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Wednesday, December 23, 2009

Jimmy Lakey Runs for 7th Congressional

I attended the Red Rocks Liberty On the Rocks December 7 meeting, where Adam Schrager discussed his inspiring book about Ralph Carr. Jimmy Lakey, a candidate for Colorado's 7th Congressional district, also attended that meeting, so I pulled out my audio recorder and asked him some questions.

In business Lakey promotes Christian music. Lakey adopted a son from Africa and continues to participate in charity work there. His biographical notes take up Part I.

For Part II, Lakey said he is running to protect the future of his son as a new American citizen. He said he is not and does not want to be a career politician. He questioned the decision of Ryan Frazier -- another Republican in the race -- to extend same-sex benefits in Aurora in a time of fiscal downturn.

For Part III, Lakey contrasted his views with those of incumbent Ed Perlmutter. While Lakey stressed his fiscal conservatism, Lakey also discussed his "faith-based beliefs" and endorsed the "personhood" measure slated for the 2010 ballot (defining a fertilized egg as a person).

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Maes Talks Taxes, Abortion, and Eminent Domain

I have been dismissive of Dan Maes, who is challenging presumptive front-runner Scott McInnis for the Republican nomination for governor. (See my first, second, and third set of comments.) But Maes shows up and answers questions, and that counts for a lot. His tenacity earns him at least a second glance -- especially given that McInnis is the ideal candidate of few.

I talked with Maes at the December 21 Liberty On the Rocks holiday party (er, "Christmas party!") hosted by the Independence Institute. We talked about a number of issues, but I assured him the conversation was off the record. He also complained that I had not given enough consideration to his candidacy. So I figured I'd invite him to further articulate some of things we talked about, on the record. I sent him five questions, which he generously answered. My questions are in bold.

I appreciate you giving me your time at the II event to discuss your campaign.

I would like to again give you the opportunity to further articulate your views, on the record. I have a number of questions arising from our conversation. I will be happy to publish your replies, unaltered, on my web page.

1. As governor, what would be your role in dealing with the military's desire to expand Pinon Canyon operations? [See the write-up about McInnis's statements on eminent domain for background.]

I would like to act as a mediator and seek out a mutually beneficial solution if possible. I do not see issues like this as zero sum. I only have the ranchers' input thus far and they have presented a very strong case for preservation based on many valuable criteria not limited to private property rights, less federalization of state land, and cultural history. I await the Army's position in detail beyond a GAO report that has unaddressed exemptions in it.

2. Generally, when do you believe eminent domain is appropriate, if ever?

It is a constitutionally acceptable process and should be applied on a case by case basis. Application of the practice should only be exercised when there is a clear and convincing case for a purely public use and benefit.

3. Please explain what specific economic policies you would adopt. Would you seek to cut specific taxes?

Yes, personal income tax and business property tax. Possibly explore a Fairtax (consumption tax).

Cut specific state programs?

Yes, TBD.

Roll back specific economic controls?

Clarify please.

[I was under the impression that Maes wanted to cut certain regulations on business, and I was trying to figure out which regulations he might want to repeal or modify. I will be happy to post Maes's additional comments on the matter if he cares to send them.] Many politicians, including W. Bush and Obama, promised to cut taxes, so I'm looking for some specific proposals.

I see our energy industry and the accompanying tax revenues as an enormous potential for our state just like our energy producing neighbors. With aggressive and responsible energy policies we could increase these revenues dramatically. Simultaneously, I have articulated my position on downsizing government FTE [full-time employees] by up to 4000.

I will defend Tabor while seeking a better balance with the effects of Amendment 23. I am a strong advocate for public schools as I have two children attending them, however; we must seek more fiscally responsible reform.

Cutting taxes is part of my plan but only after we have struck an appropriate sizing of state government and started a statewide recovery.

4. As you know, the Colorado legislature directs corporate welfare to a variety of industries, including tourism and energy. What are your views of corporate welfare?

I would like to examine the specifics in each case. Our state constitution clearly states we are not to make investments in private entities. I want to honor the spirit of our federal and state constitutions. I do see tax breaks as viable incentives to spur our economy.

5. The "personhood" measure slated for the 2010 ballot states, "As used in sections 3, 6, and 25 of Article II of the state constitution, the term 'person' shall apply to every human being from the beginning of the biological development of that human being." Please explain your views on this measure.

I support it with the understanding that the life of the child is equal to that of the mother and shall never be considered more important than that of the mother.

I appreciate your pledge to answer the survey coming soon from my dad and me. That will probably come out the first days of January.

In closing, understand that we have 3 months until caucuses, 5.5 months until state assembly, and 11 months until the general election. It is still a tad early to have all the answers but I hope I have given you something to start with. Contrary to my opponent, I do have a copy of the current state budget and will continue to examine it, get consultation on it, and come
ready to provide even more specifics in the near future. Thank you.

I will indeed be interested to see whether McInnis is as forthcoming in his answers to the upcoming survey. (I also hope the survey prompts even more specific and revealing answers from Maes on a variety of issues.) I believe the voters of Colorado deserve to know where candidates stand on the issues.

By the way, a People's Press Collective article discusses some of the recent comments of the candidates, including McInnis's comments about the CSU gun ban.

Talking both with Maes and with Clive Tidwell, the underdog in the U.S. Senate race, I picked up a "throw the bums out" vibe, which is to be expected from candidates with no political experience running against seasoned former politicians. However, I have no interest in replacing one bum with another, potentially worse one. While experience and biography do matter in these political races, I hope ultimately they are about fundamental ideas and their application to policy. So I will continue to try to get candidates to articulate their ideas and policies as fully as possible. I hope the voters -- and other political writers -- join me in this.

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Tuesday, December 22, 2009

E-Books: Amazon Versus Barnes and Noble

I've been complaining quite a lot about Amazon's e-book service. My basic complaint is that, because of Amazon's proprietary software, Amazon e-books will only play on devices supported by Amazon's reader software. Presently that excludes my Mac, which means that the only way I could buy Amazon e-books was to also buy Amazon's Kindle (or an iPhone or Touch, which runs the software).

I don't want to buy a Kindle because it does way more than what I want it to do, and as a result it is quite overpriced for my budget and needs.

Thankfully, I have friends who tend to be early adopters of new technology. One of these friends (Diana Hsieh) lent me her Kindle for a few days so that I could check it out. This was quite helpful, because, as Amazon has no physical store front, it is otherwise impossible to pick up and play around with the Kindle before buying it.

I also purchased Karen Armstrong's The Case for God from Barnes and Noble (BN), because it will read on my computer (with the BN reader) and I wanted to try it out. I'm contemplating buying several more books through BN but I worry that they won't read on the e-reader I may ultimately buy and that I won't be able to integrate my purchases from different suppliers. (The word is that Apple is also getting into the e-book game, which could change the industry dramatically.)

BN's Nook is not yet available for purchase, so I cannot directly compare the two services. I'm reading the God book on my Mac screen and comparing that with text on the Kindle. But that's what I have to work with.

I'll begin with the BN e-book. It was easy to buy (once I set up my account), and the BN e-reading software installed and functioned flawlessly. The text looks fabulous on my great Mac screen, and it is easy to increase the font size and resize the window for a narrower column of text.

