The Confusion Between IP and IP Laws

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Intellectual property is a valid form of property rights; however, most of the flaws are not with the inherent claims to ownership of the intangible property; but rather the laws allocating these rights. The duration and definitions of what constitutes IP rights can seem arbitrary (p.25). All because the Copyright Act of 1976 mandates the peculiar terms as being:

  • “…For works made for hire and anonymous and pseudonymous works, the duration of copyright is 95 years from first publication or 120 years from creation, whichever is shorter (unless the author’s identity is later revealed in Copyright Office records, in which case the term becomes the author’s life plus 70 years) (p.1)…”

This exercise in line drawing is riddled with flaws and subject to the capricious whims of invested interests (the rent-seeking behavior of Disney). Conversely, it is inane to suggest that because the property is not tangible, therefore; we cannot own it because the property lines are not clearly defined (p.2). If IP is non-rivalrous it would be considered a public good (p.534). This is ironic since many Libertarian critics are hostile towards IP  and also reject the notion of public goods. Even intangible property is rivalrous and excludable. The confusion is that consumption intangible property is not rivalrous, but the ability to profit from IP is. The first entrant into a new market will be the one to reap the most benefit from the innovative product, service, or process. Consumers will generally see anything afterward as a cheap imitation (unless they can drastically improve the product). 

The above statement should not be confused as an appeal to legislative fiat or other state measures to resolve this conundrum. But it is foolish to pretend that IP is analogous to a public good. We can alienate it (in the Lockean sense) through tacit acknowledgment of the first of the idea, patentable process, trademark, etc. Paralleling the first use provisions implied in the prior appropriation water rights regimes in the western United States. The first to put the concept to practical use could claim ownership. Admittedly, the transaction costs of such an informal system would be high. In other words, the government needs to clarify IP rights? Maybe. Hypothetically, producers could eliminate ambiguity through user contracts and licensing agreements (disputes which can be adjudicated in a private or polycentric legal system).

Prisoner’s Dilemmas: XXII- Anti-Discrimination Laws

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Professor Bryan Caplan makes some impressive observations in his 2020 essay The Anti-Jerk Law. Caplan uses the hypothetical example of an Anti-Jerk law to emphasize the fallacies of anti-discrimination laws. At their core, both the fabricated example of the Anti-Jerk law and current discrimination laws suffer from numerous flaws. Instances of discrimination are not clear-cut, much like how your boss is a jerk is subject to interpretation. But if juries are predisposed to sympathize with instances of discrimination or the censure of a mean boss, this may “… lower the de facto burden of proof…” in ligation cases. More importantly, firms might be less apt to hire individuals that can make discrimination claims. Resulting in more indirect discrimination, creating a cobra effect. Laws and policies; designed to reduce discrimination, increasing discrimination.

Effectively, anti-discrimination laws are prone to create Prisoner’s Dilemmas. Why? Employers and Employees(ethnic minorities, religious minorities, transgender people, homosexuals, women) are predisposed to work against one another. Firms are ligation adverse and seek to avoid lawsuits costs and bad publicity. On the other hand, minority employees (emboldened by anti-discrimination regulations) have laws incentivizing them to pursue maximum damages for any perceived incident of discrimination. It is evident that both incentive structures are at odds and will cause both parties to choose to defect (using the vernacular of game theory) rather than cooperate.

The Calculations:

The above scenario is a zero-sum game; due to neither party wanting to compromise and the perception of winner-take-all dynamics. To numerically determine that this scenario is a Prisoner’s Dilemma, we must validate that the situation satisfies the two conditions expressed by Nordstrom; 1.) T>R>P>S and 2.) (T+S)/2<R.

Defining The Variable:

· Reward For Mutual Cooperation: R =.5

The value of .5 has been assigned for the gains of cooperation because the values expressed are predicated on a significant potential stance of discrimination ligation. The firm could take a chance on a risky employee and an employee could tolerate mild forms of discrimination (insensitive jokes, run-of-the-mill micro-aggressions) and not sue. Functioning as an archetypal compromise, neither party is pleased with the arrangement but still better than non-cooperation. 

· Punishment for Defection: P =0

There is little to no proper punishment for defection. For the hiring company, it is difficult/ nearly impossible to prove that they choose the 20-something, recent college graduate, male over a riskier job application (from an anti-discrimination standpoint). There is virtually no actual punishment despite the formal parameters of discrimination laws. For the employee, since the social norms are aligned with anti-discrimination legislation, the social costs for suing are low (but there might be monetary costs associated with legal action which are difficult to quantify. 

· Temptation to Defection: T=1

The firm has a lot to lose by hiring an employee with a high probability of suing them; the employee has a lot to gain in situations of discrimination.

· Sucker’s Payoff: S=-1

Both parties can lose a lot if the other does not compromise. 

