Category Archives: Business and Economy

Sociological involvement in Walmart Supreme Court case

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The Supreme Court is about to hear arguments in a large class-action lawsuit against Walmart regarding female employees receiving lower pay. Interestingly, a sociologist is in the middle of the case:

Plaintiffs in the class-action suit, who claim that Wal-Mart owes billions of dollars to as many as 1.5 million women who they say were unfairly treated on pay and promotions, enlisted the support of William T. Bielby, an academic specializing in “social framework analysis.”

A central question in the case is whether he should have been allowed, in preliminary proceedings, to go beyond describing general research about gender stereotypes in the workplace to draw specific conclusions about what he called flaws in Wal-Mart’s personnel policies.

“Bielby made a conclusion that he had no basis to make,” said Laurens Walker, one of two University of Virginia professors who coined the term for the analysis almost 25 years ago. “He hasn’t done the research.”

But a brief supporting the plaintiffs from the American Sociological Association said that Professor Bielby’s work explaining how Wal-Mart’s policies may have led to discrimination “is well within our discipline’s accepted methods.”

Read the full article to find out more about the academic debate over social framework analysis. It sounds like what is it at stake is whether Bielby can make claims about organizational culture and how it might relate to this case without specific data from Walmart.

You can read the American Sociological Association’s (ASA) amicus brief here. It looks like this is the first such brief filed by the ASA since a 2006 case regarding a challenge to “Don’t Ask, Don’t Tell.” Digging a bit into the ASA amicus brief, the “summary of argument” provides some insights into what “social framework analysis” is:

“Social framework analysis” is not a sociological method, but rather a legal term for some kinds of research. What constitutes high quality “social framework analysis” continues to be vigorously de-bated among scholars. As such, the Court should assess the underlying social science methods, as practiced by social science researchers and vetted in the peer-reviewed journals of those fields, instead of the “social framework analysis” construct when deciding whether social scientific work is valid.

Systematic social science research has shown that corporate culture may affect individual-level decision-making in common ways. Corporate culture is a set of norms and values that convey messages to em-ployees about appropriate behavior. Corporations may actively try to engineer corporate cultures by implementing policies and practices that convey norms and values. Informal cultures also emerge in the workplace when employees interact, and may either reinforce or resist formal culture as well as promote other non-sanctioned norms. The extent to which corporate cultures, both formal and informal, influence individuals’ behavior depends on the strength of the cultures and also on the degree of discretion that company personnel policies give to individual decision-makers…

Namely, corporations have been shown to reduce gender disparities by instituting formal personnel policies, creating accountability processes for managers, and self-monitoring their employment patterns in order to highlight and address disparities. Extensive research in sociology and other social sciences has shown that these practices equalize gender dis-parities in the workplace by placing central checks on individual discretion that leads to biased decision-making, but do not eliminate all discretion from managerial practice. (pages 3-5)

It will be interesting to see what the Supreme Court decides, even if they are just ruling on whether the large class-action suit can go forward.

The fair use dragon

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Justin Levine over at Against Monopoly points us to a controversy at the recent San Francisco International Asian American Film Festival and reminds us that many content owners believe that fair use in U.S. copyright law is about as real as a mythical fire-breathing creature.

John Diaz of the San Francisco Chronicle explains:

"Slaying the Dragon: Reloaded," a compelling new documentary that critiques the portrayal of Asian women in U.S. visual media, has drawn protests from an unlikely quarter. It wasn’t from Hollywood, which was deservedly scoured for its depiction of Asian women in films from "Rush Hour 2" to "Sex and the City." It wasn’t from conservative commentators claiming political correctness run amok.

Instead, the objection to the documentary by Elaine Kim, a UC Berkeley professor of Asian American studies, emerged from six Asian American filmmakers just before its premiere last week at the San Francisco International Asian American Film Festival. Their complaint: that she used clips of their work without seeking their permission.

Never mind that fair use is written into the copyright statute and explicitly allows for “criticism” and “comment” and “scholarship.”  Never mind that Kim’s documentary seems to fall well within the guidelines laid out by the Documentary Filmmakers’ Statement of Best Practices in Fair Use – and that four separate companies write errors-and-omissions insurance for filmmakers based on the Statement guidelines.

