Category Archive: Entrepreneurship

  1. The Long History of Music Piracy

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    When you’re a historian, people expect you to write history. So, twelve years ago, when I told people I was writing a dissertation about music piracy, the typical response was, “But… that’s not history.”

    I couldn’t blame them. The dirt was still fresh on Napster’s grave at the time, and challenges to online services such as Grokster, Limewire, and even YouTube were still wending their way through the courts. The days of using cassettes to make mixtapes or lurching to press the “record” button to capture songs from the radio were not far behind. If anything, a few older folks might have dim memories of shaggy-haired hippies swapping Grateful Dead bootlegs in the 1970s.

    All of this seemed too fresh to be “History” in the way of Adolf Hitler and the Peloponnesian War and the like. But, in fact, piracy has a history as long as sound recording — even as long as written music itself. Jazzheads swapped copies of shellac discs in the 1930s, and shady operators even copied music in the wax cylinder era of the 1910s. Sheet music was bootlegged in the nineteenth century, just as printed materials had been since Gutenberg unleashed the printing press four hundred years earlier.

    Music, though, has proven more vexing to regulate than other copyrighted works. A piece of sheet music is cheaper and easier to photocopy than an entire book. And anyone can play his own version of a song in a way that another writer cannot “play” The Grapes of Wrath. American copyright law did not even cover music until 1831 — originally, only books, maps, and charts were protected.

    As a matter of fact, I discovered that sound recordings were not protected in the United States until 1972. How could this be?

    The Enlightenment Origins of American Copyright

    Part of the reason lay in the United States Constitution itself. Our founding document is a notoriously succinct one, outlining the structure of government and spelling out a handful of basic responsibilities for federal authorities — one of which was copyright. The founders empowered Congress:

    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.

    Children of the Enlightenment, the founders believed that the spread of knowledge contributed to the public good, and government ought to encourage it. (As Thomas Jefferson put it in 1813, “He who receives an idea from me, receives instruction himself without lessening mine; as he who lights his taper at mine, receives light without darkening me.”) Thus, government should incentivize “Authors and Inventors” to create — but rights to their works should also be “limited,” so as not to strangle the free exchange of art and ideas.

    And when they said “limited,” they meant it. The first copyright term lasted a measly fourteen years, and Congress only reluctantly added new kinds of works — written music, photography, film — to the scope of copyright over the course of the nineteenth and early twentieth centuries. Seeing copyright as a monopoly, a sort of necessary evil, they were loath to expand its domain unless absolutely necessary.

    The Trouble with Music… and Sound

    John Philip Sousa

    The fate of sound recording shows how true this is. After Thomas Edison worked out the first truly effective method for inscribing and replaying sound waves in 1877, an era of freewheeling piracy ensued. By 1905, Congress was besieged by songwriters, music publishers, and “talking machine” companies with cries for help. Famous composers such as Victor Herbert and John Philip Sousa pled their case, citing the unfairness that a band of rogues profited off their works. (Of course, Sousa also slyly conceded, “I can compose better if I get a thousand dollars than I can for six hundred.”)

    A player piano roll

    But there was a rub. How exactly would copyright reform work? The songwriters were mad because the companies making disks, wax cylinders, and player piano rolls used their music without authorization or compensation; they demanded both. The talking machine companies wanted to record performances of the written music for free. If forced to pay royalties to composers, then they wanted to have a copyright for their own recordings too.

    Congressmen were perplexed. If Sousa owns the copyright for his written composition, then how could the talking machine company own a separate copyright for a recorded performance of it? Isn’t it the same music? What if two different companies recorded two different versions of the same song? Were there copyrights for each recording?

    The debate may seem technical, arcane, even alien to twenty-first century ears, but the politicians contemplated the question long before there were music videos or sampling or remixes. It seems obvious to us today that Frank Sinatra and Sid Vicious’s versions of “My Way” are two distinct works. Obviously, one work — a song — can exist in an almost infinite number of unique permutations.

    Muddling through in the Age of Jazz

    Congress decided to punt on the issue (as it does) — and it turned out to be a good deal for songwriters, record companies, and consumers. With the Copyright Act of 1909, lawmakers set up a system that let songwriters and music publishers earn a royalty when their songs were recorded — but the rate for each “use” (each disk or piano roll manufactured and sold) was a flat one, set by the government. And artists and labels were more or less free to record versions of songs as they pleased.

    What Congress did not decide to do was to provide copyright for sound recordings themselves. It was just too confusing, and in the Progressive Era, anti-monopoly sentiment remained strong in American society. Copyright still looked like too much of a monopoly.

    The curious result was that sound recordings seemed to lack copyright protection — and pirates noticed. For decades, bootleggers operated in the shadows of the US economy, recording live performances of operas, copying out-of-print jazz and blues records for connoisseurs, and sometimes simply making a quick buck. (The Mafia occasionally pirated pop hits, though many bootleggers were just enthusiasts of hard-to-find music.) Throughout, they could point to the law and say they were not violating it — because sound recordings weren’t protected under the Copyright Act.

    The arguments may seem flimsy, but both courts and lawmakers struggled from the 1930s to the 1960s to figure out how to square the circle. Sometimes judges ruled against bootleggers under the doctrine of “unfair competition,” arguing that the pirates freeloaded off the original label’s financial investment in producing and promoting a record. (By making a record or an artist popular, judges reasoned, the label generated “good will” with the public, which the pirate unfairly exploited.)

    The Rise of Stronger, Longer Copyright

    But the problem remained, since Congress was still reluctant to act on copyright reform. It took the outbreak of widespread bootlegging in the rock counterculture of the 1960s to push the issue to the front burner. Armed with cassette tapes, hippie bootleggers copied unreleased Bob Dylan recordings (“the basement tapes”) and captured Jimi Hendrix concerts for an eager youth audience.

    Finally, in 1971, Congress passed a law that provided record labels with protection for their products. And in 1973, the Supreme Court ruled that states could pass their own anti-piracy laws, even though copyright had traditionally been understood as a responsibility of the federal government, and state laws potentially allowed infinite protection for recordings — arguably violating the “limited times” provision of the Constitution.

    In a deindustrializing America of the 1970s, though, the cries of the record industry resonated — as did those of other “information” businesses. Makers of albums and movies and software argued that their firms needed protection more than ever in a post-industrial economy, where information was the currency of the age.

    The old anti-monopoly sentiments of the Progressive Era melted like butter. Beginning in 1976, Congress embarked on a program that lengthened the term of copyright from 56 years to the life of the author plus 50 years; increased penalties for infringement; and expanded the scope of what could be copyrighted and patented (for example, software and genetically modified organisms).  Congress even arbitrarily added 20 years to the length of copyright in 1998 — a law critics dubbed the “Mickey Mouse Protection Act,” since the beloved cartoon character’s copyright was about to lapse at the time.

    The Future of Piracy

    Where does this story leave us today — in a post-Napster world of YouTube, SoundCloud, and BitTorrent? A fan could illegally download Prince’s entire discography within minutes of the artist’s passing in 2016, but he or she could not stream his songs on Spotify because the Purple One had the legal right to keep them off all streaming platforms.

    Prince’s case illustrates the paradox: copyright is stronger and longer than it has ever been before, and yet it is arguably flouted more often than ever too. The US economy still generates a great deal of “information,” but information travels more or less freely. One could argue that the postindustrial economy thrives on the very fact that it is as easy as pressing ctrl-C to copy a word, image, or sound.

    America and the world could do with a bit more of the anti-monopoly spirit of old. I do not need the incentive of a lengthy copyright term to write. (If I live another 50 years, the copyright for this article would not lapse until 2137. Is that really necessary?) And the penalties for copyright infringement do not need to be so punitive that so-called “copyright trolls” can use the law to intimidate a lowly blog out of existence with extortionate demands for using a photo without permission.

    Congress once actually had it right — as hard as those words are to type. Copyright ought to be a pragmatic bargain between artists, business, and consumers that promotes creativity, not a right of vast scope, consequence, and duration that stifles it. Hopefully lawmakers will realize that less state-enforced monopoly power, rather than more, would be good for both the economy of innovation and the public interest as a whole.

     

  2. Quietly creating freedom: Private communities and special economic zones

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    For the last several centuries, nation-states have dominated the political landscape, and set all the rules for everyone inside them.

    But now two kinds of special jurisdictions — private communities and “Special Economic Zones” — are quietly taking over functions and providing options that traditional polities cannot or will not. This gentle revolution has already brought comparative wealth and better living to millions of people — perhaps including you.

    Special Economic Zones

    In a Special Economic Zone (SEZ), a government creates exceptions to its own rules — a select haven from the status quo that prevails elsewhere in the national territory. The goal, says the World Bank, is to create a “business environment that is intended to be more liberal from a policy perspective and more effective from an administrative perspective than that of the national territory.”

    Learn More: New anti-Airbnb law protects hotels from competition (and violates private property and freedom of exchange)

    Modern SEZs come in many types and sizes. One might offer nothing more than duty-free warehousing of goods in transit, while another might provide an alternative governance regime for an entire metropolitan area.

    Though not SEZs in the modern sense, zones governed by special rules have existed almost as long as government itself. These special jurisdictions have coevolved with the nation-state, usually cooperating, but sometimes competing with it. Although they were pushed into decline for centuries, special jurisdictions never died out, and in recent decades they have enjoyed renewed vigor.

    The antecedents of modern SEZs date from 166 BCE, when Roman authorities made the island of Delos a free port, exempting traders from the usual taxes in order to stimulate local commerce. The Hanseatic League, a confederation of trading cities chartered and loosely governed by the Holy Roman Empire, effectively ruled northern Europe from around 1200 to 1600 CE, hunting down pirates and defeating kings in battle. These proto-SEZs, like primitive mammals, had real bite.

    Early types of special economic zones next appeared among many various and far-flung European colonial outposts, formed as quasi-sovereign sub-governments and typically granted unique trading privileges. Examples include Macau (founded in 1557), Hong Kong (1842), and over 80 treaty ports established throughout China from the mid-1800s onward.

    After the Enlightenment-era explosion of these special jurisdictions, the nation-state began its rise. From the Napoleonic Empire, through two world wars, to the collapse of the communist regimes, it ruled the globe.

    Pushed to the margins, SEZs reached their nadir somewhere around 1900, when the world had only about 11 free ports. SEZs seemed headed for extinction.

    Why SEZs Came Back

    What brought SEZs back from the brink? The United States should get some of the credit.

    Its Foreign Trade Zone (FTZ) program, launched in 1934, offered special exemptions from federal excise taxes and duties. This proved convenient for those who, legally speaking, wanted to be within the jurisdiction of the United States while remaining outside its customs territory. The United States boosted SEZs again in 1948, when Operation Bootstrap made Puerto Rico a free trade zone for U.S. companies engaged not just in trade, the traditional focus of FTZs, but also production.

    Despite those precedents, most commentators date the modern SEZ movement from the industrial free zone established in Shannon, Ireland, in 1959. That early example certainly did seem to set off a wave of similar innovations. Since about the mid-1980s, “the number of newly established zones has grown rapidly in almost all regions, with dramatic growth in developing countries.” Today’s most populous nation-state, China, has proved especially prolific, going from 0 special jurisdictions in 1980 to at least 295 today. About 75% of the world’s countries now host SEZs, which number at least 4,000 and perhaps (if you count all the many single-factory zones) nearly 10,000.

