Intellectual Property Laws and Government Security Threaten Science and Knowledge

If you find the title of this post provocative, you’ll be interested in a Cato book forum on Friday, October 10th.

In The Crime of Reason, Nobel laureate in physics Robert Laughlin argues that intellectual property laws and government security demands threaten the development of new knowledge. Without change, we risk bequeathing our heirs a world where knowledge is criminalized and our intellectual tradition of unfettered inquiry is lost.

Join us for a fascinating inquiry into the role of information and information rules in our society, featuring comment from Thomas Syndor of the Progress & Freedom Foundation, at noon on Friday, October 10th. Luncheon to follow.

You can register for the event here.

A Constitutional Law Lesson From the Bailout Debate

The Framers of the Constitution knew that jealousies among the branches of the federal government would slow the federal decision-making process, redounding to the benefit of the people and their liberty. As important as the Bill of Rights is, the structure of government is just as important for its bias against hasty government action.

Put aside what you think of the substance of the bailout issue as you see an example of the constitutional structure at work:

The EU: A Climate Leader Headed in the Wrong Direction

I have an article at the International Affairs Forum which notes:

[The EU}, like the lead lemming, [is] headed in the wrong direction. It has emphasized the wrong policies to address climate change. True leadership requires that not only one head the procession and convince others to follow, but that one also take the correct path. For that, the EU needs to develop policies based on rational analysis rather than feel-good gestures that might backfire.

For details, read the article.

Not All Banks Are Doing Badly

The Washington Post had a story on Friday pointing out that not all banks are on the verge of collapse:

Many smaller banks said they were actually benefiting from the problems on Wall Street. Deposits are flowing in as customers flee riskier investments, and well-qualified borrowers are lining up for loans.

“We collect money from local savers, and we lend it in the local community,” said William Dunkelberg, chairman of Liberty Bell Bank in Cherry Hill, N.J. “We’re doing fine. There are 9,000 financial institutions out there, and most of them are small and most of them are doing fine.”

Dunkelberg, a professor of economics at Temple University and chief economist for the National Federation of Independent Business, added that a recent survey of that group’s members found that only 2 percent said getting a bank loan was the great challenge facing their businesses.

It’s important to remember that “the financial industry” is sprawling and diverse. Some banks are on the verge of collapse. Others appear to be doing just fine. It would be unfair to these more prudent banks (not to mention taxpayers) to bail out their irresponsible competitors. And it’s a mistake to assume that, simply because a few reckless Manhattan firms have fallen, the entire financial industry is on the verge of collapse. It may be that these are simply firms that made too many bad investments, in which case their bankruptcy is precisely what is supposed to happen in a free market. Any Congressional action should be focused on preserving the health of the financial system as a whole, not at preventing the bankruptcy of individual firms that made bad investments.

Statism 101

Kentucky Governor Steve Beshear is trying to seize some online casinos.   Unlike casinos that are on the land, online casinos are difficult for the government to tax.  According to Mr. Beshear,  if the tax collectors can’t get their paws on a business, then that business is a “leech” on the community.  This type of thinking comes from Statism 101 and will require reading works not listed on the syllabus.  Go here and here (pdf).

Intervention Is Not the Answer

The current turmoil in financial markets is the result of bad government policy, particularly easy-money policy by the Federal Reserve and unsustainable subsidies to housing by Fannie and Freddie.

The bailout did not address these problems. Instead, it sought to compound the problem by increasing government intervention.

Ideally, politicians now will shift gears and seek to reduce government barriers to economic revitalization. Unfortunately, the political insiders from both parties almost surely will close ranks and seek cosmetic changes in hopes of ramming the bailout through Congress.

It’s Not a Pretty Picture

The failure of the bailout plan essentially shows the huge lack of confidence among the public that it would achieve its objectives. It also registers doubt about the government’s ability to implement it successfully.

The impasse shows how blunt fiscal policy is and how inept politicians are in managing the economy. The current set of problems did not arise overnight — they festered in the form of government favoritism toward housing finance companies which overextended their operations and ultimately toppled over. Now, those policies have come full circle to rest at Congress’s doorstep. Problem is, they will soon visit our doorsteps too in the form of a weaker economy.

Now that the bailout proposal has failed, Congress may seek a new approach. More likely, the existing plan will be tweaked to enable passage in a re-vote. But delay and political drama will further sap public confidence in Congress and weaken consumer confidence in the economy.

That may mean a deeper recession and trigger calls for still larger bailouts to salvage the financial sector in the future. But a larger bailout package will also be more dangerous. Larger short-term increases in federal borrowing may destabilize international capital inflows and reduce confidence in the dollar.

Overall, it’s not a pretty picture — but score one for supporters of the free market who insist on allowing market reorganization of the financial sector to continue unimpeded…albeit at high risk to the economy over the next few months.