Category: Economic Analysis of Law

Single-Payer Music Care?

Les bon temps roulez! It appears the French legislature has picked up on the conversation started by one of Christine Hurt’s posts here a few weeks ago on the iPod, and wants to do something about Apple’s iTunes lockout of rival music sellers and players. The IP blogosphere is abuzz over the move, which directly challenges Apple’s aggressive efforts to leverage dominance in the portable-player market into a monopoly over digital music retailing.

Libertarians are likely to applaud moves like this, as this Cato Institute Report demonstrates. But I want to push the dialogue in an even more market-oriented direction. Since we’re thinking big here, why don’t consumers take some self-help measures? The recording industry is extraordinarily concentrated, provoking antitrust investigations left and right. So why don’t consumers form buyers’ cooperatives? If the “big four” own 90% of the music, why don’t consumers form four or so buyers’ groups that will negotiate access to music? Each would manage a library with about one-fourth of recordings. That seems to be the model behind Europe’s efforts to hold down health care costs—have one or a few big players form a monopsony (or oligopsony?), and bargain down the price.

Now I’m not saying that’s always the best solution for health care—as Cutler, DiMasi, and others have noted, a lot of innovation is funded by the fragmented buying pool in the U.S. system. But while I care a lot about innovation in health care, I’m a bit agnostic about innovation in music. Can we reliably say that the whole lot of music composed and performed after 1980 is worth more than J.S. Bach’s oeuvre? I don’t know. So I don’t care if “single-payer music care” ends up reducing revenues to the culture industries. Admittedly, in the end, I think it would actually help those industries, as William Fisher so skillfully documents in his Promises to Keep. But that’s another post…

Boutique Medicine: Tax it, Don’t Ax It

Sick of waiting weeks for a doctor’s appointment? Or hurried visits? Well, “concierge physicians” have got a deal for you. Just pay a retainer to a practice (usually between $2,000 and $5,000 annually), and you’ll get immediate attention, long visits, and personalized preventive care. There’s just one catch—when you and, say, 400 other health care “consumers” sign-up at a given practice, it drops the other 1500 patients it had been serving to concentrate solely on retainer patients.

Is this problematic? Some important Democrats say yes, and have moved to kick “concierge physicians” out of the Medicare program. Tommy Thompson resisted that move when he headed HHS—and now he’s on a leading concierge franchise’s board. But since he’s left, some lower level officials at HHS have been raising concerns about “boutique medicine.”

After thinking about retainer care for a while, I have a few conclusions about these efforts. In a nutshell: I think it’s unwise to try to ban concierge care outright. But I do worry about it. It’s consonant with a larger movement that TNR describes: “to radically transform health insurance altogether, so that risk is gradually transferred away from large groups ( i.e., the government and large employers) and onto individuals (i.e., you).” If health insurance starts to move from a “defined benefit” to a “defined contribution” model, we can count on a diversion of scarce medical resources from a common risk pool to pockets of well-heeled consumers. Here’s why I think so…

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Dedicated Ventilators?


Imagine that bird flu hits the United States, and you’re a doctor at a hospital filled with 700 infected patients who all need ventilators to help them breathe. You have 100 ventilators. How do you allocate them? To the sickest? the youngest? the oldest? the most likely to live? the ones most likely to die without one?

The choices would be unthinkable, as Bernard Williams and Martha Nussbaum have suggested. We should be doing much more to avoid them, or at least make them less stark. But as this article from the NYT shows, we are instead doing very little:

Right now, there are 105,000 ventilators, and even during a regular flu season, about 100,000 are in use. In a worst-case human pandemic, according to the national preparedness plan issued by President Bush in November, the country would need as many as 742,500. To some experts, the ventilator shortage is the most glaring example of the country’s lack of readiness for a pandemic.

Now aren’t you happy that market forces got rid of all that “excess hospital capacity” in the 80s and 90s? According to one doctor from the Mayo Medical School, “Families are going to be told, ‘We have to take your loved one off the ventilator even though, if we could keep him on it for a week, he might be fine.'”

Given various budgetary crises, we can’t expect much help from government. Is there any creative solution? I’d like to suggest one: Let individuals buy ventilators to dedicate for themselves and their families (at nearby hospitals), in exchange for their donation of one ventilator for each one they dedicate. Here’s some “figures”….

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Three Cheers for Categorizers!


Dan mentioned an indefatigable blogger who’s now taxonomizing over 600 law-related blawgs. I’ve heard a lot of critics of bloggers complain about “navel-gazing” in this field. But this type of work is exceedingly valuable, as I try to demonstrate in a recent piece on “information overload externalities.”

In my view, categorizers are a uniquely beneficial “genus” in the information ecosystem, and they deserve special solicitude from copyright law. Categorizers should be able to provide small samples or clips from whatever works they organize or index, without begging for licenses from the copyrightholders who own the sampled work.