There is a huge disadvantage with the BN e-book and a minor one. The huge disadvantage is that the e-book will only read with the BN e-reader software, which bugs the living hell out of me. What is the point of having universal formats like pdf and HTML if e-book sellers refuse to use those formats? By contrast, an mp3 song you buy from any vendor will play on any device on the standard software. You don't buy mp3s from Amazon that play only on the Amazon music reader. (Apple-formatted songs will only play on iTunes, but, as I've noted, Apple can get away with this because the company is so great at making players.)

Incidentally, today I spent $63.10 at the Cato Institute's store to purchase seven e-books. These were straight pdf downloads, so I don't have to worry about the compatibility issues of DRM. I do think that publishers should sell both pdf and HTML formats so that users can select the format best adapted to the reading device.

The minor disadvantage is that the BN e-book has no standardized page numbers. Instead, the pagination adjusts to the window and text. The problem is that BN e-books are useless for citation purposes, unless we've gotten to the point where nobody cares about page references because books are so easily searchable. If I do a review of the book, I'll look up the page numbers, ironically, with Amazon's "look inside" feature. Perhaps that should give Amazon the idea that its business model in this area sucks.

There are some advantages to reading an e-book on a computer screen that I did not anticipate. For note-taking, I can easily open a text window next door. The BN e-book allows the reader to cut-and-paste short passages, which is awesome. I also love the way the endnotes work. Click on the endnote to move to that note at the end of the document; click the number again to go back to that point in the text. That beats the hell out of flipping back and forth in a paper copy.

What about the Kindle? Previously I had indicated that I didn't much like the Kindle's design, whereas the Sony e-reader looked more appealing. I have since visited a Sony e-reader in a Target store, and I now think it completely sucks. What I didn't notice before is that the Sony device features ten menu buttons on the right-hand side, which screams poor design. The Target model didn't even work right, which didn't fill me with confidence. It seemed a lot more like a toy than a serious reader.

The Kindle, by contrast, is an elegant machine. The screen looks marvelous, and, while I have not yet spent hours reading from it, I have no doubt that will prove no problem. The Kindle's controls are a lot more intuitive than I thought they would be. One key control is a miniature joystick, which works fabulously. (I'm used to operating a similar control on my Canon video camera.)

The Kindle, then, is great at what it does. The problem is that it does way too much for my needs, and therefore costs way too much for my budget. The Kindle is like a Hummer, when all I'm looking for is an economical and reliable little Honda. Because I don't want to buy a Kindle, and because Amazon e-books will not yet read on my Mac, I am simply not going to buy any Amazon e-books. (Again Amazon might consider the fact that its business model is completely stupid, though at least the company is working on more readers.)

The main thing that the Kindle has that I absolutely do not want in an e-reader (for the money) is wireless technology. What I want is a cheap little USB cable through which I can load e-books from my computer library onto my reader. The ability to buy books on the road is of practically no value to me.

I didn't realize you can browse the internet on a Kindle, which is cool, but again the coolness is not nearly worth the money. Of course I loaded up my own web page. The browser was tracking the loading progress -- I kid you not -- in kilobytes, with a "k." I finally got irritated by the wait and hit the stop button, at which point (at least part of) my web page displayed, and quite nicely. But, seriously, who wants to browse the internet s-l-o-w-l-y in black and white? If I want to browse the internet on the go, I'll buy an iPhone or Touch. I'd much rather carry two devices that do what they're supposed to do than one device that sucks at most of its functions.

Speaking of suckage, I tried the Kindle's audio reader software. Painful. If I were blind, I imagine I could get used to it. But it would be a real struggle. Think of the challenge of getting past Keanu's acting to enjoy the Matrix, then multiply that by a thousand.

The Kindle has a built-in speaker and audio-processing software, so it will play mp3s and audio books. That's cool, but I'd much rather buy a less-expensive e-reader plus a $59 iShuffle. Just sell me the reader. That's all I want it to do.

As an e-reader, the Kindle works great. If I could just buy the e-reader part of the Kindle at a lower price, I'm pretty sure I'd do it. The dictionary is very cool. You just push the joystick until the cursor is in front of the word of interest, and the definition pops up at the bottom.

It is possible to take notes and record them with a Kindle document. Again push the joystick until the cursor is where you want it, then start "typing" your note. The keyboard, as I anticipated, is horrible. I mean, if you were a sentient ferret or something, it would probably be the perfect size. Maybe it's okay for the "texting" generation. But I absolutely hate it. I'd much rather scribble down a few notes on a piece of paper. So, Kindle minus wireless minus the keyboard minus the high price is a device I'd love to buy.

At least the Kindle has standardized "locations" (rather than "pages"), but these don't match the paper version. They are also listed as ranges (such as "locations 14-19"), which is strange. Will publications allow Kindle-specific citations, or will Kindle buyers need to check the page references against the paper versions? I don't know why publishers don't simply insert a page counter into the text itself matching the hard-copy page counts. This is trivially easy to do, though it would be a minor distraction while reading the text. Granted, some older books already have many different paginations. But there's no reason for new books not to feature the same page references for the hardback, softcover, and e-book versions.

The Kindle will run pdf files fine. You can even upload them via USB. But to run files like Word and HTML, a user must send the file to a Kindle-specific e-mail, then Amazon "will convert the document to Kindle format." So, in other words, to get an HTML file from my computer to my Kindle sitting right next to it, I need to send the HTML file half-way around the world to wherever Amazon keeps its computers, where Amazon will convert this already-standard-format file to the completely-non-standard Amazon format, then send the file back to my Kindle wirelessly. Did I mention that Amazon's business model for the Kindle is completely ridiculous? I mean, God forbid that I'm able to send an HTML file via a USB cable and read it with my $259 e-reader. I mean, Amazon can install software that will (sort of) read the text out loud, but it can't figure out how to let me read HTML files directly?

I only had one minor problem while using the Kindle: at one point, when I was trying to jump to a linked table-of-contents entry, the Kindle thought I was trying to highlight some vast portion of the document. But I soon figured out how to cancel out of that mode, and with a little jiggling got the joystick to do what I wanted it to do. (Much of this tinkering I was doing while reading Amazon's tutorial, which is a pretty good document.)

If my income were more upper-middle-class than lower-middle-class, I'd gladly buy the Kindle, despite the risk of betting on an e-book reader that turns out to be the equivalent of Beta or HD DVD. But, given that the Kindle does way too much and therefore costs a lot, I'll wait to buy a reader until the market has settled down a bit, the formatting issues have been resolved, and I can buy a nice low-end reader for $150 or less. At this point I will either wait to buy e-books or buy BN e-books that at least will read on my Mac.

It was a fun date, but the Kindle is not yet marriage material.

December 23 Update: I just had a thought: why doesn't Amazon allow e-book purchasers to view the books in a web browser with password protection? Then Amazon wouldn't even need to release additional readers. Any device with a browser would suffice. Also, I sincerely hope that Apple makes an economy-model reader, as I imagine the Tablet will be priced well outside my budget.

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Ralph Carr Shows Politicians Can Stand for Liberty

The following article originally was published December 21 by Grand Junction's Free Press.

Ralph Carr shows politicians can stand for liberty

by Linn and Ari Armstrong

If you still have last-minute Christmas shopping to do, we have a suggestion. Adam Schrager, the thoughtful 9News reporter, wrote a book called The Principled Politician: Governor Ralph Carr and the Fight Against Japanese American Internment. This delightful account of important Colorado history came out in paperback earlier this month.