    Private Communities

    The sorts of special jurisdictions closest to everyday people — common interest developments — have become increasingly popular both in the United States and worldwide. In the United States, these take the forms of homeowners’ associations, condominium associations, and cooperative residential communities. Residents have flocked to these private “common interest communities” in recent decades.

    The popularity of common interest communities appears not only in the number of people living in them, as graphed above, but also in their growing size and sophistication. Many common interest developments have grown to the size of small cities.

    Their residents entrust these private communities to provide nearly every service otherwise available from a traditional political municipality. The largest cooperative residential corporation in the United States, Bronx’s Co-Op City, houses more than 50,000 shareholder-tenants. Their mutually owned private corporation provides them with utilities, roads, stores, offices, schools, parks, security, and more.

    Highland Ranch, Colorado, evidently the largest homeowner association (HOA) in the United States, boasts of almost 100,000 residents and 31,000 households on 22,000 acres. Highland Ranch also hosts nearly 1,000 businesses, which employ more than 6,800 people; 19 elementary schools, 4 middle schools, 5 high schools, and numerous daycare facilities; several medical facilities; places of worship serving a variety of faiths; and 70 miles of paved and natural trails, 20 parks, two 18-hole golf courses, and an 8,200-acre backcountry wilderness area. In everything but origin and legal status, these resemble conventional mid-sized cities.

    The success of private communities shows the popular support enjoyed by this very local kind of special jurisdiction.

    Pragmatic Advancements

    Further up, so to speak, at the level of SEZs, official support and encouragement become more common. Even when they reach to the highest level of government, though, the roots of special jurisdictions reach back down to the real world.

    Devotion to theory has not characterized the development of special jurisdictions, which governments have instead adopted largely ad hoc. Extemporizing and learning from experience has driven the largest and arguably most successful field test of special jurisdictions: China during the last several decades.

    Learning from the success of the Crown Colony of Hong Kong, itself a historical accident, the Chinese government began in the 1980s to try (or at least allow) a wild profusion of SEZs. Officials did so not pursuant to theory but (silently) in spite of it, and described their policy as “crossing the river by groping for stones.” This intensely pragmatic, theory-free approach seems to have worked in China. Hundreds of millions of people have escaped poverty in Chinese SEZs.

    It also bears noting that, thanks to the spread of privately developed and managed special jurisdictions, SEZs increasingly escape the charge that they can thrive only thanks to top-down subsidies. These days, special jurisdictions happen only if and when private investors fund them. That sort of objective oversight helps to ensure that special jurisdictions, far from floating on clouds of theory, have a solid grounding in the real world.

    The astonishing growth in SEZs qualifies as a revolution of sorts, but not the usual, political kind. Instead of being imposed by domestic or foreign enemies, this revolution has come from within, allowed or even encouraged by existing authorities.

    Instead of descending from the rarified theories of armchair radicals like Karl Marx, it rises from the bottom up, expressed in the everyday choices of everyday people. The same effect appears at smaller scales, in the proprietary communities that increasingly supplant politically-run municipalities. Instead of merely plugging a few new politicians into the same old offices, SEZs, private communities, and other special jurisdictions have the power to quietly and gently transform governments across the globe.

    For more about the revolution quietly transforming governments bottom-up, inside-out, worldwide, look for Professor Bell’s forthcoming book, “Your Next Government? From the Nation State to Stateless Nations” (Cambridge University Press).

  3. Elinor Ostrom, Laurel Thatcher Ulrich, and learning to see the women who have shaped the world

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    “Well-behaved women seldom make history.” Most recognizable from bumper stickers and coffee mugs, the phrase has become a pop feminist favorite.

    CC BY SA 3.0 George Ruban

    You can buy it engraved on 42 different pieces of jewelry on Etsy — possibly even with attribution to the correct author, Laurel Thatcher Ulrich, a professor of history at Harvard University.

    Unfortunately, many adopters of the slogan have deeply misunderstood Ulrich’s original intent. The statement has nothing to do with flame-throwing, or civil disobedience, or even defying convention. Rather, when Ulrich penned the phrase, her point was that the importance of the everyday is too often ignored.1 Well-behaved women seldom make the history books, but they should.

    True, the record of human civilization is filled with those who forged new paths and defied the expectations of their time. These revolutionary figures are important and rightfully remembered.

    However, most people are not Galileo, risking their lives to challenge church and state in their quest for truth. Most people, instead, make their mark by offering contributions on a more modest scale. They produce, innovate, cooperate, and govern within their homes and neighborhoods, and through membership in communities forged both geographically and through shared interests.

    I want to be very clear here that the everyday-ness of most contributions to the world applies equally to men and women. I beg of you, do not read into this argument any implication that women are better suited to contribute in domestic or communal ways.

    However, to the extent the focus of history has been on the grand feats of statesmen and scholars, the historical exclusion of women from formal political and educational systems has diminished the record of their impact on the world. A failure to recognize the importance of social history, including that of enterprise and political organization at the local level, has often gone hand in hand with a failure to recognize women’s contributions.

    Elinor Ostrom

    CC BY SA 3.0 Holger Motzkau

    Elinor Ostrom, like Ulrich, made significant contributions by engaging in scholarship that took seriously the importance of people’s day-to-day actions. Throughout her career, Ostrom studied how it is that people find ways to solve problems within their own communities, even when those problems are considered theoretically insoluble without a great statesman swooping in and forcing people to get along.

    Through archival history, ethnographic fieldwork, and a carefully selected mélange of other statistical and social scientific methods, she studied the role of communities in police services, water conservation, natural resource management, and a variety of other contexts in which individual actors are often considered helpless in the face of how many others could choose to free-ride on their efforts.

    What she found over decades of research was that conventional, non-revolutionary, everyday folks are perfectly capable of coming up with solutions to what other economists and political scientists claimed should have been cripplingly complex social problems. Even classic collective-action problems, like securing mutual commitment to a program of water conservation, are often successfully resolved by voluntary negotiation among individuals. Her book Governing the Commons investigates instances of such local resolution taking place across the world and through history.

    For these contributions, Ostrom was awarded the Nobel Prize in Economics (officially called the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel), in a joint prize with Oliver Williamson in 2009. She remains the only woman to have won the Nobel Prize in Economics.

    The framework that Ostrom used throughout this research emphasized the importance of understanding the rules-in-use in any given social context, as distinct from the rules as formally articulated. It’s the rules that people actually enforce that matter, not what people just say the rules are. What this means is that the formal record is often an unreliable indicator of the actual conditions within which people live, and the constraints that they face when attempting to accomplish their goals. This is why fieldwork has been such an integral component of Ostrom’s research.

    Through this emphasis on fieldwork and rules-in-use, Ostrom’s work — like Ulrich’s — highlights the importance of the everyday, well-behaved approach to making a difference in the world. The everyday is where local norms are created, and where local governance takes place. In part because of Ostrom’s contributions, the significant impact that local practices have on other levels of political and social organization is increasingly being recognized and grappled with by social scientists.

    I would be remiss if I didn’t conclude by noting that, like other women in history, there were several points in Ostrom’s life where her potential was dismissed because of her gender. Her pursuit of a doctoral degree was in defiance of her family’s wishes. The economics department at UCLA refused her graduate admission, and many of the political science faculty were upset when she and three other women were admitted to their doctoral program.2 Her initial appointment at Indiana University-Bloomington might not have gone through had it not been for the fact that she and her husband, esteemed political scientist Vincent Ostrom, came as a package deal.

    Learn More: Jayme Lemke: Feminism is about choice.

    Both Ulrich and Ostrom demonstrate that when we fail to account for women’s contributions — whether or not they are well-behaved — we risk ignoring significant forces determining the shape of the world.


    1Ulrich, Laurel Thatcher. 1976. “Vertuous Women Found: New England Ministerial Literature, 1668-1735.” American Quarterly 28 (1): 20–40. Available at https://dash.harvard.edu/bitstream/handle/1/14123819/Vertuous%20Women%20Found.pdf?sequence=1

    2Herzberg, Roberta, and Barbara Allen. 2012. “Elinor Ostrom (1933–2012).” Public Choice 153 (3–4): 263–68. See also this Big Think Interview: https://www.youtube.com/watch?v=N8CXgBSQhcA.

  4. Fashion design and copyright

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    Should fashion designs be eligible for copyrights? When I listen to people talk about this issue, many of the same interesting arguments come up. These people know about designer knockoffs and feel that something is not quite fair about them. Yet they also view copyists as moving innovation along in the fashion world. Copying releases new fashions from the small circles of their origins to the wider marketplace; it translates designs from abstract experimentation on the catwalk to concrete wearability on the sidewalk. Copying thus plays a vital market role in fashion. And so, in my admittedly small and biased sample, a typical conversation about fashion copyright invariably trends toward a reluctant opposition.

    The issue arises because after a century of relegating fashion designs to the wilderness of intellectual property law, Washington seems poised to begin domesticating the fashion industry. With Sen. Chuck Schumer (D-N.Y.) as lead sponsor, the Innovative Design Protection and Piracy Prevention Act (S.3278) was introduced last August. Design protection bills have been introduced routinely since the 1970s. Yet only in recent years has the cause gained significant legislative momentum. Since 2005 about a dozen precursors to the current bill have been introduced in the House and Senate. A slate of hearings has harvested the views of academics, designers, and celebrity witnesses. The current bill—pruned by numerous drafts and political-legal deals, plus a detailed review by the U.S. Copyright Office—was a honed legislative compromise designed to win majorities in both chambers in a postelection congressional logrolling frenzy.

    If enacted the bill would amend the Copyright Act to provide three years of protection to fashion designs that meet defined standards of originality and novelty. As defined in the bill, a fashion design is the “appearance as a whole of an article of apparel including its ornamentation.” An infringement of a protected design occurs if a copy is found to be “substantially identical in overall appearance” to the protected design, so long as it can be “reasonably inferred [that the copyist] saw or otherwise had knowledge of the protected design.” The bill includes a system of penalties and various provisions to limit collateral consequences like excessive litigation as well as unfair burdens on emerging designers and home sewers. Once the law was in place, fashion would join computer software, vessel hulls, and architectural designs as recent exceptions to the “useful article” rule written into the Copyright Act.

    The U.S. apparel industry has essentially always operated in a “low intellectual property equilibrium” (as law professors Kal Raustiala and Chris Sprigman have aptly surmised in their influential study of fashion copyright). Trademark protects certain features in fashion design like brand names, logos, and unique attributes that consumers use to identify designs with a particular brand. The stitched polo player on Ralph Lauren’s shirts is protected, but the overall design of the shirt is not. The plaid pattern made famous in the linings of Burberry’s top coats is protected; the silhouettes of their topcoats are not. As for patents, the process is too slow and its standards of novelty too strict for fashion.

