Blog Ipsa Loquitur

I’ll figure out the title later. For now, all you need to know is at Ars:

Copyright troll Righthaven has once again been hit with another big bill. The case, Righthaven v. Leland Wolf, targeted the It Makes Sense Blog for allegedly posting a photograph that appeared in Righthaven client the Denver Post without its permission. The court has found in favor of the defendant and has ordered Righthaven to pony up $32,147 in attorney’s fees and $1,000 in costs.

It turns out that running around filing frivolous copyright infringement lawsuits on the internet isn’t a good idea. Funny thing about that internet thing: people can figure out their rights pretty quickly.

Published on under The News

Interesting headline in New Scientist: Network Theory Reveals Patterns in Supreme Court Votes. From the article:

The nine members of the US Supreme Court show patterns of common voting that have allowed researchers using network theory to guess how individual justices would have voted in past cases with an accuracy of up to 83 per cent.

The article makes reference to the dangers of casting any single Justice as an ideologue who votes in a single-minded fashion. That kind of cuts off my planned punchline about Constructionism, but I will say this:

When spotted owls are at stake, Justice Antonin Scalia is a stone cold killer. Dude is not effing around. His dissent in Babbitt shows that he’s not a strict constructionist all the time. Sometimes, a man just wants to see some goddamn owls meet their maker.

Published on under Irreverently Irrelevant

How many tablets and phones have boasted Flash support, only to have reviewers shuffle their feet and mumble “actually, um, well, Flash video stutters a lot and isn’t very good but Adobe is working hard at it, and will have it working great soon.”

Today, Adobe’s throwing in the towel. Good riddance. HTML5 is a better solution for streaming media, and it’s an open platform.

Published on under The News

The average student graduates college with about $25,000 in loans that will take years to repay. (When I graduated law school, I had … more than that.) That kind of indebtedness can seem oppressive when you’re struggling to start a career; who’s really going to try to start the next Twitoogle or Fourspacebook when you have payments to make right away? Why not just have the government pay off everyone’s student loans, freeing up the next generation of entrepreneurs and innovators to take risks and lead us into our digital destiny?

That’s the sort of stuff we hear as the “forgive the student loans” crowd becomes more boisterous. To be fair, there are more than just social media portmanteaus at stake here; none of the other arguments let me write the word “Twitoogle,” so I went with the goofy one.

Of all the folks looking for student loan forgiveness, the crowd with all the student loans is probably the loudest. This sort of self-interested advocacy is far from unique: it’s the basis of what I can only assume is somewhere between “most” and “all” of the lobbying in America today (with a handful of very notable exceptions). But I do have to take the calls for forgiving student loans with a grain of salt, because it seems kind of like a shameless handout, just for actual people instead of banks with legal personhood.

Middle Ground and Deducting Interest

Death and Taxes has an article rounding up most of the points I’ve talked about, and I wish I’d read it first dammit recommend you give it a read. Kevin Hand gives a good account of the arguments against the stimulative effects of forgiving over $1 trillion in student loans. He also mentions an interesting middle ground, and you know how I love me some compromise pie, Dear Reader.

Right now, Congress is pretending to care about debating a number of different ways to get the economy going. One of the measures pundits have kicked around but which will never get a real vote is the elimination of the Home Mortgage Interest deduction. If you’d like an interesting and concise discussion of some of the primary effects this would have on our economy, I liked Mark Thoma’s view.

Briefly, the home mortgage interest deduction lets you deduct from your taxable income the amount of money you paid in interest on your mortgage. (Conditionally; I’m glossing over as always for the sake of discussing principles.) If you make $50,000 a year, and you paid $15,000 on your mortgage this year, of which $3,000 was interest, you get to list $47,000 as your income. Simple, right?

Student loans work the same way. The interest I pay on my student loans is deductible just like the interest I pay on my mortgage. Piece of cake.

Industrial Machinery and You

Paul David, Professor Emeritus in Economics at Stanford University, has a cool title and a cooler idea. In 2002, he proposed an income tax regime that treated student loans less like mortgages and more like industrial machinery; like a capital expenditure.

Actually, I find Professor David’s rationale for this proposal as interesting as the proposal itself. He notes that investing in new machinery is treated more favorably by the tax code than investing in education for workers. Even better, (he argues) that a progressive tax regime encourages the sheltering of income in the form of tangible property instead of in “human capital” – educated workers make more money and pay more in taxes, but a new machine is 100% deductible over time.

Capital expenditures are tangible goods that are going to be employed by a business over the course of a number of years. My income tax class always used a doughnut-making machine as an example. You buy a Donut-Tron 5000 and you expect it to last 5 years. The income tax code lets you deduct the cost of that machine, over a period of several years – the exact span depends on how long the machine is expected to last, and yes, the IRS has decided how long it thinks doughnut making machines are expected to last. (Compare with a “normal” business expense, which is deductible all at once in the same year in which it was incurred.)

So capital expenditures are deductible from your income, like interest payments, but you do it over a much longer period of time. In this way, we promote investment in updated industrial equipment every so often, by giving tax breaks to companies that invest in new equipment.

