Bill Gates and vested interests

The world’s richest man thinks robots that displace human labour should be taxed and the money used to fund philanthropic employment in health care and education.  This proposal would suit the interests of the one per cent but there are probably better ways to deal with problems created by the agricultural surplus.

Bill Gates deserves some credit for his philanthropy and for recognizing educational and health care needs although one has to be concerned about the economics of how he became the current chairman of the board of the world’s elite.

To evaluate proposals like this we need to look at the vested interests of the person making them.

Mr. Gates’ foremost interest has to be in maintaining copyright and patent legislation as that is the foundation of his fortune.  If our society did not have that legislation he would be just another clever computer nerd, we would all be using cheaper and better software and there would be a great deal more equality in our society.

His second greatest interest has to be promotion of the social monitoring and tracking industry. The future of his fortune probably depends upon the success of Microsoft in tracking and monitoring all people so the information can be sold to advertisers.  I fear this not so much because of the advertising but because once the information is collected it will also be available to governments and the one per cent for social control.  I switched my computer to linux minx because I figured Microsoft was getting too blatant and too untrustworthy in its collection of information.

Another major interest of this guy is full employment and the work ethic.  He needs for everyone to be working so we can all purchase his software and be subject to targeted advertising.  If that does not happen his position as the richest man on earth becomes precarious.

Another of Mr. Gates interests is the maintenance of poor people in this world.  Without them he would not get brownie points for philanthropy.

Will his proposal help to save jobs?  Probably not because the root problem is that we have used up the most easily available energy and mineral resources.  Those that are left will take so much energy to extract their value is limited.

The development of robots should be seen as part of a long-term technological development which has given us a high agricultural and material goods surplus and which allows all the benefits of modern civilization.  The challenge is to use the technology for the greatest enjoyment of human lives.  It may be the greatest benefit would come from a new emphasis on doing arts, crafts, music  and theatre rather than marketing more elaborate gadgets.

So there are two things which might interfere with Mr. Gates’ desire for full employment and his future.  First is the depletion of energy and mineral resources which will reduce our economic activity and the second is if more and more people get fed up with the marketing conspiracy and reduce their interest in contributing to economic growth.
 

Governments, competition and subsidies

Is it legitimate for city governments to get involved in the economy as The Economist reports a number of mayors are doing?  Governments have been involved in their economies for millenia.  For us this involvement helps a some people make profits and when the economy is tough it helps a few people get jobs.

There are two ways governments get involved in economics – by passing legislation that restricts competition and by giving subsidies either in cash or tax exemptions.

Most economic legislation at the national level works to restrict competition. Patents, copyright, licensing and tariffs all limit competition and allow the firms protected to charge higher prices and make profits they would not otherwise have had.  It may be the most  valuable business skill is government relations and lobbying.  During the recent golden age of prosperity with constant economic growth the higher prices have hardly been noticeable and for most people not relevant.  As we go into a period of economic decline already lot of people are hurting.

The other way governments influence the economy is with subsidies or tax exemptions.  

There are three concerns about government involvement in the economy.  

The first is that protection from competition and subsidies distort prices and encourage inefficiencies in the economy.  It might be cheaper and more efficient to make wing nuts in one place but subsidies alter that.  It may be that competition is now to determine  which, city or state/province has the deepest pockets for providing subsidies.  When firms can go where they get the largest subsidy, there is an element of blackmail and it is not clear this is a good way to start a relationship.

The second concern is that most of us most of the time make decisions for our own short-term interests rather than the long-term interests of the community.  For most of us a job today is more important than the future health of the planet or even survival of the human race.  Also one has to suspect that in this respect politicians are at the head of the line especially when they want to get reelected.

A third concern is that subsidies are good at providing jobs for a lucky few people but provide no benefit for the rest of the unemployed.  I believe subsides should be given to consumers rather than producers so that they don’t distort prices and can provide assistance to all who need it.

DI_404_SUCKZ_Stephen_HarperOne can make lots of arguments against government involvement in the economy, but one is fighting a lot of short-term interests.  The Canadian prime minister is the chief executive officer of corporate Canada.  This applies to the incumbent and probably to most past and holders of that post.

The evils of patents and copyrights

Two economists at the St. Louis Federal Reserve have called for the abolition of the American patent system, a proposal I endorse 100 per cent.   I would include copyright.

Their argument is that the patent system retards innovation.  My argument is that patents and copyright restrict competition which increases inequality.

“The historical and international evidence suggests that while weak patent systems may mildly increase innovation with limited side effects, strong patent systems retard innovation with many negative side effects,” Boldrin and Levine wrote. “More generally, the initial eruption of innovations leading to the creation of a new industry—from chemicals to cars, from radio and television to personal computers and investment banking—is seldom, if ever, born out of patent protection and is instead the fruit of a competitive environment.”

