Intellectual Property, revisited

Mar 12, JDN 2457825

A few weeks ago I wrote a post laying out the burden of proof for intellectual property, but didn’t have time to get into the empirical question of whether our existing intellectual property system can meet this burden of proof.

First of all, I want to make a very sharp distinction between three types of regulations that are all called “intellectual property”.

First there are trademarks, which I have absolutely no quarrel with. Avoiding fraud and ensuring transparency are fundamental functions without which markets would unravel, and without trademarks these things would be much harder to accomplish. Trademarks allow a company to establish a brand identity that others cannot usurp; they ensure that when you buy Coca-Cola (R) it is really in fact the beverage you expect and not some counterfeit knockoff. (And if counterfeit Coke sounds silly, note that counterfeit honey and maple syrup are actually a major problem.) Yes, there should be limits on how much you can trademark—no one wants to live in a world where you feel Love ™ and open Screen Doors ™—but in fact our courts are already fairly good about only allowing corporations to trademark newly-coined words and proper names for their products.

Next there are copyrights, which I believe are currently too strong and often abused, but I do think should exist in some form (or perhaps copylefts instead). Authors should have at least certain basic rights over how their work can be used and published. If nothing else, proper attribution should always be required, as without that plagiarism becomes intolerably easy. And steps should be taken to ensure that if any people profit from its sale, the author is among them. I publish this blog under a by-sa copyleft, which essentially means that you can share it with whomever you like and even adapt its content into your own work, so long as you properly attribute it to me and you do not attempt to claim ownership over it. For scientific content, I think only a copyleft of this sort makes sense—the era of for-profit journals with paywalls must end, as it is holding back our civilization. But for artistic content (and I mean art in the broadest sense, including books, music, movies, plays, and video games), stronger regulations might well make sense. The question is whether our current system is actually too strong, or is protecting the wrong people—often it seems to protect the corporations that sell the content rather than the artists who created it.

Finally there are patents. Unlike copyright which applies to a specific work of art, patent is meant to apply to the underlying concept of a technology. Copyright (or rather the by-sa copyleft) protects the text of this article; you can’t post it on your own blog and claim you wrote it. But if I were to patent it somehow (generally, verbal arguments cannot be patented, fortunately), you wouldn’t even be able to paraphrase it. The trademark on a Samsung ™ TV just means that if I make a TV I can’t say I am Samsung, because I’m not. You wouldn’t copyright a TV, but the analogous process would be if I were to copy every single detail of the television and try to sell that precise duplicate. But the patents on that TV mean that if I take it apart, study each component, find a way to build them all from my own raw materials, even make them better, and build a new TV out of them that looks different and performs better—I would still be infringing on intellectual property. Patents grant an extremely strong notion of property rights, one which actually undermines a lot of other, more basic concepts of property. It’s my TV, why can’t I take it apart and copy the components? Well, as long as the patent holds, it’s not entirely my TV. Property rights this strong—that allow a corporation to have its cake of selling the TV but eat it too by owning the rights to all its components—require a much stronger justification.

Trademark protects a name, which is unproblematic. Copyright protects a work, which carries risks but is still probably necessary in many cases. But patent protects an idea—and we should ask ourselves whether that is really something it makes sense to do.

In previous posts I’ve laid out some of the basic philosophical arguments for why patents do not seem to support innovation and may actually undermine it. But in this post I want to do something more direct and quantitative: Empirically, what is the actual effect of copyrights and patents on innovation? Can we find a way to quantify the costs and benefits to our society of different modes of intellectual property?

Economists quantify things all the time, so I briefly combed the literature to see what sort of empirical studies had been done on the economic impact of copyrights and patents.

Patents definitely create barriers to scientific collaboration: Scientific articles with ideas that don’t get patented are about 10-20% more likely to be cited than scientific articles with ideas that are patented. (I would have expected a larger effect, but that’s still not trivial.)

A 1995 study found that creased patent protections do seem to be positively associated with more trade.

