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Who really benefits from intellectual property law? And who should?

February 3, 2010 |  5:45 pm

Pirates One of my favorite economic policy bloggers, Matt Yglesias, started a kerfuffle the other day with a frighteningly commonplace point about the vain fight of creative producers against free content online, especially vis-a-vis music file-trading. In short, he proposed that in a perfect marketplace for music, 

"The price of a song ought to be equal to the marginal cost of distributing a new copy of a song. Which is to say that the marginal cost ought to be $0."

In a followup post on Wednesday, however, Yglesias took this point a step further. He argues that the entire infrastructure of intellectual property law is designed to bring the cost of all creative products down, eventually to zero, where it's best able to serve the most possible consumers; he cites the expiration date on the copyright of creative work as clear legal intent for all intellectual property to become free. He compares this to the reasoning behind expiration dates on patents for pharmaceuticals, so as to allow for cheaper generic drugs that improve lives for much less money while still providing a financial incentive to pursue new research.

This is a perniciously populist approach to how your information-market sausage gets made.

His example is wrong for two reasons. One is in his misreading of the motivation behind various copyright and patent law expiration dates. Under current copyright law, a writer, musician or artist has claim over his or her intellectual property for their life plus 70 years. That's a pretty clear indicator that copyright law was designed not only for the artist to (hypothetically) have claims to the profit from a song for their entire life, but that their children and grandchildren should as well. The patent on brand-name drugs expires 20 years after the patent is granted. The wide difference suggests a clear intent as to who the beneficiary of these laws should be -- for drugs, it's a consumer; for art, it's the artist. This is why you can't sample P-Funk or the Beatles without taking out another mortgage, but you can get penicillin for pennies.

For someone who writes so eloquently about the distorted market for health insurance, Yglesias completely overlooks how the relative market for drugs and music is not equivalent. If a song is too pricey relative to its value to you, you can choose not to buy it and your life will be pretty much the same. Even in a downward-tilting price war, this encourages artists to make theoretically more awesome music to provide you, the consumer, a better value. Drugs hardly work the same way. If you have an illness, you don't have the ability to decline the drugs you need to cure it. This is why we have patent-expiration laws -- to protect vulnerable consumers.

Therefore, the motivation to create a song or a pill has two very different sets of market circumstances encouraging or discouraging them. As a society,we have decided that both products are worthy and have crafted laws to ensure an equilibrium between allowing consumers access and making it worth one's while to create them. But because the markets are skewed toward different ends of the spectrum, copyright and patent law mediate the transactions. It is absolutely not intended to make MediaFire links to "The Fame Monster" some kind of neo-liberal marketplace ideal. 

He also mistakenly equates the "marginal cost of producing a song" with the overall cost of making one. While I'll grant that the days of seven-figure studio budgets are long over, that cost is not zero. There's a particular distortion in the fact that music is a glamor industry that people will participate in regardless of profit incentive. This ensures a steady supply of decent-enough music to feed the Internet churn of new artists. But I'd give serious pause before saying that removing any profit motive from making music is the best thing for art, artists or consumers. And none of this changes the legal reality that -- hey guys, it really is stealing to have a copy of a song and not pay someone something for it. Some artists might be more OK  with that, some might not be, but the law says it's up to the copyright holder, not the consumer.

I'm no Luddite about the Internet's impact on music -- if I had to choose, I'd certainly rather be an aspirant artist today than in any other decade in pop music, and a world where a lot of bands can make a lower-middle-class living at music rather than a few dozen bands getting to throw televisions out of hotel windows is a huge improvement. But acknowledging and navigating a world where free file-trading is the reality is not to say it's the ideal marketplace petri dish for music, nor the one our lawmakers intended. 

-- August Brown

Photo of the Somalian coast guard, which likewise tries in vain to guard against piracy, by Farah Abdi Warsameh / Associated Press