For Restaurants, Sweeping the Floor is Equivalent to Cooking Great Food

Originally posted on Mises Canada

One of the most popular proponents of BE is Rory Sutherland (who I’ve been praising for years), an ad executive with Ogilvy Mather. The interesting thing about Sutherland is that he also calls himself a follower of Mises, in addition to promoting popular BE concepts and nudges. He once gave a talk at Google titled “Praxeology: Time to Rediscover a Lost Science.” Praxeology, of course, was Mises’s preferred term for the general science of human action.

One quote he’s quite fond of, which he attributes to Mises, is “There is no sensible distinction to be made between the value a restaurant creates in cooking the food, and the value the restaurateur creates by sweeping the floor.” While I haven’t been able to source that exact quote, I do know that he made this statement in the section titled “Business Propaganda” in Human Action: 

“If the manufacturer of candy employs a better raw material, he aims at an increase in demand in the same way as he does in making the wrappings more attractive and his stores more inviting and in spending more for advertisements.”

Continue reading “For Restaurants, Sweeping the Floor is Equivalent to Cooking Great Food”

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Markets for Secrets?

Originally posted on Notes On Liberty

In a world without intellectual property, would it be possible to buy and sell secrets? I suggest the answer is yes. In this post, I provide both a theoretical framework for such markets, as well as pointing to real life examples of such markets already existing.

Introduction

In a previous post, we talked about why information is the only public good. But of course, it’s possible to keep information private. Such private information is called a secret. Currently, entrepreneurs and inventors have two choices when they have what they believe is a profitable secret: they can either keep recipe, industrial process, or so on, a secret, and be protected by “trade secret” laws; or they can “publicize” their secret in exchange for a patent (which they can use to either issue injunctions against competitors or to extract royalties).

But there has been a lot of economics literature in recent years that challenges the status of intellectual property (IP). Most famously, there is Michele Boldrin and David K. Levine’s book Against Intellectual Monopoly, where they detail both an empirical and theoretical case against the economics of intellectual property. Furthermore, patent lawyer Stephan Kinsella’s book Against Intellectual Property gives a principled legal and ethical case against IP.

Although these arguments have been gaining some steam, they are still a minority view. Critics often refer to profit motives for inventors. “Without IP, an inventor can never trust anyone they tell their invention to. Unscrupulous businessmen will take advantage of them, and reap all the profits without paying a dime to the person who originated the idea. This injustice will mean that no one will have any incentive to sharing their innovations, and so society will stagnate.” 

In a working paper titled Designing a Market for SecretsI explore this topic in detail. Here, I give the basic outline of how a market for secrets could work. I then follow up the theory with some real life examples that come close. Continue reading “Markets for Secrets?”

To Taylor Swift, Love Freedom

Originally posted to Mises.ca

imageDear Taylor,

You recently wrote an open letter to Apple, Inc. (To Apple, Love Taylor) where you spelled out your decisions on why you will not be allowing them to stream your album, 1989, without paying you for the privilege. Your letter was clear and eloquent, and provides a strong emotional case for why you feel Apple needs to pay artists during the three-month trial period for their new streaming service.

As I understand your letter, your grievance with Apple can be summed up with your statement that “it is unfair to ask anyone to work for no compensation.” In a biting kicker, you conclude, “We don’t ask you for free iPhones. Please don’t ask us to provide you with our music for no compensation.”

If Apple is truly asking you (and other artists) to provide them with labour or products with absolutely no compensation, then I agree that would be an unfair deal. In order to acquire your property, it’s only fair that the richest corpor
ation in the world offers some of theirs. But what if Apple has already compensated you for your work (or more accurately, your property), and you are now double-dipping—asking for even more compensation? Wouldn’t that be unfair? Continue reading “To Taylor Swift, Love Freedom”

In Defence of Rodney Bowers

Originally posted on mises.ca on January 29, 2013

On page 4 of last Monday’s Metro Toronto, journalist Jessica Smith detailed the heroic actions of Toronto chef and restaurateur Rodney Bowers, as he joined Vancouver chef and restaurateur Mark Brand’s effort to address poverty in his community.

The Brand-Bowers plan to address this great social ill is simple: They sell tokens for $2.25 at their restaurants, which can be exchanged for a free sandwich. The people who buy these tokens then give them away to those in need. The reason Bowers is bringing this program to Toronto is because of its immense success in Vancouver: according to Brand, he’s redeeming 120 tokens a day.

But no good deed goes unpunished. Apparently, other activists have spoken out against this program as “demeaning” and–horror of all horrors–doing the government’s job.

One such critic is York University’s Ilan Kapoor, who is a professor of critical development studies (which involves critiquing economic development from post-Marxist, feminist, etc. perspectives). He brushes off Bowers and Brand as providing merely “a Band-Aid kind of solution, because it doesn’t address the broader problems of hunger and, larger than that, joblessness and inequality.” He says the problem with private charity is it allows “private individuals–celebrity chefs in this case–to decide (how to feed people in need) and we as the audience who buy these meal tickets should not be making decisions on who we want to give them to based on our whims and fancies.” He offers as his solution “a state-funded, fair system of distribution.”

The problems with Kapoor’s criticisms are two fold. First is his dismissal of Band-Aid solutions seemingly in general. But Band-Aids still serve an important function. Bowers easily dismisses Kapoor here. “Some critics are going to say it’s dehumanizing or degrading; but what’s dehumanizing and degrading is that those people are still hungry.”

Second, Kapoor commits the fallacy of ascribing action to a collective. Put simply, only individuals act. If a group of people were to stand naked before you, you could not, merely by looking, assert that you were looking at the Ontario Legislative Assembly, or the Toronto City Council, or just group of strangers with no connection to each other. We can only ascribe identity to collectives once we understand what the individuals that make up collectives themselves understand about their condition.

So when Kapoor says he is in favour of “a state-funded, fair system of distribution” as opposed to private individuals distributing their money how they please, he is fact favouring a system where arbitrarily chosen individuals (the state) decide how to spend other people’s money. What he is saying is that arbitrarily chosen individuals can somehow avoid the follies and weaknesses of everyone else, and will not succumb to the twin demons of “whim and fancy”.

Recently deceased Nobel Laureate James Buchanan spent his entire career demonstrating that just because you are an arbitrarily chosen manager of other people’s money, does not mean that your heart becomes hardened with indifference. It does not mean you become immune to persuasion. And surely you do not suddenly become a nonemotive, friendless, dispassionate, calculating robotic bureaucrat concerned only with the attainment of the elusive “greater good”.

Politicians are people before entering office, and remain human beings while they are in office. They build relationships and owe debts of gratitude, like the rest of us. They also, like the rest of us, try to help out their friends whenever they can. They make a lot “friends” when they’re in office, too.

The only difference between us and them is that, unlike private people, every bit of help a politician offers a friend through the state is at the expense of every single other member of the community.

And because the state has vastly more resources at its disposal than any private entity, politicians are actually more susceptible to be bribed, co-opted, blackmailed, and tempted & tantalized with promises of great riches and glory in order to game the system to advantage of themselves and their “friends”.

Private charity should be embraced with open arms, precisely for the reasons that Professor Kapoor decries it so. It is precisely because private charities allow individuals to determine for themselves how to help others, that makes private charity more judicious, economical, creative, and just a little bit more human.