Getting beyond woeful: my submission to the PC’s inquiry on Intellectual Property

From a quick squiz at their report, the PC seems to have done an excellent job on the question of IP. It didn’t put too much effort distorting its recommendations to somehow second guess what was politically palatable and just set out the appropriate principles and their upshot.

Without having read it all carefully, I looked at the couple of chapters which had something sustained to say about our international circumstances – the way in which we’ve agreed to hem ourselves in by agreeing to all sorts of patently outrageous claims – most obviously the retrospective extension of IP which, axiomatically can only have costs, since you increasing the incentives to bring something that’s already with us can’t increase its chances of being brought into existence (it already has been). And I thought they were a bit lame. I thought they were lame because they didn’t point out how consistent a disgrace the Department of Foreign Affairs and Trade has been to the Australian national interest on this point. As it showed in its hearings before the inquiry I was on into Pharmaceutical Patent Extensions, it hadn’t the slightest glimmering of what might be in the Australian interest, other than arguing in the first instance that we didn’t want to change any of the laws we already had. This came out when I asked them some very open ended questions in the inquiry. I asked them a very low key open ended question – what their objectives were when they were negotiating on IP and they became completely incoherent. They consulted with all and then kind of, well represented what they’d heard. What if they heard different things from different Australian interests. That pretty much stumped them.

Anyway the PC gets the basic principles right, but in an attempt to stiffen their spine on this point I wrote the following introductory letter to introduce a document I penned a few years ago trying to engage firms like Google, Facebook and other internet companies that fancy they don’t want to do evil. I even know some quite senior people in those companies in the Bay Area – including Google Chief Economist Hal Varian. But, not surprisingly for something I didn’t turn into a full time crusade, it didn’t go anywhere. In any event the introductory letter I penned to the Commission is below and the document “An international agenda for balanced IP” appears below the fold.

Saturday, 28 May 2016

To whom it may concern,

Attached is a document drafted some years ago, which I nevertheless hope will be of some interest and use to the Commission in its current labours to more fully inform debate about IP in Australia. The immediate context in which it was written meant that it addressed providers of the digital infrastructure for the internet. But the principles to which it appeals are far more general.

There appear few countervailing forces to IP mercantilism and yet it should be possible to make headway by more vigorously and self-consciously promoting the interests of all those who stand to benefit, whether they realise it or not, from resisting it. Using transparency as a weapon against the siren song of mercantilism – which as Adam Smith observed works by misleading the public into believing that their own interests coincide with the sectoral interests of a powerful minority – is part of the founding myth of the Commission.

In that spirit I am hoping that the Commission might help Australia vigorously identify its own strategic interests in resisting the more outrageous demands of the IP mercantilists, and build institutions more capable of promoting greater understanding of the issues amongst Australia’s policy and opinion makers. Further, in the spirit of its success with the Cairns group of agricultural exporters, Australia should lead the formation of a group of countries who identify their interests not with mercantilism but with policies designed to optimise national economic interests, most particularly where those policies also promote the global economic interest.

I’d be happy to appear before the Commission on this subject should it wish.


Nicholas Gruen

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Posted in Economics and public policy, Innovation, Intellectual Monopoly Privileges, Intellectual Property | 10 Comments

Techno crystal ball gazing

As some may have noticed, I’ve been musing of late about the likely future social and economic effects of the increasingly rapid and interconnected development of ICT, artificial intelligence and robotics. This article is a bit silly in some respects but makes some useful points succinctly:

Speaking at the World Business Forum in Sydney on Wednesday, Ms Erickson said new technologies, changing demographics and the move to “knowledge work” would soon lead to an overhaul of workplace arrangements on par with the shift from craft-based industries to mass production lines during the industrial revolution.

Just as in the ‘80s and ‘90s the lower cost of communication from the introduction of computers allowed companies to radically restructure and outsource non-core activities, the same is about to happen thanks to the “lower cost of co-ordination” today, she believes. …

Just as machines have taken over industrial work, it won’t be long before they start taking over “knowledge work”, she argues.

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Posted in Geeky Musings, Social Policy | 9 Comments

Nova Peris – a contemporary political soap opera


Preselecting Nova Peris as a “Captain’s Pick” for Labor senator for the Northern Territory must have seemed like a good idea at the time in early 2013 to then Prime Minister Julia Gillard. The election of Ken Wyatt as a Liberal federal MHR from Western Australia in 2010 had sparked calls for the Labor Party to preselect Indigenous candidates for winnable federal seats.