No, the owners of films being criticized by Kim want to get paid:

The documentary addresses images of Asian American women in film, and while that is a worthy subject for a documentary and we respect Ms. Kim’s skills, as filmmakers, we do not consider this "fair use." Every filmmaker knows that he or she has to ask permission before using any intellectual property not belonging to him/her.

Using a clip of our films for review or promotional purposes is standard; however, using it in a documentary to illustrate that filmmaker’s point of view is a creative choice by the documentarian and therefore not subject to fair use.…We feel that Ms. Kim should either license our film footage properly for use in her documentary or remove it before the documentary’s world premiere at the upcoming San Francisco International Asian American Film Festival.

The Chronicle reporter was shocked, though readers of this blog shouldn’t be (unfortunately):

For me, as a journalist and champion of free expression, the upshot seemed clear: You cannot give the targets of social commentary the ability to veto it. Does anyone think for a second that the copyright holders of "Rush Hour 2" [which includes a scene where Chris Tucker and Jackie Chan are presented with a buffet of scantily clad Asian women] would consent to allow scenes of that movie to appear in Kim’s documentary at any price?

Kim did end up screening the movie at the festival, but

Kim deleted the clip from "The People I’ve Slept With."

"We did not remove the clip because we were concerned it was not fair use," Kim emphasized in an e-mail. "We removed it because we do not have the time or resources to fight against a filmmaker that personally attacked us and was being unreasonable."

Given the brutal economic and personal realities of litigation, Kim probably made the “right” choice.  Even if she found lawyers to represent her for free, fighting this in court would probably consume a large portion of her personal time and energy for years.  I certainly don’t blame her for her apparently rational choice.

Nevertheless, let us be clear:  this is what happens when copyright law is written to give one side (i.e., copyright owners) sweepingly clear rights but the other side (i.e., fair users) only an amorphous defense.  You don’t get copyright as “an engine of free expression”, as the Supreme Court continues to think.  You get censorship by people who think that fair use is a fairy tale.

Status update: P2P still in litigation

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Nate Anderson at Wired reminds us that “the first file-sharing case in the US to go all the way to trial is still going”:

Filed on April 19, 2006 and progressing through a remarkable three trials, the recording industry case against Minnesota resident Jammie Thomas-Rasset continues to burn through cash and judicial attention.

Thomas-Rasset was at first hit with a $222,000 fine in 2007, which was set aside in 2008. Another jury trial in 2009 ended with a $1.92 million judgment, which was set aside in 2010. In November 2010, a third trial ended with a $1.5 million verdict, which the judge is unlikely to allow (his previous orders suggested that a few thousand dollars per song would be the maximum permissible damages). At the moment, both sides are still arguing over the appropriateness of that $1.5 million damages award.

Almost five years.  Three trials (so far).  What a colossal waste of economic, judicial, and personal resources.

The quality of music in a post-Napster world

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David K. Levine over at Against Monopoly pointed me to a recent paper (PDF) by economist Joel Waldfogel at the University of Minnesota titled “Bye, Bye, Miss American Pie? The Supply of New Recorded Music since Napster”.  As the title implies, Waldfogel investigates the effects of Napster (and its file-sharing progeny) on the music industry:

Economists generally agree that monopolies are bad. Governments grant some of the basic textbook examples of monopolies for intellectual property, in the form of patents and copyrights. Their bad effects – allowing prices above marginal costs and therefore restricting the supply of output – are thought to be justified by their incentive effects on production. But apart from introspection and anecdotes, we don’t really know much about the effects of remuneration incentives on production in the music industry.…Does the prospect of greater rewards bring forth more music? If so, then the past decade, when the ability for sellers to generate revenue from recorded music has fallen as much as half, should be a dry period for music. This is the question we address in this study. [emphasis added]

Noting that other studies have found undiminished musical output (in terms of volume) in the post-Napster world, Waldfogel attempts to measure musical quality using “a time-constant quality threshold based on critics’ retrospective lists of the best works of multi-year time periods”:

Using indices collectively covering the period since 1960, we document that the annual number of new albums passing various quality thresholds has remained roughly constant since Napster, is statistically indistinguishable from pre-Napster trends, and that album supply has not diverged from song supply since iTunes’ revival of the single format in 2003. We also document that the role of new artists in new recorded music products has not diminished since Napster. [emphasis added]

