Mutations of Ownership: Should Genes Be Patentable?

“He who receives an idea from me, receives instruction himself without lessening mine; as he who lights his taper at mine, receives light without darkening me.” -Thomas Jefferson

The Angelina Jolie Effect

In 2013, Angelina Jolie shocked Hollywood by announcing her decision to undergo a preventive double mastectomy. She cited a hereditary risk of breast and ovarian cancer and what she had been told was a 65 percent chance of breast cancer due to a mutation in her BRCA1 gene.

The discovery that certain mutations of the BRCA 1 and BRCA 2 genes increase risk of breast and ovarian cancer was made in the 1990s. The company that began the BRCA analysis test claimed that a mutation in either of these genes could increase risk to as high as 87 percent for developing breast cancer and 63 percent for developing ovarian cancer by age 70.

The ensuing publicity caused a surge in genetic testing in what has been named the Angelina Jolie effect’. But the cost of a BRCA test is extremely prohibitive, at more than $3,000 in the United States. Jolie wrote in an op-ed that this was a huge obstacle for many women seeking tests for breast cancer, a disease that kills almost half a million people around the world each year.

When Myriad Genetics discovered the ‘breast cancer genes’ in 1994 and 1995, it managed to acquire 20-year patents for the very genes themselves, as well as any current and future methodologies for examining them. This monopolization was a boon for shareholders, and in 2013 the BRCA analysis test brought in 75 percent of Myriad’s total revenue of $613 million.

Should Biological Phenomena be Ownable?

Conversations about property rights typically involve things that people have built, bought, or otherwise created throughout their lives. But as technology challenges our fundamental understanding of biology and ourselves, we are faced with a decision about whether to update our institutions to reflect new opportunities for ownership in nature.

In 2009, a group of organizations including the Association for Molecular Pathology and the American Civil Liberties Union filed a lawsuit challenging the BRCA gene patents, arguing that they amounted to patenting human life, robbed every person of a piece of self-determination, and violated basic human dignity.

The case was supported by testimony from many women who had been disadvantaged or put at risk by patent restrictions, from being denied a second opinion on tests, to being unable to afford testing, and having insurance rejected by Myriad. After a four-year legal battle, the Supreme Court ruled in 2013 that human genes cannot be patented in the U.S. because DNA is a “product of nature”.

This ruling annulled the patents related to more than 4300 human genes, stripping monopoly status from Myriad Genetics and dozens of other companies and institutions that had profited from them. “Myriad did not create anything,” Justice Clarence Thomas wrote in the majority opinion. “To be sure, it found an important and useful gene, but separating that gene from its surrounding genetic material is not an act of invention.”

What the landmark ruling didn’t cover, however, were methods for testing BRCA genes, possible new patents of these methods, or the patentability of synthesized DNA. Myriad’s two-decade monopoly has left it with a massive database of genetic data, maintaining its dominant position in risk factor analysis for BRCA genes compared to any competitor.

The main importance of the Court’s decision was establishing this boundary between innovation and appropriation of biological phenomena. In the same way that natural resource extraction methods can be patented and monopolized, so too can techniques for analyzing and repurposing genetic material. But the mere existence of compounds in nature should not be ownable in a free and clear way, not without some sort of duty to use these natural opportunities, opportunities that hold the potential to free us of a great deal of suffering and unleash human potential.

‘Biopiracy’

It’s not just genes that have been captured for exclusive license and rent-seeking. Consider Joseph Merrick, a so-called ‘freak of nature’ known as the Elephant Man. He spent most of his short life in circuses, where many entrepreneurs made a great deal of money exploiting Merrick’s condition. Until recently his bones were on display at the Royal London Hospital museum, and there is no evidence to suggest he consented to this.

The most famous case of this sort of appropriation is that of Henrietta Lacks, an African-American woman whose cancer cells were harvested in 1951 and used to create an immortal cell line for scientific experimentation. In the process of radium and x-ray therapy, tissue was removed from her tumor and secretly sent to a lab at Hopkins University to be grown in test tubes.

Lacks died at the age of 31, leaving behind a husband and five young children. The family never received any financial support, and found out by chance that their mother’s cells (called HeLa cells) have been used in ongoing research. HeLa cells were used in developing the polio vaccine, were sent into space, and have been used for cloning, gene mapping and in vitro fertilization.

The practice of patenting materials in nature and people or aspects of cultural tradition is given the derogatory term ‘biopiracy’, and agrochemical and biotech company Monsanto offers an illustration which once again distinguishes between innovation and merely appropriating what freely exists in nature.  In 2016, the European Patent Office revoked a Monsanto patent for a virus-resistant gene found in Indian melons. Monsanto introduced the resistance to other types of melons and managed to patent this as its own invention. But the gene responsible for this resistance was discovered in 1961 and plants containing it have been publicly available since 1966. Conversely, Monsanto has won many of its own lawsuits against farmers who infringe on patent rights Monsanto has on its seeds.

Monsanto and other institutions have appropriated these materials without obtaining consent. It then has turned around and charged monopoly prices to the same people for the right to use these materials. And while cultural remuneration is tricky, privatizing these cultural products anyway has sometimes resulted in important advances in medicine and other fields. However, in the context of patents, there has more often been a very real reduction in scientific and social advancement, as patent holders merely speculate on their patent claims. This forces real innovators to pay large sums of economic rent or go through contortions to avoid patents, all in order to add to the intellectual stock of humanity.

