DRI-319 for week of 6-22-14: Redskins Bite the Dust – and So Do Free Markets

An Access Advertising EconBrief:

Redskins Bite the Dust – and So Do Free Markets

The Trials and Appeals Board (TTAB) of the United States Patent and Trademark Office (USPTO) recently suspended validity of the trademarks previously held by the Washington Redskins professional football team of the National Football League (NFL). The legal meaning of this action is actually much more complex than public opinion would have us believe. The importance of this action transcends its technical legal meaning, however. If we can believe polls taken to test public reaction to the case, 83% of the American public disapproves of the decision. They, too, sense that there is more at stake her than merely the letter of the law.

The Letter of the Law – and Other Letters

The federal Lanham Trademark Act of 1946 forbids the registration of “any marks that may disparage persons or bring them into contempt or disrepute.” That wording forms the basis for the current suit filed by a group of young Native American plaintiffs in 2006. The hearing was held before TTAB in March, 2013. This week the judges issued a 99-page opinion cancelling each of the 6 different trademark registrations of the name “REDSKINS” and the Redskins’ logo, an Indian brave’s head in silhouette with topknot highlighted on the left. The decision called the trademarks “disparaging to Native Americans at the respective times they were registered.” The wording was necessary to the verdict; indeed, the dissenting judge in the panel’s 2-1 ruling claimed that the majority failed to prove that the registrations were contemporaneously disparaging.

This was not the first attempt to invalidate the Redskins trademarks – far from it. The previous try came in 1999 when the TTAB also ruled against the team. That ruling was overturned on appeal. The grounds for rejection were both technical and substantive. The judges noted that the plaintiffs were well over the minimum filing age of 18 and that the registrations went as far back as the 1930s. Thus, the plaintiffs had undermined their claim to standing by failing to exercise their rights to sue earlier – if the trademarks were known to have been such an egregious slur, why hadn’t plaintiffs acted sooner? The plaintiffs also cited a resolution by the National Congress of American Indians in 1993 that denounced the name as offensive. The Congress claimed to represent 30% of all Native Americans, which the judges found insufficiently “substantial” to constitute a validation of plaintiffs’ claim.

Meanwhile, an AnnenbergPublicPolicyCenter poll found in 2004 that “90% of Native Americans [polled] said the name didn’t bother them,” as reported in the Washington Post. Team owner Daniel Snyder’s consistent position is that he will “never” change the team name since it was chosen to “honor Native Americans,” the same stand taken by NFL President Roger Goodell. Various Native American interest groups and celebrities, such as 5000-meter Olympic track gold-medalist Billy Mills, have sided with the plaintiffs. Senate Majority Leader Harry Reid jumped at the chance to play a race card, calling the team name a “racial slur” that “disparages the American people” (!?). He vows to boycott Redskins’ games until the name is changed. Roughly half his Senate colleagues sent a letter to the team demanding a name change.

The Practical Effects of the Ruling

Numerous popular sources have opined that anybody is now “free” to use the name “Redskins” for commercial purposes without repercussions. Several lawyers have pointed out that this is not true. For one thing, this latest decision is subject to judicial review just as were previous ones. Secondly, it affects only the federal registration status of the trademarks, not the right to the name. The enforceability of the trademark itself still holds under common law, state law and even federal law as outlined in the Lanham Act. The law of trademark itself takes into account such concepts as “pervasiveness of use,” which reflects actual commercial practice. In this case, the name has been in widespread use by the team for over 80 years, which gives it a strong de facto claim. (If that sounds confusing, join the club.) Finally, the appeals process itself takes at least two years to play out, so even the registration status will not change officially for awhile.

Thus, the primary impact of the ruling will be on public relations in the short run. The same commentators who cast doubt on the final result still urge Daniel Snyder to take some sort of token action – set up a foundation to benefit Native Americans, for instance – to establish his bona fides as a non-racist and lover of Native Americans.

Why the Law is an Ass

There are times when you’re right and you know why you’re right. There are other times when you’re right and you know you’re right, but you can’t quite explain why you’re right. The general public is not made up of lawyers. If judges say the trademark registrations are illegal, the public is prepared to grant it. But, like Charles Dickens’ character Mr. Bumble, they insist that the law is an ass. They just can’t demonstrate why.

The provision in the Lanham Act against disparaging trademarks is the kind of legal measure that governments love to pass. It sounds both universally desirable and utterly innocuous. Disparaging people and holding them up to ridicule and contempt is a bad thing, isn’t it? We’re against that, aren’t we? So why not pass a law against it – in effect – by forbidding disparaging trademarks. In 1946, when the Lanham Act passed, governments were big on passing laws that were little more than joint resolutions. The Employment Act of 1946, for example, committed the federal government to achieving “maximum employment, purchasing power and income.” There is no objective way to define these things and lawmakers didn’t try – they just passed the law as a way to show the whole world that they were really, really serious about doing good, not just kidding around the way legislatures usually are. Oh, and by the way, any time they needed an excuse for spending a huge wad of the taxpayers’ money, they now had one. (Besides, before the war a famous economist had said that it was all right to spend more money than you had.)

The law against disparaging trademarks was passed in the same ebullient mood as was the Employment Act of 1946. Government doesn’t actually have the power to guarantee maximum employment or income or purchasing power and it also doesn’t have the power to objectively identify disparagement. Unlike beauty, a slur is not in the eye of the beholder. It is in the brain of the author; it is subjective because it depends on intent. Men often call each other “bastard” or “son of a bitch”; each can be either deadly serious invective or completely frivolous, depending on the context. The infamous “n-word,” so taboo that it dare not speak its name, is in fact used by blacks toward each other routinely. It can be either a casual form of address or a form of disparagement and contempt – depending on the intent of the user.