    Copyright law has traditionally not protected fashion because a garment is considered a “useful article” that combines a utilitarian purpose (covering the body) with the designer’s creative expression. Still, certain articles like a sculpted brooch or an artistic belt buckle are protected if they are considered works of art that are separable, at least conceptually, from the clothing article itself. And while a two-dimensional sketch is generally protected, the physical rendition of the design as an article of clothing is not. “[A] man’s property is limited by the chattels of his invention,” wrote Judge Learned Hand in an important 1929 case involving dress designs, Cheney Bros. v. Doris Silk. “Others,” he concluded, “may imitate these at their pleasure.”

    The case before Judge Hand bore remarkable similarity to the fashion-copying issue before us today. The complainant was a company, Cheney Bros., Inc., whose business model employed constant experiments with dozens of dress patterns simultaneously to discover the designs that would become market trends. Meanwhile the respondent, a company named Doris Silk, would copy the successful dress patterns once they were identified by Cheney’s experiments and then proceed to undercut its prices. Even though Judge Hand’s opinion is full of sympathy with Cheney and he had some degree of impatience with the design copyist, he ultimately could find no refuge for design originators in the law. “To exclude others from the enjoyment of a chattel is one thing; to prevent any imitation of it, to set up a monopoly in the plan of its structure, gives the author a power which the Constitution allows only Congress to create.”

    Having been spurned by the courts, fashion designers did not initially go to Congress for protection. Instead, the industry organized more effectively and took matters into its own hands. The Fashion Originators Guild of America, a cartel among design originators, lasted from 1932 to 1941. Guild members agreed to boycott retailers who dealt with known copyists. The Guild employed clandestine shoppers trained to spot fakes and a tribunal to determine whether designs were copies. Guild members were fined for conducting business with known copyists. While reportedly successful at achieving its ends, the Guild was dismantled in 1941 by the U.S. Supreme Court, which ruled the boycott in violation of the Sherman Antitrust Act. Since then the fashion world has enjoyed almost no intellectual property protection.

    Meanwhile, as one would expect, copying of fashion designs has been rampant and grows faster and more efficient with digital communication and production technologies. Some design copying occurs bilaterally between individual designers. For instance, in 2009 Diane von Furstenberg inadvertently copied protected elements of a men’s jacket designed by two Canadian designers (the dispute was later settled out of court). More commonly, large-scale manufacturers copy the designs of small-scale and artisanal designers, then bring mass quantities of the modified design to market at lower prices. During fashion week or the Oscars, for example, copyists hurriedly beam runway photos to factories around the globe, which translate the images into wearable copies and begin manufacturing tout de suite. Copyists can place finished garments on store racks in a few weeks.

    It is this latter, large-scale form of copying that most disturbs design originators. “When things get copied, it’s like somebody coming into my head and robbing, stealing,” designer Maria Cornejo told NPR’s Kaomi Goetz during New York fashion week last September. This reflects the attitude more broadly of the industry’s upper crust of designers, which sometimes vilifies copyists in support of the pending legislation. In 1996 Narciso Rodriguez designed a wedding gown for his friend Carolyn Bessette for her marriage to John F. Kennedy, Jr. The gown was instantly copied and marketed around the world before Rodriguez could commercialize his own design. Fifteen years later the cleanly elegant design is still popular among brides and easy to find online. Testifying before Congress in 2008 Rodriguez pleaded for protection. “They have stolen my DNA,” he said. “We need your help.”

    As Judge Hand reminds us, copyright is essentially a form of legal monopoly. As with any restriction of competitive market forces, consumers are made to pay higher prices and enjoy less choice than without monopoly. Copyright also restricts the public domain, diminishing the rate of downstream innovation. So the downside to copyright is higher access costs for two groups.

    On the other hand, copyright is intended to encourage creative works since the designers know that their monopoly position will let them capture most of the economic value of their innovation.

    In short, copyright is a social tradeoff: Some access is sacrificed for more innovation. This is a deeply ingrained concept in American society, as Article I Section 8 of the U.S. Constitution empowers Congress “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.”

    Empirically speaking, the tradeoff bears no relevance to the fashion industry. Rather, fashion is well known as a highly competitive and highly innovative market. Design innovation in fashion is vibrant even though design originators enjoy no copyright and copying is widespread. Each fashion cycle unveils a remarkably creative array of novel designs. Entry by new designers is robust, and bold newcomers often move to the cutting edges of innovation. According to the evidence, the creative forces of design originators respond to something deeper than intellectual property protection, perhaps artistic imperative or the quest for fame. As for revenues, design originators have developed indirect mechanisms to lend their reputational capital to perfumes, cosmetics, and accessories, whose high markups afford handsome licensing fees.

    To be accurate, the supporters of the legislation do not seek to promote innovation but to achieve what they regard as fairness. Steven Kolb, the executive director of the Council of Fashion Designers of America, summed it up in that NPR report: “Designers invest a lot of time, a lot of resources, a lot of energy into creating their collections. It can take them nine months and billions of dollars. So when they present those collections and somebody can just steal them right off the runway, within seconds, and profit from their work, their energy, their intellectual property—it’s not fair.”

    Nonetheless, this competitive and innovative outcome is puzzling because the lack of copyright does not appear to have been significantly costly to the industry. On the contrary, copying helps the fashion industry broaden the scope of its innovations and achieve greater relevance to consumers and society.

    As we scratch the surface of the fashion industry and begin to analyze it more closely, we can see why fashion inverts the expected economics of intellectual property. As consumers of fashion (that is, all of us) we show enormous variety in the way each of us views it. We all place different combinations of value on novelty, exclusivity, style, variety, conformity, comfort, and of course money. Some of us are fashion-conscious. Others have mastered that traveling professor look. Probably most of us take fashion more seriously than we would admit. And we all seem to have strong feelings about how much time and money ought to be spent shopping.

    Copyists enable the industry to meet the range of consumer preferences by segmenting the market into as many different consumer types as possible. By segmenting choices into different styles and price ranges, copyists let consumers easily identify with fashion, become comfortable with a look, experiment and cross over between segments, or pick and choose from multiple segments at once. Go ahead and splurge on the suit, but bargain hunt for the shirt and tie. Segmenting also lets people with low incomes afford to participate in fashion and have access to tasteful, fashionable looks even on a modest budget. Walmart in fact sells its own apparel lines and began showing at New York’s Fashion Week in 2005. Fast fashion has dramatically expanded the options available to low-income households.

    From Catwalk to Sidewalk

    At the high end of design the fashion show lets design originators pursue their innovations. Since originators do not need to uphold wearability or marketability as priorities, they have freedom to experiment with materials, silhouettes, color patterns, hem lines, and so forth. This often results in designs that have high degrees of abstraction. This abstraction in turn gives wide berth to originators in exploring and communicating their ideas—their ideological statements on the current state of fashion, its relation to the world, and the designer’s normative claims on how he or she wishes to change the world. Most people don’t take fashion that seriously (myself not included), and many find it difficult to relate to what comes down the catwalk during fashion week.

    To go from abstract ideas on the catwalk to fashionable clothing on the sidewalk, however, requires an imitative-adaptive process. As with all fields of creative expression, ideas at a high level of abstraction are initially appreciated by niches of elite expertise and taste. Ordinary consumers may not understand everything on the runway but experts can, and these small circles of virtuosity are the only audience that matters when design originators aim to innovate. To then translate the abstract into the economic trend, downstream innovators analyze, imitate, and reformulate the originals, editing the complexity while retaining the aesthetic. This process of adaptation and imitation transports abstract ideas from elite niches to broad appeal, creating clothes that people can relate to and want to wear.

    When design copyists compete to imitate and adapt design originators, they also discover manufacturing and distribution shortcuts that help reduce unit costs. By removing a seam here or there, using less costly fabric, inventing an electronic inventory system, and so forth, fashion copyists reduce their own costs and can offer designs to consumers in even lower-priced market segments. It is only in recent decades that people of even modest purchasing power began to have access to fashionable, tasteful looks. “Queen Elizabeth owned silk stockings,” Joseph Schumpeter famously observed. “The capitalist achievement does not typically consist in providing more silk stockings for queens but in bringing them within the reach of factory girls in return for steadily decreasing amounts of effort.” Similarly, Frédéric Bastiat expressed wonder at the market’s ability to feed Paris without a central plan. The same holds for the spontaneous order of the fashion world. Paris gets clothed as well, good sir.

    The public discussion over fashion copyright is well underway. Design originators have a normative head start in that discussion, just as the complaint by Cheney Bros. drew the sympathies of Judge Hand. It is unfortunate that the public discussion treats design copyists as pirates and parasites. We might instead view them as adaptive-imitative entrepreneurs whose innovations serve beneficial economic functions. Copying in fashion is not a mere exercise in copying apparel designs. Copyists translate the abstract into the real, thus moving innovation along in the industry, reducing costs of production, and making fashion relevant to all segments of consumers and society.

    As its proponents will tell you, the proposed legislation is not about spurring innovation. Rather, it is about design originators keeping a bigger share of the economic pie that they help create. In our democratic society, the industry can lawfully attempt to steer the machinery of government in directions that enrich itself. It is up to the rest of us to discuss whether easing the competitive market burdens on design originators is worth the costs to downstream innovators and their consumers.

    This piece was originally published at the Foundation for Economic Education on November 24th, 2010.

  5. A road map for college students interested in a career advancing liberty

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    I have a confession to make: I was one of those annoying overachievers in high school.

    Always on the honor roll. In the Honor Society. President of this and that. Captain of this and that. And, of course, I had a 4.0.

    Why? Hint: it wasn’t because I wanted to spend my Friday nights studying. I did so because that’s what I was told I should do in order to get into a good college. Universities like to see strong grades and test scores, as well as participation in extracurricular activities (sports, clubs, etc.).

    But then I got to college and realized there was no longer a road map for what’s next. Was I still supposed to join a dozen clubs and run for student government? What about the grades? In short: what was I supposed to do in college to make me attractive to employers after graduation?

    The answer to that question depends on what you want to do after college. Future engineers need to do something completely different than those going into a career in the arts and humanities. Aspiring doctors and lawyers need to focus on test scores and GPA while business majors should focus on internships with relevant companies.

    So, what about a road map for a career in the free-market nonprofit sector? I’m glad you asked! As the executive director of Talent Market, a non-profit pro-liberty talent recruiting firm, I have worked with more than 100 free-market nonprofits and have a good sense for what they are looking for when it comes to talent.

    Here are five things to do if you are interested in a career advancing liberty:

    1. Join Like-Minded Student Groups

    Future employers love to see a demonstrated interest in free-market ideas. Whether you join a like-minded organization, get politically involved, or write for the alternative newspaper, you are showing how important advancing liberty is to you.

    2. Participate in Free-Market Seminars, Conferences, and Events

    If you look hard enough, you will find a plethora of liberty-oriented seminars, conferences, and events designed for students like you. Institute for Humane Studies, Foundation for Economic Education, Young Americans for Liberty, Students for Liberty, FIRE, and many other organizations offer opportunities for budding free-marketeers to learn about the ideas of liberty and start developing a like-minded network.

