Morality, Non-Zero Sum Games, Externalities & Why Someone Profiting Off Of Your Work Isn't A Bad Thing

from the diving-into-the-deep-end dept

In the discussion following my recent post about ex-RIAA boss Hilary Rosen's comments about my article highlighting all of the problems with SOPA and PIPA, Ms. Rosen was kind enough to stop by and attempt to clarify her position:
...my response was "Think analog" not as in analog policy vs digital policy but think of the real world we live in and the ethical issues we face every day. My point was that I can be pissed that the GAP doesn't have an outfit that is as stylish or fit as well as I want. And I can think that they arent serving their customer when they give me ugly clothes that dont fit well. ie: their busiess model sucks. But I don't think that gives me the right to take any of their clothes without paying just because I am an unhappy customer. That was my ONLY point. Do I think that the content industry has moved way too slowly in putting their content online? Absolutely. Do I think they could have been and should be more innovative? of course. But I also know that these are huge ships turning around in creeks and however easy the answers seem to you , they are often really hard. When people screw up their business, their sales go down. That has happened in the entertainment business. They are paying a price for their pace of change. BUT, there is also stealing. Pure old simple unethical stealing. Call it whatever you want - the march of technology - the inevitable cost of innovation, etc. To the writer or songwriter who makes their money on SALES, it is stealing. (Even if they might be thinking about making their money another way.) And while I love the dialog by for and about consumers and fans on these issues, I have no patience for big companies like Google who not only throw huge sums of money out there buying professors and economists and think tanks to kill any effort at copyright protection, they make a fortune on search advertising for those same illegal products.

So, your first sentence was right, I have long been willing to shine an unattractive searchlight at my old compatriots when they deserve it But I have no patience for the finger pointing and nastiness of the so called tech fans in this debate. Thank god I don't have to care so much anymore.
While we appreciate Rosen stopping by and joining in the discussion, the responses highlighted the myriad problems with this statement, going beyond both the tortured, nonsensical analogy (who steals something from a store that doesn't have what they want, or who steals clothes they don't like because they don't like them?) and the ridiculous "it's theft!" claims. If you want to read the full thread or discuss her specific points, I urge you to go to that thread and continue the conversation there.

The whole exchange got me thinking about some bigger issues though. Rosen's comments reminded me so much of my experiences at various recording industry events, where they pay basic lip service to things like "we have to adapt" and "we have to stop blaming customers," but then immediately flips to "but piracy must be stamped out first!" never recognizing that these two things are at odds. And what it boils down to is a mixture of a psychological issue and a confusion over economics.

First, Rosen's response, like many others, falls back on facile and inaccurate "morality" claims. This is usually a sign of a very weak structural framework to an argument. When you can't explain why, you resort to "well, it's just wrong." But, as we've explained for years, the "morality" aspect of an economic decision only comes into play when there's a decision to be made about who will be worse off. That's all morals really are about. If move x harms person y, is it "right" to do that? Folks like Rosen and many SOPA/PIPA supporters see what's happening online and it looks exactly like the previous sentence: "If downloading music harms musicians/songwriters, it's clearly not right to do that."

But that misunderstands the wider economic implications of what's happening. Let's put it another way to make this clear: If selling automobiles harms the makers of buggy whips, is it "right" to do that? I think most everyone would claim that it's fine. This is innovation in process. Thus, the simple statement, "If move x harms person y, that's immoral," seems way too simplistic. Let's expand it out further. What if, in our buggy whip hypothetical, the rise of the automobile forces the buggy whip maker to change their business model... such that they no longer make buggy whips, but steering wheels. The classical lover of buggy whips may find this upsetting -- and the buggy whip maker may complain, "but buggy whips are my product, I'm not in the steering wheel business." But the market doesn't care. In this situation, the morality question is more complex: "If move x harms person y in the short term... but opens up much greater opportunity for them to do better by accessing a much larger market, is it right?" Suddenly, the moral issue is pretty straightforward. There's no moral question at all. The market has changed, and as long as the whip maker comes along for the ride, the opportunity is there to be better off. It may be a challenge, but it's hardly a moral issue.

