Tyler Cowen's Blog, page 573
January 2, 2012
IP Feudalism and the Shrinking of the Public Domain
Creators of intellectual property used to be granted up to 56 years of monopoly before their works entered the public domain. Since the 1976 copyright act (which came into effect in 1978) copyright has been progressively lengthened so it now extends to the life of the author plus an additional 70 years, i.e. an author's heirs now get significantly more monopoly power than an author did prior to 1978, truly a kind of IP feudalism.
It's hard to believe that the extension of copyright for decades after an author's death can appreciably increase artistic creation and innovation, thus the public has gained little from copyright extension. What has been lost?
If the pre-1976 law were still in place then as of Jan 1, 2012 the following books, movies and music would have entered the public domain (from the Center for the Study of the Public Domain):
J.R.R. Tolkien's The Return of the King, the final installment in his Lord of Rings trilogy
The Family of Man, Edward Steichen's book of photographs showing the diversity and universality of human experience
Michihiko Hachiya's Hiroshima Diary: The Journal of a Japanese Physician, August 8–September 30, 1945, translated by Warner Wells, md
Evelyn Waugh's Officers and Gentlemen, the second book in his Sword of Honour trilogy
C.S. Lewis' The Magician's Nephew, the sixth volume his The Chronicles of Narnia
Vladimir Nabokov's Lolita
Jerome Lawrence & Robert E. Lee's play about the Scopes "Monkey Trial," Inherit the Wind
Isaac Asimov's The End of Eternity.
Jack Finney's The Body Snatchers
The Seven Year Itch, directed by Billy Wilder; starring Marilyn Monroe and Tom Ewell
Lady and the Tramp, Walt Disney Productions' classic animation
Alfred Hitchcock's To Catch a Thief, starring Cary Grant and Grace Kelly
The thriller The Night of the Hunter, directed by Charles Laughton; starring Robert Mitchum and Shelley Winters
Two of James Dean's three major motion pictures: East of Eden, directed by Elia Kazan and co-starring Raymond Massey and Julie Harris; and Rebel Without a Cause, directed by Nicholas Ray and co-starring Natlie Woods, Sal Mineo, and Jim Backus
Hollywood versions of major Broadway musicals such as Oklahoma! and Guys and Dolls
Richard III, Laurence Olivier's film version of the Shakespeare play, co-starring Claire Bloom, Cedric Hardwicke, Nicholas Hannen, Ralph Richardson, and John Gielgud
Unchained Melody (Hy Zaret & Alex North)
Ain't That a Shame (Antoine "Fats" Domino and Dave Bartholomew)
Blue Suede Shoes (Carl Perkins), Folsom Prison Blues (Johnny Cash)
The Great Pretender (Buck Ram)
Maybellene (Chuck Berry, Russ Fratto, & Alan Freed),
Tutti Frutti (Richard Penniman (aka Little Richard)
Under the old law these works and many others could today have been read, seen and played at low cost throughout the world. Consumers have certainly lost from copyright extension. What about creators?
We typically frame copyright and patent strength as an issue between consumers and creators, with consumers assumed to favor weaker rules and creators stronger. But, as I discuss in Launching the Innovation Renaissance, that is the wrong frame. A vibrant public domain can be good for consumers and for creators.
Under the old law, the above works could not only have been consumed they could also at low cost and without requiring the express permission of the original copyright holder have been remixed, reworked and extended in new directions. Under the new regime, innovators will not be able to easily build on these works until 2051 and it could be well into the 22nd century before we get Star Wars prequels worthy of the name.
Markets in everything
For the pointer I thank Jacqueline Mason.
January 1, 2012
How is the U.S. tax system different?
Clive Crook reports:
A new report by the Organization for Economic Cooperation and Development shows that in the middle of the last decade — i.e., after the Bush tax cuts were introduced — the U.S. income tax was about as strongly redistributive as income taxes in Canada, Denmark, Finland, the Netherlands and Sweden. You might have noticed that the CBO report on top incomes was widely quoted, but one finding got less attention: Between 1979 and 2007, "the federal individual income tax became slightly more progressive." [TC: note that this last sentence can mean a number of different things/]
The awkward truth is that the U.S. income tax system is anomalous not because it taxes the rich lightly but because it taxes everybody else lightly.