Unfortunately, categorizers have been getting some rough treatment by courts lately. For example, Google recently lost a battle against “erotic image purveyor” Perfect 10 because the low resolution images on its “image search” might reduce Perfect 10’s sales to the “cell phone viewing” market. The Author’s Guild (which appears neither to represent all authors nor to be a guild) is suing to stop Google’s digital book indexing project—even though Google permits any aggrieved copyright owner to opt out! They believe Google should have to work out, individually, permissions for each of the millions of books they want to index.

Imagine if uber-taxonomizer 3L Epiphany had to ask permission to quote or cite to any of the blawgs he compiled. Are we really going to let a few cantankerous holdouts veto an effort to archive and index the world’s expression? I hope not, for a couple reasons…

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And a Fashionista Shall Lead Them

fashionattitude.jpgIn honor of Chloe’s triumph on Project Runway (design at right), I thought I’d blog about Chris Sprigman’s and Kal Raustiala’s brilliant paper, The Piracy Paradox: Innovation and IP in Fashion Design.

“Soft IP” rights (as copyright and trademark are often called) have grown enormously. In many industries, copyrightholders are insisting on the right to control even fragments of works. Trademark holders can protect not only their marks, but also aspects of the packaging and design of their products. Promoters of this trend claim that without strong rights, no one would invest in music, books, marks, or other easily copiable expression.

But IP protection apparently isn’t that necessary in the fashion industry. In couture, “copying is rampant . . . [y]et innovation and investment remain vibrant.” The authors attempt to solve this “piracy paradox” by describing how the “snob value” of high fashion is preserved via “induced obsolescence.” As a design gets copied, its value falls precipitously–driving early adopters to buy newer designs.

The article hits some sublime points, such as Jean Cocteau’s observation that “art produces ugly things which frequently become more beautiful with time. Fashion . . . produces beautiful things which always become ugly with time.” But it sidesteps some normative questions about induced obsolescence that might point to new directions for IP scholarship…

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From Gradgrind to Glaeser

Economic analysis is often illuminating, but sometimes it just seems to provide cover for new Gradgrinds to ply reductionist utilitarianism. Case in point: the NYT Magazine has a glowing profile of Edward Glaeser, an economist from Harvard. As a patrician, provocateur, and polymath, Glaeser is reported to have single handedly revived the field of urban economics. Here are some of his prescriptions (as reported by Jon Gertner):

1) Don’t rebuild much of New Orleans— just let hard-pressed residents move somewhere else (and expect our exceedingly eleemosynary Congress to cut checks to each resident for $200,000, since that’s what they were planning to spend on infrastructure!). And don’t try to revive struggling rust-belt cities like Detroit, either.

2) “Car-based cities” are great; they “enable residents to buy cheaper, bigger houses,” and “the average car commute is about 24 minutes; on public transportation, it is around 48 minutes.”

I have a few questions for Glaeser. First, does his model value stability at all? Let’s say that this process of dispersion in search of better jobs leaves very few nuclear families with extended families nearby to help with child and elder care. Is the resultant need to hire day care workers and visiting nurses a boon to the economy, because unpaid labor to that end wouldn’t count in the GDP? Just how parsimonious are his models?

I have some personal experience with the “exodus from the Rustbelt” that Glaeser finds so appealing…

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Health Care: The Big Picture

Paul Krugman and Robin Wells have a long review piece in the NYRB correcting some common misperceptions of the U.S. health care system. They provide good empirical evidence that we both spend more than comparable countries and get worse results overall. Our system is “is unique in denying necessary care to people who lack insurance and can’t pay cash.”

When I talk about such chronic underperformance, I’m often “reminded” that while the U.S. may have an infant mortality rate that’s higher than Cuba’s, it’s still the best place for someone with insurance to get sick. Krugman and Wells chip away at this notion as well, pointing out that:

The frequent claim that the United States pays high medical prices to avoid long waiting lists for care also fails to hold up in the face of the evidence: there are long waiting lists for elective surgery in some non-US systems, but not all, and the procedures for which these waiting lists exist account for only 3 percent of US health care spending

Also, anyone who’s visited an ER lately has experienced the “spillover effects” of 41 million uninsured: endless waits as bad coughs and chronic pain that should have been treated in a doctor’s office get routed to providers of last resort. Sadly, policymakers who might be exposed to this demoralizing spectacle tend to circumvent the normal triage procedures. Economic apartheid distorts their perception of reality.

So what to do? Krugman and Wells recommend Democrats “go for broke” and propose a “single payer” plan, but there are some problems with that…

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Puffery Link

For those teased by earlier posts, you can now download from SSRN my draft paper, The Best Puffery Article Ever. I’m happy to say that it will be appearing in the Iowa Law Review in a (for our business) really short period of time – late Spring/early Summer. If you have comments on the draft piece, I’d be thrilled to get them. Just send me an email.


