Coase Colored Glasses

Archive for March 2nd, 2011

Copyrights, Technology, and Music

Friedman states that, “Copyright protection against literal copying creates a form of property that is easy to define, cheap to enforce, relatively easy to transact over, and subject to no rent-seeking problem.” Now where does music fit into all of this?

From a completely random and unidentifiable source I remember hearing that 7 consecutives musical notes makes up a copyright pattern that others legally can not copy. The bigger issue here is pirating and illegal music downloads however.

Friedman’s dated analysis of the windows 98′ software program got me thinking about music, or “file” sharing. As far as pure incentives–not ethics–are concerned, pirating music is the way to go. Why? Just like Friedman advocates, Itunes and other music companies have created technology that limits the use of their music. Any song bought from these databases can only be given to friends, burned on a CD, or otherwise shared a maximum of 7 times I believe. Conversely, pirated music has no strings attached and can be shared, burned (for personal or other uses) as many times as desired.

Today, scrolling through my nearly-full 80 gigabite Ipod I have had for a few years now I have actually benefitted from my friends ilegally downloading as opposed to purchasing music they later gave to me. In addition to the money saved (stolen in a way) the music is actually more compatable and easier to use, keep, transfer to your new computer, Ipod, etc. Today I often find myself losing songs that are password, or protected in other ways because they were purchased. Overall, I find the incentives to illegally downloading music (assuming you are not caught for what can be a huge fine as we have learned) outweigh the risks.

I can honestly say however that I have yet to directly download the music myself as some part of me still enjoys having real albums, but I am just as guilty as anyone else for befitting from pirating–modern day that is.

Gangland–The Art of Unions

Reading Leeson’s book about pirates and using their versions of business modeling leads me to believe that there aren’t many situations now days that you couldn’t relate to those times; or even say that the pirates had it figured out better. It sounds like to me that the art of somebody being a lazy worker dates back for centuries and led even the most unusual forms of businesses to try and find ways to counter the unwilling worker. In corporate settings now, whether it is a democratic management or autocratic, I would have to argue that both are mostly democratic to an extent. It is pretty obvious that the democratic business is going to be employee opinion based; but even in the autocratic business setting is going to have a huge democratic persuasion in the mix. Sure their will be one overseeing voice who’s word in the end is final in running the business. But on the underlying levels isn’t there certain employee groups, kind of like “company gangs” to use it jokingly. Most places I have worked, regardless of how the company was ran, there was always a certain social criteria that you followed in the workplace; without management even in the picture at all. Sure everybody that worked and did there job usually got along fine whether your co-workers in your area were in your work’s social click or not. But who of us has not worked at a place where there was a person that just wouldn’t pull their weight? It was pretty obvious that it was never a pleasant place for that individual to work and usually they didn’t last long. Or how about that new employee that always had an opinion about how things could be ran better after only working there for a couple of weeks (those are the ones I hated the worst). It didn’t matter how intelligent that person might be there is a bitching waiting period entering into a new job. And What about when all of the social work groups start getting along really well and complaining about what the higher ups are doing? Isn’t that how Unions started? With employees banding together to get more out of their workplace that they deserve; well I guess employees from the older generations did that. This is one thing I find troubling with now a day Unions, not that I know about much more of them. But it seems to me that Unions just meant more back in the days when there were horrible working conditions, little pay and a lot was at stake. It seems to me that Unions now have been a little pampered and most people entering into the Union probably couldn’t even tell you why it was even put in place to begin with. At least back in the pirate’s times you could all mutinies against the ships captain and kill him, bringing in another to try their chances at running the show. Maybe companies would work better by using this technique to solve problems in the workplace. But I still don’t think this would help solve anything going on in Wisconsin right now.

Incentives in the work place

I have to whole-heartedly agree with brett_bradley’s post.  I too work a low-paying job at a fast food restaurant.  While my co-workers are competent people and fun to be around, the customers and management aren’t.  They ask ‘what is the difference between original and extra-crispy?” or “how many pieces come in the 12 piece meal?” and “how much is your $5 value meal?”.  No, I am not kidding.  And my only incentive to do ‘well’ at my job is to keep it.  Raises in wages are obtained almost solely through scheduled training and can almost never be achieved by working harder or going beyond one’s responsibilities.  I would argue that we have the market share of fried-chicken in Cache Valley (the monopoly if you consider the Coloneal’s recipe the only way to fry chicken) and so what really are my incentives or the store’s incentives to do well?  We have the majority of the customers, I won’t be getting paid more regardless of how hard I work, and people will continue to buy our chicken regardless.

Reading chapter 8 of Leeson’s book more clearly pointed out these principles.  I think workers could be more effective and efficient if they were able to have some say as to what went on at the store (responsibilities, procedures, hours, products, etc) and could actually try out ideas.  He says it best on page 186 “Pirate regulations, which were privately and voluntarily adopted, were successful because they were private and voluntary…Pirates had what economists call ‘local knowledge’.”  Yes I did voluntary agree to abide by the rules when I was hired, but I think that local knowledge should be used when dealing with customers.  This book should be required reading in high school.


