We often hear that copyright is a monopoly. We also hear that as a monopoly, copyright costs consumers because monopoly goods are by definition more expensive (what economists would call “deadweight loss.” But U. of Texas at Dallas Managerial Economics Professor Stan Liebowitz July 11 presented a compelling paper at the Society for Economic Research on Copyright Issues (SERIC) conference in Geneva titled “Is the Copyright Monopoly a Best-Selling Fiction?” (Disclosure: We like Professor Liebowitz around here because he is on our Academic Advisory Panel.)

Liebowitz examined the sale of books, particularly fiction, and compared the price of copyrighted and non-copyrighted work. His conclusion? “The empirical findings indicate that the price of copyrighted works may not be higher than the prices of non-copyrighted peers and if they do have higher prices the differences are quite small.” Why? He puts forward the suggestion that in many entertainment industries pricing is uniform regardless of demand, or copyright status.

(As a personal anecdote, my daughter is currently halfway through “Little Women,” which I’m pretty sure is out of copyright, and that copy was the same as if she had bought one of her usual reads, these “teenage angst” books. My term, by the way, not one used by the marketers.)

Liebowitz goes on to address how copyright is not a traditional monopoly in any sense of the word:

Economists, along with almost everyone else, tend to equate intellectual property protection with monopoly. Unlike patents, however, which protect an inventor against later independently created but similar inventions, copyright, for all practical purposes, merely protects a work from unauthorized versions of itself. Copyright allows the creator, or anyone to whom he has assigned his copyright, to be the exclusive agent capable of making reproductions of the work (which has been extended to various forms of ‘reproduction’ including public performance, electronic transmissions to the public and so forth) but it does not provide any protection from independently created competing works no matter how similar they may be.

Although there is little doubt that copyright, by definition, grants the copyright owner a monopoly on making copies of the owner’s particular work, Kitch (2000) has reminded us that this does not mean that there is necessarily any economic monopoly or any deadweight loss. After all, every firm has a monopoly on their own product. Farmer Smith has a monopoly on Farmer Smith’s wheat. The problem (for Farmer Smith) is that farmer Smith’s wheat is just like every other farmer’s wheat, so that his wheat growing doesn’t provide any economic monopoly.

Thank you, professor. This is a far more elegant description of something I’ve been saying for some time. Yes, every musical composition is unique, every sound recording unique, every motion picture unique, every novel unique. But I can make an 8-minute song with chord progressions and Middle Eastern influences, even though Led Zeppelin achieved near perfection with that approach in “Kashmir.” I can make a movie about two cops, one who plays by the rules and one who crosses the line in order to pursue his brand of justice, even though that’s been done more times than can be counted. I can write a novel about a tyrannical editor of a New York fashion magazine, even though that was done to great commercial success in “The Devil Wears Prada.”

We keep hearing about how creators build on other’s creations. Of course they do. Inspiration comes from many muses. There is a difference, however, between being inspired and copying. That distinction is in the law, and as Liebowitz shows, the latter is not necessary for commercial success, or to ensure consumers are not over-charged.

As always, Professor Liebowitz makes many more compelling points, and elaborates in great empirical detail about the relationship among major and minor publishers, copyrighted and uncopyrighted works, mass market and other works, and price, but I will leave it to you, dear readers, to peruse them for yourselves.

This entry was posted on Monday, July 14th, 2008 at 10:03 am by Patrick Ross and is filed under economy, market forces, property rights. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.