When to pay for IP

small rendered ipod patri's evil eye small jolly roger flag, from iStockPhoto.com



I'm home today with the evil eye, and since driving with monocular vision seemed like a bad idea, I strolled to breakfast and pondered intellectual property while listening to pirated MP3s on my iPod.

I've waffled back and forth over the years about when and whether to pay for intellectual property. On the one side is the conviction I've had since a teenager that if I'm not harming anyone, and if I would not have purchased the property, it should be ok for me to use it. On the other is the more adult feeling that I can afford to reward those who produce things I value, and shouldn't I do so?

This morning I came to a tentative resolution. The fundamental tension of IP is that with protection, you get under-consumption, because all those who value the IP at more than copying cost but less than price don't get it. Yet without protection, you get under-production, since producers aren't capturing the full value of their product. So perhaps a good personal compromise would be to only pirate IP which I value at less than its purchase cost, and pay for that which I value at more than its purchase cost. That achieves both compensation and more efficient consumption.

I suspect that will mean buying books, good commercial software (what little I use), and what little pornography I know in advance to be good, while pirating music, bad (or speculative) porn, and commercial software that is only marginally better than open-source alternatives.

Time to get back to producing IP, in the form of software, for my employer...

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if you didn't value the MP3

if you didn't value the MP3 then you wouldn't download it in the first place. I don't download Whitney Houston or Britney Spears songs because I don't like their music but there are many others that do. We are hurting those Whitney and Britney fans because those artists are less inclined to produce more music. Meanwhile, those fans are downloading my favorite artists for free and making my valued bands less likely to put out new albums.

make all the silly arguments you want, downloading MP3s against the wishes of the artists and record companies is a violation of property rights and we should protect it despite the massive profits they make.

Isn't that a pretty amoral

Isn't that a pretty amoral approach -- one that completely ignores the IP producer's admonition that you aren't permitted to steal the thing from him under any circumstance, and regardless of how you value it? And from a market perspective, aren't you describing a pretty selfishly screwy market, in which only your (the buyer's) valuation matters? Things would fall apart pretty quickly if buyers felt at liberty to resolve value disagreements with sellers by simply stealing the thing, no?

There seems to be some

There seems to be some tension here between what someone says he prefers and what one's revealed preference is. I suppose it works assuming you trust yourself. I wish I trusted myself.

Isn't this what everyone

Isn't this what everyone does already? Your attitude toward downloading music seems pretty much the same as mine, and I think that's probably because everyone thinks that way. People who don't value the music just leech via downloads, people who do value it significantly buy it.

No comment of substance, but

No comment of substance, but damn, Patri, you're cute.

If you're going to use

If you're going to use economic efficiency as a guide for ethical behaviour, as you seem to be doing here, then aren't you honour-bound not to pick up the next dollar bill that you drop in the street?

See Steven Lansdburg quoting your father in The Armchair Economist.

Not to throw a monkey wrench

Not to throw a monkey wrench in your theory, but the music that you like is not underproduced. Its produced in just the right amount: once. I have gigabytes of great music on my hard drive, half of which I haven't listend to. The fact that all that music is but a drop next to the sea of music available or even all the music I would like to listen to leads me to seriously doubt that music, even good music, is underproduced.

Duncan, Suppose I come up

Duncan,

Suppose I come up with a new word or a funny joke, tell it to you, but I also demand that you do not use the word or the joke under any circumstances, unless you first pay me a referral fee. Are you morally obligated to listen to my demand, or do you think it is perfectly okay for you to use my new word or joke in your everyday conversations?

I'm not saying that I necessarily agree with Patri - I may or may not; that is not the point of this post. All I am saying is that we do not necessarily have a moral obligation to acquiesce to the demands of a producer of an idea. Which forms of ideas society tells us we must respect as property is largely arbitrary, and I am skeptical that this distinction can be grounded on any moral as opposed to strictly utilitarian arguments.

As to Micha's hypothetical,

As to Micha's hypothetical, it's fair to point out one can do the same thing with physical property: Say I shine a flashlight onto your property without your permission. I have emitted a stream of photons onto your land, a seeming trespass. Would the owner of that land be entitled to restitution for the violation?

Or see any of the arguments in the Problems chapter from The Machinery of Freedom.

My point being that yes, the boundaries of IP law are hard to define. But physical property is no different. Few libertarians think the fuzzy boundaries of physical property are a carte blanche for thievery. We should be similarly skeptical of justifying the theft of IP.

