Archive for October, 2008
Anti-Socialism = Racism ??
At Salon.com, Michael Lind asks and answers, “Is Barack Obama a socialist? If he is, then so is John McCain.“ I have to agree. McCain so often plays the class warrior that his “desperate use of the socialist smear is particularly shameless.” I might add that McCain is giving anti-socialism a bad name by associating it with hypocrisy, anger, piety, trigger-happiness, etc.
But I can’t go as far as Lind, who doesn’t really seem interested in the answer to his own question. Indeed, it appears Lind’s purpose is to teach McCain the true meaning of shameless. Lind writes:
McCain and Palin claim that Obama’s proposed healthcare system is socialist. It is nothing of the sort. It is a variant of the employer-friendly, insurance-friendly “play-or-pay” scheme discussed in the 1990s. Employers will be given the choice of providing tax-favored health insurance to their employees or being taxed to support a public insurance system. Over time the latter might expand, but for the foreseeable future our dysfunctional private insurance system will survive.
I’m sorry, but the fact that Obama would preserve private health insurance says absolutely nothing about whether his health-care plan is socialist. (If your jaw just hit the space bar, you probably need to read my paper, “Does Barack Obama Support Socialized Medicine?“) The Church of Universal Coverage loves pointing to the presence of “private” health care because it distracts attention from what they’re really doing.
Lind further attempts to innoculate Obama from the charge of socialism by associating the candidate with that great anti-socialist Friedrich Hayek. Lind describes Hayek’s Road to Serfdom as “the bible of free-market libertarians,” and refers to the part where Hayek writes:
Filed under: Cato Publications; Government and Politics; Health, Welfare & Entitlements; Political Philosophy
The ‘Business Case of the Century’
On Monday, the Supreme Court will hear the case of Wyeth v. Levine, which the U.S. Chamber of Commerce has called the “business case of the century.” A Vermont woman who had to have an arm amputated after a nausea drug was improperly administered sued the drug’s manufacturer, Wyeth (she also sued the clinic, physician, and physician’s assistant, but these parties settled). She won in state court, and Wyeth sought review in the U.S. Supreme Court under the theory of “preemption” — that states cannot regulate (by statute or common law) in fields, like pharmaceuticals, where the federal government already does. Here the FDA had approved Wyeth’s label, but Wyeth did not change that label to conform to Vermont’s particular (and stronger) laws.
I don’t know whether this is the “business” case of the century, but it may well be that for the pharmaceutical industry. The outcome turns on a close reading of the statute — as Dan Troy and Becky Wood detailed in the most recent Cato Supreme Court Review, the Court is much more likely to endorse “explicit” rather than “implicit” preemption — but everyone (especially patients) will be better off if the Court upholds FDA preemption here. The courts should not be micro-managing what goes on labels or we will end up with the “overwarning” problems that defeat the labels’ purpose. Moreover, litigation is a blunt regulatory instrument that tends to skew the FDA’s already warped incentives to give too much weight to rare side-effects at the cost of prohibiting or suppressing useful drugs. These incentives, and the related litigation costs, ultimately affect the development of new drugs.
Filed under: Health, Welfare & Entitlements; Law and Civil Liberties; Regulatory Studies
Personal Accounts for Social Security: Still the Best Deal
With the stock market in turmoil, opponents of personal accounts for Social Security have once again raised the specter of Social Security “privatization” in political campaigns across the country. “Imagine if your Social Security taxes were invested in the stock market today,” they suggest ominously. The implication is that if we had allowed today’s seniors to privately invest a portion of their Social Security taxes when they were young, those seniors would be destitute today.
But let’s look at what would really have happened. Someone retiring today, who started paying Social Security taxes when they were, say, 22, would have begun investing 43 years ago, in 1965. As Figure 1 below shows, at that time, the Dow was at 969.26. Even adjusting for inflation, as shown in Figure 2, the Dow was at 43.25.
Bush’s Midnight Regulations?
The lead story in today’s Washington Post — above the economy, above the election — is a warning that the Bush administration may deregulate something before it leaves office. Here’s the online headline and subhead:
White House Makes a Last Push to Deregulate
New regulations, which would weaken rules aimed at protecting consumers and environment, could be difficult for next president to undo.
The story begins:
The White House is working to enact a wide array of federal regulations, many of which would weaken government rules aimed at protecting consumers and the environment, before President Bush leaves office in January.
The new rules would be among the most controversial deregulatory steps of the Bush era and could be difficult for his successor to undo. Some would ease or lift constraints on private industry….
