Category: Political Economy

6

The Correct Word is Desource, Not Outsource.

Everyone thinks jobs are being outsourced; they are, in fact, being desourced. When Mitt Romney claims he will create jobs, when Barak Obama claims the same, when Google, Apple, or Amazon assert they build out the economy, they all overstate. Worse, they ignore the reality that both manufacturing and service jobs are dying. Robots, artificial intelligence, and the new information-at-scale industries all but assure that outcome. The ability to build and sell without humans is already here. I am not saying that these shifts are inherently bad. They may even be inevitable. What we do next is the question. To answer that question, we need to understand the ways humans will be eliminated from manufacturing and service jobs. We need to understand what I call desourcing.

Focus on manufacturing is a distraction, a sideshow; so too is faith in service jobs. A recent New York Times article about Apple, noted that manufacturing accounts for only about eight percent of the U.S. labor force. And, The Atlantic’s Making It in America piece shows how manufacturing is being changed by robots and other automation. According to some, the real engine is service labor “and any recovery with real legs, labor experts say, will be powered and sustained by this segment of the economy.” That is where desourcing comes in. Many talk about the non-career path of service sector jobs. A future of jobs that have low pay and little room to rise is scary and a problem. Amazon explains why that world might be heaven.

The world of low wage, high stress service work is being replaced by automation. Amazon gave up its fight against state taxes, because it is moving to a model of local distribution centers so that it can deliver same-day delivery of goods. According to Slate, Amazon will spend more than $1 billion to build centers all over the U.S. and hire thousands of people for those centers. The real story is that like any company Amazon wants to reduce operation costs; it must automate or perish as Technology Review put it. It will do that, in part, by using robots to handle the goods. Self-driving cars and autonomous stocking clerks are the logical steps after ATMs and self-serve kiosks at movie theaters and grocery stores. I am always amazed at the folks who line up at movie theater ticket windows rather than use the kiosks. A friend said to me that we should walk up to the window to keep those jobs. It is a nice idea, but I think untenable. We all want to move faster and pay less. Welcome to desourcing.

Desourcing means reducing or eliminating humans from the production or service equation. Humans are friction points. More and more we can reduce those points of contact. We no longer need to send work to other humans.

There are many economic questions that are beyond what can be addressed in a short piece. But here are some ideas on which to chew. The returns from this approach are tremendous for the companies that desource. For example, by one account, Apple makes $473,000 per employee; yet “About 30,000 of the 43,000 Apple employees in this country work in Apple Stores, as members of the service economy, and many of them earn about $25,000 a year.” So we may satisfy our need for instant gratification as companies reduce their costs, but that money will go to corporate bottom lines. Whether it will really reach the rest of the economy is not so clear precisely because a smart company will invest in desourcing. I suppose at some point companies will have to realize that they need masses who can buy stuff. Yet I think some studies indicate that serving the upper end of the economy works better than serving the masses. In theory, a company may offer goods at lower prices but to do that, it will need lower production costs. And less workers means lower costs.

I am not saying I know what will solve this riddle. I offer desourcing, because I have not seen a satisfying answer to the issue. There may not be one; for we may be stil sorting what to do as the digital age takes full hold. As the computer science folks say in early training, “Hello world.”

7

Symposium on Madhavi Sunder’s From Goods to a Good Life, September 11-13

This week Concurring Opinions is hosting a symposium on Madhavi Sunder’s From Goods to a Good Life (Amazon) published by Yale Press which offers a preview. Madhavi’s work has pushed how many colleagues and I think about intellectual property. I am honored to organize this discussion.

I have more to say about the book, but to whet your appetites, I offer this quote:

The full cultural and economic consequences of intellectual property policies are hidden. We focus instead on the fruits of innovation—more iPods, more bestsellers, more blockbuster drugs—without concern for what is being produced, by whom, and for whose benefit. But make no mistake: intellectual property laws have profound effects on human capabilities…

The symposium will include contributions from Mike Carroll, Laura DeNardis, Brett Frischmann, Mike Madison, Mark McKenna, Frank Pasquale, Zahr Said, Lea Bishop Shaver, Jessica Silbey, and Molly Van Houweling.

