“…Perhaps I can find new ways to motivate them.” - the force of the tax incentive

****

The force is with us.

That is the force of tax incentives it seems:

Chancellor George Osborne met executives from Disney-owned Lucasfilm in London earlier this year to discuss the plans and the production is thought to be eligible for a tax break.

Now let's think a little more about what this means. Yes, folks, you've got it - reducing taxes on businesses increases business investment. So why is it does in this favour-mongering, no longer smoke-filled rooms inhabiting manner? Perhaps it's so the Chancellor of the Exchequer can tweet gleefully of his success or maybe it's just a consequence of the lunacy of over-taxing businesses.

It seems to be that the nation is privileging one sort of investment - making blockbuster feature films - over the totality of business choice and investment option. Are we to offer tax incentives to a company that wants to do something more prosaic, perhaps building a recycling plant or setting up a cleaning company?

I am delighted that the jobs and money from this production are to come to the UK. But let's learn the lesson - cutting business taxes helps investment and job creation - if it's good for Disney it's also good for some South Korean company you've never heard of or indeed for the wholly homegrown business. So cutting those taxes makes sense (and will make it a whole lot less likely that businesses will engage is complicated schemes to reduce liability - but that's another story) and it supported by evidence:

...we find that a higher provincial statutory corporate income tax rate is associated with lower private investment and slower economic growth. Our empirical estimates suggest that a 1 percentage point cut in the corporate tax rate is related to a 0.1–0.2 percentage point increase in the annual growth rate.

So George, rather than doing behind doors deals with favoured businesses, just cut corporation tax some more - perhaps, as some argue, to as low as 10%:

At the same time, he could also announce his intention to reduce it even further – to 15% or even 10% once the appropriate anti-avoidance measures are in place. Such a move would have numerous benefits. For one, it would boost business confidence, encourage new investment by businesses (as it would improve net returns) and would send a strong signal that the Coalition is taking the supply-side measures necessary to restore growth. It would also immediately fulfil the Coalition pledge to “create the most competitive corporate tax regime in the G20”.

....

Some thoughts on toll bridges and copyright

Driving home from City Hall this afternoon I listened to a sweet little interview with a woman who had bought a toll bridge.

Grahame Penny and Maggie Taylor paid £403,000 for the Whitney-on-Wye bridge between Hereford and Hay-on-Wye. The crossing, which comes with a two-bedroom cottage and 1.1 acres, was built in 1779 and was granted exemption from tax by an Act of Parliament as it was privately funded.  It brings in around £2,000 per week but the couple will have to pay for annual maintenance and any staff costs.

It seemed to me that this little property might help us to understand the debate that carries on about copyright and intellectual property. But more of that in a minute – firstly we need to understand that ‘property’ is not a thing but a ‘right’. The access to my house is across land in the ownership of others but that access is my property – I do not own the land but own the right to cross that land so as to reach my house. I cannot parcel up that right but I can, should I wish, sell it -  which is what Bradford Council does with the right to fish in Chellow Dene reservoirs.

Mr Penny & Mrs Taylor own a bridge across the Wye and are permitted by law to charge you for the use of that bridge. When you drive up and hand over the necessary 80 pence, you are permitted – you have bought the right – to cross the bridge. Just once – if you come along tomorrow, you will have to pay again to have the right to cross the bridge.

Similarly, when I go to the cinema I buy a ticket allowing me to watch a particular film once and once only. If I want to watch that film again, I have to pay again just as I do with the toll bridge. And the same applies to a host of other rights to make use of another’s property – railway tickets, amusement parks, football matches and theatrical performances all spring to mind in this regard. Indeed, we even have to pay to use the lavatory.

All of these are examples where the right to use a particular “resource” is granted to the purchaser on a limited basis – most usually one use but it could be unlimited uses for a given period of time or a pre-determined number of uses. Copyright operates under the same principle – when you buy something ‘created’ by someone else it could be for your exclusive use or more typically for your use alone. Just as your 80p gets you one trip across Mr Penny & Mrs Taylor’s bridge, the money you hand over for an e-book to go on your kindle give you the use of that work and no-one else.

Without this protection, how are we to prevent you taking that e-book and selling it yourself? Not just to Mrs Smith next door but to thousands of others – all of whom might have bought the book. Even worse, you may choose to simply give the e-book away to anyone who wants it completely destroying the opportunity for the creator to benefit from his efforts. And it doesn’t really matter whether the creator is a multi-billion dollar film studio or a penniless writer in a damp flat.

If the creator chooses to let you use his work on this basis that is his right. But to suggest that he should have his right curtailed because “information wants to be free” is to create a circumstance where a man cannot profit from his own creativity. There is a case for debating what is covered by copyright – is a musical performance copyright or merely the music itself, for example – but the concept is absolutely central to the success of service economies.

The problem is not one of principle – copyright remains important – but of enforcement. Put simply, the on-line world makes it more and more difficult to police copyright effectively. And, as we have seen with the music industry, this pressure results in a dramatic change in business model. It is safe to bet that the same problem will be faced by the book publishing industry (the journal publishing business started its change and began its debate some twenty years ago) and the film industry.

And the main impact of this will be to make the published, copyright-compliant product much cheaper. Which is as it should be – instead of paying several thousand pounds for a subscription to the Journal of Consumer Marketing, the library now pays the same price for access to over 100 journals in that publishers portfolio. And the same will apply with music, books and films.

But this is not about getting rid of copyright, it is about the business models needed in an environment where the comprehensive policing of copyright simply isn’t an option.