Rather than confront this, the people who insist this must be a moral issue, back up their claims with a secondary claim to make it seem like a moral issue: "someone else is profiting off my work, and that's unfair." In many cases, the "someone" they point to is "Google." This is mostly a correlation vs. causation error. People see that Google is massively successful, and the timing correlates well with the decline in the record labels. So they assume that Google must be "taking" money from the labels. This is quite inaccurate and shows a lack of knowledge about a variety of subjects, beyond the fact that correlation is not necessarily causation. In the thread with Rosen, I point out that the claims that Google "profits" from infringement are widely overblown. Google makes money from clicks, and infringers aren't hanging around these sites clicking on ads.

But the bigger issue is this relative morality issue of "If someone else benefits from my work without paying, that's unfair." But, again, this is way too simplistic and not reflective of reality. People benefit from the work of others for free all the time. In economics, it's known as an externality. Tragically (and potentially because of the name), people think that externalities are rare. They're not. They happen all the time. Every day, people benefit freely from the work of others without paying. As the saying goes, we all "stand on the shoulder's of giants." So much of what we value today comes from advancements in the past, which we benefit from, without paying those who created them. And yet, no one thinks this is bad.

The real question is if whether you can take it a step further and recognize that the economy is not a zero-sum game, in which one party loses when the other benefits. This is often difficult to understand, but put simply: in a zero-sum market, someone paying you $10 means I lose those $10. In such a scenario it may be reasonable to worry about someone else profiting, because it really does mean you lose. But in a non-zero sum market, with externalities, the market can expand. If every time you get paid $10, I now have the opportunity to make $100, that's clearly a better deal. But, let's make it a little more complex. In the zero sum game, every time you get $10, it's at my expense. But what if the other option in that world is that every time I raise my hand, you get $10 and I get just $1. That's still a much better deal for me to take than the one where I lose money. In this case, I might not make as much as you -- even if I'm doing the work, but is that morally wrong? We're both better off under this scenario. You're better off because you make more money. And I'm better off because I'm making more money... just not as much as you.

But, for whatever reason -- psychology, economic ignorance, etc, -- many people react poorly to this, claiming that it's a moral problem. I, personally, have trouble seeing how a situation in which everyone is better off results in any sort of moral dilemma, since we never reach that crucial moral question of "who gets harmed?" Because no one has to get harmed. But here's the kicker: no one has to get harmed if they adapt. And it's the adaption part that freaks people out and makes them want to cling to something clearer, even if it makes them worse off in the long run.

Filed Under: economics, externalities, morality, non zero sum, profit, zero sum


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    sumquy (profile), 1 Dec 2011 @ 11:56am

    infringement is not theft. i think that this is the core principle that she and other music exec's just can't seem to get their heads around (or maybe they do understand and just don't care). when someone downloads a song illegally it is a selfish act, but when that same person uploads that song to the web, they are giving that artist exposure that they would not have otherwise gotten. are sales of that song impacted? maybe, and maybe not. most (honest) studies show that it is good for the artist to get as wide an exposure as possible. and here we come to the crux of the disagreement. this is where we see the disconnect between the interests of the artist and the interest of the studio. one benefits from as wide an exposure as possible while the other benefits from restricting every avenue of distribution to try and create an artificial exclusivity.

    now i am going to give you an example of the non-zero sum power of sharing. i agree so completely with stephen t. stone's post from the previous article, that i am going to "steal" it and repost it here. an obvious case of me infringing on his work, and yet we are both better off for it.

    "Ooooh, an actual RIAA-type person willing to put a name to their post! This is exciting; I've never gotten the chance to openly debate one of you before. Let's begin!

    [M]y response was "Think analog" not as in analog policy vs digital policy but think of the real world we live in and the ethical issues we face every day.

    In the real world, the RIAA has screwed over numerous artists with its favor-the-label accounting practices and copyright trickery (especially in regards to sampling), sued its own customers for daring to not go through a paywall to experience new music, and attempted to prevent MP3 players from becoming popular before they were popular. How's that for some real world ethics, hmm?