Everybody – including even Native Americans – knows that Washington football team owner George Preston Marshall, one of the legendary patriarchs of the NFL, did not choose the team name “Redskins” in order to disparage Native Americans or hold up to ridicule or contempt. He chose it to emphasize the fighting and competitive qualities he wanted the team to exemplify, because Indians in the old West were known as fierce, formidable fighters. Whether he actually meant to honor Native Americans or merely to trade on their reputation is open to debate, but it is an open-and-shut, 100%, Good-Housekeeping-seal-of-approval-certified certainty that he was not using the word “Redskins” as a slur. Why? Because by doing so he would have been committing commercial suicide by slandering his own team, that’s why.

That brings us to the second area resemblance of between the Lanham Act and the Employment Act of 1946. The Employment Act was unnecessary because free markets when left to their own devices already do the best job of promoting high incomes, low unemployment and strong purchasing power than can be done. And free markets are the best guarantee against the use of disparaging trademarks, because the inherent purpose of a trademark is to promote identification with the business. Who wants their business identified with a slur? We don’t need a huge bureaucracy devoted to the business of rooting out and eradicating business trademarks that are really slurs. Free markets do that job automatically by driving offending businesses out of business. Why otherwise would businesses spend so much time and money worrying about public relations and agonizing over names and name changes?

If the only reason for the persistence of legislation like the Employment Act and the Lanham Act were starry-eyed idealism, we could write off them off as the pursuit of perfect justice, the attempt to make government write checks it can’t cover in the figurative sense as well as the financial. Idealism may explain the origin of these laws but not their persistence long after their imposture has been exposed.

Absolute Democracy

By coincidence, another political-correctness scandal competed with the Redskins trademark revocation for headlines. The story was first reported as follows: A 3-year-old girl suffered disfiguring facial bites by three dogs (allegedly “pit bulls”). She was taken to a Kentucky Fried Chicken franchise by a parent, where she was asked to leave, after an order was placed for her favorite meal of sweet tea and mashed potatoes, because her presence was “disrupting the other customers.” Her relatives took this story of “discrimination” to the news media.

Representatives of the parent corporation were guarded in their reaction to the accusation, but unreserved in the sympathy they expressed for the girl. They promised a donation of $30,000.00 to aid in treatment of her injuries and for her future welfare. They also promised to follow up to confirm what actually happened at the store.

What actually happened, according to their follow-up investigation, was nothing. This was the result of their internal probe and a probe by an independent company they hired to do its own investigation. Review of the store’s surveillance tape showed no sign of the girl or her relatives on the day in question. A review of transactions showed no order for “sweet tea and mashed potatoes” on that day, either. KFC released a finding that the incident was a hoax, a conclusion that was disputed by another relative of the girl who was not one of those supposedly present at the incident.

Perhaps the most significant part of this episode is that KFC did not retract their promise of a $30,000.00 donation to the girl – despite their announced finding that her relatives had perpetrated a hoax against the corporation.

The Redskins trademark case and the apparent KFC hoax are related by the desire of interested parties to use political correctness as a cover for extracting money using the legal system. Pecuniary extortion is crudely obvious in the KFC case; $30,000 is the blackmail that company officials are willing to pay to avoid being crucified in a public-relations scandal manufactured out of nothing.

Their investigation was aimed at avoiding a charge of “discrimination” against the girl, which might have resulted in a six- or seven-figure lawsuit and an even-worse PR scandal. But their willingness to pay blackmail suggests an indifference to the problem of “moral hazard,” something that clearly influences Daniel Snyder’s decision not to change the Redskins’ team name. Willingness to pay encourages more blackmail; changing the team name encourages more meddling by activists.

The Redskins case is more subtle. Commentators stress that plaintiffs are unlikely to prevail on the legal merits, but doubt that the team can stand the continuous heat put on it by the PR blowtorch lit by the TTAB verdict. That is where the money comes in – owner Daniel Snyder will have to pony up enough money to the various Native American interest groups to buy their silence. Of course, this will be spun by both sides as a cultural contribution, meant to make reparations for our history of injustice and brutality to the Native American, and so on.

Of course, Snyder may turn out to be as good as his word; he may never agree to change the Redskins’ team name. The NFL – either the Commissioner or the other owners exerting their influence – may step in and force a name change. Or Snyder may even sell the team rather than be forced to change their name against his will. That would leave the plaintiffs and Native American interest groups out in the cold – financially speaking. Does that invalidate the economic theory of absolute democracy as applied to this case?

No. Plaintiffs stand to benefit in an alternative manner. Instead of gaining monetary compensation for their efforts, they would earn psychological (psychic) utility. From everyday observation, as well as our own inner grasp of human nature, we realize that some people who cannot achieve nevertheless earn psychic pleasure from thwarting the achievements of others. In this particular case, the prospective psychic gains earned by some Native Americans from overturning the Redskins name and the prospective monetary gains earned from blackmailing the Redskins’ owner are substitute goods; the favorable verdict handed down by TTAB makes it odds-on that that one or the other will be enjoyed.

This substitution potential is responsible for the rise and continued popularity of the doctrine of political correctness. “Race hustlers” like Jesse Jackson and Al Sharpton have earned handsome financial rewards for themselves and/or clients by demonizing innocuous words and deeds of whites as “racist.” What is seldom recognized, though, is the fact that their popularity among blacks at large is owed to the psychic rewards they confer upon the rank-and-file. When (let us say) a white English teacher is demoted or fired for teaching the wrong work by Mark Twain or Joseph Conrad, followers of Jackson and Sharpton delight. They know full well that the exercise is a con – that is the point. They feel empowered by the fact that they may freely use the n-word while whites are prevented from doing so. Indeed, this is simply a reversal of the scenario under Jim Crow, when blacks were forced to the back of the bus or to restricted drinking fountains. In both cases, the power of the law is used to earn psychic rewards by imposing psychic losses on others.

Legal action was necessary in the Redskins’ case because plaintiffs were bucking an institution that had been validated by the free market. The Washington Redskins have over 80 years of marketplace success on their record; the free market refused to punish their so-called slur against Native Americans. In fact, the better case is that the team has rehabilitated the connotation of the word “redskins” through its success on the field and its continuing visibility in the nation’s capital. Goodness knows, countless words have undergone this sort of metamorphosis, changing from insults to terms of honor.

