voluntaryXchange

“First Sale” Comes to Books

The DVR … and Tivo … YouTube … and independent films … are legal and popular, in part, because of a 1984 Supreme Court decision that established the precedent of “first sale”.

The legal terrain at that time included the argument that videotape itself should be made illegal because it might be used to make illegal copies.

That sounds silly, and it was shot down.

On the other hand, there is a practical point: if there was no videotape, it would be a lot easier to enforce and defend copyright. So you should be able to see the interest, if not the merit, in that side of the argument.

The precedent established, first sale, holds that if you purchase a legal, original copy, of copyrighted material … that it is yours to do whatever you want with. You can’t sell it for profit, but you can make as many copies as you like — whether or not they are later used illegally.

Flash forward, and the Supreme Court ruled this month that the principle of “first sale” applies to books as well. The case involved a Thai student in America, and the publisher Wiley.

Wiley practiced third degree price discrimination:* it sold the same book at different prices in different markets. In particular, it sold textbooks more cheaply in Thailand. No surprise there: lower incomes in Thailand are likely to make demand more elastic, and thus optimal markup lower.

But, the student saw an arbitrage opportunity: buy the books new in Thailand, ship them to America, and then resell them as mint condition used books. He made $900K doing this. Wiley sued and won. The student appealed, and the Supreme Court sided with the student.

How will this change the managerial economics landscape? Well, price discrimination will still be the first move on the part of managers. But, it may end up being less common in practice.

One thing to note is that this decision applies only to copyrighted goods, not to patented goods. So, pharmaceutical reimportation is still illegal.

* Some authors call this direct segment price discrimination.

Technorati Tags: first,sale,kirtsaeng,copyright,price,discrimination,managerial

Review of “Advanced Corporate Finance: Policies and Strategies” by Ogden, Jen and O’Connor

I used to work with Phil O’Connor. It has taken us several years to find someone who might be able to replace him: our finance graduates have gone downhill since he left.

Anyway, Phil co-authored a text. I’ve had it for years, but just got around to reading it — cover to cover.

It’s a small masterpiece. I found the book comprehensive, interesting, and at points, innovative.

There really are two books here.

In one, basic finance is laid out with a heavy use of options for insight. The options examples are not daunting, but they do require some basic exposure to options pricing to get much out of. Immersion in options at the start of the text is a fruitful way to go, although it does make the material a bit less accessible. Perhaps that's where the "advanced" in the title comes from.

In the second, there is a literature survey (a bit dated now). The book contains dozen (maybe hundreds) of excerpts from published papers. Essentially, the current research (as of publication in 2002), told in the words of the researchers themselves. Again, a very fruitful approach.

I am not sure about the usefulness of this book for a particular class, but as a general resource for any advanced program in finance, it's definitely worth considering. I strongly agree with the one reviewer who called it a "bottom of the drawer" book: one that will always be close at hand because of its utility.

Technorati Tags: ogden,jen,o'connor,review,advanced,corporate,finance

The Joy of Books

I loved the swimming ones:

Technorati Tags: joy,books

Quote 40 from Sowell's "A Conflict of Visions"

Sowell's A Conflict of Visions: Ideological Origins of Political Struggles sums up the constrained visions focus on process:

A social process has freedom to the extent that it refrains from interfering with the choices of individuals-whether or not the circumstances of those individuals provide them with many options or few. A social process has justice to the extent that its rules are just, regardless of the variety of outcomes resulting from the application of those rules. Power is exerted in social processes ... to the extent that someone's existing set of options is reduced - but it is not an exertion of power to offer a quid pro quo that adds to his existing options. Equality as a process characteristic means application of the same rules to all ...[pg. 247]

But, this now highlights how those with that vision are viewed by the unconstrained:

In the unconstrained vision, in which man can master social complexities sufficiently to apply directly the logic and morality of the common good, the presence of highly educated and intelligent people diametrically opposed to policies aimed at the common good is either an intellectual puzzle or a moral outrage, or both. Implications of bad faith, venality, for other moral or intellectual deficiencies have been much more common in the unconstrained vision's criticism of the constrained vision than vice versa. [pg. 248]

...

... Historic evasions of evidence are a warning, not a model. Too often the more fact that someone is known to disagree widely on other issues is considered sufficient reason not to take him seriously on the issue at hand ("how can you believe someone who has said?") In short, the fact than an opposing vision has much consistency across a range of issues as one's own is used as a reason to reject it out of hand. [pg. 253]

Enough already. This concludes my 6 weeks of quotes from Sowell.

Quote 39 from Sowell's "A Conflict of Visions"

I love this quote from Thomas Sowell's A Conflict of Visions: Ideological Origins of Political Struggles :

It is precisely the correctness or incorrectness of particular beliefs about social causation that requires scrutiny - a scrutiny arbitrarily barred by the phrase "value premises." ("Value premises" are, ironically, a sort of property right in conclusions, not to be trespassed on by evidence or logic.) [pg. 238]

So cool: "a property right in conclusions". Too common though: isn't this really what the OWS supporters were claiming when they boycotted Greg Mankiw's class without even listening to what he had to say?

