Donald Duck loses $700 billion in bad mortgages: That's right: $700 billion, in bad mortgages.

Considering that Donald Duck doesn't generally wear pants, it's especially bad when he loses his shirt.

I notice that the cupcakes at Babycakes cost something like $2.75,[1] while those at Bread & Cie cost about $4.50.

Now, regardless of whether the cupcakes at Bread & Cie are in fact better than those at Babycakes, I am prompted to wonder about the effect on sales if Babycakes were to introduce higher-end, more expensive cupcakes, in parallel with the present line.

My guess is that it would hurt, that a significant number of people wouldn't buy the less expensive cupcakes in the presence of more expensive cupcakes, for fear of being thought cheap, and that customers wouldn't buy enough of the more expensive cupcakes to offset the loss of sales of the present line.

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[1] Up-Date (2009:08/27): I notice that some people have come to my 'blog looking for the price of cupcakes at Babycakes. I therefore report that the price of cupcakes at Babycakes is now $3.00.

I ran across this (fisher) price schedule:

If the business were mine, then I would amend the table thus:

Granted that there might be a few belligerent customers who insisted on buying a count in one of the ranges for which there was no listing; these could be offered the price as per the first schedule. (Or a flat fee of $350 for any number from 1 to 99.)

In my opinion, San Diego is now seriously over-built. Condominia are going unsold all over town. But development continues none-the-less. Through-out the country, the real estate market has been driven by more than simple considerations of supply-and-demand. And San Diego is one of the places where the results have been notably grotesque.

The same apartment building that has the doubtful balcony of which I provided a picture on the 14th also has a questionable staircase: In fact. the staircase is collapsing rapidly. Here is a picture from the 18th: with a support having come free of the banister; and here is a picture from the 19th: with the support now lying on the ground.

Nor is this the only problematic staircase of the building. Here is another: This staircase has developed a discernible lean.

The balcony could be quickly repaired. In the short-run, all that is needed is to pull the base of the cocked support back into its original position. And this repair should be effected before the weight of the balcony and of the potted plants on it cause it to fall into the alley, potentially damaging persons or property.

The staircase shown in the first three pictures should be immediately torn-down. It cannot safely be used, nor is there a good way to block access from its base. The other staircase may have some life left to it; but, given that the one needs to be removed quickly, it would probably be most cost-effective to dismantle the other now as well.

The building seems to be crumbling about its tenants. Perhaps some of them simply don't care enough to move, but perhaps others cannot afford a better place. Generally speaking, even a home in such a poor state is better than no home. But eventually the bills will have to be paid, rents will be increased, and some of the tenants may have to leave.

I have been reading Gut Feelings: The Intelligence of the Unconscious by Gerd Gigerenzer. Gut Feelings seeks to explain — and in large part to vindicate — some of the processes of intuïtive thinking.

Years ago, I became something of a fan of Gigerenzer when I read a very able critique that he wrote of some work by Kahneman and Tversky. And there are things in Gut Feelings that make it worth reading. But there are also a number of active deficiencies in the book.

Gigerenzer leans heavily on undocumented anecdotal evidence, and an unlikely share of these anecdotes are perfectly structured to his purpose.

Gigerenzer writes of how using simple heuristics in stock-market investment has worked as well or better than use of more involved models, and sees this as an argument for the heuristics, but completely ignores the efficient-markets hypothesis. The efficient-markets hypothesis basically says that, almost as soon as relevant information is available, profit-seeking arbitrage causes prices to reflect that information, and then there isn't much profit left to be made, except by luck — unpredictable change. (And one can lose through such change as easily as one might win.) If this theory is correct, then one will do as well picking stocks with a dart board as by listening to an investment counselor. In the face of the efficient-markets hypothesis, the evidence that he presents might simply illustrate the futility of any sort of deliberation.

