revenue leaving a state to the federal budget and comparing it to federal expenditures spent within a state. Here is the summary of the analysis and what impacts it.

Federal Taxes Paid vs. Spending Received by State

States send federal taxes to Washington and receive federal spending in return. However, some states benefit more from federal taxing and spending policies than others. Some “beneficiary” states receive a positive return from Uncle Sam, making other states “donors” who pick up the tab. The most important factor determining whether a state is a net beneficiary is per capita income. States with wealthier residents pay higher federal taxes per capita thanks to the progressive structure of the income tax. Other factors include whether states have powerful Members of Congress, the number of federal employees present in a state, and the number of residents receiving Social Security, Medicare and other federal entitlements.

They have collected data for tax years 1981 through 2005 for each state. You can see the data at this pdf (MN is on page 23). The closest Minnesoa came to receiving $1 in federal spending for $1 sent in tax revenue was when we received $0.94 per $1 sent in 1988. According to their data in 2003 and 2004 we received $0.68 and in 2005 $0.72.

Iowa, well since 1985 they have received over $1 for each $1 sent. So for JH to argue that others states shouldn’t have to pay for the federal share of our rail investment is about the stupidest argument that you could make in light of the fact that receive far less in federal expenditures as a state than we send in federal tax revenues to the government.

-Josh

Leave a Comment

Heritage on inflation

January 26, 2008 at 2:20 pm (Conserative Think Tanks)
Tags: , , ,

The Heritage Foundation supports recommendations by the Republican Study Committee, my biggest surprise  this year…well actually pretty predictable. Of these recommendations, there is only one that I think a strong case can be made for, and that is ending capital gains taxation on the inflation of an asset.

End the Capital Gains Tax on Inflation. The bill would index for inflation the cost basis used when calculating the capital gains tax on assets acquired before the end of 2008. Under current law, capital gains are not adjusted for inflation. This counterproductive and unfair policy raises effective capital gains tax rates, forcing investors to retain assets and inhibiting new investments.

But to get me to support that, I would have a condition.  And to the Heritage Foundation, I think it would be very unpalatable.  That condition would be to tie the minimum wage to inflation.   Some states do this, but if the Heritage Foundation wanted economic fairness for all classes of people, not just the investor class and corporations, advocating for small incremental increases to the minimum wage would be a nice step in this direction.

Don’t worry, I am not holding my breath, turning purple, or passing out while I write this.  It is abundantly clear from this web page Minimum Wage Resources that it won’t happen.

-Josh

Leave a Comment

Moody’s on economic stimulus package.

January 25, 2008 at 5:47 am (Economic policy)
Tags: , ,

This was issued two days ago, so the information is about the effects of different types of stimulus, not an analysis of the plan that came out today.  Now unlike the Heritage Foundation, Moody’s reputation is built on their unbiased analysis.

While the President’s nonrefundable tax rebate would help the struggling economy, a refundable rebate would be substantially more helpful. In a refundable tax rebate—favored by most Democrats—all households would receive the same size check regardless of how much they owe in income taxes. For example, at a cost of $100 billion, every U.S. household could receive a $900 check. The extra boost would come via the spending of households with very low incomes, who wouldn’t receive a nonrefundable rebate since they typically don’t owe income taxes. Moreover, higher income households that are more likely to save their rebate checks would receive less under a refundable plan.

So in their analysis, providing support to those who don’t pay federal income tax is a better stimulus if you provide rebates.  Now on to the key component in the eyes of the Heritage Foundation, the bonus deprecation, here is Moody’s take,

The economic bang-for-the-buck of bonus depreciation is very modest (see table).[7] Indeed, of all the tax and spending policies considered, it provides the least amount of stimulus. Such incentives offer a limited boost because many businesses have difficulty quickly adjusting long-planned capital budgets. Moreover, most investment is made by businesses with no tax liability in the first place. Investment incentives also complicate matters for financially pressed state governments that base their business taxes on federal tax law.

Ouch, that has got to hurt.

Unfortunately the plan that was worked out today did not include an extension of unemployment insurance or increase in food stamp funding.  This is very unfortunate as Moody’s, along with Joseph Stiglitz as reported yesterday, have said this is the best investment,

Extending unemployment insurance and expanding food stamps are the most effective ways to prime the economy’s pump. A $1 increase in UI benefits generates an estimated $1.64 in near-term GDP; increasing food stamp payments by $1 boosts GDP by $1.73 (see table). People who receive these benefits are very hard-pressed and will spend any financial aid they receive within a few weeks. These programs are also already operating, and a benefit increase can be quickly delivered to recipients.