For example, there are hundreds of patents on Agrobacterium techniques alone, which has been the most common vector for companies like Monsanto splicing genetic code into plants. The reason there are so many is the risk of patent infringement. Researchers have come up with brilliant workarounds for these problems, but developing new ways to do the same things has huge opportunity costs. For scientists, it’s a purely bureaucratic hurdle, not a chance for real scientific advancement. Thankfully, tools are being developed to help reduce confusion over this, but they are not enough to encourage entrepreneurship without an army of lawyers.

Open Access

In the mid-’80s, molecular biologist Dr. Richard Jefferson pioneered a genetic research technique that helped illuminate where genes are expressed in plant tissue. He distributed this helpful technique immediately to more than 1000 labs around the world.

Jefferson said in an interview that the litigious way in which genetic patent issues tend to be resolved is not constructive, and that both parties “end up trying to promote their particular worldview based on a lack of evidence on either side”.

“So you’ll have businesses who will pound their wingtips on the table and say ‘we must have exclusive licenses, and… on the other side, you might have civil society or thoughtful social policy engagement that says ‘it’s all wrong, you shouldn’t do it that way, everything should be free’, but they may well not be aware of the very complex natures of risk mitigation businesses have to encounter,” he said.

“There’s no real evidence base that can guide real problem-solving for policymakers or for practitioners.”

One company might be better off if techniques for analyzing genes can be monopolized, but it is likely that the market for innovation and society as a whole would be better off if these medical techniques were somehow available to all. These returns to society could manifest as wealth creation, scientific innovation, and better health outcomes.

Open source success stories in the technology world –  including operating systems, programming languages and web browsers – have not offered direct profit to its community of creators, but they have provided social value and a means to create wealth. Jefferson wrote in 2006: “Many ask, ‘How do you make money in open source?’ The answer: you make money not by selling open source, but by using open source.”

There are valid reasons both for patents as well as open source. However, might there be a synthesis, a solution that would give us the best of both worlds?

Incentives are Holier than Property

Friends of Earthsharing.org, Guido Núñez-Mujica and Joseph Jackson, had a great idea for helping poor people in remote areas of Latin America. They wanted to create a light and portable machine for copying DNA (PCR) so it could be used for all sorts of things, in this case testing for tropical diseases. A standard PCR machine is fairly heavy, at least as far as jungle treks go, so a light mobile version could have really helped a lot of people get tested and then obtain treatment. However, because someone had patented the mere idea more than 25 years ago, and done nothing with it, they could not patent it themselves. This vastly reduced the pool of investors due to the increased threat of competition.

Even if others have independently thought of the same idea on their own, they are restricted from using it by an existing patent. Such ideas should not belong exclusively to the person who merely filed the patent first, at least not in an absolute way. We can, for instance, say that a patent affords the holder the opportunity to invest more into creating their idea, but that right should be coupled with an incentive to use their monopoly privilege for productive purposes.

An innovative solution to this problem parallels that of 19th-century economist Henry George, who wanted to incentivize landlords owning prime real estate to make their land available to others. He proposed a tax on the value of urban land to invigorate landlords to use prime locations productively.

Where landlords have monopoly privilege over a particular geographic location, Myriad genetics and Monsanto had, and to some degree still have, a monopoly privilege over specific ‘nucleo-graphic’ areas of DNA, untouched by the artifice of human innovation. Just like landlords who own vacant urban lots for years and leave them undeveloped, patent owners should pay increasingly more to exclude others from developing ideas that will benefit humanity.

Photo: Pixabay.

Patent Value Tax

Patents are important because the exclusive usage rights can often provide a predictable environment that can encourage production. Banks can feel confident that they can provide loans. Inventors can feel more confident that someone won’t just copy their work and get away with it. Patents are also important because it ensures that the discovery is publicly documented.

But as previously mentioned, patents also have drawbacks. Patent trolls use patents for idle speculation, holding valuable ideas for ransom. Patents contribute to a climate of high liability for new inventors, because with so many patents it is impossible to know when violations occur.

To ensure patents are only held by people who intend to use them, and only while they are intending to use them, a tax incentive system could be very helpful.

Patent values could be self-assessed by the inventor and changed at any time. The rate of tax will gradually rise over time, based on the self-assessment. If particular patent holders decide the taxes are too onerous, they can simply lower their assessment, or relinquish it into the public domain.  Anyone is allowed to place bids that are higher than that self-assessed value, and this will initiate an auction. The proceeds go to the current holder.

Auctions would be open to anyone, including the government. This would provide a vehicle by which we can use the democratic process to incentivize scientific research. Since the government could buy the patent and release it into the public domain.

Some may argue that patents are nothing more than a right to sue for violation, and do not encourage innovation. This is particularly true today considering that many technologies require a combination of existing technologies, involving multiple patent holders who are often in it to speculate. However, this dynamic would vanish if patents had high holding costs and could be publicly auctioned at any time. Patent holders would have an incentive to work with others quickly because holding onto a patent would be like holding a very expensive hot potato.

Patents as a Privilege

Founding Father and third President of the United States Thomas Jefferson is the earliest authority on American patent law, but his view on the matter was characterized by skepticism unless patents were for the public good. He was generally opposed to any kind of monopoly, and believed that ideas were both unstoppably contagious and not fit to “be a subject of property”.

“Society may give an exclusive right to the profits arising from them, as an encouragement to men to pursue ideas which may produce utility, but this may or may not be done, according to the will and convenience of the society, without claim or complaint from anybody,” he said.