Gigerenzer makes a point of noting where better decisions seem often to be made by altogether ignoring some information, and provides some good examples and explanations. But he fails to properly locate a significant part of the problem, and very much appears to mislocate it. Specifically, a simple, incorrectly-specified model may predict more accurately that a complex, incorrectly-specified model. Gigerenzer (who makes no reference to misspecification) writes

In an uncertain environment, good intuitions must ignore information

but uncertainty (as such) isn't to-the-point; the consequences of misspecification are what may justify ignoring information. It's very true that misspecification is more likely in the context of uncertainty, but one system which is intrinsically less predictable than another may none-the-less have been better specified.

I am very irked by the latest chapter that I've read, Why Good Intuitions Shouldn't Be Logical. In note 2 to this chapter, one reads

Tversky and Kahneman, 1982, 98. Note that here and in the following the term logic is used to refer to the laws of first-order logic.[1]

The peculiar definition has been tucked behind a bibliographical reference. Further, the notes appear at the end of the volume (rather than as actual foot-notes), And this particular note appears well after Gigerenzer has already begun using the word logic (and its adjectival form) baldly. If Gigerenzer didn't want to monkey dance, then he could have found an better term, or kept logic (and derivative forms) in quotes. As it is, he didn't even associate the explanatory note with the chapter title.

Further, Gigerenzer again mislocates errors. Kahneman and Tversky (like many others) mistakenly thought that natural language and, or, and probable simply map to logical conjunction, logical disjunction, and something-or-another fitting the Kolmogorov axiomata; they don't. Translations that presume such simple mappings in fact result in absurdities, as when

She petted the cat and the cat bit her.

is presumed to mean the same thing as

The cat bit her and she petted the cat.

because conjunction is commutative.[2] Gigerenzer writes as if the lack of correspondence is a failure of the formal system, when it's instead a failure of translation. Greek δε should sometimes be translated and, but not always, and vice versa; likewise, ∧ shouldn't always be translated as and nor vice versa. The fact that such translations can be in error does not exhibit an inadequacy in Greek, in English, nor in the formal system.

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[1]The term first-order logic refers not to a comprehensive notion of abstract principles of reasoning, but to a limited formal system. Perhaps the simplest formal system to be called a logic is propositional logic, which applies negation, conjunction, and disjunction to propositions under a set of axiomata. First-order logic adds quantifiers (for all, for some) and rules therefor to facilitate handling propositional functions. Higher-order logics extend the range of what may be treated as variable.

[2]That is to say that

Famously, HDRC has a large campaign debt, which she and her husband are demanding Obama help retire. I'm not sure, then, how it is that she would be in a position to offer refunds. In any event, she is asking that money which would otherwise be refunded be contributed towards her 2012 Senate campaign, instead of being used to retire her debt.

It isn't really plausible that HDRC will pay-off her Presidential campaign debts in-full; instead, creditors will receive pennies-on-the-dollar, with the Clintons representing such settlements as-if they are payment in-full. If the Clintons channel monies that could have gone to the repayment of debt instead to her 2012 Senate campaign, then those creditors will in effect have been compelled to contribute towards that Senate campaign.

As I previously noted, in an interview published on 6 April, Greenspan said that there were not many signs that the economy were actually in recession, but declared on 8 April that we were in the throes of a recession.

Well, to-day,

Asked if the U.S. economy was in recession, Greenspan said: We are on the brink.

I doubt that I am alone in wishing that Alan would make up his mind.

(I just hope that I don't find Paul Volcker playing with Neopets at David's Coffee Place to-day; that gives me the willies.)

[Back when I had an LJ, I more than once threatenpromised to write this entry. Well, I've done it. The organization is far from ideal, and there are probably various errors of grammar and of spelling. But I think that it's better that I spit this all out, rather than continuing to put the task aside.]

There are two important — and significantly distinct — models of intellectual property:

1. Under one model, a conceptual entity is itself owned; expression or instantiation of the entity is held to be legally or morally limited by the right of ownership.
2. Under the other model, the conceptual entity is not itself owned, but some possessor of the entity is permitted to condition transfer, and especially to condition transfer on subsequent transfers being likewise conditioned.