Condition 1:

· T>R>P>S

· 1> .5> 0 > -1

Condition 2:

· (T+S)/2<R

· (1+-1)/2 <.5

· (0)/2 <.5

· 0 < .5

Prima facie, it does seem as if numerically and qualitatively that anti-discrimination laws are inclined to create Prisoner’s Dilemmas.

Government Law Evolved From Extortion?

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Why did humans make the transition from customary law to formal statutory law? There is an exhaustive body of literature examining this issue, but in his paper Economic Freedom and the Evolution of Law (1998)Bruce L. Benson provides some intriguing insights. Benson tackles this question from a Hayekian perspective, asserting that modern legal institutions are the byproduct of social evolution.

The paper presents the gradual shift as the byproduct of “entrepreneurship”; individuals with leadership qualities were able to persuade a group of people to adhere to their governance. What makes this persuasion credible, especially in the absence of a state? Benson suggests that such a leader or political faction would have a comparative advantage in violence (p.219). Audaciously, detailing how the development of formal law has its roots in extortion. In these primordial legal regimes, those who acted as law enforcement officers were those who lacked entrepreneurial/leadership skills but had an advantage when it came to violence (p.220). In effect, operating as a legal application of the division of labor.

Any astute observer will also recognize there is a stark difference between voluntary acceptance of such leadership and when imposed by force. One problem with having a high concentration of authority monopolizing the capacity for violence is that such an institution is hard to disrupt. Even more concerning are the perverse incentives that arise due to the desire to retain this authority. The contribution of tributes or taxes from those seeking protection may create reasons for the leader and their law enforcement officials to engage in rent-seeking behavior to keep their monopoly in place. (p.222). Bring a great degree of clarity to why Benson categorizes this arrangement as a form of extortion.

Friday Feature Film- Anthony Bourdain: Parts Unknown (Singapore)

Prima facie, Singapore seems like an idyllic “Nanny State” nation, with the absence of the abject penury that we typically see under tyrannical regimes. However, is the veneer of safety and cleanliness worth relinquishing individual rights? If so, can such a society be sustainable long term? Can the state-sanctioned orderly nature of Singapore endure the trials and tribulations of the next century? Only time will tell, but to quote the Robert Frost poem, “Nothing Gold Can Stay”.

Bootleggers and Baptists-LVI: The War of the Wok

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Labor Unions have historically held anti-immigration and nationalistic sentiments on their platforms. This makes the fact Progressives romanticize organized labor somewhat puzzling, as both factions of political actors often have conflicting objectives. One example of the prevailing nativism in the labor movement was Cesar Chavez’s hostility towards immigrants; how contemporary liberals square this cognitive dissonance when they proudly proclaim they are “Pro-Labor” is beyond the veil of reason. It should not be shocking that labor unions were one of the driving forces in implementing anti-Chinese legislation in the early 20th Century. 

The article THE ‘WAR’ AGAINST” CHINESE RESTAURANTS, published in 2017 by Regulation Magazine, provides a historical example of the anti-Chinese sentiments of organized labor. In the early-1900s, the United States excluded Chinese immigrants from most spheres of economic life in the United States; since many jobs required licensing that was only available to U.S. Citizens (p.32). The growing communities of Chinese immigrants in cities like San Francisco were able to enter the food service industry and laundry services. Chinese restauranteurs succeeded in providing a quality and low-cost dining option; birthing the American love affair with chop-suey. This was not without resistance since these new exotic restaurants were siphoning away business from eateries owned and operated by native-born citizens. The American Federation of Labor affiliated, The Cooks’ and Waiters’ Union, was a staunch supporter of anti-Chinese legislation (p.33). Various food service unions boycotted Chinese Restaurants and advocated for laws to loosen their gripe on the restaurant industry.

After the boycotts failed to achieve the Union’s anti-competitive objectives, they decided to lean on the legislature’s pen to reclaim the market share lost by Caucasian restaurant proprietors. The unions had the perfect pretext for demanding regulation (p.13); that was the moral concern of white women. As detailed by Chin and Ormond:

“..Newspapers offered lurid reports that Chinese restaurants were fronts for opium dens, and that Chinese men used opium “as a trap for young girls.” The idea of white female victimization became a media trope. In 1899, King of the Opium Ring, by Charles E. Blaney and Charles A. Taylor, played at the Columbus Theater and the Academy of Music in New York. Later produced around the country, it featured a clown who rescues a young white woman from the balcony of a Chinese restaurant. Movies depicted similar scenes and renowned “realistic” artists painted Chinatown vistas… (p.34).

