Monday, June 04, 2007

When Markets Outgrow Copyrights

I'm planning a paper on how growth in markets affects the efficacy of copyright, and am shopping around an abstract. I welcome your comments. The abstract goes a little something like this:
Does copyright protection offer the best means of stimulating the production of expressive works? Maybe it does now. If so, however, copyright will probably over-protect expressive works in coming years. We should hope that it will, at any rate, given that human progress will render copyright obsolete.

It costs a great deal to produce the first copy of many expressive works, including such notably valuable ones as movies, books, and software. Copyright law helps to reassure would-be authors that they will recover those fixed, up-front costs. Alternative mechanisms—such as tips, patronage, automated rights management, and contracts—risk providing too little protection against unauthorized copying, leading to market failure. Hence the case for copyright.

As the market in expressive works grows, however, it promises to outgrow copyright law. As people join that market, whether by entering by the world or by escaping isolation, they offer authors new sources of revenue. Given the low marginal costs of reproducing and distributing expressive works, those larger audiences will tend to reward authors with larger profits. Holding all else equal, copyright will at some point give more protection than necessary, and its costs will outweigh its benefits.

Perhaps a lightly populated, large, and semi-agricultural nation, with slow and costly communications, required copyright law to encourage an adequate production of expressive works. It seems that those who wrote and ratified the U.S. Constitution thought as much. But however well that justification for copyright worked in years past, it works decreasingly well now. Looking forward, we can easily imagine a world where generosity, technology, and common law rights improve on, and thus replace, copyright law.

[Crossposted to The Technology Liberation Front.]


Anonymous said...

You seem to have the view that the market for copyright works will only grow on one side -- that there will be more consumers of expressive works than producers. Yet, there's some irony that you're posting this in your blog on the internet, both of which have expanded the number of content creators.

At the same time, I suggest that one reason you don't care if people copy your blog posts is that you don't put that much effort into them. If, instead, you had worked 40 hours a week for the last 6 months, I suspect that you would expect to be protected against copying.

Of course, you're right that getting rid of copyright does not mean getting rid of expressive works -- they existed before copyright and will after it. But, it will probably change the nature of those works -- there will be very few $100M Hollywood movies and a lot of economics blogs.

Tom W. Bell said...

Anon: My abstract does not talk about the supply of expressive works, true. I suppose that you could argue that in increase in authors will increase competition, driving down the profits to be had from creating expressive works, thereby counterbalancing the gains to be had from the influx of new consumers. I think that neither theory nor observed trends supports that conclusion, however. Check out the eventual paper if you want the details.

David Friedman said...

Two comments, the first echoing anonymous. Your argument assumes that the number of readers per work increases. There is no obvious reason to expect that, given that increasing population should increase both parts of the ratio.

The second is a more general one. We often carelessly say that externalities lead to inefficiency. The more precise statement is that they can lead to inefficiency. If an action by me produces a benefit of 100, only half of which I get, I still take it if the cost is less than 50.

So the crucial question is how much is lost by under rewarding producers of IP. If, in your future world, there is hardly any IP whose production cost is between its value and a tenth of its value, then giving the producer only a tenth of the value of what he produces won't cause much inefficiency. If there is lots between those values, than it will. I think you need a clearer explanation of why you expect the former, not the latter. To put it differently, why don't you conclude that the disappearance of copyright will mean that we are unable to take advantage of the greatly increased diversity of works that our larger population would otherwise make possible.

Joey Panto said...

Maybe a different angle will help. Recent debates center on enforce-ability of current copyright law. Enforce-ability has been made more difficult with improvements in copying technology. Those same improvements have increased demand for copyrighted works because the cost to obtain them (legally or illegally) has decreased.

My interest is in the IP security wars between the encrypters and code-crackers. The encryters can only win with government intervention, i.e. more punitive copyright enforcement, and heavy regulation of electronic industry to severely restrict or outlaw new copying technology. Ludds and Statists love this idea, but of course such a heavy hand starts to roll back privacy rights and free market principles.

So I do see a future with less investment in easily copied products, and more investment in difficult to copy productions...such as live performances over closed circuit TV on a pay-per-view basis.

The technology angle is the best one for analyzing how copyright law in being "outgrown".

Jeffrey said...

This is a complaint similar to the "what about supply" complaint above.

Tom, your argument seems, if I'm not mistaken, to be based on a mass-market such as Hollywood film, in which the set of demanders is already big enough for a successful movie to support itself, and getting bigger. But the set of creative works possible includes many which, despite the size of the American population as a whole, have a target audience so small that they're not necessarily able to support themselves even with our current copyright law. And as the set of human interests explodes, no matter how big the total population becomes, there will always be such niche markets.