Keys

When I got to RPI in 1968, they’d just opened a spiffy new Student Union building. Its top floor consisted of a lounge/balcony area that overlooked the Student Union Dining Hall, plus outer offices and meeting rooms. Since those were all on the outer perimeter of the building, practically every meeting room and office had windows. Pretty slick design, I think.

At the four corners of the top floor were office areas, the main Union office, plus three “special interest” office clusters. One of them was for student publications. Most of the space got taken by The Polytechnic, the school newspaper, because it was, by far, the largest organization. There was also a darkroom (in one of the few spaces without windows), and the Poly guys used that a lot, but all the publications had access to it. There were three other main publications on campus, The Bachelor (humor magazine), The Gorgon (literary magazine), and the Rensselaer Engineer, which was my equivalent of pledging a fraternity (albeit a very small one).

There were three editorial jobs on The Engineer: Features Editor, Managing Editor, and Editor-in-Chief, usually occupied by a sophomore, junior, and senior, respectively. Taking the Features Editor position traditionally set you up for a three year gig, and that’s what happened to me. Actually, the transition usually took place in the spring semester, so there was overlap with the outgoing editor-in-chief for the one semester, at least theoretically.

So I became Features Editor my freshman year. I got a key to the office, and kept it for three years. I spent a lot of time in that office, and why not? It was on campus, in a cool new building, and better than the offices that most faculty members got.

Having the key to that office was a source of comfort, or so I learned when I gave it up. Suddenly, bereft, I had to find other places to store my stuff, eat lunch (or sometimes breakfast; I kept cereal in on of the desk drawers), hide out when I felt like hiding. The office hadn’t been exactly property, but it wasn’t not property, either. I mean, how else to explain the feeling of loss when it was no longer “mine.”

Keys are interesting for a number of reasons, but here I’m interested in the fact that they define and protect property without specific legal recourse. They prevent theft or unauthorized use even in the absence of police protection. Access is both freedom and power. Property is both freedom and power.

When they were planning the new RPI Library, during the time I was in graduate school, there was a suggestion to put one of those electronic theft detectors at the entrance. The new Head Librarian and I were dead set against it. He held the very admirable position that students were part of the University Community, and that one does not begin with the assumption that members of your community are thieves. Trust them and they will reward that trust was his belief.

My own position was that putting a technical barrier in at an engineering school was just asking for it. There would be students who would never consider stealing books who would begin to do so just to show they could do it. I’d known too many students who’d gimmicked telephones, cracked the main RPI keying system, and otherwise gotten into trouble, just because it had been a challenge. Well, okay, the challenge and the getting free phone calls and getting parts for their electrical engineering projects from the labs at 3 A.M.

The two of us won the argument, at least temporarily. I think I saw some of the electronic detectors at a reunion or so back, but at least someone could maybe check to see if it did any good, because we had some years as a baseline.

So we come to copy protection (CP) and Digital Rights Management, both pernicious and foolish ideas, in my estimation, but apparently very seductive to those who want control of “intellectual property.” But CP and DRM differ from the sort of protection that keys provide in fundamental ways, ways that underscore the difference between intellectual property and chattel property or real estate.

The message that is sent by copy protection is that you don’t own what you bought, someone else owns it. So where does that leave you? Wherever it leaves you, it leaves you with less than you otherwise would have. Copy protection is never transparent; it’s a pain to deal with. It makes whatever is being “protected” less valuable.

Now an automobile that can’t be stolen would be more valuable to the owner, not less. So CP and DRM isn’t protection for the owner; it’s just restriction.

How much is that reduction in value actually worth? Hard to say, really, though I note that there is currently a move to sell non-DRM music for about 30% more than DRMed music. So somebody thinks the vigorish is about 30%.

But the other message that is sent by CP and DRM schemes is that anything goes if you can break the protection. And some people have made it their mission to do just that. The result has been an ongoing arms race, with the latest moves being to make such attempts illegal. In fact, the idea is to make even the transmission of information about how to break DRM illegal.

Me, I’m just fascinated at all the different ways there are to invent the Thought Police.

