Techdirt. Stories filed under "economists" Easily digestible tech news... http://www.techdirt.com/ en-us Techdirt. Stories filed under "economists"http://www.techdirt.com/images/td-88x31.gifhttp://www.techdirt.com/ Mon, 29 Mar 2010 05:21:33 PDT Economists Tell Spanish Gov't Its New Copyright Laws Are A Mistake Mike Masnick http://www.techdirt.com/articles/20100328/2317138756.shtml http://www.techdirt.com/articles/20100328/2317138756.shtml very reasonable copyright lawsuit rulings in Spain (that recognized private copying shouldn't be illegal, and that secondary liability didn't make sense), the Spanish gov't was backing copyright reform, supported by the entertainment industry, and would basically make Spanish copyright law mimic all the mistakes found in many other countries. Thankfully, some economists are speaking up to let the Spanish gov't know that this sounds like a terrible mistake. As TorrentFreak notes:
The report, published by the economy research center FEDEA, harshly criticizes the Government's plans to clamp down on the file-sharing public. They say that the current proposals are a "useless and an ineffective way to defend the artists because it is already an ancient form of fighting piracy."

According to professors Fernandez and Boldrin, the proposed legislation only benefits the major labels and artists "at the expense of users and lesser-known artists." They further say that it would be more effective for the entertainment industry to explore new business models instead of clinging to an old model that has proven to be ineffective.

"The Internet has changed the playing field and there are new rules that would allow a substantial reduction in property rights," Professor Pablo Vazquez said commenting on the report. The researchers therefore advise the Government to stop its war on piracy and come up with legislation that would allow for reduced copyright terms .
You may recognize the name of one of the professors involved. Michele Boldrin is the co-author of Against Intellectual Monopoly, and took part in our CwF+RtB experiment last year, and even co-wrote a nice guest post on the site.

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]]> good-for-them http://www.techdirt.com/comment_rss.php?sid=20100328/2317138756 Fri, 23 Jan 2009 09:02:00 PST Every Economic Model Is Wrong... But That Doesn't Mean They're Not Useful Mike Masnick http://www.techdirt.com/articles/20090112/0158213362.shtml http://www.techdirt.com/articles/20090112/0158213362.shtml what if the economic model you're basing business decisions on is wrong? He's building off of an Umair Haque blog post, asking whether or not economists matter any more, because the models they use are wrong. I think there's some truth to both of these pieces -- and I know both Fred and Umair, and enjoy exchanging ideas with both -- but it feels like they're throwing a pretty big baby out with the bathwater.

I don't think it's that the "old models" don't work any more. The problem is simply that they're models, not crystal balls. Every model has faults (that's why it's a model, rather than the real thing). What makes economics so difficult is that any real scenario involves too many variables to accurately model. Each modeling attempt tries to account for the most important of those variables, and assumes the impact of the rest washes out. However, changes in the world may impact one variable a lot more than expected, or change the relationship between variables -- and that's what throws a model out of whack. Every economic model is wrong because it simply cannot account for every human variable out there.

But, that doesn't mean you ignore what the models tell you. You can still learn quite a lot from those models -- including why they're wrong, and how to improve on them. So, for example, when Haque discusses Starbucks and Microsoft, as if basic economic models failed them, I disagree. I just think they didn't put enough weight into some important variables in their models. Starbucks, for example, failed to recognize the importance of "culture" in its equation, but that doesn't mean the whole equation was wrong.

It's certainly tempting to throw out the old models when they're proven incorrect, but that makes you lose a real learning opportunity. You should start from the position that all models are incorrect from the beginning -- and as each model is proven incorrect, figure out why so you can correct and improve, rather than simply tossing the whole thing out.

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]]> hating-on-economists http://www.techdirt.com/comment_rss.php?sid=20090112/0158213362 Fri, 31 Oct 2008 10:44:00 PDT Economists Realizing That Current Music Industry Structure Leads To 'Sub-Optimal Outcomes' Mike Masnick http://www.techdirt.com/articles/20081031/0207002697.shtml http://www.techdirt.com/articles/20081031/0207002697.shtml paper concerning the economics of the music industry on the internet today. It includes an economist from the collection society, one from the internet industry and one from the music industry. While the resulting paper does have some good points -- such as being one of the few industry produced papers that doesn't try to ignore the fact that file sharing directly competes with things like iTunes -- it appears to have some weaknesses as well.

The paper basically tries to describe the overall landscape for music on the internet, dividing it into three units (reflecting the three people working on the report): Music Service Providers (MSPs) such as Kazaa or iTunes (and, yes, it's impressive that they directly lump the authorized and unauthorized players together), Music Rights Providers (MRPs) such as ASCAP or other collections societies, and ISPs. The paper then uses some basic game theory to note that the interactions between these three players will often lead to "sub-optimal outcomes." No, really?

Instead, they suggest that the entire incentive structure of the industry should be reconsidered -- which is something I clearly believe as well. However, from the article, it looks like the approaches they line up don't do enough of that reconsidering. Why? Because they don't even seem to take into account the idea that (a) there are other players in the market that should be considered in the ecosystem and (b) one of the three legs of the stool set forth in the premise (the collections societies) may not be needed. If you take them out of the equation, but plug in other components of the market (say, the musicians themselves) you can quite easily see the model working quite differently than what's described in the report. Indeed, the options for creating win-win solutions become much clearer. In ignoring the other aspects of the market, while not considering that these so-called MRPs may not be necessary in today's world, the report falls well short of actually laying out optimal solutions in the market.

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