lessig on institutional corruption

Professor Lessig is presenting on Institutional Corruption today at the Kennedy School as his first public appearance at Harvard since his return a few months ago.

Professor Lessig likes to introduce three ideas to frame his talk today: 1) influence, 2) independence and 3) responsibility.

Relying on his framework of the four modalities of control that he used in Code, Professor Lessig explains how the law, markets, norms and architecture together exert influence, and that depending on your policy objectives, these four forces can be complementing or conflicting. He suggests that together they form an “economy of influence” that we need to understand if we want to make effective policy.

He continues to explain “independence”, in the sense that something is not dependent on something. Independence matters, because it means that you try to find the right answer for the right reason, as opposed to doing so for a wrong reason you might be dependent on.

Independence, however, does not mean dependence from everything. Lessig reframes independence as a “proper dependence”. In legal terms, it means that a judge depends on the law for her judgment. So independence is about defining proper dependence, and limiting improper dependence.

Responsibility is the third concept Lessig goes into. He tells us about a case he represented in 2006: Hardwicke vs ABS. It was a case that focused on a series of events concerning child abuse, all perpetrated by a single person. The question that was raised: Who is responsible? Lessig makes the argument that responsibility does not lie with the individual, that this individual has no power to reform, and that this is pathological. Instead, he makes the case that responsibility in this case is all the people who knew about the wrongdoings, but refused to pick up the phone. Nevertheless, the focus of the law was on the one pathological person. Lessig suggests it is more productive to focus responsibility on those who have the power to make changes, instead of those are pathological and are not in a position to reform. He notes it is ironic that the one person who is least likely to reform is held responsible, while the one entity who could do something about it, was immune.

He raises another example of “responsibility” gone awry. He cites Al Gore and his book “The Assault on Reason”, and lambasts its narrow perception of responsibility. It focuses on former president Bush, arguably the man least likely to reform, and instead forgets those who could have done something about it, suggesting that they also have been critically responsible.

His argument is one of “institutional corruption”. What it is not: what happened with Blagojevitch; it is not bribery, not “just politics”, not any violation of existing rules. Instead, institutional corruption is “a certain kind of influence situated within an economy of influence that has a certain effect, either it 1) weakens the effectiveness of the institution or 2) weakens public trust for the institution.

He explains the system of institutional corruption using the White House. Referring to Robert Kaiser’s book “So Damn Much Money”, he argues how the story of the government has dramatically changed in the past fifteen years and how the engine of this change has been the growth of the lobbying industry. He illustrates this with numbers: Lobbyists pay with cash which members use as support for their campaigns. The cost of campaigns have exploded over the years, and subsequently, members have become dependent on lobbyists for cash – he cites that lobbyists make up 30-70% of campaign budgets! This is not new, he carefully explains, but citing Kaiser again, what is new is the scale of this practice has gotten out of hand. Members /need/ and take /much more/, becoming /dependent/ on those who supply. This is only during the tenure, but institutional corruption also needs to be understood as something after tenure: 50% of senators translate their senate tenure into a career as lobbyist, while 42% of the house do the same. This suggests a business model, focused on life after government, that perpetuates itself, and influential people who end up becoming dependent on this system surviving, both during and after their time in Congress.

He goes on to give example after example of institutional corruption. He mentions the important work done by maplight.org that tracks money in politics, who have shown that members who voted to gut a bill had 3x times the contribution from lobbyists than those who voted against. Simply put, policies get bent to those who pay. He cites a study by Alexander, Scholz and Mazza measuring rates of return for lobbying expenditures, who conclude that ROI is a whopping 22,000%! He again cites Kaiser, who suggests that lobbying is a $9-12 billion industry.

Why does this matter? It matters if it
1) weakens effectiveness of institution or
2) weakens public trust of institution

In the first case, he argues how lobbying can shift policy. He cites a study by Hall and Deardorff “Lobbying as Legislative Subsidy” on how the work of congresspersons shift as a result of lobbying. Imagine you’re a congressperson and you see it as your goal to work on two issues: one is to stop piracy, the other is to help mums on welfare. The line of lobbyists that will happily help you with stopping piracy is long, whereas not so many will help you with the latter – so work of the congressperson shifts, and thus work of Congress shifts.