    Click image for more information

    3. Get Internships with Liberty-Oriented Organizations

    Most liberty-oriented nonprofits sponsor an internship of sorts, and that’s a far better way to spend your summer than bussing tables at Applebee’s. Not only will you gain valuable exposure to the inner-workings of a nonprofit, but you’ll also learn more about what types of nonprofit jobs are appealing to you. And, of course, you’ll continue to expand your free-market network.

    Learn More: Learn Liberty Opportunities Hub

    4. Don’t Worry About the 4.0

    It might be important for future docs and legal eagles to maintain a near-perfect GPA, but that’s not necessarily the case for those of us who want to advance liberty. I’ve worked on hundreds of searches for free-market nonprofits, and the only time clients place importance on GPA is for attorney openings, and even then, they are only interested in law school GPA. The opportunity cost of getting a 4.0 in undergrad is high; the extra time you’ll spend in the library is time you won’t be honing your leadership skills as a campus activist or expanding your liberty network at a weekend seminar.

    Now, if you plan to become a professor or lawyer for liberty, grades will matter a lot more. A good undergraduate GPA can have a huge impact on your admission to a good PhD or law program.

    5. Figure Out Where You Belong

    So, you’ve decided you belong in the liberty movement — great! But what exactly are you going do to when you get there? Become a policy analyst? Development officer? Communications specialist? Outreach coordinator? Operations guru? Project manager?

    Internships and networking will go a long way in helping you decide which type of role makes sense, as will perusing job boards and becoming familiar with the opportunities available. And don’t forget to talk to your internship coordinators and get their perspectives on where your strengths lie.

    After you’ve done all of these things, make sure to stop for a moment and congratulate yourself. Why? Because you’ve selected a career path that will bring you a lifetime of fulfillment and make the world a freer place. Well done!

  6. Why classical liberals need a research program

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    In my last post, I discussed several important moral features of classical liberalism; this time, I want to discuss classical liberalism as a research program.

    For thinkers like Ludwig von Mises and Friedrich Hayek, classical liberalism was first and foremost something to be studied and understood. The basic observation guiding their thinking is that the social world is incredibly complex yet also orderly. Furthermore, that order does not appear to be the product of some centralized coordinating authority. “Coordination without command” is the starting point of classical liberalism: how millions of individuals, each in possession of only a fraction of the knowledge necessary to create order in society, and each acting (generally) in the interests of themselves and their loved ones (rather than “society at large”), somehow produce social arrangements that exhibit a high degree of regularity and intelligibility.

    The market is the classic example of such “spontaneous orders.” There are groups that plan within markets: business firms and households. But no organization or group of organizations plans the market itself. Guided by the price system — itself underpinned by crucial institutions that protect private property rights, enforce contracts, and uphold a non-discriminatory rule of law — the groups that act within markets can “react” to each other’s wants and plans just by looking at market prices.

    If the price of oranges goes up, due to an unexpected frost killing off some of the orange crop, some households and firms will forego purchasing oranges and instead seek to fulfill their wants in other ways. The ones who still purchase oranges at the higher prices will be those who value oranges relatively more, such as hotels that can use orange juice as an input into a higher-price good, like mimosas.

    This give-and-take between buyers and sellers is the order of a market economy. Without a centralized commander, the tug-and-pull of freely adjusting market prices helps most everyone get what they want, in a way that minimizes frustrated plans and conflicts.

    To be sure, a positive appreciation for the complexities of markets and their role in human flourishing often yields a normative judgement that markets ought to be left as unimpeded as possible. Mises, famously, held a “rule utilitarian” ethical position: he favored the discovery and implementation of social rules that tended to maximize human well-being. But in order to discover these rules, he had to first “roll up his sleeves” and do the hard work of developing a rich body of social theory that could help him make sense out of the intricacies of the market and other orders, such as legal or constitutional order. Mises first and foremost was a social scientist devoted to understanding the extent to which human beings could live together peacefully, guided by forces other than sovereign fiat.

    Good classical liberals, then, can only responsibly engage the normative realm of classical liberalism if they appreciate how classically liberal institutions actually work — i.e., how real human beings relate to each other in societies not organized along the lines of a prison or army barracks. Even classical liberals who specialize in the normative aspects of the tradition must be familiar with the developments in market theory, legal theory, and constitutional theory as they have unfolded since the late 18th century.

    Classical liberals can and should be ideological. But they ought not be ideologues. For the former, an appreciation of the social world’s complexities and the institutions that govern it occupy center stage. In other words, human freedom is the conclusion written on the final line, not the assumption written on the first line.

  7. How regulations block economic progress

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    [This article is updated from one that originally appeared in the Mercury News.]

    Several years ago I participated in a colloquium whose title was something like “Advancing Technology: Thinking Outside the Box.” The presentations ranged from the ever-more imaginative uses of robots (fascinating!) to irrigating the Sahara Desert for growing crops that by mid-century could sustain the planet’s burgeoning population (unconvincing).

    My lecture was the most mundane: I proposed that better government regulation would act as what people in the military call a “force multiplier” (a tool that increases the effectiveness of your force) for technological advancement. I also argued that at present, excessively burdensome regulation blunts technological innovation.

    Progressive Policy Institute economists Michael Mandel and Diana Carew observed in a 2013 policy memo that “for each new regulation added to the existing pile, there is a greater possibility for … inefficient company resource allocation, and for reduced ability to invest in innovation.”

    The regulatory burden

    The economic burden of America’s accumulating mountain of regulatory requirements is almost unimaginable: According to a study from the Mercatus Center at George Mason University covering the years from 1977 through 2012, regulation’s drag on the US economy has made the economy a whopping $4 trillion smaller than it otherwise would have been.

    One of the reasons for this massive effect is that, as regulations become more and more complex and burdensome, prospective entrepreneurs and managers must expend more resources on issues related to regulation and thus have less available for innovation and corporate growth.

    The Competitive Enterprise Institute’s report Ten Thousand Commandments 2016 examines many of the government’s own cost estimates (which are notoriously low, because bureaucrats tend to lowball the costs and overstate the benefits of their rules). Nevertheless, the study found that federal regulation alone costs consumers and businesses at least $1.9 trillion every year in compliance costs and lost economic productivity — more than 11 percent of current GDP. According to the author, federal regulation is, in effect, “a hidden tax that amounts to nearly $15,000 per U.S. household each year.”

    The “gatekeeper” regulatory agencies, whose affirmative approvals are necessary before new innovations can be commercialized, are the source of much of the massive burden of regulation. The Food and Drug Administration alone regulates products that account for more than a trillion dollars annually — 25 cents of every consumer dollar.

    The average cost to develop and bring a new drug to market is now about $2.6 billion, but many of the largest drug companies spend significantly more than that — for pharmaceutical giant AstraZeneca, the figure is almost $12 billion per drug, and for GlaxoSmithKline, Sanofi, and Roche, it is around $8 billion.

    It might seem counterintuitive that some of the behemoth companies spend the most per approved product; after all, they have the most experience with the processes of clinical testing and negotiating the regulatory maze. The reason is that the biggest companies take the most risks in drug development and, consequently, experience the most failures.

    Too few mistakes

    And that’s not a bad thing; as Phil Knight, the co-founder of Nike, put it, “The trouble in America is not that we are making too many mistakes, but that we are making too few.”

    What he meant is that to discover the Next Big Thing, you need to think outside the box — and inevitably, many of the projects attempted will fail, whether we’re talking about nuclear fusion, new pharmaceuticals, techniques for sequestering CO2, or software to assure the safety of self-driving cars.

    Much existing regulation is superfluous or fails to be cost-effective. In his excellent book Breaking the Vicious Circle, written shortly before he was appointed to the U.S. Supreme Court, Stephen Breyer cited an example of expensive, non-cost-effective regulation by the EPA: a ban on asbestos pipe, shingles, coating, and paper, which the most optimistic estimates suggested would prevent seven or eight premature deaths over 13 years — at a cost of approximately a quarter of a billion dollars.

    Breyer observed that such a vast expenditure on regulating uses of asbestos that confer such tiny risks would cause more deaths than it would prevent from the asbestos exposure, simply by reducing the resources available for other public amenities. Nevertheless, political pressures from environmental activists pushed the EPA into making a decision whose net effect was actually to increase health risks.

    Regulatory excesses make it less likely that in any of the sectors in which American scientists and companies have excelled — nanotechnology, materials science, nuclear power, pharmaceuticals, medical devices, biotech and agriculture, to name just a few — we will discover the Next Big Thing.

    The refinement of regulation to make it more evidence-based and cost-effective isn’t as sexy as growing crops in the Sahara, but it could yield tremendous humanitarian and economic benefits in the near-term and for generations to come.

    Regulators won’t do it without significant prodding, so maybe major health-related philanthropies like the Howard Hughes Medical Institute, Gates Foundation, and Chan-Zuckerberg Initiative should make it part of their agenda. As wealthy as they are, they and their grantees would benefit from the “force multiplier” effect of smarter, more streamlined, more efficient regulation.

  8. Entrepreneurs create value for disabled workers.

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    The numbers are alarming. Approximately 6.4% of America’s labor force is plagued with some form of physical or mental disability (U.S. Census). Only 1 out of 3 disabled persons is employed, and when they are employed they get on average only about 2/3rds the income of non-disabled workers.

    It may be tempting to blame this income discrepancy on prejudice or the selfishness of employers. And this attitude lies behind the push for legal minimum wage rates, which their promoters believe will improve the welfare of the low wage workers. This belief concerning minimum wage rates is at odds with economic forces that pervade society.

    In a competitive market, wages earned by labor tend to equal the value contributed to production by labor. In traditional microeconomic analysis, we refer to this as the marginal revenue product of labor. If the minimum wage is above the value contributed by a worker, employers are discouraged from employing that worker. Surprisingly, the federal minimum wage for disabled workers reflects this —it allows the payment of sub-minimum wages to workers whose disabilities inhibit their productivity.

    A worker’s wage reflects the value derived from a time unit of labor. If, on average, a worker creates $30 worth of value for his employer in an hour of work, his wage will tend to be higher than if his labor contributes $20 of value per hour of work. The laborer who is paid only $20 per hour when he creates $30 of value in an hour can advertise his service to other employers. The famed economist John Bates Clark reflects on this in his book The Distribution of Wealth,

    There is a general rate of wages; and employers in this group can have laborers for what it costs to get them out of the other groups, in which their productive power is smaller. By doing this, they can make a profit. For an interval they can hold the difference between the pay of labor in the general market and its earning power in the industry into which they bring it. This is, however, a vanishing difference; for, as competition does its work, it slips through the employers’ fingers.

    If the employer who employs the worker whose labor, on average, creates $30 of value per hour wants to keep his service, the wage paid to him must rise closer to $30 per hour. When labor utilizes capital (like power tools or factory machines), the productivity of that labor is increased. Part of this value is itself received by the capital in the form of a rent, but so too is part derived from labor that uses it. Labor that is more productive receives a higher wage. Accountants that use accounting software will be more productive than those who use typewriters or pen and paper. Farmers that use tractors and combines are more productive than subsistence farmers who lack these means. The cost-reducing technology embodied in capital makes its users and the consumers served by it wealthier.

    Alleviating disabilities is profitable.

