Twitter-squatters

In the early 90’s the term “cybersquatter” was coined for internet profiteers whose sole strategy was to register domains in the name of businesses and sell these domains to the associated businesses for big bucks. This has since become illegal following legislation passed in 1999, which granted trademark users the right to sue cybersquatters. Now in the late 2000’s, businesses are facing a similar hurdle and a new term is soon to be forged. Twittersquatters, perhaps?

The mystifying success of Twitter, a service that essentially sends text messages en masse that updates anyone on what you’re doing, has led to problems for businesses who didn’t register for free Twitter accounts and are now being represented by non-associated people with accounts in their names. Soon everything will be sorted out, new legislation will be passed, and that will be the end of the issue until the next networking site springs up that provides a similar opportunity for _______squatters.

But maybe instead of waiting for the next opportunity to arise, we could create a universal solution in the form of a tied-ownership clause for businesses.

Tied ownership is a property right used to distinguish ownership of fugitive property; property that is not stationary or intangible, i.e. wild animals, ideas, etc. Tied ownership is the granting of a right based on the associated entity. The other type of fugitive property right is the right of first possessor – what is currently being used in most cyber related areas. The right of first possessor is axiomatic; the right is defaulted to the first one to claim ownership. What would happen if property such as twitter, facebook, and myspace accounts were defaulted to the tied owner – the entity associated with that name.

Right now the rule of first possessor is used because transaction costs are low; it is easy to determine who is granted the right to the account (the first one to register that account). But we are seeing the same sort of deadweight loss that occurred with cybersquatters in the 90’s, in addition to negative externalities in the form of defamation.

The deadweight loss comes from zero-sum activities, essentially inefficiency caused by over-investment of time and energy by squatters to acquire first possession of the account for the purpose of transfer, rather than production and creation of surplus value.

Sarah Needleman, from the WSJ, reports that unauthorized Twitter-ers have been representing certain businesses and in some cases, advocating their competitors and/or making false claims about the company. Cases such as this cause inefficiency that could otherwise be avoided by implementing a rule to tied ownership.

Unfortunately, the rule of tied ownership is difficult to implement and would cause much confusion. For example, which company would get the Twitter account “Aldo”? Would it be Aldo Shoes? Or Aldo Software Systems? And who would be the governing body that would regulate such matters? Trademark registration could automatically register the associated Twitter account; with any other Twitter similar accounts having to be manually registered by the company. If the company chooses not to register Twitter accounts that represent their trademark (such as Aldo Shoes and AldoShoes) then they forfeit any right to sue the owners of those accounts. This would create large incentives for companies to take care of the registration to avoid any inefficiencies in the system.

Are Statutory Rape Laws Economically Efficient?

This post has been very difficult for me to write as I have very strong feelings against Statutory Rape laws and after a lot of research and careful consideration, I am still not sold on the efficiency of this law.

The Statutory Rape law basically makes it illegal for any person over 18 to have consensual sex with a person under 18. The laws very from state to state but let's use this definition to keep analysis simple.

This statutory rape law basically employs the idea of strict liability which says that by committing the act, the wrongdoer accepts absolute legal responsibility for the act despite any intentions and/or negligence on behalf of the victim. The penalty for statutory rape is a felony conviction, prison sentence, and sex offender registration (in some states).

Let's first look at the justification for such sever penalties. Statutory rape is not frequently enforced in that police officers are not busting down the doors of 19 years olds to see if they are having sex with a minor. There is very little evidence of the crime that is in the public domain. Therefore, we can say that the enforcement of the law is very low, normally occuring if a complaint is made. If the parties know this, the low probability of being caught will not deter the parties. The law must then enact a harsh penalty to create a deterrence effect. This is economically efficient because it reduces transaction costs.

The rule of strict liability limits the degree of evidence needed for a conviction. Since there is no defense, the prosecutor must only show that the act happened without showing intent of the wrongdoer or negligence of the victim. This greatly reduces the administrative costs of justice which are considered when making laws. The costs to prosecute must be proportionate to the benefit society will gain from the prosecution.

The statutory rape law is partly justified by true paternalism and externalities. True paternalism is the notion that, in this case, the government knows better what you need than yourself. The district attorney will pursue a statutory rape case based on the assumption that the minor is an irrational agent. But is this assumption wholly ill-based?

Criminal law does not stand solely to bring justice to minor in question but to increase social welfare; this is where externalities come in. It may be that the relationship between the wrongdoer and victim was completely consensual and further, let's assume the victim was a rational agent; why can this case still be pursued by the DA? It's the externality argument. The US government does not want sex between minors and people over 18 to occur regularly in fear of creating an atmosphere where this act was commonplace. An atmosphere such as that could have negative effects on society, including parents and general distaste among ordinary people. Therefore, it is more efficient to have a strict liability law forbidding it.

But why might the law not be efficient? Anyone labeled as a 'sex offender' must register as one and are then subject to certain proximity laws, which are economically inefficient since you are regulating voluntary transactions. A registered sex offender is also limited in the job market and as such, creates inefficiencies since a possible comparative advantage cannot be utilized.

Taking from contract law we use the concept of default rules. One of the many purposes of default rules is to encourage full disclosure of information; therefore, the default rule holds the party with more information at fault. In our discussion, would this not be the minor? Suppose that the minor misled or simply did not offer the information to the person over 18, should the minor not be held liable? Because the statutory rape law goes against this principle, it can be said that it is not the most efficient law.

On the same subject of misrepresentation, could we not charge the minor with intentional fraud or unitentional misrepresentation? The minor chose to withold information that led to the crime; why is the minor not liable? Once again, this seems to be an inefficient result.

Further, let's look at the incentives the law creates. I would have to say that when it comes to sex, disincentives are left at the doorstep. Instead of reducing the occurrence of relationships where one party is a minor, it increases the probability that these relationships are going to be kept secret. When and if someone discovers the relationship, there is no evidence to suggest that a relationship existed and the mere testimony from the minor would be seen as mere coercion, and therefore, an acquittal would be highly unlikely.

The conclusion to this piece is not definitive and I am still unsure about where I stand since there are good arguments for and against the efficiency of this law.