The attachment of property rights to biology, and all ideas for that matter should be treated with great care, both because the natural world was not created by any one of us, and because exclusive rights to innovate need to come with a duty to use the necessary natural resources well. It is not for us to plant our flag and claim ‘this is mine!’ but to consider ourselves stewards, with a duty to use natural resources in ways that will ultimately improve our lives and the lives of others.

 

Featured image: lisichik via Pixabay.

 

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Joshua Vincent: Land Value Taxation In Practice

Significant changes to any system of taxation require significant upheaval, and perseverance from citizens in and out of government. EarthSharing.org spoke with land value taxation proponent Joshua Vincent earlier this month, in a conversation covering attitudes towards land value tax, its applications, and the activism required to advance it. Watch the interview below, broken into three parts.

Vincent has been executive director of the Center for the Study of Economics since 1997. He has consulted for more than 75 municipalities, counties, NGOs and national governments. He works with tax departments and elected officials to promote land value taxation, and has testified as an expert witness on its impact. Vincent is the editor and publisher of Incentive Taxation.

Best Valuation Methods

Vincent lays out best practices for calculating land values, most of which “rely on values that have already been established by the assessor.” By looking at sales prices in an area, particularly of vacant lots but also of derelict buildings set for demolition, a fairly accurate picture of land value can be obtained.

Building values are more complex, but still absolutely necessary for revealing land values: by subtracting building value from a property’s total value, the ideal taxable land value can be calculated. Vincent says that “if we want to help capital and labour escape taxation we have to figure out what the building is worth, because that’s where the labour and the capital goes.”

The most effective valuation systems are in states that “update their assessments on a fairly regular basis, and they also change the percentage of land value to building value to reflect essentially what the market is,” Vincent says.

Using the example of an Atlantic City casino, Vincent says that while 20 years ago the property value would have skyrocketed due to market dominance and profit levels, today that profit has been reduced substantially. “Right now the land value is half of the total parcel value, because the building has lost its revenue-generating capacity,” he says.

Approaching City Officials

A land value tax is not just an end unto itself to reduce inequities in wealth. Vincent says the focus of any campaigners for land value taxation should be its application to almost any pre-existing problems in a city.

“You have to identify a problem that the community suffers from,” Vincent says, whether it be blight, population loss, or perceived high taxes. City officials will usually tend toward enlightened self-interest, and the revenue-neutral tax abatements that a land value tax allow are attractive to public representatives whose priorities are job creation and citizen well-being.

“We would then propose: well how about a universal permanent abatement on all buildings, and not just new buildings, not just condos, but all buildings past, present and future?”

Joel Bedford SoHo 1 via photopin (license)
Joel Bedford SoHo 1 via photopin (license)

One discussion is not enough to effect real policy change, and Vincent says any correspondence should be followed up with a second meeting, further information, and a push for the council to crunch the numbers of what is a very practical, “nuts-and-bolts” policy.

“The mistake a lot of reformers of all types make is they march into a city council chambers or a mayor’s office and say ‘here’s a reform, do it’, and then they turn around and leave. I think what we are putting forward is something that is practical, it is doable, and you can demonstrate immediately how it is doable.“

Who Is Likely To Oppose Land Value Taxation?

Entrenched interests exist that have made fortunes extracting rent from populations without investing back into them, and these interests comprise the most likely and vigorous opponents of land value taxation. Vincent points the finger at speculative, “absentee owners who have a business model that depends on blight and the decay of the neighborhood.”

“A lot of people that oppose land value tax are people that have adopted business models and used tactics to thrive in a declining city,” he says. “You extract rent, literally, from the tenants but you don’t put anything into the property; you let it run down. That’s the successful business model. And they will oppose a land value tax, because their buildings have fallen apart to such a degree that they wouldn’t benefit from such a land value tax.”

Automobile-intensive businesses are another example, and in the past, owners of flat-surface parking lots have voiced opposition to changes of the tax structure. Vincent says these businesses feed off the value of urban land, itself the product of the people and the government, but “they’re doing nothing to create that value, and they’re doing nothing for the community”.

Vincent points out that some among these interests have actively funded anti-land value taxation campaigns, like in Allentown in 1997.

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Julia Bossmann: Challenges Of A Post-Work Society

BIL: Oakland 2016 Recession Generation was an Earthsharing.org conference in Oakland, California on July 9th. Foresight Institute president Julia Bossmann presented an argument for moving toward a post-work society, and the changes both economic and social that would be required to achieve this.

Bossmann recounts the incredible advances in artificial intelligence we are witnessing, whereby computers are writing original imitations of Shakespeare, dispensing effective legal advice and piloting cars through traffic. Bossmann believes that innovative scientific research will be next on the list of A.I. accomplishments.

Photo: FritzchensFritz AMD@14nm@GCN_4th_gen@Polaris_10@Radeon_RX_470@1622_M60J5.0A_215-0876204___Stack-DSC07208-DSC07236_-_ZS-PMax via photopin (license)
Photo: FritzchensFritz AMD@14nm Radeon_RX_470 via photopin (license)

“They have theoretically unlimited memory, they have a way faster speed of reading, they can find insights and facts from all across and then draw connections and find patterns. So now that we may have reached the limit in medical research – that one human mind may not be enough to figure it all out – having a machine mind may open the floodgates to finding out much more.”

Bossmann’s scenario of a post-work society presents significant economic challenges, with a disruption of millions of jobs across the professional spectrum. Truck drivers could be an early casualty, but many others earning an income by selling their time and labor stand to lose their current employment due to automation.

“How would a human even compete with someone who can drive for thousands of hours at no end and not ask for a salary?”, Bossmann says.

