It’s an election year and jobs are on every candidate’s agenda. In both Washington and Massachusetts, new jobs bills are being debated. We hear about “green” jobs and the growing job sectors in health care, education and business services. But, what we don’t hear enough about is how to make sure we have a workforce, trained and ready to take these jobs on.

Today, 45% of jobs in Massachusetts are “middle-skilled,” requiring more than a high school diploma but less than a four-year degree. We must insure that our labor force has the skills to be successful in these jobs. Employers in our major industries often indicate that it’s difficult to find people who are well-prepared to work in their sectors even in the midst of a recession. Developing strategies to address our middle skills deficiency is critical to our state’s economic growth.

That’s why SkillWorks has made addressing the middle skills crisis a priority. SkillWorks is a ten-year $25 million investment partnership to improve workforce development in Boston and in the Commonwealth. Working with foundations, government, community organizations and employers, SkillWorks is investing in training programs, preparing people for and connecting them to post-secondary education, supporting public policy efforts to create better pathways to post-secondary training, and prioritizing its efforts in growing sectors in our state’s economy.

During the initiative’s first five years, SkillWorks’ Partnerships provided training for over 3,000 people: of which 1,100 received wage increases, over 600 found new employment in target sector jobs, and over 200 were promoted. Over 30 local employers participated in this effort, with many of them increasing their own investments in workforce development. Working with state policymakers, Skillworks has also been able to leverage new public resources through the Workforce Competitiveness Trust Fund, now a national model for sector based job training.

From SkillWorks’ experience, a major barrier to advancement for many workers is the lack of a post-secondary credential or certificate, and it’s not because people are not trying. A recently released report by the national Demos Think Tank found that almost 40% of those who enroll in occupational certificate programs fail to earn a credential of any type within six years.

We know that at least two major obstacles contribute to this problem. First, many students lack essential academic preparation for post-secondary study, and they end up wasting valuable time and money in remedial education classes that can take years to complete. If they can overcome this barrier, many adults face an additional hurdle of working to finance their education and living expenses while trying to keeping up with their studies part-time.

These part-time adult students have very few financial aid options. If they succeed the gains are substantial: those who are awarded certificates earn median annual salaries 27% greater than those who leave school with no post-secondary credential. And the salaries earned by those with community college certificates in engineering and health care are close to what bachelors degree holders in the social or natural sciences earn.

SkillWorks is partnering with Jewish Vocational Service and area health care employers, including Marina Bay Skilled Nursing and Rehabilitation Center, to tackle these challenges head on. Over the next three years, more than 200 of their employees will participate in college preparation; with extensive coaching, support and tuition assistance. More than 50 employees are currently on track to receive health care certificates and degrees, and ten already have.

As state policymakers seek to get unemployed workers back to work and provide opportunities for employers to grow their workforce, they need to focus on helping more workers attain post-secondary credentials. This work should include creating better bridges to post-secondary education; more financial aid options for part-time students; and a stronger community college system.

The benefits of one and two year credential programs are immediate and profound for both individual workers and our state’s economy. Our state’s economic growth depends on a workforce that’s trained and ready for 21st century jobs.

Written by: Loh-Sze Leung and Jerry Rubin. Loh-Sze Leung is the Director of SkillWorks. Jerry Rubin is the President and CEO of Jewish Vocational Service.

A bond is a debt investment in which an investor loans a certain amount of money, for a certain amount of time, with a certain interest rate, to a company. A government bond is a bond issued by a national government denominated in the country’s own currency. Bonds issued by national governments in foreign currencies are normally referred to as sovereign bonds. The first ever government bond was issued by the English government in 1693 to raise money to fund a war against France. It was in the form of a tontine.
Risk-Government bonds are usually referred to as risk-free bonds, because the government can raise taxes to redeem the bond at maturity.

Some counter examples do exist where a government has defaulted on its domestic currency debt, such as Russia in 1998 (the “ruble crisis”), though this is very rare. As an example, in the US, Treasury securities are denominated in US dollars. In this instance, the term “risk-free” means free of credit risk. However, other risks still exist, such as currency risk for foreign investors (for example non-US investors of US Treasury securities would have received lower returns in 2004 because the value of the US dollar declined against most other currencies). Secondly, there is inflation risk, in that the principal repaid at maturity will have less purchasing power than anticipated if the inflation outturn is higher than expected. Many governments issue inflation-indexed bonds, which should protect investors against inflation risk.

According to Economist Thorsten Polleit from Mises Blog, “Many people invest their savings in government bonds. They are obviously of the opinion that government bonds offer an attractive yield and represent fairly little risk.

But wait a moment. What do government bonds actually stand for? Who pays the interest on these bonds? And who repays them?

A government bond represents a loan to the public sector, and the government uses the funds to finance its outlays: it pays politicians, bureaucrats, favored groups, social security, military spending, infrastructure, etc.

The government takes recourse to debt financing because tax revenues typically don’t cover its outlays. But why doesn’t the government raise taxes, or reign in spending, to fill the financing gap?

People don’t like to pay taxes. At the same time, they do like to receive financial benefits from the government. Those in government, in turn, love to make people happy by giving them money — as this is the best way to secure reelection.

Of all the financing instruments available, debt financing is, economically speaking, the most attractive from the viewpoint of the government and the electorate.

First, via debt financing the government can finance its hand-outs without burdening the taxpayer. The electorate can enjoy financial benefits for which it doesn’t have to pay.

Taxpayers just have to shoulder the interest-rate costs on government debt, whereas the repayment of the debt is transferred onto future generations of taxpayers.

Second, people tend to buy government bonds voluntarily, so new debt can easily be issued and placed with savers without causing political opposition.

Third, government bonds are considered low risk: the government has the power to tax — that is, to expropriate taxpayers — so investors in government bonds have reason to be fairly confident that they will recover their investment plus interest.

And fourth, socialist-ideological economics do their best to legitimize government debt: for instance, it is typically said that credit-financed public outlays stimulate production and employment.

This, however, is a misconception. The government doesn’t create new goods by credit-financed spending. Debt financing allows the government to considerably increase its grip over scarce resources, resources that would otherwise be available for alternative investment projects.