A 2009 study of Great Britain published in AER found it “puzzling” that stronger patents actually seem to reduce the rate of innovation domestically, while having no effect on foreign innovation—yet this is exactly what I would have predicted. Foreign innovations should be largely unaffected by UK patents, but stricter patent laws in the UK make it harder for most actual innovators, only benefiting a handful of corporations that aren’t even particularly innovative.

This 1996 study did find a positive effect of stronger patent laws on economic growth, but it was quite small and only statistically significant when using instrumental variables that they couldn’t be bothered to define except in an appendix. When your result hinges on the use of instrumental variables that you haven’t even clearly defined in the paper, something is very fishy. My guess is that they p-hacked the instruments until they got the result they wanted.

This other 1996 study is a great example of why economists need to listen to psychologists. It found a negative correlation between foreign direct investment and—wait for it—the number of companies that answered “yes” to a survey question, “Does country X have intellectual property protection too weak to allow you to transfer your newest or most effective technology to a wholly-owned subsidiarythere?” Oh, wow, you found a correlation between foreign direct investment and a question directly asking about foreign direct investment.

his 2004 study found a nonlinear relationship whereby increased economic development affects intellectual property rights, rather than the other way around. But I find their theoretical model quite odd, and the scatter plot that lies at the core of their empirical argument reminds me of Rexthor, the Dog-Bearer. “This relationship appears to be non-linear,” they say when pointing at a scatter plot that looks mostly like nothing and maybe like a monotonic increase.

This 1997 study found a positive correlation between intellectual property strength, R&D spending, and economic growth. The effect is weak, but the study looks basically sound. (Though I must say I’d never heard anyone use the words “significant at the 24% level” before. Normally one would say “nonsignificant” for that variable methinks. It’s okay for it not to be significant in some of your regressions, you know.)

This 1992 paper found that intellectual property harms poor countries and may or may not benefit rich countries, but it uses a really weird idiosyncratic theoretical model to get there. Frankly if I see the word “theorem” anywhere in your empirical paper, I get suspicious. No, it is not a theorem that “For economies in steady state the South loses from tighter intellectual property rights.” It may be true, but it does not follow from the fundamental axioms of mathematics.

This law paper is excellent; it focuses on the fact that intellectual property is a unique arrangement and a significant deviation from conventional property rights. It tracks the rise of legal arguments that erroneously equate intellectual property with real property, and makes the vital point that fully internalizing the positive externalities of technology was never the goal, and would in fact be horrible should it come to pass. We would all have to pay most of our income in royalties to the Newton and Faraday estates. So, I highly recommend reading it. But it doesn’t contain any empirical results on the economic effects of intellectual property.

This is the best paper I was able to find showing empirical effects of different intellectual property regimes; I really have no complaints about its econometrics. But it was limited to post-Soviet economies shortly after the fall of the USSR, which were rather unique circumstances. (Indeed, by studying only those countries, you’d probably conclude that free markets are harmful, because the shock of transition was so great.)

This 1999 paper is also quite good; using a natural experiment from a sudden shift in Japanese patent policy, they found almost no difference in actual R&D. The natural experiment design makes this particularly credible, but it’s difficult to generalize since it only covered Japan specifically.

This study focused in particular on copyrights and the film industry, and found a nonlinear effect: While having no copyright protection at all was harmful to the film industry, making the copyright protections too strong had a strangling effect on new filmmakers entering the industry. This would suggest that the optimal amount of copyright is moderate, which sounds reasonable to me.

This 2009 study did a much more detailed comparison of different copyright regimes, and was unable to find a meaningful pattern amidst the noise. Indeed, they found that the only variable that consistently predicted the number of new works of art was population—more people means more art, and nothing else seemed to matter. If this is correct, it’s quite damning to copyright; it would suggest that people make art for reasons fundamentally orthogonal to copyright, and copyright does almost nothing useful. (And I must say, if you talk to most artists, that tends to be their opinion on the matter!)

