I had a Twitter conversation yesterday with Tim Lee regarding my post about copyright enforcement, and today he responds at greater length. My contention is that copyright enforcement in the digital realm, though it's obviously had a pretty bumpy history, isn't self-evidently impossible. In fact, it might well be technically feasible. Tim responds:

The phrase that jumped out at me was "we won't know until we try." Among people who don't pay close attention to technology issues, there seems to be a widespread impression that the copyright debate pits those who think we should enforce copyright against those who are ideologically opposed to copyright protection. But the reality is that we've been "trying" to crack down on illicit file sharing for at least two decades, granting copyright holders stronger and stronger enforcement powers and devoting more and more taxpayer dollars to the effort.

[Bullet list of recent history follows, including lots of patently dumb stuff the content industry and the government have colluded on]

....The broader point is clear: every item on this list has imposed costs on third parties. Technologies with clear non-infringing uses have been pushed out of the market. Innocent parties have had their websites shut down. A woman was arrested for filming a birthday party that happened to occur in a movie theater. Angel investor Paul Graham has said he avoids funding music-related startups because the record labels are "effectively a rogue state with nuclear weapons." And most of these enforcement efforts costs taxpayer money.

By coincidence, yesterday I also linked to a piece by Gabriel Rossman that, I think, encapsulates a lot of current thinking about IP law:

My main intuition on this is that an industry that sponsored the Sonny Bono Copyright Term Extension Act has forfeited its claim to our sympathies. Thus even when it has a legitimate grievance, I am inclined to give it only mild weight. Thus I tentatively favor the Megaupload suit but I’m gonna say “sucks to be you” when the industry demands escalating the fight against piracy into the top priority of US trade diplomacy and a total war waged on the terrain of the internet’s low-level infrastructure. Nonetheless I think it’s important to clarify just how complicated estimating the effects of piracy are.

....More broadly, I think we need to be skeptical of free lunch thinking that if a policy has undesirable consequences this doesn’t mean we have to pretend there is no real problem it is addressing. It’s a common position to say “I don’t like bullying tactics, bad faith arguments, and rent-seeking of the IP industry, therefore piracy is not a problem.” I sympathize with this frustration but it’s more intellectually honest to take seriously that there might be a problem that we decide it is better to leave unsolved.

This is roughly where I am. In my view, Tim is totally correct to point out that IP enforcement in the digital era has been a farrago of bad faith, corporate rent seeking, and idiotic overreach. At the same time, I pretty strongly believe in reasonable levels of IP protection, and Tim says he does too. So the only question remaining is whether those reasonable levels are possible in the digital era without imposing intolerable costs on the rest of us.

Tim looks at recent history and thinks it isn't. Partly, I assume, he thinks this for political reasons (the content industry has so much political power that they'll always be able to jam through idiotic laws) and partly for technical reasons (there's just no way to prevent digital copying without massive intrusions on personal liberty). I'm not so sure. I look at the past couple of decades and I see a ton of uncertainty and panic: no one quite knows where everything is going, so the proverbial kitchen sink has been tossed at the problem, with predictably galling consequences. But two decades of technological development isn't really that much. Copyright law went through a lot of turmoil in the 19th and early 20th century too, as technology and globalization upended existing notions of authorial rights, but eventually things settled down. Among other things, the result was stepped up law enforcement and various bad actors being fined or sent to jail. Was that an intolerable intrusion of the state? A lot of people thought so at the time. Today we take it for granted.

Likewise, digital IP enforcement is going through the same growing pains today. It's a harder problem than in the past, both technically and politically, and Tim may be right that it's inevitably going to turn out badly. I just wouldn't be so quick to say so. As the SOPA fight shows, public awareness of what's going on in the IP realm has only barely started to gain critical mass, and I think there's a good chance it will grow in the future, producing a solid counterweight to the power of the content industry. And on the technical side, I just don't know. Maybe there really is no way to prevent unauthorized digital copying at reasonable social cost. But I don't think we can say that for sure yet. Not only is the technology itself rapidly evolving, but so are our cultural beliefs about privacy. Things that would have seemed intolerable a few decades ago are now met with yawns.

