The Economics of File Sharing 342
Howzer writes "A great Salon article popped up today, and it appears Stan Liebowitz at the Cato Institute is having second thoughts about his paper that was published on May 15. It seems the facts simply don't support his earlier assertion (& the well-known position of all the major recording labels) that downloading hurts music sales. It's good to see this argued from another angle, especially by a guy like Liebowitz."
Re:TANSTAAFL (Score:3, Informative)
You're quite right. Now, explain how much Bertelsmann's bank balance drops if I download a bunch of data that a given application on a given OS might interpret as a "song" by Britney Spears. I want to know how much less money they have after I download that data, not how much more they might have gained if I had bought a license to obtain a copy of.
Is it a penny? Is their bank balance one penny less if I download that data? No, it isn't. But, hey, that might be a rounding error, so what if I download it ten times, a hundred times, ten million times? Does their bank balance drop every time that I do that? Gosh, you know, it doesn't. How about that.
The first part of your argument is flawed, but that's a common mistake. You are really arguing only that it's "right" that people should respect copyright law. Fine, let's argue that. Why? What "science or useful art" is being promotd by copyright law as applied to music?
Don't just assert it, argue it. Convince us that protecting Bertelsmann's profits (and indirectly that of their meat puppet, Britney Spears) is what the Constitution intends, or what copyright law is supposed to achieve. Because I am having a hard time understanding how a law explicitely and clearly intended to improve the quality of content produced by talented individuals has any relevance to the law as it stands now, which largely protects the profits of huge publishers who buy and sell those individuals as commodities, while confidently asserting that the purpose of copyright law is to protect quantity of sales.
Perhaps you believe that using DRM to leverage another few thousand sales of Britney Spears albums is "promoting the progress of a useful art", but I would argue (using your style of flat assertion) that it self evidently isn't. Convince me.
Anyone who wants to understand... (Score:5, Informative)
...why this guy is so confused should read Paul Ormerod's book, Butterfly Economics [amazon.com]. The book (subtitled "A New General Theory of Social and Economic Behavior") outlines the mathematics which University of Chicago economists broke through the barrier which had prevented others from mathematizing economics.
All they had to do was assume that all agents (that's you and me) in an economic system had an infinite ability to predict the future prices of goods (and they would all have to agree). Now, these economists didn't actually believe this was true, but they hoped further work with the math would allow them to make simpler, more believable assumptions.
And further work did just that. Sort of.
In 1968, it was proven that we could relax those assumptions so that different people could have different opinions about the future state of the world. The only assumption remaining which still flew in the face of common sense: All agents had to have access to an infinite amount of computing power. And it was proven that the math broke down if this requirement was relaxed.
One might expect that this would mean the theory would be thrown out. But one would be wrong. Because orthodox economic theory requires that markets "clear" in this way.
And from this orthodox economists have shown that the distribution of wealth and income which emerges from equilibrium markets cannot be altered without making someone else worse off. Which had implications for economic policy which greatly pleased those who were opposed to certain government tax policies and regulatory policies.
And those people were rich. They funded organizations like The Hoover Institution, The Cato Institute, and Wendy Gramm's Let Enron Rip Off California Institute.
It is taught because before it was disproved it acquired a strong political following, which included politically motivated private individuals who were willing to fund research which produced the results they wanted produced. So organizations like the Cato Institute have to continue to act as if a theory which rests on absurd assumptions is true, even though we know it is not. If they do not continue to so act, they will stop getting money from wealthy conservatives. That is why the absurd theory was never thrown out.
All of this would not make much difference except that an alternative set of theories have arisen, which take advantage of more recent developments in the mathematics of non-linear systems. They make no absurd assumptions, and (though incomplete) they do work. See Ormerod's book for more information.
They new theories do not skew either to conservative or liberal biases. (Ormerod is even more critical of European attempts to micromanage their economies than he is of laissez-faire Reaganism.) One of the results of including non-linear systems into the mix has been the discovery of what is known as the "network effect." Although most of us have experienced the network effect personally, Stan Liebowitz has developed a little mini-career opposing it.
It turns out there is money in this opposition. Microsoft is willing to pay good money for this obvious nonsense. And it fits right in with Cato's nervousness about a competing theory which does not rest on the absurd assumptions theirs requires.
Which explains why Liebowitz has no clue as to why CD sales were up while Napster was booming and are down since it was shuttered. The Napster community was a classic network with people sharing their favorite music with others. Sure some used it to avoid purchasing CDs. But far more were able to hear music they might never have found otherwise. Liebowitz cannot afford to see this since it would cut off a lucrative source of income for him to admit the network effect has such power. But the rest of us are under no such limitation.
When radio came along, record companies said the new technology was so different it would destroy the copyright economy they thrived on; 30 years later they were bribing DJs to play their records. Cassette tapes were similarly attacked. VCRs were supposed to be the end of the movie business; today they are an important part of their bottom line.
Someday we'll probably see congressional investigations of record companies paying on-line music-sharing services to promote their products. And Stan Liebowitz will still be confused about why his absurd assumptions still don't predict real-world results.
Re:of course not (Score:3, Informative)
I can tape the song off the radio just like I can download it off the Internet
And part of the cost of blank cassette tapes goes to the artists to offset that loss of revenue.