At the time, there was a profuse amount of propaganda suggesting that Chinese men would try to lure white women into their establishment and then take advantage of them. The upper-class habit of “slumming” made trips to Chinatown a popular destination. There remained a lingering fear that white women would be enticed by the food but would decline into exploitation and degeneracy. Organized labor capitalized on this perception of Chinese immigrants and utilized it to provide the pretext for creating laws that would derail the success of Sino-dining establishments. Most of these measures varied by state and municipality, the majority of these laws either restricting or barring white women from entering or being employed in Chinese restaurants (p. 34-37). The unions have since given up on these measures once Chinese restaurants no longer appeared to be a threat and have since moved on to other policy issues (p.37). This chapter in American history perfectly embodies the incentives and dynamics of Bruce Yandle’s Bootleggers and Baptists (1983) model of coalitions. Regardless of the veracity of the claims of Chinese men seducing white women, it is still a “moralistic” concern as it posits a normative motive for enacting such ordinances and state legislation. Some of the holy-rollers included missionaries who entered Chinese neighborhoods proselytizing Christianity, who purportedly witness this moral impropriety (p.34). It should be conspicuous who the Bootleggers are in this scenario, as a union in themselves are nothing more than glorified lobbyists whose pedigree of rent-seeking can be traced back to the medieval guilds.

OP-ED-Jurors’ privacy important (Pinal Central)

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(Click here)

Editor:

The First Amendment of the U.S. Constitution is arguably one of the most crucial rights enumerated in the Bill of Rights. When do the rights of the free press conflict with the right to privacy of jurors deliberating on a court decision? This is the issue that Arizona Supreme Court case Morgan v. Honorable Dickerson (2022) addresses. David Morgan took issue with the fact that Cochise County uses juries where jurors are not formally named, arguing that juror identities should be public knowledge under the First Amendment. Information that is only required when “.. under law or court order…” under ARS § 21-312(A). The high court of Arizona also states that the First Amendment does not “…explicitly guarantee the press or public access to a criminal trial…”

However, the court ended up ruling against Morgan’s grievances utilizing the two-prong test established under Press-Enter. Co. v. Superior Court (Press-Enterprise II), 478 U.S. 1,8,13 (1986). The two conditions are “experience” and “logic” inquiries. The court found that historically “…revealed juror names during voir dire proceedings…” But the court disagrees with the standard of logic since disclosing the names would not benefit the proceedings and could potentially place the jurors in danger because the public can attend legal proceedings regardless of the names of the jurors being revealed. Exposing jurors does not necessarily make them more honest. A good call on the court, as the practice only compromises the jurors’ privacy.

Bootleggers & Baptists- LV-Gun Control

***Special thanks to Dylan, proprietor of the Onlookers blog! He pointed out a few typos and the necessary edits have been made.

Check out his blog (Click Here).

Few issues in the current political scene are as divisive as the Second Amendment; as articulated in the SCOTUS case District of Columbia v. Heller (2008), an individual right. Anytime a mass shooting occurs or restrictions are purposed, gun rights advocates tend to double down. After all, regulating firearms is a prisoner’s dilemma in which neither side of the aisle is interested in making any concessions. Prima facie, it does seem that guns have become increasingly regulated over the years. Potentially vindicating the slippery slope logic expressed by Second Amendment proponents. The fear of prohibitively strict gun regulations or outright bans weighs on the minds of gun owners. A point substantiated by the fact that 59 % of polled gun owners indicated that gun control advocates desire to outlaw private ownership of firearms. Many gun enthusiasts view this right as sacrosanct and a vital component of living in a free society.

Number of Mass Shootings in the United States 1982-2022. Courtesy of Statista.

How do the reactionary sentiments of slow and grinding decline to an outright gun grab correlate with patterns in gun sales? There does seem to be a connection between precipitating events and increases in transactions related to procuring firearms (including background checks). Analogous to how macroeconomic events impact trading on the stock market, the prospect of regulation after events such as mass shootings results in abnormally high gun sales. For example, gun sales in California soared by 168 % between 1996-2015. 50 % of all mass shootings within the past 50 years transpired after 2000.  20 % of the mass shootings in this timeframe occurred within the past five years.

Gun control proposals; are often formulated in the wake of a mass shooting; there does seem to be at least a superficial correlation between mass shootings, gun control proposals, and gun sales. But, are politicians and political activists concerned with decreasing the number of guns in the hands of the citizenry shooting themselves in the foot? It is inherently human for people to purchase large quantities of a commodity facing a ban. A clear example of this was before JFK enacted the Cuban Trade Embargo; he stocked up on his favorite brand of Cuban cigars. It isn’t outlandish to believe that gun owners would seek to stock up on accessories, ammunition, and firearms after a mass killing or the announcement of gun control legislation. In effect, this would encourage people to obtain more guns. Rendering the bluster of tough-on-guns rhetoric to being counterproductive. Unwittingly, when politicians like Beto O’Rourke are telling us that he is coming after our AR-15s he’s saying “.. Everyone run to the gun shop now!..”. O’Rourke is blinded by political gamesmanship; he overlooks that his firebrand comments have only created a cobra effect; people panic and buy more guns.