When plaintiffs could not prevail through honest persuasion they adopted the modern American method – they turned to legal force. However tempting it might be to associate this tactic exclusively with the political correctness of the left, the truth is that it is the means of first resort for conservatives as well. That is the seeming paradox of absolute democracy, which represents the dictatorship of the law over free choice.

Inevitably, advocates of political correctness cite necessity as their justification. The free market is not free and does not work, so the government must step in. The planted axioms – that free markets usually fail while governments always work – are nearly 180 degrees out of phase. The failures of government highlight our daily lives, but the successes of the free market tend to be taken for granted. The famous episode of Little Black Sambo and its epilogue serves as a reminder.

The Little Black Sambo stories and Sambo Restaurants

The character of Little Black Sambo and the stories about him have been redefined by their detractors – that is to say, demonized as racist caricatures that dehumanize and degrade American blacks. This is false. In the first place, the original character of Little Black Sambo, as first portrayed in stories written in the late 19th and early 20th centuries, was Tamil (Indian or Sri Lankan) – a reflection of the ecumenical reach exerted by the term “black” in those days. Eventually, the character was adapted to many nationalities and ethnic identities, including not only American black but also Japanese. (Indeed, he remains today a hero to children of Japan, who remain blissfully untouched by the political correctness familiar to Americans.) This is not surprising, since the stories portray a little boy whose heroic perseverance in the face of obstacles is an imperishable life lesson. Presumably, that is why the stories are among the bestselling children’s storybooks of all time.

When American versions of the story portrayed Little Black Sambo as an American or African black, this eventually caught the eye of disapproving blacks like the poet Langston Hughes, who called the picture-book depiction a classic case of the “pickaninny” stereotype. Defenders of the stories noted that when the single word “black” was removed and any similarity to American or African blacks deleted from the illustrations, the stories attracted no charges of racism. Yet black interest groups echoed the psychologist Alvin Poussaint, who claimed that “I just don’t see how I can get past the title and what it means,” regardless of any merit the stories might contain. The storybooks disappeared from schools, nurseries and libraries.

In 1957, two restaurant owners in Santa Barbara, CA, opened a casual restaurant serving ethnic American food. In the manner of countless others, they chose a name that combined their two nicknames, “Sam” (Sam Battistone) and “Bo” (Newell Bohnett). Over time, Sambo’s Restaurant’s popularity encouraged them to franchise their concept. It grew into a nationwide company with 1,117 locations. Many of these were decorated with pictures and statuary that borrowed from the imagery of the “Little Black Sambo” stories.

The restaurants were a marketplace success, based on their food, service and ambience. But in the 1970s, black interest groups began raising objections to the use of the “Sambo” name and imagery, calling it – you guessed it – racist. Defenders of the franchise cited the value and longstanding popularity of the stories. They noted the success and popularity of the restaurants. All to no avail. By 1981, the franchising corporation was bankrupt. Today, only the original Santa Barbara location remains.

This was certainly not a victory for truth and justice. But it was a victory for the American way – that is, the true American way of free markets. Opponents of Sambo’s Restaurants went to the court of public opinion and made their case. Odious though it seemed to patrons of the restaurants, the opponents won out.

So much for the notion that free markets are rigged against political correctness. In the case of Sambo’s Restaurants, people concluded that the name tended to stigmatize blacks and they voluntarily chose not to patronize the restaurants. The restaurants went out of business. This was the appropriate way to reach this outcome because the people who were benefitting from the restaurants decided that the costs of production outweighed the benefits, and chose to forego those benefits. The decisive factor was that bigotry was (apparently) a cost of production.

Instead of achieving their aim through legal coercion or blackmail, activists achieved it through voluntary persuasion. Alas, that lesson has now been forgotten by both the political Left and Right.

DRI-190 for week of 12-30-12: Stereotypes Overturned: Race, Hollywood and the Jody Call

An Access Advertising EconBrief:

Stereotypes Overturned: Race, Hollywood and the Jody Call

The doctrine often referred to as “political correctness” ostensibly aims to overturn reigning stereotypes governing matters such as race. Yet all too often it results in the substitution of new stereotypes for old. Economics relies on reason and motivation rather than political programming to provide answers to human choices. Nothing could be more subversive of stereotypes than that.

What follows is a tale of Hollywood, race and the American military. At the time, each of these elements was viewed through a stylized, stereotypical lens – as they still are to some extent. But in no case did this tale unfold according to type. The reasons for that were economic.

The Movie Battleground (1949)

In 1949, Metro Goldwyn Mayer produced one of the year’s biggest boxoffice-hit movies, Battleground. It told the story of World War II’s Battle of the Bulge as seen through the eyes of a single rifle squad in the 101st Airborne Division of the U.S. Army. In late 1944, Germany teetered on the edge of defeat. Her supreme commanders conceived the idea of a desperate mid-winter offensive to grab the initiative and rock the Allies back on their heels. The key geographic objective was the town of Bastogne, Belgium, located at the confluence of seven major roads serving the Ardennes region and Antwerp harbor. Germany launched an attack that drove such as conspicuous salient into the Allied line that the engagement acquired the title of the “Battle of the Bulge.”

The Screaming Eagles of the 101st Airborne were the chief defenders of Bastogne. This put them somewhat out of their element, since their normal role was that of attack paratroopers. Despite this, they put up an unforgettable fight even though outnumbered ten to one by the German advance. The film’s scriptwriter and associate producer, Robert Pirosh, was among those serving with the 101st and trapped at Bastogne.

Battleground accurately recounted the Battle of the Bulge, including an enlisted man’s view of the legendary German surrender demand and U.S. General McAuliffe’s immortal response: “Nuts.” But the key to the film’s huge box-office success – it was the second-leading film of the year in ticket receipts – was its continual focus on the battle as experienced by the combat soldier.

The men display the range of normal human emotions, heightened and intensified out of proportion by the context. Courage and fear struggle for supremacy. Boredom and the Germans vie for the role of chief nemesis. The film’s director, William Wellman, had flown in the Lafayette Escadrille in World War I and was one of Hollywood’s leading directors of war films, including the first film to win a Best Picture Oscar, Wings.

