CNET and others report about a charming new steal-don't-buy browser extension that reminds Amazon.com shoppers that much of Amazon's legal content can be downloaded illegally "4 Free" from The Pirate Bay. If correct, such reports expose the truly self-destructive venality of Internet piracy. They also expose the vacuity of an argument favored by defenders of piracy--the claim that content creators (and law-abiding distributors) can or should "compete against free." Usually, persons spouting this claim cite the case of "bottled water" as a real-life example. For two reasons, this example refutes their vapid claim.

Continue reading Internet Piracy: No, Virginia, There Really Is No "Competing" Against Yourself for "Free" . . .

posted by Thomas Sydnor @ 12:30 PM | Access: Commons, Fair Use, Orphan Works, Public Domain , Economics, Game Theory & Public Choice , Enforcement & Remedies , Free Culture Movement , Internet: P2P, Search Engines...

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Having dealt with Mr. Masnick's self-immolating attack on my analysis of Thomas, I must now even more emphatically reject Mr. Masnick's absurd claim that he "proved" that my paper on Free Culture mischaracterized the views that Professor Lawrence Lessig expressed in Code, a deplorable book advocating government control of the Internet and lawsuits against programmers. Frankly, mischaracterizing Lessig is pointless: quoting him suffices. Nevertheless, Mr. Masnick claimed, "The worst was when a variety of others pointed out Sydnor's out of context comments [sic] and put them back into context--and Sydnor still stood by the paper, refusing to admit he took a single comment out of content."

Nonsense: I stand by my paper because Mr. Masnick and "others" failed to quibble successfully even about details wholly tangential to its main argument. As Mr. Masnick's post indicates, his quibbles claimed that I had unfairly portrayed Lessig as a "communist sympathizer." But my paper said:

To be clear, I do not think that Lessig, Fisher, or other Free-Culture-Movement academics and interest groups are literally 'communists' or 'socialists....' But they do still display the flaws that made communists and socialists dangerous to themselves and others: Inherent distrust of and contempt for the utility of bilateral private exchange conjoined with boundless, unshakeable faith in the potential wisdom, foresight, and benevolence of vast and coercive governmental power.

Continue reading TechDirt's Backfiring Defense of the Thomas Decision--and the "Effective Freedom" of Totalitarian Terror (Part II). . . .

posted by Thomas Sydnor @ 11:10 AM | Academia , Economics, Game Theory & Public Choice , Enforcement & Remedies , Free Culture Movement , Internet: P2P, Search Engines... , Liberty and IP

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This week, we released "Jargonomics: Intellectual Property Prices and Marginal Cost," Authored by Solveig Singleton. The paper argues that marginal cost should not be a factor in pricing or the basis of IP policy. My release on the paper can be found here.

In the paper, Solveig offers four "lessons" for policymakers regarding marginal cost:

- Prices set above marginal cost are not a sign of undue market power or monopoly due to intellectual property or anything else.
- Prices above marginal costs bring new investment and new competitors into the market in question.
- Setting prices at marginal cost (for example, in the context of compulsory licensing of music or pharmaceuticals) does not amount to setting the "right" price; only a market can do that.
- Insisting on static inefficiency in the short run reduces investment and undermines dynamic efficiency in the long run.

The paper is much too nuanced to properly summarize here - it can be found on the PFF website.

posted by Amy Smorodin @ 10:30 AM | Economics, Game Theory & Public Choice , Markets: Business, Investment & Innovation , Prices, Terms, and Licensing

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From Music Row Law, a review of two studies now supporting the view that P2P downloading actually increases sales of physical media; the downturn in CD sales through music stores is thus a result of other factors (such as the rise of Walmart).

I remain skeptical. In analyzing this data, assumptions are key. Many other studies show harm.

The earlier study, by Strumpf, professor of business economics at the University of Kansas Business School and Felix Oberholzer, seemed to operate on some peculiar assumptions (one being that downloads of popular tunes have the same impact on sales as downloads of more obscure ones). However, their data is not available for re-analysis.

Stan Leibowitz has a concise critique of the Canadian study as well as a paper in the Journal of Law & Econ. His use of data is extremely careful.

Among other things, he concludes:

All the papers that I have seen by other economists, except for one notable exception, find some degree of harm (to record producers) caused by file-sharing. These include papers by Blackburn, Hong, Michel, Peitz and Waelbroeck, Rob and Waldfogel and Zentner. The lone exception, but the most heavily publicized, is a paper by Oberholzer-Gee and Strumpf, which I believe is littered with errors and disingenuousness as discussed in greater detail below.

His critique of the Canadian study notes:

The result that has attracted the most attention comes from this quote from the A/F report: “Among Canadians who engage in P2P file-sharing, our results suggest that for every 12 P2P downloaded songs, music purchases increase by 0.44 CDs.” Since there are 14 songs on a typical CD, this means that for each CD equivalent of song downloaded, sales of CDs would increase by one half of a CD.

To arrive at this conclusion the authors limit their sample to only those who download music from peer-to-peer sites. Limiting the sample in this way seems nonsensical. When we test the efficacy of a drug we compare those who take the drug with those who do not. If we limited our observations to only those users who take the drug we would be giving up our most useful and important information. It is possible that dosage differences across users might still provide some information about the overall impact of the drug, but the most important information is whether the drug, at any reasonable dosage, causes a change compared to no drug at all...

Our interest is in the CD purchase behavior of consumers and the ‘treatment’ is peer-to-peer downloading. The best test for that is to compare the group that downloads with peer-to-peer against the group that does not download. ...

A/F have since responded that they do not have a controlled experiment, such as that above, and imply that somehow that changes the logic of the above example. It does not. If we were to examine the impact of tobacco smoking we would compare the smokers to the non-smokers even though it is not a controlled experiment. In fact, this is how the studies were done. It would be illogical to examine only smokers. So A/F still need to provide a cogent explanation for their decision.