As the foregone benefits of the unrealized investments do not typically come into sight, peoples’ indignation about wasteful credit-financed public spending remains subdued.

II. The Incentives for Servicing Government Debt

There is another important question to answer: why are current taxpayers willing to pay for government debt built up in the past, debt for which they are not to be held responsible and from which they didn’t benefit?

The answer is this: because doing so upholds the quality of government credit. For if the quality of government credit remains favorable from the viewpoint of investors, the rulers and the ruled can continue to take recourse to debt financing.

The picture changes drastically, however, if and when debt financing becomes unaffordable for the rulers and the ruled.

“Of all the financing instruments available, debt financing is, economically speaking, the most attractive from the viewpoint of the government and the electorate.”

Once issuing new debt becomes too costly — as, for instance, borrowing rates exceed a certain level, or the debt level breaches a certain threshold — the economic incentive for rulers and the ruled to service the public debt declines rapidly. It may actually evaporate altogether.

“Why keep paying for debt that has been run up by other people?” the taxpayers will ask themselves. “Why keep spending money on something from which we no longer benefit?”

And the rulers ask themselves, “Why engage in the politically unfavorable business of taxing people, as neither we nor our subjects can issue any more new debt?”

Of course, if government debt is held in great part by the electorate, the government and the ruled class have a strong incentive to keep servicing government debt, at least in principle.

However, if government debt has reached a level that dampens economic expansion and lowers tax revenues, and if other government outlays cannot be reigned in for political reasons, debt service will have to be paid for by new doses of government debt — a situation that leads, sooner or later, to a collapse of the quality of government credit.

If government debt is predominantly held by groups who do not have a direct say in setting government policies (such as, for instance, bond holders in other countries or a minority group of the domestic electorate), the incentive for rulers and the majority of the ruled to renege on public debt becomes fairly high.

Nowadays, most investors in government bonds don’t expect that the government will actually repay its debt. What they expect is that a government bond becoming due will be rolled over. That means that an investor today expects that there will be investors in the future who will willingly lend money to the government.

Applying the same reasoning, the future investors must also expect that, when their government bonds become due, there will be other investors even further out in the future who will willingly lend money to the government.

So if today’s investors lose confidence that there will be investors in the future to roll over maturing government debt — because they (rightly or wrongly) fear that neither the ruler nor the ruled have an incentive to keep servicing government debt, the trouble starts.

What happens is that investors start fleeing out of government bonds. Bond prices drop and, conversely, government funding costs rise.

It does not take much to see that investing in bonds issued by nations that have no capacity, let alone willingness, to repay their debt is a fairly hazardous business, to say the least.

III. The Incentive for Inflation

Lately, investor concern that governments won’t service their debt has been rising, according to price signals sent by financial markets. For instance, credit-default swap (CDS) spreads have been going up drastically across all major government bond markets.

Simply speaking, a CDS spread may be interpreted as the price for insuring the bond holder against default. In that sense, the higher the CDS spread is, the higher is the probability from the viewpoint of investors that the borrower might default on its debt.

The latest upward drift of CDS spreads — which remain below the levels seen in late 2008/early 2009 — has been triggered by growing fears about the credit quality of Greece: the capacity and willingness of its rulers and ruled to continue to service the public-sector debt.

This event has obviously served as a reminder to many: investors have become increasingly aware of the overstretched financial situation of many governments, a fact that had been ignored for a long time.

However, growing concern about government-bond defaults may be overblown. Investors should remind themselves that printing new money to pay for government debt is, at least from the point of view of the government, economically more attractive than defaulting on public debt.

It shouldn’t come as a surprise if it eventually turns out that the real danger is, like so often in the past, inflation rather than default. As Ludwig von Mises noted,

If a government is not in a position to negotiate loans and does not dare levy additional taxation for fear that the financial and general economic effects will be revealed too clearly too soon, so that it will lose support for its program, it always considers it necessary to undertake inflationary measures.

Jason Bradford with Oil Drum has an interesting opinion piece that was recently published, “The following is the prepared text for a talk I gave in the city hall of Eugene Oregon the evening of Feb. 17, 2010. It was organized by two Lane County commissioners and the city mayor and is part of a series on Food Security. My role was to discuss food security in the context of peak oil. This speech is similar to one I gave last year that was also posted on The Oil Drum. At the end I recommended people look up The Post Carbon Institute and affiliates for good leads on what ideas and actions are happening in response to our predicament.

My presentation has 4 parts. First, I will connect what is going on in the economy right now with natural resources and the environment. Second, I will explain why oil is an especially important resource and what is meant by peak oil. Third, I will discuss the implications of economic decline and peak oil for the food system. And fourth, I will suggest what families and society can do given our predicament.

The Economy and Mother Nature

I want you all to imagine Mother Nature, in the personified sense. Now, and I realize this may be a stretch, think of her also as a banker, perhaps a matronly Ben Bernanke. Got that image in your head? Okay…

Several generations ago our forefathers walk into “Bank of Nature” and get a loan. Mother Nature approves our loan and offers us plenty of credit. Our ancestors are now endowed with the riches of ancient forests, prolific fisheries, fertile topsoil, clean water, concentrated mineral ores, vast reserves of fossil fuels, and a splendidly stable climate. These assets, Mother Nature’s credit slip, are the source of our wealth and comfort. Every widget, gizmo, thing-a-majig, do-dad, wach-a-macall-it and Winnebago produced in our factories, sold in our stores, stuffed in our closets, piled in our landfills and spilled in our waters originated as a loan from Bank of Nature.

Why are we having economic troubles? Because loans, as we are now discovering, are not just slips of credit, they also come with debt. While we gleefully liquidated the Natural Capital loan Mother Nature approved for us, we failed to develop a business plan that could pay back the debt. This ecological debt is the underlying drag on our financial system.

What this means, practically, is that as soon as the economy tries to heat up again, which we like to call increasing DEMAND, it will be capped on the knees by the henchmen Mother Nature hired. She will not extend us any more credit since we have done a poor job with the first loan. If you are unclear about what I mean here, I’ll explain this a bit more when I talk specifically about oil.

Oil is Special

Okay, now I want to highlight the special role of oil in our economy.

