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Where the Rs and Ds Agree

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Tuesday, 28 August 2012 10:47

Annie Lowry has a nice blogpost in the Economix section of the NYT listing some of the areas where Republicans and Democrats seem to largely agree (meaning the leadership, not the base). I'd agree with her list and add a few more items.

Both parties seem to agree on an uncompetitive dollar, having the Fed and Treasury maintain the dollar at a level that prices U.S. goods out of many markets. The result is a large trade deficit (currently around 4 percent of GDP or $600 billion a year) and the loss of around 5 million jobs in manufacturing. This is a major source of downward pressure on the wages of the bulk of the workforce.

Both parties seem to agree on extending patent and copyright protections both in the U.S. and around the world. These are incredibly costly forms of protectionism and have the effect of redistributing income upward since very few people in the bottom 90 percent draw their income from patent rents.

And both parties seem intent on preserving too big to fail banks which get a subsidy of tens of billions of dollars a year from their implicit government insurance.

I could list others, but these items amount to substantial transfers from the rest of us to those on top. It is worth noting the agreement on these issues by both parties' leaders.

Comments (11)Add Comment
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written by Last Mover, August 28, 2012 11:45
In other words both parties agree that free market competition is something to be avoided by the upper class and rubbed into the face of the middle and lower class with the gusto of a pure monopolist who has enough market power to practice third degree perfect price discrimination.
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written by S Bayer, August 28, 2012 1:06
Macroeconomically, the more expansive the patent protection, the greater the share of GDP that will be contributed by profits, and the smaller by wages. This may explain the phenomenon that perplexed Alan Greenspan (in The Age of Turbulence): that per capita GDP, in the period from 1985 to 2005 (as well as in the 1920's) rose significantly without a rise in the average wage. Moreover, the increasing profits will be re-invested, but without wage growth, there is little demand for new plant and equipment, so the re-investment will seek asset-appreciation, resulting inevitably in asset bubbles. Until the balance between wages and profits are restored, as Marriner Eccles accomplished in the 1930's, we can expect serial asset bubbles and little chance of restoring real economic growth.

Note we have an additional problem unknown in the 1920's: software copyrights (thanks to Apple, which convinced the Courts and Congress that software, since it was created at a keyboard, should be treated as literary works). With a patent, labor will need to be employed to manufacture the patented device. Labor costs constrain the profit margins. But software can be replicated at near-zero cost. Microsoft Office is reported to show a profit margin of over 60%. And while the term of a patent is 17 year, that of a software copyright is 120 years.
much much more agreement...
written by pete, August 28, 2012 2:08
Maybe she references the following additional agreements, I don't have time to read: expansionist neo-conservative foreign policy; the enduring fantasy that budget deficits lead to growth; keeping coffee and alcohol legal but not marajuana; building more roads to subsidize the auto industry (Rachel Maddow's favorite expenditure besides damming up the wilderness); assassination of U.S. citizens...the parties are 99% identical.

Regarding patents, I never hear anybody on either side discuss this. Certainly it is part of the trade agreements they sign. But I never thought of the prevention of theft of intellectual capital as something controversial. Keep your hands of my brain.

And of course, the institutionalization of too big to fail is what led to the tea party and occupy movements.

There is hope, in solid blue and red states voters can choose to vote for bringing home the troops, ending too big to fail, ending the horrendous incarceration of recreational drug users, with Gary Johnson.
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written by urban legend, August 28, 2012 2:12
You are making very interesting points about how the patent and copyright laws are being applied -- extending the supposedly temporary monopoly to allow massive profit-taking far beyond what is needed to encourage innovation. That's a more constructive way of looking at it, as opposed to railing against patent and copyright in general as "protectionism" that produces only profits -- somehow ignoring the fact that companies with tons of patents also employ hundreds of thousands of people making the products that command a good price -- but evidently an acceptable price to the buying public or the patent holder wouldn't be earning profits -- because of the patent.

Very few people regardless of income level receive rents from patents. What matters most with respect to patents -- almost 100% controlled by corporations and not individuals -- for whether personal income is re-distributed upward or downward, besides the extent to which those who earn wages are permitted to organize to match the legally-sanctioned organized power of the corporation, is the extent to which production of patented products increases jobs and pushes the society towards full employment.