Some of MGM’s leading players headed up the cast, including Van Johnson, George Murphy, John Hodiak, and Ricardo Montalban. The film was nominated for six Academy Awards and won two, for Pirosh’s story and screenplay and Paul Vogel’s stark black-and-white cinematography. In his motion-picture debut, James Whitmore was nominated for Best Supporting Actor and won a Golden Globe Award as the tobacco-chewing sergeant, Kinnie.

Whitmore provides the dramatic highlight of the film. Starving and perilously low on ammunition, the men of the 101st grimly hold out. They are waiting for relief forces led by General George Patton. Overwhelming U.S. air superiority over the Germans is of no use because fog and overcast have Bastogne completely socked in, grounding U.S. planes. Whitmore’s squad is cut off, surrounded and nearly out of bullets. Advised by Whitmore to save their remaining ammo for the impending German assault, the men silently fix bayonets to their rifles and await their death. Hobbling back to his foxhole on frozen feet, Whitmore notices something odd that stops him in his tracks. Momentarily puzzled, he soon realizes what stopped him. He has seen his shadow. The sun has broken through the clouds – and right behind it come American planes to blast the attacking German troops and drop supplies to the 101st. The shadow of doom has been lifted from “the battered bastards of Bastogne.”

1949 audiences were captivated by two scenes that bookended Battleground. After the opening credits and scene-setting explanation, soldiers are seen performing close-order drill led by Whitmore. These men were not actors or extras but were actual members of the 101st Airborne. They executed Whitmore’s drill commands with precise skill and timing while vocalizing a cadence count in tandem with Whitmore. This count would eventually attain worldwide fame and universal acceptance throughout the U.S. military. It began:

You had a good home but you left

You’re right!

You had a good home but you left

You’re right!

Jody was there when you left

You’re right!

Your baby was there when you left

You’re right!

Sound Off – 1,2

Sound Off – 3,4

Cadence Count – 1,2,3,4

1,2 – 3-4!

At the end of the movie, surviving members of Whitmore’s squad lie exhausted beside a roadway. Upon being officially relieved and ordered to withdraw, they struggle to their feet and head toward the rear, looking as worn out and numb as they feel. They meet the relief column marching towards them, heading to the front. Not wishing for the men to seem demoralized and defeated, Van Johnson suggests that Whitmore invoke the cadence count to bring them to life. As the movie ends, the squad marches smartly off while adding two more verses to the cadence count, supported by the movie’s music score:

Your baby was lonely as lonely could be

Until he provided company

Ain’t it great to have a pal

who works so hard to keep up morale?

Sound Off – 1,2

Sound Off – 3,4

Cadence Count – 1,2,3,4

1,2 – 3-4!

You ain’t got nothing to worry about

He’ll keep her happy ’till I get out

And I won’t get out ’till the end of the war

In Nineteen Hundred and Seventy-four

Sound Off – 1,2

Sound Off – 3,4

Cadence Count – 1,2,3,4

1,2 – 3-4!

The story of this cadence count, its inclusion in Battleground, its rise to fame and the fate of its inventor and his mentor are the story-within-the-story of the movie Battleground. This inside story speaks to the power of economics to overturn stereotypes.

The Duckworth Chant

In early 1944, a black Army private named Willie Lee Duckworth, Sr., was returning to Fort Slocum, NJ, from a long, tiresome training hike with his company. To pick up the spirits of his comrades and improve their coordination, he improvised a rhythmic chant. According to Michael and Elizabeth Cavanaugh in their blog, “The Duckworth Chant, Sound Off and the Jody Call,” this was the birth of what later came to be called the Jody (or Jodie) Call.

Duckworth’s commanding officer learned of popularity of Duckworth’s chant. He encouraged Duckworth to compose additional verses for training purposes. Soldiers vocalized the words of the chant along with training commands as a means of learning and coordinating close-order drill. Duckworth’s duties exceeded those of composer – he also taught the chant to white troops at Fort Slocum. It does not seem overly imaginative to envision episodes like this as forerunners to the growth of rap music, although it would be just a logical to attribute both phenomena to a different common ancestor.

Who is Jody (or Jodie)? The likely derivation is from a character in black folklore, Joe de Grinder, whose name would have been shortened first to Jody Grinder, then simply to Jody. The word “grind” has a sexual connotation and Jody’s role in the cadence count was indeed been to symbolize the proverbial man back home and out of uniform, who threatens to take the soldier’s place with his wife or girlfriend.

Already our story has turned certain deeply ingrained racial stereotypes upside down. In 1944, America was a segregated nation, not just in the South but North, East and West as well. This was also true of our armed forces. Conventional thinking (as distinct from conventional wisdom) holds that a black Army private had no power to influence his fate and was little more than a pawn under the thumb of larger forces.

Yet against all seeming odds and expectations, a black draftee from the Georgia countryside spontaneously introduced his own refinement into military procedure – and that refinement was not only accepted but wholeheartedly embraced. The black private was even employed to train white troops – at a point when racial segregation was the status quo.

Pvt. Duckworth’s CO was not just any commanding officer. He was Col. Bernard Lentz, the senior colonel in the U.S. Army at that time. Col. Lentz was a veteran of World War I, when he had developed the Cadence System of Teaching Close-Order Drill – his own personal system of drill instruction using student vocalization of drill commands. When Lentz heard of Duckworth’s chant, he immediately recognized its close kinship with his own methods and incorporated it into Fort Slocum’s routine.

The public-choice school of economics believes that government bureaucrats do not serve the “public interest.” Partly, this is because there is no unambiguous notion of the public interest for them to follow. Consequently, bureaucrats can scarcely resist pursuing their own ends since it is easy to fill the object-function vacuum with their own personal agenda. This is a case in which the public interest was served by a bureaucrat pursuing his own interests.

