Tag: economy

A Must-Read by Eduardo Porter on “Rents” in the Marketplace

This article specifically caught my attention because the term “rent seeking” has so frequently been misapplied to copyright. Interestingly enough, it is a term correctly used to describe the manner in which, for instance, the major tech platforms enjoy a competition-free market. Porter writes …

“The scholars argue that the American economy is afflicted by “rents” — returns in excess of what investments would yield in a competitive economy, where fat margins are quickly whittled away by competition.

Rising rents will take larger shares of the nation’s income. That will bolster the proportion of income that goes to corporate profits but squeeze the share that flows to workers — in wages and benefits — and to productive capital. This will discourage both work and capital investment. It will weigh on overall economic growth.”

Porter isn’t talking about book authors, filmmakers, photographers, and musicians.  He’s talking about corporations with huge stock valuations and market positions so dominant that they can kill would-be competitors to protect their “rent seeking” models. Sound like any Facebooks or Googles you know?

Yes, a copyright can be described as a kind of monopoly, but it’s a monopoly to which every citizen is entitled in the same way every citizen is entitled to personal sovereignty.  The fact that copyright’s antagonists have thrown around the term “rent seeking monopoly” in defense of corporations that really can be described by those terms only emphasizes the extent to which Big Tech managed to hypnotize the market with its shiny playthings.

Read full article at The New York Times here.

Image by michaklootwijk

Internet Association asks Trump to keep sticking it to creators.

ia-letter

On Monday, the Internet Association, which represents most of the major online platforms, sent a letter to the president-elect asking that his administration show support for the the status quo of the CDA and the DMCA in order to sustain “innovation and free expression” online.  But for the date and the name Trump, the letter is a boilerplate industry position arguing that the OSPs’ limited-liability for actions like copyright infringement is the reason we consumers enjoy all the prosperity being fostered by the internet.  Of course, I am moved to ask, even in a reluctant spirit of bipartisanship, what prosperity?

Setting aside all the vitriol and hate-speak for a moment (and it is very hard to set aside), the primary rationale voters cited in the exit polls for their votes was a “Desire for change.” So many Americans are apparently feeling anxious about their economic prospects that they are literally grasping at straws at this point.  In this regard, both parties are guilty of dissembling on the promise to “bring jobs back” when speaking to working-class voters—projecting a false image of middle-class, manufacturing jobs returning while simply ignoring the reality of automation. Even if a new factory is built in Pennsylvania, it’s mostly going to be run by robots.

Meanwhile, the internet industry is asking the presumptive change agent that is the president-elect to support the entrenchment of 20-year-old statutes that have failed to produce anything like middle-class, economic prosperity to replace what those statutes have actually cost us.  As the letter to Trump states …

“Intermediary liability laws and policies protect free speech and creativity on the internet. This, in turn, generates substantial value for our economy and society through increased scale, greater diversity, and lowered barriers to entry for creators and entrepreneurs.” 

That sounds very pretty, but where’s the beef?  We can count the money that no longer goes into the pockets of authors, music makers, filmmakers, photographers, journalists, etc. And we can count the supporting jobs and businesses those industries no longer sustain; but where is the middle-class prosperity that’s replacing those losses—all that “substantial value for our economy” the internet industry keeps talking about?  Because if people have been enjoying that prosperity, then why all the economic anxiety?  What about the millions of voters who were on the fence about Trump but are simply so worried about dwindling economic opportunity that they figured some change—any change—was worth a shot?

The internet industry is still selling roulette economics dressed up as entrepreneurism and using that pitch to justify stealing economic value from hard-working creators. I know the internet industry largely campaigned against Trump because they personally view themselves as progressives, but from a policy perspective with regard to issues like DMCA safe harbors, I’m surprised the Internet Association wouldn’t have expected a casino owner to be an ideal ally to their way of viewing the economy.  After all, the YouTube version of “prosperity” is exactly the same as a casino. A handful of big winners makes new creators forget that most who try will lose while the house always wins. They dangle stories like PewDiePie just like golden dollar signs in a casino to convince creators there is a new way to “make it” in a market where they no longer need to care about owning the rights to their work.

Maybe it’s time for the leaders in Silicon Valley to do some soul-searching and decide whether they truly care to benefit people the way they keep claiming they do; or if they just want to protect their bottom line.  There are members of the Internet Association who are more pragmatic about finding common ground with authors and creators, some who are more willing to sit down and discuss practical and voluntary solutions to solve challenges like mass infringement and other exploitations of creative work.

Other members are less inclined to this approach, given to protectionist responses and divisive PR aimed at creators seeking voluntary and legislative measures to mitigate mass infringement.  But these folks should make up their minds.  You can’t be for the people and be anti-individual rights at the same time; and the right to protect one’s ownership in expressive works is an individual right. In fact, it happens to be the first individual right mentioned in the Constitution.  Time for Silicon Valley to put down its playbook and think more humanely about the future.

Don’t ask if artists deserve to be paid.

I frequently encounter comments on this blog and around the web reiterating the thematic question as to whether or not “artists should be paid as much as they are.” The inquiry is typically posed by contrasting the arts to other professions we likely consider more critical, like emergency medicine or teaching or epidemiology.  This attitude is a bit of a shift in for artists, who are historically used to the idea that not even friends and family will take them seriously until they make a living; but regardless of the chimerical mood in the peanut gallery, everyone should rest assured that in general artists still don’t make very much money.  Be happy or unhappy about that as you will.