The benefit of extending unemployment insurance goes beyond simply providing financial aid for the jobless, to more broadly shoring up household confidence. Nothing is more psychologically debilitating, even to those still employed, than watching unemployed friends and relatives lose benefits.

On the topic of permanent tax cuts for the investor class, Moody’s doesn’t think that is particularly effective,

Making permanent the current dividend income and capital gain tax rates would also be poor economic stimulus. The current 15% tax rate that most investors currently pay is set to soon expire and tax rates will jump. There is an argument that making them permanent would create some certainty for investors, who are currently uncertain about prospects for the stock and bond markets. But whatever the longer-term benefits, the near-term economic boost would be small. The problems plaguing financial markets are broad and deep and unlikely to be measurably affected by such a policy change. Moreover, even assuming with the most favorable financial markets, the stimulus potential of such a move is small; each $1 in net cost to the Treasury produces only 37 cents worth of GDP, according to our model.

Here is their very nice table that is referenced.

Economic Stimulus

Their data makes government spending look a lot more effective than tax cuts.  You can see that even with the tax cuts, those that are most effective are those that target low income, rebates for those don’t pay federal income taxes or payroll tax holiday.

-Josh

10 Comments

Voodoo Economics at Heritage Foundation

January 25, 2008 at 4:04 am (Conserative Think Tanks, Economic policy)
Tags: , , , , ,

So the Heritage Foundation is commenting on the good and bad in the stimulus package that has been reported in the press. I am going to focus on one part of it.

An even better approach would have been to extend the pro-growth elements of the 2003 tax cuts, which reduced taxation of capital gains and dividends. Those tax cuts and the bonus depreciation helped spark the economy in the latter part of 2003. Since investment is forward-looking, many businesses are in the process of making investment decisions for 2011 and beyond. Permanent reductions in the cost of capital would help the economy by eliminating the uncertainty that businesses face when making investment considerations.

Ah, the push to make the tax cuts permanent, how very predictable. In fact we heard the same thing when they were more optimistic on the economy just one year ago.

Although PAYGO may prevent new entitlement spending in the 110th Congress, lawmakers should rework the rule before 2010 so that it does not prevent extensions of the tax relief passed in 2001 and 2003. A massive tax hike like the expiration of these tax cuts would do lasting harm to the economy and threaten the jobs market. In addition, higher taxes on dividends and capital gains would likely depress the stock market, where most retirement savings are invested, and so an ill-conceived PAYGO rule could increase retirement insecurity at the very moment when many Americans can least afford it.

What I am very unclear with is how promoting investments for 2011 and beyond is going to boost the economy now?

-Josh

Leave a Comment

Conservative elites at the Heritage Foundation

January 24, 2008 at 4:12 am (Conserative Think Tanks)
Tags: , , , , ,

Since I wrote the other blog on the economic stimulus package, I was peeking around at the Heritage Foundation web site and found a press release from today that is the basis of this post.

In one ad, Kennedy accuses the U.S. government of cutting the federal budget for heating oil assistance while a picture of the White House floats in the background. The placement of the ads also appears politically motivated. How else to explain, for example, why the ads are running on “Meet the Press With Tim Russert” and “FOX News Sunday with Chris Wallace,” shows for savvy political insiders that presumably have few viewers that qualify for heating oil assistance?

Well according the ACF the 2006 amount was $3.08 billion and 2007 was $2.19 billion. So in recent years what the Heritage Foundation sees as an accusation is a fact. But by using accuses they are trying to put it in dispute.

Now the 2nd part of that paragraph is the basis of the title of this post. Basically they are saying that poor folk that could qualify for the assistance don’t watch the Sunday morning political shows. That might be true, but it definitely is a statement that reeks of elitism.

Further on they continue the attack on the populist Chavez, by bringing out this,

By comparison, the large numbers of people living in poverty and extreme poverty in Venezuela ought to be an embarrassment for Citgo and Kennedy. After Chavez’s eight years in office and the receipt of more than $600 billion in oil revenues, Venezuelans at all income levels are no better off.

Crime, corruption, inflation and food scarcities are rampant. The average per capita income in Venezuela is less than one-sixth of America’s and millions of Venezuela’s extremely poor earn less than $1 a day.

