Tuesday, August 29, 2006

Property Rights initiatives

In Washington State this election season there is a property-rights ballot initiative, I-933. Like a similar failed initiative from last decade, it seeks compensation for property owners when regulations impact them in a negative way.

You can read the pro-933 and anti-933 arguments yourself, if you’d like. As usual for any politically charged debate, there is a lot of hyperbole, half-truths, and talking past each other from this; hence my take below.

The motivation for this initiative certainly makes sense:

  • Governments can be heavy handed with regulations, often neglecting the unintended consequences of their impact on the community.
  • Many governments are certainly guilty of rushing to regulation where other methods may work better.
  • If something is in the interests of the broad public but comes at the expense of a few, fairness dictates that the public probably should compensate the few.
  • Broad anger over last year’s US Supreme Court ruling in New London CT is a frightening reminder of the power of government to take your property for questionable uses.
These are legitimate problems. However, I think that this is a case where the medicine is worse than the disease, and the law of unintended consequences will strike this as much as unintended consequences strike when bad regulations are passed.

There are two reasons why I think this would be a bad law if passed:
  • It is based on the premise that regulations that impact property owners constitute a “taking” in the eminent domain sense of the word. I think this is a bogus argument and creates a bad precedent that is ripe for abuse and unintended consequences.
  • It automates the legislative process, which is something that strikes me as an inherently bad idea.
The basic premise of I-933 and similar property-rights laws is that regulations that impede use or value of property is a form of takings. The 5th Amendment to the US consitution says this about compensation "...nor shall private property be taken for public use, without just compensation." The Washington state constitution is somewhat more verbose, and adds the condition “or damaged for public or private use,” but essentially says the same thing.

Both of these use the word "taken," and the Washington State text also uses "damaged." Certainly a strict/literal reading of "taken" means it is no longer in the possession of the same owner as before, while a similar point of view of "damaged" implies that the property in question is no longer in quite the same shape as before. I.e., if they need my land to build a road and I can no longer use it as my own private property, that’s pretty clearly “taken.” And if they dig a retaining pond on my property, it’s “damaged” compared to its prior state. However, I think that a considerably more expansive interpretation of these words is required in order to apply them to restrictions on potential uses of the property. After all, passage of a restriction does nothing to alter my title to the land (it’s still mine to sell) so it hasn’t been taken from me, and it does nothing to the land itself (it doesn’t cause trees to fall) so it hasn’t been damaged.

No, the sorts of regulations targeted by I-933 do not actually take or damage a property itself. Instead, what they “take” or “damage” is potential economic opportunity. Even the text of the initiative admits as much, using phrases like “destroying reasonable expectations of being able to make reasonable beneficial use of property.” Is the expectation of economic opportunity the same thing as private property? I don’t think it is. Private property can be sold; economic opportunity cannot. Private property has a clear notion of ownership, which economic opportunity does not. And, most importantly, every economic opportunity by definition carries with it risks and require execution to become realized, whereas private property is already “owned.”

Consider for example a decision to buy shares in a drug company with a promising new cancer drug. I certainly have a reasonable expectation of future profit from this company. And the shares are certainly my own private property. Now suppose the FDA decides to deny certification to the new drug, causing the share price to plummet. Not what I or the company reasonably expected, but it’s certainly the FDA’s mandate to make those decisions as independently as possible. By the arguments of I-933 (and similar initiatives), I would have a legitimate claim that the FDA “damaged” my property (my shares’ value).

One might argue that the FDA example is different than 933 because 933 distinguishes regulations that affect everyone from ones that affect a select few, but I think that argument fails because I could easily argue that only shareholders in this particular drug company were affected, not everyone who owned stock.