Col. Lentz had a psychological property interest in the training system that he personally developed. He had a vocational property interest in that system since its success would advance his military career. And in this case, there seems to be little doubt that the Duckworth Chant improved the productivity of troop training. Its use spread quickly throughout the army. According to the Cavanaugh’s, it was being used in the European Theater of Operations (ERO) by V-E Day. Eventually, Duckworth’s name recognition faded, to be replaced by that of his chant’s eponymous character, Jody. But the Jody Call itself remains to this day as a universally recognized part of the military experience.

Thus, the stereotypes of racial segregation and bureaucratic inertia were overcome by the economic logic of property rights. And the morale of American troops has benefitted ever since.

Hollywood as User and Abuser – Another Myth Exploded

The name of Pvt. Willie Lee Duckworth, Sr. does not exit the pages of history with the military’s adoption of his chant as a cadence count. Far from it. To paraphrase the late Paul Harvey, we have yet to hear the best of the rest of the story.

As noted above, the Duckworth chant spread to the ETO by early 1945. It was probably there that screenwriter Robert Pirosh encountered it and germinated the idea of planting it in his retelling of the Battle of the Bulge. When Battleground went into production, MGM representative Lily Hyland wrote to Col. Lentz asking if the cadence count was copyrighted and requesting permission to use it in the film.

Col. Lentz replied, truthfully, that the cadence count was not under copyright. But he sincerely requested compensation for Pvt. Duckworth and for a half-dozen soldiers who were most responsible for conducting training exercises at Fort Slocum. The colonel suggested monetary compensation for Duckworth and free passes to the movie for the other six. MGM came through with the passes and sent Pvt. Duckworth a check for $200.

As the Cavanaugh’s point out, $200 sounds like a taken payment today. But in 1949, $200 was approximately the monthly salary of a master sergeant in the Army, so it was hardly trivial compensation. This is still another stereotype shot to pieces.

Hollywood has long been famed in song and story – and in its own movies – as a user and abuser of talent. In this case, the casual expectation would have been that a lowly black soldier with no copyright on a rhyming chant he had first made up on the spur of the moment, with no commercial intent or potential, could expect to be stiffed by the most powerful movie studio on earth. If nothing else, we would have expected that Duckworth’s employer, the Army, would have asserted a proprietary claim for any monies due for the use of the chant.

That didn’t happen because the economic interests of the respective parties favored compensating Duckworth rather than stiffing him. Col. Lentz wanted the Army represented in the best possible light in the film, but he particularly wanted the cadence count shown to best advantage. If Pvt. Duckworth came forward with a public claim against the film, that would hurt his psychological and vocational property interests. The last thing MGM wanted was a lawsuit by a soldier whose claim would inevitably resonate with the public, making him seem to be an exploited underdog and the studio look like a bunch of chiseling cheapskates – particularly when they could avoid it with a payment of significant size to him but infinitesimal as a fraction of a million-dollar movie budget.

A Hollywood Ending – Living Happily Ever After

We have still not reached the fadeout in our story of Col. Lentz and Pvt. Duckworth. Carefully observing the runaway success of Battleground, Col. Lentz engaged the firm of Shapiro, Bernstein & Co. to copyright an extended version of the Duckworth chant in 1950 under the title of “Sound Off.” Both he and Willie Lee Duckworth, Sr. were listed as copyright holders. In 1951, this was recorded commercially for the first of many versions by Vaughn Monroe. In 1952, a film titled Sound Off was released. All these commercial exploitations of “Sound Off” resulted in payments to the two men.

How much money did Pvt. Duckworth receive as compensation for the rights to his chant, you may ask? By 1952, Duckworth was apparently receiving about $1,800 per month. In current dollars, that would amount to an income well in excess of $100,000 per year. Of course, like most popular creations, the popularity of “Sound Off” rose, peaked and then fell off to a whisper. But the money was enough to enable Duckworth to buy a truck and his own small pulpwood business. That business supported him, his wife and their six children. It is fair to say that the benefits of Duckworth’s work continued for the rest of his life, which ended in 2004.

If still dubious about the value of what MGM gave Duckworth, consider this. The showcase MGM provided for Duckworth’s chant amounted to advertising worth many thousands of dollars. Without it, the subsequent success of “Sound Off” would have been highly problematic, to put it mildly. It seems unlikely that Col. Lentz would have been inspired to copyright the cadence count and any benefits received by the two would have been miniscule in comparison.

The traditional Hollywood movie ending is a fadeout following a successful resolution of the conflict between protagonist and antagonist, after which each viewer inserts an individual conception of perpetual bliss as the afterlife of the main characters. In reality, as Ernest Hemingway reminds us, all true stories end in death. But Willie Lee Duckworth, Sr.’s story surely qualifies as a reasonable facsimile of “happily ever after.”

This story is not the anomaly it might seem. Although Hollywood itself was not a powerful engine of black economic progress until much later, free markets were the engine that pulled the train to a better life for 20th century black Americans. Research by economists like Thomas Sowell has established that black economic progress long preceded black political progress in the courts (through Brown vs. Topeka Board of Education) and the U.S. Congress (through legislation like the Civil Rights Act of 1964).

The Movie that Toppled a Mogul

There were larger economic implications of Battleground. These gave the film the sobriquet of “the movie that toppled a mogul.” As Chief Operating Officer of MGM, Louis B. Mayer had long been the highest-paid salaried employee in the U.S. The size of MGM’s payroll made it the largest contributor on the tax rolls of Southern California. Legend had endowed Mayer with the power to bribe police and influence politicians. Seemingly, this should have secured his job tenure completely.

Battleground was a project developed by writer and executive Dore Schary while he worked at rival studio RKO. Schary was unable to get the movie produced at RKO because his bosses there believed the public’s appetite for war movies had been surfeited by the wave of propaganda-oriented pictures released during the war. When Schary defected to MGM, he brought the project with him and worked ceaselessly to get it made.

Mayer initially opposed Battleground for the same reasons as most of his colleagues in the industry. He called it “Schary’s Folly.” Yet the movie was made over his objections. And when it became a blockbuster hit, the fallout caused Mayer to be removed as head of the studio that bore his name. To add insult to this grievous injury, Schary replaced Mayer as COO.