Lessig suggests it also bends policies. Does money really not change results? Citing the Sonny Bono case of October 27, 1998, he shows how in copyright lobbying power had a powerful influence in getting the copyright term extended for another twenty years. Does this advance the public good? A clear no. Lessig backs this up by telling how in the challenge at the Supreme Court, an impressive line-up of Nobel Prize winning economists, including Milton Friedman, supported this and that it would be a “no brainer” to sign the support that copyright extension did not advance the public good. But he concludes that there were “no brains” in the House. An easy case of institutional corruption. There are two explanations: Either they are idiots, or they are guided by something other than reason. He suggests of course it’s the latter. It is not misunderstanding that explains these cases.

Lessig continues to explain how corruption can be seen as weakening public trust. He tells us about how the head of the committee in charge of deciding the future of healthcare is getting $4 million from the healthcare industry. Or how a congressperson ended up opposing the public option even though the majority of his constituency supports it. The idea is not that there might be a direct link between the money and the vote, but that if you take money to do something that is against the public interest, people will automatically make that link, and this weakens public trust. If you don’t take money and you go against the popular vote, that won’t reek of corruption.

Lessig goes on to discuss different fields: medicine and the healthcare industry, citing research by Drummond Rennie from UCSF that shows how there is an overwhelming bias in favor of sponsor’s company drugs. How there are 2.5 doctors to 1 detailer (a detailer being someone who is like a lobbyist for the pharmaceuticals, promoting the drugs to doctors, often giving “gifts”). How the budget for detailing tripled in the past ten years.

Lessig asks us: how can we find out whether these claims are true? Do detailing practices either weaken the effectiveness of medicine, or weaken the public trust for it? What would it take to know?

There is also the issue of “the structure of fact finding” that Lessig suggests is corrupt. Again, he argues we need to understand whether this is a process by which results are affected or trust is weakened. He cites how sponsor funded research can cause delay, and mentions the case of “popcorn lung”.

Lessig makes a strong case that we need more than intuition. That we need a framework or metric to know for sure. Because we all have ideological commitments, that we need to escape this in order to have a proper understanding of corruption. This is, in short, the aim of his new project: The Lab. It should be a neutral ground with a framework that determines whether and when institutional corruption exists, to develop remedies for institutional corruption when it exists. He sees the initial work having three dimensions: 1) data – necessary to describe influence and track its change; 2) perception of institutional corruption and understand how it has changed;
and 3) causation – what can we say about what causes what in these contexts in alleged corruption. Having this information, we can then design remedies.

media, power, and responsibility

Why are media and power always a bad combination? Whether it is the elite who is abusing the media for its own purposes (in the words of Chomsky and Herman, to ‘manufacture consent‘) or whether it is the media themselves who are powerful, often heard as in ‘the media are biased‘, the message seems clear cut: the media and power do not go together – but is it?

The notion that media often are (ab)used by the powerful goes all the way back to the origins of communication research back in the fifties when it was primarily obsessed with the effects of propaganda. The concern here is that only a particular group of people, e.g. the elite, the powerful, have access to the media and are able to set the agenda for society – if not what the public should think, then what the public should think about. This line of research carries on in the media ownership concentration literature – who owns the media has the power to allocate resources, to control editors and set the agenda. Famous (notorious) examples include Rupert Murdoch and Silvio Berlusconi. 

Then there is also concern that the media themselves are too powerful. While the media is supposed to act in the public’s interest, they often underserve certain segments of the public, such as minorities, or they slant news in favor of particular segments of the public – these are the issues of underrepresentation and misrepresentation. Not to mention the many issues the media effects research is trying to address – television violence is bad for our kids, video games make them dumb and lazy, the internet destroys their attention span, etc.