If the content industry continues to act as stupidly as they have so far, they'll probably lose. If they get smarter, they might not. It's still early days on this stuff.

One of my editors suggested I comment on this story:

As debt-plagued Greece struggles to meet Europe’s strict terms for receiving its next round of bailout money, the lesson of Portugal might bear watching.

Unlike Greece, Portugal is a debtor nation that has done everything that the European Union and the International Monetary Fund have asked it to, in exchange for the 78 billion euro (about $103 billion) bailout Lisbon received last May.

And yet, by the broadest measure of a country’s ability to repay its debts, Portugal is going deeper into the hole.

Unfortunately, I don't know what the hell to say. The basic story is simple: by demanding austerity from Portugal, European leaders are putting the Portuguese economy into a downward spiral. As Portugal's economy deteriorates, their debt levels become ever more unsustainable, requiring yet more austerity and tanking their economy even further. This is the same cycle happening in Greece (and Spain and Italy), and it's not clear where it ends.

But what's the alternative? Shovel vast amounts of money into these countries essentially without condition? That's just not in the political cards.

So what happens next? There are a few possibilities:

  • Europe muddles through. The PIIGS take a big GDP hit and put up with lots of riots and general misery, but eventually the global economy recovers, they stabilize a bit, and things start to slowly improve.
  • The PIIGS default on their debt and, perhaps, exit the eurozone and devalue their currency. After a wrenching few years, they start to recover.
  • The EU decides to become a genuine United States of Europe, and distribution of wealth from rich areas to poor areas becomes a permanent feature of the landscape, just as it is in the United States of America.

Frankly, all of these options seem pretty unlikely. Unfortunately, I can't guess which of them is the least unlikely. But these have been the options all along, and they're still the options. Nothing has really changed.

David Brooks writes today that the half century between 1912 and 1962 was a period of "impressive social cohesion." But since then everything has gone to hell:

In the half-century between 1962 and the present, America has become more prosperous, peaceful and fair, but the social fabric has deteriorated. Social trust has plummeted. Society has segmented…The American social fabric is now so depleted that even if manufacturing jobs miraculously came back we still would not be producing enough stable, skilled workers to fill them. It’s not enough just to have economic growth policies. The country also needs to rebuild orderly communities.

For the moment, I don't want to argue about why our social fabric is so depleted. I want to step back and ask if our social fabric is depleted. Let's take a look at a few possible markers of social breakdown:

  • Violent crime rose during the '60s and '70s but it's dropped steeply for the past 30 years. Violent crime rates today are one-third the rates of the early '80s.
  • High school graduation rates are a little hard to get a handle on. The official statistics say that graduation rates have risen steadily for all races over the past 40 years. James Heckman says that a better look at the data suggests that graduation rates have actually fallen by 4 to 5 percentage points. But an EPI study using high-quality longitudinal data suggests an increase of 3 to 4 percentage points. (A lot of the differences in these statistics depend on whether you count students with GEDs.)
  • The non-elderly poverty rate fell during the '60s and has stayed relatively flat since then (though the current economic downturn has temporarily sent it up a few points). The Census Bureau produced a new measure of poverty last year, but it didn't differ a lot from the standard measure.
  • Illicit drugs tend to go in and out of fashion, which makes it hard to draw firm conclusions about drug use in general. Roughly speaking though, it's probably safe to say that drug use among teens and young adults went up in the '60s and '70s, declined in the '80s, rose during the early '90s, and then began falling modestly starting in the late 90s. Illicit drug use today is certainly higher than it was during the first half of the last century, but it's been on an overall downward trend for the past 30 years.
  • Marriage rates are down and divorce rates are up.

So here's my question. Of these five markers, the only one that's indisputably worse and in long-term decline is marriage rates. The others are either better or about the same as they were 40 years ago. So what exactly is it that makes us think the social fabric of America is unraveling? The whole argument seems to hang awfully heavily on the decline in marriage rates.

