In anticipation of a hearing in the House Judiciary Committee Wednesday afternoon, Sandra Aistars, executive director of the Copyright Alliance, writes in the Hill about the principles that should guide copyright reform, calling for debate “based in reality rather than rhetoric.”

Chief among these principles is that protecting authors is in the public interest. Ensuring that all creators retain the freedom of choice in determining how their creative work is used, disseminated and monetized is vital to protecting freedom of expression.

Arguing for authors in terms of freedom of choice and expression is good rhetoric, but it’s quite unlike what I expect you’ll hear during our noon Wednesday forum on copyright and the book Laws of Creation: Property Rights in the World of Ideas.

Authors Ron Cass and Keith Hylton methodically go through each intellectual property doctrine and explore its economic function, giving few words to authors’ “choice” or their “freedom of expression.” They certainly don’t denigrate authors or their role, but Cass and Hylton don’t vaunt them the way Aistars does either.

Recent events in the copyright area are providing much grist for the discussion. You can still register for the book forum, treating it as a warm-up for Wednesday afternoon’s hearing, if your freedom of choice and expression so dictate.

While the Cypriot Parliament may be dragging its feet on a proposed rescue plan for Cyprus’ banks, the country ultimately faces a choice between Brussels’ bitter pill…and bankruptcy. Cyprus’ newly-elected President, Nicos Anastasiades, has quite accurately summed up the situation:

“A disorderly bankruptcy would have forced us to leave the euro and forced a devaluation.”

Yes, Brussels and the IMF have finally decided to come to the aid of the tiny island, which accounts for just 0.2% of European output — to the tune of roughly $13 Billion. But, this bailout is different. Indeed, the term “bail-in” has emerged, a reference to the fact that EU-IMF aid is conditional upon Cyprus imposing a hefty tax on its depositors. Not surprisingly, the Cypriots, among others, are less than pleased about this so-called “haircut”.

Still, the question lingers: Why now? The sorry state of Cyprus’ banking system is certainly no secret. What’s more, the IMF has supported a “bail-in” solution for some time. So, why has the EU only recently decided to pull the trigger on a Cyprus rescue plan?

One reason can be found by taking a look at the composition of Cyprus’ bank deposits (see the accompanying chart).

There are two main take-aways from this chart:

1. European depositors’ money began to flow out of Cyprus’ banks back in 2010. Indeed, most European depositors have already found the exit door.
2. Over that same period, non-Europeans (read: Russians) have increased their Cypriot exposure. If the proposed haircut goes through, Russian depositors could lose up to $3 billion. No wonder Valdimir Putin is up in arms about the bail-in.

Perhaps a different “red telephone” from Moscow will be ringing in Brussels soon.

Zimbabwe, a country with one of the world’s least free economies led for decades by the authoritarian Robert Mugabe, has been growing rapidly in recent years. It has outperformed the group of six African countries dubbed the “Lion Kings” because of their high growth. In a Cato paper released today, Craig Richardson explains the factors behind Zimbabwe’s growth, including high commodity prices, and why its performance is unsustainable. 

On Saturday, Zimbabwe voted on a referendum on a proposed constitution. The results should be known later this week, but as Richardson wrote Friday in a Wall Street Journal Europe op-ed, if the constitution is approved as expected, it will enshrine “government land grabs as perfectly legal.” Recall that the country began a period of severe economic and political turmoil precisely when the government began seizing large commercial farms at the beginning of the last decade. Unfortunately, most signs point to further decline for Zimbabwe.

Much legal commentary at Slate follows a pat formula: judicial activism is a genuine menace, but not from left or liberal jurists. It’s those awful judges on the conservative and libertarian side who engage in the real activism when they strike down laws and government initiatives, or as in the case of ObamaCare, come close to striking them down. To observe the formula at its most mechanical, check out Emily Bazelon’s Slate article last Wednesday portraying a judge’s striking down of Mayor Bloomberg’s ban on big soda sizes as a venture in “conservative judicial activism.”

Never mind that none of the readily available biographical information about jurist Milton A. Tingling seems to justify describing him, as Bazelon does, as a “conservative judge.” (Elected in Manhattan on the Democratic line, Judge Tingling appears to have fit his judicial career comfortably into the framework of Charles-Rangel-era Harlem politics, as David Bernstein mentions at Volokh Conspiracy. In a couple of earlier notable cases, Judge Tingling did rule against police and public-order interests, but we don’t ordinarily regard that sort of civil-libertarian streak as distinctively “conservative.”) 

