Manufacturing Scarcity

This here is an excellent talk by Chris Anderson of Wired on, well, I'm not sure what it's on, exactly. He flits from subject to subject, but the common element is the increasing use of "free" as a price for the consumer of new technologies and services. He starts off by talking about Moore's law, and the implication that if transistors become ever-cheaper every 18 months, then it makes sense to starts "wasting" them -- that is, stop locking your computers behind doors where only the IT guys can input commands, and build computers that anyone can use. Ditto hard drives: as computer storage becomes cheaper, you go from web mail services offering 2MB of storage, to 2GB of storage, to literally giving away infinite storage.

Anderson's argument, which he'll be hawking in a new book, is that a handful of new technologies are re-drawing the landscape by pushing marginal costs for a variety of activities to effectively zero. This isn't terribly new for the Internet, where the effective cost of distributing songs has been zero since 1999 or so. The effective cost of distributing books has been zero for a long time before that. And the effective cost of distributing movies is basically zero today.

Which brings us to the fight over Canada's aborted copyright changes. There is absolutely nothing in the proposed Canadian DMCA that would seriously impede piracy, nor is that the intent. (Piracy and theft already being illegal and harshly punished, there's little the act could do anyway.) The only thing you really need to know is that the DMCA-clone that the Liberals, and now the Tories, are trying to foist on us, is that it forbids circumventing DRM tools. Basically, anytime a company tries to tie up their content with some ridiculous and failure-prone software, it would be a crime to circumvent it, whether the intent was criminal or not. We know this because several times, amendments have been proposed that would limit punishment to cases where DRM was circumvented in order to violate copyright. Those amendments have never passed.

The point of these kinds of laws (around the world) is not, therefore, to enforce copyright, but to give content distributors a new set of tools with which to restrict our use of the content we pay for. This is reasonable business sense -- if I can sell you a CD and a ring tone and downloaded MP3s of the same music, I'd be silly not to at least try. The question is whether it makes any economic sense (not the same thing) or legal sense. Should we be throwing people in to jail because mainly American music labels want a more profitable business model?

Certainly, the economic case is pretty weak. The "cost" for the manufacturer of me taking a CD I buy and turning it in to ring tones or MP3s is zero. The software to do all this is freely available, they recoup the production cost of pressing the CD plus 10,000% from retail sales, and the cost of recording the music is amortized over the nearly 150-year copyright period that Canadian law allows (almost 200 in the US). The idea that consumer costs should be increased simply to improve the profitability of a few large incumbent content producers is pretty lame -- there's no scarcity here for them to profit from, after the purchase of the music itself.

But here's the thing: big copyright has always only thrived by producing scarcity where none exists. Copyright, indeed, exists to create scarcity in information. Certainly, by the mid-20th century costs for reproducing music and text had fallen so quickly that in most senses, information was a public good: the cost of adding one new consumer was basically zero. Today, almost all information is a public good in this sense.

To use the peanut butter analogy, it used to be that you could either spread information widely or thick, but not both. The economics of information dictated that gathering a large audience meant you had to produce, ahem, low-value content. Not that Hee Haw and Love Boat weren't great in their time, I'm sure. Today the economics are reversed: it's more profitable to spread thick information as widely as possible -- see the NY Times' decision to not only go to free subscriptions on the web, but to open their archives for free.

You'd think, seeing this astounding change in economics, we'd start thinking about all the wonderful things we could so by spreading information as widely and thickly as possible. We've found the cornucopia, as far as information is concerned: you can keep sucking up data all day, and there's literally no way you could consume it all. Instead, we're seeing the impulse by the content industries of all sorts (even scholarly journals are getting in on this, it's ridiculous) to try and lock down information as much as possible. The point is not to assure threatened profitability, but to continue creating scarcity where, by right, none should exist.

This process has been compared to the enclosures of the late Medieval Period, but in some ways it's even more cruel: land was, and is, a commodity in short supply -- orthodox liberal economics at least gives us a framework for showing that the enclosures made people better off in the long run. There's no similar argument here: incumbent firms have shown themselves able to profitably make compelling movies, television, and music from the status quo, so there's no reason to lock down people's use of their content. Further "enclosures" are unnecessary, and in fact counter-productive. Most economists who've looked at the system argue that the maximum necessary period for copyright protection is 20 years, +/- 5 or so. And that number is shrinking, not growing.

Funny point: while patents and copyright are today called "intellectual property" and are widely regarded as necessary to stimulate creation of content, the reality is that historically patents and copyright law served exactly opposite purposes. Letters of patent originated in Europe as a way for rival kingdoms to poach each others' high-tech workers at the time: I'd get a monopoly if I moved my sheep-shearing operation from Flanders to England. This stimulated economic growth in some areas at the expense of others, but arguably did little to stimulate new developments. And the first modern copyright laws were used to restrict copyright, not extend it. Two centuries after Shakespeare's death, the same cabal of London printers were claiming the monopoly on printing his plays. The Statute of Anne ended that insanity. How the wheel turns.

The point is that we've retroactively cast historically constructed laws and systems in a way that makes them appear more rational than they actually were. This is problematic, because it's leading us to make bad decisions now -- like continually expanding copyright terms in to the infinite future, guaranteeing monopoly profits for a few large firms at the expense of the public domain. Remember the public domain?

There's a deeper question here, and its about the failure of imagination on the part of economists generally. Here I steal shamelessly from Michael Perelman's book, Steal this Idea. (See what I did there?) Perelman points out the irony that, when confronted with a true public good (information) the response by mainstream economics has been to institute a monopoly (which is what intellectual property is, at the end of the day.) Confronted with the terrifying prospects of something without cost, modern economics thinks it's preferable to impose a monopoly -- the very antithesis of what liberal economics is supposed to preach -- than find some way to make peace with the abyss. Where is the new idea from economists about how to stimulate content production? Are we doomed in to a new round of enclosures, forever? If technology keeps making everything cheaper, why shouldn't the consumer actually benefit from the lower cost, and not be forced to pad the wallets of the already-very-rich?

There's a broader point here, and it has wider applications than just information: as technology and economics conspire to lower the costs of goods or services, what is the proper role of the government? Well, if you listen to the incumbents -- whose story never really changes -- it's to support and expand their profitability. But shouldn't economists and social justice advocates both agree that the proper role of government regulation is to bring the lowest costs to the consumers, while ensuring profitability for the industries concerned? Clearly, economists aren't going to sign up for killing the goose that lays the golden egg. But if the goose craps out an infinte number of golden eggs, why do Rogers and Bell get to keep 90% of them?