Let me make that more concrete. Under the first model, a party might be held to own the idea of renting a motor vehicle; and, within the jurisdiction, no one would be allowed to use the idea without the permission of the owner. Under the second model, a person might tell you a secret cheese-cake recipe, if you promise not to tell it to anyone else.

An operational distinction between these two models is that if some third party were to independently arrive at the idea of renting motor vehicles, under the first model she cannot profit from her independent invention; but, under the second model, if someone independently arrived at the very same cheese-cake recipe, then he could not be blocked by any other formulator or disseminator.

The two models have quite different foundations. The second model may involve the superficial appearance that a distinct class of property is involved, but the property right is really an expression of other, familiar notions of property: ownership of our minds, freedom of expression, and the right to contract. The first model, on the other hand, implies a distinct class of property. As an expression of pure logic, no truly new class of property can be introduced without thereby reducing other property rights. Prior to someone having a claim against all expression or instantiation of a idea, others could employ their persons or other property exactly in such expression; thus, once such claims are possible, ownership of the means of such expression — person and other property — is itself diminished.

Okay, now, I'm going to apply two familiar words to these two different models: The first model, whereïn the conceptual entity is owned, is the model of the patent. The second model, whereïn transfer of the conceptual entity may be conditioned, is the model of copyright.

Many people mistakenly believe that the fundamental distinction between patents and copyrights is the type of conceptual property to which they are applied. But the fact is that at some points in history, it was legally possible to patent almost any expression or instantiation of an idea. Indeed, the original letters patent conveyed monopoly rights that weren't even intrinsically linked to invention, as when a patent was granted for the selling of wine in England. (The holder had not invented wine, selling, selling wine, selling in England, or even selling wine in England.) Meanwhile, just what can legally be copyrighted has also evolved over time, and there is no logical reason that the abstract notion of a copy-right cannot be applied to any sort of design.

There is also a mistaken notion that the right of copyright in America is a creätion of the State by virtue of Article I §8 of the US Constitution:

The Congress shall have Power […] To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries;

But take note of the words of the principal author of the Constitution, James Madison, writing in The Federalist, No. 43:

The utility of this power will scarcely be questioned. The copyright of authors has been solemnly adjudged, in Great Britain, to be a right of common law. The right to useful inventions seems with equal reason to belong to the inventors. The public good fully coincides in both cases with the claims of individuals. The States cannot separately make effectual provision for either of the cases, and most of them have anticipated the decision of this point, by laws passed at the instance of Congress.

(Underscore mine.) Note also that the Bill of Rights (of which Madison is again the principal author) refers to and respects a common law[1] — America did not start its common law afresh, but continued with the common law that had been inheritted from Great Britain. Article I §8 does not bring copyrights into existence; rather, it empowers the Federal government to protect them (for a limited time), as opposed to leaving that matter to the constituent states.

Some people think that protecting copyrights at the level of constituent states is virtually inconceivable. However, in recent years we have seen the states protecting a different sort of intellectual property: specifically, screen actors have successfully lobbied constituent states to pass laws preventing their voices and likenesses from being incorporated in video posthumously by CGI (and analogous technology for audio) without permission of their estates or assignees. It is no less conceivable that the protection of copyrights could simply have been left in the hands of these states. Moreover, the Constitution does not forbid them from protecting copyrights past the intervals in which they are protected by the Federal government.

And, before I step away from the issue of Constitutionality, while Article I §8 only empowered the Federal government to protect copyrights for a limited time, Amendment 14 §1 greatly extended the power of the Federal government:

All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside. No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.

Should natural law (acknowledged in the Ninth Amendment[2]) or common law be seen to recognize copyrights in perpetuïty, the Federal government would arguably be bound to secure them for an unlimited time.

