RIAA Chief Needs Better Understanding of Fairness

Some people will use every single under-handed tactic in the book to win—and then, if they lose anyway, complain that the game was rigged.

In a New York Times op-ed yesterday, RIAA head Cary H. Sherman whines that his side lost the latest round of the copyright wars because, in his eyes, the opponents of SOPA and PIPA acted unfairly.

For those who have been following the copyright debate for longer, this claim is so laughably ironic as to need no rebuttal. That the Times ran it, however, suggests that a broader historical context is needed.

Among other groans, Sherman rails against the anti-SOPA crowd for describing the bills as “censorship,” which he describes as “a loaded and inflammatory term.” He says he would rather have “respectful fact-based conversations” using “reason, not rhetoric.”

Yet in the same essay, Sherman continues the content industry’s decades-long history of using every loaded and inflammatory term they can think of in describing infringement.

Sherman repeatedly eschews the more accurate term “infringement,” choosing the morally loaded (and inaccurate) term “theft” instead. He compares sites accused of online infringement to “stores fencing stolen goods.” He accuses SOPA opponents of “supporting foreign criminals,” “misinformation,” and “demagoguery.” He even wonders how many of the bill’s opponents may be among the members of Anonymous who engaged in retaliatory online attacks against his group.

These accusations against the moral rectitude of their opponents are a tried-and-true pattern for the content industries. Now Sherman is upset that SOPA opponents used a morally loaded term? Anybody who has paid any attention to the debate over copyright should laugh out loud.

In addition to being on the wrong end of the accusation of rhetorical hyperbole, Sherman is also on the side that has a far less sound record of making accurate factual claims and of including all relevant details.

In this very essay, Sherman plays fast and loose with the truth. He claims that the bills were “carefully devised” and were proceeding after policymakers had “studied the problem in all its dimensions, through multiple hearings.” This could hardly be farther from the truth.

The bills were written in blatant disregard of a veritable library worth of skeptical input and proposed amendments from the tech sector, civil society groups, internet engineers, legal scholars, and the public. Rep. Lamar Smith, the lead sponsor and Judiciary Committee chair, was trying to ram the bill through on the House side after a single hearing in November that was so stacked in favor of the bill—five supporters to just one opponent—that the very even-handed group Open Congress described this sham of a hearing as a “lovefest”.

During the markup in December, the bill’s House opponents practically begged Smith to hold more hearings to hear more of the technology and civil society sectors’ concerns about the bill. Smith was unmoved and tried to move forward anyway. That is hardly studying the problem “in all its dimensions,” to say the least.

Next, Sherman defends the legislation’s proposals to shutter accused infringers, saying it wouldn’t be censorship because these sites would only be shut down after a court had undertaken “a thorough review of evidence.” First, the claim that these one-sided hearings would be “thorough” is, um, generous; the operator of the accused website would not only not have any right to contest the charges in court, they would not even be notified until after it was over! In nearly all cases, the site would be shuttered before the operator knew what happened.

Further, this misleadingly implies that sites would only be affected based on a court proceeding, which is patently untrue. Under Section 103 of SOPA, a letter from a coypright holder would be sufficient to compel payment processors and advertisers to stop doing business with a site. This sets up a more extreme version of the DMCA’s notice-and-takedown provisions, except rather than nudging behavior by creating a safe harbor for sites that comply (and thus creating such strong incentives to comply that a takedown notice is almost compulsory), it actually compels companies to obey these letters from the content industry that have never seen the inside of a courtroom.

Of course such a system will be subject to both human error and genuine malfeasance. We know this for a fact because of the many examples of fraudulent, mistaken, and abusive takedown notices under the DMCA.

Of course, these are just the inaccuracies in the article itself. In general, on the count of circulating misleading information, the content industry and their allies in the government are so guilty as to have few peers in DC.

Their estimates of how much infringement costs the US economy are an especially rich source of whoppers. These estimates have varied wildly, but they have consistently been so high as to be laughable. You may have heard the figures of $250 billion and 750,000 US jobs bandied about on a regular basis (though, granted, this is an estimate for all IP infringement). It turns out this figure is literally made up out of thin air, but it has been cited endlessly by IP zealots of all stripes.

