Paul Kedrosky's Infectious Greed

Let me get this straight. According to San Jose Mercury-News columnist Dan Gillmor, Wal-mart is an evil company. But here are just some of the accolades he drive-by proffers the retailer:

• It offers great variety at low prices
• It brought competition to many small towns dominated by a small number of businesspeople charging higher prices
• It is a genuine innovator in using information technology to handle inventory and purchasing

So, what are his beefs? The usual Seattle-WTO laments, like that the company outsources, that it doesn’t pay as much of employees’ health care benefits as he would like, and that, darn it all, the 1950s were just so much fun.

Dan, consumers are smart people. If they thought that the better service and kitschy buildings in the downtown of your choice were worth paying a higher price, they would pay it. But they demonstrably don’t think brick buildings and local storeowners are always worth the (generally) higher price, and so they don’t pay it. Markets work — even when some people don’t want them to.

Update: For those of you interested in more light and less heat, consider reading some of the following papers:

• “Job Creation or Destruction? Labor-Market Effects of Wal-Mart Expansion”, by Emek Basker (University of Missouri working paper — 2003)

• “The Impact of Wal-mart on Retail Market Structure”, by Georgeanne M. Artz (Iowa State working paper — 1999)

• “Selling a Cheaper Mousetrap: Entry and Competition in the Retail Sector”, by Emek Basker (University of Missouri working paper — 2003)

What rights do students have with respect to the commercial reuse of their class assignments? That question, in part, has come up in Canada in the context of Turnitin.com, an online plagiarism detection tool. Turnitin relies partly on searching the Internet for similar texts, but it also uses its growing database of other submitted student papers to detect plagiarism.

Last fall a Montreal student refused to enter his assignments into Turnitin.com, and his professor gave him a failing grade. Now the academic senate at McGill University, where this all happened, has decided that the student’s assignments are to be graded nevertheless. Contrary to some reports, there is no clear final decision yet at McGill about the use of Turnitin.

What intrigues me is the claim that Turnitin makes money from these papers, meanwhile making students unwilling content providers. While Turnitin doesn’t resell individual papers, it does make money from them in the sense that the papers, in aggregate, become a signature database that can be used to assess the uniqueness of new papers submitted. In effect, students become unpaid employees of Turnitin.

Some critics argue that students should be allowed to opt out, thus ceasing to be unpaid workers. In the alternative, students should be paid for their content, perhaps a flat rate of pennies per page per paper.

Turnitin wants none of that, of course, arguing that it doesn’t use individual papers per se, just all the submitted papers in aggregate. Compensating every student would, in that argument, be nonsensical, creating an economic relationship where no such relationship exists.

It is intriguing. And it is also different from eBay’s policy of reselling data created by transactions on that auction site. After all, no-one is forcing you to use eBay — if you don’t like its policy of reselling transaction information you create, then you shouldn’t use eBay. Students, however, are compelled to use Turnitin, so they contribute without receiving the economic benefit.

So what is the solution? A controversial case from almost two decades ago — “The Strange Case of John Moore and the Splendid Stolen Spleen” — suggests that in a legal challenge students will lose. In the Moore case a cell line was created using T-lymphocytes from a patient’s cancerous spleen. That cell line was patented, and, unbeknowst to Moore, it became a profit-generating venture for the cancer researcher involved.

The defendant’s lawyer argued that the researcher acted in bad faith, and did not obtain informed consent. After much wrangling, it was decided, in effect, that patient Moore did not have explicit and complete rights to all byproducts of his spleen. In other words, Moore was not entitled to receive royalties from the cell lines involving his own spleen — and students are likely to do no better with term papers.

The following paragraph from a recent McKinsey study in offshoring seems to light people’s fires on the subject more than anything I know. Cite it at your peril — I mentioned it in a recent column and I’m getting positively venomous email.

Far from being bad for the United States, offshoring creates net additional value
for the U.S. economy that did not exist before, a full 12-14 cents on every dollar
offshored. Indeed, of the full $1.45 to $1.47 of value created globally from
offshoring $1.00 of U.S. labor cost, the U.S. captures $1.12 to $1.14, while the
receiving country captures, on average, just 33 cents.