Our quote of the day comes from Martin Peretz, editor-in-chief of the New Republic, in 1989.

“The cheer with which Western commentators greeted Mikhail Gorbachev’s tease that the Berlin Wall might come down when the conditions that generate the need for it disappear is another sign of how credulous we have become in receiving blandishments from Moscow.”

It’s available here.

Thank god we had people like Peretz looking out for us.

I mentioned our screwy patent system last post; today comes the news that the Supreme Court has decided that, essentially, natural laws can’t be patented.

From the article:

In general, Justice Breyer wrote, an inventor must do more than “recite a law of nature and then add the instruction ‘apply the law.’ ”

“Einstein, we assume, could not have patented his famous law by claiming a process consisting of simply telling linear accelerator operators to refer to the law to determine how much energy an amount of mass has produced (or vice versa),” he wrote.

So, that’s actually good. But it’s still evidence that our patent system is broken.

Point being, given that it’s possible to patent things that are in no way inventions, like genes and one-click shopping, it made sense for companies to try to patent natural laws, and to bring their claim all the way up to the Supreme Courth. Yes, the Court said no in this case, but in a reasonable patent regime this wouldn’t have even been a question.

Consumerist.com reports that Microsoft has patented a system that would let people pay to skip commercials.

That could be the start of a rant about our broken patent system (is this really something that needs a patent? Isn’t it sort of obvious?), but I’m on a different rant today.

Specifically:

• People will pay to avoid advertising. If we wouldn’t, there would be no point in this patent.
• Things we pay to avoid–or would if we could–are, by definition, bad.
• Therefore, advertising is, in and of itself, bad. Not just its effects, which are bad enough, but the simple fact of its existence, which causes us some amount of annoyance that we would pay to avoid.

Now: in many cases advertising is a tradeoff–I want to watch Jersey Shore, so I’ll sit through some ads in order to do it; the irritation of the ads is worth it for that Jersey Shore goodness.

But what about ads that don’t support anything–that just accost us? Like billboards? Or spam phone calls?

Why are they legal? Spam calls to cell phones are in fact not legal, but why are any spam calls allowed?

And check this out:  Sao Paolo, in Brazil, got rid of billboards. Here’s what a business owner there had to say about the effect that had:

“You have to change the whole structure of the business. Today we work instead of investing in advertising, to have something that attracts the customer. Our job is to look for referrals.”

(Quoted in The Greatest Movie Ever Sold.)

In other words, restricting advertising means that businesses have to compete the way that textbooks say they should–by actually attracting customers with their products, their services, or their prices.

Okay, that wasn’t even other words–that was many of the same words.

Point being: If we will pay to skip ads in videos and whatnot–and Microsoft is betting that we will–we would no doubt, if we had the option, pay to skip ads on billboards, on our phones, in bar bathrooms, and suchlike.

Thus, getting rid of these things would make us better off. In theory at least, measurably better off (by the amount of the money we would have spent to avoid the ads).

I can’t find any research about how much people would pay to avoid all the crap that the ad industry dumps on us, all day, every day. But certainly it’s more than zero, while the social benefits of all these ads are less than zero.

So why allow them?

Well, this is bad. An article on Truthout details how a new Pennsylvania law makes it difficult for us to even know what chemicals frackers are using, much less what they’re doing to us, because they’re trade secrets. Check out how difficult it is to get, and especially to share, information that may be needed for medical reasons. From the bill itself:

A vendor, service company or operator shall identify the specific identity and amount of any chemicals claimed to be a trade secret or confidential proprietary information to any health professional who requests the information in writing if the health professional executes a confidentiality agreement and provides a written statement of need for the information indicating all of the following:

(i) The information is needed for the purpose of diagnosis or treatment of an individual.

(ii) The individual being diagnosed or treated may have been exposed to a hazardous chemical.

(iii) Knowledge of information will assist in the diagnosis or treatment of an individual.

If a health professional determines that a medical emergency exists and the specific identity and amount of any chemicals claimed to be a trade secret or confidential proprietary information are necessary for emergency treatment, the vendor, service provider or operator shall immediately disclose the information to the health professional upon a verbal acknowledgment by the health professional that the information may not be used for purposes other than the health needs asserted and that the health professional shall maintain the information as confidential. The vendor, service provider or operator may request, and the health professional shall provide upon request, a written statement of need and a confidentiality agreement from the health professional as soon as circumstances permit, in conformance with regulations promulgated under this chapter.

There’s really no way to interpret this except:

• If you’re a health care professional, you can get a list of the chemicals a patient has been exposed to, if the patient is already sick, if you’re alert enough to suspect that he or she has been exposed, and if you’re willing to jump through hoops.
• You can use that information to diagnose and treat your patient, but not to, for instance, warn other physicians, or the public, to be on the lookout for signs of exposure to this chemical, because hey, that’s a trade secret.