Quote 38 from Sowell's "A Conflict of Visions"

Next, Sowell moves on in A Conflict of Visions: Ideological Origins of Political Struggles to characterize how weak theories can get a life of their own under the unconstrained vision:

... In short, ideas originating in one vision may be adapted to another. But, for the Malthusian population theory to last long enough for this to happen, it first had to survive more than a century of contradictory evidence. Its success in doing so suggests that evasions and tautological formulations may protect a theory against evidence as effectively as outright falsification. [pg. 229]

... Theories may persist because the difficult task of bringing them to confrontation with evidence has simply not been performed with sufficient skill and care. This may be especially so when the person testing the theory has a different vision of his own, and reads the opposing vision in his terms, rather than in its own terms. [pg. 229-230]

...

A recent example of this phenomenon has been the oft-repeated assertion that higher rates of broken homes and teenage pregnancy among black Americans are a "legacy of slavery." Only after decades of widespread repetition of this assertion was a comprehensive factual study done-revealing that broken homes and teenage pregnancy were far less common among blacks under slavery and in the generations following emancipation than they are today. Again, the point is not that a particular conclusion was mistaken but that a sweeping and unsupported assertion went unchallenged for many years because if fit a particular vision. The ability to sustain assertions without any evidence is another sign of the strength and persistence of visions. [pg. 232]

The contemporary example of this is anthropogenic global warming: evidence that warming has stopped, and that supporters were in a panic about how to cover that up, hasn't changed the viewpoint of many ... because it fits into an unconstrained vision that only the best and the brightest can save us from ourselves. Poppcock!

Quote 37 from Sowell's "A Conflict of Visions"

Sowell paraphrases Hayek in A Conflict of Visions: Ideological Origins of Political Struggles to make the point that much of what passes for social justice is merely a smokescreen:

Hayek treats much of the rhetoric of social justice as a confused evasion of harsh realities inherent in the processes required to move toward such goals. To Hayek, those things commonly modified by the adjective "social"-justice, conscience, democracy - are by their very nature inherently social, so that this adjective is meaningless by reason of redundancy, if the word is used in an honest and straightforward way. It is "incredibly empty of meaning," according to Hayek, so that "to employ it was either thoughtless or fraudulent."

Although Hayek found the concept of "social justice" to be devoid of specific meaning, he found it fraught with insinuations which he considered both erroneous and dangerous. Many "who habitually employ the phrase do not know themselves what they mean by it," he said but others who have used it were not simply engaging in "sloppy thinking" but "intellectual dishonesty." According to Hayek, "the phrase 'social justice' is not, as most people feel, an innocent expression of good will towards the less fortunate," but has become in practice "a dishonest insinuation that one ought to agree to a demand of some special interest which can give no real reason for it." The dangerous aspect, in Hayek's view, is that "the concept of 'social justice'�has been the Trojan Horse through which totalitarianism has entered". Nazi Germany being just one example. [pg 212-3]

Just last month, Dan Henninger pointed out that < a href="http://online.wsj.com/article/SB10001424052970204603004577267632224945836.html?KEYWORDS=santorum">people were putting up with Rick Santorum's weirder beliefs because he kept hammering this position, and it was working.

38. While Hayek regarded some advocates of social justice as cynically aware that they were really engaged in a concentration of power, the greater danger he saw in those sincerely promoting the concept with a zeal which unconsciously prepares the way for others - totalitarians - to step in after the undermining of ideological, political, and legal barriers to government power makes their task easier. [pg. 215]

Quote 36 from Sowell's "A Conflict of Visions"

Sowell's A Conflict of Visions: Ideological Origins of Political Struggles then argues that the definition of power in the unconstrained vision, as evidenced by consitutional scholar Lawrence Tribe, is about results:

According to Tribe, if the government refuses to pay for abortions by indigent women, then it causes "coerced childbirth," acting in effect to conscript women (at least poor women) as "involuntary incubators," thereby "denying women power over both their bodies and their futures." This is consistent with the general logic of defining power in terms of the ability to change someone else's behavior, though inconsistent with the definition of power as the reduction of [others'] pre-existing options. [pg. 180]

Note that Tribe is concered with the "ability to change". This is not saying that someone else's behavior does change, just that you can influence the choice. To Tribe, this is power. In the constrained vision, this is not power because people still have options; and it is only in reducing options that one is powerful.

Quote 35 from Sowell's "A Conflict of Visions"

Sowell quotes Peter Bauer in A Conflict of Visions: Ideological Origins of Political Struggles :

The market system delivers the goods people want, but those who make it work cannot readily explain why it is so. The socialist or communist system does not deliver the goods, but those who operate it can readily explain away its failure. (46) [pg. 169-170]

Quote 34 from Sowell's "A Conflict of Visions"

An unfortunate implication of Sowell's A Conflict of Visions: Ideological Origins of Political Struggles is that:

In the unconstrained vision, individualism refers to (1) the right of ordinary individuals to participate in the articulated decisions of collective entities, and (2) of those with the requisite wisdom and virtue to have some exemption from either systemic or organized social constraints.

Among contemporary followers of the unconstrained vision, individualism likewise centers on exemption of moral and intellectual pioneers from social pressures or even, in some cases, from laws. For example, conscientious objections to military service, or military advocacy of violence in the face of perceived social injustice, are among the exemptions Ronald Dworkin justifies, while denying that racial segregationists have any corresponding rights to violate civil rights laws. [pg. 165]

In short, this is do as I say, not as I do. Kind of a hallmark of stuff like global warming conferences and school lunch programs, wouldn't you say?