Education in India
This is related to our recent discussion of why Indian test scores why so low:
Estimating the precise enrollment of private schools is tricky. Government officials say more than 90 percent of all primary schools are run by or financed by the government. Yet one government survey found that 30 percent of the 187 million students in grades 1 through 8 now attend private schools. Some academic studies have suggested that more than half of all urban students now attend private academies.
In Mumbai, so many parents have pulled their children out of government schools that officials have started renting empty classrooms to charities and labor unions — and even to private schools. In recent years, Indian officials have increased spending on government education, dedicating far more money for new schools, hiring teachers and providing free lunches to students. Still, more and more parents are choosing to go private.
"What does it say about the quality of your product that you can't even give it away for free?" Mr. Muralidharan said.
Here is much more.
December 31, 2011
Sentences of note
But overall income inequality would likely have increased even in the absence of tax policy changes.
That is from the Congressional Research Service, here is much more. For the pointer I thank Jason Fichtner.
Facts about engines
The RMS Titanic weighed almost 50,000 tons and could carry 3,500 people. Before it sunk, it was world-famous as the massive titan of the sea. Its multiple engines, powered by 159 coal furnaces, were designed to deliver 46,000 horsepower.
Compare that to today's beastly mode of transport: the Boeing 777. Bangalore Aviation points out that a single GE90-115B engine puts out over 110,000 horsepower, or more than twice the design output of all the Titanic's steam engines.
And that power is obviously hooked up to a much smaller vehicle. The Titanic had to carry 14,000,000 pounds of coal alone; the 777 has a total weight of only 775,000 pounds.
Here is more and for the pointer I thank Roland Stephen.
Assorted links
1. What was the least important event of the year?
2. There is no great stagnation.
4. Flexible nominal wages create some new jobs. Monetary accommodation is better, but why is this a supposed disaster?
6. I am pleased to have won an Albie award.
December 30, 2011
Why not treat debt and equity the same?
Varun, a loyal MR reader, asks me:
I do have a fairly simple question on tax policy I've never really seen a good answer to: Why do we treat interest payments differently in terms of taxation? Why are interest payments tax deductible?
Clearly a zero corporate tax rate is best, but why do we offer tax shields for highly levered companies? All of private equity, and much of banking etc. is built on this tax arbitrage. Wouldn't treating interest payments on par with dividends and corporate profits (hopefully at a lower tax rate) unlock a great deal of value, drive an increase in (stock) investment, while significantly un-levering businesses? Why do we borrow when we can seek investment?
More importantly, isn't it odd that few advocate such a simple policy change: to treat debt and capital investment identically.
A good question, but there is a problem with treating debt payments any other way. In general, expenses must be deductible in some manner, if the government is to tax corporations on net rather than gross returns, however roughly or imperfectly. And it is difficult not to treat interest like an expense of some kind. For instance de facto interest could be embedded in repurchase agreements, which for the purposes of tax law would look more like "real expenses" and thus would be tax deductible. The borrowing would still go on, but in a more awkward fashion.
Without tax deductible interest payments, there would be an excess incentive to pay cash up front for assets rather than doing a mix of borrowing and holding cash for option demand. Corporations would go bankrupt more easily and in general face higher transactions costs.
Contrary to common impression, the tax deductibility of interest payments does not give a tax advantage to borrowing, not if the return to savings is taxed. What you save by borrowing and writing off interest payments you pay back tax on your more liquid asset holdings; admittedly there are complications and wedges when lending and borrowing rates are not the same. Therefore tax-deductible interest payments makes tax law roughly neutral in intertemporal terms, with lots of qualifications tacked on to that claim, including the possibility that some corporations can avoid the taxes on liquid asset holdings altogether.
The tax deductibility of interest payments operates in a highly imperfect manner, but at its core it is a piece of what an ideal (roughly) neutral tax system would look like, not a deviation from such neutrality.
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