Playing the Rent I

I’m pretty sure this is going to take more than one essay.

Because of some running commentaries on several economics blogs, especially the much esteemed Economist’s View, I’ve undertaken a review of Ricardo’s Theory of Rent. The problem, as I see it, is that economists these days are very much given to using phrases like “rent seeking behavior,” and other bits of jargon that depend upon a specific economics model, tied to a specific terminology (Ricardo’s) and which use the word “rent” in a different way from the way that it is commonly used.

“Rent” in ordinary parlance is a payment for the temporary use of a material good. You rent a house, a car, a woodchipper if you need one, and so forth. We also have words for payments for the temporary use of non-material goods. Rent on money is called “interest.” Rent on many other non-material goods, like a copyright, or part of the broadcast spectrum is called a “license.” Also, certain kinds of contracted rental arrangements are called “leases,” and those often include non-material goods, as when you “license a patent.”

But in economics jargon, all these things tend to be called “rents,” and a lot more besides. So let’s begin by reviewing Ricardo’s basic theory. In fact, let’s begin a little earlier with Adam Smith.

IN that early and rude state of society which precedes both the accumulation of stock and the appropriation of land, the proportion between the quantities of labor necessary for acquiring different objects seems to be the only circumstance which can afford any rule for exchanging them for one another. If among a nation of hunters, for example, it usually costs twice the labor to kill a beaver which it does to kill a deer, one beaver should naturally exchange for or be worth two deer. It is natural that what is usually the produce of two days' or two hours' labor, should be worth double of what is usually the produce of one day's or one hour's labor. If the one species of labor should be more severe than the other, some allowance will naturally be made for this superior hardship; and the produce of one hour's labor in the one way may frequently exchange for that of two hours' labor in the other...—Adam Smith, The Wealth of Nations

This is sometimes cited as the origin of the “labor theory of value,” but Smith is very clear that this is only true for an “early and rude state.” In a hunter-gatherer society, the “commons” have not been privatized, and the accumulated capital is small, and may be said to be dominated by accumulated wisdom, skills, and lore. Interestingly enough, this makes such societies “knowledge-based,” something that technological societies are now said to in the process of becoming.

But the labor theory of value fails right at the beginning, with Smith’s description. I may well be, for example, that it takes as much labor to catch a mouse as a beaver. Does this mean that a mouse is worth as much as a beaver? No, it means that no one bothers to catch mice.

What Smith does, as with Ricardo later, is conflate a standard of value with the source of value. For hunter gatherers, labor is the primary standard of value; it’s the easiest way to get an indication of the value of things, with the exceptions noted by Smith.

There is, incidentally, a good rant that does the same thing in relating the value of gold to the labor it takes to obtain it, in The Treasure of the Sierra Madre:

A thousand men, say, go searching for gold. After six months, one of 'em is lucky - one out of the thousand. His find represents not only his own labor but that of nine hundred and ninety-nine others to boot. That's uh, six thousand months or five hundred years scrabbling over mountains, going hungry and thirsty. An ounce of gold, mister, is worth what it is because of the human labor that went into the finding and the getting of it. -- B. Traven

One could, of course, have men spend the same amount of time and effort searching for seashells of a particular shape, and at the end of that time, those seashells would purchase just about nothing, perhaps a mouse from a hunter gatherer, but probably not a deer.

The labor theory of value holds that all value derives from labor (though there is an occasional nod to nature and “natural resources). From there, it’s a short step to Marx’s exploitation theory, that any acquisition of wealth by means other than labor is, in some fashion, an exploitation of the working class.

Now I’ll allow for the existence of exploitation; in fact, I’ll stipulate that it occurs. As the man says, “Do I believe in baptism? Hell, I’ve seen it.” Well, I’ll say the same for exploitation. But there are any number of ways that the labor theory of value fails to capture reality, not the least being that it basically winds up saying that a bird in the hand (present value of an asset) is worth the same as two in the bush (future value of an asset). In this case we’re talking about the rent on money (interest), and whether or not it’s really necessary to wait the ten years before the trees bear fruit. Again, I’ve owned trees, and they give when they give and not before.