The focus on the “proper diagnosis and treatment of an individual” is worrisome too–the thing is, any cancer, any bizarre health problem, can happen once in a while. If the rate of a rare cancer doubles, individual physicians, treating individual patients, might not notice anything is wrong if it’s the difference between seeing one patient with it and seeing two. It seems to me like a public health professional, seeing a cluster of cancers, wouldn’t be able to get information about what those people were exposed to without getting one of their individual doctors to request it.

Worse, the public health professional wouldn’t be able to look proactively–for instance, to see what happens in communities that have been exposed to chemical X–because she wouldn’t be able to tell which communities had been exposed to which agents until people start getting sick.

I’m sure that this was put through by people who preach free markets, but it resembles a true free market–which requires people to be informed about the consequences of the choices that they make–not at all. In a true free market, people might say, hey, we want cheaper gas and we’re willing to take this known risk to our health in order to get it. Which is not to say that’s the ideal, but that’s how a free market is supposed to work.

And when the coercive power of the state is used to maintain our ability to make informed decisions (like with mandatory food labeling), the result is a market that works better.

But using state power to prevent us from even knowing the risks we’re taking, so we have no practical choice but to buy what people want to sell us, resembles nothing so much as mercantilism. Not a free market, and certainly not democracy. I just can’t stop quoting Adam Smith:

It is unnecessary, I imagine, to observe, how contrary such regulations are to the boasted liberty of the subject, of which we affect to be so very jealous; but which, in this case, is so plainly sacrificed to the futile interests of our merchants and manufacturers.

And for that matter:

It is the industry which is carried on for the benefit of the rich and powerful, that is principally encouraged by our mercantile system. That which is carried out for the benefit of the poor and the indigent, is too often, either neglected or oppressed. Wealth of Nations, p697.

This resignation letter by one Greg Smith, formerly of Goldman Sachs, has created a bigger splash than most. Maybe because he published it in the New York Times.

From the letter:

I have always taken a lot of pride in advising my clients to do what I believe is right for them, even if it means less money for the firm. This view is becoming increasingly unpopular at Goldman Sachs. Another sign that it was time to leave.

. . .

It makes me ill how callously people talk about ripping their clients off. Over the last 12 months I have seen five different managing directors refer to their own clients as “muppets,” sometimes over internal e-mail.

No wonder Goldman’s stock price tanked the next day, although it bounced back. Although Smith says he didn’t see anything illegal, he definitely saw, and describes, things that Goldman could be sued for. The fact is, when you have a client–whether you’re a doctor, or an accountant, or an agent–you have a fiduciary duty to advise your client in his or her own best interest. Breaching that duty isn’t a crime in most states, but your client can damn well sue.

The initial chatter about Smith focused on the small question of whether or not he’s right (he is)–whether Goldman’s corporate culture has deteriorated to the point where they put profits above clients (Michael Bloomberg says no. He’s wrong, but he’s right when he says that the financial industry is crucial to New York City), and whether said deterioration is a Goldman problem or endemic to Wall Street (it’s the latter).

But others have pointed out that Goldman “never had moral fiber” (in Robert Reich’s words), that they have “a long history of duping clients.”

So, have Goldman’s (and Wall Street’s) morals deteriorated, or were Goldman (and Wall Street) always a bunch of bastards?

Both are true.

Wall Street has always been filled with amoral bastards who want to make money any way they can. The country saw that in the 1920s, with the orgy of speculation that led to the 1929 crash and the Great Depression.

Even after the crash, it took surprisingly long for people to understand just how bad–as people, and even as financiers–Wall Streeters were. It took years of depression, followed by congressional hearings in which (in the historian William Manchester’s Arthur Schlesinger, Jr.’s words) the heroes of Wall Street confessed to “one breach after another both of normal ethics and normal intelligence.”

After that, the New Deal set things up so that finance stayed simple and easy to supervise, and so that Wall Street was more or less forced to do what it’s supposed to do: to find real, productive investments for our savings.

Since that was the way to make money, that’s what Wall Streeters did, whether they were bastards or not.

Starting in the 1970s, we deleted our regulations in the name of the free market. The result was exactly what you would expect: a replay of the 1920s.

How long till we get it into our heads, again, that financiers are dangerous idiots who need to be watched every minute?

Before I leave this subject, check this out: It’s Goldman’s CEO’s response to Smith. Go read it. Then ask yourself: Does this read like something from the pen of an effective, dynamic person–someone so alert, so sophisticated, and so brilliant that he deserves millions of dollars a year if he deigns to lend his powers to the service of a company? Or does it sound like the work of a dull, petulant nobody?