This 1996 paper found that stronger patents had no benefits for poor countries, but benefited rich countries quite a large amount: Increased patent protection was estimated to add as much as 0.7% annual GDP growth over the whole period. That’s a lot; if this is really true, stronger patents are almost certainly worth it. But then it becomes difficult to explain why more precise studies haven’t found effects anywhere near that large.

This paper was pretty interesting; they found a fat-tailed distribution of patents, where most firms have none, many have one or a few, and a handful of firms have a huge number of patents. This is also consistent with the distribution of firm revenue and profit—and I’d be surprised if I didn’t find a strong correlation between all three. But this really doesn’t tell us whether patents are contributing to innovation.
This paper found that the harmonization of global patents in the Uruguay Round did lead to gains from trade for most countries, but also transferred about $4.5 billion to the US from the rest of the world. Of course, that’s really not that large an amount when we’re talking about global policy over several years.

What does all that mean? I don’t know. It’s a mess. There just don’t seem to be any really compelling empirical studies on the economic impact of copyrights and patents. The preponderance of the evidence, such as it is, would seem to suggest that copyrights provide a benefit as long as they aren’t too strong, while patents provide a benefit but it is quite small and likely offset by the rent-seeking of the corporations that own them. The few studies that found really large effects (like 0.7% annual GDP growth) don’t seem very credible to me; if the effect were really that large, it shouldn’t be so ambiguous. 0.7% per year over 25 years is a GDP 20% larger. Over 50 years, GDP would be 42% larger. We would be able to see that.

Does this ambiguity mean we should do nothing, and wait until the data is better? I don’t think so. Remember, the burden of proof for intellectual property should be high. It’s a fundamentally bizarre notion of property, one which runs against most of our standard concepts of real property; it restricts our rights in very basic ways, making literally the majority of our population into criminals. Such a draconian policy requires a very strong justification, but such a justification does not appear to be forthcoming. If it could be supported, that 0.7% GDP growth might be enough; but it doesn’t seem to be replicable. A free society does not criminalize activities just in case it might be beneficial to do so—it only criminalizes activities that have demonstrable harm. And the harm of copyright and patent infringement simply isn’t demonstrable enough to justify its criminalization.

We don’t have to remove them outright, but we should substantially weaken copyright and patent laws. They should be short-term, they should provide very basic protection, and they should never be owned by corporations, always by individuals (corporations should be able to license them—but not own them). If we then observe a substantial reduction in innovation and economic output, then we can put them back. But I think that what defenders of intellectual property fear most is that if we tried this, it wouldn’t be so bad—and then the “doom and gloom” justification they’ve been relying on all this time would fall apart.

9/11, 14 years on—and where are our civil liberties?

JDN 2457278 (09/11/2015) EDT 20:53

Today is the 14th anniversary of the 9/11 attacks. A lot has changed since then—yet it’s quite remarkable what hasn’t. In particular, we still don’t have our civil liberties back.

In our immediate panicked response to the attacks, the United States passed almost unanimously the USA PATRIOT ACT, giving unprecedented power to our government in surveillance, searches, and even arrests and detentions. Most of those powers have been renewed repeatedly and remain in effect; the only major change has been a slight weakening of the NSA’s authority to use mass dragnet surveillance on Internet traffic and phone metadata. And this change in turn was almost certainly only made because of Edward Snowden, who is still forced to live in Russia for fear of being executed if he returns to the US. That is, the man most responsible for the only significant improvement in civil liberties in the United States in the last decade is living in Russia because he has been branded a traitor. No, the traitors here are the over one hundred standing US Congress members who voted for an act that is in explicit and direct violation of the Constitution. At the very least every one of them should be removed from office, and we as voters have the power to do that—so why haven’t we? In particular, why are Dan Lipinski and Steny Hoyer, both Democrats from non-southern states who voted every single time to extend provisions of the PATRIOT ACT, still in office? At least Carl Levin had the courtesy to resign after sponsoring the act allowing indefinite detention—I hope we would have voted him out anyway, since I’d much rather have a Republican (and all the absurd economic policy that entails) than someone who apparently doesn’t believe the Fourth and Sixth Amendments have any meaning at all.