Often, when I encounter this question asking what “artists deserve to get paid,” it is in regard to wealthy, creative and/or performing artists.   And this is something of a variation on the recurring theme “Why should pro sports stars get paid millions to play a game, when people like nurses struggle to pay their bills?”  This rhetorical and apparently rational question is based on the fallacy that financial value is somehow tied to social value, which it simply will never be in a free-market economy. (Please resist the urge to stump for communism here.)  NFL players are paid millions because football is worth billions, and this has nothing to do with the relative “importance” of the game.

But we should clarify something about semantics right away:  in general, artists are not “paid” in the sense that most people are paid based on a contract with an employer.  Most artists are entrepreneurs, and if the product(s) their business produces sells million of units, they’re going to earn revenue in the millions of dollars. We are not “paying” them a million-dollar salary, and yet comments I read often ask literally, “Should we pay them so much.”  One might think the artists they’re talking about are on the public payroll, and we’re checking a line item in the federal budget.  “Dammit!  We’re paying Kid Rock how much???”  So, the semantics are either carelessly or purposely misleading when employing the words we and pay.

In fact, the question being asked isn’t even comparable to the ongoing debate over the salaries and bonuses that are paid to c-class executives in major companies.  While the government should not impose a maximum compensation package that a business may pay its leadership, we have seen examples of a corporate culture that can aggravate wealth consolidation and even reward failure.  When executives make four-hundred times the salary of a company’s average worker and may also receive an multi-million-dollar golden parachute, even for screwing up a corporation, these occurrences certainly beg the question as to whether or not these people should be paid so much?  And while the thesis inquiry about artists’ pay seems to echo this line of inquiry about top executives, the two subjects have nothing to do with one another.

As stated, most artists function as small businesses and produce works on spec with a wide range of investment from pure sweat to millions of dollars.  They earn revenues through sales of their works ranging from supplemental income, to full-time professional salaries, to cha-ching for a fortunate few.  It doesn’t matter if an independent business sells widgets or cheese boards or record albums; it is simply preposterous to ask whether or not the seller “deserves” the revenue from the units she is able to sell. But of course, that’s not really what the people who pose this question are asking, is it?  What they’re really asking is why they should pay for works produced by artists at all, and they are rationalizing a desire to not pay with a smokescreen of faux-humanist gibberish about creative work being less socially important than work in medicine or education.  But aside from the fact that the teacher and the doctor probably can’t perform a song anyone wants on his iPod, the real folly in this entire line of reasoning is that the doctor, the teacher, the plumber, and the fool asking the question are all economically co-dependent on that artist we’re arbitrarily presuming to remove from the ecosystem.

I know I’ve used the ecosystem analogy before, but it seems to me that it is economic suicide to eradicate a vital business engine just as it can be ecological suicide to eradicate a vital species.  We don’t necessarily know the exact cost of losing a particular beetle to deforestation, but we do know all species are interdependent and, therefore, view diversity as salubrious and extinction as hazardous.  How is an economy any different?  You would likely never be able to follow a path from a new creative venture in Singapore affecting trading that afternoon in Hong Kong, triggering a flurry of international trades, leading to a windfall in Seattle that seeds a company that offers you your next job.  But we do know that this matrix of chaos is what we call the economy, and we, therefore, accept the general principle that a rising tide raises all boats and vice versa.  Thus, most things with intrinsic economic value (i.e. things people want or need) that can be part of the grand game of trade are universally beneficial.  Put it another way, one benefits economically from the financial success of rock bands one hates. So, it is self-destructive to argue in favor of diminishing any legal, fair, and prosperous trade, especially if that trade is as economically diverse as the arts.  Diversity equals stability.

Some have argued that there is no economic harm in under-paying or not paying for entertainment media that is consumed.  Without so much as a wink, lobbyist Matt Schruers in July of 2013 wrote an article on behalf of the CCIA (Computer & Communications Industry Association) that rather astonishingly stated that “money not spent on pirated content is, in many cases, still spent.”  Hard to argue with that, but the implication that no harm is done as long as the money goes into the economy somehow is a shell game. Let’s make an evening of it…

You can save about twelve bucks by pirating three movies instead of renting them.  And with that twelve dollars, you can order a pizza to eat while watching one of your pirated films.  So, like Schruers said, that money still goes into the economy, right?  Yes, but at this point, you should probably skip the movies and the pizza and go back to economics class because what you’ve actually done is consume about $24 worth of goods and put $12 into the economy. Multiply that activity by millions of consumers and watch what happens, not just to one industry, but quite possibly to your job.  Because further exacerbating the folly of this false logic, you’ve just fed one sector of the economy that is considerably less robust than the sector you chose to starve. The core motion picture industry employs nearly two million Americans making over $100 billion in wages, and that contributes substantially to support jobs all over the country in completely unrelated industries. Like pizzerias.  Still, in some minds, that kind of wealth in the movie business translates into “they’re so rich, they don’t need my four dollar rental fee,” and this is the perfect attitude to adopt if you hope to go from being the guy ordering that pizza to one day applying for the job of delivering it.  It is far better for your overall economic health to rent one movie, buy one pizza, and tip the delivery guy for a grand total of about $18 and thus feed three tiers of the economy in a single night’s use of your disposable income.  It’s the same thing prudent investors do when they spread their bets.  Diversity equals stability.

It is a conundrum.  The technology that makes paying for creative works functionally optional fosters the notion that it is morally optional and, therefore, rationally objectionable. This leads to earnest discussion as to whether or not producers even “deserve” revenue for the things we consume; and once again, we see an example in which the technology that is supposed to connect us all actually blinds some of us to the ways in which we really are connected.