Most research seems to indicate that power and media don’t go together – bad things happen if they do. What I am wondering is – can the powerful use media for good, rather than bad? Power and media leading to bad things is a relationship of correlation, not causation. What responsibilities, obligations do the powerful have to use media for the greater good? This is a question that has been asked in democratic theory – the media should be a watchdog, should serve as a platform for the public to discuss important issues, etc. More specifically, and something I am interested in, is what kind of obligations are imposed on the media as a result of a particular power disparity – that is to say, what obligations should be imposed precisely because the media are powerful/are controlled by the powerful? 

In broadcast television, the imposition of rules that made sure political issues would be covered in a way that was honest, equitable and balanced was called the ‘fairness doctrine‘. The primary justification for imposing this (controversial) rule was that broadcast television only could carry so many channels because of spectrum scarcity. In other words, only a few limited number of channels could be broadcasted – because of the power this would give to those who control these few channels, the FCC made sure that important issues were covered in a ‘fair’ way. The fairness doctrine had many problems (partially because it wasn’t quite clear what was meant with ‘honest, equitable and balanced’ coverage) and was subsequently abolished. However, one could consider if the fairness doctrine or some kind of equivalent would still have relevance in modern days – in other words, if we’d had to ressurect this, how would it look like? Some have linked the fairness doctrine to the debates we have on network neutrality, arguing that it is in essence a fairness doctrine for the internet. 

One could thus compare the internet protocols – the rules that describe how connections on the internet are established – to rules we have for media access (besides the fairness doctrine, there have also been regulations such as the equal-time rules, specifying that broadcast stations must provide opportunity to opposing political candidates to speak).

But are the internet protocols by themselves enough? The internet protocols are famous for ‘not caring what kind of content they carry’ – as long as the protocols are followed. Should protocols care? The telecom providers argue the internet should care – they say it makes a difference (and a big burden on their network) whether content is video, peer to peer traffic or just text. They want to be able to prioritize some content over others. They want to be able to regulate traffic in such a way that a small number of users don’t end up hogging most of the bandwidth, or at least charge them more for it. Skeptics, and network neutrality proponents, fear that the telecom providers will abuse this power to prioritize content (“let’s make getting to the Microsoft Live search website really fast, and let’s slow down access to Google”). 

But the ability to be able to distinguish, to prioritize some content over others might not be a bad thing. We can disagree about who should be able to prioritize, on what basis – for example, many people might not want the telecom providers to be able to prioritize on the basis of profit maximization – but what about the following: Clay Shirky has helped us understand that the blogosphere follows a powerlaw - that is to say, a small number of so-called A-list blogs gets a disproportionate amount of attention.

If you are such an A-list blog, and you wield a certain power in the form of mass attention, what kind of moral obligations follow out of that kind of power?

Comcast to FCC: Why Regulate? We Have the Blogosphere

In a filing with the FCC (pdf), Comcast claims that, thanks to market competition and blogging watchdogs, there is no need for regulatory intervention to protect net neutrality.

The company’s recent discrimination against peer-to-peer traffic is the cause of the hearing. Last August, Comcast denied the charges (which were first documented on… drumroll please… a blog), but now the company has stopped fighting the clear and convincing evidence, instead changing the Terms of Service to reflect the fact that they are willfully throttling BitTorrent traffic.

Now, they claim:

Network Management is best left to the sound, good-faith judgment of the engineers and proprietors who run and own the networks and who are best able to remedy customer service issues promptly, rather than to regulation. The self-policing marketplace and blogosphere, combined with vigilant scrutiny from policymakers, provides an ample check on the reasonableness of such judgments.

There’s only one problem: whatever market pressure and public criticism can be leveled has already come to pass, and Comcast still has not changed direction. Could this have something to do with the market failure in the broadband market? After all, a duopoly is rarely the sign of a healthy market.

At least one prominent blogger and vocal Comcast critic finds the argument laughable.

On DRM-related sidenote, somebody (presumably Comcast) put a password on the PDF, preventing the wholesale one-step copying of text. Yet further evidence that the company is deeply committed to an open dialogue on net neutrality.