Ricardo did have an important observation that every economic theory needs to take into account, however. He was interested in the agricultural economy, because he felt that farmland was the most important limited resource. Ricardo noted that, as the demand for food increased, owing to population increases, land of lesser and lesser productivity would be brought into service. The owners of the most productive lands, therefore, could charge greater and greater rents to the farmers who farmed them (with the assistance of farm laborers who were the ultimate source of wealth in Ricardo’s view). And these rents were unearned; they just went to the owners for no other reason than their ownership or the land.

Now let’s skip forward a bit, to the development of the so-called “Perfect Competition Model,” (PCM). The PCM was developed during the last quarter of the 19th and first quarter of the 20th centuries particularly in the hands of Alfred Lord Marshall (1842-1924) at Cambridge University. It was so important in economics that it was also called The Standard Model or alternatively the Marshallian, Neoclassical or sometimes the Commodity Model.

The assumptions in the PCM are unrealistic at the limit, but there are quite a few commodities that approximate those assumptions fairly well. The commodities in question must have many producers, none of which can move the market by its own actions, e.g. reducing its own supply will have a negligible effect on supply. The product from any supplier can be substituted for any other supplier. And there must be no price-fixing or other interference in the pricing mechanism. It also turns out that practically every PCM commodity has inelastic demand; a fractional increase in supply results in a change in price by a greater fractional decline.

For producers, the results from PCM are pretty brutal. It basically says that, under most circumstances, increases in total supply result in less income to the totality of producers. If every producer becomes more productive, everyone makes less money. Alternately, this is a great deal for consumers. The market won’t absorb an infinite amount of the product, so at that limit, it’s price is zero. That limit never gets reached, because there is (almost always) some cost of production, so the producers get squeezed to the marginal cost of the least efficient producer. More efficient producers make a profit.

At some point or another, somebody noticed that the difference between the most efficient and least efficient producer looked like what Ricardo was calling “rents,” so economists began conflating profits with rents.

The problem, however, is that once you broaden the term “rent” to that extent, you get into the strange nomenclature where actual rent is considered to be a subset of “rent.”

I would say that the train leaves the rails right about there.

So I think we need some better terminology. I’ve done a fair amount of reflecting on the nature of the acquisition of material wealth, and I’d like to offer a series of terms for specific sorts of situations, qualitative models, if you will, that may get fleshed out into quantitative things if I ever have the inclination. My primary goal here is to develop a terminology that uses words as close to there ordinary meaning as possible, because while there are times when jargon is useful, it’s only after ordinary language has been exhausted.

Here are some of the terms I’m considering:

Tolls, winnings, jackpots, vigorish, fraud, insurance, house cut, fees, taxes, tax farming, premiums, good will (an old favorite), patents, licenses, and transfer payments.

I told you this was going to take more than one essay.

Fighting City Hall IV – Property and Money

“The Hobo Code says that if you put something down you’re done with it.”
– U. Utah Phillips

Modern property law considers “ownership” to be a bundle of rights, which can then be unbundled and traded (sold), according to the will of the owner in accordance with the law. We should also bear in mind the difference between “real” property (land plus what’s built upon it i.e. real estate), “chattel” or “personal” property, which is moveable (so a building can be chattel if you move it somewhere else), and “statutory property,” which includes some things which are called “intellectual property,” like copyrights and patents, but also things like broadcast licenses and commercial airline travel routes.

Property is both a matter of Custom and Law (Command, in my previous alliterative list). Without Custom, no amount of Law will hold; without Law, the intricacies of a modern society are intractable. But Custom is a popular conception and it often does not correspond to what the Law says.

There was, for example, the big kerfluffle that recently erupted over the use of Eminent Domain by a city in Connecticut to take a number of private homes to turn them over to a developer to build a shopping mall. This was seen as an unjust “taking” by many people, because it used government power to transfer property from one group of private citizens and hand it over to another group, for no “greater purpose” than to enhance the tax base of the city.