That sounds horrible. Chavez is helping poor Americans, how dare he, while neglecting the poor folk at home. Yet, the data that the Center for Economic and Policy Research issued in July 2007 (pdf) doesn’t jive with that.

The poverty rate has decreased rapidly from its peak of 55.1 percent in 2003 to 30.4 percent at end of 2006, as would be expected in the face of the very rapid economic growth during these last three years. Table 3 shows the poverty rate since 1997, by household and population. If we compare the pre-Chávez poverty rate (43.9 percent) with end of 2006 (30.4 percent) this is a 31 percent drop in the rate of poverty, which is substantial.

But wait, there’s more.

However this poverty rate measures only cash income – it does not take into account the increased access to health care or education that poor people have experienced. As we have shown previously, taking the most conservative estimate of just the value of the health care benefits – what the poor would have spent on health care in the absence of these new programs – would lower the measured poverty rate by about 2 percentage points.

and even more

The Chávez government has greatly increased social spending, including spending on health care, subsidized food, and education. The state oil company alone was responsible for $13.3 billion (7.3 percent of GDP) of social spending last year.

The most pronounced difference has been in the area of health care. In 1998 there were 1,628 primary care physicians for a population of 23.4 million. Today, there are 19,571 for a population of 27 million. In 1998 there were 417 emergency rooms, 74 rehab centers and 1,628 primary care centers compared to 721 emergency rooms, 445 rehab centers and 8,621 primary care centers (including the 6,500 ‘check-up points,’ usually in poor neighborhoods, and that are in the process of being expanded to more comprehensive primary care centers) today. Since 2004, 399,662 people have had eye operations that restored their vision. In 1999, there were 335 HIV patients receiving antiretroviral treatment from the government, compared to 18,538 in 2006.

The Venezuelan government has also provided widespread access to subsidized food. By 2006, there were 15,726 stores throughout the country that offered mainly food items at subsidized prices (with average savings of 27% and 39% compared to market prices in 2005 and 2006, respectively). These plus expanded special programs for the extremely poor (e.g., soup kitchens and food distribution) benefited an average of 67 percent and 43 percent of the population in 2005 and 2006 respectively. These do not include the 1.8 million children that were beneficiaries of a school food program in 2006, compared with 252,000 children in 1999.

Access to education has also increased substantially. For example, the number of students in ‘Bolivarian schools’ (primary education) increased from 271,593 for the 1999/2000 school year to 1,098,489 for the 2005/2006 school year. Over one million people also participated in adult literacy programs.

So it sure looks like the Chavez run government is helping poor people at home and in the US. Not what the Heritage Foundation would have you think.

-Josh

Leave a Comment

Economic stimulus package

January 24, 2008 at 3:21 am (Economic policy)
Tags: , , , , , , , , , , ,

If you have been paying attention to the news you will hear that Congress and the White House is looking to stimulate the economy, or really inoculate it against a recession.

Last Friday Treasury Secretary Henry Paulson said this in a press briefing,

SECRETARY PAULSON: Well, again, what has been put out is our broad and important principles. And a significant part of this is going to be tax relief that will go to consumers. And we’ve been talking about a package that is 1 percent of GDP, so that’s in the neighborhood of, you know, $140 to $150 billion. And we have been thinking that the biggest portion of this package should be aimed at consumers, taxpayers, and providing them relief.

Q Can you be any more specific than that?

SECRETARY PAULSON: I think I shouldn’t be more specific here. The President intentionally put out guidelines, broad principles, because we’re looking to be collaborative in working with Congress here.

Q But folks on the Hill are saying that the White House already has something in mind in the neighborhood of $800 for individuals, $1600 for families.

Now aiming this at consumers is definitely a Keynesian (demand side) policy. The idea is that it will encourage consumption which will bolster the economy. But the other side comes in in comments at the same briefing by the Chairman of the Council of Economic Advisors Ed Lazear,

CHAIRMAN LAZEAR: Excuse me, I’d just add to that. There are two major parts of the economy that we have to deal with: the consumption side, and the investment side. Consumption is important, of course, because it is the major component of GDP; it’s 70 percent of GDP. But in addition to that, investment is extremely important not only because it’s a significant part of GDP, but also because investment is the way that we create demand for labor. And demand for labor means more jobs and more wages, and that’s the reason that we have to focus on that side as well.

The focus on investment is straight out of the voodoo economic policy of Reagan. This is what you will hear from the right, they will continually hammer away at this narrative to help corporations and the investor class.

