Coase Colored Glasses

Archive for February, 2011

Carmelo Anthony Secrectly Promotes the Snuggy

A couple weeks into this semester I always dreaded having to read Friedman’s book. I found that his analysis of different topics and his in depth critiquing of different scenarios to be monotonous and hard to follow. Although I do still think these things I am finding his book to be more and more interesting in considering law. I do agree with people being able to profit from their work and writings. In the case of copyrights, I feel that if somebody writes something that they should hold all rights to that piece. But in the case of patents I can’t help but wonder if patent laws restrict our society of perhaps finding better more efficient products? I do believe that if somebody has a great idea that they should be the ones to reap the profits from that idea. But in a way I can see this as being un-beneficial to the market. Sure when somebody comes out with a product it is an idea trying to solve a problem to make life easier. But right after that product arrives to the market place people are going to have ideas to make it better. Aren’t all ideas in a sense branches from other ideas? Like take the Snuggy for example, one of the biggest new products on the market. Hell Carmelo Anthony almost got fined by the NBA for wearing it on the sidelines of a game when he was sick and had the chills. Isn’t that the purpose of it? All that it is is a backwards bathrobe. Would the inventor of the Snuggy have to pay royalties to the inventor of the bathrobe for figuring out that if you turn it around it works as a blanket with arm holes? Or how about adding a hood to it and putting in a head hole? Opps! I just gave away the next great invention, to bad I can’t profit from it because somebody already stole a branch of the original idea.

I have built houses for almost ten years for one home developer here in the valley. They do track housing and only have about five different styles to choose from. They just added a new line of about six houses to their selection that they had to purchase rights to the styles by buying the packages. But for me, I have been building these homes for so long that when I go to design and build my own home that it is going to be hard to have some of these styles not be in my head when I am trying to lay it out. It’s kind of like reading about trade secrets and not being able to think about anything else but that Busch’s Baked Beans commercial with that dog and how it is trying to give away their trade secret recipe. Am I going to be violating copyright laws for design blueprints by implementing them into my own home? I guess I will just have to add a couple extra studs and a wet bar just to make it legal.

Profit seeking management

It was established early on that pirate were profit maximizers. And that the reason and way that they ran things was to facilitate that. But it never occurred to me how good they were at that. With the way that they are set up, they are perfectly set up to be the profit maximizers that they are. In the end this comes down to management. Since I enrolled in Blackbeards management 101 class, I have learned a few very important things. Firstly and most importantly it taught me that every situation has a different management style or even just a different way to handle the problem. If the pirates hadn’t handled the situations that they had, just the way they did, then they would have seriously cut into their profits. I’m amazed how efficient that their individual greed made them. If there are regulations to prohibit abusive behaviors from captains and quartermasters, then there is nothing to stop a group of pirates from maximizing their profits. They have learned how to most efficiently govern themselves. By individually, boat by boat, creating the most cost minimizing and thus profit maximizing policies, everyone on the boat will benefit. Secondly I learned that you need to be open to everything. Just like the pirates being open to the equal treatment of blacks in their crews, if you not open to new suggestions, or new ways of doing things or new anything then you may not be managing as efficiently as possible, and thus not maximizing your profits. Just like how the pirates worked to find the most efficient system of management so they could maximize their profits, we need to work just as hard as them to figure out the exact same thing in today’s modern workplace.

Don’t want your ideas stolen? Then shut up.

Intellectual property rights are fascinating. I loved Friedman’s explanation of the differences between patents and copyrights and the inherent problems presented by each. I have many scattered thoughts on these issues, so here are just a few.

On page 133 Friedman states, “copyright applies to expression, patent to ideas.” I believe that it is generally very difficult to distinguish between an idea and the expression of an idea. Perhaps the expression of an idea suggests labor invested in that idea. Locke suggests that property becomes property by the application of labor. Anyone can have an idea, sometimes even a brilliant one, without an excess of labor. It is the development of the idea that creates the property right. Therefore, the person who labors with an idea should be the one who receives the patent. Certainly there is labor involved in receiving a patent. However, such labor is not necessarily contributing to the idea, but is focused rather on protecting that idea and restricting use of that idea by others. In my opinion, trying to get a patent wastes resources that could have been used to expand and improve the idea and thereby improve society. On pages 131 and 132 Friedman mentions the requirement of usefulness in acquiring a patent. I think this is good, because it is more likely to reward the person who has put labor into the idea.