    The same logic holds for disabled workers. A labor-inhibiting disability increase the costs of the worker to produce the same amount of product as a person who is otherwise the same but lacks the disability.

    Where there are costs that can be reduced, there is a profit opportunity. Any entrepreneur who succeeds in reducing costs faced by a laborer who suffers from a disability can earn a profit while also improving the lives of the disabled.

    Consider a disability that can now be largely disregarded in terms of its economic effects: vision impairment. According to data aggregated by the Center for Disease Control and Prevention, “14 million Americans aged 12 years and older have self-reported visual impairment defined as distance visual acuity of 20/50 or worse.” 11 million of these are able to correct their vision to 20/40 or better with glasses and other visual aids.

    In a world without this technology, the ability of these persons to function would be greatly inhibited. Both the quality of their lives and the value of their labor would deteriorate. Today, success in overcoming vision ailments is so widespread that it is easy to ignore the poverty that would exist absent this technology.

    But what about those who suffer from extreme blindness? A report from the Wall Street Journal has shown that even many who suffer from blindness can now see with the help of eSight. The product is a visor that uses video technology that, according to the company, allows 3 out of 4 persons who suffer from blindness to see. An eSight visor sells for around $10,000.

    Or consider the development of exoskeletons. An exoskeleton from SuitX allows those who are paralyzed to walk. Another company, Ekso Bionics, even promotes exoskeletons as labor-augmenting devices. These exoskeletons can be purchased at a price starting around $40,000. Entrepreneurs are working to lower these costs, however the process is a slow one. They must bear the costs of the FDA approval process, because the exoskeleton is considered a medical device.

    Entrepreneurs act as first responders for helping a significant proportion of disabled persons. They stand to gain by offering these technologies on the market. The person who purchases it makes an investment. Not only do she directly enhance her own quality of life, she can augment her labor and, therefore, income.

     

  9. How urban planners broke Brooklyn

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    Great cities and free markets work from the bottom up, driven by the individual actions of the people who live in them. Consequently, they respond in similar ways to large-scale, top-down planning: very unpredictably.

    Rulers have attempted to impress their vision onto the living flesh of cities since at least ancient Rome. But large-scale urban planning came into its own in the 20th century, and the negative unintended consequences – cycling through an endless process of government intervention – have never been more apparent. Brooklyn, one of the five boroughs that make up New York City, is a perfect case study.

    Brooklyn became “America’s first suburb” not long after New Amsterdam was founded by the Dutch and conquered by the British in 1664. New Yorkers really began moving there in large numbers after entrepreneurs such as Robert Fulton established regular ferry service across the East River in 1814; by 1834, Brooklyn was incorporated as a city. Until the City of New York financed the Brooklyn Bridge in 1869, few large-scale public works took place there, even though the population by that time was well over a quarter-million. By the time Brooklyn became part of New York City in 1899, the population had reached almost one million, but for many years after, most major projects, including the subway system, were still financed privately.

    Not until the construction of the Brooklyn-Queens Expressway in the mid-20th century (the brainchild of notorious city planner and “master builder” Robert Moses), did large-scale urban planning hit Brooklyn. But when it did, it hit hard.

    In 1949, armed with federal tax money, Moses planned to cut a straight line with the BQE through the heart of the historic, tree-lined neighborhood of Brooklyn Heights. A group of its affluent and influential residents organized to successfully fight this gross intervention, leading the expressway to be diverted around the district. Their victory against the BQE (combined with public outcry over the demolition of New York’s old Penn Station) led in 1965 to the passage of New York state’s first Landmarks Preservation regulations, which were intended to protect “New York City’s architecturally, historically, and culturally significant buildings and sites by granting them landmark or historic district status.”

    Brooklyn Heights, where my family and I have lived for over 20 years, became the first such district. The consequence of landmarking, however, has been to seriously constrain how owners could use and shape their property, practically eliminating high-rise construction in the neighborhood and making new construction much more costly.

    So the response to Moses’s intervention was a demand for further intervention in the form of landmarking, not only of buildings but of entire neighborhoods: at last count, 139 districts in New York are now designated for preservation. In recent years, housing prices across New York City have skyrocketed, owing not only to increasing demand but also to zoning regulations, building codes, and high construction costs that constrain the supply of new housing. In Brooklyn Heights, as well as in almost 25 percent of the borough of Manhattan, landmarking has only added to those costs, and this, in turn, has generated at least two unintended consequences.

    The first has been a slew of high-rise development just to the east of the Brooklyn Heights district, where pent-up demand and residential development has been shunted. The near absence of further development in Brooklyn Heights itself has reduced residential space overall or led to the conversion of non-residential buildings into housing, creating a kind of residential monoculture. It has also made surrounding areas even less affordable for those trying to live on lower incomes.

    Second, although public housing and housing subsidies existed before landmarking, landmarking has contributed to the demand for subsidies by boosting housing prices. Indeed, subsidized housing for the middle class, under the Mitchell-Lama Housing Program, was established within Brooklyn Heights during this era.

    Like most regulations, of course, there are beneficiaries who lobby for these restrictions. Those lucky enough to live in Brooklyn Heights already, as I do, enjoy the quiet and charm of a place nearly frozen in time – we basically live in a museum with restaurants. But that hardly makes up for the costs imposed on the large number of less fortunate people.

    Learn More: Why isn’t there chaos when traffic lights malfunction?

    It’s important to recognize that both market restrictions and land use regulations – for all the benefit they may confer on some – still have considerable downsides. They tend to distort or thwart the spontaneous adaptations ordinarily created by entrepreneurs to help us deal with changing conditions and desires. While the underlying mechanics of market processes and urban processes differ, the role of coordinating social institutions – prices in the case of markets and social networks in the case of cities – are indeed similar. And it’s those complex and intricate processes, largely unnoticed by central planners trying to impose “order” on the “chaos” of experimentation, that will frustrate even the best intentions of the best laid urban plans.

  10. Patents are out of control, and they’re hurting innovation

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    Every Tuesday morning, the United States Patent and Trademark Office (USPTO) issues thousands of patents. Many of these patents contain dozens or even hundreds of separate claims, and every one of these claims is like a new federal regulation governing private conduct. This is because any company or individual that creates a product or service described by one of these claims might be liable for damages or subject to an injunction.

    A patent is a right to exclude — a right to stop others from engaging in certain types of business. If the USPTO issues a patent on, say, scanning documents to email, no one else is allowed to scan documents to email without getting permission from the patent holder. That prohibition applies even to someone who has never seen the patent, never met the patent holder, or never heard of the patent system at all. That’s why patents are basically regulations: they stop people and businesses from engaging in personal and business activities, often in unexpected and intrusive ways.

    The patent system works when it incentivizes innovation that we would not otherwise have without the benefit of a patent. But if patents are given too easily, or too broadly, they become a burden on innovation. Indeed, research suggests that the vast majority of patent cases do not involve copying or free riding. Too often, companies find themselves attacked by overbroad patents in the hands of people who did little or nothing to contribute to the progress of technology. Why are these patents being issued?

    The USPTO does not have the time or the tools to adequately review patent applications. Patents are supposed to be novel and non-obvious compared to the “prior art” — that is, evidence of the state of the art at the time the patent application was filed. The universe of potential prior art is enormous. It includes earlier patents, academic publications, and all products available for sale in the United States. Much of this prior art, especially in software, cannot be easily found in indexed databases and is difficult to precisely date. A patent examiner is given about 18 hours to review a typical patent application, and only some of that time is spent searching for prior art.

    Learn More: When fans become creators

    Given the staggering range of potential prior art, examiners need more than a few hours to do a decent job. Also, they need better tools. The USPTO focuses on databases of patents and academic journals. This means that examiners usually miss large universes of potential prior art, such as open source software. The end result is patent after patent being issued on technology that already existed, or was obvious when the application was filed.

    Compounding these problems, the Federal Circuit (the appeals court that hears all patent appeals) has set the bar too low for getting patented. The court has demanded that patent examiners who make a finding of obviousness cite documentary evidence for each feature in a claim, no matter how mundane or obvious the feature is. But what if the feature is so mundane no one would write about it? The paradoxical result is that the more obvious a feature, the harder it can be to prove obvious. This is how we end up with patents on filming a yoga class or taking a photograph against a white background.

    The Federal Circuit’s pro-patent bias, especially under former Chief Judge Randall Rader, led some scholars to compare it to a “captured” agency: a regulator that has become captured by the interests that it is supposed to be regulating. Indeed, the patent system has many of the features that lead to creeping regulation in other contexts, such as large benefits accruing to narrow interests but with costs that are widely dispersed. In the patent context, this creeping overregulation takes the form of tens of thousands of low quality patents. One researcher estimated that, for software-related inventions, about 50 percent of patents are likely invalid, even under the existing permissive standards for validity. This means that, when it comes to determining patent validity, the USPTO is little better than a coin toss. Imagine if the FDA or EPA had such a low level of accuracy.

    Anyone concerned about government overreach should be alarmed by an agency that issues thousands of commands to the public every week with little oversight and only cursory review. Reforming and reigning in the patent system is crucial to making sure that intellectual property promotes innovation, rather than stifling it.

  11. Why it would be madness to produce all our own food

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    In a somewhat bizarre report, the UK supermarket Morrisons has pushed the idea that Britain would be better off if the country grew more of its own food. According to the supermarket, more domestic production would bring significant benefits, not least insulating consumers from global price volatility.

    This is a remix of an old protectionist tune: the idea that opening up markets to global trade makes an economy considerably more volatile and “risky”. It is a variation of the claim that we desire “food security” or “energy security” – the capacity to fulfil all our wants and needs through domestic production alone. It often manifests itself with support for “buying local” or “buying British” or, more recently “Buy American”, as articulated by the new President.

    No doubt this argument has more resonance given the recent iceberg lettuce shortage in the UK, following unusual weather in Spain. If only the UK produced its own lettuce, and did not depend on those unreliable Spaniards, it would surely enjoy security of supply?

    When considering reasoning such as this, it always makes sense to test whether the idea is scalable, up or down. Suppose that rather than saying “Britain should become more self-sufficient in food production”, we said, “Ryan Bourne’s family should become more self-sufficient in food production”.

    Rather than trading through exchanging cash for food products in a supermarket, in this world I would have to produce all my own food. I perhaps would have a herd of cattle, rent out a part of an allotment, use a greenhouse, invest in tools for my garden and vegetable patch and start growing a whole range of different foodstuffs.

    Let’s put aside the one-off capital purchases. The first thing to admit is that I would be hopeless at it. I don’t have a clue how to grow anything. Diverting resources into growing my own crops would probably be extremely inefficient with low yields for substantial effort.

    Given that I would be tending to my food production, I would also spend far less time doing other things that I am far better at, not least writing these kinds of articles.

    If substantial numbers of people were cajoled into producing their own foodstuff, then these costs – the inefficiency plus the loss of production elsewhere – would add up substantially across the whole economy.

    The same would be true if we decided all goods should be produced locally in my home town of Gillingham, in Kent, or even to the county itself. If significant inputs to production had to be substituted from service industries and apple production to instead produce all agricultural foodstuffs irrespective of the costs of doing so, then there would be a huge loss of overall production.