For roughly two decades, economists had supported the hypothesis of Adolf Berle and Gardiner Means that American corporations suffered from a separation of ownership and control. Ostensibly, corporate executives were not controlled by boards of directors who safeguarded the interests of shareholders. Instead, the executives colluded with boards to serve their joint interests. If ever there was an industry to test this hypothesis, it was the motion-picture business, dominated by a tightly knit group of large studios run by strong-willed moguls. MGM and Louis B. Mayer were the locus classicus of this arrangement.

Yet the production, success and epilogue of Battleground made it abundantly clear that it was MGM board chairman Nicholas Schenck, not Mayer, who was calling the shots. And Schenck had his eye fixed on the bottom line. Appearances to the contrary notwithstanding, Louis B. Mayer was not the King of Hollywood after all. Market logic, not market failure, reigned. Economics, not power relationships, ruled.

Thanks to Battleground, stereotypes were dropping like soldiers of the 47th Panzer Corps on the arrival of Patton’sThird Army in Bastogne.

No Happy Ending for Hollywood

Battleground came at the apex of American movies. Average weekly cinema attendance exceeded the population of the nation. The studio system was a smoothly functional, vertically integrated machine for firing the popular imagination. It employed master craftsman at every stage of the process, from script to screen.

Although it would have seemed incredible at the time, we know now that it was all downhill from that point. Two antitrust decisions in the late 1940s put an end to the Hollywood studio system. One particular abomination forbade studios from owning chains of movie theaters; another ended up transferring creative control of movies away from the studios.

The resulting deterioration of motion pictures took place in slow motion because the demand for movies was still strong and the studio system left us with a long-lived supply of people who still preserved the standards of yore. But the vertically integrated studio system has been gone for over half a century. Today, Hollywood is a pale shadow of its former self. Most movies released by major studios do not cover their costs through ticket sales. Studio profits result from sales of ancillary merchandise and rights. Theater profits are generated via concession sales. Motion-picture production is geared toward those realities and targeted predominantly toward the very young. Subsidies by local, state and national governments are propping up the industry throughout the world. And those subsidies must disappear sooner or later – probably sooner.

This has proved to be the ultimate vindication of our thesis that economics, not stereotypical power relationships, governed the movie business in Hollywood’s Golden Age. Free markets put consumers and shareholders in the driver’s seat. The result created the unique American art form of the 20th century. We still enjoy its fruits today on cable TV, VHS, DVD and the Internet. Misguided government attempts to regulate the movie business ended up killing the golden goose or, more precisely, reducing it to an enfeebled endangered species.

DRI-398 for week of 8-5-12: ‘Buying Local’: Reinventing the Wheel – Square

‘Buying Local’: Reinventing the Wheel – Square

According to popular folklore, the 1950s were temperamentally straitlaced and artistically straitened, a time of airless conformity and retrograde sentiment. By contrast, the present day is technologically advanced, artistically avant garde and politically progressive.

Neither stereotype stands up to scrutiny. The 50s produced critically acclaimed cinematic masterpieces like Vertigo, The Searchers, Singin’ In the Rain, Touch of Evil and The Night of the Hunter. They spawned the Civil Rights movement, Jack Kerouac, the Beats and the birth of National Review magazine. The current cinema is top-heavy with inferior remakes of previous classics, knockoffs of television series and comic-books. Our politics is poisoned by the zero-sum implications of the bi-partisan devotion to big government. We stand on the verge of repudiating the commitment to freedom and individualism made by the Founding Fathers over two centuries ago.

Historians will one day cite the doctrine known as “political correctness” as one of the most toxic pollutants of the political climate. One ingredient in the politically correct brew is the behavioral posture known as “buying local.”

The Principle of Buying Local

The guiding principle behind “buying local” (hereinafter, “BL” for purposes of brevity) calls for consumers to confine their purchases, as much as possible, to production originating in the local community. This program is deceptively simple. Close examination, however, reveals that it is adherents who are deceived.

The simplicity of the plan dissolves as soon as one tries to put it into practice. In order to limit purchases to goods produced in the local community, one must distinguish local from non-local. For exemplary purposes, consider the metropolitan area of Kansas City, MO/KS. This is an area of over 2 million people, overlapping the border between two states, consisting of over 30 separate, contiguous municipalities.

Does each one of those municipalities constitute a “local community?” Do the residents of Fairway, KS (population 3,952) pointedly refrain from shopping in neighboring Westwood, KS (population 1,533)? Should they both religiously shun neighboring Kansas City, MO (population 440,885), immediately across the state line to the west and MIssouri’s largest city? In practice, it is safe to assert, virtually nobody does. After all, Kansas City is where the lion’s share of gastronomic, artistic, athletic and cultural amenities are located – not to mention more mundane but even more practical venues like Wal Mart, Target, Costco and the Country Club Plaza (the world’s first outdoor shopping center) are located.

Very well. We will assume that advocates of BL will stipulate that the entire Kansas City metro area qualified as a “local community.” Once that’s settled, we confront questionable cases like Olathe, Leavenworth and Lawrence, KS and Peculiar, Harrisonville and Belton, MO – all small towns lying within a 40-mile radius of Kansas City. And the argument is reversible, since residents of Kansas City will want to travel to and import goods and services from these outlying communities.

Suddenly, it dawns that there is no objective, universal meaning to the term “local community.” This effectively torpedoes the concept. But that does not destroy its usefulness, which is utterly independent of economic logic and practical value.

Emotion and Politics

BL is a useful concept because pretending to use it allows people to regard themselves favorably. Because they associate the term with pleasant feelings, they do not react badly when they see the concept used to practice economic protectionism;that is, totake money away from efficient producers and give it to inefficient producers. Thus, buying local is useful to those who advocate and promote protectionism. Mostly, these are left-wing sympathizers like union members, environmentalists and central planners.