Along the lines of improving society, if a company can use another person’s idea to produce an identical product at a lower cost, shouldn’t they have that right? If we are going to focus on the benefit that comes to society, the answer is fairly incontestably, yes. The consumer would benefit initially, and society would progress more quickly over the long run because companies would have an incentive to constantly be innovating in order to stay one step ahead of competitors, thus accelerating societal progress. On page 142 Friedman discusses the First Mover Advantage, which I think would apply here. For these reasons, I may almost approve of getting rid of patents all together. Of course, there are problems that would result in terms of how to go about creating an incentive for innovation when ideas are not protected. Perhaps the argument for competition in innovation and unprotected intellectual property by patents is an unhealthy dose of social Darwinism?

I think copyrights are good. I view them as essentially a vamped up punishment scheme against plagiarism on a higher level. But then again, copyrights can be hard to define because how much does the expression of an idea have to be changed in order to no longer be violating copyright? This has especially been on my mind after watching “The Social Network” last weekend. Perhaps I will expand my thoughts on Mark Zuckerberg later this week…

Tony’s Metapost

Over the past few weeks, I have matured out of the infancy of blogging. I have never blogged before this class, and my blog posts have improved in several ways, as I’ve been able to practice. As I read over them I was also able to recognize what subjects are most engaging to me, authors I particularly relate to, positions I am connected with. I also recognized my own ignorance, interrupting my own idea flow, and jokes that really weren’t funny enough to be on the Internet. Reading over those old posts will really help me create better future posts, and at least avoid the mistakes that weakened the posts.

My posts have three prevailing themes, and they are heavily connected to Epstein’s book. My posts advocate for small, hands off government, especially when it comes to property rights. This is present with the charge for the government to defend property and enforce fair rules, and thus aid prosperity. With the government role specifically laid down to serve the public, I also speak often of the relationship between public good, and private good.

Something like six of my posts deal with or mention the role the government should have in the life of citizens. I surprised myself about how important the subject was (to me). The ideas I present are in opposition to public use (like the post regarding the Kelo decision readings in Epstein, and also about the role of the court regarding Epstein chapter 2). The protection of economic freedom is one of the most important functions of government. I talked about it in my posts and I’ll talk about it later here too. On the February 7th post I mentioned North Korea, and on the 14th, Egypt, and my hopes that the people would have changes in the rules to allow them to be successful.

In my posts on the 17th and 26th of January I made arguments and points about the relationship to public and private good, and how the government facilitates that relationship. My thoughts on this subject are largely from books I read (or listened to in audio files) since last summer while my interest in economics grew. The first book was Atlas Shrugged, by Ayn Rand, and was recommended by Randy to my ECON 1500 class. Economics in One Lesson, by Henry Hazlitt came as I searched for a standard book to help deepen my knowledge of economic vocabulary and concepts. Both authors (and I think Epstein could be added to this school of thought) strongly promote the idea that what is good for one citizen is good for the public (as far as the rules go). When government pressures or burdens one man for the sake of the other, neither has their liberty. Both are equally at risk of government oppression. This belief that the market should be governed by market force alone is prevalent in my posts.

The last subject I mentioned most, which happens to be connected to the other two, is property rights. I wrote a lot about how important it is for the government to protect them, and many of my statements are evidence of how important they are to me personally. When I wrote about property rights, it wasn’t talking just about land. I also wrote about intellectual property (Jolly Rodger Trademark, which also happened to be my worst post).

At my current point in the blogging process I feel like I’m doing much better at expressing myself than before. When I first began blogging I didn’t grasp the readings like I should have. I just wasn’t ready for how dense some of the texts would be. Epstein, as I mentioned on January 19th, was too confusing for me to understand, and as I mentioned early, has now become one of my best sources to provoke thought. In fact, I made many references early on to the difficulty of the texts. As time went on, my comprehension rose, and in the last 4 posts, I feel that I understood the texts particularly well. As one of the requirements for a 4 of 4 grades on the posts was to admit the limitations of your ideas, I first began to excuse myself from fully understanding the readings as that weakness. I now realize that those admissions of weakness should take the form of counter-arguments to the ideas I present.

In addition to comprehending more, I learned that citing specific pages in texts helps the ideas I come up with to sound entirely more credible. It forces me to pinpoint the phrases that give me ideas, and helps me looks for patterns in the text where I can find these gems. As far as credibility goes, not using outlandish and long examples makes my posts better. I began using them at first to fill word requirements, and because I didn’t understand the readings fully. I also tried to make up for not understanding the concepts by making jokes, but they weren’t funny when I read them again.