Photo: jurvetson Your Uber Otto has arrived via photopin (license)
Photo: jurvetson Your Uber Otto has arrived via photopin (license)

In general, a person’s income is derived either from time, or from ownership of assets like land and other property. Bossmann states that “once the time goes away, the only thing left is ownership. And we all know that ownership is not distributed in a way that all of us could just live on that alone; in fact, most of us need to sell our time to live”. A radical shift in how we think about ownership is required if society is to remain prosperous, Bossmann says.

As artificial intelligence progresses, those who own the valuable sites where A.I. research takes place, especially in Silicon Valley, will continue to become more disproportionately wealthy vis a vis the appreciating value of their land: rents they can charge, prices for which they can sell, etc. They will become wealthier not by doing the research and development themselves, but simply by owning valuable space in areas doing R&D. Regardless of Bossman’s predictions about the rate of A.I. progress and its replacement of human labor, a greater proportion of the wealth created will continue to go to owners of prime land.

Those who own prime locations already have a large advantage over wage earners, simply by their ever-appreciating real estate values. We have seen a huge explosion in labor-saving devices, wealth production, and wealth inequality in the last two centuries. These gains disproportionately go to the owners of property. So, there is already a need to share the returns from owning natural resources like land.

This need to redistribute the benefits of land ownership become even more obvious in Bossmann’s prediction of the future – where she assumes a lack of A.I. winters/ceilings, no comparable human intelligence augmentation, and where the Law of Comparative Advantage (between humans and robots) no longer holds. In such a scenario, obedient robots would simply produce enormous amounts of wealth, and this wealth would all go to those humans who own the natural resource inputs needed for A.I. The people who did not own land, or receive a dividend/basic income of some kind, would simply have no income.

Henry George, a prominent political economist and author from the late 19th century, argued that gains derived merely from the ownership of land and other natural resources should be considered the property of everyone, not just the title-holders. A system of land value taxation would be a pragmatic way of shifting the burden of raising public revenue from workers to landowners. It would be the obvious choice for funding a basic income that would protect people from unemployment now, and facilitate any kind of post-work society.

“Once we have figured out this dilemma, and we have machines that will do most of the work on the planet… we will look back and think that it was barbaric that people had to sell most of their living time on this planet, doing things they didn’t want to do,” Bossmann says. But reaching an economic consensus is not all that is required to reach a prosperous post-work society.

“Many of us define ourselves by our jobs, what we do for a living, how much money we make, all these things are important to so many of us. Are we willing to give up this kind of thinking for something better?”

Julia Bossmann is president of Foresight Institute, a think tank promoting transformative future technologies, and founder of Synthetic, a startup building A.I. of its own. Bossmann is a McKinsey Fellow, Singularity University GSP graduate and master of science in neuroscience and psychology. She lectures on Artificial Intelligence, hard technology, innovation, the future, and technology transforming society.

 

Photo: Tej3478 <a>Artificial Intelligence</a>. Licensed under Creative Commons.

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Who Owns Geosynchronous Orbital Pathways?

Who owns outer space? Our most idealistic visions of the future require us to transcend our narrow personal or nationalistic interests, but increasingly, space seems likely to be divvied up among the powerful, as has so often happened with the Earth. Can space be managed to serve the common interest?

Managing a Commons

Space is generally thought of as a commons. A commons is a resource which is not under the exclusive control of anyone. This makes it an interesting and challenging economic coordination problem. The US Department of Defense classifies outer space as one of the “global commons” alongside the oceans, atmosphere, and cyberspace.

Former Under Secretary of Defense for Policy, Michele Flournoy, and Shawn Brimley of the Center for a New American Security write:

“…as rising nations and non-state actors become more powerful, the United States will need to pay more attention to emerging risks associated with the global commons, those areas of the world beyond the control of any one state—sea, space, air, and cyberspace—that constitute the fabric or connective tissue of the international system.”

Even during the heated Space Race between the United States and the USSR, there were lofty ideals about how to treat the cosmos. The Outer Space Treaty, ratified by all major world powers at the time, limits the use of orbital pathways and celestial bodies to peaceful purposes. Weapons of mass destruction are specifically banned. More interestingly, it also prohibits any signatory nation from claiming ownership of celestial resources.

The resources of space were not to be seen as just a bunch of loot waiting to be plundered. According to the Treaty, managing outer space was viewed as an international responsibility of utmost importance, for the benefit of all.

Photo: NASA on The Commons Van Allen Probes via photopin (license)
Photo: NASA on The Commons Van Allen Probes via photopin (license)

New Space Race

But a new space race is on. This time, a private space race. Billionaires are funding serious commercial spaceflight companies such as SpaceX, Blue Origin, Planetary Resources, Virgin Galactic, Stratolaunch Systems, and Bigelow Aerospace, and other lesser-known private companies and defense contractors are also competing. Additionally, competitions like the Google Lunar X Prize are under way. All of these enterprises share the goal of making space more accessible.

Elon Musk once raised the possibility of launching as many as four thousand micro-satellites into low Earth orbit for the purpose of providing worldwide high-speed internet access. Mark Zuckerberg had planned a similar service  via Internet.org. Both men have quietly put these plans on the back-burner; however, the inexorable trend of cheaper spaceflight is continuing to increase satellite congestion surrounding Earth.

The progress that SpaceX has made with reusable launch vehicles does help reduce the quantity of space junk per-launch, but it also makes spaceflight cheaper thus encouraging more congestion. Junk continues to accumulate much faster than it is burned up.

