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Against Monopoly

defending the right to innovate

Monopoly corrupts. Absolute monopoly corrupts absolutely.





Copyright Notice: We don't think much of copyright, so you can do what you want with the content on this blog. Of course we are hungry for publicity, so we would be pleased if you avoided plagiarism and gave us credit for what we have written. We encourage you not to impose copyright restrictions on your "derivative" works, but we won't try to stop you. For the legally or statist minded, you can consider yourself subject to a Creative Commons Attribution License.


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Yet another proof of the inutility of copyright.

For the third time in less than a decade, courtesy of the Congress of the United States, a natural experiment is being carried out (as we write) to prove one can make money by publishing books that are not copyright protected. Said otherwise, that one does not need copyright to make money printing and selling books worthy of at least the paper they are printed upon.

A few days ago, the Congress of the United States released the report of the Financial Crisis Inquiry Commission. Like all government documents, it can be downloaded for free here. It is also published by Public Affairs for $14.99. Obviously, you can find it at online bookstores for about half that price, and it seems to be SELLING pretty well (#412 in Amazon ranking of all books, when I last checked it).

The two previous experiments were, respectively, the report on 9/11 and the one on the invasion of Iraq. According to Amazon's ranking, they are currently selling less than AIM (:-)) but they are still selling copies after a few million ones were sold or downloaded when they were first circulated. No, we have not made the 1M number ... yet!


Comments

I recently read that about 75% of the music sold in the United States is on CD, the highest percentage, by far, than any other country in the world. Given that Americans seem to have yet to follow the lead of the rest of the world with respect to digital music, is it any wonder they continue to prefer print books over digital books - even nominally free digital books?

Given La Rand's view of copyright, your moniker might stand adjusting, like Ayn Rand Was Right--except on patents and copyrights.
In your opinion...
Isn't a major contributor of the profitability of selling printed and bound books of government reports is that the seller does not actually pay for the cost of generating the reports?

Of course my assumption is that the committees writing these reports are composed of people who are being paid via taxes (among other costs). Do you think if the printers had to pony up all the costs for authoring the reports they could still generate a profit at the price point at which they are selling?

The usual argument in favor of copyright is that, without it, there would be no profit to be made selling copies whatsoever. This turns out to be catastrophically false. Substantial profits can be and are made without copyright protection.

Whether the profit made covers the cost of production, is a question that has to be answered on a case by case basis. However, in many cases copyright drives up the costs of production at least as much as profits.

Kid:

In what way would copyright drive up the cost of production?

No Body:

You are correct. Government reports are paid for by the people of the USA. So the only cost in producing those reports is the cost of paper, ink and printing, which on a high volume machine can be quite low. The profits on such reports accrues only to the printer and any middlemen and none to the authors. The total profit could still be in the two to five dollar range, all to the printer and middlemen.

Kid:

I have no idea why anyone would argue that profit is not possible without copyright. That is silly. I have heard some people make that argument, but those who understand the basis of copyright will also understand that copyright and profit are not synonymous. If such is the "usual" argument, then there are more than a fair share of idiots in the world.

Copyright only provides the limited ability to control a work. Profit is never guaranteed.

In a famous example, a movie that cost $400 to make cost hundreds of thousands to bring to the theater after licensing was dealt with.

Open source software of similar quality as proprietary competitors routinely gets produced at orders of magnitude lower costs of production.

Using samples and mixing a passionate individual behind his computer and a little creativity can make awesome songs, if only he were not discouraged by the threat of lawsuits.

A good story can inspire fans to extend the story universe or develop side characters, in some cases producing literary work popular enough that the makers DO get sued.

In the end, all human creations build on previous work - with no exception. Some more obviously than others. The chilling effect of copyright on useful imitation is the hidden cost we pay for monopoly.

Kid:

I understand what you are saying. I only wish to distinguish between cost of production and any other sort of cost. Copyright and cost of production are two separate matters. I was trying to make sure I understood how copyright somehow affected the cost of production.

Now, if someone needs to deal with other issues post-production, such as licensing, that is another issue. Yes, it does affect the "price" of the movie or work, but that is not a cost of production.

The chilling effect of copyright on useful imitation is the hidden cost we pay for monopoly.

It's a hidden cost we pay for monopoly. There are others. Copyright industries prefer inefficient, centralized, legacy distribution that's eco-hostile (e.g., shipping plastic discs across the country that are vulnerable to physical theft, damage, and going unsold post-manufacture). When they do go digital they're prone to using DRM, which adds inefficiency and waste and impedes even noninfringing uses of the work. And then there's our tax dollars going to waste on shit like "Operation In Our Sites" and to help defray court costs in IP lawsuits. (Where does the money to pay judges and bailiffs and clerks come from if a judgment is made but never paid because the side that has to pay it is broke?) And the lawyers take a big fat cut, too -- companies that use copyrights retain copyright lawyers to enforce these, companies that use copyrighted materials must deal with legal issues as well, and so on and so forth. Last, but certainly not least, IP adds transaction costs to use of content. Even CC-BY-licensed content imposes transaction costs over and above public domain content; "all rights reserved" content imposes redonkulous ones.

If someone needs to deal with other issues post-production, such as licensing, that is another issue. Yes, it does affect the "price" of the movie or work, but that is not a cost of production.

It's a cost of doing business that, if too high, will prevent the work being profitable and thus in all likelihood prevent it being made. (And if it's made anyway, the maker goes out of business and doesn't make any more.) That is, effectively, a cost of production. Or, view the product being produced as "the content plus all necessary licensed rights" rather than just the content. After all, without those licenses you don't have a product.