Bazelon assails Judge Tingling for supposedly substituting his own judgment for that of Bloomberg’s Department of Public Health on the merits of the drinks ban. But everyone agrees the question properly before the court was not whether the judge agreed with the ban. It was instead whether the ban could pass muster under the relevant New York precedent, a 1987 case called Boreali v. Axelrod in which New York’s highest court (to quote the case summary) ruled that the state Public Health Council “overstepped the boundaries of its lawfully delegated authority when it promulgated a comprehensive code to govern tobacco smoking in areas that are open to the public.” Boreali is a distinctive New York case, and creates a test for impermissible delegation that differs from what courts do when applying federal law.

Prof. Aaron Saiger, a specialist in local government law at Fordham Law School in Manhattan, had this to say the other day at Concurring Opinions about the drinks ruling: 

… Judge Tingling is right that New York State’s nondelegation doctrine – the doctrine that administrative law professors who teach only federal cases tell their students is a dead letter – prohibits the rule. The foundational case, Boreali v Axelrod, is nearly on all fours with this case. Health departments, pursuant only to sweeping language giving them authority over public health, cannot in New York State limit trade in legal markets over which the legislature has given them no explicit authority. If the City is to win its promised appeal, it is going to need to argue that Boreali should be overruled or limited.

The problem with that is that Boreali is right. Nondelegation is an important constitutional principle and should not be sidelined out of existence. … I think it’s not just reasonable, but better politics, better civics, and better constitutional law to require those shoves [i.e., paternalistic “nudges”] to come from a legislative, rather than an executive and bureaucratic, process.

Saiger’s commentary is all the more pertinent because he’s anything but a fan of the decision’s craftsmanship. Unlike Judge Tingling, he doesn’t think the ban was arbitrary or capricious; he doesn’t believe the city’s charter should be read to limit the Health Department’s decree powers to those responding to imminent or emergency health threats; and he’s not averse in principle, he says, to what the Mayor was trying to do. 

So what does Bazelon think about Boreali v. Axelrod? Does she think it should be overruled or can somehow be distinguished from the beverages case? It’s hard to tell, because her article never mentions Boreali at all, though Judge Tingling had laid it out at great length as the precedent on which he was basing his decision. 

Judges shouldn’t — and Judge Tingling didn’t — breeze right by the relevant case law in the course of reaching a foreordained conclusion. If only all legal commentators were as careful.

Health Matrix: a Journal of Law-Medicine at Case Western Reserve University School of Law has released “Taxation Without Representation: The Illegal IRS Rule to Expand Tax Credits Under the PPACA,” a paper I coauthored with CWRU law professor Jonathan Adler. From the abstract:

The Patient Protection and Affordable Care Act (PPACA) provides tax credits and subsidies for the purchase of qualifying health insurance plans on state-run insurance exchanges. Contrary to expectations, many states are refusing or otherwise failing to create such exchanges. An Internal Revenue Service (IRS) rule purports to extend these tax credits and subsidies to the purchase of health insurance in federal exchanges created in states without exchanges of their own. This rule lacks statutory authority. The text, structure, and history of the Act show that tax credits and subsidies are not available in federally run exchanges. The IRS rule is contrary to congressional intent and cannot be justified on other legal grounds. Because tax credit eligibility can trigger penalties on employers and individuals, affected parties are likely to have standing to challenge the IRS rule in court. 

This paper led to one of the most important (and ongoing) legal challenges related to the PPACA. Access the full paper here.

It doesn’t create a lot of confidence in Europe that tiny little Cyprus, with a GDP less than Vermont, is now causing immense turmoil.

Though to be more accurate, events in Cyprus aren’t causing turmoil as much as they’re causing people to examine both government finances and bank soundness in other nations. And that’s causing anxiety because folks have taken their heads out of the sand and looked at the reality of poor balance sheets.

Looking closer at the specific mess in Cyprus, an insolvent financial sector is the cause of the current crisis, though the problem is exacerbated by the fact that the government has dramatically increased the burden of government spending in recent years and therefore isn’t in a position to finance a bailout.

But that then raises the question of why Cyprus is bailing out its banks? Why not just let the banks fail?