There are other markers you could look at, of course. Income inequality. Churchgoing. Labor force participation. Membership in civic organizations. Charitable giving. Union membership. Political polarization. If you pick just the right markers and tell just the right story, you can probably make a case for a decline in the social fabric. But if you look at them all, you see some that look good and some that look bad — and we don't even agree on which is which. I think the decline in union membership is bad; David Brooks probably thinks it's good. Conversely, Brooks probably thinks the decline in churchgoing is bad; I'm not bothered by it at all.

What's more, I don't really buy the notion that American society has "segmented" either. I can be convinced otherwise if there's good evidence, but my sense is that the main thing that's changed here is that we're increasingly aware of our fragmentation thanks to living in a media-saturated environment. What did backwoods Appalachians have in common with New York bankers half a century ago? Pretty much nothing. But if you relied on the national media for your news, you barely even knew they existed. Maybe Life ran an occasional photo spread, but that was it. Ditto for black communities, Hispanic communities, evangelical communities, and a hundred other communities. Hell, judging by the reception Michael Harrington got for The Other America, most of us were blissfully unaware that poverty even existed. In actual fact, all of these things existed; they just didn't get a lot of attention. Today they do. That might make it seem like things are on a downhill slope, but it's really just a trick of the light (and perhaps advancing age).

Maybe America really is going to hell in a handbasket. Maybe our social fabric really is disintegrating. But anyone who tosses this stuff around really needs to provide some solid evidence that it's happening — and needs to contend with all the evidence, not just a few cherry-picked trends. Let's hear the argument.

Gabriel Rossman suggests that although piracy has had little effect on the quantity and quality of music, it will probably have a bigger effect on movies:

In the music industry the ratio of promotion to production costs is about 10:1....This means that over the long-run a drop in music revenues will in large part be felt by radio stations and others who specialize in promoting music.

In contrast, the promotion to production ratio in Hollywood is about 1:2. That is, the rule of thumb is that prints and promotion cost about half as much as making the film in the first place so a film that cost $100 million to make costs an additional $50 million to distribute. This means that decreased profits will mostly hit Hollywood itself rather than a related industry. Since stars are residual claimants and below-the-line workers make solid middle class livings, some of the pain will hit in the form of lower labor compensation, however you can’t lower production costs without eventually hurting production values.

The whole piece is interesting, but I wonder how long the promotion-to-production ratio in Hollywood will stay at 1:2. After all, the fundamental reason that the ratio is high in the music industry is that music is relatively cheap to produce — and recent technology has made it cheaper still.

The cost of movies, on the other hand, seems to keep going up and up and up. But how long will that remain the case? I can imagine that in the not-too-distant future movies will become 100% digital: no actors, no cameras, no sets, no nothing. Just some high-powered computers constructing voices and faces and surroundings that are indistinguishable from real life. It still wouldn't be a one-person job, the way a novel is, but it might reasonably be a 20-person or 50-person job for six months or so. In others words, even big-budget films might cost no more than a million or two to produce.

Alternatively, maybe costs will remain high even in my brave new all-digital world. By way of comparison, the cost of videogames, which hovered around $1 million once upon a time, has risen to $5-10 million over the years, and game developers now estimate that this may rise to around $50 million in the future. So maybe costs will stay high, with movies simply using up their large budgets on the latest and greatest technology no matter what it happens to be. Or, maybe audiences will simply never cotton to digital actors.

I'm not really sure. This is just food for thought. Whenever the conversation turns to the effect of piracy on Hollywood, it's something I think about. In the end, the technological supply side might turn out to be just as important as the technological IP enforcement side.

I liked Felix Salmon's response to an Andrew Ross Sorkin column about whether the Volcker Rule — which is intended to prevent commercial banks from making speculative trades on their own account — will hurt the economy:

If and when prop trading leaves the big banks, those banks will make less money. That’s by design....Insofar as trading takes place outside regulated banks, at hedge funds or small broker-dealers without access to the Fed discount window, some of the profits will simply move there, to small-enough-to-fail institutions.

