RedStateEclectic

The Stardust Transformation

Sometimes, when we ponder government involvement, it's interesting to wonder how the state could have affected things in areas where conception and innovation remain relatively unscathed by their intervening hands. Take songwriting, for example. What if every song ever composed needed the passage of two houses of government along with the approval of one person in the executive before you were allowed to listen to it? Then imagine that, once codified, it would take the efforts of a majority of the country to change any song's arrangement in any way. For our example we will use the beautiful and popular song, Stardust, known by many due to its inclusion in the movie Sleepless in Seattle.

When first conceived by Hoagy Carmichael in 1927, Stardust began as an instrumental only; a swingy - almost ragtime - piano piece. STOP. Pass it into law. Would anyone want to hear it? Take a listen: Original Stardust. Not bad but hardly something that we wouldn't quickly label as dated to that particular period.

Then, in 1929, Mitchell Parish added the wonderful lyrics while Victor Young arranged the song to a slower tempo. STOP! Pass it into law. Now would anyone want to hear it? It sounds better but, by 1931, even Bing Crosby could only barely make it sound good. Listen again: Stardust; Bing Crosby - 1931. Personally, I think I liked the original better.

Yet another nine years pass and the big bands are slowing things down to a  linger for the pleasure of the listener. The great Artie Shaw takes Stardust and performs an instrumental that sounds very appealing. STOP!! Pass it into law. Would you wish to have this as part of your record ensemble? Tilt your ear and give a listen: Stardust; Artie Shaw - 1940. Not bad at all. Let's continue, shall we?

Finally in 1957, after the number of variations on just this one song were so numerous that every lawmaker in the land would have spent his entire career just keeping up with them (if only it were the case), the incredible arranging talent of Gordon Jenkins combined with the silky-smooth voice of Nat King Cole to bring us an arrangement that touches the very soul:

Wow. Where's the box of Kleenex? Of course, at any point along the way in our little experiment, the government could have stopped the process of all of those talented individuals and their attempts at improving Hoagy's music. And maybe some people would have liked whatever arrangement the politicians might have chosen. It would have been ... "fine".

From a subjective standpoint, I must confess that I like Nat's version so far. That, dear reader, is the whole point in a nutshell.

Liberty, "Vertical," and "Horizontal" Knowledge

Some of the issues relating to the necessity of liberty are tricky, and, generally, far removed from most peoples' purview. For the most part, academia is equally ignorant, though it is the duty and the privilege of academics to pay more attention to issues that we must consider arcane so long as we have not found a way to bring them into the range of "general education."

People are wedded to irresponsible forms of government because of an unfortunate bias in the way they look at the role that knowledge plays in society.

The concept  of government, as the leader and thinker, as the Management Board of society, is so popular because politicians and the public share the same one-sided view of knowledge.

In many ways, order is created by the human mind, making use of and producing explicit knowledge. 1 + 1 = 2. If I do x, then y follows.

Therefore, it is presumed, societal order can only be created by using this capacity of the human mind.

What is overlooked is the fact that this capacity of the mind is not what is creating societal order, but its product. The values and manifold other presuppositions on which the human mind works are predicated by the way in which society develops.

And society, to a large extent, develops behind the back of our mind, unnoticed by human reason.

Necessarily so, for something as complex as the human mind and other institutions of human civilisation could only achieve the degree of powerfulness and complexity that characterises them (think of the coordination of billions of views, decisions and signals through prices) because something grander than the abilities of thinking human beings was at work in finding, proposing, testing, sieving, rejecting or accepting them.

Evolutionary selection on the level of groups - not on the level of the individual (mind), but on the level of groups. The difference is important, because group selection has a far broader scope than individual choice, as far as matters are concerned that are required to make a society - initially small hordes, later larger communities, and finally societies comprising millions of people - better adapted to their ever changing, ever challenging environment than another.

In fact, the central problem of modern societies consists in the unfortunate fact that people think they can decide what a good society is - on the level of the individual mind (of a president, politicians or other (opinion) leaders or even voters). Contrary to this assumption, it is complex evolutionary processes such as those going on in markets that produce superior selections of practices and products conducive to a sufficiently adaptive society.