If progressive politicians are inadvertently increasing the number of guns owned by the American public, who benefits from gun-grab-mania? Gun store owners. In applying the logic of Bruce Yandle’s Bootleggers and Baptists (1983) model, it becomes clear that gun control advocates are indirectly helping the proprietors of gun stores. By sending all of their patrons into a frenzy, the moral arguments of the anti-gun crowd end up drumming up more business for gun vendors. While neither party is intentionally working together and does not even share the same goals, they have a synergistic relationship. Beto is waving the flag of the gun shops without even knowing it.

Cryptocurrency and Third-Party Doctrine

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Many people hold the misconception that cryptocurrency offers total anonymity in financial transactions. There are multiple reasons why the belief that this decentralized private digital money does not conceal the identities of transacting parties. For one, the perception of complete anonymity is illusory because all transactions on the blockchain are accessible to the public. Since most blockchain environments “..have transaction structures that show the sender and receiver addresses explicitly. Because of this property of openness, a large proportion of the users can be re-identified..” (p. 18). These concerns pale in comparison to the legal resources at the disposal of government agencies with broad objectives ranging from tax collection, criminal investigation, and to even surveillance. This disproportionately impacts new entrants in the space that use exchanges and lack the technological illiteracy to hold their digital token in self-hosted wallets, as exchanges are subject to KYC and AML laws.

There are many various laws, judicial constructs, and conferred powers government actors utilize to relinquish our financial privacy. These tactics extend beyond semantical word games over what constitutes “…persons, houses, papers, and effects..” in the digital age (Amend. IV). One of the best-known doctrinal assaults against economic privacy invoked by law enforcement is the third-party doctrine. A judicial doctrine that strides a thin line, between the state interests; and regulating illegal activities (p.3). Although, the third-party doctrine has remained in use since the 1970s it has been a subject of controversy. The decision in United States v. Miller (1976) spurred the passage of the Right to Financial Privacy Act (1978), a feeble attempt to stifle the reach of the doctrine. The law was riddled with numerous exceptions to warrant requirements.

What is the Third-Party Doctrine?

Legal scholar Orrin S. Kerr provides a succinct definition of the doctrine:

“…The “third-party doctrine” is the Fourth Amendment rule that governs the collection of evidence from third parties in criminal investigations.’ The rule is simple: By disclosing to a third party, the subject gives up all of his Fourth Amendment rights in the information revealed (p.563)..”

The extent to which the doctrine is a rule and not an exception is a matter of debate among civil libertarians and privacy purists. Any information disclosed to a financial intermediary is not out of the reach of government officials. This also includes information provided to a third party that the customer believes will “remain private” ( Hoffa v. the United States) (p.9).

The nascent roots of the third-party doctrine lay within the test established in Katz v. the United States (1967). What has become known as the “Katz Privacy Test”; weighs privacy interests against the interests of the state. The case established a two-part judicial test for distinguishing when a private citizen has a reasonable expectation of privacy. 1.) An individual must have a subjective expectation of privacy. 2.) Society must accept these circumstances as being reasonable. Both standards are abstract and murky, making it a hindrance to derive clear and consistent guidance from such disputable and open-end criteria. 

It is not until nearly a decade later that the doctrine emerged when the Katz Test applied to a case regarding financial privacy. This seminal case was no other than the infamous United States v. Miller (1976).  The case involved Mitch Miller charged with producing untaxed liquor. In the process of collecting evidence, the ATF (Department of Alcohol, Tobacco, and Firearms) issued several subpoenas to collect Miller’s banking records. (p.12). Miller was never informed that his banks had been summoned to supply his records to the ATF. As luck would have it, the lower courts saw that the ATF “…had unlawfully circumvented the Fourth Amendment by first requiring the banks to maintain the customer records for a certain period and second by using the insufficient legal process to obtain those records from the bank..”(p.13). The high court reversed the previous decision citing that “…bank kept copies of personal records that he gave to the bank for a limited purpose and in which he retained a reasonable expectation of privacy under Katz..” (p. 13). The SCOTUS reasoning :

“…checks are not confidential communications, but negotiable instruments to be used in commercial transactions, and all the documents obtained contain only information voluntarily conveyed to the banks and exposed to their employees in the ordinary course of business. The Fourth Amendment does not prohibit the obtaining of information revealed to a third party and conveyed by him to Government authorities….”

Ultimately, the court ascertained that information provided to banks was not subject to Fourth Amendment protection. After all, the information we are willing to disclose to an intermediary may not be so confidential. Ideally, we would never choose to convey such information. We also trust financial institutions to exclude the gruesome details of our purchasing decisions, regardless of the legality. All because a purchase was legal does not mean it was not embarrassing. For example, frequent outings at fast-food restaurants, pornography, and scoring BTS tickets are all legal transactions, but all ones that should not be scrutinized by the judging eyes of stuck-up government employees. It is not just the bad guys who are seeking the prying eyes of government officials. 