In other words, there is a list of institutions which will be harmed by the Volcker Rule. Here it is: JP Morgan Chase, Bank of America, Citigroup, Goldman Sachs, Morgan Stanley. These institutions should get smaller. These institutions should be less profitable. There’s no reason to believe that when that happens, the economy as a whole will suffer.

....There’s also the question of whether the Volcker Rule will hurt liquidity, and whether that would be entirely a bad thing....Sorkin worries that it will become “impossible, or at least, impossibly expensive” for banks to warehouse merchandise in the form of securities available for sale. He doesn’t, on the other hand, explain why that’s a bad thing. Why should commercial banks be America’s largest market-makers, with enough clout within Sifma and other industry forums that they can set the broad anti-Volcker agenda? There’s no good ex ante reason why that should be the case, and indeed commercial banks have only truly dominated the market-making world in the past few years, since Goldman Sachs and Morgan Stanley converted after Lehman went bust in 2008.

As Felix says, there are two questions here. First, would a strong implementation of the Volcker Rule hurt big banks? Almost certainly yes. Second, would a strong implementation of the Volcker Rule hurt either the broader financial industry or the economy in general? Almost certainly not. Liquidity is the last refuge of a scoundrel, and arguments that big banks doing lots of prop trading provide the financial markets with the liquidity they need are almost certainly bogus. U.S. financial markets are big enough and active enough that they'll be awash in liquidity regardless of who's providing it.

I was never a huge fan of the proposition that we had to break up the big banks. It always struck me as the worst of two worlds: there would be huge practical problems trying to do it, and it wouldn't really address the core problems of leverage and lousy mortgage regulation that were at the heart of the financial collapse. At the same time, bank size is a problem, and finding ways to reduce bank size organically has always seemed like something well worth pursuing. A strong implementation of the Volcker Rule would at least move us in the right direction.

Brad Plumer, responding to a Clark Williams-Derry philippic against the white pages, says:

In the age of Google and unlisted cell phones, paper phone directories are being used less and less: One Gallup survey found that, in 2008, just 11 percent of households actually relied on them. Yet the vast majority of states still have laws mandating their delivery.

True enough. But when was the last time you used Google to look up a phone number? Sure, I do it occasionally, but not all that often, really. Rather, my guess is that the decline of the white pages is due mostly to ubiquitous auto dialers, email, and social media. Electronic phone books allow you to easily store hundreds of numbers and always have them at your fingertips. Email means that you have an alternate way of contacting someone you don't know well (and also an alternate means of asking for a phone number if you want to talk). And social media means that you have easy access to a much wider circle of acquaintances than you used to. I'd guess that these are the real reasons that so few people use the white pages anymore.

But who cares? Either way, it's probably time to get rid of them.

Tyler Cowen points us to Ed Glaeser, who has a bunch of advice about infrastructure spending. I don't agree with all of it, but some of his suggestions seem pretty sound. For example:

DE-FEDERALIZE TRANSPORT SPENDING: Most forms of transport infrastructure overwhelmingly serve the residents of a single state. Yet the federal government has played an outsized role in funding transportation for 50 years. Whenever the person paying isn’t the person who benefits, there will always be a push for more largesse and little check on spending efficiency. Would Detroit’s People Mover have ever been built if the people of Detroit had to pay for it? We should move toward a system in which states and localities take more responsibility for the infrastructure that serves their citizens.

To some extent, federal dollars simply represent a redistribution of money from wealthy areas to poorer areas. I don't really have a problem with that. But it does sometimes promote spending that local residents plainly don't think is important enough to fund themselves even though they could.

For example, I live in Irvine, California, which is a pretty upscale community. However, there are train tracks that run through the middle of town and until a few years ago the crossings were all at grade level. This was, frankly, not a huge problem: maybe a dozen trains a day came through town, and they were mostly short passenger trains that held up traffic for only a minute or so. Nonetheless, we built a multimillion-dollar underpass at one of the crossings, then another one, and now we're working on a third. There were a bunch of reasons provided for this (safety, future growth of train travel, etc.), but there was, I think, zero chance that we would have built any of them if we'd had to pay the full cost ourselves. But we didn't. The state and the feds ponied up about two-thirds of the cost.

