Ramblings

by Mike Masnick




History Repeats Itself: How The RIAA Is Like 17th Century French Button-Makers

from the no,-seriously... dept

As regular readers know, I've been working through a series of posts on how economics works when scarcity is removed from some areas. I took a bit of a break over the holidays to catch up on some reading, and to do some further thinking on the subject (along with some interesting discussions with people about the topic). One of the books I picked up was one that I haven't read in well over a decade, but often recommend to others to read if they're interested in learning more about economics, but have no training at all in the subject. It's Robert L. Heilbroner's The Worldly Philosophers. Beyond giving readers a general overview of a variety of different economic theories, the book actually makes them all sound really interesting. It's a good book not necessarily because of the nitty gritty of economics (which it doesn't cover), but because it makes economics interesting, and gives people a good basis to then dig into actual economic theory and not find it boring and meaningless, but see it as a way to better understand what these "philosophers" were discussing.

Reading through an early chapter, though, it struck me how eerily a specific story Heilbroner told about France in 1666 matches up with what's happening today with the way the recording industry has reacted to innovations that have challenged their business models. Just two paragraphs highlight a couple of situations with striking similarities to the world today:
"The question has come up whether a guild master of the weaving industry should be allowed to try an innovation in his product. The verdict: 'If a cloth weaver intends to process a piece according to his own invention, he must not set it on the loom, but should obtain permission from the judges of the town to employ the number and length of threads that he desires, after the question has been considered by four of the oldest merchants and four of the oldest weavers of the guild.' One can imagine how many suggestions for change were tolerated.

Shortly after the matter of cloth weaving has been disposed of, the button makers guild raises a cry of outrage; the tailors are beginning to make buttons out of cloth, an unheard-of thing. The government, indignant that an innovation should threaten a settled industry, imposes a fine on the cloth-button makers. But the wardens of the button guild are not yet satisfied. They demand the right to search people's homes and wardrobes and fine and even arrest them on the streets if they are seen wearing these subversive goods."
Requiring permission to innovate? Feeling entitled to search others' property? Getting the power to act like law enforcement in order to fine or arrest those who are taking part in activities that challenge your business model? Don't these all sound quite familiar? Centuries from now (hopefully much, much sooner), the actions of the RIAA, MPAA and others that match those of the weavers and button-makers of 17th century France will seem just as ridiculous.


If you're looking to catch up on the posts in the series, I've listed them out below:

Economics Of Abundance Getting Some Well Deserved Attention
The Importance Of Zero In Destroying The Scarcity Myth Of Economics
The Economics Of Abundance Is Not A Moral Issue
A Lack Of Scarcity Has (Almost) Nothing To Do With Piracy
A Lack Of Scarcity Feeds The Long Tail By Increasing The Pie
Why The Lack Of Scarcity In Economics Is Getting More Important Now

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  1. identicon
    Sam, 16 Jan 2007 @ 4:28pm

    Finally getting to the point

    The last few comments are finally getting to the point of the discussion, IMO. With computers, the internet, mp3s and so on, the incremental cost to produce an additional copy of a song, or movie is dropping towards zero. No more records to stamp, jewel boxes to mold, cassettes to record, boxes to ship, shelves to stock, cashiers to hire, train and pay, stores to light and heat. Just an instant and nearly costless transfer of bits.

    People know this to be the case. If I wanted to make a copy of one of my CDs, the material cost would be less than a dollar, based on retail prices for blank cds, jewel cases, etc. But in a store it would cost $10 to $20. People know this, they aren't dumb. So if the incremental cost of producing a copy of a movie or song is dropping, why isn't the price charged for a movie or song not dropping as well?

    Because the industry wants to continue to charge the same amount for a product that is costing them less and less to produce and distribute. And when people see the inherent greed and look for an alternative way, the industry wants to go after them legally, to force them to pay the artificially high price based on an obsolete, high priced distribution system.

    If the industry was to charge for a movie or song closer to their actual cost of production, then the problems of piracy would dwindle, because the differential between the cost that the industry can produce for and the pirate can produce for converge. Loss of profit motive for the pirate.

    The internet and technology is an excellent way to force the cost out of products, so that they are priced closer to their actual cost of production. That is what piracy is doing - forcing the industry to price closer to cost, and that is what the industry is fighting so hard to prevent.

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