Over the recent decades, we have built what is called a “globalized economy” where materials, labor and services are readily exchanged across the globe. This feat has only been possible due to cheap oil. The “cheapness” is key. Transportation costs are assumed to be only a small part of doing business.

Some economists have calculated what is called the Goldilocks Zone for oil prices. Below $70 per barrel and it makes no sense for oil companies to explore and develop new supplies, while prices above $80 per barrel lead to a curtailing of demand, basically cutting off prospects for U.S. economic growth. And as mature oil fields deplete, the price to explore and develop new oil wells goes higher than $70 per barrel, essentially locking the U.S. into economic stagnation.

Step back for a moment and think about how potent and special oil is. Oil is highly energy dense and easily portable. A gallon of oil contains enough energy to do the work of hundreds of people simultaneously or a single person for hundreds of hours. You can drive a 4000 lb car at great velocity for tens of miles on a gallon of gasoline. Try pushing a car that distance (but before doing so, ask your doctor if that’s okay).

So when you hear the term peak oil, what does that mean? Peak oil is simply the point in time when the global supply of oil stops growing. Peak oil is not a theory, but an historic fact for 2/3 of oil producing countries, including the United States, which peaked in 1970.

What we experience is less supply leading to a spike in prices. High oil prices then choke off economic growth because our globalized economy is structurally reliant on cheap oil. And without economic growth loans are not paid back sufficiently and a financial crisis ensues.

This is essentially what happened between 2005 and 2008. We had a credit bubble because of lax lending policies PLUS a flattening of oil production at the same time.

Ethan Genauer had this to say about the topic, “We’re only truly secure when we can look out our kitchen window and see our food growing and our friends working nearby,” says Bill Mollison, a founder of the eco-gardening revolution called permaculture.

In recent decades, as community leaders and activists have come to realize the inequality, dependence on non-renewable resources, and toxicity to the environment inherent in industrial agribusiness, many have reached the same conclusion, and a burgeoning movement for community food security has emerged.

The Community Food Security Coalition, a North American organization with over 325 member groups, defines community food security as “a condition in which all community residents obtain a safe, culturally acceptable, nutritionally adequate diet through a sustainable food system that maximizes community self-reliance and social justice.”

While some nightmarish post-peak oil scenarios foresee dog-eat-dog competition over scarce food resources where only the strongest survive, community food security envisions local cooperation, self-empowerment, and advance planning as the ideal ways to ensure healthy, consistent nourishment for everyone.”

Connecting to Food Security

Okay, so what does this have to do with food security?

Globalization and cheap energy led to the development of centralized processing and distribution channels, with what is termed “just in time delivery systems.” The typical grocery store, for example, only has a 3 day supply of food on the shelves, and relies on daily trucking from distance warehouses to restock basic supplies. An oil supply shock would disrupt getting food to stores.

Because of cheap and reliable transportation, it has been possible for entire agricultural regions to become highly specialized in production for export. So the Willamette Valley evolved into a grass seed capital, which replaced a diversified farm economy that contributed significantly to local consumption. Since we no longer have the local farms feeding us, we depend on global trade for basic sustenance.

Farming methods themselves rely on cheap energy, such as tractor fuel and imported fertilizers. Beyond the farm energy is used extensively in processing, distribution, storage and cooking. All told, about 7 calories of fossil fuel go into each calorie of food we eat.
Modern farming is highly connected to the financial system. A depressed economy makes credit scare. Many farms that are in debt and require bank credit to operate will likely go out of business. And some financing is going to be needed to help farms restructure for the transition towards new crops, new methods, and new markets.
What to Do

This brings me to the question of “What to do?”

I’ll first address this towards individual persons and families. As energy flows to society decline, our social systems will become less complex structurally, but our daily lives more complex. What I mean by this is that we will become less of “specialized cogs in a big machine” and instead have to take on more diverse, practical, and flexible roles.

The kinds of work we do will shift too. Consider whether you specialize in a “nice to have job” or a “need to have job”. Jobs are going to be more and more about securing basic needs, such as food, water, shelter, health, and security. Fewer paid jobs will be available. This will require people to rely more on the informal economy, which means getting paid through reciprocal exchange relationships. Start by getting to know your neighbors, joining social networks, and developing a few basic skills, such as gardening, bike repair, and inexpensive health care.

As our formal economy declines more work will be done in the informal economy, as is true now in so-called developing countries. Graph from Post Peak Living based on World Bank data.
This all may sound extreme, but it is already the reality for a growing subpopulation of tens of millions of Americans, and most of the 6.7 billion humans on the planet.

Now I’ll talk about what I’d like to see society do. Instead of thinking about policies and programs, I will talk about values and paradigms.

Primarily we need to recognize that the environment is our primary form of wealth. Bank of Nature, not Goldman Sachs or the Federal Reserve, is our master. It is far more important for us to pay back our ecological debts since these are non-negotiable, whereas financial ones are among people and can be forgiven. If you manage public funds, always ask whether allocating money is going to rebuild natural capital or further its liquidation.

I’d like to see community leaders ask people to consider themselves as contributors rather than consumers. The whole consumer identity should become passé. We will thrive by creating an ecological identity, which is a deep appreciation for our relatedness and absolute interdependence with other people, other forms of life on this planet, and the fundamental forces of sunshine and geology.

What I have said may provoke anxiety, and is certainly an immense undertaking, but ultimately we have no choice so let’s not whine and delay. Let’s take it on as a great adventure, a thrilling challenge. Our success or failure is going to hinge on our attitude. We need to take control of the circumstances and become active participants in transition. I can assure you that doing so is tremendously energizing, healthy, and rewarding in so many ways.”

According to The Concord Group Real Estate Advisers, “Metro Boston’s housing market was affected by the real estate bubble earlier than and not as severely as other metro areas around the country. Economic factors and market trends suggest that Metro Boston will be among the first areas to recover in terms of both increased home sales volume and home price appreciation.”

One positive attribute according to Concord is that, “Metro Boston’s housing market was not as overbuilt as other areas of the country during the housing boom. A resale-dominated market, new home sales have accounted for roughly 5% of total sales since 1990 (vs. 17% nationwide). On a percentage basis, Metro Boston’s decline in sales volume from market peak has been similar to that of the U.S. as a whole. However, peak-to-current home price decline has been significantly less severe in Metro Boston than in other regions of the country.”