Maybe these underpasses will eventually prove to be worth the cost. As a local resident who drives on these streets all the time, I doubt it, but you never know. But what I do know is that even though Irvine is pretty well off, my neighbors and I were very plainly not willing to spend the money it took to build them. We were barely willing to pay 30% of the cost. But if a construction project isn't worth the cost even to well-off local residents, by what measure is it worth the cost at all?

And now, just to disagree with something Glaeser says, there's this:

SPLIT UP THE PORT AUTHORITY: Last week gave us another painful audit of the work by the Port Authority of New York and New Jersey to manage the World Trade Center site. I’m not going to pile on, but this super-entity is too big to succeed. How can the Port Authority possibly focus on tasks such as making New York’s airports more functional when it has so much else on its plate?

I don't know squat about the Port Authority, though I don't doubt for a second that it's a dysfunctional mess. But generally speaking, there's nothing inherently more efficient about ten different $1 billion authorities compared to a $10 billion authority with ten divisions. Splitting up the Port Authority might be a good idea, but you need to make an actual argument for it, not merely assert that it's too big to succeed. Moving around the boxes on the organization chart may sound good, but all too often it's just the last refuge of someone who's run out of good ideas.

Ryan Avent wants to know why there are so many damn restrictions on putting up new buildings:

Our first question should be: is there some very compelling reason not to allow private actors to engage in mutually beneficial transactions? If a developer wants to buy a piece of land and erect a tall building on it, because he is confident that various tenants will be willing to pay him enough money to use the space to cover his costs, isn't that alone a good reason to start with the assumption that the deal should go forward?

....Of course, there are times when economists are prepared to say that a market equilibrium is not maximising social welfare. When private transactions generate costs or benefits for those not participating in the transaction—what economists call externalities—there is scope for government intervention. And in a dense urban environment, we'd expect to see lots of externalities. There are spillover costs; when a developer builds a large new building, he may disrupt existing views and add to local congestion. 

OK, let's stop right there, because I think this is the answer to the question. I don't care what you say your objection to a new building is, about 99% of the time the real objections are noise, congestion, and traffic. That's it. Everything else is just cover. It's not really about safety, or aesthetics, or neighborhood character, or the fact that George Washington once slept nearby. It's about noise, congestion, and traffic.

Which is fine. I'm certainly concerned about those things in my neighborhood, and I'd be unhappy if someone wanted to erect a 50-story skyscraper next door that turned the street outside my door into a seething, 24/7 stream of cars and weekend partiers. And unfortunately for prospective developers, that's an externality that's very difficult to mitigate. You can reduce it, maybe by paying for a street widening project or some such, but that's small beer. And in theory, you could simply pay off local residents. I might not like all the new traffic and noise, but if you paid me $5,000 a year to put up with it, maybe I'd mind it a lot less. But who do you have to pay? And how much?

These are all hard problems. I don't know the answers. Just keep in mind that you should ignore almost everything everyone says about new buildings going up nearby. The real issues are always noise, traffic, and congestion.

Adam Serwer reports today on the latest GOP attempt to make hay out of the contraception controversy. Sen. Roy Blunt (R-Mo.) has introduced an amendment to Obamacare that would allow any employer or other healthcare provider to refrain from covering any medical service that is "contrary to the provider's religious beliefs or moral convictions":

If Republican leaders get their way and Blunt's bill becomes law, a boss who regarded overweight people and smokers with moral disgust could exclude coverage of obesity and tobacco screening from his employees' health plans. A Scientologist employer could deny its employees depression screening because Scientologists believe psychiatry is morally objectionable. A management team that thought HIV victims brought the disease upon themselves could excise HIV screening from its employees' insurance coverage. Your boss' personal prejudices, not science or medical expertise, would determine which procedures your insurance would cover for you and your kids.