(Link from Lok)

Supercapitalism Really Is Super

Robert Reich’s latest book, Supercapitalism, is a fantastic analysis of the current relationship between corporations, citizens, and politics.

I put Supercapitalism on my wish list after Prof. Lawrence Lessig’s glowing recommendation. While I make no pretense of being such a gifted writer as either of these scholars, here I attempt to summarize the book and follow with a few minor points.

Reich, the former Labor Secretary and current Professor of Public Policy at Berkeley, describes us all as being of two minds. On one hand, we are all consumers and (most of us are also) investors. As such, we’re always seeking to minimize our costs and maximize our profits. This leads to lower costs and higher profits; companies that cannot deliver lose customers and investors.

On the other hand, we are also all citizens and employees. In that capacity, we are generally frustrated by the effects of our growing collective power as consumers and investors. Those low prices and high profits squeeze employees, main street family-run stores, and the environment.

Our civic selves object to these negative effects, but we know that our individual purchasing and investing power cannot reverse these trends. Even were we to make the sacrifices of paying higher prices and earning lower returns by supporting more “socially responsible” businesses, we cannot make a difference with our dollars alone. Even social movements calling for corporate responsibility fail because, even if the companies comply, they leave an economic vacuum to be filled by other companies; otherwise, companies just revert to their old ways once the heat is off.

In the “Not Quite Golden Age” of postwar America, companies could pay high wages and CEOs could act on what they saw as the public interest. Most major industries were composed of cozy oligopolies with little product variation. The high cost of industrial production set high barriers to entry, leaving companies with plenty of room to negotiate relatively good deals for employees and the public.

Thanks in large part to new information technologies, as well as the growth of worldwide shipping infrastructure, we have entered what Reich calls supercapitalism over the past 30 years. Companies can design a product on a computer in Denver, buy parts from Brazil, Egypt, and Hungary, and subcontract with a factory in Korea to follow the computerized assembly instructions.

The increasingly fierce competition between companies has led to the squeezing along every part of the supply chain. Main Street retailers can’t sell refrigerators for $1200 when the same icebox is $799 at the big box store 2 miles away. Ford can’t stay profitable by paying its workers $70 per hour in salary and benefits when comparably skilled Koreans will do the same job for half. Suppliers get squeezed, too; ask any of WalMart’s suppliers about this process.

In the era of supercapitalism, companies have little choice but to minimize prices and maximize profits. In the Not Quite Golden Age, a system of cozy oligopolies gave consumers and investors little choice; both groups had mediocre but predictable deals all around. Now, consumers and investors who do not get the best possible deals will take their money elsewhere. Companies that do not ruthlessly squeeze their costs go bankrupt or get bought out.

This process has also led to the corruption of the democratic process. In the ever-accelerating contest for strategic advantage within and between industries, companies have begun to game the system to a degree that was generally not necessary 30 to 50 years ago. Reich’s own experience in government illustrates the impact of the rapid influx of money into the DC area:

Even by the mid-1970s, when I worked there as a political appointee at the Federal Trade Commission, much of the downtown was still run-down. I’d take any lobbyist who insisted on a lunch to a cockroach-infested sandwich shop on the other side of Pennsylvania Avenue, after which I would never see the lobbyist again. But when I returned to Washington in the 1990s, the town had been transformed. … The flow of money had inflated everything in its path. (p. 132)

Corporations are the primary folks funding this influx of capital. NGOs and labor make just a drop in this rapidly growing bucket of lobbyists, PR firms, campaign donations, “expert” consultants, hotels, and fancy restaurants with leather menus and $75 steaks.

Corporations spend this cash in the search for competitive advantages within or between industries. They may not even want to play, but they have to in an attempt to counterbalance other companies’ or industries’ efforts. Competition for customers and investors is too fierce, and one bill can kill a company’s bottom line.

The result is the increasingly impenetrable Beltway we all know and love. Corporate cash has purchased such a cacophany that citizens’ voices are drowned out.