Recognizing that I-933 confuses private property with economic opportunity, there are several problems with that follow any attempt to compensate for “damage” or “takings” of economic opportunity:

  • There are potentially an infinite number of economic opportunities that an owner could contemplate, even if only one of them could actually be pursued. Imagine a property owner who buys a lot of land thinking they could farm it, build a housing development on it, or strip mine it. Obviously, once they go to do one of these, the other two become excluded. Now suppose the land is zoned for farming or housing only. The property owner could claim a loss on the strip mining opportunity. Now suppose it is zoned for farming – the owner could claim a loss for the housing opportunity (which still existed because the lot had not been strip mined). Now suppose in a final insult it is zoned for retail. Now
    the property owner can make a third claim for compensation. All without ever having executed on any of these opportunities. Sightline.org has cited a study that shows that restrictions may have actually helped property values. (I’m personally a bit skeptical of this study because it doesn’t seem to me to be enough to prove cause/effect. However, it certainly provides good strong evidence that the regulations have not actually hurt.)
  • We have a pretty long history of figuring out how much we should compensate someone for actually taking their property – we have actual sales to compare to, assessments, tax records, etc. But evaluating an economic opportunity is notoriously difficult. After all, more than 90% of all startups fail – yet each of them saw an economic opportunity worth going after. And in the other direction, sometimes the opportunity lost is not as great as one might think. In the example of the property owner above, what if after being zoned for retail the owner sells to a retail development company for a tidy profit? It would be hard then to say that the regulations actually hurt him, yet he could have been compensated multiple times.
  • This also potentially means that any attempt to raise property taxes (or even to assess property at a higher value) could trigger a claim for compensation, since a higher tax rate can diminish the value of the property.
The second broad problem I have with regulations like I-933 is that it essentially automates the legislative process, in several key ways. It’s been said that the legislative process is like watching sausage being made, but I also believe Churchill was right when he said that it’s the worst possible form of government with the exception of all the others. In particular, leadership and legislation requires tradeoffs, creativity, and conscious sentient beings lobbying for their interests. One-size-fits-all approaches almost never work well in practice.

The first “automation” problem is that I-933 does not distinguish between good and bad regulations, nor does it allow the legislature to make such a determination. While the initiative does distinguish regulations that effect everyone (not subject to compensation) from regulations that effect only a few, the distinction is not well defined – actually, the only definition is a set of examples which are explicitly exempted or included from requiring compensation.

I-933 is also a forced spending bill: for government to do its job (which in my opinion includes making hard or unpopular decisions), this requires money to be spent to “buy off” the people most directly impacted. (Since this also raises the cost of any regulation, this reinforces my suspicions that an ulterior motive for I-933 is fewer regulations overall).

Ultimately, it appears to me that this initiative in particular (and similar ones in general) are not about “property fairness” but rather about relief from regulations. After all, by putting on a strait jacket that automates spending in order to enact regulations, and makes the cost high
or else guts the regulation by requiring that it be waived, it becomes very hard for governments to enact regulations that they decide (rightly or wrongly) are needed. Nobody likes regulations and restrictions, but regulations rarely appear where voluntary methods (such as those explicitly contemplated by I-933) are working. After all, people make economic tradeoffs based on what’s best for them personally, not what’s best for the community. Nothing wrong with that, but it’s why we have government and why we have regulations.

I think that it is entirely reasonable to compensate property owners for burdens that the public asks them to bear. Governments do this all the time with tax breaks and other methods. I just do not believe that this should be automatic; a decision whether to do this (and if so, for how much) should be one of the many factors that go into the legislative sausage. Making such compensation mandatory (or else requiring a waiver from the regulation) strikes me as a form of extortion, and hence as bad law.

Wednesday, August 23, 2006

Why does the music industry hate their customers?

So now the music industry is going after sites that share guitar tabs. The issue is that the industry feels that their copyrights are being violated by these sites. Perhaps - while I think this would fall under "fair use," I'm also no lawyer so I'm not really any sort of authority to judge this. But even if they are technically within their rights to shut down these sites (or at least remove the tabs), it is utter insanity and stupidity of them to do so.

