On Philosophy

January 30, 2007

Miscellaneous Economic Thoughts

Filed under: General Philosophy — Peter @ 12:07 am

Strictly speaking the ideas below aren’t really philosophy, they are speculative economics. However, I post them here, in a philosophy blog, because economists tend not to contemplate unusual possibilities, but instead focus their efforts on analyzing existing economic systems (probably a better use of their time). So, with no further ado here they are.

Rewarding Content Creators Without Intellectual Property

Previously I have argued that intellectual property is a confused notion, since ideas and information can’t be owned in any meaningful way (anymore than you can own air, except in the sense that we own it collectively). Which makes it hard to justify laws prohibiting people from sharing information, even if that information is somehow someone else’s “intellectual property”, unless we somehow argue that without such laws the content creators wouldn’t be appropriately rewarded, and thus wouldn’t create. One way to argue against reasoning in this manner is simply to point out that there was great art created before ideas about intellectual property existed, with artists being supported by wealthy patrons (often the art itself was in public spaces, and made no one any money). However, patronage isn’t the only possibility; allow me to detail another. A band could release several free songs to serve as representative examples of its music (say on its website). Each of the remaining songs would be unreleased but would have a partial sample (either very short or low quality) and a price. The price represents the total cost of producing that song, including appropriate compensation for the artist’s time. Of course this cost will be too large for any one person to pay (probably thousands of dollars at the very least). However, people who like what they have heard so far may choose to pay a few dollars into a pool. When the pool reaches the price of the song the band gets the money and the song is released to everyone (not just the people who put money in) for free. Since the band has already been paid no amount of sharing their work can hurt them; actually it would be beneficial, since it would make them more popular and encourage more people to contribute to paying for future songs. Obviously this model could be extended to cover other sorts of artistic creations as well (except for paintings and sculpture, which create a physical object and so have never had to worry about any of this intellectual property nonsense in the first place).

Reducing the Cost of Insurance

Insurance is a big waste of money (specifically car and house insurance). If nothing happens to your car or house then you have paid a large sum of money for nothing. Of course if something does happen then you will be rather happy to have had insurance, since you will probably get more out of it than you paid in. In essence the unlucky win from insurance and the lucky lose. This isn’t to say that insurance is necessary a bad thing, insurance is essentially a system for reducing risks. However, in allowing companies to manage insurance there is some amount of waste (in the sense that insurance companies make money off the whole setup, money that could have been saved or spent elsewhere by individuals). Instead insurance could be set up as a contract between a small-ish group of people. For example, a group of people could decide to share the risks of car ownership by agreeing to divide costs from unexpected problems (whatever normal insurance would cover) between them. This effectively reduces the risk to all the people in the contract; although it becomes more likely that one of them will have an accident they can rest assured that they will never have to pay the full cost of such an accident, the same benefit that normal insurance provides. Additionally, allowing smaller groups of people to divide risks among themselves in this way motivates better driving, since you don’t want to get in an accident that your friends have to pay for, instead of the usual situation where getting into an accident is the one time that you get to see a return on your investment of insurance. And finally I suspect that individuals are decent at finding people who are at the same risk for accidents (roughly the same quality of driver and owning roughly the same cost car) and thus can distribute the risks more efficiently than the insurance company can.

Reducing the Influence of Luck on Income

As mentioned above insurance is a good way of reducing the risks in life. However, there is a big risk that no insurance plan covers, the luck factor in determining how wealthy you will end up. People of equal abilities may work equally hard but end up earning different amounts of money, because sometimes getting the better job is matter of luck (someone knows you, or maybe your resume simply happens to rub someone the right way). And getting that one good job can be a stepping-stone to better and better jobs. Unfortunately an insurance company can’t insure income (say they guarantee that you will always make $X per year based on your current potential, and then garnish some percentage of your income over that) because this would encourage people to simply give up on working and live off of their insurance policies. But, although a standard insurance company couldn’t insure income, a kind of group compact like the kind described above might. People would get together with others of roughly equal potential and agree to equally divide their total income among them. Of course there is still the potential for one or more group members to slack off, but I assume that the people who would enter into such an agreement know each other, and thus someone who slacked off would feel badly about it, since they would be hurting their friends, and thus would be more likely to work than if they were hurting a faceless corporation. Additionally, in the framework of such an agreement the group might encourage one of its members to do something risky that might pay off extremely well, like be an entrepreneur. It might not be worth the risk to be an entrepreneur to everyone, since even if on average it pays off there is still the risk of being a failure. But, with such an agreement in place, the risk is reduced by being distributed, and if the entrepreneur becomes rich everyone in the group becomes rich (also solving the problem of extreme concentrations of wealth in single individuals, who end up having more money than they know what to do with, with the money spread between more people they all end up pleasantly well off without a needless overabundance).

Create a free website or blog at WordPress.com.