Carr served as governor from 1939 to 1943, an era spanning parts of two of the nation's greatest challenges: the Great Depression and World War II. Carr responded to both these crises by defending liberty and individual rights.

As Carr entered office, Colorado government faced a $1.8 million deficit. Unlike many of today's politicians, whose answer to deficits is to raise taxes and "fees" or increase government spending, Carr called for fiscal responsibility.

Schrager writes that Carr "announced plans to abolish many of the state bureaus and boards established by the last administration." He also "proposed shifting the net income tax benefiting schools into the state's general fund." During a speech he "told the crowd that anyone who joined the civil service to have an easy job financed by taxpayers... could expect to be fired."

We wish we could hear Carr's common-sense wisdom reflected in today's political debates. (All quotations are from Schrager's book.) "The way to save money is to stop spending it." "Spending and lending is unsound and... thrift and the full payment of debts... is simple and common honesty."

While seconding the nomination of Wendell Willkie, who lost the presidential contest of 1940, Carr said, "If we are ever to save this country, we must first save business. Every one of you is in business -- big business and little business, farmers, stockmen, laboring men, industrialists."

Carr turned down a chance of running with Willkie (a wise move in retrospect) to continue his work in Colorado. Carr said, "What have we done to justify your returning us to office? We have taken the income of the state of Colorado. We have lived within it. We added not a dime of new taxes. We cut the levy for state purposes... and we balanced your blooming budget."

Carr opposed Roosevelt's expansive political controls: "The New Deal has usurped the powers of the state [and] undermined personal liberty."

Carr added, "It is not disloyal to oppose and to question the policy of one who has not yet proved himself omnipotent and to require that he too be limited and circumscribed by those same ideals and standards governing others. We insist that the president recognize and follow the Constitution which created him."

Carr summarized his basic political philosophy with an eloquence rare in politics: "The individual is supreme and government is established only to protect and foster his rights." He later added, "Every time the individual submits to a central government for a solution of another problem of business or life, there is a consequent surrender of individuality, of privilege, of right."

Carr argued that the term "liberal" had been stolen by the left. He said, "The true liberals are those who consistently follow the proposition that liberty means freedom to exercise individual rights unaffected by external restraint or compulsion... The underlying theory of the Constitution is found in the proposition that every man may use the talents which God has given him, may reach any goal toward which he sets his eyes, and may enjoy the fruits of his ambition, his study and his toil, provided only that he does not use his powers to injure his fellows."

The fate of the nation changed on December 7, 1941, when Japanese bombers attacked the U.S. base at Pearl Harbor. Carr rose to the challenge, setting up "an emergency meeting of the Colorado Council of Defense for the next morning," Schrager writes.

While most Coloradans responded to the crisis admirably, some turned to paranoia and racist threats. Some called Japanese Americans "vipers" and "yellow rats." Various politicians and media personalities wanted to put them into concentration camps. The Denver Post wrote, "To hell with the Japs!" Nels Smith, governor of Wyoming, said "there would be Japs hanging from every pine tree" if sent to that state.

Carr rejected racism. He said, "We have among us many of a new generation of Japanese people born in the United States -- sincere, earnest, and loyal." He offered a "hand of friendship" to immigrants. He urged protection of the Bill of Rights and the "security, freedom, and opportunity" it offers.

In a public address, Carr granted the existence of enemy "fifth columnists" and assented to federal relocation policies. Yet he also spoke for "loyal German, Italian, and Japanese citizens who must not suffer for the activities and animosities of others." He warned against "the danger of inflammatory statements and threats against these unwelcome guests" forcibly sent to Colorado.

Though we may not approve every detail of Carr's career, he has richly earned his place in history as a man who defended liberty. We thank Schrager for telling his inspiring story.

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Monday, December 21, 2009

Going Digital

What is extraordinary about my lifetime is that I will have witnessed the birth of the home computer industry and (if things go well) the complete conversion of all relevant media forms to digital formats separate from any particular physical "carrier" medium.

In recent days I have written about the still-problematic e-book industry as well as the move toward online video content. Fittingly, today I found an article by Matt Buchanan covering both these stories in the context of Apple's business innovations. Before getting to that story, though, I thought this is a good time to step back and gaze at the landscape.

The basic art forms are these: music, painting, sculpture, literature, dance, theater, film, and architecture. There are certain hybrids, like opera (musical theater) and illustrated fiction.

Art presented as a structure (sculpture, architecture) may be photographed and filmed, and only in these derivative forms digitized. (One may view a photograph of the Parthenon, but obviously viewing the photo is not at all the same experience as visiting the place.) Performance art may be recorded in audio or on film, and the recorded presentations may be digitized. Going to hear a symphony is a different experience than listening to a recording of a symphony, though the audio quality might be very similar.

Paintings obviously may be digitized, and the similarity of the digitized piece to the original, while generally fairly close, varies significantly by art work. The School of Athens is fantastic on a modern computer screen, but it simply does not compare with the real thing, whereas the Mona Lisa is nearly as impressive digitally (I write as I duck the stones).

Literature is readily digitized, for the same reasons that literature can be translated and read aloud. Literature is the most purely conceptual form of art, and its mode is language, and language is inherently separable from any particular medium (which is not to discount the qualities of a musty old book).

Film inherently converts a performance to a two-dimensional image, so the digitization process is perfectly natural. Some modern "films" may begin with hand drawings but develop primarily digital animation.

For our purposes, the upshot is that film, music, and literature are the most-easily digitized art forms, with paintings following behind. Regardless of how we categorize photography in terms of art, obviously it has joined film in making the natural jump to digital formats. (General retail outlets don't even sell film cameras any more.)

The basic modes of mass communication are text, photographs, speaking, and video (I'll say rather than film, which is now mostly outdated).

The above facts indicate that the modes of digitizing the fine arts match up pretty will with the modes of digitizing mass communication. Whether we are talking about fine arts or mass communication, in the digital world we are basically talking about text, still images, audio, and video. Any digital content basically combines those four sorts of presentation. Basically, if you can see it or hear it, where the seeing or hearing is the point of the thing, it can be digitized. (Whether the sense of touch can be effectively digitized remains to be seen, but a world where more than a few would want such a thing would be a very different world from our own.)

Music has essentially gone digital now. My first album was a record, as in a disc of plastic etched to stimulate a needle. (Genesis, baby, as in the band.) Interestingly, I've never actually looked up the term "analog" until just now: "of or pertaining to a mechanism that represents data by measurement of a continuous physical variable, as voltage or pressure." Anyway, within my lifetime music has gone from entirely analog to almost entirely digital.

Moreover, music has largely made the break from a particular, dedicated medium. While the music CD remains popular, increasingly people buy music online and save it to a hard drive or flash drive.

Video similarly has largely gone digital. Due to its increased file size it remains more tied to the DVD, though this is rapidly changing. My step-dad had one of those VHS video recorders you had to rest on your shoulder to operate. I own a digital video camera that records directly to flash memory. YouTube allows pretty much anybody to upload any video that's under ten minutes, while a variety of services display movies and "television" shows online.

Obviously photography has gone digital. While 35 millimeter film was the standard consumer-grade film in my childhood, today I can't name anybody I know who owns a film camera.

Strangely, text, while far more easily digitized than audio, photos, or video, remains largely bound to ink and pulp. They still print newspapers and books in large quantities. The stickiness in converting text to digital formats is funny given that the analog formats are created from digital source files. Word processors were among the first computer applications.

