Aggressively neutral on the Wisconsin walk-out

A few people have asked me what I think about the Wisconsin collective bargaining rights walk-out, so I'll just tell the world my thoughts on the matter here.

Unions cause monopoly pricing in a market. What this means is they cause a "deadweight loss" - the union gains less of a benefit than the buyers (governments in this case) lose; the market loses overall efficiency. The exception is when there is only one entity buying all the labor - although this is true for some government positions, most (police, firefighters, teachers, etc) can work for a nearby town instead.

But when it comes to labor, there are other considerations besides pure efficiency in one market. If labor prices drop too low, people who can't support their families will simply turn to crime, or take dangerous risks to solve immediate problems. Put simply, poverty has a cost too. Efficiency in the labor market isn't always worth it overall.

EVERYONE, not just union members, deserves a life free of poverty, but unions are not the best way to do it. Governments can subsidize food, shelter, health care, etc, and provide it more efficiently through taxes (land taxes for example have no deadweight loss) than unions can.

So here's why I'm aggressively neutral. The proposed union-busting legislation does nothing to address how union members will be worse off afterwards. No raise to the minimum wage, no health care reform, no improvements to the working environment. It was entirely possible for the Republicans to propose something that helps literally everyone but they did not. They know better, too, but the tea party will not accept any socialism whatsoever, even if it merely guarantees what union members already have in a less disruptive way.

This is why we can't have nice things, people.

Relakks

So now, THE MAN won't trace me quite so easily. I've signed up for Relakks, an encrypted broadband proxy in Sweden, a country with nice privacy laws. In addition to keeping my own government from watching me, (which it most likely doesn't) I also won't have to worry about getting sued by any big nasty artificial monopolies here in the states.

Hooray for importing additional freedoms! To the right is my new "location", next to beautiful Stora vänsjön.

For anyone else who uses Kubuntu, here are the directions I used to easily set it up.

Universal Health Care

I recently had an interesting discussion regarding universal health care. This discussion was 100% based on economics - although it's very sad when people don't get the care they need, the money that pays for that care has to come out of the pockets of hard-working citizens, and they have troubles of their own. People will get sick and die naturally, and although nature is my bitter enemy, I don't think the government should be involved unless it would result in a profit for the arithmetic mean citizen.

I once thought that the free market would handle medical care in the most efficient manner - people who contribute the most to society would be kept healthier for longer, while people who had nothing significant to contribute would not consume valuable medical resources. However, that is an idealistic and short-term way of analyzing the situation; it does not take into account the "investment" society could be making in potentially productive people, or the market failure caused by insurance companies who will charge people unfair rates.

I'm not advocating socialized health care. A government monopsony is no more desirable than a private monopoly, and in addition to its theoretical likelihood of paying a non-equilibrium price, would realistically result in government bureaucracy and inefficiency. If you think the wait at the doctor's office is bad now, wait until no one has to worry about paying. Without a market mechanism, the inability of the health insurance industry to support the poor would only be replaced by the inability of the government to support anyone.

So here's what I'm thinking, split into two parts:

• Eliminating the right of any insurance company to charge differing rates based on factors outside of a client's control. This will only redistribute the cost towards people without such factors, but keep in mind that there is no point in providing an incentive to do something impossible.
• Currently, factors such as hereditary illness or gender are fair game for price discrimination.
• Ideally, only choices such as smoking or vegetarianism would factor into one's insurance pricing.
• I think this policy should be applied to all forms of insurance that are government mandated (like vehicle insurance) or sponsored, but that's off topic.
• Government funding towards an insurance plan of the recipient's choice, of equal value for all citizens.
• If the government simply paid doctors and pharmacists for a citizen directly, then one of two problems will arise:
• The government determines what gets funding and what doesn't. As impressive as the government's decision-making ability has been thusfar, I don't think they'd do a very good job.
• The government just pays for what anyone can get a prescription for. Wait, why am I arguing against this? THIS IS A GREAT IDEA!
  
• Private insurance has market pressures to reduce overhead, accurately assess the needs of patients (or risk losing business), and advertise to the right groups.
• As opposed to completely socialized health care, we could gradually transition towards this system, allowing individuals with enough money to buy more expensive coverage if they so desire.
  

Tragedy of the Commons

Lately, I've been thinking about the current Intellectual Property situation, from an economics standpoint.

(If you're already familiar with the economics of intellectual property or just don't give a damn, click here to skip down to my proposal.)

