Category: Technology and Regulation

Much of the blame for the current financial crisis has been aimed at Wall Street and the bankers who, the story goes, created toxic debt instruments and then lined their own pockets with the proceeds. In “Verdict on the Crash: Causes and Policy Implications,” a new analysis from economists and scholars — including Acton Institute Research Director Samuel Gregg — the London-based Institute of Economic Affairs comes to the opposite conclusion: It was governments and regulators who erred. Moreover, the IEA report says, the people most often berated for their part in the crisis – the hedge fund managers and those who run tax havens – are among the least guilty. The report also spells out the need for a “radical overhaul” of the financial system to guard against a repeat of the errors that led to the crisis.

The authors of “Verdict on the Crash” assert that “a revolution in financial regulation is needed. The proposals of the G20 governments and the EU are wholly misconceived. Specific and targeted laws and regulations could restore market discipline.”

Read a letter to London’s Daily Telegraph from the economists and scholars who wrote the “Verdict on the Crash” report for IEA. Read highlights and download the full report from the IEA blog. Acton’s Samuel Gregg authored the chapter titled, “Moral Failure: Borrowing, Lending and the Financial Crisis.”

Blog author: kschmiesing
Thursday, March 19, 2009

Back in September I posted an announcement about a new book that contributed in interesting ways to our understanding of patent/intellectual property issues. Now Julio Cole’s full review of the book in the Independent Review is available online. An excerpt:

Should we really be surprised that the patent system’s internal dynamics have finally brought us to the point at which the potential profits of patenting have, for most industries, been entirely gobbled up by lawyers’ fees? Isn’t that outcome what we should expect after having studied the literature on rent seeking? If patents are really nothing more than special privileges granted by the state, then wouldn’t we expect the monopoly rents derived from such grants to become dissipated eventually through steady increases in rent-seeking costs?

I made a mental note of it awhile back when I heard that there was a “Christian” version of the immensely popular Guitar Hero video game franchise in the works. Wired recently reviewed Guitar Praise – Solid Rock here.

Reviewer Eliot Van Buskirk notes that Guitar Praise “inhabits a gentler world where a bad performance gets you mild clapping and gentle suggestions instead of the raucous boos and catcalls that accompany failure in Guitar Hero.”

There are two conditions that would have to be met before I would consider purchase of this game.

First, this song from Sonseed would have to be included:

Zap! (For some reason hearing that song always reminds me of this SNL skit [video here]…and since we’re closing in on Christmas, even better.)

And second, I’d have to receive a standing offer to play Guitar Praise on stage as part of my church’s praise and worship team.

On a more serious note, this is a great example of how “evangelical” culture is so often derivative of popular culture (in a bad way) and dated (also in a bad way). Somehow I don’t think “Christian” Guitar Hero is what Andy Crouch has in mind for fulfillment of the call for Christians to be “culture makers.”

Blog author: dwbosch
Thursday, October 30, 2008

Via Drudge, Australia is joining none other than China in censoring the internet. Here’s a surprising endorsement/justification the writer uses to bottom line the article:

photo credit: fathersonline.orgThe Australian Christian Lobby, however, has welcomed the proposals. Managing director Jim Wallace said the measures were needed. "The need to prevent access to illegal hard-core material and child pornography must be placed above the industry’s desire for unfettered access," Mr Wallace said.

I’m not endorsing porn. But earth to Mr. Wallace: Scan up a few ‘graphs and note how Chinese Keepers of Internet Purity shield their masses against illegal "spiritual movements." Makes me wonder how long the internet will be available to Christian "industries" like outreach and evangelism. Not too long, considering some Christians are readily turning those reigns over to government.

Jesus didn’t condemn prostitutes or demand that His disciples lobby for nanny states. He offered them grace and holiness and a new life, and people took Him up on it.

Blog author: kschmiesing
Thursday, October 23, 2008

Although many scientists cultivate the popular image of the benevolent, detached savant toiling away for the betterment of mankind, the fact remains that Ph.D.s in physics or genetics are subject to the same weaknesses as the rest of us. The image has some currency because there is an element of truth in it: scientists in many fields have contributed in remarkable ways to the material progress of humanity. That contribution should not be underappreciated.

Yet scientists are not immune to temptations to exaggerate, distort, and deceive. And the field of politics, containing as it does the promise of access to power and funding, is the near occasion of sin par excellence.

Various PowerBloggers have detailed the problematic fusing of politics and science in the area of climate change. In the latest issue of First Things, Joseph Bottum and Ryan T. Anderson do the same for the subject of stem cell research (currently accessible online by subscription only). It’s an outstanding summary of the relatively brief history of the debate, with special attention to the not-usually-praiseworthy role that researchers played in the political arena. “We need to remember the events from 2001 to 2007,” the authors assert, “for the history of the stem-cell debate forms a classic study of what happens when politics and science find each other useful.”