My mother used a real typewriter in college. I mean, you hit the key, and it caused a metal arm to strike the paper through an inked ribbon. No electricity! When I was in high school, I learned how to type on an electric typewriter; the metal arms were replaced by a rotating ball, but the mark was still made by a metal form striking the paper. Now I don't know anybody who uses anything other than a computer to generate polished text. (Well, I've met two people who still write by hand, a novelist and a philosopher, but they lie well outside the norm. Of course somebody then transforms their scribbles to digital text.)

So why is it that practically everyone generates text digitally but then many still convert it to ink on pulp? There are two main reasons, one involving technology and the other business organization. The technological problem is that reading text on computer screens tends to create eye strain (as I am already experiencing in the writing of this post). It's a lot easier to sit down for several hours and read an ink-on-paper book than it is to read a digital display of the same text. But the new eye-friendly e-readers seem to be on the road to solving this problem.

The second problem is that nobody has yet figured out a great way to sell e-books or profitably publish news online. I think it extremely likely that some combination of business leaders will solve all of these problems within the next few years. I think that, within the next decade or so, printed newspapers will be mostly gone and that the paper-on-ink book industry will look a lot like today's record industry.

Whether we look at video, audio, still images, or text, the trend is the same: people will no longer buy a physical good, they will buy a digital file online and store it on some sort of data drive.

Today I went to Target and spent just over $15 to purchase a four gigabyte "thumb" drive. I loaded it with videos, photos, audio files, database files, and text files, then dropped the device into my pocket. We no longer need dedicated physical objects to store these things. We buy them via an energy stream, then we store them on a universal storage device and enjoy them via some software program running on a gizmo.

I know that techies have already rolled their eyes and closed this page in annoyance, but I stand in awe of the digital revolution that has occurred in just a few years. These simple, obvious, and mundane facts all around us mark a turning point for our species.

As for Buchanan, he reports that Apple appears to be gearing up to expand its online video market and its small-sized computer market. As Philip Elmer-DeWitt indicates for Money, Apple's "Tablet" and associated deals may revolutionize the e-book industry.

Very soon digital content via the internet will be the norm, and records, tapes, CDs, DVDs, newsprint, and pulp books will become quaint (and even eccentric) throwbacks to an earlier age.

Update: I was just poking around at the Cato Institute's web page, and I noticed that the outfit is selling Tom Palmer's new book as an e-book for $14. This is available through Kindle for $9.99. However, I called Cato and was assured their digital books are straight pdfs, and to me that is well worth the extra four bucks.)

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NCR Says Antitrust Not Right Approach for Video; Kiosks May Dent Netflix

As I wrote last month, I've stopped doing business with Redbox, the DVD kiosk service, because that company initiated antitrust actions against film companies.

Last week I learned that NCR has acquired DVDPlay and plans to convert those "kiosks to its BLOCKBUSTER Express brand." It turns out that, in my region, these kiosks are placed in many Safeway stores.

On December 17, I sent the following e-mail to NCR:

Dear Mr. Dudash,

I no longer do business with Red Box because that company initiated antitrust actions against others, and I regard such action as unjust and a violation of individual rights.

Before I decide whether to do business with NCR/ DVDPlay, I'd like to know whether your company has initiated any antitrust actions or intends to do so. I will be happy to publish your response, and to make my consumer decisions accordingly.

Ari Armstrong

Today I received the following reply:

Hi Ari, we have not initiated any lawsuits against the movie studios at this time. We have said publicly that we do not believe that is the right approach, and we are instead working with the studios to find a solution that addresses their needs, our needs and -- most importantly -- the needs of our consumers.

However, as I'm sure you can understand, I cannot comment on what actions we may or may not take in the future. But, certainly, we have not filed any lawsuits to date and have said publicly that we do not agree with the approach of litigation.


Jeff Dudash
Public Relations

That is certainly good enough for me. I have already rented two videos from DVDPlay to see how the system works, and now I plan to rent from the service regularly.

The DVDPlay kiosk worked very well. The problem is that the consumer cannot view DVD availability by kiosk online, nor can the consumer reserve a rental online. Redbox allows both of these things, which makes that service quite a lot more useful. Hopefully, once the conversion to Blockbuster is complete, the service will upgrade its online capabilities. (I asked Dudash about this and will update this post if he answers.)

After I dropped Redbox, I upgraded my Netflix account from one-at-a-time DVD rentals to three-at-a-time. Now that I've found DVDPlay, I've reduced my Netflix account to a the single disc plan.

I figured that, while I was at it, I'd ask Netflix about its business plans. It seems to me that Netflix could offer the best of both worlds by renting DVDs through the mail and charging an additional per-rental fee for online new releases.

Right now Netflix rents DVDs for a monthly fee and offers online content at no additional charge. I've found some outstanding online offerings this way, such as Jim Henson's The Storyteller. But Netflix offers none of the hot new releases online.

Obviously Netflix also rents new releases by mail. The problem is that they tend to be delayed. I dropped the new Terminator film and Hangover from my Netflix list and rented them from DVDPlay. Currently Inglourious Basterds is listed on my Netflix queue as a "very long wait," as is Four Christmases. Public Enemies and Julie & Julia are listed as "long waits." My plan is to remove all these films from my Netflix queue and rent them at DVDPlay (if available).

Meanwhile, Amazon and iTunes rent new-release movies online for $3.99. So I can pay a dollar at DVDPlay, or I can pay four times as much to view the same content through my cable modem. For me, this is no contest. The kiosk is within easy walking distance, and I like to walk around, anyway. While I have rented many movies from kiosks, I have paid not one red cent for online video rentals (not counting the online content included with my Netflix membership).

Is Netflix planning to compete with the kiosks and with the online rental sites for new-release business? No.

I called up Steve Swasey, Netflix's Vice President of Corporate Communications. He graciously took my call. He said that Netflix is and intends to remain a subscription-based company. He pointed out that Netflix has been growing despite the competition.

Moreover, Swasey said that Netflix users tend to be more interested in the company's deep catalog and excellent customer service. (I readily granted that these are strong points for the company.) Swasey sensibly said that "a great release from 1974 is a great movie," whereas a new release may not be so great. With Netflix, he said, customers can find older movies "tailored to you." As examples, he noted that the films Crash and Hotel Rwanda have been Netflix favorites. (I hated the first film and appreciated the second.)

Swasey said that "new releases just aren't that important to most Netflix users," who instead enjoy the large catalog, tailored recommendations, and "extreme simplicity" of the monthly subscription.

As much as I enjoyed talking with Swasey and appreciate his perspective, I just don't buy his rationale. I think it would be in Netflix's interests to offer pay-per-view online rentals for new releases.

I would gladly pay Netflix an extra couple bucks to watch a new release online, rather than wait for weeks for the DVD or deal with a kiosk. This would be an added service, so only customers who wanted it would have to worry about it. Everyone else could maintain the "extreme simplicity" of the monthly subscription. (I don't regard online rentals as terribly complicated or confusing.)

I think it's obvious to everybody that the DVD is a dated medium. Its days are numbered. So, within a few years (I don't care to guess precisely how many), both DVD kiosks and the Netflix mail service will be aborted. Interestingly, NCR plans to enable consumers "to download movies from the kiosks to portable memory cards," but I don't see how this will ultimately compete with online rentals.