The case to advance the third-party doctrine was Smith v. Maryland (1979), adjudicated a few years after Miller further reinforced this hideous obstruction to individual privacy. In this case, the telephone company installed a pen register “…to record the numbers dialed from the telephone at.. the home the suspect of robberies. This scenario would be considered a Fourth Amendment exception since the phone companies already have access to and record phone records.

Another landmark case in the judicial history of the doctrine was United States v Jones (2012). The defendant was arrested on drug charges after a law enforcement official attached a GPS tracker to her vehicle for 24-hour surveillance and all without a warrant. The Supreme Court viewed the warrantless attachment of a GPS tracking device as a Fourth Amendment violation. That covert tracking constituted a trespass and a violation of the reasonable expectation of privacy.

For any faithful civil libertarian, Jones might have been a glimmer of hope in the arena of the right to privacy. The logic in Riley v. California (2014) we have the illusion of hope regarding privacy matters. Riley was a member of a San Diego gang that opened fire on a rival and subsequently drove away. He was then pulled over for expired tags while operating another vehicle and was searched before being impounded; officers intercepted contraband. The responding found two guns and called in the gun unit to analyze Riley’s phone depicting the suspect making gang signs. The ballistics tests tied Riley to the previous shooting direct toward rival gang members. The court ruled in favor of Riley in this case; digital data presents no immediate harm to investigation officers, but phones operate as “minicomputers”, holding a plethora of personal information. Therefore, a warrantless search may be acceptable in exigent circumstances (which Riley did not present).   

The next step in the stare decisis whittling down the third-party doctrine was Carpenter v. the United States (2018).  Defendant Timothy Carpenter; was implicated in a series of robberies, and his phone number was located by authorities; they used this information per the Stored Communications Act (1986)Based upon “..cell-site evidence..” Carpentry had been located as being nearby to the crimes. The five-four decision stated that :

“… Expectations of privacy in this age of digital data do not fit neatly into existing precedents, but tracking person’s movements and location through extensive cell-site records is far more intrusive than the precedents might have anticipated…”

Essentially, utilizing the tracking capabilities of smartphones veers into a territory that infringes upon our enumerated right to privacy. Paralleling, the situation in Jones warrantless tracking regardless of the method is unconstitutional. In many ways using a smartphone is analogous to strapping a tracking device to a motor vehicle.

Crypto and The Third-Party Doctrine

The byproduct of the Carpenter decision has opened a new chapter in the Jurisprudence of the third-party doctrine. Per Fourth Amendment Orrin Kerr “… Carpenter “recasts a lot of doctrine in ways that could be used to argue for lots of other changes.” (p.226). So far, the courts appear to have analogized transactions occurring on cryptocurrency with those of traditional financial institutions (banks). The first case to apply the doctrine to cryptocurrency transactions was United States v. Gratkowski (2020).

The case involved a federal investigation into a child-pornography website and officials subpoenaed Coinbase’s transaction records; defendant Richard Gratkowski was suspected of patronizing the website under investigation through the exchange. (p.1-2). Gratkowski attempted to suppress the information procured in the investigation”.. the government violated the Fourth Amendment by using a subpoena to obtain his information instead of a warrant…” (p.127). The defendant foolishly argues this point without much consideration of the stare decisis substantiating the doctrine. After all, voluntarily disclosed information, in most instances (p.1), is immune from warrant requirements. The court found paralleling cryptocurrency transactions to phone records (Carpenter) was not an equal comparison. As phone logs are far more intrusive “window into a person’s life”(p 129).

Beyond the concerns regarding the degree to which disclosure of transaction histories could be construed as intrusive, in the eyes of the law, the defendant has already consented to the visibility of his financial activity. The court perceived that Gratkowski did not have a reasonable expectation of privacy as Coinbase not only has public records of all transactions but also is subject to the Bank Secrecy Act (1970) (p. 130). Per the letter of the law, the assumption of anonymity is illusory when conducting business with an intermediary such as Coinbase since it is an institution that fits within the purview of the BSA. (p.131).

In a hail Mary attempt, Gratkowski’s defense team tried to invoke the logic of Kyllo v. the United States (2001). In Kyllo, an agent of the Department of the Interior utilized thermal-imaging technology to detect Danny Kyllo’s marijuana grow operation[1]. The Fifth Circuit felt as if extrapolating Kyllo to Gratkowski’s circumstances was inappropriate as even if thermal imaging was equal to traceable record transactions, the cited case is only applicable to searches within the home (p.132).