Waldfogel’s findings will unquestionably prove controversial in many circles.  And, to be sure, copyright policy may be based on considerations other that mere economic efficiency (e.g., John Locke’s labor theory or artists’ moral rights).  If Waldfogel’s findings are verified and generally accepted on their own terms, however, the economic policy implications seem clear:

It is easy to see that file sharing simply increases welfare. Producers lose, but their losses – when consumers steal things they used to pay for – are all transfers to consumers, who now enjoy greater surplus (the price they had formerly paid plus the former consumer surplus). In addition to the transfers from producers to consumers, file sharing also turns deadweight loss – circumstances in which consumers valued music above zero but below its price and therefore did not consume – into consumer surplus. In a purely static analysis, eliminating intellectual property rights benefits consumers more than it costs producers and is therefore beneficial for society.

2010 Census director on suburbanization of minorities

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Sociologist Robert M. Groves spoke earlier this week “at an Advertising Research Foundation event.” In his comments, Groves noted one of the major demographic trends in America: more minorities are now in the suburbs.

Of course, if Groves — with a Ph.D. in sociology and a long-time Michigan professor — were to put out a “for hire” sign for TV networks, a bidding war could heat up between Univision and Telemundo. The story of the 2010 Census, which could have been written in 2005 (or 1995, for that matter), is the boom in Hispanic America…

Last year left Groves well-armed with figures about the Hispanic population, such as the prevalence of those speaking Spanish at home and English elsewhere. And he has much to say about a dispersal trend in the Hispanic community, the departure from cities. In the Atlanta area, for example, the number of Hispanic residents spreading to the collar counties is soaring.

“The suburbanization of the minority population is a phenomenon over the past decade,” Groves said.

While the American suburbs have typically been seen as places where whites attempted to escape the city and minority populations (“white flight”), the number of minorities in the suburbs has been on the rise (read about this on a national scale here and in the Chicago region here and here).

The article goes on to consider how Groves might also be in demand as businesses look to utilize this kind of demographic knowledge:

Broadly, Groves has some cred if he were to become a network ambassador to Madison Avenue. At some level, he’s overseen a massive campaign — stretching from a Super Bowl spot to targeted marketing in 28 languages — as with the Census spent $300 million to $400 million in advertising last year.

As the Bureau sought to get more Americans to return their questionnaires, it figured that for every 1% increase it produced, that would save $85 million in the costs associated with knocking on doors later.

“The message got through and it changed behavior,” Groves said.

The director can also say he can manage a budget. The Bureau returned $1.6 billion to the government last year as it completed its work.

Before becoming director of the 2010 Census, Groves was well known in sociology for his work with surveys. This article suggests that he could parlay this Census experience plus his prior research into a lucrative corporate position.

Pivoting toward greater competition

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Ryan Singel over at Wired magazine writes about a new start-up called LawPivot that helps start-ups with their legal questions:

LawPivot’s solution is to create a Q&A site where startups can ask legal questions confidentially and then get recommended lawyers to answer the question, which can lead to the former hiring the latter.

While California-based startups can now ask three free questions a month, LawPivot will soon be charging companies $80 for each question. For lawyers, the benefit is being able to land new clients for themselves or their firms, and to build a reputation — though they don’t get paid to answer a question.

Despite potential ethical issues and haughty dismissals by certain blogs, this certainly is where the legal profession is heading.  In a globalized world with plenty of lawyers looking for work, more competition is inevitable.  Fees are going to go down.

Secondary liability, approaching the limit

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The Seattle Times reported a few weeks ago that Microsoft “is pushing Washington legislators to pass a law making it illegal for manufacturers that use pirated software to sell goods in the state”:

The proposed legislation would create a legal cause of action by making manufacturing companies liable for damages, and it would give the state attorney general and companies the right to pursue injunctions in civil court to stop the manufacturers’ goods from being sold.

For example, if a large Washington store sold T-shirts made from a company in China and the Chinese company uses pirated copies of Excel at an office in Shenzhen, Microsoft could seek an injunction to prevent the manufacturer from supplying T-shirts to be sold in Washington state.

This represents a sweeping change to current intellectual property law. It is one thing to grant monopolies via copyright for “limited Times” in order “To promote the Progress of Science and useful Arts”. It is another thing entirely to extend copyright’s monopoly over physical objects alleged to have been manufactured in another country with the help of pirated software and thus to hold the buyers of those physical objects legally responsible.