Once such rules take effect, they typically can be undone only through a laborious new regulatory proceeding, including lengthy periods of public comment, drafting and mandated reanalysis.
OK, that’s news. A fair story. Although of course the reporter quotes no economist critical of regulation — just a couple of White House flacks and a business lobbyist — though he does quote at least three pro-regulation “public interest” activists issuing dire warnings of impending doom.
But I was curious: Did the Post run a prominent story a few days before the 2000 election about the Clinton administration’s push to impose sweeping regulations before they left office? You know the answer: of course they didn’t. Before election day, according to a Nexis search, there was one reference at the tail end of the jump of a Post story in the Business section to the Mercatus Center’s Midnight Regulations website. So they knew about the problem — Mercatus was publicizing it, and the Houston Chronicle ran a front-page story — but the Post didn’t think voters needed to know.
Even though, as today’s story mentions after the jump,
[T]he last-minute rush appears to involve fewer regulations than Bush’s predecessor, Bill Clinton, approved at the end of his tenure. …
“Through the end of the Clinton administration, we were working like crazy to get as many regulations out as possible,” said Donald R. Arbuckle, who retired in 2006 after 25 years as an OMB official.
Maybe they didn’t quite grasp the problem back in 2000. We’ll see whether there are such stories toward the end of the Obama administration in the Post — and on Diane Rehm, and on ABC News, and in the New York Daily News, and all the other places that are very concerned about “midnight deregulation.”
Obama’s Non-Plan for Social Security
In the closing days of the presidential campaign, Barack Obama has had relatively little to say about Social Security — other than attacking John McCain for his (tepid) support for personal accounts. There may be a good reason for his reticence.
Senator Obama has explicitly rejected any proposal to allow younger workers to privately invest part of their payroll taxes through personal accounts. He has also ruled out any reduction in Social Security benefits. Instead, he has proposed a 4 percentage point payroll tax hike, beginning in 2019, for individuals earning more than $250,000 per year in wages. While this fits in well with Sen. Obama’s “tax the rich” philosophy, it does very little for Social Security.
As we know, Social Security will begin running a deficit — paying out more in benefits than it takes in through taxes — in just nine years, by 2017. Of course, in theory, Social Security is supposed to continue paying benefits after 2017 by drawing on the Social Security Trust Fund until 2040, after which the Trust Fund will be exhausted. In reality, the Social Security Trust Fund is not an asset that can be used to pay benefits. Any Social Security surpluses accumulated to date have been spent, leaving a Trust Fund that consists only of government bonds (IOUs) that will eventually have to be repaid by taxpayers. Therefore, in looking at Social Security’s looming crisis, what really counts is the program’s cash-flow solvency, which turns negative in 2017.
Senator Obama’s proposal would do very little to change this. Most people earning more than $250,000 per year receive the vast majority of their income in forms other than wages or salary. In fact, according to the IRS, only a little more than $1 billion in wages were earned by people with more than $250,000 in wage income. Assuming standard wage growth in the future, Senator Obama’s tax would generate barely $50 million per year. That would not even push back Social Security’s cash-flow insolvency by an additional year.
On one hand, compared to Senator Obama’s other proposed tax hikes, this one offers relatively little pain. On the other hand, it offers even less gain.
If you want to see a Social Security plan that actually works, check out Cato’s 6.2% solution.
Filed under: Health, Welfare & Entitlements; Tax and Budget Policy
The American Way of War
On TPM Cafe, a part of the Talking Points Memo media empire, I’m in a week-long discussion of a new book, The American Way of War: Guided Missiles, Misguided Men and a Republic in Peril, which oddly takes the title of the Russell Weigley classic without acknowledgement.
The other participants are the author, Eugene Jarecki, who directed Why We Fight, Greg Mitchell, editor of Editor & Publisher, Andrew Bacevich, the Boston University professor, Joe Cirincione, president of the Ploughshares Fund, and Naomi Wolf. Lawrence Wilkerson, former chief of staff to Secretary of State Colin Powell, is supposed to show up, but hasn’t yet.
I can’t recommend that you read the book, but I do recommend the discussion, especially if you’re interested in military-industrial complexes.
Against Intellectual Monopoly Forum – Nov. 10
It is commonly believed that intellectual property law in the form of copyright and patent is necessary for innovation and the creation of ideas and inventions such as machines, drugs, computer software, books, music, literature and movies.