Jobless Futures

The US economy’s long stall has confounded establishment economists. Many jobs aren’t coming back. Median wealth has declined by 39% over four years, even as GDP continues to grow (and that growth primarily benefits those at the top.) The “quantitative easers” seem content to print money for the same lords of finance and industry that got us into the current crisis. Some Keynesians have good ideas about infrastructure spending, but are blocked by political gridlock. Meanwhile, a golden remnant discerns salvation in a hard money-driven debt deflation.

On a personal level, the advice gets even more confusing. First, economists told workers to get more skills and education. A “skills gap” left much of America’s workforce unable to compete globally in information age economies. But then it turned out that college graduates were suffering in the current downturn, too. The solution: more education. But what about unemployed grad students? Finally, the economists had an answer: more of the right type of education. Science was the golden ticket. As Thomas Friedman never tires of opining, the geeks will inherit the earth.

Except, it seems, for the chemists and biologists. It turns out they might not be doing as well as even the despised lawyers. Here are some impressions from the Washington Post story “U.S. pushes for more scientists, but the jobs aren’t there:”

“There have been many predictions of [science] labor shortages and . . .robust job growth,” said Jim Austin, editor of the online magazine ScienceCareers. “And yet, it seems awfully hard for people to find a job. Anyone who goes into science expecting employers to clamor for their services will be deeply disappointed.” . . . Since 2000, U.S. drug firms have slashed 300,000 jobs. . . . [According to one laid-off drug developer,] “Very good chemists with PhDs from Stanford can’t find jobs.”

Perhaps labor economists like Claudia Goldin and Lawrence Katz will reassure us that Stanford chemists simply need to learn another skill, like end-to-end supply chain management or ventriloquism. Who knows what the magical market will need tomorrow?
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Amazon’s Pawns

I sometimes speculate at the end of my copyright class that, years hence, we’ll stop using a statutory supplement and just refer to the Amazon, YouTube, Facebook, etc. service agreements to find sources of legal authority. The cultural power of Google & Facebook gets a lot of media attention, and now Amazon is under renewed scrutiny. Wired highlights the business acumen of Jeff Bezos; Mac McClelland has told the story of the sweat it’s based on. Now The Nation is featuring an intriguing series on the company, with pieces by Robert Darnton, Michael Naumann, and Steve Wasserman (along with the slide show on 10 reasons to avoid Amazon). A few reflections on the series below:

1) Wasserman compiles an array of stats: according to the revised 2012 edition of Merchants of Culture, “in 2011 e-book sales for most publishers were “between 18 and 22 percent.” “Two decades ago, there were about 4,000 independent bookstores in the United States; only about 1,900 remain.” Publishers stand to be disintermediated, since too many have been “complacent, allergic to new ideas, even incompetent.” Amazon stands triumphant:

[By 2011], it had $48 billion in revenue, more than all six of the major American publishing conglomerates combined, with a cash reserve of $5 billion. The company is valued at nearly $100 billion and employs more than 65,000 workers (all nonunion); Bezos, according to Forbes, is the thirtieth wealthiest man in America

The aggregator has triumphed over the aggregated, and its own workers. As exposes revealed, “in one of Amazon’s main fulfillment warehouses in Allentown, Pennsylvania . . . employees risked stroke and heat exhaustion while running themselves ragged [and] [a]mbulances were routinely stationed in the facility’s giant parking lot to rush stricken workers to nearby hospitals.”
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6

Constitutional Limits on the Inter-State Market for Sovereign Territory

On Friday, I asked why there seems to be no inter-governmental market for sovereign territory, at least in the United States. Many of the thoughtful comments to the post suggested important political considerations that might prevent the market from clearing, particularly in the international context. I’ll try to address some of those considerations in my next post, but first I want to focus on the domestic context, and specifically on what limits the Constitution might place on inter-state sales of sovereign territory.

