Subject: Re: Novel anti-software-patent article
From: "Stephen J. Turnbull" <turnbull@sk.tsukuba.ac.jp>
Date: Fri, 7 Jan 2000 18:42:39 +0900 (JST)


    Craig> "Stephen J. Turnbull" <turnbull@sk.tsukuba.ac.jp> writes:

    >> The point of the rant/lecture is simply that in the U.S. over
    >> 50% of the public is fairly directly stockholders (and through
    >> pension funds and the like, that figure goes to 70% or 80%), so
    >> profits are benefits, _not costs_, to the public.

    Craig> I am not following your reasoning here.  You have a couple
    Craig> different notions of public here.

True.

BTW, I rather doubt anybody here who has appealed to "public" or
"social" benefit has been careful about defining it, even to
themselves, and I think if we all did define it we'd be surprised at
just how little agreement there is on the meaning of that term.

    Craig> First we have the public of which 50% are directly
    Craig> shareholders (the public which profits from monopoly

You may not limit the beneficiaries that way.  Anybody whose pension
fund invests in equities benefits from monopoly prices.  Taking the
union of that group with similar indirect beneficiaries (anybody with
auto insurance, for example, pays lower premia because the insurance
company invests its reserves in equities), and the direct
shareholders, and this "public" becomes an overwhelming majority.
80%? 90%?

Of course the degree to which people benefit depends on the size of
their (possibly indirect) investment, and thus on their wealth.  But
that is much more complicated than "R, S, and A v. everyone else".

You could say that by "profit" you mean _net_ of the costs by the
monopoly, but doing that accounting is extremely difficult, even in
defining those costs in principle, let alone measuring them.  But this
doesn't square with the following clause:

    Craig> prices), then we have the public that pays monopoly prices.

This is not a unique "public," either.  It varies by product.  Of
course the union of those publics substantially overlaps the above
stockholding public.

    Craig> Looks like you have capital moving from one half of the
    Craig> public to another.

It's not an issue of disjoint groups (the misconception I really
object to); the groups overlap substantially, and therefore the source
and sink of the flow are often the same.  Or, more commonly, there are
(partially) offsetting flows.

BTW, it's not capital, it's income.

    Craig> How is that generalized into public benefit?

Pardon me, I wrote inexactly.  My point is that although the portion
of a monopoly price that is accounted as monopoly profit is a _cost_
to the customer (who often enough is another monopolist!), and
customers when people are certainly members of the public, it is also
an _exactly offsetting benefit_ to a different set of members of the
public, namely individuals with a direct or indirect equity interest
in the firms.

In other words, unless stockholders are considered second-class
citizens, the _net public benefit_ of monopoly profits actually
accruing to the vendor is _exactly zero_ by definition.

There are good reasons to account stockholders second-class citizens,
of course.  After all, they're rich, and therefore evil.  Right?  At
least, less good than those of us who remain righteously poor.[1]

    Craig> This says nothing of the differential between the monopoly
    Craig> price, and the profit these stockholders actually see,
    Craig> which would in most cases still be a cost to them.

Huh?  Where is that differential going?  Are you describing the
salaries and shares and share options that make Bill Gates a multi-
billionaire and Eric Raymond, as well as several other people _on this
very mailing list_, multi-millionaires?

I don't see how it's any of our business if the stockholders in those
firms choose to reward their managements with "silly" "finder's fees"
for discovering and exploiting monopolies, as well as the more savory
business opportunities that FSBs restrict themselves to by definition.
This "differential" is a cost of business, not profit.  Ask the IRS;
they wouldn't hesitate to call it "profit" if they could, would they?

    Craig> Is there some voodoo going on here I'm not seeing?

Yes.  It's that witch-doctor over there sticking pins into the "Richie
Rich" doll as he roasts it over slow coals.


Footnotes: 
[1]  This is based on a valid ethical argument with which I personally
agree, stripped of the pejoratives.  The reason for making fun of it
here is that it is very much second order compared to the issues of
incenting and inhibiting innovation, especially in the American
context of extremely broadly distributed ownership of assets.

-- 
University of Tsukuba                Tennodai 1-1-1 Tsukuba 305-8573 JAPAN
Institute of Policy and Planning Sciences       Tel/fax: +81 (298) 53-5091
/* What's the big deal about the millennium? .............................
.... There are still 360 shopping days left until the millennial epoch! */