Coase Colored Glasses

The state legislature approved a tax hike on tobacco of $1 a pack.  The state expects to bring in an extra $44 million dollars from the tax hike.  It is great to see that the state is finding creative ways to bing in more revenue, but where is that money actually going to come from?

Turns out that poorer people are more likely to be smokers (http://www.sciencedaily.com/releases/2010/01/100115112048.htm).  So does this count as yet another tax on the poor?  In addition, smoking is a very difficult thing to give up.  Will this hike actually cause some smokers to quit or decrease the amount they smoke?  Maybe a few.  Poor people are very good at stimulating the economy, so if poor smokers have to spend more to support their habit then the state will get money that they would have spend elsewhere in the economy.

Maybe the state should start encouraging smoking among its citizens, especially the more affluent ones.  The more ciggarrettes sold, the more money that goes to the state coffers.  Instead of those anti-smoking ads they could put out adds that target richer residents of Utah to try and get a few more bucks out of them.

http://www.sltrib.com/news/ci_14655280

The property in this case would be the access to information in China. According to the three D’s discussed in class regarding properties it is  questionable whether one should see this as a property.

Definition: One can define the property as the access of information from Google in China, or in other words the right to what information provided by Google should be allowed in China.

Defendable: It is defendable, in this case via Chinese Law and technical support, though to what extent it is defendable is hard to see in the same way as music on internet is defendable.

Divestible: Similar examples to the Google vs China case how access to information is sold are newspapers and books.

What make this case interesting  are the question of defense, the idea of perfect  competition as well as the question if freedom of speech should be allowed.

As for defense the ever developing technique allows for both new measures for protection and for intrusion into the protected area, especially on the internet and in the case for information, the softwares for passwords and to break them expands still. For instance the use of images with letters and numbers to printed down during the creation of an account can be seen as a extra protection to access as one tries to protect sites from internet-robots.  On the other hand computer-viruses are reaching new levels of intelligence  as they are learning new ways to penetrate the protection given by anti-virus software via mails, links et.c.  Thus the defense is questionable. Though as one can see people who share copyrighted properties illegally (for instance movies and music) being prosecuted for intrusion to copyright it is possible to see this as a signal of legal defense to information. The technique used here in these copyright cases has been to trace the sharers via IP-addresses which would be able to use in defense of information.

If access to information is limited the probability of perfect competition is limited to a lower extent, this implies that as limits are drawn harsher and harsher where and what information should be accessed the social optimal competition amongst companies is lowered and it is possible that the level of invention due to this is lowered too.  As China still is in transition both politically and economically one can ask why they are setting limits to information to their own people as it is in their own interest to increase both competition and invention in their own country.

To my last point whether perfect freedom of speech should be allowed I have no doubt that most people would argue that they should be able to say whatever their opinion is. Though the case of perfect of speech is in my opinion not truly socially optimal. One example where it should not be allowed would is for the protection of the state, one should not for instance be able to talk about military secrets such as programs and facilities or protection plans for politicians from any country. Another example would be the freedom to speak of somebody’s medical records, to protect an individuals integrity is of high importance as I see it and to speak freely in this case is not a socially optimal case.

In the dispute between Google and China the questions are what information that would be censored or not and for what price would the Chinese government allow Google to provide uncensored information.

http://online.wsj.com/article/SB10001424052748703701004575113550674654886.html?mod=WSJ_hpp_LEFTWhatsNewsCollection