I really found it interesting that Friedman explained that patents are sometimes a mechanism that leads to the overproduction of goods.  Before reading this chapter I never directly linked patents as a form of rent seeking, but as soon as he mentioned the subject the logic became clear.  I really enjoyed his analysis on the effects that patents and copyrights have on the economy.

The topic that I am interested in is that of prescription drug production.  Patents provide an incentive for companies to invest in costly research and development.  Without these economic incentives or royalties many companies wouldn’t invest.

However, one might argue that in a market without patents, there would still exist a huge market for prescription drugs.  People get sick and therefor the demand will always exist.  Without this “minimum wage” like restriction imposed by patients the price of drugs would decrease and cause those companies that are inefficiently operating to leave the market.

I believe that innovation is actually inhibited by patents more than it is stimulated.  Many ideas and innovations aren’t explored by those with the capacities even though they might be able to produce the good more efficiently.  Nonetheless, it isn’t profitable for them because of the legal restrictions and required royalties.

In the absence of patent laws, a market for protection of innovations would develop that is much more efficient that the current system.  Inventors would devise ways, as Friedman hints, to protect against copying.  Inventions would get to the point that they would be too sophisticated to be duplicated except for by those leading experts in the field.  The required skill would keep supply low enough to ensure that companies still made a profit from the research and development.

It would be very interesting to see the difference in innovations between two separate countries with differing patent laws.

Improving Patents

As I read through Friedman’s chapter about intellectual property I found myself pretty confused. He tries to illustrate the differences between copyright and patents. Maybe it is because I know absolutely nothing about either of these subjects, but I had a difficult time understanding the chapter.

Friedman states that the biggest difference between copyright and patents is that copyright automatically protects expression and patents protect ideas after a long application process. This leaves me wondering, which one is better? In practice I think that a patent would be better because it would actually protect you from having your work stolen. I know that I personally would be scared to violate a patent law but I have violated copyright laws on several occasions. Turns out that nothing happened. I did not face any consequences for it. So is there any way that an author could apply for a patent? Or maybe we could develop a new law that would offer more comprehensive protection to authors etc. Also there should be some better enforcement to copyright laws.

One last thing, on page 131 Friedman states that a patent is valid for the author’s life plus fifty years. Then on page 133 he says that a patent is valid for the author’s life plus seventy years. Which is correct?

It is interesting to think about the differences between copyright laws and patenting.  Before diving into the reading I will admit that I didn’t know a whole lot about the differences between the two.  The more I have read the more I realize how much gray area exists between them.

Last semester I started to really get in to the entrepreneurial spirit and have since spent countless hours working on ideas that as far as I know haven’t been considered.  Knowing the difference now makes me want to do to do both.  I want to be able to copy right my idea but at the same time would it be a good idea to also get a patent for the expression of my idea?  Why is there a difference between the two? What would be the issues with putting the two in to one entity?  I understand that there are a billion writers and authors and even more books and that could cause quite the burden.  Have you ever  been to a library?  There are so many books in the world it is ridiculous how many people are authors and yet we are still amazed at them for their ideas and imagination.  I feel like the writing can definitely be seen as an idea but at the same time I can see how it would be confusing that a book is the expression but not what is written in the book.  The book is the outlet for your expressive ideas but the book has been invented.  Maybe I am just confusing myself.

Admittedly the book says it way better than I can:

“Copyright protection against literal copying creates a form of property that is easy to define, cheap to enforce, relatively easy to transact over, and subject to no rent seeking problem,” whereas, “Patent protection creates a form of property that is hard to define, hard to enforce, costly to transact over, and contains a potential inefficiency due to patent races leading to duplication and inefficiently early inventions.”

Long story short, if you have an idea, you might as well put in all of the hard work to express it into an invention so that you will be able to protect it better, maybe not easier, but from what I understand about the differences I think that it’s in your best interest to go through all of the efforts.

Remove the lure of riches…

In chapter 8 of The Invisible Hook, Leeson makes a rather profound statement. “Remove the lure of riches and you remove your best shot at living a materially enriched life.” I couldn’t help but think about this statement and how so many people in the world feel otherwise. By somehow equalizing the wealth, they feel that everyone will benefit. This then led me to the part on regulation, and how often times government feel they know what is best, and the outcome is more often than not. While I understand that the actions of few have caused harm to many, that is no reason to further regulate. It merely stifles the economy and holds us in the ever present recession we live in. While it may not be “fair”, American continues to be one of the wealthiest nations in the world. If the government manages to somehow take away the lure of riches, we may not remain so. I was very pleased to find Randys’ post of the letter he had written. It seemed to echo my sentiments exactly. By trying to further regulate, Utah could essentially endanger the recovering state of the Utah economy. These immigrants are drawn to the U.S. by the lure of riches and material possessions, which in itself may be ignoble, but has created a comfortable life for every citizen in this country. While it is true that pirate management may not be best for every situation, as Leeson said, certain principles and tactics are certainly useful in modern times. And this is one of those times. So, to the Utah State Senate and to the American Government, put on your squash-buckling pants and start thinking more like a pirate and less like a prisoner. @_@

Free Pizza.