But Michele Boldrin and his coauthor David K. Levine argue that intellectual property laws are costly and dangerous government grants of private monopoly over ideas. Their book Against Intellectual Monopoly seeks to show through theory and example that these legal regimes are not necessary for innovation and are damaging to growth, prosperity, and liberty.
The argument that intellectual property laws actually retard progress is a fascinating challenge to conventional beliefs about their foundations and utility. At the onset of the Information Age, the role of copyright, patent, and other legal regimes in the progress of science and arts is centrally important.
Join us Monday, November 10th for an interesting discussion of the book with coauthor Michele Boldrin, featuring commentary from Robert Atkinson, Founder and president of the Information Technology and Innovation Foundation.
Cato Debates Potential Auto Industry Bailout on NPR.org
Cato Senior Fellow Daniel J. Mitchell participated in a debate yesterday on NPR.org that discussed the possible implications of a government bailout of the U.S. auto industry. Mitchell argued against it, and in the middle of the debate, NPR held an online poll that showed that 68 percent of listeners agreed with him.
Quotes from Daniel Mitchell pulled from the debate:
- Consumers, acting in the marketplace, should determine which companies succeed or fail. Business success should not depend on which companies can hire the slickest lobbyists.
- Every dollar the taxpayers send to Detroit will be one less dollar that will be available in the productive sector of the economy. This means fewer jobs in other industries, fewer jobs in the service sector, and fewer jobs in all other fields.
- A federal bailout deprives other sectors of the economy of resources. Moreover, a bailout delays the much-needed restructuring of the US auto industry, much as handouts to the proverbial worthless brother-in-law enables him to continue sitting on the couch all day instead of putting his life back in order.
- Foreign companies with plants in America are much more successful. It baffles me that politicians want to reward incompetence. Actually, it’s not that surprising. Detroit probably spends a lot more on lobbyists. Too bad they don’t put an equal amount of time and effort into improving their goods and services.
- I don’t care if the bailout is profitable for government. The economic damage occurs because politicians interfere in the allocation of resources. Government intervention is a big reason why European welfare states grow slower, have higher unemployment, and lower living standards than America. We should not emulate nations such as France and Germany.
- Five years ago, a merger of GM and Chrysler would probably be killed by the antitrust bureaucrats. Now the politicians want to subsidize the merger?!?
- Bankruptcy almost surely will make consumers a bit more wary, but a bailout ensures that the auto companies won’t change the bad policies that got them in trouble. Better to restructure now. You don’t cure an alcoholic by giving him more to drink.
You can follow the entire debate here.
Filed under: Finance, Banking & Monetary Policy; Regulatory Studies
Does Harper Support Regulation of Gambling and Financial Services?
My post yesterday regarding Members of Congress who voted to exempt financial derivatives from state gambling laws created a firestorm of controversy. Well, two people asked me about it, anyway . . .
(A new WashingtonWatch.com post on the presidential candidates who didn’t help create our economic problems is available for your perusal, by the way.)
“Why would a libertarian think it’s bad to exempt anyone from regulation? Do you support gambling laws? Do you support financial services regulation?”
These are all fair questions, given my objection to preempting state gambling laws in this case. So let me expand on this observation from my earlier post:
Many gambling laws are nanny-statism, of course, but if they’re going to go away, they should be repealed by the legislatures that wrote them. This federal preemption gave special permission to certain parts of the financial services industry to run a huge gambling operation masquerading as a market in real assets.
I’m quite a bit less a fan of preemption than many of my colleagues. There are fair-minded people who believe that national markets call for national regulatory regimes to replace the states’. As commerce has become national, the Commerce Clause has become a grant of authority to regulate national markets, they appear to believe.
I’m not convinced. Given the nation’s experience under the Articles of Confederation, the Commerce Clause was included in the Constitution to prevent states from regulating parochially – that is, for the benefit of local interests over out-of-staters. The Constitution gave Congress authority to regulate commerce “among the states” – which, if words have meaning, is something narrower than just regulating all commerce.
So when state gambling laws interfere with an interest capturing the sympathy of a majority in Washington, D.C., that doesn’t necessarily empower Congress to withdraw state authority. Congress is supposed to prevent only state parochialism, not every bad idea coming out of a state legislature.
If we are to have a healthy political economy, debates about state gambling regulations should be taken to each state that enacted them. The merits of freedom and personal responsibility should be made clear there so they win majorities once again.
The alternative preferred by many is a shortcut: trumping states by moving power to the federal level. This is not a felicitous trend, and its end-point – a remote national government with plenary power – is not good for liberty.