My posts went from economically ignorant and unprepared, to well cited and structured. Once I got the hang of using the texts properly, I began to write with good examples, and plenty of evidence, while presenting my own ideas. Since February began, I’ve been able to express more about my favorite topics of property rights, public vs. private good, and small government that pays market price for what they use. If I can remember all the good and bad things I learned about my own posts thus far, future ones will be very good.

Pirate management in Religion.

As I read about the idea that ‘Greed is Good’ or basically Greed, or self interest makes the economic world go around, I was struck by the idea that this same concept can be applied to the subject of religion.

Marketplaces provide and exchange of services for some sort of gain. In a marketplace that uses monetary exchanges it might be an exchange of a good, say a subway sandwich, for some sort of monetary good, say a five dollar bill. However in a marketplace that is created by religion the services exchanged are less tangible be still to move people very real. I can exchange a ‘good deed’ for a ‘blessing’ of some sort. I’m not doing the good deed, say for example feeding the poor, because I’m generally wanting the poor to be fead. Rather I’m feeding the poor because in my self interest I want that blessing(incentive) that is associated with my action.

In this example we can see how religions create a marketplace of sorts for service to others. It creates a non monetary compensation for those who believe. WIther or not the compensation is real, or just perceived to be real is another argument, one way or another there are incentives to ‘be good’ and ‘keep the commandments’.

Perhaps this is one of the reason for religions in general. The fact that it creates an environment that promotes the social welfare while still giving people incentives to do so gives a very strong incentive for those incentivized by having social stability to start a religion. They are in a sense getting something, capturing a positive externality from peoples actions that they may or may not have done independently, while in reality giving up almost nothing from any other marketplace.

Another interesting way Religion is an active participant in economic marketplaces is through the idea of ‘trademarking’. Much like a pirate flag certain images have come to be strongly associated with certain religions and will help you know a lot about that religion by the signals it gives to those around it. Think for example of the Christian Cross, The Jewish Star, or perhaps a statue of Buddha. Each of these are in a sense a trademark. They reflect a signal, which contains within it a certain understanding of their beliefs, that can be see by any who walk past a church or building that they own.

My own Church, which many who read this may belong to, has a very recognizable logo that is standard on each building it owns. It also has various other ‘trademarks’ such as CTR rings, statues on top of temples, temples themselves each that help people identify the organization and by signal what it provides.

The one caveat in this discussion, one might argue, is the fact that religion for the most part aren’t profit seeking firms. They aren’t trying to maximized profit. They are however from the top to the bottom full of human being each trying to maximize their own incentives.

I’m crying over spilt milk

On page 150 of Epstein’s book Supreme Neglect , he cites the Nebbia v. New York case that “made it a crime for any grocery store to sell milk at less than 9 cents per quart.”  What?  After reading this sentence for the second time, I could feel my brain cells exploding.  The supreme court made it a law that firms can not make their products relatively cheaper to a competitors products.  Not to mention that this was during the great depression when marking prices up (especially of food items) just could not make any sense at all.  What were they thinking?

I learned a lot about monopolies in my Econ 2010 class and I can see why and agree with rate regulations when it comes to infrastructural firms (Questar Gas, Logan city, etc) because the demand for these services is relatively inelastic and if these firms charge outrageous prices, then that reduces the spending power for individuals and businesses and that in turn can lead to a decrease in economic expansion and prosperity.  I know most people are idiots and don’t understand the principles behind free-markets and competition and prices and costs and all that, but I would hope that Supreme Court Justices and politicians would have a basic understanding of these ideas.  America’s liberty and freedom are directly related to free-markets and property rights.

The protests in Wisconsin about Unions and budget cuts make me want to slit my wrists and do push-ups in salt water.  Unions are like cancer for the economy.  Forcing companies to pay greatly above the market price because the workers don’t think it’s ‘fair’.  I have to end here so I don’t get too pissed off.  Point is, let the market do it’s thing and take a few econ courses in your life.  You’ll be glad you did.