 

In order to have a competitive market there should be no restrictions on entry to that market.  The purpose  of patents is to give the patent holder protection from competition.

zeimusu_Sri_Yantra secondGenius is 90 per cent plagiarism.

If the British had strongly enforced patent protection, we would not have had the industrial revolution.  If the Elizabethans had copyright, we would not have Shakespeare.  If the Romans had copyright, we would not have the Bible.  If we didn’t have patents and copyright we would have a more equal society with even more useful gadgets and medical research would focus and serious diseases rather than the diseases of us rich people.

Patents and smart phones

Here’s a rather long article on patent wars in the software industry especially with regard to smart phones.

The purpose of patent and copyright legislation is to restrict competition and allow some people to make excessive profits.  In this case it appears some of those profits are going to lawyers.

If we didn’t have patent legislation the smart phones would be even smarter and would be less expensive.  Probably a lot of lower-income people would benefit greatly.

I have a theory that genius is 90 per cent plagiarism.  Therefore anyone can be a 90 per cent genius which isn’t bad – except those who don’t listen (or who get caught by patents).

Economics and the U.S. presidential candidates

The Lexington columnist in this week’s Economist tries to analyze the two U.S. presidential candidates in terms of their understanding and support for “capitalism and the free-enterprise system”.

I feel uncomfortable with terms such as “capitalism and the free-enterprise system” because I think they are meaningless words used to hide from us the reality of how our economy works.

Our economic organization is one in which governments pass legislation and regulations which work to restrict competition. Subsidies, tariffs, licensing, copyright and patents all work to limit competition and thus to increase profits.

Romney has certainly benefited from this aspect of government activity and as president would support if not expand it. I don’t now how Obama became a part of the one percent but there is no indication he would not continue to support it.

It appears both men are equally strong supporters of our current economic system whatever name one attaches to it.

 

Who’s to blame and what do we do about the economy?

One thing of which there has been no shortage during this economic crisis is words with lots of scapegoats and ideas as to what to do.  Here’s my attempt to summarize.

Who is responsible for this mess?

The two favorites are greedy Wall Street bankers and incompetent politicians who aren’t following the policies which would most benefit the speaker.  The bankers may be greedy and the politicians may be incompetent but are they any more so than their predecessors who ruled during the golden age of prosperity?

The next groups to blame are those who won’t approve stimulus spending and those who object to spending cuts. Sometimes both groups are blamed for refusing to compromise.

Others who can be blamed are the ratings agencies who gave false assurances,  those making negative statements who are thus creating a negative feedback loop and those who spreading lies to create profit opportunities for themselves.

What can we do about the economy?

One approach is to cut government spending especially that which benefits poor people or those whose finances are precarious..  Of course we don’t want to cut government spending which finds its way into our own pockets.

The second approach is to stimulate the economy.  There are several ways of doing this including government spending, creating more money (quantitative easing and the National Infrastructure Bank) or encouraging exports and restricting imports to protect jobs. We could also use people with DBS degrees (the D stands for doctor) to convince us there is no real crisis and everything will be okay.

Now here are the answers to these two questions in the view of the author of this blog.

We are all to blame.  The basic problems is that humans have used up a lot of resources, especially those that are easily accessible,  and most of us have had a part in this.  Most of us have had nice homes, designer cars, interesting vacations, frequent restaurant meals and lots of other things.  Most of us have been demanding high returns on our pensions and savings.

So what should we do about the crisis?

If the problem really is with the resource base,  stimulating the economy will only make things worse and socking it to the poor is mean – and many more  people are likely to join them.

Therefore my vote is that everyone should be expected to accept a lower standard of living starting with those with higher than average incomes supported by taxpayers (most of whom get their high incomes from belonging to a union in a monopoly field) and those with high incomes resulting from legislation that restricts competition.  This includes people whose income comes from copyright and patent legislation and those whose income is protected by licensing requirements.

It is my fear that not enough of us care enough about our neighbors for this to actually happen.

So there you have it.  This post has added 489 words to the economic hot air.

Challenging patents

This week’s issue of The Economist has a couple of articles and an editorial on patents.

Patents are currently  a motherhood thing in economics.  To challenge them is to commit treason.  Well, here goes.

One of the features of a competitive market is that it be easy for participants to get in (and out)  To do that the technology must be known to all.  Patents work to protect the interests of those already in the market.  If we really wanted a competitive market economy we would retract all patent legislation.

Progress comes from building upon what others have done.  I have read that during the Industrial Revolution the inventors and designers frequently helped each other. Patent legislation was apparently loosely enforced, if at all.  Some of the major inventors never got rich and many died poor.

Not only does the current obsession with patents restrict competition, the large sums of money involved add to costs and eventually come out of the pockets of customers.  And in any case, do we really need all these gadgets?

Probably we would all be better off if there was no patent legislation.

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