A Capital Idea

See where this is going? Professor David likes that we promote investment in shiny new things for our businesses. He doesn’t like that said promotion dis-incentivizes investment in education. His solution?

Treat student loans like capital expenses. Don’t just let people deduct their interest payments – let them deduct the whole thing over time.

Instead of the government dumping a trillion dollars into the economy today to forgive everyone’s student loans, let the government give smaller tax breaks every year, eventually adding up to tax breaks costing what the one time Student Loan Forgiveness Day would have cost. You’re either handing out a trillion dollar check today, or handing out a series of tax breaks worth a trillion dollars over a period of years.

Yes, But Is That Stupid?

It’s an interesting thought: and if you believe that rules permitting long-term deductions (called “depreciation” by tax professionals and people with blogs) of capital expenditures promote investment in personal property, why can’t it do the same for student loans?

I think you could argue that we don’t need to promote students to take out more loans that they won’t be able to pay back. However, I think the sensible reply is that business buy machinery and long-lasting goods no matter what, too. You don’t need to incentivize Krispy Kreme to buy a doughnut-making machine. They ain’t doing it by hand.

Krispy Kreme does, however, get to take the money they save by depreciating their capital expenses and apply it to other things: employment, expansion, research & development on new sprinkle technology, or whatever. Similarly, folks paying off their student loans would receive much larger deductions if their loans were classified as capital expenses.

If we can stimulate business growth by encouraging investment in capital goods, as Professor David suggests, can’t we encourage investment in human capital by treating student loans like we treat capital goods?

Published on under A Day in the Life

Ars has a stirring eulogy for the untimely demise of the creative industry in America. It was taken from us far too soon, but it lasted longer than any of us expected. Set upon by digital pirates, the USS Creation was no match for a broadside of broadband bootlegging. Now, we are left only with a smoking pile of debris where the new Michael Bay movie, “Hot Chicks in a Smoking Pile of Debris” would have stood.

Alas and alack, my countrymen. Mister Technica, please go ahead:

Battered by a decade of digital piracy and facing even more of it thanks to cheap computers, fast Internet, P2P file-sharing, and online file lockers, the US creative industries teeter on the verge of collapse. You can tell because the industry:

  • Pays better than most American jobs
  • Has outperformed the US economy through a horrific recession
  • Sells record-setting amounts of product overseas, earning more foreign revenue than the entire US food sector or US pharmaceutical companies

Things are going so “badly” that a major new report commissioned by copyright holders says that these “consistently positive trends solidify the status of the copyright industries as a key engine of growth for the US economy as a whole.”

DAMN YOU, PIRATE SCUM! DAAAAAAMN YOU!

Oh, seriously, does anyone buy the line that these guys are in dire straits because some kids who wouldn’t buy music just download songs instead? The IP titans are rolling in the money, and all they can muster is “yeah, but we’d be making more of it if it weren’t for you damn kids.”

I’d like to amend that statement. “We’d be making more of it if we had a product offering that was anywhere near as convenient as piracy. People are gagging for something like iTunes for TV shows, but we’re too concerned with maintaining our old revenue models to innovate or imagine anything but choking the life out of digital media. Herp derp derp.”

Published on under The News

Yesterday, the results for the 2011 New York State Bar Exam were published. I thought this was kind of interesting, from the New York Law Journal:

Of the candidates who took the test for the first time and graduated from American Bar Association-accredited schools, 86.1 percent passed, an increase of 0.5 percent for the same group last year. The passing rate for first-time test takers who graduated from New York law schools, however, was 86.3 percent.

Of all the 11,182 candidates who took the July exam, 69.2 percent passed. Last year, 70 percent of the record-breaking 11,557 test takers passed, compared with 72 percent in 2009 and 74.7 percent in 2008.

The legal industry is undergoing a slight correction like a guy with a blood clot in his carotid is about to undergo a slight headache. There’s not as much legal work to do as during the hilariously bubblicious economy from 2003-2007; worse yet, computers can do the legal work better, faster, and cheaper than human lawyers. Even if the work stayed steady, we wouldn’t need so many lawyers. But of course it didn’t.

Over the summer, Economix, a New York Times blog, published a state-by-state look at the surplus of the American lawyer. It was pretty disheartening for us New York lawyers. In substantive part, Catherine Rampell wrote:

In 2009, 9,787 people passed the bar exam in New York. The analysts estimated, though, that New York would need only 2,100 new lawyers each year through 2015. That means that if New York keeps minting new lawyers apace, it will continue having an annual surplus of 7,687 lawyers.

Note that that annual surplus of Empire State esquires is the largest in the nation; it’s more than the next three states combined. Now, this year, only 9,600 folks passed the bar exam. See? We’re cutting down that surplus at the blistering pace of 78 lawyers a year. At this rate, we’ll be lawyer-neutral by the year 2108, or just in time for Slumdog Millionaire to hit public domain.

Which is worse? The inelasticity for the demand of a legal education in relation to the demand for lawyers’ services, or the obscene length of copyright?

Published on under The News