DVDs must be produced and physically distributed, whether by store, mail, or kiosk. They break. They cost money on top of the digital content. Meanwhile, as streaming costs go down, the marginal production cost of an online rental will drop closer and closer to zero.

Obviously Netflix is aware of this, as the company has already started offering online content. The problem is that Netflix wants to limit the number of any particular disc it buys, which is why new releases end up with "very long waits." Yet Netflix can't offer unlimited new releases online for $8.99 per month, which is the minimum plan for unlimited online viewing.

As I suggested to Swasey, I think the reason a lot of Netflix users aren't as interested in new releases from Netflix is simply that it's difficult to get them there, and, like me, they use some other service for new releases.

At some point Netflix is going to have to figure out how to offer new releases via online rentals, if the company wishes to continue to exist. Here's my ideal plan: I pay $8.99 per month for unlimited online viewing of older content, plus $1.99 per viewing of a hot new release. (New releases could drop into the general pool after a certain number of weeks.) Under such a scheme, I would give Netflix 100 percent of my video rental business.

The problem for Netflix is getting from here to there. The company is stuck in a "Netflix hole" in which new releases are largely inaccessible to members.

How to solve this problem? Here is my suggestion. Netflix can keep its current plan for whoever wants to keep using it. Then Netflix can create an entirely new, online-only plan, as described above (monthly fee plus a modest pay-per-view fee on new releases).

Update: Here's another obvious approach: Netflix could offer a standard online video program for, say, $9 per month plus pay-per-view on new releases, and a premium program that includes unlimited viewing of new releases for, say, $20 per month. That way, people who care nothing about new releases, or who only want to watch them occasionally, can sign up for the less-expensive account, while others can pay more for full access.

That, Mr. Swasey, is what I call "extreme simplicity" -- and a business model that would vault Netflix to the top of the competition.

Until then, I will be happy to do new-release business with NCR, which has, at least for now, sworn off unjust antitrust actions.

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Tuesday, December 15, 2009

Review Questions for Epstein's Essay on Standard Oil

As I recently noted, Liberty In the Books, which I co-moderate, reviewed Alex Epstein's essay, "Vindicating Capitalism: The Real History of the Standard Oil Company."

I strongly recommend that free-market activists join a reading group in their area -- or start a new one. See my notes for some ideas about how to do that. (Alternately, if you live out in the boondocks, you can follow the Denver group's lead on your own.)

Following are my review questions that we used to guide our discussion. Remember, the point of review questions is to inspire discussion and keep it basically attached to the assigned reading. There is no need to discuss every question on the list. Page numbers here refer to the printed edition; I also include the section headers. This reading, assigned in advance of our meeting, worked great for a two-hour discussion.

1. Describe the views of John D. Rockefeller expressed by:‎
a) Henry Demarest Lloyd, 1881 (Pages 29-30)
b) Ida Tarbell, 1904 (Page 30)
c) Howard Zinn, 1980 (Page 31)
d) Paul Krugman, 1998 (Page 31)

2. What is the view of free markets expressed by Ron Chernow and John Sherman? (Pages 31-32)

The "Pure and Perfect" Early Refining Market

3. What is the theory of "pure and perfect competition?" (Pages 32-33)

4. What is Epstein's basic economic critique of the doctrine of "pure and perfect competition?" (Page 33)

5. What were the benefits of kerosene to human life? (Page 33)

6. What caused the dramatic increase in kerosene refineries from 1859 to 1864? What were some of the problems with earlier refineries? (Pages 33-35)

7. What was the trend in refineries from 1865 to 1870? (Page 35)

The Phenomenon

8. What regional advantages contributed to Cleveland's oil refineries of 1863? (Page 36)

9. What were the characteristics of Rockefeller's first refinery? (Page 36)

10. What in Rockefeller's background contributed to his success in business? (Pages 36-37)

11. In what specific ways did Rockefeller improve efficiency, expand markets, and advance technology in his industry? (Pages 37-39)

12. What is "vertical integration," how did Rockefeller practice it, and what are the benefits? (Page 38)

13. What was the state of Rockefeller's venture in 1870? (Page 40)

The Virtuous Rebates

14. What was Ida Tarbell's view of the railroad rebates granted to Rockefeller, and what is Epstein's criticism of Tarbell? (Page 41)

15. Why did railroads grant Rockefeller rebates? (Pages 41-42)

16. Were Rockefeller's practices "anticompetitive?" (Pages 42-43)

The Missing Context of Standard's Rise to Supremacy

17. From 1870 to 1880, what challenges did oil refineries face, what was the growth of Standard Oil, and what was the shift in oil prices? (Pages 43-44)

18. Why doesn't Epstein believe that cartels can succeed? (Pages 44-45)

19. What was the strategy of the South Improvement Company, and what were the results? (Pages 45-46)

20. What was the Pittsburgh Plan, and what were the results? (Pages 45-46)

From 10 to 90 in Eight Years

21. According to Epstein, what motivated Rockefeller to buy out various competitors? (Pages 46-47)

22. Did Rockefeller's treatment of some competitors to "a good sweating" constitute "predatory pricing?" (Pages 47-48)

23. What was the state of Standard Oil in 1873 and 1874? (Pages 48-49)

24. What arguments did Rockefeller make to competitors to persuade them to sell their businesses to him? (Pages 47, 49)

25. How did the Pennsylvania Railroad attempt to compete with Standard Oil, and what was the result? (Pages 49-50)

26. How did Standard Oil operate from 1870 to 1880, and what happened to the level of oil production and to kerosene prices? (Pages 50-51)

The 1880s and the Peril of the "Monopolist"

27. Did Standard Oil operate according to standard antitrust theory in the 1880s? (Page 52)

28. What was the "peak oil" theory articulated in the mid 1880s? Was was the problem with this theory? (Sound familiar?) (Page 52)

29. Why did Rockefeller expand oil production in the 1880s, what did he find, how did he cope with "skunk oil," and what did this do for Standard Oil? (Pages 52-53)

30. What new competitors did Standard Oil face in the 1880s? (Pages 53-54)

31. What was the difference between Standard Oil and government monopolies? (Pages 54-55)

The Standard Oil Trust and the Science of Corporate Productivity

32. What was a trust, and what legal problems did it overcome? (Page 56)

33. What were Standard Oil's successes as a trust? (Pages 57-58)

34. What were Rockefeller's skills as a business manager? (Pages 59-60)

35. What changing market conditions did Standard Oil face from 1899 to 1914, and what happened to the company's output and market share? (Page 60)

36. What were the journalistic and political responses to the successes of Standard Oil? What was the motivation of this reaction? (Pages 61-62)

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Sunday, December 13, 2009

Scott McInnis on Eminent Domain

In the comments to my recent post about Dan Maes, "Mike" reminded me about a proposal to expand military lands around Piñon Canyon.

Lynn Bartels writes for the December 10 Denver Post, "Republicans opposed to the military's Piñon Canyon expansion project are disappointed that property rights weren't addressed when party leaders unveiled a new platform and rallied around gubernatorial candidate Scott McInnis."

Here is how the Post's article summarizes the issue: "The Army wants to [expand] its 235,000-acre Piñon Canyon training maneuver area by almost 100,000 acres. The Army has promised to acquire the land only from a willing seller or through a long-term lease, but landowners in the impacted areas in southeastern Colorado fear their property will be seized, adversely-affected or the military will eventually want even more land."