Now Joshua Holland did a nice job over at Alternet starting with quoting Kevin Hassett of the American Enterprise Institute column in the WaPo, who basically says that there are some upsides to a recession. It is a really nice long piece Holland has written, so go read it.

So I will focus on the Newshour this evening that had William Beach of the Heritage Foundation and Joseph Stiglitz talk on this issue. First some background on the two contributors. Let’s start with William Beach,

Prior to joining Heritage in 1995, Beach held a variety of posts in the public, private and academic sectors. He served as a litigation economist with two Kansas City, Mo., law firms-Campbell & Bysfield and Watson, Ess, Marshall & Enggas – where he specialized in analyzing how anti-trust legal remedies would alter product pricing and availability. Later, as an economist for Missouri’s Office of Budget and Planning, he designed and managed the state’s econometric model and advised the governor on revenue and economic issues. After a stint in the corporate headquarters of Sprint United Inc., Beach moved to the Washington, D.C., area to serve as president of the Institute for Humane Studies at George Mason University.

A graduate of Washburn University in Topeka, Kan., Beach also holds a master’s degree in history and economics from the University of Missouri-Columbia. Beach also is a visiting fellow at the University of Buckingham in Great Britain.

and Joseph Stiglitz,

He is now University Professor at Columbia University in New York and Chair of Columbia University’s Committee on Global Thought. He is also the co-founder and Executive Director of the Initiative for Policy Dialogue at Columbia. In 2001, he was awarded the Nobel Prize in economics for his analyses of markets with asymmetric information.

Stiglitz was a member of the Council of Economic Advisers from 1993-95, during the Clinton administration, and served as CEA chairman from 1995-97. He then became Chief Economist and Senior Vice-President of the World Bank from 1997-2000.

Just on a simple look at their bios, I have to say Stiglitz is more impressive. In fairness if you looked at the bio of Paul Krugman and Milton Friedman, Friedman’s would look a lot more impressive and you can guess which I prefer. Now lets get down to what they said tonight.

JOSEPH STIGLITZ, Economist, Columbia University: Well, I would begin by focusing on, what gives the biggest bang for the buck? The problem is that, over the last seven years, our deficits have increased enormously.

Now, when you’re ranking proposals by the bang for the buck, the number-one is strengthening our unemployment insurance system. When people get thrown out of work, they get money, they spend it.

Number two, giving money, tax rebate to low-income Americans. Again, when they get the money, they’ll spend it. And a tax rebate could be done in a very quick way.

Number three, giving money to states and localities that are facing real financial constraints. Tax revenues are going down. Property values are going down. And most states have a balanced budget framework.

So if the revenues go down, they have to cut their expenditures. And this will depress the economy. So dollar for dollar, this will stimulate the economy enormously.

and predictably Beach comes out with investment,

WILLIAM BEACH, Economist, Heritage Foundation: Well, let’s back up just a moment, Ray. Those are the leading ideas. There’s one that he didn’t speak about, and I’m sure that he meant to, and that is what Republicans and Democrats have done time and again when the economy has fallen on these sort of pebbly paths, and that is to incentivize investment.

Tell businesses that if they’ll take production, expansion of plant and equipment, buying equipment, out of the future and bring it to the present, and get a tax cut for doing so, that brings production to the present, creates jobs, expands incomes by making workers more productive.

RAY SUAREZ: So give us an example of what kind of spending you’re talking about.

WILLIAM BEACH: In 2003, for example, we had a program, what was called bonus depreciation. It really is giving a tax cut to businesses so that they will do things now instead of three years from now or so. And that worked very well to get production up, to get jobs growing again.

Many people listening to this program will remember how slow jobs were. That’s been tried time and again, and it usually works pretty well.

And some of the economic research which is now being done to evaluate which of these programs really work says investment incentives are a really tried and true method for changing the direction, the slope of the economy.

Now later on Beach gets into how investment increases productivity

WILLIAM BEACH: … increasing consumption, we can have a bump up in consumption, which will inevitably happen, which will stimulate the economy in the short run.

But what we’ve learned about that is that it doesn’t necessarily — and it frequently doesn’t — change the trend of the economy. What you’re hoping for in a stimulus plan is not to just increase consumption or GDP temporarily, but to change the trend from sluggish to growing.

And to do that, you need to expand productive capacity, increase the productivity per worker. And that could be done in the short run. It can be done in conjunction with the consumption side, but it should be the dominant part of the package and not the minor part of the package.

