Category: Law and Inequality

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Expanding Bob Jones University v. United States

In Bob Jones University v. United States, the IRS revoked the tax exempt status of two religiously affiliated schools because they discriminated on the basis of race. One school (Goldsboro Christian Schools) refused admittance to black students, the other (Bob Jones University) barred interracial dating and marriage. Both schools claimed that the discrimination was religiously mandated, and that the loss of their tax exempt status violated the Free Exercise Clause. The schools lost. The Supreme Court characterized tax exemptions as a taxpayer subsidy for charitable organizations that, at the very least, do not contravene fundamental public policy like our commitment to racial equality, and held that racist schools did not satisfy that requirement: “[I]t cannot be said that educational institutions that, for whatever reasons, practice racial discrimination, are institutions exercising beneficial and stabilizing influences in community life or should be encouraged by having all taxpayers share in their support by way of special tax status.” In addition, the Court held that eliminating race discrimination in education was a narrowly tailored and compelling state interest. The bottom line is that a university may discriminate based on race, but it should not expect to be considered a beneficial organization entitled to tax subsidies.

Assuming Bob Jones was correctly decided, should its holding be limited to discrimination in education, or discrimination on the basis of race? I think not. In fact, the IRS denies tax exempt status to any nonprofit organization, religious or not, that invidiously discriminates on the basis of race. If you are a church that excludes blacks, or won’t let blacks become ministers, you may have the constitutional right to exist, but you won’t get any government money to help you prosper. Should the same policy apply to organizations, religious or not, that invidiously discriminate on the basis of sex?

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On Information Justice

Like the other commenters on From Goods to a Good Life, I also enjoyed the book and applaud Professor Sunder’s initiative in engaging more explicitly in the values conversation than has been conventionally done in IP scholarship. I also agree with most of what the other commenters have said.  I want to offer plaudits, a few challenges, and some suggestions about future directions for this conversation.

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Is IP for People or Corporations?

Another day brings another cornucopia of exciting and important comments on my book, From Goods to a Good Life: Intellectual Property and Global Justice. I thank Professors Molly Van Houweling, Jessica Silbey, Michael Madison, and Mark McKenna, and earlier Concurring Opinions commentators —Professors Deven Desai, Lea Shaver, Laura DeNardis, Zahr Said, and Brett Frischmann—for reading my book so carefully, and engaging it so helpfully. I focus here on Professor Van Houweling’s framing of an important issue arising in the discussion.

Professor Van Houweling has provoked stimulating discussion with her astute observation of two competing visions of intellectual property within the emergent “capabilities approach” school of intellectual property we identified earlier this week. Professor Van Houweling contrasts Professor Julie Cohen’s alternative justification of copyright as a tool for promoting corporate welfare (sustaining creative industries), with my attention to intellectual property laws as tools for promoting livelihood and human welfare (sustaining human beings in their quest for a good life).

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For whom does IP work?

One of the major questions Professor Sunder’s book asks is whether IP works for the people who make it. This is a question that US law does not grapple directly with, but assumes and then glosses over. It is an important question. As Molly Van Houweling mentions, drawing on Julie Cohen’s fantastic article on IP as corporate property, IP certainly works for some companies some of the time. Insofar as companies are intermediaries (distributors of IP protected goods) and the licensees of the creators of those goods (either through work for hire or assignment), firms can and do make some of their money from IP revenues, which IP is generated by individuals working alone or in groups.

The story of Solomon Linda is an example of what can go wrong from the initial creation to the widespread distribution of creative expression that has commercial value. Firms will say that without intellectual property, they cannot harness or nourish the creativity to reproduce, commercialize and distribute it, that the conditions of their productive and distributive business require exclusive rights in the intangible goods. (I think this in part right, but it is largely overstated in light of the the many other ways in which companies make money, such as first to market, complementary products, contracting for services, reputation. And the extent to which the company depends on IP is industry specific.) Individuals will say that the best environment for their creative work is a situation in which autonomy and collaboration are optimized. Individuals want time and space to do their work, and they need some funding to pursue it, but that funding may come from a day or night job that does or does not directly relate to their creative or innovative activity. Ideally, the way the individuals earn a living derives from the creative or innovative work they do, and if that is the case, they still seek autonomy and collaboration, which are often at odds with corporate structure and IP exclusivity. Sunder’s book points out many of these conflicts between individual welfare and corporate welfare. My puzzle, these days, is why there must be such inconsistency. How (when and why) does the corporate interest so greatly diverge from the individual’s interest and what, if anything, can be done about it to maximize IP’s functionality in our global system of creative and innovative production? Sunder’s book goes a long way to putting these issues front and center.