When will Sherman begin admitting what the Government Accountability Office found in its 2010 report (pdf), which describes all of the major problems in all of the industry-funded studies of copyright infringement? (The GAO concluded that it is “difficult, if not impossible, to quantify the economy-wide impacts” of infringement.)

Where is Sherman’s outrage about the MPAA’s laughable estimate that infringement costs the movie industry $58 billion/year? (For some perspective, that’s a figure larger than the GDPs of 10 different US states.)

Sherman (who, by the way, earns an annual salary of over $3m) has also made incredibly inaccurate and misleading statements on other matters, even doing so in person in Congress. For instance, in a 2004 hearing on proposed DMCA reforms, he contended:

Second, there has been an impression created that the DMCA disallows fair use. In fact, it allows consumers who legally acquire a copy to make a fair use copy and you have a triennial review process to provide even further assurance that fair use rights are not lost.

The DMCA only prohibits companies from selling black boxes to strip away content protection for any purpose.

Not only is this patently untrue, if Sherman was honest with himself, he knew it was untrue as he was saying it. Section 1201(a)(1) of the DMCA actively prohibits circumvention of access-controlling DRM (including, e.g., the protection on DVD discs), which makes it illegal for consumers to make fair use copies of the media they legally acquire. To say the DMCA “only” regulates devices is, ahem, incorrect.

Further, his reference to the Copyright Office-administered triennial review process is also disingenuous at best. In the 2000 and 2003 DMCA hearings, consumers and consumer advocates had twice asked for the right to make fair use personal copies of encrypted media such as DVDs, and twice the Copyright Office had told them no. As Oscar Gandy and I demonstrate, those proceedings were marked by the Copyright Office giving as few exemptions as possible under as narrow a set of terms as possible with little regard to consumer welfare. This has improved a bit in the years since, but Sherman’s claim would still be false today.

I fully support a rational, fact-based discussion about the future of copyright. Unfortunately, the content industries have spent at least the last three plus decades polluting the discursive waters with loaded rhetoric. Remember which technology it was that MPAA chief Jack Valenti invoked the Boston Strangler to damn? That’s right, the VCR, and he did so in 1982. They have also spent at least the last decade trafficking in skewed, inaccurate, and downright-made-up statistics to support their claim that the post-internet sky is falling.

Setting aside Sherman’s radical hypocrisy on loaded and inflammatory terms and misinformation, there’s a deeper critique here: For far too long, copyright law has been decided in a nearly-private discussion between the affected industries and select policymakers with little public input. Jessica Litman makes a very persuasive case that this was true throughout the 20th Century.

Since then, as I show in my forthcoming book, the EFF has gotten heavily involved in copyright advocacy, and Public Knowledge has become a respected on-the-Hill counterweight to the industry’s clamoring for ever-stronger copyright enforcement. These groups have also helped persuade the tech sector to stop acquiescing to the kinds of compromises that let technology-shackling acts like the AHRA and DMCA sail through in the 1990s. Thanks to these changes, it has been much more difficult for Big Content to write new changes to the copyright statutes.

Still, until late 2011, the details of a proposed bit of copyright legislation had never really penetrated into much of the public conversation. In November, over a million citizens expressed their opposition, and even this was not enough to make an impression on Congress. The content industries have been playing the lobbying game to a masterful degree for decades, and when those kinds of relationships and campaign donations are on the line, calls from angry constituents can be ignored—at least until there are so many calls that it melts the phone lines.

Last month, of course, everything changed, and now Big Content is outraged. MPAA chief Chris Dodd, as part of his own personal lashing-out (which as far exceeded that by Sherman), made far too transparent the nature of this game. On January 20, he went on Fox News and said:

Those who count on quote ‘Hollywood’ for support need to understand that this industry is watching very carefully who’s going to stand up for them when their job is at stake. Don’t ask me to write a check for you when you think your job is at risk and then don’t pay any attention to me when my job is at stake.