As we are all aware by now, Friedman says that incentives should be put where they will do the most good. In other words, when fiscal policy is used to stimulate employment (or anything else really) the salient concept should be value. “Where can we get the most bang for our buck?” Derek Thompson of The Atlantic Monthly argues that the $15 Billion jobs bill, which gives employers a payroll tax exemption for all employees hired during 2010, does little or nothing to change the incentives for employers. The point is made that for hiring a $60,000 per year employee, the employer can expect to save approximately $2500 in payroll tax credits. Assuming demand for the good or service produced is unchanged, the added production is meaningless to the employer (as the additional goods produced will not be bought and consumed,  meaning no additional revenue for the producer), leaving him or her with a net loss of $62,500, the cost of paying the new employee minus the tax credit (oversimplified I know, but sufficient to make the point). Obviously, in this case the only employers who will hire (and thus benefit from the bill) are those who were planning to hire anyway. Incentives change for nobody. A more effective solution would be to boost aggregate demand through a more direct stimulus. Basic short-run macroeconomic theory makes clear the “multiplier effect” of government spending. Basically a dollar spent by the government goes farther than a dollar in tax cuts because the dollar is “recycled” through the economy as it passes from government to households, to firms for goods and services, then back to households for factors of production allowing for higher overall income/output in the economy. This extra money being spent increases the demand for goods and services, creating a market based incentive for employers to hire more labor in order to match the increased demand with increased supply. Newly employed workers spend more money, which creates demand for more services, which creates more demand for labor as employers need to boost supply to keep up with increasing demand, causing more workers to be hired, allowing more people to spend more money on goods and services… I think you get the point.

Mr. Thompson finishes by pointing to a blog post by Paul Krugman advocating an extension of unemployment benefits in order to increase aggregate demand. While under normal circumstances, unemployment benefits create a disincentive to find work, with a ratio of five job-seekers to every job opening, these are not normal circumstances. People want to work. The incentive structure for labor is irrelevant right now. What is far more worrisome is the lack incentive for employers to hire right now. In fact, given the interlocking relationship between supply and demand, a temporary expansion of unemployment insurance would likely increase employment in the short run. What do you think?

Friedman describes an efficient rule as a rule where “total gains [are] larger than total losses, making the net effect positive.” This applies to any type of law– be it criminal, tort, or patent law. I’m sure many of you have read about the patent dispute between Apple and HTC. This article discusses the possible inefficiencies if Apple wins the case. The article mentions Apple’s “legal temper tantrum” over “HTC’s alleged infringement on up to 20 Apple patents,” with emphasis on the multi-touch-interface patent. I believe patents are crucial for innovation, because if Apple didn’t have a patent on its multi-touch, what incentives would Apple have to spend millions or billions on R&D? But what happens when patents deter competition and innovation? In that instance, I think some things must be adjusted.

Eric Von Hippel, a professor at the Sloan School of Management, said it best: “It’s a bad scene right now. The social value of patents was supposed to be to encourage innovation — that’s what society gets out of it.  The net effect is that they decrease innovation, and in the end, the public loses out.”

I am a happy iPhone user, but I am pleased to know companies like HTC with Google Android are competing with the iPhone. This competition forces Apple to innovate more and charge a lower price, which is better for me! If HTC is shut down because of this, I will be a less happy iPhone user in the future.

The Associated Press is reporting today about a case being heard before the Supreme Court regarding a tort claim filed against government doctors working for Immigration and Customs Enforcement. The negligence claim arises after the death of 36 year old Francisco Castaneda, an illegal immigrant from El Salvador. Castenda apparently when untreated for penile cancer (yeah, penile cancer … ouch!) while he was being held by I.C.E and later died as the cancer spread throughout his body.  

 This is an extremely odd claim not only because was filed on behalf of an illegal immigrant being held by a federal law enforcement agency, but the highcourt seems to be questioning the legality of the suit with respect to exactly who the tortfeasor is in this case. The basic question being, can the complainant file suit against the doctors individually, or should the suit name the federal government instead. Castaneda’s attorney, Conal Doyle explains: 

“The United States has admitted liability in this case. They’ve admitted their negligence caused his death. And so the only issue really is whether we can pursue these individual claims against the actual medical personnel who cared for him individually,”

Well its not the ONLY issue. First you have the issue that Doyle describes, a federal shield law that would absolve the doctor’s from any liablity in the case. Can anyone say perverse incentives? There is also the issue of a California state statute (that’s where the claim was filed) that would cap any damages awarded to the Castaneda family at $250,000. It’s hard to say what exactly this man’s life could be appraised for given his criminal background and status as an illegal alien. But there is also the issue of if that should be the standard for awarding damages, given the fact that the claim is not one of wrongful death but one of negligence. Finally, the elephant in the room in this story, no doubt, has to be Casteneda’s citizenship status as an illegal immigrant. Should he even have the right to file suit against anyone, let alone the federal government? What do you think?