The human mind has developed together with human culture, and it has been only one of the manifold tools the selection process filtered in as viable and useful. Without the help of forms of knowledge (storage and utilisation) quite different from, independent of, and formative to human reasoning, man and his reason could not have survived, let alone developed.

Of these additional, extra-human epistemic types, two are essential for understanding liberty: I call them non-explicit horizontal knowledge and non-explicit vertical knowledge.

Vertical I call the knowledge that has accumulated in the historical "depth" of human experience, the experience of thousands of generations, which we cannot access in a way that makes it amenable to deductive reconstruction - it is only available in coded form, namely in the form of habits, conventions, traditions, principles that we have learned to heed and/or take for granted. Their genesis cannot be reconstructed accurately and in authentic detail. At best, we can account for these with theoretical models of their main features. For instance: how foreign trade authentically began to develop and bring about - by trial and error - practices that would eventually prevail owing to their superior success, is something we can think about in general terms but never replay as they truly unfolded. At any rate, we have the benefit of those billions of experiments that produced great skill and experience of trade in men.

If we ignore vertical knowledge (general rules, principles) or throw it carelessly out of the window, we lose experience, we abandon vital means of orientation in the world - epistemic help that is not the result of the achievement of any single mind.

This is why a free society is a principle-driven society - it respects extremely dense nodes of wisdom that cannot be replaced by explicit reasoning. The libertarian understands that there is such a thing as vertical knowledge.

Now, let's turn to horizontal knowledge, which cannot bring to bear its benefits, unless vertical knowledge is understood, or at least respected.

Horizontal knowledge consists, to begin with, of widely dispersed islands, particles of knowledge, largely directly available to individuals, but only to the respective individual, and no other individual but specifically him or her. However, the full fruit of horizontal knowledge blossoms only if the particles of knowledge of which it consists are related to each other by adequate rules, i.e. vertical knowledge. The result is a game of interaction between the particles of individual knowledge - and only the outcome of this game establishes the final product of horizontal knowledge, which is a "knowledge without a subject," no one has it, but all can use and act on it to their great advantage.

The price system is an example of such horizontal knowledge, whose benefits will not be available to us, unless we respect vertical knowledge, i.e. adhere strictly to certain principles, like the principles that make for free price formation.

So, we have two types of "knowledge without a subject," that is, knowledge that cannot be found in or generated by any human mind, though millions of human minds are or have been involved in contributing to this "knowledge without a subject."

If we ignore this knowledge which is constitutive of a free society, if we glorify explicit knowledge and rely on human reasoning alone, that is if we invite and put into power arbitrariness (the hubris of a human mind or a collective of human minds, such as at work in a government or parliament) we condemn society to a regime of inferior knowledge. We make society a lot dumber than it could and ought to be.

Understanding "knowledge without a subject" as explained here, gives us insight into society as a self-generating order. It helps us appreciate why the individual should be allowed to act on his own knowledge rather than on the knowledge of others, that she should be left alone by an overbearing government, and that government should be confined to protecting the principles and rules that facilitate the game of freedom.

Plagiarize, Please

With a hat tip to the Mises blog, here's a video from  an interview with Leo Melamed in 2006, when Milton Friedman died.  There are many tidbits there, but the most fascinating, of course, is the bit about plagiarism, and the recognition that Friedman apparently had well into his 90's that the internet could be a powerful tool for promoting liberty, and that the "rules" regarding intellectual property rights needed to change.

Patently Wrong? A History Lesson on Patents

In my post "The Invisibility of Freedom," I quoted Friedrich Hayek thus:

"Since the value of freedom rests on the opportunities it provides for unforeseen and unpredictable actions, we will rarely know what we lose through a particular restriction of freedom. Any such restriction, any coercion other than the enforcement of general rules, will aim at the achievement of some foreseeable particular result, but what is prevented by it will usually not be known. The direct effects of any interference with the market order will be near and clearly visible in most cases, while the more indirect and remote effects will mostly be unknown and will therefore be disregarded. We shall never be aware of all the costs of achieving particular results by interference."