We have become inured to this loss of liberty; it feels natural or inevitable to us. But these are not minor inconveniences; they are not small compromises. Giving our government the power to surveil, search, arrest, imprison, torture, and execute anyone they want at any time without the system of due process—and make no mistake, that is what the PATRIOT ACT and the indefinite detention law do—means giving away everything that separates us from tyranny. Bypassing the justice system and the rule of law means bypassing everything that America stands for.

So far, these laws have actually mostly been used against people reasonably suspected of terrorism, that much is true; but it’s also irrelevant. Democracy doesn’t mean you give the government extreme power and they uphold your trust and use it benevolently. Democracy means you don’t give them that power in the first place.

If there’s really sufficient evidence to support an arrest for terrorism, get a warrant. If you don’t have enough evidence for a warrant, you don’t have enough evidence for an arrest. If there’s really sufficient evidence to justify imprisoning someone for terrorism, get a jury to convict. If you don’t have enough evidence to convince a jury, guess what? You don’t have enough evidence to imprison them. These are not negotiable. They are not “political opinions” in any ordinary sense. The protection of due process is so fundamental to democracy that without it political opinions lose all meaning.

People talk about “Big Government” when we suggest increasing taxes on capital gains or expanding Medicare. No, that isn’t Big Government. Searching without warrants is Big Government. Imprisoning people without trial is Big Government. From all the decades of crying wolf in which any policy someone doesn’t like is accused of being “tyranny”, we seem to have lost the ability to recognize actual tyranny. I hope you understand the full force of my meaning when I say that the PATRIOT ACT is literally fascist. Fascism has come to America, and as predicted it was wrapped in the flag and carrying a cross.

In this sort of situation, a lot of people like to quote (or misquote) Benjamin Franklin:

“Those who would give up essential Liberty, to purchase a little temporary Safety, deserve neither Liberty nor Safety.”

With the qualifiers “essential” and “temporary”, this quote seems right; but a lot of people forget them and quote him as saying:
“Those would give up liberty to purchase safety, deserve neither liberty nor safety.”

That’s clearly wrong. We do in fact give up liberty to purchase safety, and as well we should. We give up our liberty to purchase weapons-grade plutonium; we give up our liberty to drive at 220 mph. The question we need to be asking is: How much liberty are we giving up to gain how much safety?

Spoken like an economist, the question is not whether you will give up liberty to purchase safety—the question is at what price you’re willing to make the purchase. The price we’ve been paying in response to terrorism is far too high. Indeed, the price we are paying is tantamount to America itself.

As horrific as 9/11 was, it’s important to remember: It only killed 3,000 people.

This statement probably makes you uncomfortable; it may even offend you. How dare I say “only”?

I don’t mean to minimize the harm of those deaths. I don’t mean to minimize the suffering of people who lost friends, colleagues, parents, siblings, children. The death of any human being is the permanent destruction of something irreplaceable, a spark of life that can never be restored; it is always a tragedy and there is never any way to repay it.

But I think people are actually doing the opposite—they are ignoring or minimizing millions of other deaths because those deaths didn’t happen to be dramatic enough. A parent killed by a heart attack is just as lost as a parent who died in 9/11. A friend who died of brain cancer is just as gone as a friend who was killed in a terrorist attack. A child killed in a car accident is just as much a loss as a child killed by suicide bombers. If you really care about human suffering, I contend that you should care about all human suffering, not just the kind that makes the TV news.