Although I am not sure whether A/F report this statistic, the average number of files downloaded from peer-to-peer networks in their sample of downloaders is 30 (24 -- weighted values are in parentheses) files per month (the data are publicly available here). This is the equivalent (in terms of the number of tracks) of 26 (20) CDs per year. According to the A/F quote reported above, this would mean that the average downloader increases their purchase of CDs by 14 (10) units per year. Yet the same data indicate that downloaders only purchase an average of 9 (6) CDs per year. Thus, A/F’s reported result is impossible since downloaders cannot have increased their consumption by 14 (10) units and yet, after this increase, only consume 9 (6) CDs per year.

For more, see his home page.

posted by Solveig Singleton @ 8:48 AM | Economics, Game Theory & Public Choice , Internet: P2P, Search Engines... , Media: Video, Music...

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Some analysis of the social networking phenom, from Agrophilia.

posted by Solveig Singleton @ 8:46 AM | Economics, Game Theory & Public Choice

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Nick Carr's comments on CCIA's study of fair use include the following:

What the authors have done is to define the "fair-use economy" so broadly that it encompasses any business with even the most tangential relationship to the free use of copyrighted materials. Here's an example of the tortured logic by which they force-fit vast, multifaceted industries into the "fair use" category: Because "recent advances in processing speed and software functionality are being used to take advantage of the richer multi-media experience now available from the web," then the entire "computer and peripheral equipment manufacturing industry" qualifies as a "fair-use industry." As does the entire "audio & video equipment manufacturing" business. And the entire software publishing industry. And the entire telecommunications industry.

Oh dear. I think one could fairly count the Tivo, and a portion of some of the activity described above... anything involving parody, certainly.

Of course, there is a larger conceptual problem. Fair use is always fair use *of* something copyrighted... so do we add fair uses on to the value of copyright uses? There is a case to be made that the copyrighted materials--and the consequent fair use of them--would not exist in such abundance but for copyright. The logical response to that is, yes, but we wish to measure in particular the value of this particular *exception.* Fair enough, so long as one bears in mind the risk of the exception's swallowing the rule. Also, that a substantial part of the economic activity in question might well occur in similar form even without the exception, due to the growth of markets in snippets and bits and other licensed material for downstream use.

Empirical studes are funny things, aren't they?

SS

posted by Solveig Singleton @ 12:55 PM | Access: Commons, Fair Use, Orphan Works, Public Domain , Economics, Game Theory & Public Choice , Markets: Business, Investment & Innovation

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IPI has released a study on the economic costs of piracy. These studies often use some controversial assumptions, but my understanding is that this particular study used more conservative methodology than some of the industry studies and it is worth looking at. I'll also try to track substantive critiques and responses, as they come in.

Continue reading IPI Price of Piracy Study . . .

posted by Solveig Singleton @ 3:10 PM | Economics, Game Theory & Public Choice

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This site tracks the value of some "black market" goods from pirated movies to body parts and human trafficking. Missing: Murder for Hire, though Kidnapping is represented.

One ought to distinguish at least two types of markets represented here; a) those in which the goods being sold do indeed "belong" to the seller who wishes them to "belong" to the buyer. Markets for illegal drugs for example. "Belong" is in quotes because from a legal standpoint there are no "property rights," rather, the rights are those that would exist at law just as with any other planted produce or chemical stew if it were not for regulatory bans. Then there is b) the rights in question have been wrested away unlawfully from a third person and appropriated by the seller, who then transfers them to the buyer. Human trafficking, for example, and piracy.

Continue reading Site Tracks Black Markets . . .

posted by Solveig Singleton @ 7:44 AM | Accounting , Counterfeit , Economics, Game Theory & Public Choice , International , Liberty and IP , Markets: Business, Investment & Innovation

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George Mason University Law School and Microsoft announce the first in an annual series of conferences on The Law and Economics of Innovation.

The first one, The Regulation of Innovation and Economic Growth, will be held on Friday, May 4, 2007, from 9:00 a.m. - 4:00 p.m. (plus reception) at GMU Law School in Arlington. Blurb:

The . . . Conference Series . . . will bring together leading academics to present and discuss new scholarship touching on diverse aspects of a key question affecting the technology industry and the process of innovation. Each conference will conclude with a roundtable discussion among top technology industry representatives and regulators to begin to assess the concrete implications of the scholarship for the development of innovative industries.

This first conference in the series will address the complex problem of regulation and how regulation fosters or impedes economic growth through innovation: How should a jurisdiction, particularly an emerging or developing economy, approach its IP or its antitrust regime if it seeks to maximize economic growth—to optimize the role of innovation in growth?

No charge - limited space. Registration required. For further information, contact Melissa at lawconf@gmu.edu.

posted by James DeLong @ 9:29 AM | Academia , Economics, Game Theory & Public Choice , Markets: Business, Investment & Innovation

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The ten principles of economics.

posted by Solveig Singleton @ 10:10 AM | Economics, Game Theory & Public Choice

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posted by James DeLong @ 1:41 PM | Economics, Game Theory & Public Choice

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posted by James DeLong @ 9:55 AM | Economics, Game Theory & Public Choice , Internet: P2P, Search Engines...

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posted by Solveig Singleton @ 8:28 AM | Economics, Game Theory & Public Choice , Liberty and IP , Physical Property

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posted by James DeLong @ 8:53 AM | Economics, Game Theory & Public Choice

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posted by James DeLong @ 8:48 AM | Economics, Game Theory & Public Choice

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posted by James DeLong @ 8:59 AM | Economics, Game Theory & Public Choice

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