Gambling regulation is nanny-statism, but I wouldn’t go and kick the legs out from under state anti-gambling regulation through federal preemption – especially not for one narrow part of the financial services industry. This is not a game, where any loss for regulation is a gain for liberty.
If responsibility for self-protection against gambling is going to be restored to people in a given state, the legislature of that state should repeal the anti-gambling laws, signaling people that they are once again responsible for themselves. What happened here was that Congress trumped state power and withdrew the protection of state anti-gambling regulation without signaling to anyone that there were risks to be encountered. What looked like asset-based financial services to all but a few was in fact gambling.
The Congress helped perpetrate a deception about what was going on with financial derivatives – and just because some regulation went under the tires, that isn’t a victory for liberty.
Filed under: Finance, Banking & Monetary Policy; Government and Politics; Law and Civil Liberties; Regulatory Studies
No Socialists Here
Is Barack Obama a socialist? That’s the question Cato adjunct scholar Don Boudreaux asks in one of the last paper editions of the Christian Science Monitor. Not really, he concludes. But
Anyone who speaks glibly of “spreading the wealth around” sees wealth not as resulting chiefly from individual effort, initiative, and risk-taking, but from great social forces beyond any private producer’s control….This “socialism-lite,” however, is as specious as is classic socialism. And its insidious nature makes it even more dangerous. Across Europe, this “mild” form of socialism acts as a parasitic ideology that has slowly drained entrepreneurial energy – and freedoms – from its free-market host.
So why does he say that Obama is not a socialist? Well, after all,
“Socialism” originally meant government ownership of the major means of production and finance, such as land, coal mines, steel mills, automobile factories, and banks.
And no American politician would favor that, right? Oh, right.
Filed under: General; Government and Politics; Political Philosophy
If??
Brookings Institution economist Henry Aaron writes in this week’s New England Journal of Medicine:
Unfortunately, the U.S. health care system could not be better structured to frustrate the elimination of waste than if it had been designed to do just that.
Filed under: General; Health, Welfare & Entitlements
Today at Cato
Article: “Nuclear Energy: Risky Business,” by Jerry Taylor in Reason Magazine
Nuclear energy is to the Right what solar energy is to the Left: Religious devotion in practice, a wonderful technology in theory, but an economic white elephant in fact (some crossovers on both sides notwithstanding). When the day comes that the electricity from solar or nuclear power plants is worth more than the costs associated with generating it, I will be as happy as the next Greenpeace member (in the case of the former) or MIT graduate (in the case of the latter) to support either technology. But that day is not on the horizon and government policies can’t accelerate the economic clock.
Op-Ed: “Banking Crises: Plus Ça Change,” by Steve H. Hanke in Globe Asia
Banking crises are all too common. They are also costly. The potential cost of the most recent bail-out package in the United States is a staggering $2.25 trillion. That’s 16% of GDP. Compared to the actual bail-out costs following Indonesia’s banking crisis of 1997-98, the US figure is small change. Indeed, Indonesia’s bail out costs amounted to 40% of GDP.
The most shocking thing about banking crises is that few lessons are learned.
Article: “Mark to Market Accounting – What Are the Issues?” by Warren Coats for Cato.org
A number of respected people have blamed accounting rules for much of the current financial crisis. “Fair value” or “mark to market” accounting aims to present a more accurate picture of a bank’s condition and should not be abandoned.
Article: “Global Warming Fantasies Meet Financial Contraction” by Patrick J. MIchaels for Cato.org
Legislation proposed by both John McCain and Barack Obama will require that the cost of energy to become so high that people will avoid using it. The serious question is: why would we do this in the current economic environment?
Podcast: “Housing Boom, Bust and an Artificial Shortage” featuring Randal O’Toole.
Who Should Pay for Your Sheepskin?
Over at Economist.com, they’ve just kicked off a debate on the resolution “that individuals, not the state, should pay for higher education.”
On Monday, they will post my “featured guest” statement on the resolution in question, so I can’t give away my exciting conclusions right now. I can, though, give you a hint about one thing I might discuss. Think “third-party payer problem”—and I heartily encourage you to follow the whole debate and participate if you’d like.
Professor Alison Wolf of King’s College, London, provides an excellent opening defense of the resolution, and I suspect that she and all the participants will offer lots of insightful arguments while this Oxford-style throw-down goes on.
If You Don’t Think You Should Be Searched on the Subway
The good folks at the Flex Your Rights Foundation have produced a Citizen’s Guide to Refusing DC Metro Searches.