It is important, then, to distinguish between expansion of the military lands and the use of eminent domain. Property rights do not always protect the owner from being "adversely affected." For instance, unless you live in an HOA that controls for such things, your neighbor might paint his house an ugly color, park ugly cars in front, and otherwise do things that incidentally reduce the value of your property. So we must limit the discussion to actual violations of property rights, such as the use of eminent domain to forcibly seize property from those unwilling to voluntarily sell it.

According to State Representative Steve King, McInnis said the government "is no longer threatening eminent domain in the Piñon Canyon expansion." Apparently, then, McInnis's support of the project assumed that eminent domain would not be used.

However, the Fifth Amendment states that private property may be taken for public use for just compensation. Do McInnis's critics wish to claim that government ought never use eminent domain, even though the Constitution explicitly authorizes it? That's my position, but I think McInnis's critics need to detail their views. If Republicans are going to beat up their candidates for considering eminent domain for an obviously public use, that's a high bar, and one that should be set intentionally rather than as a pretext for partisan attacks.

Another comment by McInnis on the matter is more troubling. According to the Post, McInnis said, "Balancing the deep need that Colorado has for quality jobs with the rights of Piñon Canyon property owners requires leadership and dialogue."

I believe that property rights should be consistently protected, not "balanced" against some alleged need to forcibly seize property for somebody else to use. I would be interested to learn if McInnis's Republican critics believe that eminent domain should be abolished across the board, or if they merely want to restrict the practice to somebody else's property.

In the meantime, it would be helpful if McInnis would further clarify his views on eminent domain and property rights.

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Liberty In the Books

With Amanda Teresi I co-moderate Denver's Liberty In the Books, a monthly reading group that discusses free-market literature.

UPDATE: Please see the new home page for Liberty In the Books, which includes links to review questions.

I strongly recommend that others around the country start up their own free-market discussion groups. I believe that our nation is at a crossroads and that advocates of liberty need to step forward and articulate the case for economic freedom. One critical element of effective free-market activism is familiarity with relevant economic principles and history. Participants in a discussion group can help educate each other as well as offer support and encouragement for free-market activism. With that goal in mind, here I describe how the Denver group functions and what we're reading.

Please note that I cannot personally evaluate or endorse other reading groups that might use my recommendations or discussion notes. Thus, potential participants are strongly encouraged to independently investigate any other group claiming to use discussion notes for Liberty In the Books. Amanda owns the rights to the name, "Liberty In the Books." I own the copyright to any material I write about the group or about selected readings. Thus, whether you use the name "Liberty In the Books" is between you and Amanda. I suggest you pick a unique name for your group and perhaps say something the the effect that you follow the Liberty In the Books model, without claiming any formal ties or endorsement. Groups are free to distribute my review questions at will, so long as no claim is made that I endorse any group other than my own.

If you have an interest in starting an economic liberty reading group in your area, how should you proceed?

The first thing to do is to refine your purpose. Amanda and I decided to focus on the relationship between economic theory and history. Thus, the complete title of our group is "Liberty In the Books: Economics In Action." I do NOT want to discuss the arcane debates between the Austrian and Chicago schools. I do NOT want to discuss the finer points of Austrian praxeology versus positivism. I do NOT want to discuss libertarian anarchism versus the minimal state. (I'll discuss such things elsewhere, but not in this group.) Instead, the purpose of the group is to learn about the application of basic free-market principles to modern and historical political policies. It is a "political economy" group in the traditional sense of that term.

So far the Denver group has read the following works:
* Lin Zinser and Paul Hsieh, Moral Health Care vs. 'Universal Health Care'"
* Amity Shlaes, The Forgotten Man
* Thomas Sowell, The Housing Boom and Bust
* Henry Hazlitt, Economics In One Lesson
* Alex Epstein, "Vindicating Capitalism: The Real History of the Standard Oil Company"

Later I'll post discussion questions for works the Denver group has read. (I'll use the blog label "Liberty In the Books.")

Your group needs clear leadership. Amanda and I co-moderate the Denver group, and our decisions regarding the group are final. You might opt for a more democratic structure (though I think that may invite pointless and time-wasting debate). I choose the readings for our group in consultation with Amanda. (Obviously I'm open to suggestions from other members.) Another discussion group I'm in selects readings by informal, mutual agreement.

After you decide to start a group, you need to get members. You might want to start a very small group among friends. In that case, you can simply contact your interested friends and set up meeting times. Otherwise you can advertise for the group via existing activist networks in your area.

Another reading group I participate with, the Atlas Shrugged Reading Groups, successfully advertised for members with Facebook ads. You can also issue media releases and post your information on public calendars.

How should you handle membership? I've now participated in three Colorado discussion groups, and I've experienced no problem with troublesome members. Instead, I've really enjoyed getting to know others from the community and discussing important ideas with them. Nevertheless, I do think it's important to have membership guidelines, just in case you need to ask a disruptive participant to leave.

I endorse the Atlas guidelines: "The goal of the group is to better understand [the reading material] in a friendly and constructive way, not to engage in acrimonious debate or proselytizing."

Following are the guidelines I sent to the Liberty In the Books membership:

The purpose of Liberty in the Books: Economics in Action is to provide a fun forum for free-market advocates to discuss economic principles and history and their application to the important issues of the day, with the goal that members will be better able to publicly articulate the case for free markets.

Members should strive to regularly attend meetings and read the selections. Readings generally will run less than 100 pages per month and will cover various areas of policy as well as basic economic principles. Some readings will be available online, others through special reproduction rights acquired by the event's organizers. Occasionally members will need to purchase a book, which typically will provide readings for several meetings.

In order to keep the discussions interesting and topical, members should focus their comments on the reading material, though of course they may draw upon additional information that sheds light on the readings.

The group assumes a general support of free markets, enabling members to discuss matters of history and economics in greater detail than would be possible if members fundamentally disagreed about economic liberty. While membership is open, the moderators may, at their discretion, limit discussion that falls outside the purpose of the group.

While the group will discuss economics in history and theory, discussion should not assume any prior, specialized knowledge of history, economics, or policy, other than what is provided by the selected reading material. Discussion should remain accessible to any intelligent layperson familiar with the reading material, rather than veer into highly technical issues of interest only to a few.

While the moderators welcome feedback and advice from members, the moderators' decisions pertaining to Liberty In the Books are final. Moderators may, at their discretion, begin with a short presentation, invite outside discussion leaders, establish other parameters for discussion, ask disruptive members to leave, alter the location or time of meetings, change future reading selections, and in other ways guide the group.

Members are the guests of the club's organizers, who will strive to make Liberty In the Books consistently fun, inspiring, and informative.

Where to meet? If you are meeting with a small group of friends, where everyone knows each other well, you can meet at someone's home. However, if you plan to start a larger group with more open membership, I strongly encourage you to meet at a public location, such as a bookstore, library, or coffee shop. I've found that Borders Books is often particularly open to reading groups. The Denver group meets for two hours. Meetings of 1.5 hours also work well, and longer meetings may suit your group's needs, though you'll need to plan for a break.

To organize meetings, I suggest a Google group or a comparable method of communicating with members. (Make sure you get somebody's permission to add them to a such a group.) You need to set a reliable meeting location in advance (and check on the location close to the meeting), assign the reading material, and send out review questions and any other related notes.