Stux:

Are you speaking of a hypothetical when you talk of a maker going out of business, or do you have more than an isolated example?

@Kid

"In a famous example, a movie that cost $400 to make cost hundreds of thousands to bring to the theater after licensing was dealt with."

Thats interesting. Which movie is this?

"Open source software of similar quality as proprietary competitors routinely gets produced at orders of magnitude lower costs of production."

As a Linux user for the last 9 years I would kinda sorta agree with you. For my particular needs (GNU/Linux + bash) I would completely agree with you that for comparing OSes, GNU/Linux (I do not know much about the BSDes) at the bare minimum is equally good as OS X and Win 7 (personally in my opinion way better). But I don't know if I agree with the "magnitude lower costs of production." You may not be paying to buy open source (you can always pay for support) but that does not mean it is free and cost $0. Thousands of people put in many millions of man-hours to to make it. It would be interesting to know the man-hours expended to come up with GNU/Linux, OS X and Win 7.

One weakness, unfortunately for open source, is that in certain areas it is still lacking e.g. Office Software, Image Processing (GIMP is no Photoshop), and simple design basics (which flaw it has been sharing with Windows for quite some time).

I would like to give a design example closer to home. Take the book which is the raison d'etre of this blog and compare it to the free pdf which can be downloaded of the authors' (I think Levine) website. The book has a much better design. When I come across a footnote, I can instantly flip back to the back of the chapter, read it and come back to where I was, just as fast. The book also has nice index. The pdf file unfortunately does not have hyperlinked footnotes. Currently it is a pain to come across a footnote, scroll to the end of the chapter, read the footnote and then scroll back to where I left off in the orinigal text. If it was hyperlinked, it would take one-click to go to the footnote and one-click back, even better than the book. And the lack of an index (just a plain old one, not even hyperlinked) is sad. It is as if the authors want to make the experience of reading the pdf quite painful. I prefer the book, simply because it has a better design. In fact the pdf file even lacks a table of contents! (And not just a hyperlinked table of contents but also the TOC info for the pdf file, which would atleast have enabled my pdf viewer to generate a table of contents by itself).

Now how do we get designers to give us in Linux what they gave to OS X for orders of magnitude lower costs?

I definitely agree with you on the remix and fan fiction issues. I think they should be covered by fair use.

@Stux

I agree with you. The civil courts should be a loser pays system, like in Blighty. In fact I think the loser should even pay part of the salaries of the Judge, his/her clerks, court clerk, bailiff and the rest of the infrastructure.

@Anonymous: I'm speaking hypothetically, but with the knowledge that makers can and indeed do go out of business, just like any other sort of company, if they go for too long with non-zero operating costs and not enough profit.

@No Body: And when the loser has no money and declares bankruptcy? Good luck collecting. You can't get it from the loser, who doesn't have it. You can't in all fairness stick the winner with the bill. That seems to leave taxpayers.

Let's say somebody, inspired by a good story, elects to extend it. He posts a lengthy fan fiction story on the internet. A publisher decides to copy edit and publish it, and it becomes a bestseller. The publisher becomes rich, the author becomes famous (and will get offered a big price for a sequel), thousands of people enjoy a good book, and I think the world at large is better off.

Copyright's raison d'etre is precisely to prevent this kind of thing from happening.

The costs of production of that book are lower than any other book. Not all mah-hours are the same. In pure monetary terms, people contributing to open source are not getting paid, so obviously the cost is lower, but presumably you mean real world costs.

In real world costs, if somebody needs to be compensated for writing a book, that means that person would rather be doing something else. For example, consider a French teacher that makes more than enough money to pay for her needs. By teaching French, she is contributing a valuable service to society, let's say that service is worth X. If she writes a book instead of teaching French, society loses X. That is the real-world cost of those man-hours.

Comparing our fan fiction writer, he entertains himself by being in the universe that he is a fan of. He writes, not instead of teaching French, but instead of watching a movie or other personal entertainment. The real world cost of him writing is zero.

The real world cost of him writing is negative. Instead of watching a movie or doing some other personal entertainment activity with no externalities, he's doing one with a positive externality.
I love referring to your book in my Masters lectures on property rights. Last week, I cited your example of the 9/11 report and received an interesting response from one of my students: He said that, irrespective of copyright matters, most people simply prefer to read long reports like that in a (nicely) printed form. Now take into account the actual cost of printing the online report and the opportunity cost of arranging the hundreds of sheets in a binder, then it makes total sense that people would rather buy a (pre)printed copy of it for 10 bucks in the store...

Best, Sang-Min Park Research and Teaching Assistant in Law & Economics University of Kassel (Germany)

The 9/11 Commission report cost $15,000,000 to produce, not counting the salaries of the authors. Norton Publishing garnered about $600,000 in profit, because they were not required to pay the cost of production.

Boldrin and Levine hold this up as an example of how book publishing could be profitable without copyright. Of course, any business venture could be made to appear "profitable" if the cost of production is ignored. How utterly silly. In fact, the publication of the 9/11 Commission report was a LOSS of $14,400,000, at least.

The same will hold true for this new government report.

Boldrin and Levine, who claim to be Ph.D economists, would obviously know this. They either don't understand basic finance, or are being disingenuous to advance a political position. Either way it smells awful.

http://homesteadip.blogspot.com/2013/03/boldrin-and-levines-inept-anti-ip.html


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