It's "protectionsim" that has been practiced for centuries in the industrializing world -- most aggressively the faster industrialization has progressed -- that has long been considered consistent with the concept of a free market. It is also practiced by treaties in virtually every country in the world. It seems beyond utopian to imagine that the intellectual property system can be eliminated entirely within the present millenium. One should accept things that cannot be changed becaue, in theory, they serve an important public purpose with virtually no government intercession except by a single court of law. Better to focus on other ways to improve the conditions of life where change is possible. Those other ways may indeed mean eliminating abuses in those laws if sufficient political support can be achieved, but imagining we can get rid of the patent and copyright laws entirely seems like a huge waste of time.
urban....
written by pete, August 28, 2012 2:57
Seems to ignore that shareholders own corporations....so when Joe Genius invents a new toaster and sells the patent to GE, Joe gets paid, and now GE has a new toaster. Similarly, Apple shareholders (I imagine there are millions) benefit from the patents bought or created by Apple. Apple shareholders have done quite well...

Indeed, most assets of high tech companies are their intellectual property. Google's search engine is worth a few bucks. Intangeable capital is the line item in book terms...market to book value is a somewhat different measure.

Thus, with a new, important, patent, a shareholder should get a reward with a bump equal to the present value of the monopoly rent.
The history of patent law
written by Daivd, August 28, 2012 4:26
...
written by urban legend, August 28, 2012 2:12

...

It's "protectionsim" that has been practiced for centuries in the industrializing world -- most aggressively the faster industrialization has progressed -- that has long been considered consistent with the concept of a free market. It is also practiced by treaties in virtually every country in the world.


200 years ago, there were basically 2 countries with patent laws: the English and the US. Before 1784, it was only the English. There are one-offs in previous times, mainly monarchs granting special priviledges, but for the most part, that was the beginning. Even 100 years ago, for example, aspirin was not patentable in Germany. If it has long been considered a consistent part of a free market, then we have a fantastic propaganda machine to thank for that. Again, Thomas Jefferson had some experience with being an examiner and even after his years of experience as that and and as President, he observed in 1713 http://press-pubs.uchicago.edu..._8s12.html
... In some other countries it is sometimes done, in a great case, and by a special and personal act, but, generally speaking, other nations have thought that these monopolies produce more embarrassment than advantage to society; and it may be observed that the nations which refuse monopolies of invention, are as fruitful as England in new and useful devices. ...


The question is: do patents provide advantages to society that could not be derived in some other way? Perhaps they do, but they undeniably create economic distortions.
and to pete ...
written by David, August 28, 2012 4:30
Thomas Jefferson (see the link above) claims this (and I agree):
... Stable ownership is the gift of social law, and is given late in the progress of society. It would be curious then, if an idea, the fugitive fermentation of an individual brain, could, of natural right, be claimed in exclusive and stable property. If nature has made any one thing less susceptible than all others of exclusive property, it is the action of the thinking power called an idea, which an individual may exclusively possess as long as he keeps it to himself; but the moment it is divulged, it forces itself into the possession of every one, and the receiver cannot dispossess himself of it. Its peculiar character, too, is that no one possesses the less, because every other possesses the whole of it. He who receives an idea from me, receives instruction himself without lessening mine; as he who lights his taper at mine, receives light without darkening me. That ideas should freely spread from one to another over the globe, for the moral and mutual instruction of man, and improvement of his condition, seems to have been peculiarly and benevolently designed by nature, when she made them, like fire, expansible over all space, without lessening their density in any point, and like the air in which we breathe, move, and have our physical being, incapable of confinement or exclusive appropriation. Inventions then cannot, in nature, be a subject of property.
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written by liberal, August 29, 2012 4:45
urban legend blithered,
It seems beyond utopian to imagine that the intellectual property system can be eliminated entirely within the present millenium. One should accept things that cannot be changed becaue, in theory, they serve an important public purpose with virtually no government intercession except by a single court of law.


Jesus, what a load of crap. Someone a couple hundred years ago could have said exactly the same things about slavery.
...
written by liberal, August 29, 2012 4:51
pete wrote,
But I never thought of the prevention of theft of intellectual capital as something controversial. Keep your hands of my brain.


Not sure what you're referring to here, but in the case of patents the patent-holder is the one whose hands are on other people's brains.
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written by liberal, August 29, 2012 5:03
urban legend blithered,
...but evidently an acceptable price to the buying public or the patent holder wouldn't be earning profits...


That's absurd. You could use the same argument to defend any workable scheme to collect monopoly rents.

Speaking of which, you go on and on about "profits" in that paragraph, when in fact the correct word is "rents".
economics of intellectual property.
written by pete, August 29, 2012 1:33
An inventor seeks a patent on their idea which comes from their brain. The disclosure of the idea is the cost of obtaining the patent. In other words, the inventor releases the idea to the public with the assurance that they will have exclusive rights to license its use.

In a world without patents, ideas are kept secret. Ideas must be reverse-engineered, a costly process. Still could be theft of intellectual property, as today's Motorola case.

Interesting that the two industrial powerhouses used patents. Seems to be a plus for GDP.

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Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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