This bill isn't going to pass, of course. As with most Republican legislation these days, it's designed to prove to the true-believer wing of the party that their representatives in Congress are true believers too. The clown show in Washington DC continues apace.

Julian Sanchez is annoyed by people who keep self-righteously reminding us that the internet is not some special free-for-all zone that should remain exempt from all the normal rules we apply to normal life:

This is a fair point. But what about all these hippy-dippy Real World anarchists who think meatspace can remain immune to the rules any well-managed virtual community understands to be essential? How is it, for instance, that citizens are physically capable of injuring each other, regardless of whether they’ve opted in to player-versus-player? And what fool designed it so that my image is visible to all other users in the same city, even if we aren’t friends? You’ve even apparently got to jump through a bunch of hoops to get something called a “restraining order” just to implement a simple user block!

....Not everyone understands the intricate technical details of how the network functions, and not everyone needs to. But if you truly don’t comprehend that “closing down an illegal shop” is not actually the same as—and in every possible way a pretty awful metaphor for—“getting thousands of ISPs to implement DNS filtering at the domain level,” you should quietly recuse yourself from Internet policy debates. And if you find yourself suggesting that Google “helped overthrow the head of an entire country in a weekend,” and therefore must simply lack willpower when they say they can’t automatically screen out trademark and copyright violations, perhaps you should think twice about sitting on committees that vote on Internet legislation.

In all aspects of life, if you want to regulate something you first need to understand both the culture that produced the behavior you dislike as well as the purely technical impediments to regulating it. So point taken. If you don't understand the ill effects of DNS filtering — and the recent SOPA fiasco certainly proved that many members of Congress don't — you should be willing to listen to the people who do. This is not much different from suggesting that if you don't understand how Social Security funding works you might want to bone up a bit before you start ranting about it being a Ponzi scheme.

But there's another side to this, one that's well known to anyone who's ever worked in the tech industry: engineers positively love to snow their less technical colleagues whenever they're asked to do something they don't feel like doing. Suddenly tasks that seem like they're doable become gigantic obstacles that will require a minimum of a dozen programmers for 57 weeks, and your shipping schedule certainly can't accommodate that, can it? So sorry.

In other words, sometimes the opinions of the digerati should be taken with a grain of salt. Their routine pronouncements that something will "break the internet" might be true — so be careful! — but they might also be little more than a convenient way of justifying their ideological preferences and getting the meatspace morons off their backs.

On a related note, all of us, the technically literate included, probably ought to show a little more humility about what Sanchez calls the "annoyingly stubborn facts" of the technological world. He links to a much-discussed piece by Cory Doctorow (based on a speech he gave recently) in which he suggests that not only would any feasible form of digital copyright enforcement break the internet, but it would probably break the entire idea of a general purpose computer too. Shazam!

Now, maybe Doctorow is right. There's no question that the history of digital copyright enforcement has not exactly been a rip-roaring success so far. But neither has it been a total failure, and frankly, I don't see any reason to think that some smart people might come up with a form of general-purpose DRM in the future that actually works decently. Not 100% perfectly of course, but that's not the goal. And not entirely free of annoyance. That's not the goal either. Just something that's good enough to provide a measure of IP protection that works for the vast majority of non-supermen and isn't too unwieldy. Is that really any more unlikely than the invention of the internet itself? I'm not sure why.

This is not something you want to believe if, ideologically, you're opposed to IP protection because you think that digital content is fundamentally different from meatspace content on the grounds that making a digital copy of something doesn't reduce anyone else's ability to use their copy. But neither does copying a book. That's never been the point of IP law. It's always been about the income stream an author can get from selling copies of his or her work, and that's exactly the same in the digital world as it is in the physical world. The arguments in favor of IP protection are much the same in both domains.

You might not want to hear that, but just because you don't want to hear it doesn't mean it's not true. The truth is that IP protection in the digital world might very well be possible. We won't know until we try, making a whole lot of mistakes along the way. If you want to argue that IP protection is a bad idea, then fine. Make the argument. But don't pretend that your preferences are also technological certitudes. They aren't.