Reich does offer some hope for a cure. Some of the usual suspects are here, from policy changes such as stronger labor protections to procedural reforms such as publicly funded campaigns. The really interesting recommendations, though, center on Reich’s argument against the anthropomorphic view of corporations as people.

Corporations are nothing more than bundles of contracts, so he insists we should neither give them standing to sue to overturn duly enacted laws nor find them criminally liable nor tax their income as though it is the company that owes. Their shareholders and employees would still retain all their rights and responsibilities, which is proper, since a corporation is just a collection of shareholders and employees.

He makes a compelling case for the feasibility and benefits of taxing shareholders instead of companies; corporations would withhold taxes on shareholders’ behalf and give them something like a W-2 form at the end of the year. This would be feasible in the era of computer-processed financial transactions, and it would be progressive, since the wealthiest would pay a higher rate on this income. It would also eliminate corporate inefficiencies caused by some wrinkles in the tax code.

The jaded may initially blow these off as politically impossible (I certainly did), but Reich points out that most companies would rather not be shaken down. A coalition of likeminded corporations helped leverage McCain-Feingold into law, and combined with public pressure, a similar coalition could create even greater reforms.

The prospect for procedural reform in particular is not impossible, but it is quite optimistic. A few industries with a history of winning backdoor negotiations with little effective opposition would fight tooth-and-nail against anything that would reduce their unique power position: oil, telecom, and the entertainment industry all come to mind.

For instance, he perpetuates the mistaken notion that the net neutrality debate was just another contest between corporate interests. In fact, tech companies were seriously outmatched on The Hill, and it was only due to the outstanding work by NGOs such as Free Press and the mobilization of over 1 million citizens that Sen. Ted Stevens’ (R-AK) 2006 telecom bill died as a net neutrality hostage.

Additionally, Reich regrettably fails to consider the potentially obstructionist role of the corporate media in blocking political reforms. The media have an obvious economic incentive to keep campaign funding the way it is: teeming with corporate cash that winds up buying tons of ads for several months every two years.

Any attempt to tie campaigns’ spending to taxpayers’ willingness to pay would generate substantial media opposition, and a bill mandating free airtime would drive media companies to break out every political tool they have. Congress speaks to its constituents through the media; these same media will turn on them (even if not as overtly as, say, Fox) in a heartbeat, and politicians know that.

Finally, Supercapitalism could better integrate theory generally and political economy more specifically. This is ironic; the book is itself an excellent introduction to political economic analysis. But theories about the flow of political information (such as Oscar Gandy’s theory of information subsidies) and the policymaking process (perhaps Baumgartner and Jones’ theory of punctuated equilibriums) could add some heft to Reich’s analysis. This is clearly a trade press book, but it is not impossible to drag a little theory into a book with wide appeal. Paul Krugman’s highly readable book, The Age of Diminished Expectations, is a fine example, and he was using economic theory.

All told, though, Reich’s book is nothing less than a beacon of hope in a world of dark political realities. This should be on your must-read list, and I’m already thinking about how I could use it in the classroom.

Why Time Warner’s Bandwidth Pricing is Good Short-Term Solution

David Isenberg has a great post on why Time Warner’s bandwidth-sensitive pricing plan is good.

The very short version is that it’s honest and a reasonable substitute for non-neutral packet discrimination, but the details will matter tremendously.

(Isen.blog link via Berkman Buzz)

UPDATE: I failed to mention the important caveat that bandwidth-sensitive pricing will not solve our bandwidth problems. We still need more capacity to keep up with growing demand and to fuel new digital innovations.

If we think end users are an important source of innovation (and they are), higher capacity for homes and small businesses is a brutally important part of our economic and cultural future.

The bandwidth-sensitive pricing will reduce congestion, but that problem is radically overstated. The continued popularity and usability of VoIP (despite it being continually invoked as the fragile traffic in need of protection) shows that the tubes are not exactly full.