Ever since the dawn of the Industrial Revolution and the advent of mass production, small-scale production has been gradually but continually displaced by large-scale, mass production. The assembly line allowed larger quantities of output to be produced at lower unit cost than older production systems such as handicraft and piecework. All other things equal, the law of demand states that consumers will wish to buy more of any good at lower prices of that good. A corollary implication is that consumers will prefer to buy a lower-priced good to a higher-priced one – provided they view the two goods as otherwise homogeneous.

Mass production allowed firms to serve national markets. Larger firms tended to displace small, local firms. This trend began in the 18th century and continues today. Decades ago, Wal Mart established itself by entering small-town markets and displacing the monopolies enjoyed by local merchants through Wal Mart’s low prices and tremendous variety of goods. Now it faces competition from discount retailers like Target and Costco.

The economic logic underlying this historical evolution is unassailable. Countries, states, regions, cities and municipalities specialize in producing goods that highlight their “comparative advantage,” which means goods whose production they can accomplish with the smallest sacrifice of alternative output. After production, the goods then travel throughout the world via trade – international, intranational, inter-state and inter-local. Money tends to obscure the underlying barter nature of this trade by interposing itself as a medium of exchange.

Although efficient trade tends to optimally enhance the real income of just about everybody, less efficient producers often object to the outcomes realized under competition. That is where BL comes in. Promoters use it as a pretext for preventing consumers from buying lower-priced outside alternatives to local goods, or trying to, or scolding consumers who succeed. The local producers and their employees gain from this interference. The promoters of BL gain power and influence as brokers of the benefits enjoyed by local producers. And these gains come at the expense of everybody else.

The Tribal Roots of BL

The pleasant feelings associated with BL are stimulated by human instincts traceable to the evolution of our species. When male/female pairs began to aggregate into groups, the human race spent thousands of years developing habits conducive to the survival and growth of the local tribe. Production was organized to benefit the group; dependence on outsiders was dangerous. Although trade dates back as far as recorded history, the full realization of its advantages developed slowly.

Over time, more sophisticated institutions took the place of the tribe. Religion provided a form of group identification, as did geographic origin and residence. With the nation state came confederations bringing together towns, states and regions under one banner. The common denominator of appearance made ethic membership another popular source of group differentiation.

The ambiguity of the word “local” makes the concept of buying local to stretch far enough to cover all of these bases. Jews can feel good about keeping kosher. Residents of Tightwad, MO can feel virtuous about keeping their deposits at Tightwad Bank instead of Bank of America. Without quite realizing why, we can all bask in the inner glow of belonging to the tribe.

What’s the Harm?

Casual boosters of BL may object to the objections raised by economists. What’s the harm in a little local color, a little local favoritism? After all, we’re going to buy our vegetables somewhere, aren’t we? Surely economists aren’t suggesting that we shouldn’t root for local sports teams and nourish local traditions, are they?

An example may clarify the relevant distinction. Professional sports leagues were organized by creating teams linked to geographic localities (typically cities). Observation indicates that most people root for and identify with teams based on “tribal” factors like geography. On the other hand, some people derive pleasure from sports based purely on the athletic excellence displayed, regardless of geographic loyalty. If tribal loyalty is itself an originary source of happiness or utility, economists have no basis for decrying it. But the suggestion that tribal loyalty should be artificially elevated above otherwise higher-ranking considerations of economic efficiency is wrong.

There is nothing wrong with being a fan of the New York Yankees. There is nothing wrong with living in New York and being a fan of the New York Yankees. But saying that New York residents must (or should) be Yankees fans is wrong. And the inherent meaning of buying local is that natural market outcomes cannot be trusted and must be overridden in favor of local loyalty. Otherwise, why would we need the slogan?

Most people are quite willing to subordinate the appreciation of athletic excellence to tribal loyalty because it costs them little or nothing to do so. But in cases where it does cost- perhaps quite heavily – to elevate the tribe above all else, it is idiotic to do so.

Price and Perishability

This is the moment to point out that local production has its own set of countervailing advantages and efficiencies, sometimes offsetting those of mass production and national markets. The beauty of free markets is that these are already reflected in the data generated by market competition – we do not need the artificial intervention of BL to make us aware of them.

One of the most frequently cited products by BL advocates is local produce. This is hardly surprising. Consumers across America have come to know and love the products purchased in New York’s Fulton Fish Market, San Francisco’s Fisherman’s Wharf and the Farmer’s Market in Los Angeles’ Westwood Village. There are sound economic reasons why these markets arose and endured throughout the era of corporate farming and aquaculture.

After goods are produced, they must find their way into the hands of consumers. Since the locus of production is chosen to minimize production costs, it will be close to some consumers but distant from others. The price of any good must reflect not only the costs of production but also the costs of transportation from production site to the consumer. In this respect, local production has a built-in advantage – by definition, transport costs are lower for local production than for non-local. But this advantage is automatically conveyed to consumers via the price system, in the form of a lower price – or rather, a lower transport-cost component of the price. This invisibly nudges consumers towards local production. There is no need to interpose BL in the decisionmaking process. Of course, the influence of lower transport costs may not be decisive, since other factors may more-than-counterbalance it.

Although economics textbooks sometimes downplay the fact, quality is a choice variable no less important than price. One drawback of produce is its perishability. Local production enjoys another automatic advantage over non-local here and in the closely-related characteristic of freshness. And once again, markets transmit the qualitative superiority of local produce to consumers without the quasi-coercive force of BL being applied. The continuing survival of city produce markets and roadside vegetable stands is tacit evidence of this.

BL in Action

In its most innocuous form, BL is found in casual references on a variety of media. Hosts and callers to sports-talk shows will urge fans to support the home team by implying or stating outright that “loyalty” demands it. While analytically indefensible, this is comparatively harmless. The relevant comparison is to demands that taxpayers be made to support sports teams with subsidies ranging from operating subsidies to sweetheart stadium leases to bond issues supporting stadium construction. Although the rationale for sports-team subsidies often invokes secondary, multiplier benefits and job creation – none of which has the slightest logical or empirical validity – the tacit premise lurking underneath the pseudo-economic jargon is that tribal loyalty, usually disguised as civic pride, should rule.