How should the moderator conduct the meeting? I basically serve as the moderator for the Denver group, in collaboration with Amanda. You might want to ask for volunteers to help moderate.

The moderator has two key roles: start and end the meeting on time, and keep the discussion focussed on the reading material. The moderator must use some discretion in deciding when to cut off tangents. Obviously a major goal of the group is to apply knowledge of history and economics to modern problems, so discussion is bound to stray from the reading material at times. However, a meeting that constantly veers off track into marginal (or heated) debates or unrelated topics will tend to alienate the better members.

The moderator should strive to get everyone involved in the discussion without making anyone feel pressured to talk when the person would rather just listen.

A meeting that devolves into rancorous debate between two or three participants is a disaster.

I have found that, unless a reading group consists of friends who know each other and the reading material well, discussion questions form the basis of an effective meeting.

I write the review questions for Liberty In the Books. Diana Hsieh writes excellent review questions for the Atlas groups.

The moderator should be guided by the review questions without being bound by them. The goal is NOT to cover every single question and to spend the same amount of time per question. Rather, the moderator should use the questions to get the discussion started and keep it basically connected to the reading material. Some questions are more important than others, and some questions can be omitted from the discussion.

Moderating a good discussion group is an art. A good moderator is sort of like a good pilot; passengers usually only focus on what the moderator is doing when the flight gets bumpy. Your job is to keep the discussion going smoothly and to point out the nice views.

Participating in a local free-market discussion group can be enormously rewarding. You can deeply enrich your knowledge of economics and history. You can find motivation -- and motivate others -- to actively promote economic liberty. And you can make and maintain important friendships. If you are not already part of a reading group in your area, why not join an existing group or start one yourself?


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Friday, December 11, 2009

Tea Partiers Get Partisan

I liked the Tea Parties better when they were about issues, not partisan politics.

Yesterday I received the following e-mail:

Defend the Republic Rally

Saturday, December 12th from 1:00 to 2:00pm

Colorado State Capital Building - West Steps
Colfax & Lincoln
Denver, CO 80203

Northern Colorado Tea Party is encouraging all supporters to attend this rally. We are asking for a voice in the debate taking place regarding the 2010 elections. If we want the GOP to listen to us, we need to show them we are a political force to be reckoned with here in Colorado.

As the war between the United State of America and the Progressives in both political parties continues to wage, the Tea Party and 912 supporters have stepped up and answered the call of duty.

Let us stand together at the State Capital on Saturday, united to make one single statement:

Principle Over Party in 2010

Speakers will include:

Mike Holler - Author of The Constitution Made Easy
Lu Busse - Leadership Chair for Co 912 Project
Dan Maes - Candidate for Colorado Governor
Tea Party & 912 Activists

See the Denver Post article by Jessica Fender or the People's Press Collective review by Michael Sandoval for more background.

So the complaint is that Republican leaders have endorsed a candidate who might actually be able to win. I'm confused as to why this is some sort of grand sin. Anybody who thinks Dan Maes has any chance of winning the Republican primary and beating Bill Ritter is simply delusional.

(For the record, I'm registered unaffiliated, so I'll have no vote in the GOP primary. I have yet to decide whether any candidate in the governor's race will get my vote as the lesser of evils. I voted for Ritter last time around.)

As somebody who has attended, written about, and spoken at various Tea Party and related events, I have to wonder about this overtly partisan turn of the Northern Tea Party. I thought this was about issues, not parties. I thought it was about liberty, not personality.

I challenge those organizing the December 12 rally to articulate their ideological differences with Scott McInnis, and their ideological affinity with Dan Maes. I must frankly question the motives of those unable or unwilling to do so. Please leave a comment or respond via e-mail.

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Tuesday, December 1, 2009

Abolish the FTC: New Blogging Rules

The Federal Trade Commission (FTC) has imposed unjust new rules -- "Guides Concerning the Use of Endorsements and Testimonials in Advertising" -- that take effect today.

Eric Robinson summarizes the nature of the rules:

[The FTC's rules] suggest that bloggers or other consumers who "endorse" a product or service online may be liable for civil penalties if they make false or unsubstantiated claims about a product or fail to disclose "material connections" between themselves and an advertiser. (Although Richard Cleland, assistant director of the FTC's division of advertising practices, told Fast Company that the Commission will focus on warnings and cease-and-desist orders, rather than monetary fines, and told PRNewser that the Commission will target advertisers for violations, not bloggers. Another FTC official reiterated this.)

The new rules pose a variety of problems. The FTC has no legitimate authority to issue such rules, which defy the First Amendment and constitute censorship and the chilling of free speech. The rules are extremely broad, ranging from free review copies of books to Twitter posts. The rules are arbitrary and ambiguous, such that their precise requirements and penalties cannot be determined in advance. The rules thus open the door to political abuses. The rules are discriminatory in that they subject bloggers to different standards than print journalists.

The FTC is acting in blatant defiance of the First Amendment to the United States Constitution, and therefore the FTC should be abolished and its rules rescinded.

First I summarize the basic arguments against the FTC's rules. Then I link to other commentaries about those rules. Finally I review and analyze the rules in some detail.

FTC's Rules Overreach and Violate Rights

1. The FTC's rules constitute censorship and onerous controls.

Censorship consists not only of forcibly restricting what people may say and write, but forcing people to say and write things against their judgment. In this case, the FTC is forcing people to issue disclosures regarding communications that do not in any way violate anyone's rights.

Edward Champion points to an article by Caroline McCarthy for Cnet News indicating that the FTC rules apply to Facebook and Twitter posts as well. The FTC's Richard Cleland told McCarthy, "There are ways to abbreviate a disclosure that fit within 140 characters [Twitter's limit]. You may have to say a little bit of something else, but if you can't make the disclosure, you can't make the ad."

The FTC thus requires that any Twitter post that could be construed as an "endorsement" include a disclosure that meets the FTC's guidelines, within 140 characters. Such a policy limits the amount of information a user can post to Twitter or discourages the use of Twitter for certain purposes.

Champion notes that even an "Amazon Affiliates link" might trigger the FTC's disclosure requirements.

The FTC's rules constitute onerous controls in that they require bloggers and others to spend time complying with the FTC's rules. For example, the primary documentation of the rules runs 81 pages in length. The effort spent complying with the rules detracts from time available to write about other issues.

2. The FTC's rules are capricious and nonobjective.

The FTC's rules, by the agency's own admission, cannot be decided in advance in all cases. Instead, the FTC will "consider each use of these new media on a case-by-case basis for purposes of law enforcement" (page 8. Unless otherwise specified, page numbers refer to the FTC's documentation of the rules).

The FTC's rules depends on what "consumers are likely to believe" about a communication, a subjective guideline that cannot be determined in advance (e.g., page 4).

The rules also extend to those who supply free samples or review books. Using the example of a video game manufacturer who sends a free copy of a game to a reviewer, the FTC states, "The manufacturer should advise [the recipient] at the time it provides the gaming system that this connection should be disclosed, and it should have procedures in place to try to monitor his postings for compliance" (pages 79-80). What constitutes adequate compliance, and under what circumstances a supplier might be subject to enforcement, the FTC declines to detail.

In an interview with Edward Champion, the FTC's Richard Cleland offered only guesswork in answer to whether a free movie screening constitutes compensation: "The movie is not retainable. Obviously it's of some value. But I guess that my only answer is the extent that it is viewed as compensation as an individual who got to see a movie."