Dodd, a former Senator, may actually have crossed a legal line here, making explicit the implicit exchanges that characterize the systemic corruption that Lessig describes as DC’s “gift economy” of trading favors. Regardless of whether he could be prosecuted, however, is almost immaterial. Rather, it highlights the profoundly unjust and immoral way that copyright law has been made up until this point.

It was an unexpected development, to say the least, that so many of the world’s leading websites chose to act together to bring greater public attention and scrutiny to this important issue. I definitely count it as a blow for democracy and against the way of lawmaking that moves along without even the fear of substantial input from the voting public.

Whenever both RedState and MoveOn think a bill is bullocks, the odds are high that the proposal is not just imprudent, but that it is being advanced in a profoundly anti-democratic way.

If Sherman wants more fairness in policymaking, he should lobby for systemic reforms instead of railing against a genuinely democratic movement.

(10:25 pm: Edited b/c I accidentally posted the whole thing in twice. Whoops.)

Stop Online Piracy Act: Terrible Law. Great Example of Internet Mobilization?

We’re in trouble. The future of the internet is in danger, and if that danger comes to pass, it’s both unhealthy for and a very bad indicator of the health of our democracy.

Congress is already very close to passing companion bills to censor the internet, the Stop Online Piracy Act (SOPA, H.R. 3261) and the Protect IP Act (PIPA, S. 968). This is in addition to the domain name seizures already underway by Immigrations and Customs Enforcement (ICE).

All of these efforts are terrible ideas. Their supporters don’t understand or care about the internet and are happily willing to break the internet to appease the content industry. It is among the very worst contemporary examples of a government that is of, by, and for special interests, and if it passes, it will be a slap in the face of democracy, free expression, due process, and technological innovation. To top it all? It won’t even do much to stop online infringement.

Fortunately, there may be signs that things are turning our way. I’ll get to that further below.

EFF has a great summary of the several ways SOPA can lead to a site getting shut down. Section 102 deals with foreign sites and is the most all-encompassing, but 103 and 104 are actually easier for rights holders to (mis)use, and they apply to domestic as well as foreign sites, so I’ll start there.

Section 103 allows IP rights holders to go directly to a website’s payment processors and advertisers—and to demand that these third parties cease all business with the website operator. These payment processors and advertisers then have just five days to act. The website operator has the right to file a counter-notice that they are not substantially dedicated to infringement, but (a) they may not get the chance until after the payment processors and advertisers have already cut off payments, and (b) the third parties have no obligation to take the counter-notice as final and re-establish a business relationship.

Section 104 takes this “default=censorship” strategy even further. Everyone in the internet ecosystem—registrars, web hosts, advertisers, financial processors, search engines, etc. etc.—gets near-categorical federal and state immunity for any decision to terminate a business relationship with a site (or even to shutter a site) “in the reasonable belief” that the site is dedicated to infringement. Under Section 103, a rights holder must at least file a claim. Under Section 104, even the intimation that a site is infringing might be enough to get it shut down—and the site would have no legal recourse.

The Administration also gets in on the fun in Section 102, which gives the Attorney General the power to use government-mandated Domain Name System (DNS) filtering to stop Americans from accessing “foreign infringing sites.” A domain name, such as Google.com, is an easy-to-remember way to tell one’s computer to go to a specific numeric address (e.g., 74.125.39.147). It is this number (the IP address) that identifies that site’s server (the computer that hosts the website). Everyone enters the domain name into their browser’s internet address bar, but the numbers would take one to the same site. Click on the numbers above or paste them into your browser to see for yourself.

Under Section 102, if a site were found to be primarily dedicated to infringement, the government could “seize” the site’s domain name. More precisely, the domain name registrar—a company that keeps track of which domain names are attached to which servers—would, if US-based, be compelled to stop sending users to the correct server. All domestic ISPs would also be forbidden to take you to the right server (the number behind the name), and advertisers and banks would be forbidden from doing business with these companies.

If the government found a foreign site to be infringing under these bills, the government would try to make it disappear for US audiences.

