I’ve heard some peculiar arguments against intellectual property over the years, and two of them have been at events sponsored by the Cato Institute. The first was two or three years ago, when Cato hosted a conference featuring then-UCLA Economics Professor David Levine. In his dissection of copyright, he defended the notion of pirated motion pictures online competing with a theater version on day of release by arguing studios should lower production costs. He said they should emulate another film industry that was highly profitable, namely the adult film industry. Hmm.

Today Cato provided a platform to Michele Boldrin, economics professor at Washington University at St. Louis, and Levine’s co-author of a book titled “Against Intellectual Monopoly.” In his opening remarks, he said: 1) The fact that farmers in one part of southern Spain were able to learn farming techniques from farmers in another part of Spain means that knowledge passes freely without IP protection. Hmm. 2) Ideas are public goods, so anyone producing a creative work with ideas should find a way to extract rents from that production without IP protection. Hmm. 3) They can do this by being “very quick,” recouping as much as possible before the darknet steals all customers. Essentially that was the argument Levine gave at the previous Cato event. Hmm.

I’ll let others debate what the sponsorship of these panel discussions says about Cato, and instead focus on responses from Robert Atkinson, founder of the Information Technology and Innovation Foundation (ITIF). (Thank you, Cato, for including such a sharp respondent.) It was interesting to watch Boldrin, a very expressive individual, alternately frowning and eyebrow-raising as Atkinson stepped his way through a long critique of the Boldrin-Levine work.

Atkinson noted that: 1) While the book contained some proposals for reform, it was explicitly calling for elimination of intellectual property, and in fact the book repeatedly claimed that studies suggested all parties would benefit from its removal, although Atkinson found no study that truly documented that claim. Boldrin replied that he is politically realistic and knows you must start with reform before you can get to full elimination. 2) There is no focus on incentives for innovation in the book, essential if you are to discuss IP. Boldrin replied that innovation occurs often without incentives, a position Atkinson strongly disputed. 3) It was backwards to claim the Internet means creators should have to extract rents more quickly now after release, as the digital age shows it’s even harder to do so as pirated works produce that much more quickly. 4) The book sees price falling to zero but ignores the fact that in that scenario, revenues fall to zero. 5) The book as an unfortunate tendency toward diatribe, such as calling IP “evil,” referring to US Supreme Court justices as having double-digit IQs and suggesting that those who support copyright don’t appreciate facts.

Atkinson took the discussion one level higher (I was inclined to take it one level lower to the practical, as I’ll explain below). Atkinson called Boldrin a neoclassical economist, focused on producers extracting necessary rents. In contrast, Atkinson called himself a Schumpeterian, focused on the innovation and productivity. Thus, as I’ll put in my own language, not Atkinson’s, Boldrin is looking at the end of the conveyor belt and figuring out how best to distribute that product to consumers, while Atkinson is focused on making sure someone makes that product to begin with, and that someone else is coming up with an improved product or better yet a radical replacement.

As a Schumpeterian myself (see our video on the introduction to copyright, as well as many blog entries), I think Atkinson is right on the money. Copyright, and IP in general, is all about incentives. Rights are given — a limited monopoly is created — to encourage authors and inventors to produce writings and discoveries. This comes from the “Progress Clause” of the US Constitution, aptly named, as a focus only on use of end-products will soon leave you with fewer end-products.

Much of the give-and-take after the presentations focused on the publishing industry, to my surprise. Having played numerous roles in that industry, including six years as a freelance writer, I couldn’t resist jumping in. Boldrin said publishers only needed six months of copyright because they make most of their revenues there.

This ignores several points: 1) Digital piracy has not hit this industry as much as others, but we can’t assume what length of copyright they’d need for profit based just on current data. 2) Publishers publish based on having a long copyright. If they know that in six months it will be legal for me to download a free copy and you to print up beautiful bound copies that you’ll sell for one-third the price (you don’t have to cover the fixed cost of paying the writer and employing editors in an office), they will simply not publish as many books. Already most books fail to earn back their investment and are subsidized by bestsellers. Many of those will no longer be published, a loss to the Long Tail users who found the non-bestsellers valuable. (Afterward I talked at length with some attendees about other benefits to society of longer copyrights, using a John Grisham example, but I won’t get into it here; if someone wishes to hear it, post a comment.)

Boldrin refused to acknowledge directly that a 6-month copyright term would lead to fewer books; instead he started throwing around profitability numbers in the publishing industry, as if this had any bearing on the subject at hand. Atkinson noted that with copyright there is always a choice between level of access to existing works (he called it “freedom”) and incentives to create and distribute new works, and it seemed Boldrin was willing to sacrifice future creation of works for more freedom with existing ones. Boldrin didn’t dispute that.

Some critics of the Digital Millennium Copyright Act say that it stifles technological innovation, and we’ll never know the true cost because you can’t count something that never appears. I am more skeptical of the notion of the DMCA repressing innovation than they are, but admit the impact is hard to calculate. What is empirically obvious, though, is that diminishing the rights of creators leads to less incentive to create and distribute. How much would our culture be deprived? Again, you can’t count something that never appears. But it would be a loss indeed, and it’s one I’m not eager to accept.

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This entry was posted on Monday, November 10th, 2008 at 5:19 pm by Patrick Ross and is filed under copyright law, copyright opponents, creators, economy, market forces, piracy, property rights. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.