In hiring, there may be something to be said for resolving toss-ups or obscure choices in favor of local candidates. For one thing, familiarity with local conditions may carry some advantages in buying, negotiating or adhering to protocol. But BL is a time-honored means of delivering graft by requiring city contracts to give preference to local contractors, vendors or labor.

An all-star example of the BL fallacy is the insistence that BL will “keep your money in the local economy” – as if that were a desideratum devoutly to be wished. The best way to apprehend the money-leakage fallacy is to compare a local community to a country in international trade. When U.S. citizens buy foreign goods, they send dollars outside the country – or, more precisely, to the foreign-exchange market, where the dollars exchange for foreign currencies. But this dollar exodus is not permanent. Foreigners do not consume dollars directly by eating them or using them to mop their brows. As a first approximation, they will buy them from foreign-exchange dealers to use in buying U.S. goods. Now the dollars return home. (Observe that the fundamental nature of exchange is barter, the trade of goods for goods, even though money greatly facilitates this exchange process.) This logic applies to purchases of financial assets as well; the only effect of BL will be to prevent local residents from enjoying a higher rate of return on their money.

Movements in exchange rates and trade in financial assets will tend to equalize the value of a nation’s imports and exports over time. This even holds true when exchange rates are fixed and invariant, although the outcome is accomplished not through movements in exchange rates but through money flows and changes in real income and employment. The same thing applies to local communities – trade inside the U.S., for example, is conducted in a common currency, so imports and exports between the community and the rest of the country tend to equalize. It is true that occasionally a “dying” community will suffer when business leaves and money flows in only one direction. BL will not rescue this situation, though – it will merely lower the standard of living of remaining inhabitants. Lack of tribal loyalty did not cause the civic mortality and BL cannot cure it.

The international realm is the venue for perhaps the most popular display of BL. It is also the only one to attract much serious support from economists. This is the demand for preference towards “indigenous production” in developing countries. In practice, it is usually invoked in support of local agriculture. Expressed concisely, it invokes a scenario in which the real income effects of price changes overshadow the substitution effects. Farmers are so numerous that they cannot benefit from purchases of imported agricultural products, even when those products are lower-priced. The resulting loss of demand for their output causes farmers to lose more as producers than they gain as consumers. Farming is so dominant that the gains in non-agricultural sectors cannot compensate for the net losses suffered by farmers.

The remedy prescribed by the left-wing is BL on a national scale – the restriction or outright prohibition of agricultural imports from developed nations. The problem with this cure is that its success keeps the patient on permanent life support. The only hope for economic growth is to diversify the economic base sufficiently to achieve some measure of balanced development. Protecting domestic agriculture has the opposite effect; it keeps resources employed in agriculture instead of diverting them into alternative sectors.

BL, Raw Materials and Economic Development

The case of (potential) immizerizing trade is by far the exception in international economics. The typical case is that of a developing country producing raw materials, particularly extractive substances such as tin, oil, or rare minerals, or raw agricultural commodities such as cocoa or coffee beans. It would be absurd to limit consumption of these substances to their production locus; in fact, they are transported throughout the world and used as production inputs in thousands of goods and services. Less developed countries are heavily dependent on income from their export. Yet the BL doctrine, taken literally, would dictate their exclusion.

Really, the current flap over BL is simply the same as the “buy American” imbroglio that periodically emerges to bedevil U.S. consumers and economics instructors. Scratch almost any product and you discover that there is no such thing as a purely American good, because the complexity and efficiency of modern markets enables least-cost production to combine inputs from around the globe. Toyota is a “foreign” car because of its nameplate, but it is assembled in the U.S. and its so-called “American content” exceeds that of many domestic models. Meanwhile, goods with impeccable American pedigrees nonetheless employ inputs and labor from abroad.

A list of thousands of key imported inputs used in everyday U.S. production is sufficient to scotch any realistic notion of BL as an actual program. Some of these inputs are imported because they do not exist within our national borders. Others could be produced here, but only as astronomical cost. Still others were domestically produced or still are, but cannot be produced in sufficient quantities to meet domestic demand.

BL and Environmentalism

BL is so economically unsound that only political coercion could even begin to put it into widespread practice. Thus, it has much in common with environmentalist doctrine, which is likewise based on emotive, tribal considerations that dissolve into contradiction when subjected to scrutiny.

The modern reaction against “globalism” is clearly related to BL; indeed, “localism” may be viewed as the opposing metaphor to “globalism.” Environmentalists have hopped onto the anti-globalist bandwagon and made common cause with such fellow left-wingers as labor unions and socialists. Labor unions oppose international trade because trade seeks out least-cost production, and this enables producers to circumvent the local labor monopolies created by unions by importing goods created using non-union foreign labor. Consumers and foreign workers gain from this trade, but union monopolists are left out in the cold – at least in their capacity as sellers of labor, anyway.

The environmentalist link to BL Is forged by the trendy recourse to the theory of man-made global warming, which pinpoints the atmospheric release of carbon dioxide as the culprit. The environmentalist mania for reducing individual and corporate “carbon footprints” has provided a pretext for BL, on the presumption that less transport must mean less carbon usage. Not only is this an unsound generalization, it is also wildly impractical. Even the most powerful socialist dictatorship would not possess the necessary knowledge to calculate the carbon footprints of the hundreds of thousands of goods and services produced and consumed by billions of humans, let alone to successfully coordinate economic life in such a regime. The problems posed are those of “buy American” increased exponentially. And, of course, all this assumes the correctness of the initial theory.

BL is BS

BL pretends that economic problems can be reduced to a crude level and solved with reference to simple geography. But the only valid points made by the BL program are already automatically incorporated into the data transmitted by the free, competitive price system. Meanwhile, that price system also integrates a vast amount of additional subtle and complex data that BL does not even begin to contemplate. Thus, BL not only represents an attempt to reinvent the wheel – it reinvents it square.

In sum, then, BL veers between meaningless platitude and hard-core protectionism. Sliced either way, it is baloney. BL is BS, a victory of style over substance in the great politically correct tradition of the left wing.