But, aside from the question of whether copyrights are a mere creätion of the Constitution, what is or is not Constitutional is of secondary importance or less. I am concerned to argue about what makes moral and economic sense, and no one should start with the assumption that the Constitution conforms to such sense, let alone much creätes it. (Certainly I for one find parts of the Constitution regrettable before the Amendments, and parts regrettable after the Amendments.)

The operational distinction between copyrights and patents has certainly obtained. The story behind the movie The Towering Inferno (1974) furnishes my favorite example of how a copyright is not a monopoly right. This movie was a joint production of two studios, Warner Brothers and Twentieth Century-Fox, because the former had obtained the rights to The Tower by Richard Martin and the latter (in association with Irwin Allen) had obtained the rights to The Glass Inferno by Thomas N. Scortia and Frank M. Robinson. Each book was about a catastrophic skyscraper fire. Because the books were independently written, neither set of authors could make a claim against the other, nor could their respective licensees make such claims. Since neither studio could forcibly stop the other, and since the provision of one film would undercut the market for the other to the extent that combined profit would probably be less,[3] the two productions were combined into one film.

I illustrated the notion of copyrights with an example of a secret recipe. It is fair and reasonable to wonder about the proper rôle of secrecy in the foundations of intellectual property rights. A great deal in the real world has been protected by legal copyright without seeming to be at all secret.

There is actually an easily grasped relationship of secrecy to patents. Setting aside the odd case of patents of designs that are kept secret for reasons of ostensible national security (as in the case of self-sustaining nuclear fission), those who apply for patents give-up all secrecy; indeed, that's often claimed to be the point of the institution. In the defense of patents applied to invention, it is frequently argued that the alternative to patents is secrecy, and that patents represent an institution whereby inventors agree to reveal their secrets, and ultimately to transform them to public property, in exchange for a temporary monopoly. Sometimes this arrangement is represented as win-win. The inventor wins because the present discounted value of the expected profit of the short-term monopoly exceeds the present discounted value of the design if kept secret, and society wins because they get the knowledge for unlimited use later. (I've yet to see an apology that notes that reducing the inventor's costs will typically give consumers greater volume at lower cost.) However, an immediate problem with this claim is in the partition of parties into the inventor and society. An inventor — whoever gets the patent — reaps the benefits of the guaranteed monopoly; every other inventor loses rights to the design, possibly exactly those rights which are of value. The society which gets knowledge that it otherwise wouldn't have are just those who hadn't and wouldn't have independently invented the same design.

Further, let us assume that, mirable dictu, each invention would only have one inventor, so that no other inventors ever suffer expropriation. For economic efficiency, one wants an act of production to be pursued to the point at which marginal cost is just at or just below marginal benefit; thus, the optimal level of reward for inventors would be the marginal value of the invention. There is no reason to suppose that a fixed period of monopoly will present such rewards across all inventions; those sorts of inventions which are over-rewarded will be over-produced, and those which are under-rewarded will be under-produced. The over-production and under-production each represent economic loss, and thus won't somehow each balance-out the other. Nor can we expect legislators or regulators to guess that period at which the sum of losses of each sort will be minimized. We also cannot expect legislators or ostensible experts to properly set different periods for different inventions. Fundamentally, choosing a period of monopoly amounts to administrative price setting, and as such is economic nonsense.

(In the case of things that would be independently reïnvented, the marginal contribution of any given inventor may in fact be very small, regardless of the value of the design itself, so that the reward of monopoly might be especially out-of-proportion.)

In the aforemention example of a secret recipe over which a copy-right was claimed, prior concealment, and the possibility of some indefinite continuation of that concealment would seem to be an essential feature. If one knew that the recipe would become otherwise available, without condition, before one needed it, there would be less reason (if indeed any at all) to agree to conditions.

It is easy to imagine such a foundation for copyright in the cases of, say, an ordinary printed and bound book. People buying the book could be presumed to have agreed to conditions. People accessing the collections of buyers (in bookstores and libraries) could be likewise presumed to have agreed to be so bound. And perhaps one could make the claim that an improperly discarded book were a sort of fruit-of-a-poisoned-tree, so that one could not then freely copy its content.