Cleland chose to "reserve judgment" on another matter. Champion writes, "In cases where a publisher is advertising one book and the blogger is reviewing another book by the same publisher, Cleland replied, 'I don't know. I would reserve judgment on that. My initial reaction to it is that it doesn't seem like a relationship.'"

Cleland further told Champion, "These are very complex situations that are going to have to looked at on a case-by-case basis to determine whether or not there is a sufficient nexus, a sufficient compensation between the seller and the blogger, and so what we have done is to provide some guidance in this area. And some examples in this area where there's an endorsement."

Furthermore, as Champion reports, whether the FTC will target bloggers with fines -- and how much the fines might be -- remain points of ambiguity.

In other words, often there no objective way to determine when and how the FTC's rules apply prior to an enforcement action by the FTC.

As Walter Olson notes, "FTC enforcers will engage in their own fact-specific, and inevitably subjective, balancing before deciding whether to press for fines or other penalties. In other words, instead of knowing whether you're legally vulnerable, you have to guess."

Moreover, Olson notes, the receipt of freebies can "after some ill-defined point" create a relationship requiring a blogger "to disclose that relationship whenever writing about the institution in question."

Ann Athouse argues that the FTC has "deliberately made a grotesquely overbroad rule, enough to sweep so many of us into technical violations, but we're supposed to feel soothed by the knowledge that government agents will decide who among us gets fined. No, no, no. Overbreath itself is a problem. And so is selective enforcement."

The FTC's rules will therefore have a chilling effect on free speech. Those who are not part of an organization with legal representation -- and those who cannot independent afford to pay lawyers -- will now face a serious risk in publishing commentary.

Moreover, book publishers and others will face increased costs associated with complying with the rules, increasing the difficulty especially of small firms to publish works and advertise via review copies.

3. The FTC's rules open the door to further political abuses.

Political operatives inside government once turned to tax audits to punish ideological opponents. More recently campaign finance complaints have chilled free speech. The FTC's rules will provide yet another opportunity for political attack dogs to harass their opponents by filing complaints with the FTC based on perceived technical violations of the rules.

Even if the FTC clears the accused party, fighting such complaints can consume considerable money, energy, and worry. The possibility for such politically-motivated abuses will further chill free speech.

The FTC's Richard Cleland told Caroline McCarthy, "As a practical matter, we don't have the resources to look at 500,000 blogs. We don't even have the resources to monitor a thousand blogs. And if somebody reports violations then we might look at individual cases..."

McCarthy notes that "angry readers may use the regulations to attempt to get back at blogs they don't like." Ron Workman predicts that "the trolls will have a great time turning these offenders in."

4. The FTC's rules undermine the equal protection of the laws.

The FTC "acknowledges that bloggers may be subject to different disclosure
requirements than reviewers in traditional media" (page 47).

The FTC's Richard Cleland explicitly acknowledged that the FTC's rules subject bloggers to different standards than newspaper book reviewers.

5. The FTC's rules violate privacy.

A blogger properly has the right to choose what information to disclose and what information to keep private.

In some cases, the FTC's rules might require bloggers to disclose information that could compromise an individual's privacy or safety. For example, following in the footsteps of America's founders, someone might choose to write anonymously about a controversial political issue, such as abortion or homosexuality. A blogger with a material connection to the writer could not write about the anonymous work without disclosing personal information about the author.

The ability to write anonymously is central to the First Amendment, as it was central to American independence and the creation of the United States Constitution.

6. The FTC's rules are unnecessary.

In clear-cut cases of a seller paying somebody to promote a product, generally those parties do have a moral obligation to potential customers to disclose the nature of the relationship. However, most things that are moral obligations ought not be forced by law.

Publications large and small generally implement policies to assure readers or viewers that their material is free from financial incentive, or that any incentive is disclosed. Bloggers have an incentive to disclose relevant material connections in order to build trust with readers, and consumers tend to promote reputable sources of information. Producers and consumers of information tend to interact voluntarily to resolve potential problems of disclosure.

Those who hide a clear bias generally suffer exposure and ridicule, as John Lott discovered after posting positive comments about his own work under an assumed name.

The government does have a legal responsibility to crack down on fraud. For instance, if someone claims to be an uncompensated reviewer but is in fact paid to write positive reviews, that would constitute dishonest fraud, properly the target of a criminal or civil suit.

However, short of fraud and overt calls for violence, what people say and write, and how they say and write it, is properly none of the government's business.

The FTC's rules rest on the fallacious doctrine that material conditions determine ideas. Granted that some people express views because of financial incentives, generally what matters most is a person's ideological conclusions. While ideology is necessary to integrate ideas, it can adhere to the facts of reality or stray from them. Often the more dangerous bias arises not from financial incentives but from ideological blinders, and obviously no federal rule can address that vastly more serious problem.

Even a direct and substantial financial connection need not indicate any financial bias. Often a paid spokesperson already supported the product in question. The much weaker and distant material connections the FTC's rules may also cover, ranging from free books to Amazon links, don't pose any serious problem of bias, and certainly not any problem serious enough to warrant threats of federal enforcement actions.

Whether a substantial financial relationship is present or not, and whether it is disclosed or not, consumers of information and products have a responsibility to critically evaluate claims. A consumer who takes a single blogger's weakly substantiated word about some product is frankly an idiot, and no federal rule can compensate for that.

The FTC's rules continue the trend of infantilizing American adults. The FTC presumes that American consumers are just too stupid to check the facts for themselves and properly evaluate claims about products. Yet such rules tend to generate a self-fulfilling prophesy: they encourage consumers to rely on government bureaucrats to do their thinking for them. Such rules promote Homer Simpson's mentality: "The whole reason we have elected officials [and their legions of bureaucrats] is so we don't have to think all the time." Thus, such rules undercut the self-responsible individualism that is the backbone of America's success.

Links to Other Commentaries About the FTC's Rules

Regulating Speech to Death
by Diana Hsieh
October 5, 2009

A double standard for online speech
by Vincent Carroll
October 14, 2009

Interview with the FTC’s Richard Cleland
by Edward Champion
October 5, 2009

FTC: Bloggers Must Disclose Payments for Reviews (NYT)
by Ron Workman
October 5, 2009

Yes, new FTC guidelines extend to Facebook fan pages
by Caroline McCarthy
October 5, 2009

Where Did You Get That Keychain?
by Walter Olson
October 16, 2009

New FTC Rules Aim to Kill the Buzz on Blogs
by Eric P. Robinson
October 8, 2009

The FTC going after bloggers and social media is like "sending a government goon into Denny's to listen to the conversations in the corner booth and demand that you disclose that your Uncle Vinnie owns the pizzeria whose product you just endorsed."
by Ann Althouse
October 6, 2009

Letter to the FTC on Guides Governing Bloggers>
by Laura Sell, Senior Publicist, Duke University Press
October 7, 2009


The document, "Ari Armtrong's Disclosures Unjustly Compelled by the FTC," has now been published. I will update it from time to time in an attempt to comply with the FTC's unjust and rights-violating rules.

As I note in that document, "I do not expect that the FTC's rules will be ambitiously enforced in the short-term. Many bad laws (and authorized rules) have no noticeable impact when they are first implemented. Often such laws and rules remain on the books for years before bureaucrats and prosecutors take advantage of them to actively violate people's rights. That does not make their existence more comforting."

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posted by Ari at 4 Comments