Two morsels from the essay:

Still, before we commiserate too much with America’s stem-cell researchers, so badly taken advantage of, it’s worth remembering that they didn’t just let themselves be used. They rushed to be used. Offered a public platform, they begged to be exploited, and the politicians, newspapers, and television talk shows merely obliged them.

In the small demagogueries of a political season, the science of stem-cell research became susceptible to the easy lie and the useful exaggeration. A little shading of truth, a little twisting of facts—yes, the politics corrupted the science, but the scientists willingly aided the corruption. And with this history in mind, who will believe America’s scientists the next time they tell us something that bears on an election? We have learned something over these years: When science looks like politics, that’s because it is.

Blog author: kschmiesing
Thursday, September 18, 2008

As the US-incited global financial situation continues to worsen, ever shriller assertions of blame will be cast on one culprit or another. It’s my belief that any development of this magnitude always stems from multiple and interacting causes, but that doesn’t make very good copy.

Thomas Frank in the Wall Street Journal yesterday fingers deregulation (and by explicit implication the Republicans who champion it) as the criminal instigator of the financial crisis. Six weeks from election day, Frank has a transparently political goal, but let’s leave that aside. He writes:

There is simply no way to blame this disaster, as Republicans used to do, on labor unions or over-regulation. No, this is the conservatives’ beloved financial system doing what comes naturally. Freed from the intrusive meddling of government, just as generations of supply-siders and entrepreneurial exuberants demanded it be, the American financial establishment has proceeded to cheat and deceive and beggar itself — and us — to the edge of Armageddon. It is as though Wall Street was run by a troupe of historical re-enactors determined to stage all the classic panics of the 19th century.

I don’t pretend to be an expert in financial sector regulation, and it may well be that some more (or different? or fewer?) regulations could have played some role in averting this catastrophe. But I suspect there are a couple other causes that are equally or more important, and that call into question the contention that more government involvement will prevent such problems in the future.

1. If the crisis is in large part due to overly risky loan practices and the investment vehicles connected to them, then might the existence of federal backing (e.g., its de facto guarantee of Freddie Mac and Fannie Mae) and the promise of such backing (based on the fact of past bailouts and the belief that more bailouts might be forthcoming) have caused or at least aggravated the problem? In other words, government involvement helped to create the bad incentives that got us here. If financial dealers had known that the market would operate in a truly free fashion, they would never have made the decisions they did.

2. If greed played a role in the creation of the crisis, which most people of every political persuasion seem willing to grant, then what is regulation to do about it? Financial whizzes are notoriously good at circumventing government regulation. If this kind of “capitalism” needs to be curbed, moral sensibility is going to make more progress than regulatory manipulation. I’m not saying that greed can ever be eliminated, just that we need to be realistic about the prospects of success for regulation, which is fraught with unintended consequences, makes life more difficult for conscientious law-abiders, and creates a drag on the economy (the last thing we need at the moment). As Sam Gregg aptly put it at the conclusion of his Acton Commentary this week: “Could there be a better demonstration that there can be no markets without morality?”

Blog author: kschmiesing
Tuesday, September 9, 2008

As I’ve said before, some of the most interesting debates are those that break down along atypical lines: for example, by splitting dedicated limited government advocates rather than pitting them against statists. Back in 2001, the Journal of Markets & Morality conducted a controversy between two libertarian-leaning economists, Julio Cole and Paul Cleveland, concerning copyright and patent law.

Last year, we published a Christian Social Thought Series volume on intellectual property rights by David Carey that didn’t come down squarely on one side or the other, recognizing both the important role of incentives to innovation but also the obligation to limit property rights when the common good demands.

The issue hasn’t been settled yet, but now comes an important new data point from Princeton University Press: Patent Failure: How Judges, Bureaucrats, and Lawyers Put Innovators at Risk, by James Bessen and Michael J. Meurer. (HT: The aforementioned Julio Cole of Universidad Francisco Marroquín, Guatemala.)

This study shifts the terms of the debate by marshalling empirical evidence to show that one of the chief arguments in defense of patent restrictions—the innovation incentive—does not hold water. In an era of big business and big litigation, the ideal of the eccentric inventor making his living by patenting his creations appears to be antiquated. Specifically, what Bessen and Meurer demonstrate is that the costs for businesses to defend themselves againt patent infringement suits now far outweigh the benefits reaped by owning patents ($12 billion to $3 billion in 1999). In other words, patents are no longer an incentive to invention so much as a legal tool with which to damage one’s competitors.

[A caveat: This finding excludes chemical and pharmaceutical companies.]