Fractal Inequality and Politics

According to the Fed, the the net worth of the typical American household was $77,300 in 2010. The new vice presidential candidate, Paul Ryan, had a net worth of $3,207,000 in 2010—about 40 times that of the median household. The man who picked Ryan has about 80 times more wealth than him, with a net worth of $250,000,000. And one of the Romney/Ryan ticket’s greatest supporters, David Koch, has about $25,000,000,000, about 100 times Romney’s fortune. David’s brother and Sheldon Adelson are about that wealthy, too, and very politically active.

If this example sounds terribly partisan to you, just substitute in your favorite left wing billionaire and Obama/Biden, or consider the fabulous lives of Bill Clinton or Tony Blair after they retired from office. Romney/Ryan is more interesting here because of the fractal inequality on display.

Numbers like these take a little time to sink in (and perhaps they never do, given our cognitive limitations). They need to be explored and illuminated. What does it mean that, say, David Koch could double each half of the GOP ticket’s net worth by giving Romney one-hundredth of his fortune, or giving Ryan one five-thousandth of his fortune? Consider how readily you might give 1/5,000th of what you own to a charity, or use it to pay for a magazine subscription, or a dinner out. The median household might not think twice about using its $15 (about .0002 * $77,000) to buy a pizza.

What does it mean for politics when leading figures of either party can leave office and expect lucrative sinecures from tycoons or corporations? Who really is in charge?

Automation and Jobs, cont’d

The always excellent Thomas B. Edsall has a piece today discussing the dilemmas addressed in the “jobless futures” post I wrote over the weekend. Here are some of the questions posed by “young researchers and prospective entrepreneurs at Singularity University” whom Edsall observed:

How much can wealth accumulate for a small slice of the population at the top, while large numbers of people are forced to work for ever lower pay or to drop out of the workforce altogether? For such a future society to function, would wealth need to be (coercively) redistributed from the top to those below, in order for the mass of the jobless population to survive? Who would have power and how would tax and spending policies be determined in such a radically bifurcated, automated, workless society?

These are tough questions, but at least they are the right questions. The management experts interviewed by Edsall have 19 proposals for addressing this transition.

Exiling the Poor from the Insurance Market

John Roberts’ jurisprudential wizardry in NFIB has been compared to the artistic genius of pro wrestlers and rappers. Poor Americans in states newly empowered to resist the ACA’s Medicaid expansion may need even more ingenuity to get themselves insured. Both Kevin Outterson and my colleague John Jacobi have observed the perplexing predicament imposed on the poor in states that keep Medicaid 1.0, and resist Medicaid 2.0. From Jacobi’s post:

The reform provides insurance subsidies through tax credits. The credits are calculated on a sliding scale, according to household level, for people with income up to 400% of FPL [the federal poverty line] — subsidizing more generously someone earning 200% of FPL, for example, than someone earning 350% of FPL. But, under 26 USC 36B(c)(1), credits will not be distributed to those with incomes below 100% of the FPL. Why? Because Congress assumed states would take up the Medicaid expansion, obviating the need for exchange-based subsidies for the very poor. . . .Bottom line: states rejecting Medicaid 2.0 will not only forego about 93% federal funding for the program between 2014 and 2022, but they could also be depriving the poorest of the uninsured from any shot at coverage — potentially affecting millions nation-wide.

Georgia hospitals are already worried about the “unexpected prospect of lower reimbursements without the expanded pool of patients” to be covered by the Medicaid expansion:
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Academic Biases (Regarding Google, and Beyond)

Yesterday a vice president of the European Commission announced preliminary conclusions regarding the EU’s antitrust investigation into Google. The EC has warned Google to “change or face fines,” as Alex Barker puts it, noting “possible antitrust problems in how Google favours its own products in search results.” I cannot predict exactly how far US cases will go, or if the EC’s efforts to guide the development of the search market will succeed. (I have offered some preliminary thoughts at Danny Sokol’s excellent symposium on Google at the Antitrust & Competition Law Blog.) However, I applaud the EC for its attention to the matter.