Hot on the heels of yesterday’s post, here’s Ann Romney, saying “I don’t even consider myself wealthy.”

Right, her money doesn’t matter. It’s not important to her. It’s not a part of who she is.

Will she say the same when the taxman comes around?

Yep, I’m linking to Cracked again.

Here David Wong skewers the clueless excuses rich people make when people say, hey, maybe you have too much money.

My favorite quote, regarding the very common “I got rich, you could too” excuse:

So “anyone can get rich” isn’t just untrue, it’s insultingly untrue. You can’t have a society where everyone is an investment banker. And you can’t have a society where you pay six figures to every good policeman, nurse, firefighter, schoolteacher, carpenter, electrician and all of the other ten thousand professions that civilization needs to survive (and that rich people need in order to stay rich).

It’s like setting a jar of moonshine on the floor of a boxcar full of 10 hobos and saying, “Now fight for it!” Sure, in the bloody aftermath you can say to each of the losers, “Hey, you could have had it if you’d fought harder!” and that’s true on an individual level. But not collectively — you knew goddamned well that nine hobos weren’t getting any hooch that night. So why are you acting like it’s their fault that only one of them is drunk?

You’re intentionally conflating “anyone can have the moonshine” with “everyone can have it.” And you are doing it because you’re hoping that we will all be too busy fighting each other to ask why there was only one jar.

Couldn’t have put it better myself.

Secretary of the Treasury Tim Geithner has an opinion piece called Financial Crisis Amnesia in Thursday’s Wall Street Journal (I was pointed there by DrRichardCranium on Reddit; excuse his name). Geithner rightly reminds Wall Streeters that it’s a bit disingenuous to complain about reform when not too long ago they were on their knees for bailouts. And they do need to be reminded of this; they seem to have genuinely forgotten.

But one expects nothing more from Wall Streeters, after all–they’re not exactly selected for their wide knowledge or public spirit, and as I’ve said before the evidence strongly points to them being pretty much boobs.

So it’s not their amnesia that worries me; it’s Geithner’s.

From the article, with emphasis from me:

The failure to modernize the financial oversight system sooner is the most important reason why this crisis was more severe than any since the Great Depression, and why it was so hard to put out the fires of the crisis. The failure to reform sooner is why the crisis caused gross domestic product to fall at an annual rate of 9% in the last quarter of 2008; why millions of Americans lost their jobs, homes, businesses and savings; why the housing market is still so far from recovery; and why our national debt has grown so significantly.

Nowhere in his article does Geithner mention that we didn’t just fail to keep our financial regulatory system modern; over the last 30 years we gutted our regulations. Deregulation, not simply stagnant regulation, was the order of the day for 30 years. Many of our antiquated regulations would have worked just fine if they’d still been on the books.

How does Geithner not mention that? I don’t really believe that he forgot. That leaves two reasons I can think of, one good and one bad:

The good reason would be: he’s arguing to Wall Streeters (who are, as I have previously proven beyond the shadow of a doubt, boobs) in favor of the current reforms, and saying “hey, government just didn’t keep up with your cleverness” flatters them, making his pro-reform arguments go down easier. I can’t really argue with this approach; Wall Streeters do like flattery. Heck, I think half of the profession of economics exists to flatter Wall Streeters, although that’s a post for later.

The bad reason would be that Geithner really believes that the deregulations we’ve seen are unobjectionable; that the basic structure is sound and we only have to modernize it a bit with the mild fixes the administration is proposing. And that’s unfortunately pretty plausible; Geithner comes from Wall Street, and he was proposing giving Wall Street freer rein as recently as 2007. It’s entirely possible that he still doesn’t understand the full scale of the problem.

I’ll be posting about the full problem soon. It’s big. It’s very big.

This piece by Ezra Klein shows some of the ways people who don’t think of themselves as being on government assistance are assisted by the government. I don’t really have anything to add to it. You should read it.

The Planet Money blog linked to this from an outfit called Third Way, which came up with a “taxpayer receipt” showing where your federal tax money goes.

I agree with the Third Way people that this is a very good idea, and would be very easy for government to implement. Fact is, anything that dispels the myth that our tax dollars pay for welfare is a good thing. (Unless you think that military contracts are welfare for contractors.)

I do have some quibbles with their sample receipt. It’s only selected budget items, so things like military procurement are not listed, and it lumps in Social Security contributions with the rest of our taxes. As I’ll explain in a later post, hopefully one with pretty pictures, they’re Social Security contributions, not taxes, and they shouldn’t be conflated.

Still, those are quibbles–the point is that there’s no good reason not to do this. It’s not a completely original idea, but it will be timely for as long as we haven’t implemented it. Anything that simple, that gives people clear information about such an important subject, should be a no-brainer.