Economist: Copyright Is An Antiquated Relic That Has No Place In The Digital Age

by Mike Masnick
Techdirt
May. 17, 2012

For many years I've been pointing out the basics of economics concerning concepts like "free" and the importance of marginal cost to pricing in an efficient market. After one such recent post, I got an angry email from a college professor who has worked in the entertainment industry for many years, telling me that clearly I had never taken an economics class. That, of course, is not true. I took a great many economics classes, and learned the economics I talk about here on the site from some of the best economists around. Either way, I do wonder what this same individual would say upon reading well known (and greatly respected) economist Dean Baker's latest column about how The Pirate Party has got it right on copyright:
Near the top of the list of the Pirate Party's demons is copyright protection, and rightly so. Copyright protection is an antiquated relic of the late Middle Ages that has no place in the digital era. It is debatable whether such government-granted monopolies were ever the best way to finance the production of creative and artistic work, but now that the internet will allow this material to be instantly transferred at zero cost anywhere in the world, copyrights are clearly a counter-productive restraint on technology.

As every graduate of an introductory economics class knows, the market works best when items sell at their marginal cost. That means we maximize efficiency when recorded music, movies, video games and software are available to users at zero cost
. The fees that the government allows copyright holders to impose create economic distortions in the same way that tariffs on imported cars or clothes lead to economic distortions.

The major difference is that the distortions from copyright protection are much larger. While tariffs on cars or clothes would rarely exceed 20-30 per cent, the additional cost imposed by copyright protection is the price of the product. Movies that would be free in a world without copyright protection can cost $20-$30. The same is true of video games, and the price of copyrighted software can run into the thousands of dollars.
Baker goes on to suggest some alternative means to fund such creative works in a world without copyright, including ideas like "artistic freedom vouchers" that would give people a refundable tax credit on supporting creativity, on the condition that any of the creativity funded by such money would not be able to protect it with copyright for a period of time. I find such program interesting, though I do wonder if they'd even be necessary. As we've been seeing over and over again, all sorts of interesting new business models are springing up that have nothing to do with copyright. As there is demand for creativity, I fully expect more and more such models to continue to show up as well. What I fear is that the focus by those who benefit excessively from the monopoly rents and protectionism of copyright, will lead to cutting off innovation or killing off interesting and more efficient business models, before they have a chance to evolve.

Contrary to what some like to say about me, I am not convinced that copyright should be done away with completely. I do think that it needs significant reform. I just want that reform to be based on actual evidence and understanding of basic economics rather than faith and the demands of those who have benefited excessively from it, over those who have been held back because of it.













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