The National Association of Realtors reported, “The extension and expansion of the home buyer tax credit can be counted on to help home sales throughout the first half of this year, but how will markets fare after the credit expires on April 30 (with deals having until June 30 to close)?

The health of housing for the second half of the year is dependent on jobs, and on this point the picture is mixed. Although we expect GDP growth of about 3 percent this year, job growth will lag and we could see unemployment worsen to about 10.5 percent in the second quarter before it improves.

Employment has always lagged economic growth, and for commonsense reasons. Among other factors, companies tend to hold off on hiring even as business rises until they see growth is sustainable.

However, several factors give reason to believe that the job market is moving in the right direction:

• Temporary employment is up. We’ve seen several months of increasing demand for temporary workers, signaling future permanent gains.

• 2010 is a census year. This once-a-decade event is a big job generator in its own right. The government can be expected to hire a million people to help it count U.S. households. These temp jobs will serve as a bridge while the economy strengthens and companies ramp up hiring.

•Some key sectors are already adding jobs. The professional business service sector—which encompasses accounting, management consulting, and law—got hammered in the recession, but it added 50,000 jobs in December. That’s positive news for commercial markets. Meanwhile, jobs in health care service and education remain strong.

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Although many pieces must fit together for real estate to gain after the tax credit expires, we can say the most important underpinning of economic health—jobs—is showing encouraging signs.”

What’s probably even more significant with regards to the job market and census employment is the Patrick-Murray Administration’s Massachusetts Recovery Plan. Governor Deval Patrick and members of the congressional delegation released $185 million in federal recovery funds for water infrastructure improvement projects. The American Recovery and Reinvestment Act (ARRA) grants and State Revolving Fund (SRF) financing will support statewide construction projects worth nearly $800 million, maintaining and creating thousands of jobs across Massachusetts.”

Still, will the expected increase in employment opportunities be enough for distressed home owners facing immediate foreclosure?

Copyright infringement (or copyright violation) is the unauthorized or prohibited use of works covered by copyright law, in a way that violates one of the copyright owner’s exclusive rights, such as the right to reproduce or perform the copyrighted work, or to make derivative works.

According to legal theorist Stephan Kinsella, “A recent decision of the Court of Appeals for the Federal Circuit holds “that a U.S. stamp which depicts a view of a public Korean War memorial violates the copyright of the sculptor who designed it.” The case involved the sculptures made by Gaylord, a photograph of them made by John Alli (a “derivative work”), and a stamp made using Alli’s photograph. Alli and the USPS did not get Gaylord’s permission. Gaylord sued for copyright infringement.

The lower court had made three determinations:

1. “Mr. Gaylord was the sole author of the soldier sculptures” (the government was not a joint author);

2. “his sculptures were not exempt from copyright protection under the Architectural Works Copyright Protection Act (AWCPA)”, and

3. “the stamp made fair use of Mr. Gaylord’s work.”

Thus, because all 3 points were decided in the USPS’s favor, it won in the lower court.

On appeal, the CAFC upheld the lower court’s rulings on points 1 and 2, and reversed on 3: they said the stamp was not a fair use. Now I can’t say I am outraged at an agency of the federal government being hampered by federal copyright law. And I am not especially interested in whether the CAFC and lower court were right regarding the first two points (though Judge Pauline Newman, in dissent, was none too happy about it).

And while I think the CAFC’s holding on fair use seems defensible based on the language of the fair use statute, it’s instructive to read the court’s reasoning on the “fair use” claim, to get an idea of how obviously artificial and unlibertarian copyright law is.

To decide whether an unauthorized use of a copyrighted work is permissible as a “fair use,” the court has to consider four “factors”:

The purpose and character of the use, including whether such use is of commercial nature or is for nonprofit educational purposes

The nature of the copyrighted work

The amount and substantiality of the portion used in relation to the copyrighted work as a whole

The effect of the use upon the potential market for, or value of, the copyrighted work.

Now, it is quite obvious that this is purely artificial law, motivated by unprincipled, utilitarian considerations, and that these factors are completely unobjective, vague, and have nothing to do with justice or rights. Consider how the CAFC “applied” these factors (and ended up with a result opposite to the lower court). First, the court informs us, “Fair use is a mixed question of law and fact.” and “Because ‘the doctrine is an equitable rule of reason, no generally applicable definition is possible, and each case raising the question must be decided on its own facts.’” Ah.

Well that sounds like objective law to me. So, the court has to review the 4 “factors,” and “Each factor is ‘to be explored, and the results weighed together, in light of the purposes of copyright.’” Weighed together? Interpersonal utility value comparison FAIL. The court then tries to apply each of the 4 factors to the stamp to determine whether it was fair use.

The court notes that the first factor can turn on whether the derivative work is “transformative”: “whether the new work merely ‘supersede[s] the objects’ of the original creation or instead adds something new, with a further purpose or different character, altering the first with new expression, meaning, or message; it asks, in other words, whether and to what extent the new work is ‘transformative.’” More objective law with precise boundaries! The lower court held that the stamp was transformative:

The court determined that “while both the Stamp and ‘The Column’ are intended to honor veterans of the Korean War, the Stamp is transformative, providing a different expressive character than ‘The Column.’” … It explained that Mr. Alli transformed the three-dimensional sculpture with his photograph by “creating a surrealistic environment with snow and subdued lighting where the viewer is left unsure whether he is viewing a photograph of statues or actual human beings.” …

The court determined that the Postal Service further transformed The Column by “making it even grayer, creating a nearly monochromatic image. This adjustment enhanced the surrealistic expression ultimately seen in the Stamp by making it colder.” … The Court of Federal Claims concluded that the stamp was “a transformative work, having a new and different character and expression than Mr. Gaylord’s ‘The Column.’”

But no, the CAFC disagrees:

As a preliminary matter, we note that the inquiry must focus on the purpose and character of the stamp, rather than that of Mr. Alli’s photograph. The stamp does not reflect any “further purpose” than The Column. … As the Court of Federal Claims found, both the stamp and The Column share a common purpose: to honor veterans of the Korean War. … We conclude that the stamp does not transform the character of The Column. Although the stamp altered the appearance of The Column by adding snow and muting the color, these alterations do not impart a different character to the work.

