A Lack Of Scarcity Has (Almost) Nothing To Do With Piracy

from the misunderstanding-the-premise dept

Took a week off from my series concerning the economics of abundance, but wanted to jump right back into it this week. I started out with a discussion on how the number zero seems to screw up otherwise sensible people when it comes to economics, and followed that up with a post on the economics of abundance is not a moral issue. I had planned to move on to more about the actual economics, but the responses have delayed that for at least a little while.

Some of the complaints about the last piece highlighted one aspect that perhaps I had not made clear: unauthorized downloads, "piracy" or "stealing content" (if you want to use those phrases) have almost nothing to do with this discussion. People criticizing the posts on this topic keep going back to the idea that this is all some big defense of such practices when nothing is further from the truth. This series is very much written from the perspective of the producer of content, not the consumer. That is, we're trying to make clear the basic economics so that the producer of the content can use that to his or her advantage. So, the lack of scarcity we're talking about is based on the fundamental nature of the content: that it has zero marginal cost to make a new copy once the original is made. That's a simple fact that has nothing to do with whether or not people are making unauthorized copies. That nature of the content is fundamental. So everything that we're saying here applies just as much to content if there were no "piracy" at all. If there were an industry where there was a lack of scarcity, but no piracy, the information here would apply just the same.

Now, I do say "almost" nothing to do with piracy. The way that unauthorized copies play into this discussion is in the realization that they're a fact of the marketplace. That is, they're helping to accelerate the impact of that lack of scarcity, and only helps to highlight why the producers of content need to pay attention and make changes sooner, rather than later. Many of the recent actions taken by organizations like the RIAA, the MPAA and the BSA represent a fundamental misunderstanding of this fact. They believe two things that are absolutely wrong. First, that the lack of scarcity is only due to piracy and, second, that there's some way to really stop piracy. Both of these things are wrong. The lack of scarcity is due to the fact that the content has zero marginal cost -- which is true no matter what, and unauthorized copies are always going to be an issue. So, based on that, why not try to understand what happens when you have a lack of scarcity and how to profit from it, rather than fighting the obvious trend?

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    Mike (profile), 29 Nov 2006 @ 5:34pm

    Re: Re: Re: Missing the point again

    We need laws to stop them because it is bad for society at large.

    That's a huge assumption, based on a hidden assumption that a monopoly cannot be toppled. In some cases (such as with gov't granted monopolies in intellectual property) that may be true. In others, less true.

    Economics alone will not keep that company from polluting, and we need laws to stop them because it is bad for society at large.

    You're talking about apples and oranges here. Economics and laws are not mutually exclusive things where you choose one or the other.

    So you agree with the basic premise that these laws exist to counterbalance pure economics to get a desired impact? That would be a start. If the laws do not give the results that we desire, we will of course change them. These laws have worked decently well for 200 years, I think they can be modified to work. Don't you think it is a bit early to throw them all out and start from scratch?

    No. I agree with the premise that laws exist to solve market problems. That's not "counterbalancing pure economics." Laws are a part of the economics.

    However, I also believe that history has clearly shown that cases of market failure are far and few between, so if you're going to use laws to correct market failure, you better damn well have serious proof that there's a market failure.

    And, finally, as I've stated repeatedly, this is not about scrapping the laws. It's about getting the content producers to recognize that it's to their benefit to embrace the lack of scarcity, or they're going to discover that their competitors have done it instead, and they're going to be in trouble.

    Removing IP laws will be a huge market failure, and will destroy entire industries. You know, I await with bated breath your ideas on how musicians, programmers, or drug companies are going to make money in a IP-less world, or what their motivation to create is going to be.

    Keep reading. We'll get there -- though I think I've pointed out plenty of examples in the past. But, we'll get to it in more detail as we move forward with this series of posts.

    Oh come on, you are just being silly now. Yeah sure, there is a huge contradiction between being for the breakup of AT&T and being against the ability for Justin Timberlake to control what happens to his music. Please.

    I don't see your point. You were the one who claimed outright that monopolies are bad for society. Why is it true in one case they are and in another they're not? Just because one is bigger than the other doesn't change the basic economic nature of a monopoly.

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