The main problem I have with this is that it seems to serve no useful purpose. If this were making a serious dent in a real business, I'd feel otherwise. But I know from personal experience as a guitar player that there is precious little tab that is formally published by the industry; outside the most mainstream of music and the biggest hits, 99% of bands/albums/songs are simply unavailable to purchase from the copyright holder. So it's hard for me to accept any claim of economic harm that would arise from sharing what you figure out if there's no "legal" alternative. And even when songs are published, a pathetically high percentage of these books are "simplified" and are thus not at all useful to figure out how to play the song.

If the music industry published "as played" tabs for each song that they publish on a CD, that would be wonderful and I'd be arguing that the tab sites are a problem. And in fact, when I want to learn how to play something that is beyond my abilities to figure out, the first thing that I do is buy the tab if it is available. But they don't. Why? Because it's not economically viable to publish very many tabs. Which I think proves my point that they're not suffering any harm from these tab sharing sites: after all, if the market doesn't justify publishing more than a few tab books, then isn't the "problem" of guitarists sharing what they've figured out really a purely academic one?

But I find this disturbing on other levels as well.

First off, where is the line? If I figure out how to play a song (which I often do), am I violating copyright? If I show a friend in person, have I broken the law? What if I write it down and mail it to them? And if those are OK, why can't I post it on a bulletin board - is it really only a question of scale, that 1:1 communication is fine but public communication is where the line is crossed? Good commentary on this at http://www.cdfreaks.com/news/13841. And what if I just do, say, the guitar solo in the middle of the song. Wouldn't that be covered by fair use? What about just the overall chord progression, minus all the details/solos/etc.?

I really wonder why the music industry hates their customers. I think they really do - there are numerous examples of where the industry works to prevent its customers from doing perfectly legitimate things (from a copyright law perspective) in order to prevent a few illegal things. Want examples?
  • Exhibit A, in my opinion, is the whole Sony Rootkit incident; this is a poster child for hating your customers.
  • Another example is the industry's pet legislation, the Digital Millennium Copyright Act, which sure seems to me to censor free speech and makes technically illegal the ripping of your DVD's to your computer. I have absolutely no intention of sharing DVD-based movies, but the fact that I can't rip them to my hard drive so that I don't have to muck with the plastic disc is irritating and insane - how on earth does doing that violate copyright law? In buying the DVD, I've bought the right to watch the movie; why does the medium matter so much? They're treating me like a baby, assuming I'm going to share it, and inconvenience me as a result.
  • Overall, look at how grudgingly the music industry came over to legal internet distribution - and they still have onerous copy protection that is not interoperable between different devices. If you buy from iTunes, you've lost your music if you ever want to use something from someone other than Apple. How is that consumer friendly? If you buy a song, seems to me that you've bought the right to listen to that song wherever you want. (Heck, if you buy the CD or a record or a cassette, that's certainly the case. You just have to lug the physical medium around. Yuck.) The music industry's behavior clearly says to me that given the choice between making $100 in revenue and losing 5% to piracy or making $150 in revenue and losing 20% to piracy, they would choose the first option. (Do the math if you want to see why this is a bad idea). And they wonder why their sales are falling.
Anyhow, back to guitar players.

Guitar players learn how to play from other guitar players; the Internet has made it so much easier for musicians to learn to be better musicians, which should lead to better music being made (which we sorely need). What purpose is possibly served by quashing that?

Lots of bands cover songs, even in public performances. Technically, this is also illegal, but it's something that's rarely enforced except for the biggest acts. I get, though, why the industry would want to enforce this: if a band is making money on someone else's song, well, that's pretty much exactly what copyright law was designed to address; it doesn't get more clear cut than that, in my opinion.

Learning how to play a song is not the same as performing it publicly or sharing an MP3 that you ripped, any more than reading the script to Star Wars is the same experience as seeing the movie. And in this case, you're not even publishing the script, you're publishing your synopsis of the plot, albeit with as much detail as you can.