Kessler Syndrome

Space junk is any small debris left in orbit by spacecraft. The problem is that it can impact orbiting spacecraft at speeds up to twenty times faster than a bullet. Worse yet, in the event of a collision, more debris is created.

In the worst-case scenario, this process of collisions creating more debris starts a chain reaction called Kessler Syndrome. If there are enough orbiting satellites, this chain reaction can eventually consume all of them, and leave behind a speeding cloud of bullets encircling the Earth and keeping humanity grounded for a century or more.

In political economy, we would call this an example of tragedy of the commons.

To reduce this threat, a number of mechanisms have been proposed. Decommissioning large obsolete satellites can significantly reduce the likelihood. However, doing so is expensive and of little direct benefit to the individual spacefaring organization. Nonetheless, the European Space Agency has already planned missions as part of its Clean Space initiative.

Another theoretical mitigation technique includes the development of lasers to shoot down space junk, or to redirect it whenever it threatens important orbital spacecraft.

Photo: John Flannery Space Junk(license)
Photo: John Flannery Space Junk(license)

Financing cleanup efforts

Who ought to be paying for these cleanup efforts? If billionaires intend to start launching thousands of satellites, is it simply up to the public to clean up the mess?

The ‘polluter pays principle’ is standard in environmental law. In addition to aligning with our moral intuitions for responsibility, taxes on pollution have the benefit of discouraging the damaging activities that create pollution in the first place.

In keeping with this thought, it would be sensible to propose a Pigouvian tax on anyone who creates space junk, in proportion to the amount of junk that they create. Since this junk can be accurately detected, it would be straightforward to measure and determine the tax.

Amending the Outer Space Treaty and establishing a body to implement the polluter pays principle would be a common sense method by which we could work to eliminate the threat of space junk.

There’s another possible source of revenue if we consider that the orbital paths themselves are a finite resource. Satellite collisions have happened in the past and will continue going forward. Indeed, every satellite launched brings with it a small risk of collision. And the more satellites we have, the greater the likelihood of collision and, eventually, of triggering Kessler Syndrome.

Certain orbital pathways are more desirable than others. Geo-stationary orbits might be more desirable than low Earth orbit; a sun-synchronous orbit may be more desirable than an alternative orbit. If billionaires start launching thousands of satellites, it is entirely possible that we could eventually be forced to allocate these orbital paths by auction, in order to fund general collision insurance.

Such a model would certainly be more fair and predictable than our current process, which is for companies to patent orbital pathways, and sue anyone who infringes on it (regardless of collision risk). Granted, the FAA’s Office of Commercial Space Transportation also has a permitting process in the United States. But permitting practices vary by nation, and there’s little or no international coordination for revenue-sharing, insurance, or cleanup.

Motherboard interviewed Andrew Rush, a patent attorney and entrepreneur with expertise in space law, who said “As more and more companies start commercial activities using satellites, and using new and innovative ways to do so, we should see an uptick in patent activity.”

“We may also see the attendant uptick in patent litigation around some of those activities,” he added. “I personally hope that’s not the direction that we go. I hope there’s a lot more licensing and a lot more cooperative ownership and stewardship of patents, rather than just suing each other. “

An exemplary model of proper resource management can be found in the Norwegian Oil Fund. Upon discovery of its oil reserves, Norway instituted the collection of economic rent based on the revenue generated from oil extraction, plus oil exploration licensing fees. The resulting revenue was then kept in a trust fund and used to invest both within Norway and internationally. As of June 2015, the fund has accrued $873 billion. Given its size and stake in companies worldwide, the fund has become an significant player in international affairs. As such, it pursues economic and social justice through its decisions concerning its holdings, divesting from companies that violate its ethical standards.

If our civilization is able to use market pricing to collect economic rent from the Earth’s geosynchronous orbits, we would enjoy similar success as Norway while preserving a critical resource. Such concepts are already proving successful here on Earth. London uses congestion pricing to reduce traffic in its city center, and uses that revenue to fund public transportation. Congestion in space is ultimately no different.

Let’s preserve our common inheritance of space for future generations, not at the expense of our current generation, but by achieving justice. We all deserve to share the benefits and the value of outer space.

 

Feature image: NASA on The Commons Satellites for Sale (license)

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How Optimal Taxation Can Create a Better World

optimal taxation panel 2016

Earthsharing.org organized BIL: Oakland 2016 Recession Generation on July 9th in Oakland, California. The Optimal Taxation Panel participants were Yoram Bauman, Joshua Vincent, Fred Foldvary, Robin Hanson, and Kris Nelson. The panel moderator was Edward Miller (bios below).

The discussion revolved around the essential role that natural phenomena play in all economic activity and how to fairly treat these resources vis a vis taxation. Resources like land, minerals, access rights, the electromagnetic spectrum, domain names, and atmospheric carbon were discussed.

Optimal Taxation Panelists:

Yoram Bauman: PhD environmental economist and “stand-up economist.” Bauman is the founder of the revenue-neutral carbon tax proposal (I-732) that will be on the ballot in Washington State in November 2016. He has been working on environmental tax reform since his 1998 co-authorship of Tax Shift, which helped inspire the revenue-neutral carbon tax in British Columbia. Bauman also co-authored the Cartoon Introduction to Climate Change and the two-volume Cartoon Introduction to Economics. He lives in Seattle with his wife Laura and their two-year-old daughter.