To the extent that the stamp has a surreal character, The Column and its soldiers themselves contribute to that character. Indeed, the Penn State Team suggested that the Memorial have a “dream-like presence of ghostly figures.” Capturing The Column on a cold morning after a snowstorm–rather than on a warm sunny day–does not transform its character, meaning, or message. Nature’s decision to snow cannot deprive Mr. Gaylord of an otherwise valid right to exclude.

Gotta love that last touch: “Nature’s decision to snow cannot deprive Mr. Gaylord of an otherwise valid right to exclude.” O, the majesty of the copyright law! The court the applies the other three factors, holding that two of them “weigh against” fair use, while the last one, “market impact,” favors a fair use finding. So, I guess if you have 3 out of four, the 3 “weigh” more than the fourth!

Weighing the factors, we conclude that the government’s use of The Column in the stamp was not a fair use. Even though the stamp did not harm the market for derivative works, allowing the government to commercially exploit a creative and expressive work will not advance the purposes of copyright in this case.

According to Wikipedia, “Lent, in Christian tradition, is the period of the liturgical year leading up to Easter. The traditional purpose of Lent is the preparation of the believer — through prayer, penitence, almsgiving and self-denial — for the annual commemoration during Holy Week of the Death and Resurrection of Jesus, which recalls the events linked to the Passion of Christ and culminates in Easter, the celebration of the Resurrection of Jesus Christ.”

Since Wikipedia isn’t always 100% accurate Father Tim Schenck, a local Greater Boston area religious leader, gives this explanation of Lent, “One reality about the Church Year is that Lent usually overlaps with March. Now March is one of my least favorite months of the year. It has less to do with the weather (though admittedly that can be a drag) and everything to do with being in-between football and baseball seasons. I just can’t get into the NBA, hockey does nothing for me, and even though I can read about Spring Training — it’s hard for a priest to get away during Lent and take off for Florida’s Grapefruit League.

What we’re left with is March Madness. For those of you born either on Mars or in Europe, March Madness is the college basketball tournament that culminates in the crowning of the National Champion. With four brackets, 64 seeded teams, and a single elimination format, it’s an exciting couple of weeks that helps bridge the gap to Opening Day.

The fact that the word “Lent” derives from the Germanic root for Spring and was also the Anglo-Saxon name for March — lenct – means there’s no reason that we can’t engage in a parallel “Lent Madness.” Here’s how it will work. There will be 32 saints signed up for the tournament. Each day I’ll print some information about two of them and then we’ll take a vote. We’ll continue Lent Madness until we have crowned a saintly champion. Hopefully we’ll all learn a bit more about a few saints in the process. If your favorite saint isn’t included, fear not. If this works out well we can make this an annual event. If it’s a disaster, we can forget it ever happened.

This year, with only 32 to choose from, we’ll have an assortment of saints ranging from the Biblical to the ecclesiastical. You can look for a wide cross section of saints you’d probably never, ever lump together. What they all have in common, of course, is a unique and single-minded approach to serving the risen Christ. And the will to win. Finally we’ll be able to answer such critical questions as: Cuthbert vs. Bede — cut throat or strung up? And Mary vs. Martha — the ultimate cat fight?

So prepare yourselves for a saintly smackdown. I’m still working out the details but the bracket will soon be released. Each “competition” will include a poll where voting will be open for 24 hours before a winner is declared. During the first round, two saints will go head-to-head each day. Subsequent rounds will be one day/one vote until we crown the saintly champion of Lent Madness 2010. Not sure what the prize will be — gold halos seem redundant.

Sure, it’s slightly irreverent. But that’s what Lent Madness is all about.”

Jeff Tucker, global economist, just reported a very interesting case of real life economics. He uses the illustration of a laundry mat to aid in his discourse. “The professional laundry I use just informed me that their shirt-folding machine has broken, so they now must fold my shirts by hand. This of course means “an up-charge” – or so they say. How much? $0.35 per shirt.

So I have to pay a higher price as a consumer because the laundry can’t maintain its equipment? So hear this manager talk, you would think that this was somehow built into the structure of the universe, a mandate from the Almighty that I must cough up. It’s no one’s fault but I have to pay the price.

Of course this is what the laundry wants me to believe, that the price for service is nothing other than a bundling up of their costs of doing business, and, therefore, if their costs rise, it is only just and right that I should pay more.

In reality, the only institution that can really so easily pass its higher costs onto the consumer is the government itself. And that’s because they have all the guns and the law on their side.

For the rest of us, we have a choice. We can pay or go elsewhere. The price for laundry is not determined by the costs of doing business; rather, as the Austrians have taught, the costs any business is willing to bear over time is determined by the price that that the firm believes it can charge on the market.

Specific to this case, the laundry management believes that it can increase it prices – and their breaking of the folding machine is actually an irrelevant detail. If I had been willing to pay $2.35 per shirt all along, they should have already been charging me price.

Perhaps it is true that the management really believes that it is passing on its costs. Or perhaps the broken machine is the excuse they had been waiting for to test their theory that they can charge more.

It is certainly a speculation. Obviously at some point, it is worth it for me to do my laundry and fold my own shirts. It all depends on how I value my time.

It so happens, though, that one block away there is another laundry service without a broken folding machine. I don’t know what they charge but what the price increase has actually done is inspire me to absorb the search costs of looking at other services in the area.

If I stay with the current provider, it is not because I’m willing to take a hit because their machine broke. It is because I still value a clean and folded shirt more than the $2.35 I have to pay to obtain that. It is really no more complicated than that – from the point of view of the consumer.

As I was leaving the laundry, I noticed that their house computer was booting up. It said Windows 98. I’m thinking that this place could end up cutting its costs over time with an overall upgrade.

In any case, the beauty of the market is that with or without an upgrade, I’m free to decline to take the hit for their management problems. Life would be very different if government would give us the same option of shopping for other services or perhaps even governing ourselves. “

The Grateful Dead are kind of like the telephone. Simply put, the more product that is spread the greater influence of that product. With all the attention that digital copyrighted media is getting lately one is left to wonder why? Why can’t we all be like Jerry? Original content producers can take solace in the fact that if their product is spread wide enough they will eventually command a significant part of the industry.