If this bill becomes law, we will see the shuttering and/or financial starvation of thousands of websites—which are, of course, a form of speech and/or press. They would be silenced and/or starved based on either an affidavit by a rights holder, a mere suspicion by a business partner, or (at best!) a one-sided court hearing with a low burden of proof. Little wonder then that legal scholars from (my friend and) rising star Marvin Amorri to the legendary constitutional scholar Laurence H. Tribe (pdf) have concluded that the bills are unconstitutional threats to the First Amendment.

By now it should be clear that, if passed into law, SOPA or PIPA would have devastating consequences for innocent actors who are mistakenly identified. The web seizures undertaken by U.S. Immigrations and Customs Enforcement (ICE), beginning in 2010, illustrate this peril all too well. Several websites have been taken down for posting media files that were authorized and even actively shared by the copyright holders or their representatives. Others have apparently been seized merely for linking to allegedly infringing content.

One in particular, DaJaz1.com, has become the cause célèbre of the anti-domain-seizures movement. It was one of a cluster of hip hop websites seized last year. Major voices from Vibe to Kanye to P. Diddy were actively promoting the sites, hardly a sign that they are dedicated to copyright infringement.

Last week, the feds finally gave up on DaJaz1. TechDirt (which has nearly gone all-SOPA, all-the-time) had the headline:

Feds Falsely Censor Popular Blog For Over A Year, Deny All Due Process, Hide All Details…

Their opening clarifies exactly how unconstitutional this is:

Imagine if the US government, with no notice or warning, raided a small but popular magazine’s offices over a Thanksgiving weekend, seized the company’s printing presses, and told the world that the magazine was a criminal enterprise with a giant banner on their building. Then imagine that it never arrested anyone, never let a trial happen, and filed everything about the case under seal, not even letting the magazine’s lawyers talk to the judge presiding over the case. And it continued to deny any due process at all for over a year, before finally just handing everything back to the magazine and pretending nothing happened. I expect most people would be outraged. I expect that nearly all of you would say that’s a classic case of prior restraint, a massive First Amendment violation, and exactly the kind of thing that does not, or should not, happen in the United States.

They go on to detail how DaJaz1’s owners were stonewalled, blockaded, and never allowed their day in court by the feds—for over a year—while the feds managed to arrange a court process during which all court proceedings (including several granting extensions that DaJaz1’s owners should have been able to contest) were secret and all the filings were sealed and not open to the site owners.

Once the details of the accusations came out, it turned out that the allegedly infringing songs were given directly to the blog by copyright holders’ agents in the hopes of promoting the music. The RIAA was the source of the original complaint, and one of the songs in question was not even released by an RIAA label.

Another operation using similar methods but for a different goal—seizing sites with child pornography—mistakenly took down 84,000 sites in one shot, resulting in each of those thousands of sites being down for 3 days. Even worse, each domain was redirected to an ICE notice that the website had been seized for trafficking in child pornography. Nearly all of those sites were not dedicated to child pornography, and to my knowledge, ICE never even apologized to them for the error.

Further, it takes little imagination to picture a devastating chill on legitimate sites that make fair uses of copyrighted content. If I run a news and commentary site, I may be less likely to include portions of copyrighted works, even if such inclusion is very likely fair use and crucially relevant to my discussion of the matters at hand.

In particular, media criticism sites would be in grave peril; how long after the bill’s passage would it be before partisan news outlets started using the new law to silence their critics? How long before FoxNews goes after Media Matters for America? Think that’s far fetched? Witness Righthaven’s efforts to sue bloggers for using even brief quotations. And what was on the list of threats they used to scare people into paying licensing fees? Domain seizure. Among other things, these bills would give a hunting license for those who would like to shutter the sites of upstarts, competitors, and critics.

At least these bills will stop piracy, right? Hardly.

