Shots Across the Bow

A Reality Based Blog


reason and copyright laws

It's a bad month for reason magazine. Not only did I disagree with Michael Fumento's attack on the Atkins diet, but I also strongly disagree with a new study arguing that intellectual property laws are inherently bad.


I just read the piece in Reason on Intellectual property rights and I must say it was weak. Michele Boldrin and David Levine have written a paper saying that intellectual property rights (copyrights and patents) stifle innovation, producing higher prices and lower productivity. The key to their argument, quoted again from reason magazine, issue 3.03 is this:

“Innovation, they argue, has occurred in the past without substantial protection of intellectual property. ‘Historically, people have been inventing and writing books and music when copyright did not exist,’ notes Boldrin. ‘Mozart wrote a lot of very beautiful things without any copyright protection.’”

Yep, he also died penniless and was buried in paupers grave. Not to mention the fact that he produced his music under a royal subsidy, or else he would have starved to death even sooner. Strange that she chose that example, since it actually provides a stronger argument for copyrights.

Boldrin and Levine go on to argue that artists and inventors don’t need copyright protection, as long as they have the ‘right of first sale’, which means they can price their work to account the market value of all copies produced in the future. That’s all well and good, but what happens when the first buyer makes a limited number of copies available for a price substantial enough to recoup his investment? Why some enterprising young thief rips a copy of the song onto the internet, and other thieves take it for free. What does this do to the “net discounted value of the future stream of consumptive services?”

It is reduced to zero. The first purchaser is left holding the bag.

Maybe the problem is that the distributor charges too much, that his overhead raises the cost of the product above what the market will bear. OK, let’s cut out the middleman. No publishers or distributors. Britney publishes her music on the net for a very small download fee. Will she make the same amount of money, or will pirates still rip her off? Stephen King has tried this, started an online serial, downloadable for a small fee. The return he got was so small, he quit halfway through. The money he got simply wasn’t worth the effort.

This exposes the fatal flaw in Boldrin and Levine’s analysis. They argue that technically, copies aren’t free, because it takes time and materials to produce the copy. While true, this is irrelevant because the creator of the property does not receive any profit from the time or materials used to copy the work. This applies as well to the first buyer of the work, who would have no way to recover their investment once free copies flood the market. This simple fact scuttles the idea of doing away with copyright protection.
Posted by Rich
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