    So why do we believe that things would be different if we restricted production to a particular nation and decided we would only buy goods produced nationally?

    Not only would there be an absence of certain products which simply could not be produced in the UK. But goods prices would be higher owing to less competition, and total production would be much smaller because the economy as a whole would not be diverting resources into industries and products which we had comparative advantages in producing.

    In other words, protection, or restricting trade to local trade, would hurt both consumers and overall production. The only theoretical beneficiaries would be some producers within protected product markets who saw import-substitution demand rise as a result of import restrictions. And even here the absence of more competition is likely to reduce productivity improvements over time.

    Take, as an example, the recently discussed New Zealand farming reforms of the 1980s. Far from protection enhancing well-being, the evidence shows that subsidies undermined the productive potential of the sector. Practically all forms of assistance to New Zealand’s farmers were withdrawn over a period of five years in the 1980s.

    Big changes occurred – the sheep stock halved and beef and sheep farms fell by a third. But larger herd sizes and increases in lambing rates made the remaining farms much more productive, while production of fruits and wines grew sharply and a venison industry developed. The country now has a healthy and more productive agricultural sector, highly responsive to global demands and trading at world prices.

    This is an essential insight of trading that has been known since the days of Adam Smith. We can increase the size of the economy through specialisation and the division of labour – with people producing those things that they are relatively efficient at doing.

    This process is enhanced when we remove barriers within a nation or between nations to trade. Protectionism is costly. There’s a reason why, in times of war, countries have blockaded others. Hint: no country blockades another in the expectation that it would boost the local blockaded economies.

    But the costs do not just stop there. Contrary to the Morrisons report, deliberately seeking to shift to “local production” would not produce more certainty or security either. Returning to Ryan Bourne’s independent food production story, suppose that a bad harvest or a plant disease wiped out a substantial part of my food production in a given year.

    Absent the ability or willingness to trade, I would simply go without, and would not be able to consume those foodstuffs which I enjoy. In an attempt to improve security through all local production, I would have maximum insecurity of consumption. The same can be seen in the Spanish lettuce example. Were Spain to implement a “buy local lettuce” law, then the failing harvest of lettuces would result in skyrocketing prices and lower sales.

    The UK had some experience of this attempt to have “energy security” with its attempts to protect the coal industry through the 1970s and early 1980s. Far from ensuring “security of supply”, protection led to the monopoly power of the mining industry and the unions, resulting in strikes and constant threats of strikes that made energy supplies less, not more, secure.

    When the sector was liberated and support withdrawn, energy prices fell significantly as consumers were able to import much cheaper natural gas. Since then, supplies have been much steadier as they have been more diverse.

    A reliance on imports does not make an economy more at risk, because markets provide security in the same way that they provide other attributes of products which consumers consider valuable.

    If customers want their supply of any given product to be “secure” through continuous availability then supermarkets have to diversify their supply arrangements with a range of producers from across countries, which will be reflected through the prices of the goods on supermarket shelves. They might also invest in extra freezing and refrigeration units, for example.

    What about instances where governments react to rising international prices or supply shocks by imposing export restrictions to keep prices lower in domestic markets? Surely we can have the best of both worlds: trading freely in normal times but then protecting consumers when a crisis hits?

    Evidence in fact suggests that when one country starts doing this, all countries do, exacerbating the initial supply shock and leading to spiralling overall prices. This should not surprise us, since prices set freely provide signals on the shortages or surpluses of products which leads to adjustments in behaviour.

    The only semi-feasible reason why one might seek domestic self-sufficiency would be if you believed there was a high possibility of mass mobilisation war.

    Yet a substantial empirical literature has shown that trade and the interdependence it generates actually makes conflict less likely. And, frankly, if World War III happens then we’d have bigger problems than the availability of lettuce.

    This piece was originally published on CapX.

  12. 3 women who inspired the modern libertarian movement

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    Liberty was in full retreat in the early 1940s. Tyrants oppressed or threatened people on every continent. Western intellectuals whitewashed mass murderers like Joseph Stalin, and Western governments expanded their power with Soviet-style central planning. Fifty million people were killed in the war that raged in Europe, Africa, and Asia. The United States, seemingly the last hope for liberty, was drawn into it.

    Established American authors who defended liberty were a dying breed. H.L. Mencken had turned away from bitter politics to write his memoirs, while others like Albert Jay Nock and Garet Garrett were mired in pessimism.

    Amidst the worst of times, three bold women banished fear. They dared to declare that collectivism was evil. They stood up for natural rights, the only philosophy that provided a moral basis for opposing tyranny everywhere. They celebrated old-fashioned rugged individualism. They envisioned a future when people could again be free. They expressed a buoyant optimism that inspired millions.

    All were outsiders who transcended difficult beginnings. Two were immigrants. One was born in frontier territory not yet part of the United States. They struggled to earn money as writers in commercial markets dominated by ideological adversaries. All were broke at one time or another. They endured heartaches with men — one stayed in a marriage that became sterile, and two became divorced and never remarried.

    These women who had such humble beginnings — Rose Wilder Lane, Isabel Paterson, and Ayn Rand — published major books during the same year, 1943: The Discovery of FreedomThe God of the Machine, and The Fountainhead, respectively. The women, recalled journalist John Chamberlain, “with scornful side glances at the male business community, had decided to rekindle a faith in an older American philosophy. There wasn’t an economist among them. And none of them was a PhD.” Albert Jay Nock declared, “They make all of us male writers look like Confederate money. They don’t fumble and fiddle around — every shot goes straight to the centre.”

    Rose Wilder Lane

    Like her compatriots, Rose Wilder Lane surprised people. She once described herself by saying, “I’m a plump, middle western, middle class, middle-aged woman.” She had bad teeth, her marriage failed, she worked to support her aging parents, and at one point during the 1930s, she was so financially distressed that her electricity was shut off. Yet, she soared with great eloquence as she helped revive the radical principles of the American Revolution, and she inspired millions of adults and children alike as the editor of the beloved Little House books about individual responsibility, hard work, stubborn persistence, strong families, and human liberty.

    Rose Wilder Lane was born December 5, 1886, near De Smet, Dakota Territory. Her father, Almanzo Wilder, and her mother, Laura Ingalls, were poor farmers, devastated by drought, hailstorms, and other calamities that ruined crops. For years, the family lived in a windowless cabin. They missed many meals. Their daughter, named after wild roses which bloomed on the prairie, often went barefoot.

    When Lane was four, the family gave up on Dakota and moved to Mansfield, Missouri, which offered better farming prospects. She went to a four-room, red brick schoolhouse that had two shelves of books, and she discovered the wonders of Charles Dickens, Jane Austen, and Edward Gibbon. Her mainstay became the famous McGuffey Readers compiled by Cincinnati College President William Holmes McGuffey, who imparted moral lessons as he taught the fundamentals of reading and exposed young minds to many great authors of Western civilization.

    “We did not like discipline,” Lane recalled, “so we suffered until we disciplined ourselves. We saw many things and many opportunities that we ardently wanted and could not pay for, so we did not get them, or got them only after stupendous, heartbreaking effort and self-denial, for debt was much harder to bear than deprivations. We were honest, not because sinful human nature wanted to be, but because the consequences of dishonesty were excessively painful. It was clear that if your word were not as good as your bond, your bond was no good and you were worthless … we learned that it is impossible to get something for nothing.”

    She quit school after the ninth grade and determined that somehow she would see the world beyond rural Missouri. She took a train to Kansas City and accepted a job as a Western Union telegraph clerk on the night shift. She spent most of her spare time reading, perhaps three hours a day. By 1908, she relocated to San Francisco for another Western Union job and romance with advertising salesman Gillette Lane. They married in March 1909. She became pregnant but had either a miscarriage or stillbirth. It became impossible for her to conceive again.

    By 1915, the marriage had broken up, but through Gillette’s newspaper connections, Lane found her start as a journalist. For the San Francisco Bulletin, a radical labor paper, she began writing a women’s column, then a series of daily 1,500-word personality profiles. She wrote an autobiographical novel serialized in Sunset magazine.

    In March 1920, the Red Cross invited her to travel around Europe and report on their relief efforts, so that prospective donors — on whose support they depended — would know about the organization’s good deeds. Based in Paris, she traveled to Vienna, Berlin, Prague, Warsaw, Budapest, Rome, Sarajevo, Dubrovnik, Tirana, Trieste, Athens, Cairo, Damascus, Baghdad, and Constantinople. Lane imagined that Europe was the great hope for civilization, but instead, she eluded bandits, encountered bureaucratic corruption, endured runaway inflation, and witnessed civil war horrors and the darkening shadows of ruthless tyranny.

    Lane visited the Soviet Union four years after the Bolsheviks seized power. Like many people, she was enchanted by the Communist vision for a better life. She met peasants whom she expected to be rapturous about Communism. But, as she reported later, “My host astounded me by the force with which he said that he did not like the new government.… His complaint was government interference with village affairs. He protested against the growing bureaucracy that was taking more and more men from productive work. He predicted chaos and suffering from the centralizing of economic power in Moscow.… I came out of the Soviet Union no longer a communist, because I believed in personal freedom.”

    After returning to America, her career blossomed as she wrote for the American MercuryCountry GentlemanGood HousekeepingHarper’sLadies’ Home JournalMcCall’s, and the Saturday Evening Post, among others. She wrote novels about pioneer life. Famed actress Helen Hayes dramatized one of Lane’s novels, Let the Hurricane Roar, on the radio. But Lane was financially devastated during the Great Depression. In 1931, she wailed, “I am forty-five. Owe $8,000. Have in bank $502.70.… Nothing that I have intended has ever been realized.”

    In 1936, Lane wrote “Credo,” an 18,000-word article on liberty, for the Saturday Evening Post. Three years later, Leonard Read, general manager of the Los Angeles Chamber of Commerce, helped establish a little publishing firm called Pamphleteers, which reprinted Lane’s article as Give Me Liberty.

    In it, Lane explained how free competition enables civilization to flourish despite scoundrels. “I have no illusions about the pioneers,” she wrote. “In general they were trouble-makers of the lower classes, and Europe was glad to be rid of them. They brought no great amount of intelligence or culture. Their principal desire was to do as they pleased.… [Yet] Americans today … are the kindest people on earth.… Only Americans pour wealth over the world, relieving suffering in such distant places as Armenia and Japan.… Such are a few of the human values that grew from individualism while individualism was creating this nation.”

    The Discovery of Freedom

    In 1942, an editor of John Day Company asked Lane to write a book about liberty. She began work in a McAllen, Texas, trailer park, amidst a tour of the Southwest. She went through at least two drafts at her home in Danbury, Connecticut. Her book, The Discovery of Freedom, Man’s Struggle Against Authority, was published January 1943.

    While most historians focused on rulers, Lane chronicled the epic 6,000-year struggle of ordinary people who defy rulers to raise families, produce food, build industries, engage in trade, and in countless ways improve human life. She was lyrical about the American Revolution, which helped secure liberty and unleashed phenomenal energy for human progress.