Conclusion:

Per the current case law, it is indisputable that the third-party doctrine extends to cryptocurrency transactions that occur on an exchange. This does not ethically justify the application of this egregiously invasive judicial construct to financial surveillance. In balancing state and individual interests, the right to privacy implied in the Fourth Amendment was effectively sullied. An individual using banking or investment services should not have to be concerned about the trespasses of government agents on their transactional histories. Even if an individual has committed no crime, they still have a right to privacy. Do you want the judgmental eyes of an overpaid government employee criticizing your recent purchases of tickets to a BTS concert or a treasure trove of goodies at the local sex shop? Some purchases and investment decisions are downright humiliating and should remain out of the view of external individuals. All because stare decisis sides with the third-party doctrine, does not mean that it is faithful to the contextual interpretation of the Fourth Amendment. Especially, when in the digital age the perception of “…persons, houses, papers, and effects…” (Amend. IV)  has shifted into a sphere of intangible media.

While it is disturbing that the technologically illiterate must restore to using crypto exchanges subject to the legal logic of the doctrine. Unfortunately, self-hosted wallets are not safe from the encroaching hand of the state. While regulators are now seeking to target self-hosted wallets for AML and KYC, we know that the Juris prudence will most likely extend the insidious third-party doctrine to these private methods of cryptocurrency storage. Soon cryptocurrency transactions will fully be under the surveillance and auspices of the government. The best we can hope for is that the high court will realize the error of this perverted doctrine and call it out for the Fourth Amendment violation that it is.

Prisoner’s Dilemmas: XVII- Privacy Paradox

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tension between privacy and the interests of law enforcement has eroded the Fourth Amendment. Our weathering privacy rights surfaces only continue to crumble every time Americans face a choice between convenience and anonymity. When we install software we encounter this dilemma known as the privacy paradox. Most people are not inclined to read the fine print when we install new software applications on their electronic devices (computers, cell phones, and tablets); it is a bunch of legalese mumbo-jumbo acting as a temporary barrier to the products and services you desire to use. This inconvenient bulwark is penetrated by agreeing to all the terms and services detailed in the previous fifteen paragraphs. Few, if any, consumers read nor understand what they have consented to. The Privacy Paradox is defined as :

“… the dichotomy of information privacy attitude and actual behavior has been coined the term privacy paradox(Brown, 2001; Norberg et al., 2007)”.

Essentially, most people profess to care about privacy but are willing to give it up in the short term to gain access to various digital products and services. The logic of this paradox seems oxymoronic until you realize that people lack patience and an extensive attention span. This contradiction validates the observations of Thomas Schelling’s theory of Egonomics. Individuals often grapple with the competition of present wants and future concerns when making decisions. When the details of the terms and conditions of using a product or service are articulated in opaque language and presented as bottom page afterthought, no wonder people are so readily agreeing to policies that may jeopardize their privacy. This dynamic only fertilizes the substrate for a Prisoner’s Dilemma. The firm producing the product or service acts in their self-interest by wording the terms and conditions in complex language, virtually impermeable to lay readers. If users understood what they agreed to, they would be less apt to use these products. Concurrently, these customers believe they are acting in their self-interest by choosing not to read the terms and conditions page and simply consenting to these requirements.

Neither party (customer or service provider) creates an ideal climate for transparency. It is all too easy for the customer to witlessly use the product without knowing how the service provider is collecting, storing, or even selling their information to third-party companies. The severity of this information asymmetry intensifies when specific forms of data are subject to collection and surveillance by government agencies. As stated in United States v. Miller (1976) banking services carry no reasonable expectation of privacy. The courts could apply this similar logic to data collected by other varieties of service providers, especially when presented under the guise of exigent circumstances. Essentially this contraction exists due to the laziness of consumers and the perverse incentives of service providers. 

Prisoner’s Dilemmas-XV: Sugar Tariffs

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“..Look at the United States. There is no country in the world where the law is kept more within its proper domain—which is, to secure to everyone his liberty and his property. Therefore, there is no country in the world where social order appears to rest upon a more solid basis. Nevertheless, even in the United States, there are two questions, and only two, that from the beginning have endangered political order. And what are these two questions? That of slavery and that of tariffs; that is, precisely the only two questions in which, contrary to the general spirit of this republic, law has taken the character of a plunderer…” Frédéric Bastiat- The Law (1850).

The tendency for people to favor protectionist policies is an understandable fallacy, but a fallacy, nevertheless. Some Americans are under the erroneous assumption that they have a moral duty to keep domestic jobs from being outsourced. Much of this sentiment; was fostered by campaigns waged by organized labor throughout American history. It is difficult to tell if the buy American fallacy is the byproduct of union propaganda or an intrinsic sense of nationalism and economic jingoism. Regardless of whether the American public is receptive to their pithy buy domestic slogans, the union interests frequently get their way. The best example is the enduring specter of import tariffs that have plagued American economic policy for centuries. The earliest example is the Tariff Act of 1789, which was strongly favored by none other than Alexander Hamilton.