Douglas French summed up the whole issue on Ludwig von Mises’ blog, “The Grateful Dead was famous for letting their fans tape their live shows. I remember being on a flight to Vegas from Seattle with a planeload of Deadheads and the guy next to me had a suitcase full of live concert tapes that he had recorded with each tape meticulously labeled with the concert date and location.

The Dead recognized that allowing fans to record for free widened their audience and the band became one of the most profitable groups in history. The band’s lyricist, John Perry Barlow, went on to become an Internet guru.

Barlow wrote in Wired in 1994 that in the information economy, “the best way to raise demand for your product is to give it away.”

He explained to Joshua Green of the Atlantic: “What people today are beginning to realize is what became obvious to us back then–the important correlation is the one between familiarity and value, not scarcity and value. Adam Smith taught that the scarcer you make something, the more valuable it becomes. In the physical world, that works beautifully.

But we couldn’t regulate [taping at] our shows, and you can’t online. The Internet doesn’t behave that way. But here’s the thing: if I give my song away to 20 people, and they give it to 20 people, pretty soon everybody knows me, and my value as a creator is dramatically enhanced. That was the value proposition with the Dead.”

Libertarianism is a political theory that advocates the maximization of individual liberty in thought and action and the minimization or even abolition of the state.[4][5] Libertarians embrace viewpoints across a political spectrum, ranging from pro-property to anti-property (sometimes phrased as “right” versus “left”) and from minimal state (or minarchist) to openly anarchist. (Wiki)

The notion of advancing libertarian principles through litigation – particularly federal civil rights litigation – has a design flaw that’s rarely acknowledged: Lawyers are agents of the state. That applies equally to lawyers who happen to be libertarians. Unlike other regulated professions, attorneys are “officers of the court” in name and fact. Ultimately, their professional self-interest lies in expanding the size and scope of the state’s court system, not in protecting individual rights.

Last year, I criticized Cato Institute chairman Robert Levy, an attorney, for joining a motion seeking $3.5 million in attorney fees related to the Supreme Court’s five-to-four decision in Heller v. District of Columbia, a ruling that affirmed the state’s authority to restrict the right of individual self-defense while preserving only a limited Second Amendment privilege to possess firearms.

Levy and his co-counsel claimed they were entitled not just to regular fees but certain “enhancements” based on their level of skill, success in winning a rhetorical victory over the meaning of the Second Amendment, and the risks to their public reputations – even among fellow libertarians – for bringing an unpopular case. This petition for attorney fees remains stalled before a District of Columbia judge.

The delay arises from the Supreme Court’s decision to hear a case involving a similar request for attorney fees. The Heller lawyers can’t collect until the Gang of Nine decides Perdue v. Kenny A. Oral arguments were heard in October, and a ruling can come at any time.

In Perdue, a legal advocacy group, Children’s Rights, Inc., sued the State of Georgia (Sonny Perdue is the governor) over abuses in the state’s foster care system; the class action complaint alleged federal constitutional and civil rights statute violations. Following mediation, the federal court overseeing the case entered a consent decree favoring the CRI plaintiffs. Federal statute permits the plaintiff’s attorneys to recover “reasonable” fees.

The district court reduced the billable time to just over $6 million but “enhanced” that amount 75%, for a total award of over $10.5 million. The court justified the $4.5 million enhancement by citing the “far superior” quality of counsel’s legal services, and the “truly exceptional” relief obtained for their clients in the consent decree. On appeal, the Eleventh Circuit Court of Appeals in Atlanta affirmed the decision and award; one of the judges, however, noted that the $4.5 million “enhancement” appeared inconsistent with Supreme Court precedent, although more recent Eleventh Circuit precedent supported it.

The question now before the Supreme Court is whether
a reasonable attorney’s fee award under a federal fee-shifting statute ever be enhanced based solely on quality of performance and results obtained when these factors already are included in the lodestar calculation?

The “lodestar calculation” simply refers to hours-times-rate. The key word is “reasonable,” since the federal statute (42 U.S.C. § 1988) that authorizes fee awards states:
In any action or proceeding to enforce a provision of sections 1981, 1981a, 1982, 1983, 1985, and 1986 of this title, title IX of Public Law 92-318 [20 U.S.C. 1681 et seq.], the Religious Freedom Restoration Act of 1993 [42 U.S.C. 2000bb et seq.], the Religious Land Use and Institutionalized Persons Act of 2000 [42 U.S.C. 2000cc et seq.], title VI of the Civil Rights Act of 1964 [42 U.S.C. 2000d et seq.], or section 13981 of this title, the court, in its discretion, may allow the prevailing party, other than the United States, a reasonable attorney’s fee as part of the costs… (Italics added)

So are fee enhancements ever “reasonable”? At first impression, the answer is “no,” because in a normal attorney-client relationship, the attorney is not permitted to arbitrarily multiply a final fee based on the quality or outcome of the work. A client agrees to pay a certain hourly rate and that’s that. Some lawyers, of course, work on contingency, but even there, it’s a previously agreed-upon percentage of the final award.

But nothing is ever that simple, especially when you’re dealing with attorneys and their fees. A number of lawyer-based groups filed “friend of the court” briefs in support of the lower courts’ decisions in Perdue. One such brief came from a coalition of seven libertarian-leaning legal groups*, including the Institute for Justice and the Cato Institute. (The Liberty Legal Institute is listed as “counsel of record,” so for simplicity’s sake, I’ll refer to this filing as the “Liberty Brief.”)