Now consider, in this light ...

The Patent Controversy

Today one of the most controversial issues in economic policy is that of patent law. Is a patent just an extension of property rights to the realm of ideas? Or is it an unwarranted interference by the government into the rights of individuals who have purchased goods and services to use them as they see fit? Should the Western system of patents be extended worldwide? Or should we get rid of patents entirely? Is the patent system responsible for modern miracle drugs? Or is it to blame for the millions dying of HIV in Africa? Do patents lead to greater innovation and economic growth? Or do they kill the goose that lays the golden egg?

The issue of whether patents are genuine property rights or unwarranted government interference cannot of course easily be answered by a natural experiment. We will leave that discussion to philosophers. The impact of patents on innovation does have an objective answer. In this case history instead of nature has been kind enough to provide us with a wonderful natural experiment. This experiment took place in the county of Cornwall, England, between 1772 and 1852. It was there, in the extreme southwest of England, in the wet depths of the Cornish copper and tin mines, far removed from the supply of coal in Wales, that the steam engine was pioneered.

To examine innovation in steam technology, we need a measure of how good a steam engine is. One important measure is the amount of work delivered by a given amount of fuel. This can be measured by the duty of a steam engine: the number of pounds of water that can be lifted one foot for each 94 pounds of coal consumed.

In 1772 steam engines were of the so-called Newcomen design of which the best had a duty of 10 million foot-pounds (10M). In 1777 Matthew Boulton and James Watt began selling the first steam engines with a separate condenser. These initially had a duty of 18M, rising by 1792 to a peak of 26M. There things rested until 1814 when the use of the high-pressure design of Richard Trevithick led to engines with a duty of 55M. The duty then rose relatively continuously until it reached a peak of 110M in 1852.

To summarize: During the 42 years from 1772 to 1813 duty rose 3.8 percent per year; during the 38 years from 1814 to 1852 duty rose more than twice as fast—8.5 percent per year. The evolution of the duty is charted in the figure. The state of innovation is best represented by the best engine currently being produced, but for completeness the average and minimum duty of constructed engines is reported. The decline in duty growth after 1852 reflects both the general decline of the Cornish mining industry and the more difficult conditions in which steam engines were forced to operate due to the deepening of the mines.

As it happens there is one critical difference between the earlier period and the later period. By patenting the separate condenser Boulton and Watt, from 1769 to 1800, had almost absolute control on the development of the steam engine. They were able to use the power of their patent and the legal system to frustrate the efforts of engineers such as Jonathan Hornblower to further improve the fuel efficiency of the steam engine. By way of contrast, and fortunately, Trevithick did not patent his equally innovative high-pressure design.

Ironically, not only did Watt use the patent system as a legal cudgel with which to smash competition, but his own efforts at developing a superior steam engine were hindered by the very same patent system he used to keep competitors at bay. An important limitation of the original Newcomen engine was its inability to deliver a steady rotary motion. The most convenient solution, involving the combined use of the crank and a flywheel, relied on a method patented by James Pickard, which prevented Watt from using it. Watt also made various attempts at efficiently transforming reciprocating into rotary motion, reaching, apparently, the same solution as Pickard. But the existence of a patent forced him to contrive an alternative less-efficient mechanical device, the sun and planet gear. It was only in 1794, after the expiration of Pickard’s patent, that Boulton and Watt adopted the economically and technically superior crank. The impact of the expiration of Watt’s patents on his empire may come as a surprise as well. Far from being driven out of business, Boulton and Watt for many years were able to charge a premium over the price of other steam engine manufacturers.

Here we see clearly the upside and the downside of the patent system in action. The upside is that it may be the case that the prospect of a 31-year monopoly induced Watt to spend three and a half years of his life—between late 1764, when he first was asked to repair a steam engine, and mid-1768, when he applied for patents on his improved design—working to improve steam technology.