Arguably one of the most notable tariffs on the books is related to the importation of sugar. The tariffs placed on foreign sugar have been upheld through various laws over the years, starting from the nascent period of the republic.

“…On brown sugars, per pound, one cent. 

On loaf sugars, per pound, three cents. 

On all other sugars, per pound, one and a half cents

(Tariff Act of 1789, P. 25)..”

From a game-theoretical standpoint, consumers are the first ones to defect. If imported sugar is cheaper American consumers gravitate toward buying the less expensive Caribbean sugar. The lobbyists for the sugar industry work to pressure lawmakers into keeping import taxes on foreign sugar. The collective pressure placed on Congress to place and uphold tariffs can be considered a defection by the domestic sugar producers. Many economists and political scientists assume that the marginal increase in the cost of sugar would be negligible to an individual customer. In turn, fulfilling the enduring axiom of Public Choice theory; concentrated benefits and dispersed costs. Few households consume enough sugar to desire to change their baking and coffee flavoring habits. Although, these costs are salient to commercial confectionary producers who purchase mass quantities of sugar for domestic and international retail goods. It has led to firms relocating production facilities to countries without sugar tariffs (Life Savers plant moving to Canada, p. 4). Technically, this could be a defection, but the irony is that it undermines the moral initiative of keeping domestic jobs within the bounds of the United States. But not every company opts to move their factories abroad, another substitute for cheaper inputs. Hence, the rise of soft drink producers using high fructose corn syrup instead of cane sugar. One noteworthy example would be when Coke and Pepsi switched to using corn syrup in their sodas for the US market in the 1980s (p.5) (Mexican cola still uses real sugar). There has been much debate over whether high fructose corn syrup is more unhealthy than sugar. If it is more injurious to one’s health, then a Prisoner’s Dilemma is afoot, the suboptimal result being the American people doing unnecessary damage to their bodies merely to appease a small subset of the overall constituency.

The Paradox of Implicit Logrolling: Bodily Integrity- Newports and Roe

The Paradox of Implicit Logrolling (Clark, 2021) demonstrates how intra-platform vote trading can lead voters to hold logically inconsistent policy positions. One example is; a Republican purporting to be Pro-life but concurrently supporting an aggressive foreign policy. In the current political climate of the United States, the topic of bodily integrity appears to be the nexus of the most salient examples of this phenomenon. After all, the genesis of this paradox came from the incongruency of Democrats favoring vaccine mandates (93 % of poll Democrats support mandates applied to private companies) and simultaneously defending Roe v. Wade from the standpoint of bodily integrity. 

However, the current trends in the Democratic party’s policy platform‘s lack of logical continuity regarding bodily integrity are evident from the policies the party has recently supported. Last week, the Biden Administration announced a plan to move forward with a national ban on mentholated cigarettes. A measure favored by 57 % of Democrats polled. The fervor of Pro-choice (predominately left-leaning voters) advocates protesting and repudiating the decision in the leaked draft of the Dobbs case. 

These examples are not intended to shame modern liberals, nor are these normative value judgments regarding their ideological positions; these examples are merely observations derived from an applied static model. The bundle of policies favored by the Republican party is also rife with logical contradictions. The DNC seems to be providing us with most of the conspicuous examples of this paradox. The fact that the Dobbs case and the menthol ban magnifies how the topic of bodily integrity causes political parties to adopt policy preferences that pose philosophical contraventions. If it is rational to assume that electing to obtain an abortion is a matter of self-ownership, then would not the same apply to an adult choosing to smoke Newports? It is perplexing how this lapse in logic eludes many folks on the left. President Biden openly spoke out on the Dobbs decision but opted to proceed with nationwide menthol prohibition. It is possible his vocal criticism of the SCOTUS draft decision is a political maneuver to curve the disappointment of the Progressive-wing of the DNC with his centrist policies. Making the correct statements on the right wedge issue can be gold in the sphere of social currency. 

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Tribal By Combat- A Story of Transaction Costs

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Trial by combat, in the eyes of modern observers, is nothing more than a barbarous anachronism of the dark ages. In his paper, Trial By Battle (2011), Peter Leeson details the economic advantages of the judicial practice in medieval England. The two concluding paragraphs of Leeson make some profound observations regarding the societal pivot away from a violent form of legal auctions. One counteractive realization Leeson comes to suggests that we do not abandon trial by combat for moral reasons, but rather this was due to a reduction in the transaction costs of land disputes. No, we did not suddenly become enlightened.

“…Finally, trial by battle didn’t die because England became less barbaric. It died because England became a lower transaction cost economy. Just as trial by battle substituted for the Coase theorem in a world of sticky property rights, the Coase theorem substituted for trial by battle in a world with significantly more fluid property rights. In that world lower transaction costs of trade permitted markets to allocate land to higher-valuing users. It became less critical for the legal system to ensure that disputed rights’ initial allocation was efficient. Because of late twelfth-century legal reforms that unstuck land rights, the late twelfth century the judicial system could afford to move away from trial by battle and toward more ‘‘enlightened’’ trial methods, namely trial by jury. When judicial combat became an unnecessary cost, England abandoned it. 