After attending the “Regulating Search” conference in 2005, I spent some of my early academic career trying to understand whether complaints about Google had merit. I was publishing on the matter in 2006, and have continued to do so. When I started writing about this topic, some established scholars mocked my interest in it. After I published Federal Search Commission? with a co-author, one IP professor loudly scoffed that “maybe we need a federal map commission” at a conference where the restaurant location was unclear. Establishment voices who have fought for net neutrality looked with disdain or bored incomprehension at someone who dared to question a Silicon Valley darling. One scholar even threw a draft of mine on the table at a faculty talk, loudly muttered “This is not scholarship!,” and boldly predicted that Google’s dominance of search couldn’t last for more than a few years. (That was in 2008.)

I don’t know whether the EU’s actions today will lead these skeptics to a different view of my work, or to condemnations of creeping socialism. But I do think the EU has now confirmed that it was appropriate for a legal scholar to raise the types of questions I have posed over the past six years. They deserved to be part of the agenda of internet law.

This is a somewhat roundabout (and hopefully not too self-pitying) response to Frank Bowman’s earlier post on the role of outside funding in academic research (and particularly Eugene Volokh’s intervention regarding First Amendment protection for search results). Like Bowman, I worry about the effect of outside money on research. However, I think it is often the academy’s own biases and presumptions that most threaten independent thought.
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Please Make Room for the Stateless Superrich

A recent panel at the Milken Institute decried a grave injustice. Jeff Greene, a billionaire real estate investor, noted that a single mother who weighed “over 300 lbs” received welfare of about $600 a month. “She could barely take care of herself, much less her kids,” lamented Greene. The redoubtable Niall Ferguson swiftly summed up the problem:

Why, he wondered, was Greene letting this lady off the hook? Why doesn’t she get up off her fat lazy butt and get a job?!, he demanded, with his Scottish brogue in full Braveheart mode. “Taking from the successful and giving from the unsuccessful.”. . . Loud applause ensued from the Wall Street-friendly crowd, most of whom paid several thousand dollars for a conference ticket.

Contrast the target of Ferguson’s wrath with the “stateless superrich,” whose “second, third, or fourth homes” are often vacant as they “spend a few months in St Moritz, before moving to their trophy mansion in London, and then on to their luxury villa in Sardinia for the summer months.” Some worry that “their children will become indolent spongers, who will blow their inheritance ‘recklessly and lose their ambition or even their health.'” But they tend to employ “legions of charge-by-the-hour gurus” who can help make crucial decisions about, say, “how to divvy-up seven properties between three” heirs. That is job creation par excellence.*
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Why Do We Lack the Infrastructure that We Need?

Brett Frischmann’s book is a summa of infrastructural theory. Its tone and content approach the catechetical, patiently instructing the reader in each dimension and application of his work. It applies classic economic theory of transport networks and environmental resources to information age dilemmas. It thus takes its place among the liberal “big idea” books of today’s leading Internet scholars (including Benkler’s Wealth of Networks, van Schewick’s Internet Architecture and Innovation, Wu’s Master Switch, Zittrain’s Future of the Internet,and Lessig’s Code.) So careful is its drafting, and so myriad its qualifications and nuances, that is likely consistent with 95% of the policies (and perhaps theories) endorsed in those compelling books. And yet the US almost certainly won’t make the necessary investments in roads, basic research, and other general-purpose inputs that Frischmann promotes. Why is that?

Lawrence Lessig’s career suggests an answer. He presciently “re-marked” on Frischmann’s project in a Minnesota Law Review article. But after a decade at the cutting edge of Internet law, Lessig switched direction entirely. He committed himself to cleaning up the Augean stables of influence on Capitol Hill. He knew that even best academic research would have no practical impact in a corrupted political sphere.

Were Lessig to succeed, I have little doubt that the political system would be more open to ideas like Frischmann’s. Consider, for instance, the moral imperative and economic good sense of public investment in an era of insufficient aggregate demand and near-record-low interest rates:

The cost of borrowing to fund infrastructure projects, [as Economic Policy Institute analyst Ethan Pollack] points out, has hit record “low levels.” And the private construction companies that do infrastructure work remain desperate for contracts. They’re asking for less to do infrastructure work. “In other words,” says Pollack, “we’re getting much more bang for our buck than we usually do.”

And if we spend those bucks on infrastructure, we would also be creating badly needed jobs that could help juice up the economy. Notes Pollack: “This isn’t win-win, this is win-win-win-win.” Yet our political system seems totally incapable of seizing this “win-win-win-win” moment. What explains this incapacity? Center for American Progress analysts David Madland and Nick Bunker, see inequality as the prime culprit.

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