The downsides are two. The first is that the reward to success bears no relation to the cost of invention. In what respect is it necessary, reasonable, or fair to grant a 31-year monopoly and make a man fabulously wealthy because he spent a few years working on a project that benefited his fellow man? Certainly this kind of inducement was not needed for Trevithick, whose contribution to steam technology raised the duty 110 percent as against Watt’s contribution, which raised the duty only 80 percent.

The second downside of the patent system is the devastating effect it has on incremental innovation. From 1786 to 1800 there was no increase in the duty of steam engines at all, as Boulton and Watt successfully sought to prevent competition by suppressing innovation. This should be a cautionary note for people who think that the current wave of patent litigation triggered by a system of software patents created by the courts is likely to have a beneficial impact on software innovation.

Collaborative Innovation

For the 11 years following the end of the Boulton and Watt monopoly, Cornish mining activities underwent a period of slackness, as the mine adventurers were content with the financial relief coming from the cessation of the premiums they had paid to Bolton and Watt. As a consequence they neglected the maintenance and the improvement of their engines. This situation lasted until 1811, when a group of mine captains decided to begin the publication of a monthly journal reporting the relevant technical characteristics, the operating procedures, and the performance of each engine. Their explicit intention was twofold. First, the publication of the reports permitted the rapid individuation and diffusion of best-practice techniques. Second, it introduced a climate of competition among the engineers entrusted with the different pumping engines, with favorable effects on the rate of technical progress. Joel Lean, a highly respected mine captain, was appointed as the first engine reporter. The journal would later be called Lean’s Engine Reporter. During the 31 years after 1811 this collaborative competitive effort at innovation raised duty by more than the great “breakthrough” of Watt ever did.

It is worth remarking another important feature of the process of technical change in Cornish engines during the collaborative period. Most engines were single-cylinder, high-pressure, single-acting engines, with a plunger pump of the type originally erected by Trevithick in 1812. Interestingly enough, however, alternative designs were never completely ruled out. For example, in different periods, engineers such as Arthur Woolf and James Sims continued to experiment with compound engines. Throughout this period, the development of the Cornish engine remained a fluid state and this facilitated a more thorough exploration of alternative designs.

The astute reader will no doubt notice that the collaborative innovation occurring after the expiration of the Watt patents resembles nothing so much as modern open-source software development. Like with open-source software, altruism and socialism played no role—just good old-fashioned capitalist incentives. Engineers were recruited by captains of the mine on a one-off basis to build and design an engine. Engineers were in charge of the design and they supervised the erection of the engine that was commissioned to them. They also provided directions for day-to-day working and maintenance of the engines they were entrusted with. Thus the publication of technical information concerning the design and performance of different steam engines permitted the best engineers to consolidate their reputation and improve their career prospects. Over time, this practice gave rise to a professional ethos favoring sharing and publication of previous experiences.

Much of the free/open-source-software industry operates this way today, with software engineers competing for future business through the quality of their current innovations. Sharing of information is a key part of this competition. If Linus Torvalds, creator of the Linux kernel, is not nearly so rich as Bill Gates, he is nevertheless richer than most of us. (See Michele Boldrin and David K. Levine, “Open-Source Software: Who Needs Intellectual Property?” The Freeman, January 2007.)

Even the modern controversy over the current effort of the Free Software Foundation to limit software patents through the General Public License Version 3 finds reflection in the earlier Cornwall experience. Familiar with the negative impact of the Watt patents on innovation, Cornwall mine engineers were reluctant to patent their inventions. From 1781 to 1852 Cornish residents took out a grand total of 15 patents on steam technology—against 994 patents on steam technology in all of England during that period. Will it surprise you to learn that the area with the fewest patents also was the area that contributed the most to the innovation and development of steam technology?