Dedicated infringers will still find infringing sites—especially foreign sites that host infringing files with impunity. Remember, the feds are seizing the site name (e.g., Google.com) but not the number behind it (74.125.39.147). All you need is a small program to tell your computer to go to the right number—and, because the bill will forbid your ISP from getting you there, a proxy server in the middle. The same strategies have already proven successful for dissidents behind government firewalls, who still manage to upload and download forbidden information—despite far more active, on-the-fly, and resource-intensive censorship schemes.

Programmers have already developed tools to work around these restrictions. The law hasn’t even passed yet, and already there is a Firefox plugin that would help users work around SOPA-like restrictions.

You might think that at least payment processors and advertiser networks would be scared off of dealing with these sites. If it were that easy—if we could target the banks and advertisers that support internet scofflaws—then spam and other internet evils would have long since been wiped out.

The internet breeds decentralized innovation, and innovators will spring into action to help users circumvent ISP and search engine filters as well. This software will also be considered grounds for legal action—with the goal being to ban the tools, as the 1998 DMCA bans DRM-hacking devices. That’s worked so poorly that multiple free circumvention tools are available for most major DRM systems. There are so many DVD rippers that LifeHacker has a post comparing rippers to help you choose the best.

As if all of the above failures and offenses were not enough, these bills would harm our economy and reduce our competitiveness in the internet age. If SOPA were law when YouTube was getting started, the site probably would have been shuttered. The next YouTube will be much less likely to be born in the US if it can be kicked out of the legitimate portion of the web before it has really grown up. The EFF warns that sites like Etsy, Flickr, and Vimeo would be in danger.

Internet innovation is one of the few bright spots in the economy, and major internet firms have warned that this will increase the cost of regulatory compliance and decrease our competitiveness. Venture capitalists have also warned that SOPA would substantially decrease their willingness to invest in US technology start-ups. Union Square Ventures, just down the street here in NYC, even put this link saying the same thing on their homepage.

Senator Ron Wyden (D-OR) has placed a hold on PROTECT-IP, and he has even vowed to filibuster the bill should it come to the Senate floor. Because of this principled opposition and his long record of standing up for internet freedom, I made a donation to Sen. Wyden’s re-election campaign—even though my wife and I are watching every dollar as we save to buy our first home.

So these bills are terrrrrible, but they enjoy a lot of support in the House and Senate—30 cosponsors in the House, and a whopping 40 in the Senate. This post is derived from an email I sent to my Senators and Representative, and all three wrote back with disappointing notes to the effect of, “Yeah, but we gotta stop internet infringement.” Surely this is unrelated to the content industries having spent far, far more money on lobbying and campaign donations than their opponents on this issue.

Which brings us back to democracy.

In response to these bills, we have seen the swelling of a major internet movement—nearly the groundswell we saw around network neutrality in 2006. Opponents created a campaign declaring November 16—the day of a hearing in the House that was heavily stacked in favor of SOPA—as “American Censorship Day,” a campaign that went viral in a major way. Over 6,000 sites including Wikipedia, Creative Commons, Mozilla (including the default start page in Firefox), Reddit, TechDirt, and BoingBoing, directed traffic to a single action site, AmericanCensorship.org. At the time, the site said that it had generated over 1,000,000 emails and four calls per second to Congress. To date, AmericanCensorship.org has earned over 650,000 Facebook likes and 63,000 tweets.

This is democracy in action. After all, most people don’t support draconian copyright enforcement, and a solid majority of people oppose government attempts to block access to infringing materials. (40% support, 56% oppose; this skews to 33% for, 64% against when framed as censorship.)

If Wyden’s hold and the opposition can stop this fast-moving train(wreck), then perhaps democratic values and majority opinion can actually shape the future of the internet. Just maybe, a public outcry can stop a terrible idea backed by special interests.

If not, we may be in big trouble—and not just because the internet will be broken.

Thanks to Newsweek for Having Me at News/Geek

Just a quick, 24-hours-overdue thanks to the folks at the Newsweek Dev Team for hosting me last night at their third News/Geek event.

I had a rollicking good time, the questions were awesome, and the post-talk celebration was even better. If you want the Powerpoint, it’s here in all its 12.2 MB glory.

Further discussion welcome.

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.