Duncan writes: Isn’t that

Duncan writes: Isn’t that a pretty amoral approach – one that completely ignores the IP producer’s admonition that you aren’t permitted to steal the thing from him under any circumstance, and regardless of how you value it? And from a market perspective, aren’t you describing a pretty selfishly screwy market, in which only your (the buyer’s) valuation matters? Things would fall apart pretty quickly if buyers felt at liberty to resolve value disagreements with sellers by simply stealing the thing, no?

You seem a little quick to judge morality different from your own as amorality. I disagree both that using IP freely is amoral, and that it is theft. Both this comment and your market example suggest that you are unfamiliar with the standard argument against IP, so I'll recap it.

We don't let people steal physical goods because doing so deprives the owner of the good. This reason does not hold for IP, therefore it is not stealing. The main reason theft is bad is that someone has *lost* something, so it seems rather a corruption of the term to apply it to me creating a brand new copy for myself. Heck, stopping me from creating it is more like theft, or more accurately, destruction - it prevents me from having something without increasing how much of it the perpetrator has.

I don't think its a screwy market at all. My valuation of the copy is what matters, because I am the one considering bringing the copy into being. Just like any other good I bring into being, I should do so if the value to me is greater than the cost to me. The interesting question is what the externalities are.

spoonie writes: if you

spoonie writes: if you didn’t value the MP3 then you wouldn’t download it in the first place. I don’t download Whitney Houston or Britney Spears songs because I don’t like their music but there are many others that do. We are hurting those Whitney and Britney fans because those artists are less inclined to produce more music. Meanwhile, those fans are downloading my favorite artists for free and making my valued bands less likely to put out new albums.

You seem to have missed the distinction between copying cost and purchase price. Downloading the music indicates that I value it at at least that amount of time and effort. It does not indicate that I value it at 15 bucks a CD. If I am in between those two points, then my downloading does not reduce the income of the producer. I was not going to buy the CD anyway. And it is exactly then that am saying I should pirate.

nelziq - I agree that music is not underproduced, but I think that lack of protection for other things, like new movie releases (i'm talking the first-run film version, not DVD), drugs, etc. would lead to underproduction.

Andy - I'm not saying

Andy - I'm not saying economic efficiency should be the only guide, merely that it is a relevant input. If my goal is to neither suffer from underconsumption of IP, nor to deprive its producers of income, such analysis offers a useful answer.

So, what's your rule for

So, what's your rule for deciding when economic efficiency offers a useful answer?

Why not have, as one of your goals, that you shouldn't waste effort on activities that merely redistribute resources from other people to yourself? In which case you should leave your dropped dollar bills on the ground. (Perhaps you do, for all I know.)

You're right in the sense

You're right in the sense that my comment didn't draw a clear distinction between copying a thing and depriving the owner of the thing, but I'm not sure the distinction really matters. What your proposal ignores is the fact that the creator who seeks to invoke his IP rights has declared unequivocally that you may not share in the thing that is his (whether by copying or otherwise) without first paying for the privilege of doing so. You may think that the creator's IP is a piece of crap, and that he's overvalued it horribly; but your subjective valuation of the thing (or, I suppose, any valuation of the thing) ought not permit you to arrogate to yourself the power to ignore the creator's assertion of his interest. I take your point about whether this is really "theft" in the traditional sense; it isn't quite, I'll agree, but it's something like it (in that both involve ignoring the asserted interest of the first owner). And call me old school, but I think that this all has a moral component to it as well.

I think Micha's comment goes more to the heart of the matter, but the hypothetical doesn't hold. Sure, if someone gives me something for free (which Micha's hypothetical presumes), then demands that I pay for the privilege of transferring it to someone else, that person has gratuitously inflicted upon me an obligation which I ought feel free to ignore. It's like gratuitously telling someone a secret, thereby shifting to the recipient the unasked-for burden of keeping the confidence. But in the simple IP example (like a music download), the producer isn't sticking you up; he isn't impregnating you with some sort of useful knowledge, then demanding that you pay for it. He's just telling you that if you want it (or want a copy of it), you have to pay for first. That the buyer thinks the price is too high ought not justify his simply taking it (or a copy).

I would agree, though, that things like music downloads present the simplest example, in that they are much closer to being widgets. True ideas -- say, a newly-discovered mathematical theorem -- are really hard. Would the creator (or maybe discoverer) of a mathematical theorem, or a breakthrough in physics, have the right to deny its use to others without compensation? Dunno. Probably not, though I suppose he could write a song about the theorem and make some money that way. :]

Sure, if someone gives me

Sure, if someone gives me something for free (which Micha’s hypothetical presumes), then demands that I pay for the privilege of transferring it to someone else, that person has gratuitously inflicted upon me an obligation which I ought feel free to ignore.