To put it concretely:  this isn’t holding the buyers of obviously stolen TV’s out of the back of a pickup truck legally responsible for their purchases.  This is holding GM, maker of that pickup truck, legally responsible because the Chinese manufacturer of one of the parts in the truck’s engine used a pirated copy of Microsoft Outlook to receive emailed purchase orders from GM.

Now that’s secondary liability.

Hat tip to Groklaw, where I ran across this story earlier today.  If you’d like to read more about this, Pamela Jones has written rather extensive commentary, including a hypothesis Microsoft is pushing for this and similar laws in other U.S. states in order to unleash a “litigation storm against Linux” — including derivatives like Android:

The law would make it possible for Microsoft to block Android sales in whatever state passed such laws if it could find some tie between the Android product and some manufacturer of a contracted part in China or wherever who happened to use a pirated version of Microsoft Word — not to make the part but to write up an ad for it. Ephemeral, much? But can you imagine how much litigation could spring from a law like this? How little it would take to keep litigation in the air forevermore? And you don’t have to even prove infringement in China, just allege it to initiate proceedings.

Of course, Jones is quick to note that the state of Washington’s “protections” do not extend to companies like Red Hat that profit from selling open source support and services.  Under the law, software companies with proprietary licenses like Microsoft

can sue in civil court and the Attorney General can go after the “wrongdoer” US company, if a notice is sent and no amelioration occurs. But if the violation is of an *open source license*, the victim can’t sue anyone under the bill, and the Attorney General does nothing for you. It’s an exception to the law.

Chicago Tribune calls for phasing out of mortgage-interest deduction

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What interesting arguments people will make in the midst of an economic crisis. While one commentator has a number of reasons why he is “never going to own a home again,” the Chicago Tribune argues that the United States needs to phase out the mortgage-interest deduction. The main reason seems to be that the deduction primarily benefits wealthier homeowners, not the middle class:

Trade groups such as the National Association of Home Builders portray the benefit as a middle-class tax break. But it does a lot less for most Americans than those with a vested interest in promoting home sales would have you believe: If you rent, you get nothing. If you have reasons not to itemize deductions, you get nothing. If you pay off your mortgage to live debt-free, you get nothing.

Borrow a fortune for a McMansion, however, and the Internal Revenue Service provides a big discount, at the expense of every other taxpayer. More than three-fourths of the benefit from the mortgage-interest deduction goes to the 14 percent of tax filers reporting six-figure incomes. Almost one-third of the subsidy goes to the population reporting incomes of $200,000 or more. Those 3 percent of tax filers at the very top receive about the same amount as do the 86 percent earning less than six figures.

As a consequence, this deduction does little to promote homeownership — supposedly its main objective. Data suggest that almost no one now benefiting from the break would flee the real-estate market. People just wouldn’t borrow as much to fund home purchases.

What is remarkable to me about both of these arguments is that such arguments might have been unheard of before this economic crisis. But since the economy has gone downhill, the housing market in particular (and the most recent housing figures are not good), desperate times apparently call for desperate measures.

All of this bears watching: will homeownership remain a cornerstone of the American Dream?

Internet competition

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My friend Adam Holland pointed me over to Galen Gruman’s article at InfoWorld, which points to the problems that arise when carriers have considerable pricing power:

Users are being forced to sign up for separate data plans for each device. The cellular carriers advertise their data plans in data buckets, such as $25 for 2GB of iPad usage at AT&T and $20 for 1GB of iPad usage at Verizon Wireless. But you also pay separately for access on your iPhone or other smartphone. That means multiple-device users are asked to pay a lot more, forcing most to make a choice between the two.In both cases, the pricing is illogical and punitive. For their DSL and TV services, neither AT&T nor Verizon (half-owner of Verizon Wireless) charges per computer or per TV, but that’s what they’re doing for mobile devices.

Of course, I’m sure that both AT&T and Verizon would love to charge per computer/TV for home Internet use as well (and AT&T is currently in the process of instituting data caps on home users).  As with so many mobile and broadband ISP policy issues, the fundamental problem is that many ISP operate as monopolies or oligopolies.  Accordingly, there are only two major impediments to their pricing structure:

  1. Government regulation
  2. More competition

Government regulation is, of course, is notoriously tricky.  Indeed, it is often counter-productive as established ISPs use vast lobbying budgets in an attempt to regulate any new competitors out of existence.