There has been talk in the past year about how productivity gains didn’t go to workers, which is what you want if you are trying to boost consumer demand. Many people have said that the productivity gains have gone to corporate profits, but not Dean Baker in a January 1 blog dissented.

In short, a careful examination of the data shows that profit shares have not risen from 1997 to 2006. So, if the money didn’t go to ordinary workers and didn’t go to profits, then where did it go? The answer is high-end workers, which include CEOs, the hedge fund boys, doctors, lawyers, and other highly educated professionals. One of the main reasons for this upward redistribution is trade policy — but the NYT likes current trade policy.

Now the ironic thing about Beach’s position is that it seems to be contradictory, at least to me, of the Heritage Foundation mission.

Founded in 1973, The Heritage Foundation is a research and educational institute – a think tank – whose mission is to formulate and promote conservative public policies based on the principles of free enterprise, limited government, individual freedom, traditional American values, and a strong national defense.

$150 billion on economic stimulus, or 1% of GDP doesn’t sound like limited government. I am guessing that is code for limited regulation. Or maybe he is off topic and could get fired, then he will advocate for unemployment insurance that Stiglitz is talking about.

Stiglitz’s recommendations are repeat of ideas for 2002-2003 problems. As the CBPP reported on state budgets and the cuts in Feb 2003. Here was one quote in the report.

Robert M. Solow, emeritus professor of economics at MIT and winner of the 1987 Nobel Prize for Economics, has made a similar point. Solow recently wrote, “There is urgent need for substantial revenue-sharing from the federal government to the states, cities and counties. The recession and slow recovery have gutted states and local revenues. Since they operate under constitutional balanced budget constraints, governors and mayors are being forced to make drastic cuts in basic and necessary public services. This weakens the economy – states and cities spend twice as much as the federal government – and could spell disaster for many low-income people who are the main beneficiaries.”

In 2002 Congress extended the unemployment insurance as the CBO reported on.

Personally I like Stiglitz’s recommendations. I think they would do the most help.

But no matter what the package looks like, it must not exclude those who do not pay any federal income tax. They pay sales, they pay payroll taxes, and they need help as much if not more than middle and upper income folks.

-Josh

1 Comment

Intellectual Property laws

January 21, 2008 at 7:11 pm (Intellectual Property)
Tags: , , , , , , ,

I am not a huge fan of Intellectual Property (IP) laws.  I do think that people should be paid for the work that they do, but as the Writer’s Guild Association strike has shown, much of that money goes to big corporations, not the creators.

I do buy CDs, which I rip to iTunes or MP3s without the Digital Rights Management (DRMs) issues.  I own DVDs of many TV shows.  So I am not some peer to peer downloading fanatic.  But I really feel that the entertainment industry has gone too far.

Dean Baker who has the blog Beat the Press has a nice blog comparing counterfeits to unauthorized copying.

Counterfeit,

A true counterfeit good is intended to deceive the consumer. This would be an article of clothing supposedly by a famous designer, an original painting by a famous artist, or fake currency, all of which are intended to capture a far higher price in the market because the consumer is misled about their identity.

Unauthorized copy,

On the other hand, there are unauthorized copies which sell for prices that are far below the price for which the “real thing” would sell. This includes handbags and articles of clothing that may carry a designer label, but often sell for a small fraction of the designer label price. It is almost inconceivable that consumers don’t know that they are not getting the designer product.

What it all means for consumers and owners of IP

 This distinction is essential because with true counterfeits, the consumer is the victim. In the case of unauthorized copies, the victim is the company to whom the government has granted a monopoly over the sale of the item in question. The consumer is a beneficiary when they purchase an unauthorized copy at a price that is far lower than the price of the authorized version. For this reason, consumers are not likely to cooperate in efforts to stamp out the trade in [un]authorized copies. The government’s efforts to crack down on this trade is likely to meet the same fate as the Soviet Union’s effort to stamp out the black market trade in blue jeans, it didn’t work.

Dean Baker has written a couple of other reports regarding IP.  One is a new model of software development, another looks at the cost of text books, and the third focuses on the whole issue of IP including drug patents and copywright laws, it is a great overview.

Future posts on this topic will include how we force IP protections into trade agreements, how it is large source of revenue to offset our negative trade balance with other countries, and other fun stuff.

-Josh

Leave a Comment

« Older entries