 

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14

The Market for Sovereign Territory

I’m thrilled to be back at Co-Op, and I look forward to blogging about a few rough ideas that seem to be shaping up as summer research projects. The first of them starts with a story.

Once upon a time, sovereigns bought and sold themselves to one another. Specifically, they purchased sovereign territory. The United States, to take the easiest example, looks the way it does not just because of military conquest, but because of bold real estate deals, including most notably the Adams-Onis Treaty, the Louisiana Purchase, and the Alaska Purchase. Occasionally such sales were tied up with military action, as with the Treaty of Guadalupe Hidalgo, which ended the Mexican-American War, transferred the Mexican Cession, and committed the United States to pay Mexico $15 million “[i]n consideration of the extension acquired.”

Even within the United States, sales of sovereign territory were not unheard of at the time of the Founding. The Constitution’s Enclave Clause specifically refers to the federal government’s power to “purchase[]” and essentially govern “Places” within states. And the states themselves often altered their borders, sometimes for economic reasons. In 1784, for example, North Carolina ceded 29,000,000 acres to the federal government to help pay back the nation’s Revolutionary War debt–a generous but ill-fated gesture that led to the short, unhappy, and largely forgotten life of the State of Franklin.

Somewhere along the way, the market for sovereign territory seems to have dried up, at least as far as I can tell. To be sure, there is still an active market for proprietary interests in public land; the federal government, after all, owns approximately 30% of the nation’s land. But borders–sovereign territory, rather than property–do not seem to be for sale, especially domestically. Why?

 

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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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Koch, Cato, and Nonprofit Takeovers

The Volokh Conspiracy has been providing a forum for discussion of the Koch/Cato lawsuit. According to Cato Senior Fellow Jerry Taylor, the Koch Brothers may want to “use their board majority to . . . transform our Institute into an intellectual ammo-shop for American for Prosperity and other allied (presumably, Koch-controlled) organizations.” All sides may be interested in this article by Dana Brakman Reiser (“Nonprofit Takeovers: Regulating the Market for Mission Control”). Here is part of the abstract:

For-profit takeovers create a robust market for corporate control, and the legal regimes that regulate them are well known. Far less appreciated, however, are efforts to seize control of nonprofit organizations in order to alter their missions or activities. This article explores the largely uncharted territory of nonprofit takeovers, the regulation of defenses to them, and repercussions of both for the nonprofit sector and society at large. . . . [C]ase studies demonstrate both a range of nonprofit takeover tactics and the harsh responses to them by incumbent fiduciaries and reviewing courts. . . . Within the context of these cases, the article critiques courts’ deference to nonprofits’ incumbents and intolerance of takeovers. In its place, the article advocates a nonprofit-specific approach, which will work to distinguish perilous from constructive takeover activity, and balance the opposing virtues of mission preservation and evolution. This framework will provide guidance to those who may become involved in these transactions. Moreover, it will focus nonprofit law on the crucial importance of mission and the challenges of policing that mission in organizations with multiple stakeholders.

As the latest of many battles for the soul of libertarianism, this lawsuit will be closely watched.

0

The Memory Hole

On RocketLawyer’s Legally Easy podcast, I talk with Charley Moore and Eva Arevuo about the EU’s proposed “right to be forgotten” and privacy as censorship. I was inspired by Jeff Rosen and Jane Yakowitz‘s critiques of the approach, which actually appears to be a “right to lie effectively.” If you can disappear unflattering – and truthful – information, it lets you deceive others – in other words, you benefit and they are harmed. The EU’s approach is a blunderbuss where a scalpel is needed.

Cross-posted at Info/Law.