Meta Post

I wasn’t sure if we needed to post it on here, but just in case anyone wants to read it..
I wasn’t sure how I would enjoyed blogging when it was mentioned in class. I enjoy writing, but I have a hard time doing under a deadline especially a deadline that reoccurs twice a week. In economic terms the incentives weren’t clear to me when I began. Sure getting a good grade may have been an incentive but I’ve discovered that there are other incentive to writing about economics, and you begin to see the fairly abstract ideas which are discussed in books or in class in your everyday life and then you have the desire to blog about it. It’s nearly addicting.
As I read through my own blog posts I noticed three distinct things about my writing, as well as some other insights such as the idea that I must really like pirates because any time the option is to write about them I will. Granted, this shouldn’t be surprising, who doesn’t want to think and write about pirates?
The first thing I noticed is that I like to take logic to an extreme. I once heard that if you take a simple idea and put it in an extreme situation you’ll be able to see the merits and flaws of that idea better. Apparently I must feel like this works because I did it over and over again. When writing about signals instead of talking about wearing a suit I imagined myself wearing a banana suit. Also when talking about signals I thought about taking my date to Wendys and ordering off the dollar menu as a low cost food option. While talking about adverse selection and dating I gave the hypothetical situation of a man marrying a pregnant women without knowing instead of picking some smaller and more typical adverse selection problem in dating. Over all I feel like this approach has worked as its helped me to see the logic in the arguments and observations that are being made.
The second thing I noticed was the fact that I write about myself and my life a lot. While it might not seem like it to the outside observer, I realized that whatever idea we’re discussing or reading is applied in my mind to something I’m actually dealing with. The ideas aren’t just theoretical or hypothetical to me. I discover patterns and cost and incentive relationships in my own life and then share those in different parts of my blog posts. Just by listing a few of the topics that I wrote about you can clearly see things that seem to be important parts of my life.  In fact a simple list of topics I blogged about reads like a laundry list of ‘topics that are important to or interest Blake’. Just some of them are Girls, Sports, Facebook, The Bible, and Politics.
On top of applying the economic ideas to different interests the third thing I have I noticed was that as I wrote and as I reflected upon my writing I took an interesting ownership of them. It wasn’t just incentives, it was MY incentives. Pirate flags weren’t just signals they were related to MY signals that I was sending out each day. It wasn’t just moral hazard that someone faced it was situations that I was involved in. I took an odd ownership of the idea.
As reviewed the different things that stuck out to me I found an interesting theme. Economics is ruining my life. I simply can’t think normally anymore. No longer am I just enjoying the sports I watch but now I’m analysing them, I’m wondering what the incentive was that drove people to make certain decisions. I wonder how I could increase my own incentives to do certain things or wonder about the cost that are associated with everything I do. Even now as I write about how economics is ruining my life I wonder what my incentives are for saying that. Is it just the little feeling of happiness that I get from sharing? Perhaps my motivation is something even more deep and calculated.
Overall I’m reminded again and again at how rational people, including me, are with their decision making. I’m also amazed at how quickly and almost subconsciously we calculate the costs and incentives of any choice or activity, and how quickly we make strategies based on our assumed understanding of how other will react to certain incentives or costs. We think in economic terms almost naturally, we just don’t know it.
That is until someone gives the thought processes names, then we can’t escape it.

Yet Another Meta Post

I wasn’t sure if we’re supposed to post this here or not, but no harm in joining in. I have to admit that going back through my posts has been an interesting experience. The first few posts seem more tentative than the last bunch. It seems I’m either getting more comfortable with economics, I’m finding more things to take issue with, or I’ve achieved a mixture of both. I tend to write more when critical of the readings for the week. That can be considered both good and bad, but I like my later posts better. Hopefully others do too. I do need to start making those long posts a bit more concise, and be sure to read over them a few times to check for word misspellings (like “form” and “from”). The blog posts are a great incentive to do the readings for class, and I really like how it gives me a chance to think through all the readings before class. I tend to understand complex ideas better once I’ve had a chance to sleep on them, and it’s a lot easier to think through it in a blog post the night before instead of being put on the spot in front of the class.

I would like to revisit the Coase Theorem at some point (which I’m fairly sure we will in some way), because I’m not entirely sure I understand it as well as I should. I was a bit surprised to see how much I do understand. My primary major is Public Relations, and I never thought I’d be as economically minded as I am now. We started discussing finances in my Writing for PR class one day, and I found myself starting to think about it in terms of what we’ve discussed economically. I’ve learned so much in just a month and a half, and I greatly look forward to finishing out the semester.