    With stirring, sometimes melodramatic prose, she attacked myriad collectivist influences, including government schools and so-called “progressive” economic regulations. She ridiculed claims that bureaucrats could do better for individuals than individuals could do for themselves. She swept away gloom with her towering self-confidence. “Five generations of Americans have led the Revolution,” she declared, “and the time is coming when Americans will set this whole world free.”

    Individualist Albert Jay Nock lavished praise on the book, but Lane was dissatisfied with it and refused permission to reprint it. She never got around to completing another edition. Only a thousand copies of the book were printed during her lifetime.

    Nonetheless, The Discovery of Freedom had a big impact, circulating as an underground classic. It helped inspire the launching of several organizations to promote liberty — among them, Leonard Read’s Foundation for Economic Education, F.A. Harper’s Institute for Humane Studies, and Robert M. Lefevre’s Freedom School. Read retained General Motors consumer researcher Henry Grady Weaver to adapt the book as The Mainspring of Human Progress, and hundreds of thousands of copies have been distributed by FEE.

    The Little House Books

    Although The Discovery of Freedom was a founding document of the modern libertarian movement, Lane had perhaps a greater calling behind the scenes. In 1930, Laura Ingalls Wilder gave Lane a manuscript about her early life from Wisconsin to Kansas and Dakota. Lane deleted the material about Wisconsin, then went through two drafts of the rest, fleshing out the story and characters. This became a 100-page manuscript tentatively called Pioneer Girl, and she sent it to her literary agent, Carl Brandt. The Wisconsin material became a 20-page story, “When Grandma Was a Little Girl,” a possible text for a children’s picture book. One publisher suggested that the story be expanded to a 25,000-word book for younger readers.

    Lane conveyed the news to her mother, and since the original manuscript had been rewritten beyond recognition, she explained, “It is your father’s stories, taken out of the long Pioneer Girl manuscript, and strung together, as you will see.” Lane specified the kind of additional material needed, adding, “If you find it easier to write in the first person, write that way. I will change it into the third person, later.” Lane reassured her mother that the collaboration remained a family secret: “I have said nothing about having run the manuscript through my own typewriter.” By May 27, 1931, the “juvenile” was done, and Lane sent it off to publishers. Harper Brothers issued it in 1932 as Little House in the Big Woods, and it became a beloved American story.

    In January 1933, Wilder gave Lane Farmer Boy, a manuscript about Almanzo’s childhood recollections. Publishers had rejected it, presumably because it was mainly a chronicle of farm skills. Lane spent a month turning it into a flesh-and-blood story, and Harper’s bought it. The following year, Wilder gave Lane a manuscript about her life in Kansas, and she spent five weeks rewriting it into Little House on the Prairie.

    The books began generating significant income for the Wilders — a relief to Lane, whose aim was to help provide their financial security. Wilder expanded part of Pioneer Girl into another manuscript and gave it to Lane in the summer of 1936. “I have written you the whys of the story as I wrote it,” Wilder explained. “But you know your judgement is better than mine, so what you decide is the one that stands.” Lane spent two months rewriting it and drafted a letter for their literary agent, asking for better terms. This manuscript became On the Banks of Plum Creek. Lane spent most of 1939 rewriting the manuscript for By the Shores of Silver Lake; in 1940, The Long Winter; in 1941, Little Town on the Prairie; and in 1942, These Happy Golden Years.

    Throughout the later books especially, Lane portrayed young Laura Ingalls Wilder as a libertarian heroine. For example, in Little Town on the Prairie, she described her mother’s thoughts this way: “Americans are free. That means they have to obey their own consciences. No king bosses Pa; he has to boss himself. Why (she thought), when I am a little older, Pa and Ma will stop telling me what to do, and there isn’t anyone else who has a right to give me orders. I will have to make myself be good.”

    In 1974, NBC began adapting the books for Little House on the Prairie, a hugely popular television series that ran nine years and resulted in more than 200 episodes. Then came a syndication agreement assuring that they would be run again and again for at least the next quarter-century. Michael Landon wrote and directed many shows and starred as Laura’s father, Charles Ingalls.

    Lane’s last blast was a book about American needlework, which she turned into a hymn for liberty. “American needlework tells you,” she continued, “that Americans live in the only classless society. This republic is the only country that has no peasant needlework.… American women … discarded backgrounds, they discarded borders and frames. They made the details create the whole, and they set each detail in boundless space, alone, independent, complete.”

    Isabel Paterson

    Lane knew but wasn’t close to the bold, hot-tempered, sometimes tactless journalist Isabel Bowler Paterson. According to scholar Stephen Cox, she was “a slight woman, 5’3” tall, very nearsighted, a lover of pretty and slightly eccentric clothes, fond of delicate foods, a light drinker, a devotee of nature who could spend all day watching a tree grow.”

    Paterson held stubbornly to her views and told all who would listen what she thought about an issue. Dominating conversations tended to limit her social life, especially as she became a dissident against New Deal government intervention, but she did have some stalwart friends. One remarked that “if people can stand her at all, they eventually become very fond of her.”

    Paterson wrote novels and some 1,200 newspaper columns, but it was The God of the Machine that secured her immortality in the annals of liberty. It mounted a powerful attack on collectivism and explained the extraordinary dynamics of free markets.

    She was born January 22, 1886, on Manitoulin Island, Ontario. Her parents, Francis and Margaret Bowler, were poor farmers who moved to Michigan, then Utah and Alberta, in search of better luck. Paterson made soap, tended livestock, and spent just two years in school. But she read books at home, including the Bible, some Shakespeare, and novels by Charles Dickens and Alexander Dumas.

    When she was about 18 years old, Paterson went off on her own. She worked as a waitress, bookkeeper, and stenographer, earning $20 a month. She was proud to be independent. “Listen, my girl,” she told a journalist, “your paycheck is your mother and your father; in other words, respect it.”

    At 24, in 1910, she married Kenneth Birrell Paterson, but the relationship soured, and within a few years, they went their separate ways. She seldom talked about him again. She was more determined than ever to maintain her independence.

    She had done a little writing on the side to relieve boredom, and after she became a secretary to a Spokane, Washington, newspaper publisher, she did more. She began writing his editorials. She wrote drama criticism for two Vancouver newspapers. Next, fiction — her novel The Shadow Riders was published in 1916, and The Magpie’s Nest, the following year. Both were about young women struggling to achieve independence. Although Canada had become a protectionist nation, Paterson made clear in The Shadow Riders that she was a free trader.

    Paterson moved east following World War I and started reading her way through much of the New York Public Library. In 1922, she persuaded New York Tribune literary editor Burton Rascoe to give her a job, even though he didn’t like her. “She said bluntly that she wanted the job,” he recalled. “I told her my budget would not allow me to pay what she was worth. She said she would work for whatever I was prepared to pay. I said the pay was forty dollars a week. She said, ‘I’ll work for that.’”

    In 1924, she started writing a weekly column on books, and it became an influential forum for the next quarter-century. She used books as a point of departure to talk about practically anything. Many columns affirmed her commitment to American individualism. She attacked collectivist societies based on status and defended dynamic capitalism. She denounced Herbert Hoover’s interventionism and Franklin Roosevelt’s New Deal.

    The God of the Machine

    Many columns explored themes that became the basis for The God of the Machine, published by Putnam’s in May 1943. Paterson attacked fascism, Nazism, and Communism as varieties of the same evil: collectivism. She reserved some of her most eloquent blasts for Stalin, who charmed so many intellectuals. Anyone who imagines that socialist horrors were exposed recently will be shocked to see how clearly Paterson understood why collectivism always means stagnation, backwardness, corruption, and slavery.

    There’s much more in this tremendous book. Paterson provided a grand overview of the history of liberty. She made clear why personal freedom is impossible without political freedom. She defended immigrants. She denounced military conscription, central economic planning, compulsory unionism, business subsidies, paper money, and compulsory government schools. Long before most economists, she explained how New Deal policies prolonged the Great Depression.

    Paterson celebrated private entrepreneurs, who are the primary source of human progress. For instance: “Everything that was the creation of private enterprise in the railways gave satisfaction. Private enterprise mined, smelted, and forged the iron, invented the steam engine, devised surveying instruments, produced and accumulated the capital, organized the effort. In the building and operation of the railways, whatever lay in the realm of private enterprise was done with competence.… What people hated was the monopoly. The monopoly, and nothing else, was the political contribution.”

    By 1949, Paterson’s libertarian views became too much for the editors of the New York Herald Tribune, and she was fired. Nonetheless, she expressed her gratitude, saying they probably published more of her work than would have been tolerated anywhere else. They gave her a small pension, and she got along by investing her savings in real estate. She refused Social Security, returning her card in an envelope marked “Social Security Swindle.”

    Meanwhile, she had become a focal point for the fledgling libertarian movement. For example, after Leonard Read founded the Foundation for Economic Education, she introduced him to influential journalist John Chamberlain, whom she had helped convert into a libertarian. A decades-long collaboration blossomed.

    Back during the early 1940s, Paterson mentored Russian-born Ayn Rand who, 19 years younger, joined her weekly when she proofread typeset pages of her Herald Tribune book reviews. She introduced Rand to many books and ideas about history, economics, and political philosophy, helping Rand develop a more sophisticated worldview. When Rand’s novel The Fountainhead was published, Paterson promoted it in a number of Herald Tribune columns. Rand’s books went on to surpass Paterson’s — and just about everyone else’s for that matter — selling some 20 million copies.

    Ayn Rand

    Rand had a striking presence. As biographer Barbara Branden described Rand upon her arrival in America at age 21: “Framed by its short, straight hair, its squarish shape stressed by a firmly set jaw, its sensual wide mouth held in tight restraint, its huge dark eyes black with intensity, it seemed the face of a martyr or an inquisitor or a saint. The eyes burned with a passion that was at once emotional and intellectual — as if they would sear the onlooker and leave their dark light a flame on his body.” Later in life, chain smoking and sedentary habits took their toll, but Rand was still unforgettable, as book editor Hiram Haydn recalled: “A short, squarish woman, with black hair cut in bangs and a Dutch bob.… Her eyes were as black as her hair, and piercing.”

    Rand was born Alissa Rosenbaum on February 2, 1905, in St. Petersburg. Her father Fronz Rosenbaum had risen from poverty to the middle class as a chemist. Her mother Anna was an extrovert who believed in vigorous exercise and thrived on a busy social life. Alissa wanted nothing to do with either exercise or parties.

    She was precocious. After school, she studied French and German at home. Inspired by a magazine serial, she began writing stories, and at nine years old, she resolved to become a writer.

    The Rosenbaums’ comfortable world ended when the Czar entered World War I, which devastated the nation’s economy. Within a year, more than a million Russians were killed or wounded. The government went broke. People were hungry. The Bolsheviks exploited the chaos and seized power in 1918.

    The Russian Revolution spurred young Alissa to invent stories about heroic individuals battling kings or Communist dictators. At this time, too, she discovered novelist Victor Hugo, whose dramatic style and towering heroes captivated her imagination. “I was fascinated by Hugo’s sense of life,” she recalled. “It was someone writing something important. I felt this is the kind of writer I would like to be, but I didn’t know how long it would take.”