The Unraveling of the Market for Law Review Submissions

book21a.jpgProfessors, start your engines: it is time for the spring rush of law review papers. For those of you who are not law professors, aspiring professors, or student editors, you will be unfamiliar with the spectacle of thousands of professors submiting articles to dozens and sometimes hundreds of journals simultaneously, and, having received offers, attempting to expedite “up the ladder” under short time deadlines. Professors’ goals in this process are varied: maximizing characteristic X of the journal for citation/tenure/lateral movement purposes; maximizing quality of editing required (or minimizing it, depending on mood); obtaining “lead article” status; minimizing time to publication; selecting for generous copyright permissions; etc. Editors and journals simultaneously are competing to get the “best” articles, judged by a variety of measures (author individual prestige/author’s institutional prestige/expected citation by journals or important courts); beating a competing journal for quality work; making a statement on an issue of public importance; etc.

In any event, this is all old news. What is clearly new is that the time for submitting law review articles is creeping backwards. Just ten years ago, my colleagues tell me, late March was the beginning of the cycle and articles were routinely submitted and accepted in May. Now, as Kaimi’s post has highlighted, late February is the beginning of the cycle and many journals will be filled (at least for this round) by late March. Moreover, anecdotally, journals are increasingly “exploding” offers, trying to reduce competition through segmenting the market; and moving up board transitions to before Spring Break.

So what’s up? It seems to me [and, no, I can’t seem to find someone else who has said this although it isn’t earth-shattering] that we are experiencing what Alvin Roth called the “unraveling” of a sorting market. Classic examples of unraveling occur in the labor context – the judicial law clerk market is the paradimatic case – where the time the market begins to operate slowly is pushed back in time as the relevant actors try to get a first-mover advantage. As a result of this market failure, relevant information is not disseminated, and sub-optimal decisions are made.

In our law review example, similarly, the moving back of decisions has multiple pernicious effects. Authors may not be able to get any sense at all of the “market value” of their article (loosely reflected, the myth goes, by multiple offers at a variety of journals). Conversely, journals feeling pressure to move quickly will increasingly resort to proxies for quality like letterhead, prior publication, and the eminences listed in the article’s first footnote (which tell you who an author’s friends and professional contacts are).

Roth posited four stages of such markets:

Stage 1 begins when . . . the relatively few transactions [in the market] are made without overt timing problems. By the middle of stage 1 . . . some appointments are being made rather early, with some participants finding that they don’t have as wide a range of choices as they would like–students have to decide whether to accept early job offers or take a chance and wait for better jobs, and some employers find that not all of the students they are interested in are available by the time they get around to making offers. The trade journals start to be full of exhortations urging employers to wait until the traditional time to make offers, or at least not to make them any earlier next year than this year. Towards the end of stage 1, the rate of unraveling accelerates, until sometimes quite suddenly offers are being made so early that there are serious difficulties distinguishing among the candidates. There is no uniform time for offers to be made nor is there a customary duration for them to be left open, so participants find themselves facing unnaturally thin markets, and on both sides of the market a variety of strategic behaviors emerge, many of which are regarded as unethical practices. Various organizations concerned with the market may have proposed guidelines intended to regulate it, without notable success. As stage 1 ends, influential market participants are engaged in a vigorous debate about what can and should be done.

(Roth & Xing 1994, p. 996). By my reading, we’re in the middle of a stage 1 market. (Taking blogs for “trade journals,” check out Christine Hurt’s posts flagging the issue and exhorting others not to play the expedite game).

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Free Cabs, Free Tuition, and the Power of Deregulation


Yesterday’s NY Times featured an article about a NY cabbie who offers free rides and apparently cleans up on the generous tips. This reminded me of an experiment conducted by NYU Law a couple years back. A cohort of students were admitted for zero tuition with the hope that they would give more generously as alumni (taking advantage of the federal government’s tax deduction subsidy.) This left me wondering: when does this strategy of giving away a product or service ultimately prodcue greater revenue? And relatedly, are there other situations where deregulating behavior – i.e., eliminating a requirement that people behave in some way – might lead to more “good” behavior (defined in the same way as regulators might) on the part of these people.

When does giving away a product produce greater revenue? In the case of the cabbie, I think that people are tipping him beyond the normal fare for a few reasons. First, passengers probably love the choice to pay what they want. They also appreciate the trust he puts in them by allowing them to define the fee. Finally, they probably enjoy the novelty of a free cab ride. My guess is that giving away a product works particularly well where there is a one-on-one relationship between provider and consumer. But perhaps most importantly, the cost of a cab is generally known (most locals probably have an idea of what a meter fare would have been), and that cost is often BELOW actual market value. I can think of many situations – rush hour, rain, etc – in which most cabs could double their fares and still stay full.

The law school give-away offers students one more benefit (beyond choice, trust, and novelty): time. Students have limited income and NYU’s program offered students a chance to pay NYU after the six-figure incomes kicked in. But I wonder if the law school experiment is paying off? I think people over-tip the cabbie because they appreciate what he is doing for them, personally. And in the law school context, we’re not talking about dropping $20 unnecessarily; it takes serious commitment to get an alum to donate $100K (plus interest). Of course, it helps that Uncle Samuel will subsidize that gift.

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