Argument Against Joining Lessig’s Strike

Lawrence Lessig, who is quite nearly my idol, is trying to enlist would-be campaign donors in a strike for change. The idea is that campaign donors will go on strike; we’re not to give money to candidates for federal office until and unless those politicians commit to publicly funded campaigns.

I’ve been thinking about this for awhile now, and I think Brian Hurt over at Enfranchised Mind provides several good arguments to rethink this strategy. Read why he’s not joining Lessig’s strike.

I think his counter-plan–give hugely to opponents, including primary opponents, of the worst examples of that which you oppose–is a good solution. Hurt cites Club for Growth as having particular success with this strategy.

A friend of mine who’s done a lot of work on one particular issue in one state* also recommends this model. With just a few victories over particularly objectionable politicians, he’s had an outsized influence in reshaping the debate around that issue.

While I’m happy to see Lessig trying to reform politics–desperately needed–my other concern is the unfortunate likelihood that this will harm Democratic candidates in the name of small-d democracy. Lessig’s a Dem, I’m a Dem, and I’m concerned he’ll be too persuasive in recruiting other Dems, starving our side in the zero-sum game of 2-party politics.

Empirically, the internet is a better tool for mobilizing Dems than Republicans (Hindman, 2008, pp. 22-26). Small online donations helped put Obama in the White House. The people who are most likely to hear Lessig’s call helped make the 2006 and 2008 elections into big wins for Dems. I’ll bet Karl Rove is happier to see Lessig taking this tack than is Howard Dean.

This is an exciting idea, but I do think Hurt’s Club for Growth model would be far more effective.

*Note how I’m anonymizing my sources; this is a warm-up for my next research project, which will involve a lot of anonymous interviews of policy actors. Are you interested in sharing your experiences as a policy advocate of one sort or another? Please contact me at my gee male account, the first part of which is billdherman.

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.

Dems to Colleges: Police Copyright or Lose Funding

Two Democratic chairs of key House committees introduced a bill yesterday that would require colleges to police copyright and pay off the entertainment industry.

Buried on pages 411 and 412 of the 747-page bill, the College Opportunity and Affordability Act of 2007 (pdf), is the following:

Each eligible institution participating in any program under this title shall to the extent practicable—
(1) make publicly available to their students and employees, the policies and procedures related to the illegal downloading and distribution of copyrighted materials required to be disclosed under section 485(a)(1)(P); and
(2) develop a plan for offering alternatives to illegal downloading or peer-to-peer distribution of intellectual property as well as a plan to explore technology-based deterrents to prevent such illegal activity.

In other words, if a university does not offer some sort of “alternative” (read: paid subscription) to students and move toward actively filtering copyrighted content, all students would lose federal student aid.

This bill is sponsored by George Miller (D-CA), chairman of the House Education and Labor Committee, and Ruben Hinojosa (D-TX), chairman of the Subcommittee on Higher Education, Lifelong Learning, and Competitiveness. These are the representatives who are, in principle, supposed to stand up on behalf of universities.

The entertainment industry will never be satisfied until colleges actively:

1. Actively pay the entertainment industry via some form of subscription service, e.g. the new Napster, and
2. Block or monitor all other peer-to-peer traffic.

I’ve been trying to tone down my blogging rhetoric, but I’ll make an exception here: This disgusts me. The bill doesn’t even have a number yet, and Miller’s already promising a markup next week. What representative even has time to read this tome by then?

Nobody in Congress bats an eye that Verizon enables enormous amounts of infringment on their networks, but every college and university in the country is now under the gun to amend a juggernaut act despite the express-lane push from the chairmen-authors.

Miller and Hinojosa are happy to throw academic values like the free circulation of ideas, not to mention the scarce resources of educational institutions, in the toilet. Even worse, they’re railroading it through. Shame on them.

lessig on corruption

elucidating, and brilliant as always, Lessig is giving us a preview of his work on corruption. Some of his arguments relate strongly to those made by Etzioni earlier, who helped us understand that oftentimes it is dollar for dollar more efficient or profitable to invest money in lobbying than actual innovation.