The Meta Post

Over the last 6 weeks or so I have found myself taking a real world look at what is going on. For example, my fiancee 2 days ago pointed out the poles on 10th west in logan that have been put in place. They are your run of the mill, huge, aluminum power poles that Logan City must have found a pile of somewhere, because the are standing them up everywhere. What is interesting to me is to see how property rights are considered and the underlying issues of the placement of each power pole. Logan City must have “eminent domained” some properties to make it safe to run these much larger poles for higher voltage wires. One home is condemned with a pole planted right in the driveway. How was the individual home owner’s property rights recognized? It is the property of the individual property owner, but what we really define as property is that all property within the borders of the United States is the property of the state. You may have paid for it and have claim that it is yours to the point that the government will help enforce the laws that keep it the way that you want and to keep others from using it, but in the end, if it is in the interest of the public in general and the cost to you is less then the cost of the community, state or country it isn’t your property, it’s “ours”.  Kind of an interesting way to look at it.

Wait a minute, this means that there is a risk that I may lose the property that I own, due to zoning or some government interest. Is it possible to show some risk aversion and purchase some anti-government-seizure insurance? I am a rational actor, right? I want to keep what is mine to myself and I want to get the best outcome for myself based on the the circumstances at hand. I believe this is true, but we can see the rational idea that each desires private property, even pirates. After reading Leeson about how governance spontaneously occurs amongst humans I wrote, “Once one has private property and feels that he truly stands to lose from the behaviors that he may persue we find a more rational approach to life taking form.” I do believe that an individual will act to preserve his property. Its rational to human nature.

Another post I thought reflected a rationality in human nature. In my post “Is trust economical?” I commented on the experiment done in class with the quarters. All of those “repairman” except one replaced the bad parts with good ones. The single individual in the room (Really, I have no hard feelings towards Kelsey. It was just a quarter!) demonstrated the lack of integrity in some situations. Maybe it was the fact that it was a game in class over a quarter that was the motive for the drop out of honesty. No matter her rationale, it is clear that it is more economical to be honest in our dealings with others. The student that I played the game with in class kept his end of the bargain and I will be more likely to do business with him in the future. The same holds true for all institutions. Even though the rational decision in Kelsey’s case may have been to, in affect, defect to keep up with the prisoners dilemma lingo, according to the information Kelsey had, the truly rational decision is to be honest as long as you desire to stay in business.

My favorite section that I started a post on that I never finished was government health care programs. Talk about opening the flood gates to moral hazard and insuring nothing but adverse selections. I work in the medical field and watching the abuse of the system is pretty painful. A great example of moral hazard is the entire Utah Medicaid system. I’m just going to say this now so I don’t forget, there are some good people that do use Medicaid for what it is intended for, they appreciate it and do not abuse it. That said most do abuse it. What other type of health insurance do you have a mom and her 6 children going to the E.R. for coughs from the common cold, seeing doctors, getting prescriptions for the best cough syrups and anti-biotics for no other reason than to sooth the aching hearts of the mother for the large copay of $0. It’s ridiculous. Not too mention the amount of ambulance trips a Medicaid insured individual in Ogden takes to the E.R. for free on the backs of the tax payers, because their finger hurts. It’s good to finally have the vocabulary to finally identify the problems in these law and economic situations, as well as to see how one might fix them. Raise the copays! Make it important that someone have  a cost for risks! If there is, there will be less abuse.

Meta Post Blast

I usually write about what I have read.  I have noticed that I spend much of my time reading the topics and thinking about how they relate to my actual life and other things that I have read in the news.  I Haven’t really noticed any themes in my topics.  Concerns for the last couple of posts have definitely been centered upon governmental control.  I think that they have so much power and that is scary.  During the past 6 weeks I definitely have noticed that I have changed how well I analyze the information.  I am so impressed with how well everyone in the class has done and it has definitely made me want to have posts that equally analytical and intellectual.  I have definitely stepped up my game.  As I was rereading my work I was surprised at how much it seemed like I actually understand the material.  It seems that the majority of the time I feel like I have no idea what I am doing or saying but after reading those I would have to beg to differ, towards the last few.  One of the main ideas that I see as something worth discussing is Property Rights and Public Use.  Those were topics that really got me fired up and interested in what was happening.  The thing I value most about my weekly blogging is the opportunity to analyze critically the information I am reading.  It is so easy for us to just read and write but then to put in our own thoughts a lot of times can be super difficult and cause us to really get out of our comfort zones.