One third of the population of the Northern Territory is Aboriginal and half of its land mass is Aboriginal-owned. The NT has four representatives in the Federal Parliament but not one of them had ever been an Aboriginal person.

Moreover, the incumbent Labor members, Warren Snowden in the seat of Lingiari and Trish Crossin in the Senate, were long-standing politicians with competent but undistinguished careers. Some suggested disparagingly that they had superglued themselves to their seats in Parliament. Efforts to replace one of them by an Aboriginal Member of Parliament had been thwarted over the years by the NT Branch of the Party, albeit for factional rather than racist reasons.

Nevertheless, both the politicians and the administrative wing of the NT Branch had unfairly gained a reputation among some politicians federally as a bunch of primitive rednecks. It is alleged that one of Kevin Rudd’s first actions as Prime Minister in 2007 had been to demand that Territory Chief Minister Clare Martin should resign for supposedly failing to deal appropriately with the Little Children Are Sacred report into allegations of child abuse in Aboriginal communities, leading to the Howard government’s Federal Intervention stunt. One would suspect that Gillard shared Rudd’s negative view of the competence of at least some in the Territory Labor Party.

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Posted in Politics - Northern Territory | 7 Comments

6 things you need to know about urban transport reform

As a long-term resident of Darwin, where you can drive from anywhere in the metropolitan area to just about anywhere else in not much more than 25 minutes (even in the peak hour such as it is), it always takes me a couple of days to get used to the traffic snarls of Sydney and Melbourne.  Sydney’s traffic especially is vastly worse than it was when I lived there over 30 years ago.  Moreover, public transport doesn’t help all that much unless you live fairly close to a train or tram line and you’re travelling to or from the CBD.  If you don’t or you’re not, then you don’t currently have any viable choice but to travel by private car.  You could use a taxi or Uber for really important or urgent journeys (or if money’s no object), but they don’t provide a viable primary mode of transport for most people because they’re just too expensive.

Sydney and Melbourne frequently figure in lists of the world’s most “livable” cities, but it’s a mystery to me how that could be so.  For me they’re nice places to visit but I can/could only live there if I could arrange my affairs so I don’t have to travel significant distances in the metropolitan area very often. Fortunately we stay in inner urban St Kilda when in Melbourne, where the tram connections to the city are good and we usually don’t need to go anywhere else much.

For Melburnians living further out from the city the transport picture is much more grim, especially if you live a kilometre or more from a train station and your daily commute or journey is to anywhere other than the CBD.  You probably face a daily commute of 1.5 hours or more each way.  Moreover, governments have done very little about this for decades as our two largest cities have grown inexorably towards a population of 5 million in each. Compare the much more comprehensive rail networks of world cities like London, Paris, New York, Tokyo or Hong Kong. Admittedly they’re each cities of more than 10 million, but they have invested in their rail networks as they have grown, while Sydney and Melbourne (and for that matter other Australian cities) have at least until very recently mostly embraced a half-baked and under-funded version of Los Angeles freeway-based private transport.

Tony Abbott as Prime Minister seemed to think that public transport was a creature of communism or the Devil (or possibly both).  With Turnbull as PM we’re at least beginning to see public transport taken a bit seriously, and both Victorian and NSW state governments also appear to be starting to take investment in rail seriously.  However it’s still fairly unco-ordinated and half-baked, and could be derailed in an instant with a change of government at either level.  Public transport policy is anything but bipartisan but it really needs to be because the investments are long-term and very large.  Is that possible in Australia’s evolved party system? How might it occur?

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Posted in Economics and public policy, Public and Private Goods | 19 Comments

The social world as a nested ecology of public and private goods: Part Two

Part Two of my essay on the way of looking at the world I’ve worked out over the last few years and published on Evonomics can be found here. So many years, so few words :(

Part one of this essay showed how two dimensions of free riding define what we call “public goods” – things that often fall to governments to supply because markets frequently can’t: Things like defense forces, suburban roads and public fireworks displays.

The ‘non-excludability’ of such goods creates a free rider problem for market provisionIt’s hard to charge prices because, once provided, people can free ride on such goods, whether or not they pay. So we invented government to fund public goods through taxation.

But as well as being ‘non-excludable’, public goods are also ‘non-rival’. This article is a public good. Your reading it doesn’t prevent others from doing so. So once they’re provided, public goods provide a free rider opportunity.

Despite our culture’s hostility to free riding, the opportunity has always outweighed the problem. Most prosperity we’ve achieved since our days on the African Savannah arose from people copying others’ good ideas, most of which weren’t and shouldn’t have been patented because they didn’t need to be patented to come into existence. Or they were patented and the relevant patents have expired, such as the patent on James Watt’s eighteenth century refinements to piston engines.

