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September 20, 2004

The Economists' Voice: First Issue

Well, The Economists' Voice is now launched, with a small first issue. Now we get to begin the dynamic process of (a) finding a readership, (b) finding people who want to write, and (c) editing so that what appears on the website is *really* *good* and worth reading.

The Economists' Voice:

Editor: JOSEPH E. STIGLITZ, Columbia University

Co-Editors: BRADFORD DeLONG, University of California, Berkeley
AARON EDLIN, University of California, Berkeley


Richard A. Posner, (September 18, 2004) Eldred and Fair Use

John Donohue, (September 18, 2004) Clinton and Bush's Report Cards on Crime Reduction: The Data Show Bush Policies Are Undermining Clinton Gains

Joseph Stiglitz, (September 15, 2004) The Parties' Flip-Flops on Deficit Spending: Economics or Politics?

J. Bradford DeLong, (September 15, 2004) Should We Still Support Untrammelled International Capital Mobility? Or are Capital Controls Less Evil than We Once Believed?

The gem of the issue* is a meditation by Judge Richard POSNER of the 7th Circuit Court of Appeals: his meditation on the recent Supreme Court case Eldred v. Ashcroft, on copyright, on the doctrine of "fair use," and on what it all means in the twenty-first century.

If I may be allowed to give a hasty, inaccurate, and incomplete caricature of Richard Posner's jurisprudence, he believes that federal judges should not be formalists but substantivists. Formalists believe that the mission of judges is one of applying the body of ancient common-law precedent and modern legislative enactment to do what the ancient common lawyers and the modern legislators said should be done--whether or not it makes substantive sense. If there is a problem, formalists say, that is up to the legislators to correct. Judges exist to decide cases in a way that one could easily predict from the letter of the modern statute (or of the ancient precedent). Substantivists, by contrast, believe that common-law judges have latitude to pick and choose among doctrines and to evolve the law in order to bring the black letter into accord with the just, fair, proper thing to do. In particular, Posner believes, the proper function of a common-law judge is to establish economic justice, as Posner understands economic justice to be.

When most people say "economic justice" they think of redistributing wealth from the rich to the poor--lowering rents, say, and imposing extra burdens on landlords, or partially compensating those horribly scarred by freak mischance. But Posner believes (rightly) that the judicial bench is the wrong place to do income redistribution--that should be left to the legislature. What the judge on the bench can and should do, Posner believes, is to be the advocate and enabler of commerce by doing whatever she can to reduce transactions costs in order to create the maximum opportunity for trade and its gains. Arrange the rules so as to maximize wealth--that is what Posner believes is the task of a common-law judiciary. Maximizing wealth will, of course, have distributional fallout. But fixing that cannot be done from the bench, and must be done by the legislators.

We have seen this most clearly over the past generation or so as Judge Posner has been one of those leading the charge to redefine antitrust law. In the old days the purposes of antitrust law were manifold: to keep monopolies from exploiting customers, yes, but also to protect small businesses from "destructive" competition, to make sure that customers had more than one supplier (even if that raised prices), and to create a level playing field for companies bidding for business. Posner and his compatriots changed things: now the purpose of antitrust law is to maximize consumer (and sometimes producer) surplus.

Now Posner is applying his long-held jurisprudential proposals to copyright law. The Sonny Bono Copyright Extension Act and its survival of its Supreme Court challenge in Eldred v. Ashcroft has created a situation in which transaction costs are enormous. Works almost never fall out of copyright. Almost all works that are still under copyright are useless to everybody: people who want to use and reprint them cannot easily find out who the copyright holders are, and people who own the copyright cannot easily find the people who would want to use and reprint the works. Posner's view--advanced here, advanced in a series of weblog posts on Larry Lessig's website, and advanced at greater length in a forthcoming article cowritten by Posner and Bill Patry in the California Law Review--is that America's common-law judges should "deem it 'fair use' to copy an old work whose copyright owner hasn’t taken reasonable steps to provide notice of his rights." This would practically eliminate all of what seem at the moment to be an enormous transaction cost hurdle, for in the aftermath of such a line of judicial decisions a registry or registries would spring up where copyright holders could cheaply take reasonable steps to provide notice, and where potential users could do their do diligence before reprinting old works under "fair use."

It is a brilliant and very interesting idea.

But that is only one of the four things we have on the plate.

John DONOHUE from Yale argues that Clinton-era anticrime progams that provided incentives to fund more cops on the beat had remarkably high benefit-cost ratios--and that the Bush administration is shooting itself in the foot by failing to build on and expand the funding of them. Why is the Bush administration doing this? It seems that there is (a) nobody who knows anything about the substance of crime control in a high place in the Bush administration, and (b) the high Bushies are alergic to anything Made by ClintonTM. But according to Donohue Clinton-era programs may be responsible for a six to eight percent decrease in crime.

Joe STIGLITZ from Columbia still remembers the days when Democrats were for deficit spending and Republicans were for balanced budgets, and he tries to understand how the two parties swapped places. Why the flip-flop? Joe says that it is because Democratic politicians have learned some economics, and because Republican economists have lost influence, and have failed to teach their political masters the difference between a good short-run and a bad long-run deficit. This piece leaves me frustrated: I want an explanation of why the Republican High Politicians are so feckless. Joe doesn't have an answer. But nobody else--especially no Republican economist--I have talked to has an answer either.

Least satisfactory in this first issue is this piece by this guy DeLONG from Berkeley, who continues to wrestle with his own conscience on the issues of the desirability of international capital mobility. "Fifteen years ago," he writes, "I found it easy to be in favor of international capital mobility — the free flow of investment financing from one country to another. Then it was easy to preach for an end to all systems of controls on capital that hindered this flow. Now it is harder." DeLong seems badly conflicted: he lays out all the reasons why the costs of international capital mobility have been much higher and the benefits much lower than he predicted fifteen years ago, but then reverses field as he concludes "a card-carrying neoliberal like myself still cannot wish for any but the most minor of controls to curb the most speculative of capital flows."

*I should say that these opinions are my own, and that Joe Stiglitz, Aaron Edlin, and the authors are most definitely *not* associated with them (unless they wish to be).

I should also say that anyone who wants to comment should indicate if they want us to consider the comment as a possible letter to the journal...

Posted by DeLong at September 20, 2004 02:46 PM