5

Cary Sherman and the Lost Generation

The RIAA’s Cary Sherman had a screed about the Stop Online Piracy and PROTECT IP Acts in the New York Times recently. Techdirt’s Mike Masnick brilliantly gutted it, and I’m not going to pile on – a tour de force requires no augmentation. What I want to suggest is that the recording industry – or, at least, its trade group – is dangerously out of touch.

Contrast this with at least part of the movie industry, as represented by Paramount Pictures. I received a letter from Al Perry, Paramount’s Vice President Worldwide Content Protection & Outreach. He proposed coming here to Brooklyn Law School to

exchange ideas about content theft, its challenges and possible ways to address it. We think about these issues on a daily basis. But, as these last few weeks [the SOPA and PROTECT IP debates] made painfully clear, we still have much to learn. We would love to come to campus and do exactly that.

Jason Mazzone, Jonathan Askin, and I are eagerly working to have Perry come to campus, both to present Paramount’s perspective and to discuss it with him. We’ll have input from students, faculty, and staff, and I expect there to be some pointed debate. We’re not naive – the goal here is to try to win support for Paramount’s position on dealing with IP infringement – but I’m impressed that Perry is willing to listen, and to enter the lion’s den (of a sort).

And that’s the key difference: Perry, and Paramount, recognize that Hollywood has lost a generation. For the last decade or so, students have grown up in a world where content is readily available via the Internet, through both licit and illicit means; where the content industries are the people who sue your friends and force you to watch anti-piracy warnings at the start of the movies you paid for; and where one aspires to be Larry Lessig, not Harvey Weinstein. Those of us who teach IP or Internet law have seen it up close. In another ten years, these young lawyers are going to be key Congressional staffers, think tank analysts, entrepreneurs, and law firm partners. And they think Hollywood is the enemy. I don’t share that view – I think the content industries are amoral profit maximizers, just like any other corporation – but I understand it.

And that’s where Sherman is wrong and Perry is right. The old moves no longer work. Buying Congresspeople to pass legislation drafted behind closed doors doesn’t really work (although maybe we’ll find out when we debate the Copyright Term Extension Act of 2018). Calling it “theft” when someone downloads a song they’d never otherwise pay for doesn’t work (even Perry is still on about this one).

One more thing about Sherman: his op-ed reminded me of Detective John Munch in Homicide, who breaks down and shouts at a suspect, “Don’t you ever lie to me like I’m Montel Williams. I am not Montel Williams.” Sherman lies to our faces and expects us not to notice. He writes, “the Protect Intellectual Property Act (or PIPA) was carefully devised, with nearly unanimous bipartisan support in the Senate, and its House counterpart, the Stop Online Piracy Act (or SOPA), was based on existing statutes and Supreme Court precedents.” Yes, it was carefully devised – by content industries. SOPA was introduced at the end of October, and the single hearing that was held on it was stacked with proponents of the bill. “Carefully devised?” Key proponents didn’t even know how its DNS filtering provisions worked. He argues, “Since when is it censorship to shut down an operation that an American court, upon a thorough review of evidence, has determined to be illegal?” Because censorship is when the government blocks you from accessing speech before a trial. “A thorough review of evidence” is a flat lie: SOPA enabled an injunction filtering a site based on an ex parte application by the government, in contravention of a hundred years of First Amendment precedent. And finally, he notes the massive opposition to SOPA and PROTECT IP, but then asks, “many of those e-mails were from the same people who attacked the Web sites of the Department of Justice, the Motion Picture Association of America, my organization and others as retribution for the seizure of Megaupload, an international digital piracy operation?” This is a McCarthyite tactic: associating the remarkable democratic opposition to the bills – in stark contrast to the smoke-filled rooms in which Sherman worked to push this legislation – with Anonymous and other miscreants.

But the risk for Sherman – and Paramount, and Sony, and other content industries – is not that we’ll be angry, or they’ll be opposed. It’s that they’ll be irrelevant. And if Hollywood takes the Sherman approach, rather than the Perry one, deservedly so.

Cross-posted at Info/Law.