Arnold Kling  

Copyright Law and Utilitarianism

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The Science Race... "It's Their Fault"...

Richard A. Epstein has written an interesting essay on copyright law. He concludes,


But for years now, my own private campaign has been to insist that the strength of the natural law theories rested on their implicit utilitarian (broadly conceived) foundations, which require some empirical evaluation of why given institutions promote human flourishing and through it general social welfare. Under those tests all legal rules are imperfect adjustments and tradeoffs between competing goods. Quite simply, any system of private property imposes heavy costs of exclusion. However, these costs can only be eliminated by adopting some system of collective ownership that for its part imposes heavy costs of governance. The only choice that we have is to pick the lesser of two evils. There is no magic solution for liberty or property that creates benefits without dislocations. But once we recognize that trade-offs are an inescapable feature of social activity, we could conclude that a sensible system of copyright is not such a bad trade-off after all.

Epstein says that a "sensible system" includes limited duration and fair use. In my mind, this begs the question of whether a "sensible system" includes lawsuits aimed at song-swappers.

I am reminded of this nifty analysis by Zimran Ahmed.


[The] market for music is $2,857M smaller than it would be in an efficient market. This is equivalent to a copyright tax rate of about 12% (income tax efficiency is about 20% I think). So, for CDs, you can claim each additional year of copyright costs society $2,857M in dead weight loss.

But this is just for a single year. Copyright currently lasts for authors life plus 70 years (and counting). So, let's treat this as a 140 year annuity of $2,857M at a 5% discount rate. Calculating the present value gives you: 19.978 * $2,857M = $57,078M. This is the present value of the cost to society of a 140 year copyright tax.


My own view is that in the context of music, "copyright" is a phony issue. The real issue is the commitment of music companies to outdated technology--the CD--which after twenty years of Moore's Law is a hopelessly inferior medium for distributing music. Because it allows music companies to impose huge deadweight losses on society in order to preserve their obsolete technology, copyright law does not meet the utilitarian standard for a "sensible system."

For Discussion. How could government facilitate the adoption of innovative technology in music distribution without undermining private property and the incentive to create?


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TRACKBACKS (3 to date)
TrackBack URL: http://econlog.econlib.org/mt/mt-tb.cgi/77
The author at PRESTOPUNDIT -- Defining Liberalism for the 21st Century. in a related article titled $57,078,000,000 - the deadweight cost of music copyright law. writes:
    So argues Zimram Ahmed as quoted by Arnold Kling, responding to an argument by Richard Epstein favoring copyright protection for intellectual property.... [Tracked on May 3, 2004 11:31 PM]
The author at Deinonychus antirrhopus in a related article titled Nit Pick Time writes:
    Zimran Ahmed tries to answer the question, "[W}ho does it harm if Mickey Mouse is under copyright for 1,000 yrs?" The response is of course, consumers. Copyright basically allows the firm with the copyrighted product to extract rents from consumers. Ho... [Tracked on May 6, 2004 6:02 PM]
The author at voluntaryXchange in a related article titled Infinitely-Lived Copyrights? writes:
    If a copyright should preserve some, but not all, of the value of a musical piece, then we need to shorten that length a lot. Winterspeak explains this neatly. The results in the post entitled "The Copyright Tax"show that the [Tracked on May 6, 2004 7:36 PM]
COMMENTS (9 to date)
Peter Gallagher writes:

Arnold,

Of course, the nature of intermediation could change. Anyone who obtains the rights from artists and sets up a hosting service with a catalog and an interface could play the role of a music publisher. The third-party developers could access this catalog. Those developers might turn out to be the critical intermediaries, and they could end up paying musicians.

This is exactly right. The asset of the music publishers is a database of bits. Their vanity (or lack of imagination) suggests that they probably will not succeed in realizing its greatest value, because to do so requires their own disintermediation. An option no succesful 'executive' ever chooses. The alternative -- which they seem doomed to abide -- is their loss of ownership as a result of massive, continuing, casual assault on the security of their (extremely mobile) assets.

To do him justice, Dave Winer understood this at least a couple of years ago. So did the now curiously invisible (to me) Nicholas Negroponte.