This has important implications for how we understand the process of legal systems’ evolution. It suggests that legal systems’ evolution is less about a process whose course follows the trajectory of enlightened thinking and more about a process whose course follows the trajectory of the transaction cost of trade. When this cost rises, the relative price of relying on ‘‘sophisticated’’ judicial institutions rises too. Legal institutions become more ‘‘primitive’’ in the sense that we tolerate more costly (and less seemly) judicial procedures for identifying and allocating property to higher-valuing users. When the transaction cost of trade falls, so does the relative price of relying on ‘‘sophisticated’’ judicial institutions. The reverse happens: legal institutions become less primitive. Society acts enlightened because it has become cheaper to do so….”

As Leeson demonstrates, how the system of feudalism complicated the allocation of land rights; therefore, the institution of public combat trials helped distribute the land to the higher-valuing users. Those who spend more on champions to represent them in the contest must value the parcel of land more. How many traditions and institutions do we now consider archaic and outmoded by more efficient alternatives? Historians claim that such practices stopped due to an enlightened shift in social norms. Prima facie does seem more likely that social progress has been generated more by economic efficiency than lofty and abstract moral ideals. Who is to say that trial by combat was even uncivilized? Under certain conditions, it could be a feasible form of private dispute resolution analogous to dueling.

Bootleggers & Baptists XXXIX- AB-5 and Uber

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The emergence of the Gig Economy has allowed millions of Americans to earn additional money without the constraints of rigid work schedules. However, the flexibility allotted to contractors through ride-sharing and food delivery services is under threat in California. Back in 2019, the California legislature passed Assembly Bill 5 (AB-5) that would classify many freelance workers as “… workers bona fide employees, with schedules and hours determined by the company rather than the worker..” (p.4). The California courts apply AB-5 under the three-prong test developed in Dynamex Operations v. Superior Court to distinguish contractors from full employees; after AB-2257 passed in 2020, “..109 categories of workers were exempted from AB-5..” (p.7). In response to AB-5, delivery and ride-sharing platforms collectively generated Proposition 22 to exempt these services from the law (p.7). Unfortunately, the law was ruled as unconstitutional 2021; per the Los Angeles Times:

That’s in part because the law, Roesch wrote, infringes on the power of the Legislature explicitly granted by the state Constitution to regulate compensation for workers’ injuries.

 Hector Castellanos, et al. v. State of California, et al.

Amid all the AB-5 turmoil, one question emerges, who benefits from labeling gig workers as full-employees? It certainly isn’t the Uber driver. Considering, 80% of surveyed independent contractors “…reported having done some sort of independent contracting gig in the last year said that it was a part-time occupation…” (p.6). Also, most gig workers have insurance benefits either from their primary job or spouse (p.5) and prefer the flexibility over fringe benefits that “…bear opportunity costs in the form of foregone income they could have received if not for the benefits.” (p.6).

When viewed through the lens of Bootleggers and Baptist (1983), it is clear that few economic agents are hiding within the smokescreen of the workers’ rights coalition. The irony is, the demographic that AB-5 is designed to “help’, vehemently opposed the legislation. It can be assumed that the California legislature is a Dual-Role Actor in this coalition. Why? State lawmakers most likely passed this law as a worker protection provision for gig economy employees. However, Judge Roesch’s admission that excluding gig workers interferes with the authority of the legislature. Lawmakers are also Bootleggers for having an invested interest in not relinquishing political power.

 One notable economic agent on the bootlegger side of the coalition would be labor unions. Some readers may wonder why labor unions would not be considered a Baptist or even a Dual-Role Actor. Unions are heavily involved in the political process (p.410), theoretically could be perceived more as political interest groups than employee protection organizations. Arguably, these organizations do little to advance the interests of workers. Labor unions within the state of California had angled to organize ride-share drivers, “…contributing to the pressure on legislators to make a change..”(p.7). Various labor unions throughout California have expressed that AB-5 would reduce the exploitation of contract employees. However, they benefit from this legislative victory because it reinforces their political currency as an interest group. One union that stands to gain the most from reclassifying Uber drivers are taxicab unions. It is well known that the taxicab industry has struggled to compete with the convenience and lower rates of ride-sharing apps. The state of Nevada has placed restrictions on platforms offering ride-sharing services. Uber has faced many regulatory barriers often supported by taxi drivers (p.191); most notably “medallion systems” where governments issue a limited number of licenses to operate as a driver (p.574). Classifying Uber drivers as full-employees would make employing contractors more costly and onerous, thereby disturbing Uber’s operations. All of this to shield taxi drivers from the Schumpeterian gales of creative destruction.