Here is a list, from the CDC, of things that kill more Americans per month than terrorists have killed in the last three decades:

Heart disease: 50,900 per month

Cancer: 48,700 per month

Lung disease: 12,400 per month

Accidents: 10,800 per month

Stroke: 10,700 per month

Alzheimer’s: 7,000 per month

Diabetes: 6,300 per month

Influenza: 4,700 per month

Kidney failure: 3,900 per month

Terrorism deaths since 1985: 3,455
Yes, that’s right; influenza kills more Americans per month (on average; flu is seasonal, after all) than terrorism has killed in the last thirty years.
And for comparison, other violent deaths, not quite but almost as many per month as terrorism has killed in my entire life so far:
Suicide: 3,400 per month

Homicide: 1,300 per month

Now, with those figures in mind, I want you to ask yourself the following question: Would you be willing to give up basic, fundamental civil liberties in order to avoid any of these things?

Would you want the government to be able to arrest you and imprison you without trial for eating too many cheeseburgers, so as to reduce the risk of heart disease and stroke?

Would you want the government to monitor your phone calls and Internet traffic to make sure you don’t smoke, so as to avoid lung disease? Or to watch for signs of depression, to reduce the rate of suicide?

Would you want the government to be able to use targeted drone strikes, ordered directly by the President, pre-emptively against probable murderers (with a certain rate of collateral damage, of course), to reduce the rate of homicide?

I presume that the answer to all the above questions is “no”. Then now I have to ask you: Why are you willing to give up those same civil liberties to prevent a risk that is three hundred times smaller?

And then of course there’s the Iraq War, which killed 4,400 Americans and at least 100,000 civilians, and the Afghanistan War, which killed 3,400 allied soldiers and over 90,000 civilians.

In response to the horrific murder of 3,000 people, we sacrificed another 7,800 soldiers and killed another 190,000 innocent civilians. What exactly did that accomplish? What benefit did we get for such an enormous cost?

The people who sold us these deadly wars and draconian policies did so based on the threat that terrorism could somehow become vastly worse, involving the release of some unstoppable bioweapon or the detonation of a full-scale nuclear weapon, killing millions of people—but that has never happened, has never gotten close to happening, and would be thousands of times worse than the worst terrorist attacks that have ever actually happened.

If we’re worried about millions of people dying, it is far more likely that there would be a repeat of the 1918 influenza pandemic, or an accidental detonation of a nuclear weapon, or a flashpoint event with Russia or China triggering World War III; it’s probably more likely that there would be an asteroid impact large enough to kill a million people than there would be a terrorist attack large enough to do the same.

As it is, heart disease is already killing millions of people—about a million every two years—and we aren’t so panicked about that as to give up civil liberties. Elsewhere in the world, malnutrition kills over 3 million children per year, essentially all of it due to extreme poverty, which we could eliminate by spending between a quarter ($150 billion) and a half ($300 billion) of our current military budget ($600 billion); but we haven’t even done that even though it would require no loss of civil liberties at all.

Why is terrorism different? In short, the tribal paradigm.

There are in fact downsides to not being infinite identical psychopaths, and this is one of them. An infinite identical psychopath would simply maximize their own probability of survival; but finite diverse tribalists such as we underreact to some threats (such as heart disease) and overreact to others (such as terrorism). We’ll do almost anything to stop the latter—and almost nothing to stop the former.

Terrorists are perceived as a threat not just to our individual survival like heart disease or stroke, but a threat to our tribe from another tribe. This triggers a deep, instinctual sense of panic and hatred that makes us willing to ignore principles we would otherwise uphold and commit acts of violence we would otherwise find unimaginable.

Indeed, it’s precisely that instinct which motivates the terrorists in the first place. From their perspective, we are the other tribe that threatens their tribe, and they are therefore willing to stop at nothing until we are destroyed.

In a fundamental way, when we respond to terrorism in this way we do not defeat them—we become them.
If you ask people who support the PATRIOT ACT, it’s very clear that they don’t see themselves as imposing upon the civil liberties of Americans. Instead, they see themselves as protecting Americans (our tribe), and they think the impositions upon civil liberties will only harm those who don’t count as Americans (other tribes). This is a pretty bizarre notion if you think about it carefully—if you don’t need a warrant or probable cause to imprison people, then what stops you from imprisoning people who aren’t terrorists?—but people don’t think about it carefully. They act on emotion, on instinct.