Joshua Vincent: Executive Director at the Center for the Study of Economics since 1997. Vincent has consulted for more than 75 municipalities, counties, NGOs and national governments. He works with tax departments and elected officials to restructure taxation to a land-based system, and has testified as an expert witness on the impact of land value taxation. Vincent is the editor and publisher of Incentive Taxation, a journal on land value taxation.

Fred Foldvary: Board member at Robert Schalkenbach Foundation (RSF), a non-profit organization established in 1925 to spread the ideas of the social and economic philosopher Henry George (1839-1897). Foldvary received his B.A. in economics from the University of California at Berkeley, and his M.A. and Ph.D. in economics from George Mason University. He has taught economics at the Latvian University of Agriculture, Virginia Tech, John F. Kennedy University, California State University East Bay, the University of California at Berkeley Extension, Santa Clara University, and currently teaches at San Jose State University. Foldvary is the author of The Soul of Liberty, Public Goods and Private Communities, and Dictionary of Free Market Economics. He edited and contributed to Beyond Neoclassical Economics and, with Dan Klein, The Half-Life of Policy Rationales. Foldvary’s areas of research include public finance, governance, ethical philosophy, and land economics.

Robin Hanson: Associate Professor of Economics at George Mason University and a research associate at the Future of Humanity Institute of Oxford University. Hanson is known as an expert on idea futures and markets, and he was involved in the creation of the Foresight Institute Foresight Exchange and DARPA FutureMAP project. He invented market scoring rules like LMSR (Logarithmic Market Scoring Rule) used by prediction markets such as Consensus Point (where Hanson is Chief Scientist), and has conducted research on signalling.

Kris Nelson: Principal at Phoenix Finance, which provides access to capital without collateral to small businesses and startups. Nelson also serves as Legislative Director of Common Ground OR-WA, a non-profit organization that promotes a more democratic treatment of land and natural resources. Previously, Nelson worked as a Principal at Genomics Consulting, where he helped launch a clean technology venture capital firm. He holds a Master’s degree in Business Administration from Willamette University and a Bachelor’s degree in Journalism from Evergreen State College.

Edward Miller: Co-organizer of the Recession Generation event. Miller is the Administrative Director of the Henry George School of Chicago, a non-profit educational organization which provides educational opportunities to the public on the topic of classical political economy. He serves as a board member for the Center for the Study of Economics. Previously, he has worked with the Institute for Ethics and Emerging Technologies.

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Uranium Mining Continues to Threaten Grand Canyon

The Grand Canyon is remarkable for its awe-inspiring scenery, precious geological value, and diverse flora and fauna. It is a natural wonder recognized by UNESCO, and also happens to be the site of significant underground uranium deposits.

These deposits have made it a prime target for energy companies seeking to privatize the public commons that the uranium represents. Unfortunately, natural resource extraction can have devastating consequences for public health and the natural environment. President Barack Obama is now considering designating the area a national monument, to add new protections to the lands and waters of the Grand Canyon, and prevent potential environmental disaster.

Arizona has a long history of traditional mining. In 2014, the state reported 303 active mining operations employing a total of 25,660 people. The entire industry generates a staggering $12 billion of the state’s GDP. Due to market fluctuations and government restrictions, there are no active uranium mining operations in the state at this time, but between 1918 and the early 21st century, traditional uranium mining in Arizona yielded tens of millions of pounds of uranium, valued at approximately $65 per pound.

While the mining industry benefits Arizona by contributing substantially to the state’s GDP, it is often accused of hoarding publicly-owned natural resources. Such speculative hoarding is common in unregulated or under-regulated industries. The vast majority of mining operations occur on public land, which accounts for 82% of Arizona’s total landmass. Federal law, through the General Mining Act of 1872, permits US citizens to stake a natural resource claim on public land and subsequently extract that resource. While mining operations are subject to state and federal taxes, they are not required to share revenue from their operations. Natural resources, as a public commons, comprise a large share of a nation’s wealth and, as such, ought to generate substantial economic rents. An excellent example of this in action comes from Norway and the management of its oil.

photo credit: wolfgang.mller54 View via photopin (license)
photo credit: wolfgang.mller54 View via photopin (license)

The consequence of ignoring this potentially substantial source of tax revenue is that the government must turn to taxing human productive work via income and sales taxes. Consequently, economists have long argued that governments and their constituents would be best-served if public revenue was instead derived from natural resource extraction, regulated, and utilized for the common good.

Uranium mining in Arizona has a history of disastrous environmental and public health consequences. Following World War II, the United States increased uranium production in order to produce more nuclear weapons, and mining companies hired large numbers of Navajo people to work the mines. Incidence of diseases caused by excessive radiation exposure increased sharply because companies failed to adequately protect those workers. Uranium mining has polluted 15 springs and five wells in the Grand Canyon watershed with toxic levels of uranium, requiring multi-million dollar government-funded cleanup measures.

It is clear from this history that uranium mining companies have proven themselves incapable, under current regulations, of operating without jeopardising people or damaging the critical lands and waters of the Grand Canyon watershed. Introducing royalties for uranium mining would fund implementation and enforcement of regulations that would lead to greener mining.

As uranium prices increased in the early 21st century, mining companies increasingly pursued access to the vast uranium deposits surrounding the Grand Canyon. In 2012, the federal government, recognizing the need to protect “natural, cultural and social resources in the Grand Canyon watershed,” issued a 20-year moratorium on new mining operations in lands surrounding the Grand Canyon. The order applies to all mining but is primarily aimed at uranium mining. The reaction from Arizona and the mining industry was swift, citing the order as an example of federal overreach and petitioning for it to be overturned. This case has now been challenged in federal court.

