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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  1. identicon
    Dewy, 18 Mar 2007 @ 8:39pm

    Love this Debate

    If any of us are musicians we know the price of recording is plummeting thanks in large part to cheaper and better quality recording gear. A demo recording to get your band into clubs would have cost $2000, but now for $899 you can buy a nice digital recorder and make an infinite supply of 3rd rate recordings.

    I'd also like to point out a couple of fundamental flaws I see in this discussion from time to time.

    piracy vs scarcity:
    Piracy implies someone "lost" something in the transaction. A sale or royalty... or are being denied "control" over the distribution of said works. What we are debating here is the SCARCITY issue... its no longer difficult to distribute large "works" of art... that bottleneck of the market is opening up. This takes us to our next source of confusion...

    There are laws set into place by governments or industries that are often changed, modified, or even struck down for various reasons. these should never be confused with the laws of economics. The Laws of economics are INDEED like the laws of physics... and amoral. If I release a rock above your head the result may have moral implications... but morality has nothing to do with the rocks reaction to gravity.

    Mike is sharing with us a fundamental law of economics here... when the cost of distributing something (water) reaches zero, the market changes. Now either business changes with the market... or is left behind as consumers vote with their wallets and pay business models that do.

    The only thing I have seen Mike advocate here is that the industry accept and react accordingly these facts. His Argument may be useful to those among us who choose filesharing and need to help others understand that filesharing is NOT thievery... but he is speaking to the industry, not the consumer.

    I'd like to once again point out, music was never intended for a bottle... it was never intended as a single use commodity. Music is a gift of the spirit from musician to affeciando... and anything inserted between is vile and insufficient. There is no fee I can pay David Gilmore to compensate the suffering and weathering that was required for him to record Comfortably Numb or distribute that recording.

    And yet the industry that "represents" him has shaken me down 3 times for the cost of the cassette and once for the CD. (actually, when I bought the CD they were still enforcing the 12 song limit per CD, and its a double CD set...) Shall I continue to pay for this song every time I play it, and again for every device I choose to play it on? How about my friends, must they purchase a license to listen to it with me, or if I decide to show them the guitar or bass lines?

    I've seen him in concert twice, and purchased other recordings he has made... but I think I've paid them for Comfortably Numb, and they've paid him.

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