The Liberty Brief maintains that fee enhancements are essential “to enforce civil rights guaranteed by the Constitution and by statute,” because it creates a “free market” to attract skilled attorneys:

As the representatives of the American taxpayers, Congress could authorize a massive expansion of the Department of Justice to cover all civil rights cases. It could, alternatively, privatize the system and allow free market principles to encourage private attorneys to undertake the massive effort of private attorneys general, holding government power accountable to the citizen-taxpayers…

…Congress chose to privatize the system, provide market incentives to private attorneys to enforce civil rights, and subject government to the proverbial “invisible hand” of local taxpayers to hold elected representatives responsible for the waste of taxpayer dollars lost in defense of legitimate civil rights violations. See Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations 456 (Roy Hutcheson Campbell et al. eds., Liberty Fund Glasgow 1981) (1776). In short, Congress, by enacting Section 1988, harnessed free market principles to incentivize lawful government behavior, and justifiably so.
According to the Liberty Brief, it’s not enough to simply pay attorneys their regular hours-times-rate:

[A]ttorney fees are not merely about compensating attorneys who undertake the representation of those oppressed and damaged by government, often at significant risk to their regular practice. Just as important, and possibly more so, they provide the incentive for governments, especially with the outcry of local taxpayers upon the media announcement of an attorney fee judgment, to reform their unlawful conduct and refrain from civil rights violations in the future.

Now, the statute only states attorney fees must be “reasonable”; there’s no language about compensating attorneys for “risk to their regular practice” or giving taxpayers “incentive” to rise up against local governments. But the Liberty Brief assures us that “the American taxpayers, through their elected representatives, clearly endorsed attorney fee enhancements when enacting Section 1988.” And to prove it, the brief cites the statement of a single senator – Ted Kennedy:

Even with the enactment of this bill, the lawyer who undertakes to represent a client will face more uncertainty of payment than one involved in a usual contingency fee case. His fee is contingent not only upon his success, but also upon the discretion of the judge before whom he appears.

Even if he wins his case, and the judge decides he has won a fee as well, his rate of compensation is fixed not by a grateful client, but by a disinterested judge.
Nothing in Kennedy’s statement supports fee “enhancements”; furthermore, it contradicts the Liberty Brief’s claim that the “invisible hand” of market forces will set attorney fees. Judges set the fees by fiat, not attorneys and clients entering into voluntary agreements.

Beyond Kennedy’s statement, the Liberty Brief relies heavily on the “legislative history” of Section 1988 contained in the House and Senate committee reports on the original legislation, enacted in 1976. The Senate report is silent on how to define “reasonable.” The House report cited a 1974 case from the Fifth Circuit where the court listed twelve guidelines in deciding attorney fees, including the “ability” of the attorneys and the “undesirability” of the case.

Of course, the Fifth Circuit didn’t fabricate its “guidelines” arbitrarily or capriciously: “These guidelines are consistent with those recommended by the American Bar Association’s Code of Professional Responsibility…” So the court simply adopted the recommendation of the professional bar on how its own members should be paid. Then the House and Senate judiciary committees – bodies generally composed entirely of attorneys – incorporated this self-serving analysis into their own legislation, which was heavily influenced by other professional attorney groups. This is what the Liberty Brief considers “the representatives of the American taxpayers.”

Now let’s pause here and consider a purely constitutional issue. The phrase “private attorney general” frequently describes the role of plaintiff’s counsel in these type of cases. Indeed, the Alliance Defense Fund, one of the seven groups that signed the Liberty Brief, said that its attorneys “function as private attorneys general, representing clients to vindicate their constitutional rights.”

But “private attorney general” is a contradiction. Attorneys are be officers of the court – the judicial branch – but the attorney general is an officer of the executive branch. The Constitution states the president must appoint and commission all “officers of the United States.” Congress cannot simply deputize every attorney in the country as a “private attorney general.”

Among other problems, the compensation for a “private attorney general” isn’t fixed by Congress or the president but by the whim of a federal judge. All Justice Department employees are paid as part of the federal bureaucracy. It’s an awful, parasitic system, but at least the compensation of the attorney general and his deputies are subject to presidential and congressional oversight. Not so with these so-called free-market prosecutors.

Now, the counterargument is that even the government uses private lawyers when defending against civil rights lawsuits, and what’s good for the goose is good for the gander. The Liberty Brief makes this exact point:

There are…thousands of professional civil rights defense attorneys whose firms make millions of dollars defending government entities, and many, if not most, government entities are represented by them. For these attorneys, their entire firm or practice group within the firm is dedicated to defending civil rights cases for government. The more protracted the litigation and the greater the girth of the docket, the greater their economic success. … [T]his has led to a substantial increase in the size of the dockets and records in civil rights cases.

The Liberty Brief argues the remedy is to allow plaintiff’s attorneys the possibility of enhanced fees to discourage defense attorneys from protracting litigation. But there’s an even better remedy: Limit the fees that all attorneys can collect in these cases. This sounds counterintuitive to free-market supporters, but let’s remember, attorneys are agents of the state. Restricting even a “private” attorney’s compensation is no different then fixing the salary of any other government bureaucrat.

Expanding the arms race, as the Liberty Brief recommends, will only lead to more litigation. That’s exactly what the Liberty Brief’s signatories want. They claim their objective is to reduce the cost of litigation by encouraging governments to settle cases quicker; the prospect of enhanced plaintiff’s fees will somehow spur angry taxpayers to revolt and demand accountability:

Most Georgia taxpayers are probably unaware of the facts of this case or the conditions these children were forced to endure. They will, however, be made very aware of the size of the attorney fee award. They will demand answers. They will demand fiscal accountability and that the government behave responsibly. Georgia, in the future, will be somewhat leery of paying $2.4M to outside counsel plus an enhanced attorney fee judgment to defend known civil rights violations merely to avoid paying a fraction of that amount to reform and settle with the victims early on.

Georgia, and other government entities, will begin to reconsider the…strategy of government delay and obfuscation and will engage instead in some cost-benefit analysis reminiscent of the private sector. In short, in any future civil rights violations for which Georgia realizes it is responsible and must remedy, it will work to resolve the dispute as early as possible in the litigation to avoid the needless ballooning and possible enhancement of the attorney fee award. This possibility of enhancement will merely serve to realign the incentives for government to approach civil rights violations with the same desire for early resolution as the victims themselves.

This is the second prong of the “market incentives” argument at the Liberty Brief’s core. First we need the prospect of enhanced fees to attract competent plaintiff’s counsel; then we need them to discourage the government from spending money to defend its policies.

This argument is flawed on every level:

1.Since government officials are generally immune from any personal liability for their conduct, there’s no incentive for them not to engage in misconduct. Any costs are born by a third party, the nameless, faceless taxpayers.

