If Banks Were Railroads…

Monopoly (game)

In these hard economic times, it’s always great when someone can produce some humour from our suffering. Over at the Washington Post, Tim Harford (whose work is always a favourite at Lively Thought) has produced a piece that explains the current crisis using the game of Monopoly as a metaphor.

As Harford explains, Monopoly is a perfect analogy because the whole game is a giant real-estate boom with vague rules and easy money, thanks to an overly-generous central bank. Properties can always be mortgaged instantly, and when the bank runs out of money, they just print up more by scribbling numbers on a piece of paper.

Plenty of nice little Easter eggs as you work your way around the interactive board that the Post has put together.

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I, for one, Welcome our Big Government Overlords

Every election cycle, men and women who have dedicated their lives to government come before the electors and decry at length the failures of government. They promise to reduce its size and its reach. They realize, they say, that government does not have all the answers to their problems, so they promise “less government” and “lower taxes.” These are no longer solely shibboleths of the right; they are the most mainstream of ideas.

The appeal of Ron Paul, particularly among the young, technocratic elite, demonstrates just how attractive these ideas are, even in their most extreme form. Paul would dismantle the EPA, the FDA and the Federal Reserve, just for a start. For, in the minds of Libertarian extremists, there is nothing that government provides that could not be better handled by the all-knowing, all-powerful free market. This is an article of faith with these people. They are the Christian Scientists of economics. “Forget about trying to solve your problems,” they say, “just put your life into the hands of the free market and everything will be just fine. Its will be done.”

Today, in the Ideas section of the Boston Globe, Jeff Madrick mounts a vigorous defence of big government and provides an indictment of the accepted wisdom that low taxes lead to economic growth. Madrick points to the work of mainstream economist Peter Lindert, quoting from his 2004 book, Growing Public: ”It is well-known that higher taxes and transfers reduce productivity. Well-known – but unsupported by statistics and history.”

According to Madrick:

Lindert’s work surveyed a century of data across numerous countries and found that high taxes and social spending did not slow the growth of productivity or GDP. Statistically speaking, Lindert found no relationship between the level of social spending and economic growth. High tax nations like Norway grow rapidly and produce high standards of living. Even the income per hour of work in nations like France and Germany is equal to or even exceeds America’s.

We’ve become so cynical about the government, so embittered by our interactions with less-than-competent public officials, so disenchanted by sex scandals and broken promises, that we forget that public services, despite all their failings, power the economy, regulate its abuses, and increase the standard of living for all us.

From building the railroads and the highway system, to developing our universal educational infrastructure, right up to the government research and leadership that gave us the Internet (thanks, Al Gore – no, really!), government programs and social spending are often the engine that drives progress.

Madrick, whose latest book, The Case for Big Government, will be released in November, sums up like this:

There is no rich nation in the world today, including America, that has grown wealthy without significant government involvement. And there will be no rich nation in the future that can stay wealthy without robust government, either.

It’s obvious that government can’t solve all of our problems, but neither can the market. It is only a healthy balance of both that is capable of making the kind of future that we want. Now all we need is a government that we can believe in for a change.

Free-conomics & copyright law

Over at The Long Tail, Chris Anderson has a great post outlining the various models a business can employ to make money even when they find that their main product is being distributed for free.

The list comes from a 2004 paper by Hal Varian, Google’s chief economist. The paper starts with a great overview of the history of copyright, which is well worth the read.

One of the arguments advanced by the paper is that in the 18th and 19th centuries, while the US was still a “developing nation”, the American courts refused to recognize international copyrights. When, and only when, the US economy advanced to the point where it was in their best interests to see their copyrights respected overseas did they start to respect the copyrights of others.

The U.S. Copyright Act of 1790 was modeled on the Statute of Queen Anne, and offered a 14-year monopoly to American authors, along with a 14-year renewal. Note carefully the emphasis on “American.” Foreign authors’ works were not protected by the American law. In contrast, many other advanced countries such as Denmark, Prussia, England, France, and Belgium had laws respecting the rights of foreign authors. By 1850, only the US, Russia and the Ottoman Empire refused to recognize international copyright.
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The US was a developing country in the nineteenth century, and it was hardly surprising that it found it attractive to free ride on the intellectual products of other, more developed countries, such as Britain.

Considered in this light, copyright and patent infringement in China and the developing nations of the world today is a lot harder to condemn. 

Some Links:

Kevin Kelly gives a great rundown of ways to compete with free business models.

Here’s Anderson’s seminal piece in Wired, on why “free” is the way of the future.

And here’s a piece I wrote (for the now sadly defunct TQ Magazine) on why content providers stand as much to gain from piracy as they stand to lose.