But a thorough concealment plainly hasn't been considered essential to the proper consumption of audible content. And yet I generally don't want to hear the alleged music of those near-by. How, then, can I be claimed to have consented to conditions on reproduction of the composition? And, in the age of radio, it isn't just sound waves that are deliberately vibrating our homes. At what point did we consent to restrictions on what we might do with those vibrations?

We should agree that various sorts of easements — claims against what is otherwise the property of others — exist that permit some degree of transmission (of sound, of EMR, and of other things) onto and through the property of others; otherwise, we have a system of property in which trespass is pervasive and inescapable. Various economists have noted that a system with a sort of exclusive easements (and no state licensing) could allow a radio broadcasting industry. But, as Donald Clayton Hubin has more than once noted, it isn't perfectly clear why someone should be more able to claim a property right in one part of the electromagnetic spectrum than in another (eg, red), though there are plainly more practical difficulties in parcelling-out colors in the same manner in which radio frequencies have been or are proposed to be allocated.[4]

If such easements are accepted, perhaps it will be claimed that going into an area in which an easement prevails entails consent in much the same way as does taking-up a book in a library, so that one were bound to respect a claim of copy-right to overheard music and so forth. However, this notion of consent seems bizarre and dangerous to me.

Whatever might be the resolution of attempts to provide an ethical foundation for efficacious copyrights for leaky information, copyrights lend themselves to fairly economically efficient provision of the material in question. Again, for economic efficiency, we need creätors to be able to reälize the full marginal benefit of their acts of creätion, so that they will produce to the point where marginal cost is just at or just below marginal benefit. They will be hampered in doing so if the copyright ever expires, because the work will still produce marginal benefits after the point of expiry. The fact that the creätor won't be around to see that is irrelevant — if the copyright were not to expire, then she could collect their value as a present discounted expected value, or she might prefer the reward of passing them on to her posterity. (And, of course, creätors who found sufficient reward in benefiting society could exercise their copyright by giving it to everyone.)

I find it appalling that some people insist that a creätor loses almost nothing by having copyrights expire, while society somehow gains significantly. If the present value of future claims were almost nothing, then they could be purchased now for almost nothing, and the purchasers could then forswear the claim to the property. Alternately, on the assumption that the rights being taken are presently worth almost nothing to the creätor, an interested party could invest almost nothing right now, and have enough to buy a perpetual copyright at the time of proposed expiry, and then toss the work into the public domain. Plainly, if almost nothing were the cost, no one should be fighting to force expiry.

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[1] The explicit reference is in the Seventh Amendment.

[2] The Ninth Amendment reads

The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people.

thereby acknowledging that there are rights which are prior to any apparently creäted by the Constitution, and indicating that what appears to be creätion may instead be acknowledgement.

[3] In 1965, an independent company released Harlow with Carol Lynley and Paramount released Harlow with Carol Baker. The two films cut each other's throat at the box office.

[4] [Addendum (2009:10/13): See also my later discussion of radio broadcasting.]

It is, sadly, a well-known result that much recycling doesn't really pay for itself. Recycling takes resources beyond the recycled material itself, and often the value of these exceeds the total cost of producing without recycling. Therefore, States promote some sorts of recycling by subsidies. But, in the final analysis, that actually means that taxpayers fund waste, even as proponents generally think that waste is being reduced.

But that leaves a question to which I don't know the answer: Which sorts of recycling involve marginal waste?

Let's take it that I cannot keep the government from promoting the wasteful recycling of X. Well, given that, some of the costs of recycling are going to be paid whether I recycle X or not — plants will be built; power, labor, and expertise will be diverted. So then the question is of whether my throwing my X into the recycle bin will cause more resources to be consumed than my sending it to the land-fill.

As an economist, I have a thing for efficiency, coupled a more clear-headed notion of what is-and-is-not relevantly efficient than most people have. I'd really like to know what to do with my plastic and paper.