But more competition is great when it’s possible, and, fortunately, sometimes new market entrants do appear with offerings that put pressure on established providers.  To use a personal example, my wife and I use a Clear Spot for our only Internet service here in the Boston area.  It’s not perfect (ping times are high), but it’s only about $50/month and is fast enough for high quality Netflix streaming.  Moreover, the Spot’s 4G interface/Wi-Fi router allows us to use the Internet within our apartment or anywhere within Clear’s 4G network.  Among other things, this means we can use an iPod Touch “on the go” (just like an iPhone) and “tether” both of our laptops (no additional fee) and connect up to five more Wi-Fi devices (eight total).

Best of all, because Clear’s service is wireless, we don’t have to subscribe to Comcast even though they are the only ISP providing service to our building.  Maybe that’s why they sent us a letter this past week offering cable+Internet for less than $60 a month indefinitely (not as a temporary promotional price).  I guess the market really does work when the market really does work.

Monopolizing orphans

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As numerous outlets are reporting, a federal judge rejected the proposed Google Books Settlement (Wikipedia backgrounder) yesterday, citing a number of concerns:

  1. “Adequacy of Class Notice”
  2. “Adequacy of Class Representation”
  3. “Scope of Relief Under [Federal Rules of Civil Procedure] Rule 23”
  4. “Copyright Concerns”
  5. “Antitrust Concerns”
  6. “Privacy Concerns”
  7. “International Law Concerns”

In this post, I want to comment just on #5 since the court’s discussion of this point focused on the orphan works problem, an issue I analyzed at length just last summer in a journal note (PDF here).

In brief, “orphan works” are creations protected by copyright law but with unclear ownership.  Prospective users of orphan works are in a bind because they cannot ascertain who to ask for permission yet still face the prospect of substantial penalties if an owner eventually surfaces and sues for copyright infringement.  As a result, orphan works remain in legal limbo and rarely are used to their full economic and/or cultural potential.  Orphan works include many (though certainly not all) books that were published during the 20th century (still under copyright) but are now out of print (unclear ownership).

Google sought a way out of this legal limbo so that it could put such books in its database.  Specifically, Google sought to escape the orphan works problem by leveraging the “opt out” structure of this class action lawsuit.  One of the ways that class action lawsuits “work” is by binding a group of people — including those who could have “opted out” of the litigation by filing their own lawsuits but didn’t — to the outcome of the class action.  Here, Google wanted the owners of orphan works (who by definition would not be “opting out”) to be bound by the terms of the settlement.  This would have allowed Google to digitize and distribute those orphaned works.

Writing for the Southern District of New York, Judge Denny Chin expressed concern that the proposed settlement would have given Google too much power over orphan works:

The ASA [Amended Settlement Agreement] would give Google a de facto monopoly over unclaimed works. Only Google has engaged in the copying of books en masse without copyright permission.  As the United States observed in its original statement of interest: “This de facto exclusivity (at least as to orphan works) appears to create a dangerous probability that only Google would have the ability to market to libraries and other institutions a comprehensive digital-book subscription. The seller of an incomplete database — i.e., one that does not include the millions of orphan works — cannot compete effectively with the seller of a comprehensive product.” And as counsel for the Internet Archive noted, the ASA would give Google “a right, which no one else in the world would have, . . .to digitize works with impunity, without any risk of statutory liability, for something like 150 years.”

(internal citations omitted, emphasis added).

While I certainly share the court’s concern with the prospect of a Google monopoly over orphan works, I also find it rather ironic that the court cited monopoly as one of the “problems” that prevented it from approving the settlement.  After all, copyrights are themselves monopolies; they prevent non-owners from using copyrighted works in a whole host of ways (subject to fair use and certain — often technical — exceptions).  Indeed, courts straightforwardly enforce copyright monopolies every time a copyright owner wins an infringement lawsuit.

If monopolies are such a problem, why do we allow them as the foundation of copyright law?  There are policy-based answers, of course, but it seems strange that Judge Chin didn’t engage in any real policy analysis except to say:

The questions of who should be entrusted with guardianship over orphan books, under what terms, and with what safeguards are matters more appropriately decided by Congress than through an agreement among private, self-interested parties.

Of course, many would argue that U.S. copyright law and policy essentially is “an agreement among private, self-interested parties” that simply gets ratified by Congress.  Perhaps the litigants here made the mistake of picking the wrong forum.