Well, here’s where things get messy, particularly since we don’t have a lot of details. There are basically three options for dealing with financial sector insolvency.

1. In a free market, it’s easy to understand what happens when a financial institution becomes insolvent. It goes into bankruptcy, wiping out shareholders. The institution is then liquidated and the recovered money is used to partially pay of depositors, bondholders, and other creditors based on the underlying contracts and laws.
2. In a system with government-imposed deposit insurance, taxpayers are on the hook to compensate depositors when the liquidation occurs. This is what is called the “FDIC resolution” approach in the United States.
3. And in a system of cronyism, the government gives taxpayer money directly to the banks, which protects depositors but also bails out the shareholders and bondholders and allows the institutions to continue operating.

As far as I can determine, Cyprus wants to pick the third option, sort of akin to the corrupt TARP regime in the United States. But that approach can only work if the government has the ability to come up with the cash when banks go under.

I’m assuming, based on less-than-thorough news reports, that this is the real issue for Cyprus. It needs taxpayers elsewhere to pick up the tab so it can bail out not only depositors, but also to keep zombie banks operating and thus give some degree of aid to shareholders and bondholders as well.

But other taxpayers don’t want to give Cyprus a blank check, so they’re insisting that depositors have to take a haircut. In other words, the traditional government-imposed deposit insurance regime is being modified in an ad hoc fashion.

And this is why events in tiny Cyprus are echoing all over Europe. Folks in other nations with dodgy banks and unsound finances are realizing that their bank accounts might be vulnerable to haircuts as well.

So what should be done?

I definitely think the insolvent institution should be liquidated. The big-money people should suffer when they mismanage a bank. Shareholders should lose all their money. Then bondholders should lose their money.

Then, if a bailout is necessary, it should go only to depositors (though I’m not against the concept of giving them a “haircut” to save money for taxpayers).

But Cyprus apparently can’t afford even that option. And the same is probably true of other European nations. 

In other words, there isn’t a good solution. The only potential silver lining to this dark cloud is that people are sobering up and acknowledging that the problem is widespread.

Whether that recognition leads to good policies to address the long-run imbalances – such as reductions in the burden of government spending and the implementation of pro-market reforms – remains to be seen.

A couple of months ago I warned about the dangers of having government gather and publish growing reams of information in the name of making education better. Sure, it sounds great – help people get as informed as possible! – but the dangers are legion. You can read about several such pitfalls in that old post. You can also get a sense of the great wealth of data already out there in this op-ed. What I haven’t discussed – and what might concern many Americans more than anything else – is the threat that massive data collection poses to our privacy.

Articles over the last week or so have started to draw significant attention to the growing education-information complex and its connection to long-standing efforts – especially federal – to accumulate information on Americans from birth to boardroom. Gaining particular traction has been a story about how student data collected in New York could be sold to companies or other entities outside of school districts. Even more concerning is a story by Joy Pullmann in the Orange County Register about lots of data collection and mining that is either already happening or under consideration nationwide.

What’s especially troubling to some people, including Pullmann, is that not only is there ever-growing centralization of curricula such as the federally backed Common Core, as well as centralized testing of knowledge, but there are also moves to assess students’ “affect” that could include wiring them to “facial expression” cameras and “skin conductance sensors.” Contemplating such things, it’s hard not to conjure up images of A Clockwork Orange.

When you read the federal report that proposes using “affective computing methods” such as skin sensors, it doesn’t appear that the authors have nefarious, big-brother intentions. The object of the report is to examine how students’ “grit” and perseverance can be improved, and that is a reasonable goal. Similarly, furnishing information about the academic status of incoming freshmen at a college, the amount they learn while in school, and how well they fare after graduation, is driven by good intentions.

But we must never feel content with good intentions. We must care primarily about the effects of the policies stemming from our golden goals, and as I’ve written previously, there are likely big, negative, immediate effects that would go with empowering more government data collection. There are also potentially even worse long-term consequences, including that government would begin to try to adjust students’ feelings and attitudes if doing so might produce better test scores or some other, politically determined, outcome. Indeed, such affect-engineering arguably already takes place with huge increases in ADD and ADHD diagnoses that lead to personality-altering drug-taking.

It’s easy – and almost always innocent – to say that we need more information so that we can make things work better. But with that comes very big potential dangers we must never ignore.

Cross-posted at seethrue​du​.com