2.Governments, at every level, waste taxpayer money every day on projects of dubious value. There’s no reason to believe taxpayers, en masse, will focus on an excessive attorney fee award in a single case and move to hold any particular official accountable. I think the Liberty Brief’s authors know this.

3.The Liberty Brief assumes that taxpayers won’t side with the government on the merits a particular case. Nobody supports abusing foster children, of course, but when a “civil rights” case involves constitutional interpretation, there are always multiple viewpoints. The Liberty Brief’s authors arrogantly assume everyone shares their specific interpretation of a two-century-old document.

4.Settlements – the Liberty Brief’s preferred outcome in all cases – often include high attorney fee awards. And settlements are often done behind closed doors with little, if any, public disclosure or oversight.

5.As the Perdue case itself demonstrates, the possibility of fee “enhancements” means a high probability of ancillary litigation to settle the question of how much to pay attorneys – even when the underlying litigation is settled.

6.The prospect of “enhanced” fees – higher prices – will attract more lawyers to file lawsuits irrespective of their merits, imposing additional costs on taxpayers.

7.Not to reiterate what should be an obvious point, but governments rarely perform true “cost-benefit” analysis, because their resources are acquired through violence or the threat of violence. There are no customers to serve, and government cannot fail like a private business.

What the Liberty Brief’s signatories really seek are not incentives for governments to behave, but punitive damage awards – for lawyers, not clients – under the guise of “enhanced” attorney fees.

Now, that may appeal to some libertarians. After all, any defeat for the state is good for the individual. Well, maybe not. The Liberty Brief itself cites a not-so-hypothetical scenario that doesn’t exactly help their cause:

Citizens raising families, working jobs and paying bills do not watch government as closely as shareholders or stakeholders in private enterprise. A local school district can spend a million dollars fighting a child who wants to hand a candy cane with a religious poem attached to his friends during Christmas, and then hold media events expressing a need for money for education. Few private enterprises would ever spend any amount of money fighting candy canes, and those that did would probably cease to exist. Not so for government.

What this example omits is the likely reason a school district would ban a child from distributing a religious-themed candy cane in the first place: Other lawyers, who also claim to be defenders of the Constitution and civil rights, threatened (or brought) legal action to prevent the school from violating the First Amendment’s Establishment Clause. These attorneys promote the exact same legal philosophy as the Liberty Brief’s signatories – the federal Constitution is a license for courts and “civil rights” attorneys to micromanage every state and local government activity. It’s an expensive philosophy.

(As an aside, it’s laughable that the Liberty Brief brings the example of a child being told not to hand out candy canes into a case rooted in the abuse of three thousand children by the State of Georgia; it demonstrates a lack of intellectual depth perception endemic among lawyers, even libertarian lawyers.)

It’s also curious for the Liberty Brief to assert that “few private enterprises would ever spend any amount of money fighting candy canes, and those that did would probably cease to exist.” Most of the private groups that signed the Liberty Brief are themselves in the business of litigation. And they represent just a fraction of the private, nonprofit groups that bring such litigation on a daily basis, some more meritorious than others. Generally, these groups are financed through private donations, which is much closer to a free-market system then the government welfare sought in the Perdue case and its ideological cousins.

And let’s remember, not all of this litigation is against governments. If you look at the fee award statute at issue in Perdue, it authorizes fees in a wide range of cases including “unlawful intentional discrimination” by private parties – i.e., housing and employment – as well as the failure to provide “reasonable accommodations” under the Americans With Disabilities Act. If you allow “enhanced” attorney fees in cases against government entities, you also have to allow them in cases against private parties. Thus, it should be clear that the net effect of the Liberty Brief’s position will be an expansion of state power, not greater respect for the civil rights of individuals.

* The signatory groups are the Liberty Legal Institute, American Center for Law and Justice, Cato Institute, Institute for Justice, Liberty Counsel, Alliance Defend Fund, and the James Madison Center for Free Speech.

Story Contributed by Skip Oliva.

Derek Bambauer with Info/Law just did a great post on the intricacies involved in puffery. He uses the age old example of the great pizza wars to drive his point home. His conclusion on the whole issue is that Puffery should be thrown out because consumers should understand certain claims are purely opinion.

Bambauer wrote, “Domino’s has just started a new ad that makes fun of Papa John’s for its defense in a false advertising case: challenged by Pizza Hut over its claim that “Better Ingredients” mean Papa John’s has “Better Pizza,” PJ responded that the statements were “puffery.”

Puffery sounds like something related to the Big Bad Wolf, but it actually refers to advertising statements that are exaggerated or otherwise not linked to facts.

Prosser and Keeton, on Torts, define it memorably as “a seller’s privilege to lie his head off… [since] no reasonable man would believe him.” Domino’s archly notes that if Papa John’s defense is that no one should believe their statements about quality, do you really want them handling your order for a pie with mushrooms and onions?

Puffery is weird. It escapes liability under a false advertising claim because, theoretically, no one believes it. But this is obviously stupid: puffery is amazingly common. Advertisers, as informal psychologists, wouldn’t be so eager to use these statements if they were ineffectual. So, this false advertising doctrine is, itself, a falsehood.

The better way to deal with puffery is to keep it exempt from liability, but for a more straightforward reason: puffery is opinion. There’s no way to verify whose pizza is better, but Papa John’s is entitled to state its opinion (which, unsurprisingly, is that PJ’s pizza is best, and Domino’s tastes like sneaker insoles).

Opinion is protected speech, constitutionally, even in the advertising context. So, I vote we dump the concept of puffery as unbelievably outrageous, and instead assume that consumers understand these claims as opinion, even if we lose a few snarky commercials as a side effect. Props to Jared Spiegel and Anthony Arioli for this one!”

Bambauer’s analysis is interesting. However, the lines of puffery and bait-in-switch deceptive advertising are not always crystal clear. What if instead of “better ingredients” the claim was “healthier ingredients”? if both are consider non-liable than what would stop Kellogg from claiming their Coco Crispy cereal is good for your health? Actually, this is exactly what Kellogg did.

I agree with Bambauer that most puffery is common sense, however it’s the cases that aren’t so clear that are cause for concern.