The odds of terrorists actually destroying America by killing people are basically negligible. Even the most deadly terrorist attack in recorded history—9/11—killed fewer Americans than die every month from diabetes, or every week from heart disease. Even the most extreme attacks feared (which are extremely unlikely) wouldn’t be any worse than World War II, which of course we won.

But the odds of terrorists destroying America by making us give up the rights and freedoms that define us as a nation? That’s well underway.

Why did we ever privatize prisons?

JDN 2457103 EDT 10:24.

Since the Reagan administration (it’s always Reagan), the United States has undergone a spree of privatization of public services, in which services that are ordinarily performed by government agencies are instead contracted out to private companies. Enormous damage to our society has been done by this sort of privatization, from healthcare to parking meters.

This process can vary in magnitude.

The weakest form, which is relatively benign, is for the government to buy specific services like food service or equipment manufacturing from companies that already provide them to consumers. There’s no particular reason for the government to make their own toothpaste or wrenches rather than buy them from corporations like Proctor & Gamble and Sears. Toothpaste is toothpaste and wrenches are wrenches.

The moderate form is for the government to contract services to specific companies that may involve government-specific features like security clearances or powerful military weapons. This is already raising a lot of problems: When Northrop-Grumman makes our stealth bombers, and Boeing builds our nuclear ICBMs, these are publicly-traded, for-profit corporations manufacturing some of the deadliest weapons ever created—weapons that could literally destroy human civilization in a matter of minutes. Markets don’t work well in the presence of externalities, and weapons by definition are almost nothing but externalities; their entire function is to cause harm—typically, death—to people without their consent. While this violence may sometimes be justified, it must never be taken lightly; and we are right to be uncomfortable with the military-industrial complex whose shareholders profit from death and destruction. (Eisenhower tried to warn us!) Still, there are some good arguments to be made for this sort of privatization, since many of these corporations already have high-tech factories and skilled engineers that they can easily repurpose, and competitive bids between different corporations can keep the price down. (Of course, with no-bid contracts that no longer applies; and it certainly hasn’t stopped us from spending nearly as much on the military as the rest of the world combined.)

What I’d really like to focus on today is the strongest form of privatization, in which basic government services are contracted out to private companies. This is what happens when you attempt to privatize soldiers, SWAT teams, and prisons—all of which the United States has done since Reagan.

I say “attempt” to privatize because in a very real sense the privatization of these services is incoherent—they are functions so basic to government that simply to do them makes you, de facto, part of the government. (Or, if done without government orders, it would be organized crime.) All you’ve really done by “privatizing” these services is reduced their transparency and accountability, as well as siphoning off a portion of the taxpayer money in the form of profits for shareholders.

The benefits of privatization, when they exist, are due to competition and consumer freedom. The foundation of a capitalist economy is the ability to say “I’ll take my business elsewhere.” (This is why the notion that a bank can sell your loan to someone else is the opposite of a free market; forcing you to write a check to someone you never made a contract with is antithetical to everything the free market stands for.) Actually the closest thing to a successful example of privatized government services is the United States Postal Service, which collects absolutely no tax income. They do borrow from the government and receive subsidies for some of their services—but so does General Motors. Frankly I think the Postal Service has a better claim to privatization than GM, which you may recall only exists today because of a massive government bailout with a net cost to the US government of $11 billion. All the Postal Service does differently is act as a tightly-regulated monopoly that provides high-quality service to everyone at low prices and pays good wages and pensions, all without siphoning profits to shareholders. (They really screwed up my mail forwarding lately, but they are still one of the best postal systems in the world.) It is in many ways the best of both worlds, the efficiency of capitalism with the humanity of socialism.