Rather, the real problem is our general lack of growth in capacity. Other countries have really beaten us to the punch in subsidizing, requiring interconnection, and making other policy moves that have resulted in much faster growth in broadband adoption and network capacity for end users.

We may have untold dark fiber connecting major transit centers, but the last mile is still a serious bottleneck.

As bandwidth demand keeps growing, we still have a huge need to grow our capacity. Discriminating based on bandwidth, though, is a good interim solution for the reasons discussed above.

On a personal level, this is a wildly gratifying rebuff of Christopher Yoo’s suggestion that metering would just be too expensive to pull off. See Opening Bottlenecks, p. 146, for more.

The New “Direct Market”

The Register notes that while Manhunt 2 may have been effectively banned from distribution in UK stores by the British Board of Film Classification’s refusal to assign a rating (again), the game could still sell online, via direct download (link via Game Politics).

Sound familiar? If you’re familiar with the regulatory history of the comic book, another medium stereotyped as juvenile, it should. The direct market of fan shops (which was partially built on a network of converted head shops that had been selling underground comix). This is, as the previous Wikipedia link notes, the “dominant” channel of distribution for comics today. It’s also notoriously unstable and frequently resistant to reach beyond an aging group of superhero fans, rather than appealing to new readers. Comic stores also have a reputation (sometimes deserved) for being inhospitable to newcomers.

Would the “direct market” of digital distribution for games be more open and accessible than the direct market of comics? I’m not sure it would be, at least not at first. It certainly hasn’t pulled comics out of its own network of specialty stores. Despite proclamations that webcomics would be the future of comics distribution, able to reach whole new audiences, they are still overwhelmed by content aimed at geeky niche audiences. (And while I’m not sure that things will stay that way, it’s worth noting that there hasn’t been much of a move to suggest otherwise just yet.) While online distribution does get around the physical problems associated with specialty stores (such as infrequency or occasionally surly staff), it does still require a certain degree of technical aptitude. It makes retail locations destination stores, where hardcore fans could find what they want but newcomers and gift-buyers would be unlikely to tread. Moreover, digital distribution limits the kind of technologies one can use to consume content: Webcomics generally can’t be held in the hand and flipped through until converted to print, and downloaded games over a certain size would need to be on PCs, despite that consoles are the platform of choice for many.

Of course, we’re only talking about one game still—Manhunt 2—which hasn’t even been announced as being distributed digitally. The whole issue could be moot. I’m just very wary about announcing that direct downloading will be the savior of game distribution in the wake of overly restrictive industry self-regulation.

Clarifying the Video Game Rating Process

Rumor has it that the uncut version of Manhunt 2 is available for download through torrent files online. You may remember Manhunt 2 as a PS2/PSP/Wii game that was slapped with an “Adults Only” rating by the ESRB, a self-regulatory industry body, until the publisher modified the game for a “Mature” rating. The earlier rating decision effectively denied the game distribution, as Nintendo and Sony refuse to allow AO-rated games on their consoles.

Whenever video game fan sites post any news about Manhunt 2, of course, the fans chime in with comments about how unfair the ratings process is. A number of these comments tend to be somewhat uninformed, blaming the government for banning the game, when in fact retailers are legally allowed to sell unrated or AO-rated games just as they can sell unrated and NC-17-rated movies. It’s the self-regulatory system maintained by the game industry that prevents equivalent content from ever reaching audiences—unless, of course, it finds its way on the internet.

In response to the above post, one Kotaku commenter and game industry professional clarifies the ESRB system based on his professional experience dealing with the ESRB. An interesting point brought up in the comment is that the ESRB will tell publishers what sorts of content will earn a game an AO rating, but won’t specify which content must be adjusted in order to achieve an M rating. On the one hand, this leaves creative control with designers and publishers; on the other hand, it may be somewhat confusing to only give vague feedback, but then again, it’s quite possible that some feedback comes in off the record. It would be interesting to see someone eventually compare the rating and re-rating process of video games with the analogous process in the film industry.

Update: IGN suggests the specifics of Manhunt 2 for an M rating.