Photo: CEBImagery.com A New Day via photopin (license)
Photo: CEBImagery.com A New Day via photopin (license)

Many Arizona citizens have applauded the federal government, citing the enormous importance of the Grand Canyon for Arizona’s cultural heritage and economy. To many, permitting uranium mining on this stunning landscape would not only jeopardize the massive tourist activity driven by the Canyon, but would irreparably degrade a monument that is held close to the heart of Arizonans.

The federal government is now trying to make its moratorium permanent by declaring the lands surrounding the Grand Canyon as the Greater Grand Canyon Heritage National Monument. The monument was first proposed in 2015 and has support from 80% of Arizona voters, the Navajo Nation, and other key Native American tribes. The plan has stalled in Congress due to Republican opposition, but President Obama has the singular authority to bypass Congress and designate the area a monument by invoking the Antiquities Act.

An alternative approach would be to regulate the uranium mining more stringently, with the additional regulation and mining oversight financed by uranium royalties. While that may well require congressional approval, it would permit the mining to take place and that it be done under careful stewardship.

It is not yet clear which action President Obama will take, but support for the monument is a profound example of citizens recognizing the importance of their natural inheritance and taking steps to protect it.  Concerned citizens can write to President Barack Obama at 1600 Pennsylvania Ave NW, Washington, DC 20500  or call the White House at (202) 456-1111.

Featured Image: Photo: TheMorganBurke via photopin (license)

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The Norwegian Model: Managing Resource Wealth for the Common Good

Natural resources play a foundational role in a country’s economic development. As natural commons, they provide economic assets via space, raw materials, and energy that can be used to create other assets and opportunities in the form of industry and wealth. But because these commons are finite, their mismanagement often leads to a boom and bust pattern of economic development. Norway, however, has set a solid example for how to properly manage natural resources, including one of the most sought after – fossil fuels.

In the 1950’s, European countries began to speculate that vast oil and natural gas deposits lay under the North Sea. This theory was confirmed in 1959, when the largest natural gas field in Europe was discovered in the Netherlands. Excitement grew around potential future discoveries, particularly in the area of Norway’s continental shelf. Anticipating the discovery of reserves, the Norwegian government passed legislation in 1963 stating that the State owns all natural resources. The legislation also stated that the government is the only authority that can grant licenses for exploration and production. This legislation put Norway’s natural commons firmly into the hands of its citizens.

This turned out to be smart planning. In 1969, oil was discovered in Norway’s continental shelf. Oftentimes, nations turn to free-market economics, an approach that consistently fails to allocate the wealth derived from natural resources efficiently. Instead, Norway sought a different strategy to ensure that this natural commons provided long-term wealth to the entire country.

Initially, the Norwegian government gave private energy companies limited licenses to explore and tap Norway’s reserves. These companies can be credited with developing the country’s first oil and gas fields. However, in an effort to maximize national revenue, in 1972, the government moved quickly to create a government-owned petroleum company called Statoil. From that point forward, any foreign energy company granted a license was required to split 50% of the work with Statoil.

photo credit: L.C.Nøttaasen Yme platform via photopin (license)
photo credit: L.C.Nøttaasen Yme platform via photopin (license)

Norway’s fast action prevented the privatization of its natural commons and secured its oil wealth for its citizens. The government credits oil wealth with the creation and sustainability of their welfare state and support of macroeconomic development during downturns in the petroleum industry.

In the 1990’s, the government created the Government Pension Fund – Global (GPFG), informally known as the Norwegian Oil Fund, as a place to deposit all excess oil profits. The value of the fund stands at a staggering $850bn, and officials estimate that sum will surpass $1 trillion by the end of 2019.

So what has Norway been doing with all this money? Well, not much. And that is the point. The government capped annual withdrawals at 4% in order to prevent hyperinflation and to secure a surplus of money to survive in a looming post-fossil fuel world. This decision has proven wise recently as a drop in oil prices has moved Norway to declare its petroleum industry in crisis.

Norway’s natural commons management is a shining example of the prosperity that results when revenue from national resources is shared by all citizens. Norway has used this wealth to create social and economic programs that help each citizen. This wealth has also built a massive pension fund that can support the country during periods of economic hardship. It is a powerful equalizing tool not often seen in nations rich in oil and other natural resources.

photo credit: Jean-Paul Navarro The Grand Harbor via photopin (license)
photo credit: Jean-Paul Navarro The Grand Harbor via photopin (license)

Some economic scholars draw comparisons between Norway’s approach to natural commons (referred to as “petro populism”) and the theories of Henry George. Henry George, an American economist and political theorist from the 19th century, postulated that land is social commons, and that the profits drawn from land should be shared by all citizens via the use of land value taxation (LVT). In the case of Norway, they have taxed the revenue drawn from oil rich land at the very high rate of 78% and both redistributed and saved that revenue. In addition, they have carried over such sustainable thinking towards other natural resources, such as lumber and fisheries, and seen the same successes as with petroleum.

Resource-rich nations should take lessons from Norway on how to fully profit from and intelligently invest revenues from the utilization of our natural commons. The discovery of lucrative resources can inevitably lead to a boom and bust economy. Avoiding that requires managing those resources appropriately and wisely, as the Norwegians have, by using wealth derived from them to create an equitable and healthy society for all.

But all nations, whether “resource-rich” or not, have at least one socially-created resource of enormous value which can be tapped: the rental value of land.

Audio podcast on Norway and it’s oil management system. Courtesy of NPR online.