Best wishes,

Peter

John Thacker writes:

The real issue is the commitment of music companies to outdated technology--the CD--which after twenty years of Moore's Law is a hopelessly inferior medium for distributing music.

The danger in phrasing the argument this way-- focusing on the twenty year old age of the CD (which is still used by computers-- is that it allows music companies to claim that the problem is thereby solved by DVD-Audio or SACD, both new technologies... even if both have essentially the same distribution method.

Tom Grey writes:

Sharing info should never justify violence by others -- the "market" should adapt to this moral truth.

The real issue is giving incentives to creation. There are prolly many potential ways to proceed: monthly/ weekly/ daily awards -- what's new, what's good. Based on downloads, reports, or something.

Maybe a massive Library of Congress sized digital warehouse of all digital information, and every download results in a tax credit/ voucher for the creator.

Bio-advances, too, could be based on gov't funded rewards for treatments, at prod & distribution cost plus.

Hunter McDaniel writes:

What could the government do? Well, I suspect we would be better off scrapping the music copyright system altogether than continuing the futile effort to impose the limitations of physical CDs into cyberspace just to perpetuate an existing control structure and business models. I'm open to other ideas but we have to start with the First Rule of Holes - when you're in one, stop digging.

I don't see this as undermining private property since I believe the analogy of "intellectual property" to physical property is a false one.

As for incentives live performance is already the primary income source for all but a handful of musicians. I'm not sure we need anything else, but the various proposals for sampling downloads to determine distribution of some pool of revenues might be worth considering.

Brad Hutchings writes:

Arnold,

It's a little over the top to call the CD an outdated technology. It is, in fact, a very convenient and universal technology. When I buy a bunch of songs from Apple's iTMS, I can burn a CD and play them in my car (or pretty much anyone else's car), in my living room, etc. Many people have CD holders on their visors or in their glove compartments. CD-R and CD-RW are dirt cheap, as are the players and recorders.

Your prefered replacement is the large hard drive with all the music ever produced contained therein. But in order to get the new stuff, you need hi-speed Internet. The music industry is all about selling new and fresh. So at this point, your solution would exclude 60% of the US market. While the technology of CDs is very mature, the market is entrenched because it's the CD is an extremely convenient, flexible, and inexpensive medium.

I don't see the CD's lifecycle ending anytime soon. Perhaps things like MP3 CDs recorded on DVD become more popular, but the form factor of the CD is still workable.

-Brad

Steve writes:

Nit Pick:

I don't think the marginal cost is zero. It is quite low, but not zero as Zirman claims. Other than that, I think he has pretty much nailed the issue.

As for the problem with current copyright law and a possible solution, check out David Levine and Michele Boldrin's work on this.

How could government facilitate the adoption of innovative technology in music distribution without undermining private property and the incentive to create?

Boldrin and Levine would argue you don't need the current system, at least for some things like music. They argue you can have a competitive system that would allow for the same amount and maybe even more music to be produced.

Consider this, currently many artists get screwed by the recording companies. That is they see very little of the money the recording companies take in, and yet we still see lots of people who form bands, put together songs and so forth.

Jervis Ninehammer writes:

If government refrains from enacting any new restrictions on information technology, then innovation will thrive in music distribution, just as it thrives in others sectors of the economy. Current law adequately protects property rights.

Richard writes:

I only have one comment on copyright law. That is why is a copyright more important than a patent? Patent law only allows an inventor 20 years from the time of filing until it is open to the public. You have to spend much more money to develop such a patent and make sure it is indeed unique and new, yet a song or movie can be just a remake or slight twist of what people have been seeing or hearing since time began. Yet here we are giving not only the life of the artist as the time frame, but an additional 70 years. This is absurd and shows the unbelievable power of the recording industry. If the artists wanted to, they could create a website that posted their songs for download with a small cost, say a dollar and for that money millions of people would download a copy just to listen. If it is good, then they will want to hear it on the radio and in concerts as well and the artist should be able to make a really good living without the overbearing music industry. Just ask the performers that left Nashville and went to Branson to own their own theatures.

Kamiel Koelman writes:

Similar issues were discusses previously, when recordings replaced sheet music as the predominant way of distributing music. I wrote a paper giving an overiew of adopted solutions, which is available here: http://pubs.cli.vu/pub123.php

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