This doesn't solve the problem. Radio stations play copyrighted songs for free (free for the listener), and yet I doubt you would say that this means I can copy a song I hear on the radio and sell these copies on eBay. Under my example, the same would be true for a new word or joke you hear on the radio. The producer of the song has only given people permission to listen to the song on the radio; the producer has not given people permission to record and make copies of the song. So too, I have only given you permission to listen to my new word or joke; I have not given you permission to reuse my word or joke. There is no moral distinction between these two cases.

Michael - I like your

Michael - I like your analysis. I think that its worth noting the parallel to consumers who can choose between a free version of something (say software) and commercial. The existence of the free version means they only value the commercial one at the difference between their values, so they buy the commercial one less.

The key here is that the value to society of a product that has many substitutes is not the value of that product to the individual, it is the difference between his consumer surplus with that product vs. his best available. A product with cheap, reasonable substitutes is just not providing that much value. As you point out music is a product with many substitutes.

Duncan - I still disagree

Duncan - I still disagree that the creator of the property gets to dictate whether I make copies of copies. Sure, if I buy a CD, and sign a contract that says I won't pirate it, I am bound not to pirate it. But once one single copy somehow comes into being that was not bound by that contract, why does the author get to dictate the terms via which that contract-free copy is copied? He can "assert" whatever he wants - but why does he have the right? Who cares what he asserts?

As for the source of such copies, what about music that is broadcast by radio? Sure the broadcaster wants me to agree to only listen and not record. But he is making electromagnetic waves *pass through my body*. Why does he get to dictate the terms via which I intercept them? What contract have I ever signed with the RIAA in regards to radio?

If a producer of a physical good gave away free samples by dropping them from planes, with advertisements attached, would you feel bound not to use those goods in ways he did not intend, like reverse-engineering the design and copying it? I would not, and I view radio as being the same. It may be a question of how much we believe in implicit contracts, its a difference I've often found between myself and believers in IP. I feel no implicit contract to use something as its creator intended, other people seem to feel that the act of using it constitutes an agreement to follow the rules.

One problem I see with

One problem I see with Patri's approach is that it ignores the substitution effect.

Suppose for a moment that there were no music available for free and that every CD sold for $15. I could divide these CDs into 2 categories: those that I value more than $15 (CDs I might choose to purchase), and those that I value less than $15 (CDs I won't ever buy).

Move to a world where music is freely available for download, and suppose I go ahead and download all the music I want from the second category (music I enjoy, but not $15 worth of enjoyment). Now, look at an album that used to be in the first category. My choice has changed from "buy this album or get no new music" to "buy this album or get a slightly less good album for free". So, an album that used to be worth $20 to me is now maybe worth $5. Should I download it?

For many people this will have the effect of making just about everything out there slide into the less than $15 category.

On the other hand, maybe this is a feature, not a bug. It means that people who are more indifferent to exactly which new music they listen to won't pay for anything, while individuals with strong preferences for specific artists end up picking up the tab. There does seem to be a certain fairness there.

Patri- Okay, I take your

Patri-

Okay, I take your point, and understand better where you're coming from. At bottom, it seems that you are unwilling to consent to conform your conduct to the terms of an implicit contract -- that is, to restraints to which you've not explicitly agreed in advance. Of course, if I'm understanding you correctly, I'm not sure how this relates to the value analysis you described in your opening post; if you feel free as a general proposition to ignore implicit contracts, why would the value matter? Shouldn't you feel as free to copy music you really like as music you're ambivalent about?

But more generally, aren't implicit contracts of varying types -- including those in which we acknowledge personal obligations to which we've not specifically consented, and the ownership rights of others that we've not willfully acknowledged -- the foundation of a functional civil society? I'm guessing that you don't make a habit of shoplifting things, even in those circumstances in which you certainly would not be caught. I'm also guessing that you don't make a habit of pointing out to fat people that they're really fat, even though you could easily outrun them if they took umbrage. If not, why not? (Of course, maybe you do these things.) Don't we all constrain our behavior to abide by implicit contracts all the time? And if you abide by some sometimes, but not others (like the IP stuff), how do you distinguish them? Perhaps you don't abide by them when you really want to do the thing prohibited (like copy music), and abide by them when you don't value the matter at issue awfully much -- and maybe that's defensible. But it's a world in which personal preference is the only criterion for deciding to abide or not by externally-imposed conduct restraints, and it seems like a pretty amoral world to me. (And before you yell, I realize that much of this paragraph involves attributing to you positions that you have not taken, but it seemed interesting to spin it out that way.)

Duncan