Featured Image: photo credit: arbyreed  via photopin

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EarthSharing.org on Stanford Radio KZSU 90.1 FM Promoting the Recession Generation Event

WKZSU 90.1 FM Stanford University Radio Interviews EarthSharing.org

 

July 5th, 2016, Edward Miller and Jacob Shwartz-Lucas were invited onto Stanford University Radio to discuss an event they would organize in Oakland a few days later. The event was titled BIL Oakland 2016: The Recession Generation.

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The discussion revolved around the event’s aim of helping young adults to navigate the challenges of living in our harsh economic climate and rapid technological disruption.

Jacob and Edward discussed their motivations for putting on the conference. This included explaining their backgrounds, and what changes they want to see in the world.

photo credit: Jane Says via photopin (license)
photo credit: Jane Says via photopin (license)
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A Comedy of Errors: How the US Government Bungled Helium Production Over and Over

Spectrum Tubes Helium ++

What do balloons, MRI machines, and the Large Hadron Collider have in common? Helium!

These items and a multitude of others require the second-most common element in the universe to function. Although it is generally abundant throughout the cosmos, helium is relatively hard to find on Earth, as its low mass allows it to easily escape the atmosphere.

Helium can be found in a few separate deposits under ground as well as in trace amounts in the atmosphere (5 parts per million) and in underground natural gas deposits (up to 7% of total NG volume). It is also a common byproduct of radioactive decay, as alpha particles.

Since the 1920s, the United States government has held a monopoly on helium production. Helium is crucial for national defense applications such as rocket engine testing and air-to-air missile guidance systems. Thus, the government, through the Bureau of Land Management, began to produce and store it in large quantities at the National Helium Reserve in Texas, at one point amassing over one billion cubic feet of helium.

CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=646716
CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=646716

In the 1990s, the National Helium Reserve fell into debt to the tune of $1.4 billion due to poor management and increasing costs of helium extraction. Concerned about bloated government, the 1996 Congress passed the Helium Privatization Act, which initiated the shutdown of the National Helium Reserve. The Reserve was required to sell its entire stockpile at below-market rates, finally shutting down operations entirely in 2015. The intention of the Act was to jumpstart the privatization of the helium industry, but things did not play out as hoped.

The National Helium Reserve flooded the market with helium, which drove worldwide helium prices to record lows. Low prices made helium recycling economically disadvantageous, which increased consumption. Most strikingly, private industry failed to step in because low prices made helium extraction and sales unprofitable.

As the National Helium Reserve continued to sell off its reserves and slouch toward its mandated end, an heir apparent in the private sector failed to appear, and scientists began to worry. A panel convened by the US National Resource Council, a branch of the US National Academy of Sciences, recommended that the US Government increase the cost of helium and slow the depletion of the National Helium Reserve. They warned that if the US failed to take action, the closing of the reserve in 2015 could trigger a global helium crisis, and that consequences of such would be dire due to the ubiquity of the need for helium in scientific and and technological research.

Exell Helium Plant, circa 1980. By Federal Helium Program (Bureau of Land Management) [Public domain], via Wikimedia Commons
Exell Helium Plant, circa 1980. By Federal Helium Program (Bureau of Land Management) [Public domain], via Wikimedia Commons
The US Government took action in 2013 by extending the lifespan of the National Helium Reserve and selling existing helium reserves at market prices. But with private industry failing to identify and extract new helium reserves, helium prices soared and US reserves continued to dwindle. Scientists worried that the United States’ poor management of a finite natural resource would devastate the helium market for years to come.

Luckily, due to a recent discovery, this does not seem to be the case. In June 2016, a team of researchers from Durham and Oxford Universities discovered a massive helium gas field in the Tanzanian East African Rift Valley. The field is estimated to contain 54 billion cubic feet of helium, enough to meet global demand for several years.

Although the discovery of this reserve has inspired hope that more like it exist in the world, that hope should not translate into careless use and management of existing helium reserves. Our current understanding tells us that helium is extremely rare on Earth, so we must consume and regulate helium reserves with that fact in mind, at least until the development of new technology to make alternative helium production economical. Scientists have recommended banning the use of helium in party balloons (yes, seriously) and implementing helium recycling technology to prevent the escape of helium from MRI machines and other such devices.

HeCd Laser via photopin (license)
HeCd Laser via photopin (license)

The latest discovery of helium deposits presents a fantastic opportunity for Tanzania to finance its development rather than falling into the resource curse. An exemplary model of proper resource management can be found in the Norwegian Oil Fund. Norway, upon discovery of its oil reserves, instituted the collection of economic rent based on the revenue generated from oil extraction, plus oil exploration licensing fees. The resulting revenue was then kept in a trust fund and used to invest both within Norway and internationally. As of June 2015, the fund has accrued $873 billion. Given its size and ownership in companies worldwide, the fund has now become an significant player in international affairs. As such, it pursues economic and social justice through its decisions concerning its holdings, even going so far as to exclude ownership in companies that violate its ethical standards.

If Tanzania is able to collect economic rent from the exploration and extraction of its helium reserves, it could likely enjoy similar success as Norway while providing the world with a critical resource.
Our history with helium is a lesson in the consequences when governments fail to properly manage a finite natural resource. As Tanzania begins to manage its vast reserves of helium, we can only hope that they will heed the lessons of successful natural resource management.

Cover image: By Alchemist-hp www.pse-mendelejew.deOwn work, CC BY-SA 2.0 de, https://commons.wikimedia.org/w/index.php?curid=7601144

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