A timely response to news that there would be random searches, which is poor counterterrorism.
Filed under: Foreign Policy and National Security; Law and Civil Liberties
A Welcome Change
The Washington Post’s Walter Pincus reports:
Director of National Intelligence Mike McConnell has taken steps to make it easier for U.S. intelligence agencies to recruit first-generation Americans with foreign relatives.
The story, first broken by Steven Aftergood of the Federation of American Scientists, is likely to be overlooked given the focus on the campaign and on the financial markets, and might seem an obscure policy change given the high-profile national security challenges that our intelligence professionals and military personnel confront every day.
In fact, it is a crucial step toward leveraging our unique strengths as a nation. America’s openness is often seen as a vulnerability, but it should be seen instead as a sign of our vitality. The desire of millions of non-Americans to come to the United States and try to make a better life for their families remains strong, despite our recent troubles. To deny first-generation Americans the opportunities enjoyed by other Americans on the dubious grounds that they pose a unique security risk makes no more sense than any other form of blanket profiling. After all, we didn’t kick Lutherans of mixed Danish-Polish and German descent out of the FBI after Robert Hansen’s treason was discovered.
First-generation Americans, or Americans with other extensive foreign contacts (spouses, close friends, study abroad), are likely to have native or near-native proficiency in languages other than English that are in desperately short supply in our intelligence and law enforcement agencies. The hurdles for these citizens were never insurmountable; many ultimately do obtain needed security clearances. In his award-winning book The Looming Tower, Lawrence Wright profiled one of them: Ali Soufan, a Lebanese-American FBI agent, the only Arabic speaker in the New York office at the time of the USS Cole bombing, and one of only eight Arabic speakers in the entire agency.
But notwithstanding men like Soufan, the laborious and time-consuming process associated with obtaining a security clearance, and the prevailing presumption against such persons, doubtless discourages many well-intentioned people from even trying to obtain a job in law enforcement or intelligence. Here’s hoping that this change helps to open the doors to qualified men and women who are every bit as patriotic as Americans whose families have been here for generations.
Filed under: Foreign Policy and National Security; General
For a Good Time Call the U.S. Fish & Wildlife Service
Back in September, the U.S. Fish & Wildlife Service became a punchline after issuing 3.5 million duck stamps with the wrong phone number. But it wasn’t just any ordinary wrong number. Unassuming callers who were “lucky” enough to dial it were invited to “talk only to the girls that turn you on” for $1.99 a minute.
It’s a safe bet that were this to have happened in the private sector, someone would have been reprimanded or fired. Not so in the public sector. In fact, the Washington Post’s Al Kamen tells us this morning that an upcoming U.S. Fish and Wildlife Service trip “will send 28, that’s twenty-eight, senior officials to Mexico for a week of post-election R and R. It includes a tour of the fabulous Mayan ruins in Palenque in the Lacandon rain forest.”
Kamen says, “It’s unclear what benefit will be derived by the wildlife agency’s director, Dale Hall, who’s retiring Jan. 3, and Assistant Interior Secretary Lyle Laverty, who should be moving on after Jan. 20. The group includes most of the agency’s regional directors and various assistant directors.”
The folks out there working hard today, whose taxes pay for incompetent, joy-riding career bureaucrats like Dale Hall, should bear stories like this in mind the next time some DC politician speaks of the federal budget being “tight.”
Filed under: Government and Politics; Tax and Budget Policy
Bailouts: Where Will They End?
“There’s no logical end to it,” Cato Senior Fellow Gerald P. O’Driscoll Jr. said to Neil Cavuto on Fox Business. He’s talking about the incredible expanding bailouts. It started with Bear Stearns in March and then homebuilders in April. Then Fannie Mae and Freddie Mac in September, and after that the deluge. AIG, announced at $85 billion but quietly increased to $123 billion so far, and the $700 billion centerpiece and then money market funds and then bank nationalizations and an increase in the federal guarantee to bank depositors. Where will it stop?
Friday’s papers noted that the head of the FDIC said that the federal government might start guaranteeing home mortgages. On Saturday we learned that insurance companies want to get a piece of the money. Yesterday the Treasury said that automobile companies–which already got their own $25 billion program–might also be eligible for the general “financial rescue plan,” and their success might encourage other industries to try to get in on it.