It was and is unclear to me how this differs from the huge land grants that were given to railroads in the 19th Century, except possibly that the railroads gave lots of stock to the legislators who voted for such patronage, nor how it differs from more recent “takings” of homes for airports (I personally know some folks who lost their homes to an expanding Nashville International Airport). One may hold that “transportation benefits everybody,” but in fact, these cases benefited the private railroads and airlines. That the public may use them for transportation is quite true; the public can shop at a shopping mall as well.

And trust me, the folks who lost their homes to the airport thought it just as unfair as those Connecticut citizens who lost theirs.

But shopping mall developers have clout with city governments, while homeowners have clout with state legislatures, and besides, it made a good story on cable news, so a lot of states have now passed laws that limit the power of cities to do this sort of thing. I bet they haven’t restricted the states themselves all that much, however, and they can’t do anything about the Federal Government’s powers of Eminent Domain, not that the Feds would ever use them for the benefit of private corporations or anything.

I recently saw an article in the Wall Street Journal about another interesting property situation in Vermont. It turns out that there are a large number of unmarked and little used (often to the point of invisibility) roads in Vermont that go through private property, often property that has recently been sold to owners who had no idea that road easements ran through their property. One particular problem with the situation is that many of the new owners are new to Vermont, so they were not only ignorant of the easements, but also they were accustomed to different Customs, as it were. They would put up “No Trespassing” signs where the local custom was free access across neighboring properties.

When different Customs clash, the Law inevitably becomes involved, and things can get messy. Often one party or another (or both) gets Coerced.

The clash is caused by Other People, of course, and as Sartre famously noted, Hell is Other People. There’s always someone who has a vision of how Heaven should be constructed.

The Randites and the Libertarians put their faith in the perfection of the philosophy of Property, specifically Private Property. I’ve even seen arguments to the effect that there should be no such thing as public property, and the idea that there are some things that shouldn’t be property at all seems to be alien to them.

Criticisms of Libertarian and Randian philosophies are numerous and targets that big are hard to miss. But what I’d like to observe here is the curious way that their proponents (the right wing variants, anyway) choose to deal with the individual/group question. Ayn Rand in particular was adamant that “power over people” was not her aim, yet she chose to elevate the idea of private property to a Stirnerian “fixed idea.” Yet private property as a concept makes no sense except as it controls the actions of people. The fabled man-alone-on-a-desert-island has no need of it; he can do whatever he can to everything he can do it to.

Ayn Rand chose the dollar sign as her symbol, a bit of “political incorrectness” before the term was ever used (it is the same as present day political incorrectness in that flaunting it was entirely safe; indeed, all she was doing was lauding something that is almost universally desired, an action approximately as risky as saluting the flag). Money is the essence of trade and property, the medium of the exchange of property. Money conveys vast power over people, and without people, money is worthless.

The left libertarian Karl Hess once spoke about men (invariably men) who bragged to him about their “individualism,” their separation from the common herd. Who were they? Typically, he noted, they were commodity traders and the like, people whose lives and livelihoods depended entirely on playing a complex game with other people for money. Competitive they might be, but individualists? Spare me, Hess said, with a note of genuine pity in his voice.

But money has this going for it: it reduces the actual personal interactions you must have with your fellows. Often this is a good thing; if I am tired and out of sorts, I may not wish to have to follow the social niceties with every single person with whom I transact business on a given day. There are times when the credit card reader at the gas pump, or the automatic vending machine are as much of society as I wish to deal with for a while.

Money, of course, is attractive just for the material possessions it can buy, and the power that it gives you over other people’s actions. You can pay people to do things they’d never do for you if you had to convince them to do it for free, and they’ll do a better job of it than if you were using force or other means of coercion.

But money is also a means of keeping score, and it’s a way for people with poor social skills to achieve a position in society that they would otherwise never have. It’s even a way for some to tell themselves that they are individualists, when everything they do is predicated on accumulating something that has no value except in relation to other people.

”You know what I did? I went down to this place where they had a lot of food and I got a lot of it and put it into a basket. There were people at the door and I gave them some little engraved slips of paper so they’d let me take the food with me. You know what? They fell for it.”
– from the “Dear Friends” radio show by Firesign Theater