    At the University of Petrograd, she took courses with the stern Aristotelian Nicholas Lossky who, scholar Chris Sciabarra showed, had an enormous impact on her thinking. She read plays by Johann Christoph Friedrich von Schiller (she loved him) and William Shakespeare (hated him), philosophy by Friedrich Nietzsche (provocative thinker), and novels by Feodor Dostoevsky (good plotter). She was utterly captivated to see some foreign movies. She had her first big crush, on a man named Leo who risked his life to hide members of the anti-Bolshevik underground.

    In 1925, the Rosenbaums received a letter from relatives who had emigrated to Chicago more than three decades earlier to escape Russian anti-Semitism. Alissa expressed a burning desire to see America. The relatives agreed to pay her passage and be financially responsible for her. Miraculously, Soviet officials granted her a passport for a six-month visit. On February 10, 1926, she boarded the ship De Grasse and arrived in New York with $50.

    She soon joined her relatives in a cramped Chicago apartment. She saw a lot of movies and worked at her typewriter — usually starting around midnight, which made it difficult for others to sleep. During this period, she settled on a new first name for herself: Ayn, after a Finnish writer she had never read, but she liked the sound. And a new last name: Rand, after her Remington Rand typewriter. Biographer Branden says Rand might have adopted a new name to protect her family from possible recrimination by the Soviet regime.

    Determined to become a movie script writer, she moved to Los Angeles. Through her Chicago relatives, she persuaded a movie distributor to write a letter introducing her to someone in the publicity department of the glamorous Cecil B. DeMille Studio. She met the great man himself while entering his studio, and he took her to the set of his current production. She started work as an extra for $7.50 a day.

    At DeMille’s studio, Rand fell in love with a tall, handsome, blue-eyed bit actor named Frank O’Connor. They were married April 15, 1929, before her visa expired. She no longer had to worry about returning to the Soviet Union. Two months later, she applied for American citizenship.

    The DeMille Studio closed, and she found odd jobs, such as a freelance script reader. In 1935, she had a taste of success when she earned as much as $1,200 a week from her play Night of January 16th, which ran 283 performances on Broadway. It was about a ruthless industrialist and the powerful woman on trial for his murder.

    We the Living

    Rand spent four years writing her first novel, We the Living, about the struggle to find freedom in Soviet Russia. Kira Argounova, the desperate heroine, became the mistress of a party boss so she could raise money for her lover suffering from tuberculosis. Rand finished the book in late 1933. After many rejections, Macmillan agreed to take it and pay a $250 advance. The company published 3,000 copies in March 1936, but the book didn’t sell. Although word of mouth gave it a lift after about a year, Macmillan had destroyed the type, and We the Living went out of print. Rand had earned just $100 of royalties.

    In 1937, while struggling to develop the plot of The Fountainhead, Rand wrote a short, lyrical futurist story about an individual versus collectivist tyranny: Anthem. Rand’s literary agent sold it to a British publisher but couldn’t find a taker in the American market. About seven years later, Los Angeles Chamber of Commerce General Manager Leonard Read visited Rand and O’Connor — then living in New York — and remarked that somebody ought to write a book defending individualism. Rand told him about Anthem. Read borrowed her copy, read it, and his small publishing firm Pamphleteers made it available in the United States. It has sold some 2.5 million copies.

    The Fountainhead

    Rand finished plotting The Fountainhead in 1938 after nearly four years of work. Then came the writing. Her hero, architect Howard Roark, expressed her vision of an ideal man. He battled collectivists all around him to defend the integrity of his ideas, even when it meant dynamiting a building because plans were altered in violation of his contract.

    Selling the book proved tough. Rand’s editor at Macmillan expressed interest and offered another $250 advance, but she insisted the company agree to spend at least $1,200 on publicity, so Macmillan bowed out. By 1940, a dozen publishers had seen finished chapters and rejected the book. One influential editor declared the book would never sell. Rand’s literary agent turned against it. Her savings were down to about $700.

    Rand suggested that the partial manuscript be submitted to Bobbs-Merrill, an Indianapolis-based publisher that had issued The Red Decade by anti-Communist journalist Eugene Lyons. Bobbs-Merrill’s Indianapolis editors rejected The Fountainhead, but the company’s New York editor Archibald Ogden loved it and threatened to quit if they didn’t take it. They signed a contract in December 1941, paying Rand a $1,000 advance. With two-thirds of the book yet to be written, Rand focused on making her January 1, 1943, deadline for completion. She found herself in a friendly race with Isabel Paterson, then working to finish The God of the Machine.

    Rand made her deadline, and The Fountainhead was published in May 1943, the same month as The God of the Machine, about nine years after the book was just a dream. The Fountainhead generated many more reviews than We the Living, but most reviewers either denounced it or misrepresented it as a book about architecture. For a while, Bobbs-Merrill’s initial print run of 7,500 copies moved slowly. Word of mouth stirred a groundswell of interest, and the publisher ordered a succession of reprintings that were small, in part because of wartime paper shortages. The book gained momentum and hit the bestseller lists. Two years after publication, it had sold 100,000 copies. By 1948, it had sold 400,000 copies. Then came the New American Library paperback edition, and The Fountainhead went on to sell over 6 million copies.

    The day Warner Brothers agreed to pay Rand $50,000 for movie rights to The Fountainhead, she and O’Connor splurged and each had a 65-cent dinner at their local cafeteria. Rand fought to preserve the script’s integrity and largely succeeded, though some of her most cherished lines were cut. The movie, starring Gary Cooper, Patricia Neal, and Raymond Massey, premiered in July 1949. It propelled the book onto the bestseller lists again.

    Sometime earlier, when the hardcover edition had just come out, Rand told Paterson how disappointed she was with its reception. Paterson urged her to write a nonfiction book and added that Rand had a duty to make her views more widely known. Rand rebelled at the suggestion that she owed people anything. “What if I went on strike?” she asked. “What if all the creative minds of the world went on strike?” This became the idea for her last major work, tentatively called The Strike.

    Atlas Shrugged

    As Rand worked on the book for some 14 years, everything about it became larger than life. The book featured her most famous hero, mysterious John Galt, the physicist-inventor who organized a strike of the most productive people against taxers and other exploiters. The book introduced Dagney Taggart, Rand’s first ideal woman, who found her match in Galt. Key characters delivered long speeches presenting Rand’s philosophical views on liberty, money, and sex — the book often seems more like a polemic for individualism and capitalism. A friend suggested that the tentative title would make many people think the book was about labor unions, and she abandoned it. O’Connor urged her to use one of the chapter headings as the book title, and it became Atlas Shrugged.

    Rand’s ideas were as controversial as ever, but sales of The Fountainhead impressed publishers, and several big ones courted her for Atlas Shrugged. Random House co-owner Bennett Cerf was most supportive, and Rand got a $50,000 advance against a 15 percent royalty, a first printing of at least 75,000 copies, and a $25,000 advertising budget. The book was published October 10, 1957.

    Most reviewers were savage. The old-line socialist Granville Hicks was a vocal critic in the New York Times, and others were similarly offended by Rand’s attacks on collectivism. The most hysterical review of all turned out to be in the conservative National Review, where Whittaker Chambers, presumably offended by her critique of religion, likened Rand to a Nazi “commanding: ‘To a gas chamber — go!’” Word of mouth proved too strong for these naysayers, and sales began to climb, eventually past 4.5 million copies.

    With Atlas Shrugged, Rand had fulfilled her dreams, and she became depressed. She was exhausted. She no longer had a giant project to focus her prodigious energies. She leaned increasingly on her Canadian-born intellectual disciple Nathaniel Branden, with whom she had become intimate. To serve the growing interest in Rand and help revive her spirits, he established the Nathaniel Branden Institute, which offered seminars, marketed taped lectures, and began issuing publications. Rand wrote articles about her brand of libertarian philosophy, which she called objectivism. Branden, 25 years younger than Rand, was sometimes an abrasive taskmaster, but he displayed remarkable skills promoting the ideals of individualism and capitalism. Good times continued until August 23, 1968, when he told Rand about his affair with another woman. Rand denounced him publicly, and they split, although the reasons weren’t fully disclosed until Branden’s ex-wife Barbara’s biography was published 18 years later. Branden later became a best-selling author about self-esteem.

    During the past half century, no single individual did more than Ayn Rand to win converts for liberty. Her books sell a reported 300,000 copies year after year, without being advertised by publishers or assigned by college professors. Indeed, her works have been trashed by most intellectuals. Her enduring appeal is an amazing phenomenon.

    Curiously, despite the enormous influence of Rand’s books, they have had limited impact outside the English-speaking world. The most successful has been The Fountainhead, with editions in French, German, Norwegian, Swedish, and Russian. We the Living is available in French, German, Greek, Italian, and Russian editions, but a fifth as many copies are sold. The only overseas edition of Atlas Shrugged is in German — incredibly, it was never published in England. Anthem still hasn’t appeared in a translation, although French and Swedish editions are underway. Confirmation, perhaps, that America remains the world’s hotbed of rugged individualism.

    The Final Years

    Rand, Paterson, and Lane saw little of each other over the years. Rand and Paterson, both prickly pears, had a bitter split during the 1940s; after publication of Atlas Shrugged, Paterson attempted a reconciliation without success. Paterson’s friendship with Lane apparently had ended in some kind of intellectual dispute. Suffering gout and other infirmities, Paterson moved in with two of her remaining friends, Ted and Muriel Hall, in Montclair, New Jersey. There she died on January 10, 1961, at age 74. She was buried in an unmarked grave.

    Rand and Lane had already split over religion. Although Lane remained active throughout her life — Woman’s Day sent her to Vietnam as their correspondent in 1965 — she cherished country living at her Danbury, Connecticut, home. On November 29, 1966, she baked several days’ worth of bread and went upstairs to sleep. She never awoke. She was 79. Her close friend and literary heir, Roger MacBride, brought her ashes to Mansfield, Missouri, and had them buried next to her mother and father. MacBride had her simple gravestone engraved with some words by Thomas Paine: “An army of principles will penetrate where an army of soldiers cannot. Neither the Channel nor the Rhine will arrest its progress. It will march on the horizon of the world and it will conquer.”

    Rand had quarreled with many friends and led a reclusive life during her last years. She endured surgery for lung cancer. She kept more to herself after Frank O’Connor’s death in November 1979, oblivious to how her ideas inspired millions. Two years later, she enjoyed one heartening view, though; entrepreneur James Blanchard had a private train take her from New York to New Orleans, where 4,000 people cheered her resounding defense of liberty.

    Rand’s heart began to fail in December 1981. She hung on for three more months, asking her closest associate, Leonard Peikoff, to finish several projects. She died in her 120 East 34th Street, Manhattan apartment on March 6, 1982. She was buried next to O’Connor in Valhalla, New York, as some 200 mourners tossed flowers on her coffin. She was 77.

    With their acknowledged eccentricities, Rand, Paterson, and Lane were miracles. They came out of nowhere to courageously challenge a corrupt, collectivist world. They single-mindedly seized the high ground. They affirmed the moral imperative for liberty. They showed that all things are possible.

    This piece was originally published at the Foundation for Economic Education on April 8th, 2016.