The Corrections Corporation of America, on the other hand, is the exact opposite, the worst of both worlds, the inefficiency of socialism with the inhumanity of capitalism. It is not simply corrupt but frankly inherently corrupt—there is simply no way you can have a for-profit prison system that isn’t corrupt. Maybe it can be made less corrupt or more corrupt, but the mere fact that shareholders are earning profits from incarcerating prisoners is fundamentally antithetical to a free and just society.

I really can’t stress this enough: Privatizing soldiers and prisons makes no sense at all. It doesn’t even make sense in a world of infinite identical psychopaths; nothing in neoclassical economic theory in any way supports these privatizations. Neoclassical theory is based upon the presumption of a stable government that enforces property rights, a government that provides as much service as necessary exactly at cost and is not attempting to maximize any notion of its own “profit”.

That’s ridiculous, of course—much like the neoclassical rational agent—and more recent work has been done in public choice theory about the various interest groups that act against each other in government, including lobbyists for private corporations—but public choice theory is above all a theory of government failure. It is a theory of why governments don’t work as well as we would like them to—the main question is how we can suppress the influence of special interest groups to advance the public good. Privatization of prisons means creating special interest groups where none existed, making the government less directed at the public good.

Privatizing government services is often described as “reducing the size of government”, usually interpreted in the most narrow sense to mean the tax burden. But Big Government doesn’t mean you pay 22% of GDP instead of 18% of GDP; Big Government means you can be arrested and imprisoned without trial. Even using the Heritage Foundation’s metrics, the correlation between tax burden and overall freedom is positive. Tyrannical societies don’t bother with taxes; they own the oil refineries directly (Venezuela), or print money whenever they want (Zimbabwe), or build the whole society around doing what they want (North Korea).

The incarceration rate is a much better measure of a society’s freedom than the tax rate will ever be—and the US isn’t doing so well in that regard; indeed we have by some measures the highest incarceration rate in the world. Fortunately we do considerably better when it comes to things like free speech and freedom of religion—indeed we are still above average in overall freedom. Though we do imprison more of our people than China, I’m not suggesting that China has a freer society. But why do we imprison so many people?

Well, it seems to have something to do with privatization of prisons. Indeed, there is a strong correlation between the privatization of US prisons and the enormous explosion of incarceration in the United States. In fact privatized prisons don’t even reduce the tax burden, because privatization does not decrease demand and “privatized” prisons must still be funded by taxes. Prisons do not have customers who choose between different competing companies and shop for the highest quality and lowest price—prisoners go to the prison they are assigned to and they can’t leave (which is really the whole point). Even competition at the purchase end doesn’t make much sense, since the government can’t easily transfer all the prisoners to a new company. Maybe they could transfer ownership of the prison to a different company, but even then the transition costs would be substantial, and besides, there are only a handful of prison corporations that corner most of the (so-called) market.

There is simply no economic basis for privatization of prisons. Nothing in either neoclassical theory or more modern cognitive science in any way supports the idea. So the real question is: Why did we ever privatize prisons?

Basically there is only one reason: Ideology. The post-Reagan privatization spree was not actually based on economics—it was based on economic ideology. Either because they actually believed it, or by the Upton Sinclair Principle, a large number of economists adopted a radical far-right ideology that government basically should not exist—that the more we give more power to corporations and less power to elected officials the better off we will be.

They defended this ideology on vaguely neoclassical grounds, mumbling something about markets being more efficient; but this isn’t even like cutting off the wings of the airplane because we’re assuming frictionless vacuum—it’s like cutting off the engines of the airplane because we simply hate engines and are looking for any excuse to get rid of them. There is absolutely nothing in neoclassical economic theory that says it would be efficient or really beneficial in any way to privatize prisons. It was all about taking power away from the elected government and handing it over to for-profit corporations.

This is a bit of consciousness-raising I’m trying to do: Any time you hear someone say that something should be apolitical, I want you to substitute the word undemocratic. When they say that judges shouldn’t be elected so that they can be apolitical—they mean undemocratic. When they say that the Federal Reserve should be independent of politics—they mean independent of voting. They want to take decision power away from the public at large and concentrate it more in the hands of an elite. People who say this sort of thing literally do not believe in democracy.