I enjoyed Professor Blackbeard’s lecture.  He says that “pirate ships confronted many of the problems legitimate businesses face in attempting to maximize profits,” and that among these problems was “motivating workers to contribute to the firm’s goals” (180).  I thought of my on-campus, minimum-wage job.  I don’t especially like my job and have little motivation to perform well–there’s little incentive, other than a belief in hard work and honesty, or whatever, because my wages remain the same regardless of my performance.

Recently, though, we had a meeting–the first of many, I was told–wherein we talked about goals for our department and that if we reach these goals, there will be pizza at the next month’s meeting.  (I don’t know why, but ‘free pizza’ seems to be the go-to incentive for college students.  Do people realize you can buy your very own Hot-and-Ready pizza for only five dollars?)  This is a step in the right direction, but I still think my management should take Professor Blackbeard’s class.  It’s almost upsetting to me that this monthly ‘free pizza’ incentive is probably going to work.

Although the free pizza fails to “reward hard-working crew members and punish lazy ones” (181) like pirates managed to do, it still creates incentives for employees to ‘contribute to the firm’s goals.’  Leeson mentioned bonuses as a way pirates accomplished the former, but he also mentioned that there is no silver bullet for managerial organization.  So it looks like I’ll have to be content with Little Caesar’s.

She’s in a Meeting

While reading Leeson’s discussion of encouraging workers to complete their share of the workload, I recalled this comic I had read in the Salt Lake Tribune’s “Sunday Funnies” section. For those of you who don’t click the link, the protagonist uses the excuse of being “in a meeting” in order to take the rest of the day off work. This idea was started by a coworker, who had conveniently been “in a meeting” for the past week. And then I started thinking about why she would even have to use an excuse like that.

That line of reasoning then brought me to thinking about why we have excuses for missing work at all. Perhaps this is why many companies are switching over to a system where employees are simply getting a set amount of paid time off (PTO) instead of a set amount of sick leave days and vacation days. I can see how it might be difficult to vacation as a pirate because, let’s be honest, if your ship is dropping you off at a tropical island, how sure can you be that they’ll remember to come pick you up again? And that certainty only counts if you know they will want to come back for you at all. In a society that seemingly prides itself on having a strong work ethic, we really like being able to take a day or two off every now and then. The deal is even sweeter if we can get paid to miss work. If we apply economics to the situation, getting paid to miss work (whether a vacation day, sick day, or PTO) wouldn’t make much sense on paper. But studies have shown that employees are actually more productive if they can get a sanity break every once in a while. So why is it such a big deal when employers get excuses like “I couldn’t find my shoes this morning” as to why he isn’t coming in to work? Ultimately, he’ll be happier and will easily make up the work he missed. So really, he’s just being more productive with the time he is at the office, and the employer ends up paying him the same amount. My apologies if I’ve rambled in this post, but that was the loop I got stuck on.

Management, Size, and Democracy

The midterm we just took had a question about religion and pirate logic, and Kelsey’s article was given as a reference.  She stated that she believed that pirate style governance worked because of the size of the ships, and that it would be easier to run a pirate ship that all the spiritual Utahns.  The same concept came to my mind as I read Leeson’s chapter 8.

Leeson explains that a certain kind of management cannot work for every company(182-5).  Pirate ships had a small group of specialists who were on relatively equal footing (similar to a small business of licensed hair stylists).  That would not work for Wal-Mart, who rules their company autocratically from the top (185).  Leeson said: “Those who make blanket assertions about the superiority of workers’ democracy over all other firm organizational forms propose a one-size-fits-all approach where it doesn’t belong…” (185).  Could this be the case for all democracy? Lose the word work from this quote, and we have an argument.

I’m not a communist, but consider this; China is an autocratic society.  They are the largest nation in the world.  They are climbing the economic ranks as well (I think it would be safe to compare them to Wal-Mart).  Regardless of individual freedoms, they are improving people’s lives materially at a rapid rate.  We can compare the U.S. to GM.  We started out a democratic society and continued in that way.  We began to grow and became a world power.  Because we allow so much deliberation, and so many voices to get their way, we have been in the hole for awhile, and we are reluctant to lose our democratic image to real economic productivity.  We shyly move forward hoping that our democratic ideals will save us from poverty.  We started democratic and we won’t change, but Wal-Mart shines as a beacon of productivity (though they have a high attrition rate for employees).  Could it be that once we get so big, we need someone telling us what to do?  Someone who will force us to be productive?

In governments and business, size might be a key indicator for management styles.  It seems pretty apparent in the examples of GM, Wal-Mart, China, and the U.S.  The question is, how much do you enjoy the freedom to do what you want? Do you value it more that higher profits?