In many cases, such as works of art, the market is in monopolistic competition, so there is a high degree of variety and prices are what most consumers would consider "fair". Although an artist has a monopoly on his own product, the current intellectual property system works well enough because:

• There are millions of other good artists to choose from, and
• You almost never have any dire need for a particular work of art. (Exception: Hedonism Bot)

However, with patents and software copyrights, there is often no substitute, and the market is a plain old monopoly. Microsoft, for instance, has a monopoly on operating systems that can run DirectX 10, so if your business needs software that requires it, you'd better shell out whatever price Microsoft asks. More importantly, if you suffer from a deadly disease for which the treatment is patented, your demand for the product is extremely inelastic. This system can lead to serious problems, such as:

• Price gouging
• Deadweight losses (see image, right)

This is where the current intellectual property system is broken - it ceases to be a free market. It is very inefficient in terms of total surplus, and if you're some pansy who cares about human life, you should know that many people die because of the current system.

My Proposal

Although hippies may argue on this, we cannot simply eliminate all patent legislation and call the problem fixed. Without some legal structure, businesses who spent money on R&D would face a disadvantage when competing with those who just mooched. This is called the "free rider problem", and it's the main reason we created the intellectual property system in the first place.

However, there are other, possibly better options. This is my exceedingly complex idea - please tell me what you think, especially if anything similar has been used (successfully or not) in the past.

In order for businesses to conduct research, they must have a monetary incentive to do so. Since the creation of public information is a positive externality that effects everyone with access to that information (or products that can be created due to it), I think its funding should be handled by the government. I think it's safe to assume that now warning lights just flickered on in your heads, since the government is notoriously less efficient at the distribution of money than the free market. Who decides what gets funding? Who decides how much would be fair? That's by far the most difficult part of this problem, since the value of an idea is impossible to gage objectively.

First, there is the matter of who. I think the only fair way to decide this would be in a democratic manner:

• One option would be to poll a statistically significant number of people selected from the same pool as used to select juries. It would have to be a limited number, because polling all voters every time would result in massive voter fatigue. Granted, the average person is a clueless dipshit, but I think that the truly ignorant would pass on their right to vote and allow interested citizens to make the decision, much like they do already.
• Another option would be a panel of elected officials. This reduces the dipshit problem, but increases the risk of corruption, so transparency would be of the utmost importance.
  

Next, there's how much. Ideally, every voter would suggest a reward, and the median value would be the one used. This way, the vote would not be ruined by some idiot who thinks an invention should be worth a million bajillion dollars or negative double infinity dollars. If the majority of people vote "zero", it is voted down.

Ok, now there's the issue of when to vote. I think the vote should take place at least two times:

• First, when someone nominates a desired invention. This would be similar to a software bounty, serving as the minimum reward for the effort of research and reducing the risk involved for a business interested in developing intellectual property.
• Second, once the work is complete.
  
• For inventions that had been initially requested, this would be a bonus for going above and beyond the previously stated requirements. A bonus of $0.01 would just verify that the invention had satisfied the request.
• For inventions that no one had requested, this would typically be much larger, since no minimum reward had been agreed upon previously. If you invent something that no one likes, you might get burned by a low payoff.
  
• Sometimes, the value of an invention isn't clear until long after it's been released to the public. In those cases, voters could nominate it for an additional bonus after a certain time has elapsed since the last vote. At all stages, there would need to be a clear public record stating how much a party has already been rewarded. For a continually useful invention, the money would keep coming for as long as people appreciated it.
  

Now, we have a completed invention, the rights for which are shared by the constituency. These rights could be licensed to other nations or foreign businesses to recoup some of the expenses. The remaining costs would have to be raised with traditional taxes, which would hopefully be less inefficient than the monopolies I'd like to avoid. I'm personally a fan of the land value tax, but that's a whole other debate entirely.

Why My Proposal Will Probably Never Happen

• First off, this idea is a blatant violation of international law (although without our support, this law would probably die).
• Secondly, although this idea would result in a more efficient economy, it hurts big business, and for some strange reason the law tends to work in their favor.
• Thirdly, a drastic and sudden change in the way we conduct business would seriously harm the economy in the short term, and I'm not sure how a progressive transition to this system could happen.
• Finally, I'm not a real economist, and there's probably some major stuff I've overlooked. Put me in my place and point out my ignorance with a cutting comment!

EDIT 01/01/07: A problem has come to my attention - if we were to respect the IP laws of other countries, then it would be advantageous for businesses to conduct research in other countries, so they can enjoy a monopoly. If I think of a good fix, I'll post it.
EDIT 01/02/07: I think the problem is that I'm assuming monopolies should be allowed to do business without any repercussions. The import of their products would have to be taxed to the point of eating up the monopoly surplus. The EU is already doing something like this to Microsoft.