I think that this is a bad battle for the music industry to pick.

Sunday, August 20, 2006

TSA - do we expect perfection?

I think the latest "no-liquids" restrictions imposed by the TSA are ridiculous. Two things have been pointed out a thousand times before, but I think they sum things up well, albeit not completely:
a) The TSA seems to focus on the terrorist's *last* strategy, and
b) The foiled plot in Britain just proves further that intelligence and surveillance are vastly more effective than security at the checkpoint. (After all, how hard would it be to smuggle some vials of liquid or ziplock bags through security?).

Frankly, I think that the ban on liquids (assuming that this is a new permanent reality) is crazy and will do nothing to enhance our actual security in the skies - it (and other security measures) merely adds costs, inconvenience, and delay to travelers, making commercial air travel progressively more miserable. It may cause the bad guys to look for other mechanisms (though I doubt it), and it may just move them to other tactics.

People have said this in satire, but unfortunately it's true: the only way to achieve true security in the skies is to stop letting people fly. The logical conclusion here for Al Queda is to train folks in the gym, making them incredibly muscular. Put 5 of them on an airplane to overwhelm and subdue the crew, and then kick out a window. Pure muscle. I bet it could be done, and the only way to prevent that would be to ban anybody that is strong. It's ridiculous.

We seem to expect the TSA to achieve 100% in providing security. I can't think of any system that has ever achieved that, much less a government one. But I'll make a controversial assertion if only to stir some thinking: I think it is better for us to have a freer society, easier air travel, and what I'll call "98% security" than have an increasingly paranoid, security-obsessed, invasive, and inconvenient society that has 98% security but the illusion of 100% security. OK, ok, so I phrased that in a loaded way, but let me distill it to its more controversial corollary: I think it's not the end of the world for us to suffer the occasional terrorist attack. (Note to the NSA: I am *not* advocating terrorism!)

After all, every big city in America suffers from murders, yet we as a society far more rational about that: we don't avoid a living in a city just because it has had murders, we actually celebrate how safe cities like NYC have become when their murder rates have decreased. We monitor the murder rate and work to drive it down, but nobody expects that somehow we can achieve a 0% murder rate, and nobody would be willing to make the tradeoffs that would be required to achieve that (no weapons, lots of surveillance, lots of loss of privacy, etc.) I think that's the right tradeoff. As a result, the odds today of being murdered in the US still greatly outweigh the odds of being killed by a terrorist. And yet there seems to be no limit to what we'll spend or what we'll do to eliminate the risk of a terrorist attack.

Somewhere in a cave somewhere, Bin Laden is laughing his ass off. He realizes that he did it all wrong: he doesn't have to have his followers kill themselves, all they have to do is feint this way or that and get caught and the whole system gets thrown into chaos and another billion dollars gets spent chasing the unachievable "perfect security," and the whole Western population lives in more and more of a police state.

Friday, August 18, 2006

Welcome to Clear Cool Head

I don't consider myself a political person. I only recently gave my first donation ever to a political campaign. My conservative friends think I'm liberal, my liberal friends think I'm conservative. I think of myself as moderate, and try to avoid ideology where possible. That doesn't mean I don't have principles or strong beliefs about right and wrong, just that I think a lot of political thought has predictable knee-jerk reactions to things, and they start from the answer and put on the blinders to the fact that that answer may not be the best one.

I have no political background, I have no particular qualifications to be blogging in the political space whatsoever. And I'm probably full of shit most of the time - I recognize that, and if you think so, please tell me so. But there are things I think need to be said, usually where I think ideology is getting in the way of rational approaches to the problems we all face. That's why I called this "clearcoolhead" - in the hope that cooler heads /clearer thinking can produce a useful discussion/result. Hopefully this will be at least a bit interesting.