Free rider opportunities now so dominate free rider problems that some of our most successful companies provide their wares as public rather than private goods. Google and Facebook could have marketed their products behind a pay-wall to monetize more of the value they generated. But seizing the free rideropportunity and, instead, providing their services as free, public goods, led to such vast value creation that monetizing a small fraction of that value via advertising has lifted their combined market capitalization to over three quarters of a trillion dollars.

But there are areas where the free rider problem must be solved in order to seize the free rider opportunity. Take 23andMe. It provides you with a partial analysis of your genome and identifies the health issues it detects and tips on your ancestry. But the genomic analysis on which it is built is sufficiently costly that it can’t easily be covered by advertising. So it operates as a private good behind a paywall. I’ve sketched a way of generating vastly more value by providing the site as a free public good. But it probably needs some government subsidy – at least initially – and some ‘nudges’ from the health system to really thrive.

If you’re thinking that this isn’t the normal story in which innovation and productivity is a matter of more and better private goods flooding the market, you’re right. As I explain in the next section, that way of thinking was always simplistic. But the internet is consigning it to the dustbin of history.

History is a co-evolution of public and private goods

Modern economic development is far more compellingly represented as the co-evolution of new private and public goods: And new ecologies between them.

Thus, for instance, as the eighteenth century dawned, the seas weren’t properly navigable. Sailors kept dying of scurvy. And ships couldn’t work out where they were and so kept bumping into continents. We didn’t need more competition amongst shipbuilders. We needed the generation and/or application of knowledge. In fact, citrus fruits’ efficacy in solving the scourge of scurvy had been known for centuries but made it into public circulation with the first ever clinical trial (another public good) in 1747. And Harrison’s clocks famously solved the longitude problem to win the British Admiralty’s £20,000 prize (though the British themselves were free riding on the idea of a longitude prize from earlier prizes offered by the Spanish and then the Dutch). Continue reading

Posted in Economics and public policy, Information, Innovation, Public and Private Goods, Web and Government 2.0 | 2 Comments

More Uber musings

Chris Lloyd’s comment on my previous Uber post prompt some further thoughts that I think merit a separate post.  Chris said:

“If you want to make a living off of Uber, you’re going to have to drive an insane number of hours.” I am surprised that Uber cannot offer cheaper fares without exploiting drivers. There are two cost elements that are removed compared to the old model. The first is the capital value of the license plates which were huge and supported the claim for higher rates. The second is all the red tape that went with the old system. If driver pay is low and fares a barely lower than traditional fares, then it sounds like Uber must be gouging the system because of their monopoly of the technology.

I can’t be sure but I don’t think that’s correct.  I haven’t driven taxis for over 30 years, but at one stage I managed a couple of cabs for an owner so I have some idea of the economics of the industry at least as it was in those days.

It appears that Uber is on average about 20% cheaper than a taxi (except at surge pricing times), as well as providing a quicker service.  Uber takes about 20% of the driver’s takings. By comparison, generally taxi owners take 50% of the driver’s takings.  But taxi owners actually own (or lease) the taxi vehicle as well as the plate, so they have to pay leasing or other finance on the vehicle as well as insurance and all running costs. Uber drivers on the other hand supply their own vehicle so they meet all those costs themselves.

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Posted in Economics and public policy, Law, Politics - national | 3 Comments

Taxis, Uber and a fair day’s pay

A story in this morning’s media highlights the vulnerable position of pseudo self-employed “independent” contractors under Australian law:

A Perth-based Uber driver is suing the Silicon Valley giant for terminating him without notice, leaving him with $80,000 worth of car loans – one of which he says was spruiked by Uber.

In what’s believed to be the first case of its kind in Australia, Mike Oze-Igiehon alleges the company breached its contract with him by failing to pass on negative feedback before terminating his account suddenly in November.

Increasing numbers of Australian workers are being effectively forced to operate under such arrangements, with “outsourcing” being the New Black in corporate Australia (large and small) and labour hire companies more numerous than flies around a cowpat.

If Oze-Igieldon had been classified as an employee then termination of his “account” would have been unfair dismissal under the Fair Work Act, and if his loan had been classified as consumer finance he would also have enjoyed additional protections.

The problem is that more and more Australian workers are being forced into faux “independent” contractor arrangements despite in reality only being ordinary workers without skills or resources to survive amidst the swarming piranha of the real business world.  What do I mean by “faux” contractor?

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Posted in Law, Politics - national | 6 Comments