    I have pirated music. I'm not afraid to admit it right to your face. But regardless of what you and the RIAA cronies might say about pirates to Congress or the Supreme Court or any other political forum, I don't do it to slight artists or "stick it to the man" -- I do it because I want to experience new music, and up until the proliferation of iTunes and Creative Commons-licensed music, I wasn't able to do so in a easy and timely manner. Napster -- the first P2P network I ever used -- made it easy for me to find new music (and old music), including obscure works by artists that the RIAA either passed over or forgot existed. I still pirate music from Japan on an irregular basis because, excluding buying said music from super-expensive CD importers, there is no legal method of obtaining this music in the United States.

    If you want to talk about ethics, let me know what kind of ethics make the RIAA want to continually push copyright forward into infinity and make it harder for people to legally purchase/support musicians from around the world.

    I don't think that gives me the right to take any of their clothes without paying just because I am an unhappy customer.

    Simple question: when I pirate a song from SoulSeek, what have I taken? Has the original master recording of a song disappeared from its storage place? Has the artist behind the song lost the ability to perform it? What is being stolen when I pirate a song?

    Oh. Right. "Theft" is a metaphor that you and the RIAA use to conflate stealing a physical product with illegally copying a copyrighted digital file that doesn't disappear when I download it off a server or someone else's computer via P2P. That's just the ethical thing to do, though, right?

    (Note that I am not condoning or supporting piracy. I know it's illegal. I just choose not to give a flying goddamn about copyright law because I believe that copyright law only serves the interests of the corporations who rely on copyright law as a way of avoiding adapting to new business models.)

    Do I think that the content industry has moved way too slowly in putting their content online? Absolutely. Do I think they could have been and should be more innovative? of course. But I also know that these are huge ships turning around in creeks and however easy the answers seem to you, they are often really hard.

    Gee, I can't imagine how it got that way. It couldn't have anything to do with the RIAA bogging the waters with copyright law, bad accounting, and not giving a damn about artists' rights -- right?

    [T]here is also stealing. Pure old simple unethical stealing.

    Yeah, I bet that the RIAA can't stand it when technology steals the opportunity to set up a new walled garden for music.

    To the writer or songwriter who makes their money on SALES, it is stealing. (Even if they might be thinking about making their money another way.)

    "I was telling kids, 'Download it illegally, I don't care. I want you to hear my music so I can play live.'" ~ Kid Rock (an artist contracted by an RIAA label, last I checked)

    I have no patience for big companies like Google who not only throw huge sums of money out there buying professors and economists and think tanks to kill any effort at copyright protection, they make a fortune on search advertising for those same illegal products.

    Technology companies like Google should just be good little bitches and get back in the RIAA's kitchen, right? They should just lie back and take having their technology and their innovations stifled and legislated out of existence by politicians who are bought and paid for by the RIAA and the MPAA and other big media companies, right?

    This sounds like more of those RIAA "ethics".

    I have no patience for the finger pointing and nastiness of the so called tech fans in this debate.

    We have no patience for people who support legislation that will fundamentally alter the foundation of a global communications network to protect a few legacy business models that said businesses can't (and won't) fix without being forced into it.

    We have no patience for people who support the most heinous attack on the First Amendment in years just because they want us to "think of the artists" (the same artists that the RIAA has metaphorically bent over a chair).

    We have no patience for people who don't want to see the future. We have no patience for people who want to revert technology back to the past. We have no patience for people who have no idea what the hell they're doing.

    We have no patience for the RIAA. We have no patience for the MPAA. We have no patience for their lobbyists and their paid-for political representatives.

    We have no patience for you and your kind.

    The world has changed. The Internet has changed it. If the RIAA and the MPAA and the other big media corporations refuse to change with the rest of the world, then I believe that they should start digging corporate graves for each other.

    We have the power to communicate, to share, to enable new experiences and come together as a society thanks to the Internet -- and the RIAA wants to destroy how the Internet works just to make sure Lady Gaga's next single doesn't get downloaded by even a single person?

    You might want to rethink your "ethics", Miss Rosen."

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