TCS Daily

Marx's Nightmare

By Arnold Kling - May 9, 2003 12:00 AM

Frequent TCS contributor and fellow economist James Miller has written an unfortunate screed on the topic of file-sharing. He takes the view that a recent court ruling has made it more difficult to stop consumers from trading music files. Miller heaps rhetorical scorn on the file-sharing phenomenon, calling it "digital communism... theft... piracy... Karl Marx's dream..."

In his peroration, Miller asks us to imagine "the fate of stores if there were no effective laws against shoplifting: Theft would drive them to bankruptcy... Of course, copyright holders could still find a few ways to profit in a world of rampant piracy. Movies could be financed by the sale of action figures and musicians could profit from concerts. It's difficult to see how authors could profit, however, except, perhaps, by begging for tips."

A Middle Ground

What Miller fails to allow for is any middle ground between the technology-hostile position of the recording industry and Hollywood on the one hand and communist nihilism on the other. This is a false dichotomy, as several in the blogosphere have tried to explain.

  • Siva Vaidhayanathan wrote, "First, no one who understands the value of reasonable copyright is seriously arguing against copyright. But no one should be suckered into believing that just because some copyright is good [that] maximal copyright is better... Jack Valenti et. al. opposes copyright. He and the industry he represents want to [install] technocratic regulatory systems that would be clumsy, counterproductive, and futile."

  • Ed Rescorla points out that only a noisy minority directly opposes intellectual property. On the other hand, many people are what he calls Pragmatists, who "view Intellectual Property as a necessary evil. The traditional economic analysis of IP is that it's required to incentivize people to engage in the kinds of intellectual effort that produce content... In the view of the Pragmatists, the amount of protection given to IP has gone beyond the point of efficiency and so should be reduced. See the 'economist's brief' in the Eldred v. Ashcroft case for a pretty good exposition of this view."

    (Rescorla also alludes to economists Michele Boldrin and David K. Levine, whose work I discussed in A Metaphor's Metaphors.)

  • In an exchange with Rescorla, Ed Felten writes, "I would instead label the three factions (which he calls the IP Lobby, Pragmatists, and Idealists) as the 'Big-IP', 'Small-IP', and 'No-IP' factions.

    "So far, the Big-IPs have done a pretty effective job of cementing the alliance between the Small-IPs and the No-IPs, most notably by treating the Small-IPs as if they had taken No-IP positions."

In fact, James Miller's essay is a perfect example of the alienation of moderates by those who advocate the position of the entertainment industry. There are many of us who take great pains to distance ourselves from digital communists, but we nonetheless reject the rigid, dogmatic stance of the lawyers for Hollywood and the RIAA.

In particular, I believe that it is not constructive to take the metaphor of "intellectual property" completely literally. As Dan Bricklin points out, "Each copy of a videotape, book, or computer program in a department store is separately bought and paid for by that store from a wholesaler before being put on the shelf. Each shoplifted copy is not just a missed sale, but it is also out-of-pocket money paid without a return... Software is different. Buying software legally online is almost just as easy as pirating it today. Software has been susceptible to piracy for decades, yet, according to the BSA (an anti-piracy group) 'the commercial software industry... [is] the fastest growing industry in the world.'"

Bricklin makes the point that shoplifting imposes real costs on stores to replace lost inventory. Online piracy only represents a theoretical lost sale. He argues that "if we are basing our laws on the belief that online sharing is the same as shoplifting, we are making a mistake."

I continue to believe that the best metaphor for file sharing is movie popcorn. As I put it two months ago, "Music publishers who go after file swappers are like movie theater owners who won't let you bring your own popcorn to the theater. They are simply alienating their customers while trying to protect a revenue stream that they were not going to get, anyway."

Industry in Transition

Recently, some signs have appeared to indicate that there are a few music industry executives who are starting to realize that they must make the transition from being purveyors of shrink-wrapped plastic to a more Internet-savvy business model. For example, EMI is making its catalogue available through various partner sites.

John Snyder, of Artist House Records, is one of the few in the industry with insight into the future. He wrote:
"The people who run [record companies] still have their e-mail printed out by their secretaries. We have to wait for the next generation to take over, the 'software' generation, the generation of people who don't remember growing up without a computer around. I would argue that the future of music is multimedia, the future of multimedia is DVD, and the future of music companies is software. In five years, record labels will be software companies and I don't think they know that yet."

So who is it that threatens the free enterprise system as we know it? Is it the file-swappers, as James Miller claims? Or is it the lawyers and lobbyists for the recording industry, who treat the greatest feature of free markets - the ability to encourage, incorporate, and apply technological innovation - as a bug?

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