One may wonder why development in an obscure corner of England should draw our attention. As it happens, the design of fuel-efficient high-pressure steam engines did not only serve to improve the efficiency of pumping water out of mines in one small region. It is the fact that efficient high-pressure engines can be made light and compact and do not require much weight of fuel that made possible such modest advances as . . . the steam train, the steam boat, the steam jenny, and the steam just-about-everything-else. In short—the steam engine that we imagine as the centerpiece of the Industrial Revolution, the key link that took us from riding horses to being frequent fliers—was not the product of the inventive genius of James Watt. When the Boulton and Watt monopoly expired in 1800 steam engines were used only to pump water out of mines. The earth-shattering innovation of widely usable steam engines was the product of the efforts of Joel Lean and dozens of other equally anonymous Cornwall mining captains and engineers. It is equally a tribute to their steady innovation without making use of patents.

The source.

Call of the Entrepreneur

The Fox Business Channel will be featuring the Acton Institute's movie, Call of the Entrepreneur, January 10th (Saturday) from 5-6 PM Eastern. I have not yet seen this and sadly I don't get the channel on my cable. However, I have heard that it is a spectacular film that shows the origins of the creation of wealth and its relationship to God and his endowing mankind with creativity.

A must see or at least record if you have a chance. I'm going to purchase it directly from Acton soon, but tell me what you think of it.

Tom Cruise May Face Legal Action Over Hitler's Globe

From Against Monopoly:

Tom Cruise May Face Legal Action Over Hitler Globe reports that the collector who bought the famous "Hitler's globe" may sue for use of a likeness of the globe in Cruise's recent film Valkyrie, "the thriller about a real-life plot to assassinate Hitler." The article reports that in "2007, Pritikin paid $100,000 for the globe and had its likeness copyrighted to keep it from being used in propaganda by sick neo-Nazi groups." Whew, what a relief!

How is it even possible to copyright something you did not create, but purchased?

FCC to MPAA: No Selectable Output Control

The Federal Communications Commission (FCC) has rejected the Motion Picture Association of America's (MPAA) request for a waiver on the agency's ban on selectable output control (SOC). As reported by Ars in June, the FCC received the request from the MPAA to allow its members to remotely block certain digital televisions or digital video recorders (DVRs) from working.

The Electronic Frontier Foundation puts it succintly:

The basic premise of those who back SOC is that content owners should be able to decide not just who can watch their content, but how they can watch it. You want to watch my new movie on that digital TV you bought a few years ago? No, sorry, I don't like your TV (perhaps because I'm afraid of the analog component inputs it uses). You want to space-shift using your Slingbox (which lacks DRM-enabling controls on its outputs)? Oh, no, I don't think that's a good idea. You were hoping to TiVo that show that's on this afternoon so that you can watch it when you get home from work? Hm, not unless you upgrade to a new TiVo, because I won't allow the signal to make it to TiVos that don't have digital outputs. You want to record that program so that you can make a fair use of an excerpt? Dear dear, we can't have that.

Seems kind of crazy, no? That's what the FCC thought, too, which was why the agency forbade use of SOC when it last addressed this issue, in 2003. The FCC concluded that multichannel video programming distributors (MVPDs - companies like cable television providers) can't "attach or embed data or information with commercial audiovisual content . . . so as to prevent its output through any analog or digital output authorized or permitted under license, law or regulation governing such covered product."

If passed, technology companies would be at the mercy of the MPAA. Each innovation in digital distribution would have to be pre-approved by the likes of the MPAA under its state-granted intellectual monopoly.

The Failure of Locked Media (or When Locked Media Fails Spectacularly)

Yesterday, reports started to trickle in that the Zune 30 GB, a media device sold by Microsoft, was failing everywhere at once. Fans and users have dubbed it the Y2K9 bug.

From Gizmodo:

Apparently, around 2:00 AM today, the Zune models either reset, or were already off. Upon when turning on, the thing loads up and... freezes with a full loading bar (as pictured above). I thought my brother was the only one with it, but then it happened to my Zune. Then I checked out the forums and it seems everyone with a 30GB HDD model has had this happen to them.

Thankfully, a fix has already been posted by Microsoft. That is, simply wait until January 1st, 2009.

But this incident should be a wake-up call, according to Copyfight.

This should be a clarion warning that using proprietary hardware or software (DRM) to restrict peoples' ability to manage their legally owned content is a bad plan. We are all at the mercy of whatever bugs and bad business plans lie behind these locks.