However, we still have to remember that the more free riders, the less likely people are to create. To return to our toll bridge, Mr Penny & Mrs Taylor face competition from free bridges elsewhere on the river but that isn’t an argument for removing their rights.  So why should that fact that the web has led to an increase in free riders mean that copyright owners should lose their rights?

....

Oh dear, those bohemian luvvies...all that smoking, tut, tut!

The New Puritans are frothing again - this time at government backing for films that 'promote smoking':

Health experts have accused the government of spending more on subsidising American films that contain smoking scenes than on anti-tobacco campaigns.

Researchers at Imperial College London calculated that between 2003 and 2009, £338m of tax credits in Britain went to US-produced films with imagery "promoting" tobacco use.

You just have to laugh. There is no choice really - the sight of lefty indulgence eating itself is too joyful for words.

"We think film subsidy programmes should be harmonised with public health goals by making films with tobacco imagery ineligible for public subsidies," Millett said. "This wouldn't cost anything to implement so in the current financial climate it should be an attractive policy option."

You couldn't make it up!

....

A little more on Whimsy....

I am – as my more avid and assiduous readers will know – something of a fan of whimsy. If we’re allowed to use such a base word as ‘fan’ to describe the fine work of great writers? I’m never quire sure where to find the finest whimsy – the Americans have always had a knack for it. From way back writers like Mark Twain, Washington Irving and Nathaniel Hawthorne wrote whimsically – capturing that slightly laid back, wide-open-space feeling of Middle America. And this thread runs right through American writing and film – Stephen King’s short stories, Capra’s films and even more recently delights such as “Big Fish” all capture that spirit of wonder.

But it’s not just the Yanks – the “Little World of Don Camillo” is a wonder of whimsy created by an Italian, Giovanni Guareschi and there is little to top the joyous whimsy of Idries Shah’s delightful Sufi tales. Nor should we discount the English writers of whimsy – Paul Jennings with “Resistentialism” and "Ub" or Peter Simple’s collection of characters, some satirical, some just providing a great, happy smile. It is all magical, delightful – you can’t read Neil Gaiman’s “Stardust” or “American Gods” without the sorcery of whimsy sparkling through you.

For me it all started with Thurber. With the man who described his writing like this:

“The writing is, I think, different. In his prose pieces he appears always to have started from the beginning and to have reached the end by way of the middle. It is impossible to read any of the stories from the last line to the first without experiencing a definite sensation of going backwards. This seems to prove that the stories were written and did not, like the drawings, just suddenly materialize.”

Thurber wrote biography (or at least what he claimed was biography), stories – you’ll know one or two of them such as “The Secret Life of Walter Mitty” more likely from film versions – and an array of short pieces such as the wonderful ‘Fables for Our Time”. There are occasional moments of laugh out loud but mostly the stories relax you, make you want to sit back, take a sip of whisky, a drag of good cigar and just smile that big smile.

And Thurber – like so many of these writers – was modest about his talents seeming ever grateful that the world hadn’t yet rumbled him. I suspect there might be an element of self-description in the ‘moral’ to “The Owl who was God”:

“You can fool too many of the people too much of the time”

Copyright, free riders and the New England turnpikes

***

The problem really isn’t that copyright is a bad thing. As a right it’s not really much different from assorted easements, permissions and other non-physical property rights (I don’t own the drive to my house but I own a right to use it to access my house). So I defend it and the associated right for those who own the copyright to expect the law to be on their side.

The problem is the free rider. Or more importantly the inevitable avoidance of payment (and remember this isn’t a moral argument). As such the challenge for owners of digitised information is how to protect the value of their asset. At present the approach is to seek (or rather to persuade those who administer laws) to seek more and greater powers to identify and control those who are taking a free ride.

This is a short-sighted approach that is ultimately doomed to failure. I’m by no means an expert on the working of the Internet but it seems to me that those who wish to take a free ride are going to carry on doing so. Each endeavour to close the loop – to check the metaphorical ticket – will be defeated by technological creativity. And the ever more draconian measures demanded by the owners will be resisted because of the collateral impact on legitimate activity (or the legal manifestation of Marshall McLuhan’s dictum).

However, we should not dismiss a model simply because of free rider problems – there’s a strong argument for allowing the present system to continue and for alternative models of production, protection and payment to evolve. To understand this I recommend reading this piece by Daniel Klein on the New England turnpike companies where the author describes how – despite a huge double problem of free riding – investors still stumped up to buy stock in these companies. Although these investors became stockholders in a business it was a business that they knew would lose money. In effect their purchase of stock was a private payment to secure the supply of a public good.

It strikes me that ‘investors’ in music, film and software are aware of the free rider problem but recognise that without some willingness to purchase something that free rider problem will mean no music, film or software. Thus we accept the need to purchase. Those businesses that provide simple, easy access to the product in response to these payments are like the turnpike companies in that the purchasers of this access enjoy a smoother journey avoiding the need to travel round the tollgate on a rough, dangerous track.

....

A moment of whimsical generosity

***

Kathryn & I went to see Nativity - very sweet, uplifting and...well, whimsical. Queueing up to contribute my small amount to NCP's coffers I realise I'm short of change...

"Kathryn" I yell, "I don't have enough money!"

Before Kathryn can respond a young woman holds out her hand in which was a couple of quid in change...

"Take this," says the young woman.

Quite made my day especially after a good cry at a soppy film! Proves again that the world is mostly full of decent, generous folk. Just like whimsy tells us!

...