As I noted before, Congress is talking about “a second economic stimulus package, totaling $50 billion in the form of money for infrastructure projects, relief for state governments struggling with rising Medicaid costs, home heating assistance for the Northeast and upper Midwest, and disaster relief for the Gulf Coast and the Midwestern flood zone.” And Transportation Secretary Mary Peters wants “an $8 billion infusion” for the federal highway trust fund.
Where does all this money come from? The total cost is hard to estimate, because we don’t know how many of these guarantees will actually result in payments. But some analysts are talking about a total bill of $2-3 trillion. Given the underestimate on the cost of the Iraq war, we shouldn’t have confidence in any claims that it will be less. So where does the money come from? Even Obama doesn’t want to raise taxes that much. And if you tax Americans to bail out as many Americans as we’re now talking about helping, eventually you’re going to be taxing people to bail themselves out. In fact, the government is likely to borrow some of the money and have the Federal Reserve create more of it. That process seems to be under way, as Greg Mankiw and Jeff Hummel have discussed. How can that astounding and unprecedented increase in the monetary base not lead to inflation, even hyperinflation? We’ve already decided to tax the prudent and thrifty to bail out the imprudent and irresponsible. Now the prudent may face a danger even worse than taxes: inflation that erodes their hard-earned savings.
Howard Baker famously called Ronald Reagan’s tax cuts a “riverboat gamble.” This is more like a “Celebrity Solstice gamble.”
Filed under: Finance, Banking & Monetary Policy; General; Government and Politics
Members of Congress Who Voted for the Financial Crisis
In late 2000, with the budgeting and spending process in collapse, Congress hurriedly passed a mammoth spending bill called the Consolidated Appropriations Act, 2001. It contained a provision preempting state regulation of financial derivatives under gambling or “bucket shop” laws. The result less than a decade later was the out-of-control market for credit default swaps that has caused so much financial, and perhaps economic, chaos.
One hundred fifty-five members of Congress who voted for the Consolidated Appropriations Act and the preemption of state law are still serving and are up for election next week. Twenty-two senators who stood by as the bill passed by unanimous consent are also up for election Tuesday.
Details are in a WashingtonWatch.com blog post entitled “Did Your Representative Cause the Financial Crisis?”
Many gambling laws are nanny-statism, of course, but if they’re going to go away, they should be repealed by the legislatures that wrote them. This federal preemption gave special permission to certain parts of the financial services industry to run a huge gambling operation masquerading as a market in real assets.
All this is a good illustration of why it’s harmful for Congress to let the annual budgeting and spending process go off the rails. Maybe voters will hold some of their representatives accountable.
Filed under: Finance, Banking & Monetary Policy; Government and Politics; Tax and Budget Policy
“Friendly” Debate on Health Care Reform
Earlier this month I participated in a Fred Friendly Seminar on health care reform for PBS. The show, hosted and moderated by NYU Law Professor Arthur Miller, premiered on Mississippi and Louisiana public television on October 16, and will be shown on your local PBS station in January. However, you can watch the show now here.
Ten Years of the DMCA, and Little to Cheer about
This week is the tenth anniversary of the Digital Millennium Copyright Act, which Bill Clinton signed into law on October 28, 1998. I was on last Friday’s Cato Daily Podcast discussing the DMCA’s detrimental effects on high tech innovation, and I’ve got a post at the Freedom to Tinker blog discussing one likely casualty of the DMCA, digital juke box software:
What we’re seeing in the video market is what the digital audio marketplace would have looked like if the recording industry had won its lawsuit against the first MP3 players. The recording industry lost that lawsuit, and entrepreneurs went on to build products that were much better than the “official” ones being pushed by the labels. Unfortunately, entrepreneurs in the digital video market don’t have that same option.
If the DMCA were not on the books, it seems likely that many of us would have set-top boxes with 500 GB hard drives capable of ripping dozens of DVDs to an open, standard format for subsequent streaming to any display in the user’s house. The existence of those boxes would spur the creation of a wider market for other digital video products designed to interoperate with the emerging open video standard.
Unfortunately, that’s not how things have gone. Hollywood has managed to do what the recording industry was unable to do: to ban users from converting their legally-purchased content to open formats. As a result, the market for open digital video devices is a pale shadow of what it would be in a competitive market. We’re stuck with clunky, proprietary, and non-interoperable products like Apple TV that require users to re-purchase their existing movie collections in order to watch them on the new device. I think everyone would agree that it was a good thing that the courts didn’t let the recording industry shut down the MP3 player market a decade ago. So why do we tolerate a law that effectively shuts down the analogous market for DVD jukeboxes?
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