DRM, or Digital Rights Management, are access controls technologies used by publishers, hardware companies, and content creators to restrict the usage of media, files, or data they sell to consumers. DRM goes beyond copy protection (prevention of unauthorized copying). It restricts what devices the files can be accessed with, what applications it can be used, how many copies can be made, how many times something can be used. DRM locks are innocuous enough as many of them are easily broken, if it were not for the fact it is back by the full power of the state apparatus under the draconian Digital Millennium Copyright Act (DCMA) that makes anyone that attempts or succeeds in circumventing these locks a criminal.

BBC Hypocrisy Regarding DRM and Time-Shifting

From BoingBoing:

Mark sez, "A nice bit of copyright hypocrisy for you. It's a story on the BBC website about an upcoming broadcast of an episode of Dad's Army that was thought to have been lost. The original soundtrack had been erased by the BBC, but a radio presenter made his own recording of the episode and kept it for 30 years. The show's producers are thrilled to have found a good quality copy of the recording. The irony is that, as you know, UK law only allows 'home taping' for temporary 'time shifting'. Certainly not for creating a library of recordings lasting 30 years. With their DRM-encumbered iPlayer and other efforts to prevent 'copying', it's even less likely that there will be any duplicate discoveries 30 years from now."

The story in question was about BBC benefiting from a home taper's copy while simultaneously crippling its online broadcasts with Digital Rights Management (DRM) technology.

The Validity of End User License Agreements Redux

I have been reading The Technology Liberation Front (libertarians critiquing developments in the fields of the internet and technology) and came across Tim Lee's repost of the popular webcomic XKCD regarding End-User License Agreements (EULA) with a question, "Legally enforceable?"

Wendy Grossman explained the legal gray area that surrounds every EULA software companies use for their softwares:

If you did read the terms, you might be surprised. Eulas typically specify that the software's publisher is not liable if anything goes wrong. They typically specify the publisher's preferred jurisdiction for legal disputes. And some are even more restrictive: some graphics packages have been known to specify that they cannot be used in the production of pornographic images. Yet these licences are, as Hanlon complained, not really contracts: you generally cannot read them before you buy (rather than use) the software, and you can't negotiate terms.

I have tackled the question before in Copyfascism Watch, where I raised another point that EULAs are not voluntary contracts as they are not agreed upon prior to the purchase of the software. And there is the bizarre claim by manufacturers that consumers are merely purchasing the physical CDs and not the software it contains. I asked, "How legitimate are the claims of manufacturers that consumers are merely buying the CDs and not the permission to install and use the software for which the consumer (rightly, I might add) believed he is paying?"

Jeffrey Tucker of the Mises Blog responded:

[R]estrictive covenants do this all the time with houses for example. You buy the house in a particular neighborhood and it is really yours, but you can't paint your shutters pink and you have to mow your grass and can't leave a sofa on the porch etc. Why can't EULAs amount to a sort of covenant?

In the Mises Blog, Tucker also asked this question, "Are EULAs contrary to property rights?" Tucker seems to be of notion that is similar to a covenant, but therein lies the issue and the difference between physical property covenants and EULAs: covenants are known and agreed upon prior to purchase, EULAs are hidden contracts that is then revealed to you after the purchase.

A commenter named PR raised the same point:

Since the EULA isn't revealed until after the buyer has handed over his money, of course it shouldn't be considered a valid agreement. All the examples of convenants I know of are presented to the buyer before the sale, but a EULA is more like a legal Trojan horse that restricts the use of property one already owns.

Many of the responses seem to miss that point and the important issue regarding this unconscionable agreements: it is secret, it is hidden, and cannot be agreed to prior to purchase. A commenter pointed out that you can always return the software, but most stores I purchase software from only have a return-policy for unopened boxes of software. Of course, one can argue that one can choose not to patronize the store that has taken one's money for a software crippled by an agreement one cannot agree to prior to purchase and afterwards, but since when do libertarians make excuses for theft?