To be fair, there may actually be good reasons to not believe in democracy, or at least to believe that democracy should be constrained by a constitution and a system of representation. Certain rights are inalienable, regardless of what the voting public may say, which is why we need a constitution that protects those rights above all else. (In theory… there’s always the PATRIOT ACT, speaking of imprisoning people without trial.) Moreover, most people are simply not interested enough—or informed enough—to vote on every single important decision the government makes. It makes sense for us to place this daily decision-making power in the hands of an elite—but it must be an elite we choose.

And yes, people often vote irrationally. One of the central problems in the United States today is that almost half the population consistently votes against rational government and their own self-interest on the basis of a misguided obsession with banning abortion, combined with a totally nonsensical folk theory of economics in which poor people are poor because they are lazy, the government inherently destroys whatever wealth it touches, and private-sector “job creators” simply hand out jobs to other people because they have extra money lying around. Then of course there’s—let’s face it—deep-seated bigotry toward women, racial minorities, and LGBT people. (The extreme hatred toward Obama and suspicion that he isn’t really born in the US really can’t be explained any other way.) In such circumstances it may be tempting to say that we should give up on democracy and let expert technocrats take charge; but in the absence of democratic safeguards, technocracy is little more than another name for oligarchy. Maybe it’s enough that the President appoints the Federal Reserve chair and the Supreme Court? I’m not so sure. Ben Bernanke definitely handled the Second Depression better than Congress did, I’ll admit; but I’m not sure Alan Greenspan would have in his place, and given his babbling lately about returning to Bretton Woods I’m pretty sure Paul Volcker wouldn’t have. (If you don’t see what’s wrong with going back to Bretton Woods, which was basically a variant of the gold standard, you should read what Krugman has to say about the gold standard.) So basically we got lucky and our monetary quasi-tyrant was relatively benevolent and wise. (Or maybe Bernanke was better because Obama appointed him, while Reagan appointed Greenspan. Carter appointed Volcker, oddly enough; but Reagan reappointed him. It’s always Reagan.) And if you could indeed ensure that tyrants would always be benevolent and wise, tyranny would be a great system—but you can’t.

Democracy doesn’t always lead to the best outcomes, but that’s really not what it’s for. Rather, democracy is for preventing the worst outcomes—no large-scale famine has ever occurred under a mature democracy, nor has any full-scale genocide. Democracies do sometimes forcibly “relocate” populations (particularly indigenous populations, as the US did under Andrew Jackson), and we should not sugar-coat that; people are forced out of their homes and many die. It could even be considered something close to genocide. But no direct and explicit mass murder of millions has ever occurred under a democratic government—no, the Nazis were not democratically elected—and that by itself is a fully sufficient argument for democracy. It could be true that democracies are economically inefficient (they are economically efficient), unbearably corrupt (they are less corrupt), and full of ignorant idiotic hicks (they have higher average educational attainment), and democracy would still be better simply because it prevents famine and genocide. As Churchill said, “Democracy is the worst system, except for all the others.”

Indeed, I think the central reason why American democracy isn’t working well right now is that it’s not very democratic; a two-party system with a plurality “first-past-the-post” vote is literally the worst possible voting system that can still technically be considered democracy. Any worse than that and you only have one party. If we had a range voting system (which is mathematically optimal) and say a dozen parties (they have about a dozen parties in France), people would be able to express their opinions more clearly and in more detail, with less incentive for strategic voting. We probably wouldn’t have such awful turnout at that point, and after realizing that they actually had such a strong voice, maybe people would even start educating themselves about politics in order to make better decisions.

Privatizing prisons and soldiers takes us in exactly the opposite direction: It makes our government deeply less democratic, fundamentally less accountable to voters. It hands off the power of life and death to institutions whose sole purpose for existence is their own monetary gain. We should never have done it—and we must undo it as soon as we possibly can.